FICUS INVESTMENTS INC v. LLP (2009)

Order, Supreme Court, New York County (Bernard J. Fried, J.), entered February 3, 2009, which, to the extent appealed from as limited by the briefs, confirmed that part of a referee's report that found reasonable the amount of $1,541.999.08 in legal fees to be advanced by plaintiff Private Capital Group, LLC, on behalf of defendant Thomas B. Donovan, modified the report to require plaintiff to submit payment to Schlam Stone and Dolan LLP, counsel to Donovan, and directed Schlam Stone and Dolan, upon receipt of such payment, to pay Curtis, Mallet-Prevost, Colt & Mosle LLP its unpaid fees for legal services rendered to Donovan, unanimously affirmed, without costs.   Appeal from order, same court and Justice, entered January 26, 2009, unanimously dismissed, without costs, as superseded by the appeal from the February 3, 2009 order.   Orders, same court and Justice, entered February 5, 2009 and February 24, 2009, insofar as they directed Schlam Stone to pay Curtis its unpaid fees, unanimously affirmed, without costs.

 The referee's recommendation that no allocation of legal fees and expenses billed by three law firms that represented Donovan was required because the firms also represented other defendants who either were not entitled to advancement of legal fees and expenses or did not seek such advancement prior to settling was an equitable resolution of the issue, fully supported by the evidentiary record, and consistent with the purpose of advancing legal fees (see Ficus Invs., Inc. v. Private Capital Mgt., LLC, 61 A.D.3d 1, 9, 872 N.Y.S.2d 93 [2009];  Fasciana v. Electronic Data Sys. Corp., 829 A.2d 160, 177 [Del.Ch.2003];  cf. Schoon v. Troy Corp., 948 A.2d 1157, 1171 [Del.Ch.2008] [requiring pro rata allocation of advancement made to jointly represented officer] ).   The invoices had been reduced, pursuant to stipulation, to eliminate expenses either attributable to other defendants or not incurred because of Donovan's having been an officer of the company.   The evidence was uncontroverted that the remaining expenses reflected legal work that was performed by the three law firms for Donovan's benefit and would have been performed regardless whether the firms also represented the other defendants.

 Schlam Stone's assertion of a charging lien with respect to the advanced legal fees was correctly rejected, since the advancement to Donovan is not made pursuant to a final determination that he is entitled to indemnification from plaintiff (Judiciary Law § 475;  see Schneider, Kleinick, Weitz, Damashek & Shoot v. City of New York, 302 A.D.2d 183, 187-188, 754 N.Y.S.2d 220 [2002];  Natole v. Natole, 295 A.D.2d 706, 744 N.Y.S.2d 227 [2002] ), but only represents a “credit,” which he may be required to repay in the event he is ultimately unsuccessful in the defense of the lawsuit (see Ficus, 61 A.D.3d at 10, 872 N.Y.S.2d 93;  Fasciana, 829 A.2d at 175).