Rubenstein Public Relations, Inc., Plaintiff, v. World Marketplace, Inc., Defendant. (2023)

The following e-filed documents, listed by NYSCEF document number (Motion 001) 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 20 were read on this motion for DEFAULT JUDGMENT.

In this action on a contract and for an account stated, plaintiff, Rubinstein Public Relations, Inc., moves under CPLR 3215 for default judgment against its former client, defendant World Marketplace, Inc. Plaintiff seeks (i) the unpaid balance under the parties' agreement (as it appears in invoices sent to defendant and retained without objection); and (ii) its reasonable attorney fees in the amount of one-third of that unpaid balance—the percentage set forth in the retainer agreement between plaintiff and its counsel. Defendant does not oppose the motion. Plaintiff's request for the amount of the unpaid contract balance is granted; plaintiff's fee-award request is denied without prejudice.

A plaintiff moving for default judgment must establish proper service, defendant's default, and the facts constituting plaintiff's claim. (CPLR 3215 [f].) Plaintiff has shown that it properly served defendant under CPLR 311 and CPLR 313 (see NYSCEF No. 4); and defendant has not appeared. Plaintiff has established the facts constituting its claim, whether on a contractual or account-stated theory, through the affidavit of its president (NYSCEF No. 6) and accompanying documents (NYSCEF Nos. 8-14). The branch of plaintiff's motion seeking the unpaid contract balance of $37,500 (with interest on that balance accruing at the contractual default rate of 18% annually) is granted.

Plaintiff also requests attorney fees. The contract provides that defendant will pay "all reasonable attorneys' fees and disbursements[ ] incurred by [plaintiff] in collection of" outstanding invoices or expenses owed by defendant. (NYSCEF No. 8 at 3 ¶ IV.F.) Under the retainer agreement between plaintiff and its counsel, plaintiff is entitled to a contingency fee of "33 1/3% of any monies or property obtained or received by client." (NYSCEF No. 10.) Plaintiff contends, therefore, that its reasonable attorney fees under the contract with defendant amount to one-third of $37,500, or $12,500. (See NYSCEF No. 6 at ¶¶ 23-25; NYSCEF No. 15 at 4.) This court disagrees.

The 33 1/3% fee provision on which plaintiff relies would not be binding on this court even if it were contained in the contract between plaintiff and defendant. (See Prince v Schacher, 125 AD3d 626, 627-628 [2d Dept 2015] [holding that Supreme Court is not bound by a provision in a promissory note fixing attorney fees at 20% of the outstanding principal and interest].) Rather, this court has "inherent authority to determine reasonable attorney fees," taking into account the traditional "factors to be weighed in determining reasonable counsel fees." (Orix Credit Alliance, Inc. v Grace Indus., Inc., 261 AD2d 521, 521-522 [2d Dept 1999], citing Matter of Freeman, 34 NY2d 1, 9 [1974] [listing factors involved in determining reasonable attorney fees].)

In this case, moreover, the 33 1/3% contractual provision at issue is not in the contract between plaintiff and defendant. Instead, it is part of the retainer agreement between plaintiff and plaintiff's counsel. (See NYSCEF No. 10.) That provision goes to the allocation between plaintiff and plaintiff's counsel of the recovery from defendant of the principal balance and reasonable attorney fees—it does not determine what plaintiff's reasonable attorney fees are.

Plaintiff suggests that because it will likely "collect[ ] the full outstanding amount due under the Agreement," plaintiff will therefore "incur a total amount of attorney's fees of $12,500.00" once the contingency-fee provision is taken into account. (NYSCEF No. 6 at ¶ 25.) But the contract between the parties does not entitle plaintiff to recoup from defendant all attorney fees that plaintiff incurs in collecting what defendant owes. Plaintiff is entitled to recoup from defendant only the "reasonable attorneys' fees and disbursements" incurred. (NYSCEF No. 8 at 3 ¶ IV.F.) Those fees will then constitute a credit against counsel's contingency fee, calculated as one-third of plaintiff's recovery excluding fees. (See Albunio v City of New York, 23 NY3d 65, 73-75 [2014] [holding that absent contrary provision in the retainer agreement, a plaintiff's counsel on contingency is entitled to a contingent fee based on the amount of the judgment exclusive of a statutory or contractual fee award, with the plaintiff's responsibility for paying the contingent fee reduced by the amount of the statutory/contractual fee award].)¹

Plaintiff's papers on this motion do not establish the amount of counsel's reasonable attorney fees. This court thus lacks a basis, at least on this record, to award attorney fees on top of the outstanding contract balance.

Accordingly, it is

ORDERED that the branch of plaintiff's default-judgment motion seeking an award of the amounts due under the parties' contract is granted, and plaintiff is awarded judgment against defendant for $37,500, with interest on that sum at the contractual default rate of 18%, running from October 1, 2022; and it is further

ORDERED that the branch of plaintiff's default-judgment motion seeking an attorney-fee award of $12,500 is denied without prejudice; and it is further

ORDERED that plaintiff may enter a supplemental judgment for the amount of its reasonable attorney fees, with the amount of those fees to be determined by a motion on notice supported by appropriate documentation; and it is further

ORDERED that plaintiff serve a copy of this order with notice of its entry on defendant by certified mail, return receipt requested, directed to defendant's last-known address; and on the office of the County Clerk, which shall enter judgment accordingly.

Dated: May 5, 2023

Hon. Gerald Lebovits

J.S.C.

FOOTNOTES

1.   Under the Albunio default rule, were counsel's reasonable attorney fees to exceed one-third of plaintiff's recovery under the contract, counsel would be entitled only to those reasonable fees. (See 23 NY3d 65 at 75.)

Gerald Lebovits, J.