Opinion ID: 482811
Heading Depth: 3
Heading Rank: 3

Heading: Customary Charges

Text: 84 In two respects, the fees awarded were excessive because they were not limited to fees that are customarily charged or recoverable. 85 First, a general contract provision for the shifting of attorneys' fees does not authorize an award of fees for time spent in seeking the fees themselves. This is so whether that time is spent in a separate lawsuit, see, e.g., Doyle v. Allstate Insurance Co., 1 N.Y.2d 439, 444, 154 N.Y.S.2d 10, 14, 136 N.E.2d 484, 487 (1956) (legal expenses ... beyond the taxable costs ... are not recoverable as general or special damages); Swiss Credit Bank, 23 Misc.2d at 573-74, 200 N.Y.S.2d at 830-31, or in the latter stages of the very litigation in which the fee expense was incurred, see Zauderer v. Barcellona, 130 Misc.2d at 237, 495 N.Y.S.2d at 883 ([a]ttorney's fees incurred in proceedings to collect attorney's fees are not recoverable). As stated in Swiss Credit Bank, 86 [a] general agreement for the payment of counsel fees does not generally include counsel fees in the suit to collect those fees (Doyle v. Allstate Ins. Co., 1 N.Y.2d 439, 154 N.Y.S.2d 10 [136 N.E.2d 484]. Of course, it is possible to contract for such an allowance but, as it is an agreement contrary to what is usual, specific language would be needed to show such an agreement. 87 23 Misc.2d at 573-74, 200 N.Y.S.2d at 830-31. 88 The district court failed to apply this principle. The Contracts' provision for attorneys' fees was a general one, providing, without elaboration, that the prevailing party would have the right to reimbursement of reasonable attorney's fees; there was no specific language to indicate that time spent in justifying a fee application was to be included. Since reimbursement for such time is not customary, the district court's conclusion that this part of Krear's request clearly falls within the Contracts was contrary to New York law. 89 We also find unjustified the district court's enforcement against the Trustees of Krear's oral agreement to pay Katz amounts based not on the rates he charged at the time the work was done but on the higher rates he was charging by the end of the litigation. The court awarded similarly retroactive higher fees for Baden even without evidence of such an agreement between Krear and Baden. Krear urged that the higher rates be awarded retroactively to both Katz and Baden as a simplified way of awarding them interest on their fees. The court accepted this argument, noting that the lawsuit had been pending for several years, that the attorneys had not been paid during that time, and that retroactivity would adjust for the effects of inflation. This justification finds no support in the Contracts or in New York law. 90 No basis appears in the record for believing that it is customary for clients to pay their attorneys for past services, done at lower rates, more than they would have paid had their bills been paid contemporaneously with such services. Certainly we are aware of no custom by which a penurious firm such as Krear, whose only significant asset was its breach-of-contract claim, would agree to increase its fee obligation retroactively in the absence of a fee-shifting expectation. Nor is retroactivity justifiable on the basis that it is tantamount to an award of interest. The Contracts did not provide that the prevailing party would be entitled to interest on any payments made to its attorneys during the course of the litigation, and such a term should not be inferred absent specific language clearly indicating that this was the parties' intent. Further, so far as the record reveals, the initial retainer agreements between Krear and its attorneys did not call for Krear to pay the attorneys interest on bills unpaid; and as a matter of professional ethics, an attorney may not properly charge his client interest on unpaid bills unless, inter alia, the interest charges are reasonable and he has advised the client of such charges prior to rendering any services. See Committee on Professional Ethics, New York State Bar Association, Opinion # 399, Interest on delinquent accounts, 47 N.Y.St.B.J. 433 (1975). 91 In the circumstances, we think the New York courts would view Krear's belated oral agreements to pay its attorneys retroactively at ever increasing rates as an impermissible manipulat[ion of] the actual damage incurred, Equitable Lumber Corp. v. IPA Land Development Corp., 38 N.Y.2d at 524, 381 N.Y.S.2d at 465, 344 N.E.2d at 397, resulting in an unwarranted burden on the defendants to which the parties did not in fact agree.