Court Opinion

ID: 9805471
Source: CourtListenerOpinion
Date Created: 2023-08-31 17:56:55.455771+00
Date Added: 2024-06-11T10:45:18.719249
License: Public Domain

Saxe, J.
(dissenting). An apparently straightforward court rule, establishing schedules setting maximum contingency fees that may be charged in personal injury and wrongful death cases (see Rules of App Div, 1st Dept [22 NYCRR] § 603.7 [e]), presents a problem here because while it sets policy regarding the maximum allowable contingency fee, it fails to make any mention of whether, or how, that policy applies to appeals. In the present case, the nonparty law firm’s initial retainer agreement charged the maximum allowable contingency fee for its work, but specified that its retainer was only for trial work and did not cover appellate work. Then, having prevailed at trial, entitling it to the maximum contingency fee, it entered into a new retainer agreement with the client, in which the firm charged the client an additional 10% contingency fee for its appellate work. Although no statute, rule or case law specifically prohibits that arrangement, I believe that it contravenes the spirit and purpose of this Court’s rule.
Attorney retainer agreements, although subject to judicial scrutiny on grounds of unconscionability (Shaw v Manufacturers Hanover Trust Co., 68 NY2d 172, 176 [1986]), are generally treated as entitled to enforcement, as any other contract: “As a general rule, we enforce clear and complete documents, like the revised retainer agreement, according to their terms” (Matter of Lawrence, 24 NY3d 320, 341 [2014]). However, when retainer agreements provide for contingency fees in personal injury and wrongful death matters, court rules of each judicial department impose additional limitations on attorneys (see 22 NYCRR 603.7 [e]; 691.20 [e]; 806.13 [b]; 1022.31 [b]). Limitations are also imposed by statute for medical, dental and podiatric malpractice actions (see Judiciary Law § 474-a). Specifically, the foregoing rules define and limit reasonable fees for attorneys to máximums set by provided fee schedules. The schedule applicable here, under 22 NYCRR 603.7 (e), permits the attorney to contract for a fee equal to a maximum of one third of the net recovery. The question presented here is whether, under the present circumstances, section 603.7 (e) precludes trial counsel from contracting with the client for an additional percentage of the recovery, beyond that one-third fee, as counsel’s fee for the preparation of the client’s appellate case. I believe that the motion court was correct when it *138vacated the further amended judgment insofar as the judgment directed defendant to pay to plaintiffs counsel, from the total amount awarded, legal fees totaling 43V3% of the award.
Preliminarily, I disagree with the majority’s conclusion that defendant Transit Authority lacked standing to bring the motion. Because its application was a motion rather than an appeal, the question is not whether the Transit Authority is aggrieved, as would have been required by CPLR 5511 if it were the appellant; rather, the applicable standard is simply whether the movant is an “interested person” under CPLR 5015 (a). To establish that showing, the movant must show “some legitimate interest . . . [that would] be served and that judicial assistance [would] avoid injustice” (Oppenheimer v Westcott, 47 NY2d 595, 602 [1979] [internal quotation marks omitted]). The legitimate interest presented by the Transit Authority was, contrary to the law firm’s dismissive characterization, a very real possibility. That is, as the Transit Authority pointed out, at some later date plaintiff could have challenged the propriety of its counsel taking an extra 10% of the award for its fee on appeal. Furthermore, in doing so, plaintiff could seek to recoup that extra 10% not only from his trial/appellate counsel, but also from the Transit Authority, on the ground that the Transit Authority should have known of the impropriety of paying directly to plaintiffs counsel a contingency fee larger than the permissible one third.
The majority asserts that there is no misconduct supporting a vacatur of the judgment as required by CPLR 5015. However, if the fee to plaintiffs counsel provided for by the judgment violated applicable court rules regarding the maximum allowable contingency fee, that rule violation could constitute misconduct in procuring the judgment such as would properly support the remedy provided by CPLR 5015 (a) (3).
In my view, the motion court had the authority to vacate the directive ordering defendant to pay plaintiffs counsel legal fees totaling 43.3% of the amount awarded. “[I]t is well established that Supreme Court has inherent power to supervise the fees attorneys charge for legal services” (Matter of Stortecky v Mazzone, 85 NY2d 518, 525 [1995]), and “a court may vacate its own judgment for sufficient reason and in the interests of substantial justice” (Woodson v Mendon Leasing Corp., 100 NY2d 62, 68 [2003]). Since attorneys are barred from charging fees that are excessive or unreasonable (Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.5 [a]), and attorneys in *139personal injury cases are more particularly limited to an established maximum percentage (22 NYCRR 603.7 [e]), and since the Transit Authority qualified as an “interested person” to bring the issue before the court pursuant to CPLR 5015 (a), the motion court was certainly authorized to rule on the question. But, even if the Transit Authority had not been a proper party to make the application, the majority’s reliance on State of New York v Philip Morris Inc. (308 AD2d 57 [1st Dept 2003], lv denied 1 NY3d 502 [2003]), is misplaced. In that action against tobacco companies and related entities to recover the costs incurred by the state and local government for treating smoking-related illnesses, this Court held that a Commercial Division justice was not authorized to inquire, sua sponte, into an arbitration panel’s award of legal fees payable by the tobacco companies to outside counsel under a settlement agreement, where the consent decree and final judgment precluded modifications or future applications to the court unless necessary or appropriate to implement or enforce the consent decree (id.). The judgments at issue here did not contain such preclusions.
I therefore turn to the crux of the presented issue, namely, whether plaintiffs trial counsel may be paid an additional fee for work performed in connection with an appeal, beyond the one third permitted by court rule.
Notably, the purpose of the rule setting a maximum allowable fee is to “protect unsophisticated personal injury and wrongful death plaintiffs from agreeing to unconscionable fee arrangements with unscrupulous lawyers” (Rakower v Lavi, 2009 NY Slip Op 31905[U] [Sup Ct, NY County 2009]). Indeed, this Court has observed that the primary purpose of 22 NYCRR 603.7 “is protection of the public through monitoring of the fees charged by practitioners at the Bar” (Rabinowitz v Cousins, 219 AD2d 487, 488 [1st Dept 1995]). Since the purpose of the rule is to protect clients from overreaching attorneys, it is not relevant to our analysis that plaintiff agreed to the additional 10% payment.
Although the rule does not specifically refer to whether the permitted fee covers appellate work, I believe that allowing counsel to accept a 43x/3% fee contravenes the spirit of, and policy behind, the court rule, which, in its essence, precludes a plaintiffs attorney in a personal injury case from accepting a fee greater than one third of the total award.
The majority cites Albunio v City of New York (23 NY3d 65 [2014]) in support of the proposition that counsel is entitled to *140be paid a separate fee for work performed in connection with an appeal, beyond the amount permitted for trial work. However, the Court of Appeals’s approval in Albunio of “attorneys and clients . . . negotiating] a different retainer agreement for work done on appeal” where the trial retainer “did not obligate [counsel] to [continue to] represent [the client] on appeal” {id. at 76), arose in the context of an action brought under the New York City Human Rights Law, to which 22 NYCRR 603.7 had no applicability. Unlike Albunio, here section 603.7 (e) is squarely applicable, and that rule establishes that a contingency fee beyond one third of the total award is excessive.
Indeed, the majority’s interpretation of section 603.7 leaves appellate counsel in personal injury cases without any limitations or guidance on whether they may demand contingency fees, or how much they may demand, when handling appeals in personal injury matters, aside from the broad and general prohibition against excessive fees {see Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.5 [a]). We should keep in mind that in personal injury litigation, the need for an appeal is virtually assured unless the judgment is the result of a settlement. Although clients may well accede to the terms of form retainer agreements proffered by their attorneys, specifying that the agreed-on counsel fee will not cover any necessary postjudgment work, the clients may not understand the probability that further legal work will be needed in the event they prevail at trial, or the extent to which an additional contingency fee for appellate work could reduce the amount they will ultimately receive.
Even assuming that the rule’s permissible maximum contingency fee was not intended to include counsel fees for appellate work, I submit that the stated maximum should include those fees, at least where counsel who handled the trial also handles the appeal. It bears emphasis that where a law firm is defending on appeal an award it won for its client at trial, the law firm is defending its own fee as much as the client’s award, and its interest in doing so may be as pressing as the client’s own interest in prevailing. Moreover, the work of preparing the appeal is far less burdensome for trial counsel than what would be required of an attorney with no prior familiarity with the case, because trial counsel possesses a uniquely intimate and thorough knowledge of the record and all the legal arguments. Indeed, appeals of personal injury verdicts are often largely *141challenges to the amount of the damages awarded, further limiting the scope of the necessary appellate representation. With these thoughts in mind, it makes sense that the maximum fee allowable to trial counsel under section 603.7 should include the additional work of its representation of the client on appeal.
Another problem with the rule’s failure to provide for the allowable contingency fee percentage for appellate work is that seemingly reasonable percentage amounts, like 10% or 20% or 33V3%, can quickly bring the total of counsel fees to a major portion of the judgment awarded when added to trial counsel’s one third.
For the present purposes, I am not suggesting that a new attorney taking on the task of representing the client for purposes of appeal could not be entitled to a separate fee. Nor am I suggesting that trial counsel has an obligation to undertake the appeal. My only concern here is that an additional percentage should not be paid to the law firm that handled the trial, when the firm is already receiving the maximum allowable fee. In these circumstances, the rule’s maximum allowable fee should also cover the work of representing the client on appeal.
Mazzarelli, J.P., and Feinman, J., concur with ManzanetDaniels, J.; Friedman and Saxe, JJ., dissent in a separate opinion by Saxe, J.
Order, Supreme Court, Bronx County, entered January 14, 2013, reversed, on the law, without costs, defendant’s motion denied, and the matter remanded to Supreme Court for consideration of plaintiffs cross motion. Appeal from order, same court and Justice, entered May 15, 2013, dismissed, without costs, as taken from a nonappealable order.