FILED: NEW YORK COUNTY CLERK 07/11/ :43 PM INDEX NO /2010 NYSCEF DOC. NO. 557 RECEIVED NYSCEF: 07/11/2016

Transcription

1 FILED: NEW YORK COUNTY CLERK 07/11/ :43 PM INDEX NO /2010 NYSCEF DOC. NO. 557 RECEIVED NYSCEF: 07/11/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK MARTIN MOTOR SALES, INC. and JANET L. SCHLANGER, -against- Plaintiffs, Index No /10 BARATTA, BARATTA & AIDALA, LLP, JOSEPH A. BARATTA, and JOSEPH P. BARATTA, Defendants. TRIAL MEMORANDUM OF LAW ON BEHALF OF DEFENDANTS BARATTA, BARATTA & AIDALA LLP AND JOSEPH P. BARATTA S DISMISSAL WITH PREJUDICE OF THE CLAIMS AND IN SUPPORT OF DEFENDANT BARATTA, BARATTA & AIDALA LLP S COUNTERCLAIM FOR THE PAYMENT OF FEES RENDA & ASSOCIATES P.C. Attorneys for Defendants (BBA & JPB) 546 Fifth Avenue, 6th Floor New York, NY (212) of 29

2 TABLE OF CONTENTS Page PRELIMINARY STATEMENT 1 POINT I: SECTION 26 OF THE NEW YORK PARTERSHIP LAW SHIELDS JPB AS AN INDIVIDUAL MEMBER ("PARTNER") OF A LIMITED LIABILITY PARTNERSHIP FROM THIRD PARTY CLAIMS AGAINST THE INDIVIDUAL PARTNER 4 POINT II: PLAINTIFFS MMS AND JANET WERE REPRESENTED BY SEPARATE INDEPENDENT COUNSEL AND MADE AN IMPLIED IN FACT FEE AGREEMENT WITH BB&A TO PAY AND DID PAY SPECIFIC AGREED UPON FIXED AMOUNTS OF CONTINGENT LEGAL FEES FOLLOWING THE SUCCESSFUL COMPLETION OF EACH OF THE 2007 TRANSACTIONS 8 A. There was a written fee agreement between the parties. 8 B. The without recourse assignment of contingent fees by Mark to Janet in 2012 of the fixed fee contingency paid by Mark to BB&A five (5) years prior to the assignment obtained by Janet for the purpose of adding the claim to this case was Champerty. 13 C. Plaintiffs were informed in writing of the terms of engagement, the calculation of the contingent success fee and the scope of work, and are not entitled to disgorgement of legal fees because plaintiff fails to establish that such a remedy is warranted, as a matter of law. 14 POINT III: PLAINTIFFS ARE UNABLE TO PROVE ECONOMIC DURESS BECAUSE PLAINTIFFS WERE NOT WRONGFULLY THREATENED, WERE NOT PRECLUDED FROM EXERCISING FREE WILL, AND FAILED TO PROMPTLY REPUDIATE THE AGREEMENT AFTER ITS EXECUTION 21 POINT IV: PLAINTIFFS' CLAIMS FOR BREACH OF FIDUCIARY DUTY ARE TOTALLY WITHOUT ANY MERIT BASED UPON THE FACTS IN THIS CASE, IN THAT PLAINTIFFS AT ALL TIMES WERE REPRESENTED BY SEPARATE INDEPENDENT COUNSEL, AND THE DOCUMENTS ANNEXED AS TRIAL EXHIBITS CLEARLY SHOW THAT NO SUCH BREACH OF FIDUCIARY DUTY EXISTED 23 POINT V: DEFENDANTS BB&A ARE ENTITLED TO JUDGMENT ON THEIR COUNTERCLAIM FOR THE BALANCE OF THEIR FEES PLUS INTEREST AS DEFENDANTS HAVE COMPLETED ALL OF THE ADDITIONAL SERVICES REQUESTED BY PLAINTIFFS TO BE PAID THE BALANCE OF THE AGREED UPON FEE 27 CONCLUSION 27 i 2 of 29

3 PRELIMINARY STATEMENT Defendants Baratta, Baratta & Aidala LLP ( BB&A ) and Joseph P. Baratta ( JPB ), (the Defendants ), submit the within Trial Memorandum of Law in support of a dismissal of the two remaining causes of action (COA), the fourth COA seeking Declaratory Relief in the nature of disgorgement of legal fees and the fifth COA breach of fiduciary duty, in this case and in support of a judgment in favor of BB&A on its counterclaim for fees. Plaintiffs claim that there was no fee agreement between the parties despite of the written documentation establishing a fee agreement, signed fee authorizations and finally the payment of fees and interest on the fees made to BB&A. Plaintiffs further claim a breach of fiduciary duty; the amended complaint alleges that the breach consists of the defendants alleged failure to turn over original releases, refusing to cooperate with plaintiffs in the Florida lawsuits and having ongoing attorney client/business relations with Mark Schlanger. Although not plead somewhere in this litigation the theory of the alleged breach of fiduciary duty has been alluded to be as a result of the payment of an alleged excessive fee to BB&A, even though Plaintiffs were represented by separate independent counsel with respect to the fees paid. Defendants will vigorously object to this new theory never plead in the case. Defendants, and the former firm of Baratta & Goldstein ( B&G ), starting in 1995, until 2009, for approximately 14 years, represented the late Martin Schlanger until his passing in 1998, and thereafter, MMS, Janet and companies affiliated with the late Martin Schlanger and MMS. Defendants from time to time also represented members of the immediate Schlanger family, Ellen Schlanger Bregg ( Ellen ), Ellen s husband, and Mark Elliott Schlanger ( Mark ), Janet s son on non- MMS matters. In 2005, seven years after Martin Schlanger s passing, family discord and bitterness in the Schlanger family turned mother (Janet) and son (Mark) against each other and daughter (Ellen) against her brother (Mark). The Schlanger family fight was as a result of the unauthorized action of Mark in unilaterally paying himself a $3,000,000 consulting fee from the sale of the MMS Honda dealership, which resulted in a Schlanger family, business and legal dispute. There was 1 3 of 29

4 mistrust and family dysfunction to the point that the Schlanger family was unable to sit in the same room together. Unfortunately, the family dispute snared Defendant attorneys in this lawsuit. The reason for this lawsuit is that Janet, as the MMS sole owner and director, was urged by Ellen to start this suit against Defendants. Janet made a decision in 2007 to sell the MMS Volvo auto dealership and two adjoining New York City parcels of commercial real estate, one of which was owned by MMS at th Avenue, New York City, and the adjoining parcel at th Avenue, New York City, owned by Martin and Mark Realty Co. LLC ( M&M ), (a family owned property 50% owned by Janet and 50% owned by her son Mark), (the 2007 Transactions ). MMS and Janet, followed an established prior course of dealing with JPB and BB&A, and agreed to pay the Defendants BB&A a contingency success fee of an aggregate of $1,055,000 from the proceeds for the two 2007 Transactions. The 2007 Transactions included the sale of an MMS Volvo dealership in New York City to Manhattan, Ford Lincoln Mercury, a Division of Ford Motor Company ( MFLM or Ford ) and combination sale of MMS and M&M real property located at 677 and th Avenue, New York City to Rockrose Development Corp. ( Rockrose ). BB&A in 2006 provided to MMS, Janet and M&M a written calculation of the contingency success fee (10%) as well as a description of the scope of services and that if a specific transaction was not completed that there would be no fee. MMS, Janet and Mark each had separate independent counsel in negotiating the agreement to pay legal fees to BB&A. Mark also agreed that he would pay a portion of the contingency success fee of the sum of $800,000 from his share of M&M s sale proceeds based upon the successful completion of the combination sale to Rockrose in The sale to Rockrose was successfully completed by BB&A. Mark paid his share without complaint, and MMS paid all of the agreed upon fixed fee contingency fee to BB&A except the final sum of $131,500 without any complaint. Following the closings of the 2007 Transactions and distribution of the proceeds from escrow to Plaintiffs and Mark, the Schlanger family engaged in vicious and vexatious litigation between each other in their home State of Florida. There were two separate lawsuits in two separate Florida courts. As such, Defendant attorneys were caught in the middle of the Schlanger family feud. After three and a half 2 4 of 29

5 years of litigation in Florida, the Schlangers called a cease fire among themselves, and resolved the Florida lawsuits. In the interim, in 2010, Plaintiffs started the within case, and continue the salvo against Defendants without any just cause. Janet and MMS have continued the six year litigation against Defendants initially claiming five (5) causes of action: legal malpractice, replevin a demand for an accounting, failure to have a legal fee agreement and the charging of excessive fees and breach of fiduciary duty. Three of the five claims been voluntarily discontinued or dismissed. The two claims left in the case are that there was no fee agreement and that the fees were excessive and that there was a breach of fiduciary duty by BB&A, JPB and JAB. With respect to the fees plaintiffs were represented by separate counsel and fully informed in writing of the terms of engagement by BB&A for each of the 2007 Transactions, the scope of services, as well as the success contingency for the payment of any fees. Plaintiffs made a fee proposal to BB&A (fixed fee contingency), $530,000, for the Ford sale, and $525,000 for the combined MMS and M&M Rockrose sale through Plaintiffs separate and independent counsel (John Wagner, Esq. ( Wagner )), the acceptance of the services and the written fee releases on three separate occasions, in addition to the payment of interest on the fees paid on four separate occasions, all of which were in writing with the benefit advice and of plaintiffs counsel. Plaintiffs continue to try to justify the lawsuit by claiming that there was no fee agreement, and that the contingent fees were excessive, even in light of the 2014 Graubard case, which held that a contingent fee was not excessive in that a $40,000,000 (40%) fee was paid to a law firm in five months, when here, a fee of $1,723,000 was paid to BB&A, less than 10% (with $131,500 still in a special escrow fee account) and despite the writings between the parties which established a fee agreement between the parties. With respect to the assignment of the fee paid to BB&A by Plaintiff s son Mark in The exhibits clearly show that the contingent fee was agreed upon by Mark in writing with his own separate attorney present in 2007, and the fee was paid in 2007 again with his attorney present following the Rockrose closing. The Court should note that Mark never made a claim that the fee 3 5 of 29

6 was not agreed upon or that it was excessive, and 5 years after it was paid, Plaintiff Janet solicited the assignment of the fee paid by Mark at the behest of her daughter Ellen for the purpose of adding the non-existent fee claim to the within case which all amounts to Champerty. In 2004 and 2005, the former firm of Baratta & Goldstein ( B&G ) handled two similar transactions for Plaintiff MMS on a contingency success fee basis, the sale of the MMS Honda dealership and the sale of MMS real property located at th Avenue in New York City. Both transactions were successfully completed and the contingent success fee paid by MMS (Janet) without any issues or complaints. No fees whatsoever were paid by Plaintiffs for the 2007 Transactions to Defendant JPB. The 2007 Transactions were completed even though Plaintiff Janet and her daughter Ellen were in a family fight with Mark about money and had a strained, if nonexistent, relationship and wanted nothing to do with each other. With regard to the final claim of breach of fiduciary duty, there is no evidence whatsoever that BB&A and JPB favored Plaintiff s son Mark in the 2007 Transactions, as Mark was represented by his own separate independent counsel and obtained less than his pro rata share of the proceeds from the combined sale to Rockrose. Plaintiffs subjective claim that services were not performed by Defendants to their satisfaction is not a violation of a fiduciary duty claim. POINT I SECTION 26 OF THE NEW YORK PARTERSHIP LAW SHIELDS JPB AS AN INDIVIDUAL MEMBER ( PARTNER ) OF A LIMITED LIABILITY PARTNERSHIP FROM THIRD PARTY CLAIMS AGAINST THE INDIVIDUAL PARTNER. Section 26(b) of the NY Partnership Law describes the liability protection for lawyers practicing in registered LLPs. No partner of a partnership which is a registered limited liability partnership is liable or accountable directly or indirectly for any debts, obligations or liabilities of or chargeable to the registered limited liability partnership or each other whether arising in tort or contract or otherwise solely by reason of being such a partner or acting in such capacity or 4 6 of 29

7 rendering professional services or otherwise participating in the conduct of the other business or activities of the registered limited liability partnership. The exceptions to the third party liability protection for an individual member of an LLP are as follows: (1) Direct Liability. Section 26(c) specifically states: (I ) Each partner, employee or agent of a partnership which is a registered limited liability partnership shall be personally and fully liable and accountable for any negligent or wrongfully act or misconduct committed by him or her. There is not one allegation in the FAC of specific wrongdoing or misconduct on the part of JPB in BB&A s representing MMS or Janet in the 2007 Transactions. Plaintiffs claim that there was no fee agreement with Defendant BB&A is belied by the written documentation that Plaintiffs have not and cannot deny, in that Plaintiffs were represented by separate counsel hired to negotiate a contingent fee agreement with BB&A, and did so by their actions in writing and by acceptance of some $23,000,000 by Plaintiffs that was obtained through the efforts of Defendants BB&A and JPB. (2) Supervisor Liability. There is no claim of direct supervision and control of the person committing the wrong, as there was no wrong committed, not by any Defendant in this case. The claim is that Plaintiffs, represented by separate independent counsel, did not agree to a success contingent fee almost three years after the fee plus interest on the fee was paid by Plaintiffs, and that the fee was excessive, in spite of the numerous signed authorizations to release the payment of the contingent fees plus interest from a separate BB&A fee escrow account establish under the agreement and direction of Plaintiffs. (3) Liability By Agreement. There is no agreement or even a claim of an agreement that JPB agreed to be liable for any debts of BB&A, or to assume individual liability for the wrong or to the degree that a majority of partners vote to impose liability on the partners. This provision is not applicable to JPB. 5 7 of 29

8 The exception to the cloak of protection for individual liability would be if JPB had directly committed an act of misconduct or other wrongful act, not just because he performed services in the closing of a successful real estate transaction (combination sale by MMS and M&M to Rockrose). In Michael P. Lewis v. Eric D. Rosenfeld, 138 F. Supp.2d 466, US Dist. Ct. So. Dist. NY Construing NY Law, the Court stated Defendants correctly note that under New York Law, partners of a limited liability partnership are not liable for breach of fiduciary duty, common law fraud, civil conspiracy or the debts or liabilities arising in tort or contract of the partnership solely by reason of their membership in the partnership, when there is no showing that partners acted negligently or wrongfully while rendering professional services. Section 26(b) of the NY Partnership Law states that there can be no individual liability on the part of the individuals in the absence of any allegations in the Complaint of acts on the part of the individuals. Regency Found. V. Robson, No /06, 2006 WL NY Sup. Ct. 11/2/2006, partnership or its members are not liable for wrongful acts of partner for which he is not liable himself. Caplan v. Caplan, NY 445; Zito v. Fishbein Badillo Wagner Harding, Misc.3d NYS.2d 444. The FAC states that BB&A did not provide a written retainer agreement or engagement letter, and thus JAB is liable for an excessive fee when the facts show that the Plaintiffs were provided with the terms of the engagement, the calculation of the fee, as well as the scope of services and that here would be no fee if the transactions were not successful. Additionally, Plaintiffs and Plaintiffs attorney recognized the terms of engagement by follow-up s, acceptance of the services and written authorization of payment of the contingent fee and interest to BB&A, not JPB. No cause of action lies against an individual partner for legal malpractice, breach of contract and fraud with respect to a settlement agreement. In Salazar v. Sacco & Fillas LLP, 114AD 3D 745, 980 NYS 2D Partnership Law 26(b). Whoever immunizes from liability any partner in a partnership registered as a limited liability partnership who did not commit the underlying 6 8 of 29

9 wrongful act, except to the extent that Partnership Law 26(c) imposes liability on that partner where he or she directly supervised the person who committed the wrongful act and Partnership Law 26(d) imposes liability on that partner where he or she has previously agreed to assume liability on that partner where he or she previously agreed to assume individual liability for wrongs committed by another partner. JPB did not commit any wrongful or bad act, did not supervise any person that committed a wrongful act, or agree to be liable or assume liability for any wrongful act. There is no such claim in the FAC against BB&A, and no such claim against JAB individually. In Connolly v. Napoli Kaiser & Bern LLP, 12 Misc.3d 530 Supreme Court NY County, Defendants correctly note that under New York Law, Bernstein and Tannenhauser (like JAB and JPB in the within case), partners of a limited liability partnership, are not liable for the debts or liabilities arising either in tort or contract of the partnership solely by reason of their membership in the partnership. There is no claim by Plaintiffs that JPB did anything wrongful or committed a bad act. The New York Court of Appeals has recognized that the legislature s desire to enact liability protection for partners in LLP s that was the same as that accorded to shareholders of a professional corporation organized under the Business Corporation Law. In re Dewey & LeBoeuf,LLP BR Bankruptcy of 29

10 POINT II PLAINTIFFS MMS AND JANET WERE REPRESENTED BY SEPARATE INDEPENDENT COUNSEL AND MADE A FEE AGREEMENT IN WRITING WITH BB&A TO PAY LEGAL FEES AND DID PAY SPECIFIC AGREED UPON FIXED AMOUNTS OF CONTINGENT LEGAL FEES FOLLOWING THE SUCCESSFUL COMPLETION OF EACH OF THE 2007 TRANSACTIONS. A. There was a written fee agreement between the parties. Courts have recognized that a series of s and or an exchange of unsigned documents between a client and attorney are sufficient to form a formal agreement between them. E mails between law firm and client constituted an integrated fee agreement; e mails demonstrated that firm made offer to represent client in action for flat $1 million, plus a success fee equal to 20% of the amounts recovered above $4 million in that litigation, and that client accepted that offer. Kasowitz, Benson, Torres & Friedman, LLP v. Reade, 98 A.D.3d 403, 950 N.Y.S.2d 820,12 N.Y. Slip Op (1st Dep t 2012). E mail exchanges between law firm and corporation, by the plain language employed, established that law firm made an offer to provide legal representation to corporation at a rate of $350 per hour, and that corporation accepted the offer, as required for an enforceable contract. Law Offices of Ira H. Leibowitz v. Landmark Ventures, Inc., 131 A.D.3d 583, 2015 WL (2d Dep't 2015). Here, Plaintiffs had separate counsel, John Wagner, Esq., that both informed Plaintiffs of the contingent fees and made the offer on Plaintiffs behalf. The amounts of the success contingent fee, was commensurate with risk (Plaintiff Janet and her daughter Ellen were in a family feud with Mark and would not communicate or cooperate with each other, because of the volatility of the Schlanger family relations the transactions could have busted at any time, even at closing which would have meant that defendants would have not been paid for the many years of work performed). The 2007 Transactions included two family agreements (the Family Agreements ) and started in 2005 and continued to 2009 with several thousand hours over an almost four year period. BB&A and JPB were compelled to spend many days of almost full time for the commercially complex agreements and successful completion of the three asset sales. BB&A was able to complete 8 10 of 29

11 the sales as a result of the almost 14 year relationship and the extensive 40 year commercial transactional experience of JPB. The contingent fee agreement with the Plaintiffs followed a prior course of dealing which involved the successful completion and payment to Defendant BB&A for the commercial sale of Plaintiffs Honda auto dealership and commercial real estate owned by Plaintiffs. Plaintiffs separate independent attorney, on behalf of Plaintiffs, proposed the exact amounts of the fixed fee contingency ($525,000 and $530,000) to be paid to BB&A for the successful completion of each separate 2007 Transactions, and BB&A agreed to perform the necessary services and did perform and successfully complete the 2007 Transactions. Plaintiffs accepted the BB&A services, and authorized in writing the payment of the agreed upon contingent fixed fee for the sale of Volvo (Ford) and Rockrose closings. The following is a chronology of the documentary facts: (a) Plaintiffs were informed on November 6, 2006 of the calculation of the contingency success fee and the scope of work for the sale of the MMS Volvo dealership: Nov. 6, 2006 engagement letter, fax letter to JPB from M&M prepared by JPB explaining the calculation of the contingent fee of 10%, scope of service and that if the closing was not completed that there would be no fee. (b) from John Wagner to JPB dated March 6, 2007: Janet has proposed that your fees for negotiating and representing MMS and her in the Volvo and Rockrose deals equals $530,000 and $525,000, respectively for a total of $1,055,000. These amounts equate to the net figures we discussed. (c) from Bregg to Wagner dated June 13, 2007: Volvo Joe $530,000. (d) On September 10, 2007: You are hereby authorized to release the sum of $265,000 from the escrow account for your fees for the Ford sale and the balance of $265,000 on January 4, 2008, signed by Janet Schlanger, President. (e) from Wagner to Ellen and Janet dated January 15, 2008: 9 11 of 29

12 Looks like he has a clear right to the Ford money. (f) spreadsheet from Bregg to Wagner dated January 15, 2008: BB&A (Ford) $256,000. (g) dated February 6, 2008 by Janet to BB&A: MMS Ford Account interest due $9, BB&A. Please distribute the interest as per the spreadsheet. February 20, Signed by Janet Schlanger. (h) from Bregg dated January 25, 2008 to Wagner: The way it was left on the 15 th was that Joe was allowed to take the balance of the Ford transaction as per the signed letter. Additionally, Plaintiffs further released payment from the separate escrow BB&A fee account for the Rockrose contingent fee as well as the release in writing of the interest on the Rockrose fee. The Rockrose Contingent Success Fee Paid to BB&A 1. dated March 6, 2007 from John Wagner to JPB: Janet has proposed that your fees for negotiating and representing MMS in the Volvo and Rockrose deals equals $530,000 and $525,000, respectively, for a total of $1,055,000. These amounts equate to the figures we discussed. 2. from John Wagner dated October 12, 2007 to JPB: Analysis of available funds. Martin Motor Sales, th Avenue, as of October 12, 2007, acknowledging the authorization and payment of the sum of $262,500 on October 12, 2007, and the balance on January 4, 2008, as per the attached letter. 3. dated January 15, 2008 from Ellen Bregg to John Wagner: Baratta, Baratta & Aidala $262, dated February 6, 2008 signed by Janet Schlanger: MMS Rockrose account interest due as of January 5, 2008 BB&A $3, February 20, 2008: Please distribute the interest as per the spreadsheet. Thank you, Janet Schlanger of 29

13 5. Fax dated April 14, 2008: Please release $131,500 from you (Joe Baratta) escrow account. Signed Janet Schlanger. 6. from Ellen Bregg to John Wagner dated April, 2008, subject Comm JB: Joe has done everything except the closing booklet and Carr. As per your letter, we are releasing ½ when he got everything except Carr done. We still have $131,500 left. 7. April 14, from Ellen Bregg to JPB: I will have my mother sign an authorization releasing your half of the commission today. 8. Fax dated April 15, 2008: Please transfer the following cc: Baratta, Baratta & Aidala LLP, interest in the sum of $1, Janet L. Schlanger. 9. from Ellen Bregg dated April 14, 2008 to JPB, subject CARR: There is nothing further that can be done until our legal representative is back in town regarding CARR Electronics. 10. The parties clearly memorialized the agreement as to the legal fees to be paid. The allegation that there was no agreement is belied by the actions and the writings of the Plaintiffs. [T]he parties course of performance under the contract is considered to be the most persuasive evidence of the agreed intention of the parties. Generally speaking, the practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence The parties to an agreement know best what they meant, and their action under it is often the strongest evidence of their meaning. Federal Ins. Co. v. Americas Ins. Co., 258 A.D.2d 39, 44, 691 N.Y.S.2d 508 at 512 (1 st Dep t 1999) (citations and internal quotes omitted) dated Nov. 24, 2008 to John Wagner from Joseph P. Baratta, Subject, Martin Electronics & Security Systems Inc. Dear John, Have there been any further development with respect to the above. Since our recent telephone conversation we have not received any further word. Please advise as to the status of the release of the fee escrow for June 2, of 29

14 12. Oct. 15, 2008 John Wagner to JPB: The feedback I received regarding CARR is that you and I should sit tight for another week or so while things get worked out directly with Craig. 13. Nov. 11, from JPB to John Wagner, cc to Janet and Ellen Bregg: We have not had any discussion with Able Band or Mr. Chase, as we understood that you were working directly with Craig Malise s attorney in order to come to a resolution. Service contingent fee paid by Mark Schlanger to BB&A for Martin and Mark Realty Company LLC sale of 677 Eleventh Avenue, NYC to Rockrose. The terms of an agreement fixing an attorney's compensation may in effect be ratified or adopted. In re Reisfeld, 227 N.Y. 137, 124 N.E ; Reese v. Resburgh, 54 A.D. 378, 66 N.Y.S st Dep't 1900 ; People v. Schacht, 132 Misc. 560, 230 N.Y.S. 564 Gen. Sess Thus uncontested proof of performance by the parties of an alleged agreement memorialized in a letter belies a contention that the agreement was never accepted by one of the parties, since an offer may be accepted by conduct or acquiescence. Liner Technology Inc. v. Hayes, 213 A.D.2d 881, 624 N.Y.S.2d 284 (3d Dep't 1995). Binding agreement may be assembled from more than one writing, even if writings are not all signed by party against whom enforcement is sought. Nolfi Masonry Corp. v. Lasker Goldman Corp., 160 A.D.2d 186, 553 N.Y.S.2d 156 (1st Dep t 1990). Plaintiff stated a contract claim against corporate defendant for failure to pay legal fees, by alleging that he did the work at the request of the corporate defendant, at agreed upon rates. Gordon v. Credno, 102 A.D.3d 584, , 960 N.Y.S.2d 360, 362 (1st Dep't 2013). An engagement letter between MMS and BB&A, there exists a valid, enforceable contract. Viewing the acts of the parties objectively, it is clear that: (1) BB&A performed the requisite legal services, finalizing the sales of the Volvo dealership to MFLM and the combined M&M and MMS property to Rockrose; (2) MMS and M&M accepted those legal services, closed the transactions and accepted payment; and (3) the communications between BB&A and the various parties involved of 29

15 with MMS (chiefly Ellen and their attorney Wagner) clearly establish that MMS understood its obligation to pay legal fees, evidenced by (a) the fact that MMS proposed the fees that were paid, (b) the internal communications within MMS that referred to and discussed the precise amount of the legal fees, and (c) MMS s payment of all but the remaining $131,500 of legal fees by written release from the escrow account. B. The without recourse assignment of contingent fees by Mark to Janet in 2012 of the fixed fee contingency paid by Mark to BB&A five (5) years prior to the assignment obtained by Janet for the purpose of adding the claim to this case was Champerty. Plaintiff claims that Janet accepted the without recourse assignment of any potential fee claim by her son Mark in 2012, almost five (5) years after Mark agreed to pay and paid BB&A with his counsel present the exact amount of the fixed contingent legal fee that he agreed to. In fact, Janet and MMS signed and agreed to the 2007 escrow fee release signed by Mark. Full disclosure of Mark s fee agreement was specifically stated in the 2007 Family Agreement, as well as in the written release from escrow of the payment of that fee in Both were signed by Janet with her separate attorney present. The March 2, 2007 Schedule A specifically stated: Mark agrees to pay the sum of $800,000 to b for legal fees from his share of proceeds received as a result of the sale of his interest in Martin and Mark. The October 10, 2007 fee release of the $800,000 from the escrow account was signed by both Mark and Plaintiffs. Ellen Bregg testified at her deposition that Plaintiffs obtained the 2012 assignment from Mark for the specific purpose of adding the claim to the lawsuit, which is an admission of champerty. The taking of an assignment of a claim for the purpose of bringing an action thereon in violation of the statute, Jud. Law 489. Champerty may be asserted as a defense in an action brought by the assignee on the claim. Wainco Funding v. Logiudice, 199 A.D.2d 950, 606 N.Y.S.2d 86 (3d Dep't 1993); Frank H. Zindle, Inc. v. Friedman's Express, 258 A.D. 636, 17 N.Y.S.2d 594 (1st Dep't 1940); Empire Management Corp. v. Russo, 81 N.Y.S.2d 817 (Sup 1948); Seth-Howard Corp. v. Schupner, 77 N.Y.S.2d 892 (Sup 1948) of 29

16 C. Plaintiffs were informed in writing of the terms of engagement, the calculation of the contingent success fee and the scope of work, and are not entitled to disgorgement of legal fees because plaintiff fails to establish that such a remedy is warranted, as a matter of law. Plaintiffs contend in its FAC that it is entitled to disgorgement of legal fees to the extent that those fees are in excess of the reasonable value of their services, based on BB&A s failure to comply with the letter of engagement requirement under 22 NYCRR , and are also claiming unconscionability with respect to the fees paid. (A) Plaintiffs admitted that Plaintiffs received a notice of engagement letter, which described the method of calculating the contingent fee and the services to be performed and that if the sale of the asset was not successfully completed, that there would be no fee paid, (B) the failure to comply with 22 NYCRR is alone not a ground for disgorgement, and (C) the contingency fee arrangement as agreed upon is not unconscionable. Plaintiffs are not entitled to disgorgement of legal fees as a matter of law. (D) Furthermore, contrary to Plaintiffs allegations in its first amended complaint, and notwithstanding the lack of grounds for disgorgement, Plaintiffs and BB&A had a prior course of dealing, where Plaintiffs paid for legal services of the same general kind rendered previously, establishing an exception to the general engagement letter requirement under 22 NYCRR (b). (D) Finally, Plaintiffs are not entitled to disgorgement on the basis of breach of fiduciary duty because there was no such breach of fiduciary by BB&A or JPB as Mark was represented by his own independent counsel with respect to the 2007 Transactions, and, in fact, Janet obtained a $715,000 benefit over and above the proportionate amount that she should have received from the combined sale of the M&M and MMS real property to Rockrose. Further, MMS and Janet were also represented by their own separate independent attorney (Wagner) in the 2007 Transactions, and specifically with respect to the fee agreement. (1) An attorney s failure to comply with NYCRR is not alone a basis for disgorgement of previously paid legal fees, as a matter of law. The relevant case law has described the policy rationale behind the retainer agreement requirement. 22 NYCRR 1215 was enacted to aid the administration of justice by prodding of 29

17 attorneys to memorialize the terms of their retainer agreements containing basic information regarding fees, billing, and dispute resolution which, in turn, minimizes potential conflicts and misunderstandings between the bar and clientele. Seth Rubenstein, P.C. v. Ganea, 41 A.D.3d 54, 61 (2nd Dep t 2007). Indeed, the rule is designed to prevent a misunderstanding about fees which is the most frequent source of disputes between attorneys and clients. Feroleto, 6 Misc. 3d at 683. Feroleto goes on to state that, this is not about attorney discipline in any way, shape or form.... Id. These cases establish that the policy of the rule is preventative, not punitive. In fact, The language of 22 NYCRR contains no express penalty for noncompliance. Rubenstein, 41 A.D.3d at 60 (citing Beech v. Lefcourt, P.C., 12 Misc.3d 1167(A) (Civ. Ct. 2006); Matter of Feroleto, 6 Misc. 3d 680, 682 (Sur. 2004)); Barry Mallin & Assoc. P.C. v. Nash Metalware Co. Inc., 18 Misc.3d 890, 894 (N.Y. Civ. Ct. 2008); Jones v. Wright, 16 Misc.3d 133(A), *1 (N.Y. App. Term 2007). Plaintiffs were informed in November 2006 of the terms of the contingency fee, so that Plaintiffs claims that Plaintiffs were not aware of the contingency fees for the 2007 Transactions are not true. Plaintiffs provided the evidence of the notification and explanation of the fees which were in Plaintiffs possession. Following this non-punitive policy, the case law clearly establishes that 22 NYCRR 1215 is not a tool for disgorgement of already-paid legal fees for services rendered. Constantine Cannon LLP v. Parnes, 2010 WL (New York Cnty. 2010) ( Clearly, a violation of 22 NYCRR , in and of itself, is not a ground for the disgorgement or refund of already paid attorneys fees. ); Richard A. Kraslow, P.C. v. Logiudice, 31 Misc. 3d 141(A), *2 (App. Term 2011) (holding that a violation of 22 NYCRR , in and of itself, is not a ground for the disgorgement or refund of already paid attorney's fees ); Strobel v. Rubin, 24 Misc. 3d 144(A), *1 (App. Term 2009) ( Defendant-attorney's failure to comply with the rules on retainer agreements (see 22 NYCRR ) did not, in itself, provide a basis for the return of the retainer fee previously paid by plaintiff. ); Meyer, Suozzi, English & Klein, P.C. v. Jeroboam Co., Inc., 2007 WL (Nassau Cnty. 2007) ( Disgorgement is not required for failure to comply with written retainer rules ) of 29

18 The subjective intent of the attorney failing to provide a written retainer agreement is also relevant to the issue of fee disgorgement. As stated in Feroleto, where the failure to comply with is not willful, the penalty should be commensurate with the offense. It appears unduly harsh to unjustly enrich the [client] at the expense of the [attorney] where, as here, the [attorney] s failure to comply with the rule appears to be unintentional and the [client] concedes that she knew that counsel was to be compensated for his services. 6 Misc.3d at 684. Where an attorney s failure to comply with the retainer agreement rules is not willful or unintentional, it would violate the purpose of the law to impose a penalty, especially one as harsh as disgorgement, on the attorney. In the within case, there was compliance by Plaintiffs admission. As a matter of law, it would be in appropriate to require disgorgement of the fees MMS paid to BB&A due to the parties inability to execute a written retainer agreement. In fact, BB&A consistently attempted to finalize an agreement for the fees, and the documentation shows that BB&A closed the 2007 Transactions without objection by MMS, and that MMS accepted the almost $22,000,000 benefit, paid BB&A almost all of the fees plus interest after the closings were successfully completed. Plaintiffs were represented by additional independent counsel (Wagner) and had the option of not making payment, as the 2007 Transactions were completed and payment of the fees and interest on the fees by Plaintiffs were made by Plaintiffs after the completion of the 2007 Transactions. Rather, MMS insisted that BB&A perform more additional work in order to receive the last part of the remainder balance of the fees. MMS s insistence on BB&A continuing to perform additional legal services is proof that MMS was fully aware of the fact that it was responsible for paying for those legal services, and that it understood the amount of fees to be paid. Id. This fact proves that there was no misunderstanding between MMS and BB&A about the scope and cost of representation. Rubenstein, 41 A.D.3d at 61; Feroleto, 6 Misc. 3d at 683. Accordingly, even though the parties were unable to come to a consensus for the precise terms of the fees, it is evident that the purpose of 22 NYCRR has been fulfilled at least in part because MMS of 29

19 repeatedly recognized that it was responsible for paying BB&A for the legal services rendered, and recognized the precise amount to be paid. Rubenstein, 41 A.D.3d at 61; Feroleto, 6 Misc. 3d at 683. It has been noted that, while failure to comply with 22 NYCRR alone is not a basis for disgorgement, a client may seek to recover a fee already paid if it appears that the attorney did not properly earn said fee. Jones, 16 Misc.3d at *1; Constantine Cannon LLP v. Parnes, 2010 WL Plaintiff MMS alleges that the fees paid were, exorbitant, grossly in excess of the reasonable value of the services rendered and, under all of the facts and circumstances, unconscionable. (emphasis added). In theory, a successful case of unconscionability could have proven that the fees paid were not properly earned. This is not such a case. (2) The contingency fee arrangement for the sales (2007 Transactions) to Rockrose and Manhattan Ford was not unconscionable. In general, an unconscionable contract has been defined as one which is so grossly unreasonable as to be unenforceable because of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. King v. Fox, 7 N.Y.3d 181, 191 (2006) (quoting Gillman v. Chase Manhattan Bank, 73 N.Y.2d 1, 10 (1998)). This definition establishes that a plaintiff must establish a procedural element ( absence of meaningful choice ) and a substantive element ( terms which are unreasonably favorable to the other party ) to prove that a contract is unconscionable. Id. King goes on to state, A contingent fee may be disallowed as between attorney and client in spite of a contingent fee retainer agreement where the amount becomes large enough to be out of all proportion to the value of the professional services rendered. Id. (quoting Gair v. Peck, 6 NY2d 97, 106 (1959)). Even though a fee arrangement might in theory be found unconscionable, [i]t is inherently difficult to determine the unconscionability of contingent fee agreements because at the time of agreement, the precise amount of recovery is still unknown. As such, it is not necessarily the agreed-upon percentage of the recovery due the attorney or the duration of the recovery that makes a contingent fee agreement unconscionable, but rather the facts and circumstances surrounding the agreement, including the parties intent and the value of the attorney s services in proportion to the fees charged, in hindsight of 29

20 Id. at 192. (citations omitted). King further stated that perhaps the most important factor in determining whether a fee arrangement is unconscionable is, whether the client was fully informed upon entering into the agreement with the attorney. Id. This statement strongly suggests that the procedural element of unconscionability should play a dominant role in the analysis, even where the amount of the fees may be very large. Plaintiffs were fully informed of the amount of the fees, as Plaintiffs proposed the fees. More recently, the Court of Appeals in Matter of Lawrence addressed the issue of contingent fee unconscionability. Matter of Lawrence, 24 N.Y.3d 320, 340 (2014). In that case, an attorney and its client had a retainer agreement, arranging for a 40% contingent fee on any settlement the lawyer arranged for its client, less an allowance for certain hourly charges. Id. at 328. When the attorneys settled the case for over $100 million, the client refused to pay the fee, complaining that it was unconscionable. Id. The Court of Appeals ultimately held that the fee was neither procedurally nor substantively unconscionable. The court in Lawrence adopted the analysis from King for the unconscionability of contingent fee agreements. First addressing the element of procedural unconscionability, the court stated that the crucial issue was whether the client was fully informed upon entering the agreement. Id. at 337. The court went on to state that, even where there is no fraud or undue influence, the attorney must show that the client had full knowledge of all the material circumstances known to the attorney. Id. (citations omitted). In its analysis, the Court of Appeals found that the client fully understood the retainer agreement as it was formed. Id. Furthermore, Bregg scheduled the amount of the fees, and Plaintiffs own accountant (Gluckman & Gevirman) provided an accounting of the fees to Plaintiffs, such that there was no question as to her understanding of the fee. Id. Addressing the issue of substantive unconscionability in Matter of Lawrence, the court cited Gair v. Peck for the proposition that the amount of the fee, standing alone and unexplained, may be sufficient to show that an unfair advantage was taken of the client or, in other words, that a legal of 29

21 fraud was perpetrated on him. Lawrence, 24 N.Y.3d at 339 (citing Gair v. Peck, 6 N.Y.2d 97, 106 (1959) (internal quotations marks and citations omitted)). Against this standard, the court held that the fee, in excess of $40 million, was not substantively unconscionable. Moreover, the Court of Appeals ruled that the value of the legal services provided should be measured not merely by the time it devoted to the client s case, but also by the size of the recovery the attorney obtained for the client. Lawrence, 24 N.Y.3d at 340. The attorney in this case had recovered a settlement of over $100 million, well above what either the attorney or the client had expected. Id. In addition to the discussions of procedural and substantive unconscionability, both the King and Lawrence courts discussed the inherently risky nature of an attorney s contingent fee arrangement. Hence, the Schlanger family was not even talking to each other, talked through separate counsel and there was a substantial risk that the 2007 Transactions would have been delayed or in part never happen due to the family discord and bad feelings between the family. The court in King noted that In entering into contingent fee agreements, attorneys risk their time and resources in endeavors that may ultimately be fruitless. King, 7 N.Y.3d at 191. The Lawrence court, citing an opinion it had given for the parties several years earlier, noted that, the contingency system cannot work if lawyers do not sometimes get very lucrative fees, for that is what makes them willing to take the risk a risk that often becomes reality that they will do much work and earn nothing Lawrence, 24 N.Y.3d at 339 (quoting Lawrence v. Graubard Miller, 11 N.Y.3d 588, 596 (2008)). The court went on to comment, It is in the nature of a contingency fee that a lawyer, through skill or luck (or some combination thereof), may achieve a very favorable result in short order; conversely, the lawyer may put in many years of work for no or a modest reward. Id. at 340. Because contingent fee agreements carry with them substantial risk, and because the lawyers who willingly accept such terms must be compensated for bearing such substantial risk, Absent incompetence, deception or overreaching, contingent fee agreements that are not void at the time of inception should be enforced as written. Id. at 339. In sum, the Court of Appeals, through its detailed discussions in King and Lawrence, has made clear that lawyers of 29

22 contingent fee agreements should be evaluated for unconscionability primarily based upon client s full information of the fee ahead of time, and absent a clear showing of procedural unconscionability, the court should not disturb the fee, even when it is very large. The contingent fees in this case aggregated approximately 10% and followed the prior course of dealing with Plaintiffs. As for substantive unconscionability, Plaintiffs claims that the fee was unconscionable fails on its face. Against the precedent of Matter of Lawrence, there is no possibility that the fee in the case at bar might be held substantively unconscionable. In Lawrence, the fee arrangement called for a contingency percentage of 40%. In the case at bar, the contingency percentage was for approximately 10%. In Lawrence, the total amount of the award for the attorneys was over $40 million, on a settlement of over $100 million. In the case at bar, the award for BB&A is less than $1.7 million, on a total sale price of over $22 million. Finally, the attorneys in the Lawrence case worked for less than five months before settling the case. In the case at bar, BB&A worked for approximately two (2) years before closing the 2007 Transactions to earn their fees. Therefore, in light of the clear precedent set by Lawrence, there is no logical basis for the present fee to be found substantively unconscionable. The fee plaintiff complains is unconscionable is neither procedurally nor substantively unconscionable because MMS had independent counsel and was fully informed throughout the fee negotiation process, and because the fee is less drastic in both percentage and total amount than that in Lawrence, which the Court of Appeals held not to be substantively unconscionable. Therefore, because the fee is not unconscionable, the fee was properly earned by defendant BB&A; and in turn, because the fee was properly earned, there is no basis for disgorgement thereof under a failure to comply with 22 NYCRR s written retainer requirement. Jones, 16 Misc.3d at *1; Constantine Cannon LLP v. Parnes, 2010 WL of 29

23 (3) Plaintiffs were provided in writing with the terms of the calculation of the contingency fee and the scope of services on November 6, In addition, BB&A and MMS had a prior course of dealing, where BB&A represented MMS in the successful completion of the sale of the MMS Honda dealership and the successful completion of the sale of MMS real property to Con Ed, establishing the 22 NYCRR exception to the retainer requirement rule. This section shall not apply to (b) representation where the attorney s services are of the same general kind as previously rendered to and paid for by the client. Plaintiffs claim of disgorgement of fees agreed upon and paid are not grounds for disgorgement, and as Defendant BB&A has completed all of the expanded services demanded by Plaintiffs, BB&A is entitled to be paid the balance of the fees and interest that has been held in the designated BB&A fee escrow account for the past eight (8) years. POINT III PLAINTIFFS ARE UNABLE TO PROVE ECONOMIC DURESS BECAUSE PLAINTIFFS WERE NOT WRONGFULLY THREATENED, WERE NOT PRECLUDED FROM EXERCISING FREE WILL, AND FAILED TO PROMPTLY REPUDIATE THE AGREEMENT AFTER ITS EXECUTION. Plaintiffs were represented by separate independent counsel with respect to the contingent fee agreement. To repudiate an agreement on the ground that it was procured under duress, the party seeking repudiation must show both (1) a wrongful threat, and (2) a preclusion of the exercise of free will. In re Guttenplan, 222 A.D.2d 255, 257 (1st Dep t 1995). However with respect to economic duress, there are several limitations. A threat to exercise a valid legal right is not wrongful and cannot constitute duress. Madey v. Carman, 24 Misc.3d 1207(A), *3 (Nassau Cnty. 2006). Nor do financial pressures constitute economic duress. Id. Additionally, such party is deemed to have implicitly ratified the agreement if it is not promptly repudiated. Id. (holding that petitioners failure to take action for over two years after execution of agreement deemed ratification); Wujin Nanxiashu Secant Factory v. Ti-Well Intern. Corp., 14 A.D.3d 352, 353 (1st Dep t 2005) (holding failure to promptly repudiate agreement after execution deemed ratification); Kaminsky v. Herrick, Feinstein LLP, 59 A.D.3d 1, 13 (1st Dep t 2008) (holding plaintiff implicitly ratified agreement by waiting three years to seek rescission after of 29

24 execution); Livathinos v. Vaughan, 121 A.D.3d 485, 486 (1st Dep t 2014) (holding defendant s failure to promptly repudiate agreement warranted failure of duress defense); Morad v. Morad, 2 A.D.3d 626, (2nd Dep t 2006) (holding husband s three-year delay in seeking to set aside agreement barred him from raising issue of duress). Additionally, where a party seeking rescission under duress accepts benefits under the contract at issue, Livathinos, 121 A.D.3d at 486; Guttenplan, 222 A.D.2d at 257, or where a party makes payment on the agreement, Wujin, 14 A.D.3d at 353, that party s action is deemed to have ratified the agreement. In the present case, plaintiffs were not wrongfully threatened, and they were never precluded from exercising their free will. Rather, Ellen Bregg, in her deposition testimony, stated that they were never threatened by BB&A. Furthermore, plaintiffs were not precluded from exercising their free will because plaintiffs were the only ones with the legal authority to release funds to BB&A, pursuant to the Escrow Agreement. Contrary to plaintiff s FAC, BB&A never caused any fees to be paid to itself. Rather, all funds disbursed to BB&A from the escrow account were so disbursed by the written authorization of Janet Schlanger. Therefore, there is no feasible manner in which plaintiffs were wrongfully threatened, nor precluded from exercising their free will. Plaintiffs do contend, through deposition testimony, that they felt that they had no choice but to continue working with BB&A, otherwise risk putting the sales of the Volvo dealership and the properties to Rockrose in jeopardy. However, financial pressure such as this does not amount to economic duress. Madey, 24 Misc.3d at *3. Moreover, plaintiff s failure to raise any complaint about the transactions whatsoever for over three years after the transactions were executed precludes plaintiffs from alleging duress, for such a failure to rescind the agreement promptly is deemed an implicit ratification of the agreement. Guttenplan, 222 A.D.2d at 257; Wujin, 14 A.D.3d at 353; Kaminsky, 59 A.D.3d at 13; Livathinos, 121 A.D.3d at 486; Morad, 2 A.D.3d at Plus, plaintiffs accepted millions of dollars in benefits from the proceeds of the sales, Livathinos, 121 A.D.3d at 486; Guttenplan, of 29