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 In 325 East 83 Realty, LLC v. Fleming, the parties had been involved in a holdover proceeding in which the owner alleged "excessive noise" emanated from the tenants' unit.
After trial, the New York County Housing Court found that the disturbances were the result of the building's faulty construction and, since they prevailed, the tenants were thus entitled to an award of their legal fees.
When a hearing was held, the landlord challenged the propriety of the charges incurred and contended that tenants' attorney billed for "unrelated matters, unnecessary work, or excessive work."
Using the "lodestar method" -- which multiplies counsel's reasonable time by a reasonable hourly rate -- the Civil Court concluded that the amount of fees sought by the tenants' attorney required downward adjustment. While the attorney's' hourly rates were reasonable -- given his experience and the customary rate for similar services in Manhattan -- the court found the amount of time expended on the case to be "disproportionate, unreasonable," "duplicative, unnecessary and excessive."
The court noted this was a "simple holdover claim" that was litigated over two days, and even though counsel was informed that a post-trial brief wasn't required, the tenant's attorney spent 21 hours preparing one.
After examining the work performed, the court reduced the fee request from $51,141.11 to $21,451.02, and emphasized that while the counsel had performed the work and "did it well," the landlord wasn't required to "pay for the extravagantly excessive time devoted to this case."
Now that's some haircut!
 To download a copy of the Civil Court's decision, please use this link: 325 East 83 Realty, LLC v. Fleming
 In Gaisi v. Gaisi, Mark Hus wanted legal fees for securing his client a brokerage commission
Before the Gaisis filed for divorce, Mr. Gaisi entered into a brokerage agreement with Kirk Properties to sell certain property. After an initial deal didn't materialize, a Referee was appointed and a sale to the original purchaser resulted in “sizable proceeds” for Mr. Gaisi. Elizabeth Kirk-Blitzer, the president of Kirk Properties, sought the Referee to pay her a broker’s commission from those proceeds and eventually entered into a “Stipulation Releasing Brokerage Agreement,” which provided Kirk-Blitzer with $35,000 in satisfaction of all claims between Kirk-Blitzer and the Gaisis. The Westchester County Supreme Court then granted a request made by Mark Hus, Kirk-Blitzer’s attorney, that Gaisi pay $9,420 for Hus’s work to obtain the broker’s fee. Since the settlement did not provide for fees, Gaisi appealed to the Appellate Division, Second Department, which agreed that such sums may only be awarded when "authorized by agreement between the parties.” When a settlement fails to reserve such rights, any fee entitlement is deemed to have been waived. Hus must have been in a huff over that. To download a copy of the Appellate Division’s decision, please use this link: Gaisi v. Gaisi
Continue reading "ATTORNEY DENIED FEES" »
 Section 130-1.1 of New York State’s rules and regulations authorizes courts to impose costs and other monetary sanctions against any party or attorney engaged in “frivolous conduct.”
According to 22 NYCRR 130-1.1, conduct is frivolous if: (1) it is without merit and "cannot be supported by a reasonable argument for an extension, modification or reversal of existing law;" (2) its primary purpose is to delay proceedings or "harass or maliciously injure" another party; or (3) "it asserts material factual statements that are false." When considering whether there has been a possible violation of that rule, a court is required to examine the circumstances surrounding the party’s conduct and must consider -- among other things -- whether its frivolous nature was apparent, should have been apparent, or had been brought to a party’s attention. In 1050 Tenants Corp. v. Lapidus, a cooperative tenant was sanctioned under this Rule by the New York County Civil Court for falsely testifying at a nonpayment proceeding about the signing of a stipulation of settlement. Since the agreement’s enforceability was a focal point of the case, and the tenant was found to have asserted a “material factual statement” that was false, the court awarded costs to the cooperative. When the Appellate Term, First Department, affirmed on appeal, we doubt the tenant-shareholder sanctioned the outcome. To download a copy of the Appellate Term’s decision, please use this link: 1050 Tenants Corp. v. Lapidus
Continue reading "FALSE TESTIMONY SANCTIONED" »
 In Dell Inc. v. GJF Construction, the rules of suretyship came to Dell’s rescue in a convoluted case involving the recovery of unpaid rent.
Trinity Centre LLC owns a structure bordering the World Trade Center site. In October of 1995, Trinity leased three floors of its building to Plural, Inc., for a term ending on June 30, 2006. In 2002, at Plural’s request, Trinity leased two of Plural’s floors to GJF Construction Corporation until June 30, 2007 -- one year beyond the Plural’s original lease expiration date. This arrangement created a new lease between Trinity and GJF, and amended the existing lease with Plural. Under the terms of that new agreement, and because GJF was leasing the space at less rent than Plural had originally agreed to pay, Plural paid the difference between the new and old rental amounts each month. The contract also provided that Plural would be responsible for GJF’s unpaid rent. And, if GJF defaulted, Trinity’s rights were assigned to Plural, creating a surety relationship. On June 28, 2002, Dell executed a guaranty agreement obligating itself to Plural’s lease-related responsibilities. The document provided, among other things, that “Guarantor [Dell] will pay the Landlord [Trinity] any delinquent rent.” In August of 2004, GJF stopped paying rent and, on February 13, 2005, vacated the space, claiming that the premises were unusable since they had been permeated with toxins after the 9/11 attacks on the World Trade Center. Because Plural was liable for GJF’s unpaid rent and Dell had guaranteed Plural’s obligations, Trinity filed suit against Dell with the New York County Supreme Court. After paying Trinity $1,358,058.34, Dell then commenced litigation claiming GJF was required to reimburse Dell for the monies remitted to Trinity. The New York County Supreme Court found that, through the rules of subrogation, Dell had all the rights Trinity would have had to enforce the GJF’s lease. And, because GJF’s liability continued through June of 2007, and Dell had no obligation to mitigate damages, Dell could rightly seek to recover the monies paid to Trinity. The court dismissed GJF’s claims regarding the site’s toxic conditions since there is no “warranty of habitability” for commercial properties, and GJF leased the premises in “as is condition.” Additionally, GJF’s arguments were foreclosed by the fact that it entered into the lease after the September 11 attacks, and was aware of the conditions which existed at the time of the lease’s execution. In the absence of a triable issue of fact, Dell’s application for a money judgment in the amount of $1,358,058.34, and for an award of its legal fees and costs, was granted by the Supreme Court. As this case clearly demonstrates, you can expect hell if you mess with Dell. To download a copy of the Supreme Court's decision, please use this link: Dell Inc. v. GJF Construction ------------------------------ Dell Inc. and Dell Marketing USA were represented by Nicholas Caputo of Robinson Brog Leinwand Greene Genovese & Gluck, P.C.. Defendant GJF Construction Corp. was represented by Henry Bergman of Moses & Singer.
 Wouldn't you want to work for someone who pays for all of your expenses AND also allows you to pocket all the income you generate from your personal activities?
That's the "deal" attorney Stanley Schlein had with the City of New York until September 13, 2006, but there was a slight problem .... Apparently the City never agreed to that arrangement. While Chairman of the New York City Civil Service Commission (CCSC), Schlein would have the CCSC Office Manager perform "non-City tasks" on "City time." And, to that end, the Office Manager would use the CCSC's "computer, telephone, photocopy machine, and facsimile machine" to assist Schlein with matters exclusively related to his private law practice. In addition to assisting him with preparing litigation documents, the CCSC's Office Manager helped him with client correspondence and invoices. Yet another CCSC employee delivered packages, sent and retrieved faxes, greeted visitors and secured materials from Schlein's car. And, finally, Schlein admitted using a CCSC telephone to make some 2,000 "personal" or "law-practice related" telephone calls from January 2004 to September 2006. At some point, the Conflicts of Interest Board (COIB) learned of the abuses and commenced an investigation into Schlein's conduct. By a "Stipulation and Disposition," finalized last month, Schlein conceded that he had violated the City Charter and the Rules of the City of New York which preclude, among other things, use of a public servant's position to "obtain any financial gain, contract, license, privilege or other private or personal advantage, direct or indirect." Yet, despite all of his indiscretions, Schlein was fined a lowly $15,000. (Of course, the settlement documents are conspicuously silent as to the value of the services allegedly misappropriated or the income Schlein generated during the time that he purportedly abused his position with the CCSC.) $15,000? That doesn't cover a secretary's salary! What kind of penalty is that? Click these links to download copies of the COIB's Press Release (dated January 23, 2008) and the Stipulation and Disposition.
 In Sultan v. Connery, New York County Supreme Court Justice Marcy Friedman addressed an array of claims that had been filed against Sean Connery (of James Bond fame), his family, lawyers, and contractors for repair work performed on the Connerys' condominium. Playing the role of “Dr. No,” Justice Friedman dismissed a large chunk of the case and chastised the parties for their “slash and burn” tactics.
(We wouldn't have expected less from the former "spy.") The Sultans and Connerys share a two-unit condominium townhouse in Manhattan. In 2001, the Connerys undertook renovations to their unit and sought the Sultans’ approval to repair the roof. Eventually, the parties submitted their dispute to arbitration and the arbitrator allowed the Connerys to proceed with the work, but directed that the Sultans be compensated for damage incurred during the renovation process. Dissatisfied with that outcome, the Sultans filed a series of civil lawsuits and a summary eviction proceeding against the Connerys. (Those cases were dismissed for various defects.) The Connerys countered with six lawsuits of their own against the Sultans -- seeking to enforce the arbitration award, appoint a receiver, and evict the Sultans. Particularly galling to Friedman was the Connerys’ attempt to start a suit in Nassau County, rather than in Manhattan where the property was situated. And, the Connerys reportedly violated a court rule by failing to list all of the parties' related litigation on a form which had been filed with the court when one of the lawsuits had been filed. In this latest chapter of this saga, the Sultans sued the Connerys and their contractors for personal injury and property damage resulting from the 2001 repair work, and also asserted a claim against the Connerys’ lawyers for frivolous litigation practices. The Connerys, on the other hand, asked the court to dismiss the case, to prohibit the Sultans from filing additional litigation, and for an award of sanctions. While the Court dismissed most of the relief sought by the Sultans, either for failure to state a legally cognizable basis for relief or because the matters had been addressed in prior litigation, a few claims against the Connerys, and some of their contractors, were allowed to survive. Interestingly, the Court sanctioned the Sultans and their counsel for frivolous practices, and awarded attorneys’ fees to the contractors whose work had been performed prior to 2001. (Since a "time bar" or "statute of limitations" applied, any relief sought against those parties was not viewed as meritorious.) Justice Friedman declined to award attorneys’ fees to the Connerys, or to reimburse their counsel for the latter’s own defense costs. And, while the Court refused to prohibit the Sultans from further litigation, it ordered the parties to disclose all prior lawsuits to the court clerk should either side opt to file another case in the future. Finally, and most importantly, Justice Friedman urged the parties to mediate their differences in order to “restore normalcy to this most unfortunate situation in which the neighbors have wholly lost the ability to cooperate” with the other. While that was certainly sound advice, it ain't likely to bond ... James Bond. To download a copy of the Supreme Court's decision, please use this link: Sultan v. Connery ----------------------------- Special thanks to our friend, Gines Pasamonte, for flagging this case to us.
 In Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. v. Torino Jewelers, Ltd, a jewelry company retained the law firm of Eiseman, Levine Lehrhaupt, & Kakoyiannis (ELLK) to represent it, as counsel, in a federal lawsuit.
To that end, Torino signed a retainer agreement which provided for an initial payment of $25,000 and monthly payments which were not “anticipated” to exceed a total of $60,000 for the preliminary representation and the preparation and filing of a motion to dismiss a case which had been filed against the jeweler. The parties’ retainer agreement provided, in pertinent part, as follows: Should a fee or cost dispute arise between us concerning an amount between $1,000 and $50,000, you may select to resolve the dispute through arbitration proceedings in New York City in accordance with 22 NYCRR 137.
Torino signed the agreement and, on March 22, 2006, the underlying federal court case was dismissed. On that day, ELLK met with the jeweler and agreed that, as of that date, Torino owed ELLK some $49,424.80 in fees. (While Torino asserted that it had instructed the firm to stop all work, ELLK contended to the contrary.) On March 31, 2006, ELLK faxed Torino an invoice for $60,404.60. The additional $10,979.80 was incurred from March 22 to March 29, 2006, and the charges were itemized in a three-page breakdown which Torino refused to pay. When ELLK filed a lawsuit in the New York County Supreme Court to recover those monies, Torino moved for an order compelling the parties to arbitrate the dispute. The Supreme Court granted Torino’s motion, finding that arbitration is strongly favored and the parties had agreed to resolve any billing dispute in that manner. On appeal, the Appellate Division, First Department, was of the opinion that since $60,404.60 was the total in dispute, and that sum exceeded the $50,000 cap contained in the parties’ retainer agreement, arbitration was unavailable. The AD1, relying on Primavera Labs. v. Avod Prods., 297 AD2d 505, 505 [2002], would not order ELLK to submit to arbitration without evidence of some prior agreement, or an unequivocal intent, to do so. Since no such understanding existed, the AD1 reversed the lower court and remanded the matter to the New York County Supreme Court for further proceedings. We're guessing this was one gem Torino didn't treasure. To view a copy of the Appellate Division’s decision, please us this link: Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. v. Torino Jewelers, Ltd ------------------------ To view our related posts on this topic, please use this link: Arbitration
 In Townhouse Co. v. Peters, a nuisance holdover proceeding had been filed against Frances Peters.
Townhouse alleged that Peters’ apartment was so cluttered and unkempt, that eviction was merited. Peters countered that the condition had been remedied and agreed to allow Townhouse to inspect the unit in order to determine whether a cure had been effected. After two of those visits, Townhouse sought to end or “discontinue” the case. Interestingly, when the parties were unable to agree on the terms of the discontinuance, Townhouse asked the court for an order ending the case. The New York County Civil Court granted the motion, but conditioned the request upon Townhouse’s payment of Peters’ legal fees and costs. On appeal, the Appellate Term, First Department, disagreed with that result and vacated the fee award. The AT1 was of the opinion that "absent a showing of prejudice to tenant, landlord's motion to discontinue should have been granted unconditionally." Can't the incurrence of legal fees be a form of "prejudice?" And, was relief denied to the tenant because she was not free of guilt in this particular instance? Unfortunately, the decision fails to address those questions. We do know this: At this point, Townhouse is probably petered out. For a copy of the Appellate Term’s decision, please use this link: Townhouse Co. v. Peters
 Hollywood, that tinsel-strewn temple to American culture, has decided that its legal fees and costs are cutting into corporate profits.
Because lawsuits plague many movie and television productions, and the going rate for some attorneys can top $1,000 hour, Hollywood is turning to India, where legal counsel can be obtained for as little as $60-$100/hour. The legal services provided by the lawyers of that country range from the drafting of copyright clauses, processing visa applications for actors and directors, to opposing defamation charges filed against programs, like HBO’s controversial “Da Ali G Show.” But Hollywood ain’t alone. Microsoft outsources much of its patent research work to India, while General Electric has relocated its base base for legal compliance and research for two if its largest divisions, GE Plastics and GE Consumer Finance, to that country. Outsourced legal work was projected to reach a dizzying $163 billion in 2006, and the work is no longer exclusively “back office.” Lexadigm, a New Delhi-based firm, recently completed a brief applying the Fifth Amendment due process clause to a tax dispute which made its way to the U.S. Supreme Court. While in the bigger scheme of things we're talking about a relatively small fraction of our country's total legal work, the problem is the lack of transparency or public disclosure -- since many of these outsourcing firms are intensely secretive about their clientèle lists, fearful of reprisals from U.S. workers and consumers. But the lure of bargain-basement legal services is undeniable. There are reportedly some 200 million English-speaking, college-educated Indians in that country and their resumes are littered with JD’s and LLM’s from some of America’s top law schools. It remains to be seen whether our profession, as we now know it, can survive the assails of that other American institution ... the “free market.” 
 A colleague forwarded a two-page memo which appears to have been authored by Miguel R. Rivera, Sr., Associate General Counsel of Wal-Mart.
In a seemingly unprecedented move, the company has decided to tighten its belt on its escalating legal costs and, in turn, is hitting the nation's biggest law firms where it hurts most: their wallets. Objecting to the $160,000 annual salary for "inexperienced" first-year New York City lawyers, the company has imposed a "moratorium on across-the board rate increases" and indicates that it will only consider "reasonable, individual requests for rate increases for those attorneys ... who are performing at an exceptional level and whose experience and knowledge is adding substantial value toward meeting Wal-Mart's legal objectives." Who is to be the judge of what is "reasonable" and who are "exceptional?" Why, Wal-Mart, of course. Our favorite part of the memo reads as follows: The salaries that law firms choose to pay their junior associates are none of our concern. We have every reason to be concerned, however, about the impact of salary hikes on law firm billing rates. Based on the size and frequency of the rate increase requests that we have seen over the past three years, it appears that many of the requested increases are largely attributable to the steady, nationwide increase in junior associate salaries. In turn, it appears that that the steady climb in first-year associate salaries -- and the effect those annual adjustments have on salaries for more senior associates -- may also be contributing to the push in larger markets for partners to break what's been described as the "$1,000 per hour barrier."
In some respects, law firms secretly agree with Wal-Mart. Spiraling salary costs have gotten out of control and are in need of being contained. The income expectations of many young lawyers are out of whack with any reality we know or can comfortably embrace. And if this trend were to continue unabated, it would likely pose a very real hardship to smaller firms vying for some of the profession's best talent. (In addition, if firms must pay more in order to be competitive and retain talent, that inevitably translates into higher legal costs for clients, and makes representation of the "average joe" significantly less affordable.) Of course, it's hard to feel sorry for our friends at Wal-Mart. In 2006, the company reported some $11 billion in profits and its President and CEO, H. Lee Scott, Jr., took home some $10 million+ in salary, bonuses and perks. (How about a moratorium on executive compensation, Mr. Rivera?) It will be interesting to see how this all pans out. (If we were to venture a guess, we doubt Wal-Mart will tolerate any resistance from its outside counsel. After all, we're talking about a company whose slogans are: "Always low prices. Always." And, "Save Money. Live Better.") To download a copy of the memo, please use this link: Walmart memo (November 1, 2007)
 In Tortomas v. Andrade, Jodi Ann Tortomas and John Andrade were divorced in 2004, and according to a Suffolk County Supreme Court order Tortomas was permitted to move to Toronto with her son on condition that she'd pay for Andrade’s accommodations when he visited their child in Canada.
In November 2005, Andrade trekked up north to see his offspring, but Tortomas refused to cover the associated costs. The Suffolk County Supreme Court found Tortomas in violation of its order and granted Andrade’s request to “authorize disbursement to him from an escrow account the sum of $1,000, representing reimbursement for his hotel expenses for the visit in November 2005.” The court also granted Andrade’s request “to authorize disbursement to him from the escrow account the sum of $2,445 for costs and attorney’s fees associated with his motion to enforce the previous order of the court.” On appeal, the Appellate Division, Second Department, found that Andrade had properly been awarded his fees and costs. Adelante, Andrade! To download a copy of the Appellate Division’s decision, please use this link: Tortomas v. Andrade
 To the victor belong the spoils, except, of course, in landlord-tenant cases.
In First Ave. Village Corp. v. Harrison, a holdover case started against tenant Alexander Harrison was dismissed due the landlord's "incredible" testimony and failure to establish the existence of certain lease defaults alleged in its predicate notice. Upon dismissing the holdover, the New York County Civil Court granted the tenant's request for legal fees and also concluded that the landlord had engaged in frivolous litigation practices. While the Appellate Term, First Department, agreed that the case should have been dismissed, it did not believe that the landlord's counsel had engaged in sanctionable conduct nor that the tenant should recover his legal costs since the latter had engaged in "unauthorized" alterations and there had been "initial intransigence in responding to the landlord's demands for access" which resulted in "undue delay in resolving the disputed issues." So, even though the tenant's purported misconduct couldn't be established at trial, his "unclean hands" impeded his ability to recover fees. Does that make sense to you? For a copy of the Appellate Term's decision, please use this link: First Ave. Village Corp. v. Harrison ----------------------- *For our other blog posts on this topic, please use this link: Prevailing Party
 Sixteen years is a long time for a rent strike, but that's how long it's taken the case of Solow v. Tanger to reach resolution. (And, it still may not be over, if further appeals are taken.)
The New York County Supreme Court originally awarded the landlord legal fees in the amount of $652,141.94, plus interest calculated from April 4, 2004. On appeal, that award was reduced by the Appellate Division, First Department, to $290,737. Even though the case was a "contentious and protracted landlord-tenant dispute," the AD1 was of the opinion that the higher sum was "excessive" and a reduction "bearing a closer relationship" to the amount in controversy was appropriate.* So, here's the $361,000 question: If a case escalates out of proportion and a contentious adversary causes fees to exceed the amount in dispute, what is a litigant (or attorney) to do? Surrender? The AD1's rationale strikes us as completely unworkable and legally untenable. To download a copy of the Appellate Division's decision, please use this link: Solow Mgt. Corp. v Tanger (2007) _________________________ *In the underlying case, Solow was awarded over $326,000 in rent arrears. See Solow Mgt. Corp v. Tanger (2003)
In Slomin’s v. Franquiz, Slomin’s brought an action claiming that Jorge Franquiz had breached certain alarm installation and monitoring agreements that he had with the company. Apparently Franquiz had failed to pay all sums due under the contracts. The City Court of Middletown, Orange County, sided with Slomin’s, and awarded a judgment in the amount of $1,607.53. On appeal, the Appellate Term, Second Department, largely concurred with that outcome. The AT2 held that the lower court had properly determined that Franquiz’s failure to make all payments comprised a breach and, as a result, Slomin’s was entitled to recompense as a result. The AT2 pooh-poohed Franquiz’s argument that copies of the contracts produced at trial were illegible and improperly admitted into evidence. The court found the copies in question perfectly legible and admissible as business records, “which had been recorded and copied by [Slomin’s] in the ordinary course of its business.” But the AT2 slightly modified the lower court’s decision. "Since [Slomin’s] did not assert a claim for attorney’s fees in the complaint or at trial, the award in favor of [Slomin’s]” was reduced by $267.92, which represented the portion of the judgment awarded for such fees. What baffles us is how Slonim's got something it didn't ask for. 
Alarming, no? For a copy of the Appellate Term’s decision, please use this link: Slomin’s v. Franquiz
 It's been reported by most of the major media outlets, but just in case you missed it, some lawyers at top firms are now charging their clients a hefty $1000 an hour for their services.
Do I hear a ka-ching? Here's the version of the report that appeared in today's Wall Street Journal: Lawyers Gear Up Grand New FeesHourly Rates Increasingly Hit $1,000,
Breaching a Level Once Seen as Taboo By NATHAN KOPPEL
August 22, 2007; Page B1
The hourly rates of the country's top lawyers are increasingly coming with something new -- a comma. A few attorneys crossed into $1,000-per-hour billing before this year, but recent moves to the four-figure mark in New York, which sets trends for legal markets around the country, are seen as a significant turning point. On Sept. 1, New York's Simpson Thacher & Bartlett LLP will raise its top rate to more than $1,000 from $950. Firm partner Barry Ostrager, a litigator, says he will be one of the firm's thousand-dollar billers, along with private-equity specialist Richard Beattie and antitrust lawyer Kevin Arquit. The top biller at New York's Cadwalader, Wickersham & Taft LLP hit $1,000 per hour earlier this year. At Fried, Frank, Harris, Shriver & Jacobson LLP, also of New York, bankruptcy attorney Brad Scheler, now at $995 per hour, will likely soon charge $1,000. At large firms, billable rates have climbed steadily over the years, since 2000 rising an average of 6% to 7% annually, according to the law-firm group of Citi Private Bank, a unit of Citigroup Inc. But for some time, the highest-billing partners at top big-city firms have hovered in the mid-to-high $900 range, hesitant to cross the four-figure threshold. "We have viewed $1,000 an hour as a possible vomit point for clients," says a partner at a New York firm. "Frankly, it's a little hard to think about anyone who doesn't save lives being worth this much money," says David Boies, one of the nation's best-known trial lawyers, at the Armonk, N.Y., office of Boies, Schiller & Flexner LLP. A select group of attorneys began billing at that rate before this year, such as Stephen Susman, a founding partner of a Houston firm who has tried big-ticket cases around the country, and Benjamin Civiletti, a former U.S. Attorney General under President Carter and a senior partner at Washington, D.C-based Venable LLP. And in London, top attorneys bill at rates that, when converted, can hit almost $1,500 an hour. As a critical mass develops around fees of $1,000 an hour in New York, though, more firms may feel comfortable going to that level and beyond. "One-thousand dollars per hour has symbolic significance," says Robert Rosenberg, a Latham & Watkins LLP partner who bills $925 an hour. "But like the year 2000, it's just a number." Yet, many attorneys are still reluctant to charge $1,000 an hour. "There is a perception issue between $1,050 and $950," says Hugh Ray, a partner at Andrews Kurth LLP in Houston. "At some point, you look bad if you go too high." Mr. Boies says psychology in part has held him back from charging more than $880 per hour, noting, "When I started practicing law in 1966, my billing rate was considerably under $100." Law firms also derive comfort from running with the pack. "We prefer not to be market leaders when it comes to rates," says J. Gregory Milmoe, a bankruptcy attorney at Skadden, Arps, Slate, Meagher & Flom LLP in New York. Mr. Milmoe says in September his hourly rate will climb to $950. Firms' hesitation to breach the $1,000 mark shows that legal services aren't unlike other high-end products that sell at "just under" prices, like the $19,900 car, says Eric Anderson, a marketing professor at Northwestern University's Kellogg School of Management. "The sellers are worried that they will be perceived as extremely expensive." Some clients' reactions bear that out. Brackett Denniston III, the general counsel of General Electric Co., says the company has paid $1,000 per hour for "specialized" legal advice. Still, "that's a line we'd rather not see crossed," Mr. Denniston says. "A thousand dollars per hour is emblematic of the high cost of major law firms," he says. "More than rates, my greater concern is the overall inflation level" in legal costs. Thomas Sager, assistant general counsel of DuPont Co., says he recently balked when a New York lawyer cited $1,000 as his hourly rate. Instead, Mr. Sager says, he agreed to pay the attorney a flat monthly fee. "One-thousand dollars may be someone's choke point, but mine is actually a lot lower," he says. Still, some lawyers are confident they're worth $1,000 per hour, and that now's the time to break the barrier. "I haven't personally experienced resistance to my billing rates," Mr. Ostrager says. "The legal marketplace is very sophisticated." Law firms say the boosts aren't just about lining partners' pockets. They're partly a response to booming costs, which in recent years have included skyrocketing associate salaries -- first-year lawyers in many firms make $160,000 a year -- and expenses associated with geographic expansion. While it's hard to raise prices on standard legal work, for matters such as bet-the-company deals, intricate patent disputes, huge bankruptcies or complex antitrust litigation, firms often feel they can raise fees for name-brand partners without upsetting clients. Indeed, clients are often most cost-conscious about junior attorneys, believing they provide less value-per-dollar than senior counsel. Considering a major-league baseball player can make the equivalent of $15,000 per hour, "$1,000 for very seasoned lawyers who can solve complex problems doesn't seem to be inappropriate," says Mike Dillon, the general counsel of Sun Microsystems Inc. Hourly rates, of course, tell just part of the fee story. Firms occasionally discount their stated rates for top clients. And companies sometimes prefer to pay their lawyers a flat fee for each case or deal, believing it encourages more efficiency than billing by the hour. Plaintiffs trial lawyers often bill on a contingency-fee basis, earning a share of a settlement or verdict -- an amount that can dwarf top rates. "It represents an opportunity cost when I am working by the hour," says Mr. Susman, who last year raised his hourly fee to $1,100. He did it in part, he says, "to discourage anyone hiring me on that basis."
 If you are not named on a lease, haven't paid directly rent to the landlord, and/or, are not protected by some form of rent regulation, chances are the law will consider you to be a "licensee" -- someone whose right to occupy commercial or residential space can be terminated on as little as ten days' written notice.
In Rabney v. Adams, Marilyn Adams, a former tenant of an apartment, found out that her status was reduced to that of a mere "licensee," as a result of a 1998 settlement divorce decree wherein she had surrendered her interests in the unit. When Arthur Rabney, the named tenant of the apartment, sought to evict Adams, he filed a licensee holdover proceeding with the New York County Civil Court. Finding that Adams had relinquished her rights to the premises pursuant to the decree, both the Civil Court and the Appellate Term, First Department, concluded that she could now be removed from the apartment. In an interesting twist, even though Rabney was the "prevailing party" in the case, his request for legal fees was denied since there was no lease agreement between the parties and the provisions of the parties' divorce settlement did not govern the holdover proceeding (since the dispute "did not arise from any default under the divorce decree"). A former spouse as roommate. Interesting concept, no?* For a copy of the Appellate Term's decision, please use this link: Rabney v. Adams ---------------------------- *If Ms. Adams continued to occupy the unit since relinquishing the unit back in 1998, wasn't she really a "tenant-at will" or "at-sufferance," entitled to a 30-day termination notice?
 As we have previously reported, there continues to be a disturbing resistance by our appellate courts to award legal fees to a prevailing party, even when that reimbursement is clearly authorized by the parties' lease agreement.*
Although we have already expressed our concerns about this phenomenon, we couldn't resist writing about it again, particularly after we came across the Appellate Term's decision in East Midtown Plaza Hous. Co. v. Cannings. In that nonpayment case, after a cooperative was awarded some $4,419.00 in maintenance and additional-rent charges, it also sought to recover some $8,100 in legal fees it had incurred during the litigation's course. While the New York County Civil Court granted the landlord's request for fees, the Appellate Term, First Department, characterized the recovery as "manifestly unfair" and reversed. In this particular case, deficiencies with the building's multiple-dwelling registration (or "MDR") triggered "substantial delay and expense," and prevented the cooperative from quickly pressing its claim to completion. That, according to the AT1, militated against the grant of fees in the landlord's favor. A lone dissenter, Justice William P. McCooe was quite troubled by the request and a bit more vehement in his disapproval of the cooperative's conduct: The landlord transformed what should have been a garden variety summary non-payment proceeding into one requiring motions and a cross motion because of its misstatements as to the status of the building in the petition and the motion papers which misled the motion court to render an erroneous decision and waste judicial resources. A dismissal of the proceeding at that point for failure to file a multiple dwelling registration statement would have resulted in the tenant being the prevailing party ... The claim for attorneys fees is already twice the award and in large measure was caused by the landlord's conduct. The landlord should not be rewarded for its mistakes nor should the tenant be required to pay for them ....
While we understand that the fees associated with correcting the building's MDR status should not have been chargeable to the tenant, it remains unclear why the balance of the costs incurred by the landlord was denied -- and why not even a pro-rated portion of the owner's costs was awardable in this instance. Since the cooperative successfully recouped a money judgment against the tenant, we are of the opinion that a blanket denial of all fees and charges was far from a fair, equitable, or just result. To download a copy of the Appellate Term's decision, please use this link: East Midtown Plaza Hous. Co. v. Cannings -------------------------- *For our other blog posts on the issue, please click on the following link: Attorneys' Fees
 If you live in New York City, chances are that you have been subjected to a co-op board’s interminable and often arbitrary scrutiny (or know of someone that has undergone the ordeal).
Potential purchasers of a cooperative apartment must usually undergo an interview and secure the approval of the entity’s board of directors before the seller may transfer his/her proprietary lease and shares of stock in the cooperative corporation. And to the chagrin of many, there are currently very few regulations governing the process by which co-ops make these determinations. While discrimination laws prohibit decisions based upon “prohibited categories” including, but not limited to, race, creed, color, national origin, gender, age, disability, family composition, military status, citizenship status, sexual orientation, and marital status, since co-op boards are under no legal compunction to disclose the reasoning behind a rejection, violations of these laws are not readily uncovered. Critics claim that this silence discourages New Yorkers from seeking homes in cooperative apartment buildings, interferes with the housing market, and reinforces economic, racial, and other forms of segregation. Moreover, a rejected applicant must usually resort to a costly and time consuming lawsuit in order to find out why they were denied approval and even then, unless some form of “bad faith” can be independently established, the chances of securing the pertinent information can still be quite remote. There are additional pitfalls associated with this cloak of secrecy: sellers are unable to hold purchasers in default should the latter fail to cooperate with board requirements. By way of example, in Rosenthal v. Oakes, Oakes refused to return Rosenthal’s down payment on an apartment after the co-op board declined to consent to the apartment’s transfer. Since the board’s rejection was supposedly not attributable to any “bad faith conduct” on Rosenthal’s part, the New York County Supreme Court and the Appellate Division, First Department, both concluded that Rosenthal was “entitled to cancel the contract for the sale of the apartment and to the return of the escrowed down payment.” Arguably, disclosure of the co-op board’s reasoning might have triggered the seller’s ability to find the purchaser in breach and might have entitled the seller to retain the contract down payment. In response to these and other concerns, New York City Council Member Hiram Monserrate has sponsored a new bill (the “Fair and Prompt Coop Disclosure Law,” Intro 119) which would require co-op boards to disclose to prospective purchasers the reason(s) for a rejection. The bill proposes that whenever a co-op withholds consent to a sale, the purchaser must be given a written statement detailing the reason(s) for the denial. That statement must also include the number of applications received, as well as the number rejected, for the three year period preceding the decision. Under that law, the statement must be given within five business days of the co-op’s decision. Following a twenty day grace period, a non-compliant entity may be subject to fines, penalties, and legal fees.[i] In theory, the statement should convey sufficient information to enable the purchaser to remedy the deficiencies in an application or for the seller to avoid a future rejection of a subsequent applicant. While the bill is supported by two-thirds of the Council, it has met with considerable resistance from co-op boards and various council members, including Council Speaker Christine Quinn. Opponents claim that the new law will discourage people from serving on co-op boards, invite lawsuits and incite ill will. We agree. While some form of explanation is certainly better than none, we're of the opinion that the proposed requirements will likely cripple boards’ decision-making processes and open the floodgates to seemingly endless lawsuits. Fasten your seatbelts! For a copy of the Appellate Division’s decision, please use this link: Rosenthal v. Oakes
For a copy of the Fair and Prompt Coop Disclosure Act, please use this link: Int. No. 119
[i] Fines for first-time violations would range from $1,000 and $15,000. By the third infraction, fines may be as high as $25,000.
 If your lease is about to expire and you live in a free market (unregulated) apartment, or if you're a tenant of a commercial space, it is always best to assume you will have to leave on the agreement's end date, particularly if you don't have a written option or lease renewal in-hand.
Without an extension signed by your landlord, you can be sued for "holding over," that is, your landlord can start a special landlord-tenant proceeding asking a judge to order your eviction, direct that you pay the fair market value of the space during the period you remained in occupancy (after the expiration of your lease), and may further seek an award of the legal fees and costs that were incurred removing you from the premises. In 4446-50 Realty Inc. v. Rojas, the tenants, Rafel Rojas, "Jane" Oryden, d/b/a/La Mesquita Restaurant a/k/a El Cactus Restaurant, claimed to have a lease renewal which allowed them to remain in possession beyond their original May 31, 2001 expiration date. In an eviction proceeding started against them in the New York County Civil Court, the tenants were unable to produce an original copy of the renewal document and were otherwise unable to prove the existence of an extension (since the tenants' sole witness inexplicably refused to submit to cross-examination). Because the renewal document was found to be nothing more than a "draft agreement," which had never been countersigned by the landlord, both the Civil Court and the Appellate Term, First Department, concluded that the El Cactus Restaurant's eviction was appropriate. What is left unanswered by the decision is why it took this particular landlord some six years to get to this point? Are we missing some prickly details? For a copy of the Appellate Term's decision, please use this link: 4446-50 Realty Inc. v. Rojas
 Lawyers often spend months (or years) battling a case on a client’s behalf, with the matter often getting resolved shortly before trial. The terms of that resolution will usually be embodied in a written form known as a "settlement agreement" or "stipulation of settlement."
If they’re not careful, lawyers can also end up spending months (or years) battling what was meant by the words or phrases they employed in those settlement documents. By way of example, in Widewaters Property Development Co., Inv. v. Katz, Widewaters had sued Katz (and others) for violating a settlement agreement which required the defendants to correct certain soil and groundwater contamination. It was Widewaters’ contention that the settlement required the defendants to use their "best efforts" to complete the work, and that the defendants had breached that obligation. Defendants moved to dismiss the complaint and alternatively sought summary judgment -- a formal adjudication on the merits of the dispute, based solely on the court’s review of the submitted documents. The Plaintiff later moved to dismiss the defendant’s counterclaim which alleged "tortious interference with contract." The Onondaga County Supreme Court partially granted the defendant’s request by dismissing certain allegations that appeared in plaintiff’s pleadings, but otherwise denied the parties’ requests. Since the parties’ agreement failed to define what was meant by the term "best efforts," the Appellate Division, Fourth Department, affirmed the denial of summary judgment. The AD4 did not believe that that part of the dispute was resolvable by way of motion practice, since what comprises "best efforts" is often a "question of fact," requiring a formal hearing or trial. Interestingly, the defendant also sought to recoup its legal fees incurred in making the motion. While the parties’ settlement agreement provided that such fees were recoverable "to the extent such party prevails on the merits with regard to any litigation arising from or related to this Settlement Agreement," the appellate court did not believe that the dismissal of only a portion of the plaintiff’s complaint triggered an entitlement to recoup costs, particularly in view of the litigation's ongoing nature. Finally, the AD4 reversed the Supreme Court’s refusal to dismiss the "tortious interference" counterclaim. In the absence of meddling by a "stranger," or third party, that counterclaim was unsustainable. That concludes our best efforts to analyze this case! For a copy of the Appellate Division's decision, please use this link: Widewaters Property Development Co., Inv. v. Katz
 Shayne, Dachs, Stanisci, Corker & Sauer -- a prominent personal injury firm -- was sued by a former client for messing up a case.
Apparently, Bernard Rudolf was hit by an automobile while crossing a Merrick, Long Island intersection. A personal-injury lawsuit was later filed, and once the trial was concluded, Rudolf's counsel asked the judge to instruct the jury on a section of the law that was not really appropriate for the case. The jury returned a verdict finding Rudolf and the driver who injured him equally negligent (apportioning 50% fault to each) and awarded Rudolf about $127,500. Not satisfied with that result, Rudolf hired new counsel who moved for a retrial. Rudolf's attorneys argued that the wrong section of the law had been applied thus prejudicing the case's outcome. The Appellate Division, Second Department, agreed and a new trial was ordered. This time, the jury found the driver exclusively responsible for the incident and the case settled for $750,000. Despite this substantial recovery, Rudolph later sued Shayne, Dachs, Stanisci, Corker & Sauer (his original attorneys) for malpractice alleging that as a result of that firm's error he had been forced to pay legal fees and other expenses, and, had lost some $190,000 in interest on the monies that he would have originally recovered (had the $750K been paid to him in the first instance). The Nassau County Supreme Court responded with an award of $28,703.27 -- which solely represented the professional fees. On appeal, the AD2 reversed because in light of the $750K recovery, Rudolf had not suffered any "damages." The New York State Court of Appeals did not concur with AD2 and determined that Rudolf had not been made "whole" by the $750K he received, since $28,703.27 had been incurred to "correct" his original counsel's error. As for the lost interest, that theory was correctly rejected by our state's highest court as "pure speculation." But here is a quote from the decision that caught our eye: There is no basis to presume that a difference in the instructions on determining liability would have altered the jury's calculation of damages.
If that's so, then why find the original lawyers liable for $28K in fees and expenses? Rudolf got a second bite at the apple and luckily succeeded. (You'd think he'd count his blessings and leave well enough alone.) But what if he had achieved the same (or a worst) result? Would that have resulted in a draw? It seems that the court compelled the original attorneys to shoulder Rudolf's costs of securing a new trial largely because they had conceded committing the error. But that should not have been an operative factor nor made a difference. The way we calculate it, Rudolf did some $622,500 better after the second trial. That's not "damage," that's more like a windfall to us. Talk about having your cake .... For a copy of the the Appellate Division's decision, please use this link: Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer (AD2) For a copy of the Court of Appeal's decision, please use this link: Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer (C/A)
 James Sykes purchased a newly constructed penthouse apartment from RFD Third Avenue I Associates (RFD) for $3.9 million. Prior to closing, Sykes found a number of problems with the unit and a punchlist was provided.
RFD agreed to complete the repairs within thirty days and placed $75,000 in escrow to ensure the work's performance. If litigation ensued, the parties further agreed that "the prevailing party [would] be entitled to recover its legal fees and disbursements." A lawsuit alleging breach was filed and RFD eventually released the $75,000 (together with accrued interest thereon) to Sykes. Since the parties were unable to reach an accord on legal fees, the New York County Supreme Court assigned the matter to a special referee to hear and determine the issue. The referee was of the opinion that since the parties had settled the repair/escrow claim, neither side had prevailed and no award of fees was appropriate under the circumstances. On appeal, the Appellate Division, First Department, reversed. The AD1 concluded that the "true scope" of the dispute was whether RFD had "work[ed] diligently and use[d] reasonable good faith efforts to complete" the open items. Since it apparently did not do so, the appellate court was of the opinion that Sykes had "won" the case, even though he achieved that favorable result by way of a "stipulation rather than than a judicial determination." While we understand the general premise, we are not certain the AD1 called it right. Shouldn't courts be encouraging the resolution of disputes? If parties feel it is in their interests to resolve a dispute amicably, then the outcome should be viewed as a "draw" -- with each side absorbing its own fees and costs. Let's face it. More often than not, disputes are settled because of the perceived "nuisance value," particularly when the costs of litigation will exceed the amount in controversy. Since such resolutions are not always a concession that a suit was rightfully maintained or that the adversary's claim had merit, then why allow a mere settlement to trigger an entitlement to fees? We believe that exposing litigants to an opponent's fees disincentivizes participants from seeking or achieving closure earlier in the process. (That can't be a good thing.) Each side should bear its own costs unless and until there has been a formal adjudication of a dispute's merits. And, at that point, if an adversary has a right to recover fees, so be it. Let's make peace, not war! Onward! For a copy of the Appellate Division's decision, please use this link: Sykes v. RFD Third Avenue I Associates, LLC
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