[*2]BACKGROUND AND PROCEDURAL HISTORY

Plaintiff commenced this action pursuant to a summons and endorsed complaint filed December 15, 2017, seeking a judgment for $25,000.00, for the return of a retainer fee paid to defendants based on the allegation that the legal fees were not earned.

Dai & Associates PC (DA) appeared by counsel and filed an answer on March 19, 2018. The answer asserted affirmative defenses including lack of privity, and failure to state a cause of action. DA also filed counterclaims against plaintiffs for breach of contract, tortious interference, aiding and abetting breach of fiduciary duty and unjust enrichment. DA cross claims against Peter H McCallion (PM)for indemnification and contribution, breach of fiduciary duty, tortious interference and breach of contract.

PM, who is an attorney admitted to practice law in New York, appeared on his own behalf and on March 26, 2018 filed an answer, counterclaim and a reply to the cross claims.

PM has repeatedly defaulted in appearing in this action.

An initial court date was set for April 25, 2018. PM failed to appear on that date and the action was adjourned to August 6, 2018 and marked final as against PM.

On August 6, 2018, PM again failed to appear and the court (Kenney, J) issued a written order striking DM's answer based on his failure to appear and holding either party could move for a default judgment as against DM. The action was adjourned to October 22, 2018.

On October 22, 2018, plaintiffs moved for a default judgment as against DM. The motion was denied by the court, (Walker-Diallo, J) pursuant to a decision and order dated December 7, 2018. The court scheduled a further pre-trial conference for January 23, 2019.

The action was further adjourned from January 23, 2019 to June 13, 2019.

On June 13, 2019, a trial date was set for September 17, 2019.

On August 20, 2019, plaintiffs moved for an order precluding PM from submitting any evidence at trial based on his failure to comply with discovery. The motion was granted by the court (Dominguez, J) to the extent of an order which stated that DM would produce all documents by September 19, 2018, that depositions would take place on or before October 10, 2019 and setting a trial date for October 15, 2019.

DM failed to comply with the discovery deadlines set in the order. Instead DM submitted letter from a Dr. Howard Baskin stating that he had an emergency dental appointment on October 4, 2019, which might require subsequent appointments during work hours.

Based on this submission, on October 14, 2019, the court (Ramseur, J) issued an order extending DM's time to comply with discovery and adjourning the trial to December 4, 2019, with a final marking as against all parties.

On December 4, 2019, DM failed to appear for trial, instead he submitted a note from a doctor stating he had beEn seen by the doctor on December 3, 2019, and that he should be excused from court on December 4, 2019. There was no information as to what medical ailment required DM's absence from court.

The court declined to grant DMs application for an adjournment^[FN1] and on December 4, [*3]2019, the court held a bench trial as to the remaining parties and an inquest as against DM. The action was adjourned to December 9, 2019 for the submission of post trial memoranda. On December 9, 2019, the memos were submitted, and the court reserved decision.

The first witness to testify at trial was Selena Gil (SG). SG testified that she is the owner of Selena Gil, Inc. The nature of the business is that SG acts as a consultant for clients investing in high end jewelry. SG hired PM to resolve a dispute about money that had arisen with one of her partners and pertaining to her jewelry business. SG was referred to PM. SG had an initial phone conversation with PM and then she met with him the following day.

They met at the office of DA. PM presented SG with a retainer agreement to sign (Ex 1). The retainer agreement was on the letterhead of Dai & Associates, P.C. It was an agreement between DA and SG and her company, which PM signed on behalf of the firm. It states in pertinent part:

Dai & Associates, P.C. ("Dai & Associates" or the "firm") is pleased to accept the request of you and your company, Selena Gil, Inc. (The "Company") for legal representation." In accordance with the Rules of Professional Conduct and the Firm's procedures, this engagement agreement (the "Agreement") confirms the terms on which Dai & Associates will provide legal services to the Company.

Billing Matters

I will be the attorney in the Firm principally responsible for you and the Company's matters. The charge for our services is based primarily upon the then current hourly rates of our personnel performing the services (unless otherwise agreed in a separate written addendum to this Agreement). Other attorneys, non-lawyer professionals, and legal assistants, including personnel with lower rates, will work with me as appropriate. My current hourly rate is $650.00. Our billing rates and charges for all clients as revised annually. However, we reserve the right to revise them at other times during the course of our representation, with 30 days' advance notice to you. Our new rates will be applied to your and the Company's account.

A retainer fee of $25,000 shall be due upon execution of this Agreement, against which the foregoing rates, charges and expenses shall be billed.

...

We will provide a monthly statement with a brief description of each item of work. Monthly billings will also include expenses incurred in connection with each service matter. Expense include items such as a filing fees (sic), travel costs, delivery/messenger [*4]services, and photocopies. Certain of these charges may include an adjustment above cost for administrative expenses and overhead incurred by the Firm to provide the billed service or will be billed at fair market value, although in some instances the Firm may receive such items on a discounted basis. Disbursements in excess of $500 will normally be forwarded to you and the Company for direct payment.

...

The Firm reserves the right to decline to continue to provide services to clients who do not comply with this Agreement. You and the Company agree that the Firm may, at its election, and subject to withdrawal requirements as may apply, withdraw from this representation if you or the Company fails to comply with the term sof this Agreement. You and the Company agree not to contest the Firm's withdrawal from any court proceeding in such an event.

Pursuant to the retainer agreement, SG gave PM a check for $25,000.00. SG made the check payable to PM personally instead of the firm. PM told SG that this was due to a fee splitting arrangement he had with his partners. The check was issued by Selena Gil Inc. and was cashed by PM on August 4, 2017 (Ex 2).

SG had no further discussions with PM regarding the preparation of any documents and she never received any written work product from him.

On or about August 21, 2017, SG and PM met at the Metropolitan Club for lunch. SG told PM that she had resolved the issue with her partner and she did not want him to do any further work on the matter.

SG received only one statement from PM in late October or early November. The statement was again on letterhead that Dai & Associates PC at the top, and stated that from August 3 to October 31, 2017, PM worked 62 hours and that after application of the amount paid for a retainer there was an additional balance due of $15,300.00 (Ex 3). There was no break down or description of any kind of the work done, the specific dates or time spent just a flat number alleged due.

Upon receipt of this document, SG asked PM for an itemized statement. PM sent SG a "Statement for Services Rendered" dated November 7, 2017. This statement (Ex 4) alleged a total of 50 hours billed and a balance due of $13,350, but it did contain dates that the work was allegedly done, and a brief description of thE work done.

SG testified that PM had not provided her with any legal services and that he billed for things he never told her he would bill for and for research she never asked to have done.

PM had told SG that he may be able to bring her clients for the sale of jewelry. SG agreed that if PM brought her a client that resulted in a sale she would pay him a commission. Much of the billing on the alleged statement was not for legal services rendered but was related to PM's attempts to earn a commission by bringing SG a buyer for jewelry.

Defendant submitted text messages between PM and SG in evidence (Ex A). All of the communications between August 16, 2017 and October 10, 2017, pertained to PM's efforts to [*5]bring SG potential clients and none of them related to the provision of any legal services.

SG acknowledged that she did speak with PM about her legal matter on August 4, but it was not for 1.5 hours but only a few minutes, and the only documentation she provided to PM related to her partnership dispute consisted of some emails and text messages.

Dawei Gongsum (DG) testified for defendant. DG has been a partner at Dai & Associates PC since 2006. In the fall of 2017, DG was the managing Partner of the Firm.

DG testified that in July 2017, PM was introduced to the firm through a former client/friend, and that at the time PM was a partner at an investment banking firm. PM told DG that he was leaving the investment banking firm and that he had a client WERR, that was a Chinese company looking for a bilingual law firm. PM told DG that in order for him to bring the client to the firm he would have be listed as a partner. DG agreed and specified that he would be entitled to a 3/3/4 split and would get 30 percent of the fee as the originating attorney , 30 % as the working attorney and the other 40% would go to the firm.

DG reviewed the firm's procedures with PM. The firm gave PM an email address at the firm, a phone number at the firm and use of space within the firm including the conference room. PM set up one meeting with WERR and the firm but the firm never got any legal work from WERR. PM never brought in any other clients, besides plaintiff herein, and the firm never made any payments to PM.

The court finds that there was an agreement that PM was a Partner of the firm at the time the transaction took place with plaintiffs.

When DG learned of SG's request for a refund of the retainer, she confronted PM. DG testified that PM admitted that what SG said was true and that he had taken a $25,000 retainer from SG and deposited the money into his own account. DG said she tried to mediate the matter between SG and PM and asked PM to return the funds to SG. DG testified that she told PM he had not followed the appropriate procedures in bringing in SG as a client.

PM admitted to DG that the work he did was not legal work but was primarily trying to introduce prospective clients to SG. PM never submitted any time slips for billing work on SGs case. DG testified without credibility that she could not recall whether PM was listed on the firm's website as an attorney with the firm. The court also found DG's testimony that she was unaware that PM used the firm conference room to meet with any client except WERR as lacking in credibility.

Under New York State Law a client has an absolute right to terminate the attorney-client relationship at any time without cause, and the attorney may not sue that client for breach of contract (Demov, Morris, Levin & Shein v Glantz 53 NY2d 553).

Therefore once an attorney has been discharged by his client, the client is liable to pay only for the reasonable value of service rendered by him up to the time of discharge (Martin v Camp 219 NY 170).

It is undisputed that the on August 21, 2017, 18 days after their initial discussion, SG terminated the attorney client relationship between her self and the defendants. Most of the work done after that date was not for legal services, and not pursuant to the retainer agreement between the parties and defendants were not permitted to draw down on the retainer for the nonlegal work [*6]done after said date. Additionally, defendants were not entitled to continue billing after 8/21 as SG had directed that all legal work stop on said date.

Based on the Statement for Services Rendered submitted by DM (Ex 4), the court finds that the work billed on 8/9, 8/10, 8/14, 8/15, 8/16 and 8/21 was for non-legal services and pursuant to the oral agreement between DM and SG that if he found a buyer he would get a commission. While the description on some of these dates purports to relate in part to work on the dissolution, there is no division of time between the alleged legal work, and non-legal work and based on the foregoing the court disallows any charges from said dates.

The only competent evidence of any actual legal work done, was based on SG's testimony about an initial phone call, an initial meeting and some documents that were sent for review. The court finds that the value of the legal services rendered to plaintiffs prior to the termination by SG on 8/21/17 was 2.5 hours or a total of $1,651.25. The court finds that plaintiffs are entitled to a refund of the balance of the retainer paid.

The sole remaining issue pertains to the claims by DA that PM had no actual or apparent authority to bind the firm and that only PM should be liable for any judgment rendered herein. The court disagrees, and finds both actual and apparent authority. As noted above, the court finds that in August 2017, PM and DA had an oral agreement that PM was a Partner of the firm and had agreed upon the percentage of fees to be split between the parties.

Additionally, apparent authority of PM to act on behalf of the firm was created by the conduct of the firm, and it was reasonable for SG to believe when she met with PM in the firms conference room and signed a retainer agreement on firm letterhead that he was a Partner of the firm. The firm gave PM an email on its website for communication with clients, gave him a phone number to be contacted at the firm, allowed him to use the firm's facilities for representation of plaintiffs including the use of the conference room for the initial meeting, and use of letterhead and stationary. The court finds that DA not only held itself out as affiliated with PM but also had specific knowledge that PM would make use of this affiliation in the course of his dealings with clients (Stichting Ter Behartiging Van de Belangen Van Oudaandeelhoouders in Het Kapital Van Saybolt International BV v Schreiber 407 F.3d 34).

Even in this litigation, the responsive pleading filed by DA supports that inference. Paragraph 19 of the pleading states the firm had a contractual relationship with PM. Paragraph 25 of the counterclaim states that as a partner of DA, PM had a fiduciary duty to the firm. Paragraph 26 of the pleading states that PM breached his fiduciary duty to the firm by accepting payment from plaintiffs and not giving any of the fund to the firm. Paragraph 31 of the pleading states that in the event the court does not find the existence of a binding contract between the firm and plaintiffs , that plaintiffs have been enriched by the legal services provided by PM who was a partner of the firm.

The allegation that PM was a Partner of the firm and owed the firm a fiduciary duty is repeated in paragraphs 39, 40, and 48 (which even asserts a partnership agreement between the firm and PM).

The court also finds that DA is entitled to a judgment for indemnification against PM.

CPLR § 3019(b) provides in pertinent part:

A cross-claim may be any cause of action in favor of one or more defendants ... against one or more defendants .... A cross-claim may include a claim that the party against [*7]whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant.

The court finds that DA is entitled to judgment against PM for indemnification on the amount found due to plaintiffs. Additionally, DA's partnership agreement with PM provided that PM was to give DA 40% of any earned fee. Thus DA is entitled to judgment against PM for $23,348.75 plus $660.50 representing 40% of the fee actually earned by PM as a Partner of the firm on this matter.

Based on the foregoing, the court finds that plaintiffs are entitled to a judgment in the amount of $ 23,348.75 plus costs and interest from September 1, 2017 as against both defendants herein.

Dai & Associates PC is entitled to judgment against Peter McCallion in the amount of $24,009.25 plus costs and interest from September 1, 2017.

All other claims are dismissed with prejudice.

Finally, the court finds that the facts adduced at trial raise significant ethical issues that warrant further investigation, including but not limited to the excessive and improper billing by PM, and what type of account the funds given as a retainer were deposited. As such, a copy of this decision shall be forwarded to the Grievance Committee for the Ninth Judicial District.

This constitutes the decision and order of this court.

J.C.C.