Bass v. Bar Steel Construction Corp., 22 N.Y.2d 200 (1968)

Agreements between attorneys and clients are construed most favorably for the client, but this rule applies only when a true construction problem exists regarding the terms of the agreement.

Summary

Bass, an attorney, sued Bar Steel to recover fees for services rendered based on a retainer agreement. The dispute centered on the interpretation of a clause regarding fees for settlements obtained after a judgment. Bar Steel argued that a subsequent settlement, rather than the initial judgment, should determine the fee amount and that a portion of the settlement represented an undisputed claim subject to a lower fee. The Court of Appeals reversed the lower court’s grant of partial summary judgment for Bar Steel, holding that the retainer agreement contained ambiguities and triable issues of fact regarding the fee calculation method and the nature of the settled claims.

Facts

Bass, an attorney, entered into a retainer agreement with Bar Steel to prosecute claims against Merritt-Chapman & Scott Corp. and defend against counterclaims. The letter agreement specified a 20% fee on amounts recovered by settlement or judgment after trial commenced. Bar Steel’s president added a handwritten modification limiting the fee to 2% on “retainage” if involved. Bass secured a judgment of $863,540.92 for Bar Steel. While an appeal was pending, Bar Steel settled with Merritt-Chapman for $707,000 without consulting Bass. A stipulation was later introduced indicating that a portion of the settled amount was undisputed.

Procedural History

Bass sued Bar Steel to recover fees. The Supreme Court, Special Term, granted Bar Steel’s motion for partial summary judgment, concluding that Bass was bound by the modified retainer agreement and that the fee should be based on the settlement amount, with a lower percentage applied to the undisputed portion. The Appellate Division affirmed. Bass appealed to the New York Court of Appeals.

Issue(s)

1. Whether the retainer agreement unambiguously provided that the attorney’s fee should be calculated based on the initial judgment amount, even if a subsequent settlement occurred during the appeal process.

2. Whether a triable issue of fact existed regarding the parties’ intent concerning the 2% fee limitation for undisputed claims (the “retainage”).

Holding

1. No, because the retainer agreement’s language created ambiguity regarding whether the fee should be based on the judgment or the subsequent settlement.

2. Yes, because there was a dispute regarding whether the “retainage” provision applied to claims that were subject to litigation and the validity of a stipulation determining what claims were undisputed.

Court’s Reasoning

The court found that the retainer agreement was not clear regarding whether the fee should be calculated based on the judgment or the settlement. The clause stated that if a claim is settled after a judgment, 20% of the judgment would be paid as a fee. This raised a question of interpretation. The court noted that agreements between attorneys and clients are construed most favorably for the client but emphasized that this rule is only applicable when a genuine construction problem exists. The court reasoned that since Bass was retained for his expertise as a trial attorney, and the retainer agreement specifically excluded appellate representation, the agreement could be interpreted to mean that the fee was intended to be a percentage of the initial judgment. The court highlighted that the agreement’s language created a “material and triable issue.”

Regarding the 2% fee limitation, the court found that a triable issue existed concerning the parties’ intent. Bar Steel introduced a stipulation from Merritt-Chapman stating that there was no dispute over $307,050.51, although litigation was necessary to collect this amount. However, Bass attacked the stipulation, arguing that it was executed in consideration for the settlement agreement and did not provide a proper method for determining what sums were in fact undisputed at the time the retainer agreement was executed. Bass also contended that the 2% provision applied only to the extent that the “retainage” was separate and apart from any litigation. The court concluded that these conflicting contentions created a genuine issue of fact that could not be resolved on a motion for summary judgment. As such, the court reversed the order and remitted the matter to the Special Term for trial. The court noted that the original retainer included the following clause, “ where “ a claim is settled at any time after trial has commenced or a judgment is procured on that claim, 20% of such amount as is recovered by such settlement or by such judgment of that claim, shall be paid as and for a fee.”