Matter of Montgomery v. Montgomery, 64 N.Y.2d 96 (1984)

A client has the absolute right to discharge an attorney at any time; if the discharge is for cause, the attorney is not entitled to compensation, but if the discharge is without cause, the attorney is entitled to compensation on a quantum meruit basis.

Summary

This case concerns a dispute over attorney’s fees in an infant’s personal injury settlement. After a settlement was reached but before court approval, a conflict arose between the client and the attorney, Broder. The client alleged Broder was discharged for cause due to misconduct and extortionate fee demands. The Court of Appeals held that a hearing was necessary to determine whether Broder was discharged for cause. If so, he is not entitled to fees. If the discharge was without cause, his compensation must be determined based on quantum meruit, reflecting the reasonable value of his services.

Facts

An infant’s personal injury action was settled for $1,200,000. Before the settlement was approved by the court, a dispute arose between the plaintiffs (the infant and their representatives) and the trial counsel, Broder.
Broder moved to discharge the attorneys of record (Hinman, Straub, Pigors & Manning) due to a conflict of interest and sought an increase in his attorney’s fees from 33 1/3% to 50%, requesting that he be awarded all attorney’s fees.
The plaintiffs filed a cross-motion opposing any fee payment to Broder, claiming he was discharged for cause because of misconduct and extortionate demands for increased fees.
The record did not contain any denial of these allegations by Broder.

Procedural History

Supreme Court approved the settlement and placed 33 1/3% of the funds in escrow for attorney’s fees.
The court denied both Broder’s motion and the plaintiffs’ cross-motion, awarding Broder 60% of the original 33 1/3% fee and refusing to hear the plaintiffs’ evidence that Broder was discharged for cause.
The Appellate Division affirmed the Supreme Court’s decision without opinion.
The case was appealed to the Court of Appeals.

Issue(s)

1. Whether an attorney who is discharged for cause is entitled to compensation for services rendered.
2. Whether an attorney who is discharged without cause before the completion of services is entitled to compensation, and if so, on what basis.
3. Whether a hearing is required to determine if an attorney was discharged for cause before determining the attorney’s fee.

Holding

1. No, because an attorney discharged for cause has no right to compensation or a retaining lien.
2. Yes, because the attorney’s compensation must be determined on a quantum meruit basis.
3. Yes, because a determination of whether the discharge was for cause is necessary to determine the attorney’s entitlement to, and the basis for, compensation.

Court’s Reasoning

The Court of Appeals emphasized a client’s absolute right to discharge an attorney at any time. The court distinguished between discharge for cause and discharge without cause.
If the discharge is with cause, the attorney forfeits the right to compensation or a retaining lien. The court cited Matter of Weitling, 266 NY 184 and Marschke v Cross, 82 AD2d 944 in support of this principle.
If the discharge is without cause before the completion of services, the attorney is entitled to compensation, but the amount must be determined on a quantum meruit basis. This means the attorney is entitled to the reasonable value of the services rendered, not necessarily the full contract fee. The court cited Crowley v Wolf, 281 NY 59, 64-65 and Matter of Shaad, 59 AD2d 1061.
The Court noted that the plaintiffs alleged they discharged Broder on April 15, 1981, before the judicial approval of the compromise order, a necessary step in an infant’s action. They claimed the discharge was due to Broder’s personal misconduct and extortionate conduct.
Because of these allegations, the Court of Appeals determined that a hearing was required to determine whether Broder was discharged for cause. If so, he would not be entitled to any fee. If the discharge was without cause, the court would need to determine his fee based on quantum meruit. The court stated: “A hearing is required to determine if he was discharged for cause or, if he was discharged without cause before completion of the services, for a determination of his fee on the quantum meruit basis”.