Murtaugh v. Murtaugh, 74 N.Y.2d 48 (1989)
When a client discharges an attorney without cause and hires a new attorney, the discharged attorney may elect to receive compensation based on a fixed dollar amount for services rendered (quantum meruit) or a contingent percentage fee based on their proportionate share of the work performed.
Summary
This case addresses the proper method for determining attorney’s fees when a client discharges their attorney without cause and hires a new attorney, and the attorneys dispute the fee division after a settlement. The Court of Appeals held that the outgoing attorney could elect to receive compensation based on either the reasonable value of services rendered (quantum meruit) or a contingent percentage fee based on the proportionate share of work performed. The court emphasized that the agreement between the attorneys dictated the type of fee, not whether the outgoing attorney was the attorney of record or possessed a statutory lien.
Facts
Teresa Wong sustained severe injuries in a car accident. Her family initially retained attorney Edward Murtaugh on a contingent fee basis (one-third of the recovery). Murtaugh began work on the case, including initiating conservatorship proceedings and gathering evidence. Before Murtaugh filed a lawsuit, the family discharged him without cause and hired the Lipsig firm, also on a contingent fee basis. The attorneys agreed Murtaugh had a lien and the fee amount would be determined later. The Lipsig firm settled the case for $1.8 million.
Procedural History
The Supreme Court initially awarded Murtaugh 20% of the total attorney’s fee based on his proportionate contribution to the case. The Appellate Division modified this decision, holding that Murtaugh was only entitled to the reasonable value of his services ($35,000) because he was not the attorney of record and thus lacked a charging lien under Judiciary Law § 475. Murtaugh appealed to the Court of Appeals.
Issue(s)
Whether an outgoing attorney, discharged without cause, must be the attorney of record and possess a charging lien under Judiciary Law § 475 to elect a contingent percentage fee based on the proportionate share of work performed, as opposed to a fixed fee based on quantum meruit.
Holding
No, because the agreement between the outgoing and incoming attorneys, not the outgoing attorney’s status as attorney of record or possession of a statutory lien, determines the method of evaluating the fee. The outgoing attorney may elect between a fixed fee based on quantum meruit or a contingent percentage fee based on proportionate work performed.
Court’s Reasoning
The Court of Appeals stated that while a client has the right to discharge an attorney at any time, with or without cause, the discharged attorney is entitled to compensation. When the dispute is between the attorneys, the outgoing attorney may elect to take compensation based on a fixed dollar amount (quantum meruit) or a contingent percentage fee. The court disagreed with the Appellate Division’s requirement that the outgoing attorney must be the attorney of record to elect a contingent fee. The court reasoned that Murtaugh possessed a common-law retaining lien on the client’s file, securing his right to the reasonable value of his services. By surrendering the file in exchange for a contractual lien from the Lipsig firm, Murtaugh did not relinquish his right to a fee. The method of evaluating the fee (fixed or contingent) is independent of the security. The Court construed the language of the agreement, “determined at the conclusion of the litigation,” as evidencing an intent for a contingent percentage fee. “A fixed dollar fee based on the reasonable value of his services easily could have been calculated at the time of discharge without reference to the outcome of the litigation or the proportionate share of work performed by each lawyer.” The court noted that interpreting the agreement as providing only for a fixed dollar amount would mean that Murtaugh received no consideration for turning over his file. The court also invoked the principle that ambiguous contract terms are strictly construed against the drafter, Lipsig, Sullivan and Liapakis. Thus, the Court of Appeals reversed the Appellate Division’s order and remitted the matter for further proceedings to determine Murtaugh’s contingent percentage fee.