Captain Lori Albunio et al., Appellants,v.The City of New York, et al., Defendants, Mary D. Dorman, Nonparty-Respondent.BriefN.Y.February 18, 2014To be Argued by: LEON FRIEDMAN (Time Requested: 20 Minutes) New York County Clerk’s Index No. 113037/03 Court of Appeals of the State of New York CAPTAIN LORI ALBUNIO and LIEUTENANT THOMAS CONNORS, Plaintiffs-Appellants, – against – THE CITY OF NEW YORK, THE NEW YORK CITY POLICE DEPARTMENT, INSPECTOR JAMES HALL, Individually and as an Employee, and FREDERICK PATRICK, Individually and as an Employee, Defendants. ––––––––––––––––––––––– MARY D. DORMAN, Non-Party Respondent. REPLY BRIEF FOR PLAINTIFFS-APPELLANTS LAW OFFICE OF LEON FRIEDMAN, ESQ. Attorney for Plaintiffs-Appellants 148 East 78th Street New York, New York 10075 Tel.: (212) 737-0400 Fax: (212) 861-9015 APL - 2013 - 00097 Date Completed: September 3, 2013 TABLE OF CONTENTS Preliminary Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 COUNTERSTATEMENT OF THE CASE.................... 5 ARGUMENT I. NEW YORK COURTS SHOULD FOLLOW FEDERAL COURT INTERPRETATION OF FEDERAL CIVIL RIGHTS LA WS WHEN INTERPRETING SIMILAR STATE CIVIL RIGHTS LAWS A WARDING ATTORNEYS' FEES. . . . . . . 13 II. RETAINER AGREEMENTS THAT DO NOT EXPLICITLY PERMIT STAUTORY FEES TO BE ADDED TO THE JUDGMENT AMOUNT TO DETERMINE THE CONTINGENCY FEE SHOULD NOT BE INTERPRETED TO ALLOW SUCH A RESULT ........................................ 19 III. THE CASES CITED BY PLAINTIFFS SUPPORT THEIR POSITION THAT STATUTORY FEES SHOULD NOT BE ADDED TO THE SUM RECOVERED TO DETERMINE THE CONTINGENCY FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 IV. THE APPEAL FEES A WARDED TO MS. DORMAN SHOULD ALSO BE DEDUCUTED FROM THE CONTINGENCY AMOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 V. NO ADVISORY OPINION IS BEING REQUESTED . . . . . . . 33 CONCLUSION. . . . . . . . . .. ... . . . ... .. .. . . . . . . . ... . .. . . . . . . 33 TABLE OF AUTHORITIES CASES Albunio v. City of New York, 16 N.Y.3d 472,922 N.Y.S.2d 244 (2011) .............................................................. 15 Albunio v. City of New York, 35 Misc. 3d 1238(A) (Sup. Ct., N.Y. Cty., June 6, 2012) ................................. 29,30 Allen v. Riese Organizations, Inc .. , 106 A.D.3d 514, 965 N.Y.S.2d 437 (1st Dept. 2013) ............................................... 9 Ashwood Capital, Inc. v. OTG Management, Inc., 99 A.D.3d 1, 948 N.Y.S.2d 292 (1st Dept. 2012)(emphasis added) ................. 24,25 Matter of Aurecchione v. New York State Division of Human Rights, 98 N.Y.2d 21, 744 N.Y.S.2d 349,771 N.E.2d 231 [2002] ..................................... 16 Bates v.Kuguenko, 100 F .3d 961 (9th Cir. 1996) ................................................................................... 26 C.I.R. v. Banks, 543 U.S. 426 (2005) .................................................................................................. 2 City of Riverside v. Rivera, 477 U.S. 561 (1986) .............................................................................................. 3, 4 Cobb v. Miller, 818 F.2d 1227 (5th Cir. 1987) ................................................................................... 3 Cunningham v. County of Los Angeles, 879 F .2d 481 (9th Cir. 1989) ..................................................................................... 2 Emigrant Bancorp, Inc. v. Commissioner of taxation and Finance, 59 A.D.3d 30, 869 N.Y.S.2d 689 (3d Dept. 2008) .................................................. 18 Federal Insurance Co. v. International Business Machines Corp., 18 N.Y.3d 642 (2012) .............................................................................................. 21 11 F omuto v. Nisi, 84 A.D.3d 617, 923 N.Y.S.2d 493 (1st Dept, 2011) ............................................... 15 Fox v. Vice, 131 S. Ct. 2205 (2011) ............................................................................................. 3 Jacobson v. Sassower, 66 N.Y.2d 991, 499 N.Y.S.2d 381 (1985) ........................................................ 19,20 Kimel v. State, 76 A.D.3d, 188, 906 N.Y.S.2d 403 (4th Dept. 2010) ............................................. 15 Lowe v. Pate Stevedoring, Co., 595 F .2d 256 (5th Cir. 1979) ................................................................................... 29 McGrath v. Toys"R" Us, Inc., 3 N.Y.3d 421, 788 N.Y.S.2d 281 (2004) .............................................. 13, 14, 15, 16 Morgan v. Greater N.Y. Taxpayers Mutual Insurance Association, 305 N.Y. 243 (1953) ................................................................................................ 21 People v. Rodriguez, 77 A.D.3d 420,908 N.Y.S.2d 652 (1st Dept. 2010) ............................................... 17 Ross v. Douglas County, Nebraska, 244 F.3d 620 (8th Cir. 2001) ................................................................................... 28 Seligson, Morris & Neuburger v. Fairbanks Whitney Corporation, 22 A.D.2d 625, 257 N.Y.S.2d 706 (1st Dept. 1965) ............................................... 22 Shaw v. Manufacturers Hanover Trust Company, 68 N.Y.2d 172, 507 N.Y.S.2d 610 (1986) .............................................................. 20 Sorrenti v. City of New York, N.Y. County Index No. 126981/02 ......................................................................... 30 Spano v. Simendinger, 613 F. Supp. 124 (S.D.N.Y. 1985) ............................................................................ 2 iii Suzuki v. Yuen, 678 F .2d 761 (9th Cir. 1982) ................................................................................... 30 Talcott v. Bowen, 832 F .2d III (8th Cir. 1987) ................................................................................... 29 Trief v. Elghanayan, 251 A.D.2d 123,674 N.Y.S.2d 310 (1st Dept. 1998) ............................................. 20 U strak v. Fairman 851 F.2d 983 (7th Cir. 1988) ............................................................ 31 Veldarde v. Pace Membership Warehouse, 105 F.3d 1313 (9th Cir. 1997) ................................................................................. 26 Venegas v. Mitchell, 495 U.S. 82 (1990) ................................................................................ 11, 27, 28.29 WWW Associates, Inc. v. Giancontieri, 77 N.Y.2d 157,565 N.Y.S.2d 440 (1990) .............................................................. 24 Weaver v. State, 91 A.D.3d 758, 939 N.Y.S.2d 64 (2d Dept. 2012) .................................................. 17 Williams v. New York City Housing Authority, 61 A.D.3d 62,872 N.Y.S.2d 27 (1st Dept. 2009) ................................................... 15 Williams v. Roberts, 904 F.2d 634 (11th Cir. 1990) ................................................................................... 2 Zakrzewska v. New School, 14 N.Y.3d 469,902 N.Y.S.2d 838 (2010) ........................................................ 15,16 IV Preliminary Statement The answering brief of Non-Party Respondent Mary Dorman is significant for what it did not say. It does not cite a single case from any jurisdiction, state or federal, that supports her position in this litigation. Other than the decision appealedfrom, no court has ever held that statutory fees should be added to the client's final recovery to determine the appropriate contingency amount payable to an attorney, unless specific language to that effect is contained in the retainer agreement. It is certainly true that attorneys can request that the statutory fees be added to a final judgment to determine the contingency amount. They can insist on specific language in the retainer agreement requiring that result. See discussion in Petitioners' Opening Brief "POB" at 17-18,25. But without such specific language, federal courts have concluded that a retainer agreement that requires that a client pay the attorney one third of the "total amount recovered" "damages recovered" "recovered by suit" does not allow the attorney to add the statutory fees to the judgment award to determine the contingency fee. (See discussion in "POB" at 25-28). The result must be the same if the retainer agreement specifies that the contingency amount is based on the "sum recovered," as in this case. There are good reasons why the federal courts have come to that conclusion and why this Court should follow that result. Untutored clients would not 1 understand that general terms in a retainer agreement such as "sum recovered" includes totally unrelated concepts, such as statutory fees which are nowhere mentioned in the agreement. Contrary to assertions in the answering brief, plaintiffs made very clear that they did not understand there would be such an addition. They strongly objected to Ms. Dorman's claim (made at a later time) that she was entitled to do so. (R, 61, 65, ~ 8). Allowing attorneys to add those fees to any judgment to determine their fees could lead to overreaching and serious ethical concerns. In addition, the answering brief nowhere disputes that absurd results can result from the interpretation offered by the courts below. Under an ordinary retainer agreement requiring the client to pay one third of the "sum recovered" or "damages recovered," what happens if an attorney applies for fees, and the statutory fees awarded exceed the damage award? The Supreme Court has noted: "Sometimes, as when the plaintiff seeks only injunctive relief, or when the statute caps plaintiffs' recoveries, or when for other reasons damages are substantially less than attorney's fees, court-awarded attorney's fees can exceed a plaintiffs monetary recovery." C.I.R. v. Banks, 543 U.S. 426, 438 (2005). 1 I See e.g. Spano v. Simendinger, 613 F.Supp. 124 (S.D.N.Y. 1985)(damage award of $2,500 and fee award of $62,078); Cunningham v. County o/Los Angeles, 879 F.2d 481 (9th Cir. 1989)(settlement of$5,000 and fee award of$12,000); Williams v. Roberts, 904 F.2d 634 (11th Cir. 1990)($25,000 damage award and $34,488 fee 2 Civil rights cases allow citizens to act as "private attorney generals," vindicating important rights against government actors. As the Supreme Court has noted, "When a plaintiff succeeds in remedying a civil rights violation, we have stated, he serves 'as a "private attorney general" vindicating a policy that Congress considered of the highest priority.' [citation omitted] . .. A civil rights plaintiff who obtains meaningful relief has corrected a violation of federal law and, in so doing, has vindicated Congress's statutory purposes." Fox v. Vice, 131 S.Ct. 2205, 2214 (2011). But the final judgment awarded in those cases may not include a large damage award. If the amount of statutory fees is automatically added to the total recovery to determine the appropriate contingency fee to be paid to the attorney, as the courts below held, a strange and bizarre outcome can occur. In our opening brief, we offered as an example, the case of City of Riverside v. Rivera, 477 U.S. 561 (1986) where the damage award was $33,350 and the attorneys' fee award was $245,456. (POB at 28). Under our analysis, assuming that a standard contingency agreement had been signed, the lawyer would be entitled to only $11,126 from the client -- one third of$33,350. Since the statutory fee award ($245,456) was greater than that sum, no fee would have to be paid. But under Ms. award); Cobb v. Miller, 818 F.2d 1227 (5th Cir. 1987)($12,300 damages and $23,708 fee award). None of these cases discuss contingency agreements related to the award. 3 Dorman's analysis, a court must add the $245,456 to the $33,350 for a total of $278,806 and the lawyer was entitled to one third of that total or $92,935. So the client would have to surrender his entire award (of $33,350) and pay an additional $59,585 to the lawyer! Nowhere does the answering brief challenge that analysis. Nowhere does the answering brief offer any limitation to the results noted above. That by itself requires that the decision below must be reversed. Ms. Dorman's brief also remarks: Thus, according to Plaintiffs, they should receive the full amount of the verdict recovered from the trial, a total of $1.55 million ($789,279 for Connors and $769,958 for Albunio, including interest), while Ms. Dorman's compensation should be limited to the statutory fees for her trial and appellate work, and nothing else. (Non Respondent's Answering Brief "NRAB" at 5)( emphasis added). But the brief fails to inform the court of the total amount of statutory fees awarded. Why did it hesitate to do so? Because the statutory fees for both trial and appellate work was $616,403, far above the $517,078 contingency amount? 2 Ms. Dorman's brief claims in footnote 3 that "Plaintiffs also claim that even the disbursements and pre-judgment interest on the statutory fee should be deducted from the verdict," citing Plaintiff s brief at 6. No such claim is made on that page. The record shows that in addition to the $387,491 that Ms. Dorman was awarded for her fees, the court also ordered that $17,070.04 in disbursements be paid. RIO, n.3. 4 COUNTERSTATEMENT OF THE CASE In her description of the facts of this dispute, Ms. Dorman's answering brief makes a number of errors. The brief suggests and implies that the plaintiffs were informed from the start that statutory fees would be "added to the pot" to determine the contingency amount. The record does not support that assertion. The brief states that Ms. Dorman "explained the terms of each of the retainer agreements with each of the Plaintiffs prior to their being signed and on a number of other occasions and ... they expressed no disagreement." (NRAB at 6). But the brief does not specifically claim (except in one confusing passage) that Ms. Dorman "explained" that statutory fees would be added to any sum recovered to determine her fee, only that she explained the "terms" of each retainer agreement. The brief then states: "when Defendants appealed the judgments to the Appellate Division, she again explained to both Plaintiffs that the statutory fee 'went into the pot' as part of the total recovery for contingency purposes and that neither of them disagreed." Id. (emphasis added), citing R23-24, ~ 7, 12-16. That latter statement, including the word "again," can only be interpreted as claiming that at the time the original retainer agreement was signed, Ms. Dorman stated that statutory fees would be added to the pot. But if that were so, why wasn't a specific written provision to that effect included in the retainer agreement? 5 The brief then states: "The record reflects that Ms. Dorman explained the terms of the retainer agreements to Plaintiffs at the time they were signed," citing R23. (NRAB at 6, n 4.). Once again, the brief does say directly that she explained the issue of adding the statutory damages to the judgment, only that she explained "the terms of the retainer agreement," which could refer only to the requirement that she was entitled to one third of the damages recovered. The brief asserts at a later time: "Neither did they [the plaintiffs] request an evidentiary hearing to dispute Ms. Dorman's statements that she had explained the terms of the retainer agreements to Plaintiffs before they signed them and subsequently." (NRAB at 8)( emphasis added). Once again, the statement implies that adding the statutory fees to the final judgment was "explained." But it does not say so directly. The brief makes another veiled allusion to the claim that fees were supposed to be added to the verdict. "Ms. Dorman argued that she and the Plaintiffs had plainly intended to include the statutory fees as part of the sum recovered for contingency purposes ... "(NRAB at 9)(emphasis added). The brief also states: "if Plaintiffs disagreed with the terms of the retainer agreement when Ms. Dorman explained it, it was incumbent on them to raise those disagreements at that time and not several years later," (NRAB at 36)(emphasis added). 6 The brief also states: "In this case, Ms. Dorman has made clear her intent at the time she signed the retainer agreement - that any statutory fees would be added to, not deducted from, the verdict for contingency purposes. The plain language of the retainer agreements forbids deducting statutory fees from either the 'sum recovered' or from Mr. Dorman's contingency fee. Ms. Dorman stated explicitly that she explained these terms to Plaintiffs at the time they signed the retainer agreements in 2005, and thereafter (R23-25)" (NRAB at 41)( emphasis added). Thus five separate times, the brief claims that Ms. Dorman "explained the terms" of the retainer agreement to the plaintiffs, but the brief implies but never explicitly states that the "explanation" included the question of adding statutory fees to the final judgment. It was only on the last mention of this issue (on NRAB p. 41) does the brief more explicitly seem to say (the words are not clear since they deal with retainer agreements, plural) that she did make such an explanation before the first retainer agreement was signed. However, the record is to the contrary. Nowhere in the cited paragraphs of Ms. Dorman's affidavit (R23-24, ~ 7, 12-16) (R 23-25) that allegedly support this claim, does Ms. Dorman actually assert that she informed the clients -- at the time they signed the initial retainer agreement -- that there would be such an inclusion. In one citation (R 23, par. 7). Mr. Dorman states that the plaintiffs signed the retainer agreements "after discussions regarding the terms." But she does not say 7 that the terms included her plan to add the statutory fees to the "pot." Indeed her affidavit says the opposite. Only when the appeal to the Appellate Division was discussed, did she claim that she mentioned statutory fees being part of the total recovery. Only at that point, she states, did she tell the clients that the statutory fees would be "added to the pot." She notes: "At that time we first discussed how the initial judgments (if we were successful on appeal) would be distributed. I advised both of them in person that the fee award would be 'added to the pot' as a total recovery subject to the two/thirds one third distribution. Neither expressed any disagreement." (R24, par. 12) (emphasis added). If this was the first time that the division of proceeds was discussed, it would have to be the first time that the question of statutory fees being added to the recovery was discussed. 3 Thus the record shows (as opposed to the allegations in the answering brief) that, at the time of the initial retainer, there was no discussion of statutory fees being "added to the pot." If there was such a discussion, why was her supposed definition of "sum recovered" not included in the retainer agreement? Ms. Dorman's brief also claims: "They [the plaintiffs] did not deny that Ms. Dorman had explained fully to them her intent to add the statutory fees for the trial 3 As explained in the text, Plaintiffs dispute Ms. Dorman's contention as to the time of this discussion. Lieutenant Connors asserts that the discussion at the time of the Appellate Division appeal related to adding the interest award to the contingency amount, not statutory fees. (R65, ~ 8). 8 to the amount of the verdict at the time of the appeal to the Appellate Division, or they did not disagree;" (NRAB at 7). 4 But the Record shows that both Captain Albunio and Lieutenant Connors did deny that assertion. They state in their affidavits that the first time Ms. Dorman made such a claim was after this Court's final judgment upholding the verdict. The Court of Appeals decision upholding the judgments below was handed down on March 3 1, 20 11. We then knew the judgments in our favor would be paid. It was at that point that Ms. Dorman advanced his theory that the fee award would be added to the judgments in our favor to determine her contingency fee. We strongly object to that analysis. (R61, 65, par 8.)(emphasis added) Thus the answering brief misstates the record when it claims: "They did not state, or even suggest, that they expected or understood any fees to be deducted from the contingency fee, or that they were not aware of the potential for a statutory fee award." (NRAB at 7). But the record shows that they did not 4 The answering brief claims in a footnote that Ms. Dorman explained what the initial retainer agreement meant before the appeal to the Appellate Division. Since the parties signed new retainer agreements after that explanation, the brief asserts, this mean that they ratified Ms. Dorman interpretation of a different and earlier retainer agreement. NRAB at 35, n. 9. But there is nothing in the retainer agreements on appeal that in any way deals with the meaning of the earlier agreement. Further this case does not remotely meet the legal rules on ratification of contracts. "Ratification occurs when a party accepts the benefits of a contract and fails to act promptly to repudiate it." Allen v. Riese Organizations, Inc .. 106 A.D.3d 514, 517,965 N.Y.S.2d 437, 440 (1 st Dept. 2013). Here, the clients accepted the "benefits" of the original contract and are not seeking to repudiate it. They are arguing that the contract by its own terms did not have the meaning that Ms. Dorman attributed to it. 9 understand that statutory fees would be "added to the pot." If they had such an understanding, they would not have "strongly objected to that analysis" at a later time. Ms. Dorman also claims that if she had not applied for fees, "Connors would have received $520,852, Albunio would have received $513,305 and Ms. Dorman would have received $517,305." According to Plaintiffs, "the net result of Ms. Dorman's application for fees would have been to decrease her own recovery by $129,000." (NRAB at 5). That is absolutely incorrect. The net result of Ms. Dorman's applying for fees was that she received $99,098 more than the contingency fee, as explained below. It is true that if Ms. Dorman had not applied for fees, the contingent amount would have been $1,551,237. Ms. Dorman would have been entitled to one third of that or $517,079. But she applied for statutory fees for her trial work and received $379,491 and then applied for appeal fees and received an additional $228,912 for a total of $616,403. That sum is $99.098 more than the contingency fee alone. It is our contention, as all the federal courts have held (without specific language to the contrary), that the statutory fees must be subtracted from the contingency amount due. (POB at 19-21). That is true since attorneys are entitled to the higher of the contingency amount or the statutory fees but not both. If the statutory fees are greater than the contingency fee, then the attorney gets no further 10 contribution from the client. If the contingency amount is greater, then the client must make up the difference. But the lawyer still gets, at a minimum, the full amount of the agreed upon fee. Thus, under any circumstances, Ms. Dorman would receive, at the least, her full contingent fee of$517,079. But once she applied for and received statutory fees, the clients would not have their recovery reduced by having to pay the full contingency amount. As the Supreme Court noted in Venegas v. Mitchell, 495 U.S 82, 89 (1990): "Civil rights plaintiffs, if they prevail, will be entitled to an attorney's fee that Congress anticipated would enable them to secure reasonably competent counsel. If they take advantage of the system as Congress established it, they will avoid having their recovery reduced by contingent-fee agreements" (emphasis added). Ms. Dorman also notes: "The net effect of her application for appellate fees would have been to wipe out her contingency fee altogether." That is certainly correct. But that is the result of the lawyer being able to keep the higher of the contingency amount or the statutory fee amount, but not both. Ms. Dorman is receiving a total of$387,491 plus $228, 912 (appeal fees) for a total of $616,403, far above the contingency amount of $517,079. There is no legal basis for her receiving any larger amount. Ms. Dorman's brief also quotes from another part of the retainer agreement. 11 Such percentage shall be computed on the net sum recovered after deducting taxable costs and disbursements, including expenses for expert medical testimony and investigative or other services properly chargeable to the enforcement of the claim or prosecution of the action. But for the following or similar items there shall be no deduction in computing such percentages: [The two aforementioned retainer fees], liens, assignments or claims in favor of hospitals, for medical care and treatment by doctors and nurses, or of self insurers or insurance carriers. (NRAB at 2-3)(emphasis added)(R28, 29) The answering brief omits the words "The two aforementioned retainer fees," since those words undercut their argument. The answering brief suggests that the last sentence in the retainer agreement somehow supports their argument. "The plain language of the retainer agreements forbids deducting statutory fees from either the 'sum recovered' or from Mr. Dorman's contingency fee." (NRAB at 41). But the words refer to how the contingency fee was to be computed initially, not what sums must be deducted from the finally-computed contingency fee thereafter. Certain matters are to be deducted from the final verdict (such as disbursements) to determine the fee. Other matters, such as liens against, or assignments by, the client would be immediately paid out from the final judgment. But those liens and assignments would not affect the computation of the contingent fee. If the final judgment was $1 million and included $100,000 in expenses, the $100,000 would be subtracted from the judgment to determine the fee. But if there was a tax lien against the client and $100,000 had to be paid from the judgment to 12 satisfy the lien, that $100,000 would not be subtracted from the judgment to determine the contingency fee. But the words have nothing to do with what happens after the contingency fee is determined. The retainer agreements specify what must be deducted and what cannot be deducted from the "net sum recovered" to determine the fee. If matters such as expenses, costs, retainer payments, liens and assignments are discussed in order to determine whether they are to be added or subtracted from the net sum recovered to establish the appropriate fee, it would make sense to discuss statutory fees as well. How would an award of such fees effect the determination of "net sum recovered"? The very fact that there was no discussion of such fees shows that no one believed they had any role to play in the definition of "net sum recovered." ARGUMENT POINT I NEW YORK COURTS SHOULD FOLLOW FEDERAL COURT INTERPRETATION OF FEDERAL CIVIL RIGHTS LAWS WHEN INTERPRETING SIMILAR STATE CIVIL RIGHTS LAWS AWARDING ATTORNEYS' FEES Ms. Dorman's main argument (which continues for some thirteen pages) misses the point of this Court's decision in McGrath v. Toys "R" Us, Inc., 3 N. Y.3d 421,429,788 N.Y.S.2d 281,284 (2004). Both state and federal laws protect civil rights. Both sets of laws have similar language. Under those circumstances, the 13 interpretation of state civil rights laws should generally follow the interpretation of federal civil rights laws made by federal courts. As this court noted in McGrath,: "Where state and local provisions overlap with federal statutes, our approach to resolution of civil rights claims has been consistent with the federal courts in recognition of the fact that, whether enacted by Congress, the State Legislature or a local body, these statutes serve the same remedial purpose -- they are all designed to combat discrimination." 3 N.Y.3d at 429. Since there are hundreds of federal cases dealing with attorneys fees under federal civil rights statutes, the federal courts have examined all the ramifications of those laws. But there are far fewer state cases dealing with the subject. The law involved in this case, New York City Administrative Code Section 8-502(f), has been cited only ten times in New York reports, according to a search by WESTLA W. The only other New York laws dealing with the award of attorneys fees in civil rights cases include Executive Law § 297(10), allowing attorneys fees to be awarded to successful plaintiffs only in housing discrimination cases. That provision is rarely invoked, only once according to a WESTLAW search. A recent Appellate Division decision has held that attorneys' fees may also be awarded in a 14 case brought under the Equal Access to Justice Act, CPLR 86. See Kimel v. State, 76 A.D.3d, 188, 906 N.Y.S.2d 403(4th Dept. 2010). 5 It is true that New York can change its law to make it different from federal law, as it did in the Local Civil Rights Restoration Act of2005, discussed in this court's previous decision in this case. Albunio v. City o/New York, 16 N.Y.3d 472, 922 N.Y.S.2d 244 (2011). Two of the cases cited in the answering brief deal with this change in the wording of the law to distinguish it from federal precedents. See Fornuto v. Nisi, 84 A.D.3d 617, 923 N.Y.S.2d 493 (1st Dept, 2011) and Williams v. New York City Housing Authority, 61 A.D.3d 62, 872 N.Y.S.2d 27 (1 st Dept. 2009). When the law has been changed from its federal counterpart, then state courts must apply a new analysis. But ifno change is made in the state law, this Court's requirements in McGrath must still be followed. This Court noted in Zakrzewska v. New School, 14 N.Y.3d 469,479, 902 N.Y.S.2d 838,842 (2010): 5 There are provisions for the award of attorneys' fees in specialized statutes under New York law. See e.g. Labor Law § 198(1-a), providing for reasonable attorneys fees to be paid in a case dealing with employee salaries below the minimum wage; Real Property Law § 234, providing for a tenant's right to recover attorney fees in proceedings against a residential landlord. See also Uniform Justice Court Act § 1812, providing for the award of reasonable attorneys fees in certain Small Claims Court actions, and Eminent Domain Procedure Law § 701, providing for reasonable attorneys fees in some eminent domain proceedings. 15 We have "generally interpreted" state and local civil rights statutes "consistently with federal precedent" where the statutes "are substantively and textually similar to their federal counterparts" ( McGrath v. Toys "R" Us, Inc., 3 N.Y.3d 421,429,788 N.Y.S.2d 281,821 N.E.2d 519 [2004] [emphasis added] ). And we have always strived to "resolve federal and state employment discrimination claims consistently" ( Matter of Aurecchione v. New York State Div. of Hum an Rights, 98 N.Y.2d 21,25,744 N.Y.S.2d 349, 771 N.E.2d 231 [2002] ). Ms. Dorman's briefmischaracterizes the key issue. It complains that "Treating retainer agreements as subject to federal rather than state law fails to advance this remedial purpose [of combating discrimination]." NRAB at 17. We certainly agree that retainer agreements are subject to state law. Nor do we claim state courts "are bound by federal attorney fee decision arising under comparable statutes," as Ms. Dorman's brief claims (NRAB at 17)(emphasis in original). But when state courts interpret the relation between statutory fee awards and contingency agreements, there are good reasons for state courts to follow the many federal precedents that have already dealt with that issue. First, there is the need for consistency. Often claimants may sue under both state and federal civil rights laws. Thus the laws carrying almost identical language should be treated the same way, since litigants would then have proper guidance as to what the laws mean. As this Court noted in McGrath, the state and federal laws contain similar language and "serve the same remedial purpose" of combating discrimination and should be interpreted consistently with each other. 16 The decision of the court below would undermine that purpose since it would allow lawyers to take advantage of their civil rights clients (who may not understand all of the terms of a standard retainer agreement) and increase their own fees, reducing the compensatory awards award the clients by juries. Second, on a more general level, state courts often deal with the overlap of state and federal laws. They usually make an effort to insure that their decisions are consistent with federal law and court decisions under those laws, particularly when the laws have the same language and serve the same general purpose. See e.g. Weaver v. State, 91 A.D.3d 758, 939 N.Y.S.2d 64 (2d Dept. 2012) (provisions of state Mental Hygiene Law consistent with requirements of federal Social Security Act); People v. Rodriguez, 77 A.D.3d 420,421,908 N.Y.S.2d 652, 653 (1 st Dept. 2010)( failure to provide notice of intercepted telephone calls does not require suppression of wiretap evidence, as federal courts have consistently held: "Federal courts have held that under 18 USC § 2518(8)( d), the federal equivalent of CPL 700.50(3), no suppression remedy properly flows from a post-termination notice violation without a showing of prejudice to a defendant named as a target in the eavesdropping warrant ( see United States v. Fury, 554 F .2d 522, 528-529 [2d Cir.1977], cert. denied 436 U.S. 931, 98 S.Ct. 2831, 56 L.Ed.2d 776 [1978] ). In light of the general principles stated by the Court of Appeals in People v. Bialostok, 80 N.Y.2d 738,746-748, 594 N.Y.S.2d 701, 610 N.E.2d 374 [1993], as 17 well as the language ofCPL 700.50(3), we hold, consistent with federal law, that suppression of wiretap evidence based on the People's failure strictly to observe the statute's notice requirement is not warranted without a showing of prejudice"; (emphasis added); Emigrant Bancorp, Inc. v. Commissioner of taxation and Finance, 59 A.D.3d 30, 33, 869 N.Y.S.2d 689, 692 (3d Dept. 2008)(state tax law interpreted cons istentl y with federal tax law); Third, often federal courts have greater expertise with an issue simply because they have examined and passed upon the legal issue many times. The Supreme Court and the lower federal courts have examined this problem (the relation between statutory fees and a contingency fee arrangement) many times in applying civil rights statutes almost identical to the state laws on the subject. See POB at 17-21; 25-30). Therefore those federal precedents should be followed by state courts when dealing with the same problem, namely how to reconcile a contingency fee arrangement and a statutory fee award. Furthermore, there are many good reasons why the federal rule should be followed, as noted in the next point. 18 POINT II RETAINER AGREEMENTS THAT DO NOT EXPLICITLY PERMIT ST AUTORY FEES TO BE ADDED TO THE JUDGMENT AMOUNT TO DETERMINE THE CONTINGENCY FEE SHOULD NOT BE INTERPRETED TO ALLOW SUCH A RESULT There are many good reasons why this Court should adopt the federal rule and should interpret a retainer agreement containing the terms "sum recovered" (with no explanation of what those words mean) as not including any statutory fees awarded. 6 The first and most important reason is that such a retainer agreement does not -- by their own terms -- explain to a client what he or she must pay the attorney. We noted in our opening brief (pp. 31-33) that legal documents prepared by an attorney often contain legal terms that civilians are not familiar with. In particular, retainer agreements must be carefully and explicitly detailed so the clients fully understand what they are agreeing to. This Court has noted: In cases of doubt or ambiguity, a contract must be construed most strongly against the party who prepared it and favorably to the party who had no voice in the selection of its language. Additionally, and as a matter of public policy, courts pay particular attention to fee arrangements between attorneys and their clients. An attorney has the burden of showing that a fee contract 6 The answering brief argues that plaintiffs' "sole argument" was that "they were prohibited by federal law." (NRAB at 8). As the discussion in POB 28-33 shows, that is simply not true. 19 is fair, reasonable, andfully known and understood by the client. Jacobson v. Sass ower, 66 N.Y.2d 991,993,499 N.Y.S.2d 381,382 (1985) (emphasis added). In another case dealing with the interpretation of a retainer agreement, this court has noted: "the agreement between client and attorney [ must] be construed most favorably for the client." Shaw v. Manufacturers Hanover Trust Company, 68 N.Y.2d 172, 177,507 N.Y.S.2d 610,612 (1986). In a case very similar to this one, decided by the First Department, Triefv. Elghanayan, 251 A.D.2d 123,674 N.Y.S.2d 310 (1 st Dept. 1998), the Court held that "a contract must be construed most strongly against the party who prepared it." Thus the retainer agreement "must be interpreted against plaintiff law firm, the retainer agreement's drafter, and in favor of the defendant [client]." 251 A.D.2d at 123. If retainer agreements must be carefully scrutinized and must be interpreted "most favorably for the client" and against the attorney, and if the attorney has the burden of showing that all the terms were "fully known and understood by the client," then in this case, the retainer agreement cannot be interpreted in the manner urged by Ms. Dorman. The agreement was not "clear and unambiguous" as the lower court held (R5), nor did the agreement "unambiguously require that the award of attorneys fees be included in the 'sum recovered'" as the First Department held. (R88). 20 The agreement specified that clients must pay to the attorney "thirty three and one third per cent of the sum recovered." What would an unsophisticated civilian -- a person of ordinary intelligence -- believe that those words meant? This Court has noted that "The language employed in a contract of insurance must be given its ordinary meaning, such as the average policyholder of ordinary intelligence, as well as the insurer, would attach to it." Federal Insurance Co. v. International Business Machines Corp., 18 N.Y.3d 642, 648 (20 12)[citing Morgan v. Greater N Y. Taxpayers Mut. Ins. Ass 'n, 305 N.Y. 243, 248 (1953)]. Would a person of "ordinary intelligence" interpret the terms "sum recovered" in a retainer agreement as covering not only the amount that the jury awarded, but also the amount of statutory fees that a court later ordered paid to his or her lawyer? Do civilians understand how statutory fees are determined or awarded. 7 There is no evidence whatsoever showing that, at the time the retainer agreements were signed, the clients "fully kn[ ew] and understood" what the contract meant, in terms of adding the statutory fee to the judgment amount to determine the fee. The Appellate Division and the Supreme Court made no such 7 It is true that the earlier Spar & Bernstein retainer agreement did mention statutory fees. See discussion below at 22-23. But how would untutored civilians understand the significance of a later retainer agreement that never mentioned such fees? 21 inquiry here. They just assumed -- by stating that the words were unambiguous -- that any non-legal civilian would understand the meaning of the words used. Lawyers, of course, have specialized training and knowledge that clients lack. Courts should be especially concerned about contracts prepared by persons with specialized knowledge "where much of the language used consists of special words of art whose meaning is known only to specialists in the field," Seligson, Morris & Neuburger v. Fairbanks Whitney Corporation, 22 A.D.2d 625, 632, 257 N.Y.S.2d 706, 713 (1 st Dept. 1965). A lawyer may be aware of the possibility of obtaining a statutory fee award in a civil rights case that may impact on the contingency award in a retainer agreement. But a client would not have such specialized knowledge as to how those fees would impact the retainer agreement unless specific language was used explaining that situation. The answering brief claims again and again, as noted above, that the terms of the contract were "fully explained" by Ms. Dorman to the clients. As noted above, the record undermines any such assertion. So the clients were not told what those words meant until long after the retainer agreement was signed. The other response by the answering brief is that the clients had signed an earlier retainer agreement with Spar and Bernstein that did mention statutory attorneys' fees and that did specify that any fees awarded would be deducted from the contingent amount. "Plaintiffs were aware at the time they retained Ms. 22 Dorman of the potential for statutory fees if successful at trial." (NRAB at 33). But Ms. Dorman's retainer agreement did not mention attorneys' fees and did not specify that statutory fees would be deducted from the contingent amount. Thus "there are only two permissible constructions: either the statutory fees are added to the verdict to determine the 'sum recovered' or Ms. Dorman keeps both the contingency and the statutory fees." (NRAP at 33). That reasoning is, to put it bluntly, absurd and illogical. There are many other "permissible constructions" of the failure of the retainer agreement to mention statutory fees. One possibility would be that Ms. Dorman was not planning to apply for statutory fees. Another possibility is that Ms. Dorman was planning to follow the well-established law in the federal system that an attorney was required to offset statutory fees from the contingency amount whether or not such a subtraction was allowed in the retainer agreement. The very fact that there are so many possible interpretations of the words of the retainer agreement - even two suggested by the answering brief -- shows that it could not be considered "clear and unambiguous." The answering brief claims again and again that the plaintiffs do not claim that they "misunderstood their retainer agreements with Ms. Dorman." (NRAP at 32). The brief claims that it was incumbent on the plaintiffs to claim that they "misunderstood" the agreement before they could challenge Ms. Dorman's 23 interpretation. "They raise no claim that they did not understand the terms of the agreement or that they had expected them to mean something else." (NRAB at 30). First, that claim is incorrect. Both clients assert that it was only after this Court affirmed the underlying judgment that Ms. Dorman told them that the statutory fees would be added to the pot. "We strongly objected to that analysis." (R61, 65. Par. 8). If they "strongly objected" to Ms. Dorman's analysis, that could only mean that they had an opposite understanding of what the agreement meant. Their strong objection can only be interpreted as reflecting the clients' "understanding" that the statutory fees would not be added to the judgment to determine Ms. Dorman's fee. Thus the claim that the client never said they misunderstood the terms of the agreement is incorrect. More important, it is fundamental that it is the words of the contract, not the subjective intent or understanding of the parties, that controls. This Court has noted: A familiar and eminently sensible proposition of law is that, when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms. Evidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing. WWW Associates, Inc. v. Giancontieri, 77 N.Y.2d 157, 162, 565 N.Y.S.2d 440, 443 (1 990)(emphasis added). See also Ashwood Capital, Inc. v. OTG Management, Inc., 99 A.D.3d 1, 7, 24 948 N.Y.S.2d 292, 297 (1 st Dept. 20 12)(emphasis added): This case serves as a reminder that in order to determine the contracting parties' intent, a court looks to the objective meaning of contractual language, not to the parties' individual subjective understanding of it. As Judge Learned Hand stated: "A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however, it were proved by twenty bishops that either party, when he used the words, intended something else than the usual meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake, or something else of the sort. Of course, if it appear by other words, or acts, of the parties, that they attribute a peculiar meaning to such words as they use in the contract, that meaning will prevail, but only by virtue of the other words, and not because of their unexpressed intent" [citing Hotchkiss v. National City Bank of New York, 200 Fed. 287,293 (S.D.N.Y. 1911)] The cited cases show that a court must examine the words "sum recovered" in the context of a retainer fee prepared by the lawyer and decide whether an untutored client would "fully know and understand" that those terms covered a statutory fee not mentioned or explained anywhere else in the agreement. Such retainer agreements had to be interpreted against the lawyer's interests. The answer is obvious: a client would not have such an understanding. The answering brief suggests that if there is any ambiguity in the original retainer agreement, the matter should be remanded for an evidentiary hearing. (NRAB at 40-42). But we believe that the legal rules quoted above require that the 25 agreement be interpreted against the interests of the attorney who prepared the agreement and thus the term "sum recovered" cannot be interpreted as including statutory fees. POINT III THE CASES CITED BY PLAINTIFFS SUPPORT THEIR POSITION THAT STATUTORY FEES SHOULD NOT BE ADDED TO THE SUM RECOVERED TO DETERMINE THE CONTINGENCY FEE The Dorman brief seeks to counter plaintiffs' argument by claiming that the cases cited in their opening brief do not support their position on this appeal. It claims that one case, Veldarde v. Pace Membership Warehouse, 105 F.3d 1313 (9th Cir. 1997) involved an Arizona attorneys' fees statute, not the federal statute. But the federal court did hold that a retainer agreement specifying that an attorney should get one third of the "total amount recovered" did not permit the statutory fees to be added to the damage award. It is the reasoning of the federal court that should be followed, even if another state law with similar language to New York law was involved. The answering brief disregards Bates v.Kuguenko, 100 F .3d 961 (9th Cir. 1996) on the ground that it is an unpublished opinion without precedential value in the Ninth Circuit. (NRAB at 26). But it does not challenge the reasoning of that decision which also held that a retainer that specified that an 26 attorney would get a certain percentage of the "damages" did not "contemplate an award of attorneys' fees" being added to the judgment amount. The answering brief claims that the Supreme Court decision in Venegas v. Mitchell, 495 U.S. 82, 89 (1990) did not hold that the statutory award must be subtracted from the contingency fee: "Venegas held no such thing." (NRAB at 26). The brief rejects the notion that statutory fee awards must offset any amounts in a contingency fee award. "That was not the Supreme Court's holding." (NRAB at 23). "The statutory fee award is not a vehicle to reduce or obliterate their contractual obligations to Ms. Dorman. Venegas v. Mitchell. supra." (NRAB at 39-40). Those assertions are all wrong. First, the retainer agreement in Venegas did not permit an attorney to keep both statutory fees and the full retainer agreement. "The contract also provided that any fee awarded by the court would be applied, dollar for dollar, to offset the contingent fee." 495 U.S. at 84. The Supreme Court simply held that the statutory fee is not the limit on what a lawyer could obtain in a civil rights case. "We have never held that § 1988 constrains the freedom of the civil rights plaintiff to become contractually and personally bound to pay an attorney a percentage of the recovery, if any, even though such a fee is larger than the statutory fee that the defendant must pay to the plaintiff. Indeed, our cases look the other way." 495 U.S. at 87. 27 Thus if the contingency amount is higher than the statutory fee, the client must make up the difference: "Civil rights plaintiffs, if they prevail, will be entitled to an attorney's fee that Congress anticipated would enable them to secure reasonably competent counsel. If they take advantage of the system as Congress established it, they will avoid having their recovery reduced by contingent-fee agreements" (emphasis added). 495 U.S. at 89. But they can "avoid having their recovery reduced by contingent fee-arrangements" only if the statutory fee award necessarily reduces the contingent fee. The Supreme Court affirmed the Ninth Circuit decision which made this explicit. "When the district court concludes that a contingent fee that exceeds the statutory fee is reasonable, the plaintiff may be required to pay the difference between the 1988 award paid by the defendant and the contingent fee. The plaintiffs attorneys are not entitled to both the statutory award and the full amount afthe cantingentfee." 867 F.2d 527,534, n 7. (9th Cir. 1989)(emphasis added). Thus all the later federal cases that later reaffirmed the conclusion that an attorney cannot keep both statutory fees and the full contingency amount (cited at POB 19-21) were not "effectively overruled by the holding in Venegas" as the answering brief claims. (NRAP at 25) The answering brief repeats that same error when it discusses Ross v. Douglas County, Nebraska, 244 F.3d 620, 622 (8th Cir. 2001). (NRAB at 25). It 28 claims that the court's reliance on Talcott v. Bowen, 832 F .2d 111 (8th Cir. 1987) undercut its reasoning. The Talcott case held that an attorney cannot keep both the contingency fee and the statutory fee awarded. The answering brief asserts that the Talcott decision "conflicts directly with the subsequently decided Venegas v. Mitchell." (NRAB at 25). But as noted above, the Venegas case did not hold that a lawyer may keep both the contingency amount, and the statutory fee. The retainer agreement between the parties explicitly rejected that conclusion. Thus Talcott is still good law. The answering brief makes no effort to distinguish the another case cited, Lowe v. Pate Stevedoring, Co., 595 F.2d 256 (5th Cir. 1979) that held that statutory fees cannot be added to the damage award to determine the contingency fee. The answering brief also cites Pickett v. Sheridan Health Care Ctr., 664 F.3d 632 (7th Cir. 2011)(NRAB at 22-23) , cited by plaintiffs in their opening brief (POB at 17-18) In that case the retainer agreement, specifically allowed the attorney to keep both statutory fees and the contingency amount, unlike the agreement here. POINT IV THE APPEAL FEES AWARDED TO MS. DORMAN SHOULD ALSO BE DEDUCUTED FROM THE CONTINGENCY AMOUNT Ms. Dorman was awarded $228,812 for her work on appeal. See Albunio v. 29 City o/New York, 35 Misc.3d 1238(A), 2102 WL 2122451 (Sup. Ct. N.Y. Cty, June 6, 2012). The City initially did not file an opposing brief to the request and indeed did not oppose an application for appeal fees by the attorneys in a companion action, Sorrenti v. City o/New York, N.Y. County Index No. 126981/02. The City finally did submit a late opposition which the Court rejected. See Albunio, supra * 1. The Court noted that under federal law, appeal fees were awarded to successful attorneys and that New York law should follow federal precedents in that area, Id. at * 2. Ms. Dorman's brief argues that since a new retainer agreement was signed by the parties, the award of appeal fees cannot offset the fees due under the original retainer agreement. 8 But the brief never challenges the assertion in our opening brief that an appeal "is not a separate action, but a continuation of one." Suzuki v. Yuen, 678 F.2d 761,763 (9th Cir. 1982). Appeal fees are awarded virtually automatically in federal case when the appeal court affirms a civil rights 8 The Answering brief makes the totally illogical claim that because the appeal retainers (signed in 2009 and 2010) explicitly provided that statutory fees would be deducted from any fees that they were obliged to pay, then the initial retainer agreement (signed in 2005) without such language must be interpreted in a contrary manner. (NRAB at 37). The brief adds that the new language in the appeal retainers "would have alerted them that Ms. Dorman did not intend to deduct her statutory fees from her one-third contingency fee in the initial retainer agreements." (NRAB at 37). It is obvious that later agreements do not automatically dictate the interpretation of earlier agreements with different language. 30 judgment.9 "As the prevailing party in the underlying civil rights action, Ustrak is entitled to reimbursement of fees reasonably incurred, whether they are fees incurred in the original civil rights trial and appeal, fees incurred in proving those fees, or fees incurred in defending the district court's fee award." Ustrak v. Fairman, 851 F .2d 983, 990 (7th Cir. 1988)( emphasis added). And those fees should be applied, just as the trial fees are, to offset any contingency amount due to the successful attorney. Thus the only issue is whether the signing of a new retainer agreement for the appeal changes this result. We emphasized in our opening brief that this result could lead to attorney manipulation. A civil rights lawyer has a contingency arrangement with a client. He or she wins the underlying case and receives modest statutory fees for the trial work, which offsets some but not all of the contingency amount. To secure the maximum fee, the attorney then requires the client to sign a new retainer agreement for any appeal work. If that is done, the lawyer then knows that if he or she wins the appeal, any appeal fees would not be applied to reduce the contingency fee owed by the client. Obviously if a new lawyer is involved, the 9 The Dorman answering brief claims it is not automatic, but they offer no examples of when the successful appeal of a successful civil rights case would not lead to the award of appeal fees. (NRAB at 44-45). 31 result is different. The new lawyer is not defending fees earned at an earlier time. But the situation lends itself to manipulation and should simply not be countenanced. There was enough contention and dispute in this case when the appeal was being considered so that the creation of additional adversity between lawyer and client should not be permitted. (See POB at 38-39). In addition, in this case, Ms. Dorman seemed to agree that the appeal fees would offset any contingency amount. Ms. Dorman had assured her clients that "I will credit the fees awarded to me to that one third." (R68). That email was sent on December 9,2009, after the second retainer agreement was signed on March 18, 2009, but before the third retainer agreement was signed on June 25, 2010. That email seemed to assure the clients that ALL the fees awarded to her (both trial fees and appeal fees) would be credited to the amount owed under the retainer. Ms. Dorman argues that the phrase "credit the fees awarded to me to that third" means that the fees will be "credited to rather than deducted from the one third contingency fee." NRAB at 37. That is an impossible reading of the words. If that is what Ms. Dorman meant she should have written. "I will add the fees awarded to me to the total recovery." By using the word "credit" she was saying that the clients would be "credited" (given the benefit of) her award of fees which would then be deducted from the contingency amount owed. No other meaning is possible. 32 POINT V NO ADVISORY OPINION IS BEING REQUESTED The Answering brief claims that Plaintiffs are seeking an advisory opinion from this Court since Ms. Dorman is not requesting both statutory and contingency fees. (NRAB at 27-28). However, the First Department declared that she was entitled to both sets of fees. "Nor does this State follow the rule found in certain federal statutes that contingency counsel must take the larger fee or the statutory fee." (R88). Thus it is the Appellate Division that rendered the (erroneous) advisory opinion. Plaintiffs are simply requesting that such an erroneous advisory opinion be removed so that other courts in the First Department would not consider themselves bound by that decision. CONCLUSION F or the reasons stated above, the decision of the Appellate Division, First department must be reversed and an order issued requiring that the statutory fee awards granted to Ms. Dorman satisfy the requirements of the retainer agreement and the clients are not required to make any further payments to Ms. Dorman. Dated: New York, N.Y. September 3,2013 33 L on Friedman 148 East 78th Street New York, NY 10075 (212) 737-0400 Attorney for Plaintiffs-Appellants
