RECOVERING DOCUMENTED LEGAL FEES

*Mr. Barnes, a member of Barnes & Barnes, P.C., can be reached at lkb@barnespc.com

Almost without exception, a new client presented with litigation will inquire whether he or she may recover counsel fees incident to the litigation.  Assuming the client has a basis to pursue legal fees (whether in contract, statute or Court rule), it is counsel’s role to evaluate the viability of the claim.

It is black letter law that counsel fees incurred in pursuing litigation are a cost to be borne by a plaintiff and the recovery of counsel fees by a successful party is not permitted unless the same has been authorized by an agreement between the parties, statute or court rule.  A.G. Ship Maintenance Corp. v. Lezak, 69 N.Y.2d 1, 511 N.Y.S.2d 216 (1986).  The Court of Appeals has held that this “American Rule” of bearing one’s counsel fees promotes more equal access to the Courts.  Might Midgets, Inc. v. Centennial Ins. Co., 47 N.Y.2d 12, at 22, 416 N.Y.S.2d 559 (1979).

Assuming that the counsel fee claim is grounded in contract, counsel must keep in mind that the meaning of a written agreement is an issue of law to be determined by the Court, which must initially determine whether the subject terms are ambiguous. Assuming no ambiguity, the Court will interpret the agreement to give fair meaning to all the language in an effort to provide a practical interpretation of the writing.  Thus, “when interpreting a contract, the court should arrive at a construction which will give fair meaning to all of the language employed by the parties to reach a practical interpretation of the expressions of the parties so that their reasonable expectations will be realized.”  DOUBLE CHECK THIS CITE.  Fetner v. Fetner, 293 A.D.2d 645, 741 N.Y.S.2d 256 (2nd Dep’t 2002).

In view of the public policy obliging parties to bear the cost of counsel, a provision for recovery of fees must be construed strictly to avoid inferring duties that the parties did not intend to create.  Indeed, in the seminal Court of Appeals case on the subject, the Hooper Associates Court ruled that:

Inasmuch as a promise by one party to a contract to indemnify the other for attorney’s fees incurred in litigation between them is contrary to the well-understood rule that parties are responsible for their own attorney’s fees, the court should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise

Hooper Assocs., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487, at 491, 549 N.Y.S.2d 365 (1989).

In light of the mandatory strict construction, a party’s request for attorney’s fees will generally be denied unless the claim at issue is explicitly encompassed by the contractual provision which authorizes the recovery of fees.  See, e.g., Severino v. Classic Collision, Inc., 280 A.D.2d 463, 719 N.Y.S.2d 902 (2nd Dep’t 2001); Popyork, LLC v. 80 Court Street Corp., 23 A.D.3d 538, 806 N.Y.S.2d 606 (2nd Dep’t 2005); Vacation Village Homeowners Ass’n Inc. Mordkofsky, 254 A.D.2d 650, 679 N.Y.S.2d 435 (3rd Dep’t 1998); Rio Energy International, Inc. v. J. Aron & Co., 244 A.D.2d 29, 664 N.Y.S.2d 306 (1st Dep’t 1997) (plaintiff’s claim for attorneys’ fees was properly rejected on the ground that under the “Non-Performance” clause of the subject contract, recovery of attorneys’ fees is limited to plaintiff’s exercise of the remedy of liquidation and set-off, a remedy not exercised by plaintiffs, who instead opted to sue for breach of contract); and Kleinberg v. Radian Group, Inc., 2003 WL 22420001 (rejecting claim for counsel fees because the claim did not fall squarely within the scope of the counsel fee provision).

The Infinity and Maroney Office Services Agreements provide identically as follows:

5.         Payments and Escalations

… Client agrees that any collection action taken by TIO to recover fees under this Agreement may be brought in the County of Nassau, New York.  In the event of a successful collection action by TIO, Client agrees to pay all reasonable and related attorneys fees and costs [emphasis added].  …

Similarly, plaintiff alleges at 10X that the R & R Membership Agreement provides:

Analysis of the Subject Provision and the Prevailing Rule of Law Mandates that No Counsel Fees are Recoverable

The subject counsel fee provisions clearly provide that fees may be awarded, if at all, only with respect to a claim for “fees” due pursuant to the three quoted agreements. The terms “Fee” is defined in the Eighth Edition of Black’s Law Dictionary as: “A charge for labor or services, esp. professional services.”  Plaintiff’s claims against our defendants are general business tort claims and breach of contract claims all of which are premised upon our defendants’ purported inappropriate hiring of Sawicki and Roschilla.  There is no claim for arrears for services rendered by plaintiff to the licensees during the term of the membership agreements.  Accordingly, since the foregoing case law requires that the counsel fee clauses be strictly construed, there is no way that the relied-upon provision can support a claim for counsel fees.  Indeed, the Court of Appeals has made clear that a party’s request for attorney’s fees will generally be denied unless the claim at issue is explicitly encompassed by the contractual provision which authorizes the recovery of fees.  There is nothing in the language or purpose of subject counsel fee provision to indicate that the parties intended to encompass within its purview plaintiff’s unforeseen business tort claims against its former licensees.

Had the plaintiff intended the disputed provision to permit reimbursement for counsel fees in the event of a business tort claim, as opposed to simply a “fee” collection action, it would have been simple enough to have stated as much.  But by limiting the scope of instances where plaintiff can recover its counsel fees, it cannot now piggyback the counsel fees incident to its business tort claims against the defendants upon a limited-in-scope provision related to “fee” for services provided by plaintiff to its de facto tenants.

In the final analysis, it is plaintiff who bears the heavy burden of persuading the Court to depart from the American Rule, and in light of the language relied upon by plaintiff, it simply cannot meet that burden.  See Flagstar Bank FSB v. Caribbean Mortgage Corp., 2007 WL 1449 (E.D.N.Y. 2007).  In Flagstar, a prevailing party was entitled to recover its counsel fees pursuant to the parties’ Settlement Stipulation.  The Flagstar Court ruled that defendants, by making “an improper request for further proceedings in [an] already-closed legal action, as opposed to instituting a new proceeding or forcing Flagstar to do so by standing on what it originally described as its rights under the Stipulation and thereby provoking an enforcement action” did not occasion any new legal action. Accordingly, the Eastern District Judge in Flagstar ruled that plaintiff was not entitled to recover its counsel fees from defendant in light of the limited scope of the subject provision which plaintiff relied upon to substantiate the counsel fee claim.  The Court admittedly could “not square the language of the settlement agreement’s fee-shifting provision, upon which [claimant] exclusively relies with the circumstances of this case.”

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