Court of Appeals Holds that the Term “Mediation” in a Fee Sharing Agreement is Not Necessarily Limited to a Single Day

In Marin v Constitution Realty, LLC (Menkes v Golomb) (No. 2), an attorney fee sharing dispute previewed here, plaintiffs’ principal attorney, Sheryl Menkes, retained Jeffrey A. Manheimer to act as her co-counsel for the case, to take depositions, and to take the case to trial if necessary. Their agreement provided that for these services, Manheimer would be entitled to 20% of any attorney fee award. After Menkes thereafter discharged Manheimer, and obtained partial summary judgment on liability for the plaintiffs, Menkes retained David Golomb to handle the mediation on damages and any trial if the case did not resolve during the mediation. The Menkes-Golomb agreement provided that Golomb was entitled to 12% of the attorneys’ fees if the case was resolved during the mediation, “scheduled for May 20, 2013,” or 40% if the case moved past mediation to trial.

The Court of Appeals held that the Menkes-Golomb fee sharing agreement, which split the fees dependent upon whether the case was resolved in mediation or is taken to trial, did not limit the “mediation” to a single session or day with a mediator. Instead, the Court held, the agreement’s reference to the date of the mediation was merely descriptive because it was set off by commas, and the parties “plainly contemplated the fact that many mediation efforts require multiple sessions or follow-up conversations before settlement can be achieved.” (Opn, at 9). Because the mediation continued past the original session and was ultimately resolved through the efforts of the mediator, the Court held, Golomb was only entitled to the 12% fee.

In a sharp rebuke of Menkes’s attempt to avoid paying Manheimer the 20% fee, the Court soundly rejected Menkes’s argument that her failure to comply with New York’s Rules of Professional Conduct by advising her clients of Manheimer’s representation could not serve as a basis to award Manheimer fees only on a quantum meruit basis. Particularly, the Court held, “Menkes’s attempt to use the ethical rules as a sword to render unenforceable, as between the two attorneys, the agreements with Manheimer that she herself drafted is unavailing.  Her failure to inform her clients of Manheimer’s retention, while a serious ethical violation, does not allow her to avoid otherwise enforceable contracts under the circumstances of this case.” (Opn, at 6-7).

Although the scope of the Court’s ruling is somewhat limited to the unique facts of this case, it does offer some helpful tips to attorneys entering fee sharing agreements. First and most importantly, it is imperative that you make absolutely clear that any fee sharing agreement that you enter is unambiguous about how the fee is going to be determined. The language you choose, including the punctuation, makes a difference. If you are agreeing to split the fees based upon responsibility for certain stages of the case (e.g., motion to dismiss, discovery, summary judgment, mediation, trial), make clear under what circumstances the fee changes. The failure to do so could lead to additional, and expensive, litigation about how the fee should be calculated, which could have been avoided in the first instance with a clear agreement.

And, second, don’t try to use your own “serious ethical violations” to try to avoid your obligations under the fee sharing agreement and expect a court to agree with you.

The Court of Appeals’s opinion can be found here.here

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