Law Practice Management

Cut Out of Final Chapter of $39.5M Case, Kasowitz Sues Client for $7.1M 'Success Fee'

A new general counsel for Duane Reade Inc. may have thought he was saving his employer money when he allegedly settled a contract dispute with an ATM operator in 2009 for $39.5 million without involving the New York-area drugstore chain’s longtime outside lawyers.

But despite its lack of involvement in the final chapter of the litigation, says Kasowitz Benson Torres & Friedman, the law firm is still entitled to a $7.1 million “success fee” provided for as part of an alternative fee arrangement with Duane Reade, according to the New York Law Journal.

Instead of charging its usual hourly rates for its lawyers’ work for Duane Reade in the Cardtronics litigation over ATM fees, Kasowitz agreed to accept a $1 million flat fee, payable in ten installments of $100,000, explains the complaint (PDF provided by New York Law Journal) filed last week in Manhattan Supreme Court.

However, the alternative billing arrangement also provided for an additional “success fee equal to 20 percent of any value Duane Reade received in the matter in excess of $4 million,” the firm contends in the complaint.

Kasowitz was actively involved in handling the case, and developed the litigation strategy and several key components eventually agreed to in the final settlement, the action says. The pact, which involved both a cash payment and an ongoing stream of revenue from increased ATM fees charged to machine users at Duane Reade stores, is allegedly worth $39.5 million.

The suit alleges breach of contract, quantum meruit and unjust enrichment causes of action.

A spokeswoman for the drugstore chain declined the legal publication’s request for comment.

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