Contracts

Kasowitz bid for $7M success fee in ex-client's ATM litigation is nixed by top NY court


An effort by a New York law firm to obtain a $7 million success fee from a former client got a final kibosh Tuesday from the state’s top court.

In a brief ruling (PDF), the New York Court of Appeals declined to hear a challenge by Kasowitz Benson Torres & Friedman of earlier decisions holding that the law firm had agreed in emails to accept a flat $1 million fee.

The ruling leaves in place an opinion last year by a divided Appellate Division, First Department panel. The majority held that emails between Kasowitz and its then-client, Duane Reade, established a flat fee of $1 million for the firm’s work on litigation over automated teller machine fees owed to the drugstore chain, as a Reuters article explained.

At issue in the underlying ATM litigation was a deal in which Duane Reade was supposed to get half of all transaction charges earned by ATM machines operated by Cardtronics in its stores. After Cardtronics inked a deal with JPMorgan Chase to put the bank’s name on the ATMs at Duane Reade, however, profits plummeted because Chase customers got to use the machines for free.

In email exchanges in 2006 with Duane Reade’s then-general counsel, a Kasowitz lawyer who is no longer with the firm suggested a fee of $1 million, plus 20 percent of “everything above $4 million as the success fee portion” for the ATM litigation, the Reuters article recounts.

The Cardtronics case settled in 2009 for approximately $1.75 million, at which point the Cardtronics contract terminated. Duane Reade then immediately entered into a contract with Chase for $30 million.

Kasowitz sought a portion of the Chase contract amount, contending that it should be considered part of the recovery in the case to which the success fee applied.

Although the majority in the 3-2 Appellate Division ruling called the emails “precise” in their description of what the attorney’s fees would be, a dissenting judge disagreed, saying that the recovery concept was ambiguous and could very well put the Chase contract amount within the scope of the damages recovered by the ATM litigation.

“There is simply nothing in the Goldberg e-mails that is ‘precise,’” said Justice James Catterson in a dissenting opinion last year. “Goldberg wrote about calculating the fee based on damages to Duane Reade, not simply the amount claimed in the contract action.”

Hat tip: Legal Profession Blog

Also see:

ABAJournal.com: “Cut Out of Final Chapter of $39.5M Case, Kasowitz Sues Client for $7.1M ‘Success Fee’”

ABAJournal.com: “Ex-Client Disputes Kasowitz’s Claim for a $7M Success Fee”

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