Commercial Division Blog
Posted: February 10, 2017 / Categories Commercial, Contracts, Law Firms and Professional Ethics
Failure to Inform Client of Retention of Co-Counsel Does Not Render Retainer Unenforceable
On February 9, 2017, the Court of Appeals issued a decision in Marin v. Constitution Realty, LLC, 2017 NY Slip Op. 01019, holding that the failure to inform a client of the retention of co-counsel did not render the retainer unenforceable.
In Marin, the plaintiff's attorney-of-record engaged co-counsel to assist her in a matter, agreeing to pay them a percentage of the fees earned. She did not inform the client that she had engaged co-counsel, a "violat[ion of] the former Code of Professional Responsibility DR 2-107 (a) (22 NYCRR 1200.12 [a]) and the current Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.5 (g)." A dispute subsequently arose over the payment of fees to co-counsel. The Court of Appeals rejected the attorney-of-record's argument that the engagements with co-counsel were unenforceable, explaining:
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. As we have previously stated, it ill becomes defendants, who are also bound by the Code of Professional Responsibility, to seek to avoid on ethical' grounds the obligations of an agreement to which they freely assented and from which they reaped the benefits. This is particularly true here, where Menkes and Manheimer both failed to inform the clients about Manheimer's retention, Menkes led Manheimer to believe that the clients were so informed, and the clients themselves were not adversely affected by the ethical breach.
(Internal quotations and citations omitted).