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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 26, 2019

Client Can Seek to Recoup Fees Paid to Counsel that had an Alleged Conflict of Interest

On June 19, 2019, the Second Department issued a decision in Baugher v. Cullen & Dykman, LLP, 2019 NY Slip Op. 04904, holding that a client could assert a claim to recoup fees paid to counsel that had an alleged conflict of interest, explaining:

An attorney who violates a disciplinary rule may be discharged for cause and is not entitled to fees for any services rendered. A cause of action for forfeiture of legal fees based on an attorney’s discharge for cause due to ethical violations may be maintained independent of a cause of action alleging legal malpractice or breach of fiduciary duty, and does not require proof or allegations of damages.

Here, the complaint seeks forfeiture of legal fees paid to the defendant between January 2007 and August 2009 in connection with the plaintiff’s decedent’s claim against Wilson for retained earnings. The complaint alleges that the decedent retained the defendant in January 2007 to recoup the retained earnings from Wilson, that the defendant also represented and performed legal work for Wilson on that issue between 2008 and 2009, that the interests of the decedent and Wilson on that issue were adverse, and that the dual representation violated rule 1.7 of the Rules of Professional Conduct. The complaint further alleged that, as a result of its previous dual representation, the defendant was disqualified from representing the decedent’s estate in a 2009 turnover proceeding against Wilson to collect the retained earnings. Contrary to the determination of the Supreme Court, these allegations are sufficient to state a viable cause of action to disgorge legal fees.

(Internal quotations and citations omitted) (emphasis added).

We both bring and defend professional malpractice claims and other claims relating to the duties of professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you have questions regarding such claims or appeals of such claims.

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