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THE COMPLAINT STATED A CAUSE OF ACTION TO DISGORGE LEGAL FEES PAID TO LAWFIRM WHICH IS ALLEGED TO HAVE REPRESENTED ADVERSE PARTIES IN THE SAME MATTER; THE ACTION TO DISGORGE FEES IS INDEPENDENT FROM ANY ACTION ALLEGING LEGAL MALPRACTICE OR BREACH OF A FIDUCIARY DUTY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the complaint stated a cause of action for forfeiture of legal fees on conflict of interest grounds:

The complaint alleged that the plaintiff’s decedent retained the defendant in 2005 to, among other things, analyze her ownership interest in Wilson [Corporation], including her right to certain retained earnings in the sum of $20 million. The complaint further alleged that, in January 2007, the defendant began acting as Wilson’s corporate counsel, and, beginning in 2008, performed legal services for Wilson regarding the decedent’s right to those retained earnings. * * *

“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 … .

… [T]he 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 (22 NYCRR 1200.0). 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 … . Baugher v Cullen & Dykman, LLP, 2019 NY Slip Op 04904, Second Dept 6-19-19

 

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