Wang v. Shun Lee Palace Restaurant, Inc.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------X : CHENG XIA WANGet al., : : Plaintiffs, : : 17-CV-840 (VSB) - against - : : OPINION& ORDER : SHUN LEE PALACE RESTAURANT, INC. : D/B/A SHUN LEE PALACE, et al., : : Defendants. : : ---------------------------------------------------------X Appearances: Aaron B. Schweitzer,Tiffany Troy,Jian Hang,John Troy Troy Law, PLLC Flushing, New York Jian Hang,Jiajing Fan Hang & Associates, PLLC Flushing, New York Counsels for Plaintiffs A Michael Weber,Eli Zev Freedberg,Huan Xiong,Kevin K. Yam,Maayan Deker Littler Mendelson, P.C. New York, New York Counsels for Defendants VERNON S. BRODERICK, United States District Judge: Five Plaintiffs in this case substituted their law firm, Troy Law, PLLC (“Troy Law”), with Hang & Associates,PLLC (“Hang & Associates”). Now before me are two motions for attorneys’ charging liens filed byTroy Law seeking to recover their attorneys’ fees from these Plaintiffs’ settlement proceeds. After reviewing the record, I find that Troy Lawhas waived its entitlement to enforce the charging lien against certain Plaintiffs, and that its assertedlien amountis excessiveas to the remaining Plaintiffs. The motion is therefore DENIED in part and GRANTED in part. Factual and Procedural Background On July 10, 2019, five Plaintiffs—Cheng Xia Wang, Jun Qing Zhao, Ze Jun Zhang, Chunlin Zhang and Bao Guo Zhang—each filed a motion to substitutetheir attorney. (Docs. 109–115.) In affidavits they filedin support of the motions, the five Plaintiffs stated that they were “not satisfied with the legal service [Troy Law] provides[, and t]herefore . . . retained [Hang & Associates]to replace Troy Law[.]” (See,e.g.Zhao Aff. ¶ 3.)1 Troy Law filed its opposition to the motions tosubstitute attorneys on July 19, 2019. (Doc. 118.) I granted the five substitution motions on July 26, 2019. (Doc. 128.) On August 3, 2020, Plaintiffs notified me through a letter that they hadreached an agreement in principle with Defendants to settle the New York Labor Law (“NYLL”) claims of Chunlin Zhang and Bao Guo Zhang(thereafter, the “NYLL Plaintiffs”). (Doc. 192.) On September 6, 2020, Troy Law filed an opposition tothe NYLLPlaintiffs’settlement and requested that I review the settlement. (Doc. 199.) After I denied Troy Law’s request, (Doc. 201), Troy Law filed a motion for reconsideration, (Doc. 202), and Hang & Associates subsequently filed a cross motion for sanctions against Troy Law on October 12, 2020, (Doc. 205). On February 16, 2021, I issued an Opinion & Order which, among other things, denied Troy Law’s motion for reconsideration and ordered Troy Lawto show cause why it should not be sanctioned. See Bao Guo Zhang v. Shun Lee Palace Rest., Inc., No. 17-CV-00840 (VSB), 2021 WL 634717 , at *17–19 (S.D.N.Y. Feb. 16, 2021). Troy Law failed to show cause pursuant 1“Zhao Aff.” refers to the Affidavit of Jun Qing Zhao in support of his motion to substituteattorney. (Doc. 111.) to my order, and I grantedthe motion for sanctions on June 11, 2021. (Doc. 229.) On March 25, 2021, Troy Law filed a motion for an attorneys’ charging lien on the claims of Cheng Xia Wang, Jun Qing Zhao, and Ze Jun Zhang. (Doc. 216.) On April 8, 2021, these three Plaintiffs, who had become represented byHang & Associates,filed theiropposition to Troy Law’s motion. (Doc. 221(“Hang Mem.”).) Subsequently, Cheng Xia Wang, Jun Qing Zhao, and Ze Jun Zhang (thereafter, the “CheeksPlaintiffs”) settled their claims with Defendants and filed their settlement agreement on August 6, 2021 along witha letter requesting that I approve their settlement under Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 200 (2d Cir. 2015). (Doc. 238.) On August 26, 2021,Troy Law filed a motion for an attorneys’ charging lien on the NYLL Plaintiffs’ settlement proceeds. (Doc. 246.) On September 9, 2021, Hang & Associates filed its objection to Troy Law’s motion. (Doc. 251.) On September 13, 2021, Defendants filed a letter explaining their position concerning Troy Law’s motions. (Doc. 252.) Although Defendants do not oppose the enforcement of charging lien against the Cheeks Plaintiffs, they argue that Troy Law has waived the charging lien against the NYLL Plaintiffs; Defendants further note that Troy Law’s requested fees with respect to the five Plaintiffs are excessive. (See id.at 4-8.) Defendants also request that,in the event I grant either charging lien motion,they should not be required to contribute additional funds to the settlement. (See id. 4–5.) On September 20, 2021, Troy Law filed its reply tothe oppositions of Hang & Associates and Defendants. (Doc. 253(“Reply”).) On May 10, 2022, I held anevidentiary hearing to determine whether TroyLaw was terminated for cause. On that day, Plaintiff Chen Xia Wang and Jun Qing Zhao testified. (See Trans. I 4:7 and 43:16.)2 A second session of the hearing was held on May 31, 2022, during which Plaintiff Ze Jun Zhang testified, and Plaintiff Guoyi Wangtestified on behalf of Troy Law. (See Trans. II 81:12and 113:5.)3 Discussion A. Applicable Laws New York Judiciary Law Section 475codified the common law doctrine of attorneys’ charging liens. See Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 449 (2d Cir. 1998). The charging liens under Section 475 are “enforceableinfederal courts in accordancewithitsinterpretationbyNewYorkCourts.” Id.(internal quotation marks omitted). The statue “allows attorneys to assert a charging lien, enforceable against the recovery of former clients, as a means of securing compensation for services that produced that recovery.” Barros v. AMTRAK,NO. 18 Civ. 3394 (VSB) (SLC), 2020 WL 6581184 , at *10–11 (S.D.N.Y. Nov. 10, 2020). It provides that [f]rom the commencement of an action, special or other proceeding in any court or before any state, municipal or federal department, . . . the attorney who appears for a party has a lien upon his or her client’s cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, award, settlement, judgment or final order in his or her client’s favor, and the proceeds thereof in whatever hands they may come. . . . The court upon the petition of the client or attorney may determine and enforce the lien. N.Y. Jud. Law § 475 . As the statute made clear, the charging lien attaches only “from the commencement of anaction.” See Stair v. Calhoun, 722 F. Supp. 2d 258, 270 (E.D.N.Y. 2010) (“[T]he lien should be fixed to account for services rendered beginning at the time of the action’s commencement and not at the time that the firm was retained.”);Winkfield v. Kirschenbaum & 2“Trans. I” refers to the transcript for the evidentiary hearing held on May 10, 2022. (Doc. 317.) 3“Trans. II” refers to the transcript for the evidentiary hearing held on May 31, 2022. (Doc. 319.) Philips, P.C.,No. 12 Civ. 7424(JMF), 2013 WL 371673 , at *3 (in determining the reasonable value of the charging lien, disregarding fees for services rendered prior to the date the complaint was filed). Although “[a]nattorney’s permittedwithdrawalfrom representationof apartydoes not affect his entitlementtothe statutorylienunder Section475,”Perez v. Progenics Pharms.,Inc., 204F.Supp.3d528,553(S.D.N.Y.2016) (internal quotationmarks omitted),theattorneywill lose the right toenforcethe charginglienif she“withdraws or is discharged for cause,” Antonmarchi v. Consol. Edison Co., 678 F. Supp. 2d 235, 241 (S.D.N.Y. 2010) (internal quotation marks omitted). “Courts typically find a discharge ‘for cause’where there has been a significant breach of legal duty[, and a] client must show that his former attorney’s conduct constituted a failure to properly represent his interests.” Id.(internal quotation marks omitted). Although a client need not plead malpractice to show “for cause” discharge, see D’Jamoos v. Griffith, No. 00-CV-1361 (ILG), 2006 WL 2086033 , at *4 (E.D.N.Y. July 25, 2006),“discharge on account of personality conflicts, misunderstandings or differences of opinion having nothing to do with any impropriety by the lawyer, does not amount to discharge ‘for cause.’” Ruiz v. KeratinBar Inc., No. 17-CV-2216 (VEC), 2020 WL 7079904 , at *4(S.D.N.Y. Dec. 3, 2020) (citation omitted). “Absent anexpress agreement between the attorney and clientto the contrary, a discharged attorneymayrecover thefair andreasonable valueof the services rendered ... computed on the basis of quantum meruit.” Stair, 722 F. Supp.2d at 268 . “The party seeking attorney’s fees . . . bears the burden of establishing that the number of hours for which compensation is sought is reasonable.” Custodio v. Am. Chain Link & Const., Inc., No. 06 Civ. 7148(GBD)(HBP), 2014 WL 116147 , at *9 (S.D.N.Y. Jan. 13, 2014). “[T]he determinationof the reasonable value of the attorney’s services ‘isa matter withinthe sounddiscretionof thetrial court.’” Sequa Corp. v. Gbj Corp., 156 F.3d 136, 149 (2d Cir. 1998) (quotingChernofsky & DeNoyelles v. Waldman,622N.Y.S.2d560,566(2dDep’t 1995). “[H]ours that are excessive, redundant,or vague are tobe excluded,‘andindealingwithsuchsurplusage,the courthas discretionsimplytodeduct a reasonable percentage of the number of hours claimedas a practical means oftrimmingfatfrom a fee application.’” Pettifordv.City of Yonkers,14Civ.6271 (JCM),2020WL1331918,at *6(S.D.N.Y.Mar.20,2020) (quotingKirschv.Fleet Street,Ltd., 148F.3d149,173(2dCir.1998)); see alsoid.at*8(applyinga 55% across-the-boardreduction totherequestedamountof attorneys’charginglien). Lastly, “the right to enforce a Section 475 lien will be waived by any action inconsistent with an intent to enforce the lien.” Avaras v. Clarkstown Cent. Sch. Dist., No. 15 CIV 9679 (NSR), 2021 WL 5745718 , at *5 (S.D.N.Y. Dec. 2, 2021) (quoting Petition of Harley & Browne, 957 F. Supp. 44, 49 (S.D.N.Y. 1997)). “This ‘waiver rule is intended to prevent other parties from being misled by an attorney’s actions or inaction.’” Id. (quoting Kaplan v. Reuss, 495 N.Y.S.2d 404, 407 (2d Dep’t 1984)). The charging lien will be deemed waived “if the attorney knowingly allows the proceeds to pass into the hands of the client or another party without asserting his or her rights,or if the attorney fails to enforce the lien within a reasonable time.” Id.(quoting Kaplan, 495 N.Y.S.2d at 407 ). B. Application 1. The NYLL Plaintiffs The parties informedme of the NYLL Plaintiffs’ settlement ina letter filed on August 3, 2020. (SeeDoc. 192.) Troy Law was or should have been aware of this settlement immediately upon the filing of the letter,if not before, andit filed an objectionto the settlement shortly afterwards on September 6, 2020. (See Doc. 199.) However, Troy Law waited until August 26, 2021—over one year after it became aware of the settlement—to file the instant motion for a charging lien. (Doc. 246.) Troy Law tries to justify this delay by arguing that “[n]o report of settlement funds disbursement has been made.” (Reply 5.) Citing to Harley & Browne, 957 F. Supp. at 44 ,and Kaplan, 495 N.Y.S.2d at 404 , Troy Law contends that “[a] motion to enforce the lien is timely” as long as “the exchange contemplated by the settlement agreement has not yet taken place.” (Id.at 6.) However,the cases cited by Troy Law do not support this assertion since the courts never ruledthat the timeliness of the motion depends on the disbursement of funds. Indeed, both Harley & Browneand Kaplan make clear that the right to enforce a lien will be waived if the attorney “fails to enforce the lien within a reasonable time.” Harley & Browne, 957 F. Supp. at 49 ; Kaplan, 495 N.Y.S.2d at 407 . In fact, the right to enforce the lien can be waived even if the attorney asserts the lien before the settlement proceeds are disbursed. See Avaras, 2021 WL 5745718 , at *6 (finding the lien waived with an eight-month delay even though the attorney asserted the lien before the disbursement of settlement proceeds, and disagreeing that Harley & Browneor Kaplanwouldcompel a different result because “Kaplanmakes clear that waiver may occur . . . if the attorney fails to enforce the lienwithina reasonabletime” (emphasis in original)). Troy Law also argues that until my denial of theirmotion for reconsideration—a motion I have found to warrant sanctions, (seeDoc. 209 at 37–39)—they “were not sure whether the settlement would be upheld or not.” (Reply 6.) However, Troy Law cannot be allowed tocreate more time for itself to enforce the charging lien simply by filing motions,unless the law would impose something akin to a stay. TroyLaw asserted the lien against the NYLL Plaintiffs five months after it had asserted the lien against the Cheeks Plaintiffs, six months after my denial of their motion for reconsideration, and over one year after they became aware of the settlement. Such delayis too long to be reasonable under the circumstances; it might have misled the existingparties about the attorney’s intention, and “intervention at this late stage would prejudice [them] by destroying their [s]ettlement and sendingthem back to the drawing board,” In re Holocaust Victim Assets Litig., 225 F.3d 191, 199 (2d Cir. 2000); see also Avaras 2021 WL 5745718 , at *6 (“The Second Circuit has generally held that an eight- to eighteenth-month delay in an attorney’s request to intervene after the applicant knew or should have known of an interest is untimely.”) (collecting cases). Accordingly, Troy Law has waived its entitlement to enforcethe charging lien as to the NYLL Plaintiffs, and I deny their motion. 2. The Cheeks Plaintiffs The CheeksPlaintiffs asserts that Troy Law is not entitled to charging lien because they terminated Troy Law’s representation“for cause.” (See Hang Mem. 9–10.) They point to the affidavits filed in support of their motions to substitute their attorney, in which they each stated that they were “not satisfied with the legal service” provided by Troy Law. (See,e.g.Zhao Aff. ¶ 3 .) During the hearing, the Cheeks Plaintiffs each testified that they were not satisfied with Troy Law’s representation because Troy Lawfailed to provide them with updates on the status of the case and had a “poor attitude,” i.e.,Troy Law was not responsive to their inquiries. (See TranscriptI 6:3 (mentioning “poor attitude”), 15:13-24 (“[E]very time we make inquiries, we never get an answer.”); 49:6-9 (“[W]e went . . . to inquire about the progress of our case, but Mr. Troy was very tough with his language, so it was not a happy situation and we were not happy.”); Trans. II 82:18-20 (“[T]here was very little communication for those two years [of representation] between attorney Troy and us.”).) Such evidence is not sufficient to show terminationfor cause. Although NewYorklawdoes not explicitlydefinethe term “for cause,” courts havefoundterminationfor cause where “the attorneyhas engagedinsome kindof misconduct,has beenunreasonablylaxinpursuingthe client’s case,or has otherwise improperly handledthecase.” Garciav.Teitler,No.04-CV-832(JG),2004WL1636982,at *5(E.D.N.Y. 2004) (collectingcases),aff’d,443F.3d202(2dCir.2006). “Poor clientrelations,differences of opinion,or personalityconflicts donot amount tocause.” Garcia,443F.3d at 212. Here, althoughthefrequencyandclarityofTroyLaw’s communicationwiththefive Plaintiffs prior to the terminationwas not entirelyideal,thereis noevidence demonstratingthat TroyLawviolated anyprofessional rules orwas “unreasonablylax”inpursuingthe case.4 AlthoughI later sanctionedTroyLaw,boththe sanctionandTroyLaw’s conduct that ledtothe sanctiontook place after the terminationanddonot affectitsentitlementtoenforce the charginglien. Because Troy Law was not terminated by the CheeksPlaintiffs for cause, it is entitled to enforce the charging lienagainst them. Nevertheless,I find that the amount of charging lien asserted byTroy Lawis excessive. First, the charging lien only attaches upon commencement of the action, which, in this case, was February 3, 2017. (See Doc. 1.) The record, however, includes billing entries dated before February 3, 2017, (see Billing Record 1–2);5 these entries cannot be included as part of the computation of the charging lien. See Winkfield, 2013 WL 371673 , at *3. Second, almost all of the entries after June 12, 2019 involve work related to the five Plaintiffs’ motionsto substitute their attorney. (See Billing Record 11–12.) The work relevant to these entries was created by 4Specifically, there is no evidence suggesting that Troy Law failed to communicate any settlement offertothe five Plaintiffs. Defendants confirmed during the hearing that there was no settlement offer extended prior toTroy Law’s termination. (Trans. II 141:25-142:3.) 5“Billing Record” refers to the billing record submitted by Troy Law in support of its motion for attorneys’ charging lien against the CheeksPlaintiffs. (Doc. 216-2.) Troy Law’s own decision to oppose its former clients’ motions; in other words, it was not “in furtherance of obtaining a favorable judgment on behalf of [Plaintiffs] and.. .thus not properly the subject of the charging lien.” Stair, 722 F. Supp. 2d at 271 ; see also Pettiford,2020WL 1331918,at*7(excluding time billed for the attorney to prepare motion to withdraw as counsel from the computation of charging lien). Third, althoughTroy Law was representing twenty- three Plaintiffs at the time, the charging lien it is seeking to attach only relates to the three CheeksPlaintiffs;the Billing Record, however,covers work done for all of twenty-three Plaintiffs. The entries show time billed for “Finaliz[ing] the Complaint” or “review[ing] email[s],” without specifying the portion that was specifically dedicated to the work related to the CheeksPlaintiffs, and without providing an explanation why the total amount sought is reasonable for the three CheeksPlaintiffs. (Billing Record 2–3.) Fourth, certainentries are vague and the hours billed are unreasonable. For example, John Troy, the partner of Troy Law who purportedly billed at $550 an hour, spent one hour reviewing my Individual Rules and the Individual Rules of Magistrate Judge Debra C. Freeman.6 (Id.) It is not clear why John Troy— the highest billing attorney—would be the appropriate person to review the Individual Rules. Shuyang Xie, an associate at Troy Law purportedly billed at $250 at hour, also spent over eleven hours “scan[ning] paystubs.” (Id. 8–9.) This work does not appear to have needed someone with a law degree, and nothing in Troy Law’s papers militates against this finding. Entries like “Reviewing Defendants’ Comment,” “Revise and Review Documents,” and “Download, Review, Data Entry and Calendar” are so vague that I cannot determine their reasonableness, let alone that they apply to the CheeksPlaintiffs. (Id. 7, 8, and 9); see Pettiford,2020WL1331918, at *7(disregarding entries like “review additional docs” and “drafting demands” as overly 6AlthoughJudge Freemanwas the designated Magistrate Judge, this case was never referred to her for any purpose. vague). Fifth, although Troy Law asserted an amount of $63,379.70 “on a quantum merit basis,” (Troy Decl.¶ 8),7 it is unclear how itreached this number as the billing records it submits donot contain a total sum or any form of computation. (See Billing Record 20.) Sixth, Troy Law lists a number of attorneys and staff members that worked on this case, and asserts an hourly rate of $550 for John Troy, $350 for Senior Associates George Byun,Aaron Schweitzer, and Kenneth Willard, from $150 to $300 for Junior Associates, and from $100 to $150 for clerks and paralegals. (See generallyBilling Record; see also Doc. 247 at 29.)8 In other cases where Troy Law proposed the same or similar rates, courts have routinely found that “these individuals are not entitled to compensation at the hourly rates they proposed.” De Los Santos v. Hat Trick Pizza, Inc., 16-cv-6274 (AJN), 2021 WL 4150967 , at *2(S.D.N.Y. Sep. 13, 2021) (collecting cases) (determining as reasonable an hourly rate of $400 for John Troy, $160 for George Byun, and $150 for Adam Schweitzer, among others). For the reasons that have been thoroughly explained by many of my colleagues, see id.,I find that the hourly rates that Troy Law proposes for its legal team are excessive. Giventhe number of attorneys and staff members that have appeared on the Billing Record and the vagueness of thoseentries, I do not make individual findings as to the reasonable hourly rates for each person or the reasonable hours foreach task. Instead, I believe that an across-the-board deduction of 70% is appropriate, andfind that an amount of 30% × $63,379.70 = $19,013.91 to be reasonable attorneys’ fees for Troy Law. However, my analysis does not end with my determination that an across-the-board 7“Troy Decl.” refers to the declaration of John Troy in support of Troy Law’s motion for attorneys’ charging lien. (Doc. 216-1.) 8Troy Law did not provide the attorneys’ credentials in connection with their motion as to the CheeksPlaintiffs. They filed it previously in connection with their motion as to the NYLL Plaintiffs. (SeeDoc. 247.) reduction is appropriate. In a separate Opinion & Order, I have approved the Cheeks Plaintiffs’ settlement of $107,250.00 and determined an award of attorneys’ fees in the amount of $35,750.00 to be fair and reasonable. (Settlement O&O 7–8.)9 This amount represents one third of the settlement award. For the settlement amount to be fair to theCheeks Plaintiffs, the total award of attorneys’ fees for Troy Law and Hang & Associates cannot exceed $35,750.00. To determine a fair ratio for Troy Law and Hang & Associates to spilt the award for attorneys’ fees, I must compare the reasonable fees of the two firms. The billing records submitted by Hang & Associates shows a total charge of $51,457.50. (Invoice 28.)10 Although I have determined that the hourly rates charged by Hang & Associates are reasonable, certainhours billed donot reflect the work done solely for the CheeksPlaintiffs. (See Settlement O&O 8 n.4.) There are also a number of entries that are too vague to be included. (See generally Invoice (repeated entries of “Review court filing” and “Review court order”).) Therefore, I applya 20% across-the-board deduction and determine the reasonable attorneys’ fees for Hang & Associates to be 80% × $51,457.50= $41,166.00. I find it fair to require Troy Law and Hang & Associates to spilt the total award of attorneys’ fees based on the ratio of their respective reasonable attorneys’ fees. Troy Law is entitled to $35,750.00× [$19,013.91÷ ($19,013.91+ $41,166.00)] = $11,295.25, and Hang & Associates is entitled to $35,750.00× [$41,166.00÷ ($19,013.91+ $41,166.00)] = $24,454.75. Conclusion For reasons above, Troy Law’s motions for attorneys’ charging lien is DENIED in part 9“Settlement O&O” refers tomy Opinion & Order approving the CheeksPlaintiffs’ settlement filedsimultaneously with this Opinion & Order. 10“Invoice” refers to the billing records submitted by Hang & Associates in support of the CheeksPlaintiffs’ motion for settlement approval. (Doc. 238-2.) and GRANTED in part. Defendants shall make payment from the Cheeks Plaintiffs’ settlement proceeds to Troy Law in the amount of $11,295.25, and to Hang & Associates in the amount of $24,454.75, SO ORDERED. Dated: July 13, 2022 New York, New York / f . A Vernon S. Broderick United States District Judge This is a deviation from the method of disbursement contemplated by the settlement agreement. The parties shall inform me within two weeks of the filing of this Opinion & Order whether my suggested method of disbursement presents any issues.