Law Firms, Investigators and 1st or 2nd Departments

Sunday, September 11, 2005 | 0

Kroll Associates Inc. v. Sands Brothers & Co. Ltd., NYLJ 8/25/05 (Supreme Court, New York County) (LEHNER, j)

What is the liability of a law firm for outside investigative services rendered in connection with litigation being handled by it? Currently the law guiding courts on this question differs depending on which side of the East River the case is pending.

In June 2000, the Littman Krooks law firm was representing defendant Sands Brothers in litigation pending in Texas. On June 26, 2000, Littman Krook approached plaintiff Kroll Associates to provide investigative services for Sands in connection with that litigation.

After the meeting, Kroll sent a retainer letter setting forth the terms of the relationship. The retainer letter set forth the various charges to be made by Kroll, and states that "you ," i.e. Littman Krooks, agree to pay a $30,000 retainer and "will be billed on a monthly basis." The letter also provides that "Sands agrees it is liable for payment of our invoices."

Kroll stated that, in light of the need for prompt action, it commenced its work without having received a signed copy of the retainer letter or the $30,000 retainer. The retainer letter was never signed by any of the parties. Kroll asserted that it periodically kept Roth and Sands personnel advised of the progress of its investigation. On July 6 it faxed its report to Roth, which contained a preamble stating: "This is a confidential document prepared solely for the private and exclusive use of personnel of Littman Krooks Roth & Ball." At the bottom of each page of the report were the words: "Privileged and Confidential Attorney Work Product." Kroll subsequently sent an invoice dated July 28, 2000 to Roth at Littman Krooks in the total amount of $56,002.12. In December, Roth advised Kroll that the law firm had a dispute with Sands over its legal fees and suggested that the invoice be sent to Sands.

When payment was not received, Kroll commenced this action in 2001.

The First Department held in Urban Court Reporting, Inc. v. Davis, 158 AD2d 401 (1990), that "contrary authority notwithstanding" " . . . we think an attorney who, on his client's behalf, obtains goods or services in connection with litigation should be held personally liable unless the attorney expressly disclaims such responsibility . . . (as it) seems to us to be more equitable to hold the attorney liable in the absence of his express indication to the contrary, since the attorney may avoid liability by the simple expedient of indicating to the reporting service or other provider of services that the client and not the attorney is liable for the obligations incurred."

A contrary rule has prevailed in the Second Department. The leading case is Sullivan v. Greene & Zinner, P. C., 283 AD2d 420 (2001), where in an action by a court reporter against a law firm, the court wrote that "it is well settled that an attorney is only an agent for his or her client, and thus is not responsible for the court reporter's fee, unless the attorney assumed that responsibility." This holding has been followed in several Appellate Term decisions in the Second Department.

Thus, from the above authorities, in the First Department the rule is that an attorney is liable to litigation service providers unless responsibility is expressly disclaimed, whereas in the Second Department the attorney is liable only if responsibility is assumed.

The court in the case at hand (which is in the First Department) "observes that while the retainer letter was never signed by any of the parties, it has been held that absent a statutory requirement of a writing (which does not exist here), 'an unsigned contract may be enforced, provided there is objective evidence establishing that the parties intended to be bound'. Here the retainer letter, which apparently was never objected to by Littman Krooks, could properly be interpreted to have intended to create liability on both i) the law firm to whom it was addressed and thus the 'you' referred to in the body thereof as the party to make payment, as well as ii) Sands, with respect to which there was set forth a specific obligation for payment. Factually, the meeting of June 27 at Littman Krooks, at which Kroll was retained, was attended by lawyers from the firm as well as a representative of Sands; status reports on the investigation were given to both Sands and the law firm; and the report of June 6 was sent only to the law firm labeled 'attorney work product.' Based on the foregoing, the court finds that Littman Krooks has not established that it expressly disclaimed an obligation to pay for the services to be rendered by Kroll in connection with the litigation the firm was handling for Sands, and hence is not entitled to the relief requested."

The motion for summary judgment by Littman Krooks was denied.

by NY attorney Lawrence Rogak.

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