In the department of “Lawyers behaving badly”, I’m going to bet that I can get you to side with – and actually empathize with — the convicted international arms dealers and generally bad guys in this fee dispute with two lawyers. 

The story is about Luis Felipe Moreno-Godoy (let’s call him the Accountant, even though he’s not actually an accountant) and Monzer Al Kassar (let’s call him the Big Boss) and their dispute with Roger Stavis and Steven Kartagener, a pair of NYC-based criminal defense lawyers.  It was a for-pay case involving pretty serious charges.  The basic elements were the Colombian civil war, the US support of the Colombian government, the financing of that resistance through the manufacture and sale of cocaine, and the killing of US personnel involved in the fight to eradicate the coke.  You’ve seen enough movies and TV shows to get the basic idea.  The two were interesting enough to merit a profile in The New Yorker

Anyway, that was the backdrop, and while you and I might think, “I’m staying away from that”, there are some people who think “That’s a business opportunity.”  So, in 2005, the Drug Enforcement Administration sets up an elaborate sting operation that ultimately grabs the Accountant, the Big Boss, and a co-defendant conspiring to get in on an element of this lucrative business by agreeing to sell surface-to-air missiles to the resistance and to kill the Americans who were flying the planes that were getting rid of the cocaine.  The negotiations stretch from February 2007 to June of that year, after which they were all indicted, extradited to the US, tried, and finally convicted.  The Accountant is doing 25 years; the Big Boss is in for 30.  The losing – and presumably well-paid – lawyer is Roger Stavis.  (There are some other lawyers involved as well, but the court doesn’t take them to task so I won’t tar them with the same brush.)

To understand what happens next, you need to know about that high-end criminal defense lawyers they tend to get paid a flat fee up front.  The basic idea is that the next check they see is going to be the last check they see, so if they want to get paid ever, they need to get paid up front.  They try not to ask a lot of questions about where the money comes from, because that falls into the category of stuff they don’t really need to know or want to know.  In this case, the Government had sought forfeiture of a whole bunch of the Big Boss’s assets, so after conviction he was probably a little short on legitimate cash with which to pay a US lawyer.

Stavis agrees to do his clients’ Second Circuit appeal for a flat fee of $125,000, but at some point the Accountant suggests that they might want to bring in a fresh set of eyes, and Stavis recommends his friend Steven Kartagener, who’ll charge them another $100,000.  The clients agree, and the Accountant’s wife then sends Kartagener another $100K.  But here’s the thing: Kartagener never does any work because he can’t get the security clearance he needs.  Instead of sending the money back to wherever it came from, he sends $90,000 of it to Stavis’s firm and then (after the Accountant asks for his money back) sends the remaining $10K to Stavis personally.

The Accountant very politely asks Stavis to refund the $100K and the Big Boss also asks very politely, but Stavis flat-out refuses.  Stavis tells the Accountant that he was using the additional $100K to represent the Clients on the appeal that he already agreed to do for a flat fee of $125K.  Fast forward a while, and Stavis has $225K in his pocket for losing (in 2011) the appeal that he had contracted (in 2008) to do for $125K.

In 2014, the Accountant is sitting in federal prison with little to do, so he files a pro se complaint against the two lawyers for breach of contract, breach of fiduciary duty, and malpractice.  The fiduciary duty and malpractice claims are dismissed early on, but the New York statute of limitations for contract claims is 6 years, so that’s the claim (along with some quasi-contract claims thrown in by a lawyer who took the case over) that survives initial motion practice.  It goes through full discovery and gets resolved on cross-motions for summary judgment. 

Are you mad at the lawyers yet?  I am, but if you’re not, let me tell you their defense.  They don’t deny that they made a contract with the clients, that the clients performed, and that they breached.  (Kartagener also floated the nonsense that his performance was impossible because he couldn’t get a security clearance, but it certainly wasn’t impossible for him to send the money back instead of putting it in Stavis’s pocket.)  Instead, they said that the Accountant hadn’t shown that the extra $100K was his own money, so they should be able to keep it.  It’s the last element of a contract claim – proof of damages – that they said was missing. 

That’s not the law.  Unless the lawyers’ promised services were worth less than $100,000 to the client, then even if the client borrowed every penny of the fee, what he expected to receive (something worth $100,001, for example) minus his own costs (paying off a $100,000 loan, for example) leaves the client with a dollar’s worth of damages.  That’s not zero.  Or incidental/consequential damages: when the money wasn’t returned, they had nothing left with which to hire a new appellate lawyer, and were stuck with Stavis who already lost once.  (Don’t think that the lawyers didn’t try arguing that whatever they were going to deliver was worthless anyway, because the clients lost their appeal.  They tried that too, without success.)  Depending upon the proof, the damages might be small, but they also might far exceed $100,000.

For what it’s worth, the Second Circuit did agree that the client had to show that the money was his in order to recover on the quasi-contract, but they reinstated his claim because he had provided enough evidence of that to avoid summary judgment. 

What were these lawyers thinking?

Links:

2011 Second Circuit opinion upholding 2008 convictions

2017 SDNY opinion on cross-motions for summary judgment

2021 Second Circuit opinion reversing summary judgment in favor of those two lawyers.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>