Kasowitz Flattened by Flat-fee Arrangement with Duane Reade

On Tuesday, the Appellate Division, First Department ruled that the firm of Kasowitz Benson Torres & Friedman was not entitled to a multimillion-dollar fee claim for successfully representing Duane Reade. The 3-2 panel found that a “precise” fee arrangement negotiated via email existed between the parties and it did not allow Kasowitz to recover fees beyond a flat $1 million payment.

Kasowitz had made a claim of approximately $7 million for litigation over automated teller machine fees owed to the drugstore chain Duane Reade. The negotiations between Kasowitz and Duane Reade over fees occurred by a simple exchange of emails and lacked a formal contract. This led to a dispute over the interpretation of the alternative fee arrangement.

The litigation in which Kasowitz represented Duane Reade was the result of a deal Duane Reade signed in 2003 with ATM operator Cardtronics. Under the deal, Cardtronics would place ATMs inside the chain stores and Duane Reade would earn a half of all transaction surcharges. But two years later, Cardtronics signed a deal with JPMorgan Chase to put Chase’s name on the ATMs and Chase customers were exempted from paying the surcharge. This reduced the earnings of Duane Reade and prompted the dispute between it and Cardtronics.

In 2009, the dispute between Cardtronics and Duane Reade was settled with Cardtronics paying $1.75 million and on the same day Duane Reade entered into a contract worth more than $30 million with Chase. Before the litigation, in 2006, Duane Reade’s then general counsel, Michelle Bergman asked Kasowitz attorney Daniel Goldberg to represent Duane Reade in the court battle against Cardtronics. In an email, Goldberg suggested a $1 million fee, as well as 20 percent of “everything above $4 million as the success fee portion.”

Later, Kasowitz claims that the value of the new deal struck between Chase and Duane Reade should be considered as part of recovered damages, but in 2011, Manhattan Supreme Court Justice Paul Wooten found Kasowitz could not parcel the new contract between Chase and Duane Reade into “recovered damages.”

The majority wrote, “By the plain language employed, they demonstrate that Kasowitz made an offer to represent Duane Reade in the Cardtronics case for a flat $1 million, plus a success fee equal to 20% of the amounts recovered above $4 million in that litigation, and that Duane Reade accepted that offer”

The case is Kasowitz Benson Torres & Friedman v. Duane Reade, Appellate Division, First Department, No. 7495.