Alternative Fee Agreement Turns Into Litigation: Kasowitz Sues Client Duane Reade

Figuring out who to create alternative fee agreements that work for both clients and lawyers is going to be part of the long process of them becoming the standard (if they ever do).

And when you are talking about lawyers, figuring it out means figuring it out through litigation.

Kasowitz Benson has sued its client, the pharmacy chain Duane Reade. The firm said it is owed $7 million the under an alternative fee arrangement that required payment equal to 20% of any value (in excess of $4,000,000) Duane Reude received from a lawsuit between Duane Reade and a company that installed ATMs in Duane Reade stores.

The fee arrangement also involved a flat fee of $1,000,000, which Duane Reade did pay, the complaint said.The arrangement was brokered by Kasowitz and Duane Reade general counsel Michelle Bergman in 2006.

Bergman left the company in November 2008, while the litigation was still pending, and the new general counsel settled the lawsuit, without Kasowitz’s knowledge in February 2009.

Kasowitz contends that settlement — the cash value, plus the value from increased earnings the settlement will bring, including a new deal for ATMS with Chase — equals at least $7 million, with additional discovery needed.

It appears there will be several battle fronts in this case: 1) Did the work Kasowitz did result in the settlement; 2) how the “value” of the settlement should be calculated; and 3) what the actual number value is, once a calculation is determined.

Clearly, therefore, the lawsuit involves more than just the development of an alternative fee agreement, but it raises interested issues about how specific such contracts must be, especially when basing payment on “value” received outside of the actual, dollar amount settlement.

Nate Raymond of the New York Law Journal has a full report and a copy of the complaint.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.