Labor & Employment Law Daily Wrap Up, WAGE-HOUR—E.D.N.Y.: Plaintiffs’ counsel directed to refrain from making false representations regarding fee arrangements, (Apr 30, 2026)

By Ronald Miller, J.D.

The court determined that the employees’ act of opting out of a settlement conference despite knowing it would lead to dismissal of the case was effectively no different from discharging plaintiffs’ counsel.

An employer was entitled to intervene to obtain an order directing plaintiffs’ counsel to cease making false and misleading statements to employees, including threats about the employees’ decision not to pursue or participate in a wage-hour settlement conference, a federal district court in New York ruled. The court determined that plaintiffs’ counsel’s message to its clients, indicating that it could “go after” them for fees and that they had a “legal” obligation to appear at a settlement conference, were both untrue. By pressuring its own clients, plaintiffs’ counsel exhibited an unconscionable abuse of the trust and power implicit in the attorney-client relationship (Yu v. Kotobuki Restaurant, Inc., No. 17-CV-4202 (JMA)(JMW) (E.D.N.Y. Apr. 28, 2026)).

Settlement conferences. A settlement conference had been scheduled for March 18, 2026. Because certain individual plaintiffs failed to appear at prior settlement conferences despite court orders to appear, the court emphasized that in-person attendance is required at all future settlement conferences. If any employee did not attend the March 18, 2026 settlement conference or any future court-ordered settlement conferences, their claims concerning two of the employer’s restaurants would be dismissed.

Motion to intervene. On March 16, 2026—two days before the scheduled hearing—the employer filed a Motion to Intervene. The employer stated that a serious issue had come to its attention concerning the handling of the settlement conference by plaintiff’s counsel. It requested an order directing plaintiffs’ counsel to cease making false and misleading statements to employees concerning threats about their decision not to pursue or participate in settlement conference.

Threat by plaintiffs’ counsel. At least one employee indicated his unwillingness to attend the upcoming settlement conference. In response, the plaintiffs’ counsel advised him that he may be responsible for outstanding legal fees if he chose not to attend.

At a court-ordered conference to address these representations, plaintiffs’ counsel did not deny the accusations. In fact, he read into the record a chat message sent by the law firm to the employees, which accorded with the representations in the employer’s letter. The court reserved judgment and instructed plaintiffs’ counsel to file their Opposition, along with any supporting exhibits and documentation in furtherance of their arguments therein including the relevant engagement letters and text messages referenced on the record.

Despite plaintiffs’ counsel’s threats, only two employees showed up to the March 18 settlement conference. So a magistrate judge issued a recommendation to dismiss the claims of seven employees. The district court adopted that recommendation on April 15, 2026.

Plaintiffs’ counsel filed its opposition to the employer’s Motion to Intervene on March 20, 2026, which included both its retainer agreement with the employees and the full text of the offending chat message.

Because two employees remained, and because of the seriousness of the alleged misbehavior, the court addressed the employer’s Motion to Intervene.

Chat message. The chat message in question stated: The case is ready for go for [sic] final settlement conference. You have a legal obligation to cooperate and proceed with the case. In any case, if you want to withdraw from this case, we may have no other choice but to go after you for paying the attorney fees for whatever efforts we make and time we spent for [sic] the case until now.

The court concluded that the phrase “we may have no other choice but to go after you” clearly implied that the employees would need to pay plaintiffs’ counsel out of Plaintiff’s own pocket.

Plaintiffs’ counsel maintained that the representations in that chat message were “true” and “not improper.” Specifically, it maintained that, although its payment structure under the retainer agreement was largely contingency based, it would still have a right to collect fees under the doctrine of quantum meruit and/or Section 475 of the New York Judiciary Law.

Retainer agreement. The retainer agreement mentions quantum meruit only once. If Plaintiff settles its claims without consent of Troy Law, the retainer agreement provides that Troy Law shall have “the option of seeking compensation on a quantum meruit basis to be determined by the court.” Because the employees have not settled without consent of Troy Law, this provision is inapplicable.

The retainer agreement specifically contemplates two ways the engagement might end early: discharge of attorney, and withdrawal of attorney. In either event, Troy Law shall be paid “out of the recovery” for reasonable fees and costs advanced. Since there has been no recovery to date, these provisions would appear to be inapplicable.

In the section titled “Attorney’s Fees,” the retainer agreement provides: “If there is no net recovery, Attorney will receive no attorney’s fees.”

Finally, Troy Law pointed to a clause providing the firm a lien for fees and costs advanced by the firm “under this agreement and on all proceeds of any recovery obtained.” The court determined that this provision added nothing because other terms laid out in the retainer agreement provide that attorney fees and costs are paid only from the recovery, if any.

Quantum meruit. “Under New York law, a client may discharge his or her lawyer at any time, with or without cause. If a lawyer is discharged for cause, he or she is not entitled to legal fees. If the lawyer is discharged without cause and prior to the conclusion of the case, however, he or she may recover either (1) in quantum meruit, the fair and reasonable value of the services rendered, or (2) a contingent portion of the former client’s ultimate recovery, but only if both of the parties have so agreed.”

“In order to recover in quantum meruit under New York law, a claimant must establish (1) the performance of services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services.”

Section 475 of the Judiciary Law. Section 475 of the Judiciary Law provides that an attorney has a charging lien on the “proceeds” of “a verdict, report, determination, decision, award, settlement, judgment or final order in his or her client's favor[.]” “The charging lien set forth in Section 475 is also equally enforceable against settlement funds as well as monetary awards resulting from a favorable judicial disposition.” Because there has been no recovery in this case, Troy Law’s purported right to “go after” its clients has no basis in Section 475.

However, the Second Circuit has noted that quantum meruit is a distinct legal theory from a charging lien, and that recovery under quantum meruit, unlike a charging lien, is available even where recovery has not been obtained. However, even if Troy Law is discharged without cause—i.e., the only situation in which quantum meruit could apply—the firm’s payment is contractually capped at a percentage of the employees’ recovery (if any).

Discharge of plaintiffs’ counsel. To be sure, the employees here did not discharge Troy Law. The employees simply decided not to show up to the settlement conference. Because this circumstance was not contemplated in the retainer agreement, Troy Law argued the default rule of quantum meruit controls.

Here, the court determined that the employees opting out of a settlement conference despite knowing it would lead to dismissal of the case is effectively no different from their discharging Troy Law. Contrary to Troy Law’s argument, that fact cut against quantum meruit, because the retainer agreement implicitly precludes quantum meruit where the plaintiff voluntarily drops the case.

In sum, the retainer agreement provided that “If there is no net recovery, Attorney will receive no attorney’s fees.” Therefore, it was misleading for plaintiffs’ counsel to represent to its clients that it could “go after” them to pay out of pocket if they exercised their right to withdraw from the representation.

Accordingly, there was no basis for Troy Law’s assertion that it could legally “go after” its clients for fees.

The case is No. 17-CV-4202 (JMA)(JMW).

Judge: Wicks, J.

Attorneys: Aaron Schweitzer (Troy Law) for Sheng Wei Yu, Aimee Lacaden, Wei Jie Yu, and Joshi Dharm Raj. Salvatore Puccio (Garfunkel Wild) for Kotobuki Restaurant, Inc. dba Kotobuki dba Kotobuki-Hauppauge, Kotobuki Roslyn, Inc. dba Kotobuki dba Kotobuki-Roslyn, Kotobuki-Roslyn dba Kotobuki dba Kotobuki-Babylon, Kotobuki Manhattan, Inc. dba Kotobuki dba Kotobuki-Manhattan, Yoshihiro Narita, Eric Kim, BEY United, LLC dba Kotobuki dba Kotobuki-Manhattan, and Bon S. Koo.

Companies: Kotobuki Restaurant, Inc.; Kotobuki; Kotobuki-Hauppauge, Kotobuki Roslyn, Inc.; Kotobuki-Roslyn; Kotobuki Babylon, Inc.; Kotobuki-Babylon; Kotobuki Manhattan, Inc.; Kotobuki-Manhattan; BEY United, LLC

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