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April 5, 1972

UNITED STATES of America, Defendant

Shaw, District Judge.

The opinion of the court was delivered by: SHAW

Plaintiff filed a complaint in this court seeking a refund for corporate income tax alleged to have been erroneously assessed by the government and paid by plaintiff. Plaintiff expressed dissatisfaction with the services of its attorney, Charles Emmett Lucey, Esq. As a consequence, Mr. Lucey withdrew his representation but refused to relinquish books, correspondence and files belonging to plaintiff on the ground that he had a lien thereon for unpaid counsel fees. Plaintiff denies that there is any money owing and moves for an order of this Court directing Charles Emmett Lucey, Esq., and the firm of Maguire, Tucker and Oehmann, Esqs., of which Mr. Lucey was formerly a member, to return all books, correspondence and files belonging to plaintiff so that they may be available for continued prosecution of the tax litigation by substituted counsel.

 The dispute involves interpretation of a retainer agreement executed by William J. Bigley, president of plaintiff corporation, and the Washington, D.C., law firm of Maguire, Tucker and Oehmann with whom Mr. Lucey was associated as a partner at the time of the execution of the retainer agreement. An evidentiary hearing was held and the following pertinent facts emerged:

 Mr. Lucey severed his partnership association with the firm of Maguire, Tucker and Oehmann and Mr. Lucey provided all of the legal services in the tax litigation, including preparation and filing of the complaint in this court. The law firm with which he was formerly associated makes no claim for any earned fees. The retainer agreement was set forth in two letters, both drafted by Mr. Lucey. The retainer agreement as set forth in these letters is quoted in pertinent part as follows:

The Corporation shall pay this firm a retainer of $5,000.00 which shall be due and payable upon acceptance of this arrangement. Hourly charges at the rate of thirty dollars ($30.00) per hour for associates and seventy-five dollars ($75.00) per hour for partners time shall be paid. These hourly charges, together with out-of-pocket expenditures incurred by this firm in connection with this matter, shall be rendered monthly. The books of the firm will be open for your inspection at any time in this regard. In addition, a contingency fee in the amount of 10% of any recovery up to $30,000.00 and 20% of any recovery over and above $30,000.00 shall be paid. (Letter of January 20, 1970) This letter will serve to confirm our agreement of this date which in effect amends the fee arrangement set forth in my letter of January 20, 1970 so as to provide an overall limitation on hourly fees of $5,000.00. That is to say, the hourly charge shall be as set forth in the letter of January 20th, but such charges shall not exceed in the aggregate of $5,000.00. (Letter of January 23, 1970).

 Both letters were signed by Mr. Lucey and countersigned by Mr. Bigley as president of plaintiff corporation. Mr. Bigley's signature appears below a postscript which reads:

I hereby agree to the above-described arrangement with Maguire, Tucker & Oehmann.

 The fact that the two letters set forth the only written agreement to pay counsel fees is not disputed. The dispute centers around the question of what the parties intended by the language used. Mr. Lucey contends that it was the understanding of both parties that plaintiff would pay a $5,000 retainer and pay additional hourly billing fees, the aggregate amount of which was not to exceed $5,000. Under the agreement as interpreted by Mr. Lucey he was entitled to receive as much as $10,000 plus a percentage of tax refund recovery. Mr. Bigley insisted that he had agreed to a $5,000 retainer to be applied against hourly billings, such billings not to exceed a total of $5,000. The initial $5,000 fee was paid in March 1970. Mr. Lucey now demands an additional $5,000 which he asserts to be the charge for hourly billings. When questioned by the Court as to what plaintiff was to receive in the way of services for the initial payment of $5,000, Mr. Lucey replied in substance that the consideration for this was that he hold himself available to represent plaintiff. He takes the position, as indicated above, that the $5,000 was merely a retainer by virtue of which he would hold his legal services available to plaintiff and that it was intended that additional payment computed on an hourly basis was to be made for any services actually rendered in the tax litigation up to an amount not to exceed $5,000.

 In point of clarity as to the intent of the parties, the retainer agreement drafted by Mr. Lucey leaves much to be desired. If the intent of the parties emerging from discussions prior to the drafting of the retainer agreement was as contended by Mr. Lucey, it seems that it would have been a very simple matter to express that intent in clear and unequivocal language. On the crucial issue of the understanding which the parties had reached as to legal fees by discussions prior to drafting of the two letter agreements, testimony is in sharp conflict and credibility is sharply in issue. The two letters are integrated writings and the absence of clear and unequivocal expression permits evidence of all surrounding circumstances. Resort to extrinsic evidence of surrounding circumstances is permissible where there is doubt as to what the parties intended by the language which was used. In Casriel v. King, 2 N.J. 45, 65 A. 2d 514 (1949), the New Jersey Supreme Court stated:

. . . The admission of evidence of extrinsic facts is not for the purpose of changing the writing, but to secure light by which to measure its actual significance. Such evidence is adducible only for the purpose of interpreting the writing -- not for the purpose of modifying or enlarging or curtailing its terms, but to aid in determining the meaning of what has been said. So far as the evidence tends to show not the meaning of the writing, but an intention wholly unexpressed in the writing, it is irrelevant. (At page 517)

 Atlantic Northern Airlines v. Schwimmer, 12 N.J. 293, 96 A. 2d 652 (1953); Deerhurst Estates v. Meadow Homes, Inc., 64 N.J. Super. 134, 165 A. 2d 543 (App. Div. 1960).

 Parenthetically, it should be mentioned at this point that the Court is proceeding to apply New Jersey law. Plaintiff is a New Jersey corporation. The facts out of which the tax litigation which Mr. Lucey was to handle arose out of an income tax assessment made in this district. Litigation for a refund of taxes paid was commenced in this district. While the retainer agreement was drafted in the Washington, D.C., office of Mr. Lucey, the acceptance thereof was in the State of New Jersey.

 The motion for return of property consisting of books, correspondence and files of plaintiff is collateral to the primary tax suit for refund of income tax. Accordingly, there is a threshold question of jurisdiction. Under the doctrine of ancillary jurisdiction, this Court does have jurisdiction to determine the payment of legal fees. State of Iowa v. Union Asphalt and Roadoils, Inc., 281 F. Supp. 391 (S.D. Iowa 1968). This Court agrees with the definition of ancillary jurisdiction as set forth in Union Asphalt, supra, at pages 396, 397:

The ancillary jurisdiction theory is relatively simple -- once federal jurisdiction properly attaches to a primary case, the court also has jurisdiction over certain subsidiary or subordinate disputes even though it might not independently be able to proceed to adjudicate them. See, e.g., Murphy v. Kodz, 351 F.2d 163 (9 Cir.); Lee v. Terminal Transport Co., 282 F.2d 805 (7 Cir.), cert. den. 365 U.S. 828, 81 S. Ct. 713, 5 L. Ed. 2d 705 (1960); Aetna Ins. Co. v. Chicago, R.I. & P.R. Co., 229 F.2d 584 (10 Cir.); Glens Falls Indem. Co. v. United States, etc., 229 F.2d 370 (9 Cir.). It is well-settled that upon substitution of attorneys in litigation, a client may be required to either pay the attorney or to post security for reasonable fees as ancillary to the Court's jurisdiction of the main case. See e.g., National Equipment Rental, Ltd. v. Mercury Typesetting Co., 323 F.2d 784 (2 Cir.); Maddox v. Jinkens, 66 App. D.C. 362, 88 F.2d 744; Woodbury v. Andrew Jergens Co., 69 F.2d 49 (2 Cir.). In the situation at hand, the Court's jurisdiction to fix attorney fees is generated by its auxiliary relation to the antitrust action by the State. It may be true that the practice of injecting a condition of departure into an Order of removal is proper, but the Court cannot agree that it must be done in every case. The precepts of the ancillary jurisdiction doctrine dictate that the federal courts should extend their jurisdiction to encompass orbital disputes subordinate to the principal action so that complete justice may be done. See Walmac Co. v. Isaacs, 220 F.2d 108 (1 Cir.); Cooperative Transit Co. v. West Penn Elec. Co., 132 F.2d 720 (4 Cir.); Ancillary Jurisdiction of the Federal Courts, 48 Iowa L. Rev. 383 (1963). Considerations of judicial economy and fairness to all parties underlie the ancillary jurisdiction theory. Consolo v. Federal Maritime Comm., 383 U.S. 607, 86 S. Ct. 1018, 16 L. Ed. 2d 131 (1966). And once ...

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