Stenographic Services, The Doctrine of Account Stated and The Statute of FraudsPrint Article
- Posted on: Oct 23 2019
Stenographic services are an important part of any litigation. After all, deposition and trial testimony must be recorded, as they are part of the record.
Typically, the attorney noticing the testimony retains the court reporter and commits to be directly responsible for the costs of the services. In some states, such as New York, the attorney is legally responsible (by rule, regulation or statute) for the stenographer’s fees, unless specifically disclaimed in writing.
There are times, however, when the attorney and the client have an arrangement whereby the court reporter is requested to bill the client directly for the services performed. New York’s Statute of Frauds and General Business Law require this arrangement to be in writing and communicated in writing to the court reporter. Otherwise, the attorney will be held personally liable for the costs of such services.
Disputes arise when the court reporter bills the attorney for the services rendered and does not receive any payment therefor. The court reporter claims that it has an actionable claim for an account stated. But, as Justice Margaret A. Chan of the Supreme Court, New York County, found in Veritext Corp. Servs. v U.S. Adjustment Corp., 2019 N.Y. Slip Op. 33058(U) (Sup. Ct., N.Y. County Oct. 15, 2019) (here), the statute of frauds may be a defense to such a claim.
Below, this Blog examines the account stated doctrine and the statute of frauds applicable to a promise by an attorney to answer for the debt of his/her client – that is, the attorney’s promise as the agent of the client to pay a court reporter’s fees on behalf of that client.
The Doctrine of Account Stated
The common-law doctrine of account stated is rooted in medieval England. Citibank (S. Dakota) N.A. v. Jones, 184 Misc. 2d 63, 64 (Dist. Ct., Nassau County 2000), citing Teeven, A History of Legislative Reform of the Common Law of Contracts, 26 U. Tol. L. Rev. 35, 46 (1994). The doctrine “is widely accepted, not only in New York, but in most jurisdictions….” Id.
An account stated may be defined, broadly, as an agreement, express or implied, between the parties to an account based upon prior transactions between them, with respect to the correctness of the separate items composing the account, and the balance due. Jim-Mar Corp. v. Aquatic Constr., 195 A.D.2d 868, 869 (3d Dept. 1993), citing, inter alia, Interman Indus. Prods. v R. S. M. Electron Power, 37 N.Y.2d 151 (1975), and Chisholm-Ryder Co. v Sommer & Sommer, 70 A.D.2d 429 (4th Dept.1979). Stated differently, an account stated is an agreement, independent of the underlying agreement (Episcopal Health Servs., Inc. v. Pom Recoveries, Inc., 138 A.D.3d 917 (2d Dept. 2016)), regarding the amount due on past transactions (JP Morgan Chase Bank, N.A. v. Rabel, 27 Misc. 3d 656 (N.Y. City Civ. Ct. 2010)).
An account stated is predicated upon a transaction between the parties such that it creates a debtor and creditor relationship, prior to the statement of the account. Bank of New York-Delaware v. Santarelli, 128 Misc. 2d 1003, 1004 (County Ct., Broome County 1985). To make an account stated, the indebtedness must refer to an existing debt; it cannot be made to create a liability where none existed before. Ryan Graphics, Inc. v. Bailin, 39 A.D.3d 249, 250 (1st Dept. 2007). A cause of action alleging an account stated cannot be used to collect under a disputed contract. Ross v. Sherman, 57 A.D.3d 758 (2d Dept. 2008).
Since an account stated sounds in breach of contract, the agreement may be implied as well as express (i.e., an express agreement to treat a statement of debt as an account stated). Chisholm-Ryder, 70 A.D.2d at 431 (citation omitted); Grinnell v. Ultimate Realty, LLC, 38 A.D.3d 600 (2d Dept. 2007). An agreement may be implied if a party receiving a statement of account keeps it without objecting to it within a reasonable time because the party receiving the account is bound to examine the statement and object to it, if there is an objection. Id. Notably, silence is deemed acquiescence and warrants enforcement of the implied agreement to pay. Id. (citations omitted). An agreement may also be implied if the debtor makes partial payment. The partial payment is considered acknowledgment of the correctness of the account. Id., citing, inter alia, Parker Chapin Flattau & Klimpl v Daelen Corp., 59 A.D.2d 375, 377 (1st Dept. 1977). See also Shea & Gould v. Burr, 194 A.D.2d 369 (1st Dept. 1993) (receipt and retention of account without objection within a reasonable time coupled with a partial payment gives rise to an actionable account stated entitling plaintiff to summary judgment).
An account presented to and accepted by the debtor does not lose its character as an account stated by reason of the account including installment payments. However, an account stated may only encompass amounts not yet due if there remains no further obligation to be performed by the party claiming payment. Gurney, Becker & Bourne, Inc. v. Benderson Dev. Co., Inc., 47 N.Y.2d 995, 996 (1979).
To state a cause of action for an account stated, a plaintiff must allege that: (1) the defendant is indebted to the plaintiff for a specific amount, constituting the sum of one or several billing invoices delivered to the defendant over a particular period of time; (2) the plaintiff’s demands have not been complied with; (3) the accounts remain outstanding; and (4) there is an absence of objection from the defendant. In the absence of fraud, mistake or other equitable considerations making it improper to recognize the agreement, if the foregoing elements are satisfied, then the account is conclusive.
A cause of action for an account stated will fail where the defendant has rendered to the plaintiff its objections to its obligation to pay the amounts billed within a reasonable time. Joe O’Brien Investigations Inc. v. Zorn, 263 A.D.2d 812 (3d Dept. 1999). For purposes of a claim of account stated, whether a bill has been held without objection for a period of time sufficient to give rise to an inference of assent is typically a question of fact, and becomes a question of law only in those cases where only one inference is rationally possible. Accent Collections, Inc. v. Cappelli Enterprises, Inc., 94 A.D.3d 1026, 943 N.Y.S.2d 189 (2d Dept. 2012); Whiteman, Osterman & Hanna, LLP v. Oppitz, 105 AD3d 1162, 1163 (3d Dept. 2013). However, generalized objections lodged by a defendant after receiving a plaintiff’s billing statements do not constitute objections to the billing statements. Costopoulos v. DeCoursey, 151 A.D.3d 1452, 57 N.Y.S.3d 249 (3d Dept. 2017).
The Statute of Frauds Relating to Stenographic Services
In New York, the statute of frauds is found in General Obligations Law (GOL) § 5-701 through 5-705. These provisions require a signed writing for certain types of agreements, including, but not limited to, agreements to answer for the debt of another person. GOL § 5-701(a)(2).
The purpose of the Statute of Frauds is “to avoid fraud by preventing the enforcement of contracts that were never in fact made.” Fox Co. v Kaufman Org., 74 N.Y.2d 136, 140 (1989). Where a party promises to answer for the debt of another, the promise, if it is to be enforceable, “must either be evidenced by writing or plaintiff must prove it is supported by a new consideration.” Martin Roofing v Goldstein, 60 N.Y.2d 262, 265 (1983).
When an attorney, during the course of litigation, obtains court reporting services on his/her client’s behalf, he/she will be held personally liable for the costs of such services unless the attorney expressly disclaims such responsibility. Urban Ct. Reporting v. Davis, 158 A.D.2d 401, 402 (1st Dept. 1990). “This is … [as] [i]t seems to us to be more equitable to hold the attorney liable in the absence of his express indication to the contrary, since the attorney may avoid liability by the simple expedient of indicating to the reporting service or other provider of services that the client and not the attorney is liable for the obligations incurred.” Id. This view was adopted by the Legislature in its enactment of General Business Law (GBL) § 399-cc. Elisa Dreier Reporting Corp. v. Global Naps Network, Inc., 84 A.D.3d 122, 125 (2d Dept. 2011)
GBL § 399-cc provides that “when an attorney of record orders a stenographic record of any judicial proceeding, deposition, statement or interview of a party … it shall be the responsibility of such attorney to pay for the services and the costs of such record except where … the attorney expressly disclaims responsibility for payment of the stenographic service or record in writing at the time the attorney orders … that the record be made.” The Legislature enacted Section 399-cc “to protect court reporters in the event they [were] unable to recover payment for their services.” Elisa Dreir Reporting, 84 A.D.3d at 126-127.
Veritext Corp. Servs. v U.S. Adj. Corp.
Plaintiff, Veritext Corporate Services (“Veritext”), provided court reporting and deposition services to defendant, U.S. Adjustment Corp. (“USAC”). Veritext alleged that it provided the services to various USAC attorneys and law office clients with the understanding that all billing would be submitted to and paid by USAC. Veritext maintained that it sent invoices to USAC for these services and that USAC made sporadic payments leaving invoices in the amount of $100,817.83 outstanding. Veritext averred that it had no record of any objection to the amounts listed on the invoices and since partial payment was made by USAC at various points, Veritext continued to provide the court reporting services until August 2015.
Veritext moved for summary judgment against USAC for an account stated. USAC opposed the motion.
Veritext argued that USAC made partial payment on the outstanding invoices and retained the invoices without objection. USAC’s failure to object to any of the statements, coupled with the payments on the account, argued Veritext, indicated an acquiescence to the balance due, thereby entitling it to summary judgment on the account stated.
USAC argued that the motion should be denied because there was no proof that there was an underlying contract obligating it to pay Veritext’s invoices. USAC maintained that because Veritext failed to submit an affidavit by anyone with personal knowledge of the alleged “understanding” between the parties or any express written agreement evidencing that USAC would be responsible for payment, Veritext’s claim for account stated must be denied.
USAC further argued that Veritext’s claim was barred by the statute of frauds (i.e., G0L § 701(a)(2) and GBL § 399-cc) because Veritext provided services to “various clients of defendant” and “to different law offices and attorneys” without any writing evidencing an assignment or agreement by those parties for USAC to pay for the stenographic services. USAC explained that under GOL §701(a)(2) and GBL § 399-cc, Veritext’s claim for an account stated should fail as the stenographic services must be paid by the attorneys of record, not USAC, in the absence of proof of a written assignment.
The Court denied the motion.
The Court’s Decision
The Court found issues of fact concerning USAC’s liability for the invoices – that is, USAC’s obligation to pay the invoices sent to Veritext. Slip Op. at *3. The Court explained its finding as follows:
Crucially, it is unclear whether defendant is required to pay plaintiffs invoices. GBL 399-cc requires that an attorney of record pay for stenographic services. The submitted invoices include the phrase “Bill To”, followed by the name of the attorney of record, and an address of USAC’s place of business. Additionally, it is unclear from the submitted evidence whether the attorneys of record assigned their obligations to pay plaintiff to defendant. Viewed in the light most favorable to defendant, this indicates that the attorneys of record, not defendant, are obligated to pay plaintiff. As such, summary judgment is inappropriate at this time.
Id. at **3-4.
GBL § 399-cc provides that the attorney of record must pay for the requested stenographic services unless such responsibility is expressly disclaimed in writing at the time the services are requested. In Veritext, issues of fact prevented the grant of summary judgment because it was unclear who was responsible for the payment of Veritext’s invoices.