Mann v Saland

[*1] Mann v Saland 2006 NY Slip Op 50650(U) [11 Misc 3d 1081(A)] Decided on April 19, 2006 Supreme Court, New York County Lehner, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 19, 2006
Supreme Court, New York County

Joseph C. Mann, Plaintiff,

against

Anne Saland, a/k/a Anne Salant, Defendant.



108396/03

Edward H. Lehner, J.

The legal issues posed herein are: i) whether the legal services rendered by plaintiff in connection with an application by defendant to set aside a divorce obtained by her deceased husband constitute a "domestic relations" matter governed by 22 NYCRR 1400, etc., and ii) whether a retainer agreement whereby only the plaintiff-attorney would benefit from a settlement with defendant's sister-in-law in an amount less than a specified sum is enforceable.

Defendant's husband obtained a divorce from her in 1991, of which she was allegedly unaware until after his death in 1999. Upon learning of the divorce, defendant retained plaintiff in September 1999 to vacate same. It is agreed that if such application were successful, defendant would be entitled to the deceased's entire estate, which was valued to be approximately $400,000, whereas otherwise the deceased's sister (Alice Simmons) would be the sole beneficiary (Tr. pp. 3, 28).

Ms. Simmons was appointed by the Surrogate's Court to represent her brother's estate in opposing the application to vacate the divorce. After Justice Lobis of this court directed a hearing before a referee on said application, a settlement was reached between defendant and Ms. Simmons.

Prior to reaching the settlement, the parties hereto executed a retainer agreement dated December 4, 2000 (the "Retainer") whereby defendant authorized plaintiff to negotiate with Ms. Simmons and to settle her claim for up to a maximum of $200,000 of assets from the estate. The Retainer further provided that if the settlement with Ms. Simmons was in an amount less than $200,000, then defendant "freely and willingly pays the difference between the settled amount and the $200,000 to Joseph Mann as a fair and reasonable compensation to Joseph Mann for his legal services." Thus, if Ms. Simmons accepted a settlement of $10,000, plaintiff would, under the Retainer, be entitled to a fee of $190,000 (Tr. p. 25), whereas if the settlement was in the amount of $190,000, the fee would be $10,000. Thus, the amount by which a settlement was less than $200,000 would only accrue to the benefit of plaintiff. Finally, the Retainer provided that if Ms. Simmons demanded more than $200,000 in settlement, plaintiff would prepare the matter for trial and, in the event of a recovery after trial, would be entitled to a fee of one-third of the net recovery. Plaintiff is conversant in the Chinese language and defendant, who is Chinese, has a [*2]limited knowledge of English (Tr. pp. 7, 8, 21).

Pursuant to the stipulation of settlement "so ordered" by Justice Lobis on February 1, 2001, Ms. Simmons agreed to withdraw her objection to the application to set aside the divorce and to withdraw as temporary administratrix of her brother's estate and consent to the appointment of defendant. In consideration thereof, defendant agreed that certain estate assets valued at approximately $150,000 would be transferred to Ms. Simmons. Thereafter, by order of Justice Lobis dated March 5, 2001, the prior divorce decree was vacated.

When the dispute regarding plaintiff's legal fee could not be resolved, this action was commenced in April 2003 in which plaintiff seeks to recover $75,000 premised on three causes of action: 1) contract; 2) quantum meruit; and 3) unjust enrichment. In her answer defendant asserted a counterclaim for malpractice. While the motion before me by defendant is for summary judgment to dismiss the complaint, at oral argument defendant limited her application to dismiss only the first cause of action based on the Retainer (Tr. p. 15). No bill of particulars has been submitted on this motion and thus it is not clear how plaintiff arrives at the sum of $75,000 as the amount due under the Retainer.

Defendant maintains that this matter is governed by the provisions of 22 NYCRR 1400, etc., headed "Procedure for Attorneys in Domestic Relations Matters." Section 1400.1 provides that Part 1400 "apply to all attorneys who ... undertake to represent a client in a claim, action or proceeding in ... Supreme Court ... for divorce ... or to modify a judgment or order in connection with any such claims, actions or proceedings." Plaintiff admittedly has not complied with the provisions of said Part, but maintains they are not applicable. Defendant further asserts that the Retainer violates 22 NYCRR 1200.11(c)(2)(i), which bars a lawyer from entering into an agreement for a "fee in a domestic relations matter ... (which is) in any way determined by reference to the amount of ... (any) property settlement."

Discussion

I find that the rules referred to above relating to domestic relations disputes did not apply to the litigation between defendant and her sister-in-law. Although the validity of a divorce was at the heart of the controversy, the dispute was essentially an estate distribution matter in that the issue to be determined was whether defendant or Ms. Simmons would receive the assets of the deceased. Indicative of the fact that Part 1400 was only intended to regulate litigation between parties who were or had been in a marital relationship are: §1400.3, which requires that in actions pending in the Supreme Court a retainer agreement "be filed with the court with the statement of net worth"; §1400.5(a)(2), requiring that when an attorney takes a security interest in or lien on real property to secure his or her fee, it must be shown that "notice of an application ... has been given to the other spouse"; and §1400.5(b), which provides that "an attorney shall not foreclose on a mortgage placed on the marital residence while the spouse who consents to the mortgage remains the titleholder and the residence remains the spouse's primary residence."

The Part 1400 provisions were adopted in June 1994 as joint rules of the four Appellate Divisions. The genesis therefor was a report dated May 4, 1993 of the Committee to Examine Lawyer Conduct in Matrimonial Actions appointed in July 1992 by then Chief Judge Wachtler and chaired by former Justice E. Leo Milonas (the "Report"). The repeated use of the terms "spouse," "wife" and "husband" in the Report shows that the recommendations therein were intended to deal with litigation between persons who were or had been married. The very first sentences of the [*3]Executive Summary of the Report demonstrate the type of matters intended to be dealt with, as there it is stated: "The dismantling of a marital relationship, the loss of love and intimacy, the bitter struggle over children, the marital home, and finances, cause intense and conflicting feelings of anger, rejection, guilt and vulnerability. Litigants report that they experience a state of despair and isolation equalled only upon the death of a loved one."We have all experienced the sorrow resulting from the breakup of a marriage and family. Whether we have lived through the destructive process ourselves, or have observed the experiences of close friends or family members, we know the consequences are enduring. The emotional scars remain long after the lawyers and judges have left the scene."It is charged that a legal system which should operate to alleviate people's grief, protect their children and preserve resources in fact exacerbates the problems attendant to divorce."

While I have concluded that the dispute over the distribution of the assets of the deceased's estate was not the type of controversy intended to be encompassed within the framework of the Part 1400 rules, because of a court's "traditional authority ... to supervise the charging of fees for legal services" [First National Bank of East Islip v. Brower, 42 NY2d 471, 474 (1977)], I will next examine the provisions of the Retainer to determine enforceability. This obligation exists "even in the absence of undue influence or fraud" [Koral v. Koral, 185 AD2d 298, 299 (2nd Dept. 1992)].

"[A]s a matter of public policy, courts pay particular attention to fee arrangements between attorneys and their clients ... (and) [a]n attorney has the burden of showing that a fee contract is fair, reasonable, and fully known and understood by the client" [Jacobson v. Sassower, 66 NY2d 991, 993 (1985)]. In summarizing the principles governing the attorney-client relationship, Judge Bellacosa wrote in Matter of Cooperman, 83 NY2d 465, 471-472 (1994): "Sir Francis Bacon observed, [t]he greatest trust between [people] is the trust of giving counsel' (Bacon, Of Counsel, in The Essays of Francis Bacon, at 181 ([1846]). This unique fiduciary reliance, stemming from people hiring attorneys to exercise professional judgment on a client's behalf giving counsel' is imbued with ultimate trust and confidence. The attorney's obligations, therefore, transcend those prevailing in the commercial market place. The duty to deal fairly, honestly and with undivided loyalty superimposes onto the attorney-client relationship a set of special and unique duties, including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the clients' interests over the lawyer's. To the public and clients, few features could be more paramount than the fee the costs of legal services. Accordingly, attorney-client fee agreements are a matter of special concern to the courts and are enforceable and [*4]affected by lofty principles different from those applicable to commonplace commercial contracts." (Internal citations omitted)

Further, it has been held that where, as here, a retainer is entered into "subsequent to employment which (is) beneficial to the attorney, it is incumbent on the attorney to show that the terms are fair and reasonable" [Baye v. Grindlinger, 78 AD2d 690 (2nd Dept. 1980)]. See also, Matter of Schanzer, 7 AD2d 275 (1st Dept. 1959), aff'd. 8 NY2d 972 (1960).

Without determining whether or not the amount demanded herein is fair and reasonable, I conclude that the unusual fee provisions of the Retainer are unenforceable as, if Ms. Simmons agreed to any settlement, which under the Retainer would have to be for an amount under $200,000 (otherwise there would be a trial), no amount of the reduction would accrue to the benefit of the client, but rather solely to the attorney. Thus, his fee, which the Retainer refers to as "fair and reasonable compensation," could vary from $200,000 if Ms. Simmons dropped her claim (and thus 50% of the estimated value of the estate), to any amount less than the $200,000 maximum settlement authorized. I find that so variable an amount of compensation cannot be deemed fair and reasonable, and therefore the fee provisions of the Retainer are unenforceable.

Accordingly, defendant's motion, as modified as aforesaid at oral argument, to dismiss the first cause of action is granted.

This decision constitutes the order of the court.

Dated: April 19, 2006________________

J.S.C.