Fruman v Strishak
Annotate this CaseDecided on March 7, 2006
Supreme Court, Kings County
Steven (Vyacheslav) Fruman, V.I.F. MANAGEMENT, INC., Plaintiffs,
against
Andre Strishak, Esq., ANATOLE STRISHAK and SVETLANA STRISHAK, Defendants.
38375/03
Lewis L. Douglass, J.
Sometime in 1995 the plaintiff, a non lawyer, and the defendant, a lawyer, entered into an arrangement to operate a personal injury law firm. The non lawyer is now suing for a million and a half dollars which he claims is the balance due to him for the services he performed over a five year period ending sometime 2003.
The threshold question is whether this arrangement was a fee-spitting arrangement or whether it was a legitimate contract wherein the lawyer merely hired the defendant to manage his office for a "15% facility fee." This "15% facility fee," according to the non lawyer is 15% of the office overhead such as rent, salary for paralegal's, etc. The lawyer claims that this is a subterfuge and the 15% actually is a percentage of his fee when personal injury cases are settled.
In addition to managing the office when the lawyer did not have sufficient funds to cover office expense, the non lawyer would advance the funds until the lawyer's cash position improved which in plain language can only mean until the cases are settled.
In support of the argument by the non lawyer that this was not "fee-spitting" he points to the fact that every two weeks vouchers were prepared and submitted to the lawyer. The lawyer denies receiving the vouchers and implies that they were prepared just to support this litigation. These vouchers may be routine records to show payroll and other expenses but to the extent they purport to prove the relationship between the lawyer and non lawyer they are not helpful in determining how these parties operated when they were getting along. This arrangement was not in writing, and in this lawsuit there is a separate dispute about the ownership of a building that was purchased in the name of the [*2]lawyer's parents, but according to the non lawyer there was an oral understanding that the building was actually to be used to expand the law practice and was to be owed by them as equal partners. The real arrangements between these parties was never reduced to writing.
If the non lawyers version is to believe the economic incentives in this contract are backwards. The fee is 15% of the overhead thus, the more equipment the non lawyer purchases, the more paralegals he hires, the higher would be his 15% contrary to a normal relationship where your fee would go up if you make the operation more efficient.
The non lawyer also describes his responsibility as including "procuring" clients. This is a clear violation of Section 479 of the Judiciary Law which prohibits "any person . . . . to procure . . . . legal business" and the entire arrangement violates the proscriptions against fee-spitting as contained in the Code of Professional Responsibility DR3-102
In reviewing the affidavits submitted in connection with this motion for summary judgment, the court is in no position to make a precise financial analysis. But all parties concede that over the five year period, the lawyer paid to the non lawyer seven million dollars and according to the non lawyer, the lawyer owes him another half a million dollars. It is possible that these figures represent the cost of running the office plus 15% but although not critical to my ultimate decision, the movement of seven million dollars over the five year period from the lawyer to the non lawyer is more consistent with the division of personal injury settlements then overhead of a law practice plus a management fee.
Plaintiff also argues that even if the contract is illegal, the law will, in some occasions, enforce illegal contracts when one side is in such a superior position that it would be unfair to allow the superior party to retain the value of the services without paying for the services. For example, an airline attendant who works more the hours than the FAA permits, would be entitled to get paid for the hours over and above the maximum even though it's unlawful, since the attendant's power and understanding of the law is so minimal as compared to the airline companies. We don't have a situation here. Both of these parties understood the personal injury business and sought to construct an arrangement which circumvented Section 479 Law and the Code of Professional Responsibility. There is no evidence that one exploited the other. The fact is that both broke the law and are equally at fault, neither can ask a Court to enforce this illegal contract.
The defendant also argues even if the contract is unenforceable the illegality has [*3]no relationship to the dispute about the title to the building which they purchased, therefore, and the Court should permit the issue of who owns the building to go forward. The purchase of the building arose out of this illegal arrangement and this Court cannot be asked to enforce that arrangement or anything derived from that illegal arrangement.
I do not reach the question of the applicability of the Statue of Frauds. What is offensive here is the clear violation of the Code of Professionally Responsibility and that should be the focus of any Appellate Court review.
Neither parties are entitled to ask this Court to enforce any part of this illegal arrangement.
The complaint is dismissed.
This constitutes the decision and order of the Court.
Hon. Lewis L. Douglass
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