Platovsky v City of New York

[*1] Platovsky v City of New York 2007 NY Slip Op 50840(U) [15 Misc 3d 1125(A)] Decided on April 23, 2007 Supreme Court, Kings County Kramer, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 23, 2007
Supreme Court, Kings County

Gerald Platovsky and Vicki-Jo Platovsky, Plaintiffs,

against

The City of New York, the New York City Health and Hospitals Corporation, Cumberland Hospital and Brooklyn Cumberland Medical Center, Defendants.



Gerald Platt and Kelner & Kelner, EsqS., Plaintiffs,

against

Law Finance Group., Law Investment Co., LLC, Robert Herbst, Esq. and Beldock Levine & Hoffman, LLP, Defendants.



15745/88



Plaintiffs were represented by Robert Herbst, Esq. of Beldock, Levine & Hoffman, LLP, 99 Park Ave., NY, NY 10016 and then subsequently represented by Kelner & Kelner, Esqs., 140 Broadway, NY, NY 10005. Defendant LawFinance Group, Inc. was represented by Napoli Bern & Ripka, LLP, 115 Broadway, NY, NY 10006

Hebert Kramer, J.

Can an arbitrator decide questions involving the violation of attorney disciplinary rules?

This matter involves the division of the proceeds of a settlement in an action that was commenced in 1982 by the plaintiff, Gerald Platt, against the City for injuries he sustained in an attack when he was a first year resident at Cumberland Hospital. Platt and his former and current attorneys, and the LawFinance Group, a California judgment purchase company who bought a portion of the anticipated recovery, variously claim entitlement to portions of the $750,000 proceeds.

The attorneys are accusing one another of misconduct and ethical breeches in an effort to undermine their respective fee demands. The judgment purchase corporation is claiming that pursuant to its purchase contract this entire matter must be sent to arbitration. The successor attorneys, the Kelner firm, are asserting that their rights are not governed by the purchase contract since they did not execute it. Finally, [*2]the contract agreement calls for the application of California law to any controversies arising from it.

As a threshold matter, this Court's research has disclosed that the decisions of the Courts of New York and of California are in accord with respect to the question of "arbitrability" presented by the facts at bar. However, since the parties have, under the judgment purchase agreement, elected to have their disputes governed by the law of California, this Court, following clear precedent established in New York, will apply the law of California as the jurisdiction of choice to resolve all of the disputes presented herein. Boss v. Am. Express Fin. Advisors, 15 AD3d 306, 307(lst Dept. 2005) aff'd, 6 NY3d 242(2006).[FN1]

As a further preliminary matter, this Court finds that the successor attorneys, Kelner and Kelner, while not direct signatories to the judgment purchase agreement had seen the agreement before they undertook representation of the plaintiff, Platt, and are subject to its terms by virtue of the fact that they were knowing, successor attorneys who stood to benefit from their representation of Platt. See Norcal Mutual Ins. Co., v. Newton, 84 Cal. App. 4th 64, 76(Ct. App. lst Dist., 2000). They are considered parties under the terms of the agreement, and its arbitration provision, because, as successor attorneys, they had "consulted [with] or [were] engaged by [plaintiff] seller in connection with the . . . litigation."

The arbitration clause lies at the heart of the motions currently pending before this Court [FN2]. The question to be determined is whether all of the issues involved in the division of the settlement proceeds should be sent to arbitration or whether the question of the violation of attorney discipline rules which can implicate public policy concerns should be determined preliminarily by a court of law.

In addressing this question, the LawFinance Group directed our attention to a California decision that appears to be dispositive. In Moncharsh v. Heily & Blase, 3 Cal 4th 1(1992), decided in the highest Court of California, the dispute involved the division of fees between an outgoing attorney and his former firm. Under the employment [*3]agreement, fee disputes were to be submitted to arbitration. At the arbitration, the attorney argued that a provision of the employment agreement was unenforceable because it violated public policy and the rules of professional conduct. The arbitrator disagreed, the superior court affirmed the decision and the intermediate appellate court affirmed the judgment in part finding that the clause in question did not offend public policy or the rules of professional conduct.

On appeal to the California Supreme Court Moncharsh argued that the "fee splitting provision of the contract that was interpreted and enforced by the arbitrator was illegal' and violative of public policy' as reflected in several provisions of the Rules of Professional Conduct. Such illegality, he claim[ed], ha[d] been recognized as a ground for judicial review as stated in a line of cases emanating from [a prior decision of the California Supreme Court]. Deciding, the question at bar, the Moncharsh Court held that "Moncharsh's allegation that paragraph X-C was illegal, even if true, does not render illegal either (I) the entire employment agreement, or (ii) the agreement to arbitrate itself. Accordingly, his illegality claim was an arbitrable one, and he did not waive the issue by failing to object to arbitration on this ground." Moncharsh, supra 3 Cal 4th at 29.

Indeed, in response to Moncharsh's arguments that the provision violates disciplinary rules that prohibit unconscionable fees and certain types of fee splitting arrangements and agreements restricting an attorney's right to practice, the Moncharsh Court indicated that it perceived "nothing in the Rules of Professional Conduct at issue in this case that suggests resolution by an arbitrator of what is essentially an ordinary fee dispute would be inappropriate or would improperly protect the public interest." Id. at 32-33.

Similarly, in the matter before this Court, the cross allegations of misconduct and violations of the disciplinary rules made in connection with the fee dispute do not demonstrate that resolution by an arbitrator of the disputed division of the settlement funds would improperly protect the public interest. And in this regard, an application of New York case law would lead to the same result. See e.g., Hackett v. Milbank, Tweed Hadley & McCloy, 86 NY2d 146(1995)(ex- partner's claims that a denial of a supplemental payment to him by his former firm constituted, inter alia, an impermissible restraint on the practice of law were arbitrable and the award upheld under the strong public policy favoring arbitration).

Accordingly, the motions and cross motions in both of the above titled matters are resolved as follows: All of the parties to this dispute are to proceed in an expeditious fashion to arbitration in accordance with the terms of the judgment purchase agreement for a determination of the division of the settlement proceeds. None of the funds received in the settlement of the underlying action and which are currently being held in escrow are to be disbursed without further order of the arbitrator.

This constitutes the decision and order of the Court.

J.S.C. Footnotes

Footnote 1: Thus the objections made to arbitration that were based upon the application of New York's General Business Law§399(c) are rejected.

Footnote 2: The Platt action originated in New York County. By order of Hon. Carol Emead, it was transferred to this Court to be joined with the Platovsky action in order that the related issues raised in the foregoing motions could be jointly determined. In the Platovsky action, Kelner and Kelner, Esqs. seek a declaration that Robert Herbst Esq., and his firm were discharged for cause in this matter and were not entitled to any fee in connection therewith; and seek an order disgorging Robert Herbst, Esq. and his firm of any fees they may have previously received as compensation and for a determination of the rights of the LawFinance Group in the instant proceeding. In the Platt action, petitioners seek an order permanently staying arbitration in this matter and respondent LawFinance Group seeks in relevant part an order preliminarily enjoining Kelner & Kelner, Esqs. from disbursing any of the funds received in settlement of the Platovsky action pending determination of the amounts owed to them and disqualifying Kelner & Kelner from further representation of Platt due to a conflict of interest.