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Sunday, September 09, 2012

Important New Decisions - September 9, 2012

First Department Holds Where 'Substantial Compliance' with Matrimonial Rules, Attorney Allowed to Recover Fees Owed for Services Rendered, but Not Yet Paid For and Block Billing Is Not Improper

In Daniele v Puntillo, --- N.Y.S.2d ----, 2012 WL 3079201 (N.Y.A.D. 1 Dept.), Plaintiff was retained by defendant in March 2004, replacing defendant's prior counsel in her divorce proceeding. Plaintiff and defendant executed a retainer agreement in March 2004. The agreement specified the nature of representation, a $25,000 retainer fee, billing arrangements and payments, and billing rates, among other details. Attached to the retainer agreement was a Statement of Client's Rights and Responsibilities, also executed by both parties in March 2004. Plaintiff contended that on May 14, 2004, he filed a copy of the executed retainer agreement with the court as well as defendant's updated statement of net worth, as mandated by 22 NYCRR 1400.3. Shortly after executing both documents, defendant paid the $25,000 retainer fee. Plaintiff represented defendant from March 2004 through December 2004, when defendant's divorce proceedings ended in a stipulation of settlement. During that time, plaintiff sent defendant detailed billing statements, which were in "block billing" form, meaning that each timekeeper would enter a description of his or her work for a particular day, along with the total amount of time spent on those tasks for that day. Defendant made intermittent payments up until December 2004. When plaintiff commenced suit, there was an outstanding balance of $104,918.46.

At the close of plaintiff's case, defendant moved for a directed verdict dismissing the complaint on the ground that plaintiff failed to comply with 22 NYCRR 1400.3, thereby barring his claim for fees. The trial court denied the motion on the ground that defendant had admitted compliance with 22 NYCRR 1400.3 in her answer. The trial continued to conclusion, and the court found an account stated in that defendant had not established that she objected to the bills. The court then granted judgment to plaintiff in the amount of $106,048.96.

The Appellate Division affirmed. It observed that where there has been 'substantial compliance' with the matrimonial rules, an attorney will be allowed to recover the fees owed for services rendered, but not yet paid for. The applicable rule, 22 NYCRR 1400.3, mandates that an attorney in a matrimonial matter file a copy of the signed retainer agreement with the court, along with the statement of net worth. The record showed that a copy of the executed retainer was filed with the court on May 14, 2004, along with the updated statement of net worth. Even if plaintiff, as substituted counsel, should have filed the retainer within 10 days of its execution, he substantially complied with the requirements by filing the executed copy with the updated statement of net worth. Although it would have been better practice for plaintiff to have put proof of the filing in evidence on his direct case, his failure to do so did not change the fact that he substantially complied with the rule.

The Appellate Division rejected the Defendant’s argument that plaintiff's billing practices and willful spoliation of evidence should result in sanctions, and dismissal of his claims. Defendant argued that block billing was improper and that "task billing," which listed the time for each separate task and is an enhanced level of billing, should have been used. However, block billing is common practice among law firms and neither 22 NYCRR 1400.3 nor the retainer agreement called for task based billing. Regarding the spoliation of evidence allegation, defendant contended that plaintiff intentionally destroyed a particular attorney's individual time sheets, thereby preventing her from using those records to impeach plaintiff. Plaintiff testified at trial that the information from that attorney's individual time sheets was entered into the firm's time entry system, then reviewed by him and incorporated into the firm's bills to defendant. The court found that, in any event, the time sheets were not key evidence, and thus their alleged destruction did not deprive defendant of the ability to defend against plaintiff's claim for fees. Accordingly, a spoliation sanction was not warranted.

Second Department Holds Wife of 30 Year Marriage Who Worked Only 3 Years During Marriage Properly Denied Maintenance Where She Was Highly Educated and Similarly Situated to the Defendant

In Carr-Harris v Carr-Harris,--- N.Y.S.2d ----, 2012 WL 3204572 (N.Y.A.D. 2 Dept.) plaintiff and the defendant were married for more than 30 years, during which time the defendant worked as a church minister. The parties had four children, one of whom was a minor at the time the trial was commenced. At trial, the plaintiff testified that the defendant was the main breadwinner of the family and that, although she had a Master's degree and had worked towards two separate doctorate degrees, she worked for only three years during the course of the marriage. She also testified that the parties had borrowed more than $75,000 from her aunt, Gloria Ewsuk, although they did not execute a promissory note or other documentation confirming the loan. The parties also borrowed $40,000 from the plaintiff's mother, Kathleen Petrochko, and received $50,000 from the defendant's mother, Zoya Carr-Harris. The plaintiff claimed that, although the parties executed a promissory note for the sums received from Zoya, the principal amount was a gift and the parties were obligated only to repay $20,000 in interest, of which $17,000 had been repaid. Toward the end of the trial, the plaintiff admitted that she signed confessions of judgment in favor of various family members and friends, claiming that these individuals had loaned her money during the marriage and during the divorce proceedings and that she wished to ensure that the lenders would be repaid. The defendant claimed that the sums received from Ewsuk were gifts and that he never had any direct discussions with Ewsuk regarding the alleged loans. He acknowledged that the parties borrowed $40,000 from Petrochko, which they agreed to pay back with interest. He also claimed that the entire sum received from Zoya was a loan, and the parties were obligated to repay the principal and accumulated interest.

Supreme Court found that the sums received from Ewsuk were gifts, as there was no documentary evidence to support the claim that the sums were intended to be loans. It determined that the parties owed $70,000 to Petrochko, $50,000 to Zoya, and $21,000 to the three nonminor children, reflecting the sums the parties had borrowed from their children in order to make a down payment for the purchase of the marital home. Supreme Court determined that the plaintiff was not entitled to reimbursement of the cost of repairs to the marital residence, as her proof on this point was insufficient. Supreme Court ordered the sale of the marital home and determined that the parties should share equally in the proceeds after payment of all loans and expenses other than the liens that the plaintiff unilaterally placed on the home in favor of her family and friends. It imputed an income of $40,000 to the plaintiff, noting that she was highly educated and had not worked to her potential. Supreme Court found that the defendant, who was now working as a public school teacher, had an income of $54,000. The court ordered the defendant to pay $705.91 per month in child support and determined that the parties would share in the cost of statutory add-ons, with the defendant being liable for 57% of such expenses. In addition, it ordered defendant to maintain health insurance for the minor child until he reached the age of 21, ordering the parties to share the cost of unreimbursed medical expenses with the defendant paying 57% of such costs. The defendant was also ordered to pay child support arrears from his share of the proceeds of the sale of the marital residence. The Supreme Court found both parties at fault for the litigious nature of the proceedings and determined that the parties were equally situated, as both were in the process of beginning new careers. Thus, Supreme Court denied the plaintiff's requests for counsel fees and spousal support. The parties were ordered to share equally in the educational costs for the minor child's college through his 21st birthday.

The Appellate Division affirmed. It found that Supreme Court appropriately exercised its discretion in denying spousal maintenance to the plaintiff. The plaintiff was highly educated and was similarly situated to the defendant in terms of age, educational background, and future potential to work. Like the defendant, she was in the process of beginning a new career and, according to her own testimony, she should be able to earn approximately $40,000 per year. Thus, Supreme Court's imputation of income to her was appropriate, and the record supported the court's finding that the plaintiff was not entitled to spousal maintenance. It found that for the same reasons, Supreme Court properly denied the plaintiff an award of counsel fees. It also found that each of each of the Supreme Court's findings regarding the loans was supported by the record. The Supreme Court was free to credit the defendant's testimony. The Supreme Court properly denied the plaintiff's request for reimbursement of expenses that she allegedly incurred in making repairs to the marital home because the plaintiff failed to sufficiently prove that claim.



Second Department Holds Violation of the Rule Against ex Parte Communications Will Support a Motion Seeking an Attorney's Disqualification, Including Situations Where the Party Is a Child


In Madris v. Oliviera,--- N.Y.S.2d ----, 97 A.D.3d 823, 2012 WL 3024450 (N.Y.A.D. 2 Dept.) the Appellate Division reversed an order which granted mother's motion to disqualify the father's attorney and the attorney's law firm from appearing in the action. In the course of this Family Court Act article 6 proceeding, the father and the subject child allegedly experienced difficulty communicating with the caseworker assigned by the Nassau County Department of Social Services (DSS) to complete the court-ordered investigation. The father's attorney wrote to the caseworker's supervisor to alert her to the problem and to ask that she interview the parties to ensure that a complete and accurate report was produced for the court, and sent copies of the letter to the attorneys for the mother and the child. The mother moved to disqualify the father's attorney and the attorney's law firm on the basis that the attorney had violated Rules of Professional Conduct (22 NYCRR 1200.0) Rule 4.2 by engaging in improper ex parte communications with the child and with the DSS. The court granted the motion and disqualified the father's attorney and her firm.

The Appellate Division reversed. It observed that a party's entitlement to be represented in ongoing litigation by counsel of his or her own choosing is a valued right which should not be abridged absent a clear showing that disqualification is warranted. While the right to choose one's counsel is not absolute, disqualification of legal counsel during litigation implicates not only the ethics of the profession but also the parties' substantive rights, thus requiring any restrictions to be carefully scrutinized. The party seeking to disqualify a law firm or an attorney bears the burden to show sufficient proof to warrant such a determination.. Whether to disqualify an attorney is a matter which lies within the sound discretion of the court.

Rule 4.2 of the Rules of Professional Conduct (22 NYCRR 1200.0) provides that an attorney may not communicate with a represented party regarding the subject of the representation (subsection a) or permit his or her client to do so (subsection b) unless opposing counsel has consented or the communication is authorized by law. Although a violation of the rule against ex parte communications will support a motion seeking an attorney's disqualification, including situations where the party is a child, conclusory assertions of conduct violating a disciplinary rule will not suffice to support disqualification. Here, the court improperly placed the burden on the father rather than on the mother (i.e., on the opponent of disqualification rather than on the movant) and failed to consider the evidence in the light most favorable to the nonmoving party. There was no evidence that the father or his attorney improperly questioned the child regarding his interactions with the caseworker assigned to conduct the court-ordered investigation. Because there was no violation of Rule 4.2(b) of the Rules of Professional Conduct (22 NYCRR 1200.0), there was no basis for disqualification of the father's attorney due to communications with the child.

The Appellate Division also held that family court misapprehended the role of the DSS where it has merely been assigned as the agency to complete a court-ordered investigation. An entity cannot claim a blanket protection from ex parte interviews by taking the position that house counsel is responsible for all future legal matters affecting that entity. Similarly, if a governmental party were always considered to be represented by counsel for purposes of the rule against ex parte communications, the free exchange of information between the public and the government would be greatly inhibited. Because the DSS was not a represented party within the meaning of Rule 4.2(a) of the Rules of Professional Conduct (22 NYCRR 1200.0), the court erred in disqualifying the father's attorney and the attorney's law firm on this basis as well.


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