Home » Speaking Engagements » Kathleen Donelli, White Plains lawyer, Ethics and Professionalism-2005

Kathleen Donelli, White Plains lawyer, Ethics and Professionalism-2005

Pace University School of Law

February 5, 2005

Kathleen Donelli, Esq.*

McCarthy Fingar LLP

11 Martine Avenue

White Plains, New York 10606

I. Retainer Agreements and Fee Disputes

In 1992, Harried Husband (“H”) retained Paul, a partner at the law firm of Hughes Toby (“Hughes”), to represent H in a matrimonial action. In 1996, Paul left Hughes to become a partner at Nowe & Paul (“Nowe”) and continued to represent H in his matrimonial action. When Paul left Hughes in 1996, H owed approximately $10,000 in outstanding legal fees and agreed that he would pay his legal fees upon the sale of H’s marital residence, which H’s wife had vacated in 1992. After Paul joined Nowe, H incurred an additional $30,000 in legal fees. 

H's wife defaulted and H was given title to the marital residence in his divorce judgment. However, he told Paul that he could not pay his $40,000 in outstanding legal fees because he had decided not to sell the marital residence. Paul commenced an action against H to collect his legal fees and filed a lis pendens against the marital residence.

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* Kathleen Donelli is a partner with McCarthy Fingar LLP and concentrates her practice in the areas of matrimonial law and commercial litigation. She is the President of the Westchester Women's Bar Association and a former President of the White Plains Bar Association. Nancy Schembri, who is an associate with the law firm of McCarthy Fingar LLP, has been extremely helpful in the research and preparation of these materials.

1. Will H’s motion to dismiss Paul’s action be granted?

2. Was it proper for Paul to file a lis pendens against the marital residence?

3. Would H succeed in a claim against his wife if H’s wife filed a lis pendens in connection with her action to vacate the divorce judgment?

4. H elected to submit his fee dispute to arbitration and argued that Paul was not entitled to any legal fees because he never signed a retainer agreement. Since Paul initially was retained before 1993, Paul argued he did not need a retainer agreement.

a. Is Paul entitled to the $10,000 in legal fees H incurred while Paul was a partner at Hughes?

b. Is Paul entitled to the $30,000 in legal fees that H incurred while Paul represented H at Nowe?

c. What steps should Paul have taken when he joined his new firm?

5. What if H had incurred his legal fees after 1/1/02 and

· H's outstanding legal fees were in excess of $50,000

· Paul wanted to submit their fee dispute to arbitration but H did not want to do so

· Forty days after Paul and H received the arbitrators' decision awarding Paul $30,000, H demanded a trial de novo.

II. Trusts & Estates

Patricia (“P”), a partner at Up & Cumming, spoke on the telephone with a potential new client, Sonny (“S”). During their telephone conversation, S told P that his mother (“M”) had recently died and that although she had a substantial estate, he believed that M only had left him her car. S told P that he believes that M left all of her money to her attorney, Edward Executor (“E”). S explained that E had recently befriended M, and that he believed that E was able to take advantage of M because she had Alzheimer’s disease. P explained to S that her minimum fee in these matters was $10,000. S explained that he could not pay P $10,000 and their telephone conversation ended.

A few weeks later, E called P and asked her if she would represent M’s estate in a will contest instituted by M’s son, S. P would like to represent E.

1. Was M’s bequest to E proper? What, if anything, should E have done to enable him to receive such a bequest from M? What effect would M's bequest to E have on the probate of M’s will? 

2. What steps, if any, must P take to represent M’s estate in the will contest?

3. Could P represent M's estate if, instead of P talking to S on the telephone, P’s legal assistant spoke with S who immediately told S that P could not represent him because he did not have money to pay her $10,000?

4. Could P represent E if, instead of having a conversation with S regarding the facts of this matter, she immediately told S that her minimum fee would be $10,000 and S told her that he could not afford to it?

III. Conflicts of Interest

Alice (“A”) is an associate at Nowe & Paul (“Nowe”) and attends weekly commercial litigation department meetings to discuss the status of all outstanding cases. Alice is able to access all client files by computer. Nowe represents At Issue, Inc., the plaintiff in an action against Nuday Associates, and Alice has done a substantial amount of work on this case. Alice now would like to take an associate position at Up & Cumming, a firm that represents Nuday Associates in its pending action with At Issue, Inc. and in other unrelated real estate transactions.

1. If Up & Cumming hires Alice to work in their commercial litigation department, can Up & Cumming continue to represent Nuday Associates in the pending action?

2. Is there anything that Up & Cumming can do to enable them to represent Nuday Associates in the pending litigation after they hire Alice?

3. Can Up & Cumming continue to represent Nuday Associates in unrelated real estate transactions. Would your answer be the same if Alice works in Up & Cumming's real estate department instead of their commercial litigation department?

I. FEE DISPUTE ARBITRATION:

Part 137 of the Rules of the Chief Administrator (Ex. A)

A. APPLICATION

Applies to all attorneys retained in a civil matter on or after January 1, 2002 for fee disputes from $1,000 to $50,000 "except that an arbitral body may hear disputes involving other amounts if the parties have consented." §137.1(b)(2). All attorneys are required to participate and if they fail to do so without good cause, should be referred to the grievance committee." §137.11

Applies to Domestic Matters and replaces Part 136: Fee Arbitration in Domestic Matters, which shall only apply to fee disputes in domestic matters where representation began prior to January 1, 2002.

Does not apply to:

· "claims involving substantial legal questions, including professional malpractice or misconduct." §137.1(b)(3);

· personal injury action because under §137(1)(b)(5) the fees in such disputes are determined pursuant to Judiciary Law §474-a.

· "disputes where no attorney services have been rendered for more than two years" §137.1(b)(6);

· criminal matters.

B. REQUIRING CLIENT TO SUBMIT TO ARBITRATION

The Client Always Has the Right To Fee Dispute Arbitration; The Attorney Only Has The Right To Fee Dispute Arbitration With The Client's Prior Written Consent.

Under §137.2(a), arbitration of disputed paid and/or unpaid legal fees is mandatory if requested by the Client. However, the Client does not have to participate in an arbitration requested by the attorney unless the attorney has obtained the Client's advance written consent "in a retainer agreement or other writing that specifies that the client has read the official written instructions and procedures for Part 137, and that the client agrees to resolve fee disputes under this Part." §137.2(b).

Section 6.B.1 of the Board of Governors' Standards and Guidelines (the "Board's Standards," attached as Ex. B at 4) states that the client's consent must be knowing and informed. The client's consent under §137.2(b) shall be stated in a retainer agreement or other writing specifying that the client has read the official written instructions and procedures for the local program designated to hear fee disputes between the attorney and client, and that the client consents to resolve fee disputes under Part 137.

Attached as Ex. C is UCS 137-13(11/01) "Consent To Resolve Fee Disputes By Arbitration Pursuant To Part 137.2(b) of the Rules of the Chief Administrator" which may be incorporated into a retainer agreement.

C. OPTING OUT OF TRIAL DE NOVO

The Client And Attorney Are Entitled To Commence A Trial De Novo, Within 30 Days After The Arbitration Award Is Mailed, Unless The Attorney Obtains The Client's Prior Written Consent That The Arbitration Award Will Be Final and Binding "In a Form Prescribed By The Board of Governors."

The De Novo Review procedure is set forth in §137.8 (Ex. A at 11).

Under §137.8 of the new Fee Dispute Resolution Program, either party is entitled to a de novo review of the arbitration award if an action is commenced "within 30 days after the arbitration award has been mailed."

Under §136.8 of the Fee Arbitration in Domestic Matters, the standard of review for an arbitration award was set forth in CPLR §7511, which basically requires a showing of corruption, fraud or misconduct to vacate an arbitration award or a "miscalculation of figures" or "mistake in the description of any person, thing or property referred to in the award" to modify an arbitration award. CPLR §7511.

However, under §137.2(c), which applies to matrimonial attorneys retained on or after January 1, 2002, the client and attorney are entitled to a de novo review unless the attorney makes the fee arbitration award "final and binding" with a client's prior written consent "in a form prescribed by the Board of Governors." (Ex. A at 3).

Section 6.B.2 of the Board's Standards states that in addition to complying with Section 6.B.1 of the Board's Standards, "the retainer agreement or other writing shall also state that the client understands that he or she is waiving the right to reject an arbitration award and subsequently commence a trial de novo in court." Ex. B at 4.

Attached as Ex. D is UCS 137-14(11/01) Form "Consent To Submit Fee Dispute To Arbitration Pursuant To Part 137.2(c) of the Rules of the Chief Administrator and to Waive Right To Trial De Novo."

II. WRITTEN LETTERS OF ENGAGEMENT IN CIVIL AND CRIMINAL MATTERS WITH

FEES OF $3,000 OR MORE:

Part 1215 to Title 22 of the Official Compilations of Codes, Rules and

Regulations of the State of New York (Ex. E)

A. APPLICATION

Effective March 4, 2002, all attorneys must have a written letter of engagement before commencing representation OR within a reasonable time after commencing representation of a client if it is impracticable at the time of commencement or if the scope of services cannot be determined at the time of the commencement of representation.

For purposes of Part 1215, where an entity (such as an insurance carrier) engages an attorney to represent a third party, the term "client" shall mean the entity that engages the attorney.

Where there is a significant change in the scope of services or the fee to be charged, an "updated letter of engagement" must be given to the client.

Part 1215 does not apply:

· if legal fees are expected to be less than $3,000

· where the attorney's services "are of the same general kind as previously rendered to and paid for by the client" [i.e., regularly existing clients]; or

· to domestic relations matters which are still subject to Part 1400 of the Joint Rules of the Appellate Division.

B. CONTENTS OF LETTERS OF ENGAGEMENT

Letters of Engagement Must Include:

(1) scope of legal services;

(2) attorney's fees to be charged, expenses and billing practices; and

(3) where applicable, notice of the client's right to arbitration of fee disputes under Part 137.

Letters of Engagement May Include:

· Under §137.1(b)(2), Ex. A, an attorney may make fee arbitration apply to disputed amounts less than $1,000 or more than $50,000 "if the parties have consented. ..." Without the client's consent, fee arbitration does not apply to sums less than $1,000 or more than $50,000.

· Under §137.2(b), Ex. A, an attorney may make fee arbitration mandatory for the client by obtaining the client's written consent in "a retainer agreement or other writing..." If not included in the retainer agreement, fee dispute arbitration commenced by a client is mandatory for the attorney but is not mandatory for the client if commenced by the attorney. Form attached as Ex. C.

· Under §137.2(c), an attorney can make the arbitration award final, instead of subject to a de novo review, by obtaining the client's written consent. Form attached as Ex. D.

· Under §137.2(d), an attorney can select a different arbitral forum for fee dispute arbitration, by obtaining the client's written consent.

III. RETAINER AGREEMENTS IN DOMESTIC RELATIONS MATTERS:

Part 1400 of the Joint Rules of the Appellate Division (22 NYCRR 1400, Ex. I)

Effective as of November 30, 1993, attorneys in domestic relations matters MUST:

· give prospective clients a statement of clients rights and responsibilities under §1400.2;

· have a written retainer agreement complying with the conditions and containing the information set forth in §1400.3;

· if the attorney wants to charge a "minimum fee", this provision must be included in the retainer agreement under §1400.4; and

· if the attorney wants the option of seeking a security interest for unpaid legal fees, this provision must be included in the retainer agreement under §1400.5.

Under DR 2-106(C)(2), attorneys must have a written retainer agreement in domestic relations matters.

Under §202.16(c) of the Uniform Rules for the New York State Trial Courts, a signed copy of the retainer agreement must be attached to the Statement of Net Worth that under §202.16(f) is to be filed with the court 10 days prior to the preliminary conference which is to be held within 45 days after the matrimonial action has been assigned to a judge.

IV. FAILURE TO OBTAIN A RETAINER AGREEMENT IN DOMESTIC RELATIONS MATTERS BARS AN ATTORNEY FROM COLLECTING LEGAL FEES

Bishop v. Bishop, 743 N.Y.S.2d 724 2002 N.Y. App. Div. LEXIS 5976 (2d Dep't 2002):

It is well settled that a "[matrimonial] attorney is precluded from seeking fees from his or her client where the attorney has failed to comply with 22 NYCRR 1400.3, which requires the execution and filing of a retainer agreement that sets forth, inter alia, the terms of compensation and the nature of services to be rendered." (Mulcahy v. Mulcahy, 285 A.D.2d 587, 588, 728 N.Y.S.2d 90; see Kayden v. Kayden, 278 A.D.2d 202, 717 N.Y.S.2d 908; Potruch v. Berson, 261 A.D.2d 494, 688 N.Y.S.2d 897). Likewise, an attorney's failure to provide a prospective client with a statement of rights and obligations will also preclude collection of a fee (see Hunt v. Hunt, 273 A.D.2d 875, 876 , 709 N.Y.S.2d 744), as will the attorney's failure to provide itemized bills at least every 60 days (see Julien v. Machson, 245 A.D.2d 122, 666 N.Y.S.2d 147; Kaplowitz v. Newman, 185 Misc.2d 205, 206, 713 N.Y.S.2d 115). The failue to abide {**3] by these rules, "'promulgated to address abuses in the practice of matrimonial law and to protect the public,'" will result in preclusion from recovering such legal fees (Mulcahy v. Mulcahy, supra at 588, quoting Julien v. Machson, supra).

Settembrini v. Settembrini, Unpublished, Hon. Fred Shapiro (N.Y. Sup. Ct. August 19, 2002)

Attorney sought unpaid legal fees from client he represented in a matrimonial matter. Attorney represented client in prior estate and tax matters but did not ask the client to sign a retainer agreement. Attorney also did not ask client to sign a written retainer agreement until after beginning representation in the matrimonial action. Attorney was allowed to recover fees earned subsequent to the time he provided the client with a Statement of Client’s Rights and Responsibilities and executed a retainer agreement for the matrimonial action, because there was substantial compliance with the matrimonial rules, which is a prerequisite to recovering unpaid legal fees. The court disallowed fees of over $20,000 for work attorney completed prior to the date client signed the written retainer agreement.

A. AN ATTORNEY CAN CHARGE FOR AN INITIAL CONSULTATION WITHOUT A RETAINER AGREEMENT BUT MUST HAVE A SIGNED STATEMENT OF CLIENT’S RIGHTS AND RESPONSIBILITIES

NYSBA Opinion 685 3/19/97

Prospective clients in matrimonial matters must be provided with the Statement of Client’s Rights and Responsibilities, but need not be asked to sign retainer agreements, at consultations that occur before the attorney has agreed to undertake the representation. An attorney can charge the client for the initial consultation so long as he or she provides the client with a clear understanding of the cost of the consultation and the method by which it will be calculated.

B. MAY NEED A NEW RETAINER AGREEMENT WHEN PARTNER CHANGES

LAW FIRMS

Esanu Katsky Korins & Siger, LLP v. Stoessinger, N.Y.L.J. 9/20/01 at 17 (Civil Ct. N.Y. Co. September 2001)

Attorney was retained in June 1993, prior to the November 30, 1993 effective date of 22 NYCRR 1400 et seq. and Part 136.5(c) (the "Matrimonial Rules") and continued to represent the client when he changed law firms in 1995. The court denied his claim for legal fees in the amount of $17,613.61 incurred while at his former law firm, reasoning that the client had retained the attorney's former law firm and without evidence of an assignment of rights from his former law firm, the attorney lacked standing to pursue a claim for legal fees owed to his former law firm.

The court then denied his claim for legal fees in the approximate amount of $53,000 incurred while at his current law firm because the attorney failed to obtain a written retainer from the client after he changed law firms in 1995. Citing Flanagan v. Flanagan, 267 A.D.2d 80 (1st Dep't 1999) and Julien v. Machson, 245 A.D.2d 122 (1st Dep't 1997), the court reasoned that the attorney was not entitled to recover attorneys fees incurred at his new law firm because he had not substantially complied with the Matrimonial Rules.

Lesson: Get a written assignment of rights and a new retainer letter for each active client when changing law firms.

Koeth v. Koeth, 2002 NY Slip Op 40046U (Sup. Ct. Nassau Co. 2002)

Attorney sought enforcement of his charging lien. A retainer agreement had been executed between the attorney’s law firm and his client in 1995 in compliance with 22 NYCRR 1400.3 and client received a Statement of Client’s Rights and Responsibilities in compliance with 22 NYCRR 1400.2. Attorney left his law firm several months later and continued to represent client in her matrimonial action without executing a new retainer agreement or tendering a Statement of Client’s Rights and Responsibilities. The court held that the attorney was entitled to the fees earned after leaving his law firm. Client-defendant cited in support of its position Potruch v. Berson, (Supreme Ct., Nassau Co. Index No.29881/1997) [aff’d, 261 A.D.2d 494; 688 N.Y.S.2d 897 (2d 1999)], in which the plaintiff-attorney was denied legal fees for failing to comply with 22 NYCRR 1400. 

The court distinguished Potruch from this case. In Potruch, the retainer agreement was signed between the law firm and the client before the attorney seeking the fees became affiliated with the firm. The attorney in Koeth, however, was employed at the firm at the time of the execution of the retainer agreement, which was executed on firm letterhead on which the attorney’s name was printed as a “name” partner. The attorney in Potruch transferred to second and third firms as well, and still no retainer was executed. In Koeth, the court found that the attorney’s second firm adopted the retainer of the former firm and that the attorney, in two subsequent motions filed on behalf of client, also adopted the original retainer agreement. In addition, the attorney sent out all bills to the client on his letterhead.

Finally, and most compelling, is that the client, on three occasions, ratified the original retainer agreement in her motions to the court and acknowledged her awareness of the status of the legal fees paid on account. The court, in allowing the fees, stated that the attorney’s conduct did not violate the “spirit and purpose” of the rules.

Distinguished: Esanu may be distinguished from Koeth, because in Esanu, the client never signed a Retainer Agreement, while in Koeth, the client signed a Retainer Agreement with the first firm.

B. NEED A NEW RETAINER AGREEMENT WHEN SCOPE OF LEGAL

SERVICES CHANGES

Hunt v. Hunt, 273 A.D.2d 875, 709 N.Y.S.2d 744 (4th Dep't 2000).

The Wife's motion papers were stricken due to her attorney's failure to file the requisite certifications pursuant to 22 NYCRR 202.16(e) and 130.1.1a.

Wife's attorney was not entitled to attorney's fees because the attorney also violated the Matrimonial Rules by not providing a statement of client's rights and responsibilities and a written retainer agreement. The court rejected the attorney's argument that the Matrimonial Rules did not apply because the attorney was retained before November 30, 1993, reasoning that the "motion brought by plaintiff was a new 'claim' within the meaning of 22 NYCRR 1400.1."

Lesson: Get a Statement of Clients Rights and Responsibilities, as well as a written retainer agreement, when representing a client on what a court might determine to be a new "claim" or a "substantial" change in the scope of legal services.

Contact Me

If you think you may require the assistance of Kathleen Donelli in any matter, email (kdonelli@mccarthyfingar.com) or phone her (914-385-1010) with any question you may have.