New York Probate and Estate Administration Lawyer Blog
The law firm of RA and Moss (the RA Firm) and the Law Offices of CA PC (CA) (together, the Firms) seek to determine and enforce charging liens pursuant to section 475 of the Judiciary Law. The liens would secure fees claimed by the Firms for legal services to WK under a retainer agreement dated July 10, 2006 (the 2006 Retainer). The Firms represented WK in a decade-long dispute among several WK family members, involving various real estate holdings and family trusts. The dispute had been punctuated by at least two abortive settlements, the latter one in 2004. On January 3, 2008, however, the WK’s internecine battles ended in a global settlement placed on the record in open court and then further memorialized in a written stipulation implemented by a closing on August 27-29, 2008. The liens now claimed by the Firms relate to William’s share of the proceeds of that settlement.
Discovery having concluded, the Firms and WK have cross-moved for partial summary judgment. The issues raised on these motions involve the validity of the 2006 Retainer, its allegedly wrongful procurement, and, if it is valid, the meaning of several of its terms and the extent to which William’s obligations under it are subject to conditions that have not been satisfied. The Firms acknowledge that the sums to which they are entitled for work resulting in the 2008 settlement cannot be fully determined without a hearing. WK for his part asserts that a hearing is needed to determine the Firms’ fees for hourly services in the litigation preceding that settlement.
In dissension among three generations of WK over the considerable family wealth is at the root of the present proceeding. In the first generation were Harry, who died in March 1983, and his wife Ruth, who died in November 2000. In the second generation were the couple’s two children, Robert, who died in October 1996 and Nancy, who is still living.
Harry’s will divided his estate between a trust (Harry’s Marital Trust) and an outright disposition to Ruth. Ruth in turn placed the assets that she had received outright from Harry’s estate, including interests in various real estate entities, into successive grantor trusts. Until 1998, the trusts operated under provisions paralleling the provisions of Harry’s Marital Trust, with the remainders evenly divided between the issue of Robert and Nancy.
Robert left a large estate, including interests in the thirteen closely held companies in which the WK real estate was held. Under Robert’s will, probated on November 13, 1996, these interests passed to a marital trust for the lifetime benefit of his widow, Roberta (Robert’s Marital Trust). The portion of the remainder that included majority interests in 11 of the closely held companies was to pass to William, with Robert’s interests in the two additional family businesses to be divided between Alexandra and Caroline.
WK had a strained relationship with his father and continues to have a strained relationship with Roberta. She, however, serves with Alexandra as co-executor and co-trustee under Robert’s will. The intra-family litigation began after Robert’s death when WK sued his mother and sister as executors of Robert’s estate, asserting, inter alia, claims of ownership to Robert’s interests in the family businesses. Those claims went to trial before then Surrogate Preminger and were resolved in a decision rendered in early 2001. Shortly thereafter, the executors petitioned to settle an interim accounting, in which WK filed objections.
Additional issues arose with respect to Ruth’s grantor trust, first established in 1983 and then replaced in 1993 (the 1993 Grantor Trust). After Robert died, Ruth began to have more contact with Nancy, from whom she had been estranged for many years. By February 1998, Ruth had moved into Nancy’s home in Florida, and two weeks after Ruth’s relocation Ruth executed instruments revoking the 1993 Grantor Trust and replacing it with another trust (the 1998 Grantor Trust). The dispositive provisions of the 1998 Grantor Trust differed dramatically from those of the 1983 and 1993 trusts. Rather than benefiting the issue of both of Ruth’s children, the 1998 trust instrument instead left one half of the remainder at Ruth’s death to Nancy outright and the balance in further trust for Nancy’s primary benefit, giving Nancy the right to appoint the principal by her will. The 1998 trust instrument named Nancy and her son David as trustees.
Shortly after the 1998 trust instrument was executed, Nancy and David as fiduciaries sought an accounting by Alexandra as trustee under the 1993 Grantor Trust and an order directing that she turn over the principal of that trust to them as trustees of the 1998 Grantor Trust. Alexandra responded by challenging the validity of the purported revocation and replacement of the 1993 Grantor Trust, maintaining that Ruth had lacked capacity to take such steps and that, in the alternative, she had been unduly influenced to do so.
At or about the same time as the 1998 trust instrument was drafted, Ruth changed her will and also purportedly tried to install Nancy and David as successor trustees of Harry’s Marital Trust. After Ruth’s death almost three years later, Nancy offered Ruth’s will for probate in Florida, over Alexandra’s objections.
Various proceedings, involving numerous motions, followed. Thus, after Nancy and David petitioned to compel an accounting for Harry’s Marital Trust, Roberta and Alexandra voluntarily accounted for that trust as well as for the 1993 Grantor Trust, in proceedings in which Nancy and David filed objections. The issues in these accountings were referred to the Hon. Alice Daniels to hear and report. Nancy challenged, inter alia, the validity of a 1994 transfer to Robert of Ruth’s 55% interest in a property known as Clypeta; questioned the trustees’ valuations in relation to the real estate entities; objected to the size of management fees paid by the trustees in connection with the real estate interests held in the trusts; and further objected to the trustees’ failure to turn over assets to Nancy, individually, and to her and David as trustees of the 1998 Grantor Trust.
During the hearing before Special Referee Daniels, the fiduciaries of Robert’s and Ruth’s respective estates entered into a settlement term sheet dated October 16, 2001, which purported to embody a global settlement of issues regarding those estates, including a Federal RICO action commenced by Nancy in the Federal District Court for the Southern District of New York and the Florida proceeding for probte of Ruth’s 1998 will. Eventually, however, the term sheet, expressly conditioned upon court approval, itself became a subject of litigation, Nancy unsuccessfully seeking its approval in this court, in the Florida probate court, and in federal courts in Florida and New York.
In August 2002, Roberta and Alexandra filed an Intermediate Accounting as executors of Robert’s estate. WK filed objections in that proceeding, claiming, inter alia, that the fiduciaries had inflated estate income to benefit Roberta individually, leaving his remainder interest so encumbered as to be essentially worthless. In a separate proceeding against Robert’s executors, WK also sought to enforce certain rights arising from his 30.98% interest in one of the real estate entities, Whitehouse Estates, Inc., as well as his alleged ownership of other property that the executors claimed were part of Robert’s estate.
In November 2003, the issues raised in the executors’ Intermediate Accounting, as well as those raised in William’s proceeding against Robert’s executors, were referred to the Hon. Israel Rubin to hear and report, the most significant of which were (1) whether the 2001 Term Sheet should be approved; (2) the proper characterization and treatment of the challenged inter-company balances; and (3) the ownership of the Clypeta entity. The 2001 Term Sheet had allocated Clypeta to Nancy or to entities under her control, a position that WK vigorously opposed.
Special Referee Rubin took testimony and evidence over twenty-four days from July 2004 through April 2005. His report, which this court confirmed in its entirety, recommended that the 2001 Term Sheet not be approved, that the Clypeta entity be ruled an asset wholly owned by Robert’s estate, and that the inter-company balance issues be resolved by an independent accountant.
On December 1, 2004, while the evidence was still being taken by Special Referee Rubin, the parties reached a tentative global settlement. William’s share in the 2004 tentative settlement is the basis for the $43 million “Trigger Amount” to which the 2006 Retainer refers. The 2004 tentative settlement, which called for acceleration of William’s remainder interest in Robert’s Marital Trust, was never consummated. Instead, in the wake of Referee Rubin’s confirmed rulings, litigation among the various family members continued. By the spring of 2006, however, WK apparently had decided that his fee arrangements with his lawyers could not also continue.
Summary determination of a claim or defense is appropriate only where the party seeking it makes a prima facie showing of entitlement to such determination as a matter of law. If such showing is made, the burden shifts to the opposing party to produce admissible evidence establishing that a material issue of fact nevertheless remains open, requiring trial.
In addressing the particular claims, defenses, and counterclaim raised here, the court must be cognizant of certain general principles that underlie the attorney-client relationship. Given the fiduciary nature of that relationship, fee agreements between attorney and client are affected by lofty principles different from those applicable to commonplace commercial contracts. Accordingly, as a matter of public policy, courts must carefully scrutinize such fee arrangements. A client must be fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements. The burden is on the attorneys who drafted the fee agreement to show that it is “fair, reasonable, and fully known and understood by their clients. Moreover, as a general contract principle, where a term of the agreement is ambiguous, that is, reasonably susceptible of more than one interpretation, that term must be construed in favor of the non-drafting client. Where there is no ambiguity, however, the client does not have such an advantage; the instrument must simply be read in accordance with its plain terms. Furthermore, in a dispute between lawyer and client, the latter is not to be perceived as always the former’s victim. Indeed, the charging lien itself is the law’s device for shielding a lawyer from the possible knavery or overreaching of the client
WK argues that Avedesian’s compensation must be limited to quantum meruit in that the 2006 Retainer was with the RAFirm, and that law partnership dissolved by operation of law upon the death of partner Arthur Richenthal, on October 11, 2007. WKpoints out that the Retainer does not contain provisions for its continued effectiveness post-dissolution or for any assignability to another firm. Indeed, WK maintains that, as a personal services contract, the Retainer could not have been made assignable and that it therefore cannot now serve as the basis for CA’s claim to a charging lien. Instead, according to William, CA could not purport to represent WK under the 2006 Retainer after the RAFirm dissolved or, at the latest, after February 2008, when CA filed a change of attorneys from the Richtenthal Firm to his own. According to William, in the absence of his own separate retainer, CA has no basis for his claim to a performance fee.
While WKis technically correct as to provisions of partnership law, the enforceability of an attorney retainer, including its transfer to another law firm or entity, does not depend on partnership law. The case of Goldston v Bandwidth Tech. Corp. makes the point. There the Appellate Division addressed a claim that the dissolution of the by operation of law upon the departure of constituted a breach of the retainer agreement, making it unenforceable. The court emphasized that a change in the organization of a business does not, without more, give rise to a claim by a party contracting with that business even if the reorganization adversely affects the party’s interest. The question there, as here, is whether the client clearly recognized that the attorney was continuing the prior representation. Here, the evidence is indisputable that WK considered Avedesian his attorney in these proceedings, and he was not discharged by WK until well after this charging lien proceeding was commenced.
A similar rule has been recognized even in the matrimonial context where the policing of retainer agreements by regulation is more stringent. The defenses that the 2006 Retainer was not assignable to Avedesian and that the settlement did not occur while the retainer was still in effect are dismissed.
As yet another defense, WK contends that his obligation to pay fees under the 2006 Retainer was subject to preconditions that have not been satisfied. In this connection, he argues that the Retainer required (1) that his remainder interest in Robert’s Marital Trust be accelerated and the trust assets be disbursed, as contemplated in principle under the 2004 agreement; (2) that he receive in settlement the specific properties whose values were the basis of the Trigger Amount; and (3) that there be a closing, which WK contends has not yet occurred.
None of these conditions is found in the text of the 2006 Retainer; moreover, as to the purported failure to close, this court has previously found to the contrary. The Retainer expressly contemplates a (1) contingency arrangement for a settlement among substantially all of the descendants of Ruth and Harry WK and the trusts and the estates thereof; (2) fees for litigation work; (3) out of pocket expenses; and (4) security in respect of your fees and expenses. There is nothing in the instrument that expressly or impliedly conditions the contingency fee on any specific settlement result. Although WK claims to have understood that there was such a condition, the court cannot accept his invitation to import into the agreement terms that were not there when the parties executed it. This is not to overlook that the Retainer’s performance fee provisions refer to four specified real estate entities and arrive at the Trigger Amount by adding the total values of such entities. But it is clear that such provisions merely establish a baseline against which to measure the increase in gross value that is one of the two factors in the fee calculation. The provisions not only are bare of language to suggest the purported condition, but also, are expressed in terms that affirmatively suggest quite the contrary. Thus, if the Retainer had contemplated a performance fee only on condition that WK receive the four specified properties as part of the settlement ultimately secured for him by the Firms, the appraised values of those properties would have been irrelevant: the performance fee would simply have been calculable as a percentage of the value of any additional interest that was ultimately secured for him in settlement.
As for William’s contention that the closing has not occurred, that proposition was resolved against WK in a decision of this court addressing the enforcement of William’s side agreement with CA on August 20, 2008, concerning a monthly escrow payment to secure the Firms’ respective charging liens. In that decision, this court ruled that the closing had in fact occurred and had thus triggered William’s obligation to begin the payments provided for under the side agreement. There is certainly no legal basis to reargue that decision in the context of this one.
For the foregoing reasons, William’s defenses alleging unsatisfied conditions are dismissed. Each party’s motion for partial summary judgment is granted in part and denied in part as set forth in the foregoing discussion. As is indicated by the foregoing, and as is acknowledged by the Firms’ request for only partial summary judgment, the precise value of what WK received in settlement cannot be calculated on this record and is accordingly an issue to be resolved at a hearing.
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