Summary
In Blumenberg v. Neubecker, 12 N Y2d 456, 461, 240 N.Y.S.2d 730, 732, 191 N.E.2d 269, 271 (1963), the New York Court of Appeals observed that where an attorney procured the reduction of a liability for his client the client had "received a benefit which was `remarkable, unusual and eminently satisfactory.'"
Summary of this case from Leighton v. N.Y., Susquehanna Western RailroadOpinion
Argued April 3, 1963
Decided May 9, 1963
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, GEORGE EILPERIN, J.
Daniel Eisenberg for appellant-respondent. Samuel Lawrence Brennglass and Allan Rubin for respondent-appellant.
This controversy involves an agreement whereby an attorney and accountant agreed to represent the defendant in a Federal income tax matter. The Internal Revenue Service had filed a deficiency tax claim against defendant in the sum of $918,220.96. Through the efforts of the plaintiff, an attorney, and the accountant, a settlement was made with the Government in the sum of $293,157.08. The plaintiff and the accountant, one Glickman, through the intervention of another attorney, were retained by the defendant under a written agreement providing for a contingent fee of one third of the difference between the amount of the deficiency claim and that of the ultimate determination by the Internal Revenue Service. After the final settlement, the defendant refused to honor the retainer agreement, and thereafter the plaintiff, suing in his own right and as assignee on the claim of Glickman, brought this action, alleging two causes of action, one upon the retainer agreement and the other upon quantum meruit.
After a trial in the Supreme Court, a jury awarded the plaintiff a verdict in the sum of $208,354.69 upon the retainer agreement. By a divided court, the Appellate Division, Second Department, reversed the judgment and dismissed the cause of action on the retainer agreement on the ground that the agreement contemplated legal services by a layman, and that the arrangement between the parties involved illegal fee splitting between a layman and a lawyer (Penal Law, § 276). The order of reversal, however, permitted the plaintiff to pursue his claim based on quantum meruit for services which he alone rendered.
A contract for the rendition of legal services, or the performance of such services, by one not a lawyer, is invalid and the fact that the nonlawyer is to act jointly or along with an attorney will not alter this result. However, we agree with the conclusion reached by the two Justices who dissented in the Appellate Division that the contract here under consideration did not on its face contemplate the rendition of legal services by the accountant. Furthermore, there is proof in this record from which a jury could find not only that Glickman confined his activities to accountancy procedures and accounting problems, but also that the understanding among the parties when the agreement was made was that Glickman's responsibility was in the area of accountancy and that plaintiff's responsibility, in the field of law, was to represent the defendant in the Tax Court and to deal with the legal problems involved.
An arrangement such as was here arrived at assures the sort of co-operative effort whereby the expertise of both lawyer and accountant in their respective fields may be availed of and is designed to achieve for the client who retained them the best possible result. Indeed, such an arrangement comes close to the ideal setup contemplated by the New York State Bar Association and the New York State Society of Certified Public Accountants acting jointly in 1962. (See Principles Applicable to Legal and Accounting Practice in the Field of Taxation, McKinney's Cons. Laws of N.Y., Book 29, Judiciary Law, Appendix [1962 Supp.], pp. 300-302.) Thus, in their joint statement, the two associations declared (Principles, loc. cit., p. 300): "In the large areas in the tax field where the legal and accounting aspects are interrelated and overlap, it is often in the public interest that the services of both professions be utilized. Indeed, experience has shown that a lawyer and a certified public accountant working together on behalf of a common client in the tax field constitute a very effective team. When the lawyer and accountant have joined hands in the preparation and presentation of a case before the Internal Revenue Service, the taxpayer is most effectively represented."
As already indicated, a jury could find from the proof in this record that defendant personally retained both the plaintiff and Glickman to render services in their respective fields. It is of no consequence that their retainer was effected by a single agreement or that their compensation was to be equal or that it was specified in a lump sum contingency percentage, as long as the fee provided for the accountant was to be for accounting services rendered by him, and the fee for the lawyer for legal services which he was to perform. It is only necessary to add, as the dissenters below observed, that the defendant has received a benefit which was "remarkable, unusual and eminently satisfactory", and, since a jury could find that there was no fraud or overreaching on the part of the plaintiff or Glickman, either in the making of the retainer agreement or in the rendition of services, the judgment and order of the Appellate Division should be reversed and a new trial granted.
The judgment and order appealed from should be reversed and a new trial granted, with costs to abide the event.
I dissent and vote to affirm.
The contract, a single joint retainer, typewritten on one sheet of paper, did provide for one indivisible fee for services which were at least partly legal and for the payment of all expenses and disbursements by the lawyer, a former employee of the Internal Revenue Bureau, and accountant. Plaintiff, a lawyer-accountant admitted to practice in the Tax Court, and the accountant, Glickman, who was not so admitted, were clearly partners in the strictest sense, sharing jointly profits and losses (expenses) with respect to a legal matter. It requires no extended discussion to demonstrate that this violates the canons of ethics governing the independence required of a lawyer in his dealings with his client. (See Rules of Practice of U.S. Tax Court, rule 2; Canons of Professional Ethics of American Bar Assn., Nos. 12, 33, 34, 35, 47; Opinion 614 of Association of Bar of City of New York; Opinion 343 of New York County Lawyers Assn.; Opinion 297 of American Bar Assn. Committee on Professional Ethics.) These canons are declarative of the policy of this State respecting the conduct of attorneys and I think the general rule applicable to contracts against public policy should control. No cause of action should be held good where the complaint states on its face an illegal agreement. The agreement also violates the Treasury Department Regulations prohibiting wholly contingent fees for services in matters before the Internal Revenue Service. (Code of Fed. Reg., § 10.37, subd. [b]; 1963 Fed. Tax Regs., vol. 2, p. 1672.) ( Stone v. Freeman, 298 N.Y. 268; McConnell v. Commonwealth Pictures Corp., 7 N.Y.2d 465; Van Bergh v. Simons, 286 F.2d 325.) The fact that the illegality lies in the violation of an attorney's canons of ethics rather than a statute should in no way diminish a court's disapprobation. ( Matter of Annunziato, 201 Misc. 971; Matter of Rothman, 12 N.J. 528, 535.)
Chief Judge DESMOND and Judges DYE, FULD, VAN VOORHIS and SCILEPPI concur with Judge FOSTER; Judge BURKE dissents and votes to affirm in an opinion.
On the appeal by plaintiff: Judgment reversed and a new trial granted, with costs to abide the event.
On the appeal by defendant: Order reversed and a new trial granted on both causes of action, with costs to abide the event.