Opinion
652971/2019
02-14-2020
Thane ROSENBAUM, Plaintiff, v. Roslyn MYERS, Defendant.
For Plaintiff: Benjamin A. Allee Esq., Yankwitt LLP, 140 Grand Street, White Plains, NY 10601 For Defendant: Robin Shifrin Esq., 1212 5th Avenue, New York, NY 10019, Robert S. Smith Esq., Friedman Kaplan, 7 Times Square, New York, NY 10019
For Plaintiff: Benjamin A. Allee Esq., Yankwitt LLP, 140 Grand Street, White Plains, NY 10601
For Defendant: Robin Shifrin Esq., 1212 5th Avenue, New York, NY 10019, Robert S. Smith Esq., Friedman Kaplan, 7 Times Square, New York, NY 10019
Lucy Billings, J. Plaintiff sues for breach of a contract in which defendant agreed to pay plaintiff a percentage of the net proceeds from the sale of residential real property. Defendant moves to dismiss the complaint under C.P.L.R. § 3211(a)(1) and (7) and for attorneys' fees under 22 N.Y.C.R.R. § 130-1.1.
I. THE COMPLAINT
The Verified Complaint alleges that beginning on or about October 1, 2004, plaintiff, an attorney, assisted defendant to obtain full title to residential property at 202 Lenox Avenue, New York County, as part of her equitable distribution of marital assets in a divorce action. An Acknowledgment of Debt dated February 7, 2005, signed by defendant, and attached to the Verified Complaint, provides that she owes plaintiff a debt equal to 25% of the net proceeds eventually realized from the sale of the property, in exchange for his legal representation and advice. II. DEFENDANT'S MOTION TO DISMISS THE COMPLAINT
In evaluating defendant's motion to dismiss the complaint under C.P.L.R. § 3211(a)(7), the court must accept plaintiff's allegations as true, liberally construe them, and draw all reasonable inferences in his favor. JF Capital Advisors, LLC v. Lightstone Group, LLC , 25 N.Y.3d 759, 764, 16 N.Y.S.3d 222, 37 N.E.3d 725 (2015) ; Miglino v. Bally Total Fitness of Greater NY, Inc. , 20 N.Y.3d 342, 351, 961 N.Y.S.2d 364, 985 N.E.2d 128 (2013) ; ABN AMRO Bank, N.V. v. MBIA Inc. , 17 N.Y.3d 208, 227, 928 N.Y.S.2d 647, 952 N.E.2d 463 (2011) ; Drug Policy Alliance v. New York City Tax Comm'n , 131 A.D.3d 815, 816, 15 N.Y.S.3d 784 (1st Dep't 2015). Dismissal is warranted only if the complaint fails to allege facts that fit within any cognizable legal theory. ABN AMRO Bank, N.V. v. MBIA Inc. , 17 N.Y.3d at 227, 928 N.Y.S.2d 647, 952 N.E.2d 463 ; Lawrence v. Graubard Miller , 11 N.Y.3d 588, 595, 873 N.Y.S.2d 517, 901 N.E.2d 1268 (2008) ; Nonnon v. City of New York , 9 N.Y.3d 825, 827, 842 N.Y.S.2d 756, 874 N.E.2d 720 (2007) ; Mill Financial, LLC v. Gillett , 122 A.D.3d 98, 103, 992 N.Y.S.2d 20 (1st Dep't 2014). A motion to dismiss based on documentary evidence pursuant to C.P.L.R. § 3211(a)(1) will succeed only if admissible documentary evidence completely refutes plaintiff's factual allegations, resolving all factual issues as a matter of law. Nomura Home Equity Loan, Inc., Series 2006-FM2 v. Nomura Credit & Capital, Inc. , 30 N.Y.3d 572, 601, 69 N.Y.S.3d 520, 92 N.E.3d 743 (2017) ; Goshen v. Mutual Life Ins. Co. of NY , 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 (2002) ; Calpo-Rivera v. Siroka , 144 A.D.3d 568, 568, 42 N.Y.S.3d 19 (1st Dep't 2016).
Relying on the documents filed in the divorce action in this court where defendant obtained her equitable distribution, she maintains that plaintiff's noncompliance with the regulations governing matrimonial actions bars enforcement of a contract to recover compensation for his services in the divorce action. In particular, defendant claims that, in providing her legal representation and advice, plaintiff failed to (1) give her a statement of rights and responsibilities, 22 N.Y.C.R.R. § 1400.2 ; (2) obtain from her or file with the court a written retainer agreement, 22 N.Y.C.R.R. § 1400.3 ; (3) file a statement of her net worth with the court, 22 N.Y.C.R.R. § 202.16 ; or (4) obtain the court's approval to secure his attorney's fees with a security interest. 22 N.Y.C.R.R. § 1400.5. Although plaintiff may not be required in his complaint to allege compliance with the regulations governing matrimonial actions, an attorney's violation of these regulations precludes the attorney from collecting fees for services in a matrimonial action. Law Off. of Sheldon Eisenberger v. Blisko , 106 A.D.3d 650, 652, 965 N.Y.S.2d 501 (1st Dep't 2013) ; Edelman v. Poster , 72 A.D.3d 182, 184, 894 N.Y.S.2d 398 (1st Dep't 2010) ; Julien v. Machson , 245 A.D.2d 122, 122, 666 N.Y.S.2d 147 (1st Dep't 1997). Defendant also claims that enforcement of the Acknowledgment of Debt violates the Rules of Professional Conduct prohibiting contingent fees in matrimonial actions, 22 N.Y.C.R.R. § 1200.0, Rule 1.5(c) and (d)(5), thus invalidating the contract. Xiao Yang Chen v. Fischer , 6 N.Y.3d 94, 101, 810 N.Y.S.2d 96, 843 N.E.2d 723 (2005) ; Weinstein v. Barnett , 219 A.D.2d 77, 79, 640 N.Y.S.2d 103 (1st Dep't 1996) ; Medina v. Richard A. Kraslow, P.C. , 149 A.D.3d 928, 929-30, 53 N.Y.S.3d 116 (2d Dep't 2017) ; Law Off. of Howard M. File, Esq., P.C. v. Ostashko , 60 A.D.3d 643, 644, 875 N.Y.S.2d 502 (2d Dep't 2009). See Freeman Lewis LLP v. Financiera De Desarrollo Indus. y Commercial S.A. , 172 A.D.3d 574, 574-75, 102 N.Y.S.3d 554 (1st Dep't 2019) ; David v. Hack , 97 A.D.3d 437, 438, 948 N.Y.S.2d 583 (1st Dep't 2012).
The regulations governing matrimonial actions apply to plaintiff's legal representation and advice for three principal reasons. First, plaintiff filed an appearance on defendant's behalf in the divorce action. Aff. of Roslyn Myers Ex. 1 ¶ 14. See 22 N.Y.C.R.R. § 1400.1 ; Law Off. of Sheldon Eisenberger v. Blisko , 106 A.D.3d at 652, 965 N.Y.S.2d 501. ; Edelman v. Poster , 72 A.D.3d at 186, 894 N.Y.S.2d 398. Second, as alleged in the complaint, plaintiff provided legal services to defendant in the divorce action. Myers Aff. Ex. 1 ¶¶ 5, 13-14, 16, 34. In fact, the complaint extols plaintiff's extensive legal services in the divorce action, assisting defendant in obtaining valuable real property as part of her equitable distribution, which plaintiff oversaw to its resolution through a settlement and judgment in 2006. Id. ¶¶ 14, 16, 34. This assistance to defendant qualifies not only as legal services, but as one of the most significant services, in the divorce action. Third, the Acknowledgment of Debt itself specifies that the "debt arises as a consequence of the extensive representation and advice in all legal proceedings and negotiations with various parties," when the only "legal proceedings" in which plaintiff and defendant were involved was the divorce action. Because the Acknowledgment of Debt's plain terms provide that the debt arose from plaintiff's legal services, which plaintiff rendered in a divorce action, the matrimonial regulations govern those legal services and the contract to compensate plaintiff for them. Edelman v. Poster , 72 A.D.3d at 184, 894 N.Y.S.2d 398. See Coburn v. Coburn , 303 A.D.2d 281, 281, 755 N.Y.S.2d 615 (1st Dep't 2003).
The only violation of the regulations governing matrimonial actions that the documents filed in the divorce action establish is plaintiff's failure to file a retainer agreement. 22 N.Y.C.R.R. § 1400.3 ; Leary v. Bendow , 161 A.D.3d 420, 421, 76 N.Y.S.3d 519 (1st Dep't 2018) ; Matter of Part 60 RMBS Put-Back Litig. , 155 A.D.3d 482, 483, 65 N.Y.S.3d 133 (1st Dep't 2017) ; Bennett v. Gordon , 99 A.D.3d 539, 539, 952 N.Y.S.2d 166 (1st Dep't 2012) ; Yuppie Puppy Pet Prods., Inc. v. Street Smart Realty, LLC , 77 A.D.3d 197, 202, 906 N.Y.S.2d 231 (1st Dep't 2010). The Acknowledgment of Debt itself, attached to the complaint, establishes that "the payment or amount of the fee is ... determined by reference to the amount of ... equitable distribution, or property settlement," in violation of 22 N.Y.C.R.R. § 1200.0, Rule 1.5(d)(5)(i). To support the other violations, defendant relies on her affidavit, which the court may not consider as the type of documentary evidence to support a motion under C.P.L.R. § 3211(a)(1). Serao v. Bench-Serao , 149 A.D.3d 645, 646, 53 N.Y.S.3d 628 (1st Dep't 2017) ; Calpo-Rivera v. Siroka , 144 A.D.3d at 568, 42 N.Y.S.3d 19 ; Asmar v. 20th & Seventh Assoc., LLC , 125 A.D.3d 563, 564, 4 N.Y.S.3d 198 (1st Dep't 2015) ; City of New York v. VJHC Dev. Corp. , 125 A.D.3d 425, 426, 2 N.Y.S.3d 453 (1st Dep't 2015).
Although a single violation of the regulations in the context of substantial compliance with the regulations may not totally bar recovery, plaintiff falls far short of substantial compliance. Law Off. of Sheldon Eisenberger v. Blisko , 106 A.D.3d at 652, 965 N.Y.S.2d 501 ; Daniele v. Puntillo , 97 A.D.3d 512, 513, 949 N.Y.S.2d 365 (1st Dep't 2012) ; Moyal v. Moyal , 85 A.D.3d 614, 616-17, 927 N.Y.S.2d 19 (1st Dep't 2011) ; Flanagan v. Flanagan , 267 A.D.2d 80, 81, 699 N.Y.S.2d 406 (1st Dep't 1999). Taking the position that the regulations do not apply to him, he shows no compliance whatsoever. Edelman v. Poster , 72 A.D.3d at 184, 894 N.Y.S.2d 398 ; Julien v. Machson , 245 A.D.2d at 122, 666 N.Y.S.2d 147. The established violation of 22 N.Y.C.R.R. § 1400.3, moreover, is substantial in itself, because the requirements for a retainer agreement implicate the client's rights to cancel the agreement, to be informed of the attorney's hourly rate, to itemized billing every 60 days, and to arbitrate any dispute concerning the attorney's fee, none of which plaintiff afforded to defendant. Therefore, even though plaintiff may have obtained favorable results for defendant, his total failure to comply with the regulations governing his services bars enforcement of the contract providing for his recovery of compensation for those services.
Defendant does not dispute that plaintiff provided legal services collateral to the divorce action, such as assisting her in financing and developing the property obtained in the divorce action. The fact that the Acknowledgment of Debt may include legal services unrelated to the divorce action, however, does not permit plaintiff to recover for those separate services when his compensation for matrimonial services and non-matrimonial services is combined in a single contract that violates 22 N.Y.C.R.R. § 1200.0, Rule 1.5(c) and (d)(5), and § 1400.3. See Morrison Cohen Singer & Weinstein, LLP v. Brophy , 19 A.D.3d 161, 162, 798 N.Y.S.2d 379 (1st Dep't 2005) ; Ross v. DeLorenzo , 28 A.D.3d 631, 634, 813 N.Y.S.2d 756 (2d Dep't 2006). The "better rule is to prohibit contingency fees in any action containing matrimonial claims," Ross v. DeLorenzo , 28 A.D.3d at 634, 813 N.Y.S.2d 756, because:
allowing contingency fees for nonmatrimonial claims interposed with matrimonial claims would contravene the important policy concerns that inform the general prohibition. Such a rule would create an incentive for attorneys to characterize most, if not all, of the proceeds of a settlement as deriving from the nonmatrimonial claims in order to maximize the value of, and therefore the fee derived from, those claims.
Id. at 634-35.
Plaintiff's opposition to defendant's motion demonstrates that just such an incentive motivates plaintiff here. As set forth above, the complaint extols plaintiff's extensive legal services in the divorce action and his assistance to defendant in obtaining valuable real property as part of her equitable distribution. Upon realizing that plaintiff's violation of the regulations governing matrimonial actions precludes plaintiff from collecting fees for services in the divorce action, however, his attorney seeks to characterize most of plaintiff's services as assisting defendant, outside the context of the divorce action, in financing and developing the property obtained in the divorce action. This characterization ignores the complaint, ignores the fact that financing and developing the property would have been meaningless without obtaining it, and engages in the very mischief and controversy over which services did and did not relate to the divorce action that the rules regulating retainer agreements and prohibiting contingent fees in matrimonial actions seek to avoid.
The contract providing compensation for matrimonial services and any non-matrimonial services is unenforceable. 22 N.Y.C.R.R. § 1200.0, Rule 1.5(c) and (d)(5), § 1400.3 ; Morrison Cohen Singer & Weinstein, LLP v. Brophy , 19 A.D.3d at 162, 798 N.Y.S.2d 379 ; Medina v. Richard A. Kraslow, P.C. , 149 A.D.3d at 929-30, 53 N.Y.S.3d 116 ; Ross v. DeLorenzo , 28 A.D.3d at 634, 813 N.Y.S.2d 756 ; Law Off. of Howard M. File, Esq., P.C. v. Ostashko , 60 A.D.3d at 644, 875 N.Y.S.2d 502. See Freeman Lewis LLP v. Financiera De Desarollo Indus. y Commercial S.A. , 173 A.D.3d at 574-75, 102 N.Y.S.3d 554 ; David v. Hack , 97 A.D.3d at 438, 948 N.Y.S.2d 583. Since the only claim in the complaint is for breach of the contract, the question whether plaintiff may recover for the non-matrimonial services based on another theory, were he within the applicable statute of limitations, is not before the court. C.P.L.R. § 213(2). See Law Offs. of Paul A. Chin, P.C. v. Seth A. Harris, PLLC , 159 A.D.3d 637, 638-39, 74 N.Y.S.3d 198 (1st Dep't 2016) ; Ferst v. Abraham , 140 A.D.3d 581, 582, 34 N.Y.S.3d 38 (1st Dep't 2016) ; Fischbarg v. Doucet , 63 A.D.3d 628, 628, 883 N.Y.S.2d 25 (1st Dep't 2009) ; Medina v. Richard A. Kraslow, P.C. , 149 A.D.3d at 930, 53 N.Y.S.3d 116.
III. DEFENDANT'S MOTION FOR SANCTIONS
The court may impose sanctions on plaintiff and his attorney in the form of reasonable attorney's fees as defendant requests when plaintiff and his attorney have engaged in "frivolous conduct." 22 N.Y.C.R.R. § 130-1.1(a). For conduct to qualify as "frivolous," however, it must be completely without merit and unsupported by any reasonable argument for an extension or modification of current law, be undertaken primarily to delay or prolong the litigation or to harass or maliciously injure another person, or involve false material factual statements. 22 N.Y.C.R.R. § 130-1.1(c) ; Borstein v. Henneberry , 132 A.D.3d 447, 450, 17 N.Y.S.3d 414 (1st Dep't 2015) ; Cadlerock Joint Venture, L.P. v. Sol Greenberg & Sons Intl., Inc. , 94 A.D.3d 580, 581-82, 942 N.Y.S.2d 497 (1st Dep't 2012) ; Newman v. Berkowitz , 50 A.D.3d 479, 480, 857 N.Y.S.2d 75 (1st Dep't 2008) ; Tavella v. Tavella , 25 A.D.3d 523, 524-25, 812 N.Y.S.2d 38 (1st Dep't 2006).
Given the absence of any dispute that plaintiff provided non-matrimonial as well as matrimonial services and obtained favorable results for defendant, she fails to establish that his action to enforce the contract intended to compensate him for those services was nothing but an exercise in futility. Ray v. Ray , 180 A.D.3d 472, 474–75, 119 N.Y.S.3d 98, (1st Dep't 2020) ; Parkchester S. Condominium Inc. v. Hernandez , 71 A.D.3d 503, 504, 898 N.Y.S.2d 109 (1st Dep't 2010) ; Adelaide Prods., Inc. v. BKN Intl. AG , 38 A.D.3d 221, 227, 834 N.Y.S.2d 3 (1st Dep't 2007) ; Parametric Capital Mgt., LLC v. Lacher , 26 A.D.3d 175, 175, 807 N.Y.S.2d 874 (1st Dep't 2006). See Borstein v. Henneberry , 132 A.D.3d at 451-52, 17 N.Y.S.3d 414. Instead, plaintiff's action falls in the category of actions pursued in good faith, but ultimately found unpersuasive. Ray v. Ray , 180 A.D.3d at 474–75, 119 N.Y.S.3d 98 ; Bradley v. Bradley , 167 A.D.3d 489, 490, 89 N.Y.S.3d 171 (1st Dep't 2018) ; Gordon Group Invs., LLC v. Kugler , 127 A.D.3d 592, 594, 8 N.Y.S.3d 115 (1st Dep't 2015) ; Kremen v. Benedict Morelli & Assoc., P.C. , 80 A.D.3d 521, 523, 916 N.Y.S.2d 44 (1st Dep't 2011). See Yeun-Ah Choi v. Shoshan , 136 A.D.3d 506, 506, 26 N.Y.S.3d 255 (1st Dep't 2016). Defendant does not show that she warned plaintiff she would seek sanctions for his meritless action, and he nonetheless persisted, see 22 N.Y.C.R.R. § 130-1.1(c), nor that he has advanced repeated untenable legal claims, engaged in a pattern of delay, unprofessional conduct, or harassment, or misrepresented material facts. Ray v. Ray , 180 A.D.3d at 474–75, 119 N.Y.S.3d 98 ; Lawlor v. McAuliffe , 152 A.D.3d 427, 428, 58 N.Y.S.3d 363 (1st Dep't 2017) ; Komolov v. Segal , 96 A.D.3d 513, 514, 947 N.Y.S.2d 14 (1st Dep't 2012) ; Benishai v. Benishai , 83 A.D.3d 420, 420, 920 N.Y.S.2d 84 (1st Dep't 2011). See Zappin v. Comfort , 146 A.D.3d 575, 575, 49 N.Y.S.3d 6 (1st Dep't 2017) ; Borstein v. Henneberry , 132 AD3d at 452, 17 N.Y.S.3d 414.
Finally, since defendant herself drafted the Acknowledgment of Debt, it does not constitute an abusive practice of matrimonial law that the regulations plaintiff violated are intended to address, even though, in practicing matrimonial law, he was required to comply with them or suffer the consequence of being denied compensation. See Straus v. Strauss , 173 A.D.3d 631, 632, 105 N.Y.S.3d 413 (1st Dep't 2019). For these reasons, the court denies defendant's motion to the extent that she requests sanctions. 22 N.Y.C.R.R. § 130-1.1(a) and (c) ; Ray v. Ray , 180 A.D.3d at 474–75, 119 N.Y.S.3d 98 ; Torres v. Torres , 171 A.D.3d 613, 614, 96 N.Y.S.3d 848 (1st Dep't 2019) ; Bradley v. Bradley , 167 A.D.3d at 489-90, 89 N.Y.S.3d 171 ; Korangy v. Malone , 161 A.D.3d 645, 646, 78 N.Y.S.3d 303 (1st Dep't 2018).
IV. CONCLUSION
For the all reasons explained above, the court grants defendant's motion to dismiss the complaint based on plaintiff's noncompliance with 22 N.Y.C.R.R. § 1200.0, Rule 1.5(c) and (d)(5), and § 1400.3. C.P.L.R. § 3211(a)(1). The court denies defendant's motion (1) to dismiss the complaint based on plaintiff's noncompliance with 22 N.Y.C.R.R. §§ 202.16, 1400.2, and 1400.5 as academic and (2) to impose sanctions. 22 N.Y.C.R.R. § 130-1.1(a) and (c). Defendant also may pursue any claims regarding ethical violations in the forum for those claims. 22 N.Y.C.R.R. §§ 1246.7 and 1246.8. See Shapiro v. McNeill , 92 N.Y.2d 91, 97, 677 N.Y.S.2d 48, 699 N.E.2d 407 (1998) ; Suttongate Holdings Ltd. v. Laconm Mgt. N.V. , 173 A.D.3d 618, 619, 106 N.Y.S.3d 1 (1st Dep't 2019) ; Cohen v. Kachroo , 115 A.D.3d 512, 513, 981 N.Y.S.2d 711 (1st Dep't 2014) ; Arkin Kaplan LLP v. Jones , 42 A.D.3d 362, 366, 840 N.Y.S.2d 48 (1st Dep't 2007).