Opinion
No. 2022-51196 Index No. XXXXXX/20XX
09-30-2022
E.C., Plaintiff, v. A.B., Defendant.
Plaintiff-wife is represented by Donahoe Talbert LLP, Paul M. Talbert, Esq. Defendant-husband is represented by Katsky Korins, LLP, David L. Katsky, Esq.
Unpublished Opinion
Plaintiff-wife is represented by Donahoe Talbert LLP, Paul M. Talbert, Esq.
Defendant-husband is represented by Katsky Korins, LLP, David L. Katsky, Esq.
Kathleen Waterman-Marshall, J.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63 (Motion 002) 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 75 were read on this motion to/for JUDGEMENT-MONEY; VACATE -DECISION/ORDER/JUDGMENT/ AWARD.
Upon the foregoing documents, the motion by Plaintiff E.C. ("Wife") for an order: (1) directing Defendant A.B. ("Husband") to comply with Article III, paragraphs 3, 5, and 8 of the parties' September 5, 2019 Stipulation and Agreement (the "Agreement"); (2) awarding her counsel fees in the sum of at least $20,000; (3) directing the Clerk to enter a money judgment against Husband for unpaid maintenance arrears in the sum of $70,857, plus additional fees accrued between the date of the application and its hearing, plus statutory interest; and (4) for other relief, is granted in part.
Upon the same record, Husband's cross-motion for an order: (1) amending or reforming the Agreement as to vacate certain provisions thereof due to alleged procedural deficiencies under the DRL; (2) disqualifying Donohoe Talbert LLP ["the firm"] as the attorney for Wife or directing a discovery hearing on disqualification; (3) staying this matter pursuant to CPLR 2201 pending a determination of a pending related plenary proceeding; (4) awarding him counsel fees; and (5) vacating a May 15, 2022 Income Execution, is denied.
Brief Background
The parties were married on April 6, 1991 and have two emancipated children of the marriage, each in their twenties. Throughout their twenty-eight-year marriage, Wife primarily cared for the parties' children and home while Husband maintained a lucrative business career. During the marriage, Husband co-founded [], a financial services company ["the company"]; he continues to act as the company's Managing Member. Husband and Wife each hold separate interests in the company through various holding LLCs. Wife receives quarterly distributions from the company in proportion with her ownership interest and assumes the same for Husband.
Wife filed for divorce in 2019 and retained Paul M. Talbert, Esq. ("Mr. Talbert") of the firm as counsel. Husband chose to represent himself, pro se. The parties resolved their financial issues by executing the Agreement on September 5, 2019. As is here relevant, the Agreement provides that beginning October 1, 2019, and continuing for up to ten years thereafter, Husband shall pay Wife one-half of his Net After-Tax income in maintenance. Article III, paragraph 3 requires Husband to request that the company make direct deposits into Wife's account when they are made into Husband's, and to provide Wife with documentation in connection with Husband's income. Paragraph 8 of the same Article obligates Husband to provide Wife with his local, state, and federal tax returns, along with other documents necessary to determine his Net After-Tax Income. Pursuant to Article III, paragraph 5, Husband's CPA is to calculate his Net After-Tax Income and Wife's maintenance payments concurrently with the preparation of Hsband's annual tax returns.
Husband requested the parties' mutual friend, attorney, and then General Counsel and Chief Compliance Officer of the company, Dave Diamond ("Mr. Diamond"), to represent him during the Agreement's negotiation. Mr. Diamond declined the request, stating he would "not be representing [Husband] as an attorney with respect to any matters related to [his] divorce" and that he may be providing general advice to Wife in the same matter. Despite acknowledging his response, Husband refused to retain alternate counsel. Mr. Talbert also unsuccessfully urged Husband to secure counsel.
After finalizing the Agreement, the parties completed an uncontested divorce packet in which Husband acknowledged receipt of the Notice of Guideline Maintenance and waived service of all further papers except the Judgment of Divorce. The Agreement was incorporated, but not merged, into their Judgment of Divorce, signed on November 20, 2019. Husband paid maintenance to Wife from the Agreement's execution until June of 2021, when he abruptly ceased making payments. This prompted Wife to file the instant motion and Husband to cross-move for the aforementioned relief.
Wife served Husband with a Notice of Default on July 9, 2021. Mr. Talbert provided Husband's current attorney, David Katsky, Esq., with an Income Execution for Support Enforcement Pursuant to CPLR 5241 (the "Income Execution"), dated May 9, 2022, seeking to deduct 55% of Husband's current and subsequent company income to pay his monthly maintenance obligation plus arrears. By this time, Wife believes Husband accrued $141,747 in maintenance arrears, based upon her understanding of his income and quarterly distributions. Husband moved to vacate the Income Execution and objects to its service upon any employer.
Donohoe Talbert LLP
Husband acknowledges his voluntarily and knowing decision to negotiate the parties' divorce pro se and uses this status to support several of his arguments. At the same time, however, Husband attempts to establish an attorney-client relationship between himself and Mr. Diamond upon which he bases his conflict of interest claim and argument for disqualification of Mr. Talbert and his firm as Wife's attorneys. This Court does not find Husband's arguments persuasive.
As "[d]isqualification denies a party's right to representation by the attorney of its choice," it is "a valued right and any restrictions must be carefully scrutinized." S & S Hotel Ventures Ltd. P'ship v 777 S.H. Corp., 69 N.Y.2d 437, 443 (1987); First Hawaiian Bank v Russell & Volkening, Inc., 861 F.Supp. 233, 238 (SD NY 1994) (disqualifying another party's counsel is a drastic measure, only to be taken after a "painstaking analysis of the facts" and evidentiary support).
Therefore, a party seeking to have opposing counsel disqualified must make a clear showing: (1) of an attorney-client relationship between themselves and the attorney whose disqualification is sought; (2) that the subject matter of the prior and current proceedings is substantially related; and (3) the interests of the present and moving clients are materially adverse. Tekni-Plex, Inv. v Meyner & Landis, 89 N.Y.2d 123, 132 (1996); Janczewski v Janczewski, 169 A.D.3d 795, 796-97 (2nd Dept 2019) ("existence of a prior attorney-client relationship between the moving party and opposing counsel, that the matters involved in both representations are substantially related, and that the interests of the present client and former client are materially adverse).
Any "doubts as to the existence of a conflict of interest are resolved in favor of disqualification in order to avoid even the appearance of impropriety." Janczewski v Janczewski, supra. When based upon a conflict of interest, a motion for such relief must be made promptly. Matter of Peters, 124 A.D.3d 1266 (4th Dept 2015).
As to the first of the three prong test, Husband does not allege an attorney-client relationship between himself and Mr. Talbert, or his firm, directly, and instead argues that such relationship existed between himself and Mr. Diamond. An attorney-client relationship is formed when an attorney explicitly undertakes to perform a specific task. Wei Cheng Chang v Pi, 288 A.D.2d 378, 380 (2d Dept 2001). While traditional indicia of a formal relationship are unnecessary, courts may look to various factors, including the existence of a retainer agreement, to determine whether one existed. Reyes v. Leuzzi, 2005 NYLJ LEXIS 142, (Sup Ct, NY County 2005) (citing First Hawaiian Bank v Russell & Volkening, Inc., supra). A party's unilateral beliefs and actions do not confer upon them the status of a client. Jane St. Co. v Rosenberg & Estis, P.C., 192 A.D.2d 451 (1st Dept 1993).
Mr. Diamond expressly declined to represent Husband, a fact that Husband concedes. Mr. Diamond did not explicitly undertake any task on behalf of Husband. No retainer was ever executed between the two and no fees ever paid. Husband's mere belief that Mr. Diamond represented him in the parties' divorce is unilateral and insufficient to establish an attorney-client relationship. See generally Solondz v Barash, 225 A.D.2d 996, 998 (3rd Dept 1996) ("It is true that an attorney-client relationship may arise by words and actions of the parties; however, one party's unilateral beliefs and actions do not confer upon him or her the status of client. Here, there is nothing in the record to indicate that Barash either affirmatively led plaintiff to believe that he was acting as plaintiff's attorney or knowingly allowed plaintiff to proceed under that misconception"); Jane St. Co. v Rosenberg & Estis, P.C., supra.
Even assuming arguendo that an attorney-client relationship existed between Mr. Diamond and Husband (which it did not), this Court still would find no basis to disqualify Donohoe Talbert LLP because Mr. Diamond is not an employee or member of, or otherwise affiliated with, that firm. Disqualification of an attorney requires disqualification of their entire firm. Kassis v Teacher's Ins. Annuity Ass'n, 93 N.Y.2d 611, 616 (1999). Mr. Diamond did not have a sufficiently "close, regular and personal" relationship with Donohoe Talbert LLP to consider him associated therein. Kelly v Paulsen, 145 A.D.3d 1398, 1399 (3d Dept 2016) (citing Dietrich v Dietrich, 136 A.D.3d 461, 463 (2016)). D.T. LLP did not share an office space with Mr. Diamond. Nor was Donohoe Talbert LLP alleged to have provided Mr. Diamond with support services, work product instruction, or access to confidential client material. See Id.
On this record, it is clear that Mr. Diamond merely acted as mediator between the parties during the negotiation, and, in connection with this motion, he is a merely third-party witness. Mr. Diamond could have provided an affidavit on behalf of Husband on these motions. The fact that he did so on behalf of Wife does not re-write history and create an attorney-client relationship where one never existed.
Moreover, no unethical conduct was alleged sufficient to disqualify Mr. Talbert or his firm. Husband's claim that Mr. Diamond abused his company credentials and shared confidential information with Mr. Talbert is speculative; no evidence was offered to show information was actually obtained and shared by Mr. Diamond, is somehow harmful, or otherwise undiscoverable. See In re Estate of Kochovos, 140 A.D.2d 180, 181 (1st Dept 1988); Estate of Marsh, 179 A.D.2d 581, 581-82 (1992). Any information Mr. Diamond obtained from Husband in connection with negotiating the Agreement is not protected by the attorney-client privilege as no such relationship existed. No substantial issue of fact is left outstanding in this regard, so no evidentiary hearing is required. See Elghanayan v Elghanayan, 107 A.D.2d 594 (1st Dept 1985).
Since, as noted above, Husband admits that there is no attorney-client relationship between himself and Mr. Talbert or any other employee or member of Donohoe Talbert LLP, and he has failed to provide sufficient evidence of an attorney-client relationship between himself and Mr. Diamdond, analysis of the remaining two factors for disqualification is therefore unnecessary. Dev. Don't Destroy Brooklyn v Empire State Dev. Corp., 31 A.D.3d 144, 151 (2nd Dept 2006) (each factor "must be present to warrant disqualification"). The record is clear, and so this Court finds, that as there was no prior attorney-client relationship between Husband and any of Wife's attorneys, there is no "impermissible conflict of interest," or even the appearance of impropriety, prohibiting Mr. Talbert and his firm from continuing as the attorneys for Wife and disqualification of Mr. Talbert and his firm is not warranted. See HSBC Bank USA, N.A. v Santos, 185 A.D.3d 475, 477 (1st Dept 2020) ("When the law firm targeted by the disqualification motion has never represented the moving party, that firm owes no duty to that party. It follows that if there is no duty owed there can be no duty breached"); Turner v Owens Funeral Home, Inc., 140 A.D.3d 632, 634 (1st Dept 2016) ("Because plaintiffs never had any attorney-client relationship with Crisci, Weiser & McCarthy, they do not have standing to seek disqualification."); Dev. Don't Destroy Brooklyn v Empire State Dev. Corp., supra (disqualification unwarranted where no prior attorney-client relationship).
The Agreement is Enforceable
Husband unsuccessfully argues that the Agreement should be voided or amended on two grounds: failure to adhere to relevant statutory requirements regarding spousal maintenance and unconscionability.
It is the general policy of New York courts to encourage parties to settle their difference privately by way of separation agreement rather than judicial intervention. McCaughey v McCaughey, 205 A.D.2d 330, 331 (1st Dept 1994). Statutory requirements as to spousal maintenance differ depending on whether the matter is resolved by stipulation or by the court. See DRL § 236 B (6)(a) (" Except where the parties have entered into an agreement pursuant to subdivision three of this part providing for maintenance, in any matrimonial action the court, upon application by a party, shall make its award for post-divorce maintenance pursuant to the provisions of this subdivision.") (italics added); DRL § 236 B (5)(a) (same in reference to temporary maintenance orders). Indeed, New York's Uncontested Divorce Forms embody the clear distinction in requirements for those seeking court-determined maintenance and those who resolve this issue through negotiated stipulation. See Form UD-1 ("I am not seeking maintenance as a payee as described in the Notice of Guideline Maintenance ("Notice") other than what was already agreed to in a written agreement/stipulation; OR I seek maintenance as payee, as described in the Notice.") (italics added); Form UD-8(2) ("if either party is seeking maintenance, [the Annual Income Worksheet] and [the Maintenance Guidelines Worksheet] are required forms.") (italics added).
There is no requirement that the Court provide an unrepresented party with a completed Maintenance Guideline Worksheet - i.e., one that sets forth the precise amount of guideline maintenance and any deviations from the guideline - before incorporating a stipulation resolving maintenance into their Judgment of Divorce. The cases relied upon Husband are inapposite, as each involves child support awards or court determined maintenance awards. See Bill v Bill, 214 A.D.2d 84 (2nd Dept 1995) (agreement pursuant to CSSA invalid); Matter of Usenza v Swift, 52 A.D.3d 876 (3d Dept 2008) (same); Matter of Michael JF v Jennifer MB, 192 A.D.3d 556 (1st Dept 2021) (child support agreement invalid); Anonymous v Anonymous, 142 A.D.3d 187 (1st Dept 2016) (preliminary conference order awarding temporary maintenance invalid for failure to state the presumptive maintenance amount; explain their deviation therefrom; and advise parties of temporary maintenance calculation).
Even if such requirement existed (and it does not), Husband expressly would have waived it in his Affidavit of Defendant: he waived service of all further papers except the Judgment of Divorce. Regardless, the statutory notice requirement was satisfied by service upon Husband, an unrepresented party, of the Notice of Guideline Maintenance in the beginning of this divorce action. Such Notice informed him of the applicable statutory formulas used in court-calculated maintenance and notified him that the higher earning spouse is obligated to pay maintenance, unless the parties agree or otherwise waive this right. Both Wife and Husband acknowledged receipt of the Notice of Guideline Maintenance in their Uncontested Divorce Affidavits. This fact is also recited in their Judgment of Divorce. Both further acknowledge that they are not seeking any maintenance outside of what is provided in the Agreement. The notion that Husband lacked sufficient understanding to formulate questions or apply the included formulas upon receiving the Notice of Guideline Maintenance is unconvincing.
Consequently, the Agreement does not violate any statutory requirements as to spousal maintenance. Husband received the statutory maintenance notices and entered into a specific and express Agreement as to his maintenance obligation to Wife after full and fair negotiation in which he actively participated (more on that below). Thus, the Court was not required to provide Husband with a completed Maintenance Guideline Worksheet.
Husband did not specifically request, in his notice of cross-motion, vacatur of the Agreement upon the ground of unconscionability; he did assert such claim, however, in his plenary action that has since been withdrawn and discontinued. In any event, Husband's unconscionability claim was argued and responded to at length on the instant motions and is sufficiently related to the relief sought such that it may be addressed. See generally Carter v Johnson, 110 A.D.3d 656, 658-59 (2d Dept 2013); Fried v Jacob Holding, Inc., 110 A.D.3d, 56, 65 (2d Dept 2013) (court may entertain requests for affirmative relief not raised in an explicit cross motion where the requests are interrelated to the relief sought on motion and movants had opportunity to address the requests).
Contrary to Husband's argument, the Agreement is not unconscionable and is in fact fully enforceable. Absent fraud, duress, overreaching, or unconscionability, courts generally hold valid a separation agreement which is regular on its face and adheres to the requirements of DRL § 236 B (3). See Smith v Smith, 29 Misc.3d 1226 (A) (Sup Ct, New York County 2010); McCaughey v McCaughey, supra; DRL § 236 B (3). Two elements must be shown to find a contract unconscionable: "procedural unconscionability, which requires 'a lack of meaningful choice' on the part of one of the parties, and substantive unconscionability, which requires contract terms which are 'unreasonably favorable' to the other party." Cilento v Cilento, 186 A.D.3d 556, 557 (2d Dept 2020) (citing Gilman v Chase Manhattan Bank, 73 N.Y.2d 1, 10-12 (1988).
The procedural element relates to the formation of the contract. Eichholz v Panzer-Eichholz, 188 A.D.3d 820, 824 (2d Dept 2020). The mere fact that a party was not represented by independent counsel during the negotiation of a marital settlement does not alone establish overreaching or automatically require its nullification. Brennan v Brennan, 305 A.D.2d 524, 525 (2d Dept 2003). "This is especially true where, as here, the [party] expressly acknowledged that he was fully informed of his right to retain his own counsel and the [opposing party's] attorney, who drafted the agreement, repeatedly urged him to do so." Id. Thus, Husaband's reliance on his voluntary and knowing pro se status, is not compelling. Husband has extensive experience in business, an Ivy League education, and experience in litigation. See Levine v Levine, 6 N.Y.2d 42, 48 (1982). His decision to remain pro se despite repeated requests to retain counsel did not prevent him from playing an integral role in negotiating the Agreement's terms or understanding their meaning. Husband made various edits to the Agreement and followed up to ensure their inclusion in the final draft. Moreover, Mr. Diamond's consultation with Mr. Talbert does not, standing alone, render the Agreement's formation process unfair.
Nor is the language of the Agreement unconscionable. A marital agreement may be deemed substantively unconscionable if its terms are so inequitable as to "shock the conscience and confound the judgment of any person of common sense." McCaughey v McCaughey, 205 A.D.2d 330, 331 (1st Dept 1994). Where each party is provided with meaningful, bargained for benefits, the court may decline to find substantive unconscionability. See Hughes v Hughes, 131 A.D.3d 1207, 1208 (2d Dept 2015); Cilento v Cilento, 186 A.D.3d 556, 558 (2d Dept 2020).
Wife and Husband are both afforded meaningful benefits under the Agreement and its maintenance provisions fail to shock the conscience of this Court. Each is entitled to keep their current residence and the personal property therein but must carry their associated expenses. Each received a luxury vehicle and is obligated to pay various debts. Wife's maintenance award represents a potential court ordered award given the duration of the marriage and standard of living during the marriage. See DRL § 236 B (6)(e) - (f)(1). Moreover, since Husband accepted the benefits of the Agreement and substantially complied with all terms for nearly two years, he is deemed to have ratified it. See Brennan v Brennan, supra.
Enforcement & Attorney's Fees
As this Court has found the Agreement to be enforceable in its entirety, Husband is directed to immediately comply with all obligations contained therein. Husband is specifically directed to comply with Article III, paragraphs 3, 4, and 5, which, inter alia, require payment to Wife of one-half of Husband's net monthly income and require Husband to ensure that his CPA calculates his Net After-Tax Income. As noted above, Husband unilaterally stopped making the monthly maintenance payments to Wife in June of 2021. In addition, he has not directed his CPA to calculate his Net After-Tax Income and did not provide Wife with information sufficient for her to seek a second opinion as to Husband's Net After-Tax Income. Husband's contention that Wife is obligated to remit maintenance in excess of what he owed was raised for the first time in response to the instant motion. Thus, any alleged payments in excess of his maintenance obligation during the period prior to June of 2021, are deemed voluntary under Article V of the Agreement and may not be recovered now.
Since the record is not complete as to the total amount incurred, Wife, through her counsel, is directed to submit an Attorney Affirmation and updated legal invoices demonstrating the amount presently due. Husband's attorney may submit an affirmation addressing or objecting to the amount of legal fees and the setting forth the reasons therefor.
Income Execution & Money Judgment
Husband missed more than three maintenance payments, placing him in default under the Agreement pursuant to CPLR 5241(a)(7). This warrants an income execution under CPLR 5241(b)(1). No mistake of fact was alleged as to the amount or existence of Husband's support obligation and his remaining challenges are legal contentions resolved and disposed of above. While the Income Execution's language regarding the required procedure to assert a mistake of fact does not mirror that of CPLR 5241 verbatim, this Court is satisfied that Husband was afforded due process and declines to vacate it on this ground. See Cramer v Cramer, 140 A.D.2d 990 (4th Dept 1998) (income execution vacated where creditor's attorney served income execution upon incorrect office, without notice to debtor, and failed to include notice of limitations upon deductions); Reynders v Reynders, 155 A.D.2d 987 (4th Dept 1989) (court erred in refusing to vacate income execution where initiation was without prior notice to debtor and underlying support order did not qualify as basis for Income Execution).
Consequently, Wife was entitled to serve the May 15, 2022 Income Execution upon Husband's employer, and the Court denies Husband's request to quash the Income Execution. Wife may amend the Income Execution to include additional arrears or payments made by Husband upon receipt of his CPA's calculation of Net After-Tax Income. See CPLR 5241 (b).
While Wife meets the requirement for a money judgment under DRL § 244, she secured repayment of arrears by way of Income Execution adding five percent to the withholdings for payment of arrears. Therefore, her request for a money judgment, and for leave to amend her application under DRL § 244-a, is denied without prejudice as academic.
CPLR 2201 Stay Request
Husband originally asked that this Court stay the matter pursuant to CPLR 2201 pending resolution of his related plenary action; he has since withdrawn such action as well as his request for a stay.
Accordingly, it is
ORDERED that Husband's cross-motion to disqualify Paul M. Talbert, Esq. and Donohoe Talbert LLP as the attorneys for Wife, is hereby denied in its entirety; and it is further
ORDERED that Wife's motion to enforce the Agreement, is granted; and Husband's cross-motion to amend and reform certain provisions of the Agreement, is denied; and it is further
ORDERED that the maintenance provisions in the Agreement are enforceable, satisfy relevant DRL requirements, and are neither procedurally nor substantively unconscionable; and it is further
ORDERED that Husband shall fully and immediately comply with the Agreement, including but not limited to Article III, paragraphs 3, 5, and 8 of the Agreement; and it is further
ORDERED that Wife is entitled to recover from Husband her reasonable attorney's fees incurred in connection with her efforts to enforce the Agreement, such sum to be determined upon the submission of her attorney's affirmation of legal services and updated legal invoices demonstrating the present value of legal services rendered in connection with this matter; and it is further
ORDERED the Husband's request to quash the May 15, 2022 Income Execution served upon his employer, is denied; and it is further
ORDERED that Wife's request for this Court to direct the Clerk to enter a money judgment for $70,857 and for leave to amend her application under DRL § 244-a is denied as academic; and it is further
ORDERED that Husband's request for attorney's fees is denied; and it is further
ORDERED that Husband's request for a stay pursuant to CPRL 2201 is denied as withdrawn.