Follow the Rules or Forget Your Fees

A more recent committee, known as the Miller Commission, has investigated how to improve the existing system for litigants, practitioners and courts and promulgated additional recommendations. The Matrimonial Rules, among other things, require: 1) presentation of a specific 'Statement of Clients Rights and Responsibilities' to be given to clients at the initial consultation; 2) the entry into and filing of written retainer agreements with thirteen mandatory provisions to be included; and 3) scheduled billing at least once every 60 days. 'Substantial compliance' with the Matrimonial Rules is needed in order to recover additional fees due and owing. Disciplinary proceedings have resulted at times from failure to comply with these Rules. Attorneys should be aware of these unique exigencies involved in the representation of a client in New York domestic relations matters and should also be cognizant of the possibility that their own jurisdiction may also seek to regulate their family law practices in a way which, on one hand, strives to improve the ethical standards of the field, while on the other, singles out the field from all others in requiring repeated review, special regulation and heightened scrutiny of conduct.

Recovering Fees

Matrimonial counsel, like those in all fields, may face many obstacles in recovering fees. In addition to the potential pitfalls in recovering counsel fees from one's own client, however, a New York matrimonial practitioner may face further perils in the recovery of counsel fees from the adverse spouse if he or she has not substantially complied with the rules in connection with his or her own client.

In what appeared at the time to be a case of first comment on the issue, the Appellate Division, Second Department, in Wagman v Wagman, 8 AD3d 263, 777 NYS2d 678 (2d Dept. 2004), reversed the lower court's award of counsel fees where the attorney who sought the award, on behalf of his client, failed to file the retainer agreement or to bill at least once every 60 days.

A prior Second Department case, Mulcahy v Mulcahy, 285 AD2d 587, 728 NYS2d 90 (2d Dept. 2001), had held 'An attorney may recover a fee from an adversary spouse where there is substantial compliance with 22 NYCRR 1400.3.' Wagman, however, affirmed the negative, to wit: failure to comply substantially with the Matrimonial rules vis-'-vis your own client results in that client's inability to recover from his or her spouse.

Two Recent Decisions

That finding has now been further considered in two recent decisions – the Second Department's holding from November 2006 in Sherman v. Sherman, 34 AD3d 670 (2nd Dept 2006), and the January 2007 exploration into the Matrimonial rules' purpose by Supreme Court Justice Jeffrey S. Sunshine in Harding v Gilbert, NYLJ, Jan. 22, 2007, at 27 col 1 (Sup Ct Kings County, Sunshine, J.); 2007 NY Slip Op 50057(U).

In Sherman, the wife's attorney performed post-judgment services, which included seeking money judgments against the former husband due to his noncompliance with the terms of the judgment of divorce. The wife's attorney also sought the recovery of counsel fees from the husband for rendering those services, only to have been denied that relief by the trial court. On appeal, the Second Department affirmed the denial of counsel fees because the post-judgment retainer agreement between the wife's counsel and the wife merely ratified the provisions of the pre-divorce retainer and did not set forth all of the rules' required provisions anew. The court held:

Here, the retainer agreement between the appellant and her attorney terminated by its own terms upon entry of the judgment of divorce. Contrary to the appellant's contention, the filing of a new retainer agreement in support of the instant motion for a post-judgment attorney's fee, which purportedly ratified the former agreement, did not amount to substantial compliance with the matrimonial rules (see Wagman v. Wagman, 8 AD3d 263, 777 N.Y.S.2d 678). Accordingly, the Supreme Court properly concluded that the appellant's attorney was not entitled to recover a fee for post-judgment services rendered to the appellant.

In Sherman, a proper retainer agreement apparently existed and expired of its own terms in the issuance of the divorce judgment. The post-judgment retainer, having ratified the prior retainer merely re-establishes and continues the terms already agreed to. There is no apparent diminution of the client's knowledge of what is expected or of the attorney's obligations and the client's responsibilities. Labeling this 'failure to substantially comply' with the Matrimonial Rules is not in keeping with the intent of the rules. Certainly if counsel does not substantially comply with the rules as to his own client, and the client then becomes non-obligated for the attorney's fee, the non-obligated client should not be able to recover that fee from his or her spouse as a windfall. That does not seem to be the case, however, in Sherman, and justice does not appear to have been done.

Common Sense Meaning

Contrary to what seems a draconian result in Sherman, Justice Sunshine, in Harding, endeavors to find a common sense meaning to the Matrimonial Rules and find equity in its application. In citing to Justice Jacqueline W. Silbermann's report 'The Matrimonial Rules ' Ten Years Later,' Justice Sunshine quotes:

In particular, requiring a detailed explanation of the fee arrangement, coupled with regular itemized billing, would ensure that a client knew in advance what charges could be incurred as well as kept regularly informed of what charges had in fact accrued. Eliminating the element of surprise ' and ignorance in this regard was meant to address a common source of conflict between attorney and client as the case progressed. (See 'Rules Governing Attorney Conduct: 22 NYCRR Part 1400, Procedure for Attorneys in Domestic Relations Matters' ' .)

In Harding, the wife sought recovery of an additional $20,000 in pendente lite counsel fees from the husband. In opposing the application, the husband alleged that the wife's attorney was not in substantial compliance with the Matrimonial Rules in that billing was not undertaken at least once every 60 days pursuant to 22 NYCRR 1400.2. The facts indicate that while the wife retained counsel on March 1, 2006, the first bill was not generated until June 1, 2006, with the next three bills being dated June 27, Sept. 1 and Oct. 30. The court determined that, what amounted to one missed billing statement, did not constitute non-substantial compliance with the rules. In this case, the wife's counsel's omission of one billing statement does not rise to the level of 'substantial noncompliance.' Clearly, the intent of 22 NYCRR 1400.2 requiring attorneys to bill their clients every 60 days was to keep litigants apprised of the amount of legal expenses they were incurring for legal services in a timely manner. (Footnote omitted) In the case at bar, the husband seeks to utilize what wife's counsel contends is an inadvertent omission of a mandate, which is clearly designed to protect a litigant in the relationship with their lawyer, to prevent a nonmonied spouse from collecting a pendente lite counsel fee. This court will not apply such a standard, to do so would allow the husband with a superior 'pocketbook' who has paid his attorneys significant sums of monies to prevent the wife from seeking counsel fees and the ability to be adequately represented because of one missed billing that was 30 days late. Under these circumstances, a first billing in 90 days instead of 60 does not mean that counsel was not in 'substantial compliance' with the rules. The rule was intended to protect the client, not prevent the adversary from being directed to pay a nonmonied spouse's fee based upon a 30-day late bill (see Winkelman v. Furey, 281 AD2d 908 [4 Dept 2001]).

Conclusion

The fact-sensitive application of the Matrimonial Rules by Justice Sunshine is appropriate. However, the question arises: If Ms. Gilbert's retainer was exhausted in the first 90 days and she was then asked to pay a balance due, would her attorney have forfeited that additional fee in light of the failure to have billed properly in the event the matter resulted in a fee dispute? While the lack of a bright line determination of 'substantial compliance' on billing would seem to leave the door open for two missed bills, or three ' it should not.

Justice Sunshine distinguishes the holding in Wagman by noting significantly that the attorney therein failed to file the retainer agreement in a timely fashion or present evidence of any billing having been rendered at least every 60 days.

Violators of the rules should not go away unscathed and the rules should be applied strictly to those who by their conduct do a disservice to their clients and to the profession. It is imperative, however, that the court apply the facts to the law in hopes of achieving some amount of justice. We should be pleased that, with thoughtful analysis, such as was undertaken in Harding, this can actually result.

Lee Rosenberg, a partner at Saltzman Chetkof & Rosenberg in Garden City, NY, is a fellow of the American Academy of Matrimonial Lawyers.

While all states have rules addressing attorney practices, New York appears to stand alone in singling out the matrimonial practice for special attention. New York matrimonial and family law practitioners are highly regulated. We are governed, not only by general disciplinary rules and the code of professional conduct applicable to all attorneys, but we are also regulated by what is commonly known as the 'Matrimonial Rules,' set forth in the New York Code of Rules and Regulations. In addition, the disciplinary rules also contain provisions, exclusive to family law practitioners, prohibiting contingency fee retainers and restricting sexual relationships between attorney and client.

The 'Matrimonial Rules' derive from the Report of the Committee to Examine Lawyer Conduct in Matrimonial Actions issued in 1993, which, in addition to holding extensive hearings, reviewed law and rules from California, Oregon, Massachusetts, Florida and West Virginia. The Committee also reviewed ABA opinions and standards of the American Academy of Matrimonial Lawyers. The vast majority of states had no rules specifically singling out the conduct of family law attorneys; the rules in place were limited mostly to fee arbitration issues. No states had rules prohibiting sexual relationships.

The Miller Commission

A more recent committee, known as the Miller Commission, has investigated how to improve the existing system for litigants, practitioners and courts and promulgated additional recommendations. The Matrimonial Rules, among other things, require: 1) presentation of a specific 'Statement of Clients Rights and Responsibilities' to be given to clients at the initial consultation; 2) the entry into and filing of written retainer agreements with thirteen mandatory provisions to be included; and 3) scheduled billing at least once every 60 days. 'Substantial compliance' with the Matrimonial Rules is needed in order to recover additional fees due and owing. Disciplinary proceedings have resulted at times from failure to comply with these Rules. Attorneys should be aware of these unique exigencies involved in the representation of a client in New York domestic relations matters and should also be cognizant of the possibility that their own jurisdiction may also seek to regulate their family law practices in a way which, on one hand, strives to improve the ethical standards of the field, while on the other, singles out the field from all others in requiring repeated review, special regulation and heightened scrutiny of conduct.

Recovering Fees

Matrimonial counsel, like those in all fields, may face many obstacles in recovering fees. In addition to the potential pitfalls in recovering counsel fees from one's own client, however, a New York matrimonial practitioner may face further perils in the recovery of counsel fees from the adverse spouse if he or she has not substantially complied with the rules in connection with his or her own client.

In what appeared at the time to be a case of first comment on the issue, the Appellate Division, Second Department, in Wagman v Wagman, 8 AD3d 263, 777 NYS2d 678 (2d Dept. 2004), reversed the lower court's award of counsel fees where the attorney who sought the award, on behalf of his client, failed to file the retainer agreement or to bill at least once every 60 days.

A prior Second Department case, Mulcahy v Mulcahy, 285 AD2d 587, 728 NYS2d 90 (2d Dept. 2001), had held 'An attorney may recover a fee from an adversary spouse where there is substantial compliance with 22 NYCRR 1400.3.' Wagman, however, affirmed the negative, to wit: failure to comply substantially with the Matrimonial rules vis-'-vis your own client results in that client's inability to recover from his or her spouse.

Two Recent Decisions

That finding has now been further considered in two recent decisions – the Second Department's holding from November 2006 in Sherman v. Sherman , 34 AD3d 670 (2nd Dept 2006), and the January 2007 exploration into the Matrimonial rules' purpose by Supreme Court Justice Jeffrey S. Sunshine in Harding v Gilbert , NYLJ, Jan. 22, 2007, at 27 col 1 (Sup Ct Kings County, Sunshine, J.); 2007 NY Slip Op 50057(U).

In Sherman, the wife's attorney performed post-judgment services, which included seeking money judgments against the former husband due to his noncompliance with the terms of the judgment of divorce. The wife's attorney also sought the recovery of counsel fees from the husband for rendering those services, only to have been denied that relief by the trial court. On appeal, the Second Department affirmed the denial of counsel fees because the post-judgment retainer agreement between the wife's counsel and the wife merely ratified the provisions of the pre-divorce retainer and did not set forth all of the rules' required provisions anew. The court held:

Here, the retainer agreement between the appellant and her attorney terminated by its own terms upon entry of the judgment of divorce. Contrary to the appellant's contention, the filing of a new retainer agreement in support of the instant motion for a post-judgment attorney's fee, which purportedly ratified the former agreement, did not amount to substantial compliance with the matrimonial rules ( see Wagman v. Wagman , 8 AD3d 263, 777 N.Y.S.2d 678). Accordingly, the Supreme Court properly concluded that the appellant's attorney was not entitled to recover a fee for post-judgment services rendered to the appellant.

In Sherman, a proper retainer agreement apparently existed and expired of its own terms in the issuance of the divorce judgment. The post-judgment retainer, having ratified the prior retainer merely re-establishes and continues the terms already agreed to. There is no apparent diminution of the client's knowledge of what is expected or of the attorney's obligations and the client's responsibilities. Labeling this 'failure to substantially comply' with the Matrimonial Rules is not in keeping with the intent of the rules. Certainly if counsel does not substantially comply with the rules as to his own client, and the client then becomes non-obligated for the attorney's fee, the non-obligated client should not be able to recover that fee from his or her spouse as a windfall. That does not seem to be the case, however, in Sherman, and justice does not appear to have been done.

Common Sense Meaning

Contrary to what seems a draconian result in Sherman, Justice Sunshine, in Harding, endeavors to find a common sense meaning to the Matrimonial Rules and find equity in its application. In citing to Justice Jacqueline W. Silbermann's report 'The Matrimonial Rules ' Ten Years Later,' Justice Sunshine quotes:

In particular, requiring a detailed explanation of the fee arrangement, coupled with regular itemized billing, would ensure that a client knew in advance what charges could be incurred as well as kept regularly informed of what charges had in fact accrued. Eliminating the element of surprise ' and ignorance in this regard was meant to address a common source of conflict between attorney and client as the case progressed. (See 'Rules Governing Attorney Conduct: 22 NYCRR Part 1400, Procedure for Attorneys in Domestic Relations Matters' ' .)

In Harding, the wife sought recovery of an additional $20,000 in pendente lite counsel fees from the husband. In opposing the application, the husband alleged that the wife's attorney was not in substantial compliance with the Matrimonial Rules in that billing was not undertaken at least once every 60 days pursuant to 22 NYCRR 1400.2. The facts indicate that while the wife retained counsel on March 1, 2006, the first bill was not generated until June 1, 2006, with the next three bills being dated June 27, Sept. 1 and Oct. 30. The court determined that, what amounted to one missed billing statement, did not constitute non-substantial compliance with the rules. In this case, the wife's counsel's omission of one billing statement does not rise to the level of 'substantial noncompliance.' Clearly, the intent of 22 NYCRR 1400.2 requiring attorneys to bill their clients every 60 days was to keep litigants apprised of the amount of legal expenses they were incurring for legal services in a timely manner. (Footnote omitted) In the case at bar, the husband seeks to utilize what wife's counsel contends is an inadvertent omission of a mandate, which is clearly designed to protect a litigant in the relationship with their lawyer, to prevent a nonmonied spouse from collecting a pendente lite counsel fee. This court will not apply such a standard, to do so would allow the husband with a superior 'pocketbook' who has paid his attorneys significant sums of monies to prevent the wife from seeking counsel fees and the ability to be adequately represented because of one missed billing that was 30 days late. Under these circumstances, a first billing in 90 days instead of 60 does not mean that counsel was not in 'substantial compliance' with the rules. The rule was intended to protect the client, not prevent the adversary from being directed to pay a nonmonied spouse's fee based upon a 30-day late bill ( see Winkelman v. Furey , 281 AD2d 908 [4 Dept 2001]).

Conclusion

The fact-sensitive application of the Matrimonial Rules by Justice Sunshine is appropriate. However, the question arises: If Ms. Gilbert's retainer was exhausted in the first 90 days and she was then asked to pay a balance due, would her attorney have forfeited that additional fee in light of the failure to have billed properly in the event the matter resulted in a fee dispute? While the lack of a bright line determination of 'substantial compliance' on billing would seem to leave the door open for two missed bills, or three ' it should not.

Justice Sunshine distinguishes the holding in Wagman by noting significantly that the attorney therein failed to file the retainer agreement in a timely fashion or present evidence of any billing having been rendered at least every 60 days.

Violators of the rules should not go away unscathed and the rules should be applied strictly to those who by their conduct do a disservice to their clients and to the profession. It is imperative, however, that the court apply the facts to the law in hopes of achieving some amount of justice. We should be pleased that, with thoughtful analysis, such as was undertaken in Harding, this can actually result.

Lee Rosenberg, a partner at Saltzman Chetkof & Rosenberg in Garden City, NY, is a fellow of the American Academy of Matrimonial Lawyers.