Working Without Fees: Failure to Heed Rules in Domestic Relations Matters

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By Lazar Emanuel
[Originally published in NYPRR December 2000]


Two decisions by New York County Supreme Court judges imposed draconian penalties on lawyers who failed to follow the rules controlling retainer agreements, client billing, arbitration notices and other matters in domestic relations proceedings. In the first case, Marshall, P.C. v. Chitayat [QDS: 22264757], lawyer Marshall’s claim for $280,000 in legal fees was dismissed by Judge Kahn on motion. In the second, Liu v. Liu [QDS: 22266923], Judge Lobis denied a law firm’s claim for $160,876 in legal fees after a referee had determined the fees were reasonable compensation for the work involved.

In light of these cases, this article reviews the rules applicable to client representation in domestic relations matters. The relevant sources are 22 NYCRR Part 136, 22 NYCRR Part 1400 and DR 2-106. After Chitayat and Liu, no lawyer can afford to undertake a domestic relations matter without consulting these rules often and regularly.

In this context, what is a domestic relations matter? The definition is supplied by 22 NYCRR 1400.1:

“…a claim, action or proceeding, or preliminary to the filing of a claim, action or proceeding, in either the Supreme Court or Family Court, or in any court of Appellate Jurisdiction, for divorce, separation, annulment, custody, visitation, maintenance, child support or alimony, or to enforce or modify a judgment or order in connection with any such claims, actions or proceedings.”

At the outset of any representation in a domestic relations matter, the lawyer is required to provide the client with a Statement of Client’s Rights and Responsibilities in a form prescribed by the Appellate Division. The form is recited in 22 NYCRR 1400.2. If the client is not paying a fee, the lawyer may delete the portions of the Statement dealing with fees; otherwise, the client must get the entire Statement. The lawyer must get the client’s signature acknowledging receipt of the Statement before the representation can begin.

[Editor’s note: Lest there be any confusion, the Statement of Client Rights and Responsibilities under §1400.2 is not the same as the Statement of Client Rights in NYCRR Part 1210; the former applies only in domestic relations matters; the latter must be visibly posted in all law offices.]

Contents of Statement

If the client is paying a fee, the Statement of Client’s Rights and Responsibilities must contain the following provisions:

• You [the client] are entitled to a written retainer agreement which must set forth, in plain language, the nature of the relationship and the fee arrangement.

• You are entitled to fully understand the proposed rates and retainer fee before you sign a retainer agreement.

• Your attorney may not request a fee that is contingent on the securing of a divorce or on the amount of money or property that may be obtained.

• Your attorney may not request a retainer fee that is not refundable. In the event of discharge or withdrawal before the retainer is used up, your lawyer is entitled to compensation commensurate with his work but must return any balance remaining unearned.

• You may agree with your attorney to a minimum fee below which the fee will not fall based upon “the handling of the case to its conclusion.”

• You are entitled to know what lawyers will work on your case and the fees to be charged by each lawyer.

• You are entitled to know in advance how you will pay for fees and expenses and how your retainer, if any, will be spent.

• You are entitled to receive a written itemized bill at least once every 60 days.

• You have the right to be present for all court conferences.

• You are entitled to make the final decision on your objectives and on any settlement of your case.

• You are under no obligation to sign a confession of judgment or promissory note, or to agree on a lien on your home to cover legal fees. No security interest may be obtained by your lawyer without the court’s approval. Your attorney may not foreclose a lien on the marital residence.

• Any escrow deposit by you must be kept by the attorney in a special escrow account. You may request a written escrow agreement, a receipt and a complete record of disbursements.

• If you dispute your legal fees, you have a right to ask for arbitration. You may ask your lawyer for the necessary forms and information.

Contents of Retainer Agreement

22 NYCRR Part 1400 applies to all attorneys in domestic relations matters. Section 1400.3 requires that a lawyer in a domestic relations proceeding who “enters into an arrangement for” or who “charges or collects” any fee from the client, shall enter into a retainer agreement with the client “setting forth in plain language the terms of compensation and the nature of services to be rendered.” The agreement must be signed by both lawyer and client, and, in the case of actions in the Supreme Court, a copy must be filed with the court “with the statement of net worth.” Any amendment must be filed with the court within 15 days after execution. A copy of the retainer agreement and any amendment must be given to the client. The retainer agreement must recite all of the following:

• The names and addresses of the parties.

• Nature of the services to be rendered.

• Amount of the advance retainer, if any, and what it covers.

• Whether a portion of the retainer may be refunded. In the case of withdrawal or discharge before the retainer is depleted, how the lawyer’s fees will be determined and how any remainder will be refunded to the client.

• The client’s right to cancel the agreement at any time and how the lawyer’s fee will be determined and paid upon cancellation.

• How the lawyer will be paid once the retainer is depleted and the action continues; whether the client will be asked to pay another lump sum.

• The hourly rate of each person whose time will be charged to the client, plus how any out-of-pocket disbursements will be determined (all changes in rates and disbursements must be covered by a written amendment signed by the parties).

• In plain language, any agreement for a fee in addition to the agreed-upon hourly rates, such as a reasonable minimum fee clause; plus the circumstances under which any additional fee may be calculated and incurred.

Rules Covering Arbitration

The lawyer’s obligation to advise the client of the right to arbitrate any fee dispute, recited in the Statement of Client’s Rights and Responsibilities, is confirmed and reaffirmed in several other NYCRR provisions. Section 1400.7 provides:

“In the event of a dispute between attorney and client, the client may seek to resolve the dispute by arbitration, which shall be binding on both attorney and client and subject to review under CPLR 75, pursuant to a fee arbitration program established and operated by the Chief Administrator of the Courts…”

22 NYCRR Part 136 deals entirely with fee arbitration in domestic relations matters. It is designed to implement Section 1400.7. Thus, Section 136.2 provides:

In the event of a fee dispute between attorney and client, whether or not the attorney has received the fee in dispute, the client may seek to resolve the dispute by arbitration, which shall be binding upon both attorney and client. A client may request arbitration pursuant to section 136.(5)(e) of this Part either in response to notice from the attorney pursuant to section 136.5(a) of this Part, upon consent pursuant to §136.5(d) of this Part, or upon the client’s own initiative.

The procedure for controlling arbitration is contained in §136.5. Among other things, this Section:

• Requires a lawyer in a fee dispute to notify the client in writing by certified mail or by personal service of the right, at any time within 30 days of the notice, to elect binding arbitration to resolve the dispute.

• Requires a lawyer to allege in any suit for fees that she gave the notice to elect arbitration to the client and that the client failed to file a timely request for arbitration.

The lawyer’s obligation to resolve all fee disputes in domestic relations matters through arbitration is further confirmed in DR 2-106. DR 2-106(e) recites simply:

“In domestic relations matters, a lawyer shall resolve fee disputes by arbitration at the election of the client.”

Other Provisions in DR 2-106

DR 2-106 deals generally with fees for legal services. With respect to fees in domestic relations matters, the Rule reflects the NYCRR provisions controlling fees and retainer agreements. Thus, DR 2-106(c)(2) directs a lawyer:

• Not to require a fee which is contingent upon securing a divorce or determined by reference to the amount of support, distribution or property settlement.

• Not to arrange for, charge or collect a fee without a written retainer agreement with the client; the agreement must not contain a nonrefundable fee clause.

• Not to charge or collect any fee based on a security interest, confession of judgment or other lien without prior notice to the client in a signed retainer agreement and the court’s approval after notice to the adversary.

• Not to foreclose on a mortgage on the marital residence while the spouse who consented to the mortgage remains the titleholder and uses the residence as his or her primary residence.

DR 2-106(f) restates the requirements of 22 NYCRR 1400: “In domestic relations matters, a lawyer shall provide a prospective client with a statement of clients rights and responsibilities at the initial conference and prior to the signing of a written retainer agreement.”

As Chitayat and Liu confirm, there’s nothing ambiguous or unsettled about these rules. Any lawyer undertaking a domestic relations matter who fails to observe them does so at the risk of his fees.

Lazar Emanuel is the Publisher of NYPRR.

DISCLAIMER: This article provides general coverage of its subject area and is presented to the reader for informational purposes only with the understanding that the laws governing legal ethics and professional responsibility are always changing. The information in this article is not a substitute for legal advice and may not be suitable in a particular situation. Consult your attorney for legal advice. New York Legal Ethics Reporter provides this article with the understanding that neither New York Legal Ethics Reporter LLC, nor Frankfurt Kurnit Klein & Selz, nor Hofstra University, nor their representatives, nor any of the authors are engaged herein in rendering legal advice. New York Legal Ethics Reporter LLC, Frankfurt Kurnit Klein & Selz, Hofstra University, their representatives, and the authors shall not be liable for any damages resulting from any error, inaccuracy, or omission.

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