DIVORCE - AWARDING COUNSEL FEES WHEN THERE IS A CAP

SM v. MR, 2017 NY Slip Op 51071 - NY: Supreme Court, Richmond 2017:

"Accordingly, When Wife testified that she was obligated to pay her attorney the sum of $42,281, she was at best mistaken. Pursuant to the clear terms of their agreed upon retainer, Wife owes her attorney no more than $10,000, of which she has already paid $7,500. Notably, there is no language in the retainer that would indicate that Wife's attorney "reserves the right" to seek any balance of counsel fees from Husband. Moreover, the retainer does include language indicating that Wife has "not relied on any oral statement "and that the agreement can only be "modified in writing . . . signed by both of the parties hereto." (See Pl. Ex. 16).

However, the question remains as to whether the clause capping counsel fees, which was negotiated between Wife and her attorney, inures to the benefit of Husband. Husband argues that he is akin to a "third party beneficiary" to Wife's retainer agreement as he is being asked to pay the hourly amount indicated therein, to the attorney who drafted the agreement. Wife argues that the retainer was drafted for her benefit, and therefore cannot be used to protect Husband.

While this appears to be a matter offirst impression, the Court does not find itself without guidance. Matrimonial retainers are highly regulated, and thus are often the subject of scrutiny at trial. These regulations, which were "designed to address abuses in the practice of matrimonial law and to protect the public" are contained in 22 NYCRR 1400. See Hovanec v. Hovanec, 79 AD3d 816 (2d Dept. 2010). A failure to abide by these regulations, such as a failure to provide a written bill every 60 days, or the failure to provide a written retainer agreement, or a "statement of client's rights" may preclude an attorney from recovering a legal fee from his or her client. See Matter of Grald v. Grald, 33 AD3d 922 (2d Dept. 2006).

In the First, Third and Fourth Judicial Departments, the Appellate Courts have held that the protections of 22 NYCRR 1400, which must be set forth in a written retainer agreement, are protections that only run between attorney and client, as signatories to the retainer contract. For example, the First Department has held that "it is the right of the client, not the adversary spouse, to be billed every 60 days, and the client may waive that right." See Rivacoba v. Aceves, 110 AD3d 495 (1st Dept. 2013); See also Harrington v. Harrington, 93 AD3d 1092 (3rd Dept. 2012); Petosa v. Petosa, 56 AD3d 1296 (4th Dept. 2008).

However, this Court sits in the Second Judicial Department, which has taken a markedly different view as to the applicability of the provisions set forth in a retainer agreement to the adversarial spouse. In the Second Department, the failure to substantially comply with the retainer requirements set forth in 22 NYCRR 1400 will preclude an attorney's recovery of a legal fee from his or her client, "or from the adversary spouse." See Montoya v. Montoya, 143 AD3d 865 (2d Dept. 2016); See also, Wagman v. Wagman, 8 AD3d 263 (2d Dept. 2004); Vitale v. Vitale, 112 AD3d 614 (2d Dept. 2013). The Appellate Division has explained the reasoning behind thisruling by holding that "since the plaintiff's counsel was precluded from seeking unpaid fees from the plaintiff, the plaintiff's spouse may not be required to pay such fees." See Rosado v. Rosado, 100 AD3d 856 (2d Dept. 2012). This Court finds that while the facts of the cases cited above are different, the reasoning is equally applicable to the issue presently before this Court.

Husband has not argued that Wife's counsel is not in compliance with the rules required for a matrimonial retainer. However, following the Rosado logic, Husband argues that since plaintiff's counsel is precluded from ever seeking more than $10,000 from Wife, that he cannot be required to pay more than that amount, as the protections of the retainer apply equally to him in the Second Department. This Court agrees and finds that clauses of Wife's retainer agreement apply to Husband, so long as Husband is being asked to contribute to the counsel fees owed under that retainer.

Wife's attorney argues in the alternative, that the Court should grant legal fees to Wife under the spirt of DRL §237 because of "public policy concerns." Wife's attorney argues that non-monied matrimonial litigants would be somehow hindered in acquiring representation if they could not seek counsel fees from the monied spouse in a matrimonial proceeding. (Tr. 9/29/16 pgs. 10-11). While this argument effectively sets forth part of the reasoning behind DRL §237, it is not persuasive in the unique circumstance before this Court. Husband is not arguing that he cannot be compelled to pay Wife's counsel fees. In fact, he has already paid $11,500 to Wife's attorney. Husband simply argues that he cannot be forced to pay a fee in excess of what Wife would ever have to pay under the retainer. Therefore, a ruling agreeing with Husband does affect the reasoning behind, or purpose of, DRL §237.

It is well settled law that the main purpose behind DRL §237 is to level the playing field between the monied spouse and the non-monied spouse. See Kaufman v. Kaufman, 131 AD3d 939 (2d Dept. 2015). "The courts are to see to it that the matrimonial scales of justice are not unbalanced by the weight of the wealthier litigants wallet." Saunders v. Guberman, 130 AD3d 510 (1st Dept. 2015).

Contrary to Wife's counsel's public policy argument, Wife effectively leveled the playing field the minute she signed the retainer agreement. Wife obtained a competent trial attorney for the sum of $10,000, no matter how difficult, or lengthy the litigation became. Husband, on the other hand, has been required to pay his attorney an hourly rate during the course of this proceeding, without the benefit of a cap. Thus, if anyone was at a financial disadvantage when it came to the issue of counsel fees, it was Husband, not Wife.
Moreover, the Court finds thatpublic policy also favors "predictably and clarity" in regard to contracts, especially matrimonial retainers. See Sport Rock Int'l v. Am. Cas. Co. of Reading, 65 AD3d 12 (1st Dept. 2009); See also, Moran v. Erk, 11 NY3d 452 (2008). Here, Husband was entitled to rely upon a fair and usual reading of Wife's retainer agreement. Upon reading that agreement it would be fair for him to conclude that since his Wife was not required to pay more than $10,000, and since the retainer did not contain a provision authorizing Wife's attorney to seek fees in excess of the cap (from either spouse), that he would not have to pay any more than $10,000.

For the reasons set forth above, and after careful consideration of the arguments raised by Wife and Husband, the Court finds that Husband was entitled to rely upon the aspect of Wife's retainer that limited her counsel fee exposure in this matter. As Wife could not be charged more than $10,000, it would be inequitable to require Husband to pay her attorney more than thatcontracted for sum. See Mulcahy v. Mulcahy, 285 AD2d 587 (2d Dept. 2001); See also, Wagman v. Wagman, 8 AD3d 263 (2d Dept. 2004); Bentz v. Bentz, 71 AD3d 931 (2d Dept. 2010). As it is undisputed that Husband has already paid the sum of $11,500 to Wife's counsel, Wife's application for a final award of counsel fees is hereby denied."