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Timestamp: 2019-04-26 05:36:57+00:00

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Whenever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorney's fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord therefor shall be paid by the tenant as additional rent, there shall be implied in such a lease a covenant by the landlord to pay to the tenant the reasonable attorney's fees and/or expenses incurred by the tenants as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease.
Residential leases invariably drafted by the landlord frequently contain a provision requiring a tenant to pay the landlord attorney's fees if the landlord prevails in a lawsuit based on the tenant's breach of the lease. Of course, a corollary provision allowing the tenant to collect attorney's fees from the landlord is not a part of most residential leases. The statute was enacted to address that imbalance resulting from an inequality of bargaining power and to achieve parity between residential tenants and landlords.
In Tinker Limited Partnership, the petitioner brought a summary non-payment proceeding, withdrew its petition and notice of petition and then commenced a second such proceeding. The respondent moved in the initial proceeding for an order awarding attorney's fees pursuant to RPL 234. The court denied the motion.
Centennial Restorations Co. v. Wyatt is an example of the latter situation, where the court concluded the case could not be commenced again. There, the landlord had commenced a non-primary residence holdover proceeding against a rent-controlled tenant. Ultimately, the case was marked off the calendar at the landlord's request. Almost a year later, the landlord successfully moved to restore the case to the calendar. However, on the day it was scheduled for trial, at the landlord's request, it was marked off a second time.
[I]f a restored case is not ready when reached, it shall forthwith be dismissed or an inquest or judgment ordered as provided in paragraph (b).
In reliance on that provision, the tenant moved to dismiss the proceeding and for attorney's fees. Reversing the Civil Court and the Appellate Term, the Appellate Division, First Department, held that the case should have been dismissed since the language of 22 NYCRR 208.14(d) is unambiguous and mandatory.
Another example cited by the court in Tinker Limited Partnership of a situation where courts have held a tenant entitled to attorney's fees where the court disposed of the case without reaching the merits is the Appellate Term, First Department decision in Park South Associates v. Essebag.7 There, the Appellate Term concluded that, as a practical matter, the petitioner would not bring the proceeding again.
In Park South Associates, the Civil Court held that a notice to cure was fatally defective and dismissed a holdover petition. On the issue of attorney's fees, the Civil Court held that an award of attorney's fees to the tenant under RPL 234 was not yet warranted because it could not be determined whether the landlord would commence a new holdover proceeding. As stated in the Appellate Term decision, the Civil Court nonetheless "proceeded to award counsel fees by applying the 'bad faith' exception to the 'American' rule which generally requires that litigants bear the cost of their own legal expenses," viewing the prosecution of the summary proceeding based on the defective notice as being "bad faith" per se.
In all the cases discussed so far, whether or not the court awarded attorney's fees, the court considered RPL 234 and whether there was an ultimate outcome and prevailing party. The decision by Judge Rashford in Miller v. Gaess12 points to a procedural situation in which attorney's fees might be awarded without regard to RPL 234 and thus without necessarily addressing these issues.
That case was a holdover proceeding based on the respondent-tenant's alleged unauthorized subletting or assignment of his occupancy rights. After the respondents answered, the landlord moved pursuant to CPLR 3217(b) to discontinue the proceeding. The respondents cross-moved to condition the discontinuance on petitioner's payment of respondents' costs and attorney's fees incurred in defending the matter.
In arguing for attorney's fees, the respondents in Miller alleged that they were prejudiced by the lawsuit because they had incurred legal fees in excess of $5,000 in litigating the proceeding. As summarized in the decision, they also asserted that they had been irreparably harmed by the mere filing of the proceeding "since they are now 'blacklisted' in light of the Office of Court Administration's practice of selling New York City Housing Court data to companies known as 'tenant screening bureaus' who in turn prepare reports they sell to landlords."
The court granted the petitioner's motion only to the extent of discontinuing the underlying proceeding without prejudice on the condition that the petitioner pay respondents' reasonable attorney's fees. It granted the respondents' cross-motion only to the extent of directing a hearing to determine the amount of attorney's fees and costs to be awarded to respondents.
That "may be recommenced" language effectively means a standard under which attorney's fees would be denied on the grounds of no ultimate outcome when a new proceeding has not actually been brought, as long as it could be brought. Presumably, that is subject to the qualification, emphasized in Park South Associates, of not postponing indefinitely the ultimate outcome. Thus, the ultimate outcome standard would appear, in some circumstances, not to be a bright line standard.
Clearly, attorney's fees pursuant to CPLR 3217(b) can be awarded in situations where attorney's fees pursuant to RPL 234 might not be available. For example, attorney's fees under RPL 234 are contingent on, inter alia, there being an attorney's fees clause in the parties' lease. Attorney's fees under CPLR 3217(b), however, are rooted only in statute, not in contract. As another example, attorney's fees under RPL 234, as shown above, are awarded only where there is an ultimate outcome and a prevailing party. Those are not necessary factors, however, as to attorney's fees under CPLR 3217(b).
Finally, what all these cases (both under RPL 234 and CPLR 3217[b]) underscore, in the context of awards of attorney's fees, is something that practitioners quickly learn as a general matter. Even in the absence of settlement, obtaining a favorable outcome for a client can often occur without a determination that the client is correct as to the merits of the dispute.
Warren A. Estis is a founding partner and William J. Robbins is a partner at Rosenberg & Estis.
1. 26 Misc.3d 1216(A) (Dist. Ct. Nassau Co. 2010), NYLJ, Feb. 8, 2010, p. 20, col. 1.
2. NYLJ, Oct. 23, 2009, p. 26, col. 1 (Civ. Ct. N.Y. Co.).
3. 61 AD 2d 828, 402 N.Y.S.2d 432 (2d Dept. 1978).
4. 248 AD 2d 193, 669 N.Y.S.2d 585 (1st Dept. 1998).
5. NYLJ, Feb. 8, 2010, p. 20 at col. 2.
6. 248 AD 2d at 197, 669 N.Y.S.2d at 588.
7. 126 Misc. 2d 994, 487 N.Y.S.2d 252 (A.T. 1st Dep't 1984).
8. 126 Misc.2d at 995, 487 N.Y.S.2d at 253-254.
9. 61 A.D.2d at 828, 402 N.Y.S.2d at 433.
11. NYLJ, Feb. 8, 2010, p. 20 at col. 2.
12. See, supra, at footnote 2.
13. NYLJ, Oct. 23, 2009, p.26, at col. 4.
14. NYLJ, Feb. 8, 2010, p. 20, at col. 2.
15. NYLJ, Dec. 16, 2009, p. 26, col. 3 (Civ. Ct. N.Y. Co.).
A Queens man who prevailed against his landlord's attempt to evict him has a right to recover attorney's fees because under his lease the landlord would have had the right to fees if he had prevailed against the tenant, an appellate court has ruled.
A four-judge panel of the Appellate Division, Second Department, found last week in Casamento v. Juaregui, 60453/07, that New York's Real Property Law creates an implied covenant giving the tenant, Luis Juaregui, the same right to recover attorney's fees in eviction proceedings that his lease gives the landlord, Dominic Casamento.
The unanimous opinion was written by Justice Daniel D. Angiolillo, who was joined by Justices Joseph Covello, Thomas A. Dickerson and Sheri S. Roman.
Mr. Casamento served Mr. Juaregui with a notice that he was in default of his lease in March 2010, claiming that Mr. Juaregui had physically assaulted him and had made alterations to his bathroom and kitchen without permission. He subsequently served Mr. Juaregui with a notice of termination and said he would take action if Mr. Juaregui failed to leave. Mr. Casamento told Mr. Juaregui that, under the lease, he would be responsible for all of Mr. Casamento's legal fees.
In April, Mr. Casamento began a summary holdover proceeding in Queens Civil Court. Mr. Juaregui filed an answer alleging that Mr. Casamento had assaulted him, not the other way around, and was facing criminal charges. He also said that he was forced to repair his bathroom and kitchen because Mr. Casamento had failed to repair damage that created unsafe and unhealthy conditions. Mr. Juaragui counterclaimed for a rent abatement on grounds of breach of warrant of habitability.
Mr. Juaregui prevailed against Mr. Casamento's petition and moved for attorney's fees. Justice Gilbert Badillo denied that motion, as did the Appellate Term on appeal. Mr. Juaregui then appealed to the Appellate Division.
According to last week's opinion, the outcome of the case hinged on the interpretation of Paragraph 16 of the lease, which "consists of a preprinted form which is generally in use throughout New York," according to the decision. That paragraph provides that, if a tenant defaults, the landlord may recover costs, including "reasonable legal fees," incurred in re-renting the apartment.
Mr. Juaregui argued that, under 234 of the Real Property Law, Paragraph 16 created an implied covenant giving him the right to recover attorney's fees after winning in an eviction proceeding.
Section 234, which was enacted in 1966, states: "Whenever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord therefor shall be paid by the tenant as additional rent, there shall be implied in such lease a covenant by the landlord to pay to the tenant the reasonable attorneys' fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease."
Mr. Casamento argued that Paragraph 16 applied only to the cost of re-renting an apartment vacated by an eviction, and therefore did not create a broad covenant allowing Mr. Juaregui to recover fees.
Justice Angiolillo wrote that Paragraph 16 of the lease did trigger an implied covenant under 234, regardless of the fact that Mr. Casamento did not prevail and therefore did not re-rent the apartment.
"The implication of a covenant in favor of the tenant here is consistent with the Legislature's remedial purpose of effecting mutuality in landlord-tenant litigation and helping to deter frivolous and harassing litigation by landlords who wish to evict tenants," Justice Angiolillo wrote.
"Paragraph 16 provides the landlord with a mechanism to institute an eviction proceeding and regain possession of an apartment prior to the expiration of the lease term, immediately re-rent at a higher rate, and recover his or her attorney's fees and other expenses of litigation from amounts received from the re-rental, while the defaulting tenant remains liable for the entire outstanding balance of rent and added rent due for the unexpired term," the judge added. "Under such circumstances, a landlord has nothing to lose in instituting eviction proceedings, even if the factual basis for such proceedings is frivolous, unless the landlord faces the prospect of having to pay the tenant's attorney's fee if the tenant prevails."
Justice Angiolillo noted that the First Department had reached the same conclusion with respect to a similarly worded lease in a 1992 decision, Bunny Realty v. Miller, 180 AD2d 460. He said that the Civil Court and Appellate Term had incorrectly relied on two later First Department cases that did not award fees to tenants. Those cases Oxford Towers Co., LLC v. Wagner, 58 AD3d 422, 423, and Madison-68 Corp. v. Malpass, 65 AD3d 445 did not overturn Bunny Realty, but rather involved leases with different language, where Bunny Realty did not apply.
The judge stressed "that the outcome of every motion for an award of an attorney's fee pursuant to section 234 must be based upon a review of the complete lease provision at issue, within the context of the lease, in order to discern its meaning and import before that lease provision may be properly analyzed under the statutory mandate regarding the implied covenant in favor of the tenant."
Santo Golino, counsel to Mr. Casamento, could not be reached for comment.
Steven De Santo, counsel to Mr. Juaregui, said the decision was significant because it clarified that landlords could not get out of the Section 234 covenant by using narrow, often confusing language to claim their right to attorney's fees. He said that many landlords tried to avoid the covenant by using language that would not make sense if "landlord" and "tenant" were simply switched.
"You're not supposed to mirror the language," he said. "You're supposed to imply a covenant."
Ronald S. Languedoc, an associate at Himmelstein, McConnell, Gribben, Donoghue & Joseph who represents tenants, said the case is significant because a large number of tenants in New York have leases with similar language, and many real estate attorneys had believed, based on Oxford Towers and Madison-68, that those tenants did not have an implied right to recover fees in eviction disputes.
Scott E. Mollen of Herrick, Feinstein, who represents landlords, said the Second Department had provided "a helpful decision for both tenants and landlords" that "gives clarity to the real estate industry" about when tenants can recover fees.
Under New York law, attorney's fees cannot be collected by a prevailing party unless they are authorized by an agreement between the parties or by statute. Residential leases­ invariably drafted by the landlord­ frequently contain a provision for the tenant to pay the landlord's attorney's fees. Of course, a corollary provision allowing the tenant to collect attorney's fees from the landlord is not a part of most residential leases.
Whenever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord therefor shall be paid by the tenant as additional rent, there shall be implied in such a lease a covenant by the landlord to pay to the tenant the reasonable attorneys' fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease. (Emphasis added).
By its express language (highlighted above), this statute includes two kinds of lease provisions which will trigger the implied covenant in favor of the tenant. Many leases, however, contain provisions for the landlord recovering attorney's fees from the tenant that do not expressly track the statutory language. The issue then becomes whether the particular lease clause is the kind covered by RPL 234.
Any rent received by Landlord for the re-renting [of the apartment after cancellation of the lease for tenant's failure to cure a default after notice] shall be used first to pay Landlord's expenses and second to pay any amounts Tenant owes under this Lease. Landlord's expenses include the costs of getting possession and re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs.
The Appellate Division held that "the particular language of paragraph 16 [in its entirety]…was sufficient to trigger the implied covenant in the tenant's favor pursuant to section 234." The opinion was written by Justice Daniel D. Angiolillo, with Justices Joseph Covello, Thomas A. Dickerson and Sheri S. Roman concurring. We examine here the court's reasoning, and some of the authorities it cited.
In Casamento, the tenant, Luis Juaregui, leased an apartment in Queens. Paragraph 7 of the lease provided that the tenant could make alterations only after obtaining the landlord's prior written consent. Under paragraph 10 of the lease, the tenant was liable for damages sustained and expenses incurred by the landlord "relating to any claim arising from any act or neglect of" the tenant.
The landlord served a notice to cure alleging that the tenant had violated those paragraphs of the lease "by physically assaulting landlord and making alterations to the bathroom and kitchen without the landlord's prior written consent." The notice also asserted that the tenant was responsible, per the lease, for the landlord's legal fees in connection with the notice to cure "and any and all work done prior to and subsequently thereto, based upon your default under the lease." Thereafter, the landlord served a notice of termination and commenced a holdover proceeding.
The Civil Court (Ann Katz, J.) dismissed the landlord's petition, finding that the tenant "had conditions in his apartment in 2001 that the landlord failed and refused to repair and, over the passage of time, the conditions became so bad the tenant had no choice but to do the repairs himself." (The court deemed the issue of assault not within its jurisdiction.) Nine months after the court issued its decision, the tenant filed a motion seeking an award of attorney's fees based on RPL 234.
The court (Gilbert Badillo, J.) denied the tenant's motion. It held that the language of paragraph 16(D)(3) of the lease "is triggered by the vacatur of the apartment and the expenses involved in a reletting" and that "the lease does not contain any language for legal fees for broad breach circumstances."
Judge Badillo was thereafter unanimously affirmed by the Appellate Term. (The justices on the Appellate Term panel were Justices Michael L. Pesce, Michelle Weston and Jaime A. Rios.) It characterized paragraph 16(D) of the lease as "provid[ing] that the landlord may deduct his costs of getting possession and re-renting the apartment, including attorney's fees, from the rents received upon a reletting following a cancellation of the lease," and held that such a clause "is not the type of provision covered by Real Property Law 234." After granting the tenant's motion for leave to appeal, the Appellate Division reversed and remitted the matter to Civil Court for a hearing to determine the amount of the attorney's fees to be awarded to the tenant.
The Appellate Division stated that it "discern[ed] the meaning of paragraph 16 by reading all clauses of this provision together and in context with the lease as a whole to determine its purpose and intent." The court pointed out that subparagraph 16(A)(5) provided that if the tenant failed timely to cure the default, then the landlord could cancel the lease and the tenant "continues to be responsible as stated in this Lease."
The court also pointed to subparagraph 16(C)(1)(b), providing that if the lease were cancelled, the landlord could "use eviction or other lawsuit method to take back the Apartment," and to subparagraph 16(D)(1), providing that if the landlord took back the apartment, then "[r]ent and added rent for the unexpired term becomes due and payable." The court noted that, pursuant to paragraph three of the lease, the term "added rent" was defined as "other charges to Landlord under the terms of this Lease" which the tenant "may be required to pay."
In addition, the court noted that, according to subparagraph 16 (D)(2), if the lease was cancelled, the landlord could relet the apartment and the tenant "stays liable and is not released except as provided by law."
We interpret this remedial scheme to permit the landlord to recoup any attorney's fee he incurs in an eviction proceeding against a defaulting tenant under circumstances in which the premises are relet prior to the defaulting tenant's satisfaction of outstanding rent and added rent. The landlord's entitlement to an attorney's fee in the eviction proceeding falls within the definition of 'added rent' in such circumstances because it is a charge which the tenant "may be required to pay," albeit indirectly.
While paragraph 16 is not an all-inclusive attorney's fee provision, it does permit the landlord, under the circumstances described, to recover an attorney's fee incurred in litigation occasioned by the tenant's failure to perform an obligation set forth in a covenant of the lease. Paragraph 16, thus, literally fits within the language of the first prong of section 234, since it does "provide that in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease."
The Appellate Division found support for its conclusion in the spirit and purpose of RPL 234. It stated that the "implication of a covenant in favor of the tenant here is consistent with the Legislature's remedial purpose of effecting mutuality in landlord-tenant litigation and helping to deter frivolous and harassing litigation by landlords who wish to evict tenants." The court noted that unless a landlord faced the prospect of being responsible for a prevailing tenant's attorney's fees, a landlord had nothing to lose in instituting an eviction proceeding with a merely frivolous factual basis where there was a prospect of re-renting for a higher amount and the lease contained a provision for landlord's recovery of attorney's fees like that in paragraph 16.
The Appellate Division in Casamento also sought to substantiate its holding in light of caselaw precedent. It began its analysis by stating that in 1992, in Bunny Realty v. Miller, "the Appellate Division, First Department, construed a similarly worded lease provision to give rise to the implied covenant" for tenant's recovery of attorney's fees pursuant to RPL 234. The court acknowledged, however, that "[m]ore recently, the [Appellate Division,] First Department issued decisions in two cases"­--Oxford Towers Co, LLC v. Wagner and Madison-68 Corp. v. Malpass­which "some courts have interpreted as being at odds with the holding in Bunny Realty."
Indeed, as the court noted, the Appellate Term itself in Casamento had cited Oxford Towers and Madison-68 for the proposition that paragraph 16 was "not the type of provision covered by Real Property Law 234." Similarly, citing those same two cases, the Appellate Term, First Department, in 303 E. 37th Sponsors Corp. v. Goldstein held that an attorney's fees provision did not trigger RPL 234 and stated that "[t]o the extent Bunny Realty…suggests a contrary conclusion, we decline to apply it."
By contrast, the Casamento court pointed to a decision in Stephen LLC v. Zucchiatti where the Civil Court, New York County, stated that "[w]ithout a clear signal from the Appellate Division, First Department, that it has decided to undo 17 years of precedent and one of its more prominent decisions regarding attorneys' fees, this court will continue to follow Bunny." That, too, in part, was the approach of the Casamento court to Oxford Towers and Madison-68. It pointed out that those cases "did not expressly overrule Bunny Realty, nor even cite it."
The Casamento court concluded that "the statement in Oxford Towers…that the lease provision at issue was 'not the type of provision covered by [RPL] 234' cannot be construed literally to hold that any provision containing the language quoted in Oxford Towers is, as a matter of law, insufficient to trigger" RPL 234. "To the extent that the phrase can be so interpreted," the court continued, "it constitutes dicta which we decline to follow."
The court in Casamento also cited the following four cases: Morris v. Flaig, Cross v. Zyburo, Fragiacomo v. Pugliese and Bender v. Niebel. It characterized these cases as ones which, not expressly citing Bunny Realty, had held that "lease provisions permitting the landlord to recover an attorney's fee as an expense of reletting an apartment are not subject to the implied covenant of section 234." It distinguished the attorney's fees provisions in those cases from lease paragraph 16 in the case before it. In those cases, said the court, the fees provisions were all limited to fees incurred in reletting only, while paragraph 16 "includes an attorney's fee incurred in obtaining possession by legal process."
The Appellate Division in Casamento also addressed the fact that, "further complicat[ing] matters," the Appellate Term in Casamento had relied on the Appellate Division, Second Department decision in Gannett Suburban Newspapers v. El-Kam Realty Co. to support its conclusion that RPL 234 did not govern lease provisions like paragraph 16. The Appellate Division emphasized that Gannett involved a commercial lease, to which RPL 234 does not apply. It also "caution[ed] that all of the relevant provisions in the commercial lease at issue in that case were not quoted or paraphrased in the reported decision," so it was not clear if the provision was limited (like that in Morris v. Flaig) or more expansive like paragraph 16. Accordingly, stated the court, the Appellate Term in Casamento "applied our [the Appellate Division, Second Department] holding in Gannett Suburban too broadly, and should no longer rely upon it in determining a motion pursuant to section 234 for an award of an attorney's fee."
Finally, citing Halle v. Adbuljaami and 490 Owners Corp. v. Israel, the Casamento court pointed out that the Appellate Terms in both the First and Second departments had "permitted a landlord to recover an attorney's fee in a holdover proceeding pursuant to a lease provision which was similar to paragraph 16." The court contrasted those cases with 303 E. 37th Sponsors Corp. and Hamilton v. Menalon Realty, LLC, where, according to the Appellate Division in Casamento, as to such lease provisions, those Appellate Terms had "not allowed tenants to invoke the implied covenant pursuant to section 234." That "incongruous result," stated the court, was "contrary to the legislative intent of section 234 to level the playing field."
In short, the Casamento decision underscores once again how significant, given RPL 234, the issue of attorney's fees is in landlord-tenant litigation. In the Second Department, that decision is controlling as to a tenant's right to recover attorney's fees in leases with similar language to lease paragraph 16 in Casamento. Hopefully, the Appellate Division, First Department, will have an opportunity soon to state definitively its position as to such fee clauses in light of Bunny Realty, Oxford Towers, Madison-68, and the Casamento court's reading of these cases.
Warren A. Estis is a founding partner at Rosenberg & Estis. William J. Robbins is a partner at the firm.
1. 2011 WL 4090175 (2d Dept. 2011).
2. 2011 WL 4090175 at *2.
3. 26 Misc.3d 136(A), 907 N.Y.S.2d 99 (A.T. 2d, 11th and 13th Judicial Districts 2010).
4. 2011 WL 4090175 at *6.
6. 180 A.D.2d 460, 579 N.Y.S.2d 952 (1st Dept. 1992).
7. 58 A.D.3d 422, 872 N.Y.S.2d 431 (1st Dept. 2009).
9. 29 Misc.3d 131(A), 918 N.Y.S.2d 400 (A.T. 1st Dept. 2010).
10. 24 Misc.3d 1203(A), 890 N.Y.S.2d 371 (Civ. Ct. N.Y. Co. 2009).
11. 511 F.Supp.2d 282 (E.D.N.Y. 2007).
12. 185 A.D.2d 967, 587 N.Y.S.2d 670 (2d Dept. 1992).
13. 11 Misc.3d 96, 816 N.Y.S.2d 826 (A.T. 9th and 10th Judicial Districts 2006).
14. 11 Misc.3d 136(A), 816 N.Y.S.2d 693 (A.T. 2d and 11th Judicial Districts 2006).
15. 306 A.D.2d 312, 760 N.Y.S.2d 553 (2d Dept. 2003).
16. 24 Misc.3d 143(A), 901 N.Y.S.2d 899 (1st Dept. 2009).
17. 189 Misc.2d 34, 729 N.Y.S.2d 819 (A.T. 2d Dept. 2001).
18. 14 Misc.3d 13, 829 N.Y.S.2d 400 (A.T. 2d Dept. 2006).
It happens to every lawyer at one time or another. After months or years of loyal service, a client suddenly announces that she has found a new lawyer, and wants the case file transferred to that lawyer as soon as possible. This request raises a host of practical questions. What exactly is included in the "case file?" What must be given to the client, and what can be withheld? Who is responsible for the costs of sorting through and copying the file? What if the client has not fully paid for the lawyer's services?
Indeed, few areas of professional responsibility law prompt as many inquiries from lawyers and clients as the seemingly simple act of surrendering the client file. These inquiries become particularly fraught when legal malpractice claims or fee disputes loom, and lawyers become concerned that the contents of their files will somehow be used against them in upcoming litigation. In this article, we will answer some of the most common questions clients and practitioners ask.
The answer to this is straightforward: Assuming the client has paid the bill, the client owns the file. (The last section of this article addresses the situation where the client has not paid.) Moreover, since the client owns the file, and is generally free to discharge the lawyer, the client is entitled to get back the entire file if he or she asks, with some minor exceptions.
This basic principle was established in New York in Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn L.L.P., 91 N.Y.2d 30, 666 N.Y.S.2d 985 (1997). There, Proskauer had represented Sage Realty Corp. in connection with a large real estate mortgage financing involving several properties. Id. at 32. The work involved was substantial, resulting in a 14-volume closing binder and legal fees totaling more than $1 million. Id. at 33. After approximately two years, Sage discharged Proskauer and retained Nixon Hargrave to represent it in various post-closing matters. Id. Sage asked Proskauer to turn over the files "in their entirety" and, Proskauer's bill having otherwise been paid, "tendered a check for Proskauer's bindery expenses" (i.e., the expenses of creating the transaction's closing binder). Id.
Proskauer, however, turned over only part of the file. It agreed to produce the closing binder, client-supplied papers, client correspondence, the index to the case files, and the final versions of such supporting documents as formal legal opinions, tax forms, and environmental and engineering reports. Id. It would not produce internal memoranda, attorney notes, drafts and mark-ups of contracts, correspondence with third parties and an internally prepared chart showing the ownership structure of the various properties involved in the refinancing. Id.
Even after Sage sued to retrieve the entire file, Proskauer remained adamant. The lower courts, relying on Zackiva Commc'ns Corp. v. Milberg, Weiss, Bershad, Specthrie & Lerach, 223 A.D.2d 417, 636 N.Y.S.2d 768 (1996), which articulated the New York rule at the time, agreed with Proskauer that only the closing binder and the client's own documents need be returned, and that the remainder of the file, reflecting the "opinions, reflections and thought processes" of counsel, was Proskauer's "private property," and did not need to be produced absent a showing of particularized need. See Sage, 235 A.D.2d at 355.
The Court of Appeals reversed, and created a new statewide rule regarding return of the client's file. Following the lead of "[a] majority of courts and State legal ethics advisory bodies," the Court held that "upon termination of the attorney-client relationship, where no claim for unpaid legal fees is outstanding," a lawyer must "presumptively accord [the client] full access to the entire attorney's file on a represented matter with narrow exceptions." Sage, 91 N.Y.2d at 34. The Court rejected the view that the attorney had a property right in the contents of the client's file.
Noting that New York case law provided that, in a pending matter, courts "have refused to recognize a property right of the attorney in the file superior to the right of the client," the Court saw "no principled basis" for holding that an attorney's property right in the file somehow "spring[s] into being" when the attorney-client relationship ends. Id. at 36. The Court's conclusion found further support in the attorney's fiduciary "obligation of forthrightness" to the client, and in the impracticality of placing the burden on the client to articulate a specific need for a particular document when the client has no access to the file. Id. at 36-37.
The Sage Court's conclusion makes sense for another and perhaps simpler reason: The client has paid the full fee, and thus owns the work the attorney has done, including the contents of the file. The Court suggests as much at one point in its decision. Id. at 37 ("petitioners should be entitled to inspect and copy work product materials, for the creation of which they paid during the course of the firm's representation") (emphasis added). As the Court recognized, the prior notion that somehow, vis- -vis the client, the lawyer has a superior right to all "work product" in the file, stands both the economic and fiduciary relationship between lawyer and client on its head.
What Must Be Turned Over?
Under Sage, lawyers could no longer resist client demands for attorney "work product," even "opinion work product," "barring a substantial showing by the [law] firm of good cause to refuse client access"­though what this particularized showing would be is never explained. Id. Thus, such items as internal legal memoranda, attorney notes of key meetings (especially meetings with third parties), correspondence with third parties, and investigative reports­indeed, any documents that might "be of significant usefulness to the client or to a successor attorney"­have to be turned over. Id. at 37-38.
Nevertheless, the Court created a few exceptions. In addition to a showing of "substantial need" to refuse disclosure in a particular case, these exceptions fall into two categories: (1) "documents which might violate a duty of nondisclosure owed to a third party [e.g., documents subject to an attorneys' eyes only confidentiality agreement], or otherwise imposed by law;" and (2) "firm documents intended for internal law office review and use." Id. at 37.
As examples of the latter, the Court cited documents "containing a firm attorney's ... assessment of the client, or tentative preliminary impressions of the legal or factual issues presented in the representation, recorded primarily for the purpose of giving internal direction to facilitate performance of the legal services entailed in that representation." Id. at 37-38. More broadly, the Court noted "the need for lawyers to be able to set down their thoughts privately in order to assure effective and appropriate representation." Id. at 37, citing Restatement [Third] of Law Governing Lawyers [Proposed Final Draft No. 1, 1996], 58, comm. C (hereafter, "Restatement Draft").
The Sage Court thus created a new and unformed zone of protection over certain documents that are immune from disclosure, even to the client. We know that this is not a new client privilege (the client cannot waive it and demand production) and not some form of attorney work product (the Sage Court said that work product had to be turned over). Id. at 37. Beyond that, the scope of the exception remains a mystery.
In trying to solve that mystery, courts must keep in mind that the Sage case involved a dispute between a lawyer and a client upon withdrawal. It was not intended to serve as a rule of discovery in civil cases. Yet New York courts, federal and state, have tried to apply Sage in that context, leading to different views as to the breadth of the exception. Some courts have articulated the exception rather narrowly, pinning it on the former client's need for the document, though their holdings go no further than saying, as Sage does, that opinion work product must be disclosed. See, e.g., Polin v. Wisehart & Koch, 00 Civ. 9624, 2002 WL 1033807 at *3 (SDNY 2002); Gamiel v. Sullivan & Liapakis, 289 A.D.2d 88, 88, 733 N.Y.S.2d 610 (1st Dept. 2001); Bolton v. Weil Gotshal & Manges, LLP, Index No. 602341/03, 2005 WL 5118189 at *4 (Sup. Ct. N.Y. Co. 2005) (also requiring disclosure of firm policies regarding billing and conflict checks).
Other courts and commentators articulate what we consider the better view: that draft documents intended as preliminary­an associate's draft memorandum not shown to the partner, a lawyer's draft letter to the adversary not shown to co-counsel, a draft e-mail to the client not sent to him­are within the Sage exception. See, e.g., In re Touch Am. Holdings, No. 03-11915 (KJC), 2009 WL 1393078 at *2 (Bankr. D. Del. 2009) (applying Sage to prohibit disclosure of, inter alia, "incomplete documents circulated only within the law firm that contain a lawyer's preliminary assessment of legal and factual issues"); Lippe v. Bairnco Corp., 96 Civ. 7600 (DC), 1998 WL 901741 (SDNY 1998) (Chin, J.) (withholding "attorney notes, research memoranda, and research outline[s]" because they constitute "tentative preliminary impressions"); P. Connors, "1997-98 Survey of New York Law: Professional Responsibility," 49 Syracuse L. Rev. 679, 693 (1999) (noting that Sage "carved out an important exception for documents intended for internal law office review"); see also In re Refco Sec. Litig., 07 MDL 1902 (JSR), 2011 WL 497441 (SDNY 2011) (barring discovery of internal e-mail discussions among law firm partners conveying preliminary impressions of case in securities class action, though court noted disclosure may be broader in legal malpractice case). As these authorities recognize, allowing the production of internal, preliminary documents which their authors considered incomplete or incorrect serves no useful purpose­even to the now adverse former client.
Must Lawyer Copy the File?
The language of the Sage opinion is unclear on whether the lawyer must copy the file and if so, who pays. Sometimes the Court suggests that the client has only the right to inspect and copy [See Sage, 91 N.Y.2d at 37 ("petitioners should be entitled to inspect and copy work product materials")]; at other times it suggests the lawyer may (or even must) produce the original. Id. at 35, citing Restatement Draft, 58(3), Comm. d (attorney obligated to deliver "such originals and copies of other documents possessed by the lawyer relating to the representation as the ... [former] client reasonably needs"). Indeed, the actual holding of the case requires turnover of the original file, with the costs of "assemblage and delivery of the documents to the client ... properly chargeable to the client under customary fee schedules of the firm, or pursuant to the terms of any governing retainer agreement." Id. at 38.
Of course, turning over the original file makes many attorneys uncomfortable. The client could sue for malpractice, and the attorney would not have the documents needed for a defense. Thus, many attorneys insist on copying the file before turning it over and, despite Sage's holding and the absence of appropriate language in their retainer agreements, charging the copying costs to the now former client.
At least one court has held that this is permissible. In Moore v. Ackerman, 24 Misc. 3d 275, 876 N.Y.S.2d 831 (Sup. Ct. Kings Co. 2009), the court suggested that retaining at least parts of the original file may be mandatory under certain ethical rules, particularly former DR 9-102(D) [now N.Y. RPC 1.15(d1)], which requires retention of retainer agreements and client bills. But even if retention is not mandatory, the court went on, a lawyer may make a copy of the outgoing file and charge the copying costs to the client. Moore, 24 Misc.3d at 280-81, citing N.Y. State Bar Op. 780 (2004) ("[a] lawyer may generally retain copies of documents in the client's file at the lawyer's own expense, even over the client's objection").
The situation becomes more complex when the client demanding the file has not paid the law firm in full. At that point, the law firm has the right to assert a common law retaining lien on the file. The retaining lien, which is a common law concept,1 attaches to all property, books, documents, monies or securities belonging to the client that come into the attorney's possession in the course of his professional employment. See Hoke v. Ortiz, 83 N.Y.2d 323, 331, 610 N.Y.S.2d 455, 459 (1994), citing People v. Keeffe, 50 N.Y.2d 149, 155, 428 N.Y.S.2d 446 (1980).
This lien allows the attorney to hold onto the entire file on a particular matter until the bill for that matter has been paid, giving the attorney remarkable leverage in any fee dispute. Significantly, the right to assert the lien is unrelated to the outcome of the matter, and covers all unpaid matters for the particular client. See, e.g., Matter of Fox v. Gina Constr. Corp., 22 Misc. 2d 177, 179, 198 N.Y.S.2d 789 (Sup. Ct. Queens Co. 1960) ("the retaining lien secures an attorney for the payment of all services rendered to his client, not only those related to the property and papers in his hands....").
Often, the mere assertion of the retaining lien results in the client either paying the bill in full or working out an informal resolution. When that does not happen, the attorney may continue to "withhold turning over [the file] to a successor attorney until a court determines the amount of the lien and whether turnover of the files should be conditioned on payment or the posting of a bond." Na v. Berman, Index No. 20337/05, 2008 WL 449814 at *1 (Sup. Ct. Queens Co. Feb. 6, 2008). The attorney wanting his or her lien "fixed" either brings a motion (if the existing case is on-going) or a special proceeding, and the court can fix the conditions for return of the file­either payment of a provisional amount of fees or the posting of a bond. Id.
There are two main limitations on retaining liens. First, attorneys who have been discharged for cause may not assert such a lien. N.Y. Jur.2d, Attorneys at Law, 280. Second, the court will often reject the assertion of a retaining lien if "exigent circumstances" exist, such as an imminent trial or closing where the failure to produce the file would seriously prejudice the client's rights. Na, supra, 2008 WL 449814 at *1.
To avoid trouble when asked to turn over the file, attorneys should: (a) review the file carefully and, after removing the handful of documents that Sage Realty allows to be withheld, turn over the entire file; (b) include in their retainer letters that the discharging client pays the costs of reproducing the file; and (c) not hesitate to assert their retaining lien.
Ronald C. Minkoff is a partner and the head of the professional responsibility group at Frankfurt Kurnit Klein & Selz. He is an adjunct professor of professional responsibility at NYU School of Law.
1. The retaining lien has to be distinguished from a charging lien, which is governed by statute [N.Y. Jud. Law 475] and attaches to the proceeds of the lawsuit. Significantly, the two liens are not mutually exclusive; in appropriate situations, the attorney may assert both. N.Y. Jur.2d, Attorneys at Law, 280.
Real Property Law (RPL) §234, "which governs residential leases, establishes an implied covenant providing a tenant with the right to recover an attorney's fee incurred in the successful defense of a summary proceeding to recover possession of a leasehold where the parties' lease provides for the landlord's recovery of an attorney's fee if successful in such litigation." In the subject case, a tenant successfully defended a summary proceeding in the Civil Court, but had been denied an award of attorney's fees on his motion pursuant to RPL §234.
The Appellate Term had affirmed the order of the Civil Court. The Appellate Division (court) reversed and took "this opportunity to examine and reconcile an apparent conflict among the courts with respect to similarly worded lease provisions." The court cautioned that "the outcome of any claim pursuant to [RPL] §234 depends upon an analysis of the specific language" of the subject lease provision.
The subject lease (lease) barred the tenant from making alterations without the landlord's prior written consent. The lease made the tenant liable for damages sustained and expenses incurred by the landlord "relating to any claim arising from any act or neglect of the tenant." The lease also contained provisions regarding the landlord's remedies if the tenant defaulted. The lease provided that if the lease was cancelled or the landlord took back the apartment, "[r]ent and added rent for the unexpired Term becomes due and payable." The lease further provided that "[a]ny rent received by [the] Landlord for the re-renting shall be used first to pay [the] Landlord's expenses and second to pay any amounts Tenant owes under this Lease." The landlord's expenses were defined to include "the costs of getting possession and re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs." The term "added rent," was defined as "'other charges to Landlord under the terms of this Lease' which the tenant 'may be required to pay.'"
The landlord had served a notice to cure, alleging that the tenant had physically assaulted the landlord and had made alterations without the landlord's prior written consent. The notice further advised that, pursuant to the lease, the tenant was responsible for "legal fees incurred by the landlord with regard to the preparation and service of this Notice to Cure and any and all work done prior to and subsequently thereto, based upon your default under the lease."
The landlord had thereafter served a notice of termination and commenced a summary holdover proceeding. The tenant claimed that the landlord had intentionally assaulted the tenant with a truck, was facing criminal charges and that the apartment had sustained "[flood damage] and the landlord had refused to make repairs for seven years, resulting in dangerous and unhealthy conditions." The tenant also asserted that he had received the landlord's oral permission to make the repairs, and the landlord had inspected the work and expressed satisfaction with it.
The Civil Court had dismissed the petition, finding that the landlord had failed and refused to make repairs over a long period of time and the tenant had "no choice but to do the repairs himself." Additionally, the tenant had sued the landlord for personal injuries arising from the landlord's alleged assault. The landlord had paid $10,000 to settle that action. The tenant thereafter filed a motion in the Civil Court, seeking attorneys' fees, citing RPL §234. The landlord argued that "the notice to cure did not create a right to an award of an attorney's fee beyond the lease provision, which authorized an award of an attorney's fee only" in a specific situation, not applicable here, where the landlord re-lets the apartment.
The Civil Court agreed with the landlord and rejected the tenant's claim for legal fees and the Appellate Term affirmed. RPL §234 provides in pertinent part that whenever a residential lease "shall provide that in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord therefor shall be paid by the tenant as additional rent, there shall be implied in such lease a covenant by the landlord to pay to the tenant the reasonable attorneys' fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease."
This statute encompasses two kinds of lease provisions, "either of which will trigger the implied covenant in favor of the tenant: a provision that (1) 'in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease' or a provision that (2) 'amounts paid by the landlord [for an attorney's fee] shall be paid by the tenant as additional rent'…."
After reviewing the legislative history and remedial intent of RPL 234, the court explained that although the subject attorneys' fees lease provision was not an "all inclusive attorney's fee provision, it does permit the landlord, under the circumstances described, to recover an attorney's fee incurred in litigation occasioned by the tenant's failure to perform an obligation set forth in a covenant of the lease." Therefore, such provision "literally fits within the language of the first prong of section 234, since it does 'provide that in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease.'"
Accordingly, the court held that the attorney's fee provision met the first prong of §234 and triggered "the implied covenant in favor of the tenant." The court opined that its conclusion was consistent with the "remedial purpose of section 234," i.e., "to 'level the playing field'" by vesting tenants with the "potential right to recover such legal expenses." Additionally, RPL 234 serves as "a deterrent to overreaching practices by landlords who now rely upon their tenants' inability to bear the cost of legal proceedings required to redress [the] landlord's improper acts…." The court also observed that under the subject circumstances, absent the tenant's right to recover attorneys' fees, the landlord would have "nothing to lose in instituting eviction proceedings, even if the factual basis for such proceedings is frivolous."
The court cited Bunny Realty v. Miller, 180 AD2d 460), wherein the Appellate Division, First Department construed a similarly worded lease provision and held that such provision gave rise to the implied covenant. The court noted that although some courts believe that the First Department had issued two decisions which were inconsistent with Bunny Realty, and effectively overruled Bunny Realty, those decisions neither expressly overruled Bunny Realty, nor even cited it. The court explained that one of the more recent First Department cases was predicated upon a cause of action to rescind an agreement that was not a lease and to the extent that such case discussed RPL 234, the court found such language to be "dicta which we decline to follow." As to certain other cases that did not expressly cite Bunny Realty and which held that lease provisions permitting a landlord to recover an attorneys' fee incurred as a expense of re-leting an apartment are not subject to the implied covenant of RPL §234, the court stated that those cases were "all limited to the attorney's fee incurred by a landlord in reletting only…."
The subject paragraph, however, "includes an attorney's fee incurred in obtaining possession by legal process." The court also distinguished a decision which had language similar to the subject lease provision, but which involved a commercial lease. The court noted that a commercial tenant "does not have an implied right to an attorney's fee even where the commercial lease contains such a clause in the landlord's favor…." Further, such case did not quote or paraphrase all of the relevant provisions in the commercial lease and it was unclear whether the landlord in such commercial case had the right to deduct an attorney's fee "incurred merely as a cost of reletting," or, like the subject paragraph, "an attorney's fee incurred in litigation to evict the tenant on the ground of the tenant's default." Thus, such decision had no applicability to the subject issue.
Additionally, the court observed that the First and Second Department Appellate Terms "in cases involving lease provisions similar to [the subject provision], have allowed landlords to collect an attorney's fee, but have not allowed tenants to invoke the implied covenant pursuant to section 234…." The court believed that permitting the landlord, but not the tenant to recover an attorney's fee in such circumstances "is contrary to the legislative intent of section 234 to level the playing field."
Finally, the court warned that "the outcome of every motion for an award of an attorney's fee pursuant to section 234 must be based upon a review of the complete lease provision at issue, within the context of the lease, in order to discern its meaning and import before that lease provision may be properly analyzed under the statutory mandate regarding the implied covenant in favor of the tenant." The court emphasized that its holding­ that the subject lease provision was "sufficient to trigger the implied covenant in the tenant's favor pursuant to section 234"­was based on the "particular language" of such provision.
Tenant attorney Kenneth B. Hawco - and a member of this forum - won the case for his client, and then the tenant was awarded attorney fees to cover the legal expenses.
This decision explains in detail how a court can determine the question of attorney fees and their calculation.
[w]henever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease…, there shall be implied in such lease a covenant by the landlord to pay to the tenant the reasonable attorneys' fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease…."
Thus, under RPL §234, when a residential lease contains a provision entitling the landlord in a summary proceeding to recover attorney fees and/or expenses based on the tenant's breach of the lease, there is implied in the lease a reciprocal covenant for the landlord to pay the tenant's attorney fees and/or expenses based on the landlord's default or when the tenant is successful in defending a summary proceeding.
Relying in part on the First Department's 1992 ruling in Bunny Realty v. Miller,3 the three-judge majority in Graham held that the lease provision at issue did entitle the tenant to recover his attorney fees under RPL §234 and remanded the matter to Civil Court for a hearing to determine the tenant's attorney fees. In so holding, the majority refused to follow the First Department's prior holdings in Oxford Towers v. Wagner4 and Madison-68 Corp. v. Malpass,5 which both held that RPL §234 was not invoked by the virtually identical language at issue in Bunny Realty and now in Graham.
The two-judge dissent stated that the subject lease provision did not invoke RPL §234, in that, inter alia, "nothing" in the subject lease provision provided for the tenant's payment of attorney fees, and that the language "merely provides for an offset of rents collected in the event of a reletting."
Not surprisingly (given the two-judge dissenting opinion), the Appellate Division granted leave to appeal to the Court of Appeals. In Graham Court Owner's Corp. v. Taylor, 2015 WL 685732 (Feb. 19, 2015), the Court of Appeals affirmed and held that RPL §234 applied to the subject lease and that the tenant was entitled to attorney fees as the prevailing party.
The facts as recited by the Appellate Division and the Court of Appeals are as follows. In May 2004, the tenant and landlord entered into a lease for an unregulated apartment in Manhattan for $2,200 per month. In October 2005, the tenant filed a rent overcharge complaint with the New York State Division of Housing and Community Renewal (DHCR), claiming that he was never made aware that the apartment was subject to rent stabilization when he took occupancy. The landlord opposed the complaint on the ground that the apartment became deregulated because the landlord performed $60,000 in renovations to the apartment before the tenant took occupancy. In response, the tenant submitted proof that he, not the landlord, performed the renovations. DHCR ruled in favor of the tenant and found that there had been an overcharge and that the apartment remained rent-regulated. The Supreme Court thereafter dismissed the landlord's Article 78 petition challenging DHCR's ruling, and the Appellate Division affirmed.
Thereafter, the landlord accused the tenant of having made unauthorized alterations to the apartment, in violation of the lease provision requiring the tenant to obtain the landlord's "prior written consent" before making any alterations. On March 30, 2007, the landlord served the tenant with a notice to cure claiming that the tenant had installed a new electrical system in the kitchen without landlord's prior written consent and thereafter, on April 23, 2007, served a notice of termination citing the tenant's failure to cure.
After a non-jury trial, the Civil Court dismissed the holdover proceeding, finding that the landlord's agents had specifically authorized the tenant to make the alterations. The court further found that the landlord's principal had "lied repeatedly and obviously" at trial.7 The court also found that the landlord had commenced the proceeding in retaliation for the tenant's successful rent overcharge claim. The court denied the tenant's claim for attorney fees under RPL §234, but granted the tenant attorney fees under RPL §223-b(5) as part of his damages for retaliatory eviction.
On appeal, the Appellate Term, First Department modified the order to the extent of denying the tenant attorney fees under RPL §223-b(5) and otherwise affirmed. The Appellate Division thereafter granted the tenant leave to appeal with respect to the denial of attorney fees.
The Court of Appeals affirmed. First, the court rejected the landlord's argument that the fees permitted under paragraph 15(D)(3) "constitute costs for reletting of the premises and not for litigating the tenant's breach." The court stated that the issue was "not whether the attorney fees are available in the landlord's underlying proceeding against the tenant for breach of the lease" as there is "no such limitation found in the text of Real Property Law §234." Rather, the court found that the issue was "whether the lease provides that 'in any action or summary proceeding' the landlord may recover attorney fees incurred as a result of the tenant's breach of a leasehold covenant or agreement." The court found that that is precisely what the lease at issue provided, "by permitting recovery of attorney fees for getting possession and reletting only when the tenant breaches the lease."
Second, the court, citing to its decision in Duell v. Condon9 observed that it was "mindful that Real Property Law §234 is a remedial statute intended to 'equalize the power of landlords and tenants.'" The court also noted that, as it stated in Duell, "an additional purpose of Section 234 [is] 'to discourage landlords from engaging in frivolous litigation' intended to 'harass tenants, particularly tenants without the resources to resist legal action, into terminating legal occupancy.'" The court stated that "with this understanding, the court broadly interpreted Real Property Law §234, giving expansive meaning to the definition of tenants and the types of landlord actions covered under the statute, and applying the statute retroactively to preexisting leases to extend the reach of the statute."
whereby the landlord is allowed to recover attorney fees that result from the tenant's breach, while at the same time denying the tenant a similar right of recovery, merely because the landlord will recoup the fees by reletting the premises. This construction of the statute and the lease agreement would once again favor the landlord, in contravention of the legislative intent to place the parties on an equal footing ….
Finally, the Court of Appeals rejected the landlord's reliance on a rule of statutory construction that limits judicial construction of a remedial statute to the "fairly expressed provisions of the act:"
As the court held in Duell, Section 234 requires the landlord and tenant be placed on equal footing, a task made easier in this case by the simple fact that paragraph 15(D)(3) explicitly provides for attorneys' fees. Moreover, this rule of construction is inapplicable here where the parties themselves have adopted a provision allowing for attorney fees. Having agreed to this provision, the landlord cannot now complain that Real Property Law §234 imposes an unwelcome displacement of the common law rule.
The Court of Appeals in Graham, agreeing with the Appellate Division, First Department, has given an expansive view of RPL §234 in finding that the reciprocal mandate of the statute was triggered by the subject lease clause. In so holding, the court placed great emphasis on the legislative intent of RPL §234 to place the landlord and tenant on "equal footing." Thus, landlords should now be aware that the same or a similar provision in a residential lease to the one at issue in Graham will be found to entitle the prevailing tenant to recover his or her attorney fees.
1. 115 A.D.3d 50 (1st Dept. 2014).
3. 180 A.D.2d 460 (1st Dept. 1992).
4. 58 A.D.3d 422 (1st Dept. 2009).
5. 65 A.D.3d 445 (1st Dept. 2009).
9. 84 N.Y.2d 773 (1995).
Warren A. Estis is a founding partner at Rosenberg & Estis. Michael E. Feinstein is a partner at the firm.

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