Source: https://casetext.com/brief/0826a67c-in-the-matter-of-sylvan-lawrence-deceased-richard-s-lawrence-et-al-respondentsvgraubard-miller-et-al-appellants-richard-s-lawrence-et-al-intervenors-respondents-brief-7
Timestamp: 2020-04-02 21:09:05
Document Index: 11452067

Matched Legal Cases: ['§ 605', '§ 90', '§ 33', '§ 127', '§ 127', '§ 127', '§ 127', '§ 127', '§ 605', '§ 90', '§ 33', '§ 2', '§ 127', '§ 127', '§ 10', '§ 10', '§ 279', '§ 408']

In the Matter of Sylvan Lawrence, Deceased.---------------Richard S. Lawrence, et al., Respondents,v.Graubard Miller, et al., Appellants,----------------Richard S. Lawrence, et al., Intervenors-Respondents. | Brief | Casetext
In the Matter of Sylvan Lawrence, Deceased.---------------Richard S. Lawrence, et al., Respondents,v.Graubard Miller, et al., Appellants,----------------Richard S. Lawrence, et al., Intervenors-Respondents.
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N.Y.Sep 9, 2014
APL-2013-00264 New York County Surrogate’s Clerk File No. 175/82 Court of Appeals STATE OF NEW YORK In the Matter of a Petition to Compel Payment of Legal Fees for Services Rendered in Connection with the Estate of SYLVAN LAWRENCE, Deceased. RICHARD S. LAWRENCE and PETER A. VLACHOS, as Executors of the Estate of Alice Lawrence, Deceased, Respondents-Plaintiffs-Respondents, against GRAUBARD MILLER, Petitioner-Defendant-Appellant, C. DANIEL CHILL, ELAINE M. REICH and STEVEN MALLIS, Defendants-Appellants, and RICHARD S. LAWRENCE, SUZANNE LAWRENCE DECHAMPLAIN and MARTA JO LAWRENCE, Intervenors-Respondents. >> >> BRIEF FOR RESPONDENTS-PLAINTIFFS-RESPONDENTS To Be Argued By: Daniel J. Kornstein Time Requested: 30 Minutes KORNSTEIN VEISZ WEXLER & POLLARD, LLP Attorneys for Respondents- Plaintiffs-Respondents 757 Third Avenue New York, New York 10017 212-418-8600Of Counsel: Ina R. Bort Amy C. Gross Date Completed: December 27, 2013 -i- Table of Contents Page CURBING ATTORNEY CONDUCT "CONTRARY TO THE STANDARDS . . . THE PROFESSION SHOULD UPHOLD" . . . . . . . . . 2 QUESTIONS PRESENTED . . . . . . . . . . . . . . . . . . . . . . 4 SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . 5 STATEMENT OF FACTS: THE "DUBIOUS" AND "SUBTERRANEAN" CIRCUMSTANCES . . . . . . . . . . . . . . 10 1. Huge Secret Cash Gifts . . . . . . . . . . . . . . 11 2. Unconscionable Revised Retainer . . . . . . . . . . 13 RELEVANT PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . 15 Referee's Report . . . . . . . . . . . . . . . . . . . . 16 Surrogate's Decision . . . . . . . . . . . . . . . . . . 18 Appellate Division Decision . . . . . . . . . . . . . . 19 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22 PART ONE -- INVALID GIFTS . . . . . . . . . . . . . . . 22 I FAILURE TO MEET VERY "HEAVY" BURDEN OF PROVING VALIDITY OF GIFTS . . . . . 22 A. The Rule: Presumptive Invalidity . . . . 22 B. Failure to Satisfy the Rule . . . . . . . 25 1. Failure to Tell Alice to Seek Independent Advice . . . . . 27 2. Extraordinary Size of Gifts . . . . 39 3. Conspiracy of Silence . . . . . . . 41 -ii- Page 4. Failure to Advise About the Gift Tax . . . . . . . . . 44 5. $400,000 Reluctant "Gift" to Firm . . . . . . . . . . . 46 6. Lack of Forthrightness . . . . . . . 47 C. Were the Gifts Solicited? . . . . . . . . 47 II THE CLAIMS TO VOID THE GIFTS WERE TIMELY . . . 49 A. Policy Rationale . . . . . . . . . . . . 49 B. Not Limited to Negligence Claims . . . . 51 C. Sufficiently Related . . . . . . . . . . 51 III SURROGATE ACTED WITHIN HER AUTHORITY . . . . . 54 PART TWO -- UNCONSCIONABLE REVISED RETAINER . . . . . . 57 IV REVERSION TO ORIGINAL RETAINER APPROPRIATE . . . . . . . . . . . . . 57 A. Applicable Precedent . . . . . . . . . . 58 B. Policy Favoring Standards . . . . . . . . 63 C. Time Charges Plus Interest Are Fair . . . . . . . . . . . . 64 D. No Impact on Future Valid Contingency Fees . . . . . . . . . 65 V PROCEDURAL UNCONSCIONABILITY . . . . . . . . . 66 A. Not Fully Understood . . . . . . . . . . 68 B. Alice Was Not Fully Informed . . . . . . 71 1. Failure to Disclose Potential Upside . . . . . . . . . . 71 2. Failure to Discuss Case Status . . . . . . . . . . . . 74 -iii- Page 3. Graubard's Breach of Its Fiduciary Duty . . . . . . . . . 75 C. Failure to Get Written Consent to Law Firm Conflict . . . . . . . . . . 77 D. Chill "Wore [Alice] Down" . . . . . . . . 79 VI SUBSTANTIVE UNCONSCIONABILITY . . . . . . . . 81 A. Virtually No Risk . . . . . . . . . . . . 83 1. Existing Claims Had High Value . . . 83 2. The Hybrid Contingency Reduced the Risk . . . . . . . . . . 84 3. 95 Wall Street Decision Created No Risk . . . . . . . . . . 85 4. Graubard's Prior Work and Paid Fees 85 5. 1983 Agreements With Lawrence Children Further Reduced Risk . . . 86 B. Disproportionality . . . . . . . . . . . 87 C. Sheer Amount of Fee Too High . . . . . . 88 D. Case Law Supports Findings of Referee, Surrogate and First Department . . . . . 89 E. Mistaken Policy Arguments . . . . . . . . 89 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . 91 -iv- Table of Authorities Cases Page(s) 520 E. 72nd Commercial Corp. v. 520 E. 72nd Owners Corp., 691 F. Supp. 728 (S.D.N.Y. 1988) . . . . . . . . . . 60, 76 Anonymous, 1 Wend. 108 (Sup. Ct. of Judicature of N.Y. 1828) . . . 43 Armstrong v. Morrow, 166 Wis. 1, 163 N.W. 179 (1917) . . . . . . . . . . 50, 54 Automatic Bedding Corp. v. Ortner, 26 A.D.2d 664, 272 N.Y.S.2d 628 (2d Dep't 1966) . . . . 57 Barrett v. Stone, 236 A.D.2d 323, 653 N.Y.S.2d 598 (1st Dep't 1997) . . . 55 Bercow v. Damus, 5 A.D.3d 711, 776 N.Y.S.2d 289 (2d Dep't 2004) . . . . . 62 Borgia v. City of New York, 12 N.Y.2d 151, 237 N.Y.S.2d 319 (1962) . . . . . . . . 53 Boyle v. 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Suffolk Co. 1954) . . . . . . . . . . . . . . 61 In re Bond & Mortgage Guarantee Co., 303 N.Y. 423 (1952) . . . . . . . . . . . . . 6, 23, 67, 82 In re Cooperman, 83 N.Y.2d 465, 611 N.Y.S.2d 465 (1994) . . . . . . . . . 75 In re Doss, 367 Ill. 570, 12 N.E.2d 659 (1938) . . . . . . . . . . . 43 In re Estate of Schneiderman, 105 A.D.3d 602, 963 N.Y.S.2d 250 (1st Dep't 2013) . . . . . . . . . . . . . . . . 23, 35, 36 In re Fitzsimons, 174 N.Y. 15 (1903) . . . . . . . . . . . . . . . . . . 60 In re Himmel, 125 Ill. 2d 531, 533 N.E.2d 790 (1989) . . . . . . . . . 43 In re Howell, 215 N.Y. 466 (1915) . . . . . . . . 66, 71, 73, 75, 77, 81 In re Kindberg's Will, 207 N.Y. 220 (1912) . . . . . . . . . . . . . . . . . . 38 In re Putnam, 257 N.Y. 140 (1931) . . . . . . . . . . . . . . . . . . 38 In re Stamell, 252 B.R. 8, 16 (Bankr. E.D.N.Y. 2000) . . . . . . . . . 78 -vii- Page(s) In re Van Den Heuvel's Will, 76 Misc. 137, 136 N.Y.S. 1109 (Surr. Ct. N.Y. Co. 1912) . . . . . . . . . . . . . . . 42 In the Matter of David Gross, Dkt. No. DRB 09-186 (Sup. Ct. N.J. Disciplinary Review Board Dec. 18, 2009) . . . . . . . . . . . . . . 42 Israel v. Sommer, 292 Mass. 113, 197 N.E. 442 (1935) . . . . . . . . . . . 38 Jacobson v. Sassower, 66 N.Y.2d 991, 499 N.Y.S.2d 381 (1985) . . . . . . . 66, 67 Kaufman v. Cohen, 307 A.D.3d 113, 760 N.Y.S.2d 157 (1st Dep't 2003) . . . 76 King v. Fox, 7 N.Y.3d 181, 818 N.Y.S.2d 833 (2006) . . . . 8, 9, 66, 71, 73, 75, 76, 79, 81, 82, 88, 89 Lawrence v. Graubard Miller, 106 A.D.3d 607, 965 N.Y.S.2d 495 (1st Dep't 2013) . . . . . . . . . 2, 19, 20, 24, 69, 83, 88 Lawrence v. Graubard Miller, 11 N.Y.2d 588, 873 N.Y.S.2d 517 (2008) . . . . . . . . . . . . . . . 3, 8, 9, 66, 82, 87, 89 Lawrence v. Graubard Miller, 48 A.D.3d 1, 853 N.Y.S.2d 1, aff'd, 11 N.Y.3d 588, 873 N.Y.S.2d 517 (2008) . . . . . 16 Lawrence v. Graubard Miller, 48 A.D.3d 1, 853 N.Y.S.2d 1 (1st Dep't 2007) . . . . . . . . . . . . . 3, 66, 73, 75, 86 Leinwand v. Swan Coin-o-Matic Laundry, Inc., 115 A.D.2d 302, 496 N.Y.S.2d 118 (4th Dep't 1985) . . . 61 Lowrey v. Will of Smith, 543 So. 2d 155 (Miss. 1989) . . . . . . . . . . . . . . 39 Luk Lamellen U. Kupplungbau GmbH v. Lerner, 166 A.D.2d 505, 560 N.Y.S.2d 787 (2d Dep't 1990) . . . . . . . . . . . . . . . . . . . . 51 -viii- Page(s) M.W. Realty Assocs. v. 805 Third Ave. Co., 125 Misc. 2d 1077, 480 N.Y.S.2d 674 (Sup. Ct. N.Y. Co. 1984) . . . . . . . . . . . . . . . . 61 Marcus Brothers Textiles, Inc. v. Avondale Mills, Inc., 78 A.D.2d 800, 433 N.Y.S.2d 114 (1st Dep't 1980) . . . . . . . . . . . . . . . . . . . . 61 Marron v. Bowen, 235 Iowa 108, 16 N.W.2d 14 (1944) . . . . . . . . . . . 39 Matter of Buchyn, 300 A.D.2d 739, 751 N.Y.S.2d 625 (3d Dep't 2002). . . . 33 Matter of Clines, 226 A.D.2d 269, 641 N.Y.S.2d 277 (1st Dep't 1996) . . . . . . . . . . . . . . . . . 6, 23, 24 Matter of Cooperman, 83 N.Y.2d 465, 611 N.Y.S.2d 465 (1994) . . . . . . 2, 90-92 Matter of Coughlin, 221 A.D.2d 676, 633 N.Y.S.2d 610 (3d Dep't 1995) . . . . 59 Matter of Cousins, 80 A.D.3d 99, 909 N.Y.S.2d 421 (1st Dep't 2010) . . . . . . . . . . . . . . 28, 36, 37, 46 Matter of Delorey, 141 A.D.2d 540, 529 N.Y.S.2d 153 (2d Dep't 1988) . . . . 38 Matter of Estate of Rothko, 43 N.Y.2d 305, 401 N.Y.S.2d 449 (1977) . . . . . . . . . 62 Matter of Friedman, 136 A.D. 750, 121 N.Y.S. 426 (2d Dep't 1910) . . . . . . 59 Matter of Goliger, 58 A.D.3d 732, 871 N.Y.S.2d 689 (2d Dep't 2009) . . . . 59 Matter of Guattery, 278 A.D.2d 738, 717 N.Y.S.2d 764 (3d Dep't 2000) . . . . 59 Matter of Hefron, 771 N.E.2d 1157 (Ind. 2002) . . . . . . . . . . . . . . 78 Matter of Henderson, 80 N.Y.2d 388, 590 N.Y.S.2d 836 (1992) . . . . . . . . . . 5, 22, 23, 25, 27, 30-32, 36, 40 -ix- Page(s) Matter of Musso, 227 A.D.2d 404, 642 N.Y.S.2d 322 (2d Dep't 1996) . . . . 61 Matter of Schanzer, 7 A.D.2d 275, 182 N.Y.S.2d 475 (1st Dep't 1959) . . . . 60 Matter of Sherbunt, 134 A.D.2d 723, 520 N.Y.S.2d 885 (3d Dep't 1987). . . . 33 Matter of Smith, 214 A.D. 622, 212 N.Y.S. 577 (1st Dep't 1925) . . 7, 58, 60 Matter of Smith, 95 N.Y. 516 (1884) . . . . . . . . . . . . . . . . . . . 23 Matter of Winckler, 234 A.D.2d 307, 651 N.Y.S.2d 69 (2d Dep't 1996) . . . . 61 McDonald v. Hewlett, 102 Cal. App. 2d 680, 228 P.2d 83 (Cal. Dist. Ct. App. 1951) . . . . . . . . . . . . . . . 42 McGrath v. Toys "R" Us, Inc., 3 N.Y.3d 421, 788 N.Y.S.2d 281 (2004) . . . . . . . . . 65 Meinhard v. Salmon, 249 N.Y. 458 (1928) . . . . . . . . . . . . . . . . . . 91 N.Y. Times Co. v. City of N.Y. Comm'n on Human Rights, 41 N.Y.2d 345, 393 N.Y.S.2d 312 (1977) . . . . . . . . . 19 Naiman v. New York Univ. Hosps. Ctr., 351 F. Supp. 2d 257 (S.D.N.Y. 2005) . . . 7, 59, 60, 77, 78 Nesbit v. Lockman, 34 N.Y. 167 (1866) . . . . . . . . . . . . . 5, 6, 22-24, 28 Nicholson v. Shockey, 192 Va. 270, 64 S.E.2d 813 (1951) . . . . . . . . . . . 42 Northern Westchester Prof'l Park Assocs. v. Town of Bedford, 60 N.Y.2d 492, 470 N.Y.S.2d 350 (1983) . . . . . . . . . 55 Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010) . . . . . . . . . . . . . . . . 64, 65 Quinn v. Walsh, 18 A.D.3d 638, 795 N.Y.S.2d 647 (2d Dep't 2005) . . . . 57 -x- Page(s) Radin v. Opperman, 64 A.D.2d 820, 407 N.Y.S.2d 303 (4th Dep't 1978) . . . . . . . . . . 23, 24, 28, 34, 40, 46 Reilly v. McAuliffe, 331 Mass. 144, 117 N.E.2d 811 (1954) . . . . . . . . . . 38 Reoux v. Reoux, 3 A.D.2d 560, 163 N.Y.S.2d 212 (3d Dep't 1957) . 28, 34, 35 Schlanger v. Flaton, 218 A.D.2d 597, 631 N.Y.S.2d 293 (1st Dep't 1995) . . . . . . . . . . . . . . . . 26, 51, 68 Shaw v. Mfrs. Hanover Trust Co., 68 N.Y.2d 172, 507 N.Y.S.2d 610 (1986) . . 8, 66, 67, 71, 77 Shumsky v. Eisenstein, 96 N.Y.2d 164, 726 N.Y.S.2d 365 (2001) . . . . . . . . . . 7 Sterling Nat'l Bank v. Israel Disc. Bank of N.Y., 305 A.D.2d 184, 762 N.Y.S.2d 584 (1st Dep't 2003) . . . . . . . . . . . . . . . . . . . . 75 Stroud v. Tunzi, 72 Cal. Rptr. 3d 756, 160 Cal. App. 4th 377 (Cal. Ct. App. 2008) . . . . . . . . . . . . . . . . . . 61 Ten Eyck v. Whitbeck, 156 N.Y. 341 (1898) . . . . . . . . . . . . . . . . . 22-24 Toomey v. Moore, 213 Or. 422, 325 P.2d 805 (1958) . . . . . . . . . . . . 39 Veneski v. Queens-Long Island Med. Group, P.C., 18 Misc.3d 1118(A), 856 N.Y.S.2d 503, 2007 WL 4754349 (Sup. Ct. N.Y. Co. 2007) . . . . 28, 36, 40 Webster v. Kelly, 274 Mass. 564, 175 N.E. 69 (1931) . . . . . . . . . . . 38 Wendt v. Fischer, 243 N.Y. 439 (1926) . . . . . . . . . . . . . . 23, 67, 82 Whitehead v. Kennedy, 69 N.Y. 462 (1877) . . . . . . . . . 66, 71, 73, 75, 76, 81 Yannitelli v. D. Yannitelli & Sons Constr. Corp., 247 A.D.2d 271, 668 N.Y.S.2d 613 (1st Dep't 1998) . . . 57 -xi- Page(s) York Mortgage Corp. v. Clotar Constr. Corp., 254 N.Y 128 (1930) . . . . . . . . . . . . . . . . . . . 55 Statutes and Rules 22 N.Y.C.R.R. § 605.13(c) . . . . . . . . . . . . . . . . . . 33 CPLR 4403 . . . . . . . . . . . . . . . . . . . . . . . . 55, 56 DR 5-104 . . . . . . . . . . . . . . . . . . . . . . . . . 77-79 EC 2-20 . . . . . . . . . . . . . . . . . . . . . . . . . 66, 77 EC 5-5 . . . . . . . . . . . . . . . . . . . . . . 27-29, 31, 34 EC 7-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 N.Y. Judiciary Law § 90(6-a)(a) . . . . . . . . . . . . . . . 33 SCPA 506(4) . . . . . . . . . . . . . . . . . . . . . . . . . 55 Other Authorities 1 New York County Lawyers' Association Ethics Institute (eds.), The New York Rules of Professional Conduct: Rules and Commentary 180 (2010) . . . . . . . . . . . . 25 24 A.L.R.2d 1288 . . . . . . . . . . . . . . . . . . . . 50, 54 38 Am. Jur. 2d, Gifts § 33 . . . . . . . . . . . . . . . . . 39 C.S. Patrinelis, Undue Influence in Nontestamentary Gift from Client to Attorney, 24 A.L.R.2d 1288 (1952) . . . . . . . . . . . . . . 23, 39 I James Kent, Commentaries on American Law 320-21 (1826) . . . . . . . 63 Joseph M. Perillo, The Law of Lawyers' Contracts is Different, 67 Fordham L. Rev. 443, 444 (1998) . . . . . . . . . . . 90 -xii- Page(s) Kristina Crosswell, Attorney-Client Relationships -- Undue Influence -- Fiduciary Duty Mandates That Attorney Advise Client to Secure Independent Advice and Counsel Before Accepting Benefit from Client, 60 Miss. L.J. 657, 669 (1990). . . . . . . . . . . . . . 38 Lawrence J. Vilardo & Vincent E. Doyle III, Where Did the Zeal Go?, 38 Litigation 53 (2011) . . . . 70 Lester Brickman, Contingency Fees Without Contingencies: Hamlet Without the Prince of Denmark?, 37 UCLA L. Rev. 29, 92 (1989) . . . . . . . . . . . . . 84 NYSBA Committee on Prof. Ethics, Opinion 697 - 12/30/97 (41-97), Legal fees; combination of hourly and contingency fee . . . . . . . . . . . . . . . . . . 85 Paul Krugman, Addicted to the Apocalypse, N.Y. Times, Oct. 25, 2013 . . . . . . . . . . . . . . . 65 Restatement (First) of Contracts . . . . . . . . . . . . . . 61 Restatement (Second) of Contracts . . . . . . . . . . . . . . 61 Restatement (Third) of Law Governing Lawyers . . . . . . . . . . . . . 5, 6, 22, 23, 30, 39 3356000BRIDJK.00017.wpd COURT OF APPEALS: STATE OF NEW YORK ------------------------------------------X In the Matter of a Petition to Compel : Payment of Legal Fees for Services Rendered in Connection with the Estate of : SYLVAN LAWRENCE, : Deceased. : ------------------------------------------X RICHARD S. LAWRENCE and PETER A. VLACHOS, as Executors of the Estate of : APL-2013-00264 Alice Lawrence, Deceased, : Respondents-Plaintiffs- Respondents, : N.Y. Co. Surr. Ct. File No. 175/82 - against - : GRAUBARD MILLER, : Petitioner-Defendant- : Appellant, : C. DANIEL CHILL, ELAINE M. REICH, and STEVEN MALLIS, : Defendants-Appellants, : and : RICHARD S. LAWRENCE, SUZANNE LAWRENCE : DECHAMPLAIN and MARTA JO LAWRENCE, : Intervenors-Respondents. ------------------------------------------X CONSOLIDATED BRIEF OF RESPONDENTS RICHARD S. LAWRENCE AND PETER VLACHOS AS EXECUTORS OF THE ESTATE OF ALICE LAWRENCE This case is about an attorney-client relationship that soured in the brine of lawyer overreaching and deception. It raises important issues of legal ethics concerning client gifts to attorneys and midstream retainer changes. In a unanimous decision, the Appellate Division, First Department ruled that the 1 Lawrence v. Graubard Miller, 106 A.D.3d 607, 608-09, 965 N.Y.S.2d 495, 497-98 (1st Dep't 2013). 2 Matter of Cooperman, 83 N.Y.2d 465, 472, 611 N.Y.S.2d 465, 468 (1994). 3 These are the words of Referee Howard Levine. Vol. I, A128a n.12. (References to the Joint Appendix are indicated by the appropriate volume of the Joint Appendix followed by the relevant page number.) 4 As one Appellate Division Justice put it on an earlier (continued...) 2 attorney-defendants in this case failed to carry their burden to prove the validity of those transactions.1 The Appellate Division's resolution of those questions of law is amply supported by the record and securely anchored in decades of decisions by this Court addressing the attorney-client relationship, "so special and so sensitive in our society."2 The Appellate Division's decision should be affirmed. By doing so, this Court will guide the bench, bar and public on these serious recurring issues. CURBING ATTORNEY CONDUCT "CONTRARY TO THE STANDARDS . . . THE PROFESSION SHOULD UPHOLD"3 This Court should not disturb the Appellate Division's decision because it was the proper response to what happened here. The appeals by the law firm, Graubard Miller ("Graubard"), and the individual attorney defendants, C. Daniel Chill, Elaine M. Reich, and Steven Mallis (collectively, the "Attorneys"), from a Decision and Order of the Appellate Division entered May 23, 2013, seek to upend that court's well-founded, legally sound reaction to overreaching by Graubard and the Attorneys.4 4(...continued) appeal, the repeated attorney misconduct in this case was rooted in "nothing short of plain greed." Lawrence v. Graubard Miller, 48 A.D.3d 1, 20, 853 N.Y.S.2d 1, 15 (1st Dep't 2007) (Catterson, J., dissenting). He further described their conduct as "outrageous" and "well beyond the limits of all propriety." Id., 48 A.D.3d at 18-19, 853 N.Y.S.2d at 13-14. He wanted to "refer the defendants to the Departmental Disciplinary Committee." Id., 48 A.D.3d at 9, 853 N.Y.S.2d at 7. 5 Lawrence v. Graubard Miller, 11 N.Y.2d 588, 596, 873 N.Y.S.2d 517, 521 (2008) (affirming denial of motion to dismiss). 3 One aspect of the overreaching involves secret cash gifts, totaling $5.05 million, from longtime Graubard client Alice Lawrence ("Alice") to the Attorneys. The other is an eve-of- trial retainer revision between Graubard and Alice (an elderly widow) that would have modified a time-charge arrangement and resulted in a $44 million contingency fee for four-and-a-half- months' ordinary and unexceptional work. That contingency fee would have been over and above the $22 million in time charges Graubard had already received from Alice over 22 years. When this case was last before this Court on a pre-answer motion to dismiss, the revised retainer was deemed suspect "[o]n its face."5 The proof at trial has since confirmed this Court's initial suspicion many times over. A 15-day bench trial produced abundant evidence of the impropriety of the gifts and the modified fee agreement. The Referee (Hon. Howard Levine) found that the Attorneys' testimony was not credible, that they acted inappropriately and unethically, and that the revised retainer was substantively unconscionable. The Referee's findings were only the beginning. With every 6 The Appellate Division's decision is based on findings of fact by the Surrogate not reviewable by this Court. Glenbriar Co. v. Lipsman, 5 N.Y.3d 388, 804 N.Y.S.2d 719 (2005). 4 post-trial decision in this case, the Estate and the public interest have been further vindicated. The Surrogate voided the gifts and affirmed the Referee's rejection of the $44 million contingency fee under the unconscionable revised retainer. The Appellate Division affirmed the Surrogate's decision on the gifts, found the revised retainer procedurally as well as substantively unconscionable, and rejected the fee calculation method used by the Referee and Surrogate, instead reverting to the time-charge basis under the original agreement. QUESTIONS PRESENTED On the facts established by the tribunals below,6 the questions of law before this Court are: 1. Did the Appellate Division correctly rule that the Attorneys failed to meet their burden of proof to rebut, by clear and convincing evidence, the presumption that the gifts were the product of undue influence? Yes. 2. Did the Appellate Division correctly rule that the Estate's claim for return of the gifts was timely? Yes. 3. In light of the revised retainer agreement's unconscionability, did the Appellate Division properly award Graubard fees based on the time-charge arrangement in its original retainer with Alice? Yes. 4. Did the Appellate Division correctly rule that Graubard 7 See, e.g., Matter of Henderson, 80 N.Y.2d 388, 394, 590 N.Y.S.2d 836, 840 (1992) (internal quotation marks omitted); Cowee v. Cornell, 75 N.Y. 91, 99-100 (1878); Nesbit v. Lockman, 34 N.Y. 167, 169 (1866). 5 failed to meet its burden to show that the revised retainer agreement was not procedurally unconscionable? Yes. 5. Did the Appellate Division correctly rule that Graubard failed to meet its burden to show that the revised retainer was not substantively unconscionable? Yes. SUMMARY OF ARGUMENT Since the Appellate Division's decision cures the ill effects of the Attorneys' misconduct, redresses the harm done to their client, and protects the public by deterring future attorney misconduct, this Court should affirm. This case turns on whether the Attorneys and Graubard met their burden of proof to demonstrate the propriety of the transactions at issue. The facts brought forth at trial were not enough to sustain their burden for either transaction. 1. Gifts Correctly Voided. A gift from a client to a lawyer, particularly a substantial gift, is "presumed void" and is "scrutinized with extreme vigilance."7 According to the Restatement (Third) of Law Governing Lawyers, "The law of undue influence treats client gifts as presumptively fraudulent, so that the lawyer-donee bears a heavy burden of persuasion that the gift is fair and not the product of overreaching or otherwise an 8 Restatement (Third) of Law Governing Lawyers § 127 cmt. a (2000). 9 Matter of Clines, 226 A.D.2d 269, 270, 641 N.Y.S.2d 277, 278 (1st Dep't 1996). 10 Nesbit, 34 N.Y. at 169. See also, e.g., Gordon v. Bialystoker Center & Bikur Cholim, Inc., 45 N.Y.2d 692, 698, 412 N.Y.S.2d 593, 596-97 (1978); Clines, 226 A.D.2d at 270, 641 N.Y.S.2d at 278. 11 In re Bond & Mortgage Guarantee Co., 303 N.Y. 423, 431 (1952). 6 imposition upon the client."8 To rebut this presumption, the attorney has the burden of proving by "clear and convincing"9 evidence that the client gave the gift voluntarily, with "perfect[] underst[anding]" and without any undue influence.10 This rule is applied with "uncompromising rigidity."11 The facts, not subject to review in this Court, show that the Attorneys failed to tell Alice to seek independent advice before she gave the gifts. They kept the gifts a secret from their partners and their co-clients, the Lawrence children. They failed to tell Alice that she would be legally responsible for the gift tax and that the amount of the gift tax would be $2.7 million. At the same time the Attorneys obtained the gifts for themselves personally, they also solicited from a reluctant Alice a $400,000 bonus to Graubard. The Referee found their testimony about these events not credible. These facts, raising genuine doubts about the genesis of the gifts, made the Attorneys' burden insurmountable. 2. Timeliness of Gift Claim. The Appellate Division, as have all prior decision makers, correctly found that Alice's 12 Shumsky v. Eisenstein, 96 N.Y.2d 164, 167-68, 726 N.Y.S.2d 365, 368 (2001); Glamm v. Allen, 57 N.Y.2d 87, 93, 453 N.Y.S.2d 674, 677-78 (1982); Greene v. Greene, 56 N.Y.2d 86, 94- 95, 451 N.Y.S.2d 46, 51 (1982). 13 Matter of Smith, 214 A.D. 622, 624-25, 212 N.Y.S. 577, 580-81 (1st Dep't 1925); Connors v. Wildstein, 271 A.D.2d 633, 634, 706 N.Y.S.2d 189, 190 (2d Dep't 2000); Naiman v. New York Univ. Hosps. Ctr., 351 F. Supp. 2d 257, 265 (S.D.N.Y. 2005). 7 claim to invalidate the gifts was timely. The continuous representation doctrine, which recognizes the difficulty for a client to sue her lawyer as long as the representation goes on, applies here and tolls the statute of limitations while the Attorneys continued to represent Alice on the same or related matters.12 3. Remedy for Unconscionable Retainer. Inasmuch as the revised retainer was found unconscionable (as explained below), the Appellate Division correctly determined Graubard's fee by looking to the original retainer agreement.13 The original time- charge retainer governed the parties' relationship for over 20 years during which Alice paid Graubard $22 million in fees. The Appellate Division's fee determination was consistent with the rules governing contracts and wills, where the original document controls if a later modification is voided. Only where there is no prior valid retainer does a court have the discretion to set a reasonable fee. The Appellate Division's remedy eliminated any arbitrariness or excessive discretion. 4. Procedural Unconscionability. Attorney fee agreements can be unconscionable on procedural and substantive grounds, especially where there is "deception or overreaching in their 14 Lawrence, 11 N.Y.3d at 596 n.4, 873 N.Y.S.2d at 521 n.4. 15 King v. Fox, 7 N.Y.3d 181, 190, 818 N.Y.S.2d 833, 839 (2006). 16 Shaw v. Mfrs. Hanover Trust Co., 68 N.Y.2d 172, 176, 507 N.Y.S.2d 610, 612 (1986) (citations omitted). 8 making."14 Graubard did not meet its burden to show that Alice agreed to the revised retainer "with full knowledge of all the material circumstances known to" Graubard, and without any "misconception."15 The importance of an attorney's clear agreement with a client as to the essential terms of representation cannot be overstated. The client should be fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements . . . . [C]ourts as a matter of public policy give particular scrutiny to fee arrangements between attorneys and clients, casting the burden on attorneys who have drafted the retainer agreements to show that the contracts are fair, reasonable, and fully known and understood by their clients.16 The revised retainer was therefore procedurally unconscionable. Here, Alice erroneously believed that by entering into the revised retainer, she would reduce her overall legal fees and receive most of the proceeds from any recovery. Graubard failed to explain to her that it, not she, would receive the largest amount in any recovery, and also failed to review the status of the case with her before she signed. Graubard also failed to inform her that it had calculated a likely recovery of almost $50 million, when Graubard knew that Alice believed she would recover a few million dollars, at most. Graubard further failed to 17 Lawrence, 11 N.Y.3d at 596, 873 N.Y.S.2d at 521 (citations omitted). 18 King, 7 N.Y.3d at 192, 818 N.Y.S.2d at 841. 19 Id. 9 obtain from Alice in writing, as it should have, a waiver of the law firm's conflict of interest in entering into the revised retainer. 5. Substantive Unconscionability. An attorney fee agreement can be substantively unconscionable either from the start or in hindsight (or both). As this Court has already held in this action, "[o]ur case law clearly provides that circumstances arising after contract formation can render a contingent fee agreement -- not unconscionable when entered into -- unenforceable where the amount of the fee, combined with the large percentage of the recovery it represents, seems disproportionate to the value of the services rendered."17 "Besides the sheer amount of the fee, another factor to consider -- and perhaps the most important -- in determining the unconscionability of a contingent fee agreement, is whether the client was fully informed upon entering into the agreement with the attorney."18 This includes an examination of "the facts and circumstances surrounding the agreement, including the parties' intent and the value of the attorney's services in proportion to the fees charged, in hindsight."19 It also requires an analysis of the level of risk assumed by the attorneys that their work may 20 Gair v.Peck, 6 N.Y.2d 97, 102, 188 N.Y.S.2d 491, 494 (1959). 10 go uncompensated.20 The facts show that the revised retainer here was substantively unconscionable both from the beginning and retrospectively. On its face, the revised retainer greatly limited or even eliminated Graubard's risk. Graubard knew, though Alice did not, that it assumed no additional risk by converting to a hybrid contingency arrangement. As also found by the Referee and Surrogate, the huge $44 million fee Graubard sought was wildly disproportionate to the amount or the quality of work performed over the remaining four and a half months of the representation. STATEMENT OF FACTS: THE "DUBIOUS" AND "SUBTERRANEAN" CIRCUMSTANCES The trial revealed the Attorneys' repeated disregard of their legal and ethical duties and of well-established requirements for attorney-client transactions. Not surprisingly, given their conduct, two of the three Attorneys testified that they had never read the Code of Professional Responsibility in its entirety, and the third had not read it since law school in the 1970s. Vol. V, A365-66; Vol. VI, A717, A1043-44. The attorney-client relationship at issue here started in 1983. Vol I, A88a. It was then that Alice and two of her grown children (Richard and Marta Jo Lawrence) signed time-charge retainers with Graubard. Vol. I, A89a; Vol. XVI, A6318, A6319. 11 The purpose of that retention was for Graubard to represent their interests in litigation concerning the estate of Alice's late husband (and the children's father) Sylvan Lawrence against the executor, Sylvan's brother Seymour Cohn. Vol I, A88a. Alice and the children (including Suzanne Lawrence DeChamplain along with Richard and Marta Jo Lawrence) had conflicting interests in the estate litigation. The conflict was over the relative fractional shares Alice and the children would receive. Based on information received from Graubard, the children waived the conflict (Vol. I, A130a-131a), but that did not relieve Graubard of the obligation to keep them informed. In light of new information, the children could later choose to revoke that consent. 1. Huge Secret Cash Gifts In November 1998, after receiving a significant distribution from her husband's estate in the litigation handled by the Attorneys, Alice met with Chill at her Connecticut home. As a result of that meeting, Alice wrote three checks totaling $5.05 million to the Attorneys personally. Vol. I, A90a, A100-102a, A106a-107a, A124a. None of the Attorneys told Alice, as required by law and ethics, to seek independent, disinterested advice before she gave the checks. Vol. I, A114a, A117a-119a. None of the Attorneys perceived "any" ethical issues about the gifts, and they "did not review the Code [of Professional Responsibility], consult ethics counsel as they had done on other estate representation issues, 12 nor did they undertake any independent research." Vol. I, A115a. When the Attorneys received the gifts, Chill solicited an additional $400,000 "bonus" for Graubard, in which he, Reich, and Mallis shared as members of the firm (without telling the firm that they had also obtained the $5.05 million in gifts). Alice did not want to give the bonus to the firm, as the accompanying cover note made clear: "Danny- I'm not sure just what I should be thanking the firm for. (Keeping me on as a client?) You write my thank yous. A." Vol. XV, A6035. No one at the firm thanked her or otherwise acknowledged the bonus. Vol. I, A77a, A119a. Not only did the Attorneys not inform their partners about the individual gifts, one did not even tell her spouse, an Acting Supreme Court Justice. Nor did they tell the Lawrence children, their other clients on the same matter, even though a known conflict existed between Alice and the children over the allocation of Sylvan's estate. The Attorneys also did not inform Alice, before receiving the gifts, that she would have to pay almost $3 million in gift tax, though they were acutely aware of it. Vol. I, A80a, A127a-128a n.11. After writing the gift checks, Alice expressed remorse to a close friend. She referred to Chill's "Svengali-like" influence over her when she equivocated over paying the gift tax. Vol. I, A78a; Vol. VIII, A1912-14, A2107. And one of the Attorneys referred to Alice's "thank you" notes accompanying the checks as notes "we got Alice to write." Vol. I, A78a; Vol. VIII, A1931- 32. 13 2. Unconscionable Revised Retainer The Attorneys who obtained the $5.05 million in secret gifts also created the second issue, an eve-of-trial modification of the retainer arrangement. In December 2004, Alice felt discouraged about the prospects for her case (a pessimism Graubard encouraged but secretly did not share) shortly after what she understood was an adverse ruling on one of her claims. At that time, Alice expressed concern about the size of Graubard's endless legal bills and asked Chill about the possibility of entering into a new fee arrangement. By this time Alice had paid to Graubard $22 million in time charges since 1983. Chill responded by proposing a contingency fee. Vol. I, A137a-138a, A185a n.27. He did so after Graubard advised Alice to reject a $60 million settlement offer in the underlying case. Vol. V, A507-08; Vol. XVI, A6361-62. In January 2005, as a trial date was being set, Alice and Graubard entered into a revised retainer, a hybrid contingency arrangement that called for a cap of $1.2 million in time-charge fees for only the first year, as well as a 40% contingency of any recovery, taken out of Alice's share. Vol. I, A138a-139a; Vol. X, A2985-86. The revised retainer also required Alice to pay disbursements and sought to have her negotiate with Graubard if the total recovery through settlement fell short of Graubard's time charges. Vol. X, A2985-86. It was, for Graubard, a "heads- I-win, tails-you-lose" revised retainer. When drafting the revised retainer, Graubard expected an 21 Graubard's valuation of the claims is reflected in a document Graubard prepared "well before" (Graubard Br. at 102) the revised retainer, as well as in a letter to the Referee after the revised retainer was signed. Vol. I, A170a-171a; Vol. XVI, A6374; Vol. X, A2992-2997. Graubard shared neither the memo nor its conclusions with Alice. 14 upside recovery of almost $50 million, while encouraging Alice in her mistaken belief that the maximum recovery would be only "a few mil." Vol. I, A170a-179a, A184a-186a.21 Although Graubard knew Alice wanted the "lion's share of any recovery" and to be the "senior partner," as Alice told Graubard, Graubard assumed that role, as it stood to receive more from any recovery than did Alice herself. Vol. I, A301a; Vol. VI, A699, A701, A803, A833. Shortly after Alice signed the revised retainer (when she was almost 80 years old and suffering from health problems) (see, e.g., Vol. VIII, A1927-1930; Vol. XV, A5866), she promptly told her best friend that Chill "wore [her] down" and that she "probably shouldn't have signed what she did." Vol. VIII, A2108- 12. Other testimony corroborated these statements. Vol. VIII, A1919-21, A2050-51. Graubard did not inform the Lawrence children of the revised retainer, and in fact inserted a clause binding the children (as heirs) to the agreement without their knowledge, even though as clients they had a right to know this information that might bear on a decision whether or not to revoke their consent to the known conflict. Vol. I, A132a-133a. Thus did the Attorneys continue their "subterranean" pattern, begun with the secret gifts, of deliberately not informing their co-clients of vital information. 15 Four months after the revised retainer was signed, the underlying litigation settled for approximately $106 million, largely as a result of "smoking gun" documents (the "Epps documents") produced in response to routine document requests served well before the revised retainer was signed. Vol. I, A89a, A139a-140a, A179a-184a, A187a. Graubard sought a fee of approximately $44 million (Vol. I, A89a-90a, A136a), which would have exceeded Alice's share of the recovery by more than $2.4 million. Vol. I, A151a, A301a. Alice objected, and this dispute followed. RELEVANT PROCEDURAL HISTORY Graubard first sued Alice for its fee in Surrogate's Court, New York County in August 2005. Vol. I, A90a. Soon thereafter, Alice sued Graubard and the Attorneys in Supreme Court, New York County seeking to void the revised retainer and for return of the $5.05 million in gifts. Id. The two cases were consolidated in Surrogate's Court. Id. In her complaint, Alice alleged that Chill came to her home and told her that, after obtaining favorable litigation results, the Attorneys were "each entitled to receive a bonus," that "he was entitled to the amount of $2 million for his efforts" and that Reich was entitled to $1.55 million and Mallis $1.5 million, and that "this type of bonus payment was routinely made." Vol. I, A341a-342a, ¶ 15. Her complaint stated further that, "relying upon the advice of her [three Graubard] attorneys," Alice wrote the three requested checks not to the Graubard firm "but rather 22 Lawrence v. Graubard Miller, 48 A.D.3d 1, 853 N.Y.S.2d 1, aff'd, 11 N.Y.3d 588, 873 N.Y.S.2d 517. 16 to each of the three attorneys individually." Vol. I, A342a, ¶ 17-18. See also Vol. IV, A1452a-1453a, ¶¶ 9-13 (Aff. of Alice Lawrence sworn to Sept. 8, 2005). Alice promptly moved to dismiss Graubard's claims, arguing that the revised retainer was void as a matter of law. Vol. I, A90a-91a. The motion was denied, and that decision was affirmed based on the need for factual development.22 Alice died in February 2008, and the executors of her estate were substituted. Vol. I, A93a. The parties engaged in pre-trial discovery, and the Referee held a trial and issued his Report. Vol. I, A100a. Referee's Report The Referee found that Graubard and the Attorneys had acted "contrary to the standards we believe the profession should uphold." Vol. I, A128a n.12. He concluded that the lawyers acted unethically in receiving more than $5 million in cash gifts from a client, and that they breached their fiduciary duties by keeping the gifts a secret from their partners and their three other clients, the Lawrence children. Vol. I, A117a-120a, A127a- 128a n.11. The Referee concluded that the Attorneys violated Ethical Consideration 5-5 by failing to advise Alice to seek independent advice before she gave the gifts. He said that the Attorneys' "unprecedented acceptance of gifts in the millions of dollars without compliance with the client safeguards incorporated in EC 17 5-5 could well give the appearance of impropriety, which could adversely reflect on the Attorneys' fitness to practice law and provide a basis for charging a violation of Disciplinary Rule 1- 102(a)(7)." Vol. I, A117a, A119a-120a. He found the $44 million contingent fee sought by Graubard to be "unreasonable" and "unconscionable." Vol. I, A170a, 187a. He also deemed Graubard's inserting a clause in the revised retainer binding Alice's "heirs, executors, successors and assigns" to be unethical and an act of disloyalty to the Lawrence children. Vol. I, A132a-133a. The Referee expressly "disbelieved" testimony of two of the Attorneys, calling it "incredible," "implausible," "inconsistent," "contrive[d]," and "nothing but a self-serving afterthought." Vol. I, A117a, A119a, A173a-174a, A176a, A179a. He went on to describe their testimony as "so obviously erroneous that it casts doubt on the bona fides" of its assertion. Vol. I, A176a. At trial, two former Graubard partners -- one a name partner (Scott Mollen) and one a managing partner -- testified that they would not believe Chill even if he were under oath. Vol. VIII, A2169, A2182-83. Chill, whose testimony the Referee did not believe, was the only witness to key conversations with Alice. Even though his testimony could not be contradicted by the deceased Alice, the Attorneys could not mask their misconduct. Although he made amply supported findings of lawyer misconduct, the Referee then made certain recommendations that 18 did not address -- much less redress or cure -- the ethical problems he found, and were based on a misinterpretation of the law. Disregarding the lawyers' misconduct, the Referee recommended that: (1) Graubard receive $15,837,374.02 in arbitrarily calculated fees, amounting to almost ten times its hourly charges, or $4,200 an hour, for four-and-a-half months' ordinary work under a substantively unconscionable revised retainer, and (2) gifts of more than $5 million to the Attorneys who violated legal and ethical rules were valid. Vol. I, A190a- 191a. Surrogate's Decision The Surrogate rejected the Referee's recommendation about the gifts. Vol. I, A82a. Finding that the "dubious" and "subterranean" circumstances surrounding the gifts "emit an odor of overreaching too potent to be ignored" (Vol. I, A80a-81a), she ordered the $5.05 million returned to the Estate. "Simply put," the Surrogate stated, "a lawyer's covert enjoyment of a benefit derived from a client, thereafter explained by the lawyer in sworn testimony that is not wholly to be credited, are not the attributes of a stainless gift nor the ingredients of a successful defense of it." Vol. I, A81a. The Surrogate confirmed the Referee's recommendation as to the revised retainer. Vol. I, A83-A85a. The Surrogate issued an Amended Decree ordering the Estate to pay Graubard a fee of $15,837,374.02 (without prejudgment interest) and ordering the Attorneys to return the gifts (also 23 In voiding the gifts, the Appellate Division mentioned only some of the facts and arguments advanced by the Estate to justify that result, see infra, but in affirming, this Court is not limited to the grounds relied on by the Appellate Division. Eadie v. Town Bd. of North Greenbush, 7 N.Y.3d 306, 314, 821 N.Y.S.2d 142, 145 (2006); N.Y. Times Co. v. City of N.Y. Comm'n on Human Rights, 41 N.Y.2d 345, 348, 393 N.Y.S.2d 312, 315 (1977). 19 without prejudgment interest). Vol. I, A64a-A65a. Following the Amended Decree, Chill and Reich fully repaid the $3.55 million they had received, but Mallis has repaid only $500,000 of his $1.5 million gift. Appellate Division Decision On appeal by all parties, the Appellate Division affirmed the Surrogate's decision requiring the Attorneys to return the gifts, explaining that the Attorneys "failed to meet their burden of showing by clear and convincing evidence that [Alice] gave the gifts willingly and knowingly." 106 A.D.3d at 608, 965 N.Y.S.2d at 497. "Indeed," the Appellate Division stated, "the secrecy surrounding the gifts, and their extraordinary amounts, which [the Attorneys] accepted without advising [Alice] to seek independent counsel, preclude a finding in [their] favor."23 106 A.D.3d at 608-09, 965 N.Y.S.2d at 497. The Appellate Division found the Estate's claim for return of the gifts timely under the continuous representation doctrine. 106 A.D.3d at 608, 965 N.Y.S.2d at 497. The Appellate Division also found that the revised retainer was "both procedurally and substantively unconscionable." 106 A.D.3d at 609, 965 N.Y.S.2d at 497. In finding substantive 20 unconscionability, the Appellate Division affirmed the Surrogate's decision, which had in turn adopted the Referee's recommendation. The Appellate Division approved the Referee's consideration of both: (1) the lack of real risk faced by Graubard in converting to the hybrid contingency arrangement, and (2) the disproportionate value of the fee sought to the services rendered. 106 A.D.3d at 609, 965 N.Y.S.2d at 498. In finding procedural unconscionability, the Appellate Division held that Graubard had not shown that Alice, who sought to reduce her legal fees, "fully knew and understood the terms of the retainer agreement." 106 A.D.3d at 609, 965 N.Y.S.2d at 497. In particular, the Appellate Division was persuaded by the evidence that Alice "believed that under the contingency arrangement, she would receive the 'lion's share' of any recovery," but that the way the revised retainer actually worked, "the law firm obtained over 50% of [Alice's] share of proceeds." Id. The Appellate Division also differed from the Surrogate and Referee in calculating the amount of fees due Graubard. It found that the formula created by the Referee and adopted by the Surrogate was "improper," and that in light of the "preexisting, valid retainer agreement, the proper remedy is to revert to the original agreement." 106 A.D.3d at 609-10, 965 N.Y.S.2d at 498. The Surrogate issued a Decree on Remand requiring the Estate to pay Graubard $2,919,605.15, representing Graubard's time charges from January to May 2005, plus interest. Vol. XVII, 21 A7303-04. The Estate paid that judgment. Graubard and the Attorneys sought and received leave from the Appellate Division to appeal its decision to this Court. Vol. XVII, A7388-90. 24 See Restatement (Third) of Law Governing Lawyers § 127 cmt. a (2000). 25 Nesbit, 34 N.Y. at 169. See also Matter of Henderson, 80 N.Y.2d at 394, 590 N.Y.S.2d at 840; Gordon, 45 N.Y.2d at 698, 412 N.Y.S.2d at 596-97; Ten Eyck v. Whitbeck, 156 N.Y. 341, 353 (1898). 22 ARGUMENT PART ONE -- INVALID GIFTS The Appellate Division's decision voiding the gifts should be affirmed because: (a) the Attorneys failed to meet their "heavy" burden of proof to rebut the presumption that the gifts were void; (b) Alice's claim was timely; and (c) the Surrogate and the Appellate Division acted within the scope of their authority. I FAILURE TO MEET VERY "HEAVY" BURDEN OF PROVING VALIDITY OF GIFTS A. The Rule: Presumptive Invalidity The legal standard governing gifts to lawyers, in New York and most other American jurisdictions,24 is well settled. As this Court stated in 1866 and has repeated ever since, the law regards a client's gift to a lawyer "with great suspicion," so that, "where persons, standing in a confidential relation . . . receive benefits from . . . the persons for whom they are counsel . . . the transaction is scrutinized with the [most extreme] vigilance, and regarded with the utmost jealousy."25 Where the donee is a lawyer and the donor is his client, "[t]he law . . . 26 Matter of Smith, 95 N.Y. 516, 523 (1884). See also Cowee, 75 N.Y. at 99-100 (special rule applies where parties "do not deal on terms of equality but that either on the one side from superior knowledge of the matter derived from a fiduciary relation, or from overmastering influence, or on the other from weakness, dependence, or trust justifiably reposed, [because] unfair advantage" is "probable"). 27 In re Bond & Mortgage Guarantee Co., 303 N.Y. at 431 (quoting Wendt v. Fischer, 243 N.Y. 439, 444 (1926)). 28 Henderson, supra; Gordon, supra; Ten Eyck, supra; Cowee, supra; Nesbit, supra; In re Estate of Schneiderman, 105 A.D.3d 602, 963 N.Y.S.2d 250 (1st Dep't 2013); Clines, supra; Radin v. Opperman, 64 A.D.2d 820, 407 N.Y.S.2d 303 (4th Dep't 1978); Restatement (Third) of Law Governing Lawyers § 127 cmt. a. "[I]n England the rule appears to be that the gift is absolutely void." C.S. Patrinelis, Undue Influence in Nontestamentary Gift from Client to Attorney, 24 A.L.R.2d 1288 (1952). 29 Restatement (Third) of Law Governing Lawyers § 127 cmt. a. 30 Vol. I, A75a (Surrogate's Decision). 23 wisely . . . adjust[s] the quality and measure of proof to the circumstances, to protect the weaker party and, as far as may be, to make it certain that trust and confidence have not been perverted or abused."26 "Only by this uncompromising rigidity has the rule of undivided loyalty been maintained against disintegrating erosion."27 Based on such serious concerns, an unbroken line of decisions reaching back to the mid-nineteenth century establishes the following controlling standard: a. A gift from a client to an attorney is presumed void.28 This presumption is rebuttable only under specific conditions. b. The attorney has the burden of proof, which is "heavy"29 and "daunting."30 31 Gordon, 45 N.Y.2d at 698, 412 N.Y.S.2d at 596-97 ("clear proof") (quoting Ten Eyck, 156 N.Y. at 353); Nesbit, 34 N.Y. at 169 (the "clearest evidence is required"); Clines, 226 A.D.2d at 270, 641 N.Y.S.2d at 278 ("clear and convincing"); Howland v. Smith, 9 A.D.2d 197, 200, 193 N.Y.S.2d 140, 144 (3d Dep't 1959) ("strong, convincing and satisfactory proof"). 32 Radin, 64 A.D.2d at 820, 407 N.Y.S.2d at 305. 33 Lawrence, 106 A.D.3d at 608, 965 N.Y.S.2d at 497. 34 Clines, 226 A.D.2d at 270, 641 N.Y.S.2d at 278. 35 Radin, 64 A.D.2d at 820, 407 N.Y.S.2d at 305. 36 Howland, 9 A.D.2d at 200, 193 N.Y.S.2d at 144. 37 Nesbit, 34 N.Y. at 169. 38 Cowee, 75 N.Y. at 100. 24 c. To meet that burden, the quantum of proof must be "clear and convincing."31 (Significantly, although the Attorneys acknowledge that they have the burden of proof, nowhere in their 64-page brief do they say what level of proof that burden requires. Their brief mistakenly reads as if the Estate has the burden of proving there was undue influence.) d. The clear and convincing proof, "usually through disinterested persons,"32 must show that the client gave the gifts "willingly and knowingly,"33 that the gift was "voluntary and understandingly made by the donor, uninfluenced by fraud, duress or coercion,"34 that the gift was "fair and fully intended by the client,"35 "entirely honest, legitimate and free from taint,"36 that "there was no fraud, influence, or mistake; that the transaction was perfectly understood"37 by the client, that "all was fair, open, voluntary and well understood."38 39 Id. 40 1 New York County Lawyers' Association Ethics Institute (eds.), The New York Rules of Professional Conduct: Rules and Commentary 180 (2010). 41 Matter of Henderson, 80 N.Y.2d at 394, 590 N.Y.S.2d at 840 (judicial scrutiny essential "particularly in light of the size of the bequest"). 25 This test was "well settled" in this Court's decisions as early as 1878.39 Since then, it has lost neither its value nor its rigor, and continues to serve its important and beneficial purpose. The rule regularly applied by lower courts, means that lawyers act at their peril and should "exercise extreme caution" when they accept a gift, especially a large gift, from a client.40 As the size of the gift increases, so does the need for more precaution and scrutiny.41 The Attorneys do not challenge the rule, but they fail to satisfy it. They exercised the opposite of "extreme caution" -- they acted recklessly. B. Failure to Satisfy the Rule The Attorneys did not meet their heavy burden to prove, by clear and convincing evidence, that there was no undue influence, duress, or deception and that the gifts were voluntary, open and well understood. In the Surrogate's words, the Attorneys did not "show by the strong, convincing and satisfactory proof required by the authorities . . . that the conveyance to [them] was entirely honest, legitimate and free from taint." Vol. I, A77a (internal quotation omitted). 42 Schlanger v. Flaton, 218 A.D.2d 597, 602, 631 N.Y.S.2d 293, 297 (1st Dep't 1995). 43 Forest Park Assocs. Ltd. P'ship v. Kraus, 175 A.D.2d 60, 62, 572 N.Y.S.2d 317, 319 (1st Dep't 1991). 26 The Surrogate went on: "[I]t is far from clear" that Alice "was acting in accordance with her own volition, as opposed to" the Attorneys' when she made the gifts. Vol. I, A77a. The Surrogate agreed that Alice was "sophisticated and intelligent" but also noted that "in a post-Madoff world," such a person "is not unquestionably beyond victimization." Vol. I, A76a n.4. The applicable legal and ethical rules regarding gifts do not vary with the client's character or level of sophistication. The courts have rejected the argument that an attorney discharged his duty by making "such disclosure as was appropriate to a sophisticated businessman,"42 and held that a lawyer's ethical duties exist "irrespective of the sophistication of the client.'43 Nor are the standards looser for clients who are domineering, mean and abusive, as the Attorneys disrespectfully describe Alice. Even if she were the person they describe, their ethical obligations remain the same. The Surrogate accordingly found "a combination of dubious circumstances that emit an odor of overreaching too potent to be ignored." Vol. I, A80a. The Surrogate ruled that "[s]everal factors prevent the conclusion that the gifts in this case have been proved freely given by the donor." Vol. I, A77a. Those factors -- those "dubious circumstances" -- include: (a) the failure to advise Alice to get independent advice, (b) the size of the gifts, (c) 44 Henderson, 80 N.Y.2d at 394, 590 N.Y.S.2d at 839-40. 45 EC 5-5 states: "A lawyer should not suggest to the client that a gift be made to the lawyer or for the lawyer's benefit. If a lawyer accepts a gift from the client, the lawyer is peculiarly susceptible to the charge that he unduly influenced or overreached the client. If a client voluntarily offers to make (continued...) 27 the secrecy surrounding the gifts, (d) the failure to advise about the gift tax, (e) Alice's reluctant $400,000 bonus to Graubard, and (f) the Attorneys' lack of forthrightness. Any one of these facts is enough to demonstrate the Attorneys' failure of proof; together they compel affirmance of the decisions of the Surrogate and Appellate Division voiding the gifts. 1. Failure to Tell Alice to Seek Independent Advice The Attorneys' most glaring failure was their failure to tell Alice, in the words of the Code of Professional Responsibility (EC 5-5), to "secure disinterested advice from an independent, competent person who is cognizant of all the circumstances" regarding the gifts. This requirement, which the Court has described as "crucial,"44 is not only a bulwark of New York law, but of American jurisprudence in general. The Appellate Division's decision did not retroactively create a new ethical or legal requirement. On the contrary, it simply applied long-established common law rules regarding client gifts. a. EC 5-5 Violated. "I do find," ruled the Referee, "that the Attorneys violated EC 5-5 in failing to advise Alice" to get independent advice.45 Vol. I, A117a. He expressly rejected 45(...continued) a gift to the lawyer, the lawyer may accept the gift, but before doing so, should urge that the client secure disinterested advice from an independent, competent person who is cognizant of all the circumstances. Other than in exceptional circumstances, a lawyer should insist that an instrument in which the client desires to name the lawyer beneficially be prepared by another lawyer selected by the client." 46 See, e.g., Nesbit, 34 N.Y. 167; Radin, 64 A.D.2d 820, 407 N.Y.S.2d 303; Reoux v. Reoux, 3 A.D.2d 560, 163 N.Y.S.2d 212 (3d Dep't 1957); see also Veneski v. Queens-Long Island Med. Group, P.C., 18 Misc.3d 1118(A), 856 N.Y.S.2d 503, 2007 WL 4754349 (Sup. Ct. N.Y. Co. 2007); Matter of Cousins, 80 A.D.3d (continued...) 28 Chill's contrary testimony as incredible. Moreover, "Reich and Mallis testified that Chill never told them of his advice to Alice and they never gave such advice themselves. . . . Reich and Mallis accepted their gifts without any assurance whatsoever that the mandates of EC 5-5 were complied with." Vol. I, A118a- 119a. This unequivocal failure casts a long, dark shadow over the Attorneys' position. From the Referee's perspective, it gave "the appearance of impropriety, which could adversely reflect on the Attorneys' fitness to practice law and provide a basis for charging a violation of Disciplinary Rule 1-102(a)(7)." Vol. I, A119a-120a. b. Common Law Violated. The Attorneys' failure also violated common law. Contrary to what the Attorneys say, the rule in EC 5-5 is neither just an "aspirational" goal, nor merely a technicality. It is a basic, salutary, preventive requirement. The common law recognized it long before it was incorporated in EC 5-5.46 Whether or not EC 5-5 exists, and even in its absence, 46(...continued) 99, 909 N.Y.S.2d 421 (1st Dep't 2010). 47 Contrary to what the Attorneys argue (Attorneys' Br. at 49-50), the Rules of Professional Conduct, which replaced the Code of Professional Responsibility in 2009, did not do away with the "independent advice" requirement found in the common law and EC 5-5 regarding gifts. The New York State Bar Association's Official Comment 6 to Rule 1.8(c) repeats verbatim the independent advice language of EC 5-5. 29 failure to tell a client to seek disinterested advice beforehand invalidates a gift under the common law.47 The case law and EC 5-5 create a bright-line rule -- a figurative Rubicon -- that the Attorneys improperly crossed. Nothing Alice said or did after that critical moment when the warning should have been given should or could retroactively validate the gifts. The Attorneys incorrectly assert that Alice's consultation with her accountant after giving the gifts satisfied their obligation. Attorneys' Br. at 16-17, 50-51. Not so. That was after the fact. The key is to urge a client to get independent advice before making the gift. c. No "Gap" in the Law. Confronted with the Attorneys' serious legal and ethical violations, the Referee incorrectly thought the law provided no remedy. He erroneously thought, and the Attorneys argue here, that neither disciplinary nor non- disciplinary cases permitted him to invalidate the gifts. Vol. I, A119a-121a. They are mistaken. The Referee misperceived a "gap" between the common law and the Disciplinary Rules that supposedly "allows gifts to attorneys, such as the ones in the present case, to be found valid although most would find them 48 See also Restatement (Third) of the Law Governing Lawyers § 127 cmt. a (2000) ("Sanctions for a violation of this rule include [that] . . . [a] client can rescind a gift to the client's lawyer . . . ."). 49 80 N.Y.2d 388, 590 N.Y.S.2d 836. 30 contrary to the standards we believe the profession should uphold." Vol. I, A128a n.12. In other words, he mistakenly believed that the courts were required to enforce an unethical gift. There is no gap, and there is a remedy. Relevant case law requires a court to invalidate gifts to attorneys where, as here, the attorneys violate applicable legal and ethical principles, particularly the requirement to tell the client to obtain independent advice. Relying on the inherent authority to regulate lawyers it licenses, which it has exercised for more than a century, this Court should invalidate the gifts.48 d. Matter of Henderson. The Court underscored the importance of independent advice in Matter of Henderson.49 In that case, decedent's sister objected to the probate of the will because of a large bequest to the testator's attorney, allegedly obtained by fraud and undue influence made possible by a long professional relationship. The question on appeal from a dismissal of the objection was whether there were triable issues of fact. The Court held that an evidentiary hearing was necessary, even though the attorney/beneficiary did not draft the will (indeed refused to do so), told the client to consult another independent attorney (referring the client to the bar 50 80 N.Y.2d at 393, 590 N.Y.S.2d at 839. 51 80 N.Y.2d at 392, 590 N.Y.S.2d at 838 (quoting EC 5-5). 52 80 N.Y.2d at 393-94, 590 N.Y.S.2d at 839. 53 Id. 54 80 N.Y.2d at 394, 590 N.Y.S.2d at 839-40 (emphasis added). 31 association referral service) to prepare the will, and wrote the client a four-page memorandum to give to the other attorney explaining the circumstances and analyzing the client's assets. Despite the precautions taken by the attorney/beneficiary, the Court in Henderson ruled that there may be "other facts and circumstances" of potential relevance.50 The Court explicitly cited and quoted EC 5-5, stating: "the Code of Professional Responsibility suggests that an attorney who accepts a substantial gift from a client ‘is peculiarly susceptible to the charge that he [or she] unduly influenced or overreached the client.'"51 The Court went on to point out that the attorney who drew the will "never seriously inquired into [the client's] reasons" for making the bequest, met with her only briefly, and made no "independent review" of her personal situation.52 "Consequently," wrote the Court with EC 5-5 in mind, "it could be inferred that Henderson did not receive the benefit of counselling by an independent attorney."53 It further held, "In such circumstances, the crucial element of discrete independent representation by disinterested counsel may be lacking."54 Explaining the policy underpinning its rationale, the 55 80 N.Y.2d at 394, 590 N.Y.S.2d at 840. 32 Henderson Court quoted its precedents articulating the need to "scrutinize" fiduciary transactions "with extreme vigilance." In words directly applicable to this case, the Court wrote: Such scrutiny is especially important when attorney-beneficiaries are involved, since the intensely personal nature of the attorney-client relationship, coupled with the specialized training and knowledge attorneys have, places attorneys in positions that are uniquely suited to exercising a powerful influence over their clients' decision. While most attorneys exercise that power with scrupulous honesty, the risk of undue persuasion is sufficiently substantial as to justify judicial inquiry, at least where, as here, there may have been no meaningful consultation or intervention by independent counsel.55 Henderson thus emphasizes both the need for extremely close scrutiny of the gifts in this case and the importance of the Attorneys' failure to advise Alice to get independent advice. It is against this instructive background that the relevant case law should be analyzed. e. Disciplinary Cases Distinguished. The Referee misplaced his reliance, as do the Attorneys in their brief, on disciplinary cases, in which only the attorney's fitness to practice law is at issue, and the burden of proof is reversed. The available remedies in disciplinary proceedings are distinct from those sought here. According to the Referee, the 56 300 A.D.2d 739, 751 N.Y.S.2d 625 (3d Dep't 2002). 57 134 A.D.2d 723, 520 N.Y.S.2d 885 (3d Dep't 1987). 58 Sherbunt, 134 A.D.2d at 724, 520 N.Y.S.2d at 887. 59 Buchyn, 300 A.D.2d at 740, 751 N.Y.S.2d at 627. 60 See 22 N.Y.C.R.R. § 605.13(c) (Office of the Chief Counsel of the Disciplinary Committee "shall have the burden of proof"). 33 courts in Matter of Buchyn,56 and Matter of Sherbunt57 -- two disciplinary cases -- found ethical violations relating to inter vivos gifts, but did not invalidate the gifts. Vol. I, A120a. But in disciplinary proceedings, restitution may be sought and ordered only where there is willful misappropriation, N.Y. Judiciary Law § 90(6-a)(a), which is not the standard here. In Sherbunt, moreover, rescission was not even sought, and the attorney had "urged his client to seek disinterested advice."58 The Buchyn court had no reason to address the issue of restitution or rescission of the disputed gifts because the disciplinary proceeding from which the appeal arose followed on the heels of a settlement whereby the attorney had already given back to the client an amount "roughly equivalent to the amounts transferred to him."59 The burden of proof in disciplinary proceedings is also the opposite of the burden of proof here. Buchyn and Sherbunt were disciplinary proceedings in which the burden of proof was on the Disciplinary Committee, not the attorneys accused of misconduct.60 The Attorneys here, unlike the attorneys in Buchyn and Sherbunt, did bear (but did not successfully carry) the heavy 61 64 A.D.2d 820, 407 N.Y.S.2d 303. 62 64 A.D.2d at 820, 407 N.Y.S.2d at 305. 63 64 A.D.2d at 821, 407 N.Y.S.2d at 305. 64 64 A.D.2d at 820-21, 407 N.Y.S.2d at 305. 34 burden of proving the propriety of the gifts. f. Non-Disciplinary Cases. Many non-disciplinary cases, most of which were not cited by the Referee, invalidate inter vivos gifts where the attorney failed to comply with the common law rule or EC 5-5. The only non-disciplinary case the Referee discussed was Radin v. Opperman, in which the Fourth Department affirmed the return of inter vivos gifts.61 The Referee incorrectly found Radin inapplicable because it did not cite EC 5-5 as grounds for invalidation. Vol. I, A120a-121a. But Radin involved facts that arose before EC 5-5, so the court's analysis would not specifically refer to EC 5-5.62 The Fourth Department, however, relied on the failure to comply with the common law requirement (later embodied in EC 5-5) as a reason for invalidating the gifts: "No lawyer should accept such beneficence without meticulously adhering to the principles above set forth," which include having the client seek disinterested advice.63 The court indicated that this is mandatory: "Most damaging to his position as a lawyer is that he has not indicated that . . . he had decedent seek disinterested advice. . . ."64 The Referee overlooked, and the Attorneys misinterpret, 65 3 A.D.2d 560, 163 N.Y.S.2d 212. 66 Reoux, 3 A.D.2d at 564, 163 N.Y.S.2d at 216. 67 Id. 68 105 A.D.3d 602, 963 N.Y.S.2d 250 (1st Dep't 2013). 69 Id., 105 A.D.3d at 602, 963 N.Y.2d at 252. 35 Reoux v. Reoux,65 in which the Third Department invalidated inter vivos gifts based on the common law requirements later embodied in EC 5-5, which was not then in effect. Reoux held that the attorney "was bound by the highest punctilios of honor . . . to see to it that the defendant was meticulously advised as to her rights and duties."66 The court pointed out that the attorney "never suggested independent counsel."67 The Attorneys misperceive the importance and thrust of In re Estate of Schneiderman.68 See Attorneys' Br. at 52-53. That recent decision supports Alice, not the Attorneys, and illustrates the relevant propositions of law. The Appellate Division in Schneiderman reversed summary judgment dismissing a claim against an attorney-defendant for undue influence in connection with a $1 million gift created by means of a joint bank account. "Under the circumstances presented," stated the Appellate Division, "defendant failed to overcome the presumption of undue influence and failed to eliminate any triable issue of fact warranting dismissal."69 Moreover, "there was no meaningful consultation with independent counsel that would support a 70 Id., 105 A.D.3d at 603, 963 N.Y.S.2d at 252. 71 18 Misc.3d 1118(A), 856 N.Y.S.2d 503, 2007 WL 475434. 72 2007 WL 4754349, at *3. 73 Matter of Cousins, 80 A.D.3d 99, 909 N.Y.S.2d 421. 36 finding that decedent was not unduly influenced by defendant."70 For this last proposition, the First Department cited Matter of Henderson, which stressed the "crucial" importance of advising the client to get pre-gift independent advice before making the gift. Relying on Court of Appeals precedent, Schneiderman thus highlights the essential requirement to tell the client to seek independent advice. g. The Veneski/Cousins Decisions. Neither the Attorneys nor the Referee refer to Veneski v. Queens-Long Island Med. Group,71 which invalidated a $450,000 gift based on the failure to abide by EC 5-5. The court found it "incredible that [the attorney] even sought to claim that his client gave him such a large gift absent careful adherence to the procedures outlined in the Code of Professional Responsibility. . . . The [clients] were never advised . . . to obtain independent legal counsel, and the disputed question whether such payment was a gift was properly resolved against [the attorney]."72 The attorney in Veneski was disbarred primarily because he took the $450,000 "gift."73 The facts in Veneski/Cousins, detailed in the Cousins decision, are eerily similar to ours. Here, however, the "gifts" amounted to $5.05 million, more than ten times the gift in Veneski/Cousins. The attorney "did not 74 80 A.D.3d at 103, 909 N.Y.S.2d at 425 (internal quotation marks omitted). 75 80 A.D.3d at 104, 909 N.Y.S.2d at 425. 76 Two of the Attorneys confessed at trial that they had never read the Code of Professional Responsibility in its entirety, and the third had not read it since attending law school in the 1970s. Vol. V, A365; Vol. VI, A717, A1043-44. 37 take any of the precautions one would expect a lawyer to take when accepting a 'gift' of this magnitude from a client."74 So too here, with even greater force. An "aggravating factor[]" in Veneski/Cousins was the attorney's "lack of remorse, candor and insufficient appreciation of the seriousness of the proceedings."75 Here, the Attorneys' lack of remorse is shown in their brief, and their lack of candor is emphasized by the Referee's rejection of their trial testimony as "incredible" and "contrived." The Attorneys' "insufficient appreciation of the seriousness" of the ethical issues posed by the gifts is extraordinary. None of the Attorneys perceived "any" ethical issues about the gifts, and they "did not review the Code, consult ethics counsel as they had on other estate representation issues, nor did they undertake any independent research."76 Vol. I, A115a. h. Will Cases. The Attorneys and the Referee also mistakenly relied on cases that upheld will bequests to attorneys despite ethical lapses. Vol. I, A121a. Challenges to testamentary gifts carry a different burden of proof from cases involving inter vivos gifts. A person seeking to invalidate a 77 In re Kindberg's Will, 207 N.Y. 220, 228-29 (1912). See also In re Putnam, 257 N.Y. 140 (1931). 78 141 A.D.2d 540, 529 N.Y.S.2d 153 (2d Dep't 1988). 79 Kristina Crosswell, Attorney-Client Relationships -- Undue Influence -- Fiduciary Duty Mandates That Attorney Advise Client to Secure Independent Advice and Counsel Before Accepting Benefit from Client, 60 Miss. L.J. 657, 669 (1990). 80 See, e.g., Reilly v. McAuliffe, 331 Mass. 144, 117 N.E.2d 811 (1954); Israel v. Sommer, 292 Mass. 113, 197 N.E. 442 (1935); Webster v. Kelly, 274 Mass. 564, 175 N.E. 69 (1931). 38 bequest bears the burden of proving that the bequest was improper, whereas, in contrast, the attorney has the burden of proof regarding an inter vivos gift. The rule that a transaction between an attorney and client conferring a benefit or advantage on the former is presumptively invalid, and the burden of relieving himself from that presumption rests on the attorney, is confined to transactions or gifts inter vivos, and does not apply in all strictness to a gift by will.77 That is why will cases like Matter of Delorey78 are inapposite. i. Independent Advice Rule "Widely Recognized". The soundness of the rule requiring the attorney receiving a gift to advise a client to get independent counsel is "widely recognized" in "many" American jurisdictions.79 Indeed, it is often not enough for the donee-attorney to have made sure the client has obtained independent advice; the specificity and competence of that advice will be closely scrutinized.80 One Mississippi court held that advising the client to obtain independent counsel is 81 Lowrey v. Will of Smith, 543 So. 2d 155 (Miss. 1989). See also Toomey v. Moore, 213 Or. 422, 325 P.2d 805 (1958); Marron v. Bowen, 235 Iowa 108, 16 N.W.2d 14 (1944). 82 38 Am. Jur. 2d, Gifts § 33 ("primary consideration"); C.S. Patrinelis, Undue Influence in Nontestamentary Gift from Client to Attorney, 24 A.L.R.2d 1288 at §§ 2, 7. 83 Restatement (Third) of the Law Governing Lawyers § 127(2). 39 the only way to rebut the presumption that a gift is void.81 As a general proposition of American law, the single most important factor, the "primary consideration," is whether the attorney has made sure that the client has obtained disinterested and independent advice.82 The Restatement makes clear that, "A lawyer may not accept a gift from a client . . . unless . . . (c) the client, before making the gift, has received independent advice or has been encouraged, and given a reasonable opportunity, to seek such advice."83 Contrary to what the Attorneys say (Attorneys' Br. at 6), recommending independent advice is "a sine qua non of satisfying that common-law standard." It is virtually a per se rule. Failure to tell Alice to get independent advice would, then, have been enough by itself to void the gifts. But there are still other reasons to affirm. 2. Extraordinary Size of Gifts Exacerbating the failure to tell Alice to seek independent advice are the "extraordinary amounts" of the gifts. Vol. XVII, A7394. The Court has stressed the need for heightened scrutiny 84 Matter of Henderson, 80 N.Y.2d at 394, 590 N.Y.S.2d at 840. 85 Restatement (Third) of the Law Governing Lawyers § 127 cmt. f (2000). See also Veneski, 2007 WL 4754349, at *3 (scrutinizing attorney gift recipient's actions in light of substantial nature of gift); Radin, 64 A.D.2d at 820, 407 N.Y.S.2d at 305 (same). 40 "particularly in light of the size" of a gift to an attorney.84 For gifts of such size, one would have expected the Attorneys to have meticulously complied with all relevant legal requirements. Gifts in excess of $5 million from a client to attorneys are apparently unprecedented. As the Referee stated, "[t]he three legal ethics experts called by both sides conceded that they knew of no other occasion when a client had given a lawyer a gift of [that] magnitude." Vol. I, A110a-111a. The enormity of the gifts becomes even more important when viewed in relation to the Attorneys' compensation. The gifts were many times their annual income and admittedly "life altering." Vol. I, A110a; Vol. VI, A895. As the Restatement states, if a gift is "substantial in relation to the lawyer's assets, it suggests a motivation on the part of the lawyer to overreach the client-donor, or at least not to have fully advised the client of the client's rights and interests. Under [such] circumstances, the lawyer violates the client's rights by accepting such a gift."85 The Surrogate rejected the Referee's conclusion that the gifts "were not unprecedented for Mrs. Lawrence herself." Vol. I, A78a. The Surrogate compared the "magnitude" of the gifts to 41 "the size of the few other major lifetime gifts" Alice gave to others (Vol. I, A78a-79a), and concluded: That there is some disparity between these other gifts and the challenged ones (i.e., simultaneous gifts [totaling $5.05 million], not to mention the $400,000 to the firm of which each was a member) appears clearer in light of the fact that by the time they received such gifts the lawyers had already collected millions of dollars from Mrs. Lawrence in more than handsome legal fees. Vol. I, A79a. The Attorneys' efforts to excuse their conspicuous failures by pointing to Alice's other, dissimilar and smaller gifts has already been rejected. 3. Conspiracy of Silence A most damning fact, as the Surrogate found, "is the sustained secrecy that defendants uniformly maintained with respect to these gifts." Vol. I, A80a. The Attorneys, conscious of their misconduct, told no one (except their tax accountants) about the gifts, including "those persons . . . to whom concededly they owed a fiduciary duty." Vol. I, A115a. They failed to tell their other co-clients (Alice's children), their law partners, and even one of their spouses. Id.; Vol. I, A80a. "[T]he Attorneys concealed information," stated the Referee, "which surely would have been of great interest to [their law partners and the Lawrence children], to whom the Attorneys owed a fiduciary duty." Vol. I, A111a. The secrecy of the Attorneys, not the client (Attorneys' Br. 38-39), is what matters here. The veil of secrecy used by the Attorneys is all but ignored by the 86 See Howland v. Smith, 9 A.D.2d 197, 199, 193 N.Y.S.2d 140, 143 (3d Dep't 1959) (attorney's estate failed to show client's conveyance to him to be free of taint "because the circumstances surrounding the transaction itself abound with suspicious elements, secrecy and factors wholly inconsistent with a bona fide transaction); In re Van Den Heuvel's Will, 76 Misc. 137, 153, 136 N.Y.S. 1109, 1120 (Surr. Ct. N.Y. Co. 1912) ("clandestine" will that drafting attorney kept "profoundly secret" not product of voluntary act). Other states also view secrecy surrounding a gift as a powerful indicator of undue influence. See, e.g.,In the Matter of David Gross, Dkt. No. DRB 09-186 at 40 (Sup. Ct. N.J. Disciplinary Review Board Dec. 18, 2009) (attorney's "efforts to conceal his receipt of [alleged gift] indicate his awareness of wrongdoing"), available at http://njlaw.rutgers.edu/collections/drb/decisions/09-186.pdf; McDonald v. Hewlett, 102 Cal. App. 2d 680, 685, 687, 228 P.2d 83, 86, 87 (Cal. Dist. Ct. App. 1951) (secrecy "quite significant" and renders testimony of lawyer "subject to suspicion"); Nicholson v. Shockey, 192 Va. 270, 64 S.E.2d 813 (1951) (silence contributed to failure to overcome presumption of undue influence). 42 Attorneys in their brief, as it was by the Referee, who erroneously focused instead on whether Alice kept the gifts secret. Because Alice told her accountant and best friend, the Referee incorrectly discounted the notion of any secrecy altogether. The Surrogate was right to cite this cloak of silence -- a recognized badge of guilt -- as a significant factor in invalidating the gifts.86 If Alice requested that the Attorneys keep the gifts secret (Attorneys' Br. 39), they should not have accepted the gifts because of their conflicting fiduciary duties, especially to their three other clients, the Lawrence children. "There is no exception to fiduciary duty [to one client] because of [another] client's insistence that you violate it." Vol. IX, A2230-35 (testimony of Prof. Stephen Gillers). Disciplinary Rule 4-101(c)(2) states that "A lawyer may reveal . . . [c]onfidences 87 See also Anonymous, 1 Wend. 108 (Sup. Ct. of Judicature of N.Y. 1828) (it is attorney's duty to do what he has no doubt the court would order to be done, though his client instruct him otherwise); In re Himmel, 125 Ill. 2d 531, 539, 533 N.E.2d 790, 792-93 (1989) (rejecting attorney's argument that he did not comply with code of professional responsibility in deference to client instruction and holding that "A lawyer, as an officer of the Court, is duty-bound to uphold the rules in the Code. . . . A lawyer may not choose to circumvent the rules by simply asserting that his client asked him to do so."); In re Doss, 367 Ill. 570, 572, 12 N.E.2d 659, 660 (1938) (attorney cannot escape responsibilities by "urging, as an excuse, that he is only following his client's instructions"). 43 or secrets when . . . required by law. . . ," as was the case here.87 That Alice even told the Attorneys to keep the gifts secret is open to serious doubt. The only evidence of such instruction comes from the testimony of Chill, whom the Referee found to be not credible on a number of issues. The Attorneys seek to create the misimpression that they did not hide the existence of the gifts. Although they did not tell their law partners or the Lawrence children (their clients) about the gifts, they now claim "they" told Alice's accountant/financial adviser (Jay Wallberg) or his associate (Paul Bishop) about the gifts, as if that revelation lifts the shroud of secrecy. Attorneys' Br. at 7, 57. Not so. Chill never spoke to Wallberg or Paul Bishop about the gifts, and because Wallberg was already aware of the gifts before any conversation with the Attorneys, they were not "disclosing" the existence of the gifts to Wallberg. Reich and Mallis, moreover, did not discuss the gifts with Wallberg or Bishop until months later, and they only did so on a confidential basis in 44 connection with the preparation of their own personal tax returns, which were being prepared by Wallberg and Bishop. Vol. VIII, A1896, A1915, A1918; Vol. VI, A897; Vol. V, A361-62. As with many of their actions here, too, the Attorneys were looking out for their own interests, not those of their clients. To claim that such facts show no secrecy about the gifts is to blink reality. It is undisputed that the Attorneys did not tell their law partners or the Lawrence children, and that is the secrecy that matters. If the other partners at Graubard or the Lawrence children knew, they likely would have asked uncomfortable questions and taken action of some sort. * * * These three factors -- failure to advise Alice to get independent advice, the extraordinary size of the gifts, and the curtain of secrecy -- were discussed by the Appellate Division, but the record established other factors that can be relied on by this Court, too. 4. Failure to Advise About the Gift Tax The Attorneys' secrecy also included failure to tell Alice about the gift tax implicated by the gifts. Vol. I, A80a. For a gift of $5 million to be "knowing" and "perfectly" or even just "well" understood, as the law demands, the Attorneys were required to advise Alice about the gift tax consequences -- which added another $2.7 million to her total cash outlay -- before she 88 At the oral argument of the first appeal in this case to this Court, Attorney Mallis, representing himself pro se, made the following false and misleading statement to this Court: "I was led to understand, one of my partners did have a conversation, not at all what she [i.e., Alice] characterizes, but had a conversation with her about the gift taxes, but it was not me." At trial, Mallis admitted that the above statement to this Court was incorrect and untrue. Vol. V, A401-06. "Q. Is it a correct statement? A. It is not. Q. So isn't true then that you told the Court of Appeals at an argument in this case you made a statement that was untrue? A. I misspoke, yes." Id. at A404. 45 made the gifts. None of them did so.88 The Surrogate expressly rejected the Referee's conclusion that Alice was "aware" of the gift tax consequences, finding: [T]he record does not support the Referee's conclusion that Mrs. Lawrence was sufficiently "knowing" in relation to these particular gifts. . . . Indeed, there is evidence that suggests the contrary. Such evidence comes in the form of testimony concerning Mrs. Lawrence's distress when she learned from her tax accountant -- but only after the gifts had become a fait accomplis -- the extent of the tax cost to her as a donor. Vol. I, A80a-81a. The Surrogate and the Referee both recognized that, even without a per se rule requiring advice about gift tax implications, nothing prevented the Attorneys from "volunteer[ing] such advice," and, moreover, they "might be expected to" do so, "given the magnitude of the gifts in issue." Vol. I, 81a. Aware that no fact could be viewed in isolation from the rest of the evidence, the Surrogate properly recognized that the Attorneys' failure to advise as to the tax consequences 89 80 A.D.3d at 103, 909 N.Y.S.2d at 424. See also Radin, 64 A.D.2d at 820, 407 N.Y.S.2d at 304 (filing of gift tax return did not validate gift); Cuthbert v. Heidsieck, 364 S.W.2d 583, 587-88 (Mo. 1963) (voiding gift to attorney from client who had filed gift tax return, stating gift tax return could have been "planned by defendant [attorney] to secure" the gift "without his payment of taxes on income earned"). 46 of the gifts was highly suspicious and "of a piece with their other subterranean conduct in relation to these gifts." Id. The Referee also erred in finding that Alice's filing of a gift tax return was evidence of the gifts' validity. Several cases have held otherwise. In Veneski/Cousins, it did not even matter that the client had signed a gift tax return and "reaffirm[ed] the gift multiple times over the ensuing years while represented by other counsel."89 5. $400,000 Reluctant "Gift" to Firm The Surrogate correctly focused on the suspicious $400,000 bonus check to Graubard, which the Referee found Chill had solicited from Alice. Vol. I, A119a. The Surrogate explained that this "smaller gift obviously had gone against the grain of the donor's feelings and judgment." Vol. I, A77a. "In light of that purported 'gift' to the firm, it would take an unwarranted leap of faith to conclude that the multi-million-dollar checks written at about the same time to the lawyers had not likewise been extracted from her by some degree of pressure, whether express or tacit, patent or subtle, from at least one of the three donees." Id. (emphasis added). Moreover, the Attorneys, as partners in Graubard, shared in 47 that $400,000 bonus. They did so without informing their partners that they had simultaneously received $5.05 million from Alice for their "Estate Legal Services" and without informing the children. 6. Lack of Forthrightness This avalanche of suspicious facts is too much for the law to tolerate. "[I]n view of such overall [subterranean] conduct," the Surrogate concluded that "defendants played their cards too close to the vest to satisfy the standard of strict forthrightness to which lawyers have long been held in relation to their clients." Vol. I, A81a. The Surrogate explained that, "for purposes of gauging defendants' bona fides, it is somewhat telling that . . . several aspects of their testimony [were] not credit-worthy." Id. C. Were the Gifts Solicited? Although the Attorneys claim that the gifts were unsolicited, the only testimony to support that assertion came from Chill, whom the Referee found had no credibility. Alice -- the only other party to the discussion with Chill -- died before the trial, but she stated, both in her complaint and in an affidavit, that Chill had indeed solicited the huge gifts. See Vol. I, A341a-342a (Complaint ¶¶ 15-17); Vol. IV, A1452a-1453a (Affidavit ¶¶ 9-13). The allegations of the complaint and evidence at trial undermine the Attorneys' claim that the Estate does not contend 90 "Danny- I'm not sure just what I should be thanking the firm for. (Keeping me on as a client?) You write my thank yous. A." Vol. XV, A6035. 48 the gifts were solicited. The circumstances surrounding the simultaneous $400,000 bonus to Graubard, which the Referee found Chill had "surely" solicited (Vol. I, A119a), and the sarcastic wording of Alice's cover note90 with that $400,000 check raise doubts about Chill's claim of non-solicitation. That cover note to Chill also casts grave doubts on Chill's professed non- involvement; Alice thanks Chill for suggesting that he would distribute those checks: "Danny C You were kind to suggest you distribute the enclosed envelopes for me." Vol. I, A106a. He was no mere passive recipient. As the Surrogate stated, it would "take an unwarranted leap of faith" to conclude the gifts were not solicited. Vol. I, A77a. * * * Scrutinized, as the cases teach us it should be, with "great suspicion" and with "the most extreme vigilance" to "make it certain" that no impropriety exists, and applying the rule with the needed "uncompromising rigidity," the totality of the circumstances more than justifies affirming the Appellate Division on the gifts. Rather than clear and convincing proof of validity, at a minimum the evidence leaves deep, troubling doubts about whether the gifts were: (a) voluntarily and knowingly made; (b) "perfectly" or even "well" understood by Alice; (c) uninfluenced by fraud, duress, or mistake; and (d) "entirely" 49 honest, legitimate, "open," fair and "free from taint." II THE CLAIMS TO VOID THE GIFTS WERE TIMELY The Attorneys erroneously point to the passage of time between the gifts (1998) and when Alice challenged them (2005) for two purposes: first, as supposed evidence of the voluntariness of the gifts, and second, as a time-bar to the claim. Both arguments fail because of the "continuous representation" doctrine. In light of their continuous representation of Alice, the Attorneys cannot say that she asserted her gift claim too late. Every decision-maker in this case -- Referee, Surrogate, and Appellate Division -- has ruled that Alice's claim is timely due to the continuous representation doctrine. That doctrine holds that the statute of limitations otherwise applicable to a client's claim against a professional is tolled while the professional continues to represent the client on the same or a related matter. Such a conclusion did not expand the continuous representation doctrine. It met and applied the traditional elements of that doctrine. No fundamental transformation or sea change in the law resulted. Nor is there any conflict with prior decisions of this Court. A. Policy Rationale The continuous representation rule exists to avoid 91 Glamm, 57 N.Y.2d at 93, 453 N.Y.S.2d at 677-78 (1982). See also Shumsky, 96 N.Y.2d at 167-68, 726 N.Y.S.2d at 368 (2001). 92 See also Armstrong v. Morrow, 166 Wis. 1, 163 N.W. 179 (1917); 24 A.L.R.2d 1288 at § 10 (client's delay in seeking to void gift to attorney is not laches where "relationship of (continued...) 50 disrupting the attorney-client relationship unnecessarily, and it recognizes that a client cannot be "expected to jeopardize his pending case or his relationship with the attorney handling that case during the period that the attorney continues to represent the person."91 That pragmatic understanding of the attorney-client relationship and its psychological and emotional components is why the lapse of time does not bar Alice's gift claim either procedurally or on the merits. Although the delay "loomed large" in the Referee's view of the gifts, the Surrogate, relying on a decision of this Court, disagreed: After all, the courts have recognized that, so long as a client is depending upon a lawyer for representation in an on-going matter, the client as a practical reality may well feel obliged to forbear from assuming an adversarial posture against the lawyer (cf. Shumsky v. Eisenstein, 96 NY2d 164, 167-68). Thus, this court does not agree that the passage of years from the time of the gifts to the time Mrs. Lawrence contested them is itself evidence that undermines her estate's undue influence claim. Vol. I, A79a-A80a. The policy behind the continuous representation doctrine, as articulated by this Court and the Surrogate, justifies and explains any delay.92 92(...continued) attorney and client has been a continuing one, the presumption being that the influence has also been continuing"). 93 56 N.Y.2d 86, 451 N.Y.S.2d 46 (1982). 94 Id., 56 N.Y.2d at 94, 451 N.Y.S.2d at 51. 95 See, e.g., Schlanger v. Flaton, 218 A.D.2d 597, 631 N.Y.S.2d 293 (1st Dep't 1995) (applying doctrine to claims for breach of fiduciary duty and violation of disciplinary rules); Luk Lamellen U. Kupplungbau GmbH v. Lerner, 166 A.D.2d 505, 506, 560 N.Y.S.2d 787, 788-89 (2d Dep't 1990) (continuous representation doctrine "equally applicable to causes of action to recover damages for legal malpractice and to causes of action alleging a breach of contract by an attorney"). 51 B. Not Limited to Negligence Claims The continuous representation doctrine applies to attorney- client transactions and is not limited to malpractice claims. The leading case from this Court is Greene v. Greene,93 a breach of fiduciary duty case that did not involve a malpractice claim, but did arise from an attorney-client transaction. Greene made explicitly clear that the continuous representation doctrine is not limited to malpractice cases. "Nor do we agree with the defendant's suggestion," held the Court, "that the rule should be confined to negligence cases where it originated."94 Greene has been consistently interpreted that way by lower courts.95 C. Sufficiently Related The Attorneys' legal representation of Alice was ongoing and sufficiently related to the disputed gifts to trigger the continuous representation doctrine. The legal work performed by the Attorneys for Alice was the Sylvan Lawrence estate litigation. It was in connection with that litigation that they 52 obtained the multi-million dollar gifts. Thus, on the memo line on each gift check, Alice wrote: "Estate Legal Services/Gift." Vol. I, A349a, ¶ 55; see also Vol. I, A107a. Vol. XV, A6026. The Attorneys describe those gifts as "an expression of her gratitude" for their help in the fight against Cohn, the executor of the Sylvan Lawrence estate. Attorneys' Br. at 12. They were made "immediately after the Attorneys had achieved what to Alice was a major victory in her battle with [Cohn]." Vol. I, A124a. It does not matter that the Attorneys never gave Alice legal advice -- that is, never represented her -- concerning the gifts. There need only be a "substantial relationship" between the matter in dispute and the ongoing representation. Put another way, the ongoing representation can be on the "same or related" matter as the subject of the dispute. Greene again supplies the answer. The attorney in Greene 96 Greene, 56 N.Y.2d at 95, 451 N.Y.S.2d at 51 (emphasis added, citation omitted). See also Borgia v. City of New York, 12 N.Y.2d 151, 155, 237 N.Y.S.2d 319, 321 (1962) ("We hold that at least when the course of treatment which includes the wrongful acts or omissions has run continuously and is related to the same original condition or complaint, the 'accrual' comes only at the end of the treatment") (emphasis added). 53 concocted an illusory distinction between the matter in dispute, i.e., the management of the trust, and the area of representation, i.e., the creation of the trust. In rejecting that false distinction, this Court held: It appears to be conceded that the defendants performed legal services on the plaintiff's behalf by creating the trust and continued to act as her attorney in all legal matters relating to its administration. In addition the plaintiff alleges that this was an integrated plan proposed by the defendants as a solution to her concern over the proper investment of her funds. If these allegations are credited, the defendants' various activities on plaintiff's behalf can be seen as part of a course of continuous representation concerning the same or a related problem.96 The legal battle over Sylvan Lawrence's estate did "continue" well after the Attorneys obtained their gifts. Alice would not have wanted to jeopardize their handling of that battle by taking any steps to revoke or scale back the gifts in the wake of having made them. Given these indisputable facts, the Referee and the Surrogate aptly applied the doctrine. "[A]s a practical reality," ruled the Surrogate, "[Alice] may well [have felt] obliged to forbear from assuming an adversarial posture against 97 See also Armstrong, 166 Wis. 1, 163 N.W. 179 (rejecting claim of laches where client waited four years before challenging attorney who continued to represent him); 24 A.L.R. 2d 1288 at § 10. 98 The policy behind the continuous representation doctrine also explains Alice's "thank you" notes sent after giving the gifts. At the time, the Attorneys were still in the midst of representing Alice, and she wrote those notes to placate her attorneys and, in turn, not jeopardize the pending Sylvan Lawrence estate litigation. Jay Wallberg testified that Elaine Reich told him that the Attorneys told Alice to write those notes. Vol. VIII, A1931-32. The Surrogate found that Wallberg's testimony that Reich said "we got Alice to write" the thank you notes is "some further suggestion that the lawyers themselves -- and not the client alone -- had a hand in the making of these gifts." Vol. I, A78a (emphasis added). 54 [her] lawyer[s]." Vol. I, A79a. The Appellate Division agreed.97 106 A.D.3d at 608, 965 N.Y.S.2d at 497. * * * The Attorneys have shown no reason to disturb the determination by all prior tribunals that Alice's gift claims were timely.98 III SURROGATE ACTED WITHIN HER AUTHORITY The Attorneys' brief largely ignores the Surrogate's decision. But the propriety of the Appellate Division's decision is underscored by the care and meticulousness of the Surrogate's decision covering the gifts. In finding that the Attorneys had failed to meet their "heavy" burden of proof, the Appellate Division and the Surrogate acted well within their authority. The Surrogate was entitled to make new findings regarding the gifts where the Referee's 99 See Galiber v. Previte, 40 N.Y.2d 822, 824, 387 N.Y.S.2d 561, 562 (1976) ("On its own initiative, Special Term had the power to confirm or reject, in whole or in part, the report of the referee . . . . "). 100 Barrett v. Stone, 236 A.D.2d 323, 324, 653 N.Y.S.2d 598, 598 (1st Dep't 1997) (internal quotation marks omitted) ("Under CPLR 4403, the motion court could, with respect to the Special Referee's report, make new findings with or without taking additional testimony"). 101 See Northern Westchester Prof'l Park Assocs. v. Town of Bedford, 60 N.Y.2d 492, 499, 470 N.Y.S.2d 350, 354 (1983) (affirming Appellate Division holding that plaintiff had not met burden of proof, even though trial court had found for plaintiff; the authority of the Appellate Division "is as broad as that of the trial court . . . and that as to a bench trial it may render the judgment it finds warranted by the facts, taking into account in a close case ‘the fact that the trial judge had the advantage of seeing the witnesses.'") (quoting York Mortgage Corp. v. Clotar Constr. Corp., 254 N.Y 128, 134 (1930)). 55 findings were unsupported by the record or against the weight of the evidence. The Surrogate assessed the record as a whole, and the Appellate Division, in turn, relied on her conclusions. The Surrogate was not required to act as a mere rubber stamp of the Referee. SCPA 506(4) and CPLR 4403 authorize her to "confirm or reject, in whole or in part," the Referee's report,99 and to "make new findings with or without taking additional testimony."100 She gave deference where deference was due, and made her own determinations where she was allowed to and where, in her view, the record evidence compelled her to do so. The Surrogate was keenly aware of the "applicable standards" of review, as is reflected in her decision. There, she points out that her function resembled "that of an appellate court in reviewing the trial court's determination."101 Vol. I, A74a (internal quotation omitted). As a result, the "court may adopt 102 Cohen v. Hallmark Cards, Inc., 45 N.Y.2d 493, 498, 410 N.Y.S.2d 282, 285 (1978). 56 or reject the Referee's recommendations, in whole or in part." Id. She goes on, "[w]here the findings below depend upon credibility, the court must give the Referee's findings 'great weight,' since he presided at the trial and was thus in the best position to assess credibility. Nevertheless, it is still open to the court to make new findings (CPLR 4403) to the extent, if any, that the findings below are unsupported by the record or against the weight of the evidence." Vol. I, A74a (citations omitted). The Surrogate's compliance with the appropriate level of review is further highlighted throughout the text of her decision. She did not presume to revisit any of the Referee's factual findings based on credibility. Instead, she found that any such findings could not, as to the gifts, have led to the conclusions he ultimately drew. Her analysis was the product of careful attention to the limits of her authority. In any event, "[i]n reviewing a judgment of Supreme Court, the Appellate Division has the power to determine whether a particular factual question was correctly resolved by the trier of facts."102 * * * Based on the Attorneys' failure to carry their burden of proof, the timeliness of Alice's gift claim, and the scope of the authority of the Surrogate and the Appellate Division, the gifts were properly ruled invalid, and that ruling should be affirmed. 103 Graubard was fortunate. The courts could have ruled that forfeiture was appropriate due to improper behavior of the Attorneys (partners in Graubard) in connection with the gifts and their unethical treatment of the Graubard children. See, e.g., Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 44, 556 N.Y.S.2d 239, 242 (1990); Quinn v. Walsh, 18 A.D.3d 638, 638, 795 N.Y.S.2d 647, 648 (2d Dep't 2005); Yannitelli v. D. Yannitelli & Sons Constr. Corp., 247 A.D.2d 271, 272, 668 N.Y.S.2d 613, 613 (1st Dep't 1998); Automatic Bedding Corp. v. Ortner, 26 A.D.2d 664, 665, 272 N.Y.S.2d 628, 629 (2d Dep't 1966); Chen v. Chen Qualified Settlement Fund, 552 F.3d 218, 225 (2d Cir. 2009). Or, as the revised retainer was procedurally unconscionable and substantively unconscionable from day one (that is, not just in hindsight), courts could have denied all fees for work thereafter. The Appellate Division's determination was, in other words, kind to Graubard, not "punitive" as amicus New York State Trial Lawyers Association ("NYSTLA") claims. 57 PART TWO -- UNCONSCIONABLE REVISED RETAINER Because the Attorneys also engineered a revised retainer that was procedurally and substantively unconscionable (as shown below), the Appellate Division correctly looked to the original retainer to determine Graubard's compensation.103 In so doing, it followed settled New York case law. Its decision also comports with the general precept that time charges are a "reasonable" way to determine a fee award. IV REVERSION TO ORIGINAL RETAINER APPROPRIATE The Appellate Division, the Surrogate, and the Referee all agreed that the revised retainer was unconscionable and that Graubard should not receive $44 million in fees. Only the Appellate Division, however, applied the appropriate remedy: it reverted to the terms of the original fee agreement, which resulted, in addition to the $22 million in time charges Graubard 104 214 A.D. 622, 212 N.Y.S. 577. 58 received before 2005, in a recovery by Graubard of $2,919,605.15 more in time charges for the four a half months' work done since January 2005. Vol. XVII, A7396. This is correct as a matter of precedent, policy and fairness. It was neither appropriate nor necessary to devise a complex, arbitrary and discretionary formula to calculate Graubard's fee. Such an approach misconstrues well-settled authority, as it assumes that when a fee is found to be unconscionable or unreasonable, the court may "either reduce the contingent-based fee to a reasonable and fair amount, or strike it entirely and award an amount on the basis of quantum meruit." Vol. I, A187a (emphasis added, citations omitted). Rather, the correct approach, regardless of whether the revised retainer is unconscionable on procedural or substantive grounds, is to rely on the surviving original agreement. A. Applicable Precedent The correct rule, adopted by the First and Second Departments, is that where a revised fee agreement is unenforceable, the prior fee agreement is used to calculate the attorney's fee. For example, at issue in Matter of Smith,104 cited by the Appellate Division, were an original contingency fee and a revised contingency fee in Surrogate's Court. The First Department found the revised retainer inequitable and unenforceable and, as a result, held that the original retainer 105 271 A.D.2d at 634, 706 N.Y.S.2d at 190. 106 351 F. Supp. 2d at 265. 107 Matter of Friedman, 136 A.D. 750, 752, 121 N.Y.S. 426, 428 (2d Dep't 1910). 108 See, e.g., Matter of Goliger, 58 A.D.3d 732, 871 N.Y.S.2d 689 (2d Dep't 2009); Matter of Guattery, 278 A.D.2d 738, 739, 717 N.Y.S.2d 764, 766 (3d Dep't 2000); Matter of Coughlin, (continued...) 59 controlled. Similarly, in Connors v. Wildstein,105 the Second Department, confronted with a revised contingency fee retainer that called for a fee in excess of that Court's schedule of reasonable fees, rejected the revised retainer and found that "the defendant was entitled only to the amount authorized by the initial retainer agreement." A federal court in Manhattan applying New York law reached the same result. In Naiman v. New York Univ. Hosps. Ctr.,106 also relied on by the Appellate Division, the court rejected a modified retainer and ordered fees to be calculated based on the original retainer. The idea of a choice in fixing a fee arises from a misinterpretation of an inapplicable line of authority finding, in the absence of a prior fee agreement, that a court can reduce an unconscionable or unreasonable fee to a fair and reasonable fee.107 The cases that invoke this rule do not involve revised retainers; rather, they involve original void retainer agreements, and therefore, the courts had no previous agreement to guide them.108 108(...continued) 221 A.D.2d 676, 677, 633 N.Y.S.2d 610, 611-12 (3d Dep't 1995); Matter of Schanzer, 7 A.D.2d 275, 278, 182 N.Y.S.2d 475, 480 (1st Dep't 1959); 520 E. 72nd Commercial Corp. v. 520 E. 72nd Owners Corp., 691 F. Supp. 728, 738-39 (S.D.N.Y. 1988). 109 174 N.Y. 15 (1903). 110 See, e.g., Boyle v. Waters, 206 Mich. 515, 523, 173 N.W. 519, 522 (1919) (finding, where counsel failed to show valid (continued...) 60 In re Fitzsimons109 is not, as Graubard argues, in conflict with the First Department in this case, or with Smith, Naiman or Connors. Graubard mischaracterizes Fitzsimons. The case says nothing about the remedy when unconscionability is found. The case was remanded on the issue of unconscionability, in the event of which a remedy would be decided. The case says nothing about how the remedy will be computed. Fitzsimons, moreover, dealt with an original, not a revised, retainer. Graubard's other authority is equally inapplicable, as none of it involves a valid original retainer purportedly replaced by an invalid revision. Rather, it stands for the unremarkable proposition that where a retainer agreement would result in an attorney receiving an unconscionable fee, that fee should be reduced. None of Graubard's authority confronts the most important factual circumstance of this litigation: that the unconscionable fee agreement replaced a valid 22-year arrangement between the parties. Use of a prior fee agreement when a revised agreement is invalid has deep and widespread support in the law of sister states.110 It is also consistent with the general rule regarding 110(...continued) modification of fee agreement, that counsel's "right to compensation must be determined by their first contract of hire"); Fischoff v. Hamilton, 2012-Ohio-4785, 2012 WL 4903096, at *1 (Ohio Ct. App. Oct. 17, 2012) (enforcing original fee agreement where modification found void for failure to perform); Stroud v. Tunzi, 72 Cal. Rptr. 3d 756, 762, 160 Cal. App. 4th 377, 385 (Cal. Ct. App. 2008) (rejecting request for quantum meruit instead of enforcement of original fee agreement where modification of original fee agreement failed); Christian v. Gordon, 43 V.I. 179, 2001 WL 883551, at *4 (Terr. V.I. June 20, 2001) (rescinding unconscionable revised fee agreement based on contingency and declaring that original hourly fee agreement remained effective). 111 See Leinwand v. Swan Coin-o-Matic Laundry, Inc., 115 A.D.2d 302, 302, 496 N.Y.S.2d 118, 118 (4th Dep't 1985); M.W. Realty Assocs. v. 805 Third Ave. Co., 125 Misc. 2d 1077, 1080, 480 N.Y.S.2d 674, 676 (Sup. Ct. N.Y. Co. 1984); Galfand v. Chestnutt, 402 F. Supp. 1318, 1329 (S.D.N.Y. 1975). See also Restatement (Second) of Contracts § 279 cmt. b (1981) ("on avoidance of the substituted contract the original duty is again enforceable"); Restatement (First) of Contracts § 408 cmt. b (1932) ("on avoidance of the second [contract varying the terms of an original agreement between the parties,] the original contract again comes into effect"). 112 See, e.g., Matter of Winckler, 234 A.D.2d 307, 651 N.Y.S.2d 69 (2d Dep't 1996); Matter of Musso, 227 A.D.2d 404, 642 N.Y.S.2d 322 (2d Dep't 1996); In re Beatty's Will, 206 Misc. 542, 133 N.Y.S.2d 651 (Surr. Ct. Suffolk Co. 1954). 113 See Cortesi v. R&D Constr. Corp., 73 N.Y.2d 836, 838, 537 N.Y.S.2d 475, 475 (1988); Cappelli v. State Farm Mut. Auto. Ins. Co., 259 A.D.2d 581, 582, 686 N.Y.S.2d 494, 494 (2d Dep't 1999); Marcus Brothers Textiles, Inc. v. Avondale Mills, Inc., 78 A.D.2d 800, 800, 433 N.Y.S.2d 114, 115-16 (1st Dep't 1980). 61 contracts under New York law,111 as well as the rule regarding wills: If the most recent will is invalid, then the court looks to the earlier will.112 The law is settled in New York that where modification of an agreement fails, the original agreement's provisions govern.113 Alice never "abandoned" the original fee arrangement, nor did Graubard. The revised retainer specifically states that it is a 114 See Bercow v. Damus, 5 A.D.3d 711, 712, 776 N.Y.S.2d 289, 291 (2d Dep't 2004) (no later agreement). 115 43 N.Y.2d 305, 323, 401 N.Y.S.2d 449, 457 (1977). 62 "modif[ication of] our existing retainer agreement," not an abandonment of that agreement. Vol. X, A2985. Graubard's relationship with Alice, the main subject of the retainer, was unchanged. Only one aspect of that relationship -- payment -- was modified, and all other terms of the agreement remained intact. The "abandonment" authority cited by Graubard is not controlling. Neither of those cases deals with attorney retainer agreements, let alone midstream modifications like the one at issue here. One does not even address what happens to the original agreement when a later agreement fails.114 The only other case Graubard cites, Matter of Estate of Rothko,115 is inapposite for two powerful reasons. First, and most important, Rothko was not a case in which the Court was reviewing the fiduciary duties of a lawyer to a client, which receive special attention. Second, in Rothko, the gallery colluded with the executors to cheat the estate. It reached a deal with regard to the paintings that was voidable and was voided. It then tried to get the right to sell the paintings under the original agreement with Rothko made while he was alive. The Court found the original agreement to have been abandoned and refused to let a party who had tried to cheat the estate resuscitate its original position via an earlier agreement. That 116 Brown v. Allen, 344 U.S. 443, 496 (1953). 117 I James Kent, Commentaries on American Law 320-21 (1826). 63 is a far cry from this case, where the same parties sought to modify a single provision of their earlier agreement, and the modification specified that it was just that -- a modification of the earlier agreement, not a repudiation. Because the revised retainer was invalid, the terms of the original retainer control. B. Policy Favoring Standards One major virtue of reverting to the original retainer is the predictability of the outcome and avoidance of standardless results. The law generally hesitates to give courts more leeway than necessary when making decisions. As Justice Frankfurter once said: "Discretion without a criterion for its exercise is authorization of arbitrariness."116 And one of the greatest early New York judges, Chancellor Kent, agreed that, without guidance, "the courts would be left to a dangerous discretion, and to roam at large in trackless fields of their own imagination."117 Fixing a lawyer's fee is one such situation. The Referee's $15.8 million fee award had no basis in the record. Reverting to a valid prior retainer, when such a retainer exists, provides standards used by the parties themselves (in this case for 22 years). The Referee's award, by contrast, was wholly subjective and cannot be justified under any standard of review. 118 Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 546 (2010). See also City of Burlington v. Dague, 505 U.S. 557, 562 (1992). 119 Perdue, 559 U.S. at 551-52 (citation and quotation omitted). 64 C. Time Charges Plus Interest Are Fair Awards based on attorney time charges are widely regarded as fair and "reasonable," and there is no reason to disturb the Appellate Division's determination. It is, after all, what the parties agreed to and what Graubard relied on to charge and collect from the client $22 million in fees for the prior 22 years. It is also fair in view of the law firm's fostering Alice's impression that she could expect a recovery of only "a few mil." The Appellate Division's approach is in accord with the "lodestar method" of determining fee awards, which is often used in fee-shifting analyses. Based on the number of hours worked multiplied by prevailing hourly rates in the community, the method has, according to the United States Supreme Court, a "strong presumption" of being a sufficient measure of a reasonable fee.118 Among the benefits of the lodestar method are that it roughly approximates the fee the attorney would have received under an hourly billing arrangement, it is "readily administrable," and it is "objective . . . and thus cabins the discretion of trial judges, permits meaningful judicial review, and produces reasonably predictable results."119 Quality of 120 Perdue, 559 U.S. at 554. See also McGrath v. Toys "R" Us, Inc., 3 N.Y.3d 421, 429-30, 788 N.Y.S.2d 281, 284-85 (2004) (applying lodestar method in determining fees in action based on New York City Human Rights Law); Gamache v. Steinhaus, 7 A.D.3d 525, 527, 776 N.Y.S.2d 310, 311-12 (2d Dep't 2004) (Article 78 proceeding to compel county to make certain personnel appointments and salary adjustments); Gutierrez v. Direct Marketing Credit Servs., Inc., 267 A.D. 427, 427, 701 N.Y.S.2d 116, 117 (2d Dep't 1999) (FDCPA action); City of Burlington, 505 U.S. at 562. 121 "Once upon a time, walking around shouting ‘The end is nigh' got you labeled a kook, someone not to be taken seriously. These days, however, all the best people go around warning of looming disaster." Paul Krugman, Addicted to the Apocalypse, N.Y. Times, Oct. 25, 2013, at A27. 65 representation, results obtained, complexity of a case, and other factors are normally reflected in the billable hours calculation, and thus, except in "rare" or "exceptional" cases, the approach will track a calculation based on hourly rates.120 D. No Impact on Future Valid Contingency Fees The fee awarded by the Appellate Division should not be disturbed because of imaginary scenarios conjured by Graubard.121 For example, it is never a "windfall" for a litigant to receive proceeds from a valid settlement. Except for the fee, those proceeds belong to the client. Graubard's hypothetical scenario describing its possible recovery had the underlying dispute settled before production of the Epps documents is also both irrelevant and unsupported. See Graubard Br. at 121-22. 122 King, 7 N.Y.3d at 191, 818 N.Y.S.2d at 840 (quoting Shaw v. Mfrs. Hanover Trust Co., 68 N.Y.2d 172, 176, 507 N.Y.S.2d 610, 612 (1986)); see also, e.g., Lawrence, 11 N.Y.3d at 595, 873 N.Y.S.2d at 520. 123 King, 7 N.Y.3d at 190, 818 N.Y.S.2d at 839 (quoting Greene, 56 N.Y.2d at 92, 451N.Y.S.2d at 49). See also Jacobson v. Sassower, 66 N.Y.2d 991, 993, 499 N.Y.S.2d 381, 382 (1985); In re Howell, 215 N.Y. 466, 473 (1915); Whitehead v. Kennedy, 69 N.Y. 462, 466 (1877); Lawrence, 48 A.D.3d at 8, 853 N.Y.S.2d at 6; EC 2-20. 124 Shaw, 68 N.Y.2d at 176, 507 N.Y.S.2d at 612. 66 V PROCEDURAL UNCONSCIONABILITY The revised retainer is infected with procedural unconscionability. The genesis of the revised retainer does not bear scrutiny. To meet their burden to establish that the retainer agreements they draft are not procedurally unconscionable, attorneys must show that such agreements "'are fair, reasonable, and fully known and understood by their clients.'"122 The attorney must show that "the client acquiesced in the agreement ‘with full knowledge of all the material circumstances known to the attorney,' and that such acquiescence was not brought about by fraud on the attorney's part, or misconception on the part of the client."123 "The importance of an attorney's clear agreement with a client as to the essential terms of representation cannot be overstated. The client should be fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements."124 Here, too, the courts apply "uncompromising rigidity" in analyzing the fairness of the 125 In re Bond & Mortgage Guarantee Co., 303 N.Y. at 431 (quoting Wendt, 243 N.Y. at 444). 126 See also, e.g., Shaw, 68 N.Y.2d at 176, 507 N.Y.S.2d at 612; Greene, 56 N.Y.2d at 92, 451 N.Y.S.2d at 49; Jacobson, 66 N.Y.2d at 993, 499 N.Y.S.2d at 382. 67 attorney-client transaction.125 When a retainer agreement is revised during the course of representation, the attorney bears the burden of establishing, by more than a preponderance of evidence, that the revision is reasonable and fair, that the client was informed of all material facts known to the attorney, that it was fully understood by the client, and that there was no undue influence. "The courts' expression of heightened scrutiny given a midstream retainer modification suggests that a higher standard of proof would apply, and that clear and convincing evidence of conscionability may be required." Vol. I, A153a (Referee's Report).126 Graubard's focus on who initially suggested the revised retainer is misleading and irrelevant. Equally irrelevant is Graubard's portrayal of Alice as sophisticated. Whether or not Alice was as savvy and independent as Graubard claims has no bearing on any disclosure obligations to Alice under DR 5-104(A), and their obligation to have fully informed Alice of the implications and consequences of the revised retainer was unconditional. [T]he Code of Professional Responsibility places the burden upon counsel, irrespective of the sophistication of the client, to obtain his consent after full disclosure before entering into a business transaction . 127 Forest Park, 175 A.D.2d at 62, 572 N.Y.S.2d at 319 (emphasis added). See also Schlanger, 218 A.D.2d at 602, 631 N.Y.S.2d at 297 (relying on Forest Park, rejecting attorney's argument that he was excused from complying with DR 5-104(A) because client was a "sophisticated businessman"). 128 NYSTLA Br. at 11. 68 . . where the differing interests of counsel and the client may interfere with the exercise of professional judgment for the client's protection.127 As the facts at trial showed, Graubard failed to: $ Ensure that Alice fully understood the revised retainer, including addressing her misconception that she, rather than Graubard, would receive the largest amount in any recovery; $ Fully inform Alice about all relevant circumstances, including Graubard's view that recovery would likely be nearly $50 million, while Graubard knew that Alice expected a recovery of not more than a few million dollars; and $ Obtain Alice's written consent to the law firm's conflict in entering the revised retainer. These failures, coupled with the revised retainer's lack of risk for Graubard, undercut the premise of the amicus brief. The NYSTLA states that its position would be different if the law firm had engaged in "misconduct" or "overreaching," but that is exactly what happened here.128 A. Not Fully Understood As the Appellate Division found, Graubard "failed to show that [Alice] fully knew and understood the terms of the retainer agreement -- an agreement she entered into in an effort to reduce 69 her legal fees." 106 A.D.3d at 609, 965 N.Y.S.2d at 497. Alice's misconceptions about the revised retainer are shown by the disconnect between what she thought she was getting under the agreement and what she got. Alice wanted, according to Chill, the "lion's share" of the recovery, "the bulk of the money," and to be the "senior partner" in any arrangement with Graubard. Vol. VI, A699, A701, A803. Graubard's insinuation that this intent was irrelevant because Alice expressed it to Chill during negotiations makes no sense; of course Alice's statements during negotiations bear on her understanding of the agreement she was negotiating. But, as the Appellate Division and the Referee already found, and as Chill admitted, it was Graubard, and not Alice, that stood to recover the most under the revised retainer. Vol. XVII, A7394, Vol. VI, A833. The revised retainer agreement provides that Graubard's 40% be paid from Mrs. Lawrence's share of the settlement. . . . As of November 30, 1996, Mrs. Lawrence's interest in Sylvan's Estate was fixed at 75.9378%. (Report, p. 18). Consequently, using Graubard's $110.3 figure for the settlement amount, Mrs. Lawrence's 75.9378% share of those funds would be approximately $83,758,511. If Graubard's 40% fee is then paid from those funds, the remainder left to Mrs. Lawrence (and now her Estate) would be approximately $41,638,511 -- $2,481,489 less than the $44,120,000 Graubard would receive. Vol. I, A301a (footnote omitted) (Sept. 23, 2009 Referee's Report). Graubard should have explained this to Alice. Graubard would actually recover more of any settlement than 129 See, e.g., EC 7-1 ("The duty of a lawyer . . . is to represent the client zealously"); Lawrence J. Vilardo & Vincent E. Doyle III, Where Did the Zeal Go?, 38 Litigation 53 (2011); see also Vol. IX, A2250; Vol. V, A483. Graubard's suggestion, and amicus NYSTLA's outright assertion, that a contingent fee gives an attorney an extra incentive to perform zealously ignores in disturbing fashion that this duty does not depend on how much an attorney expects to be paid. 70 Alice. After doing the complicated calculation explained by the Referee and deducting the 40% to Graubard, Alice's share would only be 35%. Not only would Alice not be receiving the "lion's share," but the percentage stated in the revised retainer (40%) is misleading, because Graubard would, in fact, be receiving more than 50% of Alice's recovery amount. In these circumstances, as Professor Stephen Gillers testified, Graubard should have recognized that Alice was mistaken in believing that she would receive the largest share of the recovery. Vol. IX, A2258-59. Graubard also failed to explain to Alice that the revised retainer would not meet her stated fee objectives. Alice asked to renegotiate the time-charge retainer "in an effort to reduce her legal fees." Vol. XVII, A7394. The new agreement would not reduce those fees. Chill and Graubard failed to clarify another fundamental misunderstanding: Alice's belief that increasing Graubard's share to 40% from the 30% she proposed, would "give you [Graubard] some incentive to work really hard for me." Vol. VI, A700. Alice, like any client, was entitled to zealous advocacy regardless of the fee arrangement.129 Graubard did not explain to Alice that its obligations to her would not change, thereby leaving Alice 130 See,e.g., King, 7 N.Y.3d 181, 818 N.Y.S.2d 833; Shaw, 68 N.Y.2d 172, 507 N.Y.S.2d 610; Whitehead, 69 N.Y. 462; In re Howell, 215 N.Y. 466. 71 with the misimpression that the increased percentage under the revised retainer would somehow obligate Graubard to work harder. B. Alice Was Not Fully Informed Graubard failed to disclose material facts to Alice before she signed the revised retainer. Ethicist Gillers testified that the cases on attorney fee arrangements: emphasize the importance of a fully informed client using words like well understood or perfectly understood or fully aware of the consequences, or the material considerations . . . you want a client who knows the implications of what he or she is doing. Vol. IX, A2215-16.130 Gillers explained that a client -- even a somewhat sophisticated, independent client like Alice -- must have full knowledge of the material consequences of the new agreement, and must be able to evaluate its relative advantages and disadvantages as compared to the existing agreement. Vol. IX, A2250-56. Graubard did not give Alice that knowledge. Graubard's failure to inform had three components: (a) failure to disclose the potential upside under the revised retainer; (b) failure to discuss the status of the case with Alice; and (c) failure to honor its fiduciary duty. 1. Failure to Disclose Potential Upside Graubard misled Alice about a potential large recovery. 72 Graubard had determined that the likely recovery on the remaining claims was almost $50 million, but, as the Referee found, Alice was under the misimpression, based on Graubard's encouragement, that "any recovery would be in the single digit millions, 'a few mil'" and "Chill did not express any disagreement." Vol. I, A185a. Chill failed to "discuss with Alice any upside in the range of recovery 'in the many tens of millions of dollars.'" Vol. I, A171a, 184a-185a. Knowing that Alice mistakenly understood her chances of recovery to be so low, Chill and Graubard should have discussed with Alice, but did not, what they viewed as a high-end recovery. Thus, while Graubard had the benefit of more complete information (including a memo analyzing possible outcomes, the revised retainer, the status of the case, and the impact on the firm) when it drafted and agreed to the revised retainer, it kept Alice in the dark. More accurately, Chill duped Alice into believing that a contingency fee would be a reasonable way to proceed. According to Chill, Alice thought that without the 95 Wall Street claim (dismissed in a December 2004 decision), "all that's left is a claim for a few mil[lion]." Vol. VI, A697. Although the Attorneys' witnesses testified at trial that they believed the 95 Wall Street decision would "cast a pall" on all of Alice's other claims, the Referee rejected that alleged interpretation as "patently erroneous." Vol. I, A173a, 179a. He did not think his 95 Wall Street decision "was in fact or even in the Firm's 131 See Lawrence, 48 A.D.3d at 8, 853 N.Y.S.2d at 6 (court must determine "whether [client] understood the ramifications of the revised agreement"); Whitehead, 69 N.Y. at 466 (attorney "is bound to establish affirmatively that [the agreement] . . . was in every respect free from . . . misconception on the part of the client"); In re Howell, 215 N.Y. at 474 (same). 132 King, 7 N.Y.3d at 190, 818 N.Y.S.2d at 839. 73 contemplation a devastating blow" to the remaining claims. Vol. I, A173a. Graubard wrongly let Alice believe that without the 95 Wall Street claim, the most she could hope for was "a few mil." Graubard also did not present any evidence that Alice understood that the contingency percentage would stay the same if there were a recovery much beyond a few million dollars. That information would have been material to her decision to accept the contingency fee arrangement.131 According to Professor Gillers, the revised retainer: was reached without giving Alice Lawrence the information . . . I've summarized as a number crunching and predicting information about the possible direction of the cases and the outcomes. . . . [S]he was not provided by the lawyers with the pros and cons . . . and the absence of information . . . leads to my conclusion it was not procedural[ly] conscionab[le]. Vol. IX, A2542-43. As Gillers explained, Graubard hid key information from Alice. Because Graubard did not disclose to Alice "all the material circumstances known to the attorney,"132 the Appellate Division correctly found the revised retainer procedurally unconscionable. 74 2. Failure to Discuss Case Status In early and mid-January 2005, when the revised retainer was under discussion, Graubard never reviewed the status of the case with Alice, either orally or in writing. No one discussed with her the likelihood of success, the potential recovery, how long the case could continue, or the benefits and risks of the revised retainer compared with Alice's 1983 retainer. Vol. V, A473-75; Vol. VI, A807-08. The only communication from Graubard to Alice regarding the case status at that time was Chill's January 10, 2005 letter to the Referee (Alice was blind copied). Vol. X, A2989-91. That letter asked for "a trial of the remaining objections" within a matter of months. Vol. X, A2989. The letter also stated that Graubard did "not anticipate making any additional summary judgment motions" and that a "relatively manageable amount . . . remains to be done." Id. Chill concluded that "all concerned deserve closure." Vol. X, A2990. Between November 2004 and March 2005, Graubard sent no analysis of Alice's claims to her. Vol. V, A489-90. This omission at a critical moment is particularly noteworthy in contrast to the flurry of memos and letters Graubard sent to Alice between 1997 and 2004 analyzing claims and potential recoveries in the action. Vol. V, A489; Vol. X, A2903-39, A2963- 73. Alice was entitled to the same information that Graubard had 133 See King, 7 N.Y.3d at 190, 818 N.Y.S.2d at 839 (client must have "'full knowledge of all the material circumstances known to the attorney'") (quoting Greene, 56 N.Y.2d at 92, 451 N.Y.S.2d at 49); In re Howell, 215 N.Y. at 473 (same); Whitehead, 69 N.Y. at 466 (same); Lawrence, 48 A.D.3d at 8, 853 N.Y.S.2d at 6 (court must determine "what [client] was advised"); see also (Vol. IX, A2263). 134 See In re Cooperman, 83 N.Y.2d 465, 472, 611 N.Y.S.2d 465, 467 (1994) (describing client's "unique fiduciary reliance" on attorney, and including among an attorney's duties "honoring the clients' interests over the lawyer's"). 135 Sterling Nat'l Bank v. Israel Disc. Bank of N.Y., 305 A.D.2d 184, 186, 762 N.Y.S.2d 584, 586 (1st Dep't 2003) (continued...) 75 when deciding whether to agree to the revised retainer.133 By contrast, although Chill discussed with Graubard's managing partner the pros and cons of the revised retainer (Vol. VI, A818- 19), he did not have any such conversation with Alice. Vol. VI, A815, A817-18, A823. Due to Graubard's nondisclosures, Alice had less information than her lawyers regarding the future course of the litigation. 3. Graubard's Breach of Its Fiduciary Duty As a fiduciary, Graubard had an absolute duty to inform Alice of its view that she would likely recover much more than the "few mil" she expected.134 That is particularly so because it knew more than she did. New York applies the rule of "superior knowledge" in an array of contexts in which silence would at one time have escaped criticism. It is no longer acceptable, if it ever was, to conclude in knowing silence, a transaction damaging to a party who is mistaken about its basic factual assumptions when . . . he would reasonably expect a disclosure.135 135(...continued) (citations omitted; omission in original). See also Greene, 56 N.Y.2d at 92, 451 N.Y.S.2d at 49-50 (finding that, even absent proof of fraud or undue influence, fiduciary relationship between attorney and client means that agreement between them may be invalid unless attorney can demonstrate "that the client was fully aware of the consequences and there was no exploitation of the client's confidence in the attorney"); Genger v. Genger, 21 Misc. 3d 1132(A), 875 N.Y.S.2d 820, 2008 WL 4938269, at *4 (Sup. Ct. N.Y. Co. 2008) (party has duty to disclose material facts (1) if there is fiduciary relationship, or (2) if one party has superior knowledge); cf. Kaufman v. Cohen, 307 A.D.3d 113, 120, 760 N.Y.S.2d 157, 165 (1st Dep't 2003) (failure of fiduciary to disclose material facts may constitute actual fraud). 136 691 F. Supp. 728 (S.D.N.Y. 1988), aff'd, 872 F.2d 1021 (2d Cir. 1989). 137 691 F. Supp. at 738. 138 Id. 139 See King, 7 N.Y.3d at 192, 818 N.Y.S.2d at 841 ("perhaps the most important" factor in determining whether a fee agreement (continued...) 76 In 520 E. 72nd Commercial Corp. v. 520 E. 72nd Owners Corp.,136 an attorney who acted as general counsel to a co-op board on a flat rate retainer was separately retained to sue on the board's behalf under a contingency agreement, which the court held to be unconscionable. The court noted that when the attorney "executed the contingency agreement, he stood in a fiduciary capacity vis-a-vis the Cooperative."137 The court held that he "had a duty to present fairly and fully," among other things, "the values at stake, and the likelihood of success," and that he failed to do so.138 Similarly, here, Graubard had a fiduciary duty to Alice and breached that duty when it failed to disclose its assessment of the potential value of the litigation.139 139(...continued) is unconscionable "is whether the client was fully informed upon entering into the agreement with the attorney"); Whitehead, 69 N.Y. at 466 (attorney must show that client had "full knowledge of all the material circumstances known to the attorney"); Shaw, 68 N.Y.2d at 176, 507 N.Y.S.2d at 612 ("client should be fully informed of all relevant facts"); In re Howell, 215 N.Y. at 473 (attorney must provide evidence that the client signed the agreement "with full knowledge of all the material circumstances known to the attorney who drafted the same"); Greene, 56 N.Y.2d at 92-93, 451 N.Y.S.2d at 49-50 (attorney must show that client was "fully aware of" and "fully and fairly informed of the consequences of the agreement"); see also EC 2-20 (lawyer may enter contingent fee agreement with client otherwise able to afford fixed fees if client is "fully informed of all relevant factors"). 140 351 F. Supp. 2d at 264. 77 C. Failure to Get Written Consent to Law Firm Conflict A related but distinct aspect of procedural unconscionability is DR 5-104, which bars attorney-client business transactions unless: (a) the terms are fair and reasonable to the client and fully disclosed in writing in a way the client can understand; (b) the lawyer advises the client to seek independent counsel; and (c) the client consents in writing to the terms of the transaction and the lawyer's conflict, after full disclosure. Graubard failed to obtain written consent from Alice regarding its conflict in entering into the revised retainer. Vol. V, A464; Vol. VI, A810-11, A916. If DR 5-104 covers midstream modifications of retainers, then the revised retainer violated DR 5-104 and was procedurally unconscionable for that reason as well. DR 5-104 should apply. In Naiman v. New York Univ. Hosps. Ctr.,140 the court stated that "a midstream modification that 141 See also Matter of Hefron, 771 N.E.2d 1157, 1162 (Ind. 2002) (applying the terms of DR 5-104, in the form of Indiana's Professional Conduct Rule 1.8(a), to renegotiation of a fee agreement); Gurvey v. Legend Films, Inc., No. 3:09-cv-00942 AJB (BGS), 2012 WL4061773, at *11 (S.D. Cal. Sept. 14, 2012) (applying the terms of DR 5-104, in the form of New York and New Jersey's Rule of Professional Conduct Rule 1.8 and a similar California rule, to negotiation of compensation of an attorney with an existing relationship with the clients). 142 252 B.R. 8, 16 (Bankr. E.D.N.Y. 2000). 78 increases a contingency fee percentage may be a 'business transaction' that creates a conflict of interest between the attorney and the client."141 And in In re Stamell, the court explained that DR 5-104 "appears to be the most applicable provision" when a retainer is revised midstream.142 DR 5-104 reflects the common law factors in determining whether an attorney retainer agreement is procedurally improper. The extra precaution in DR 5-104 -- requiring the client to consent to the conflict in writing -- is another protection for the client that is easy for an attorney to comply with and should be mandatory when the retainer agreement is changed in the middle of the representation. As a matter of logic, public policy, the thrust of Naiman and Stamell, and the parallel between the common law and the Disciplinary Rules, DR 5-104 should apply to midstream retainer modifications, and perhaps more so here because it was not so much midstream as eve of trial/settlement. Alice considered revising the retainer to be a business transaction, as she described herself and the firm as "partners." Vol. I, A147a, A151a, A156a. And Chill referred to revising the retainer as an "arms' length" transaction. Vol. VI, A675, A701. 143 The Appellate Division did not discuss this issue as part of its finding that the revised retainer was procedurally unconscionable. 144 King, 7 N.Y.3d at 190, 818 N.Y.S.2d at 839 (internal quotation marks omitted). 79 In spite of these considerations, the Referee and Surrogate thought that DR 5-104 should not apply.143 Vol I, A129a. Their conclusions were not based on analysis, but merely on the absence of precedent from a New York court squarely holding that DR 5-104 does apply. This Court can and should hold that DR 5-104 applies here, and that Graubard violated it. This conclusion, as Gillers testified, is reinforced by Alice's genuine need for legal guidance in evaluating the revised retainer. Vol. IX, A2257-60, A2546. Alice was not a lawyer, and without information provided by Graubard or the advice of an independent lawyer, she could not have had "full knowledge of all the material circumstances known to the attorney."144 D. Chill "Wore [Alice] Down" The genesis and execution of the revised retainer show that the Attorneys exploited their long-term relationship with Alice to wear her down and get her to sign the revised retainer, even though she did not think it was a good idea. Chill went to Alice's home and used his influence to get her to sign the revised retainer. Barbara Kling, Alice's closest friend (Vol. VIII, A2100), testified that, just before Alice signed the revised retainer, Alice called her and told her "that Chill was coming up to the house and he only came up to the house 145 Although the Referee found these witnesses to be biased, the Surrogate cited their testimony, noting that the Referee "did not make a finding to the effect that the witness's veracity or accuracy of recall were to be doubted." Vol. I, A78a. The First Department did not discuss this testimony. 80 if he wanted something." Vol. VIII, A2108-09. Just after Chill's visit, Alice spoke to Kling again, and the first thing Alice said was that Chill "wore her down." Vol. VIII, A2109-10. Alice, who sounded very upset, also told Kling that she "probably shouldn't have signed what she did." Vol. VIII, A2110-12. Angel Rivas, Alice's full-time handyman, reported that Alice told him she "signed something she shouldn't have," after Chill visited her. Vol. VIII, A2050-51.145 Jay Wallberg, Alice's accountant and friend, observed Alice's confusion about the revised retainer. In January 2005, when Alice first talked to Wallberg about it, she said she did not understand what it was. Vol. VIII, A1918-19. Alice told Wallberg that she had received the document from Chill, and that Chill had told her not to tell anyone about it or show it to anyone. Vol. VIII, A1920-21. When Wallberg explained to her that it would give Graubard 40% of any recovery, she said she was not going to agree to it. Vol. VIII, A1919-20. All these circumstances must be evaluated in light of what Alice herself described as the "Svengali"-like influence Chill -- her attorney and closest, most trusted advisor for over 20 years -- exercised over her. Vol. VIII, A1914. As Professor Gillers explained, the long relationship between Alice and Graubard cannot be ignored in determining the level of influence Graubard 146 See, e.g., King, 7 N.Y.3d at 190, 818 N.Y.S.2d at 839; In re Howell, 215 N.Y. at 474; Whitehead, 69 N.Y. at 466. 81 had on her and the need for independent counsel. Vol. IX, A2259. * * * Graubard did not satisfy its high burden of proof to show that it complied with all applicable legal and ethical requirements in entering into the revised retainer with Alice. Nor did it meet its burden to prove that there was no fraud or undue influence, or that it did not exploit its superior knowledge and fiduciary relationship with the client.146 The parties lacked a mutual expectation of what would happen under the revised retainer. Their different understandings of the status of the case and prospects of recovery were worlds apart. These basic facts should prompt the Court to affirm the Appellate Division's correct conclusion that the revised retainer was procedurally unconscionable. VI SUBSTANTIVE UNCONSCIONABILITY At every post-trial stage, the decisions have correctly found the revised retainer substantively unconscionable and reduced Graubard's requested fee. A fee agreement can be substantively unconscionable, either from the start or in hindsight (or both). This Court's "case law clearly provides that circumstances arising after contract formation can render a contingent fee agreement -- not unconscionable when entered into -- unenforceable where the amount of the fee, combined with the 147 Lawrence, 11 N.Y.3d at 596, 873 N.Y.S.2d at 521. 148 King, 7 N.Y.3d at 192, 818 N.Y.S.2d at 841. 149 Id. 150 Gair, 6 N.Y. at 102, 188 N.Y.S.2d at 494. 151 In re Bond & Mortgage Guarantee Co., 303 N.Y. at 431 (quoting Wendt, 243 N.Y. at 444). 82 large percentage of the recovery it represents, seems disproportionate to the value of the services rendered."147 "Besides the sheer amount of the fee, another factor to consider -- and perhaps the most important -- in determining the unconscionability of a contingent fee agreement, is whether the client was fully informed upon entering into the agreement with the attorney."148 The inquiry looks at "the facts and circumstances surrounding the agreement, including the parties' intent and the value of the attorney's services in proportion to the fees charged, in hindsight."149 Also key is the level of risk assumed by the attorneys that their work may go uncompensated.150 This examination of the appropriateness of a transaction between lawyer and client is to be followed with "uncompromising rigidity."151 The facts show that the revised retainer here was substantively unconscionable at the outset and grew more so in light of later events. From the moment it happened, Graubard took virtually no risk in switching to a revised retainer with Alice. Furthermore, the $44 million fee Graubard demanded was 83 vastly disproportionate to the approximately four and a half months of ordinary litigation work it performed under the revised retainer. The staggering amount of the fee was simply inappropriate and out of line with the parties' sharply contrasting expectations. As a result, the Referee, the Surrogate, and the Appellate Division all correctly found that the revised retainer was substantively unconscionable. A. Virtually No Risk The Referee properly assessed Graubard's risk under the revised retainer as "small" and "quite modest." Vol. I, A171a. The Appellate Division agreed that "it seems highly unlikely that the firm undertook a significant risk of losing a substantial amount of fees" and further agreed that Graubard's description of enhanced risk was "nothing but a self-serving afterthought." 106 A.D.3d at 609, 965 N.Y.S.2d at 498 (internal quotation marks omitted). This conclusion follows given that: (1) Graubard knew the existing claims had high potential value; (2) the revised retainer had built-in reductions of risk; (3) Alice's loss on a claim involving 95 Wall Street was not dispositive; (4) Graubard accumulated most of its knowledge over the prior 22 years; and (5) Graubard had existing time-charge retainers with two of Alice's children. 1. Existing Claims Had High Value In examining the likelihood of success, the Referee focused and relied on an internal case assessment memo, prepared by 152 Lester Brickman, Contingency Fees Without Contingencies: Hamlet Without the Prince of Denmark?, 37 UCLA L. Rev. 29, 92 (1989). 84 Graubard in 2004 "well before" (Graubard Br. at 102) the retainer revision, in which Graubard predicted a recovery of close to $50 million. Vol. I, A170a-171a; Vol. XVI, A6374. Graubard made this prediction months before it received the "smoking gun" Epps documents. Graubard did not share this information with Alice. After the revised retainer was signed, Graubard, in a March 3, 2005 letter to the Referee, applied the same or higher potential damage figure to the remaining claims. Vol. X, A2992- 97; Vol. XVI, A6374. The Referee's Report approving the settlement confirmed that Graubard's 2004 valuations of the claims were well founded. Vol. XVI, A6353-58. As Alice had turned down, on Graubard's advice, a $60 million settlement offer in 2004 (Vol. V, A507-08; Vol. XVI, 6361-62), Graubard knew there was very little risk in entering into the revised retainer. If there is a very high likelihood of recovery (even though the amount of recovery may be in doubt), and conversely an extremely small possibility of nonrecovery, then there is, from the points of view of both ethical and fiduciary standards as applied to contingent fees, no realistic risk of nonrecovery.152 2. The Hybrid Contingency Reduced the Risk The Referee recognized the revised retainer itself shielded Graubard by providing for hourly charges up to $1,200,000 153 NYSBA Committee on Prof. Ethics, Opinion 697 - 12/30/97 (41-97), Legal fees; combination of hourly and contingency fee (also observing that such arrangements should have lower-than- standard contingency fee to reflect this reduced risk); Vol. IX, A2282 (testimony from Estate's expert); Vol. VII, A1454 and Vol. VIII, 1795-96 (testimony from Graubard's expert). 85 ($300,000 per quarter) for the first year, plus disbursements. Vol. I, A166a. Such hybrid contingency agreements automatically reduce the risk.153 3. 95 Wall Street Decision Created No Risk The Referee rejected Graubard's assertion that his December 2004 95 Wall Street decision posed enormous risk to Graubard in entering into the revised retainer. Vol. I, A173a. According to the Referee, "Graubard's asserted interpretation . . . is so obviously erroneous that it casts doubt on the bona fides of that assertion," "is nothing but a self-serving afterthought," and appears "contrived . . . after the fee dispute surfaced once the settlement agreement closed in July 2005." Vol. I, A176a, 179a. 4. Graubard's Prior Work and Paid Fees Under the typical contingency fee arrangement, a law firm receives nothing until it makes a recovery. Graubard, in contrast, had already received a king's ransom ($22 million) in fees from Alice. These pre-2005 fees provided Graubard with yet another safety net. Unlike a firm taking a contingency case from the outset, Graubard "was able to exploit work it did before January [2005] for which it had been fully compensated." Vol. IX, A2278. 154 Cf. Lawrence, 48 A.D.3d at 20, 853 N.Y.S.2d at 15 (dissent) (noting that if Graubard had refunded the fees already paid, the risk assessment might be different). 86 Almost all the work that led to the large settlement was performed before 2005 (Vol. I, A180a, A183a-184a), for which Graubard had already been fully paid. Vol. X, A2723-25. The revised retainer did not credit Alice for any of the fees she had already paid.154 The key Epps documents that led to the settlement were produced in response to routine pre-2005 document requests. The Referee found that the claims settled in 2005 "had been the focus of Graubard's litigation efforts since 2002," and Graubard began working on those claims long before 2002. Vol. I, A180a, Vol. V, A106-15. There was far less risk to Graubard as a result of that extensive knowledge base. See, e.g., Vol. VII, A1456-57 and Vol. VIII, A1800-02 (testimony from Graubard's expert); Vol. IX, A2264, A2543-44 (testimony from Estate's expert). 5. 1983 Agreements With Lawrence Children Further Reduced Risk In the unlikely event the revised retainer's protections somehow left Graubard facing a payment gap, Graubard could always recover any shortfall in its hourly charges from Alice's adult children, Richard and Marta Jo, with whom Graubard had existing unmodified hourly-rate retainers. Vol. XVI, A6318-19. In entering the revised retainer, the firm did not remind Alice that it would still expect a fee from the children, further reducing, if not eliminating, its risk. 155 Lawrence, 11 N.Y.3d at 596 n.4, 873 N.Y.S.2d at 521 n.4. 87 * * * This virtual no risk aspect of the revised retainer is what makes it substantively unconscionable from inception. This is not a case where substantive unconscionability flows solely from an unexpected windfall recovery. The revised retainer was substantively tainted at its core from the start. Graubard's focus on eliminating unconscionability in hindsight ignores this aspect of the agreement, as well as the "deception [and] overreaching"155 that accompanied it. B. Disproportionality The Referee, the Surrogate, and the Appellate Division also found that the $44 million contingent fee was disproportionate to the four and a half months of ordinary and unexceptional work performed by Graubard and that these services were not worth the "astounding rate" of $11,000 per hour. Vol. I, A180a; Vol. XVII, A7395-96. Nor was it worth the still "astounding rate" of $4,200 awarded by the Surrogate. Regarding the size of the settlement, the Referee, who also presided over the underlying case, explained that "Graubard's legal services either played a negligible role or played a role largely before the Revised Retainer Agreement was entered into." Vol. I, A189a. As for the work actually performed by Graubard in 2005, the Referee found that it was quite "manageable" (Vol. I, 156 These findings by the Referee completely belie contrary uninformed assertions by amicus NYSTLA, who did not attend the trial. The Referee found Graubard's work in 2005 to be unexceptional, not, as NYSTLA claims, excellent. And it is the Referee's factual finding that Graubard's work was unexceptional, rather than any words of courtesy about Graubard's work from other counsel in the case, that is relevant to this question. 157 Gair, 6 N.Y.2d at 107, 188 N.Y.S.2d at 498. See also King, 7 N.Y.3d at 192, 818 N.Y.S.2d at 841. 158 NYSTLA Br. at 4. 88 A171a n.24) and by no means "exceptional."156 Vol. I, 187a. C. Sheer Amount of Fee Too High The Appellate Division found that the Referee also correctly considered the "sheer amount" of the contingent fee Graubard sought. 106 A.D.3d at 609, 965 N.Y.S.2d at 498. As this Court has made clear, "[T]here comes a point where the amounts to be received by attorneys under contingent fee contracts are large enough to be unenforceable under the circumstances of the case."157 Here, appropriately, the Referee, the Surrogate, and the Appellate Division found $44 million for five months of work to be unjustifiably high and well out of line with the parties' intent or expectations. As NYSTLA states in its amicus brief,158 "[n]o one anticipated that the case would settle quickly" -- unlike the personal injury cases discussed in its brief, where quick settlement appears to be a common outcome. Graubard was not "penalized" from speedy recovery. Rather, the decisions below recognized that the sudden large recovery was beyond the expectations of either side and acted accordingly. As the 159 See Graubard Br. at 69. See also Lawrence, 11 N.Y.3d at 596, 873 N.Y.S.2d at 521 ("circumstances arising after contract formation can render a contingent fee agreement -- not unconscionable when entered into -- unenforceable where the amount of the fee, combined with the large percentage of recovery it represents, seems disproportionate to the value of the services rendered"). 160 See Lawrence, 11 N.Y.3d at 596, 873 N.Y.S.2d at 521; King, 7 N.Y.3d at 192, 818 N.Y.S.2d at 841; Gair, 6 N.Y.2d at 107, 188 N.Y.S.2d at 498. 89 Referee found, neither Alice, nor even Graubard, expected a recovery of over $100 million. In turn, they could not have anticipated a $44 million fee award. Vol. I, A186a. D. Case Law Supports Findings of Referee, Surrogate and First Department Graubard acknowledges that a fee agreement can be appropriate when made (not this case) but unconscionable in retrospect,159 but argues that no New York court has invalidated an attorney-client contingency agreement based on hindsight. Graubard, in essence, challenges the very concept of substantive unconscionability in hindsight. Graubard's attempt to limit substantive unconscionability is not persuasive, as courts routinely hold that a retainer agreement can be deemed unconscionable in hindsight.160 The facts here cry out, perhaps more than in any other case, for such a finding. E. Mistaken Policy Arguments This case is no threat to the contingency fee system. Graubard and amicus NYSTLA wrongly speculate, without any empirical or other valid support, that by invalidating 161 Gair, 6 N.Y.2d at 110, 188 N.Y.S.2d at 500. 162 Matter of Cooperman, 83 N.Y.2d at 472, 611 N.Y.S.2d at 468. 163 Joseph M. Perillo, The Law of Lawyers' Contracts is Different, 67 Fordham L. Rev. 443, 444 (1998). 90 substantively unconscionable fee agreements, courts would discourage attorneys from taking contingency cases. But all the courts would thus discourage are unethical and abusive fee arrangements, hardly an undesirable outcome. "All regulation of improper practices has its consequences or should have in curtailing the practices. That is the purpose."161 * * * As this Court has found, "attorney-client fee agreements are a matter of special concern to the courts and are enforceable and affected by lofty principles different from those applicable to commonplace commercial contracts."162 And while Graubard mentions the attorney's common law lien as a means to protect lawyers against the "knavery" of their clients (Graubard Br. at 71), "[m]ore often, the courts' treatment of lawyers' contracts reflects a policy of enforcing professionalism by showing their scorn for the knavish conduct of scoundrels in the legal profession."163 164 Matter of Cooperman, 83 N.Y.2d at 472, 611 N.Y.S.2d at 468. 165 Meinhard v. Salmon, 249 N.Y. 458, 464 (1928). 91 CONCLUSION The decision of the Appellate Division should be affirmed in all respects. The Attorneys failed to meet their heavy burden of proof to rebut the presumption that the $5.05 million in gifts to the Attorneys was void. The continuous representation doctrine means Alice's claim was timely. As for the revised retainer, because it was both procedurally and substantively unconscionable (both from the outset and in hindsight), the Appellate Division properly looked to the original retainer to determine Graubard's fee. Cases like this give lawyers a bad name. These distressing circumstances fuel distrust of lawyers. "Because the attorney- client relationship is recognized as so special and so sensitive in our society,"164 the situation presented here is unacceptable and should be corrected, as it was by the Appellate Division. The Court should affirm and, in doing so, make clear that we belong to an honorable profession whose members are obliged to act with integrity. If "the punctilio of an honor the most sensitive" is the standard of conduct for commercial ventures,165 all the more so does it govern the unique attorney-client relationship built on special trust and confidence. "This unique fiduciary reliance . . . is imbued with ultimate trust and confidence. . . . The 166 Matter of Cooperman, 83 N.Y.2d at 472, 611 N.Y.S.2d at 467. 92 attorney's obligations, therefore, transcend those prevailing in the commercial market place. . . . The duty to deal fairly, honestly and with undivided loyalty superimposes onto the attorney-client relationship a set of special and unique duties."166 The conduct of Graubard and the Attorneys sunk far below that high standard of professional behavior. Affirming the decision of the Appellate Division is the only way, in the Referee's words, to validate "the standards we believe the profession should uphold" (Vol. I, A128a, n.12) and transform an embarrassment to the legal profession into an important positive lesson in professional ethics. Dated: New York, N.Y. December 27, 2013 Respectfully submitted, KORNSTEIN VEISZ WEXLER & POLLARD, LLP By: _________________________ Daniel J. Kornstein Attorneys for Respondents- Plaintiffs-Respondents Richard Lawrence and Peter Vlachos, as Executors of the Estate of Alice Lawrence Deceased 757 Third Avenue New York, New York 10017 (212) 418-8600 Of Counsel: Ina R. Bort Amy C. Gross