New York Law Review

Tag: attorneys’ fees

  • Kimmel v. State of New York, No. 36 (2017): Equal Access to Justice Act (EAJA) and Sex Discrimination Claims

    Kimmel v. State of New York, No. 36 (2017)

    The Equal Access to Justice Act (EAJA) allows for the award of attorney’s fees and costs to a prevailing plaintiff in an action against the State of New York under the Human Rights Law for sex discrimination in employment by a state agency.

    Summary

    Betty Kimmel, a former New York State Trooper, sued the State for sex discrimination, harassment, and retaliation, ultimately prevailing at trial and receiving a substantial jury award. Kimmel and her attorneys sought fees and costs under the Equal Access to Justice Act (EAJA). The trial court denied the motion, holding the EAJA inapplicable to actions seeking compensatory damages for tortious acts of the State. The Appellate Division reversed, and the Court of Appeals affirmed, finding that the EAJA, which provides for attorney’s fees in certain civil actions against the state, applied to Kimmel’s case. The Court relied on the plain language of the statute and its legislative history, which supported a broad interpretation of the term “any civil action,” rejecting the State’s argument that the term was limited to review of administrative actions.

    Facts

    Betty Kimmel, a New York State Trooper from 1980-1994, experienced sex discrimination, sexual harassment, and retaliation. Kimmel filed a complaint in 1995 against the State of New York and the New York State Division of State Police, alleging a hostile work environment and seeking damages, including attorney’s fees. The State defendants denied any wrongdoing and engaged in obstructionist tactics, leading the Appellate Division to strike their answers. After over a decade, Kimmel prevailed at trial and received a jury award exceeding $700,000. Kimmel and her attorneys then sought attorney’s fees under the EAJA.

    Procedural History

    Kimmel filed suit in 1995. The State defendants’ answers were struck due to their obstructionist tactics. Supreme Court held that the EAJA did not apply. The Appellate Division reversed this decision. The Court of Appeals heard the case on appeal from the Appellate Division order, and affirmed the Appellate Division’s decision.

    Issue(s)

    1. Whether the EAJA permits the award of attorney’s fees and costs to a prevailing plaintiff in an action against the State under the Human Rights Law for sex discrimination in employment by a state agency.

    Holding

    1. Yes, because the plain language of the EAJA defines “any civil action” broadly and there are no explicit limitations that would exclude Kimmel’s case, which was brought under the Human Rights Law and was not brought in the Court of Claims.

    Court’s Reasoning

    The Court of Appeals first looked at the plain language of the statute and found the EAJA applicable to “any civil action” against the state. The Court acknowledged that two limitations exist: that another statute does not specifically provide for counsel fees, and that an action was not brought in the Court of Claims. Since Kimmel’s case was brought in Supreme Court under the Human Rights Law, neither of these exceptions applied. The Court rejected the State’s argument that the term “judicial review” in the EAJA limited its scope to Article 78 proceedings or actions seeking review of a state agency’s administrative actions. The court determined that to accept the State’s interpretation would render the exclusion of actions in the Court of Claims meaningless. The Court also cited that the EAJA was intended to be comparable to the federal Equal Access to Justice Act, and is a remedial statute and therefore, should be construed broadly.

    The Court emphasized that “the word ‘any’ means ‘all’ or ‘every’ and imports no limitation” and further noted that the State’s interpretation would require adding an exception to the statute that was not clearly expressed.

    The concurring opinion agreed that the statutory language was ambiguous but concurred in the result. The concurrence emphasized a concession made by the State during oral arguments, where the State admitted that the EAJA could apply to a Human Rights Law action seeking injunctive relief against a State agency.

    The dissenting opinion maintained that the EAJA’s language, when read in context and with consideration to legislative history, limits its application to judicial review of agency actions and does not encompass actions seeking compensatory damages.

    Practical Implications

    This case clarifies that under the EAJA, attorney’s fees can be awarded in sex discrimination cases brought under the Human Rights Law, which can be brought in Supreme Court, against state agencies. The Court’s emphasis on the plain language of the statute and its legislative history highlights the importance of examining the specific statutory language. Attorneys should consider the possibility of obtaining attorney’s fees under the EAJA for clients who prevail in actions against the State, particularly in the absence of other fee-shifting provisions. Furthermore, the Court’s decision emphasizes the broad construction of remedial statutes. Lawyers and lower courts should be aware of the practical and fiscal consequences of this ruling and its impact on the state’s willingness to engage in litigation.

    Subsequent cases will likely apply this ruling to similar cases involving state agencies and discrimination, and could extend to other types of civil actions against the state that do not fall under the Court of Claims jurisdiction.

  • Matter of New York City Coalition to End Lead Poisoning v. Giuliani, 248 N.Y. 339 (2014): Prevailing Party Status Under the New York State Equal Access to Justice Act and the Catalyst Theory

    Matter of New York City Coalition to End Lead Poisoning v. Giuliani, 248 N.Y. 339 (2014)

    A party is considered a “prevailing party” under the New York State Equal Access to Justice Act (EAJA) if their lawsuit prompted a change in the position of the party from whom they seek reimbursement of legal fees, even if a court order was not obtained.

    Summary

    The New York City Coalition to End Lead Poisoning (Coalition) sought attorney’s fees under the New York State Equal Access to Justice Act (EAJA) after the New York City Human Resources Administration (HRA) reversed a decision to reduce a petitioner’s shelter allowance. The petitioner argued that the lawsuit prompted HRA’s reversal, making her a “prevailing party” under EAJA, even though the court did not issue a ruling. The Court of Appeals reversed the Appellate Division’s decision, finding that even if the catalyst theory was applicable, the State of New York did not change its position, so attorneys’ fees were not recoverable.

    Facts

    The New York City Human Resources Administration (HRA) reduced a petitioner’s shelter allowance. The petitioner requested a “fair hearing” before the New York State Office of Temporary and Disability Assistance (OTDA). HRA agreed to restore the lost benefits retroactively. OTDA issued a “Decision After Fair Hearing” consistent with HRA’s representation. When HRA did not act, the petitioner’s attorney contacted OTDA seeking enforcement. OTDA responded that to its knowledge, HRA had complied. The petitioner commenced an Article 78 proceeding to compel HRA and another city agency to comply with the OTDA decision, and OTDA to enforce it. HRA subsequently restored the shelter allowance. The petitioner then sought attorneys’ fees from the State under New York State’s Equal Access to Justice Act (EAJA).

    Procedural History

    Supreme Court dismissed the proceeding as moot and denied the application for attorneys’ fees, citing the United States Supreme Court’s decision in Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health & Human Resources, which rejected the catalyst theory. The Appellate Division reversed, granted the application for attorneys’ fees, and remanded for a hearing. The Appellate Division recognized the catalyst theory. The Appellate Division granted the respondent leave to appeal to the Court of Appeals.

    Issue(s)

    1. Whether the catalyst theory applies to determine “prevailing party” status under New York’s EAJA.

    2. Whether the petitioner is entitled to attorneys’ fees under the catalyst theory.

    Holding

    1. The Court did not decide whether the catalyst theory applies to determine “prevailing party” status under New York’s EAJA.

    2. No, because even assuming the catalyst theory applies, the petitioner is not entitled to attorneys’ fees.

    Court’s Reasoning

    The court reasoned that the focus should be on whether the party from whom the fees are sought has changed their position in response to the lawsuit. The court stated, “Under the pre-Buckhannon federal precedent that petitioner would have us apply, a fee claimant recovers attorneys’ fees only if his or her lawsuit prompted a change in position by the party from which claimant seeks reimbursement.” The court emphasized that even if the catalyst theory was applied to determine “prevailing party” status, attorneys’ fees would not be recoverable because the State of New York (the party from whom fees were sought) had not altered its position. The City of New York changed its position. The court did not need to decide whether the catalyst theory is New York law, and took no position on that question. The court stated that, even if the catalyst theory applied, the petitioner could not recover fees because “the State has consistently sided with petitioner regarding HRA’s reduction of her shelter allowance.”

  • Flemming v. Barnwell Nursing Home, 15 N.Y.3d 375 (2010): Counsel Fees for Objectors in Class Actions

    15 N.Y.3d 375 (2010)

    New York law does not permit an award of counsel fees and expenses to an objector in a class action lawsuit.

    Summary

    This case addresses whether an objector to a class action settlement can recover attorney’s fees. A class action was brought against Barnwell Nursing Home for failing to meet patient care standards. Caroline Ahlfors Mouris objected to the proposed attorney’s fees for class counsel, compensation for the settlement administrator, and the incentive award to the class representative, but not the overall settlement amount. She also sought attorney’s fees for her work as an objector. The New York Court of Appeals held that CPLR 909 only allows attorney’s fees for the representatives of the class, not for objectors, even if their objections are successful. The court declined to apply the “common fund” doctrine to authorize such an award.

    Facts

    A class-action lawsuit was initiated on behalf of 242 residents of Barnwell Nursing Home, alleging failure to comply with patient care standards under Public Health Law § 2801-d. The parties reached a settlement after nearly six years of litigation. Caroline Ahlfors Mouris, representing her mother’s estate, objected to the proposed fees for class counsel, the settlement administrator’s compensation, and the incentive award for the class representative. Mouris also requested counsel fees for preparing and presenting her objections.

    Procedural History

    Supreme Court approved the settlement, awarding fees to class counsel, an incentive award to the originator of the claim, and compensation to the administrator. The court denied Mouris’s objections and her request for counsel fees, finding her objections did not assist the court or benefit the class. The Appellate Division modified the Supreme Court’s order by reducing or eliminating the awards, holding that CPLR 909 does not allow counsel fees to parties other than class counsel. The New York Court of Appeals granted Mouris leave to appeal.

    Issue(s)

    Whether New York law permits an award of counsel fees and expenses to an objector in a class action lawsuit.

    Holding

    No, because the language of CPLR 909 permits attorney fee awards only to “the representatives of the class,” and does not authorize an award of counsel fees to any other party, individual, or counsel.

    Court’s Reasoning

    The Court of Appeals relied on the general rule in New York that attorneys’ fees are incidental to litigation and are not recoverable unless supported by statute, court rule, or written agreement. CPLR 909, enacted as part of a comprehensive reform of class action laws in New York, codifies the common-law rule that attorneys’ fees may be paid from a fund created for the class. The court emphasized the statute’s language, which permits attorney fee awards only to “the representatives of the class.” The court stated, “Had the Legislature intended any party to recover attorney fees it could have expressly said so, as it has in other contexts.” The court distinguished federal practice, where some courts have awarded counsel fees to objectors under Federal Rules of Civil Procedure rule 23(h), noting that New York’s statute is only partly modeled on the federal provision. While Mouris argued for application of the “common fund” doctrine, the court rejected it, stating that no modern New York court has applied the rule to authorize an objector’s counsel fee award in a class action. The dissenting opinion argued that denying fees to successful objectors discourages monitoring of attorney’s fees and is contrary to the common fund doctrine. The dissent contended CPLR 909 should not be interpreted as a comprehensive codification that eliminates the common fund doctrine in this context, and that the statute does not explicitly forbid awarding fees to non-representatives of the class. The majority countered that the Legislature had the opportunity to provide for objector fees when revising CPLR Article 9, and its silence indicates no such intent, thus the court would not “assume a provision it could have easily provided and recognize a doctrine that has not been invoked in the last century.”

  • In re Estate of Hyde, 15 N.Y.3d 183 (2010): Surrogate Court’s Discretion in Allocating Attorney’s Fees

    In re Estate of Hyde, 15 N.Y.3d 183 (2010)

    Surrogate’s Court Procedure Act (SCPA) § 2110 grants the trial court discretion to allocate responsibility for payment of a fiduciary’s attorney’s fees for which the estate is obligated to pay—either from the estate as a whole or from shares of individual estate beneficiaries.

    Summary

    This case addresses the discretion of the Surrogate’s Court in allocating attorney’s fees in estate litigation. The Renzes, non-objecting beneficiaries of two trusts (Hyde and Cunningham), sought to have trustee counsel fees deducted solely from the shares of the objecting beneficiaries (the Whitneys). The Surrogate’s Court, relying on a prior interpretation of SCPA 2110, ordered fees disbursed from the corpus of each trust generally, impacting the Renzes. The Court of Appeals reversed, overruling its prior holding in Matter of Dillon, and held that SCPA 2110 grants the Surrogate’s Court discretion to allocate attorney’s fees either from the estate generally or from individual beneficiaries’ shares, based on a multi-factored assessment.

    Facts

    Charlotte Hyde created a testamentary trust (Hyde Trust). Nell Pruyn Cunningham created an inter vivos trust (Cunningham Trust). Mary Renz and Louis Whitney were income beneficiaries and presumptive remaindermen of both trusts. The Whitneys (Louis Whitney and his children) objected to the trustees’ accountings in both trusts, alleging failure to diversify assets. The Renzes, along with other beneficiaries, did not object. The Renzes filed an acknowledgment as non-objectors and sought to have future trustee counsel fees paid exclusively from the objecting beneficiaries’ shares.

    Procedural History

    The Surrogate’s Court dismissed the Whitneys’ objections. Citing Matter of Dillon, the court ordered trustee counsel fees to be disbursed from the corpus of each trust generally. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether SCPA 2110 grants the Surrogate’s Court discretion to allocate responsibility for payment of a fiduciary’s attorney’s fees for which the estate is obligated to pay—either from the estate as a whole or from shares of individual estate beneficiaries.

    Holding

    Yes, because SCPA 2110 provides the trial court with discretion to disburse funds from any beneficiary’s share in the estate—and not exclusively from “the estate generally.”

    Court’s Reasoning

    The Court overruled its prior interpretation of SCPA 2110 in Matter of Dillon, which had mandated that attorney’s fees be paid from the estate generally. The Court found that Dillon ignored the plain meaning of the statute and departed from prior jurisprudence emphasizing fairness. The Court noted the statute’s unambiguous language allowing disbursement from any beneficiary’s share. It cited the principle that statutes should be construed to avoid unjust or unreasonable results. The Court emphasized that trustee should have “an opportunity to prove their expenses and the circumstances under which they were incurred,” and at that point, “it would be for the court to determine on the facts of the case what part, if any, of such expenditures should be allowed to the [trustees] and charged against the life tenant and what part against the corpus of the estate” (Ungrich, 201 NY at 420). The Court directed the Surrogate’s Court to undertake a multi-factored assessment when allocating fees, including: whether the objecting beneficiary acted solely in their own interest or the common interest; the possible benefits to individual beneficiaries; the extent of participation; the good or bad faith of the objector; justifiable doubt regarding fiduciary conduct; the portions of interest held by non-objectors relative to objectors; and the future interests affected by reallocation.

  • LMK Psychological Services v. State Farm, 12 N.Y.3d 217 (2009): Calculating Attorney’s Fees and Tolling Interest in No-Fault Insurance Claims

    LMK Psychological Services v. State Farm Mut. Auto. Ins. Co. , 12 N.Y.3d 217 (2009)

    In New York no-fault insurance cases, attorney’s fees are calculated based on the aggregate amount awarded for each insured’s claim, not per individual bill, and the tolling of interest applies once a denial is issued, regardless of whether the denial was timely.

    Summary

    LMK Psychological Services, medical providers, sued State Farm for denying no-fault insurance claims. The lower courts awarded attorney’s fees on a per-bill basis and calculated interest without applying the tolling provision. The Court of Appeals reversed, holding that attorney’s fees should be calculated based on the aggregate amount of each insured’s claim, consistent with the Superintendent’s interpretation. The Court also held that the tolling provision applies once a denial is issued, even if untimely, to encourage prompt resolution of disputes.

    Facts

    Two medical providers, LMK Psychological Services and another, treated automobile accident victims insured by State Farm. State Farm denied the no-fault insurance claims assigned to the providers by the insureds. The providers sued State Farm, alleging failure to pay or deny multiple bills within 30 days as required by law.

    Procedural History

    The Supreme Court granted summary judgment to the providers, awarding attorney’s fees on each bill and interest without applying the tolling provision. The Appellate Division affirmed, holding that the attorney’s fees were properly awarded on a per-bill basis and that State Farm was not entitled to the tolling provision because it did not issue timely denials. The Court of Appeals granted leave to appeal and reversed the Appellate Division’s order.

    Issue(s)

    1. Whether attorney’s fees in no-fault insurance cases should be calculated on a per-bill basis or on the aggregate amount of payment required to be reimbursed for each insured’s claim.
    2. Whether the tolling provision for interest accrual applies when an insurance company fails to issue a proper and timely denial of a claim.

    Holding

    1. No, because the Superintendent of Insurance’s interpretation that attorney’s fees are calculated based on the aggregate amount awarded for each insured’s claim is reasonable and entitled to deference.
    2. Yes, because the purpose of the “Fair claims settlement” provision is to encourage claimants to resolve disputes quickly, and this purpose is best served by tolling interest once a denial is issued, even if untimely.

    Court’s Reasoning

    The Court of Appeals deferred to the Superintendent of Insurance’s interpretation of Insurance Law § 5106 and related regulations. The Superintendent issued an opinion letter stating that attorney’s fees should be calculated based on the aggregate amount of payment required to be reimbursed based upon the amount awarded for each bill which had been submitted and denied. The court stated, “[The Superintendent’s] interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision.”

    The Court found that the Superintendent’s interpretation of 11 NYCRR 65-3.9(c) regarding the tolling provision was also entitled to deference. The Superintendent interpreted this provision to mandate that the accrual of interest is tolled, regardless of whether the particular denial at issue was timely. The Court reasoned that this interpretation encourages claimants to swiftly resolve any dispute concerning their entitlement to no-fault benefits. As the Court explained, the underlying purpose of Section 5106 is to encourage “Fair claims settlement.” Even if a denial is untimely, “a claimant should still be encouraged to act to resolve the dispute quickly.”

  • LMK Psychological Services, P.C. v. State Farm Mutual Automobile Insurance Company, 12 N.Y.3d 217 (2009): Calculating Attorney’s Fees and Tolling Interest in No-Fault Insurance Claims

    12 N.Y.3d 217 (2009)

    When calculating attorney’s fees in no-fault insurance claims, the fee should be based on the aggregate amount awarded for each insured, not each individual bill, and the tolling provision for interest applies even if the denial of claim was untimely.

    Summary

    LMK Psychological Services sued State Farm for failing to pay no-fault insurance benefits. The lower courts calculated attorney’s fees on a per-bill basis and did not apply the interest tolling provision due to State Farm’s allegedly improper and untimely denials. The Court of Appeals reversed, holding that attorney’s fees should be calculated based on the aggregate amount for each insured, consistent with the Superintendent of Insurance’s interpretation. The Court also held that the interest tolling provision applies regardless of the timeliness of the denial, as it encourages prompt resolution of disputes.

    Facts

    LMK Psychological Services, P.C., and another medical provider, treated automobile accident victims insured by State Farm. State Farm denied some of the no-fault insurance benefit claims assigned to the providers by the insureds. The providers sued, alleging that State Farm failed to pay or deny multiple bills within the required 30 days.

    Procedural History

    The Supreme Court granted summary judgment to the providers, awarding attorney’s fees calculated on each bill and interest without applying the tolling provision. The Appellate Division affirmed, finding the attorney’s fees calculation proper and the tolling provision inapplicable due to State Farm’s allegedly improper denials. The Court of Appeals granted State Farm leave to appeal.

    Issue(s)

    1. Whether attorney’s fees in no-fault insurance claims should be calculated on a per-bill basis or based on the aggregate amount awarded for each insured?

    2. Whether the interest tolling provision in no-fault insurance claims applies when the denial of claim was untimely or improper?

    Holding

    1. No, because the Superintendent of Insurance’s interpretation of the regulation is reasonable and entitled to deference; attorney’s fees should be calculated based on the aggregate of all bills for each insured.

    2. Yes, because the purpose of the no-fault law is to encourage prompt resolution of disputes, and the tolling provision should apply regardless of the timeliness of the denial.

    Court’s Reasoning

    The Court deferred to the Superintendent of Insurance’s interpretation regarding the calculation of attorney’s fees. The Superintendent’s opinion letter stated that attorney’s fees should be based on the aggregate amount of payment required to be reimbursed based on the amount awarded for each bill submitted and denied for each insured, and not on each bill individually. The Court stated that “[w]e have long held that the Superintendent’s ‘interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision’” (quoting Matter of New York Pub. Interest Research Group v New York State Dept. of Ins., 66 NY2d 444, 448 [1985]).

    Regarding the tolling provision, the Court again deferred to the Superintendent’s interpretation. The Court reasoned that “it is consistent with section 5106, entitled ‘Fair claims settlement,’ the purpose of which is to encourage claimants to swiftly seek to resolve any dispute concerning their entitlement to no-fault benefits. Once a denial is issued, even if an untimely one, a claimant should still be encouraged to act to resolve the dispute quickly.” Therefore, the tolling provision should apply regardless of whether the denial was timely or proper. The court emphasized that the Superintendent’s interpretation was “not irrational or unreasonable” (quoting Matter of Council of City of NY v Public Serv. Commn. of State of N.Y., 99 NY2d 64, 74 [2002]).

  • Giuliani v. Commissioner of New York State Department of Health, 12 N.Y.3d 433 (2009): Eleventh Amendment Immunity and Attorney’s Fees in Medicaid Cases

    Giuliani v. Commissioner of New York State Department of Health, 12 N.Y.3d 433 (2009)

    The Eleventh Amendment does not bar suits against state officials in their official capacity seeking prospective relief to end ongoing violations of federal law, even if such relief has an ancillary effect on the state treasury; however, attorney’s fees under 42 U.S.C. § 1988 are only available if the plaintiff prevails on a federal claim.

    Summary

    This case concerns whether a Medicaid applicant, Giuliani, could recover attorney’s fees from the Commissioner of the New York State Department of Health (DOH) under 42 U.S.C. § 1988(b). Giuliani argued that DOH’s calculation of his wife’s “community spouse resource allowance” (CSRA) violated the federal Medicaid Act. The Court of Appeals held that while the Eleventh Amendment does not bar Giuliani’s suit because he sought prospective relief, it could not determine whether the lower court had awarded relief on federal grounds. The case was remitted to determine if DOH’s CSRA calculation violated federal law and whether Giuliani was entitled to attorney’s fees.

    Facts

    Giuliani applied for Medicaid benefits in October 2004, which was denied because his household income and resources exceeded permissible limits. He requested an administrative fair hearing to reverse the denial and establish an increased CSRA for his wife. The Administrative Law Judge (ALJ) affirmed the denial but found his wife entitled to an increased CSRA, remanding the matter to determine how much of Giuliani’s excess resources were needed to purchase a life annuity to raise his wife’s income to the threshold amount.

    Procedural History

    Giuliani commenced a CPLR article 78 proceeding against the Commissioner of DOH, alleging the annuity requirement was arbitrary, capricious, and violated 42 U.S.C. § 1396r-5(e)(2)(C) and the State Administrative Procedure Act. Supreme Court granted the petition, annulling the fair hearing decision and awarding attorney’s fees. The Appellate Division reversed the fee award, holding Giuliani did not prevail on a claim under 42 U.S.C. § 1983. The Court of Appeals reversed and remitted the case.

    Issue(s)

    1. Whether the Eleventh Amendment bars a suit against a state official seeking to remedy a denial of Medicaid benefits.

    2. Whether a party is entitled to attorney’s fees under 42 U.S.C. § 1988 when relief is awarded on state grounds, but a federal claim is also present.

    Holding

    1. No, because the relief sought was prospective in nature, aiming to end an ongoing violation of federal law and vindicate the right to Medicaid eligibility.

    2. The Court could not determine if attorney fees were appropriate because it was unclear whether the lower court’s ruling was based on a violation of federal law.

    Court’s Reasoning

    The Court reasoned that under Ex parte Young, the Eleventh Amendment does not bar suits against state officials seeking prospective relief to end ongoing violations of federal law. The Court emphasized that the relief Giuliani sought was prospective because it would result in his ongoing entitlement to Medicaid benefits. The fact that Medicaid eligibility would be retroactive was incidental to the primary relief sought: the annulment of the fair hearing decision. The Court contrasted this with retrospective relief, which seeks to remedy a past violation.

    The Court noted that attorney’s fees under 42 U.S.C. § 1988 are available where relief is sought on both state and federal grounds, but awarded only on state grounds if the constitutional claim is substantial and arises from a common nucleus of operative fact. However, in this case, it was unclear whether the Supreme Court based its decision on federal law, specifically 42 U.S.C. § 1396r-5(e)(2)(C). Because the Supreme Court did not make a determination that the Commissioner violated the specific statutory provision, the Court of Appeals could not conclude that Giuliani was a prevailing party on a federal claim for the purposes of awarding attorney’s fees.

    The Court remitted the matter to Supreme Court to determine if DOH’s CSRA calculation violated federal law and whether Giuliani was entitled to attorney’s fees under section 1988.

  • Burns v. Varriale, 9 N.Y.3d 207 (2007): Apportionment of Attorney’s Fees in Workers’ Compensation Cases with Nonschedule Permanent Partial Disabilities

    9 N.Y.3d 207 (2007)

    In workers’ compensation cases involving nonschedule permanent partial disabilities, the value of future benefits is too speculative to allow for the present apportionment of attorney’s fees based on the carrier’s anticipated relief from those future payments.

    Summary

    Owen Burns, a police officer, sustained permanent injuries in a motor vehicle accident during his employment and was classified as permanently partially disabled, receiving ongoing workers’ compensation benefits. He later settled a third-party personal injury action related to the accident. A dispute arose regarding the apportionment of attorney’s fees between Burns and the workers’ compensation carrier, Travelers, specifically concerning the carrier’s future relief from benefit payments due to the settlement. The New York Court of Appeals held that because the value of future benefits for a claimant with a nonschedule permanent partial disability is speculative and cannot be reliably ascertained at the time of a third-party settlement, Burns was not entitled to an immediate apportionment of attorney’s fees based on those future benefits.

    Facts

    Owen Burns, a police officer, was injured in a motor vehicle accident while on duty. He sustained permanent injuries and was classified as permanently partially disabled, receiving $400 per week in workers’ compensation benefits. Burns sued the other driver, Varriale, and reached a settlement for the full amount of Varriale’s insurance policy ($300,000). Travelers, the workers’ compensation carrier, asserted a lien against the settlement proceeds for past benefits paid. A dispute arose concerning the apportionment of attorney’s fees, particularly regarding the value of future benefits Travelers would be relieved from paying due to the settlement.

    Procedural History

    Burns petitioned the Supreme Court to compel Travelers to consent to the settlement, extinguish Travelers’ lien, and direct Travelers to pay “fresh money” because its share of attorney’s fees exceeded the lien amount. Travelers consented but reserved its right to a credit against future benefits. Supreme Court granted Burns’ petition, extinguishing the lien and ordering Travelers to pay “fresh money.” The Appellate Division modified the Supreme Court’s order, directing Burns to pay Travelers the value of its lien reduced by its share of litigation costs. The Court of Appeals affirmed the Appellate Division’s decision.

    Issue(s)

    Whether the present value of future workers’ compensation benefits for a claimant with a nonschedule permanent partial disability is ascertainable at the time the claimant recovers damages in a third-party action such that the claimant is entitled to an immediate apportionment of attorney’s fees based on the carrier’s relief from paying those future benefits.

    Holding

    No, because the value of future workers’ compensation benefits for a claimant with a nonschedule permanent partial disability is speculative and cannot be reliably ascertained at the time of a third-party settlement.

    Court’s Reasoning

    The Court reasoned that unlike death benefits, permanent total disability benefits, or schedule loss of use awards, benefits for permanent partial disabilities are inherently uncertain. These benefits depend on the claimant’s continued attachment to the labor market, their actual earnings, and other factors that can change over time. The Court stated, “[I]n a permanent partial disability case, whether a claimant has maintained a sufficient attachment to the labor market must be resolved by the Board in determining his or her reduced earning capacity and whether benefits should be awarded.” Because the rate and duration of these benefits may fluctuate, the value of future compensation payments is too speculative for an immediate apportionment of attorney’s fees. The Court distinguished this situation from death benefit cases, where benefits are paid at a set rate for life unless the spouse remarries, or permanent total disability cases, where there is no expectation of returning to the workforce. The Court emphasized that while immediate apportionment is not possible, the carrier can be required to periodically pay its equitable share of attorney’s fees as continuous compensation benefits are awarded. The trial court can fashion a means of apportioning litigation costs as they accrue and monitoring how the carrier’s payments to the claimant are made. This ensures that the carrier’s payment of attorney’s fees is based on an actual, nonspeculative benefit. The court quoted Matter of Kelly v. State Ins. Fund, 60 N.Y.2d 131, 138 (1983): “[Equitable apportionment] was purposely adopted to avoid ‘rigid statutory formulas’ and to implement a ‘practical and flexible’ approach towards ensuring that a compensation carrier assumes its fair share of the costs of litigation.”

  • AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428 (2007): Scope of Representation in Legal Malpractice Claims

    AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428 (2007)

    An attorney’s duty of care in a legal malpractice action is defined by the scope of the retainer agreement, and a failure to advise on matters outside that scope does not constitute malpractice.

    Summary

    AmBase Corp. sued its former attorneys, Davis Polk, for legal malpractice, alleging that Davis Polk failed to advise them that an agreement with their parent company might have limited their tax liability. Davis Polk successfully defended AmBase in a tax dispute with the IRS. AmBase argued that Davis Polk’s failure to explore the agreement caused them to maintain a loss reserve, damaging business opportunities. The court held that Davis Polk’s representation was limited to litigating the tax amount, not determining liability allocation, and that AmBase failed to prove damages resulting from Davis Polk’s alleged negligence. The court also affirmed the award of attorneys’ fees to Davis Polk, finding AmBase had sufficient notice and opportunity to contest the fees.

    Facts

    In 1985, AmBase became independent after its parent, City Investing Company, liquidated. An agreement between AmBase and City Investing assigned primary liability for federal income taxes to AmBase and secondary liability for other debts. The IRS later claimed City Investing owed withholding taxes. In 1991, AmBase asserted it was liable as N.V.’s agent for withholding taxes. In 1992, AmBase hired Davis Polk to resolve the IRS dispute. In 1995, the IRS issued a deficiency notice. The Tax Court ruled in AmBase’s favor in 2001.

    Procedural History

    AmBase sued Davis Polk for legal malpractice after successfully defending against the IRS claim, alleging damages from a missed advising opportunity. Davis Polk moved to dismiss and sought payment of outstanding legal fees. The Supreme Court dismissed AmBase’s complaint, granted Davis Polk’s motion, and awarded attorneys’ fees. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether Davis Polk committed legal malpractice by failing to advise AmBase that an agreement with its parent company might have limited its tax liability, when Davis Polk was retained to litigate the amount of tax liability.
    2. Whether the award of a money judgment to Davis Polk for attorneys’ fees was proper when no counterclaim had been interposed.

    Holding

    1. No, because Davis Polk’s representation was limited to litigating the amount of tax liability, and the issue of liability allocation was outside the scope of their representation.
    2. Yes, because AmBase had sufficient notice and opportunity to contest the amount of the fees throughout the proceedings, and failed to do so.

    Court’s Reasoning

    The Court reasoned that a legal malpractice claim requires proof that the attorney failed to exercise reasonable skill and knowledge and that this failure caused actual damages. Here, Davis Polk’s retainer agreement defined its scope of representation as resolving the tax issues before the IRS, not determining liability allocation. The court stated, “The plain language of the retainer agreement indicates that Davis Polk was retained to litigate the amount of tax liability and not to determine whether the tax liability could be allocated to another entity.” AmBase understood it was primarily liable for the taxes, as evidenced by its prior conduct and public filings. Even if Davis Polk had erred, AmBase failed to prove that this error caused damages. The court found that “[a] legal malpractice action is unlikely to succeed when the attorney erred because an issue of law was unsettled or debatable.” Regarding the attorneys’ fees, the court emphasized that AmBase had multiple opportunities to contest the amount but failed to do so. The court stated, “AmBase had numerous opportunities throughout the litigation to challenge the calculation of the fee, but did not.”

  • King v. Fox, 7 N.Y.3d 181 (2006): Ratification of Attorney’s Fee Agreement During Continuous Representation

    7 N.Y.3d 181 (2006)

    A client can ratify an attorney’s fee agreement, even during continuous representation or if attorney misconduct occurred, provided the client is fully informed and acquiesces knowingly and voluntarily.

    Summary

    This case addresses whether a client can ratify an attorney’s fee agreement, even one that is potentially unconscionable or arises during ongoing representation where attorney misconduct occurred. Edward King, a musician, sued his attorney, Lawrence Fox, alleging the fee agreement was unconscionable. The Second Circuit certified questions to the New York Court of Appeals regarding ratification. The Court held that ratification is possible under these circumstances if the client had full knowledge of the facts, understood their rights, and voluntarily agreed to the terms. The burden is on the attorney to prove the client’s informed acquiescence, free from fraud or misconception.

    Facts

    Edward King hired Lawrence Fox in 1975 to recover royalties from his work with Lynyrd Skynyrd. Fox, a personal injury lawyer with limited entertainment law experience, agreed to a one-third contingency fee. King signed a retainer agreement reflecting this. In 1978, a settlement was reached, and Fox advised King that the one-third fee would apply to both past and future royalties. King was surprised but proceeded with the settlement. King’s wife wanted another lawyer to review settlement documents, but Fox misrepresented a deadline, leading King to accept. For years, MCA sent royalty payments to Fox, who deducted his fee and remitted the balance to King. This arrangement continued until 1995 when King started receiving full royalty checks directly. Fox then demanded his share, leading to the lawsuit.

    Procedural History

    King sued Fox in the Southern District of New York, alleging the fee agreement was unconscionable. The District Court initially granted summary judgment to Fox based on the statute of limitations, which was reversed and remanded by the Second Circuit. On remand, the District Court again granted summary judgment to Fox, finding King had ratified the agreement. King appealed, and the Second Circuit certified three questions to the New York Court of Appeals.

    Issue(s)

    1. Is it possible for a client to ratify an attorney’s fee agreement during a period of continuous representation?
    2. Is it possible for a client to ratify an attorney’s fee agreement during a period of continuous representation if attorney misconduct has occurred during that period? If so, can ratification occur before the attorney has committed the misconduct?
    3. Is it possible for a client to ratify an unconscionable attorney’s fee agreement?

    Holding

    1. Yes, because continuous representation does not preclude ratification if the client possesses full knowledge of relevant facts and acquiesces.
    2. Yes, because misconduct does not automatically invalidate ratification, so long as the client’s agreement is not procured by that misconduct. Ratification cannot occur *before* the misconduct takes place, since the client must be aware of the misconduct to knowingly ratify the agreement despite it.
    3. Yes, but with qualifications, because ratification of an unconscionable agreement is rare and requires a fully informed client with equal bargaining power who knowingly and voluntarily affirms the agreement, understanding the facts making it voidable and their rights.

    Court’s Reasoning

    The Court of Appeals held that New York law allows a client to ratify an attorney’s fee agreement even during continuous representation, despite potential attorney misconduct, or even if the agreement is unconscionable. The Court emphasized that for ratification to be valid, the attorney bears the burden of proving the client’s acquiescence was made with full knowledge of all material circumstances and was not induced by fraud or misrepresentation. The Court recognized the unique fiduciary duty attorneys owe their clients, requiring fee agreements to be fair, reasonable, and fully understood. Quoting Greene v Greene, 56 NY2d 86, 92 (1982), the court stated the attorney must show the client acquiesced “with full knowledge of all the material circumstances known to the attorney,” and that the client was not influenced by fraud or misconception. Even though the client’s continuous representation by the attorney may toll the statute of limitations for legal malpractice, it does not prevent the client from ratifying the fee agreement. The court noted, quoting Shaw v Manufacturers Hanover Trust Co., 68 NY2d 172, 176 (1986), that “courts 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”. The Court acknowledged that unconscionable agreements are generally voidable, but a fully informed client with equal bargaining power can knowingly and voluntarily affirm the agreement if they understand the facts that make the agreement voidable and know their rights as a client. The Court did not decide whether ratification occurred in this particular case, leaving that determination to the lower courts.