Bay Ridge Lawyers Association
Developments in the Law E-Newsletter

SEPTEMBER 2011 EDITION

President: Helen Z. Galette

Committee Co-Chairs:
James Villani and Mary Ann K. Stathopulous

MEDICAID PLANNING. EXPANDED MEDICAID ESTATE RECOVERY. The federal government passed the Omnibus Budget Reconciliation Act of 1993 (OBRA-93), which contained a mandate that each state have a Medicaid law that contains an estate recovery provision, but left to the states the choice of either limited or expanded recovery. In 1994, New York accepted this mandate and chose to limit estate recovery to the probate or intestate estate. Recently, New York expanded estate recovery beyond the probate and intestate estate to “any other property in which the individual has any legal title or interest at the time of death, including jointly held property, retained life estates, and interests in trusts, to the extent of such interests.” This could impact retained life estates, any trusts in which a Medicaid recipient is a beneficiary and any other property in which a Medicaid recipient has an interest at the time of death.  Although the law passed with an effective date of April 1, 2011, the law will not be implemented until regulations are adopted by the Commissioner of the New York State Department of Health.  Attached hereto as Exhibit 1 is a commentary prepared by Mr. Anthony Lamberti on proposed regulations regarding the Expanded Medicaid Estate Recovery Law. Thank you, Anthony.

ESTATES. ATTORNEY’S FEES. IN A PROCEEDING PURSUANT TO SCPA §2110 TO FIX AND DETERMINE AN ATTORNEY'S FEE, THE SURROGATE BEARS THE ULTIMATE RESPONSIBILITY OF DECIDING WHAT CONSTITUTES A REASONABLE LEGAL FEE. The petitioner was a proponent of a will leaving the decedent’s entire estate of $5 million to her. She retained an attorney to represent her in a contested probate proceeding. The attorney agreed to represent the petitioner on a contingent fee basis pursuant to a written retainer agreement. Weeks later, the probate proceeding was settled. The attorney had received a $5,000 retainer and a $585,000 contingency fee pursuant to the terms of the retainer agreement. The petitioner brought a proceeding to fix and determine the attorney’s fee pursuant to SCPA §2110. The attorney moved for summary judgment. The Surrogate's Court denied the petition and granted the attorney’s motion to dismiss. The petitioner appealed. The Appellate Division reversed the Surrogate and directed that the reasonableness of the attorney’s fee should be determined by the Court. The Appellate Division held that in a proceeding pursuant to SCPA §2110 to fix and determine an attorney's fee, the Surrogate bears the ultimate responsibility of deciding what constitutes a reasonable legal fee, regardless of the existence of a retainer agreement or whether all of the interested parties have consented to the amount of fees requested. "Although contingent fee retainer agreements are not per se improper in matters involving the administration of estates . . . agreements entered into between an attorney and his client, as a matter of public policy, are of special concern to courts". (Matter of Lanyi, 147 AD2d 644, 647 [1989]; see Matter of Thompson, 66 AD3d 1035, 1036 [2009]; Matter of Krulish, 130 AD2d 959, 959 [1987]). The burden of proving that the retainer agreement was reasonable rests with the attorney. Matter of Talbot, N.Y.L.J. 5/17/11, P.1, C.5 (2nd Dept., 2011). 2011 NY Slip Op 04059 [84 AD3d 967].

PROBATE. 19 YEAR OLD INSTRUMENT DENIED PROBATE AS ANCIENT DOCUMENT. PROOF OF A WILL WHEN THE WITNESSES ARE DECEASED OR UNAVAILABLE. In an uncontested probate proceeding, the court was asked to admit a will to probate as an ancient document whereby the petitioner was unable to provide the court with either affidavits or testimony of the attesting witnesses.  It was alleged that one of the witnesses was deceased and the other's whereabouts were unknown. The Court acknowledged that where witnesses are deceased or their whereabouts are unknown, the Court may admit a will to probate under the Ancient Document Rule, with some Courts applying the common law 30-year rule, and others adopting the more liberal 20-year federal rule. However, the Court found no authority for admitting the 19-year old propounded instrument to probate under the rule. Nonetheless, the Court ruled that although the will could not be admitted to probate as an ancient document the proceeding did not have to be dismissed. Despite its failure to qualify as an ancient document, the Court explained a statutory basis upon which the instrument may be probated absent the testimony of any witnesses. SCPA §1405[4] provides that the will may be admitted to probate based solely upon “the handwriting of the testator and of at least one of the attesting witnesses and such other facts as would be sufficient to prove the will”. To satisfy this requirement, the Surrogate noted that the handwriting of the predeceased attorney draftsman could be obtained from his original will that was on file with the Court, and proved based upon an affidavit from a handwriting expert that the signature on the propounded instrument was written by the same person who executed his will. Similarly, he stated that the Court would be satisfied with the genuineness of the subject decedent’s signature based upon an affidavit from one of her children or other relatives.  The Court ruled that the foregoing approach would satisfy the court of the genuineness of the will and permit its admission to probate. Matter of Santoro, N.Y.L.J. 5/3/11, p.25, c.2 (Surr.Ct., Nassau Co., Surr. McCarty III).

FAMILY LAW. CUSTODY. FACTORS. CHANGE OF SCHOOL. In this custody proceeding, the Family Court awarded custody to the father (respondent) based upon the testimony of the parents, the father’s employer, and a court-appointed forensic evaluator, who supported custody with the mother, and an in camera interview with the child. Order granting custody to the father is reversed, with custody granted to the mother. Although the parents’ relations were amicable and each could adequately care for their child’s needs, the Appellate Division finds that the Family Court did not afford sufficient weight to the child’s need for stability. With the father having custody, the child would be required to transfer to a different school, which would necessitate his waking up much earlier and traveling 45 minutes on public transportation in Queens to the City, remaining at the father’s office for two hours each day after school, and then returning home at 6 or 7 PM. Under the circumstances, as indicated by the forensic examiner, the schedule would be "long" and "grueling for the child," in contrast to leaving him in his current school, where he was "thriving." Matter of Moran v. Cortez. Decided June 7, 2011. Second Department.

FAMILY LAW. CUSTODY. RELOCATION. FINANCIAL NECESSITY. In this child custody proceeding, petitioner (father) sought to prevent the respondent (mother) from relocating to Pennsylvania with her husband. In opposition and in support of her own cross-petition for permission to relocate, the respondent contended that she needed to do so out of financial necessity because both she and her husband lost their jobs, depleted their savings and lost their home through foreclosure. Order granting the father’s petition and denying the mother’s cross-petition is reversed in its entirety. Although the relationship that a child has with the non-custodial parent is important, it does not take precedence over the need to give appropriate weight to the financial necessity for relocating. Here, the mother’s husband obtained new employment in Pennsylvania, which included medical insurance for both the mother and the child. Further, the mother and father testified that they would share transporting their child between New York and Pennsylvania, and the mother indicated that she and her husband would pay for the petitioner’s hotel expenses in Pennsylvania when he visited. Matter of Butler v. Hess. Decided June 17, 2011. Fourth Department.

REAL PROPERTY LAW. FORECLOSURE. VALIDITY OF MORTGAGE. AUTHORITY OF MORTGAGOR’S REPRESENTATIVE. As far as mortgagees are concerned, the law is clear that they do not have a duty of care to ascertain the validity of the documentation presented by an individual who claims to have the authority to act on behalf of a borrower corporation or entity. LZG Realty, LLC v. HDW 2005 Forest, LLC. Decided August 30, 2011. Second Department.

CIVIL PROCEDURE. PERSONAL INJURY. DEFENSES. RES JUDICATA. SETTLEMENT WITH CORPORATION. SUBSEQUENT ACTION AGAINST EMPLOYEE. In this personal injury action arising out of the filling of the plaintiff’s prescription with the wrong medication, the injured plaintiff and his wife, derivatively, settled with the corporate owner of the pharmacy for $300,000, executed a general release, and filed a stipulation of discontinuance with prejudice. When the plaintiffs subsequently commenced a negligence action against the pharmacist who filled the prescription, who was both an employee and part owner of the pharmacy, he moved to dismiss on res judicata grounds. In opposition, the plaintiffs contended that res judicata did not apply because they did not assert in the previous action that the defendant corporation was liable based upon the pharmacist’s negligence. Order granting the defendant’s motion is reversed, and motion denied. Res judicata may be invoked where there is either a final judgment between the parties or a settlement with a stipulation of discontinuance with prejudice. To establish privity for purposes of res judicata, the party raising the defense must demonstrate a “connection between the party to be precluded and a party to the prior action such that the interests of the party can be said to have been represented in the prior proceeding.” Here, the defendant did not establish privity because the plaintiffs never asserted liability against the corporation based upon his conduct in his capacity as a pharmacist. [Editor’s comment: The release named only the corporate defendant, its d/b/a, and its heirs, executors, administrators, successors and assigns, but not its agents, servants and/or employees.] Farren v. Lisogorsky. Decided August 30, 2011. Second Department.

CRIMINAL LAW. INCARCERATED DEFENDANT. DNA. CIGARETTE. Defendant, who was convicted by a jury of first degree robbery for a gas station holdup, contended on appeal that the prosecution’s use of a DNA saliva sample from a cigarette butt which he left in an ashtray while talking to a detective during his incarceration for a different crime violated his right to counsel. The Appellate Division affirmed the conviction. The Court of Appeals also affirms. The defendant’s right to counsel was not violated because: (1) the defendant requested the meeting with the detective to discuss a landlord/tenant matter; (2) the detective did not bring up the gas station robbery as a topic of conversation; and (3) the saliva on the cigarette butt was not a communicative act that disclosed the defendant’s "state of mind." People v. Gibson. Decided June 14, 2011.

CRIMINAL PROCEDURE. 2009 DLRA. EXCLUSION OFFENSE COMMITTED DURING PAROLE FOR DRUG OFFENSE. LOOK-BACK PERIOD. APPLICABILITY. Defendant, who committed what would be considered an “exclusion offense” during his parole on a drug conviction, moved for resentencing under the DLRA of 2009. Order of the County Court denying the motion is affirmed. Although the 10-year look back period does not apply in this situation, because the “exclusion offense” occurred after the drug offense, the defendant’s criminal behavior while on parole, which may be considered in determining a resentencing application, justified the County Court’s denial of the motion in the interests of substantial justice. People v. Devivo. Decided August 11, 2011. Third Department.

CONTRACTS. GETTING MORE THAN NEW YORK’S 9% STATUTORY INTEREST RATE BY STIPULATING TO HIGHER RATE IN CONTRACT. The interest presumably allowed under the CPLR on litigated obligations is the 9% provided for in CPLR 5004.  When a contract obligation, most typically a loan, carries interest at a higher rate which the law allows (so long as not in violation of the applicable state usury rate) the defaulting borrower may have an incentive to withhold payment as long as possible for the obvious reason that as of the moment of default the money will be held at the lower 9% rate rather than the higher contract rate bargained for.  The reason is the general rule that as of the moment of default, the contract rate ceases and the statutory rate takes over. But a lender can get around that.  Case law has indicated that making the contract rate applicable to until the principal is paid (by including language in the contract to that effect) will supersede the CPLR 5004, 9% rate and earn even post-judgment interest at the contract rather than the statutory rate. That opportunity has been recognized for quite a while now, but reported cases have shown lenders forfeiting the chance by not using tight enough language in the contract.  See, e.g., Marine Mgmt., Inc. v. Seco Mgmt., Inc., 176 A.D.2d 252, 574 N.Y.S.2d 207 (2d Dept 1991; 3-2 decision), affd 80 N.Y.2d 886, 587 N.Y.S.2d 900 (1992), and the discussion in the Commentary on McKinney’s CPLR 5004.  Clear authority for the proposition that including the “until the principal is paid” clause in the contract will work for the lender, can be found in this recent Court of Appeals decision.  NML Capital v. Republic of Argentina, N.Y.3d, N.Y.S.2d, 2011 WL 2567294 (June 30, 2011).

CONSTITUTIONAL LAW. PRIVILEGES AND IMMUNITIES CLAUSE. NON-RESIDENT MEMBERS OF NYS BAR. Plaintiff is licensed to practice law in the states of New York, New Jersey, and California. Plaintiff maintains her residence and law office in Princeton, New Jersey, which is an hour long commute from the New York state line and New York City. Plaintiff states that while attending a continuing legal education course, she learned that under Section 470, nonresident attorneys may not practice law in New York without maintaining an office located in New York. Section 470, which does not apply to attorneys who reside in New York, provides: "A person, regularly admitted to practice as an attorney and counsellor, in the courts of record of this state, whose office for the transaction of law business is within the state, may practice as such attorney or counsellor, although he resides in an adjoining state." N.Y. JUDICIARY LAW §470 (McKinney 2010). Section 470 continues to be enforced by Defendants and by New York courts. Plaintiff is unable to practice law in New York, despite her full compliance with all requirements applicable to attorneys residing in New York, because she does not maintain an office in New York. Section 470 has not yet been enforced against Plaintiff; however, Plaintiff claims that because she has no office in New York, the law has forced her to refrain from representing clients when doing so would require her to practice in New York courts.  Plaintiff claims that Section 470 infringes on her right to practice law in New York in violation of the Privileges and Immunities Clause. Plaintiff claims that Section 470 effectively imposes a residency requirement on nonresident attorneys because it conditions the practice of law in New York on maintaining an office in New York. Plaintiff further asserts that this requirement serves no substantial state interest and unnecessarily prevents her from practicing law in New York, despite the fact that she meets all of the requirements imposed on attorneys who are New York residents.  The Supreme Court has traditionally interpreted the Privileges and Immunities Clause to prevent a state from imposing an unreasonable burden on citizens of other states to (1) conduct business, or pursue a common calling within the state; (2) to own private property within the state; and (3) to gain access to the courts of the states. See Baldwin v. Fish & Game Comm’n of Mont., 436 U.S. 371, 383 (1978)(citing Ward v. Maryland, 79 U.S. 418 (1871); Blake v. McClung, 172 U.S. 239 (1898); Canadian Northern R. Co. v. Eggen, 252 U.S. 553 (1920)).The Privileges and Immunities Clause, however, is “not an absolute” – in other words, it does not wholly prohibit a state from using residency to distinguish between persons. Toomer, 334 U.S. at 396. “Only with respect to those ‘privileges’ and ‘immunities’ bearing upon the vitality of the Nation as a single entity must the State treat all citizens, resident and nonresident, equally. Defendants have failed to establish either a substantial state interest advanced by Section 470, or a substantial relationship between the statute and that interest, the Court concludes as a matter of law that it infringes on nonresident attorneys' right to practice law in violation of the Privileges and Immunities Clause. Schoenefeld v. State of New York, 1:09-CV-00504, NYLJ 1202513835501. Decided: September 7, 2011.

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