In a lengthy, thoughtful August 29, 2017 opinion in S.M. v. M.R., Richmond County (Staten Island) Supreme Court Justice Catherine M. DiDomenico resolved the financial issues incident to the parties’ divorce. Among the issues were those that arose from parties’ family and financial ties to Egypt, the absence of proof on various financial matters, and the wife’s 1999 medical degree in Egypt, all but abandoned since moving to the United States in 2002 resulting in her current need for rehabilitative maintenance.

The final issue tackled by the Court was the wife’s request for an award of counsel fees in the sum of $43,000 for her attorney’s handling of the entirety of this divorce proceeding. The wife based her claim upon the fact that she was the non-monied spouse in this action (D.R.L. §237[a]). In support of her claim, the wife submitted a copy of her attorneys’ retainer agreement, together with legal billing.

The husband objected to any award on the basis of the language of that retainer agreement: the wife and her attorney had agreed to “cap” counsel fees at the sum of $10,000.

You agree to pay Your Attorney for legal services at the rate of $250.00 per billable hour and $750.00 per each half-day appearance in Court by Steven Scavuzzo Esq. The foregoing rates are valid for services rendered in calendar years 2013 and 2014. In the event that such rates are modified you will be advised and requested to execute an amendment reflecting the new rates. Legal fees in this matter shall be capped at $10,000, not including costs, disbursements, post-judgment enforcement and any appeal You wish to pursue.”

The husband argued that this cap should inure to his benefit; that as the wife can never be charged more than $10,000 for the divorce proceeding, as a matter of law he cannot be responsible for any more than that amount. The wife’s attorney should be prohibited from seeking an award of counsel fees by the clear language of his own retainer agreement

The husband went on to note that he had already paid $11,500 in pendente lite counsel fees to wife’s attorney, and that the wife had paid the sum of $7,500 directly to her attorney. The husband further argued that since this combined amount was in excess of the $10,000 “cap,” the wife’s attorney should be required to refund the amount of $6,469 into the marital estate for purpose of equitable distribution.

In response, and over the husband’s objection, the wife took the stand to “explain” the agreement; that she “understood” the language to mean that Wife’s attorney would seek any remaining balance over the $10,000 cap from her Husband.

Justice DiDomenico noted that a final award of reasonable counsel fees is a matter within the sound discretion of the trial court, controlled by the equities and circumstances of each particular case. While D.R.L. §237 permits consideration of many factors, paramount amongst these factors is financial need. The purpose of D.R.L. §237 is to “redress the economic disparity between the monied spouse and the non-monied spouse. Other factors to be considered include the relative merits of the parties’ positions, and if either party engaged in conduct that resulted in a delay of the proceedings or unnecessary litigation. For cases commenced after October, 2010, there is a rebuttable presumption that an award of counsel fees should be granted to the non-monied spouse.

However, neither party could find relevant caselaw regarding this issue. Neither did the Court find applicable precedent in its own research. It appeared to be a matter of first impression.

Justice DiDomenico held that the wife’s efforts to “explain” her “understanding” of the language used in the retainer contract, amounted to little more than impermissible parol evidence. The Court found that the language was clear and unambiguous on its face, and should be enforced in accordance with its terms.

Accordingly, when the wife testified that she was obligated to pay her attorney the sum of $42,281, she was at best mistaken. Pursuant to the clear terms of their agreed-upon retainer, the wife could owe her attorney no more than $10,000, of which she had already paid $7,500.

Quote: Notably, there is no language in the retainer that would indicate that Wife’s attorney “reserves the right” to seek any balance of counsel fees from Husband.

The husband argued that he was akin to a “third party beneficiary” to that agreement. Thus, the question remained as to whether the clause capping counsel fees, which was negotiated between the wife and her attorney, inured to the husband’s benefit.

Although it appeared to be a matter of first impression, the Court did not find itself without guidance. Justice DiDomenico noted that matrimonial retainers are highly regulated, and thus are often the subject of scrutiny at trial. A failure to abide by these retainer and billing regulations may preclude an attorney from recovering a legal fee from his or her client.

Justice DiDomenico also noted that the Appellate Divisions of the First, Third and Fourth Judicial Departments have held that the these regulations are protections that only run between attorney and client, as signatories to the retainer contract.

However, as she noted, Justice DiDomenico sits in the Second Judicial Department, which has taken a markedly different view as to the applicability to the adversarial spouse of the provisions set forth in a retainer agreement. In the Second Department, the failure to substantially comply with retainer requirements will preclude an attorney’s recovery of a legal fee from his or her client, “or from the adversary spouse.” The Appellate Division has explained the reasoning behind this ruling by holding that “since the plaintiff’s counsel was precluded from seeking unpaid fees from the plaintiff, the plaintiff’s spouse may not be required to pay such fees.” While Justice DiDomenico recognized that the issues presented in the Second Department cases may have been different, the reasoning was equally applicable to the issue presently before the Court.

While the husband had not argued that the wife’s counsel was not in compliance with the rules required for a matrimonial retainer, following the logic in such cases, the husband argued that since his wife’s counsel is precluded from ever seeking more than $10,000 from his wife, the husband cannot be required to pay more than that amount. The protections of the retainer apply equally to him in the Second Department.

This Court agrees and finds that clauses of Wife’s retainer agreement apply to Husband, so long as Husband is being asked to contribute to the counsel fees owed under that retainer.

The wife’s attorney argued in the alternative, that the Court should grant legal fees under the spirit of D.R.L. §237 because of “public policy concerns;” that non-monied matrimonial litigants would be somehow hindered in acquiring representation if they could not seek counsel fees from the monied spouse in a matrimonial proceeding. However, Justice DiDomenico stated that while that argument effectively set forth part of the reasoning behind D.R.L. §237, it was not persuasive in the unique circumstance before the Court. The husband was not arguing that he could not be compelled to pay the wife’s counsel fees. In fact, he already paid $11,500 to the wife’s attorney. The husband simply argued that he could not be forced to pay a fee in excess of what the wife would ever have to pay under the retainer. Therefore, a ruling agreeing with the husband was consistent with the reasoning behind, or purpose of, D.R.L. §237.

The main purpose behind D.R.L. §237 is to level the playing field between the monied spouse and the non-monied spouse.

Contrary to the wife’s counsel’s public policy argument, the wife effectively leveled the playing field the minute she signed the retainer agreement: the wife obtained a competent trial attorney for the sum of $10,000, no matter how difficult, or lengthy the litigation became.

Moreover, the Court found that public policy also favors “predictably and clarity” in regard to contracts, especially matrimonial retainers. Here, the husband was entitled to rely upon a fair and usual reading of the wife’s retainer agreement. Upon reading that agreement, it would be fair for him to conclude that since his wife was not required to pay more than $10,000, he would not have to pay any more than $10,000.

Justice DiDomenico found that the husband was entitled to rely upon the limitations of the wife’s retainer agreement. As it was undisputed that the husband already paid the sum of $11,500 to his wife’s counsel, the wife’s application for a final award of counsel fees was denied.

On the other hand, the husband’s application for the return of $6,469 to the marital estate for purposes of equitable distribution was also denied. While the husband paid slightly more than the $10,000 cap, the retainer limitation at issue did not include “costs and disbursements.” The wife’s attorney expended $2,531 in costs and disbursements. Accordingly, he had a right to seek those costs and disbursements from the husband.

The Court found that the sum paid by the husband above the $10,000 cap, in the amount of $1,500, shall be deemed his contribution towards those costs and disbursements.

Finally, the Court noted that the wife, herself, made no application for a return of the balance of the monies paid by the wife to her attorney that resulted in combined payments in excess of the $10,000 cap plus $2,531 in costs and disbursements. Accordingly, the Court “need not address that issue.”

Steven Scavuzzo, Esq., of Manhattan, represented the wife. Mitchell Newman, Esq., of Staten Island, represented the husband.