Mid-trial in a “high-end” matrimonial, it was held that the “monied” husband would not be required to continue to pay his wife’s continuing fees. Rather, in his October 10, 2013 decision in Sykes v. Sykes, Manhattan Supreme Court Justice Matthew F. Cooper held that such fees would be paid from $2 million in marital assets; each side to use half of the sum to pay his or her own outstanding and prospective counsel and expert fees, subject to reallocation after trial.

From the divorce action’s commencement in December, 2010, until February, 2013, just before the trial, Mr. Sykes had paid close to $1 million in counsel fees for himself and, voluntarily, for his wife. Then, in March 2013, the wife’s attorneys billed the husband $238,196 for their services rendered that month. He paid that bill in full. In April 2013, during which the first eight days of trial took place, the wife’s attorneys billed the husband $355,329 for their services. In addition, the husband was billed $74,853 for the wife’s experts’ services. Mr. Sykes, then decided he could no longer foot the litigation costs for both sides. He declined to pay the April 2013 bills or any subsequent bills incurred by the wife for her attorneys’ or experts’ services absent further order of the court.

Instead, Mr. Sykes, moved for an order authorizing him to release $2 million from marital funds and evenly share that amount with his wife so that each party could pay his or her own interim litigation expenses. He argued that not only had his income and personal funds significantly declined over the last two years, but that permitting the wife to proceed without “skin in the game” (a phrase attributed to Warren Buffett), enabled her to push forward with the litigation without any concern for its cost or any eye towards settlement.

Ms. Sykes opposed the release of the money for the payment of counsel and expert fees. She maintained that she had “skin in the game” by virtue of having to travel from France to make periodic court appearances; she was every bit as motivated as the husband to reach a fair resolution of the case. Moreover, Ms. Sykes argued that because she had no income other than the husband’s $75,000 monthly interim maintenance and child support support payments, she must be considered the nonmonied spouse. Thus, she was entitled under statutory and case law to have her husband pay her interim legal fees. Moreover, she claimed the law was clear: interim counsel fees must come from her husband’s income and separate funds rather than marital funds so as not to deplete her assets.

Justice Cooper noted that New York had long sought to prevent wealthy litigants from gaining an advantage in divorce proceedings simply by being able to spend more on representation than their less well-to-do spouses. Citing the 1999 Court of Appeals decision in O’Shea v. O’Shea, 93 N.Y.2d 187, 193, 689 N.Y.S.2d 8, the award of interim counsel fees was designed “to prevent the more affluent spouse from wearing down or financially punishing the opposition by recalcitrance or by prolonging the litigation.” It was incumbent on courts “to see to it that the matrimonial scales of justice are not unbalanced by the weight of the wealthier litigant’s wallet.”

This policy was reinforced when the legislature amended Domestic Relations Law §237(a) in 2010. Where previously that statute had merely given courts the power to direct the payment of interim counsel fees “as, in the court’s discretion, justice requires,” the amendment made it clear that such discretion should ordinarily be exercised in favor of awarding fees. It states:

There shall be a rebuttable presumption that counsel fees shall be awarded to the less monied spouse. In exercising the court’s discretion, the court shall assure that each party shall be adequately represented and that where fees and expenses are to be awarded, they shall be awarded on a timely basis, pendente lite, so as to enable adequate representation.

Justice Cooper noted that in the case before him, there was nothing to indicate that the husband had sought to use his financial resources to make the playing field uneven, or the scales of justice unbalanced. There was no evidence of recalcitrance on his part, nor any suggestion that he had attempted to unnecessarily prolong the litigation; to the contrary, the husband had consistently shown himself to be eager to move the case forward to a resolution. Nor was there any disparity between the seasoning and quality of the parties’ legal teams; both parties were represented by firms at the apex of the New York matrimonial lawyer hierarchy. The wife was represented by Cohen Clair Lans Greifer & Thorpe LLP (the three lawyers who regularly appeared together for her in court were billing at hourly rates of $900, $700 and $500). The husband was represented by Mayerson Abramowitz & Kahn, LLP.

Justice Cooper concluded that Mr. Sykes was not seeking to deprive the wife of the high level of representation that she had enjoyed; nor was he asking that she pay anything out of the $75,000 she received each month as pendente lite support. What he was seeking — after almost three years of litigation, during which time he had significantly reduced his separate assets paying both his and his wife’s litigation fees — was to have a relatively small portion of the parties’ millions of dollars in marital assets made available for the payment of each side’s fees.

Thus, Justice Cooper noted, although DRL§ 237(a), as amended, created a presumption that interim counsel fees be awarded to the less monied spouse, that presumption was a rebuttable one. The determination, as it has always been, remained “a matter within the sound discretion of the trial court, and the issue is controlled by the equities and circumstances of each particular case.” Patete v. Rodriguez, 109 A.D.3d 595, 599, 971 N.Y.S.2d 109 (2d Dept 2013)

Justice Cooper reviewed the parties’ overall financial circumstances. Mr. Sykes had the far higher income. Although he was now earning less than the astronomical sums he reaped a few years back when his hedge fund was booming, his compensation was still in the millions. Ms. Sykes, on the other hand, remained unemployed; living on the $75,000 monthly interim support.

However, Justice Cooper noted, the fact that the husband’s income exceeded the wife’s did not necessarily make him the “monied spouse” for the purposes of determining interim counsel fees.
Quoting Kings County Justice Jeffrey S. Sunshine in Scott M. v. Ilona M., 31 Misc.3d 353, 369, 915 N.Y.S.2d 834 (Sup Ct, Kings County 2011), “the court cannot decide that just because one party earns more than the other that he or she automatically becomes the monied spouse.”

Thus, the requisite inquiry as to the parties’ financial circumstances cannot — and should not — be restricted to income alone. Instead, as Justice Sunshine noted, “the court must realistically assess the available resources to each party as a result of the litigation.” Id. at 371.

To properly conduct that assessment, Justice Cooper noted, consideration must be given not only to the assets that each side now has in his or her possession, but to those assets which each party stands to obtain through equitable distribution.

Here, prior to litigation entering the actual trial stage, the husband had a bank account with more than $3.7 million in post-commencement separate funds. That sum had been reduced this year by $1.2 million, largely by the expenditures the husband made for both sides’ litigation costs.

The overwhelming bulk of the assets that either side held were marital assets. These included $7.6 million in the couple’s Fidelity brokerage account, the husband’s interest in his hedge fund and other business entities, the wife’s French bank account, the houses owned by the parties (but occupied by other family members), and the home in Darien, Connecticut, which the husband purchased for himself subsequent to the commencement of the divorce.

Both sides acknowledged that the wife would receive 50% of the non-business marital assets. While the parties disputed the share of the husband’s business assets to which the wife is entitled, it appeared to Justice Cooper at this juncture that it would be a meaningful one. Every indication was that the wife would receive approximately $10 million as her share of equitable distribution. Thus, it was difficult for Justice Cooper to find that the husband’s financial situation was so far superior to the wife’s that he must continue to pay 100% of her litigation costs from his income or out of his separate property.

Simply stated, the wife may not have nearly as much money available to her now as the husband but once the case has concluded and the marital assets have been distributed, she will be a multi-millionaire. Accordingly, there is not such a “significant disparity in the financial circumstances” (Prichep v. Prichep, 52 AD3d 61, 65, 858 N.Y.S.2d 667 [2d Dept 2008]) between the parties that one side must be made to bear the full responsibility for the legal fees of the other.

The question thus became whether it was appropriate to utilize marital assets for the payment of interim counsel and expert fees. Although a party “should not have to deplete her assets in order to have legal representation comparable to that of the spouse,” or “spend down a substantial portion of [her] assets in order to qualify for . . . a [counsel fees] award,” no such burden was being placed on Ms. Sykes.

It was hard for Justice Cooper to see how releasing $1 million to each side from the large pool of marital funds available for equitable distribution could somehow threaten to “deplete” the wife’s assets. Likewise, while the release of the money to pay the wife’s current litigation fees might constitute a “spend down” of her assets, the amount involved — some 10% of what the wife could be expected to receive by way of equitable distribution — certainly did not qualify as a “substantial portion” of those assets.

The determination of an interim counsel fee application “is still a matter within the sound discretion of the trial court.” It is not to be “a mechanical operation whereby one side can be made to pay all of the other side’s legal fees simply by virtue of having greater income, or even by having a greater overall net worth.” The equities of each particular case must be considered.

In this case, the equities were on the side of relieving Mr. Sykes from having to continue paying all of the wife’s interim counsel fees out of his own pocket. In so finding, the court was receptive to the husband’s argument with regard to the notion of “skin in the game.” As it stood now, it was solely Mr. Sykes who suffered any financial consequences as a result of the litigation going forward; the longer the case went on, the more days of trial there were, the more the husband would spend. Consequently, the husband had every incentive to curtail the litigation to the extent possible, even if that meant accepting a settlement that fell short of what he wanted. Ms. Sykes, on the other hand, without any “skin in the game,” did not have the same incentive.

Because [her] adversary is her soon-to-be ex-husband, and because the case is a divorce where feelings of animosity, betrayal and abandonment constantly lurk just below the surface, one can easily understand how the wife, perhaps against her better instincts, might find that it serves her interests on a number of levels to make the husband continue to expend copious funds on her behalf.

Rather than giving the parties equal footing on a level playing field, the present arrangement gave Ms. Sykes the distinct advantage over her husband.

Thus, Justice Cooper concluded that it was fair and appropriate for the $2 million to be released from marital funds, each side to use half of the sum to pay his or her own outstanding and prospective counsel and expert fees. Reallocation, if appropriate, would occur after the court had the opportunity to hear the case in its entirety.