NY Lawyer's Bid to Keep "Gift" Was Naughty, Judge Rules (MORE, CLICK HERE)

New York Lawyer - December 24, 2007
By Anthony Lin
New York Law Journal

A New York judge has shot down a lawyer's claim that his client intended to give him more than $450,000 as a gift rather than as part of his legal fee in a medical malpractice case.

Norman L. Cousins represented Kevin Veneski in a 1998 lawsuit against Queens-Long Island Medical Group, whose care Mr. Veneski was in when he suffered a devastating stroke that left him disabled. The case settled in 2002 for a $3 million lump sum and an annuity yielding $750,000 over the next 20 years.

Mr. Cousins received around $948,000 in legal fees but sought more, claiming that the length and expense of the litigation had left him bankrupt.

But Manhattan Supreme Court Justice Sherry Klein Heitler rejected Mr. Cousin's request in February, finding that the lawyer had already collected over $500,000 more in fees than he was entitled to under his retainer agreement, which allocated him 30 percent only of the first $250,000 of recovery, with his share shrinking to 10 percent of any amount over $1.25 million.

The lawyer moved for reargument on the grounds that he could provide new documents to show that Mr. Veneski intended most of that amount as a gift. Mr. Cousins provided the court with a letter with an attached gift tax form he allegedly sent to his accountant in 2003 as well as a letter allegedly signed by Mr. Veneski stating his intention to make a gift to Mr. Cousins.

But Justice Heitler ruled in a Dec. 12 decision in Veneski v. Queens-Long Island Medical Group. 10011/98, that Mr. Cousins' documents were available and should have been filed with his earlier motion. She said he had provided no reasonable justification for withholding them until his motion to reargue and they were no longer timely.

Even if his documents were timely and authentic, she said, his claimed gift would not be acceptable under state legal ethics rules, which say that, prior to accepting a large, unsolicited gift from a client, a lawyer should urge the client to seek the advice of independent counsel. The rules further state that independent counsel should draw up any instrument for such a gift.

The judge said Mr. Cousins' claimed gift met neither of those requirements, and she said the advice of a disinterested party would be all the more pressing in the case of Mr. Veneski, who had suffered brain injuries in a 1988 car accident even before suffering a stroke.

"Thus the court finds it incredible that Cousins 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 judge wrote.

She said a referee would determine how much in improperly collected legal fees Mr. Cousins needed to return to Mr. Veneski.

Large cash gifts to lawyers are also at issue in a lawsuit brought against the law firm Graubard Miller by former client Alice Lawrence, the widow of real estate developer Sylvan Lawrence. The firm had long represented Ms. Lawrence in an estate battle against her brother-in-law.

According to Ms. Lawrence's suit, she was approached in 1998 by Graubard Miller partner C. Daniel Chill, who allegedly said he and two of his partners were entitled to bonuses from her because of the favorable course of litigation. He allegedly described this as a standard practice.

Ms. Lawrence paid $5 million in "gifts" to the three partners, on which she also paid $2.7 million in gift taxes. She is now seeking the return of the gifts as part of a lawsuit in which she is also challenging a 40 percent retainer fee Mr. Chill negotiated with her in the closing months of a two-decades-long litigation for which she already paid Graubard Miller $18 million in hourly fees.

Last month, the Appellate Division, First Department, ruled that the 40 percent contingent-fee agreement between Graubard Miller and Ms. Lawrence was not unconscionable on its face. The panel's 4-1 majority denied Ms. Lawrence's motion to dismiss Graubard Miller's petition to compel payment of the contingent fee and said further proceedings would be needed to determine the propriety of the arrangement.