APL-2013-00264
New York County Surrogate’s Clerk File No. 175/82
Court of Appeals
STATE OF NEW YORK
In the Matter of a Petition to Compel Payment of Legal Fees
for Services Rendered in Connection with the Estate of
SYLVAN LAWRENCE,
Deceased.
RICHARD S. LAWRENCE and PETER A. VLACHOS, as Executors
of the Estate of Alice Lawrence, Deceased,
Respondents-Plaintiffs-Respondents,
against
GRAUBARD MILLER,
Petitioner-Defendant-Appellant,
C. DANIEL CHILL, ELAINE M. REICH and STEVEN MALLIS,
Defendants-Appellants,
and
RICHARD S. LAWRENCE, SUZANNE LAWRENCE DECHAMPLAIN
and MARTA JO LAWRENCE,
Intervenors-Respondents.
>> >>
BRIEF FOR DEFENDANTS-APPELLANTS
C. DANIEL CHILL, ELAINE M. REICH,
AND STEVEN MALLIS
To Be Argued By:
Michael A. Carvin
Time Requested: 30 Minutes
JONES DAY
222 East 41st Street
New York, New York 10017
212-326-3939
macarvin@jonesday.com
Attorneys for Defendants-Appellants
C. Daniel Chill, Elaine M. Reich,
and Steven Mallis
Of Counsel:
Michael A. Carvin
Jacob M. Roth (both
admitted pro hac vice)
Date Completed: November 11, 2013
TABLE OF CONTENTS
Page
i
QUESTIONS PRESENTED ..................................................................................... 1
PRELIMINARY STATEMENT .............................................................................. 2
STATEMENT OF THE FACTS .............................................................................. 8
A. For Fifteen Years, the Attorneys Faithfully Represent Alice, a
Notoriously Difficult and Demanding Client, in a Battle over
Her Deceased Husband’s Estate. .......................................................... 8
B. In 1998, the Attorneys Achieve a Life-Altering Victory for
Alice, Forcing the Distribution of $124 Million to Alice and
Her Children and “Liberating” Her from the Executor’s
Control. ............................................................................................... 11
C. Alice Celebrates Her Victory by Expressing Her Appreciation
to the Attorneys with Gifts Amounting to a Small Fraction of
the Sums They Had Won on Her Behalf. ........................................... 12
D. Within Days After Sending the Gift Checks, Alice Discusses
the Gifts with Her Accountant/Financial Advisor and Thereafter
Pays the Gift Taxes............................................................................. 16
E. For Nearly Seven Years, Alice Continues To Be a Difficult
Client But Gives No Hint of Regret Concerning the Gifts. ............... 17
F. Alice First Asserts the Gifts Are Invalid in 2005, After She Is
Sued by Graubard for Legal Fees. ...................................................... 18
G. Alice Obstructs the Litigation and Lies To Evade Her
Deposition, Behavior the Referee Found To Be “Willful and
Contumacious.” .................................................................................. 19
PROCEDURAL HISTORY .................................................................................... 21
JURISDICTIONAL STATEMENT ....................................................................... 23
ARGUMENT .......................................................................................................... 24
I. THE ESTATE’S CLAIM FOR RETURN OF THE GIFTS WAS
TIME-BARRED AND SHOULD HAVE BEEN DISMISSED. ................. 24
A. Alice’s Gift Claim Was Concededly Brought Beyond The Six-
Year Limitations Period. .................................................................... 26
TABLE OF CONTENTS
(continued)
Page
ii
B. The Continuous Representation Doctrine Did Not Toll The
Statute Of Limitations. ....................................................................... 26
1. The continuous representation doctrine applies only to a
claim alleging improper provision of professional
services, and only if professional representation
regarding the disputed act remains ongoing. .......................... 27
2. The policy rationales for continuous representation
tolling do not apply in the context of a fee- or gift-related
dispute. ..................................................................................... 29
3. The Appellate Division committed legal error. ....................... 32
C. The Holding Below Eviscerates The Public Policy Interests
Served By Statutes Of Limitations, As This Case Exemplifies. ........ 36
II. THE ESTATE’S CLAIM FOR RETURN OF THE GIFTS FAILS ON
THE MERITS, AS A MATTER OF LAW, BECAUSE THE GIFTS
WERE GIVEN KNOWINGLY AND WITH NO UNDUE
INFLUENCE, AS THE COURT-APPOINTED REFEREE
PROPERLY FOUND. .................................................................................. 39
A. The Undisputed Evidence Establishes, As A Matter Of Law,
That Alice Gave The Gifts Knowingly And Without Undue
Influence. ............................................................................................ 41
1. The Attorneys did not exercise undue influence. ..................... 41
2. Alice fully understood the gifts. ............................................... 45
B. The Appellate Division Erred By Conflating An Aspirational
Ethical Canon With The Governing Common-Law Standard. .......... 48
C. The Appellate Division Erred By Overturning Judge Levine’s
Report On The Basis Of Facts That Are Not Even Probative Of
Undue Influence In This Case. ........................................................... 54
1. Size of the gifts. ........................................................................ 55
2. The so-called “secrecy.” ......................................................... 56
D. Other Evidence Adduced By The Estate, Which Even The
Court Below Did Not Rely On, Is Also Legally Insufficient To
Invalidate The Gifts. ........................................................................... 60
TABLE OF CONTENTS
(continued)
Page
iii
E. At Minimum, Judge Levine As Trier Of Fact Was Entitled To
Great Deference In Weighing The Evidence, And Was Clearly
Not Legally Required To Find Undue Influence ............................... 63
CONCLUSION ....................................................................................................... 65
iv
TABLE OF AUTHORITIES
Page(s)
CASES
409-411 Sixth St., LLC v. Mogi,
2013 N.Y. Slip Op. 06604 (N.Y. Oct. 10, 2013) ......................................... 64, 65
Ackerman v. Price Waterhouse,
84 N.Y.2d 535 (1994) ......................................................................................... 37
Bambi’s Roofing, Inc. v. Moriarty,
859 N.E.2d 347 (Ind. Ct. App. 2006) ................................................................. 29
Barile v. Kavanaugh,
67 N.Y.2d 392 (1986) ......................................................................................... 23
Booth v. Kriegel,
36 A.D.3d 312 (1st Dep’t 2006) ......................................................................... 28
Borgia v. City of New York,
12 N.Y.2d 151 (1962) ................................................................................... 30, 32
Burns v. McClinton,
143 P.3d 630 (Wash. Ct. App. 2006) .................................................................. 28
Castle Oil Corp. v. Thompson Pension Employee Plans, Inc.,
299 A.D.2d 513 (2d Dep’t 2002) ........................................................................ 37
Children’s Aid Soc’y v. Loveridge,
70 N.Y. 387 (1877) ................................................................................. 41, 46, 50
Clean Rental Servs., Inc. v. Karten,
146 A.D.2d 462 (1st Dep’t 1989) ....................................................................... 64
Duffy v. Horton Mem. Hosp.,
66 N.Y.2d 473 (1985) ......................................................................................... 36
Flanagan v. Mt. Eden Gen. Hosp.,
24 N.Y.2d 427 (1969) ............................................................................. 36, 38, 39
Glamm v. Allen,
57 N.Y.2d 87 (1982) ........................................................................................... 27
TABLE OF AUTHORITIES
(continued)
Page(s)
v
Glavey v. Latzman,
No. 570379/03, 2003 WL 23095673 (App. Term 1st Dep’t Nov. 18,
2003) ................................................................................................................... 33
Greene v. Greene,
56 N.Y.2d 86 (1982) ............................................................................... 30, 31, 35
In re Schneiderman,
105 A.D.3d 602 (1st Dep’t 2013) ................................................................. 52, 53
In re Van Den Heuvel’s Will,
76 Misc. 137 (Surr. Ct. 1912) ............................................................................. 57
Martin v. Edwards Labs.,
60 N.Y.2d 417 (1983) ......................................................................................... 36
Matter of Bartel,
33 A.D.2d 987 (4th Dep’t 1970) ................................................................... 47, 55
Matter of Buchyn,
300 A.D.2d 739 (3d Dep’t 2002) .................................................................. 51, 52
Matter of Clines,
226 A.D.2d 269 (1st Dep’t 1996) ..................................................... 40, 48, 55, 65
Matter of Delorey,
141 A.D.2d 540 (2d Dep’t 1988) ........................................................................ 52
Matter of Henderson,
80 N.Y.2d 388 (1992) ................................................................................... 40, 55
Matter of Holy Spirit Ass’n v Tax Comm’n,
81 A.D.2d 64 (1st Dep’t 1981) ........................................................................... 64
Matter of Howland,
9 A.D.2d 197 (3d Dep’t 1959) ...................................................................... 47, 57
Matter of Putnam,
257 N.Y. 140 (1931) ........................................................................................... 52
TABLE OF AUTHORITIES
(continued)
Page(s)
vi
Matter of Ryan,
34 A.D.3d 212 (1st Dep’t 2006) ................................................................... 41, 46
Matter of Sherbunt,
134 A.D.2d 723 (3d Dep’t 1987) (per curiam) ....................................... 48, 52, 59
Matter of Von Wiegen,
101 A.D.2d 627 (3d Dep’t 1984) ........................................................................ 64
McCoy v. Feinman,
99 N.Y.2d 295 (2002) ............................................................................. 27, 32, 39
McDermott v. Torre,
56 N.Y.2d 399 (1982) ......................................................................................... 32
Nesbit v. Lockman,
34 N.Y. 167 (1866) ............................................................................................. 39
Nussenzweig v. DiCorcia,
9 N.Y.3d 184 (2007) ..................................................................................... 37, 38
Poster v. Poster,
4 A.D.3d 145 (1st Dep’t 2004) ........................................................................... 64
Radin v. Opperman,
64 A.D.2d 820 (4th Dep’t 1978) ................................................................... 47, 53
Reoux v. Reoux,
3 A.D.2d 560 (3d Dep’t 1957) (per curiam) ........................................... 39, 40, 53
Rodkinson v. Haeker,
248 N.Y. 480 (1928) ........................................................................................... 31
Ruskin, Moscou, Evans & Faltischek, P.C. v. FGH Realty Credit Corp.,
228 A.D.2d 294 (1st Dep’t 1996) ....................................................................... 31
Schlanger v. Flaton,
218 A.D.2d 597 (1st Dep’t 1995) ....................................................................... 35
TABLE OF AUTHORITIES
(continued)
Page(s)
vii
Shumsky v. Eisenstein,
96 N.Y.2d 164 (2001) ......................................................................................... 27
Siegel v. Kranis,
29 A.D.2d 477 (2d Dep’t 1968) .......................................................................... 30
Snook v. Sullivan,
53 A.D. 602 (4th Dep’t 1900) ....................................................................... 39, 47
Sokoloff v. Harriman Estates Redevelopment Corp.,
96 N.Y.2d 409 (2001) ......................................................................................... 23
Thoreson v. Penthouse Int’l, Ltd.,
80 N.Y.2d 490 (1992) ......................................................................................... 64
Transp. Workers Union of Am. Local 100 AFL-CIO v. Schwartz,
32 A.D.3d 710 (1st Dep’t 2006) ......................................................................... 28
U.S. Trust Co. v. Olsen,
194 A.D.2d 481 (1st Dep’t 1993) ....................................................................... 64
Whiteman, Osterman & Hanna, P.C. v. Oppitz,
105 A.D.3d 1162 (3d Dep’t 2013) ...................................................................... 31
Williamson v. PricewaterhouseCoopers LLP,
9 N.Y.3d 1 (2007) ................................................................................... 27, 30, 36
Woyciesjes v. Schering-Plough Corp.,
151 A.D.2d 1014 (4th Dep’t 1989) ..................................................................... 33
STATUTES
CPLR § 213 .............................................................................................................. 26
CPLR § 214-a ........................................................................................................... 37
CPLR § 4519 ............................................................................................................ 21
CPLR § 5602 ............................................................................................................ 23
TABLE OF AUTHORITIES
(continued)
Page(s)
viii
OTHER AUTHORITIES
N.Y. Lawyer’s Code of Prof’l Resp. (2007) ....................................................passim
N.Y. Rules of Prof’l Conduct ...................................................................... 52, 55, 56
1
QUESTIONS PRESENTED
I. The “continuous representation” doctrine tolls the statute of limitations on a
client’s claim arising from a professional’s error or malfeasance in providing
professional services for the period during which the professional continues to
represent the client in the same matter. The first question presented is whether the
Appellate Division erred by applying that doctrine to toll the six-year statute of
limitations on a client’s claim seeking the return of unsolicited, one-time gifts she
made to her attorneys, with respect to which the attorneys never represented her.
II. Under this Court’s decisions, an inter vivos gift from a client to an attorney
is valid if given knowingly and without undue influence. The Honorable Howard
A. Levine was appointed below as a Referee to hear and report. After a long trial,
he found that the unsolicited gifts Appellants received were given knowingly and
voluntarily, free of undue influence. The second question presented is whether the
Appellate Division erred by holding Judge Levine’s determination “preclude[d]” as
a matter of law by three factors it held dispositive: (i) Appellants’ failure to urge
the client to seek independent counsel regarding the gifts, which no rule of law or
ethics requires; (ii) the gifts’ size, although they were minor relative to the client’s
net worth and consistent with gifts she gave others; and (iii) Appellants’ adherence
to the client’s instruction not to tell their law partners or her children about the
gifts, although they discussed them openly with her financial advisor; and further,
2
whether the court erred by doing so on a record that conclusively established the
gifts’ validity and was legally insufficient to support a contrary finding.
PRELIMINARY STATEMENT
The dispute between Appellants C. Daniel Chill, Elaine Reich, and Steven
Mallis (“the Attorneys”) and the Estate of Alice Lawrence (“the Estate”) concerns
three unsolicited gifts that Alice Lawrence (“Alice”) gave the Attorneys in 1998
following a monumental, $124 million victory by the Attorneys in litigation they
had been pursuing on Alice’s behalf for fifteen years. Accompanying the gifts
were Alice’s handwritten, heartfelt notes expressing deep appreciation to and
affection for the Attorneys. After discussions with her accountant/financial advisor,
Alice filed a gift tax return and paid taxes on the gifts. Seven years later, an
unrelated fee dispute erupted between Alice and the Attorneys’ law firm, Graubard
Miller. After Graubard sued her for fees, Alice filed a retaliatory suit alleging, for
the first time, that the gifts were invalid and seeking their return. After a lengthy
hearing, the court-appointed Referee, the Honorable Howard A. Levine—a former
trial and appellate judge (including on this Court), as well as a former prosecutor—
characterized that claim as merely a defensive litigation tactic.
I. Alice’s claim was plainly barred by the statute of limitations. There is
no dispute that the applicable limitations period was six years, and that Alice did
not sue for the gifts’ return until nearly seven years after giving them.
3
The court below nonetheless held that the “continuous representation”
doctrine tolled the statute of limitations. That was a fundamental error of law. As
this Court repeatedly has held, continuous representation tolling applies to claims
challenging the provision of professional services, and extends only for so long as
the professional continues to represent the client in the same matter that gave rise
to the claim. The quintessential example is malpractice. Lacking expertise, clients
cannot be expected to second-guess the way that professionals render professional
services, particularly while representation in that matter is ongoing. Moreover,
awaiting the end of the challenged representation allows the professional the
chance to remedy any errors, thereby avoiding the need for a lawsuit. This Court
has held that, absent such rationales, the tolling doctrine should not be applied.
Neither the doctrine of continuous representation nor its rationale has any
application where, as here, the client’s claim is not based on the professional’s
representation of the client, but instead arises from a separate and distinct financial
transaction between professional and client. In a gift transaction, as in the payment
of a fee, the professional is not representing the client at all, much less doing so
continuously. Hence, the client is not called upon to assess the manner in which
expert professional services are being performed. Nor would deferring suit allow
the professional the opportunity to take corrective measures in the course of
rendering ongoing services in the matter.
4
It is therefore not surprising that no case—before this one—has applied the
continuous representation doctrine to a fee or gift dispute, or to any dispute that did
not concern the manner in which professional services were performed. Other
states similarly have rejected application of continuous representation tolling to
financial disputes between professionals and client. Affirming the court below not
only would contravene well-settled law, it would expose professionals in New
York to liability for routine financial transactions (such as billing) for the duration
of the general professional-client relationship, thereby undermining the important
public policies that statutes of limitations are designed to protect. This case, in fact,
is a perfect example: By refusing to apply the statute of limitations, the Attorneys
were forced to defend a transaction that was (by the time of trial) over ten years
old, and do so without the testimony of Alice Lawrence—who died after resisting a
years-long effort to depose her. The decision below should be reversed, and the
Estate’s claim for return of the gifts should be dismissed as time-barred.
II. After presiding over 15 days of hearings, listening to the testimony of
22 witnesses, reviewing hundreds of exhibits, and analyzing extensive post-trial
submissions, Judge Levine issued a 105-page Report in which he concluded that
the Attorneys had satisfied their burden of proving that the gifts (of $2 million,
$1.55 million and $1.5 million, respectively to Chill, Reich, and Mallis) were fully
understood and not induced by undue influence. (I:A100a, 124a)
5
Judge Levine’s conclusion was fully supported by the evidence. Each gift
was accompanied by a contemporaneous, handwritten note from Alice expressing
“deep appreciation” to the Attorneys. (I:A124a) Extensive evidence depicted
Alice as “not at all a person susceptible to undue influence” (I:A108a), but
rather—even according to her children and closest confidants—“intelligent,”
“strong-willed” and “tough” (I:A109a). Alice was immensely wealthy, financially
sophisticated, and “extraordinarily demanding” as a client (I:A125a) to the point of
being abusive to the Attorneys, whom she frequently threatened to fire (I:A127a).
Yet, Alice could also be extremely generous, as demonstrated by seven-figure gifts
she made to other non-family-members, including her physician. (I:A125a) Based
on these undisputed facts—as well as Alice’s telling failure to express regret to
anyone about the gifts until the Attorneys’ firm sued her for fees seven years later
(I:A126a)—Judge Levine correctly determined that the gifts were made knowingly
and without undue influence. That was, indeed, the only legally permissible or
rational conclusion that could be drawn from the evidence.
Without questioning any of Judge Levine’s factual findings, the Appellate
Division held that the conclusion he reached was “preclude[d]” as a matter of law
by three factors: First, the Attorneys had not urged Alice to obtain independent
counsel regarding the gifts. Second, the gifts were in “extraordinary amounts.”
Third, there was alleged “secrecy surrounding the gifts.” That was legal error.
6
It is well-settled that a client gift is valid if made knowingly and without
undue influence. Recommending independent counsel is obviously not a sine qua
non of satisfying that common-law standard. No case (until this one) has held
otherwise. Indeed, client gifts have been upheld numerous times notwithstanding
the absence of such advice. Even professional ethics rules—which are stricter than
the common law, not more permissive—do not mandate urging independent advice.
Hence, under the decision below, lawyers would be fully authorized under the
ethics rules to accept a voluntary gift without recommending independent advice,
but nonetheless be liable for damages because, absent such a recommendation,
they are deemed as a matter of law to have unduly influenced the client. That is
contrary to the law of undue influence articulated by this Court, and is particularly
unwarranted here, where undisputed facts show that Alice did obtain independent
advice from her accountant/financial advisor within days of making the gifts and
then reaffirmed her intent to make the gifts by directing him to report them on a
gift tax return and paying the gift taxes.
As to the size of the gifts, they were minor in relation to Alice’s vast fortune,
each gift representing a fraction of 1% of her net worth—and that is surely the only
relevant comparison, since the inquiry into the size of a gift is meant to detect
whether there was undue influence on the donor. Moreover, Alice’s gifts to the
Attorneys were comparable to gifts she had given other non-family-members.
7
The third factor invoked by the Appellate Division as preclusive of a valid
gift—“secrecy”—refers to the fact that the Attorneys, adhering to Alice’s express
direction, did not mention the gifts to their law partners or Alice’s children. They
did discuss the gifts openly, however, with Alice’s financial advisor (who was also
co-executor of her estate), thus dissolving any remotely rational or conceivable
inference of undue influence. Particularly given these facts, holding “secrecy” to
be preclusive of a valid gift is also plain legal error.
The Appellate Division’s error is all the more obvious when one considers
the undisputed evidence upon which Judge Levine determined that the gifts were
made knowingly and without undue influence. The spontaneous, unsolicited
nature of the gifts, Alice’s heartfelt notes, her consultation with her financial
advisor and payment of the gift taxes, her continued work with (and abuse of) the
Attorneys for seven additional years, her lack of complaint about the gifts until the
fee dispute, her history of substantial gift-giving to non-family members, and her
famously domineering nature compel the conclusion that the gifts were valid.
Given these undisputed facts, the three factors cited by the Appellate Division are
legally insufficient to invalidate the gifts, and certainly cannot mandate such a
result. The Appellate Division thus doubly erred—by holding that Judge Levine’s
determination of the gifts’ validity was legally “preclude[d],” and by doing so on a
record that cannot legally support a contrary finding of invalidity.
8
STATEMENT OF THE FACTS
A. For Fifteen Years, the Attorneys Faithfully Represent Alice, a
Notoriously Difficult and Demanding Client, in a Battle over Her
Deceased Husband’s Estate.
The events that preceded the 1998 gifts to the Attorneys are not in dispute.
(I:A100a) Alice’s husband, Sylvan Lawrence, died in 1981, leaving an empire of
commercial properties in New York City. (I:A88a) Sylvan’s brother and business
partner, Seymour Cohn, was named executor of Sylvan’s estate. (Id.) Cohn
controlled not only his own 50% interest in the partnership properties, but, as
executor, Sylvan’s 50% interest as well. (I:A101a) Alice wanted her “freedom”
and not “to be subject to Mr. Cohn’s whims.” Cohn, however, “resisted selling the
properties” and distributing the proceeds. (I:A101a; V:A77-78; VII:A1130-32)
As a result of this conflict, Alice brought suit in 1983 and “[c]onstant
litigation followed … concerning virtually every aspect of the administration of the
estate.” (I:A88a) After hiring and firing two other law firms (VII:A1153-54,
1186-87), Alice retained Graubard in August 1983 to represent her in the
proceedings. (X:A2726) At Graubard, Chill was Alice’s primary contact, Reich
worked on the case from the outset, and Mallis joined the team in 1989. (V:A76;
VI:875) Because of Cohn’s reluctance to sell the properties, Alice’s attorneys
brought numerous proceedings seeking to compel him to do so. (I:A101a; V:A81-
84)
9
Alice was an intelligent, aggressive and domineering client. Based on
undisputed evidence, the Referee found she was “intelligent, sophisticated, strong-
willed, independent, tough, aggressive, [and] experienced in dealing with
attorneys.” (I:A153a) Alice’s son described her as “intelligent,” “very self-
willed,” and “famous for yelling” at “[a]nything and everything.” (VII:A1221-22,
1252, 1267-68) She was so intimidating that her own children hesitated to call her
for fear of being abused. (VII:A1198-99, 1267-68, 1528-29) Alice’s confidant,
co-executor, and accountant, Jay Wallberg, similarly described Alice as “tough,”
“strong-willed,” and “not a pushover.” (VIII:A1942) Alice had described herself
in prior proceedings as a “force to be reckoned with” (VII:A1208); her “own
person” who made her “own decisions” (VII:A1174); and one who “never”
consulted with her attorneys or children about business decisions, but kept her own
counsel. (VII:A115a) She tersely stated: “I trust nobody.” (VII:A1103)
These stark qualities were patently evident in Alice’s dealings with
professionals. The Referee found that Alice “was tough, aggressive and abusive to
… those whom she employed.” (I:A125a) His Report cites undisputed evidence
that:
Alice retained and terminated the services of many professionals
including architects, attorneys, physicians, and accountants. She was
demanding, abusive and willing to fire them when she felt that they
were not following her directions or otherwise displeased her. The
record is replete with examples of her dominating, micromanaging,
vituperative behavior. In addition to dismissing attorneys who
10
represented her before she hired Graubard, she frequently got into
arguments with and fired various architects, accountants, and other
professionals that she had retained.
(I:A109a) The Referee’s findings regarding Alice’s domineering character and
controlling behavior is supported by uncontradicted testimony and unimpeached
documentary evidence. (See, e.g., V:A582-83; VI:A639-41; VII:A1153-54, 1198-
99; XV:A5728, 5729-30, 5734, 5735, 5981-82, 5986, 5987 (referring to an
architect with whom Alice had recently concluded an arbitration, and asking that
Chill “KILL Him PLEASE‼”), 6002-18)
Alice treated the Attorneys in the same domineering manner. The Referee
recounted the following undisputed testimony regarding Alice’s relationship with
the Attorneys:
She was tough and aggressive (Tr. 876). She insisted on being
involved in all aspects of the litigation from major decisions to minor
ones (Tr. 877). She reviewed drafts of briefs, motion papers and
correspondence (Tr. 878-79). Frequently she would demand that the
documents be tougher and she would threaten to fire Graubard (Tr.
586-90, 665-66).1
(I:A109a; see also XI:A3386, 3406-08, 3413, 3418-21, 3423-24, 3427, 3475-76,
3489-90, 3557, 3713-14, 3756)
The Referee found that when Alice disagreed with the Attorneys, “she
ignored or overrode” their advice. (I:A154a) He found in this regard that Alice:
1 Transcript excerpts referenced in the Referee’s Report can be found at the same page
numbers in the Joint Appendix preceded by the letter “A.”
11
was deeply involved with the strategy and the tactics of the litigation
and she was an extraordinarily demanding client. She did not want
anything of importance, and indeed many things of little importance,
to be done without her knowledge and approval. She reviewed drafts
of documents and forcefully voiced her opinion on matters large and
small (Tr. 577-80, 584-89).
(I:A125a)
The Referee further found that Alice not only engaged in
“micromanagement of the litigation,” but was “abusive [in her] treatment of the
Attorneys” as well. (I:A125a) She “frequently verbally abused the Attorneys and
threatened to fire them if they dared to not carry out her commands.” (I:A127a)
Despite Alice’s demanding and abusive behavior, she also appreciated the
Attorneys’ tireless efforts on her behalf. In a note to Chill, she expressed gratitude
to him for “being there for me—over and over—and for listening so patiently to
all the ravings & rantings—mostly, for caring.” (XV:A5926; emphasis in original)
Another note stated: “Monumental job! My grateful thanks to you—Elaine and
Steve—It’s in the hands of God, now. You’ve done all that could be done—and
much more.” (XV:A5928; see also XV:A5922-25, 5927)
B. In 1998, the Attorneys Achieve a Life-Altering Victory for Alice,
Forcing the Distribution of $124 Million to Alice and Her
Children and “Liberating” Her from the Executor’s Control.
It was not until 1998—fifteen years after litigation began—that Alice’s legal
team finally succeeded in forcing Cohn to sell the remaining properties and to
distribute the proceeds. Alice’s share was $84.3 million (VI:A671), delivered in
12
two checks deposited on November 16 and November 30, 1998, respectively.
(XV:A6046-50) The Lawrence Children received another $40 million (VI:A671),
totaling $124 million for Alice and her family.
The Referee found that “Alice fully understood the difficulty of the litigation
with [Cohn] and the significance of this distribution.” (I:A125a) Alice at last had
achieved her hard-fought battle with her despised brother-in-law for her “freedom”
and the power to “run my own life as I see fit” and “not to be subject to Mr.
Cohn’s whims.” (VII:A1130-31) To mark the occasion, Alice framed copies of
the two checks (XV:A6051-52)—even though she already had a net worth of
“approximately $220 million” prior to receiving her $84.3 million share of the
$124 million November 1998 distribution. (I:A126a)
C. Alice Celebrates Her Victory by Expressing Her Appreciation to
the Attorneys with Gifts Amounting to a Small Fraction of the
Sums They Had Won on Her Behalf.
It is undisputed that in the aftermath of her victory, on November 25, 1998,
the day prior to Thanksgiving, Alice asked Chill to come to her home in
Connecticut, where she told him that, as an expression of her gratitude, she
intended to make substantial gifts to her litigation team—Chill, Reich, and Mallis.
(I:A105a; VI:A672-73, 679) Alice’s friend and business partner, Barbara Kling,
testified that several days after Chill’s visit, she saw checks payable to Chill,
Reich, and Mallis sitting on a counter in Alice’s house. (VIII:A2105-06)
13
Alice subsequently mailed to Chill an envelope marked “Personal”
containing a cover note and three smaller envelopes addressed to him, Reich, and
Mallis. (VI:A680-84; XV:A6021) The outer envelope was postmarked November
30, 1998—the day the second of Alice’s two distribution checks was deposited,
and five days after Alice met with Chill. All of the notes are in Alice’s
handwriting. (I:A106a; XV:A6021, 6023-25, 6027-28) Their authenticity was
unchallenged. (I:A124a) Alice’s cover note stated:
Danny –
You were kind to suggest you distribute the enclosed envelopes
for me. Thank you again and yet again! from all the
Lawrences.
Alice
(I:A106a; XV:A6023)
Inside the smaller envelope addressed to Chill was a check for $2 million
and a note from Alice dated November 30, 1998, which reads:
Dear Danny –
Without you—what?
You’ve stood by me all these years—buoyed me up with
unflagging optimism and persistence—and kept all the team
actively functioning despite continual frustration—knowing we
all would prevail one day.
You are my friend of all friends,
Most affectionately,
Alice
14
(I:A107a; XV:A6024-26)
Inside the envelope addressed to Reich was a check for $1.55 million
accompanied by a note dated November 30, 1998 which reads:
For Elaine
My Friend—my children’s friend.
All of us thank you!
Appreciatively,
Alice
(I:A107a-08a; XV:A6027-29)
And inside the envelope addressed to Mallis was a check for $1.5 million
and a note, also dated November 30, 1998, which reads:
Dear Steve,
Justice seemed to be blinded forever, but with just such a shove
as you, Elaine and Danny have made in my behalf, she came
through after all.
My most grateful thanks for all your unprecedented efforts—all
these years.
Affectionately,
Alice
(I:A108a; XV:A6030-31)
Each of the Attorneys sent Alice a warm thank-you note soon after receiving
the gifts. (VI:A895-96; XV:A6032-34) Alice retained Chill’s thank-you note until
her death. (XV:A6032) Replete with humility, Chill’s note reads:
15
Dear Alice,
Emotion resulting from your munificence to me keeps
interfering with my ability to write an appropriate thank you
note. But here goes!
I was deeply touched by your generosity, both fiscal and
spiritual. Your profession to me of such unconditional
friendship moved me profoundly. I will be forever grateful and
shall strive to prove worthy of your largesse.
May God grant both of us good health and long life so that we
may share in future triumphs in friendship and love.
Love,
Danny
(XV:A6032)
The Estate conceded, and the Referee found, that the gifts were not solicited.
(I:A119a) The Referee further found that Alice’s handwritten notes to the
Attorneys conclusively established the absence of undue influence. His Report
states that Alice’s notes:
(a) “speak in Alice’s voice” (I:A124a);
(b) “bespeak spontaneity and sincerity” (I:A125a);
(c) were “manifestly sincere and genuine expressions of Alice’s
deep appreciation” to the Attorneys “for their efforts and loyalty” (I:A124a); and
(d) themselves “show that the gifts were made voluntarily” and
“not as a result of any undue influence” (I:A124a).
16
D. Within Days After Sending the Gift Checks, Alice Discusses the
Gifts with Her Accountant/Financial Advisor and Thereafter Pays
the Gift Taxes.
The Referee found that at the time Alice made the gifts, “she was already
familiar with the gift tax consequences of making substantial gifts.” (I:A123a)
The evidence was incontrovertible: Alice had previously filed four gift tax returns
and paid substantial gift taxes. (I:A123a; XVI:A6163; see also XVI:A6159 (memo
regarding Alice’s request for tax advice regarding a $500,000 gift)) In addition,
the Referee credited Reich’s testimony that in prior estate planning sessions with
Alice, Reich had explained the gift tax rules to her. (I:A123a; VI:A916-17, 921-
23; XVI:A6157) The Referee also found that one of the reasons Alice had not
wanted the children to receive a larger fraction of Sylvan’s residuary estate was her
concern that “the Internal Revenue Service would view the excess amount passing
to the children as a gift from Alice which would be subject to gift tax (Tr. 923-
26).” (I:A123a) Finally, the Referee noted that monthly $800 checks (totaling
$9600 for the year) that Alice gifted to each of two grandchildren in 1998 “showed
that Alice was aware of the [then applicable] $10,000 annual exclusion limitation
on tax-free gift giving (Tr. 928-32).” (I:A123a; see also XVI:A6166-88, 6280)
With respect to gift taxes payable on the Attorneys’ gifts, the Referee found
that Alice discussed the matter with her accountant, Wallberg, within days of
making the gifts. (I:A123a) Wallberg testified that his conversation with Alice
17
concerning the taxes occurred on December 10, 1998 (VIII:A1909), when he told
Alice that the gift tax would amount to $2.7 million. (I:A123a; VIII:A1911-12)
Wallberg also told Alice that instead of paying gift taxes, she could report the
transfers as bonuses, in which event the Attorneys would be required to report the
amounts as income and Alice would be entitled to a tax deduction. (I:A123a-24a;
VIII:A1911-12) Wallberg “did not testify that [Alice] had expressed any doubts or
regrets about having made the gifts (Tr. 1908-17).” (I:A127a)
Based on Wallberg’s testimony, the Referee found that Alice “decided to
report the transfers as gifts and to pay the $2.7 million gift tax (Tr. 1912, 1917,
1944-45).” (I:A124a) Following Alice’s instructions, Wallberg prepared a gift tax
return for her signature, treating the transfers as gifts. (VIII:A1917) The Referee
concluded that, in choosing to pay the gift taxes, Alice “re-confirmed her intent to
make the gifts to the Attorneys with a full understanding of the gift tax
consequences.” (I:A124a) He also found that in signing the gift tax return as
preparer after extensive discussions with Alice, Wallberg—under penalty of
perjury—“declared in substance his belief that the transfers to the Attorneys were
bona fide gifts (Tr. 1943-44).” (I:A126a-27a)
E. For Nearly Seven Years, Alice Continues To Be a Difficult Client
But Gives No Hint of Regret Concerning the Gifts.
Alice continued to work closely with the Attorneys on litigation against
Cohn. The Referee found that, for “seven continuous years” following the gifts,
18
Alice, as in the past, “frequently verbally abused the Attorneys and threatened to
fire them if they dared to not carry out her commands.” (I:A127a) Nevertheless, it
is uncontroverted, as the Referee found, that Alice “never complained to them
about the validity of the gifts or expressed any regret for having made them.”
(I:A126a, citing V:A360; VI:A689-90, 896) To the contrary, she “continued to
show confidence in the judgment and integrity of the Attorneys” (I:A127a), as by
appointing Chill as co-executor (with Reich as an alternate) in her 2000 and 2004
wills (VI:A668, 690; XV:A6113, 6140-41) and Chill as her health care proxy in
2004 (VI:A690-92; XV:A6036-39). Needless to say, as the Referee found, “[i]t is
unlikely that she would have made these appointments if she had had the slightest
conviction that Chill had manipulated her into making the gifts.” (I:A127a)
F. Alice First Asserts the Gifts Are Invalid in 2005, After She Is Sued
by Graubard for Legal Fees.
Alice’s litigation against Cohn concluded on July 25, 2005, with a settlement
in excess of $110 million. (I:A140a & n.17) Under a revised fee agreement that
Alice had negotiated with Graubard, the firm was entitled to 40% of this sum.
(I:A137a-39a) When Alice learned of the settlement amount, in early May 2005,
she confided in her son that she had “made a mistake” in entering into the revised
fee agreement and assured him that she would “handle it.” (VII:A1223, 1229-30)
Indeed, days after the settlement closing, Alice informed Graubard, through new
attorneys, that the firm was fired and its fee would not be paid. (I:A321a)
19
Graubard promptly commenced a proceeding against Alice in Surrogate’s
Court to collect its legal fee. (I:A308a) Within weeks, Alice filed a retaliatory suit
in Supreme Court against Graubard and the Attorneys, seeking (a) rescission of the
contingency fee agreement, (b) a return of all legal fees she had paid Graubard
since 1983, and (c) a return of the gifts she had given the Attorneys in 1998.
(I:A338a-39a) Alice’s action was transferred to Surrogate’s Court. That action,
and Graubard’s suit to recover its fees, are the two proceedings that were referred
to Judge Levine and that are now before this Court.
Judge Levine found that Alice’s September 2005 action was “[t]he first time
Alice asserted the gifts were not valid.” (I:A126a) He found that her almost
seven-year delay “raises serious doubts as to the bona fides of her challenge,” and
“suggests that the gift validity challenge was only devised as a defensive litigation
tactic and not as a legitimate claim having merit on its own.” (I:A126a, 127a)
G. Alice Obstructs the Litigation and Lies To Evade Her Deposition,
Behavior the Referee Found To Be “Willful and Contumacious.”
Having made scurrilous allegations against the Attorneys in her Complaint,
Alice obstructed the discovery process by persistently thwarting the Attorneys’
efforts to obtain her deposition. Following a motion for sanctions brought by the
Attorneys and Graubard, Judge Levine issued a 38-page Report detailing her
misconduct. (I:A199a-236a) He found that Alice successfully resisted a more than
two-year effort to take her deposition until, due to a terminal illness that she
20
deliberately concealed, she died on February 16, 2008 without ever having been
deposed. (I:A213a)
The Referee found that although Alice “was a critical witness whose
testimony was highly relevant and necessary to the issues presented,” she pursued
a course of “resistance” that “went beyond what can be legally justified.”
(I:A213a, 215a) She filed duplicative, meritless requests for reconsideration of the
decision to permit her deposition, the “real purpose” of which “was delay.”
(I:A218a) When that failed, Alice defaulted in appearing for a deposition the
Referee had ordered; she then filed meritless appeals. (I:A218a-21a) Alice also
made “repeated representations to [the courts] that she would appear for her
deposition within thirty days of an adverse decision by the Appellate Division” on
her interlocutory appeals—and then “reneg[ed] on her commitment.” (I:A223a)
The Referee further found that Alice represented, repeatedly, that there was
no condition that would “impair her ability to testify if a stay of her deposition was
granted”—even after she was told that “she was terminally ill.” (I:A223a) As a
result of that deception, the Attorneys were unable “to depose [Alice] before she
died.” (I:A227a) Based on these events, the Referee concluded that Alice:
demonstrated a consistent pattern of deliberate, reasoned refusal to
comply with disclosure orders and to otherwise comply with her
disclosure obligations. She also made misrepresentations to her
adversaries, to me, to the Surrogate, and to the Appellate Division on
material issues. …
21
[Alice’s] pattern of deliberate refusal to fulfill her disclosure
obligations and her various misrepresentations were willful and
contumacious and require the imposition of sanctions … .
(I:A233a-34a (emphasis added))
Since Alice’s testimony was “critical” to the pending disputes, the Referee
noted that “it might well be appropriate to strike [her] pleadings.” (I:A235a, 236a)
Ultimately, however, he recommended only that the Estate be required to waive
the Dead Man’s Statute (CPLR § 4519), which otherwise could have barred the
Attorneys’ testimony at the hearing about their transactions and communications
with Alice. (I:A236a) Surrogate Webber confirmed the Referee’s Report and
upheld that limited sanction against the Estate. (I:A192a, 196a)
PROCEDURAL HISTORY
In September 2005, in response to Graubard’s lawsuit against Alice for legal
fees, Alice sued Graubard and the Attorneys in Supreme Court seeking, inter alia,
return of the gifts she had given the Attorneys in 1998. (I:A338a-39a) The action
was transferred to Surrogate’s Court and referred to Judge Howard A. Levine, as
Referee. The Attorneys moved for summary judgment on statute of limitations
grounds. The Referee recommended that the motion be denied. (I:A281a)
Surrogate Weber confirmed his Report without analysis. (I:A263a)
Judge Levine conducted a lengthy evidentiary hearing in October through
December of 2009. (I:A87a, 100a) In August 2010, he issued a 105-page Report
22
concluding that the Attorneys “had met their burden to show by strong, convincing
and satisfactory proof that the gifts were free from undue influence and that the gift
transaction was fully understood by Alice.” (I:A122a, 124a) He therefore
recommended dismissal of the Estate’s claim for return of the gifts. (I:A190a)
Without holding oral argument, Surrogate Nora Anderson disaffirmed that
part of Judge Levine’s Report that upheld the gifts. (I:A68a) She thereafter
entered an Amended Decree ordering the Attorneys to “forfeit and return” the gifts.
(I:A58a, 65a) The Attorneys appealed.
The Appellate Division, First Department issued an opinion and order on
May 23, 2013, which affirmed the Surrogate’s Amended Decree as to the dispute
between the Estate and the Attorneys. (XVII:A7391-97) It modified the Amended
Decree as to the fee dispute between the Estate and Graubard, and remanded for
proceedings to determine the amount of the fees owed by the Estate. (Id.)
Appellants moved in the Appellate Division for leave to appeal from the
May 23, 2013 order as follows: Mallis on May 29, 2013, Chill and Reich on June
18, 2013, and Graubard on June 20, 2013. While the motions for leave to appeal
were pending, the parties stipulated to a Final Decree on Remand that (i) resolved
the Estate-Graubard fee dispute in accordance with the Appellate Division’s May
23, 2013 decision and (ii) ordered the Attorneys to return the gifts. The Surrogate
entered the Final Decree on Remand on July 29, 2013. (XVII:A7398)
23
JURISDICTIONAL STATEMENT
On September 10, 2013, the Appellate Division granted the motions filed by
the Attorneys and by Graubard for leave to appeal to this Court. (XVII:A7388-90)
This Court has jurisdiction pursuant to CPLR § 5602(a)(1)(i), because this
action originated in Supreme Court and was transferred to Surrogate’s Court, and
the Appellate Division’s order is not appealable as of right and is final as to the
Attorneys (who were not parties to the Surrogate’s Court proceeding commenced
by Graubard to recover its fees). Sokoloff v. Harriman Estates Redevelopment
Corp., 96 N.Y.2d 409, 414 n.* (2001); Barile v. Kavanaugh, 67 N.Y.2d 392, 395
n.2 (1986). Alternatively, this Court has jurisdiction under CPLR § 5602(a)(1)(ii),
because the May 23, 2013 order of the Appellate Division necessarily affected the
Surrogate Court’s Final Decree on Remand, which is not appealable as of right and
which finally resolved the action. (XVII:A7398) See also CPLR § 5602(b)(1).
The issues on which the Attorneys seek review were properly preserved.
The Attorneys argued in Surrogate’s Court that the Estate’s claim was barred by
the statute of limitations. (See I:A279a) That issue was decided by the Referee,
Surrogate’s Court, and the Appellate Division. (I:A263a, 280a-81a; XVII:A7393)
The Attorneys also argued throughout that the gifts were valid as a matter of law.
(See I:A104a-110a) Again, the Referee, Surrogate’s Court, and Appellate Division
all addressed that issue. (I:A82a, 128a; XVII:A7394)
24
ARGUMENT
I. THE ESTATE’S CLAIM FOR RETURN OF THE GIFTS WAS TIME-
BARRED AND SHOULD HAVE BEEN DISMISSED.
It is undisputed that the applicable limitations period for Alice’s claim for
return of the gifts was six years. It also is undisputed that Alice waited nearly
seven years after giving the gifts before asserting that claim. The claim was
therefore barred by the statute of limitations and should have been dismissed.
The lower courts, however, invoked the “continuous representation” tolling
doctrine to save the Estate’s claim. That doctrine operates to postpone the time by
which clients must bring suit against professionals for malpractice or analogous
misfeasance, on the sensible assumption that clients cannot be expected to
understand or promptly sue professionals regarding ongoing matters within the
latter’s professional expertise. Further, it is preferable to afford professionals the
opportunity to try to fix their own errors while the representation is ongoing, rather
than require clients to sue at once, potentially precluding such self-correction.
Neither the doctrine nor its underlying rationale has any force with respect to
claims over disputed fees or gifts—arms-length transactions that do not themselves
entail rendering professional services. In other words, where (as here) a client’s
claim concerns a transaction between attorney and client, separate and distinct
from the rendition of professional services, rather than representation by the
attorney of the client as part of a professional representation, the doctrine is inapt.
25
Moreover, even where continuous representation tolling does apply, it lasts
only for so long as the professional continues to represent the client in connection
with the challenged matter. But, as is obvious and as the Referee found after trial,
the Attorneys did not represent Alice with respect to the gifts; they represented her
in estate litigation, an entirely distinct matter. (I:A135a) Since the Attorneys did
not represent Alice at all in connection with the gifts, much less continuously, the
continuous representation doctrine cannot save the Estate’s time-barred claim.
Indeed, any contrary rule would undermine well-established law governing
day-to-day financial interactions between attorneys and clients, thereby exposing
professionals to liability of indefinite duration for all sorts of routine disputes, and
thus disrupting the repose to human affairs that statutes of limitations are intended
to provide. This case is a perfect example: As a result of the lower courts’
application of the continuous representation doctrine, the Attorneys were forced to
bear the burden of proof as to conduct that (by the time of trial) had occurred more
than ten years earlier, and were unable to depose Alice, who died after years of
avoiding deposition through willful and contumacious misconduct.
For these powerful reasons, no New York court has previously applied the
continuous representation doctrine to claims such as overbilling or improper
receipt of a gift. Appellate courts in other states have expressly refused to apply
the tolling doctrine to such circumstances. This Court should do the same here.
26
A. Alice’s Gift Claim Was Concededly Brought Beyond The Six-
Year Limitations Period.
CPLR § 213(1) provides a maximum six-year limitations period for actions
for which “no limitation is specifically prescribed by law.” Accordingly, “the
parties do not dispute that the longest relevant period of limitations with respect to
[the gift] claims had expired sometime in the beginning of December, 2004, six
years after Chill received the envelope from [Alice] containing gifts for each of the
[Attorneys].” (I:A280a) There is likewise no dispute that Alice’s Complaint was
“filed on September 13, 2005,” nearly a year after the expiration of that six-year
period. (I:A280a) There is thus no question that, absent a tolling of the statute,
Alice’s claim for return of the gifts should have been dismissed as time-barred.
B. The Continuous Representation Doctrine Did Not Toll The
Statute Of Limitations.
The Appellate Division held that the six-year statute of limitations
applicable to Alice’s gift claim was tolled by reason of the continuous
representation doctrine. (See XVII:A7393) In so holding, the court applied the
doctrine to a claim concerning one-time gifts, transactions in which the Attorneys
did not represent the client at all, let alone continuously. That was legal error. The
continuous representation tolling doctrine does not and should not apply here.
27
1. The continuous representation doctrine applies only to a claim
alleging improper provision of professional services, and only if
professional representation regarding the disputed act remains
ongoing.
Controlling Court of Appeals authority holds that two essential criteria are
the sine qua non of continuous representation tolling: (i) a claim of misconduct
concerning the manner in which professional services were performed, and
(ii) ongoing professional services with respect to the specific matter or transaction
complained of. Williamson v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1, 9, 11
(2007) (continuous representation tolling not applicable unless there is a “mutual
understanding” of the need for further representation with respect to the
“particular problems [conditions] that give rise to [the] malpractice claims”; a
“continuing professional relationship” alone does not suffice); McCoy v. Feinman,
99 N.Y.2d 295, 306 (2002) (tolling applies “only where there is a mutual
understanding of the need for further representation on the specific subject matter
underlying the malpractice claim”); Shumsky v. Eisenstein, 96 N.Y.2d 164, 167-68
(2001) (tolling applicable “only where the continuing representation pertains
specifically to the matter in which the attorney committed the alleged
malpractice”); Glamm v. Allen, 57 N.Y.2d 87, 94 (1982) (tolling during period of
“ongoing representation” if “attorney who allegedly was responsible for the
malpractice continues to represent the client in that case”) (all emphases added).
28
Unsurprisingly, until this case, the First Department had enforced those
same requirements. Booth v. Kriegel, 36 A.D.3d 312, 314 (1st Dep’t 2006) (tolling
applies to claims “arising from the rendition of professional services only so long
as the defendant continues to advise the client” regarding the “particular
transaction sued upon”) (emphases added); Transp. Workers Union of Am. Local
100 AFL-CIO v. Schwartz, 32 A.D.3d 710, 713-14 (1st Dep’t 2006) (doctrine not
applicable where continuing representation has only “incidental connection” to
transaction giving rise to the lawsuit), leave denied, 8 N.Y.3d 942 (2007).
In light of these requirements, continuous representation tolling has never
previously been applied when a client’s claim concerns a financial transaction
between the professional and client (such as a fee dispute), rather than malfeasance
in the provision of professional services on behalf of the client (such as
malpractice). In the former case, the two basic elements are not satisfied: When a
professional engages in a financial transaction with a client, by charging a fee or
accepting a gift, the professional is not representing the client in that transaction—
and certainly not continuously. Rather, the two parties are engaging in a financial
transaction that is separate and distinct from the rendition of professional services.
Other states similarly have refused to apply the continuous representation
tolling rule to disputes over attorneys’ fees and the like, as opposed to claims of
deficient professional performance. E.g., Burns v. McClinton, 143 P.3d 630, 632,
29
636 (Wash. Ct. App. 2006) (holding that “‘continuous representation’ rule does not
apply to a fee dispute arising out of an ongoing professional relationship,” because
it did not arise from “professional error”); Bambi’s Roofing, Inc. v. Moriarty, 859
N.E.2d 347, 358 (Ind. Ct. App. 2006) (finding continuous-representation doctrine
inapplicable to claim of “embezzlement” of client’s funds by professional).
In sum, continuous representation tolling applies—as its name indicates—to
claims (like malpractice claims) arising from a professional’s error or malfeasance
in the course of a particular continuous representation. Here, the Attorneys never
represented Alice with respect to the gifts she mailed to them. As Judge Levine
found after the hearing, and nobody disputed, “accepting the gifts … did not occur
in the course of Graubard’s rendering legal services to Alice.” (I:A135a) Even if,
as the Estate has argued, the gifts were given in recognition of the Attorneys’
representation, that at most would simply mean the gifts were akin to legal fees,
which (as shown) are not subject to continuous representation tolling, given that
the doctrine is limited to disputes about the actual rendition of legal services.
2. The policy rationales for continuous representation tolling do
not apply in the context of a fee- or gift-related dispute.
The purposes underlying continuous representation apply only to claims
alleging malfeasance in the rendition of professional services and are inapplicable
to financial transactions between clients and professionals. This confirms that the
doctrine should not be extended beyond its longstanding parameters.
30
Continuous representation tolling has two rationales. First, a lay person
“realistically cannot be expected to question and assess the techniques employed or
the manner in which the services are rendered.” Greene v. Greene, 56 N.Y.2d 86,
94 (1982). That is, a client cannot “be expected, in the normal course, to oversee
or supervise the attorney’s handling of the matter.” Id. Thus, the client should not
be burdened with the obligation to identify the professional’s errors midstream:
“The client is hardly in a position to know the intricacies of the practice or whether
the necessary steps in the action have been taken.” Siegel v. Kranis, 29 A.D.2d
477, 480 (2d Dep’t 1968). Second, if the client becomes aware of an error, the
client should not be required immediately to sue, since that would only “interrupt
corrective efforts.” Borgia v. City of New York, 12 N.Y.2d 151, 156 (1962).
Rather, the professional should be afforded a chance to “provide corrective or
remedial services” in the course of the same representation, and thereby obviate the
need for a suit entirely. Williamson, 9 N.Y.3d at 11. Importantly, this Court has
rejected continuous representation tolling where “the purpose underlying [the
doctrine] would not be served by its application.” Id.
Neither of the concerns that justify continuous representation tolling has any
force in the context of a dispute between a client and a professional over fees or a
personal gift. First, when a client pays a lawyer or gives the lawyer a gift, the
lawyer is not—in that transaction—“perform[ing] legal services on the [client’s]
31
behalf.” Greene, 56 N.Y.2d at 95. Requiring the client to dispute the payment or
seek return of the gift within the ordinary limitations period would therefore not
impose on the client a duty to “question and assess the techniques employed” by
the professional, or evaluate “the manner in which the services are rendered.” Id.
at 94. To the contrary, there is every reason to expect the client to “oversee or
supervise” a financial transaction between attorney and client. Id. Indeed, the
“account stated” doctrine requires clients to review attorneys’ invoices and timely
raise any objections. Rodkinson v. Haeker, 248 N.Y. 480 (1928); Whiteman,
Osterman & Hanna, P.C. v. Oppitz, 105 A.D.3d 1162, 1163 (3d Dep’t 2013);
Ruskin, Moscou, Evans & Faltischek, P.C. v. FGH Realty Credit Corp., 228
A.D.2d 294, 295 (1st Dep’t 1996) (client obligated to make “objection within a
reasonable time” of receiving a “law firm’s invoices”).
The law thus presupposes that clients are fully capable of conducting arms-
length financial transactions with lawyers. As the account stated doctrine shows,
the law assumes that clients can and will—and indeed must—exercise independent
judgment when dealing with lawyers on financial matters in which the attorney is
not acting on the client’s behalf. See also N.Y. Rules of Prof’l Conduct, R. 1.8(a)
(rules governing a business transaction between attorney and client not applicable
unless the client expects the lawyer “to exercise professional judgment [in the
transaction] for the protection of the client”). Put simply, clients may defer to
32
lawyers only on questions of professional judgment—not as to payment for
services, and not as to receipt of gifts. In both of the latter situations, the client is
not burdened with any need to exercise contemporaneous oversight over the matter
in which professional services beyond their expertise are being rendered.
Second, unlike ongoing professional matters, disputes over fees or gifts
involve no “mutual understanding of the need for further representation” regarding
that transaction. McCoy, 99 N.Y.2d at 306. Since the disputed act is not the
subject of any prior or ongoing representation, there is no concern that disputing a
payment or seeking return of a gift would interrupt “corrective efforts.” Borgia, 12
N.Y.2d at 156. Postponing the time for commencing litigation over a fee or gift,
therefore, would not permit the attorney to “correct his or her malpractice” and so
avoid suit. McDermott v. Torre, 56 N.Y.2d 399, 408 (1982). Here, there was no
“mutual understanding of the need for further representation” regarding the gifts.
McCoy, 99 N.Y.2d at 306. And having done nothing on the client’s behalf in the
gift transaction, there was nothing for the Attorneys to “correc[t]” through any
ongoing professional services regarding the gifts. Borgia, 12 N.Y.2d at 156.
3. The Appellate Division committed legal error.
Contrary to all of the foregoing authority, the Appellate Division below held
that the continuous representation doctrine “applies where, as here, the claims
involve self-dealing at the expense of a client in connection with a particular
33
subject matter.” (XVII:A7393) This novel application of the doctrine to financial
disputes, by labeling them “self-dealing” by the professional, is plain error. Such
disputes, however characterized, do not either satisfy the essential components of
continuous representaation tolling or serve its underlying purposes.
No New York court heretofore has applied continuous representation tolling
to a financial dispute between client and attorney (or any other professional).
Indeed, the one case the Appellate Division cited as supposed authority for its
holding—a “cf.” cite to Woyciesjes v. Schering-Plough Corp., 151 A.D.2d 1014
(4th Dep’t 1989)—expressly rejected application of continuous representation
tolling to a fee dispute. The client in Woyciesjes claimed that his attorney
“improperly charged him a fee of 50% rather than one third” and “erroneously
calculated the 50% fee.” Id. at 1014. Despite an allegation that the attorney
committed “fraud” as to those billing practices, the court flatly rejected “plaintiff’s
contentions that the continuous representation doctrine is applicable.” Id. at 1014-
15. Woyciesjes thus confirms that tolling is inapplicable to claims arising from
financial transactions between clients and professionals. Accord Glavey v.
Latzman, No. 570379/03, 2003 WL 23095673, at *1 (App. Term 1st Dep’t Nov. 18,
2003) (per curiam) (holding claim for overcharge of fees time-barred, even though
“representation of plaintiff in the underlying matter may have continued”).
34
The doctrine is inapplicable to financial disputes with clients regardless of
whether, as below, these disputes are characterized as “self-dealing” by the
professional. All such disputes can be described as enrichment by the professional
at the client’s expense. If that were enough to constitute “self-dealing” and thus,
under the Appellate Division’s novel rule, trigger continuous representation tolling,
then any plaintiff suing a professional could describe the latter as engaging in
“self-dealing,” and thereby circumvent at the threshold the statute of limitations.
Allowing the Appellate Division’s rule to stand would thus open a Pandora’s box,
allowing application of continuous representation tolling to all financial (or other)
controversies between clients and professionals. Indeed, under the Appellate
Division’s formulation, merely sending a bill to a client would constitute “self-
dealing at the expense of a client.”
Moreover, as the foregoing reflects, the Appellate Division mischaracterized
what constitutes “self-dealing” and plainly erred by suggesting that any such “self-
dealing” is even alleged here. The Attorneys’ receipt of unsolicited gifts cannot
conceivably constitute an act of “self-dealing” since the Attorneys were on one
side of the transaction only. They simply accepted the checks that Alice herself
wrote and mailed to them. No plausible definition of “self-dealing” could
encompass that conduct. Rather, self-dealing requires that the professional act on
both sides of the transaction. The Appellate Division’s characterization of the gift
35
transaction as involving “self-dealing” by the Attorneys is thus itself without any
foundation. Accordingly, the lynchpin for the Appellate Division’s application of
the novel rule that it enunciated simply does not exist.2
In short, at the heart of the Appellate Division’s “self-dealing” label is the
premise that professionals can never engage in arms-length financial transactions
with clients; that attorneys are always representing their clients, even when
negotiating against them. Yet, as shown above, that premise is fundamentally
irreconcilable with well-established doctrines (such as account stated) that govern
financial transactions between attorneys and clients.
Thus, under well-settled law, attorneys are plainly not providing professional
services for a client when they engage in a financial transaction with a client, such
as routine billing. Because a lawyer who charges a fee or accepts a gift does not
thereby render professional services to the client, the continuous representation
doctrine does not apply.
2 Of course, continuous representation tolling can apply to claims of self-dealing, but only
where its basic elements—a disputed transaction that is the subject of ongoing professional
representation—are present. E.g., Greene, 56 N.Y.2d at 90-91, 94-95 (applying tolling where
lawyer mismanaged trust assets entrusted to him “for professional assistance”); Schlanger v.
Flaton, 218 A.D.2d 597, 599 (1st Dep’t 1995) (attorney protected “his own interests at the
expense of” client, “while … acting as counsel”). The gift transactions at issue here, however,
involved neither professional representation nor ongoing professional representation (nor self-
dealing, for that matter).
36
C. The Holding Below Eviscerates The Public Policy Interests Served
By Statutes Of Limitations, As This Case Exemplifies.
The Appellate Division’s predicate for its novel application of continuous
representation tolling to this case—i.e., “claims that involve self-dealing at the
expense of a client”—in practical effect extends tolling for the duration of the
relationship between professional and client, a result this Court has squarely
rejected. Williamson, 9 N.Y.3d at 9. Such uncircumscribed expansion of the
continuous representation doctrine violates not only Court of Appeals authority,
but statutory law as well, and also defeats well-established public policy.
The primary purpose of statutes of limitation is fairness. Duffy v. Horton
Mem. Hosp., 66 N.Y.2d 473, 476 (1985). “The statutes embody an important
policy of giving repose to human affairs.” Flanagan v. Mt. Eden Gen. Hosp., 24
N.Y.2d 427, 429 (1969). There comes a point at which a defendant “ought to be
secure in his reasonable expectation that the slate has been wiped clean.” Id. “The
Supreme Court has noted that statutes of limitation ‘are founded upon the general
experience of mankind that claims, which are valid, are not usually allowed to
remain neglected. The lapse of years without any attempt to enforce a demand
creates, therefore, a presumption against its original validity … .’” Id. (quoting
Riddlesbarger v. Hartford Ins. Co., 74 U.S. 386, 390 (1868)).
Also, a defendant should be entitled to defend against a claim “before his
ability to do so has deteriorated through passage of time.” Martin v. Edwards
37
Labs., 60 N.Y.2d 417, 425 (1983); accord Nussenzweig v. DiCorcia, 9 N.Y.3d
184, 188 (2007) (“[S]tatutes of limitations are designed to spare the courts from
litigation of stale claims, the citizen from being put to his defense after memories
have faded, witnesses have died or disappeared, and evidence has been lost … .”
(internal quotation marks omited)); Ackerman v. Price Waterhouse, 84 N.Y.2d
535, 542 (1994) (statutes of limitations serve “society’s interest in adjudication of
viable claims not subject to the vagaries of time and memory”). The Appellate
Division’s transgression of these policies is flagrant—and exacerbated by the fact
that the Attorneys here bore the burden of proof regarding Alice’s belated claim.
Transforming the continuous representation doctrine per the decision below
would expose all types of professionals in New York to liability of indefinite
duration. The continuous representation doctrine applies, under common law and
by statute, to professionals such as “architects, engineers, … and accountants.”
Castle Oil Corp. v. Thompson Pension Employee Plans, Inc., 299 A.D.2d 513, 514
(2d Dep’t 2002); see also CPLR § 214-a (codifying continuous representation for
“medical, dental or pediatric malpractice … where there is continuous treatment
for the same illness, injury or condition which gave rise to the … act, omission or
failure” complained of). If tolling applies outside the context of rendering
professional services, as the Appellate Division held, then all of those professionals
face the prospect of potential liability of indefinite duration for even routine
38
financial disputes in which the professional is claimed to have been enriched at the
client’s expense—that is, all financial disputes with professionals.
For example, an accountant who has an ongoing relationship with a client
could be sued for self-dealing based on overbilling that allegedly took place many
years earlier. An architect who spends years building a home for a client could be
sued and forced to defend expense items billed at their first meeting. And law
firms could be accused by a long-time client of self-dealing based on alleged
overbilling that occurred decades before. Line items on old invoices may be
impossible to defend given the passage of time. Yet, this Court repeatedly has
determined that a defendant eventually “ought to be secure in his reasonable
expectation that the slate has been wiped clean of ancient obligations,” especially
because “loss of evidence” makes it difficult to defend against such “stale claims.”
Flanagan, 24 N.Y.2d at 429; accord Nussenzweig, 9 N.Y.3d at 188.
This case exemplifies the harm that expanding the continuous representation
doctrine would wreak upon the important policy interests served by statutes of
limitations. The Attorneys had a right to rely on the gifts in structuring their
financial affairs. Certainly following expiration of the limitations period, the
Attorneys ought to have been “secure” in their “reasonable expectation” that such
would not be unsettled. Flanagan, 24 N.Y.2d at 429. Moreover, the trial occurred
more than ten years after the gifts were given and after Alice had died. And
39
because Alice died without ever having been deposed—due to her willful and
contumacious refusal to submit to deposition—the Attorneys had to bear the
burden of proving that the gifts were given knowingly and free of undue influence
without being able to cross-examine Alice. Such “loss of evidence” is precisely
why legislatures “protec[t] parties from the prosecution of stale claims.” Id. at
429-30 (quoting Riddlesbarger v. Hartford Ins. Co., 74 U.S. 386, 390 (1869)).
As this Court has noted, “the Legislature has specifically enjoined that ‘no
court shall extend the time limited by law for the commencement of an action.’”
McCoy, 99 N.Y.2d at 300 (quoting CPLR § 201). Tolling doctrines are judicially
created exceptions to that rule. Accordingly, they should be applied only where
necessary to satisfy their purposes, not injudiciously expanded until they swallow
the limitations period entirely, as the decision below would do here.
II. THE ESTATE’S CLAIM FOR RETURN OF THE GIFTS FAILS ON
THE MERITS, AS A MATTER OF LAW, BECAUSE THE GIFTS
WERE GIVEN KNOWINGLY AND WITH NO UNDUE INFLUENCE,
AS THE COURT-APPOINTED REFEREE PROPERLY FOUND.
Under the common law, a client’s gift to an attorney is valid if the attorney
proves that it was made (i) knowingly and (ii) without undue influence. Nesbit v.
Lockman, 34 N.Y. 167, 170 (1866) (such gift must be “fair, voluntary and well
understood”); id. (attorney must provide “evidence” that there was no “fraud or
undue influence”). Accord Snook v. Sullivan, 53 A.D. 602, 606 (4th Dep’t 1900)
(“free from fraud and was her voluntary act”); Reoux v. Reoux, 3 A.D.2d 560, 562
40
(3d Dep’t 1957) (per curiam) (“free and voluntary on the part of the donor”);
Matter of Clines, 226 A.D.2d 269, 270 (1st Dep’t 1996) (“understandingly made
by the donor, uninfluenced by fraud, duress or coercion”).
This Court has recognized that there is nothing inherently improper about a
client making a gift to an attorney:
A testator’s freedom to bequeath property in accordance with his or
her wishes should not be diminished merely because the object of the
testator’s generosity happens to be an attorney with whom the testator
has enjoyed a beneficial professional relationship. Attorneys often
extend themselves on behalf of their long-time clients, and such “acts
of kindness and consideration” do not by themselves “constitute
undue influence” when they “evoke reciprocal sentiments of gratitude
and affection” by the client.
Matter of Henderson, 80 N.Y.2d 388, 392-93 (1992) (citations omitted). But
because courts are “vigilan[t]” in applying the undue-influence inquiry in the
context of a fiduciary relationship (I:A104a), the attorney bears the burden of
establishing the gift’s validity (Reoux, 3 A.D.2d at 562).
In this case, Judge Levine reviewed the evidence and rendered detailed,
fully-supported findings establishing that the gifts to the Attorneys were valid as a
matter of law. Indeed, New York courts have upheld client gifts on records far less
robust than this. Nevertheless, the Appellate Division ordered the Attorneys to
return the gifts, conclusorily citing three factors—size, secrecy, and the failure to
urge independent counsel—as legally preclusive of the gifts’ validity.
(XVII:A7394) These factors, however, do not remotely suggest undue influence,
41
even when considered in isolation, much less when viewed in the context of all the
undisputed record evidence cited by Judge Levine. At a minimum, they surely do
not require the trier of fact (here, Judge Levine), who is owed great deference, to
find undue influence as a matter of law.
A. The Undisputed Evidence Establishes, As A Matter Of Law, That
Alice Gave The Gifts Knowingly And Without Undue Influence.
Judge Levine presided over a lengthy hearing, heard from numerous
witnesses, examined hundreds of exhibits, and ultimately issued a comprehensive
Report that made extensive factual findings and credibility determinations. Based
on uncontroverted evidence, Judge Levine correctly found that Alice’s gifts to the
Attorneys were legally valid, carefully detailing the supporting evidence and the
ineluctable inferences that followed therefrom. (See I:A122a, 124a)
1. The Attorneys did not exercise undue influence.
Undue influence is “‘a moral coercion, which restrained independent action
and destroyed free agency, or which, by importunity which could not be resisted,
constrained the testator to do that which was against [her] free will and desire, but
which [s]he was unable to refuse or too weak to resist.’” Children’s Aid Soc’y v.
Loveridge, 70 N.Y. 387, 394 (1877). “‘To be ‘undue,’ the influence exerted must
amount to mental coercion that lead the testator to carry out the wishes of another
….’” Matter of Ryan, 34 A.D.3d 212, 213 (1st Dep’t 2006). Judge Levine
concluded that “the gifts were free from undue influence.” (I:A124a)
42
First, the Referee credited the Attorneys’ unrebutted evidence that the gifts
were not solicited. The Estate did not claim otherwise. (I:A119a) Since it was
conceded that the Attorneys did not solicit the gifts, the gifts had to have been
voluntarily made and therefore could not have been induced by undue influence.
Second, Judge Levine found that the “hand-written notes from Alice
accompanying the checks sent to each of the Attorneys” conclusively established
the absence of undue influence. (I:A124a) “These notes,” Judge Levine observed,
“show that the gifts were made voluntarily by Alice and not as the result of any
undue influence by her Attorneys.” (Id.) As is evident from the documents
themselves, the notes “speak in Alice’s voice”; were “manifestly sincere and
genuine expressions of Alice’s deep appreciation to each of the members of her
‘team’ for their efforts and loyalty”; and “clearly bespeak spontaneity and
sincerity.” (I:A124a, 125a) Alice’s effusive, heartfelt expressions of gratitude and
affection to the Attorneys, as set forth in her notes to each of them (for example, to
Chill, “my friend of all friends” (XV:A6024-26)), leaves no room for doubt as to
the voluntary nature of the gifts and the absence of undue influence.
Third, the gifts were made “immediately after the Attorneys had achieved
what to Alice was a major victory in her battle with … her despised brother-in-law
[Cohn],” following “years of bitter litigation” and “despite [Cohn’s] fierce
resistance” and resulting in the distribution of “approximately $124 million to
43
Alice and the Lawrence Children.” (I:A124a) For Alice, this was a profound,
liberating event, which she marked by framing her distribution checks. (VI:A891-
92; VII:A1130-31; XV:A6051-52) After fifteen years of struggle, she had gained
the “freedom” “to run [her] own life as [she] see[s] fit,” “not . . . subject to Mr.
Cohn’s whims.” (VII:A1130-31) Since Alice “was an extraordinarily demanding
client” (I:A125a), it was “not surprising,” as Judge Levine found, that Alice would,
of her own volition, want to recognize the Attorneys “for their success,” “for their
willingness to use unusually aggressive tactics in zealously advancing her cause,”
and “for tolerating her abusive treatment and her micromanagement.” (Id.)
Fourth, overwhelming, unrebutted evidence illustrated Alice’s domineering
personality, which permeated her interactions with the Attorneys. (Id.) The record
was “replete with examples of her dominating, micromanaging, vituperative
behavior.” (I:A109a) Alice frequently fired lawyers—including two firms before
she retained Graubard—and frequently “would threaten to fire Graubard.” (Id.)
Alice’s domineering personality and abusive behavior are utterly antithetical to her
claim of undue influence. Judge Levine accordingly found it “highly improbable
that anyone would have been able to persuade Alice to make multimillion dollar
gifts against her will in 1998.” (I:A125a) Indeed, the evidence of Alice’s
independent, domineering nature was so extraordinary that on the seventh day of
the hearing Judge Levine excluded further evidence on this point as cumulative,
44
finding the evidence that already had been introduced enough “to take down a
forest.” (VII:A1211)
Fifth, further negating undue influence, the Referee found that Alice’s
“spontaneous and grandiose generosity to others demonstrates that the gifts to the
Attorneys were not aberrational on Alice’s part. (I:A125a) Alice gave her doctor a
gift of $1.4 million to buy an apartment; her friend and business partner, Barbara
Kling, a “$1 million painting” (id.) and $5.7 million in unpaid loans to a business
Alice and Kling owned jointly (VIII:A1991; XV:A5892-93); and cash to her
handyman of “over $600,000 in loans-gifts, and a house.” (I:A125a)
Sixth, Judge Levine evaluated the gifts’ size relative to Alice’s net worth.
The latter, in 1997, was “approximately $220 million.” (I:A126a) Thus, Alice’s
gifts to the Attorneys, after she received another $84.3 million in November 1998,
“had only a minor impact on Alice’s fortune, making it less likely that undue
influence was needed to impel her to make the gifts against her will.” (Id.)
Seventh, Judge Levine found that Alice’s “seven year delay in challenging
the gifts seriously undermine[d] [her] undue influence claim.” (Id.) The Referee
noted that during those years, Alice never complained about the gifts—not to the
Attorneys, despite her continued work with them; or her accountant, despite their
discussions concerning gift taxes—and not until after Graubard’s lawsuit in August
2005 to collect fees. (Id.) The Referee inferred from this suspicious chronology
45
that “the gift validity challenge,” whose “bona fides” he questioned, “was only
devised as a defensive litigation tactic and not as a legitimate claim having merit
on its own.” (I:A126a, 127a) Indeed, no other conclusion is plausible.
As the foregoing evidence definitively establishes, if ever there was a client
not susceptible to undue influence, it was Alice Lawrence.
2. Alice fully understood the gifts.
The evidence incontrovertibly showed that Alice, then 73 years old, fully
understood the gifts. (I:A122a) The Estate “concede[d]” that Alice “was mentally
competent” when the gifts were made. (Id.) In addition, Judge Levine found that
Alice was knowledgeable and experienced regarding gifts and gift taxes. It is
undisputed that she routinely made gifts (I:A123a; XVI:A6166-88, 6280; see also
XVI:A6159); had filed gift tax returns in the past and paid substantial gift taxes
thereon (XVI:A6063); had previously been advised regarding the gift tax rules
(I:A123a; VI:A916-17, 921-23; XVI:A6157); discussed the amount of gift taxes
payable on the gifts here at issue with her accountant/financial advisor, Wallberg
(I:A123a; VIII:A1909, 1911-12); and subsequently signed and filed a gift tax
return prepared by him and paid the gift taxes thereon (I:A361a, A366a), thereby
reaffirming and ratifying her intention to make the gifts. (I:A123a-124a)
* * *
46
To summarize, the undisputed facts show that a robustly independent and
extremely demanding client, in full control of her faculties, known for making
generous gifts to non-family members (including her physician), made unsolicited
gifts (representing an inconsequential percentage of her vast fortune) to the lawyers
who had just succeeded—following fifteen years of effort and abuse—in obtaining
a momentous legal victory that left the client’s family $124 million wealthier.
Contemporaneous, handwritten notes document the transaction; gift taxes were
paid after consultation with an independent advisor who offered an out; and the
gifts went unchallenged for nearly seven years, until the client became embroiled
in an unrelated fee dispute and sued, but even then refused to be deposed. On
these facts, it is simply impossible, as a matter of law, to reach the conclusion that
the Attorneys exerted “mental coercion” (Ryan, 34 A.D.3d at 213) that Alice was
“too weak to resist” (Children’s Aid Soc’y, 70 N.Y. at 394).
Comparing the facts here to those in other client gift cases vividly illustrates
the point. The cases in which New York courts have required forfeiture of gifts
uniformly involve highly vulnerable clients; gifts that represent significant portions
of their net worth; the absence of any credible writings in the donor’s own hand
that the gifts were intended; insidious concealment of the gifts until after the
donors expired; and other circumstances leading one to wonder why such gifts
would have been made. This case involves the very opposite in every particular.
47
In Matter of Howland, 9 A.D.2d 197 (3d Dep’t 1959), an “infirm and
eccentric” elderly woman purportedly conveyed to her lawyer a residence she had
bequeathed to another, with the conveyance prepared by the lawyer’s secretary’s
husband “in an automobile” and not recorded until after her death. Id. at 199.
In Snook v. Sullivan, the court voided a purported conveyance of stock by a
client of “advanced age” in “feeble health” who “easily became nervous and
excitable over business transactions,” whose stock dividends were “her only
support” and who had already willed the stock to her sister, where the donee never
told the bank of the transfer until “after her death.” 53 A.D. at 602-03, 607.
In Radin v. Opperman, 64 A.D.2d 820 (4th Dep’t 1978), the lawyer
transferred “over $20,000” to himself from the decedent, an octogenarian resident
of a “Veterans’ Administration Facility.” Id. at 820. The decedent subsequently
“notified the bank not to honor any withdrawals from his accounts unless he
personally presented the bankbook.” Id.
In Matter of Bartel, 33 A.D.2d 987 (4th Dep’t 1970), the lawyer sold his 84-
year-old client’s home so she could move “to a nursing home,” and then “breached
his trust relationship with his elderly client in initially commingling the proceeds
of the sale with his own funds in his personal account.” Id. at 987-88. He claimed
that the client had later, orally, gifted him those proceeds—“which constituted
almost half of [her] resources”—but “[n]o writing of any kind was introduced.” Id.
48
And, in Matter of Clines, the decedent had been “diagnosed with Organic
Brain Syndrome,” and there was no “documentation,” not even “a gift tax return,”
to support the alleged transfer of “the bulk of the decedent’s estate” to his
“caretaker and/or fiduciary.” 226 A.D.2d at 270.
The facts here also compare favorably to cases in which courts found that
donees had satisfied their burden with respect to inter vivos gifts. See, e.g., Matter
of Sherbunt, 134 A.D.2d 723, 723-34 (3d Dep’t 1987) (per curiam) (upholding gift
from “retired schoolteacher” who lived “in a nursing home,” “not revealed to any
other party,” and memorialized only in a writing “typed by” the donee himself).
If the record facts in this case do not establish a legally valid client gift, no
facts ever could.
B. The Appellate Division Erred By Conflating An Aspirational
Ethical Canon With The Governing Common-Law Standard.
The Appellate Division did not dispute any of Judge Levine’s specific
factual findings. Instead, it ruled on the law that the Attorneys’ failure to “advis[e]
[Alice] to seek independent counsel” “preclude[d] a finding in [their] favor” on the
legally dispositive question of the gifts’ validity. In support of that determination,
the Court exclusively cited Ethical Consideration (“EC”) 5-5 of New York’s
former Code of Professional Responsibility, which said that, before accepting a
gift, a lawyer “should urge that the client secure disinterested advice from an
independent, competent person.” That was legal error.
49
EC 5-5 was expressly aspirational, and so obviously could not be a
requirement of the common law. Indeed, it is self-evident that a donor need not be
advised to seek independent counsel in order to give a knowing and voluntary gift.
Thus, as Judge Levine correctly concluded, under the caselaw the failure to adhere
to EC 5-5 does not invalidate a gift. (I:A120a) Advising independent counsel may
prove a gift valid, but failing to so advise cannot and does not prove a gift invalid.
1. EC 5-5 was “aspirational” only; it was not a “mandatory” Disciplinary
Rule. See N.Y. Lawyer’s Code of Prof’l Resp., Preliminary Statement (2007). EC
5-5 contained three aspirational guidelines regarding gifts, apparently formulated
to protect attorneys from unfounded client charges of undue influence.3 First, a
lawyer should not solicit a gift. Second, a lawyer may accept an unsolicited gift
“but before doing so he should urge his client to secure disinterested advice from
an independent, competent person.” Third, a lawyer should not prepare an
instrument for a client which names the lawyer beneficially.
When in April 2009 the Appellate Divisions replaced the Code (including its
Ethical Considerations) with the new Rules of Professional Conduct, they chose to
incorporate only the first and third of EC 5-5’s guidelines—and drop altogether the
aspirational concept that a lawyer should, before accepting a client gift, urge the
3 EC 5-5 stated in this regard: “If a lawyer accepts a gift from the client, the lawyer is
peculiarly susceptible to the charge that he or she unduly influenced or overreached the client.”
50
client to consult with an independent third party. It would be downright bizarre for
the common law to forbid what professional ethics rules allow—namely,
acceptance of an unsolicited gift without urging independent advice.
In all events, the test for a gift’s validity is whether it was given under
“undue influence.” See supra, Part II.A. Ethics rules obviously would not tolerate
“undue influence” over a client, so their failure to require suggesting independent
advice demonstrates conclusively that such advice is not needed to avoid undue
influence (or otherwise render gifts valid). Equally obvious, a gift can be knowing
and voluntary even if the donor was not urged to obtain independent advice. EC 5-
5’s recommendation is prophylactic, and following it may be sufficient to show
that a gift was voluntary. But not following it does not remotely establish that a
gift was not voluntary. A gift is invalid if the product of undue influence—“a
moral coercion, which … constrained the [donor] to do that which was against
[her] free will,” Children’s Aid, 70 N.Y. at 394. Failure to urge independent
advice, standing alone, could hardly create such “coercion” as a matter of law.
For a multitude of reasons, a donor might not need (or might not want) to be
urged to seek independent advice before giving a gift. Alice, for example, was
extraordinarily wealthy and insisted on making all of her own decisions; moreover,
she spoke to her financial advisor, Wallberg, about the gifts on her own accord,
even though the Attorneys purportedly did not urge her to. (See I:A126a) Since
51
Alice did, in fact, consult an independent third party, the Attorneys’ alleged failure
to recommend that course of action cannot conceivably bear on, let alone be legally
dispositive of, whether she made the gifts with full understanding and without
undue influence—i.e., of her own free will.4 Retroactively turning what had been
an aspirational guideline recommending that attorneys urge a client to seek
independent advice into a rule whereby attorneys must urge the client to consult
with independent counsel as the sine qua non of a knowing and voluntary gift is
fundamentally unfair and simply makes no sense.
2. Accordingly, it is not surprising that no prior case has held failure to
urge a client to consult with independent counsel to be dispositive of the common-
law question whether the gift was given knowingly and without undue influence.
To the contrary, the caselaw confirms, contrary to the Appellate Division, that EC
5-5 cannot be equated with the common-law test for undue influence and cannot be
the legal basis for invalidating gifts. In Matter of Buchyn, 300 A.D.2d 739 (3d
4 We note, simply for the Court’s reference, that Chill testified that he did advise Alice to
consult other counsel before giving the gifts. (See I:A117a) The Referee found that testimony
inconsistent because Chill could not recall whether he had so advised Alice twice or three times
(I:A117a-18a), but the conversation had taken place eleven years earlier. He also found it
implausible that Chill would have given this advice despite not being familiar with the applicable
ethical rules (which did not, in any event, require it). (I:A117a) But suggesting independent
legal advice, even if not required, is a fairly standard approach to all sorts of ambiguous or
uncertain ethical scenarios, and was precisely the advice previously given to Alice in somewhat
analogous circumstances. (VI:A669, 701-02, 909, 974-75) Nevertheless, recognizing the great
deference owed to Referees on matters of fact and credibility, the Attorneys accept the Referee’s
determination on this matter for purposes of this appeal.
52
Dep’t 2002), an attorney accepted assets from a “feeble” woman in her 90’s
without urging independent advice. Id. at 740-41. The court nonertheless found
no undue influence, noting that the evidence “does not lead to the necessary
conclusion that undue influence was exerted.” Id. at 741. Similarly, in Matter of
Sherbunt, the court found that the attorney had violated EC 5-5 but still affirmed
that the gifts were not “the product of undue influence.” 134 A.D.2d at 724.
Indeed, under Matter of Putnam, 257 N.Y. 140 (1931), and its progeny, an
attorney who drafts a will for a client and names himself as a beneficiary—in
violation of EC 5-5’s third guideline and of new mandatory Rule 1.8(c)(2) of the
Rules of Professional Conduct—is nonetheless entitled to a hearing on the issue of
undue influence. Thus, even in the far more egregious scenario where the attorney
drafts the instrument of transfer, the attorney is not thereby precluded from proving
the absence of undue influence. In Matter of Delorey, 141 A.D.2d 540 (2d Dep’t
1988), an attorney drafted a will naming himself “sole legatee” and “conceded that
he never advised [the client] to have the will drawn by someone other than
himself.” Id. at 540-41. Yet the court allowed the attorney to seek to “rebut” the
presumption of undue influence with proof “that the gift was freely and willingly
made.” Id. at 541-42. And in In re Schneiderman, 105 A.D.3d 602 (1st Dep’t
2013), the court found “no evidence to suggest that [the donor] consulted with
[independent counsel] regarding the $1 million gift” he had given to his lawyer
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before his death. Id. at 603. Yet, the court did not rule the gift to be invalid as a
matter of law. To the contrary, it held that there were “triable issue[s] of fact”
regarding the dispositive question of undue influence as to the gift. Id. at 602.
Yet if a lawyer who violates a mandatory ethics rule by drafting a client’s
will granting himself a bequest is not precluded from proving that the bequest was
not tainted by undue influence, then surely one who receives an unsolicited gift
and violates no ethics rule is not—contrary to the Appellate Division—
“preclude[d]” from proving the same.
In the few cases that have mentioned failure to urge independent advice,
overwhelming evidence necessitated an “undue influence” finding, regardless of
whether such advice was given. In Radin, the lawyer transferred money to himself
from an octogenarian who told the bank “not to honor any withdrawals from his
accounts unless he personally presented the bankbook.” 64 A.D.2d at 820. In
Reoux, the lawyer took securities from a client’s safe-deposit box—after the
“forgetful” client was “ill and confined in a nursing home”—and misadvised her
that she had contracted to give him half of her property. 3 A.D.2d at 562-64.
At most, these cases suggest that urging advice can be a factor confirming
that gifts were voluntary, serving as a “shield” for the attorney. But failure to do
so is not, in itself, probative of undue influence and so cannot be used as a “sword”
against the attorney, certainly not dispositively as held by the Appellate Division.
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And here, where the client is a sophisticated, independent woman of immense
wealth who gives unsolicited gifts to lawyers who recently secured $124 million
for her family, and handwrites notes thanking the lawyers for their long, loyal
support, any additional “shield” would be wholly redundant—surely not, contrary
to the decision below, legally mandated.
3. Invalidating Alice’s gifts because the Attorneys did not encourage
independent advice is especially erroneous, because it is undisputed that Alice did
obtain such advice about the gifts, from her principal financial advisor/confidant,
Jay Wallberg. As Judge Levine found, Alice “had extensive phone conversations”
with Wallberg about the gifts just days after they were given, and then reaffirmed
her intention to make the gifts by signing and filing a gift tax return she instructed
Wallberg to prepare and paying the taxes. (I:A126a) So even if there were a rule
under which undue influence turns on independent advice (which there is not),
surely it is satisfied where, as here, the donor actually procured such advice.
C. The Appellate Division Erred By Overturning Judge Levine’s
Report On The Basis Of Facts That Are Not Even Probative Of
Undue Influence In This Case.
Beyond its invocation of EC 5-5, the Appellate Division conclusorily held,
without citation, that Judge Levine’s determination that the gifts were valid was
“preclude[d]” by two other factors: (i) the gifts’ “extraordinary amounts”; and (ii)
“secrecy surrounding” them. (XVII:A7394) That, too, was legal error. For
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reasons persuasively explained by Judge Levine, neither the size of the gifts nor
the so-called secrecy concerning them is even probative of undue influence in this
case—much less dispositively so.
1. Size of the gifts.
The Appellate Division held that the “extraordinary amounts” of the gifts
precluded a finding that they were knowingly and voluntarily given. However,
neither EC 5-5 of the former Code of Professional Responsibility, nor Rule 1.8(c)
of the current Rules of Professional Conduct, nor prior decisional law invalidates a
gift to an attorney by reason of its size. (XVII:A7394) Moreover, as Judge Levine
observed, the gifts “had only a minor impact on Alice’s fortune,” and were “not
aberrational” in light of similarly large gifts that Alice gave other non-family
members, including her physician. (I:A125a, 126a) Of course, the size of Alice’s
fortune and Alice’s gift-giving are the only relevant factors, because the relevant
legal inquiry is whether the donor was unduly influenced.
If a client gift is large relative to the donor’s assets, that raises suspicions as
a matter of common sense, as the gift jurisprudence recognizes. See, e.g., Clines,
226 A.D.2d at 270 (purported gift constituted “bulk of the decedent’s estate”);
Bartel, 33 A.D.2d at 988 (purported gift represented “almost half of [client’s]
resources”); Henderson, 80 N.Y.2d at 394 & n.2 (hearing on undue influence
where purported bequest was nearly half of client’s estate). But if, as here, a gift is
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“minor” relative to the donor’s net worth (each gift being a fraction of 1% thereof),
then its size is not probative of anything; it raises no special suspicions. (I:A126a)
That is especially true here, since Alice gave gifts to others in comparable amounts.
Notwithstanding Alice’s largesse to the Attorneys and others, she died leaving an
estate worth nearly $350 million. (XV:A5899)
2. The so-called “secrecy.”
The other factor the Appellate Division held to be legally preclusive of the
gifts’ validity was the so-called “secrecy surrounding the gifts.” (XVII:A7394)
Judge Levine addressed the issue of secrecy and found: “The evidence does not
support any shroud of secrecy.” (I:A127a n.11)
The facts regarding the “secrecy” with which the gifts were given are not in
dispute. The gifts were obviously not secret from Alice, since it is undisputed that
it was her idea to make the gifts, she who wrote the gift checks and handwritten
notes that accompanied them, and she who mailed them to the Attorneys. Secrecy
came into play only because, at Alice’s instruction, the Attorneys did not disclose
the gifts, ex post, to their law partners or her children. (I:A115a)5 Alice, of course,
was free to disclose the gifts to anyone she chose, including her children or others
at Graubard. Consistent with her instructions to the Attorneys, she did not.
5 Under Rule 1.6(a) of the Rules of Professional Conduct, an attorney is required to
maintain confidentiality regarding “information that the client has requested be kept
confidential.”
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With respect to the Attorneys, it was undisputed that they openly discussed
the gifts, more than once, with Jay Wallberg or Paul Bishop, who worked in
Wallberg’s accounting office. Wallberg was Alice’s confidant and financial
advisor and Bishop was Wallberg’s associate—the last people a gift recipient
would talk to if trying to conceal a coerced gift. (V:A361; VII:A1301-02)
Standing alone, this dispels any notion of nefarious secrecy.
Again, silence surrounding a gift could be probative of undue influence
where the silence was designed to keep knowledge of the gift from the donor or her
close advisors. See, e.g., Howland, 9 A.D.2d at 199-200 (finding undue influence
where lawyer’s secretary’s husband prepared conveyance of house from “infirm
and eccentric” elderly client and kept the deed secret until “after the death” of
client); In re Van Den Heuvel’s Will, 76 Misc. 137, 148-55 (Surr. Ct. 1912)
(finding undue influence where client suffering from “senile dementia” executed
new will and drafter “failed to advise” client’s personal lawyer of the new will,
which was kept “profoundly secret” until her death). In other words, obvious
attempts to hide the exploitation of highly vulnerable clients from their closest
advisors plainly bolsters suspicion about the transaction’s bona fides. But here the
client was neither vulnerable nor was any attempt made to hide the gifts from her
closest advisor.
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Keeping gifts private is not independently suggestive of an effort to conceal
undue influence. After all, most people normally do not discuss their personal
financial matters with others, and attorneys normally do not discuss their client
interactions with others. Here, the Attorneys, as noted, did not keep the gifts secret
from Alice’s financial advisor and confidant, the very person they would have
concealed the gifts from if there were any impropriety involved. Moreover, they
took other affirmative steps to document the gift transactions, which would have
been self-defeating if they wanted to “cover-up” improperly induced gifts. Most
obviously, they each sent Alice effusive “thank you” notes, providing the alleged
victim with contemporaneous, undeniable evidence of the generous gifts.
(VI:A895-96; XV:A6032-34) (Alice did, in fact, retain Chill’s “thank you” note
until after this litigation commenced. (XV:A6032)) The Attorneys’ discussions
with Alice’s closest advisor and their providing contemporaneous documentation
to Alice about the gifts are irreconcilable with any effort to “hide” those gifts.
Thus, the only rational conclusion to be drawn from the Attorneys’ decision
not to mention the gifts, ex post, to their law partners or to Alice’s children is the
one reached by Judge Levine: that such non-disclosure provided “scant, if any,
evidence of undue influence applied to Alice.” (I:A127a n.11) It is undisputed
that the so-called secrecy was at Alice’s express instruction. (I:A115a; V:A353;
VI:A676-77, 901) Indeed, that is why Alice was confident enough to assert in her
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Complaint, seven years later, that the Attorneys “never have reported … to the
Graubard firm” the gifts that she gave them. (I:A349a)
Alice’s confidentiality instruction was hardly surprising: The gifts were none
of anybody’s business. As her daughter testified, Alice “gave money to whom she
gave money to. It’s her money.” (VII:A1530) As for the Graubard partners, Alice
did not want them to be resentful. (VI:A676-77) The Attorneys’ adherence to
Alice’s instruction in this regard is thus not probative of undue influence, as Judge
Levine found. See Sherbunt, 134 A.D.2d at 724 (finding no undue influence even
though sizeable gift was kept confidential at donor’s request). Nor, of course,
would it be surprising even absent such a directive for the Attorneys not to boast
about the gifts, just as people typically do not boast about their salaries.
* * *
As explained above, neither the gifts’ size, nor the Attorneys’ adherence to
Alice’s instruction not to disclose them to others, nor the absence of advice to seek
independent counsel, is remotely indicative of undue influence here. Those factors
are thus legally insufficient to establish that the Attorneys failed to satisfy their
burden of proving that the gifts were knowingly and voluntarily given. So it was
plain legal error to conclude that these factors required such a finding as a matter
of law. Moreover, particularly given the incontrovertible evidence relied upon by
Judge Levine—i.e., Alice’s heartfelt notes, the $124 million distribution to her
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family, Alice’s domineering personality, her discussions with Wallberg, her gift
tax return, her comparable gifts to others, and her seven-year delay in seeking their
return—the undisputed facts can legally support only one possible conclusion: that
the gifts were knowing and voluntary. Consequently, the claim for return of the
gifts must fail as a matter of law, and the decision below must be reversed.
D. Other Evidence Adduced By The Estate, Which Even The
Appellate Division Did Not Rely On, Is Also Legally Insufficient
To Invalidate The Gifts.
Beyond the three factors cited by the Appellate Division, the Estate has
previously argued that other evidence demonstrates that the gifts were induced by
undue influence. But even the Appellate Division did not rely on this “evidence,”
none of which is remotely legally sufficient to invalidate the gifts.
The alleged solicitation of the notes: With respect to Alice’s handwritten
notes, Judge Levine expressly discredited testimony from the co-executor of
Alice’s estate, Jay Wallberg, that the Attorneys had asked Alice to write them.
(I:A124a n.10) Wallberg claimed that Reich told him the Attorneys “had Alice
write” the notes. Reich denied saying that. Noting Wallberg’s receipt of “more
than $6 million” in executor’s commissions, his “hostility toward the Attorneys,”
and his “attempt[ ] to be helpful to the Estate,” Judge Levine expressly discredited
Wallberg’s testimony, concluding: “I do not credit his version of the conversation
with Reich.” (Id.) He further found that, even if Reich had made the statement
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attributed to her, it would have been “puffery” since, given Alice’s undisputed
domineering personality, the Referee did “not believe that the Attorneys could
have persuaded Alice to write these notes.” (Id.) Indeed, no such allegation was
made in Alice’s Complaint. (I:A342a) And even if the notes had been solicited,
that suggests nothing more than a request for Alice to document the transaction.
Alice’s supposed doubt: The Estate offered the hearsay testimony of
Barbara Kling, Alice’s friend and business partner, that during a visit to Alice’s
home before the gifts were mailed, Kling “think[s]” Alice told her that Alice
“didn’t think that these checks were the right thing to do, but she did write them.”
(VIII:A2107) Apart from its tentative nature, Judge Levine discredited Kling’s
testimony because of her clear bias. He noted that “Wallberg’s testimony showed
an interest in helping the Estate, as did Kling’s.” (I:A156a n.21 (emphasis added))
Judge Levine therefore gave no credence to this testimony which, in any event, is
legally insufficient to overcome the conclusive evidence establishing the gifts’
validity. Even if Alice had made the statement Kling thinks she made, it would
show only that Alice engaged in a deliberative process before subsequently mailing
the gift checks and writing the notes that accompanied them.6
6 The checks were not mailed until November 30, 1998, the same date the notes are dated.
(XV:A6021, 6024, 6027, 6030; I:A106a)
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The note accompanying Graubard’s bonus: A week after giving the gifts,
Alice sent Graubard a bonus check with a cover note addressed to Chill.
(XV:A6035) Dripping with sarcasm, the note stated: “I’m not sure just what I
should be thanking the firm for (keeping me on as a client?)” (Id.) The Estate has
suggested that this note somehow supports its claim as to the gifts.
To infer from Alice’s sarcastic note regarding the firm’s bonus that the gifts
to the Attorneys were the result of undue influence is logic that borders on the
backwards. In stark contrast to the sarcastic note accompanying the firm’s bonus,
the notes conveying the Attorneys’ gifts were effusive, heartfelt, spontaneous, and
sincere expressions of appreciation. Thus, if anything, Alice’s note accompanying
the firm’s bonus further shows that Alice was willing and able to speak her mind
openly, making the contrasting notes to the Attorneys—notes, in Judge Levine’s
words, of “spontaneity and sincerity” (I:A125a)—all the more compelling.
Thus, Alice’s note with respect to the firm’s bonus (as to which no claim of
undue influence was ever made) does not give rise to any rational inference that
the gifts to the Attorneys were not knowingly and voluntarily made. The only
inference to be drawn from this evidence cuts precisely the other way.
The alleged Svengali effect: The Referee also expressly rejected as “not
credible” the Estate’s speculative theory that Chill exercised a “Svengali-like
influence over Alice,” accounting for her decisions both to make the gifts and
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remain silent about them for seven years. (I:A127a, 155a) Based on the evidence,
the Referee found it “highly improbable that Chill could have exerted Svengali-like
influence over Alice to induce her to make the gifts,” and “even less likely that
Chill could have exerted such influence over her for seven continuous years,”
during which Alice continued to harass and abuse the Attorneys. (Id.)
In short, neither the factors cited by the Appellate Division, nor the other
“evidence” adduced by the Estate and rejected by Judge Levine, provides a legally
sufficient basis for invalidating the gifts—much less a basis to legally compel the
trier of fact to reach that result, as the Appellate Division erroneously held.
E. At Minimum, Judge Levine As Trier Of Fact Was Entitled To
Great Deference In Weighing The Evidence, And Was Clearly
Not Legally Required To Find Undue Influence.
In the alternative, even if the facts do not compel a finding that the gifts were
valid as a matter of law, they surely do not legally compel the contrary conclusion,
for all of the reasons discussed above. Even if Judge Levine could permissibly
have held that the gifts were unduly influenced—which he could not have—the
evidence plainly did not foreclose him from reaching the contrary determination,
which was fully supported by the record. Thus, even if the evidence was legally
sufficient for a finding of undue influence, it clearly did not legally compel such a
finding. Consequently, undue influence would have been at worst a question for
the trier of fact to resolve—which Judge Levine did, in the Attorneys’ favor.
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That resolution was entitled to great deference. “[T]he decision of the fact-
finding court should not be disturbed upon appeal unless it is obvious that the
court’s conclusions could not be reached under any fair interpretation of the
evidence, especially when the findings of fact rest in large measure on
considerations relating to the credibility of witnesses.” Thoreson v. Penthouse Int’l,
Ltd., 80 N.Y.2d 490, 495 (1992). This Court cited Penthouse just weeks ago,
reversing the Appellate Division for “instead substituting its own view of the trial
evidence.” 409-411 Sixth St., LLC v. Mogi, 2013 N.Y. Slip Op. 06604, at *2 (N.Y.
Oct. 10, 2013) (mem.). That deference is particularly warranted when the trier of
fact is a Referee. “New York courts will look with favor upon a Referee’s report,
inasmuch as the Referee, as trier of fact, is considered to be in the best position to
determine the issues presented.” Matter of Holy Spirit Ass’n v Tax Comm’n, 81
A.D.2d 64, 70-71 (1st Dep’t 1981). The Referee “see[s] and hear[s] the witnesses”
and so is best positioned to “resolv[e] matters of credibility.” Poster v. Poster, 4
A.D.3d 145, 145 (1st Dep’t 2004). His report “should be confirmed whenever its
findings are substantially supported by the record.” U.S. Trust Co. v. Olsen, 194
A.D.2d 481, 482 (1st Dep’t 1993). And all “reasonable inferences” drawn from
the evidence are to be sustained, Matter of Von Wiegen, 101 A.D.2d 627, 628 (3d
Dep’t 1984), even if competing ones are “no less likely and no more speculative,”
Clean Rental Servs., Inc. v. Karten, 146 A.D.2d 462, 463 (1st Dep’t 1989).
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Consistent with this longstanding jurisprudence according great deference to
Referees, the Appellate Division did not question any of Judge Levine’s factual
findings. To the contrary, the court cited Clines (XVII:A7394), which similarly
held that a Referee will be reversed only if his conclusions “could not have been
reached based upon any fair interpretation of the evidence.” 226 A.D.2d at 269.
Rather, the Appellate Division reversed Judge Levine’s Report “as a matter of law”
(XVII:A7388) and as legally “preclude[d]” (XVII:A7394). That was clear legal
error, because even assuming arguendo that the evidence was legally sufficient to
invalidate the gifts, it certainly did not legally preclude the contrary conclusion
reached by the trier of fact—Judge Levine. And, of course, unless Judge Levine’s
Report was legally precluded, the Appellate Division could not and would not have
reversed it, because that court cannot and does not simply “substitut[e] its own
view of the trial evidence.” Mogi, 2013 N.Y. Slip Op. 06604, at *2.
In short, however the issue is analyzed, the Appellate Division legally erred
by invalidating the gifts, and its decision must be reversed.
CONCLUSION
For the foregoing reasons, this Court should reverse the decision and order
of the Appellate Division, and order that the Surrogate’s Amended Decree be
modified to dismiss the Estate’s gift claim against the Attorneys.
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Respectfully Submitted,
By: ______________________
Michael A. Carvin, Esq.
Jacob M. Roth, Esq. (both of the
bar of the District of Columbia,
by permission of the Court)
JONES DAY
222 East 41st Street
New York, NY 10017
(212) 326-3939
macarvin@jonesday.com
Counsel for Defendants-Appellants
C. Daniel Chill, Elaine M. Reich,
and Steven Mallis
