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
RICHARD S. LAWRENCE and PETER A. VLACHOS, as Executors
of the Estate of Alice Lawrence, Deceased,
C. DANIEL CHILL, ELAINE M. REICH and STEVEN MALLIS,
RICHARD S. LAWRENCE, SUZANNE LAWRENCE DECHAMPLAIN
and MARTA JO LAWRENCE,
BRIEF FOR INTERVENOR-RESPONDENT
RICHARD S. LAWRENCE
To Be Argued By:
Norman A. Senior
Time Requested: 15 Minutes
GREENFIELD STEIN & SENIOR, LLP
600 Third Avenue
New York, New York 10016
Attorneys for Intervenor-Respondent
Richard S. Lawrence
Norman A. Senior
Angelo M. Grasso
Date Completed: December 27, 2013
TABLE OF CONTENTS
TABLE OF AUTHORITIES .......................................................................... ii, iii
PRELIMINARY STATEMENT ......................................................................... 1
STATEMENT OF QUESTIONS PRESENTED ................................................. 9
STATEMENT OF FACTS ................................................................................ 10
ARGUMENT ..................................................................................................... 25
POINT I GRAUBARD AND THE GRAUBARD
ATTORNEYS ENGAGED IN MISCONDUCT
WHILE REPRESENTING RICHARD ............................. 25
A. Graubard’s Inclusion of a Clause In the Modified
Retainer Expressly Designed to Limit Richard’s
Rights Was an Act of Disloyalty ........................................ 25
B. Graubard’s Failure to Disclose the Modified
Retainer ............................................................................... 28
C. Graubard’s Failure to Disclose the Gifts ............................ 31
POINT II BECAUSE OF GRAUBARD’S MISCONDUCT,
THE ONLY FEE IT WAS ENTITLED TO IS
THE ONE AWARDED BY THE APPELLATE
DIVISION ........................................................................... 33
CONCLUSION .................................................................................................. 35
TABLE OF AUTHORITIES
Brill v. Friends World College
133 A.D.2d 729, 520 N.Y.S.2d 160 (2nd Dep’t 1987) .................................... 34n
Diamond v. Oreamuno
24 N.Y.2d 494, 301 N.Y.S.2d 78 (1969) ......................................................... 34n
Doviak v. Finkelstein & Partners LLP
90 A.D.3d 696, 934 N.Y.S.2d 467 (2nd Dep’t 2011) ........................................ 33
Eadie v. Town Bd. of North Greenbush
7 N.Y.3d 306, 821 N.Y.S.2d 142 (2006) ......................................................... 25n
Feiger v. Iral Jewelry, Ltd.
41 N.Y.2d 928, 394 N.Y.S.2d 626 (1977) ....................................................... 34n
First Nat’l Bank of Cincinnati v. Pepper
454 F.2d 626 (2nd Cir. 1972) ............................................................................. 34
Lawrence v. Miller
48 A.D.3d 1, 853 N.Y.S.2d 1 (1st Dep’t 2007) ................................................. 21
Lawrence v. Miller
11 N.Y.3d 588, 873 N.Y.S.2d 517 (2008) ......................................................... 21
Matter of Clarke
12 N.Y.2d 183, 237 N.Y.S.2d 694 (1962) ....................................................... 34n
Matter of Cooperman
83 N.Y.2d 465, 611 N.Y.S.2d 465 (1994) ................................................. 27, 27n
Matter of Lawrence
106 A.D.3d 607, 965 N.Y.S.2d 495 (1st Dep’t May 23, 2013) ..................... 4, 25
Matter of Sherbrunt
134 A.D.2d 723, 520 N.Y.S.2d 885 (3rd Dep’t 1987) ...................................... 28
Matter of Winston
214 A.D.2d 677, 625 N.Y.S.2d 927 (2d Dep’t 1995) ........................................ 33
New York Times Co. v. City of New York Comm. on Human Rights
41 N.Y.2d 345, 393 N.Y.S.2d 312 (1977) ....................................................... 25n
Orendick v. Chiodo
272 A.D.2d 901, 707 N.Y.S.2d 574 (4th Dep’t 2000) ....................................... 34
Pessoni v. Rabkin
270 A.D.2d 732, 633 N.Y.S.2d 338 (2d Dep’t 1995) ........................................ 34
Quinn v. Walsh
18 A.D.3d 638, 795 N.Y.S.2d 647 (2d Dep’t 2005) .......................................... 33
Simpson Elec. Co. v. Leucadia, Inc.
72 N.Y.2d 450, 534 N.Y.S.2d 152 (1988) ....................................................... 25n
Yannitelli v. D. Yannitelli & Sons Constr. Corp.
247 A.D.2d 271, 668 N.Y.S.2d 613 (1st Dep’t 1998) ....................................... 33
Statutes and Regulations:
N.Y. CPLR § 1013 ............................................................................................. 21
N.Y. SCPA § 2110 ............................................................................................. 21
DR 1-102(a)(7) ................................................................................. 2, 22, 28, 28n
DR 5-101 ........................................................................................ 22, 28, 28n, 30
DR 5-104 ............................................................................................................ 22
DR 5-105 ............................................................................................................ 22
EC 5-1 .................................................................................................. 22, 28, 28n
EC 5-5 .................................................................................................................. 2
This proceeding concerns serious, repeated ethical lapses and
violations committed by Graubard Miller (“Graubard”) and three of its partners, C.
Daniel Chill (“Chill”), Elaine M. Reich (“Reich”) and Steven Mallis (“Mallis,”
together, “the Graubard Attorneys”), who accepted an “unprecedented” $5.05
million in gifts from its client, Alice Lawrence (“Mrs. Lawrence”), and acquired a
40% stake in the litigation between the Lawrences and the estate of Seymour Cohn
(“Cohn Estate”) without disclosing either to their joint client, Richard Lawrence
At a fifteen-day hearing before Referee Howard A. Levine
(“Referee”), it was proven that:
1. The Graubard Attorneys accepted $5.05 million in gifts
from Mrs. Lawrence, which they failed to disclose to
their co-clients, Richard and his sisters, Marta Jo
Lawrence (“Marta Jo”) and Suzanne De Champlain
(“Suzanne”)1, even though the gifts provided Graubard
with a motive to favor Mrs. Lawrence over the Children
because of the existence of a continuing conflict of
2. Chill solicited a $400,000 gift to Graubard from Mrs.
Lawrence, which was also not disclosed to Richard and
3. After receiving in excess of $22 million in hourly legal
fees over a 22-year period, Graubard and Mrs. Lawrence
entered into a new undisclosed retainer (the “Modified
1 Richard and his two sisters are sometimes referred to as the “Children.”
Retainer”) that gave Graubard a 40% stake in the
4. For the express purpose of ensuring that it could collect
its fee if Richard or his sisters objected, Graubard
inserted a provision in the Modified Retainer making it
binding upon Mrs. Lawrence’s successors and assigns.
At trial, the Graubard Attorneys admitted that they:
1. Did not consider Richard and Mrs. Lawrence to be
2. Deliberately concealed the existence of the gifts and the
Modified Retainer from Richard and his sisters; and
3. Purposely crafted the Modified Retainer to limit
Richard’s and his sisters’ ability to challenge it.
After a three-week hearing, the Referee found, inter alia, that:
− The Graubard Attorneys violated EC 5-5 by failing to
advise Mrs. Lawrence to seek advice from independent
counsel on the gifts. (Joint Appendix (“JA”), Vol. I, p.
− By accepting gifts of “unprecedented” magnitude and
failing to comply with EC 5-5, the Graubard Attorneys
may have violated DR 1-102(a)(7). (JA, Vol. I, p.
− Graubard engaged in a clear “act of disloyalty” to
Richard by making the Modified Retainer binding on
Mrs. Lawrence’s “heirs, executors, successors and
assigns.” (JA, Vol. I, p. A133a)
− The behavior of the Graubard Attorneys was “contrary to
the standards . . . the profession should uphold.” (JA,
Vol. I, p. A128a, n.12)
− The Modified Retainer was substantively
unconscionable. (JA, Vol. I, p. A187a)
− Chill and Mallis were not credible witnesses: (a) Chill’s
testimony that he advised Mrs. Lawrence to speak with
independent counsel concerning the gifts was
“incredible,” “inconsistent,” and “implausible”, as was
his testimony that he did not solicit the firm’s $400,000
gift; and (b) Mallis’ lengthy testimony about the
allegedly devastating effect of losing a summary
judgment motion was “contrived,” “patently erroneous,”
and without basis in fact. (JA, Vol. I p. A117a-119a,
Despite these findings, the Referee declined to hold Graubard or the
Graubard Attorneys accountable for their serious misconduct. He did not set aside
the $5.05 million in gifts and, based on a formula he derived, awarded Graubard
approximately $16 million in attorney’s fees for five months of what he
characterized as unexceptional work.
The two courts that have reviewed the Referee’s Report and the
underlying evidence have agreed with the Referee’s findings, but disagreed with
his legal conclusions. On the motions to confirm and modify the Referee’s Report,
the Surrogate set aside the gifts, finding there existed “a combination of dubious
circumstances that emit an odor of overreaching too potent to be ignored” and that
the Graubard Attorneys “played their cards too close to the vest to satisfy the
standard of strict forthrightness to which lawyers have long been held in relation to
their clients.” (JA, Vol. I, p. A80a-81a) The Appellate Division affirmed, finding
that the clandestine gifts should be set aside because the Graubard Attorneys
“failed to meet their burden of showing by clear and convincing evidence that the
widow gave the gifts willingly and knowingly.” Matter of Lawrence, 106 A.D.3d
607, 608-9, 965 N.Y.S.2d 495, 497 (1st Dep’t May 23, 2013).
Although the Surrogate affirmed the Referee’s report as to the nearly
$16 million in legal fees, the Appellate Division disagreed, and after finding the
Modified Retainer procedurally and substantively unconscionable, awarded
Graubard a fee based on its prior valid time charge agreement with Mrs. Lawrence.
106 A.D.3d at 609, 965 N.Y.S.2d at 497.
The Appellate Division’s holding was correct in all respects. The
additional finding of procedural unconscionability is amply supported by the
Graubard’s Misplaced Concern for the Demise of the Contingency Fee
It stretches credulity to contend, as Graubard does (GM Br., p. 3-8),
that if it is not awarded the $44 million it seeks for five months’ work, the
“disposition of every contingent fee case” would be put at risk. No other
contingency fee case in the past or in the future will likely involve the gargantuan
amount of fees sought under these circumstances. Nor will any future contingency
fee case -- so “vitally important to the civil justice system” (GM Br., p. 7) -- likely
involve an eve of trial fee renegotiation conducted by a lawyer who had received a
$2 million undisclosed “gift” from one of his four clients.
The “stunning” recovery in 1998 that Graubard claims justifies the
three gifts occurred after fifteen years of litigation for which Graubard had billed
and already received in excess of $8.4 million. The “victory” only resulted in the
Lawrences receiving some of the money to which they were already entitled.
The contentious and disparaging remarks concerning Mrs. Lawrence’s
conduct and reputation seek to divert the Court’s attention from the core issues in
this case -- the modified fee arrangement and the outsized secret gifts. Mrs.
Lawrence’s reputation for being “tough,” “sophisticated,” “astute,” “mean-
spirited,” etc., has nothing to do with an attorney’s fiduciary obligations to all of
his or her clients -- not just the one who pays the bills. They also have no bearing
upon the fact that Mrs. Lawrence clearly did not understand that Graubard, and not
she, would receive the “lion’s share” of any recovery under the Modified Retainer.
The fee award of nearly $1.6 million (plus interest) for five months’
of “unexceptional” work is in fact generous. A review of Graubard’s time records
(JA, Vol. X, p. A3177-3263) shows that Chill routinely billed Mrs. Lawrence for
work that was most unlikely to be performed by the senior partner in charge of the
litigation. For example, he billed Mrs. Lawrence 36.8 hours to prepare for a single
conference with the Referee; Mallis and Reich combined billed less than 16 hours
preparing for the same conference. (JA, Vol. X, p. A3180-3181, A3185-3186,
A3192-3193) In April 2005, Chill billed 111.9 hours for purportedly reviewing
and excerpting the deposition transcripts of five witnesses. Mallis, Reich and two
of Graubard’s associates - attorneys much more likely to be reviewing and
digesting depositions than the senior partner - billed significantly less time doing
substantially the same work in April and May 2005. (JA, Vol. X, p. A3217-3219,
As for Mrs. Lawrence’s failure to be deposed – in the end, Graubard
was not prejudiced, but Mrs. Lawrence’s estate and her children were. The estate
and Mrs. Lawrence’s children were required to waive the Dead Man’s Statute or
else have their pleadings dismissed. This enabled Messrs. Chill and Mallis and Ms.
Reich to testify without contradiction about their alleged discussions with Mrs.
Lawrence concerning the gifts and the renegotiated fee arrangement. Despite this
huge litigation advantage, the Referee rejected most of Mr. Chill’s testimony as
incredible (JA, Vol. I, p. A117a-119a) and found that Mr. Mallis’ conduct bordered
on perjury, his testimony having been contrived solely for trial (JA, Vol. I, p.
Graubard’s Disregard for Richard and His Sisters
In its 126-page brief, Graubard mentions Richard, also a client for
over two decades, only in passing, and ignores the fact that it had a separate,
hourly retainer agreement with him. This is consistent with Graubard’s routine
treatment of Richard and his sisters as afterthoughts. At trial, Chill testified that he
did not consider Mrs. Lawrence and her children to be “equal clients” and did not
owe Richard an undivided duty of loyalty. (JA, Vol. VI, p. A779-780)
Chill’s testimony is supported by Graubard’s conduct. The Graubard
Attorneys did not disclose to Richard that Mrs. Lawrence had given them over $5
million in gifts at a time when there was a conflict of interest between Mrs.
Lawrence and the Children concerning the computation of their respective
fractional share interests in the Estate. Graubard’s own ethics expert testified that
the gifts should have been disclosed to Richard because of the possibility that “the
gift was a quid pro quo to favor” Mrs. Lawrence at his expense. (JA, Vol. VII, p.
Seven years later, Graubard continued to disregard its ethical duty to
Richard by failing to advise him that Graubard and Mrs. Lawrence had executed
the eve of trial Modified Retainer, making the firm Richard’s business partner.
Worse, Graubard drafted the Modified Retainer to make it binding on Richard and
his siblings, Mrs. Lawrence’s “heirs, executors successors and assigns,” in order to
prevent them from challenging the agreement. (JA, Vol. VI, p. A705-706)
Graubard’s actions and inactions concerning the gifts and Modified
Retainer showed a blatant disregard for professional ethics and their fiduciary duty
to Richard. The Appellate Division’s decision should be affirmed and Graubard
should receive nothing more than its hourly time charges under the valid prior
STATEMENT OF QUESTIONS PRESENTED
1. Did the Appellate Division, First Department correctly set aside
the Modified Retainer?
2. After setting the Modified Retainer aside, did the Appellate
Division, First Department correctly revert to the 1983 retainer agreement to
calculate the compensation owed to Graubard?
STATEMENT OF FACTS
The following statement of facts is primarily directed to Graubard’s
breach of its ethical obligations to Richard during its 22-year representation of him.
Graubard’s Representation of Richard Lawrence.
Sylvan Lawrence (“Sylvan”) died on December 8, 1981, survived by
Mrs. Lawrence and the Children. Sylvan and his brother, Seymour Cohn
(“Seymour”), were partners in Sylvan Lawrence Co., a real estate empire that
owned properties in New York City worth hundreds of millions of dollars.
Seymour was appointed executor of Sylvan’s estate in 1982 and served until his
death in 2003. (JA, Vol. V, p. A134)
From 1983 through 2005, Graubard represented the Lawrences in
connection with litigation against Seymour in his capacity as executor of Sylvan’s
estate. Graubard entered into separate time charge retainer agreements with Mrs.
Lawrence, Richard and Marta Jo on or about August 4, 1983. (JA, Vol. X, p.
A2726; Vol. XVI, p. A6318, A6319) Although Graubard billed both Mrs.
Lawrence and Richard (JA, Vol. X, p. A3177-3293), by agreement within the
family, Mrs. Lawrence paid Graubard’s fees. (JA, Vol. VII, p. A1207) Through the
end of 2004, Mrs. Lawrence had paid Graubard over $22 million in legal fees and
disbursements. (JA, Vol. X, p. A2723-2725)
As a client of Graubard for over twenty years,2 documents were
routinely submitted on behalf of Richard, along with his mother and sisters. (See,
e.g., JA, Vol. XIII, p. A4715-4744, A4776-4917, A4922-4925, A4937-4941)
Graubard repeatedly represented to the Court that it was Richard’s counsel. For
example, in an April 1, 1998 letter to Judge Silverman, Reich wrote:
We, as attorneys, represent the children in
three of the captioned proceedings pursuant
to which the motion compel a fractional
interest was made - namely, the two
captioned accountings and the dissolution
proceeding. The children thus have
appeared in those proceedings by this firm,
as attorneys. (JA, Vol. XI, p. A3380-338)
Similarly, when Judge Levine became Special Referee, Chill informed
him that Graubard was “the attorneys for the four beneficiaries.” (JA, Vol. XI, p.
As its client, Graubard stated it had kept Richard abreast of the status
of the litigation, sent him status letters, and copied him on key letters to Mrs.
Lawrence. (See, e.g., JA, Vol. XI, p. A3382-3383, A3390-3392, A3398-3401,
2 Graubard’s representation of Richard ended in September 2005, when Graubard sued him
for tortious interference with contractual relations, a claim Graubard withdrew when Richard
moved for summary judgment. In granting Richard’s motion, the Referee found that the claim
was based on “nothing more than unsubstantiated allegations and speculation” because, by
Graubard’s own admission, the firm’s claim hinged on obtaining favorable testimony from Mrs.
Lawrence who had died two years earlier and was suing Graubard for the return of the gifts,
rescission of the Modified Retainer, and refund of all fees previously paid. (JA, Vol. XVII, p.
A3404, A3409-3410, A3411-3412, A3422, A3518, A3608, A3807-3809) Notably,
Graubard’s 2004 memorandum analyzing a proposed $60 million settlement offer
was addressed to Mrs. Lawrence, Richard, and his sisters. (JA, Vol. XI, p. A3625-
3642) Richard was also present for the follow-up meeting with Graubard
regarding the settlement offer. (JA, Vol. V, p. A158)
The Fractional Share Conflict.
Sylvan’s Will divides his residuary estate into two shares: one for
Mrs. Lawrence and one for the Children. (JA, Vol. I, p. A130a-131a, n. 13) The
proportion that each share received was determined by a calculation colloquially
called the “fractional share” or “shifting fraction.” As Mallis explained at trial:
Under Sylvan’s will there was – there is
what is known as a shifting fraction, which
means that expense of the estate,
administration expense, also legal fees,
executor expenses, were charged solely
against the three children’s share, the B
share. That meant every time there was
an...estate administrative expense, the
fraction of Alice...vis-à-vis her children’s
shifted, theirs went down, hers went up,
relative to each other. (JA, Vol. V, p. A91-
Because Mrs. Lawrence’s and the Children’s shares were inversely
proportional, Graubard had a clear conflict of interest when it calculated and set
the fraction (a process that began in 1997). Every percentage point that Mrs.
Lawrence gained came at the Children’s expense.3 (JA, Vol. V, p. A445; Vol. VI
A902-903) Cognizant of this conflict, and aware that Mrs. Lawrence was
simultaneously pressuring Richard and his sisters to “maintain a united front”
against Seymour, Graubard sent the Children multiple letters describing the
conflict and advising them to consider retaining separate counsel. (JA, Vol. XV, p.
A6055-6071; Vol. XVI, p. A6320-6325, A6331-6348) The Children repeatedly
waived the conflict and permitted Graubard to represent them in computing the
fractional share. Id. In connection with advising the Children of this conflict and
drafting the relevant disclosures and waivers, Chill and Reich sought advice from
Susan Brotman, Esq., outside counsel who they consulted on ethics issues. (JA,
Vol. VI, p. A721-722) Ms. Brotman provided them with sample language for the
conflicts letters, which they adopted. (JA, Vol. XVI, p. A6326-6330)
Despite the Fractional Share Conflict The Graubard Attorneys Fail
to Disclose the Gifts They Received from Mrs. Lawrence.
In November 1998, almost seventeen years after Sylvan’s death,
Seymour distributed nearly $125 million from Sylvan’s Estate: $84.3 million to
Mrs. Lawrence and $40.5 million to the Children. (JA, Vol. X, p. A2727) When
the distribution was made, the fractional share had not been set. (JA, Vol. XVI, p.
3 It is undisputed that Mrs. Lawrence wanted her share to be as large as possible. (JA, Vol.
VI, p. A613)
In December 1998, Mrs. Lawrence made $5.05 million gifts to the
Graubard Attorneys: $2 million to Chill, $1.55 million to Reich, and $1.5 million
to Mallis. In 1999, she paid over $2.7 million in gift tax on the gifts. (JA, Vol.
XVI, p. A6161-6165) The only witnesses to the conversation that preceded the
gifts were Chill and Mrs. Lawrence. At trial, the Referee found Chill’s unrebutted
testimony about the gifts “simply implausible in many respects and demonstrably
inconsistent.” (JA, Vol. I, p. A117a)
According to Chill, Mrs. Lawrence invited him to her home and
advised him that she wished to make “substantial” gifts to him, Reich and Mallis.
(JA, Vol. VI, p. A673) He claims that in response, he told her that she should
make the gifts to the firm, but that Mrs. Lawrence refused because she did not like
the firm. (JA, Vol. VI, p. A674) Although Chill testified that he told Mrs.
Lawrence that since they “are in some kind of transaction that puts us at arms’
length,” she should consult with independent counsel, (JA, Vol. VI, p. A675) the
Referee found “implausible [Chill’s] claim that he instinctively knew during his
visit with Mrs. Lawrence...that it was his duty to advise her to consult with
independent counsel.” (JA, Vol. VI, p. A117a) Chill also testified that at the
conclusion of their meeting, Mrs. Lawrence instructed him not to tell Richard
about the gifts. (JA, Vol. VI, p. A677)
Several days later Chill received an envelope containing three
envelopes addressed to him, Reich and Mallis, and a note reading:
You were kind to suggest you distribute the
enclosed envelopes for me. Thank you
again and yet again! From all the
Alice. (JA, Vol. VI, p. A681-682; Vol. XV,
p. A6023) (emphasis in original)
The envelope addressed to Chill contained a check for $2 million and
a note from Mrs. Lawrence. (JA, Vol. VI, p. A682-683; Vol. XV, p. A6024) Chill
then distributed the remaining envelopes to Reich and Mallis with a strict
admonition: “Mrs. Lawrence attached one condition...not to reveal to anyone the
giving of the gifts.” (JA, Vol. VI, p. A684, A901) Reich’s and Mallis’ envelopes
contained checks for $1.55 million and $1.5 million, respectively, together with
handwritten notes. None of the notes told the recipients not to disclose the gifts.
(JA, Vol. XV, p. A6027-6031) Jay Wallberg, Mrs. Lawrence’s accountant, testified
that Reich later showed him the note she received and said “this is the note we had
Alice write to us.” (JA, Vol. VIII, p. A1932)
It is undisputed that all three Graubard Attorneys kept these
“unprecedented” gifts a secret from Richard, Marta Jo and Suzanne, as well as
their partners. (JA, Vol. VII, p. A1311) Reich, who characterized the gift as “life
altering,” did not even tell her husband, an acting Supreme Court justice. (JA, Vol.
VI, p. A895, A1028-1029) It is also undisputed that neither Reich nor Mallis took
any steps to confirm Mrs. Lawrence’s purported instructions to keep the gifts a
secret. All three attorneys testified that they perceived no ethical issue with
receiving clandestine seven-figure gifts from a client and hiding it from their
partners, and co-clients who had a conflict of interest with the donor client, and
conceded they did not consult an ethics expert (such as Ms. Brotman, with whom
Chill and Reich were in touch with concerning the fractional share issue). (JA,
Vol. V, p. A369-371, A457 (Mallis); Vol. VI, p. A719-721 (Chill); Vol. VI, p.
Chill Solicits a $400,000 Bonus for Graubard.
On or about December 7, 1998, Chill received a check from Mrs.
Lawrence made out to Graubard for $400,000, accompanied by a handwritten note:
I’m not sure just what I should be thanking
the firm for (keeping me on as a client?)
You write my thank yous.
A. (JA, Vol. VI, p. A689; Vol. XVI, p.
A6349-6350) (emphasis in original)
Chill testified that while he was surprised to receive the check, he did
not contact Mrs. Lawrence to ask why she sent a six-figure bonus to a firm she did
4 Richard, his sisters, and the Estate contended below that these violations of the Code of
Professional Responsibility mandated disgorgement of all fees Graubard received from the date
of the gifts. While Richard believes that this relief is appropriate, he concedes that this issue is
unpreserved for appeal and will not be argued.
not like. (JA, Vol. VI, p. A769-770) The Referee concluded that Chill solicited the
bonus. (JA, Vol. I, p. A119a)
95 Wall Street and The Modified Retainer.
By the end of 2004, Mrs. Lawrence had paid over $22 million to
Graubard, including in excess of $1.9 million in 2002, $2.2 million in 2003, and
nearly $2.5 million in 2004. (JA, Vol. X, p. A2723-2725) Mrs. Lawrence
repeatedly complained to Graubard (mainly Chill) about these fees. (JA, Vol. VI,
On December 16, 2004, the Referee issued a decision dismissing the
“95 Wall Street” objection to Seymour’s accounting. (JA, Vol. XIII, p. A4636-
4661) Mallis and Chill described the decision as a crippling blow, which had a
cascading effect “on [Mrs. Lawrence’s] ability to succeed on other claims.” (JA,
Vol. VI, p. A697) The Referee, however, expressly found that Graubard’s views
as to the impact of his decision on the balance of Mrs. Lawrence’s objections was
“patently erroneous” and “contrived.” (JA, Vol. I, p. A173a, A179a)
Nevertheless, while Mrs. Lawrence erroneously believed that the
upside of the litigation was then only “a few mil” because of what Graubard told
her about the 95 Wall Street decision, she and Graubard renegotiated the fee
− Chill originally proposed that Graubard receive a 50%
interest. Mrs. Lawrence rejected this, stating that she
would always be the “senior partner.” (JA, Vol. VI, p.
− Mrs. Lawrence proposed that Graubard receive 30%,
which she voluntarily raised to 40%, under the misguided
impression that giving Graubard a higher percentage
would make the firm “work harder.” (JA, Vol. VI, p.
− Mrs. Lawrence did not speak with independent counsel
about renegotiating the fee, and there are no
contemporaneous writings indicating that anyone at
Graubard advised her to seek independent counsel. (JA,
Vol. VI, p. A831 (Chill); Vol. VII, p. A1297 (Reich);
Vol. I, p. A119a (Referee))
− Less than a year prior to the revision, a co-executor of
Seymour’s estate proposed settling all claims between
Seymour’s estate and the Lawrence family for $60
million. (JA, Vol. V, p. A144) Although it was rejected,
it was never withdrawn, and remained on the table in
2005.5 (JA, Vol. VIII, p. A1880)
The Terms of the Modified Retainer
On or about January 19, 2005, Mrs. Lawrence executed the Modified
Retainer6 (JA, Vol. X, p. A2985-2986), which provides:
1. Graubard would receive hourly fees for 2005 with a cap
of $1.2 million ($300,000 per quarter) plus all
5 The $60 million offer remaining on the table is consistent with the Referee’s finding that
the 95 Wall Street decision did not have a catastrophic effect on the Lawrences’ remaining
objections to Seymour’s accounting. (JA, Vol. I, p. A173a-179a)
6 The Modified Retainer only modified the agreement between Mrs. Lawrence and
Graubard. The firm’s retainers with Richard and Marta Jo remained in full force and effect,
meaning that even if the Lawrences recovered nothing from the Cohn Estate, Graubard had the
ability to collect its hourly time charges from Richard or Marta Jo, truly reducing its risk to zero.
2. Graubard would receive 40% of any recovery, less any
hourly fees paid in 2005.
3. Graubard’s fees would be paid from Mrs. Lawrence’s
share of the recovery but would be calculated based upon
the entire recovery.
4. In the event the amount due to Graubard was less than
the firm’s time charges, Graubard and Mrs. Lawrence
were to “arrive at a fair resolution of the shortfall to the
Graubard firm,” essentially reducing the Graubard’s real
risk to zero.
5. If anything happened to Mrs. Lawrence, the Modified
Retainer was made binding upon her “heirs, executors,
successors and assigns.” (“Paragraph 5”)
The Epps Documents
Four months after the Modified Retainer was executed, the litigation
settled for approximately $106 million, because of “smoking gun” documents (the
“Epps Documents”) produced in response to earlier served document demands.
These documents demonstrated that Seymour had engaged in extensive self-
dealing while administering Sylvan’s estate. (JA, Vol. X, p. A2998-3138)
The importance of the Epps Documents cannot be overstated. Mallis
described them as “explosive,” “a litigator’s dream,” and the litigation’s “turning
point.” (JA, Vol. V, p. A499-502) Reich testified that the documents turned the
prospects of the litigation from “bleak to rosy.” (JA, Vol. VI, p. A1071-1072) Even
the Referee concluded that the Epps Documents were “critical” and had “grave
implications.” (JA, Vol. I, p. A186a)
Not surprisingly, after discovery of the Epps Documents, Seymour’s
Estate offered $100 million to settle all of the Lawrences’ claims against Seymour.
Graubard accepted this offer without conducting any meaningful negotiations to
improve it.7 (JA, Vol. V, p. A273-274)
Commencement of the Fee Dispute Litigation
On August 9, 2005, Graubard commenced this proceeding, alleging
causes of action against Richard individually for tortious interference with
contractual relations, and against Richard in his capacity as successor executor of
Sylvan’s Estate. (JA, Vol. I, p. A308a-321a) Richard served his answer on or about
August 19, 2005 (JA, Vol. I, p. A322a-329a), and the matter was referred to the
Referee to hear and report. (JA, Vol. II, p. A530a) Mrs. Lawrence subsequently
commenced an action in Supreme Court for, inter alia, rescission of the Modified
Retainer and the return of the gifts and all legal fees paid to Graubard. That action
was removed to Surrogate’s Court and also referred to the Referee. (JA, Vol. II, p.
In late 2005, Richard and Mrs. Lawrence made separate motions to
dismiss, claiming that the Modified Retainer was unconscionable and that the
7 Mallis testified that he advised the Cohn Estate that the matter would not settle for less
than $100 million. Unsurprisingly, the Cohn Estate’s next offer was $100 million, which
Graubard accepted with some minor enhancements. (JA, Vol. V, p. A267-268, A273-274) There
is no dispute that Graubard made no real effort to increase the final dollar figure.
Graubard Attorneys had violated various Disciplinary Rules and Ethical
Considerations. Their motions were denied by the Referee (JA, Vol. II, p. A444a-
486a), whose report was confirmed by the Surrogate (JA, Vol. II, p. A487a-488a).
The Surrogate’s Order was affirmed by the Appellate Division with dissent
(Lawrence v. Miller, 48 A.D.3d 1, 853 N.Y.S.2d 1 (1st Dep’t 2007)), and was
affirmed by this Court to allow for the development of a factual record (Lawrence
v. Miller, 11 N.Y.3d 588, 873 N.Y.S.2d 517 (2008)).
Thereafter, discovery ensued. Graubard eventually moved to
withdraw its SCPA § 2110 and tortious interference claims, alleging that the
former was “largely redundant”8 with the claims against Mrs. Lawrence and the
latter could not be proved. In separate reports, the Referee granted Graubard’s
motions. (JA, Vol. XVII, p. A7122-7131 (§ 2110 claim); A7132-7142 (tortious
On the eve of trial, Graubard moved to exclude the Children from
participating in the hearing. Richard and his sisters moved to permissively
intervene pursuant to CPLR 1013 (JA, Vol. XVII, p. A7145-7147 (Richard);
A7148-7150 (Marta Jo and Suzanne)), and the Referee granted their motions. (JA,
Vol. V, p. A6-8) The Referee then held a fifteen-day hearing. In post-trial briefs,
8 Richard opposed the withdrawal of the SCPA §2110 claim unless conditions were
imposed because it was believed that Graubard’s real motive in seeking this withdrawal was
because it did not want the Court to review it and Chill’s time records, which the Court must do
in an SCPA §2110 proceeding.
Richard contended that because Graubard violated four Disciplinary Rules (DR 5-
101, 5-104, 5-105, and 1-102(A)(7)) while representing him, the Modified Retainer
should be set aside and Graubard should not be awarded any additional fees.
The Referee’s Report.
On August 27, 2010, the Referee issued his report, upholding the
gifts, finding that the Modified Retainer was substantively but not procedurally
unconscionable and awarding Graubard almost $16 million in fees under a formula
that he created. With respect to Richard’s claims that Graubard committed
numerous violations of the Code of Professional Responsibility9, the Referee found
that the insertion of Paragraph 5 into the Modified Retainer was “an act of
disloyalty” that “could provide the basis for charging violations of DR 5-101, DR
1-102(a)(7) and EC 5-1;” (JA, Vol. I, p. A132a-133a). The Referee further ruled
that Graubard did not violate DR 5-101 by failing to disclose the gifts or Modified
Retainer, and also did not violate DR 5-104 or 5-105. Despite finding that
Graubard had violated two Disciplinary Rules and one Ethical Consideration, the
Referee declined to award Richard any relief.
9 The Referee rejected Graubard’s argument that Richard lacked standing to present a
claim, finding that Richard could conform his pleadings to the proof, and that Graubard could
not claim surprise or prejudice since all of Richard’s claims were argued during trial. (JA, Vol.
I, p. A128a-129a)
The Surrogate Voids the Gifts But Affirms the Fee Award.
Richard moved to modify or reject that portion of the Referee’s
Report that found that Graubard and the Graubard Attorneys did not violate the
Code of Professional Responsibility with respect to Richard. On September 8,
2011, the Surrogate issued her Decision and Order, in which she ordered the
Graubard Attorneys to repay the $5.05 million in gifts, but confirmed the
remainder of the Referee’s Report. (JA, Vol. I, p. A68a-86a) With respect to
Richard, the Court confirmed the portion of the Referee’s Report that granted
Richard’s motion to intervene. (JA, Vol. I, p. A71a-74a) However, the Court did
not revisit the question of which Disciplinary Rules Graubard and the Graubard
Attorneys violated and declined to grant Richard any relief for the two violations
of the Code of Professional Responsibility. (JA, Vol. I, p. A85a-86a)
The Appellate Division Sets Aside the Modified Retainer.
On appeal, the Appellate Division set aside the Modified Retainer,
finding it both procedurally and substantively unconscionable. (JA, Vol. XVII, p.
A7394-7396) Rather than use the Referee’s methodology for computing
Graubard’s fees, the Appellate Division looked to the prior retainer and awarded
Graubard fees based on hourly time charges. (JA, Vol. XVII, p. A7396) The
Appellate Division also affirmed the Surrogate’s decision to void the gifts but
declined to reach the merits of Richard’s arguments on appeal, deeming them
“academic.” (JA, Vol. XVII, p. A7397)
Graubard moved before the Appellate Division for leave to appeal to
this Court and its motion was granted. (JA, Vol. XVII, p. A7390) Richard
opposes Graubard’s appeal and asks this Court to affirm the First Department’s
Decision and Order.
Richard is mindful of the Appellate Division’s statement that whether
the Children were permitted to intervene in this proceeding was “academic and
need not be addressed,” along with its dicta that if it were to reach the merits of the
Children’s claims, it “would find them without merit.” 106 A.D.3d at 610, 965
N.Y.S.2d at 498. The arguments raised below are made based solely on the
Referee’s findings of misconduct which remain undisturbed.10
GRAUBARD AND THE GRAUBARD ATTORNEYS ENGAGED
IN MISCONDUCT WHILE REPRESENTING RICHARD
A. Graubard’s Inclusion of a Clause In the Modified Retainer Expressly
Designed to Limit Richard’s Rights Was an Act of Disloyalty.
It is undisputed that Graubard took affirmative steps to limit Richard’s
rights and ensure that it was paid under the Modified Retainer. At trial, Chill
testified that this provision was included to ensure that Richard could not thwart
Graubard’s large payday:
10 The fact that the Appellate Division did not set aside the Modified Retainer because of
Graubard’s ethical violations vis-à-vis Richard is irrelevant, as this Court has the inherent
authority to affirm a decision below on grounds other than those relied by the Appellate
Division. See Eadie v. Town Bd. of North Greenbush, 7 N.Y.3d 306, 821 N.Y.S.2d 142 (2006)
[affirming appellate division while disagreeing with one of its bases for the appellate division’s
decision]; Simpson Elec. Corp. v. Leucadia, Inc., 72 N.Y.2d 450, 534 N.Y.S.2d 152 (1988)
[affirming Appellate Division decision “for different reasons”]; New York Times Co. v. City of
New York Comm. on Human Rights, 41 N.Y.2d 345, 393 N.Y.S.2d 312 (1977) [“we would
affirm the order of the Appellate Division but on other grounds”].
Once again, the specter of Richard
Lawrence appeared in my mind and I was –
I was heedful of Mrs. Lawrence’s
admonition that be careful of Richard
Lawrence’s possible interference in the
matter and if I die – if I’m alive you don’t
need to worry about it, but if I die and this
estate thing is not over, you will have to be
protected from Richard Lawrence.
And I discussed this with Miss Reich and
[this provision] came about as a result of
that discussion. That’s why it is heirs,
executors, successors and assigns. It
addressed that potential problem. (JA, Vol.
VI, p. A705-706)
Chill further testified that whether you owe a client undivided loyalty
“depends” on unidentifiable circumstances:
Q You have two clients to whom you
owe equal fiduciary obligation as an
attorney, correct; Mrs. Lawrence and
her son, isn't that right?
A Based on the assumption that I don't
believe is correct.
Q What assumption?
A Based on an assumption that they
were equal clients.
* * *
Q Aren't all clients owed the highest
degree of fiduciary duty by an
A Depending on the nature or the
circumstances, the particular duty
owed. Depends on the circumstances.
No general rule as to the measure and
degree of what you have to tell your
client by way of a fiduciary
relationship on any given situation.
(JA, Vol. VI, A779-780)
This was clear error as ethics expert Professor Stephen Gillers
The law firm is now in the position of
negotiating a contract that purports to
withdraw that right, that purports to make
the agreement binding on their own clients
which the client doesn’t know. (JA, Vol.
The Referee agreed with Professor Gillers, finding that “in all
dealings with clients, the attorney must act with fairness, honesty and undivided
loyalty, which includes ‘safeguarding client property and honoring the clients’
interests over the lawyer’s (Matter of Cooperman, 83 N.Y.2d 465, 472 (1994)11).”
(JA, Vol. I, p. A132a) The Referee further found that the sole reason Graubard
inserted Paragraph 5 was “to secure its own financial interests at the expense of the
Lawrence Children’s interests.” Id. The Referee concluded that Graubard’s
11 In Cooperman, this Court noted the importance of the fiduciary duty an attorney has with
a client, holding, “This unique fiduciary reliance, stemming from people hiring attorneys to
exercise professional judgment on a client’s behalf–“giving counsel”–is imbued with ultimate
trust and confidence. The attorney’s obligations, therefore, transcend those prevailing in the
commercial marketplace. The duty to deal fairly, honestly and with undivided loyalty
superimposes onto the attorney-client relationship a set of special and unique duties, including
maintaining confidentiality, avoiding conflicts of interest, operating competently, safe-guarding
client property and honoring the clients’ interests over the lawyer’s.” 83 N.Y.2d at 472, 611
N.Y.S.2d at 467 (internal citations omitted)
insertion of Paragraph 5 was “an act of disloyalty” that “could provide the basis for
charging violations of DR 5-10112, DR 1-102(a)(7)13 and EC 5-114.” (JA, Vol. I, p.
A132a-133a) See Matter of Sherbunt, 134 A.D.2d 723, 725, 520 N.Y.S.2d 885,
888 (3d Dep’t 1987) (“[w]hile respondent's acceptance of the gift and loan was not
itself misconduct, the circumstances of the acceptance clearly adversely reflected
on respondent's fitness to practice law by presenting the appearance of impropriety.
The charging of excessive fees further adds to his aura of a betrayal of a client's
B. Graubard’s Failure to Disclose the Modified Retainer.
The Referee further noted that Graubard acted “behind the Lawrence
Children’s backs, apparently never intending to disclose the Revised Retainer
Agreement during litigation with Seymour and his estate.” (JA, Vol. I, p. A132a-
133a) This was clearly improper, as Richard had a right to know that another party
12 DR 5-101 provides that “A lawyer shall not accept or continue employment if the
exercise of professional judgment on behalf of the client will be or reasonably may be affected
by the lawyer's own financial, business, property, or personal interests, unless a disinterested
lawyer would believe that the representation of the client will not be adversely affected thereby
and the client consents to the representation after full disclosure of the implications of the
13 DR 1-102(A)(7) provides that “a lawyer or law firm shall not...engage in any other
conduct that adversely reflects on the lawyer’s fitness as a lawyer.”
14 EC 5-1 provides that “the professional judgment of a lawyer should be exercised, within
the bounds of the law, solely for the benefit of the client and free of compromising influences
and loyalties. Neither the lawyer’s personal interests, the interests of other clients, nor the
desires of third persons should be permitted to dilute the lawyer’s loyalty to the client.”
had acquired a majority economic interest in the outcome of the litigation. At trial,
Professor Gillers testified:
A [The Modified Retainer] also
implicates the children because the
children gave the waiver they gave
when the person calling the shots, and
the only other person in the interest in
the corpus was Alice, but now the
children have to know that there is
another economic interest in the
division between the children and
Alice. And that other economic
interest has an interest in not
diminishing Alice’s share.
Therefore...the children have to know
the advice Alice is getting is not from
a lawyer with no economic interest,
but a lawyer with an economic
interest and yet it’s an objectivity test
and that might affect the children’s
decision about whether to revisit the
waiver. Because you can always
withdraw a waiver within certain
The children might say, well, you
know, we’re not so comfortable any
longer not being at the table through
our own lawyer because it’s not only
just our mother there. So the children,
they might not say that. We don’t
know. But they have a right to make
Q Did the law firm have an ethical
obligation to inform the children
about the revised fee arrangement
when it was made?
A An ethical obligation to inform the
children and comply with the same
DR 5-101 protocol vis-à-vis the
children [and] also Alice.
Q Does the law firm have an obligation
to obtain a conflict waiver from the
children regarding the new retainer?
A Yes. Because regarding the change in
modifications had by the new retainer
is how I put it...The children gave
their consent in ’97 based on certain
facts on the ground, consents to
conflicts or to forgo independent
counsel or to be pro se, whatever the
children did [has] to be fully
informed. The law firm went out and
hired a person versed in this world
and secured a consent based on
certain facts. Now, there is a new fact
and maybe the children wish that fact
to influence their judgment. (JA, Vol.
IX, p. A2269-2271)
Throughout the litigation, Richard remained Graubard’s client and
was entitled to make his own decisions as facts and circumstances changed. If
Richard knew that Graubard had secretly bargained for and received the largest
financial stake in the litigation he may well have assumed an active decision-
making role, or may have explored the issues together with his siblings and/or
engaged other counsel. In particular, the hybrid contingency fee arrangement might
have caused him to examine more critically the firm’s opinion on the advisability
of accepting the Cohn estate’s initial $100 million settlement offer, which the firm
barely negotiated. (JA, Vol. V, p. A273-274) At the time of the settlement,
Richard did not know that there was more than $40 million in it for Graubard.
This lack of knowledge and inability to objectively evaluate the offer was solely
because Graubard failed to disclose the existence of the Modified Retainer.
C. Graubard’s Failure to Disclose the Gifts.
By failing to disclose the huge gifts, the Graubard Attorneys
deliberately withheld information that was pertinent to Richard’s decision to have
Graubard continue to represent him while the fraction was being calculated.
Professor Gillers testified that as Graubard’s clients, Richard and his sisters:
have a right to make that decision. When
we deal with these issues, we’re not saying
bad things will happen, but respecting the
client’s autonomy and so the non-donor
client has a right to know about the sizeable
There is a duty to keep the client informed
about important facts in the professional
relationship. And even if the lawyer thinks,
well, it won’t make any difference, that’s
not the lawyer’s decision. (JA, Vol. IX, p.
Even Graubard’s ethics expert testified that Graubard was ethically
obligated to disclose the clandestine gifts to Richard and his sisters:
Q Don’t the lawyers have an obligation
to inform the children who are also
their clients about these large gifts?
A It would really depend on the
circumstances here. But the children,
given the conflict, should generally be
aware of the fee arrangement between
the parent where there is a conflict
with the children.
Q So the children should be aware of the
fee arrangement with the parent,
A Right. The fact that a gift was being
given and so forth. Anything that
would potentially cause–where there
was this conflict, the lawyers for the
parent. And the concern I would have
on a go-forward basis is, if the gift
was a quid pro quo to favor [the]
parents over the children in this
conflict. (JA, Vol. VII, p. A1434-
If Richard knew about the enormous gifts Mrs. Lawrence made to the
Graubard Attorneys, he may well have decided to retain separate counsel during
the time period when the conflicting fraction was being calculated. Graubard made
this impossible by hiding the existence of these gifts from Richard.
BECAUSE OF GRAUBARD’S MISCONDUCT, THE
ONLY FEE IT WAS ENTITLED TO WAS THE ONE
AWARDED BY THE APPELLATE DIVISION
Although the Appellate Division was correct in setting aside the
Modified Retainer as procedurally and substantively unconscionable, Graubard’s
misconduct also warrants setting aside the Modified Retainer.15
In Quinn v. Walsh, 18 A.D.3d 638, 795 N.Y.S.2d 647 (2d Dep’t
2005), the Second Department stated the general rule that “an attorney who
engages in misconduct by violating the Disciplinary Rules is not entitled to legal
fees for any services rendered.” 18 A.D.3d at 638, 795 N.Y.S.2d at 648 quoting
Matter of Winston, 214 A.D.2d 677, 625 N.Y.S.2d 927 (2d Dep’t 1995). This rule
has been repeatedly reinforced by the Appellate Division:
− Yannitelli v. D. Yannitelli & Sons Constr. Corp., 247
A.D.2d 271, 272, 668 N.Y.S.2d 613, 613 (1st Dep’t
1998) held that when the attorney has committed
“numerous violations of the Code of Professional
Responsibility...[he] has, as a result, forfeited any
entitlement to fees.”
− In Doviak v. Finkelstein & Partners, LLP, 90 A.D.3d
696, 699, 934 N.Y.S.2d 467, 470 (2d Dep’t 2011), the
Second Department reaffirmed that “an attorney who
violates a disciplinary rule may be discharged for cause
and is not entitled to any fees for services rendered.”
15 Richard contended below that these violations should have resulted in Graubard
forfeiting all legal fees Graubard received since the gifts were made; however, he concedes that
this argument has not been preserved for this appeal.
− Orendick v. Chiodo, 272 A.D.2d 901, 902, 707 N.Y.S.2d
574, 575 (4th Dep’t 2000), held that “an attorney who is
discharged for cause is not entitled to a fee,” and further
provided that misconduct that occurs before the discharge
but is not discovered until later “may serve as a basis for
− Pessoni v. Rabkin, 220 A.D.2d 732, 732, 633 N.Y.S.2d
338, 338 (2d Dep’t 1995) held that it is “well settled” that
attorneys who violate Disciplinary Rules “[are] not
entitled to legal fees for any services rendered.”
− The Second Circuit held in First Nat’l Bank of Cincinnati
v. Pepper, 454 F.2d 626 (2d Cir. 1972) that “an attorney
discharged for cause or guilty of professional misconduct
in the handling of his client’s affairs has no right to
payment of fees.” 454 F.2d at 633.
Graubard’s drafting of Paragraph 5 in order to limit Richard’s rights
under the Modified Retainer, coupled with its non-disclosure of it to Richard,
clearly warrant setting the agreement aside.17
16 Accord Brill v. Friends World College, 133 A.D.2d 729, 730, 520 N.Y.S.2d 160, 161 (2d
17 Whether Richard suffered actual damages is irrelevant, as the rule is prophylactic in
nature. As this Court noted in Diamond v. Oreamuno, 24 N.Y.2d 494, 498, 301 N.Y.S.2d 78, 81
(1969), proof of damages is dispensed with in a breach of fiduciary claim since “the function of
such an action, unlike an ordinary tort or contract case, is not merely to compensate the plaintiff
for wrongs committed by the defendant but…to prevent them.” 24 N.Y.2d at 498, 301 N.Y.S.2d
at 81; see also Matter of Clarke, 12 N.Y.2d 183, 188, 237 N.Y.S.2d 694, 697(1962); Feiger v.
Iral Jewelry, Ltd., 41 N.Y.2d 928, 929, 394 N.Y.S.2d 626, 626 (1977).
For the foregoing reasons, this Court should affirm the May 23, 2013
decision of the First Department and award to Richard such other and further relief
which as to the Court seems just, equitable and proper.
Dated: New York, New York
December 23, 2013
GREENFIELD STEIN & SENIOR, LLP
Norman A. Senior
Attorneys for Intervenor-Appellant-
Cross-Respondent Richard Lawrence
600 Third Avenue
New York, NY 10016
Angelo M. Grasso