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2nd Circuit Upholds Denial of Fees to Ex-Lawyer in Malpractice Suit
New York Law Journal
January 07, 2009
A federal judge acted within his authority when he denied all fees to a lawyer who won a $2.4 million medical malpractice case but who failed to investigate the future needs of a child disabled at birth and overcharged his client, a federal appeals court has ruled.
The 2nd U.S. Circuit Court of Appeals on Monday upheld the discretion of Eastern District Judge Edward Korman to refuse Steven F. Goldman's application for $388,000 in fees.
Arnold E. DiJoseph represented Goldman before Judge Korman and on his appeal.
"I find it very disturbing that an attorney who obtained damages of $2.4 million versus Martin Clearwater & Bell, one of the top malpractice defense firms in the state of New York, right after examinations before trial, isn't getting a penny," DiJoseph said. "Nobody is even arguing that the result he obtained wasn't satisfactory. He isn't getting any fees because he made a mistake and that somehow got transformed into how he was trying to steal $20,000 from a brain-damaged baby."
Judges Rosemary Pooler and Peter Hall, and, sitting by designation, Eastern District Judge David Trager, rejected Goldman's appeal in Chen v. Mt. Sinai-NYU Medical Center Health Systems, 06-1302.
In a per curiam opinion, the panel said it was laying out the facts in more detail than it normally would because Goldman's case was "instructive with respect to the nature of the conduct that may merit the denial" of fees.
In 2003, Zuhua Chen signed a medical malpractice retainer with Goldman to represent her and her infant son, David, who suffered severe brain damage and other medical problems at birth that will require ongoing supervision and treatment for the rest of his life.
Goldman obtained a settlement with the Mt. Sinai-NYU Medical Center Health Systems, NYU Downtown Hospital and the doctors involved. He then filed a stipulation of settlement and infant compromise order directing that he be paid $408,000 in fees and $20,000 in expenses, and that Chen be paid $250,000 for her loss of services claim, and $1.7 million as trustee for her son's special needs trust.
But Korman said he was unable to analyze the reasonableness of the settlement because Goldman failed to provide documentation for his fees and for David's current medical condition and a projection of his expenses for future medical care.
Saying the attorney's information was "totally unhelpful," the judge appointed a special master, attorney Steven North, who was told by Goldman that he had applied the sliding scale fee system set forth in New York Judiciary Law §474-a for medical malpractice compensation.
When North inquired as to the fee, Goldman claimed he had miscalculated it under the sliding scale, and it was actually $388,000.
North also reported to the judge that Goldman, in his initial retainer in the case, "provided for a sliding scale legal fee in excess of the statutory maximum and additionally contained an agreement of doubtful propriety that the client would consent to a one-third fee if the case 'goes to trial.'"
North also said Goldman failed to provide the needed medical records to allow him to assess the child's needs going forward.
A frustrated Korman said in February 2005 that he had "never had a case in which the presentation of an infant's compromise has been so poorly presented by plaintiff's counsel" and decided to retain his own medical expert. One month later, he appointed a guardian ad litem for David.
Meanwhile, on April 12, 2005, Goldman resigned from the bar during a disciplinary investigation unrelated to the matter before Korman [In re Goldman, 17 AD 3d 64 (1st Dept. 2005)].
Goldman acknowledged in the disciplinary proceeding that he was under investigation for complaints that between Dec. 17, 2001, and Jan. 16, 2002, he had used settlement funds received in four cases for his own purposes before paying the clients and that he had failed to retain full records for three separate trust accounts.
After his resignation, Goldman continued to press his fee request in the Chen case. At a December 2005 hearing, Korman called the application and compromise order "totally incompetent."
The judge said he had "seen lawyers who are small time practitioners who settle slip and fall cases put together an infant's compromise that is 10 times or 100 times better than this."
He also concluded that the fee overcharge was deliberate and that Goldman had committed misconduct. Korman denied the fee application in 2006.
At the 2nd Circuit, Goldman argued that it would have made no sense to jeopardize a large fee award for an extra $20,000 and that he had corrected the mistake.
In its opinion Monday, the circuit said, "The facts here present a close case."
"Goldman's counsel argues that the excessive fee request was the result of Goldman calculating his fee according to the scale set forth in §474-a and then mistakenly adding the total for expenses to that sum," the court said. "Given that Goldman's initial fee request exceeded the maximum statutory amount by $20,000, the same amount he requested in expenses, this explanation is plausible."
However, the court said, Korman's conclusion also was supported by the record, including Goldman's representation at the December 2005 hearing that a typographical error was responsible for the excessive request.
The record "demonstrates that the fee discrepancy and Goldman's inability to explain it were a sound basis for the district court's determination that Goldman had committed misconduct in this case," the circuit said.
Goldman also argued in his appeal that the judge had let his resignation from the bar influence his decision, but the circuit said "nothing in the district court's orders in this case suggests that it considered that resignation -- or the circumstances surrounding it -- in deciding to deny Goldman's fee application."
The circuit noted that Goldman provided no real assistance to Korman in his effort to determine whether the settlement was reasonable.
"Equally disturbing, the record suggests that Goldman himself had made only limited inquiries into David's condition and the nature and extent of David's future medical needs," the panel said.
Curtis Mechling and Sandra J. Rampersaud of Stroock & Stroock & Lavan represented the guardian ad litem.
"The circuit acted within existing authority and they wrote in careful detail about why they affirmed [Judge Korman's] decision," Mechling said. "This is a case where the attorney made misrepresentations to the court as regarding his entitlement to fees. That's an ethical violation that we believe justified Judge Korman's determination to deny fees and the 2nd Circuit agreed."
