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The timeless debate over how much control courts should have over the manner and amount of attorney fees took a new twist recently when an upstate New York appellate panel ordered a matrimonial lawyer to return her $13,000 fee. Two weeks ago, the Appellate Division, 3rd Department, apparently concluded that to the extent Judiciary Law � 474, which restrains the court’s regulatory power over attorneys, conflicts with a disciplinary rule requiring written retainer agreements and other consumer protections, the disciplinary rule trumps. Attorneys said the unanimous ruling in Serazio-Plant and Channing, 91690, seemingly marks the first time an appellate court has considered and rejected a facial challenge to the so-called “Milonas Rules” governing the conduct of matrimonial lawyers. Those rules, promulgated when E. Leo Milonas was chief administrative judge, impose a number of requirements on matrimonial lawyers, including provision of a statement of client’s rights and responsibilities, a written retainer agreement, regular itemized bills and other mandates. In its recent decision, the 3rd Department said an attorney’s failure to comply with those rules, coupled with concerns over whether she earned her fee in the first place, supports an arbitration decision that denied her any fee at all. “We are unpersuaded that the matrimonial rules, both as written and as applied to the facts on appeal, strayed beyond the court’s supervisory powers regarding attorneys or ran afoul of the statutory provisions of Judiciary Law � 474,” 3rd Department Justice John A. Lahtinen wrote for the unanimous panel. Justices Thomas E. Mercure, Edward O. Spain and Anthony J. Carpinello were also on the panel. The appeal resulted from a dispute between a lawyer and her client, and a collision between � 474 and DR 2-106. According to the 3rd Department decision, Cara Serazio-Plant in December 1997 retained attorney Cassandra L. Channing of Catskill to represent her in a divorce. Over the span of several months, Serazio-Plant paid Channing $10,000 in legal fees and $3,000 to hire an expert witness. In March 1999, Serazio retained a different lawyer. Thereafter she received an itemized time sheet from Channing demanding an additional $4,887 in fees. Serazio-Plant challenged the award under the mandatory arbitration procedures of 22 NYCRR Part 136, and the Matrimonial Arbitration Panel found that the entire $13,000 fee must be returned. The panel observed that Channing failed to comply with the Milonas Rules in neglecting to provide the statement of rights and responsibilities, a written retainer agreement or timely itemized bills. “While the panel is not prepared to rule that, in every case, the failure to comply with one or more of the matrimonial rules set forth under Part 1400 results in an automatic forfeiture of an attorney’s legal fee, it is our belief that, given the totality of the circumstances, Channing is not entitled to a fee for services rendered on behalf of … Cara Serazio-Plant,” the panel said. On appeal, Channing’s attorney, Peter V. Coffey of Englert, Coffey & McHugh in Schenectady, N.Y., invoked the wisdom of the likes of Plato, James Madison, Alexander Hamilton, Thomas More and several others in arguing against a court-engineered disciplinary rule that he says impermissibly infringes on the practice of law. “When an individual injures another citizen in violation of the Civil Law it is a tort,” Coffey said in his brief. “When an individual injures another citizen in violation of the Criminal Law it is a crime. When an official or body of the state violates the law it is tyranny.” Coffey argued that the disciplinary rule simply cannot be reconciled with, and certainly cannot overpower, the language of Judiciary Law � 474, which reads: “The compensation of an attorney or counselor for his services is governed by agreement, expressed or implied, which is not restrained by law.” The Legislature, Coffey contended, has determined that attorney compensation is governed by an expressed or implied agreement. But the disciplinary rule, by requiring a written agreement, precludes implied agreements, Coffey maintained. Serazio-Plant’s attorney, Eugenia M. Brennan of Coxsackie, N.Y., countered that the arbitration decision was not couched solely on Channing’s failure to follow the disciplinary rules, but also on the attorney’s performance. Regardless, in an interview she agreed with Coffey that the Appellate Division ruling apparently gives the disciplinary rule the upper hand in a clash with the Judiciary Law. In the decision, Justice Lahtinen and the 3rd Department said it is long established that the courts have supervisory control over attorney-client fee arrangements. The court said that � 474 and the rules setting forth “parameters which provide safeguards to both parties to an agreement for legal services regarding this historically contentious area of law” can co-exist. It also said that Channing’s failure to follow the rules, combined with conduct the arbitrator’s termed “troubling — such as submitting false and unreliable records, charging for an expert who was never retained and failing to timely provide the file to the client’s new attorney — justify an utter denial of fees. “In light of the established breach of the Code of Professional Responsibility, the failure to adhere to important aspects of the matrimonial rules and the significant exacerbating circumstances that totally eroded respondent’s credibility, it was within the province of the arbitrators to conclude that respondent utterly failed to satisfy her burden of proof and, thus, that no attorney fee was justified,” Justice Lahtinen said. Coffey said he is considering an appeal. Both he and Brennan agreed that the decision sends a powerful message on the application of the disciplinary rules vis-a-vis � 474. “The decision upholds the inherent power of the courts to regulate attorney conduct, including how we charge fees, whether it is in writing and how much it can be,” Brennan said in an interview.

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