Raunak Kothari ()
In 2010, the Legislature implemented a statutory presumption that prospective or interim counsel fee awards should be paid by the “monied” party to the “less monied” party in divorce actions and other family law proceedings.1 This rebuttable presumption is intended to ensure that each party (namely, the “less monied” spouse or parent) is “adequately represented” from the outset of a proceeding.
Since the presumption came into effect, courts have encountered various problems in fashioning interim counsel fee awards under the new statutory framework. These problems are due partly to the reality that support awards can skew who is the “monied” party and partly to the fact that interim awards are, by their very essence, prospective in nature, so they cannot properly account for unreasonable litigation conduct by the less monied party.
Faced with these problems, New York County Supreme Court Justice Matthew Cooper issued a decision a few months ago in Sykes v. Sykes that could have far reaching implications on interim fee awards under the current legal framework.
More than a decade before the statutory presumption was instituted, the Court of Appeals had decreed that “courts are to see to it that the matrimonial scales of justice are not unbalanced by the weight of the wealthier litigant’s wallet.”2
When the statutory presumption came into effect in 2010, there was little doubt that the body of case law that had been developing around fee awards over many years would continue to govern new cases. For while the amended statutes employ less metaphor than case law, they are intended to reach the same result—litigational parity and the adequate representation of both parties, starting with the commencement of a proceeding.
Under the prior statutes, interim fee awards were purely discretionary. Without any presumption in favor of such awards, it was the less monied party’s burden to demonstrate an entitlement to interim fees. The amended statutes shifted the burden to the “monied” party in family law cases to rebut the presumption that interim fees should be awarded to the less monied party.3
Since they are prospective in nature, interim counsel fee awards are not final determinations based upon full consideration of the facts and circumstances of any given case after trial, but predictions as to the parties’ true financial circumstances and their conduct in litigation. As a practical matter, however, many family law cases never reach the trial stage, and, out of the few cases that do proceed to trial, many are settled mid-trial, so final determinations as to counsel fee awards are relatively rare.
In reality, courts make prospective, interim counsel fee awards far more often than they render final determinations or make reallocations of interim fee awards. Like interim maintenance (alimony) and child support awards, then, interim counsel fee awards have a far greater significance in practice than the word “interim” might suggest.
In its seminal decision in O’Shea v. O’Shea, the Court of Appeals explained that fee awards in matrimonial cases should be “the product of judicial discretion rather than mechanical application. Each case will be different, and judges are skilled in making appropriate distinctions.” Under O’Shea, interim fee awards were intended “to further the objectives of litigational parity, and to prevent the more affluent spouse from wearing down or financially punishing the opposition by recalcitrance, or by prolonging the litigation.”
In 2004, the Court of Appeals revisited the issue of interim fee awards in Frankel v. Frankel.4 The Court of Appeals began its decision by noting, “In matrimonial litigation, counsel fee awards have helped reduce what would otherwise be a substantial advantage to the monied spouse.” Observing that “the realities of contentious matrimonial litigation require a regular infusion of funds,” the court added in an oft-cited footnote that “more frequent interim counsel fee awards would prevent accumulation of bills” and criticized the practice of trial courts to defer fee awards until trial, as such deferral “compromises the nonmonied spouse’s ability to adequately litigate the case.”
Despite the Court of Appeal’s pronouncements in O’Shea and Frankel, there continued to be instances where trial courts denied interim counsel fee requests by the less monied party and/or deferred making a fee award until after trial. In one such case, Prichep v. Prichep,5 the Second Department unanimously reversed a lower court’s decision denying a wife’s request for interim counsel fees, even though the denial had been without prejudice to a renewed application after trial.
In its frequently cited decision, the Second Department reasoned that only final fee awards require courts to account for all the equities and other case-specific considerations, such as the relative merits of the parties’ positions and unreasonable litigation conduct. With respect to interim fee awards, however, “no such detailed inquiry is warranted. [A]n award of interim counsel fees to the nonmonied spouse will generally be warranted where there is a significant disparity in the financial circumstances of the parties” and courts “should normally exercise their discretion to grant [an interim fee] request made by the nonmonied spouse, in the absence of good cause—for example, where the requested fees are unsubstantiated or clearly disproportionate to the amount of legal work required in the case.”
While the 2010 statutory presumption shifted the burden and imposed certain disclosure requirements, the substantive legal principles articulated in the pre-2010 case law have remained in full force.
Determining Monied Party
The task of determining the monied party is often straightforward. At the same time, support awards can skew the requisite analysis, and courts have increasingly factored in resource-shifting due to support awards when rendering interim fee awards.
In one of the earlier reported trial court decisions applying the amended statutes, a trial court held that the parties’ net available resources after support payments can rebut the presumption that generally favors interim counsel fee awards to the less monied party. See J.H. v. W.H.6
While the husband in J.H. v. W.H. was the monied spouse, the trial court concluded that the husband could not, for the purposes of an interim fee award, be deemed the monied spouse due to the effects of the temporary maintenance and child support awards in that case. After setting forth detailed financial calculations that factored in the husband’s support payments, the court noted that the reallocation of resources made the parties “similarly situated” so the husband had successfully rebutted the presumption that he should be responsible for his wife’s interim fees. Accordingly, the husband and wife were each held responsible for their own fees.
In another early Kings County case applying the statutory presumption, a trial court also found that the husband could no longer be deemed the monied spouse for the purposes of an interim counsel fee award because of “a substantial shift in actual financial resources.” See, Scott M. v. Ilona M.7 In cutting the less monied wife’s fee request in half (yet still awarding interim fees), the trial court explained that courts should “realistically assess the available resources to each party as a result of the litigation” and “leave the payor spouse with funds sufficient to meet their daily living expenses.”
Now that several years have passed since the institution of the statutory presumption, trial courts have increasingly fashioned interim fee awards by looking to each party’s net resources, expenses, and other financial circumstances, rather than by mechanical determination of the “monied party” based on income. As the Court of Appeals decreed, trial courts have been mindful of the unique facts and circumstances of each case and have refined the results through the exercise of discretion.
Prospective Nature of Awards
While the complications due to support awards can be addressed at least in part by analyzing the parties’ net available resources rather than focusing on income alone, the problems due to the prospective nature of interim fee awards are more difficult to address.
Under the presumption and the case law, a monied party is generally required to contribute to the less monied party’s interim fees without regard to the less monied party’s litigation conduct, which can only be properly assessed with the benefit of hindsight at the conclusion of a case and an evidentiary hearing as to fees (points that are rarely reached in the majority of cases).
Long before courts can use hindsight to ascertain the true dynamics of any given case or make after-the-fact determinations, they must render decisions as to interim fee awards, even though such awards may improperly impact the less monied party’s litigation conduct. While providing for later reallocation can serve as a check on unreasonable conduct, there are still cases where a less monied spouse takes unreasonable positions, engages in obstructionist tactics, or simply lacks incentive to resolve the litigation in a reasonable fashion. The possibility of reallocation is, after all, often dim.
To be clear, in cases where conduct by the less monied party is so egregious that it meets the stringent definition of “frivolous,” the monied party may even seek fees from the less monied party (and even their counsel) as sanctions under Rule 130-1.1 of the Rules of the Chief Administrative Judge (22 NYCRR 130-1.1).8 In such extreme cases, a finding of “frivolous” conduct by the less monied party would presumably rebut the presumption and warrant denial of interim fees to the less monied spouse. As a practical matter, however, litigation conduct is not often deemed “frivolous” (especially where competent attorneys are involved) and conduct that might be deemed unreasonable but does not rise to the level of “frivolous” is far more common. Cases falling in this grey area are the most difficult to decide under the statutory presumption.
‘Sykes v. Sykes’
In Sykes v. Sykes,9 the husband, who owned a successful hedge fund, initially paid his wife’s divorce counsel more than $1 million in interim fees out of his post-commencement income. In the middle of trial, the husband ceased paying his wife’s fees, arguing that she would have no “skin in the game” if he were to continue paying her fees. In response, the wife asserted that she should not be required to deplete or spend down marital assets to pay her legal fees, even if such assets were significant, because the husband had a far greater income and, unlike the wife, could easily finance his own fees through his income.
In reaching its decision, the Sykes court did not focus on the disparity between the parties’ respective earnings, but cited the notion of “skin in the game” in denying the wife’s request for additional interim fees to be paid with the husband’s post-commencement income.
Explaining that the notion of skin in the game refers to the belief that “the best way to insure that a party to a divorce will litigate reasonably and responsibly is to require the party to share in the cost of the litigation,” the Sykes court noted that the husband had not engaged in unreasonable litigation conduct even though he had greater financial resources and that the litigation playing-field was level to the extent that both parties were “represented by firms at the apex of the New York matrimonial lawyer hierarchy.” Rather than award the wife a blank check out of the husband’s income, the court granted the husband’s request for pretrial division of $2 million in marital funds, so that each party could pay their respective legal fees using those funds.10
Citing Scott M. v. Ilona M., supra, the Sykes court reasoned that it should not look solely at the parties’ respective incomes and separate assets, but also to the assets that each party stood to obtain through equitable distribution. Because the wife would receive $10 million as her share, there was not a “significant disparity” between the parties’ respective financial circumstances, such as to require the husband to pay 100 percent of the wife’s legal fees from his income or separate property.
In response to the wife’s argument that she should not be required to deplete or spend down her share of marital assets to pay her legal fees, the court responded:
[T]he amount that the wife is poised to receive from equitable distribution will exceed many times over whatever she contributes to the cost of her representation. According to Webster’s Dictionary, ‘deplete’ means “to use most or all of” or “to greatly reduce the amount of.” Thus, it is hard to see how releasing $1 million to each side from the large pool of marital funds available for equitable distribution could somehow threaten to ‘deplete’ the wife’s assets. Likewise, while the release of the money to pay the wife’s current litigation fees may constitute a ‘spend down’ of her assets, the amount involved—which is somewhere in the vicinity of ten percent of what the wife can be expected to receive by way of equitable distribution—certainly does not qualify as a ‘substantial portion’ of those assets.
In addressing the equities and policy underpinnings of its decision, the Sykes court noted that as long as the wife’s interim legal fees were paid by the husband, only he would have an incentive to resolve the litigation. The court further explained:
The wife, on the other hand, without any ‘skin in the game,’ does not have the same incentive insofar as her litigation costs are being paid for completely by her adversary. Because that adversary is her soon-to-be ex-husband, and because the case is a divorce where feelings of animosity, betrayal and abandonment constantly lurk just below the surface, one can easily understand how the wife, perhaps against her better instincts, might find that it serves her interests on a number of levels to make the husband continue to expend copious funds on her behalf.
The Sykes court did provide for reallocation of interim fees at the conclusion of the matter. However, unlike most instances where a monied spouse pays interim fees and is permitted to later seek reallocation, it became the wife’s burden in Sykes to pursue reallocation, even though she was the less monied spouse.
Because the reported decision in Sykes does not detail the litigation history in that case, it is difficult to know the extent to which the result reached in that case applies to other cases. Moreover, while the Sykes court found that the interim fees at issue were a “relatively small portion of the parties’ millions of dollars in marital assets,” it is also unclear whether a Webster’s lay definition of the word “deplete” is consistent with the principle that the less monied spouse should not be required to “exhaust a large portion of her finite resources” for the payment of counsel fees.11
Setting aside these questions, what does seem clear is that the dramatic impact of interim fee awards in family law cases will increasingly lead to arguments premised on the notion of “skin in the game,” at least until the issue is addressed by an appellate court.12
Even under the statutory presumption favoring interim fee awards to the less monied party, Sykes signals that trial courts—in exercising the great deference accorded to them by appellate courts in family law matters—will still not make formulaic determinations, but will refine the results as necessary with due regard to the specific equities of a given case.
Raunak Kothari is the principal of the Law Office of Raunak Kothari, specializing in family law.
1. See, Domestic Relations Law (DRL) §§237(a), 237(b), and 238. Among family law practitioners, interim fee awards are also known as “pendente lite” fee awards. DRL §237(a) provides for interim fee awards in divorce actions and certain other proceedings. DRL §237(b) provides for such fees in certain financial proceedings between spouses involving a prior order and between parents in de novo custody, access, and child support proceedings. DRL §238 provides for such fees in certain enforcement and modification proceedings.
2. O’Shea v O’Shea, 93 N.Y.2d 187 at 190 (1999).
3. The justification submitted to the Legislature in support of the amended statutes stated in part: “Given the importance of pendente lite counsel fees, and the frequency of financial imbalance between parties to matrimonial proceedings, it is inappropriate to place the burden upon a non-monied spouse to justify it.”
4. 2 N.Y.3d 601 (2004).
5. 52 A.D.3d 61 (2d Dept. 2008).
6. 2011 NY Slip Op 50478(U) (Sup. Ct., Kings County, 2011).
7. 31 Misc.3d 353 (Sup. Ct., Kings County, 2011).
8. See, e.g., Silverman v. Silverman, 304 A.D.2d 41 (1st Dept. 2003). Under Rule 130-1.1, conduct is “frivolous” if: (1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law; (2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or (3) it asserts material factual statements that are false.
9. 41 Misc.3d 1061 (Sup. Ct., New York County, 2013).
10. While the division of marital assets for the payment of interim fees was made subject to reallocation, Sykes may implicate the general rule against pre-trial division of marital assets. This issue, however, is beyond the scope of this article.
11. See, Charpiée v. Charpiée, 271 A.D.2d 169 at 171 (1st Dept. 2000).
12. A notice of appeal has been filed by the attorneys for the wife in Sykes, but it is not yet clear whether the appeal will be perfected. It is also unclear at this time whether there will, in fact, be any final reallocation of interim fee awards in that case.