[*1]Decided on September 8, 2011

In the Matter of aPetition to Compel Payment of Legal Fees for Services Rendered in Connection with the Estateof Sylvan Lawrence, Deceased. RICHARD S. LAWRENCE and JAY L. WALLBERG, as Executors of the Estate ofAlice Lawrence, Deceased, Plaintiffs, - against - against GRAUBARD MILLER, C. DANIEL CHILL, ELAINE M. REICH,and STEVEN MALLIS, Defendants.

1982-175

Nora S. Anderson, J.

The multi-million-dollar estate of Sylvan Lawrence was the subject ofcontinuous and heated litigation in this court for decades, with decedent's beneficiary widow andexecutor brother as the chief antagonists. The litigation, involving a multitude of proceedings anda barrage of motions, was eventually settled (in mid-2005), but only after the brother himself haddied. However, on the heels of the settlement, a related contest erupted in two trial courts in NewYork County (a Surrogate's Court proceeding and a Supreme Court action, the latter ultimatelytransferred to this court). In both the proceeding and the action, the principal combatants were thewidow and her three children (collectively, the "Lawrence Family"), on one side, and, on theother, the law firm (and three of its partners) that had advocated for her interests in the estatelitigation.

Presently before the court are motions and cross-motions to confirm, modify, or reject aSpecial Referee's post-hearing report on the merits filed by the several parties to that spin-offlitigation — including the executors of the widow's estate (she too having escaped the frayonly in death).

Procedural Background

In the proceeding commenced in this court shortly after settlement of the Sylvan Lawrencelitigation, the law firm sought payment from the Sylvan Lawrence estate for the firm's services tothe widow during her legal battles with the executor (SCPA 2110). In the alternative, the firmsought to enforce its right to legal fees from the widow under their revised retainer agreement(the "Revised Retainer"). According to the petition, the Revised Retainer entitled the [*2]firm to 40 percent of the sum (approximately $110.3 million)received by the widow in the settlement with her brother-in-law (which was reached only a fewmonths after she had executed the Revised Retainer). The law firm also sought damages againstone of the Lawrence children individually ^[FN1] on the ground that he had tortiously interferedwith his mother's performance of her obligations under the Revised Retainer. The firm's amendedpetition identified the two other Lawrence children (who were residuary beneficiaries of theirfather's estate, along with their mother and brother) as persons interested in the outcome; the twowere formally joined in the proceeding in mid-2006, pursuant to an uncontested motion by thefirm.

Shortly after the firm commenced its proceeding, the widow filed a complaint in SupremeCourt (New York County) against the firm and three of its partners; as noted above, that actionwas eventually transferred to this court. Among other things, the widow sought rescission of theRevised Retainer, restitution of some $18 million in fees that she had paid to the firm under theiroriginal retainer agreement, as well as return of a total of $5.05 million in gifts that she had madeto the three individual partners in 1998.

By a series of orders issued in 2006, this court referred all aspects of the proceeding andaction to the Hon. Howard A. Levine as Special Referee. Numerous pre-trial motions ensued,including motions to dismiss (CPLR 3211) and for summary judgment (CPLR 3212). By thetime motion practice was concluded, the only claim remaining in the firm's proceeding was thefee issue between the firm and the widow's estate, the firm having discontinued its claim forpayment of fees from the Sylvan Lawrence estate and the court having dismissed the firm's causeof action against the son for tortious interference.

The remaining fee dispute in the proceeding and the issues raised in the widow's action werethen tried by the Special Referee at an evidentiary hearing that began on October 5, 2009, andcontinued for another 14 sessions.

In the report of his findings of fact and conclusions of law based upon that hearing (the"Report"), Judge Levine made the following recommendations to this court:

1) the widow's claims concerning the gifts (and taxes thereon) should be dismissed withprejudice, the lawyer defendants having borne their very heavy

burden of establishing that (a) the client's gifts to them were not voidable products of undueinfluence and (b) any violation of the partners' duties to their clients did not warrant forfeiture ofthe gifts;

2) the widow's claim for restitution of the $18 million in fees that she had

paid under the original retainer agreement should be dismissed with

prejudice, the firm having not committed the type of wrong-doing against the

the widow that would constitute a basis for disgorgement of the fees that shehad alreadypaid;

3) the firm's claim for compensation under the Revised Retainer should be granted only tothe extent of ordering the executors of the widow's estate to pay the firm $15,837,374.02 (asopposed to the $44 million or so claimed by the firm under the Revised Retainer); and

4) the widow's claims for relief in connection with the firm's fees under the[*3]

Revised Retainer should be dismissed withprejudice.^[FN2]

The Lawrence Children's Motion to Intervene

Before addressing the substantive merits of the Report, the court must pause to consider theSpecial Referee's disposition of the Lawrence children's motion to intervene, an application madeon the cusp of the evidentiary hearing. The motion appears to have been prompted by apre-hearing letter from the firm to the Special Referee to the effect that there was no basis for thechildren to continue to participate as litigants now that the firm's request for relief under SPCA2110 and its tort claim against the son were no longer in issue.

As is disclosed by a review of the filings in this litigation, the intervention issue here isburdened by certain procedural anomalies that have inspired somewhat curious legal argumentsfrom the parties. As noted above, all three of the Lawrence children had been joined in the firm'sproceeding. It appears, however, that none of them was ever formally made a party to thewidow's action. Nevertheless, it further appears that during the years of pre-trial litigation (beforethe Special Referee, the Surrogate's Court, and the Appellate Division) all of the Lawrencechildren were treated as parties and no distinction was made between their relationship to thefirm's proceeding, on the one hand, and to the widow's action, on the other hand.

The firm's theory for eventually opposing the Lawrence children's continued participationwas simple enough: the children (although residuary beneficiaries of the widow's estate) had nointerest in the litigation now that relief was no longer being sought against the Sylvan Lawrenceestate or the Lawrence son individually. But such argument (as applied to the fee issue and, forthat matter, the gift issue raised in the action) was hardly consistent with the rationale that thefirm itself had advocated in its 2006 motion for the daughters' joinder in the firm's proceeding,i.e., that residuary beneficiaries as a practical matter have a material interest in issues thatthreaten to reduce the size of the residuary by millions of dollars.

The position assumed by the Lawrence children themselves in relation to the interventionquestion is equally awkward. At no point since 2006 has either of the two daughters filed somuch as a proposed (much less ripe) pleading in either the proceeding or the action. Nor has theson for his part filed even so little as a proposed amended pleading in the proceeding or aproposed answer in the widow's action.

As is pointed out on behalf of the Lawrence children, a failure to annex a proposed pleadingto a motion to intervene (under CPLR 1014) is not necessarily fatal to the motion (Ryder vTravelers Ins. Co., 37 AD2d 797 [4th Dept. 1971]). Moreover, as noted above, the partieshere had stipulated to dispensing with formal intervention motions. However, but for thesuggestion of the children's counsel to the contrary, it would seem clear that would-beintervenors must ultimately submit a proposed pleading (Sterling Natl. Bank and TrustCo., 86 AD2d 547 [1st Dept 1982; Ryder v Travelers Ins. Co., supra) identifying, forthe other parties and for the court, the intervenors' position on the issues raised by the petition orcomplaint. If there was some circumstance that prevented the filing of such pleadings by thisjuncture, it remains unidentified.

In view of the foregoing, the intervention granted by the Special Referee might appear [*4]problematic, but for the combined force of three considerations.First, the right to object to a flaw in a pleading (and at least arguably, by extension, to theabsence of any pleading at all) may be waived by the adversary (see Nardi v Hirsh, 250AD2d 361 [1st Dept 1998]) or may be retroactively cured even after judgment is rendered or adecree issued (see Gonfiantini v Zino, 184 AD2d 268 [1st Dept 1992]). Second, aprocedural default may in some contexts be excused if the adversary will suffer no prejudice as aresult (id., at 369). There is surely a basis for applying such principles to this case, giventhe fact that (a) the position of the Lawrence children has been clear for years and (b) thatposition is largely derivative of the widow's claims and technically does not amount in any eventto a "claim for relief" directed to the Lawrence children themselves. Thus, the firm and theindividual defendants cannot plausibly argue that intervention has placed them at an unfairdisadvantage by a previously undisclosed exposure to broadened liability or that the litigation hasbeen unduly burdened by the children's participation. Third, it must be noted that, although thechildren do not qualify as intervenors under the strict requirements of CPLR 1012, their practicalstake in the issues here makes them appropriate intervenors under CPLR 1013.^[FN3]

Accordingly, the Special Referee's grant of the Lawrence children's motion to intervene isconfirmed.

The Report's Recommendations

Before the merits of the Special Referee's recommendations are addressed, the applicablestandards should be acknowledged. First, the court's function on motions such as these "is similarto that of an appellate court in reviewing the trial court's determination" (Wynard vBeiny, 2003 WL 21729779 (Sur Ct New York County 2003). Thus, the court may adopt orreject the Referee's recommendations, in whole or in part. Where the findings below dependupon credibility, the court must give the Referee's findings "great weight" (Poster v Poster, 4 AD3d 145 (1stDept 2003), since he presided at the trial and was thus in the best position to assess credibility(see Roberts v Fulmer, 301 NY 277, 284; cf. Amend v Hurley, 293 NY 587,594). Nevertheless, it is still open to the court to make new findings (CPLR 4403) to the extent,if any, that the findings below are unsupported by the record or against the weight of the evidence(see Visco v Marion, 268 AD2d 303).

Recommendation 1: That the Widow's Requests for Relief withRespect to theThree Gifts and Taxes Thereon Should be Denied[*5]

In connection with the challenged gifts, the SpecialReferee has provided the court with a careful and exhaustive analysis of the relevant principlesand precedents. Among those principles is the well established rule that, when a gift ischallenged, the donee "bears the burden of proving by clear and convincing evidence that the giftwas voluntary and understandingly made by the donor, uninfluenced by fraud, duress orcoercion" (Matter of Clines, 226 AD2d 269, 278 [1st Dept 1996]). Moreover, where thedonee is a lawyer and the donor is his client, "the law ... wisely ... adjust[s] the quality andmeasure of proof to the circumstances, to protect the weaker party and, as far as may be, to makeit certain that trust and confidence have not been perverted or abused...." (Matter ofSmith, 95 NY 516, 523 [1884]). Thus, as the Referee recognized, a client's inter vivos gift toher lawyer — given the confidential relation between the two — is " presumptivelyvoid, subject to proof by the lawyer, usually through disinterested persons, that the transactionwas fair and fully intended by the client'" (Report at pp. 16-17, quoting Radin vOpperman, 64 AD2d 820 [4th Dept 1978]. While the presumption is rebuttable and there isno per se rule against such transfer (seeLawrence v Miller, 48 AD3d 1, 8), the lawyer who would retain the client's gift once itis challenged faces the daunting task of "show[ing] by ... strong, convincing and satisfactoryproof ... that the conveyance to him ... was entirely honest, legitimate and free from taint."Matter of Howland, 9 AD2d 197, 200 [3d Dep't 1959]. In other words, as our Court ofAppeals observed long ago, and that the Referee himself echoed,

"it is certain that the law regards a [client's "gift" to a lawyer] ... with great suspicion; that,where persons standing in a confidential relation ... receive benefits from ...the persons for whomthey are counsel ... the transaction isscrutinized with the [most] extreme ... vigilance, andregarded with the utmostutmost jealousy. The clearest evidence is required, that there was nofraud, influence, or mistake; that the transaction was perfectly understood by the weaker party ....The presumption is against the propriety of the transaction, and the onus of establishing the giftor bargain to have been fair, voluntary and well understood, rests upon the party claiming ...."(Nesbit v Lockman, 34 NY 167, 169 [1866]).

On the one hand, the lawyers in this case were able to muster proof of certain circumstancesthat might have pointed to the fairness of the gifts in question had there been no lawyer-clientrelationship and thus no added evidentiary burden on the donees: the donor here was asophisticated and intelligent individual of extraordinary wealth,^[FN4] who was no stranger to making large gifts andwho (as her accountant's testimony confirms) knew how to reach out for independentprofessional advice. However, while these aspects of the situation satisfied the Special Refereethat the contested gifts had been freely made and were not the products of a lawyer's unfairadvantage over his client,^[FN5] the court is nevertheless constrained to findotherwise, [*6]i.e., that defendants did not satisfy theirburden "to show by the strong, convincing and satisfactory proof required by the authorities ....that the conveyance to [them] was entirely honest, legitimate and free from taint" (Matter ofHowland, 9 AD2d 197, 200 [3d Dept 1959]).

Several factors prevent the conclusion that the gifts in this case have been proved freelygiven by the donor. For one thing, however wilful or assertive the client might have been in othercontexts or at other times, in relation to her lawyers at this particular time it is far from clear thatthe octogenarian, who at that point had been dependent upon defendants to champion herinterests in a highly contentious litigation for 16 years, was acting in accordance with her ownvolition, as opposed to theirs. This at the very least is established by the note from Mrs.Lawrence with respect to her $400,000 "gift" to the law firm (contemporaneous with the gifts tothe individual lawyers), which smaller gift obviously had gone against the grain of the donor'sfeelings and judgment (["I'm not sure just what I should be thanking the firm for (keeping me onas a client?]. You write my thank yous."). In light of that purported "gift" to the firm, it wouldtake an unwarranted leap of faith to conclude that the multi-million-dollar checks written at aboutthe same time to the lawyers had not likewise been extracted from her by some degree ofpressure, whether express or tacit, patent or subtle, from at least one of the three donees.

Further light on the subject is scant if only because there were no neutral witnesses to theprivate discussions that Mrs. Lawrence had with the one lawyer donee with whom she spokebeforehand about the gifts. Nevertheless, the record contains at least one additional piece ofevidence that the gifts were not the products of the donor's unfettered choice. Such evidencecame in the form of testimony at the hearing by Barbara Kling, one of Mrs. Lawrence's closefriends, who recalled having seen the checks during a visit with Mrs. Lawrence at the latter'shome and having been told by Mrs. Lawrence that, "she didn't think that these checks were theright thing to do, but she did write them." The Special Referee did not make a finding to theeffect that the witness's veracity or accuracy of recall were to be doubted. Accordingly, we are[*7]left with a contemporaneous statement from the donorherself, strongly suggesting that as to these multi-million-dollar transfers she would not be actingas an entirely free agent. Indeed, the fact that Mrs. Lawrence's "thank you" notes were items that,in the words of one of the lawyers at trial, "we got Alice to write" is at least some furthersuggestion that the lawyers themselves — and not the client alone — had a hand inthe making of these gifts.

This is not to ignore two aspects of the "gift" transactions that figured significantly in theSpecial Referee's conclusion that they had been untainted. One was that, in the Referee'sestimate, the mammoth amounts of the checks were merely natural expressions of Mrs.Lawrence's generosity in light of her gargantuan means (which at the time was some $220million). To be sure, according to expert testimony, in the history of lawyer-client relations thegifts at issue were perhaps singularly large. However, although the Special Referee conceded thatthese gifts might have been unprecedented in such sense, he was of the view that they were notunprecedented for Mrs. Lawrence herself. Such estimate is, however, somewhat dubious. Thebetter comparison, it would seem, is between the magnitude of these lifetime gifts, on the onehand, and the size of the few other major lifetime gifts that Mrs. Lawrence was shown to havemade, each also occurring at points when her wealth would have allowed her to part withmillions of dollars without sacrifice. Thus, to Ms. Kling, Mrs.'s Lawrence's "close friend andbusiness partner," she had given a painting "worth as much as $1 million" (Report, at p. 24) andto her handyman she had made a loan of "over $600,000," with virtually no likelihood of hisrepayment" (id.); and (some eight years after the challenged gifts) to a medical doctorwho had agreed to remain as director of a hospital facility that had been named for Mrs.Lawrence she had given $1.4 million. That there is some disparity between these other gifts andthe challenged ones (i.e., simultaneous gifts of $2 million to one lawyer; $1.55 million toanother; and $1.5 million to a third, not to mention the $400,000 to the firm of which each was amember) appears clearer in light of the fact that by the time they received such gifts the lawyershad already collected millions of dollars from Mrs. Lawrence in more than handsome legal fees.

The second aspect of the gift issue that loomed large in the Special Referee's assessment wasthat Mrs. Lawrence had not challenged the gifts until after seven years had elapsed and after sheherself had been put in a defensive posture in a proceeding regarding the lawyers' fees. In theopinion of the Special Referee, Mrs. Lawrence's failure to act to set aside the gifts earlier was perse a suspicious circumstance that cast strong doubt on the bona fides of her claims. Suchanalysis, however, favored the lawyers with an inference (i.e., that Mrs. Lawrence'schallenge to the gifts was not authentic) that was not necessarily warranted under thecircumstances. After all, the courts have recognized that, so long as a client is depending upon alawyer for representation in an on-going matter, the client as a practical reality may well feelobliged to forbear from assuming an adversarial posture against the lawyer (cf. Shumsky vEisenstein, 96 NY2d 164, 167-68). Thus, this court does not agree that the passage of yearsfrom the time of the gifts to the time Mrs. Lawrence contested them is itself evidence thatundermines her estate's undue-influence claim.

In the final analysis, however, there is more to militate against the gifts than their sheermagnitude, or the donor's then long-term dependency upon the donees' advice, or her clearambivalence in relation to the gifts. There is here a combination of dubious circumstances thatemit an odor of overreaching too potent to be ignored. Thus, there is the sustained secrecy that[*8]defendants uniformly maintained with respect to these gifts,defendants having kept the very fact of the gifts not only from the Lawrence children, but also,from defendants' own law partners and, in the case of one of the defendants, even from her ownspouse. Moreover, as what may be deemed to be but an added element of such secrecy,defendants chose not to divulge to the client what they themselves clearly knew: that the gifts'cost to her would be more than half again as great as the multi-million-dollar amounts on the faceof the checks. Despite their confidential relation to the client, defendants held their peace in suchrespect even though they had reason to expect that mention of a gift tax of such magnitude beforethe checks were written might have been enough to extinguish or curb the client's donative urge.

This is not to overlook the evidence on which the Special Referee relied when he found thatMrs. Lawrence as a donor was "aware[]" (Report, at p. 37) in this regard, having more than oncebeen called on to pay gift taxes in the past. But the record does not support the Referee'sconclusion that Mrs. Lawrence was sufficiently "knowing" in relation to these particular gifts. Inother words, there is no basis for finding that a word of advance warning from defendants wouldhave had no effect on Mrs. Lawrence's willingness to make the gifts at all or at least to make thegifts in such munificent amounts. Indeed, there is evidence that suggests the contrary. Suchevidence comes in the form of testimony concerning Mrs. Lawrence's distress when she learnedfrom her tax accountant — but only after the gifts had become a fait accomplis —the extent of the tax cost to her as donor.

Nor is this to take issue with the Special Referee's observation that there appears to be noauthority for a per se rule requiring an attorney/proposed donee to advise a client donor as to thetax implications of the contemplated gift. But the absence of a per se rule would not prevent thecourt from concluding, as the Referee also recognized, that a good-faith donee in a case such asthis, given the magnitude of the gifts in issue, might be expected to volunteer such advice. Norwould the absence of a per se rule prevent the court from regarding defendants' non-disclosure asof a piece with their other subterranean conduct in relation to these gifts. In other words, theabsence of such a rule would not bar the court from concluding that, in view of such overallconduct, defendants played their cards too close to the vest to satisfy the standard of strictforthrightness to which lawyers have long been held in relation to their clients (see, e.g.,Matter of Putnam, 257 NY 140 [1931]; Matter of Smith, 95 NY 516 [1884]; cf.Matter of Weinstock, 40 NY2d 1 [1976]). Moreover, for purposes of gauging defendants'bona fides, it is somewhat telling that, when defendants purported to disclose the facts at trial aswitnesses, the Special Referee himself found several aspects of their testimony not credit-worthy.

In the end, defendants' basic problem is that "[t]he law is not so impracticable as to refuse totake notice of the influence of greed and selfishness upon human conduct ...." (Matter ofSmith, 95 NY 516, 522 [1884]). Simply put, a lawyer's covert enjoyment of a benefit derivedfrom a client, thereafter explained by the lawyer in sworn testimony that is not wholly to becredited, are not the attributes of a stainless gift nor the ingredients of a successful defense of it.

For the foregoing reasons, it is concluded that the challenged gifts must be set aside and thefunds returned to Mrs. Lawrence's estate.

Some additional observations in this connection are warranted to the extent that plaintiffs'submissions (including the complaint, proofs submitted at trial, and motion papers now beforethe court) refer to the gift taxes paid by Mrs. Lawrence in 1999 as the subject of possible relief.[*9]First, plaintiffs have supplied no basis for the propositionthat, as their motion papers put it, defendants should "repay" the estate the sum of $2.7 millionfor "gift tax benefits." Simply put, defendants did not "benefit" from such taxes, which Mrs.Lawrence paid to the U.S. Treasury rather than to defendants. This is not to ignore the shadow ofa suggestion in plaintiffs' case that (a) the 1998 checks were "bonuses" that were taxable incometo defendants and (b) the gift tax payment by Mrs. Lawrence in effect was thus a proxy for theincome taxes that defendants should instead have paid the Treasury on account of the checks. Butthere is nothing in the record from which to find that the checks were not what the SpecialReferee clearly found them to be — i.e., gratuitous transfers — as amongMrs. Lawrence and the three lawyers or, for that matter, as between them and the IRS. So muchfor the theory of disgorgement that might follow if defendants had been unjustly enriched inrelation to the gift taxes. Second, even if the complaint had given fair notice of a claim that thegift tax paid by Mrs. Lawrence was an appropriate element of recoverable damages —which the complaint in fact did not — there is nothing in plaintiffs' submissions, in anyother part of the record, or in the precedents cited by plaintiffs to inform and support such aclaim. In sum, the gift tax is not a factor in the recovery in this case.

Finally, the court shares Judge Levine's view (see note 12 of the Report) that thelegislature would do well to establish a black-letter rule, similar in spirit to the rule supplied bySCPA 2307-a,^[FN6] thatwould better protect against the current gap between the common law and the more stringentDisciplinary Rules in relation to substantial gift-giving by clients to their lawyers who are not ofa familial relation to them. To that end, a copy of this decision is being sent to the JudiciaryCommittee of each house of the State legislature.

Recommendation No.2: That the widow's claim for restitution of fees paid undertheoriginal retainer agreement should be denied.

For the reasons stated in the Report, this recommendation is confirmed.

Recommendation # 3: That the firm's claim to some $44 million for fees from thewidow'sestate under the Revised Retainer should be grantedonly to the extent of allowing the reducedamount of some$15.84 million

Recommendation #4: That the widow's request to be relieved of any obligationtopay a fee under the Revised Retainer, and for related relief,should bedenied.

These two Recommendations are perhaps best evaluated in the light ofthe alternative remedies proposed by the parties. According to the firm, the remedy due it issimply a function of contract law, the widow (having breached a purported obligation to pay itsfee) being [*10]answerable in damages. By contrast, according tothe other side, the Revised Retainer does not constitute a contract to speak of, having beenprocedurally and substantively unconscionable at its inception as well as in retrospect. In thatlight, the widow's fiduciaries argue, (1) the firm should be deemed to have forfeited any right tocompensation from the widow, or (2) the firm's compensation should be limited to the timecharges allowable under the original retainer, or (3) the firm should be awarded only in quantummeruit, as is appropriate where one person has given value to another pursuant to a contract thatfor some reason ultimately fails.

By contrast, the Special Referee fashioned what is in effect a middle-ground remedy,although it certainly has more to commend it than that. Having determined that the RevisedRetainer had not been unconscionable at its inception, the Special Referee recognized that theparties had indeed entered into a valid contract. However, he further determined that, if enforcedto the letter of every one of its terms, the contract would in retrospect be unconscionable (seeGair v Peck, 6 NY2d 97, 107; Matter of Lawrence, 11 NY3d 588, 595) — i.e., inthis case, it would serve as a lawyer's license to overreach.

It is therefore understandable that the Special Referee rejected quantum meruit as the basisfor compensation to the firm, since such relief in quasi contract applies where no viable contracthas ever been created. It was likewise understandable that he would reject the Lawrence Family'ssuggestion that the original retainer — from which the lawyers and clients had agreed todepart — serve as a default provision for compensation. Instead, the Special Refereerecommended a remedy that, while preserving a pivotal term of the Revised Retainer that was notitself unconscionable — the contingency nature of the fee — would rework thecontingency formula to arrive at a result fairly reflecting various relevant factors (principally risk,proportionality, and the parties' intent). Thus, the size of the award that he recommended givesthe firm appropriate credit for services rendered and results achieved under a contract that therecord discloses was duly entered into. At the same time, the award also gives the LawrenceFamily its own due, i.e., a very substantial reduction of the contractually prescribed fee inview of circumstances pointing to the conclusion that "technical contractual rights must yield" tothe lawyer's duty as an officer of the court (Matter of Friedman, 136 AD 750 [2d Dept1910]).^[FN7]

For these reasons, and the reasons stated in the Report, these two recommendations areconfirmed.

The report also lists as a final recommendation that "the Lawrence Children's claims that [thefirm's] ethical violations require forfeiture of all fees and expenses [the widow] paid [the firm]after making the [disputed] gifts ... should be dismissed with prejudice" (Referee's Report datedSeptember 16, 2010, in Matter of Lawrence and Lawrence v Graubard,1982-0175, at 105. As indicated above, ^[FN8] however, there is nothing in the record tosuggest that any of the three [*11]Lawrence children filed anypleadings raising any such "claim." Accordingly, in the absence of a claim to be granted ordenied, this portion of the referee's report is not treated as a recommendation to speak of in termsof confirmation or rejection. Moreover, even if the technicalities could be overlooked, theReferee's recommendation in this connection is supported by his reasoning, precedent, and thefactual record, and the Report would therefore be confirmed by the court.

Finally, the court wishes to express its deep gratitude to Judge Levine for the quality andextent of the effort that he has devoted to these matters. Thanks to Judge Levine's incomparableexperience and skill, the heat generated by high-stake issues and discordant counsel wasconverted to a useful light that informs every page of the record. Although disagreeing with thatReport in one of its aspects, the court nonetheless appreciates the lucidity, care, and intelligencethat characterize every aspect.

Settle Decree and Judgment.

_____________________________

S U R R O G A T E

Dated: September, 2011

Footnote 1:The child in question is RichardLawrence, who succeeded his uncle Seymour Cohn as executor of the estate of Sylvan Lawrence.

Footnote 2:The report also lists as a final recommendation that "the Lawrence Children�s claims that [the firm's] ethical violations require forfeiture of all fees and expenses [the widow] paid [the firm] after making the [disputed] gifts ... should be dismissed with prejudice" (Referee's Report dated September 16, 2010, in Matter of Lawrence and Lawrence v Graubard, 1982-0175, at 105). As indicated infra, however, there is nothing in the record to suggest that any of the three Lawrence children filed any pleadings raising any such "claim." Accordingly, in the absence of a claim to be granted or denied, this portion of the referee's report is not treated as a recommendation to speak of in terms of confirmation or rejection.

Footnote 3:Unlike the provisions of section1012, which in essence allow intervention only to persons whose relationship to the issues makethem necessary parties, the terms of section 1013 permit intervention "when a statute of the stateconfers a right to intervene in the discretion of the court, or when the person's claim or defenseand the main action have a common question of law or fact." The statute further provides that, [i]n exercising its discretion, the court shall consider whether the intervention will unduly delaythe determination of the action or prejudice the substantial rights of any party." As the discussionin text indicates, the firm cannot plausibly point to such delay or prejudice.

Footnote 4:In a post-Madoff world, it mustbe recognized that an individual of such description is not unquestionably beyond victimization.

Footnote 5:Interestingly, however, theSpecial Referee had in one sense given the Lawrence Family an unearned benefit of a doubt inthis connection, taking at face value the Family's contention that the firm had ethicallymis-stepped by representing all of them jointly on the "fractional share" issue in the SylvanLawrence estate (see Matter of Lawrence, NYLJ, November 2, 1998, at 30, col 4) (the"1998 decision"). This is not to ignore that, in theory, the fractional-share, marital-deductionformula under the will gave the widow and children "zero-sum" interests in the residue andtherefore implied a potential conflict between her, on the one side, and them on the other. Buteven apart from the practical convergence of the children's interests with their mother's (theyhaving been the presumptive objects of her bounty under her will), there was no conflict on theone aspect of the issue that was litigated against the Sylvan Lawrence executor. As a reading ofthe 1998 decision confirms, that aspect — how distributions were to be valued —arose when it could not be known whether the competing methods (the "shifting fraction"methodology versus the "fixed fraction" methodology") would ultimately advantage the widowor, instead, her children. All that was then knowable in such regard was that the fixed fractionmethodology proposed by the firm would achieve a cost-containment advantageous to thechildren (since, under the will's terms, their share of the residue alone would bear such cost). Somuch for the children's notion that the firm was favoring their mother in this respect. In anyevent, the Special Referee rightly concluded that any arguable breach of the firm's duty to thechildren by favoring the mother would not have been the basis for remedies to her.



Footnote 6:That section limits thecommissions of an attorney-executor where the latter drafted the will in which he or she isappointed unless he or she disclosed in writing to the testator specified aspects of the conflictinherent in such an appointment.

Footnote 7:It may be noted that thesliding-scale formula recommended by Judge Levine is akin to mechanisms adopted by thelegislature when it has aimed to avoid either a windfall or a shortfall in compensating providersof services under contingency or quasi contingency arrangements (see, e.g., SCPA 2307[commissions of fiduciaries other than trustees); Judiciary Law 474-a [contingent fees forattorneys in medical, dental or podiatric malpractice cases]).

Footnote 8:See pp. 5-6,supra.