Freeman's Estate, In re

Citation355 N.Y.S.2d 336,34 N.Y.2d 1
Parties, 311 N.E.2d 480, 1974-1 Trade Cases P 75,085 In re ESTATE of Julius FREEMAN, Deceased. In the Matter of the Accounting of LINCOLN ROCHESTER TRUST COMPANY, as Executor of Julius Freeman, Deceased, Respondent, v. James A. FREEMAN, Appellant.
Decision Date27 March 1974
CourtNew York Court of Appeals

Sanford Robert Shapiro and Warren B. Rosenbaum, Rochester, for appellant.

Luther Ira Webster, Rochester, for respondent.

Michael J. Beyma, Elliott Horton and Alan Illig, Rochester, for Monroe County Bar Association, amicus curiae.

BREITEL, Chief Judge.

Appellant objectant, in a proceeding to settle an executor's account, contests the amount of attorney's fees awarded for services rendered to the estate. Objectant, the son of decedent and sole beneficiary or his father's estate, appeals from an Appellate Division order affirming the award, contending that the Surrogate was improperly influenced by the then existing Monroe County Bar Association minimum fee schedule. It is argued forcefully that, although the estate was considerable in value, there were no unusual difficulties and the large fee allowed was therefore unduly influenced by the schedule allowing a percentage based on the gross estate. It is urged, in particular, that the fee schedule effectively fixed the fee level for legal services in Monroe County and thus violated the State's antitrust law (Donnelly Act, General Business Law, § 340).

The order should be affirmed. Although the Surrogate considered the minimum fee schedule, he made a sufficiently independent determination of the reasonableness of the fee allowed and, in doing so was entitled to consider custom and practice in the community. Moreover, the law is a profession and not a business and therefore not subject to the Donnelly Act which prohibits business arrangements restraining competition. Whether all Bar Association minimum fee schedules are, however, unprofessional, it is not necessary to decide in this case or at this time; but they may violate professional standards if their purpose or effect would be to control the fee level for professional services, or would have the purpose or effect of preventing 'fee competition' in the rendering of legal services.

The gross estate aggregated some $329,000. Objectant was the sole beneficiary and eventually would receive the entire net estate. The fee allowed to the attorney for the estate was $13,250, which equalled almost precisely the amount that the then minimum fee schedule established by the Monroe County Bar Association would have required or 'suggested' in decedents' estates. There is no contention by respondent attorney or the Amicus curiae Bar Association that the handling of the estate involved any but routine practice in a decedent's estate.

The pertinent provisions of the State's antitrust statute trace their origin to 1897 and 1933 (L.1897, ch. 383; L.1933, ch. 804, § 1; see, generally, New York State Bar Association Antitrust Section, Report of Special Committee to Study the New York Antitrust Laws, pp. 10a--20a (1957); Maroney, Antitrust in the Empire State: Regulation of Restrictive Business Practices in New York State, 19 Syracuse L.Rev. 819 (1968)). Presently, section 340 of the General Business Law declares void and illegal against public policy '(e)very contract, agreement, arrangement or combination whereby * * * (c)ompetion or the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state is or may be restrained'.

Objectant contends that, since the statute expressly includes the furnishing of service, lawyers who provide legal services are covered by the statute. The statutory reference to service was added in 1933, shortly after the decision in New York Clothing Mfrs.' Exch. v. Textile Finishers Assn. (238 app.div. 444, 265 N.Y.S. 105). it was there held that a price-fixing agreement among members of defendant association was not violative of section 340 because the statute, as then written, did not apply to services.

Although there was no cause and effect relationship between the decision and the legislation, the addition of the term 'service' was designed to prohibit anticompetitive practices of service industries. According to its draftsman, then Attorney-General Bennett, the 1933 amendment extended 'the protection of the law to all those businesses which sell, not a specific product or commodity, but a service such as laundering, dry cleaning, shoe repairing and numerous others' (Bennett, The Recent Amendments to the Donnelly Act, 5 N.Y. State Bar Assoc. Bulletin 384, 389 (1933)). The view expressed by the then Attorney-General indicates that the use of the word 'service' was confined to a commercial or business setting. The term was therefore used with a limited purpose, and therefore limited sense. Hence, whether arrangements in the legal profession, which concededly involves services, violate the antitrust law does not turn on the word 'service'.

On this analysis, the issue, as it would be under Federal antitrust law, is whether the legal profession is a business or trade as that term is used in section 340 (see United States v. Real Estate Bds., 339 U.S. 485, 489, 491--492, 70 S.Ct. 711, 94 L.Ed. 1007 (1950)). Whatever the authority of Goldfarb v. Virginia State Bar (E.D.Va., 355 F.Supp. 491), 1 where the court held that minimum fee schedules violated the Sherman Act, the question now presented deals solely with the relationship of the State antitrust law to the statutory scheme for regulating the practice of law.

A profession is not a business. It is distinguished by the requirements of extensive formal training and learning, admission to practice by a qualifying licensure, a code of ethics imposing standards qualitatively and extensively beyond those that prevail or are tolerated in the marketplace, a system for discipline of its members for violation of the code of ethics, a duty to subordinate financial reward to social responsibility, and, notably, an obligation on its members, even in non professional matters, to conduct themselves as members of a learned, disciplined, and honorable occupation. These qualities distinguish professionals from others whose limitations on conduct are largely prescribed only by general legal standards and sanctions, whether civil or criminal. (See Pound, The Lawyer from Antiquity to Modern Times, pp. 4--10.) Interwoven with professional standards, of course, is pursuit of the ideal and that the profession not be debased by lesser commercial standards (see Drinker, Legal Ethics, pp. 210--273). Departures from the ideal, few or many, should rarely, if ever, justify a lowering of the standards (cf. Ryan, Address to the Graduating Law Students of the University of Wisconsin, 1873, 19 Notre Dame Lawyer 117 135--140 (1943)).

Given this character of any profession, and certainly as that character is applied to the legal profession, professional associations justify their existence to the extent that they further the standards and the ideal (see, e.g., Botein, Six Decades of Achievement, 25 N.Y. County Lawyers' Assn. Bar Bulletin, p. 205 (1968); see, also, Pound, op. cit., Supra, pp. 10--20).

Bar Associations have, of course, been pre-eminent in pursuit of the professional ideal. As a consequence, they have been used under legislation and by the courts in the control of conduct in the profession (see, e.g., Matter of Bar Assn. of City of N.Y., 222 App.Div. 580, 227 N.Y.S. 1). Their role in the promulgation and interpretation of canons of ethics and in professional disciplinary machinery has been quite extensive (see, e.g., Association of the Bar of the City of New York and New York County Lawyers' Assn., Opinions of Committees on Professional Ethics (1956); 22 NYCRR 603.12, 691.12, 800.28, 1022.9).

Another index of professionalism in the Bar, especially in modern times, is that the organized Bar both sponsors and fosters research, programs and proposals unrelated to the development of individual skills. Instead these activities are designed to extend the capacity of the Bar to serve the public; even beyond the likelihood of financial reward for such service (see, e.g., Association of the Bar of the City of New York, Mental Illness, Due Process and the Criminal Defendant (1968)).

The history and purpose of the legal profession and the professional associations supports the view that the profession is not included within the terms 'business or trade' as used in section 340 of the General Business Law. The several provisions in the Judiciary Law regulating the conduct of members of the Bar suggest particularly close restrictions on the profession (see, e.g., Judiciary Law, §§ 480--487). Before that, by ancient tradition, rules of conduct were established for the profession (see, e.g., VI Holdsworth, History of English Law 433 (1924)). Today, specific statutes provide for broad judicial power and control over the profession (Judiciary Law, § 90, subd. 2; see Gair v. Peck, 6 N.Y.2d 97, 111, 188 N.Y.S.2d 491, 501, 160 N.E.2d 43, 51, app. dsmd. and cert. Den., 361 U.S. 734, 80 S.Ct. 401, 4 L.Ed.2d 380; People ex rel. Karlin v. Culkin, 248 N.Y. 465, 469, 471--472, 162 N.E. 487, 489--490).

Even a superficial examination of the regulatory system applicable to the Bar suggests that if the Legislature had intended to reach alleged economic restraints, like fee schedules, it would have done so either by specific statute, or by court rules and controls within the existing scheme for judicial oversight of the Bar. Judicial regulation would, as with contingent fees and the like, be much more expeditious, effective, and direct than the comparatively clumsy device of antitrust law enforcement.

Consequently, it is concluded that neither by virtue of the statutory language, the legislative history, or intent of the Legislature does the Donnelly Act apply to the legal profession.

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