Cooperman, Matter of

• Decision Date: 17 March 1994
• Citation: 633 N.E.2d 1069,83 N.Y.2d 465,611 N.Y.S.2d 465
• Parties: , 633 N.E.2d 1069, 62 USLW 2581 In the Matter of Edward M. COOPERMAN (Admitted as Edward Michael Cooperman), an Attorney, Appellant. Grievance Committee for the Tenth Judicial District, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 465

611 N.Y.S.2d 465

83 N.Y.2d 465, 633 N.E.2d 1069, 62 USLW 2581

In the Matter of Edward M. COOPERMAN (Admitted as Edward Michael Cooperman), an Attorney, Appellant Grievance Committee for the Tenth Judicial District, Respondent.

Court of Appeals of New York.

March 17, 1994.

[83 N.Y.2d 466] [633 N.E.2d 1070] Nicholas J. Damadeo, P.C., Plainview, and Lipsitz, Green, Fahringer, Roll, Salisbury & Cambria, Buffalo (Paul Cambria of counsel), for appellant.

[83 N.Y.2d 467] Frank A. Finnerty, Jr., and Muriel Steigerwald Gennosa, Robert P. Guido, Syosset, for respondent.

Lawrence A. Cunningham, Lester Brickman, New York City, amici curiae.

[83 N.Y.2d 468] Fried, Frank, Harris, Shriver & Jacobson, New York City (Howard W. Goldstein and Stuart M. Altman of counsel), for New York Council of Defense Lawyers, amicus curiae.

Steven Finell, Archibald R. Murray, Albany, for New York State Bar Ass'n, amicus curiae.

[83 N.Y.2d 469] Malvina Nathanson, and Lawrence S. Goldman, New York City, for New York State Ass'n of Criminal Defense Lawyers and another, amici curiae.

OPINION OF THE COURT

BELLACOSA, Justice.

The issue in this appeal is whether the appellant attorney violated the Code of Professional Responsibility by repeatedly using special nonrefundable retainer fee agreements with his clients. Essentially, such arrangements are marked by the payment of a nonrefundable fee for specific services, in advance and irrespective of whether any professional services are actually rendered. The local Grievance Committee twice warned the lawyer that he should not use these agreements. After a third complaint and completion of prescribed grievance proceedings, the Appellate Division suspended the lawyer from practice for two years. It held that the particular agreements were per se violative of public policy. We affirm the order of the Appellate Division, 187 A.D.2d 56, 591 N.Y.S.2d 855.

I.

In 1990, the petitioner, Grievance Committee for the Tenth Judicial District, initiated a disciplinary proceeding charging attorney Cooperman with 15 specifications of professional misconduct. They relate to his use of three special nonrefundable retainer fee agreements.

The first five charges derive from a written fee agreement to represent an individual in a criminal matter. It states: "My minimum fee for appearing for you in this matter is Fifteen Thousand ($15,000.00) Dollars. This fee is not refundable for any reason whatsoever once I file a notice of appearance on your behalf". One month after the agreement, the lawyer was discharged by the client and refused to refund any portion of the fee. The client filed a formal complaint which the Grievance Committee forwarded to Cooperman for a response. Cooperman had already received a Letter of Caution not to use nonrefundable retainer agreements, and while this new complaint was pending, Cooperman was issued a second Letter of Caution admonishing him not to accept the kind of fee arrangement at issue here. He rejected the admonition, claiming the fee was nonrefundable.

Charges 6 through 10 refer to a written retainer agreement in connection with a probate proceeding. It states in pertinent part: "For the MINIMAL FEE and NON-REFUNDABLE amount of Five Thousand ($5,000.00) Dollars, I will act as your counsel". The agreement further provided: "This is the minimum fee no matter how much or how little work I do in this investigatory stage * * * and will remain the minimum fee and not refundable even if you decide prior to my completion of the investigation that you wish to discontinue the use of my services for any reason whatsoever." The client discharged Cooperman, who refused to provide the client with an itemized bill of services rendered or refund any portion of the fee, citing the unconditional nonrefundable fee agreement.

The last five charges relate to a fee agreement involving another criminal matter. It provides: "The MINIMUM FEE for Mr. Cooperman's representation * * * to any extent whatsoever is Ten Thousand ($10,000.00) Dollars. * * * The above amount is the MINIMUM FEE and will remain the minimum fee no matter how few court appearances are made * * *. The minimum fee will remain the same even if Mr. Cooperman is discharged."." Two days after execution of the fee agreement, the client discharged Cooperman and demanded a refund. As with the other clients, he demurred.

Cooperman's persistent refusals to refund any portion of the fees sparked at least three separate client complaints to the Grievance Committee. In each case, Cooperman answered the complaint but refused the Grievance Committee's suggestion for fee arbitration. Thereafter, the Grievance Committee sought authorization from the Appellate Division, Second Department, to initiate formal disciplinary proceedings against Cooperman. It tendered an array of arguments that these retainer agreements are unethical because, first, they violate the lawyer's obligation to "refund promptly any part of a fee paid in advance that has not been earned" (Code of Professional Responsibility DR 2-110[A][3]. Further, the agreements create "an impermissible chilling effect upon the client's inherent right upon public policy grounds to discharge the attorney at any time with or without cause," in violation of DR 2-110(B)(4). The petition also alleged that the fees charged by Cooperman were excessive in violation of DR 2-106(A), and that he wrongfully refused to refund unearned fees in violation of DR 2-110(A)(3). Finally, it notes that denominating the fee payment as nonrefundable constitutes misrepresentation (DR 1-102[A][4].

After an extensive hearing, the Referee made findings supporting violations on all 15 charges. On appropriate motion, the Appellate Division confirmed the Referee's report with respect to charges 2 through 5, 7 through 10, and 12 through 15. The Court disaffirmed the report as to charges 1, 6 and 11, which alleged that the retainer agreements constituted deceit and misrepresentation. In sustaining the remaining charges, the Court held that these retainer agreements were unethical and unconscionable and "violative of an attorney's obligations under the Code of Professional Responsibility to refund unearned fees upon his or her discharge" (187 A.D.2d 56, 57, 591 N.Y.S.2d 855). The Court also concluded that Cooperman's fees were excessive. The Court suspended him from the practice of law for a period of two years but did not order restitution.

II.

Whether special nonrefundable retainer fee agreements are against public policy is a question we left open in Jacobson v. Sassower, 66 N.Y.2d 991, 994, 499 N.Y.S.2d 381, 489 N.E.2d 1283, a fee dispute case. We agree with the Appellate Division in this disciplinary matter that special nonrefundable retainer fee agreements clash with public policy and transgress provisions of the Code of Professional Responsibility (see, DR 2-110[A][3]; [B][4]; 2-106[A], essentially because these fee agreements compromise the client's absolute right to terminate the unique fiduciary attorney-client relationship.

The particular analysis begins with a reflection on the nature of the attorney-client relationship. Sir Francis Bacon observed, "[t]he greatest trust between [people] is the trust of giving counsel" (Bacon, Of Counsel, in The Essays of Francis Bacon, at 181 [1846]. This unique fiduciary reliance, stemming from people hiring attorneys to exercise professional judgment on a client's behalf--"giving counsel"--is imbued with ultimate trust and confidence (see, Rosner v. Paley, 65 N.Y.2d 736, 738, 492 N.Y.S.2d 13, 481 N.E.2d 553; Greene v. Greene, 56 N.Y.2d 86, 92, 451 N.Y.S.2d 46, 436 N.E.2d 496). The attorney's obligations, therefore, transcend those prevailing in the commercial market place (compare, Meinhard v. Salmon, 249 N.Y. 458, 463, 464, 164 N.E. 545). The duty to deal fairly, honestly and with undivided loyalty superimposes onto the attorney-client relationship a set of special and unique duties, including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the clients' interests over the lawyer's (see, Matter of Kelly, 23 N.Y.2d 368, 375-376, 296 N.Y.S.2d 937, 244 N.E.2d 456; see also, Brickman and Cunningham, Nonrefundable Retainers Revisited, 72 NCLRev 1, 6 [1993]. To the public and clients, few features could be more paramount than the fee--the costs of legal services (see, Jacobson v. Sassower, 66 N.Y.2d 991, 993, 499 N.Y.S.2d 381, 489 N.E.2d 1283, supra ) . The Code of Professional Responsibility reflects this central ingredient by specifically mandating, without exception, that an attorney "shall not enter into an agreement for, charge, or collect an illegal or excessive fee" (DR 2-106[A], and upon withdrawal from employment "shall refund promptly any part of a fee paid in advance that has not been earned" (DR 2-110[A][3]. Accordingly, attorney-client fee agreements are a matter of special concern to the courts and are enforceable and affected by lofty principles different from those applicable to commonplace commercial contracts (see, Matter of Schanzer, 7 A.D.2d 275, 182 N.Y.S.2d 475, affd. 8 N.Y.2d 972, 204 N.Y.S.2d 349, 169 N.E.2d 11; Martin v. Camp, 219 N.Y. 170, 114 N.E. 46).

Because the attorney-client relationship is recognized as so special and so sensitive in our society, its effectiveness, actually and perceptually, may be irreparably impaired by conduct which undermines the confidence of the particular client or the public in general. In recognition of this indispensable desideratum and as a precaution against the corrosive potentiality from failing to foster trust, public policy recognizes a client's right to terminate the attorney-client relationship at any time with or without cause (see, Matter of Dunn, 205 N.Y. 398, 402, 98 N.E. 914; Tenney v. Berger, 93 N.Y. 524; DR 2-110[B][4]. This principle was effectively enunciated in Martin v. Camp (219 N.Y. 170, 114 N.E....