Lawrence v. Miller (In re Lawrence)

• Decision Date: 28 October 2014
• Docket Number: No. 149.,149.
• Citation: 998 N.Y.S.2d 698,2014 N.Y. Slip Op. 07291,23 N.E.3d 965,24 N.Y.3d 320
• Parties: In the Matter of Sylvan LAWRENCE, Deceased. Richard S. Lawrence et al., Respondents, v. Graubard Miller et al., Appellants, and Richard S. Lawrence et al., Intervenors–Respondents.
• Court: New York Court of Appeals Court of Appeals

24 N.Y.3d 320

23 N.E.3d 965

998 N.Y.S.2d 698

2014 N.Y. Slip Op. 07291

In the Matter of Sylvan LAWRENCE, Deceased.Richard S. Lawrence et al., Respondents

v. Graubard Miller et al., AppellantsandRichard S. Lawrence et al., Intervenors–Respondents.

No. 149.

Court of Appeals of New York.

Oct. 28, 2014.

Sullivan Papain Block McGrath & Cannavo P.C., New York City (Brian J. Shoot of counsel), and Flemming Zulack Williamson & Zauderer LLP, New York City (Mark C. Zauderer of counsel), for Graubard Miller, appellant.

Jones Day (Michael A. Carvin, of the District of Columbia bar, admitted pro hac vice, and Jacob M. Roth, of the District of Columbia bar, admitted pro hac vice, of counsel), for C. Daniel Chill and others, appellants.

Kornstein Veisz Wexler & Pollard, LLP, New York City (Daniel J. Kornstein, Ina R. Bort and Amy C. Gross of counsel), for respondents and intervenor-respondents.

Berchem, Moses & Devlin, P.C., Milford, Connecticut (Robert L. Berchem and Michelle Devlin Long of counsel), and Akin Gump Strauss & Feld LLP, New York City (Kim Koopersmith of counsel), for Marta Jo Lawrence and another, intervenors-respondents.

Greenfield Stein & Senior, LLP, New York City (Norman A. Senior and Angelo M. Grasso of counsel), for Richard S. Lawrence, intervenor-respondent.

Pollack Pollack Isaac & DeCicco, New York City (Brian J. Isaac of counsel), for New York State Trial Lawyers Association, amicus curiae.

OPINION OF THE COURT

READ, J.

Beginning in 1983, defendant law firm Graubard Miller (Graubard or the law firm) represented Alice Lawrence (Lawrence) and her three children in litigation arising from the death of her husband and their father, Sylvan Lawrence (decedent), a real estate developer. At the time of decedent's death in 1981, his company owned commercial real estate in New York City valued at an estimated $1 billion. Decedent's brother and lifelong equal business partner, Seymour Cohn (Cohn), was executor of the estate. Cohn resisted selling decedent's properties and distributing the proceeds to Lawrence and the children, which caused Lawrence to bring suit in 1983. For over two decades, she and Cohn (and after he died in November 2003, his estate) battled in court (hereafter, the estate litigation).

Lawrence, who died in February 2008, has been portrayed as intelligent, tough and sophisticated in business matters, having

personally managed an investment portfolio worth more than $200 million. She described herself in prior proceedings¹ as a “force to be reckoned with”; her “own person” who made her “own decisions”; and someone who “never” consulted with her attorneys or children about business matters, but rather kept her own counsel and “trust[e]d nobody.” Consistent with this persona, Lawrence participated in almost every detail of the estate litigation—large and small—and reviewed all of the documents and motions her attorneys filed. She demanded to be the “senior partner” in the litigation and threatened on numerous occasions to fire Graubard when she thought that the law firm was not carrying out her wishes. She had no qualms about rejecting Graubard's advice outright.

The estate litigation came to an abrupt and unexpected end on May 18, 2005, when the Cohn estate agreed to settle for over

$100 million, a sum about twice what Graubard assessed the remaining claims to be worth. There quickly followed, though, this dispute between Lawrence and Graubard with respect to the law firm's fee, and the validity of certain gifts made by Lawrence to three Graubard partners in 1998. For the reasons that follow, we hold that the parties' revised retainer agreement was neither procedurally nor substantively unconscionable and is therefore enforceable; and that the Lawrence estate's claim for return of the gifts is time-barred.

IThe Revised Retainer Agreement

By the end of 2004, Lawrence had paid Graubard approximately $18 million in legal fees on an hourly fee basis since 1983 in connection with the estate litigation. After 2002, the major remaining contested claims involved accounting objections. These claims rested on the contention that Cohn had in one way or another abused his position as executor to engage in self-dealing. Positive outcomes in this phase of the litigation were uncertain and costly to pursue. Indeed, Lawrence spent a total of $4.88 million in legal fees in 2003 and 2004. There were no distributions to the Lawrence family during those two years.

In early 2004, soon after Cohn died, Lawrence tried to negotiate a settlement directly with Cohn's children. Her efforts resulted in a $60 million offer,² but it was subject to numerous open-ended givebacks. Lawrence's son, later (and still) coexecutor of her estate, testified that his mother did not consider this a bona fide offer that would achieve a complete and definitive financial separation of the Lawrences from the Cohns, her goal ever since the inception of the estate litigation in 1983. In her son's telling, Lawrence likened the $60 million offer to an earlier proposal made by Cohn in which he “purportedly wanted to buy her share [in a particular building] ... presented her with a simple offer and then proceeded to add so many conditions and qualifications ... that it was obvious that he had no intention of concluding the deal.”

Then on December 16, 2004, the Referee ruled against Lawrence with respect to her single largest accounting objection by far, which related to a Manhattan office building known as 95 Wall Street. This unexpected loss was quite a blow, and prompted Lawrence to complain about her legal fees and ask for a new fee arrangement going forward. She and C. Daniel Chill (Chill), the lead attorney at Graubard for Lawrence-related matters, discussed the possibility of a contingency fee arrangement. Lawrence proposed a 30% contingency; Chill countered with 50%. They eventually agreed upon a fee of 40% of the net recovery after deduction of up to $1.2 million in time charges for calendar year 2005.

Graubard sent Lawrence a proposed revised retainer agreement on January 12, 2005. She received the agreement the next

day and reviewed it with her longtime accountant, Jay Wallberg (Wallberg). The notes of Wallberg's conversation with Lawrence suggest that he was the source of a paragraph that Graubard added to the final version of the agreement forwarded to Lawrence for signature on January 14, 2005, which she received the following day. The added paragraph clarified that hourly billing was to continue for one year only.

Lawrence executed the revised retainer agreement on January 19, 2005; as relevant, the agreement states as follows:

“1. For the calendar year commencing January 1, 2005, [Graubard] will continue to send you on a quarterly basis invoices for services rendered for the quarter, plus disbursements. Against each such invoice, [Lawrence] will pay the firm a flat sum of no more than $300,000 for that quarter. If at the end of the calendar year [Graubard's] invoices for services rendered for the calendar year, in the aggregate, total less than $1,200,000, exclusive of disbursements, [Graubard] will either credit [Lawrence] with the overpayment or refund to [Lawrence] such overpayment at [her] option. If at the end of the calendar year, [Graubard's] invoices for the calendar year, in the aggregate exceed $1,200,000, exclusive of disbursements, [Lawrence] shall have no obligation or liability to [Graubard] for any such excess.

“2. Commencing January 1, 2005, with respect to any monies distributed to the beneficiaries of [decedent's estate], [Graubard] will be paid from [Lawrence's] share of such monies 40% of the total distributed to the beneficiaries, minus the total amount paid by [Lawrence], including fees and disbursements, pursuant to paragraph 1 above.^{[ 3 ]}

“3. In the event [Lawrence] settle[s] the litigation with [Cohn's estate], with respect to any monies distributed to the beneficiaries pursuant to said settlement, [Graubard] shall be paid on the same basis as is set forth in paragraph 2 above. Should the amount due to [Graubard] pursuant to this paragraph 3 be less than the amount of its actual time and disbursement charges commencing January 1, 2005, it is agreed between [Lawrence and Graubard] that [Lawrence and Graubard] will arrive at a fair resolution of the shortfall to [Graubard], which in all events shall be entirely in [Lawrence's] discretion.

“4. [Lawrence's] obligation to make quarterly payments under this agreement shall not extend beyond one year.”

The case settled on May 18, 2005 in the midst of an evidentiary hearing to resolve certain of the outstanding accounting objections raised by Lawrence. This sudden turn of events came about on the heels of a “smoking gun” discovery made by Graubard that Cohn had engaged in egregious self-dealing in connection with the sale of several properties (the so-called “Epps claim”). This “smoking gun” did not exactly drop into Graubard's lap: the law firm makes the point, which appears to be uncontested, that it had doggedly pursued the Epps claim even though earlier attempts to trace Cohn's malfeasance had proven fruitless and Lawrence had expressed skepticism about whether this particular claim (not one of the larger accounting objections) was worth continued time and effort.

Once the “smoking gun” surfaced, the Cohn estate offered Lawrence and the children over $100 million to dispose of the estate litigation. This figure was about twice what Graubard estimated the remaining claims to be worth; essentially, the “smoking gun” revelation was so damaging that the Cohn estate paid a substantial premium to bring the litigation to a swift and certain conclusion. At the time, the Referee estimated that

“[t]o hear and determine the remaining unresolved issues would likely require at least 30 additional trial days, the submission of post hearing legal memoranda, and [the] rendering of an extensive report on the law and the facts on the issues that are the subject of the present hearing as well

...