Continuous Representation I: When does it apply?
24 N.Y.3d 320, ___ NYS2d ___, 2014 NY Slip Op 07291 [2014]
The litigation over the estate of Sylvan Lawrence lasted twenty-two years, from 1983 to 2005. The opposing sides were the decedent’s widow and children, and his executor, his former business partner. Fifteen years into the litigation, the decedent’s widow made gifts of over a million dollars each to three of the partners of the firm representing her and her children, and of $400,000 to the firm itself. At the end of the litigation, the widow sought to compel the attorneys to return the gifts. The attorneys raised the defense of limitations, and the widow relied on the continuous representation toll to avoid it.
The litigation over the estate itself settled in 2005, with the widow and her children receiving over $100 million from the estate of the executor. The continuing litigation, which is here resolved by the Court of Appeals, has been between the widow and children, and the law firm. The issues have been whether the amended retainer agreement between them was enforceable as written (leading to a contingent fee of $44 million) and whether or not the attorneys were required to return the gifts.
As dear to our hearts as the retainer question may be, it presents issues of professional responsibility, not procedure. Beyond noting that the Court of Appeals found it enforceable despite the size of the resulting fee, we will therefore leave it alone. The attorneys’ acceptance of the gifts also presents issues of professional responsibility, which the Appellate Division addressed, finding the attorneys’ conduct in receiving them to have been improper. Fascinating to us as it may be, that also is also beyond the scope of this note.
What is squarely in our sights is the question of limitations. The widow waited until after the estate litigation had ended before suing for the return of the gifts, that is to say, until nearly 8 years after they had been given. The context was that she refused to pay the attorneys the fees required under the contingent amended retainer agreement, the attorneys commenced a proceeding in Surrogate’s Court to compel payment, and the widow responded by seeking rescission of the agreement and the return of all fees and the gifts.
Since the most generous limitations period which might apply is the six-year catchall of CPLR 213(1), her claim is time-barred unless the continuous-representation toll applies. If it does, then the period only started to run with the end of the estate litigation, and her claim is timely. Both Surrogate’s Court and the Appellate Division held that the toll applied and dealt with the issues on their merits. The Referee in Surrogate’s Court found the gifts free from undue influence or other impropriety; the Surrogate disagreed and found that the attorneys had not sufficiently established that the gifts were “free from taint,” and ordered the moneys returned.
The Appellate Division held that the continuous-representation toll applied, since in its view the claim was one of the attorneys’ “self-dealing at the expense of a client”. On the merits, the Appellate Division held that the attorneys had not satisfied their burden of showing that the gifts were given willingly and knowingly, and without undue influence. The fact that the attorneys had acted in secret, without advising the widow to seek independent counsel, together with the extraordinary amount of the gifts, made a finding in their favor untenable.
The Court of Appeals, however, found the continuous-representation toll inapplicable.
The prerequisites of the claim are “a claim of misconduct concerning the manner in which professional services were performed, and the ongoing provision of professional services with respect to the contested matter or transaction.” The toll applies only where the continuing representation relates to the specific claim of malpractice. The Court perceived a distinction between a claim of improperly rendered professional services, and a dispute between lawyer and client over a financial transaction, such as fees or a gift. Where the matter is the payment of fees or making a gift, the attorney is not acting so as to represent the client at all, and certainly not representing the client with regard to the matter involved in the claim against the lawyer.
The considerations which lead to the continuous-representation toll do not apply to this situation. First, the toll is based on the inability of the client, typically a layperson, to properly understand the manner of provision of legal services or to provide meaningful supervision of the attorney’s handling of the matter. Second, the client should not be expected to disrupt an ongoing relationship with his attorney by suing him, when the attorney might well be attempting to correct any problem.
Where the client has given her attorney a gift, on the other hand, the attorney is not performing legal services. Requiring the client to take steps to have the gift returned does not ask the client to evaluate the lawyer’s services or to risk interfering with correction of a problem. Here, the gifts involved no understanding of continuing representation relating directly to them, and no correction of problems in prior representation.
Finally, the Court of Appeals disagreed with the Appellate Division’s characterization of the lawyers’ acceptance of the gifts as “self-dealing,” which involves an attorney acting in his own interest to the detriment of a client. Where there is self-dealing that relates to ongoing representation, the toll may apply, but the acceptance of a gift is not self-dealing.
The Court therefore refused to expand the continuous-representation rule to encompass this situation, and viewed the claim as barred by limitations.
There was a partial dissent, by Judge Rivera, who viewed the gifts as sufficiently linked to the ongoing representation to sustain the toll. On the merits, he would have found that the lawyers’ acceptance of the gifts violated ethical rules in that they should have advised the widow to seek independent advice. Further, the widow conditioned the gifts on the lawyer’s decedent’s children were also clients in the estate litigation and the gifts were not disclosed to them. Disclosure was required so that the children could properly assess whether the gifts had affected the lawyers’ continued representation.
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