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NYC Dept of Consumer Affairs Report, "Women in Divorce: Lawyers, Ethics, Fees & Fairness" Part 1

New York City Department of Consumer Affairs' Report:

"WOMEN IN DIVORCE: LAWYERS, ETHICS, FEES, AND FAIRNESS," written by Karen Winner and issued by Commissioner Mark Green, March 1992

I. SUMMARY: DIVORCE, NEW YORK STYLE

Divorces are rarely easy. But with the help of expert lawyers pursuing the best interests of their clients, parting spouses can settle fairly their property and child custody disagreements. In the end, both spouses would be left with their rightful shares of the marital assets.

That's how divorces are supposed to proceed. But a year-long study of divorce in New York City by the Department of Consumer Affairs has found a different reality. Women, in particular, are often denied a fighting chance for their rightful share of marital assets because the American adversarial legal system and New York's equitable distribution law encourages both enormous legal fees and the financial exploitation of vulnerable clients. And the high cost of matrimonial cases practically prevents middle-class couples from using the justice system to divide equitably marital assets or resolve child custody disputes.

Divorce legal fees -- much like doctor and hospital bills -- are beginning to spiral out of control. Legal fees for a contested New York City divorce can typically mount to $50,000. Just a half day in court can cost $1,000 or more. Legal representation has become largely unaffordable for the middle class. In terms of annual volume, we estimate that the divorce "industry" generates fifty million dollars-a-year in Manhattan and the Bronx alone.

The Department of Consumer Affairs undertook this project because several female divorce clients came to our office asserting that their lawyers charged them enormous fees but produced little value in return. Our subsequent research uncovered several patterns of financial abuse by divorce lawyers; some practices are illegal, some are unethical, and some appear unfair but fall into a vast grey area not covered by the Lawyers' Code of Professional Responsibility.

Based on reports from clients, lawyers and judges, some divorce lawyers engage in abuses which have the effect of either impoverishing female clients or pricing them out of the justice system, or both:

Demand huge sums of money on the brink of the trial or settlement.

One lawyer asked his Brooklyn client to sign a $100,000 promissory note a few days before the trial, which involved a custody dispute. Because the mother feared losing her child, it was difficult if not impossible for her to refuse to sign.

Fail to refund retainer fees even though little or no work was performed on the case.

One very prominent lawyer refused to refund $15,000 after the couple reconciled only two weeks after signing the retainer agreement. One wife told us her lawyer included in his retainer a "penalty fee" for reconciling with the spouse.

Refuse to release client's files to her or him.

Lawyers sometimes use a "retaining lien" to keep their clients file until the bill is paid, a practice which puts the consumer over a barrel if she/he wants to have another attorney continue the case. Without access to the documents in the client's file, it is very difficult either to continue the divorce proceeding or to dispute the fee. Some lawyers will not even return basic personal documents, such as a passport.

Charge large fees for little work.

A lawyer met with a client twice for a total of two hours, during which time the lawyer said he could not handle her case. Assuming the charge for his services would come to a few hundred dollars, the client was shocked when he sent her a bill for $2,500. In a questionnaire from a national sample, a quarter of those answering acknowledged billing more hours than they actualy worked.

Overcharge, and then abandon clients when their money runs out.

One lawyer charged a formerly upper middle class woman several thousand dollars to work on her case, and then abandoned her when she couldn't come up with $35,000 more for his future legal work. A judge ordered the lawyer to continue working on her case, but he still refused, according to the client. Because her legal rights were left unprotected, she lost her home to foreclosure and is now living in a homeless shelter in Virginia.

Pad their bills and sue their clients for more.

One Manhattan client paid $2,500 to her lawyer for six weeks of work, but the lawyer then went to the client's husband, without the client's knowledge, and asked him for $10,000 in legal fees, promising that he would get his client to settle. The client wouldn't settle, and her lawyer then presented her with a $35,000 bill. After the client refused to pay, a judge presided over a fee dispute hearing, and the matter was settled for less than half the disputed amount.

Excessively litigate and use other needless delaying tactics to drive up fees and obstruct justice.

They come in for the conference and one lawyer says 'I want this and I want this' and the other lawyer says 'why didn't you ask me?' and then the first lawyer says, 'because seven weeks ago I tried to call you and you didn't call me back.' And I say to him, 'Well, will you give it to him?' and he says, 'of course I will.' They've just spent three hours of the client's time over something that was not an issue at all -- it was an absolute non-issue.

Some lawyers use "motion churning" and other delaying tactics against opposing parties. But when deployed in a divorce, they can impoverish the unmonied spouse -- virtually always the wife. Justice Kristen Booth Glen of the Supreme Court of the State of New York (NY County) describes one form of delay:

Besides questionable billing practices, our study found that divorce lawyers sometimes misrepresent their divorce clients in several other ways. The problem of lawyers with conflicts of interest was illustrated by the case of a family lawyer of a Manhattan couple who had detailed financial information on both the husband and wife, yet represented the husband in preliminary divorce discussions anyway. This report will discuss lawyers who illegally helped their clients conceal assets from spouses by assisting with perjury and forgery at depositions, in net worth statements, and in other financial exchanges of information. State Supreme Court Justice William Rigler told us he sees perjury in assets valuation "a great deal of the time."

Many non-monied spouses find themselves in a desperate Catch-22 situation where they don't have the large sums of money required by lawyers for continued representation. Lawyers will allow a client to run up a huge bill. However, if the settlement became doubtful -- such as where the husband declared bankruptcy -- the lawyers still expected the same level of payment from the destitute spouse. We found they may then take the client's personal jewelry, the family home, or ask the client's family for payments.

Of course, some divorce clients can be very difficult, and a desire "to take him [or her] for all he [or she] is worth" can delay cases and greatly inflate legal costs. But, while the majority of matrimonial lawyers are ethical, our research shows there are still many members of the matrimonial bar who are more concerned about their fees than their clients. For example, at a March, 1992 meeting at the Association of the Bar of the City of New York, several matrimonial attorneys openly acknowledged that they use non-refundable retainers, "minimum fee" clauses, liens on family homes, hold on to clients' files, and view these tactics as acceptable methods to collect payment from their clients.

At the heart of many of these fee-related problems is poor communication between lawyers and clients: bills can be hard to read, retainers are usually vague and in legalese, and many lawyers fail to orally communicate early-on just how expensive a case can become or to inform a client of all their options as a divorce cases proceeds. "I've seen six-page retainer letters filled with pitfalls. No client could understand them," notes Manhattan attorney Rita Warner.

Miscommunication with clients is a more serious shortcoming in divorce cases than in any of some two dozen kinds of legal matters -- including personal injury and collection cases -- according to the American Bar Association's "Report of the National Legal Malpractice Data Center." The ABA's findings were based on a four-year study of 30,000 malpractice claims. The study cited failure to get clients to consent to important pending matters in their cases as the biggest problem within family law practice.

In addition to the national malpractice study cited above, Hal Lieberman, of the First Department Disciplinary Committee, told us that ten to fifteen percent of the 3,000 annual grievances filed in his office, covering Manhattan and the Bronx, concern matrimonial cases.

While surveys such as the ABA's and Disciplinary Committee's are indicative of the scope of this problem, we have relied extensively on anecdotal evidence because State Supreme Court matrimonial files, which would permit a more empirical analysis, are sealed. Local Bar Associations do not keep track of settlement outcomes in fee disputes, nor do local Disciplinary Committees, which oversee lawyer discipline, reveal much about the complaints they review. No other empirical research exists on the subject of legal fees in divorce. In fact, to our knowledge, this is the first critique of divorce lawyers and clients undertaken by a public agency.

In all, we conducted 107 separate interviews, with divorce clients, matrimonial lawyers, legal scholars and judges. And our findings and conclusions have been reviewed in a meeting of an advisory group to this study, comprised of prominent judges, law professors, ethicists, reform activists, and experts in the field of lawyer discipline.

This study urges the Appellate Divisions to adopt several simple measures to prevent the worst kinds of financial abuse of divorce clients.

1. A Divorce Client Bill of Rights.

We urge the Appellate Division to require that all lawyers hand their prospective divorce clients a Divorce Client Bill of Rights at the initial interview in order to better inform clients what to expect and to provide for a more equal relationship between lawyer and lay person. For example, it would inform the client that he/she has the right to know how many attorneys and other legal staff members are working on the case at any given time, and what the client would be charged for their services. A model Divorce Client Bill of Rights is attached as Appendix A.

2. Fee itemization and monthly billing.

The Appellate Division should require lawyers to itemize monthly bills in matrimonial matters. Attorneys would have to fully break down how much they are charging for the time of partners, associates and paralegals, and for various other expenses such as photocopying, accountants, investigators and messengers.

3. Mandatory arbitration at the election of the client in fee disputes between lawyers and divorce clients.

The Appellate Divisions should establish such a program through amendments to the Rules of the Supreme Court, Appellate Division[s], which would require lawyers to abide by the arbitration board's decisions in fee disputes, if the client elects mandatory arbitration. Mandatory fee arbitration is already being used in several states such as New Jersey and Maine, and is also in widespread use in the securities industry to reduce the potential for costly legal actions. Until mandatory arbitration is made available, consumers should seek out lawyers who are willing to sign a fee arbitration agreement, which can be added as a provision to any written retainer agreement between lawyers and clients.

4. The Appellate Division should refer cases where there is a "pattern and practice of lawyer abuse" to the New York City Department of Consumer Affairs.

The Department would then seek injunctions and fines for lawyers' deceptive trade practices. Although lawyer misconduct is regulated by the Appellate Divisions of the State Supreme Court, the Department of Consumer Afairs is also responsible, under the New York City Consumer Protection Law, for protecting consumers against deceptive trade practices. Some of the methods used by lawyers to take advantage of their clients, such as false advertising and misrepresentation of facts regarding their services, are deceptive trade practices. Thus, the Department could use the enforcement authority provided by the New York City Consumer Protection Law (CPL) to take action against lawyers who are engaging in a pattern of deception. However, the Appellate Division Disciplinary Committees would have to be willing to refer cases to the Department where a "pattern and practice" exists.

5. Encourage judges to grant fair, timely counsel fees to non-monied spouses from monied-spouses.

To deter delaying tactics and encourage settlements, judges should grant fees to non-monied spouses' lawyers at their usual rates from the monied-spouse; it's unfair to allow one side to use the common marital pot to exhaust the otherside.

6. The Appellate Divisions and the Bar should establish a Blue Ribbon Panel of independent experts and divorce clients to explore how to systemically reform an inherently unfair system.

While the adversary process may work well with comparably large businesses arguing in court over millions or billions of dollars, in the divorce area it ironically depletes the marital pot it's supposed to divide. The result may not be quite the movie War of the Roses, but rather a war of attrition that often helps lawyers, not clients. The Blue Ribbon Panel should seriously consider new, non-adversary system approaches. For example, if a contested divorce involves assets, say, of $30,000 or under, a court-appointed trustee would be appointed to hold a brief hearing, and then come to a decision, because inexpensive justice is better than no justice at all.

II. INITIAL OBSERVATIONS
The following initial observations form the basis for the investigation that follows.

A. At the outset, divorce lawyers have many crucial advantages over their female clients.

To make matters worse, divorce clients are usually in an emotionally vulnerable state. Insecurity, anger, and pain -- feelings common in a marital break-up -- put clients at a distinct disadvantage when dealing with an experienced lawyer.

Lawyers also have the advantage of possessing detailed financial information about the client, and eventually about the spouse, as well. "In matrimonial law you know exactly how much money your side has and exactly how much your opponent's side has and in the hands of less than an honest lawyer, that's very damaging information," says Howard Benjamin, a Manhattan matrimonial lawyer and former Deputy Counsel for the Disiciplinary Committee (First Department) that oversees lawyer discipline in Manhattan and the Bronx.

Women are at a particular economic disadvantage in divorce because they typically do not control family assets at the end of a marriage. A study that measured the economic consequences of divorce for women, by Saul Hoffman, Professor of Economics at the University of Delaware and Greg J. Duncan, University of Michigan, found that standard of living drops 30 percent for women and rises 10-15 percent for men in the one year following the divorce. (The study was based on income adjusted for family size.) According to Hoffman, "The loss of their income was in spite of the fact that women increased the amount of their work after the divorce. It reflects the difference in earning ability for women and probably inadequate child support." Hoffman additionally noted that the income decline remained for those women who didn't remarry.

These figures reflect U.S. Census Bureau data which shows that income available to children drops 37 percent immediately following the father's departure. Without the financial resources necessary to fight in court for their rightful share of marital assets, women are effectively priced out of justice. In a survey of lawyers conducted by the Nassau County Bar Association's Committee on Women in the Courts, 30 percent of lawyers who responded said their female matrimonial clients often settle prematurely because they are without available funds to pay, compared to 17.3 percent of lawyers who said their male clients settled prematurely. In Nassau County, lawyers and judicial officials have been meeting during the past year to discuss the problems divorcing wives frequently face, such as the "inequality in the negotiating ability between a husband who has the money and a wife who does not."

Women sometimes also have an educational or life experience disadvantage. This is especially true of older women in "traditional" marriages, who have been homemakers most of their lives. Stanford University legal ethics scholar, Deborah Rhode, explains: "Women are in a position of vulnerability -- they are unused to negotiating with lawyers and can get taken advantage of."  

B. Deficiencies in the legal system also help waste clients' money.

Because motions aren't scheduled to be heard at set times of the day in State Supreme Court, dozens of lawyers may have to sit around waiting for hours for their motions to be called. This allows lawyers, who charge by the hour, to bill for idle time. Former U.S. Attorney and State Bar Association President Whitney North Seymour Jr. estimates that a typical client could save from $2,000 to $10,000 if court clerks scheduled motions with appointment books and telephones. Unfortunately, individual appointments are impractical given each judge's heavy case load. Indeed, the problems of an underfunded and overcrowded court system adds immensely to total client costs.

C. Only the well-to-do can afford full-fledged divorce proceedings.

This report necessarily focuses on relatively well-off couples who are involved in contested divorce. Few others can really afford it. "Nobody can afford it unless they have unlimited assets," said State Supreme Court Justice Emily Jane Goodman. "The courts are only available to the very rich, and those served by Legal Services. Legal Services only represents the smallest fraction of people and they are completely overburdened."

What do middle class people -- such as a couple earning $20,000 - 60,000 and with two kids -- do? What do poor people do? "There's a lot of people who can't be served," according to Pat Bath, Director of Public Information at the Legal Aid Society. "People who are above poverty income have no place to go." Those earning more than $8,275 a year ($11,100 for family of two) are ineligible. Poor people who do qualify face long waiting lists for divorce services at Legal Aid, sometimes so long that they are asked to come back later to put their name on a list. Battered women and tenant evictions are given priority over matrimonial cases, Bath adds.

Even where working-class people are fortunate enough to be eligible for free legal services, such as from a pre-paid union legal plan, there are often waiting periods from three to five months. District Council 37, Municipal Employees Legal Services Plan (MELS), serves 140,000 City workers, including Parks Department personnel, school lunch workers, computer-operators and clerical workers. The union's legal branch serves 1,800 divorce clients at any given time -- with many more on waiting lists, according to Loris Primus, supervising attorney in the Matrimonial Unit at MELS. "Most of our clients fall into an income range of $25,000 -- if they were to go out there to hire an attorney they would not be able to afford one," said Primus. "The other side has to pay out of the pocket for legal fees. Our side doesn't. Without DC-37, a lot of people wouldn't be able to afford attorneys so they would be nowhere." Primus explained:

I've seen legal fees for the other side from $2,500 to up to $12,000. A woman first went to a private attorney and then came to us. Her income was close to $26,000. Her husband was making $28,000. They don't have any real estate. They were fighting over the child because she thought it would be too dangerous for the child. Her lawyer was charging her $225 per hour. They got bogged down after four or five hearings. The court ordered that a forensic examination be done for custody and that would have cost $2,500 to $3,000. At that time, she had amassed a legal fee of over $7,000 -- and she hadn't got the divorce yet. Her gross income was only $26,000. We took that case.

D. Poor communication between divorce lawyers and clients leads to misunderstandings and inadequate client representation.

As mentioned in the Summary, miscommunication with clients is a more serious shortcoming in divorce cases than in any of 25 other kinds of legal matters, according to an ABA study on malpractice. Our discussions with a number of prominent divorce lawyers revealed a somewhat unsympathetic view of their clients. When asked why so many consumers complained to us about not being informed of the possibility of high fees, one of the lawyers said: "It's because they just don't listen. They don't hear." When asked why consumers complained that proceedings are often not explained or documents not provided, we were given responses such as, "they won't understand the papers anyway," and there would be "unnecessary questions." When told that consumers complained about lawyers not returning phone calls, lawyers said that such clients should report this to the Disciplinary Committees; but as we show later in this report, that alternative is an impractical remedy.

We discerned a very definite "us against them" attitude at a meeting of the Association of the Bar of the City of New York's Matrimonial Committtee, which we attended to get input into this report from about 20 of the City's leading divorce lawyers. One lawyer wanted to know why we were not writing a report about how lawyers are abused by their divorce clients, rather than the other way around. Another characterized "those women's groups" as consisting of "women who vent their spleen over and over again." Other lawyers complained that clients assume "divorce lawyers are fair game," and "clients have a license to steal."

E.  The inadequate lawyer disciplinary system fails to deter "divorce lawyer abuse."

Divorce lawyers are trusted to voluntarily comply with the Code of Professional Responsibility. Lawyers are disciplined by the New York State Appellate Division's Disciplinary and Grievance Committees -- which are, of course, run by lawyers. And the mechanism for addressing fee disputes, the Bar Association's Fee Conciliation Service, is of little help to divorce clients because its decisions are not binding.

The problem is rooted in an overall lack of lawyer accountability to the public. Investigation of lawyer misconduct has traditionally been shrouded in secrecy. This is true particularly in New York, according to Hal Lieberman, of the First Department's Disciplinary Committee. He calls New York "one of the most restrictive states in this area." Since the outcomes of most complaints are kept secret, a divorce client has no way to learn how many complaints have been filed against his or her lawyer, or if the lawyer was reprimanded, short of being disbarred.

We found a particular pattern in which lawyers often deflect complaints about fees and settlement outcomes by attacking the complainant's character. For example, lawyers answering ethics charges very often portray the complainant-client as vengeful, or having an ax to grind, or being a sore loser. According to State Supreme Court Justice Kristen Booth Glen, "The few people who raise the problem [of unfair settlements] are seen as embittered hags who just wanted to punish their husbands -- I think this really has to be out in the open."

On the other hand, to our knowledge there have been no prosecutions in New York City of lawyers who assist spouses to conceal assets, i.e. under-reporting their client's income (usually the husband's) on net worth statements taken under oath. This problem occurs most frequently where the husband is self-employed and is able to manipulate earnings and values to show less than their real worth, which is done to avoid (or evade) income taxes. Michael Cherkasky, Chief of the Investigation Division of the Manhattan District Attorney, explains:

If you rob someone with a gun, the first time, you don't go to jail. People don't go to jail for forgery in New York City. It's extremely rare. If you do it for the twentieth time, you'll go to jail, but most people who forge don't do that. Most of the time, we're not going to pursue those cases. There has to be mega-bucks involved and even then, it's often handled by civil litigation.

Some of the lawyers we interviewed said asset undervaluing is common. Lillian Kozak, a certified public accountant who has examined business records of at least 200 privately-held companies, reports that she has seen this happen in the vast majority of cases. Rather than jeopardize the spouse with the Internal Revenue Service, wives are told to keep quiet about the fraudulent tax statements. One client recalled her lawyer asking: "You don't want him to go to jail do you? Then you'll never collect what he owes you!"

III. HOW SOME DIVORCE LAWYERS MAKE WINDFALL PROFITS

Divorce lawyers typically charge by the hour. The going rates in Manhattan usually range from $200 to $400 an hour, with rates somewhat less in the other boroughs. Most divorce lawyers also require a big lump sum payment before they will start a case. This down payment is called a retainer, and it can range anywhere from $500 to $50,000. The retainer is used up as the lawyer's time is consumed on the case. With legal fees so high, a $5,000 or even a $10,000 retainer can be exhausted before the case has hardly begun, Justice Gangel-Jacob told us.

So-called "rainmakers," as they are known in the legal profession, are the highest-priced lawyers and have the biggest reputations. Their special talent is to draw clients. On the somewhat lower end of the rate scale are high-volume chain law firms, such as Jacoby & Meyers, which would not disclose their rates to us over the phone, although a Jacoby & Meyers retainer we obtained cited an estimated $1,150 fee for an uncontested divorce, plus costs of $370. A lawyer's base hourly rate, however, does not include various other significant costs that may or may not be disclosed to the client. In addition to paying for the attorney, the client is expected to pay for any number of other legal personnel, including partners, associates, and paralegals whom their lawyer may involve in the case, and who also charge by the hour.

Clients also pay for lawyers' out-of-pocket "disbursements," such as for document photocopies, travel expenses, messengers, process servers (personnel who deliver summonses) and miscellaneous expenses that may add up to very substantial sums. For example, one prominent lawyer charged a woman a minimum of $150 in travel time even though his office was only a ten-minute car ride from the courthouse.

The client's total fees can vary drastically, depending on how long it takes to do the legal work, and how many lawyers, paralegals, and others are involved. We found some lawyer's bills doubled every time the lawyer went to court because he or she brought along an associate. In one such example, a client paid $500 an hour for two lawyers, which added up to $1,600 for one day's court time -- and this happened whenever something needed to be done in court because the senior lawyer always needed the associate to brief him.

The inherent problem with the hourly rate systems used by nearly all matrimonial lawyers is that the less scrupulous lawyers can reap fortunes from clients who have no real way to ascertain how long a certain task should take or how many people are reasonably needed to carry it out. Hourly billing in matrimonial cases was strongly criticized in an article in the Journal of the American Academy of Matrimonial Lawyers (Vol. 7, 1991): "Billing by the hour has many inherent problems. In most cases, the client wants the case resolved as quickly and efficiently as possible. The attorney, whose fee will be determined solely by hourly charges, will be compensated less for a quick and efficient resolution and more for a slow and protracted case. Thus the usual method of billing permits and promotes a conflict between the interests of the attorney and that of the client...Hourly billing also incorrectly assumes that all tasks have the same value..."

Scrupulous higher-priced lawyers we interviewed said they will not take cases their client cannot afford. But unless the firm has a policy of disclosing such information, or provides a detailed fee agreement, there is simply no other way for a client to know just how high fees might climb.

Two recent U.S. government studies of government-paid lawyers working on the S&L bailout are instructive on the topic of hourly billing. They showed the lawyers had built up their billing hours with unauthorized research and that they charged an inflated $100 an hour for clerical work. The reports concluded that the practice of hourly billing encourages lawyers to pad the bill.

The U.S. government uncovered massive over-billing at the S&L's, but divorce clients have no government research team to find out if they are being victimized by deceptive billing practices.

Here are the ways that too many divorce lawyers fleece unwary clients:

A. Basic overcharging, hidden charges and phony bills

Legal ethicists explain that the profit motive lies behind runaway legal costs. As Stanford University Law Professor Deborah Rhode wrote:

Depending on the press of other business, attorneys who charge by the hour may face considerable temptation to prolong certain tasks or to retain matters that they cannot complete efficiently. And clients are not always well situated to monitor counsels' performance. . . .Legal strategies may reflect intentional meter-running, an abuse that litigators frequently report observing (though never committing). At best, such paper churning and procedural shadow-boxing suggests a more subtle mixture of adversarial psychology, financial incentives, and perfectionist anxieties. . . most lawyers will prefer to leave no stone unturned, provided, of course, they can charge by the stone.

Empirical evidence suggests that deceptive billing practices are not uncommon. "In one small survey, nearly all the practitioners reported some form of deception," Rhode added. She wrote that abuses included "billing two clients for the same time; charging for unnecessary work, or failing to disclose the basis of a bill. . . In another survey involving questionnaire responses from a larger national sample, a quarter of respondents acknowledged billing more hours than they actually worked; about half of those responding denied padding themselves but believed that other lawyers did."

Making it easier for unscrupulous lawyers to get away with deceptive billing is the sketchy format of many legal fee statements. These usually provide only a cursory description of the work that was done. And since they sometimes bill their time in tenth-of-an-hour segments, a 30 second phone call would be rounded-up to cost the same as a six minute one. In addition, some law firms fail to compute bills, leaving it to the client to do the arithmetic.

New York law firms' billing disclosure policies "tend to be more lax" than elsewhere, according to a recent report in The Wall Street Journal.

With vague billing statements, minimal working knowledge of the law, and no access to the lawyer's original time-sheets, consumers cannot possibly tell if a bill is justified or if a lawyer's costly time is being wasted. But consumers provided us with quite a few cases where overcharging was fairly apparent:

  • An ex-wife said she was billed for every call she made requesting that her original documents be returned to her after her divorce. Because the documents were never returned all at once, she was forced to keep calling.
  • A wife we interviewed was billed for the time she spent reorganizing her own file at the lawyer's office.
  • Another wife was billed for phone calls never received because no one was at home.
  • One lawyer raised fee rates in the middle of the case, without warning the client beforehand.
  • A wife told us her lawyer included in his retainer a "penalty fee" for reconciling with the spouse.

Lawyers we spoke with said that certain documents may be no more than standard "boilerplate" forms that could be filled out in minutes by a paralegal. But thousands of dollars can be billed for them. "Every lawyer today has a word processor, and at the large firms, a lot of this [work] is boilerplate and on the computer," says White Plains attorney Gloria Jacobs.

In a subtler form of over-billing, lower-paid associates are required to bill at a far higher rate than they get paid. This, however, is not disclosed to the client, who may end up paying more because of an associate's inexperience. "I wasn't worth $350 an hour -- I still don't charge that," said Howard Benjamin, of his years as an associate at a matrimonial firm.

In one divorce case, a financially-successful Manhattan writer who left a violent six-year marriage appears to have been financially exploited on successive occasions in garden-variety billing abuses. When she married, she was worth about $500,000, derived from writing and real estate. At the end of her six-year marriage, her separate assets had climbed to roughly $600,000. But after her divorce, Sophie (not her real name) had substantially less money than at the beginning of her marriage because she paid $150,000 in divorce fees and is now being sued for more by one of her former lawyers. A chronological history of her fee experience illustrates how a woman can suffer from bloated legal fees:

She Paid Additional Charges the Lawyer Billed
Lawyer 1:
(for 6 months work)
(Dec. '87- June '88)
$15,287.50 $35,182.86
Lawyer 2:
(for 16 months work)
(June '88 - Oct. '89)
$80,000 $16,762.85
Lawyer 3:
(for 6 weeks work)
(Oct. 10, '89 - Nov. 30, '89)
$3,500 $8,284.50
Lawyer 4:
(for 6 weeks work)
(Dec. 12, '89 -  Jan. 22, '90)

$2,500
$2,500 later

$10,000(paid by her husband)

$35.541.49
Lawyer 5:
(for 15 months work)
(Feb. '90 - May '91)
$28,000

approx. $28,000

Court documents show that Sophie's first lawyer charged her $35,182.86 for five months work, in addition to the retainer and first payment she made. We learned that this work was actually done mostly by an associate with only fourteen months experience but who was billed out at $325 an hour.

Lawyer No. 4 abandoned the case after he met with Sophie's husband without Sophie's permission and proposed to him that, if he paid him $10,000 to cover his legal fees, he could pressure Sophie to settle. Sophie's ex-husband told us he was so outraged by the lawyer's proposal that he was willing to testify against his wife's lawyer. He said:

A lawyer approached me and said he represented my ex-spouse and that he was not being paid. That he was doing this as a favor for one of his clients and that he had influence that other lawyers were not able to exert over my wife. He asked me if I would pay him $10,000 in legal fees. He later sent my wife a rather large bill that seemed to be very outrageous. It was a very bitter divorce...[but] in spite of the fact that I was not on good terms with my wife, I offered to testify for her if necessary because of what he did.

The lawyer then sent Sophie a bill for $35,000, which she could not pay. She was forced to retain her fifth lawyer to continue her divorce case and to handle the legal fee dispute. This lawyer, Manhattan attorney Richard Burns, wrote in a trial memorandum:

At the trial, defendant will show that the bills, which constitute plaintiff's only existing time records, show excessive time spent by attorneys on various matters, including top rate billing for routine matters, billing of time by two lawyers working together on the same assignments, and two lawyers, Mr. X (at the rate of $350.00 and hour) and Mr. Y (at the rate of $200.00 or $210.00 an hour) together attending court conferences and billing the full time of both attorneys.

Sophie said that the Justice who oversaw the fee dispute eventually gave her the option of taking it to trial or settling for a "nominal" amount. Sophie offered to pay a fee of $2,500 and her ex-husband offered to pay the $10,000 the lawyer had originally asked for, to resolve the dispute. The lawyer accepted.

Some lawyers engage in outright phony billing. Sophie was once billed roughly $850 for a supposed conference meeting with her divorce lawyer. She took her billing dispute before a special court referee, and proved she was on an out-of-town speaking engagement on the day of the supposed meeting by showing news clippings dated the day of her appearance.

Lawyers' rates are based on numerous factors, outlined in the Code of Professional Responsibility, such as the going rates in a given locality and how much experience the attorney has had. One very important factor that the Code does not take into account, however, is the client's ability to pay large sums. But such an omission creates a major legal problem for non-monied spouses because it means the courts are not required to show any special consideration in cases of financial hardship. This was confirmed by Special Referee Steve Liebman, who makes decisions in fee disputes at State Supreme Court in Manhattan. As Justice Gangel-Jacob told us, referring to fees: "Some lawyers really play hardball -- without any kind of morality when it comes to the client."

Corporations trying to control costs in these recessionary times are turning increasingly to auditing firms that specialize in evaluating and uncovering irregularities in legal bills. But the average divorce client can't afford to hire someone to check legal bills, especially not after paying some of them.

B.   Abandoning clients when their money runs out.

Lawyers can run up huge bills and then abandon their clients if they can't pay. Non-monied spouses who are left legally defenseless in their divorces can be consequently plunged into poverty.

For example, Deirdre Akerson -- a formerly upper-middle-class Westchester woman married for 24 years to an advertising executive -- said she was forced onto the streets after her lawyer abandoned her case. Last April, a judge ordered the lawyer to continue working on Deirdre's case, court records show. But according to Deirdre, the lawyer still refuses to work on her case until she pays the $30,000 for his future legal services. The lawyer, however, denies this and says that Deirdre has not instructed him to continue.

Deirdre, age 44, has a graduate degree in political science, but gave up her career to raise two children. Hospital records show she was also a battered wife, which she said led to their separation. Because she did not have the funds to support herself or her children during the separation, her lawyer obtained court-ordered support to pay for necessities and for the mortgage on the family home. But her husband refused to send payments, and without money, Deirdre's lawyer refused to pursue collection. Consequently, the home was foreclosed, and Deirdre began life on the streets. She said her low point was when she had to live under a bridge in Florida last year. Deirdre is currently living in a homeless shelter in Virginia.

According to Deirdre: "How can I instruct him [the lawyer] to do anything when he wants $30,000?. . .He said [in December] if I absolutely insisted, he'd file a judgment against my husband for non-payment of the pendente lite [order] but it would cost me $30,000 to file that paper -- one paper -- and he wanted to be paid. And he said, you can't afford it, so he said your only choice is to settle with him. My husband doesn't want to settle -- why should he? He doesn't pay me anything now. If he settled he'd have to pay me."

Deirdre not only lost her home, but her rights as a mother as well. She cannot even see her 13-year-old daughter because a court-appointed guardian, the legal liaison between Deirdre and her daughter, will only correspond with Deirdre's lawyer. But since Deirdre's lawyer won't continue the case, Deirdre cannot work out any visitation rights with her daughter.

We obtained a copy of Justice Samuel G. Fredman's written decision, addressing the lawyer's motion to withdraw, which states:

. . . As I myself stated from the bench, there is no involuntary servitude in America, and I have no right to make any attorneys work without payment, but in this case they made their own agreement and a balancing of the equities involved at this time, as I see the picture, makes it necessary that they carry out their responsibilities to this plaintiff, however cumbersome that is going to be for them . . . The lawyer has no right to withdraw from his or her part of the bargain merely because the client is deferring the method of payment . . . There is no excuse for clients in a matrimonial [case], who may have borrowed, or scrimped or saved to have enough money to pay a retainer, being forced into either seeking new counsel, often at the most difficult stages of a litigation and often without any source to pay a new retainer, or having to choose to represent themselves at such serious times.

C.   Needless delaying tactics

Lawyers' delaying tactics were considered the most frequent divorce case problem in a recent survey of roughly 500 matrimonial lawyers by The American Academy of Matrimonial Lawyers, an elite 1,200-member association of the nation's most prominent divorce lawyers. In its new guidelines for matrimonial lawyers -- Bounds of Advocacy -- the Academy warned: "Attorneys may be tempted to wear down the opposing party or counsel by means of 'hardball' tactics. These tactics do not support the legitimate interests of clients, and are clearly improper. . . An attorney should cooperate in the exchange of information and documents whenever possible. An attorney should not use the discovery process for delay or harassment, or engage in obstructionist tactics."

Nonetheless, a serious fee abuse results from "motion churning" -- when a lawyer uses unnecessary court procedures to rack up fees or to deliberately delay justice. Deliberately financially wearing down the opposing party is an accepted tactic in legal warfare, according to Fordham University Ethics Associate Professor Russell Pearce: "Motion churning is a conventional defense tactic. Part of the game of our judicial system is imposing costs on the other side." In divorce proceedings, motion churning puts often-financially fragile wives at a distinct legal disadvantage.

White Plains matrimonial attorney and divorce reform activist Gloria Jacobs has cited motion churning as a "frequent" problem. Justice Kristen Booth Glen told us that she and her colleagues are also aware of motion churning: "I have the sense some lawyers really churn, horse around and run up huge bills. I have to assume they are churning because there is really no legal or strategic reason for them to be doing it." One lawyer told us that some colleagues will figuratively "bill by the pound" for paper they produce in divorce cases.

Lawyers engaged in motion churning use up the client's funds without completing the work and then, after collecting their fees, sometimes ask to be removed from the case. Justice Glen explained that this form of practice is more frequent with wealthier clients:

Well, the ones who do it tend to have richer clients. There's more to spend. And frequently those lawyers will just litigate to death at the beginning of the trial and then they will have collected $80,000 or $90,000 from their clients and their clients stop paying or run out of money and then the lawyer moves to be relieved, or the client fires them or they fire the client and an enormous amount of money has been spent and the case is still nowhere near trial-ready and now the people are really crazed because they've used up all this money.

Other forms of delay include missed appointments, refusal to provide information to the spouse's attorney in a timely manner, and forcing the other side to submit to costly deposition sessions or respond to voluminous requests for production of documents. According to State Supreme Court Justice Walter M. Schackman, "All too often, unnecessary deposition sessions continue days on end, ultimately disclosing no useful information whatsoever. . .A request for a conference can stop tactics designed to harass or pressure an opponent."

One attorney told us of receiving a 20-page set of interrogatories, or written questions, seeking financial information about her client. Yet her client was a welfare receipient. Presumably, the client's spouse was billed by his attorney for this seemingly needless information request.

One typical delay example involved a 44-year-old Staten Island homemaker with two children, who filed for divorce from her alcoholic husband. She said she has been waiting three years for an evaluation of his commercial property, but the husband and his lawyer repeatedly missed appointments and postponed court dates three times to exchange financial information. "The lawyer used delaying tactics so my money would run out and it has," the homemaker says. "I really believe these lawyers tell these men not to support their wives so the wives will be starved out." The ability to delay is also made possible in part because there is lax compliance with provisions of the Civil Practice Law and Rules (CPLR) governing the exchange of financial information between the spouses.

D.   Producing no value for the fees

Unlike other consumer services, divorce lawyers are paid by their time, not necessarily for results achieved. Depending on a number of variables, the divorce lawyer may or may not produce results. Ethicist Stephen Gillers explained, "The other side has to agree and the judge has to agree. The client doesn't understand at the end of the day, she could be nowhere through no fault of the lawyer or fault of the lawyer." The lawyer also does not even have to guarantee to stay in the case before it is resolved. Like a doctor who boasts the operation is a success even though the patient died, so too do some lawyers take on a case only to charge so much money that they drain the client of their entire settlement.

Melodie Bahan, president of the New York Chapter of the National Organization for Women, says that her organization receives from 30 to 50 calls a week on divorce issues. "A good number of them [clients] are unhappy with what happened," said Bahan. "One of the main complaints is that the lawyers took a lot of money and nothing happened."

Even huge legal fees paid to prestigious lawyers don't guarantee that the spouse will recoup any marital funds at all. One case of a client allegedly receiving no or little value for enormous legal expenditures is a woman from Westchester with a doctoral degree in special education from Columbia University, whose lawyer-husband abandoned her and her children after 24 years of marriage. Susan (a pseudonym) spent a total of $15,000, and her lawyers, having obtained a $45,000 judgment against her, have siezed and liquidated her $20,000 retirement fund and have frozen her personal bank account:

Susan paid her White Plains/Manhattan lawyers $15,000 specifically to get her child support award enforced, since her husband refused to pay. At the time, Susan had three minor children -- two were preschoolers. She was teaching one and a half days a week at a local college and trying to develop a tutoring practice. Her annual earnings were under $10,000 a year.

She claims her lawyers did not do what she hired them for -- to enforce the child support award. Her lawyers have a different story, claiming she owed them $70,000 for three years of their time.

Before the scheduled trial, the lawyers asked Susan to sign a note for the $70,000 supposedly owed, but she refused. Then they abandoned her case, and took her to court, where a judge reduced the value of the lawyer's work to $45,000. The lawyers, attempting to collect from Susan, wrote her a letter on October 10, 1991, which stated:

"I really do not wish you and the children anything but the best . . .however, the kinds of disappointments that I have had in this profession, which have fortunately been few and far between, mandate that I look upon a situation like this as a businessman, as well as a professional, and I have a responsibility to my partners and my employees to see to it that the bills are paid. I can no longer put your and your children's welfare above that of my partners and employees."

Susan's lawyers subsequently seized and liquidated her $20,000 retirement fund and her entire bank account, which included her salary and baby-sitter earnings. "The judge issued an order saying my husband should pay unpaid child support, but my attorneys refused to try and collect it," she told us. "Now enforcement is what they just did to me. They got a judgment for the unpaid fee. They then restrained my IRAs, bank accounts and pay check. They forced the liquidation of my retirement funds and then they took it (in December). They just did that to me. But they refused to do it to my husband."

We contacted Susan's lawyer for the other side of the story. He told us he did not want to pursue collection from the husband for child support because he did not want to go to court every month. He said the strategy was to let the arrears add up and collect it all at once, by asking for the house. No one explained to Susan that this may have been a good legal strategy -- but it left her with insufficient funds to live on.

Hours before a restraining lien was placed on her IRA retirement fund, Susan, in desperation, called the Department of Consumer Affairs. We asked Susan's lawyer why he continued to carry the case, when Susan clearly could not afford their services. "Because we're nice guys," the lawyer said. An examination of the retainer agreement shows that the firm expected the client to keep current on payments, and yet the firm made no attempts to collect their fees from her on a regular basis. Susan's lawyer admitted to us that the firm only billed Susan three times a year. When asked why the firm does not submit monthly billing, Susan's lawyer told Consumer Affairs that he and his secretary make mistakes in the bill and that if clients scrutinized the bills and asked questions, he'd have to charge them for the phone calls. "Many people would begin to scrutinize it . . Let's assume there's an input mistakes -- mistakes I make, mistakes my bookkeeper makes. If I sent out a print-out to every client, they are going to look at it. . . All they're going to notice is a $35 dollar disbursement incorrectly billed to their account. They're going to make three or four phone calls that will increase the cost because now I'm going to have to answer their questions."

The woman in one Brooklyn divorce case related to us a litany of delays that this adversary process tolerates or inspires in just the initial stages of her case.

Ann O'Reilly (a pseudonym), a Brooklyn wife, secretary, and mother of five children, married 22 years, said she has been waiting for more than seven months for her lawyer to establish even one meeting with her husband and his attorney. She said she has called her lawyer at least 20 times in the past several months to try and find out why the meeting has not been arranged. So far, she has paid her attorney $1,250. In the meantime, her estranged husband, a retired police sergeant, has been living in the home and will not discuss financial arrangements that need to be made for their children's college and high school educations.

According to Ann's lawyer, the case was stalled because Mr. O'Reilly's lawyer repeatedly failed to return his phone calls or answer his letters. He told us he sent several written requests asking his lawyer to submit Mr. O'Reilly's net worth statement, but said he never received it. His lawyer also said he has put in more than "20 calls" to Mr. O'Reilly's lawyer, and has left phone messages four times in the past few months with his secretary. Mrs. O'Reilly's lawyer told us that the delays reached the point where even the estranged husband called him to get the case moving: "Ann's husband wants to settle, and he even called me. I told him I couldn't talk to him (ethical rules prevent it) but I told him 'I strongly advise you to talk to your attorney because he's the only one holding it up.'"

But when we contacted Mr. O'Reilly's lawyer, he insisted that he was merely carrying out Mr. O'Reilly's instructions not to release the net worth statement. He denied not returning the calls, and said Mrs. O'Reilly's lawyer never asked to meet with him. The facts of this case emerged when it became clear that the husband's lawyer wanted the wife's lawyer to pursue the case in court. "He knows what he has to do if he wants to get the case moving," the husband's lawyer said, indicating it would have to be tried in court.

We then contacted Mr. O'Reilly, who acknowledged that he contacted his wife's lawyer "at that time." He did not indicate, however, if he was still in favor of settling the case, or why he apparently changed his mind. After we relayed the information from the husband's lawyer to Mrs. O'Reilly's lawyer, he responded: "It looks like this is going to have to go to litigation. It's going to be very expensive. She can't really afford it. It's very stupid."

A week following our inquiry, Mrs. O'Reilly reported to us that her lawyer sent her a letter offering a $500 refund to be relieved of the case.

E.   Using non-refundable retainers

We found that some lawyers do not grant refunds even if they do no or minimal work. Such lawyers, including some of Manhattan's most prestigious, have "non-refundable" provisions in their retainers. There is strong disagreement in the profession over whether non-refundable retainers are ethically allowed. "It [a non-refundable retainer] is generally accepted in the profession if the client understands the terms and the amount is reasonable," according to Professor Stephen Gillers. He explains that the client is paying for the availability of the lawyer, not just the lawyer's time. Others, however, believe non-refundable retainers are unfair, and in direct violation of the Code of Professional Responsibility, DR 2-106, which prohibits lawyers from charging excessive fees. It states: "A. A lawyer shall not enter into an agreement for, charge or collect an illegal or excessive fee." The New York State Bar Association agrees that non-refundable retainer agreements are improper, but with the following narrow exceptions: they are allowed if the retainer clearly explains to the client under what grounds they are entitled to a refund; it must also note that the non-refundability is conditioned upon the absence of lawyer default.

Moreover, under consumer protection principles, where service performance obligations are not met by the seller, a contract should not be allowed to be "non-cancellable." For example, New York City's Consumer Protection Law Sec. 404 states: "(a) A contract for consumer goods and services may not be described as non-cancellable, unless the seller has performed all its obligations at the time the consumer signs the contract.

(b) A contract that complies with Section 404(a) may describe the fee or penalty that will be imposed if the consumer cancels, or may state that the consumer who does not perform his or her obligations under the contract will be responsible to the seller for damages."

Last July, as reported in the New York Law Journal (July 17, 1991), Nassau County State Supreme Court Justice Christ struck down a nonrefundable retainer agreement by matrimonial attorney Joel R. Brandes after he refused to refund $15,000 to a couple who reconciled shortly after the agreement was signed. According to Justice Christ, Brandes -- a former Chair of the Bar Association's Matrimonial Law Commitee and co-author of a six-volume treatise on matrimonial law -- had charged a fee that was "grossly excessive and shocking to the court's conscience." Joel R. Brandes, P.C. v. Zingmond, 573 N.Y.S 2d 579. (At this writing, no appeal has been perfected.) He used a non-refundable retainer even though, according to Justice Christ, "Non-refundable retainer agreements violate universal contract principles which require the non-breaching party to mitigate its damages." Christ continued:

It merits mention that not one document was generated during the tenure of the agreement. Not one pleading or letter was prepared by counsel.
No appearance in court was made. No conference among counsel was scheduled, nor does it appear from the time-sheets submitted that the plaintiff was involved in negotiating a settlement with adverse counsel during the pendency of the attorney/client relationship.
Thus, to permit counsel to retain what he characterizes as the minimum fee would be to lend judicial approval to an hourly rate of $3,571.43 ($15,000 divided by 4.2 hours) and sanction the violation of DR 2-106, the disciplinary rule that prohibits a lawyer from charging or collecting a clearly excessive fee.

We have obtained a copy of the retainer of one of the most prominent law firms in Manhattan. It reads, "The forgoing retainer is non-refundable and is intended to be our minimum fee. The entire sum shall be forfeited upon the occurrence of any event that terminates our attorney-client relationship prior to the retainer being consumed upon a time or hourly basis."

The issue of non-refundable retainers concerned some of the State Supreme Court Justices we interviewed. Said Justice Phyllis Gangel-Jacob: "A lawyer's fees are supposed to be ascertained according to quantum meruit [meaning 'as much as he deserved' for work and labor]." The problem is: too few clients know this standard and acquiesce in retainers such as the one cited above.

F.   Charging excessively for enforcement

Judges can order financially-able husbands to make payments to their wives, but this does not mean the wife will necessarily be able to collect. Because enforcement is not guaranteed, an unmonied spouse can find herself financially vulnerable at the end as well as the beginning of her case. After spending a large sum in legal fees to retain a lawyer, and then spending more to uncover the funds, she might have to spend even more money on lawyers to go into the court to get the judgment enforced.

Spouses who violate a court order to make child support payments represent an especially serious problem. These individuals leave the custodial spouses and children with little choice but to hire an attorney to go into court to enforce the award, or to attempt to collect from a child support enforcement agency. According to Judith Reichler, past director of the New York State Commission on Child Support, "If somebody applies to a child support agency, a free service, there is automatic enforcement -- if the guy [father] is on the books, working, and pays the taxes." But, if the spouse is self-employed, it is much harder to collect. The attorney must re-activate the case, and either file a contempt motion against the spouse who is in arrears or get a judgment against the non-payer.

Going to court every month to collect payment from a delinquent spouse is a financially draining proposition. If the monied spouse is on a salaried payroll, and misses three payments, his wages can be garnished, but not automatically, according to Chief Clerk John Werner, State Supreme Court (NY County). Werner says that the person must go to the court or the local child support collection agency and fill out necessary forms to start the enforcement procedure or go to his or her lawyer. The lawyer can send an income execution form to the support-paying spouse's employer.

The New York Times recently reported that mothers in need of child-support enforcement have gotten poor results from the lawyers who have dominated the highly-profitable child-support collection industry. The record in New York State of collecting child-support payments is, in fact, very poor: of $1.7 billion in child-support awards, only 20 percent has been paid. As a result, lawyers are now facing new competition from specialty collection agencies. According to an owner of one such collection agency, "Private lawyers charge more regardless of results" and the new collection companies, unlike lawyers, "do not drop a case when the defaulting parent moves to another jurisdiction."

Lawyers can ask judges to require the monied-spouse to put up collateral as security for payment of support awards, but only if that spouse (usually the ex-husband) has shown a pattern of delinquency. Also, there is no assurance that the lawyer will ask for collateral or that the judge will grant it.

A Manhattan attorney we interviewed said that, in one case, he asked the judge at the time of settlement to place bonds belonging to the monied spouse in an escrow account as security in case the spouse refused to pay the divorce judgment. The judge refused, and the spouse later did refuse to pay the award. Without the bonds, the woman had to ask her attorney to go back into court to file a contempt motion against the ex-spouse.

The case of Dolores, a Staten Island homemaker, illustrates the Catch-22 situation many wives find themselves in: they desperately need enforcement, but they have no money to require it. Dolores told us she has been waiting for her maintenance award for 15 years, during which time it had accrued to about $40,000. She has already spent a total of $7,500 on lawyer fees, and cannot afford to pay more fees to get the award enforced. "I don't know where to turn," she said. "I'd like to know what to do -- to get some advice, but I don't know about going to another lawyer."

Divorced From Justice
"Karen Winner’s groundbreaking exposé of the flagrant denials of due process and judicial abuses inflicted on women in our family courts is a clarion call for legislative action."  
-- 
U.S. CONGRESSMAN JERROLD NADLER

Karen Winner
Attorney at Law
252 West 37th Street
Suite 600
New York, N.Y. 10018
Tel: 212-337-3464
Fax: 212-691-6452

winner@gooddivorcebaddivorce.com
www.WinnerAtLaw.com

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Author Karen Winner Esq testifies before the New York Commission on Statewide Attorney Discipline