Law Firm in Guardianship Proceeding Does Not Have to Return Retainer Even Though Client Paid With Mother's Funds

A New York appeals court rules that a law firm whose client was removed as her mother's guardian does not have to return the client's retainer even though it was later discovered the client used her mother's funds to pay the retainer. In the Matter of Domenica P. (N.Y. Sup. Ct., App. Div., 2ndDept., Nos. 2014-12018, 2015-03762, March 28, 2018).

Rosario R. was appointed guardian of the person over her mother, Domenica P. After an altercation between Rosario and Domenica, the court removed Rosario as guardian of the person. Rosario hired the law firm of Ira S. Newman to represent her in challenging the removal. Rosario paid the law firm $20,000 from an account in her name. The law firm solicited assurances from Rosario that the money was from her own savings. When Rosario attempted to pay additional fees from a joint account with Domenica, the law firm rejected the payment and stopped representing her.

After Rosario admitted at a hearing that the initial $20,000 payment was from Domenica's funds, the guardian initiated a proceeding against the law firm to recoup the payment. Under state law a guardian may start a proceeding to discover property withheld from the incapacitated person. The law firm argued that it had no knowledge that the money belonged to Domenica when they accepted it. The trial court ruled in favor of the guardian, and the law firm appealed.

The New York Supreme Court, Appellate Division, reverses, holding that the law firm is not required to return the funds. According to the court, without evidence that the law firm "colluded with the daughter in converting her mother's funds, or had substantial knowledge that the money used for the retainer was derived from funds belonging to Domenica P., no judgment against them is warranted." Two justices dissent, arguing that a hearing is necessary to determine whether the funds needed to be returned.

For the full text of this decision, go to: https://www.courts.state.ny.us/courts/ad2/Handdowns/2018/Decisions/D54804.pdf

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