• Court Finds That New York's Dead Man's Statute Does Not Bar Attorney's Defense in a Disciplinary Proceeding
  • November 1, 2008
  • Law Firm: Hinshaw & Culbertson LLP - Chicago Office
  • In re Zalk, 2008 WL 2367490 (N.Y. 2008)

    Brief Summary
    New York CPLR § 4519, the “Dead Man’s Statute”, did not bar an attorney from testifying in his defense in a bar disciplinary proceeding.

    Complete Summary
    For several years, attorney Richard A. Zalk represented husband and wife, Arthur and Ruth Gellman. Zalk never sent the Gellmans regular accountings or billings for legal work performed. Zalk asserted instead that the Gellmans and he would agree on an appropriate fee after the conclusion of each matter.

    Arthur Gellman died in 1990, at which time Zalk represented his estate. In the years following Arthur Gellman’s death, Zalk performed legal work for Ruth Gellman related to the Hamilton Gardens apartment complex (the “Apartments”), for which he claimed that he neither billed nor received payment.

    In 1998, Zalk represented Ruth Gellman in the $2 million sale of the Apartments. Zalk placed the $200,000 down payment into his attorney escrow account, maintaining that Ruth Gellman insisted that he keep $200,000 as payment for legal services. More precisely, Zalk contended that Ruth Gellman and he had orally agreed that Zalk would be paid for his legal services for the years from 1990 to 2000 upon the sale of the Apartments.

    Upon the death of Ruth Gellman in 2000, Zalk represented the estate in the sale of the family home and kept in contact with the Gellman daughters, who had been appointed as co-administrators of the estate. Eleven days after Ruth Gellman’s death, Zalk issued a check payable to himself in the amount of $25,000 from the Apartments escrow fund. In January 2001, Zalk withdrew $27,500. In April 2001, Zalk withdrew $12,500; in June 2001, $20,000; and in September 2001, another $20,000. In total, and over the course of 13 months, Zalk appropriated $100,000 from the Apartments escrow account for his own use.

    The Gellman daughters demanded an accounting from Zalk and a check for the remaining monies. In response, Zalk, conceding that he did not have a fee agreement in writing, claimed the money as a gift or fees for legal work performed. The Gellman daughters then filed a complaint with the Departmental Disciplinary Committee (the “Committee”).

    The Committee charged Zalk with three charges of misconduct: (1) for conduct involving dishonesty, fraud, deceit, or misrepresentation, in violation of DR 1-102(A)(4); (2) misappropriation of funds in violation of DR 9-102(A); and (3) violation of DR 9-102(B)(4) regarding _____keeping disputed funds in trust. The following charges were supplemented by stipulation: (4) engaging in conflict of interest in violation of DR 5-101(A); and (5) conduct reflecting adversely on Zalk’s fitness as a lawyer in violation of DR 1-102(A)(7).

    At the disciplinary hearing before a referee, the referee reasoned that the plain language of the Dead Man’s Statute did not preclude Zalk from relying on his conversations with the deceased Ruth Gellman to describe their putative fee arrangement because an attorney disciplinary proceeding was not, by its nature, “against the executor, administrator or survivor of the deceased person,” as contemplated by the statute. The referee, recommending that the first four charges be dismissed but sustaining the fifth charge, recommended a sanction of public censure. Disagreeing with the referee’s application of the Dead Man’s Statute, the hearing panel remanded the matter for further proceedings.

    In a per curiam opinion, the Appellate Division found that Zalk had engaged in professional misconduct and concluded that the Dead Man’s Statute precluded him from using his testimony to disprove the charges, as “the outcome of the proceeding could certainly affect [the Gellman daughters’] rights, since pursuant to Judiciary Law § 90(6-a)(a), the Court has the authority to require [the Accused] to make monetary restitution [to them].” Id. at *4.

    Noting the language of the statute, the Court of Appeals reversed and reached the same conclusion as the referee, finding that the Dead Man’s Statute only applied to testimony “against the executor, administrator or survivor” of the deceased. By the court’s reasoning, Zalk testified as a witness on his own behalf against the Committee and therefore the Dead Man’s Statute did not foreclose testimony that potentially cut against the parties’ interests in the contingent future proceeding.

    Significance of Opinion
    This opinion is one of many that underscores the oft-cited maxim that fee agreements are best memorialized in writing in order to avoid potential traps.