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Jackson & Nash, LLP v. E. Timothy McAuliffe, PLLC

Supreme Court, New York County

December 10, 2008

JACKSON & NASH, LLP, Plaintiff,
v.
E. TIMOTHY McAULlFFE, PLLC and E. TIMOTHY McAULlFFE, Defendants, E. TIMOTHY McAULlFFE Third-Party Plaintiff,
v.
ALBERT L. LINGELBACH, ALBERT L, LINGELBACH, , P.C, and JOSEPH MICHAELS IV, Third-Party Defendants. Index no. 102265/06

Unpublished Opinion

HERMAN CAHN, J

Defendant and third-party plaintiff, E. Timothy McAuliffe, moves to dismiss and/or for partial summary judgment, dismissing that portion of the complaint which seeks to compel him to account and pay to plaintiff Jackson & Nash, LLP (Jackson & Nash or the Firm), certain executor's commissions he received from the Estate of Virgina Field, CPLR 3211 (a) (7) and 3212 (e). Jackson & Nash cross-moves for partial summary judgment on its first, second, third and fourth causes of action, CPLR 3212.

Jackson & Nash, a now-defunct law firm, brings this action to recover certain commissions and fees earned by McAuliffe, a former partner of the Firm. The Firm alleges that McAuliffe actually earned these fees from two clients in the final months of his tenure with the Firm, but did not bill and/or collect them until after his departure. In its complaint, the Firm seeks an accounting (first cause of action), damages for breach of contract (second cause of action), unjust enrichment (third cause of action) and breach of fiduciary duty (fourth cause of action). The Firm also seeks to impose a constructive trust on those fees (fifth cause of action).

In the third-party action, McAuliffe sues his former partners in Jackson & Nash for an accounting of the assets of the firm and to recover his equity interest in the Firm. The Virgina C. Field Estate

McAuliffe became a partner of Jackson & Nash on January 26, 1999. Mrs. Virginia C. Field had been a client of his before he joined the Firm. She died on April 30, 2003. Her Last Will and Testament named McAuliffe as a Co-Executor of her Estate. Preliminary Letters Testamentary were granted to McAuliffe on May 28, 2003, by the Surrogate's Court, New York County. He withdrew as a partner from the Firm on August 14, 2003. On November 5, 2003, approximately three months after his resignation from the Firm, McAuliffe obtained Letters Testamentary in the Estate. The Estate was settled on December 14, 2005 and McAuliffe received his executor's commission in the amount of $247, 819.96 on that date.

The Firm claims that under its partnership agreement, it is entitled to the fees received by McAuliffe in December 2005. The parties agree that, for the purposes of this motion, the relevant portion of the Partnership Agreement is Section 8.5. That section provides, in relevant part, as follows:

8.5 Allocation of Fees, Commissions and Allowances
(a) All fees and allowances received by a Partner or Counsel for legal services, and all fees and allowances received by a Partner for acting as a referee or arbitrator, shall belong to the Firm.
(b) All fees and commissions payable to a Partner for acting as an executor, administrator, trustee, committee, conservator, guardian ad litem, general guardian or other similar fiduciary capacity shall belong to the Firm . . .

The operative word in section 8.5 (b) is "payable." The Firm argues that the critical factor is not when the fees were first payable, or actually paid, but what services the attorney performed while at Jackson & Nash in order to generate a commission (Lingelbach Aff, ¶ 11).It also argues that McAuliffe could have applied for an advance payment of commissions.

The right to commissions is wholly statutory and is governed by the Surrogate's Court Procedure Act (SCPA). Commissions are determined by the law as it stands on the date the commissions are allowed, since the right to commissions accrues on the settlement of the account (SCPA 2307). "No right to commissions accrues and they are not payable until judicially allowed by the Surrogate in the decree settling the account of the fiduciary" (Matter of Nelson, 105 Misc.2d 747, 749 [Sur Ct Westchester County 1980], quoting Matter of Gilder sleeve, 75 Misc.2d 207, 209 [Sur Ct Orange County 1973]).

It is commonplace that commissions are payable only when allowed by the court. No vested right to commissions arises because of the mere act of receiving nor because of the mere act of paying out nor indeed because of the combined acts of receiving, administering and distributing. What is intended to be compensated is the entire body of service by the fiduciary

(Matter of Erickson, 184 Misc. 830, 834 [Sur CtNY County 1945]). Accordingly, since an executor's commissions are not "payable" until the settlement of the account, and the Field Estate account was not settled until December 2005, two years after McAuliffe left Jackson & ...


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