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Tischler v. Fahnestock & Co.

January 8, 2009

ESTHER TISCHLER BY JACQUELINE MCMICKENS AS GUARDIAN FOR THE PROPERTY OF ESTHER TISCHLER, PLAINTIFF,
v.
FAHNESTOCK & CO., INC., AND KENNETH GOLD, DEFENDANTS.



The opinion of the court was delivered by: Carolyn E. Demarest, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

The instant motion (Motion sequence No. 8), originated by the court-appointed Guardian for the Property of Esther Tischler, Jacqueline McMickens, Esq., and supported by the predecessor counsel for plaintiff, is for approval of a settlement of legal fees and disbursements due to attorney Leon Borstein pursuant to a charging lien confirmed in open court on September 28, 2005. At the argument on a prior motion brought by the predecessor counsel to fix his fee, it was determined that assessment of the amount of the fee would be deferred pending arbitration among the parties due to the fact that counsel's retainer agreement provided for a contingency fee. As the subject litigation has finally been resolved by settlement among all parties, it is now appropriate to address the motions to set counsel's fee.

History of the Case

This action was commenced on behalf of plaintiff Esther Tischler, by summons and complaint dated March 26, 2003, claiming damages for the alleged failure of defendant securities brokerage, Fahnestock & Co., Inc. ("Fahnestock"), and defendant broker, Kenneth Gold ("Gold"), to redeliver, upon demand, stock of Independence Community Bank and tax free bonds which had been transferred to Fahnestock from a pre-existing account at another brokerage house (Kensington Capital Corp.) and to pay interest earned on such bonds to Esther as demanded. The complaint further contains a claim that defendants breached their fiduciary duty to plaintiff by violating rules of the National Association of Securities Dealers prohibiting manipulative, deceptive or fraudulent "devices" in effecting transactions.

Esther Tischler suffers from Downs Syndrome. The then 33 year-old plaintiff resided with her mother, Regina Tischler ("Regina"), who attended to her every need. Regina had not, however, obtained a court order authorizing her to act upon her adult daughter's behalf. As alleged in the complaint, in March of 2000, defendant Gold met with Esther and Regina at their home and obtained authorization to open an account for Esther, signed by Esther and Regina. A second joint account was opened in the names of Regina and Esther. A certificate for ten thousand shares of Independence Community Bank Corp. ("Bank Stock") was delivered to Gold at that meeting. Subsequently, bonds held in Esther's name at Kensington were transferred by Gold to Fahnestock, allegedly without authority. The complaint alleged that Fahnestock had failed and refused to deliver these assets back to Esther upon demand.

Leon Borstein, Esq. ("Borstein"), who had represented Regina Tischler in prior matters, was retained to prosecute the case brought solely on behalf of Esther. The Retainer Agreement, dated February, 2003, between the law firm, Borstein & Sheinbaum, and Regina and Esther Tischler, relating to the instant action against Fahnestock and Gold, provides for a contingent fee of 33 1/3% of damages recovered plus payment of disbursements and expenses as billed, and is signed by both Regina and Esther whose execution was "sworn" before notary Jeanette Dukler. The complaint, filed March 27, 2003, on behalf of Esther, alleged that, despite Esther's obvious condition as a person incapacitated by Downs Syndrome, and without advising Regina of the need to obtain authorization to act upon her daughter's behalf, Gold had obtained a trading authorization for a joint account which would enable Regina to trade Esther's assets. Based upon this improperly obtained authorization, Regina delivered to Gold a certificate for the Bank Stock, which stock was subsequently sold, allegedly without authorization. The complaint further alleges that, without authorization, Fahnestock transferred bonds valued at $650,000 from Esther's Kensington account and retained interest paid thereon.

By answer dated May 6, 2003, defendants Fahnestock and Gold interposed an affirmative defense alleging that Regina, as Esther's agent and guardian, was responsible for any losses to Esther. On May 12, 2003, a third party action was commenced against Regina Tischler alleging that she had directed all activity in Esther's account and would be liable to Fahnestock and Gold for any damages recovered by Esther.

By Order dated May 12, 2003, upon application by counsel Leon Borstein, this Court appointed Jeanette Tischler, Esther's sister-in-law, guardian ad litem to prosecute the case. Jeanette Tischler continued to retain Borstein & Sheinbaum, executing a second Retainer Agreement as Esther's guardian. However, recognizing the conflict between the legal interests of Regina and Esther in the subject litigation, by handwritten letter dated July 24, 2003, receipt of which is acknowledged by Regina, Mr. Borstein advised Regina that he did not represent her in the case and that she should obtain her own lawyer. Thereafter, Regina appeared by independent counsel of her choosing or pro se. The parties proceeded to mediation in an attempt to reach a settlement.

On April 28, 2004, with all parties, including Regina, represented by separate counsel, the Court was advised of a tentative settlement. However, when queried as to her position regarding the merits of such proposal, Jeanette Tischler, as guardian ad litem for Esther, indicated that she would do what her mother-in-law, Regina, wanted, thus confessing her inability to act independently in Esther's best interest; whereupon, the Court relieved Jeanette Tischler and subsequently appointed Fern Finkel, an attorney familiar with the applicable law, from the OCA fiduciaries list. Ms. Finkel also continued to retain Mr. Borstein to litigate the matter on Esther's behalf, obviously relying upon his familiarity with the complex facts of the case to assess her ward's interests. In light of the permanency of Esther's incompetence, Ms. Finkel was directed by the Court to commence an Article 81 proceeding under the Mental Hygiene Law for the appointment of a guardian to continue to act on Esther's behalf following the conclusion of the instant case. See prior Decision dated September 19, 2005.

The Article 81 proceeding was heard by Justice Yvonne Lewis of this Court who appointed Esther's brother, Jerry Tischler, as sole guardian of Esther's property and co-guardian of her person. Upon being advised of this determination on September 22, 2004, in open court, I relieved Fern Finkel as guardian ad litem and substituted Jerry Tischler. At that appearance, Regina Tischler appeared pro se, having discharged her attorney, Richard Horowitz, in court on May 12, 2004; Jerry Tischler was represented by attorney Israel Goldberg. At the next appearance on October 27, 2004, the Court was advised that Israel Goldberg had been substituted by Jerry to prosecute the case for Esther and Leon Borstein was relieved. The Court noted that Mr. Borstein had a charging lien pursuant to Judiciary Law § 475 against the proceeds of any recovery, the sum of which would be determined at the conclusion of the case.*fn1

Subsequently, plaintiff moved to stay the instant action pending arbitration before the NASD as required by the Customer Agreement executed upon the opening of the subject accounts. Finding such alternative to litigation to be in the best interest of the plaintiff, the Court granted the requested stay and authorized arbitration pursuant to CPLR § 1209. SeeDecision dated September 19, 2005. Unfortunately, the guardian and his counsel failed to proceed to arbitration and the matter languished until August of 2007. In the interim, by Supplemental Order dated May 4, 2006, Justice Lewis relieved Jerry Tischler as guardian and replaced him with plaintiff's present guardian, Jacqueline McMickens, Esq. On October 23, 2007, this Court relieved Jerry Tischler as plaintiff's guardian ad litem and substituted Ms. McMickens who has also acted as counsel.

By Notice of Motion dated August 9, 2007 (Motion sequence # 7), Mr. Borstein moved to vacate the stay pending arbitration and for a determination regarding his charging lien based on quantum meruit, in light of information made known to him through counsel for the parties that no arbitration had taken place or was planned. All assets, purportedly valued in excess of $800,000, formerly held by defendant Fahnestock in plaintiff's account, had been delivered to the guardian. Mr. Borstein argued that the guardian and new counsel had abandoned the case and, based upon the recovery of $800,000 in assets, he should be awarded "not less than $81,143" in fees and disbursements of $3,046.91. At the return of the motion on September 5, 2007, this Court was apprised of the substitution of Ms. McMickens as guardian by Justice Lewis and the failure to pursue arbitration for two years was confirmed. Mr. Borstein was directed to serve his motion on Ms. McMickens.

Upon her first appearance in this action on October 23, 2007, Ms. McMickens advised that prior counsel to guardian Jerry Tischler had been uncooperative in providing her the documentation necessary to pursue the instant litigation and that Fahnestock had indicated to her that its records had been destroyed. Mr. Borstein agreed to provide the necessary discovery and assist McMickens in prosecuting the case. The matter was adjourned to February 6, ...


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