Grants jurisdiction to entertain certain declaratory judgment actions commenced pursuant to the fee dispute resolution program

Currently, a procedural vacuum exists where a party to a Part 137 arbitration may be aggrieved by an award rendered in favor of the adverse party, but the aggrieved party is not seeking affirmative monetary relief. In Tray, for example, the arbitration proceeding resulted in an award granting the defendant law firm a judgment against the plaintiff in the sum of $6,538.79. The client then commenced an action for trial de novo in District Court, seeking an order declaring that the arbitrator in the Part 137 arbitration made a mistake and should not have determined that she owed her former attorneys any money. The court classified the action as one for declaratory relief and dismissed it for lack of jurisdiction, because the District Court has no authority to issue declaratory judgments. Citing several other decisions, the court observed "the need for a review of the 22 NYCRR § 137 Rules with a mind toward the articulation of specific procedures to bring these actions before the court for judicial review when such review is warranted. It is clear from the instant case and the cases cited herein that the failure to address this issue has imposed undue burdens on the parties involved in these fee disputes and the courts and has frustrated the objectives of the Fee Dispute Resolution Program."

In Pruzan v. Levine, 18 Misc.3d 70, 852 N.Y.S.2d 584 (App. Term, NY Co. 2007), the client commenced arbitration under Part 137 to recover a $5,000 fee that he had paid to his attorney. Upon the arbitrator's award of $2,500 to the client, the attorney commenced a special proceeding in civil court seeking de novo review, purportedly pursuant to Article 75 of the CPLR. The Civil Court dismissed the petition and concluded that the petitioner attorney required declaratory relief, which was not available in the Civil Court (CCA art. 2; CPLR 3001; see Zuckermann v. Spector, 287 A.D.2d 402,731 N.Y.S.2d 715(2001) (a declaration that an attorney was discharged for cause and is not entitled to compensation is not within the Civil Court's jurisdiction)).

As Tray and Pruzan vividly demonstrate, the aforementioned Court Acts do not grant jurisdiction to the lower courts to entertain a declaratory judgment action to challenge arbitration awards rendered pursuant to Part 137. The aggrieved party must, therefore, seek declaratory relief in the Supreme Court. This measure would remedy this procedural vacuum. Further, we believe that, while there should not be an additional burden on the lawyer who seeks to be paid his or her fees in favor of a possibly recalcitrant client, limiting the venue only to a Supreme Court venue more often than not in these cases places a greater, more expensive and inconvenient burden on the client. This measure would remedy any unfairness to either party and increase access to the courts by providing jurisdiction for a declaratory judgment action in this very limited circumstance.

This measure would have no fiscal impact on the State.

Effective date

It would take effect on the first day of January next succeeding the date on which it shall become law and shall apply to actions commenced on or after such effective date. LEGISLATIVE HISTORY : New proposal.