[*1]
Bykov v Gevargiz
2014 NY Slip Op 50025(U) [42 Misc 3d 1212(A)]
Decided on January 9, 2014
Supreme Court, Kings County
Sunshine, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on January 9, 2014
Supreme Court, Kings County


Luke Bykov, Plaintiff,

against

Elizabeth Gevargiz, Defendant.




52917/2012



Walter E. Anderocci, Esq.

Attorney for Plaintiff

32 Court Street

Brooklyn, New York 11201

Meredith A. Lusthaus, Esq.

Attorney for Defendant

186 Joralemon Street, Suite 910

Brooklyn, New York 11201

Cheryl Solomon, Esq.

Attorney for the Children

26 Court Street, Suite 700

Brooklyn, New York 11242

Jeffrey S. Sunshine, J.

The following papers numbered 1 to 7 read herein :

Papers Numbered [*2]

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1, 2, 6

Opposing Affidavits (Affirmations)4, 7Reply Affidavits (Affirmations)5

Other Papers ___Affirmation of Attorney for Children______3__________

Plaintiff-husband filed an Order to Show Cause, dated June 6, 2012, seeking an order of this Court for leave to: 1) reargue plaintiff's Order to Show Cause dated September 14, 2012 and defendant's cross motion dated October 25, 2012 and upon re-argument rescinding the referral order dated February 5, 2013 to hear and determine "pendente lite maintenance and child support" and fixing plaintiff's pendente lite maintenance and child support in accordance with the temporary maintenance guidelines and the child support standards act retroactive to the date of the cross motion with credit for sums paid to date; 2) renew plaintiff's Order to Show Cause dated September 14, 2012 and defendant's cross motion dated October 25, 2012 and upon renewal rescinding the referral order dated February 5, 2013 to hear and determine "pendente lite maintenance and child support" and fixing plaintiff's pendente lite maintenance and child support in accordance with the temporary maintenance guidelines and the child support standards act; 3) downwardly modifying the interim order of unallocated support dated April 23, 2013; 4) directing defendant to pay child support to plaintiff for the one child of the parties [name and date of birth omitted], who resides with plaintiff; 5) leave to re-argue plaintiff's Order to Show Cause dated September 14, 2012 and defendant's cross motion dated October 25, 2012 and upon re-argument removing the restriction that "there is no unrelated adult present" from plaintiff's court ordered access to the younger children of the marriage; 6) modifying the order of interim access to provide the same schedule but without restriction; 7) renew plaintiff's order to show cause dated September 14, 2012 and defendant's cross motion dated October 25, 2012 and upon renewal removing the restriction that "there is no unrelated adult present" from plaintiff's court ordered access to the younger children; 8) compelling defendant to forthwith restore the approximate $175,000.00 in marital funds taken/dissipated/secreted by her since July 17, 2012; 9) compelling defendant to make the $1755,000 [sic] in liquid marital funds taken/dissipated/secreted by her since July 17, 2012 equally available to plaintiff for the payment of his legal, expert and support fees; 10) enforcing the order of the Court directing defendant to pay 20% of the cost of the real estate appraisal or, in the alternative, taking a negative inference against defendant with regard to the value of the marital residence; 11) compelling defendant to forthwith fill out the license checklist and provide it to the neutral evaluator or, in the alternative, taking a negative inference against defendant with regard to the value of her nursing license; 12) for such additional and different relief as to this Court seems equitable just and fair.

Defendant-wife filed a cross motion, dated June 25, 2013, seeking an order of the court: 1) denying all relief sought by plaintiff in his Order to Show Cause, dated June 5, 2013; 2) directing plaintiff to pay directly to defendant's counsel the sum of $40,000.00 as an interim [*3]counsel fee in connection with these proceedings; 3) directing plaintiff to pay 100% of all court-ordered expert and appraisal fees; 4) modifying the Court's Order of Visitation between plaintiff and the parties' two youngest children [names and dates of birth omitted] 5) granting defendant such other and different relief as to the Court may be just, proper and equitable.

The attorney for the children filed an affirmation dated June 24, 2012 taking no position on the financial relief in plaintiff's Order to Show Cause, dated June 6, 2013,but responding to plaintiff's request to remove a restriction placed on plaintiff's parenting time with the children.

Plaintiff filed a Reply, dated July 2, 2013, in Support of his Order to Show Cause and in Opposition to defendant's cross motion. Defendant's counsel filed a Supplemental Affirmation in Support of Defendant's Cross-Motion for Interim Counsel Fees, dated September 12, 2013.

Defendant filed an Order to Show Cause for Contempt, dated August 15, 2013, seeking an order of the Court holding plaintiff in contempt for failure to pay defendant $6,000.00 each month for July and August 2013; and 2) an award of counsel fees in accordance with defendant's pending motion returnable September 13, 2013.

Plaintiff filed an Affidavit in Opposition, dated October 16, 2013, to defendant's Order to Show Cause, dated August 15, 2013, for an order of contempt and enforcement of the February 8, 2013 "temporary order of support".

Procedural Background

The plaintiff-husband commenced this action for divorce on July 13, 2012 and filed an Amended Summons with Noticed, dated July 17, 2012. Plaintiff filed an Emergency Order to Show Cause for pendente lite relief, including custody and access, on September 14, 2012 which was heard the same day. Based on the allegations raised by the parties at the September 14, 2012 emergency hearing, the court, on consent, appointed an attorney for the children by written order dated September 14, 2012. The matter was adjourned to October 9, 2012. Based on cross allegations by the parties at the October 9, 2012 court appearance, the court, on consent, appointed a mental health professional, by written order dated October 10, 2012, and issued a Request for a Court Ordered Investigation to the Administration for Children Services, dated October 10, 2012. The matter was adjourned to November 29, 2012; however, the November 29, 2012 court appearance was adjourned to January 17, 2013. On December 7, 2012, the court received correspondence from the court-appointed mental health professional, on notice to the parties, that he anticipated that an additional sum would be necessary to complete the forensic evaluation. That day, the court sent correspondence to the parties' counsel, via facsimile directing that the parties provide the Court with a consent stipulation regarding the court-appointed mental health professional's request for additional compensation by December 12, 2012 or to conduct a telephone conference call to chambers on December 13, 2012 at 4:45 p.m. if there was no consent on the issues of additional compensation. On December 14, 2012, the court issued a written sua sponte order granting the court-appointed mental health professional's request for additional compensation in compliance with the pro rata percentage set in the original appointment order dated October 12, 2012 when the court did not receive a consent stipulation, a conference call, or any other notification from the parties regarding the issue of additional compensation for the court-appointed mental health professional.

The January 17, 2013 court appearance was adjourned to February 5, 2013 due to [*4]inclement weather and travel delays.

The parties appeared for a preliminary conference on February 5, 2013 and for oral argument on the parties' respective applications for pendente lite relief given the tremendous disparity in the parties' rendition of the plaintiff's income and the claim of many millions of dollars transferred through multiple banks in foreign jurisdictions. At the February 5, 2013 court appearance the court referred the parties' pending motions seeking pendente lite maintenance and child support and any reallocation of the parties' financial responsibility for court-appointed experts to Referee Michelle Sweeting, by written order, for a hearing to begin March 13, 2013.[FN1] The court also heard oral argument relating to defendant's application for an interim award of support until the matter could be heard and determined by the referee. Following oral argument, the court issued an oral decision directing the plaintiff to pay unallocated support pendente lite to the defendant in the sum of $6,000.00 monthly pending completion of the hearing before Referee Sweeting.[FN2] On consent of the defendant, the court directed defendant to pay the mortgage on the marital residence and the expenses relating to the children from the monthly unallocated support.[FN3] Based on outstanding discovery demands by defendant, the court also directed plaintiff to provide completed authorizations in proper form for "all credit cards, bank accounts and American Express cards" to defendant's counsel no later than February 12, 2013 and that defendant "provide an accounting to Plaintiff's attorney on or before February 19, 2013, signed by Defendant under oath, attesting as to where the marital assets alleged to have been removed are located" and that defendant "provide Plaintiff with copies of all 1099's, W-2s and whatever documents she has received by law as of January 31st from her employer". The court further directed an interim parenting access schedule. The court adjourned the matter to April 9, 2013. Plaintiff filed a proposed order based on the court's February 5, 2013 oral decision, with notice of settlement, which was signed on April 23, 2013.

At the court appearance on April 9, 2013, based on claims of outstanding discovery by defendant, the court issued a written order directing the parties to exchange all outstanding discovery and to conduct depositions by dates-certain and set the matter [*5]down for a compliance conference on June 20, 2013.

At the June 20, 2013 compliance conference the court learned that discovery was still not complete and directed that the parties complete all outstanding discovery and file the note of issue on or before October 1, 2013. The court set the matter down for a pre-trial conference on October 24, 2013 and set the issues of custody and parenting access down for trial all-day on November 15, 2013; November 20, 2013 and November 27, 2013.

At the pre-trial conference on October 24, 2013, the court heard oral argument on that part of defendant's cross-motion, dated June 25, 2013, seeking an award of interim counsel fees. The matter was marked decision reserve with a control date of January 3, 2014.

The parties proceeded to trial on the issues of custody and parenting access on November 15, 2013. The court continued to hear testimony all-day on November 20, 2013 and November 22, 2013. The trial was scheduled to continue; however, on November 23, 2013, counsel notified the court that the parties had reached a final written agreement fully resolving the issues of custody and parenting access. The parties requested the opportunity to enter settlement negotiated instead of trial on November 23, 2013. Notwithstanding their oral representation that the matter was being solved and they would be ready to proceed to allocution the court, after having agreed to keep the part open (with consent of the Administrative Judge for Civil Matters) appeared after 4:30 p.m. without a signed agreement. The court was notified by counsel by telephone that the parties entered into a written agreement at approximately 6:20 p.m. that evening. The parties appeared with counsel for allocution on the written custody and parenting access agreement on November 25, 2013.

The hearing before Referee Sweeting on the parties' pendente lite motions began on July 3, 2013 and continued all-day on July 9, 2013; July 10, 2013; July 12, 2013; July 31, 2013; August 1, 2013; September 9, 2013; October 27, 2013 and December 2, 2013.[FN4] After eight (8) full days of testimony, the parties settled all aspects of the pending motions for pendente lite financial relief, except for defendant's application for interim counsel fees, by written stipulation. The parties' on consent, so-ordered interim stipulation providing that plaintiff pay to the defendant unallocated temporary support in the sum of $5,000.00 monthly, retroactive to October 11, 2012 with tax implications reserved for future determination by the trial court with the first payment of $5,000.00 due January 1, 2014 and continuing each month thereafter until "final order of the court [*6]or settlement by the parties of all issues in this action."[FN5] The parties stipulated that, based on the stipulated unallocated support sum of $5,000.00 monthly, the plaintiff owed the defendant the sum of $75,000.00 in retroactive unallocated temporary support from October 1, 2012 to December 31, 2013. The parties further stipulated that plaintiff should receive a credit in the sum of $38,000.00 representing sums paid directly to defendant during those months which left an outstanding interim support arrears balance due to defendant in the sum of $37,000.00 ($75,000.00 — $38,000.00 = $37,000.00).[FN6]

The parties further stipulated to reallocate their financial responsibility for the court-appointed experts from plaintiff, 80%, and defendant, 20%, to plaintiff, 75%, and defendant, 25%.

As part of the parties' consent stipulation, the defendant withdrew her Order to Show Cause for Contempt, dated August 15, 2013, and plaintiff withdrew his Order to Show Cause, dated June 6, 2013. As such, the applications currently pending before the court are defendant's cross motion, dated June 25, 2013, seeking an order of the Court: 1) denying all relief sought by plaintiff in his Order to Show Cause, dated June 5, 2013; 2) directing plaintiff to pay directly to defendant's counsel the sum of $40,000.00 as an interim counsel fee in connection with these proceedings; 3) directing plaintiff to pay 100% of all court-ordered expert and appraisal fees; 4) modifying the Court's order of temporary visitation between plaintiff and the parties' two youngest children [names and dates of birth omitted] 5) granting defendant such other and different relief as to the Court may be just, proper and equitable.

The affirmation of the attorney for the children, dated June 24, 2012, took no position on the financial relief, including defendant's application for interim counsel fees, requested by the parties and, as such, while not withdrawn is now moot.

Plaintiff filed a Reply in Support of his Order to Show Cause and in Opposition to defendant's cross motion, dated July 2, 2013. Plaintiff's counsel did not file an Affirmation in connection with plaintiff's July 2, 2013 Reply. Defendant's counsel filed a Supplemental Affirmation in Support of Defendant's Cross-Motion for Interim Counsel Fees, dated September 12, 2013.

The following relief requested by defendant in her cross motion, dated June 25, [*7]2013, while not withdrawn by defendant in the parties' stipulation dated December 3, 2013, are now moot by way of consent agreements between the parties: section (1) requesting an order denying all relief sought by plaintiff in his Order to Show Cause, dated June 5, 2013, is now moot as plaintiff withdrew his Order to Show Cause in the parties' stipulation dated December 3, 2013; section (3) requesting an order that plaintiff pay 100% of all court-ordered expert and appraisal fees is now moot as the parties stipulated to their respective financial responsibility for all court-ordered expert and appraisal fees in December 3, 2013 stipulation; section (4) requesting an order modifying visitation between plaintiff and the parties' two youngest children [names and dates of birth omitted] is now moot as the parties entered into a final written agreement resolving custody and parenting access, dated November 25, 2013. The sole remaining relief requested by defendant-wife pending before the court is her request for an order of the court directing plaintiff-husband to pay her counsel the sum of $40,000.00 for interim counsel fees.

In her Affidavit in Support of her cross-motion for counsel fees, defendant argues that she is the less-monied spouse because plaintiff has "hundreds of thousands of dollars in unrecorded income" from his business, of which he is the sole proprietor, and that he has engaged in a course of conduct intended to delay the proceeding and to obscure his income which has resulted in her incurring unnecessary counsel fees in an attempt to cull information regarding his actual income. Defendant contends that while she earns income of approximately $90,000.00 annually as a W-2 employee that plaintiff is actually the monied-spouse despite his tax returns reflecting nominal annual income (often under $30,000.00 annually). Defendant argues that plaintiff failed to provide supporting books and records to substantiate his claimed reported income and that, as a result, she had to incur many hours of counsel fees to subpoena records, conduct extensive document review and engage in multiple days of deposition in an effort to assess plaintiff's actual income. Defendant argues that discovery revealed that more than sixty million dollars ($60,000,000.00) in credits passed through plaintiff's business accounts in the five (5) years immediately before plaintiff commenced that action for divorce while plaintiff reported "negligible income [emphasis in original]" during the corresponding years.

Plaintiff argues that defendant is the monied-spouse because she earns more than $90,000.00 annually while he reports substantially less on his tax returns.

Plaintiff also alleges that defendant took more than $175,000.00 in liquid marital assets when he commenced the divorce proceeding. Defendant does not deny that she withdrew approximately $175,000.00 in liquid assets from joint accounts but she denies that she "secreted" any marital assets by claiming that she took the money and placed it in "trust" for the parties' children and provided plaintiff with a detailed accounting of the funds with her Statement of Net Worth, dated July 17, 2012. She avers that the starting balancing in each of the two (2) "trust" accounts were $75,000.00 in July 2012 and, as of March 11, 2013, there remains "approximately" $65,000.00 in each of the two (2) "trust" [*8]accounts. Defendant annexed an Affidavit and Accounting, dated March 22, 2013, with an affidavit of service on plaintiff's counsel, to her cross-motion.

Plaintiff claims that the parties paid their monthly expenses, including the mortgage on the marital residence, auto payments and insurance, utilities, life insurance and other marital expenses from defendant's income. Defendant denies that the parties paid most marital expenses from her income and claims that the source of the $175,000.00 in the joint accounts that she withdrew was "basically from [her] salary since the commencement of [her] employment in 2007" and that she was able "to accumulate these balances since [she] started working in 2007 because [the parties] lived off the money the plaintiff generated from his business..."

Defendant claims that she felt compelled to withdraw the $175,000.00 from the parties' joint accounts because, shortly after he commenced the divorce, plaintiff returned to the marital residence and removed "half-million dollars ($500,000.00)" in cash and "over one hundred thousand dollars ($100,000.00) in gold [emphasis in original]" bars.

Plaintiff's counsel argued on the record during the October 23, 2013 oral argument that defendant is utilizing the $175,000.00 she withdrew from the parties' joint accounts "as an arsenal" against the plaintiff in the proceeding based on the fact that she deposed plaintiff for eight (8) days and because, at the time of oral argument, plaintiff had been under direct examination for four (4) days before Referee Sweeting.

Defendant argues that plaintiff vastly under-reported his annual income on the parties' joint tax returns during the marriage and points to the parties' lavish monthly expenses and lifestyle during the marriage, without corresponding debt and with the ability to save at least a documented $175,000.00 in liquid assets between 2007 and 2012, to argue that plaintiff has access to more income and financial resources than he reports. Defendant argues that discovery revealed that plaintiff advanced approximately $56,000.00 on behalf of his girl-friend to open a pet salon in August, September and October 2012.

In his Affidavit in Opposition, dated July 2, 2013, plaintiff avers that defendant's allegations regarding him removing large sums of cash and gold bars from the marital residence is mere "fantasy" and claims that he has "nothing to hide." Plaintiff denies that he receives any cash income in excess of what he reports on his tax returns and avers that his clients, who are mostly located in Russia, pay him exclusively by "international wire" and that "[e]very client payment is documented by a wire and every client expense is documented by a receipt such as a credit card statement." He avers that his business "volume is high but the profit margin is not" and argues that his annual income resulted solely from a "three percent commission rate" so that while many millions of dollars may have passed through his business accounts in the years preceding the divorce that "every million dollars in goods purchased and brokered yields [him] gross income of $30,000.00" and from that he must then pay "business expenses" before he collects any income and therefore his income is nominal. According to his tax returns, plaintiff [*9]reported annual income of $42,000.00 in 2008, $24,000.00 in 2009, $32,400.00 in 2010 and $85,400.00 in 2011. Plaintiff maintains that he was the less-monied spouse during the marriage and is unable to meet his basic expenses and pay unallocated support. He argues that defendant was the monied-spouse during the marriage and, as such, that she is not entitled to any interim counsel fees.

Defendant avers that she had to live off the parties' savings when the plaintiff commenced the divorce, took approximately $500,000.00 in cash out of the marital residence and "stopped supporting the family [emphasis in original]" in October 2012 forcing her to make a motion for pendente lite relief.

In her Affidavit, dated June 24, 2013, defendant avers that:

Yes, I did participate in not reporting this income on our joint tax return. There are multiple reasons for that, including the fact that we have a family to protect and I had to go along with much of what the plaintiff was doing, but I had absolutely no idea of the extent of plaintiff's vast income and revenue until review his business bank records. However, the fact that I have not reported plaintiff's hidden income in tax returns does not mean this income did not exist.

Defendant annexed the parties' joint 2005 income tax return showing plaintiff reported annual salary in the sum of $26,500.00; however, she claims that in 2005 plaintiff purchased a single-family home, the parties' marital residence where she and the parties' two (2) youngest children currently reside, for $579.000.00 and that the monthly mortgage payment is $2,267.75 which exceeds the plaintiff's annual reported income for 2005 by almost $1,000.00 ($2,267.75/month x 12 monthly payments = $27,213.00 annual mortgage obligation) without accounting for utilities, food and clothing for the family, vacations and the cost associated with operating and insuring the parties' vehicles. Defendant also claims that plaintiff purchased two (2) items of jewelry in 2011 with a total purchase price of $31,480.00 when he reported a total net income of $60,999.00 all while while paying $1,400.00 monthly to lease a BMW and approximately $1,600.00 monthly for one of the parties' children to take tennis lessons.

As detailed in defendant's counsel's affirmation, plaintiff claimed annual income during the four (4) years prior to commencing the divorce proceeding as follows: 2008, $38,787.00; 2009, $22,164.00; 2010, $27,065.00; 2011, $60,999.00. Defendant's counsel argues that plaintiff reported nominal annual income which did not comport with the parties' annual expenses and lifestyle expenditures and all while the company plaintiff solely owns was receiving "tens of millions of dollars [emphasis in original]" during the corresponding years.

Defendant annexed Bank of America account statements (BOA xx64) in plaintiff's name showing average monthly deposits in the sum of $12,841.00 from October 2012 to February 2013. She claims that plaintiff did not report the BOA xx64 account to the court even during the oral argument at the court appearance on February 5, 2013 and the [*10]information was only discovered during discovery. Defendant avers that "plaintiff spent lavishly [emphasis in original] on travel, expensive automobiles, fine jewelry and a very expensive lifestyle overall, only a portion of which was presented" to the court during oral argument on February 5, 2013 and that as a result of extensive discovery she has "far more information concerning plaintiff's true finances..."

Defendant avers that she has paid approximately $80,000.00 in counsel fees to her attorney in connection with this proceeding and requests an interim award of $40,000.00 in counsel fees claiming that counsel fees are required "in part, due to the plaintiff's tactics in this litigation in failing to reveal his true financial circumstances, activities and income [emphasis in original] and causing a massive amount of hours to be devoted to document review and pre-trial discovery." Defendant annexed a letter, dated June 19, 2013, from the court-appointed business evaluator detailing a need for additional compensation necessary to complete the evaluation based on the "lack of books and records supporting the business tax returns and the level of income reported on the business tax return as compared to the deposits..." and given the "huge amount of activity" associated with plaintiff's business bank accounts. Defendant claims that "[d]iscovery to date has revealed that plaintiff is seized of hundreds of thousands of dollars in annual revenue" and "holds hundreds of thousands of cash in gold" and, therefore, "[h]e has the means to pay a reasonable counsel fee" to her attorney while she "[does] not have any money but that which is in trust for the children". Plaintiff avers in his sworn Affidavit, dated July 2, 2013, that:

I have always been honest in my tax filings and followed the advise of my

accountant which I trusted. However, I am not understandably unnerved by my accountant's bizarre behavior. As a result, I have retained [an independent CPA] to review and audit my last three years of tax returns and recreate what my accountant should have turned over. In the event that I need to amend a filing, I will do so immediately. I have no intent to deceive or defraud this court, the Defendant or the government. If my accountant made any errors they will be immediately rectified and all information will [sic] provided to [court-appointed business evaluator] and [defendant's counsel] as soon as it is complete.

Defendant's counsel argues that as recently as June 25, 2013, plaintiff advanced the sum of $30,000.00 to a privately retained forensic accountant to assess his previously filed business income tax returns, which were the subject of days of prior depositions. Counsel argues that while plaintiff found funds to retain a private forensic accountant in June 2013 he unilaterally decreased the court-ordered interim award of monthly support he paid defendant from $6,000.00 to $2,000.00 in June, 2013, July 2013 and August 2013 and paid no support to defendant in September 2013. Counsel argues that, as a result of plaintiff's failure to comply with the court-ordered support, defendant was forced to incur additional legal fees associated with filing an Order to Show Cause for Contempt. [*11]

Defendant annexed to her cross-motion seeking counsel fees a copy of her retainer agreement with counsel; her Statement of Net Worth, dated July 17, 2012; a copy of her 2012 tax return; and an accounting showing counsel fees incurred for legal services rendered by her counsel in connection with the divorce proceeding from August 21, 2012 to June 17, 2013.

Plaintiff did not annex copies of bills for counsel fees incurred in connection with this matter or make any representation in his opposition papers regarding how many counsel fees plaintiff has incurred or how much he owed to counsel in connection with this matter. Defendant claims that plaintiff had not revealed how much he has paid in counsel fees or what, if any, balance was due and owing to his attorney relating to this divorce proceeding. Defendant claims that plaintiff could not have borrowed $20,000.00 in cash from his grandmother, as he claimed in prior papers, because she passed away more than three (3) years prior. At oral argument on October 23, 2013, plaintiff's counsel represented on the record that plaintiff had paid "[a]pproximately 100,000 [sic]" for legal fees rendered in the pending divorce proceeding and that he was current without any outstanding balance due and owing for services rendered.

Defendant's counsel filed a Supplemental Affirmation, dated September 12, 2013, annexing an accounting for legal services rendered from August 21, 2012 to September 3, 2013.[FN7] According to the accounting, dated September 11, 2013, which is signed by the defendant, defendant has incurred counsel fees in the sum of $109,100.74, paid counsel fees in the sum of $85,000.00 and has a balance due and owing in the sum of $24,100.74 ($109,100.74 — $85,000.00 = $24,100.74). Counsel affirms that the outstanding balance does not include counsel fees that would be generated by the continued hearing before Referee Machelle Sweeting.[FN8] Counsel affirms that plaintiff's attempts to obscure his true income has required defendant to inquire extensive counsel fees based on repeated court appearances, discovery demands, detailed document review and many days of depositions and ongoing hearing before the Referee. Counsel affirms that he "introduced into evidence at the current hearing before REFEREE J MACHELLE SWEETING [emphasis in original] many of plaintiff's business bank records, which show that from part of 2008 through early 2013 [plaintiff] received in his business wire accounts (as credits and additions) over sixty million ($60,000,000.00) dollars [emphasis in original]" while plaintiff claimed personal income of "$42,000.00 in 2008, $24,000.00 in 2009, $32,400.00 in 2010 and $85,400.00 in 2011." Counsel affirms that plaintiff's failure to be forthcoming regarding his financial resources that many "hundreds of hours of legal [*12]services" will be required to complete discovery and trial of the proceeding and that an interim award of counsel fees is required to level the financial playing field because "defendant can only pay additional legal fees if she resorts to her life savings, or funds she has put aside for the children" while "plaintiff controls millions of dollars and hides much of it."

Ability to Pay

Defendant contends that plaintiff is engaging in dilatory tactics in an attempt to conceal his actual income and that, as a result, her attorney has been and will continue to be required to engage in extensive document discovery and review which cause her unnecessary counsel fees and costs. She avers that she does not have the financial ability to pay her litigation expenses on top of her daily living expenses, especially when plaintiff has unilaterally decided when to pay or not pay his court-ordered support obligation during the proceeding and when to spend money for other purposes, such as retaining a private forensic accountant to review his business tax returns. The defendant annexed a copy of her Statement of Net Worth, dated July 17, 2012, to her cross-motion seeking counsel fees. According to her Statement of Net Worth, the defendant's monthly expenses are $12,609.33 [$151,311.96 annually] and that in 2012 she earned annual income in the sum of $92,867.02.

Discussion


Interim Counsel Fees

An award of interim counsel fees is within the discretion of the Court (DeCabrera v. Cabrera-Rosete, 70 NY2d 879 [1987]). Pursuant to Domestic Relations Law section 237(a), which was amended as of October 2010, the Court in an action for divorce:

. . . may direct the person or persons maintaining the action, to pay counsel fees and fees and expenses of experts directly to the attorney of the other spouse to enable the other party to carry on or defend the action or proceeding as, in the court's discretion, justice requires, having regard to the circumstances of the case and of the respective parties. There shall be rebuttable presumption that counsel fees shall be awarded to the less monied spouse. In exercising the court's discretion, the court shall seek to assure that each party shall be adequately represented and that where fees and expenses are to be awarded, they shall be awarded on a timely basis, pendente lite, so as to enable adequate representation from the commencement of the proceeding.

It has long been established that "[a]n award of an attorney's fee pursuant to Domestic Relations Law § 237(a) is a matter within the sound discretion of the trial court, and the issue is controlled by the equities and circumstances of each particular case" (Grant v Grant, 71 AD3d 634, 634-635, 895 NYS2d 827 [2d Dept 2010], quoting Gruppuso v Caridi, 66 AD3d 838, 839, 886 NYS2d 613 [2d Dept 2009], quoting Morrissey v Morrissey, 259 AD2d 472, 473, 686 NYS2d 71 [2d Dept 1999]). "In determining whether to award such a fee, the court should review the financial circumstances of both parties together with all the other circumstances of the case, which [*13]may include the relative merit of the parties' positions'" (Gruppuso, 66 AD3d at 839, quoting DeCabrera v Cabrera-Rosete, 70 NY2d 879, 881, 524 NYS2d 176 [1987]). " An appropriate award of attorney's fees should take into account the parties' ability to pay, the nature and extent of the services rendered, the complexity of the issues involved, and the reasonableness of the fees under all of the circumstances'" (DiBlasi v DiBlasi, 48 AD3d 403, 405, 852 NYS2d 195 [2d Dept 2008], lv denied 10 NY3d 716, 862 NYS2d 468 [2008], quoting Grumet v Grumet, 37 AD3d 534, 536, 829 NYS2d 682 [2d Dept 2007] [citations omitted]).

It is also well-settled that "[a]n award of interim counsel fees is designed to create parity in divorce litigation by preventing a monied spouse from wearing down a nonmonied spouse on the basis of sheer financial strength" (Rosenbaum v Rosenbaum, 55 AD3d 713, 714, 866 NYS2d 234 [2d Dept 2008], citing O'Shea v O'Shea, 93 NY2d 187, 193, 689 NYS2d 8 [1999] Wald v Wald, 44 AD3d 848, 844 NYS2d 86 [2d Dept 2007]). "Such awards are designed to redress the economic disparity between the monied spouse and the non-monied spouse' and ensure that the matrimonial scales of justice are not unbalanced by the weight of the wealthier litigant's wallet'" (Kaplan v Kaplan, 28 AD3d 523, 523, 812 NYS2d 360 [2d Dept 2006], quoting Frankel v Frankel, 2 NY3d 601, 607, 781 NYS2d 59 [2004], quoting O'Shea, 93 NY2d at 190).

Interim counsel fees are awarded to level the playing field and " prevent the more affluent spouse from wearing down or financially punishing the opposition by recalcitrance, or by prolonging the litigation'" (Gober v Gober, 282 AD2d 392, 393 [1 Dept., 2001], quoting O'Shea v O'Shea, 93 NY2d 187,193 [1999] see also Prichep v Prichep, 52 AD3d 61, 65 [2 Dept., 2008]). Thus, interim fees are generally warranted "where there is a significant disparity in the financial circumstances of the parties" (Prichep, 52 AD3d at 65; see also DelDuca v DelDuca, 304 AD2d 610, 611 [2 Dept., 2003] Celauro v Celauro, 257 AD2d 588, 589 [2 Dept., 1999]). "[U]nlike a final award of counsel fees, a detailed inquiry or evidentiary hearing is not required prior to the award of interim counsel fees" (Isaacs v Isaacs, 71 AD3d 951, 951 [2 Dept., 2010] see also Prichep, 52 AD3d at 65; Singer v Singer, 16 AD3d 666, 667 [2 Dept., 2005] Flach v Flach, 114 AD2d 929, 929 [2 Dept., 1985]). Additionally, it should be noted that the court in Prichep specifically provided that "[w]hen a party to a divorce action requests an interim award of counsel fees, as opposed to a final award, no such detailed inquiry is warranted" (52 AD3d 61, 65, 858 N.Y.S.2d 667 [2 Dept.,2008].

The Court may also consider imputed income in awarding counsel fees (see Steinberg, 59 AD2d at 705; Rocanello v Rocanello, 254 AD2d 269, 269, 678 NYS2d 385 [2 Dept., 1998] Popelaski v Popelaski, 23 AD3d 735, 738, 803 NYS2d 108 [2 Dept., 2005]).

"The court may also consider whether either party has engaged in conduct or taken positions resulting in a delay of the proceedings or unnecessary litigation (see Ciampa v. Ciampa, 47 AD3d at 748, 850 N.Y.S.2d 190; Timpone v. Timpone, 28 AD3d at 646, 813 [*14]N.Y.S.2d 752; Morrissey v. Morrissey, 259 AD2d at 473, 686 N.Y.S.2d 71; Walker v. Walker, 255 AD2d 375, 376, 680 N.Y.S.2d 114)." (Prichep v. Prichep, 52 AD3d 61, supra).

Defendant's counsel submitted an affirmation in support annexed to defendant's cross-motion seeking an award of interim counsel fees, dated June 24, 2013. Defendant annexed a retainer agreement to her application. The retainer agreement provides that the defendant paid an initial retainer agreement in the sum of $10,000.00 and would be billed at a rate of $400.00 for legal services rendered in connection with this matrimonial action. Defendant's counsel seeks an award of pendente lite counsel fees in the sum of $40,000.00 and annexed bills in support of the request, which as of September 3, 2013, reflected counsel fees due and owing in the sum of $24,100.74 after expending the defendant total retainer of $85,000.00. Defendant's counsel's hourly rate appears reasonable based upon his experience.

Plaintiff provided a copy of his retainer agreement, annexed to his , dated March 1, 2012, stating that he paid an initial retainer in the sum of $20,000.00. The retainer agreement provides that the plaintiff will be billed at a rate of between $50.00 to $400.00 for legal services rendered in connection with this matrimonial action depending on whether the service is rendered by a filing clerk or a partner in the firm. At oral argument on October 23, 2013, plaintiff's counsel represented on the record that plaintiff had paid "[a]pproximately 100,000 [sic]" for legal fees rendered in the pending divorce proceeding and that he was current without any outstanding balance due and owing for services rendered. The court notes that during oral argument on February 5, 2013, defendant's counsel argued that in the prior year the plaintiff purchased at least one Roger Dubois watch for approximately $47,000.00. Plaintiff's counsel represented on the record that plaintiff did sell an "expensive watch" in order to pay litigation expenses. The source(s) of plaintiff's additional payments for counsel fees remains unclear at this time.

During oral argument on October 23, 2013, plaintiff's counsel described plaintiff as being engaged in a "complex business structure...." It is clear that plaintiff's inability or unwillingness to provide books and records of his business to defendant's counsel and to the court-appointed forensic accountant in a timely manner during the course of this litigation resulted in delays and forced defendant's counsel to engage in many hours of extensive document review and many days of depositions in order to cull together a clearer picture of the plaintiff's income. The court notes that plaintiff concedes that his books and records were insufficient and that he had to retain a private forensic accountant to assess his business tax returns after his prior accountant "suddenly" refused to continue working with him once he commenced this proceeding and the court-appointed business appraiser requested backup documentation for his business tax returns. Clearly, this resulted in defendant incurring considerable additional counsel fees relating to extensive document review and deposition time.

The court notes defendant's argument that plaintiff's representations regarding his [*15]income appear not to comport with the parties' lifestyle or plaintiff's discretionary spending which, it appears, in many years far exceeded his reported annual income as reflected on the parties' joint tax returns. Furthermore, the court notes that the parties' lifestyle and expenses far exceeded their reported income without any perceivable corresponding incurrence of debt. The court notes defendant's argument that document review revealed that plaintiff paid over $220,000.00 in personal expenses through his business American Express credit card for shoes, clothes, jewelry, computers and electronics between December 2010 and February 3, 2013 and that he paid more than $80,000.00 in personal travel expenses for himself, the family and various alleged paramours between November 27, 2011 and February 2013 on a HSBC credit card. Plaintiff does not address in his Opposition papers defendant's allegation that he paid many personal expenses through his business merely averring that any misreporting of his annual income was due to accountant error and in no way a result of any purposeful misreporting on his part. It is clear that plaintiff's "complex business structure", including his inability to substantiate his business tax returns with business books and records resulted in the need for defendant to pursue extensive document discovery. The court notes that plaintiff has not provided sufficient explanation for why significant financial accounts were omitted from his sworn Statement of Net Worth and why he did not reveal the "forgotten" accounts or acknowledge them until defendant uncovered the accounts during extensive discovery.

Additionally, the court notes the undisputed fact that plaintiff has self-selected, at times, which expenses he has paid during this litigation, such as paying a $30,000.00 retainer to a private forensic accountant while simultaneously reducing, then completely discontinuing, his monthly court-order support obligation unilaterally. The court notes that plaintiff does not dispute that he provided $56,000.00 in monies to fund his girl-friend's business enterprise and at least $100,000.00 in counsel fees to his attorney during the litigation while claiming he could not meet his daily living expenses and that he did not have the financial ability to pay his interim monthly child support obligation.

The court further notes that, despite plaintiff's repeated assertions that the court erred in imputing income to him over his reported income when making the interim support award, after eight (8) full-days of hearing on the issue of pendente lite support before Referee Sweeting that the parties ultimately stipulated to pendente lite monthly support in the sum of $5,000.00, only $1,000.00 less than the court-ordered interim support the court directed plaintiff to pay pending hearing and determination of the parties' pendente lite motions before Referee Sweeting. The court notes that the parties' stipulated to the pendente lite support sum without the plaintiff providing any representation regarding his annual income despite the eight (8) days of hearing. The court is aware that, at this time, there remains many unanswered questions regarding the plaintiff's income. It also appears that extensive discovery is necessary as defendant's counsel must continue to exercise due diligence in attempting to uncover the full extent of [*16]plaintiff's income and to understand the complex business structure which plaintiff appears disinclined to reveal through forthcoming discovery demands. Furthermore, it appears that the questions regarding plaintiff's income are a result of the "complex" business structure he solely controlled during the marriage and this litigation as the sole proprietor of his business. Clearly, plaintiff inability, or unwillingness, to reveal his true financial circumstances and income has, and may continue to require, defendant to incur many additional counsel fees in extensive discovery which may not otherwise have been necessary to resolve this matter. The court notes defendant's allegation that the documentation obtained by defendant during discovery appears to reveal more inconsistencies with plaintiff's representations regarding his income than provide support for plaintiff's previously reported income and, as such, defendant has incurred many additional counsel fees. The plaintiff's representations regarding his income are simply incompatible with the parties' lifestyle during the marriage and the plaintiff's spending during this litigation.

The Court finds that under the facts and circumstances presented here, including the complexity of the issues raised, the need for extensive discovery, the many days required for depositions, the eight (8) full-days of hearing conducted before Referee Sweeting before the parties stipulated and settled the pending motions, the three (3) days of trial on the issues of custody and parenting access before the parties settled those issues by written agreement before testimony concluded and decision was reserved, an award of pendente lite counsel fees in the sum of $40,000.00, as requested by defendant, is just and appropriate. This award of $40,000.00 to the defendant for pendente lite attorney's fees is without prejudice to future applications for additional counsel fees, as necessary at the time of trial or sooner, upon the requisite showing (see DRL § 237; Prichep v. Prichep, 52 AD3d 61, 858 N.Y.S.2d 667 [2nd Dept.2008] Kesten v. Kesten, 234 AD2d 427, 650 N.Y.S.2d 807 [2nd Dept.1996] Dodson, 46 AD3d at 305; Jorgensen v Jorgensen, 86 AD2d 861, 861 [2 Dept.,1982]). On reaching this decision, the Court considered the parties income and assets and liabilities, as affirmed to in their respective Statements of Net Worth. The Court also considered the nature and complexity of this case and has reviewed the parties' retainer agreements, the fees billed, the legal services rendered and the expertise of the defendant's attorney. The Court believes that, pursuant to the dictates of Prichep (supra.), to require a more detailed inquiry would defeat the purpose of a pendente lite counsel fee award and serve as an obstacle to the non-monied spouse obtaining and maintaining competent counsel.

An initial payment in the sum of $40,000.00 shall be made directly from the plaintiff to the defendant's counsel within thirty (30) days of service of notice of entry of this decision and order. If the plaintiff fails to make the full payment in compliance with this decision and order the defendant's attorney may enter a judgment for the full amount due and owing, with a credit for any payment, plus statutory interest, with the Clerk of the Court upon ten (10) days written notice by certified and regular mail to the plaintiff and [*17]without further application to this Court. This matter is scheduled for a pre-trial conference on the financial issues on February 27, 2014.

This shall constitute the decision and order of this court.

E N T E R

Hon. Jeffrey S. Sunshine

J.S.C.



Footnotes


Footnote 1:On February 5, 2013, the court issued, on consent, written orders appointing an appraisers for certain real estate, the plaintiff's business and the defendant's nursing degree and license all of which were to be paid pro rata, subject to reallocation,as follows: plaintiff, 80%; and defendant, 20%.

Footnote 2:At oral argument on February 5, 2013, defendant's counsel asked the court to impute the sum of $200,000.00 annually to plaintiff for the purpose of determining an interim award of support in the sum of $7,000.00 monthly in unallocated support until the matter was heard and determined by Ref. Sweeting.

Footnote 3:The monthly mortgage on the marital residence is approximately $3,600.00.

Footnote 4:The hearing, originally schedule for March 13, 2013, was adjourned based on a procedural scheduling error and, on consent of the parties through counsel, the hearing was adjourned to May 29, 2013 and May 30, 2013. The May 29, 2013 hearing date was vacated due to illness of plaintiff's counsel. The May 30, 2013 hearing date was vacated due to plaintiff's counsel's unavailability due to a Family Court commitment involving overseas telephone testimony.

Footnote 5:The parties stipulated that defendant be solely financially responsible for keeping the mortgage on the marital residence current, for the cost of her child care and for the child [B.]'s day care/school, and for the cost of the children [B.] and [G.]'s activities while plaintiff be solely responsible for costs associated with the child [S.]'s activities.

Footnote 6:The parties' stipulation provided that plaintiff had until December 20, 2013 to provide defendant with proof of any additional interim support payments for which he should receive a credit, in addition to the agreed upon sum of $38,000.00 after which final arrears would be calculated.

Footnote 7:The accounting is not broken into billing statements and there is no indication as to when or whether the billing statements were sent to the client.

Footnote 8:The court notes that the hearing before Referee Sweeting did continue thereafter, all day, on September 12, 2013; October 28, 2013; and December 3, 2013.