This is a motion for an order to increase counsel fees, pursuant to Judiciary Law § 474-a, by Norman Leonard Cousins, the former attorney for plaintiffs Kevin and Juanita Veneski. The Veneskis cross-move for an order finding that Cousins owes them $1,231,061.89 for moneys taken from them, and leaving to the United States Bankruptcy Court the issue of what, if anything, Cousins owes to them in connection with litigation against them by Legal Asset Funding, LLC (LAF), both by way of indemnification, if they are found liable to LAF, and for the Veneskis' attorneys' fees in defending the LAF litigation, and for damages for physical and mental pain caused by Cousins as a result of all of that litigation.

According to Kevin Veneski, he is totally disabled as a result of a thromboembolic stroke which he suffered on March 27, 1996. Veneski has had no formal education beyond high school, and has not been able to work since his stroke.

Cousins initially represented the Veneskis in this medical malpractice case against Queens-Long Island Medical Group P.C. and Lawrence Sikolsky, M.D.

The retainer agreement between Veneski and Cousins, dated June 6, 1997, set attorney's fees on the basis of the fee scale mandated by Judiciary Law § 474-a for contingent fee litigation.^[FN1] In addition, in order to fund the litigation, Veneski entered into a litigation financing agreement with Cousins, pursuant to which Veneski would borrow money from Cousins for expenses and would be liable for the disbursements plus interest at the rate of 15% per annum, to be calculated from midway between the date on the retainer and the date on the Closing [*2]Statement to be filed by Cousins, regardless of when the expense chargeable to the case was made. Pursuant to the financing agreement, the disbursement expenses, but not the interest thereon, would be deducted from the recovery for the purposes of computing attorney's fees.

Pre-trial discovery was conducted in 1998 and 1999, and shortly before trial, liability was conceded. The case went to trial on damages, in or about December 1999, before Judge Robert Lippman. On February 2, 2000, the jury awarded the Veneskis $4,215,300.00.

On February 26, 2000, Veneski signed an affidavit in support of a potential application by Cousins, pursuant to Judiciary Law § 474-a, to receive an award of attorney's fees in the amount of 1/3 of Veneski's net recovery. In that affidavit, Veneski stated that "I intend to give Mr. Cousins one third (1/3) of the net recovery he has obtained for me in this action whether it be denominated a fee, gift or gratuity (a tip)." Affidavit of Kevin Veneski, dated February 26, 2000. Cousins did not, however, file a motion for an increase in attorney's fees at that time.

Appeals from the jury verdict were filed, and the Appellate Division ordered a new trial, on the basis that expert disclosure notices of defendants' experts were improperly admitted in evidence. Veneski v Queens Long Island Med. Group, 285 AD2d 369 (1st Dept 2001).

On October 25, 2001, the Veneskis agreed to the assignment of their 1977 financing agreement to Legal Asset Funding (LAF), which had advanced Cousins the sum of $90,000 towards disbursements in the Veneski case.

In November 2002, during the second trial, the matter was settled on the basis of a recovery of $3,000,000 in cash and an annuity to be purchased at the cost of $369,472, which would yield a recovery of $750,000 for Veneski over a period of 20 years.

On December 12, 2002, Cousins wrote to Veneski, notifying him that he was about to receive the first payment of $1,000,000. Cousins notified Veneski that he was sending Veneski $500,462.84, based upon the following calculation:

Gross Recovery$1,000,000.00

Less disbursements-$154,011.26

Net Recovery$845,988.74

Attorney's fees$281,996.25

Check to Veneski$500,462.84

In the letter, Cousins stated that "Subject to Court approval (if required), the attorney fee is one-third of the net recovery." Cousins did not, however, seek court approval prior to deducting the $281,996.25 from Veneski's recovery.

It is not clear from the record in this case how much money Cousins borrowed from LAF for the Veneski and other cases, but on January 21, 2003, Cousins wrote a check to LAF in the amount of $154,011.26 to cover moneys borrowed from LAF for disbursements on the Veneski case.^[FN2] On January 24, 2003, Cousins wrote a second check to LAF for $63,529.65, for interest [*3]charged to the Veneski case. Nonetheless, the Veneskis were sued by LAF in New Jersey (see Legal Asset Funding, LLC v Cousins, D NJ, Civ 05-2051 [HAA] and Legal Asset Funding, LLC v Cousins, Super Ct, Chanc Div, NJ, Docket No. HUD-C-1-04]) and in Pennsylvania (Legal Asset Funding, LLC v Veneski, 2006 WL 2623884 [MD Pa 2006]) in connection with the funds borrowed by Cousins.^[FN3]

Subsequently, the main insurance carrier for defendants, Group Council Mutual Insurance Company, became insolvent. See Matter of Serio v Group Council Mutual Insurance Co., Sup Ct, NY County, Index No. 400592/02 (petition for liquidation of the Superintendent of Insurance). As a result, the second settlement payment to Veneski was paid through the Liquidation Bureau. In the context of the Group Council Mutual Insurance Co. proceeding, Cousins indicated to the court that his attorney's fees in connection with that portion of the recovery were $212,500.^[FN4] Additionally, in an affidavit submitted in the LAF New Jersey Litigation, Cousins reiterated that the maximum fee permitted on the $2,000,000 payment to Veneski was $212,000. See Affidavit of Norman Leonard Cousins, at 2, Legal Asset Funding, LLC v Cousins, Super Ct, Chancery Div-Hudson County, NJ, Docket No. HUD-C-1-04. Nonetheless, on October 20, 2003, Cousins wrote to Veneski indicating that the Liquidation Bureau would be sending Veneski a check for $1,787,500 in connection with the second payment of $2,000,000, and asking that, on receipt, Veneski send Cousins a check for an additional $454,450.55 for attorney's fees, based on Cousins' calculation again, without seeking court approval of his fee at 1/3 of the recovery; the $454,450.55 requested by Cousins represented the balance of that 1/3 amount, since he had already been awarded $212,500 for attorney's fees, pursuant to an order of the court in Serio v Group Council Mutual Ins. Co. (supra).

According to Veneski, he sent Cousins the requested check for $454,450.55, and though [*4]he noted on the memo line that the check was for attorney's fees, Cousins, without his consent, crossed out "attorney's fees" and wrote "gift."

Cousins has emphasized that he agreed to delay taking his attorney's fees on the portion of Veneski's recovery that takes the form of the annuity, claiming that he had done so, to his own detriment, and out of concern for Veneski, to ensure that Veneski would have an advocate if anything were to happen to interfere with his obtaining the annuity payments in the future. However, when the first annuity payment of $20,000 was sent to Cousins, he wrote to Veneski, on October 17, 2005, indicating that as a result of the following three deductions, the balance available for Veneski and for himself, in the form of attorney's fees, was zero:

Annuity payment$20,000.00

Less deduction of medicaid-3,633.00

lien paid by Cousins

Less deduction of interest on

disbursements previously

mis-calculated-9,052.97

Less deduction of disbursements

advanced by attorney-7,314.03

Balance available for

distribution to client & lawyer$00.00

According to Veneski, and as it appears from the letters written by Cousins to Veneski, Cousins had already either withheld or received a total of $948,520.98 from Veneski in attorney's fees, in addition to $154,011.26 in disbursements and $63,529.65 in interest on those disbursements.

Previously, on January 29, 2003, Cousins had written to Veneski, enclosing a proposed loan agreement authorizing him to deduct $250,000 from Veneski's share of the next settlement check for Cousins to borrow that sum from Veneski at the rate of 10% per annum.^[FN5] According to Veneski, when Cousins asked him what he had done with the first settlement payment, he told Cousins that he had invested the initial $500,462.84 in stock with the local bank. He states that he did not want to lend the money to Cousins, but was afraid to turn him down, so instead, he instructed the bank to refuse the loan, when he came with Cousins to borrow the money. The bank did reject Veneski's loan request. According to Veneski, Cousins then "demanded" that Veneski lend him $65,000 in cash; Veneski reluctantly agreed, and withdrew $65,000, which he gave to Cousins. In return, Veneski received a promissory note for $65,000, not from Cousins, but from Cousins's client in another medical malpractice case, Pamela Brandes. See Brandes v v [*5]North Shore Univ. Hosp., supra. According to Veneski, Cousins never advised him to consult with independent counsel regarding Cousins's loan request.

Finally, Veneski challenges certain of the expenses for which Cousins previously charged and received payment, including, but not limited to, payment to a person to read deposition transcripts at the trial. Cousins had submitted a request for such an expense in a previous medical malpractice case which was rejected by the court. See Merl v Adler, Sup Ct, NY County, March 14, 1995, Friedman, J., Index No. 14327/89, at 6-7 (disallowing the cost of actors hired to read part of certain transcripts during the trial).

On September 10, 2004, Cousins filed a voluntary petition for Chapter 13 bankruptcy. In re Cousins, Bankr Ct, SD NY, No. 04-15898-RDD. On April 6, 2005, the Bankruptcy Court granted Cousins's motion to dismiss his bankruptcy petition; however, Cousins filed a new petition on April 15, 2005. In re Cousins, Bankr Ct, SD NY, # 05-12633-RDD. That case is pending. In this motion, Cousins claims that he was forced to file for bankruptcy protection as a result of this case, both because he needed to turn to predatory lenders to obtain litigation funding ^[FN6] and because the Appellate Division ruling overturning the first jury verdict caused a delay in his receipt of attorney's fees.

In his motion for additional fees, Cousins contends that he worked on the Veneski case for eight years, spending a total of 3,987 hours.According to Cousins, his normal fee is $500 per hour. Applying that rate to the hours he allegedly expended, Cousins claims that he would receive $1,993,500 in attorney's fees. Cousins seeks $1,198,511.97, or 1/3 of Veneski's recovery, less the $154,464.08 for disbursements. He argues that under the statutory rate, he would receive $509,553.59, which would represent an hourly fee of $127.80 per hour. Cousins contends that such a rate is 13.58% of the settlement amount, which, he argues, was found inadequate in Contorino v Florida OB/GYN Assn., P.C. (283 AD2d 67 [2d Dept 2001]). In Contorino, where an estimated 6,000 hours were spent by the attorneys, resulting in a structured settlement worth more than $4.25 million, the case touched nearly every attorney in the firm, including paralegals, support staff, consultants, and others, and a portion of the fee was to be shared with another attorney who had worked on the case for approximately two years before he referred it to the current attorney. On that record, the Appellate Division in Contorino, awarded the attorney a fee of $1,000,000 which is less than what Cousins is seeking here. Here, in contrast, although this motion for additional fees was filed in 2006, the case was settled in November 2002, approximately four years after it was filed in 1998. Little activity in the case occurred after settlement other than some correspondence in connection with disbursement of the lump sum recovery payments to Veneski and some questions concerning the annuity. Furthermore, despite the voluminous photocopied exhibits provided with his motion (many of which have nothing to do with this case), Cousins provides little, if any, contemporaneous documentation of the majority of the purported 3,987 hours spent on this case. [*6]

Cousins does not respond to Veneski's allegations that: he has already taken nearly 1/3 of Veneski's recovery in the form of fees, without the approval of the court; he improperly pressured Veneski to give him a loan; he changed the notation from "attorney's fees" to "gift" on the $454,450.55 check, without Veneski's knowledge or permission; and he claimed improper disbursements. Rather, Cousins states that he will respond after the New Jersey trial in Legal Asset Funding, LLC v Cousins (Super Ct, Chancery Div-Hudson County, NJ, Docket No. HUD-C-1-04) is complete, claiming that, were he to respond at this point, he would "put the Veneskis at grave risk." Affirmation of Norman Leonard Cousins, dated November 13, 2006, at 2. Cousins does devote approximately 14 pages of his response attacking the representation of the Veneskis by their current attorney, Harris D. Leinwand. Cousins also devotes considerable discussion to attacking the actions of Thomas A. DeClemente, a principal in Legal Asset Funding, LLC, in unrelated cases, and submits at least one dozen exhibits relating to Mr. DeClemente.

Like Judge Olivieri in Legal Action Funding v Cousins (Sup Ct, Chancery Div, Hudson County NJ, September 28, 2006, Docket No. HUD-C-1-04, Tr. at 4), this court is not interested in Cousins' ad hominem attacks on other attorneys. The court is frankly more concerned about Cousins's actions in this matter. Noting that Cousins declined to respond to Veneski's allegations and the documentation provided by Veneski in support of his allegations, either in his Affirmation in Opposition to Cross Motion, dated November 13, 2007, or his letter to the court, dated December 22, 2006, this court determines as follows:

With respect to the matter of attorney's fees, Cousins's motion for additional fees is denied. Moreover, the court concludes that Cousins has, without the approval of the court, already billed and received attorney's fees in the amount of 1/3 of Veneski's lump sum recovery of $3,000,000. Assuming that the disbursements of $154,011.26 were properly calculated, pursuant to the Judiciary Law, Cousins would have been entitled to approximately $435,000 in attorney's fees on the $3,000,000 lump sum portion of the recovery. Having already received approximately $948,000 on the lump sum portion of the recovery, the court concludes that Cousins owes Veneski, at a minimum, approximately $513,000 that he has received over and above the statutorily-permitted amount.

The Veneskis contest certain of the disbursements for which Cousins received reimbursement. The court is in accord with the decision in Merl v Adler (supra), that Cousins improperly included the cost of a transcript reader as a reimbursable disbursement. The cost of that item is not clear from the submitted papers, however. Veneski also contests at least some of the disbursements for meals. Again, this court is in accord with the court in Merl, that certain of those expenses may have been improperly charged to Veneski as disbursements. Those matters cannot be determined on the basis of this record; therefore, the court refers to a referee, to hear and report with recommendations, Veneski's challenges to the disbursements billed by and paid to Cousins, in the amount of $154,011.26. Because the total amount of attorney's fees to be awarded pursuant to Judiciary Law § 474-a is dependent on the proper amount of disbursements deducted from Veneski's recovery, the ultimate calculation of permissible attorney's fees and, therefore, the amount which Cousins owes the Veneskis, must be held in abeyance, pending the hearing and report of the referee.

With respect to Veneski's alleged loan to Cousins, although the alleged loan does not [*7]relate directly to the relief requested in the motion and cross motion before this court, if, as Veneski alleges, Cousins pressured Veneski to lend him money, and did not advise his client to seek the advice of independent counsel with respect to that loan, a serious question exists regarding whether Cousins's actions constituted professional misconduct. See Matter of Gebo, 19 AD3d 932 (3d Dept 2005); Matter of Leff, 275 AD2d 135 (1st Dept 2000); Matter of Farrington, 270 AD2d 710 (3d Dept 2000); DR 1-102 (22 NYCRR 1200.3 [a][5],[7]); DR 5-104 (22 NYCRR 1200.23 [a]). The court will, therefore, refer that matter to the Disciplinary Committee of the Appellate Division, First Department, for further inquiry. In so doing, the court notes that on January 2, 2007, Harris D. Leinwand, the current attorney for the Veneskis, filed a complaint with the Disciplinary Committee regarding the alleged loan, as well as other actions by Cousins in connection with his representation of the Veneskis.

Finally, the court finds that any questions regarding what, if anything, Cousins owes to Veneski in connection with litigation against him by Legal Asset Funding, LLC (LAF), both by way of indemnification if he is found liable to LAF, and for the Veneskis' attorneys' fees in defending the several LAF lawsuits and any damages for physical and mental pain caused by Cousins, are not properly part of this litigation.

Accordingly, it is hereby

ORDERED that the motion of Norman Leonard Cousins for additional attorney's fees, pursuant to Judiciary Law § 474-a, is denied; and it is further

ORDERED that the cross motion of plaintiffs Kevin and Juanita Veneski is granted to the extent that the court finds, as set forth above, that Cousins has billed and received from Veneski a greater amount in attorney's fees than he is entitled to pursuant to Judiciary Law §474-a; and it is further

ORDERED that a determination of the exact amount to be reimbursed to Kevin Veneski is held in abeyance, pending a hearing by a Special Referee, who shall hear and report with recommendations on the issue of the propriety of certain disbursements charged by Cousins and paid by Veneski except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further

ORDERED that the court will refer to the Disciplinary Committee of the Appellate Division of the Supreme Court of the State of New York, First Department, the question of whether Norman Leonard Cousins improperly pressured his client, Kevin Veneski, to loan money to him, without advising his client to seek the advice of independent counsel; and is further

ORDERED that a copy of this order with notice of entry shall be served on the Special Referee Clerk, 60 Centre Street, Room 119, New York, New York 10007, no later than February 16, 2007, to arrange a date for the reference to a Special Referee.

This shall constitute the decision and order of the court.

DATED: January 30, 2007



SHERRY KLEIN HEITLERJ.S.C. [*8]