Referee Fees and the “Caddyshack” Principle
Print Article- Posted on: Nov 23 2019
Referees are frequently appointed by New York courts. The fees to which an appointed referee is entitled are generally governed by Rule 8003 of the New York Civil Practice Law and Rules (“CPLR”). CPLR 8003(a) presently provides that:
A referee is entitled, for each day spent in the business of the reference, to three hundred fifty dollars unless a different compensation is fixed by the court or by the consent in writing of all parties not in default for failure to appear or plead.
Referees can be appointed for a variety of different reasons. As one court noted in describing the types of references to which CPLR 8003(a) applies:
This section is applicable to all kinds of references in which an attorney is enlisted by the court to resolve a limited issue upon evidence submitted, including proceedings involving, e.g., the assessed value of property (O’Dwyer v. Robson, 103 AD2d 1036 (4th Dep’t, 1984)), the determination of counsel fees (Albano v. Albano, 2003 WL 21911128), an accounting upon the dissolution of a business relationship (Pittoni v. Boland, 278 AD2d 396 (2d Dep’t, 2000), as well as the sale of real property in foreclosure actions.
NYCTL 1998-2 Trust v. Kahan, 9 Misc.3d 1119(A), 862 N.Y.S.2d 809, at *1 (Sup. Ct. Kings Co. 2005).
In mortgage foreclosure actions (a frequent topic of this Blog ([here] [here] [here] [here] [here] [here] [here] [here] [here] [here] [here] [here] [here] [here]), referees are typically appointed to: (1) calculate the amounts due to a lender; and, (2) sell the foreclosed property. In Wells Fargo Bank, N.A. v. Brown, (Sup. Ct. Suffolk Co. October 28, 2019), the court was called upon to decide the quantum of fees to which a referee was entitled.
The referee in Wells Fargo (the “Referee”) was appointed to “compute the amount due and owing under the mortgage and execute the sale of the Property.” Wells Fargo, at *2. While acting in his appointed capacity, the Referee was sued numerous times by the defaulted borrower. As a result, the Referee, who was the managing partner of a law firm, was forced to defend himself, and prevailed, in the actions – all of which were determined to be frivolous. In so doing, the Referee incurred significant legal fees and expenses.
The court decided the Referee’s motion for an “Award of Referee’s Fees and Reimbursement of Legal Fees” by setting the matter down for an evidentiary hearing, at which the Referee presented “credible” evidence of the amounts claimed by him to be due. Wells Fargo, at *2. The next question for the court was “how much compensation the Referee should be entitled to regarding such fees relating to the mortgage foreclosure and the defense of the aforementioned litigation proceedings.” Wells Fargo, at *2. The court stated that “the issue at bar is to determine what is considered ‘reasonable’” based on CPLR 4321(1), which provides that “[a]n order or a stipulation for a reference shall determine the basis and method of computing the Referee’s fees and provide for their payment. The court may make an appropriate order for the payment of the reasonable expenses of the referee….” Wells Fargo, at *2.
The court then set forth the following seven factors to consider when determining the reasonableness of legal fees: “(1) complexity of the matter; (2) time and labor required; (3) attorney’s experience and reputation; (4) amount in controversy; (5) normally charged attorney’s fees for similar work; (6) results of the attorney’s actions; and (7) attorney’s responsibility.” Wells Fargo, at *2 – 3. The court also noted that the “Loadstar-the product of a reasonable hourly rate and the reasonable number of hours required-creates a presumptively reasonable fee.” Wells Fargo, at *2 – 3 (citations and internal quotation marks omitted). According to the “forum rule,” which the court noted it must “adhere” to, a reasonable hourly rate must take into consideration, the “prevailing [hourly rate] in the community.” Wells Fargo, at *3 (citation omitted).
Using the Loadstar approach, the court found that the Referee’s claim for legal fees and expenses in the approximate amount of $139,000.00 was fair and reasonable because he had to, inter alia, defend three frivolous lawsuits. After all, “[i]t has long been established that frivolous lawsuits typically warrant the awarding of Attorney’s fees as damages to the innocent party as compensation for having to defend themselves over such a matter.” (Citation omitted.) Notwithstanding the court’s finding of reasonableness of the requested legal fees and the decided frivolity of the litigations brought against the Referee that he was forced to defend, the court found that there “is, however, a statutory impediment to [the requested] award which overrides the general principles enunciated in the case law [analyzed by the court].” Wells Fargo, at *7. The court, in ultimately determining that absent an order authorizing enhanced fees in advance, compensation was limited to the statutory fee, stated:
The Plaintiff argues that the Referee cannot receive an enhanced fee because it was not authorized in the Order of Reference, citing to CPLR 8003 and Matter of Charles F., 242 AD2d 297, 660 N.Y.S.2d 594 [2nd Dept.1997]. The Court therein held: “…since the record does not contain any agreement concerning the Referee’s compensation which was made prior to the Referee’s performance of his duties, the Referee’s fee must be limited to the statutory per diem fee of $50 (see, CPLR 8003 [a]; Majewski v Majewski, 221 AD2d 420; Neuman v Syosset Hosp. Anesthesia Group, 112 AD2d 1029).” (Id. at 298). In the case of NYCTL 1998-2 Tr. v. Kahan, 9 Misc. 3d 1119(A), 862 N.Y.S.2d 809 (Sup. Ct. Kings Co. 2005), Justice Demarest described, with great eloquence, the public policy dangers in allowing Referees to remain under compensated. Despite these concerns, however, she ultimately held that CPLR 8003 constrained the Court to find that it was impermissible to award “…payment in excess of $50.00 per day…without written agreement or prior court authorization.” (Id.). This rule cannot be circumvented by authorizing enhanced compensation nunc pro tunc. (Id.). As noted in Scher v. Apt, 100 A.D.2d 582, 583, 473 N.Y.S.2d 521 (2nd Dept. 1984) “…the statutory per diem rate should apply under ordinary circumstances unless a different rate has been fixed at some preliminary point in the proceeding.” (Id. at 583).
Wells Fargo, at *7 – 8.
Thus, the court found that “a fair reading of the Order of Reference appointing [the Referee] confirms the lack of authorization for a fee in excess of the $50.00 per diem provided in CPLR 8003.” Wells Fargo, at *8. The court also noted that the statutory fee set forth in CPLR 8003(a) has been increased to $350 since the Referee’s appointment in Wells Fargo, but there is no indication in the statute or legislative history that the higher fee was to be applied retroactively. Wells Fargo, at *8. In calculating the Referee’s compensation, the court stated:
The $50.00.00 (sic) compensation can be awarded, not just for the date of sale, but “…for each day spent in the business of the reference…” (CPLR 8003[a]). We agree with the Kahan Court that this applies to each day that [the Referee] devoted himself to perform “some aspect” of his “duties as Referee to sell” (NYCTL 1998-2 Tr. v. Kahan, supra). This Court finds that appearing in Federal and State Court to defend his actions as a Referee clearly come within the scope of duties for which he is eligible to be compensated.
Wells Fargo, at *8. Based on this analysis, the court found that the $50.00 per diem rate should be applied to the Referee’s 156 days of work, for a total of $7,800.00. The court also awarded the Referee reimbursement of $2,449.51 in expenses that were “separate and distinct from the fees addressed in CPLR 8003 and can also be awarded.” In noting the great disparity between the fees the Referee sought and the amount he was awarded, the court stated:
The Court is mindful that this sum is but a fraction of the amount requested by the Referee and what the Court found to be a reasonable reflection of his considerable legal services in this case. The operative Statute, however, is absolute and so learned Counsel must be consoled with the truth found in the words of the immortal poet Katherine Philips: “So honour is its own reward and end.”
Wells Fargo, at *8. Thus, while the Referee lost out on a $139,000.00 fee, he did get $7,800 and “honour.” So, to quote Bill Murray’s character from Caddyshack, “at least the Referee has that going for him – which is nice.”
