Why Adjust Expert Fee in An Application Pursuant to EDPL Section 701?

In a recent decision by the Honorable Wayne P. Saitta, Supreme Court, Kings County, the court discussing Section 701 of the Eminent Domain Procedure Law stated:

Where the proof offered by a claimant has had no effect on the final award, then it cannot be found to have been necessary to achieve just and adequate compensation and the court will not award an additional allowance as to those efforts.  (First Bank & Trust Co. of Corning v State of New York, 184 AD2d 1034, [4th Dept 1992] affd 81 NY 2d 392.)

Justice Saitta further noted,

Where a court accepts part of a claimant’s valuation and rejects part of a claimant’s valuation, the court must determine what part of the fees and expenses contributed to the court’s award.

It is often not possible to determine what part of an attorney’s efforts were spent on a theory of valuation that was rejected by the court and what time was spent on efforts that resulted in the increased award.  (Meyers v State of New York, 166 Misc2d 586 [Ct. of Claims, 1995].)  Matter of City of New York (Oakwood Beach Bluebelt, Yeshivas Ch’san Sofer, Inc.), Rich. Co. Sup. Ct. Index No. 4009/09, August 5, 2020.  We represented the Yeshivas.

The trial court reduced the expert fees by applying a percentage of the expert’s fee to the amount finally determined compared to the expert’s value.  We think this is an unsound analysis.  A claimant is duty bound to value condemned property on its highest and best use which requires expert testimony.  To apportion an expert’s fees based on the amount of award is not based on logic or the law.  This is especially true when the expert’s opinion is neither speculative or exaggerated.

New York’s statute allowing reimbursement for legal and appraisal fees in eminent domain proceedings is Section 701 of the Eminent Domain Procedure Law.  The statute provides as follows:

In instances where the order or award is substantially in excess of the amount of the condemnor’s proof and where deemed necessary by the court for the condemnee to achieve just and adequate compensation, the court, upon application, notice and an opportunity for hearing, may in its discretion, award to the condemnee an additional amount, separately computed and stated, for actual and necessary costs, disbursements and expenses, including reasonable attorney, appraiser and engineer fees actually incurred by such condemnee.  The application shall include affidavits of the condemnee and all parties that have incurred expenses on the condemnee’s behalf, setting forth inter alia the amount of the expenses incurred.

The statute has been held to be remedial in nature.  Matter of City of New York (Douglaston Little Neck Branch Library), 160 AD2d 696, 697 (2d Dept 1990).

In City of Long Branch, the court not only departed from the fees set forth in the retainer by excluding fees on the statutory interest on the award, but also awarded a higher percentage of the excess than called for in the retainer.  The retainer agreement between claimant and its counsel provided for fees of 20% of the first $500,000 of the excess of the final award over the initial offer and 15% of any additional excess.  (Matter of City of Long Beach v Sun NLF Ltd. Partnership, 172 AD3d 1061.)  The court calculated the award of attorneys’ fees by applying a contingency fee formula from a different but similar case.  (Id. at 1063.)  The court held that the formula in the similar case, 25% of the excess of the final award over the advance payment, was reasonable.  (Id. at 1063.)

What can be gleaned from these cases is that there is no bright line rule either allowing or prohibiting basing attorneys’ fees pursuant to § 701 on both the award and the interest on the award.  In determining the amount of attorneys’ fees to be awarded, the court is not bound by a retainer that provides for attorneys’ fees on an award and interest on the award, nor is it bound by the specific manner in which attorneys’ fees are calculated under a retainer.  The manner in which the fees are structured as between a claimant and its attorneys is not determinative, what matters is whether the resulting total fee is reasonable.

The Court of Appeals explained the reason for EDPL § 701,

In fairness to a private party owner forced to litigate the value of its property when the State comes forward with an unreasonably low offer in effecting the taking of that property, the Legislature enacted section 701 of the Eminent Domain Procedure Law.  This section allows the owner to apply for allowances – litigation costs expended to ensure just compensation.  General Crushed Stone Co. v State of New York, 93 NY2d 23, 25 (1999).

The Second Department handed down Matter of City of Long Beach v Sun NLF Ltd. Partnership, 172 AD3d 1061 (2d Dept 2019).  The decision concerned an application for reimbursement of legal, appraisal fees and disbursements pursuant to EDPL Section 701.

The condemnor made a pre-vesting offer to the property owner of $2,080,000.  After trial the Supreme Court awarded $11.8 million.  Claimant sought an additional allowance totally $2,024,412.

The trial court reduced the amount sought for attorneys’ fees and awarded $831,303.  The condemnor appealed and the claimant cross-appealed.  The Appellate Division held that the Supreme Court improvidently exercised its discretion and increased attorneys’ fees to $1,366,250.  It’s interesting to note that the court calculated the legal fee at 25% over the offer rather than 1/3 which was the actual retainer, and which presumably the clients paid.  Shouldn’t that be controlling?

EDPL Section 701

In August 1987, the Eminent Domain Procedure Law (EDPL), § 701, was amended to provide that when an award in a condemnation proceeding was “substantially” in excess of the condemnor’s proof on the trial, the trial court, in its discretion, if required to afford a claimant “just compensation,” could award a claimant an additional allowance in his litigation expenses, including attorneys’, engineering and appraiser’s fees.

Specifically, EDPL § 701 states:

“In instances where the order or award is substantially in excess of the amount of the condemnor’s proof and where deemed necessary by the court for the condemnee to achieve just and adequate compensation, the court, upon application, notice and an opportunity for hearing, may in its discretion, award to the condemnee an additional amount, separately computed and stated, for actual and necessary costs, disbursements and expenses, including reasonable attorney, appraiser and engineer fees actually incurred by such condemnee.  The application shall include affidavits of the condemnee and all parties that have incurred expenses on the condemnee’s behalf, setting forth inter alia the amount of the expenses incurred.”

Initially one must consider whether the court’s award “is substantially in excess of the amount of the condemnor’s proof.”

The Second Department in Malin v State of New York, 103 AD2d 899 (2d Dept 1992) held that the claimant need only show “more than a modest increase in value.”  In the Malin case, that increase was a 79 percent increase in value over and above the State’s initial offer.

One aspect of EDPL § 701 has been well established.  The standard for determining both “substantially in excess” and the computation of the contingency legal fee is the initial advance payment made under EDPL § 303.  The base from which the court determines whether the claimant achieved an award “substantially in excess” is not based on the condemnor’s proof at trial.  Rather, the basis utilized is the initial advance payment.  General Crushed Stone v State of New York, 93 NY2d 23 (1999); First Bank & Trust Co. of Corning v State, 184 AD2d 1034 (4th Dept 1992); Lee-Hi Fuel v State, 1979 AD2d 494 (1st Dept 1992).  This is logical and consistent with the statutory intent.  Only by having retained counsel and hiring experts could a claimant reach trial so as to realize the award.  Matter of New York City Transit Authority, 160 AD2d 705 (2d Dept 1990) (“…the only interpretation which would fulfill the legislative intent of the amendment, and the policy of the EDPL, is the city’s initial offer…be utilized for comparison purposes.”)

Posted in EDPL Sec. 701, Reimbursement of Legal Fees
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