A Futile Quest for Fees

Titus OneNine featured earlier this morning the following news item from Long Island:

MINEOLA, N.Y. (CN) - The Episcopal Diocese of Long Island wants law firms to repay the $205,000 in legal fees that "dissident" parishioners allegedly paid out of church coffers after trying unsuccessfully to take over a church. The squabble erupted after the consecration of the church's first openly gay bishop, in 2003.
The Diocese says the dissidents voted to disaffiliate St. James Church of Elmhurst in 2005, then used church money to pay their legal fees as they sought control of the parish's 304-year-old property.
Citing "theological and moral decline," the St. James' dissidents fled the Diocese and affiliated with the Anglican Church of America, according to news reports at the time.
The Jakubik Law Firm and Silber Law Firm represented them in an action seeking control of the church's property, which was held in a trust created in 1871, but a court dismissed their claim in April 2008.
During the legal battle, the dissidents appointed an "unauthorized priest" and formed the St. James Anglican Church, according to the complaint. The Diocese says the dissidents wrote checks against the parish's bank and stock accounts to pay $205,000 in legal fees.
The church and diocese sued Mark Jakubik, Meyer Silber and their law firms, alleging unjust enrichment and conversion. They are represented by Jennifer McLaughlin with Cullen & Dykman of Garden City.

This sparse account does not even begin to tell the full tale. Fortunately, the story in the Courthouse News Service attaches at the end a .pdf version of the actual complaint filed in Nassau County Court against the defendant law firms. From a study of this complaint, many interesting observations are possible.

The first thing to note is that the defendant law firms do not maintain any offices in Nassau County. The Jakubik Law Firm is based in Philadelphia, and the Silber Law Firm has its offices on Broadway in Manhattan. The complaint charges them each with four separate causes of action: (1) money had and received; (2) unjust enrichment; (3) conversion; and (4) "aiding and abetting" conversion.

Let's start with the cause of action for "money had and received". This is what is called a "common count", and is based on the old action at common law known as "assumpsit" (Lat. for "he [the defendant] promised." The most frequent form of this action was based on a simple allegation that the defendant borrowed or received funds which he promised, either in express words or from his implied conduct, to repay.

How can this describe any form of a payment to a law firm for its legal services? It is the client who becomes indebted to the law firm by the rendition of legal services, and not the other way around. What the Diocese of Long Island is saying in its common count is that since the money used to pay the attorneys was actually held in trust for it under the Dennis Canon, the attorneys should not have treated it as theirs when they got it, but instead as a form of "stolen goods." But if the attorneys believed that at the time they got the money, they had no business representing their clients, and should just have advised them to throw in the towel. The validity of the Dennis Canon and its diocesan equivalent was very much in contention while the lawsuit was going on -- it was the pivot around which the whole lawsuit turned.

Let's look at the second cause of action, for "unjust enrichment." If the Post Office by mistake delivers to me a package intended for you, and I keep it instead of handing it over to you, I have been unjustly enriched at your expense. "Unjust enrichment" is the legal equivalent of an unmerited windfall, to which you have no right. That again hardly describes (I hope) the amounts which lawyers receive for their services. Saying that the payments to them were undeserved is alleging that their services were really of no value -- but again, if that were truly the case, the lawyers had no business rendering any legal services in the first instance. So I do not see this claim succeeding, either.

The third cause of action alleges the tort of conversion. If, again, I take something that belongs to you and convert it to my own purposes, I have committed the wrong of conversion, for which the law provides damages in the amount of the value of the thing converted. Even assuming that one could make a claim that the money in the hands of St. James Parish was held in trust for the Diocese, however, when was that money converted from such trust purposes? It should be obvious to any person of sense that the conversion occurred when the money was allocated to the payment of legal expenses by writing a check to the law firms which had a signatory on it which the bank in question was bound to honor. The check became payable to the law firms at that moment. Their later act of depositing the check in their own accounts for collection did not constitute the act of conversion, because the check constituted an order to the Parish's bank to pay the attorneys. The conversion, if any occurred, therefore occurred when that order was given, and not when the bank carried it out. The Diocese has sued the wrong defendants on its claim of conversion -- as it all but admits outright by its next cause of action. It should have gone after the people who wrote the checks.

That final cause of action, as already noted, is for "aiding and abetting" the act of conversion that has been claimed. In saying that the defendant law firms only aided and abetted the conversion, the Diocese is pleading that the actual act was done by someone else -- the "unnamed co-conspirator" -- namely, the officer of the Parish who was authorized to, and who did, sign the checks. But that person was "aided and abetted" in the writing of the checks by, if anyone, the persons who approved the lawyers' bills for payment, and the persons who ordered the legal services in the first instance. Nothing the attorneys did could be seen as contributing in any fashion to the giving of the order for payment to the bank -- that could be done only by authorized officers of the Parish. So once again, it looks as though the Diocese is barking up the wrong tree.

(I am also unclear how one can be liable for "aiding and abetting" under New York civil law. The tort consists not in the aiding and abetting, but in the tort itself which the aiders and abetters help commit. So that would just bring one back to the main claim for conversion -- for which, as explained above, I cannot see how the attorneys could be held liable.)

The complaint thus presents considerable hurdles which must be overcome if it is to succeed. And another big hurdle is obtaining personal jurisdiction over the Philadelphia defendant in Nassau County in New York. For the Supreme Court of Nassau County to exercise jurisdiction over a lawyer from Philadelphia, the attorney would have to have committed some tort in Nassau County. The checks paying for his legal services, however, were presumably all sent to his offices in Philadelphia, and any actions his office took to cash them -- even if those were the actions which might make the law firm liable -- would have occurred in the State of Pennsylvania, and not the State of New York. (The Manhattan law firm may be reached by the courts of New York, but there would probably be a problem of venue. I do not know New York civil procedure, but it may be that a claim of a tort occurring in Manhattan would have to be brought in that county, and not in Nassau County.)

One has to ask, therefore, what the Diocese of Long Island hopes to gain by this complaint. It is not as though the Dennis Canon were a matter of public record, so that the Parish bank accounts were titled all along as having been "in trust for the Diocese of Long Island." Remember that the Dennis Canon expressly places no limits on the parish's power to deal with its own property while it remains a part of the Episcopal Church. It can use funds to buy a new organ, or to operate a mission in Africa, and the Diocese can have nothing to say about it.

And that points up another deficiency in the complaint: it does not say when the funds were disbursed. It alleges that the attorneys were initially retained by the Parish "in or about March 2005" -- but that the lawsuit to declare its property free and clear was not filed until the following October. If some or all of the money was paid in advance to the attorneys before the Parish actually withdrew from the Diocese (the vote is alleged to have taken place on March 30, 2005), then the Diocese should have gone after the money while it was still in the attorneys' trust accounts, and before it was earned by the rendering of services. Under the express terms of the Dennis Canon, as mentioned, there were no restrictions of any kind on how the Parish could spend its funds before it voted to leave.

Even after the vote to leave was taken, what would be the status of money taken in as regular Sunday offerings and parish pledges? Once the vote to leave occurred, the Parish ceased to be a member of the Episcopal Church -- at least that is the claim which triggers the operation of the reversion of the property to the Diocese under the Dennis Canon. So if the Diocese asserts its rights under the Canon by saying the Parish left, it cannot also say that the money the Parish is collecting continues to belong to it.

Notwithstanding such logic, the Diocese appears in the present complaint to say that the Parish never really left. It alleges in paragraph 16:

Under the rules and canons of the Episcopal Church and its various dioceses, neither the Parish nor any other Episcopal parish may unilaterally disaffiliate from its diocese or the Episcopal Church upon a vote of its current vestry or membership.

However, if the Parish never left, then the Dennis Canon never was triggered! It purports to shift the beneficial ownership of the property, according to its terms, only when the Parish in question ceases to "remain[] a part of, and subject to, this Church and its Constitution and Canons." Thus the Diocese cannot have it both ways: either the Parish never left, in which case "the existence of this trust, however, . . . in no way limit[ed] the power and authority of the Parish . . . otherwise existing over [its] property", or else the Parish did leave, in order for the Diocese now to claim that there were thereafter limits on how the Parish could use its property acquired before it left. And I cannot see any legal argument by which the terms of the Dennis Canon could reach property acquired by a parish after it leaves and is no longer subject either to ECUSA or its Dennis Canon.

Thus I foresee troubles with the Diocese of Long Island getting anywhere with this lawsuit as currently asserted. It is noteworthy, in that regard, that Bishop Lamb and his group, who filed a similar claim in the San Joaquin litigation against the law firm retained by Bishop Schofield and his diocese, have now seen fit to drop it altogether. Not only did the claim face an uphill battle, for the same reasons discussed above, but it threatened to interfere with Bishop Lamb's ability to make use of the summary adjudication ruling he obtained from the trial court on an earlier version of the complaint -- before the one adding the law firm was filed.

It is far too easy to file suit these days and then think it through afterward. People who live in the Diocese of Long Island should be questioning their bishop and his staff about the wisdom of the use of scarce diocesan funds to mount this questionable foray against people who were just doing their job as the attorneys for their clients.