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June 17, 2008
Dead Man's Chest, Take 2: New York Court Of Appeals (Incorrectly) Reverses Dead Man's Statute Ruling In Lawyer Discipline Case
Last October, I wrote about the opinion of the New York Supreme Court, Appellate Division, First Department in In re Zalk, (N.Y.A.D. 1 Dept. 2007), in which Manhattan attorney Richard A. Zalk was alleged to have stolen $172,151 from his clients, Arthur and Ruth Gellman. Zalk began representing the Gellmans in 1979, and, according to Zalk, after Arthur died in 1990, he continued to represent Ruth over the next 10 years, without billing her, in connection with her ownership of an apartment. In 2000, Ruth sold the apartment for $2 million, $200,000 of which was paid into Zalk's escrow account as a down payment. After closing, Ruth died, and Zalk kept $172,151 in the escrow account for himself. He claimed that Ruth told him to keep this amount in the account as payment for his 10 years of unpaid legal services. The First Department, however, found that Ruth's alleged statement to Zalk about keeping this money as payment was inadmissible during the guilt phase of his trial under New York Dead Man's Statute (NY CPLR 4519).
Dead Man's Statutes generally preclude interested parties from testifying about any communication, transaction, or promise made to them by a now deceased or incapacitated person when the testimony would go against the decedent's estate (For instance, the New York Dead Man's Statute prevents testimony "against the executor, administrator or survivor of a deceased person."). The theory behind these statutes is that the interested person has reason to fabricate his testimony, and the deceased/incapacitated person does not have the ability to dispute the testimony and protect his estate from false claims. Thus, for instance, a person who sought to testify that a now deceased individual promised to give him his car would not be allowed to do so because of the fear that his testimony would consist of perjury. Or, an attorney charged with taking money from his now deceased client could not testify that his client told him he could take the money as payment for his previous pro bono representation.
As I noted in my previous post, the First Department found that Zalk's testimony was "against" Ruth's estate even though her daughters were not parties to the hearing because (1) it went against their competing claim to the money, and (2) the court could have ordered that Zalk make monetary restitution to Ruth's daughters. I agreed with this reasoning and concluded:
"I don't see how the New York Court of Appeals could change the evidentiary ruling. Zalk was clearly an interested party as he stood to acquire $172,151 if Ruth's alleged promise was true. Furthermore, Ruth was clearly deceased at the time that Zalk wanted to testify. The reasoning behind the statute, protecting the deceased's estate from "plundering," was clearly at play in the case. And the court's argument about why Zalk's testimony went "against" Ruth's estate seems pretty persuasive."
And guess what? Last week, the Court of Appeals of New York (the quivalent of most states' supreme courts) reversed the First Department's ruling in In re Zalk, 2008 WL 2367490 (N.Y. 2008). But guess what else? I stand by my earlier decision and think that the Court of Appeals' opinion engages in the same type of semantic gymnastics and insouciance to the purpose behind a statute/rule that has plagued courts in the nolo contendere/Rule 410 context as identified in my post last week and my article, The Best Offense is a Good Defense. So, where did the Court of Appeals go wrong? Let's look at its opinion.
According to the Court of Appeals, "although Zalk 'testified 'as a witness in his own behalf or interest,' ... he did not testify 'against the executor, administrator or survivor' of Mrs. Gellman. Rather, he testified against the Disciplinary Committee, which is none of these latter....' In essence, the [Disciplinary] Committee takes the position that, although the Gellman daughters are not parties to the disciplinary proceeding, the rules of the Fund and the doctrine of collateral estoppel endow them with a vital interest in a finding that Zalk converted estate monies. But the Dead Man's Statute only applies to testimony 'against the executor, administrator or survivor' of the deceased. It does not foreclose testimony that potentially cuts against these parties' interests in a contingent future proceeding."
And my response is: How did Zalk not testify against Ruth's estate? The Court of Appeals appears to be adding words to the Dead Man's Statute, making it applicable only when there is proposed testimony "against the executor, administrator or survivor of a deceased person [and the executor, administrator or survivor is also a party to the action.]" Yet, if we compare other rules of evidence, we see that there is no reason to construe the statute in this manner.
The best example is the statement against interest exception to the rule against hearsay contained in Federal Rule of Evidence 804(b)(3) (and state counterparts), which states that when you have an "unavailable" witness, and that witness made "[a] statement which was at the time of its making so far contrary to the declarant's pecuniary or proprietary interest, or so far tended to subject the declarant to civil or criminal liability, or to render invalid a claim by the declarant against another, that a reasonable person in the declarant's position would not have made the statement unless believing it to be true," the statement is admissible as an exception to the rule against hearsay. Now, what is the import of this rule? Does it mean that the statement must be against the declarant's interest in the present action or that the declarant be a party in the present action?
The answer to both questions is "No," and, indeed, Federal Rule of Evidence 804(b)(3) (almost) always applies to a non-part witness, not a party. Instead, we deem such a statement a statement "against interest" because it will potentially cut against the declarant's interests in a contingent future proceeding. In other words, it is a statement "against interest" in precisely the same way that the Disciplinary Committee argued that Zalk's testimony was a statement "against the executor, administrator or survivor" of the deceased.
But we can take it even a step further because Federal Rule of Evidence 804(b)(3) can, again, (almost) never be used to harm the declarant's interests in the action in which it used because the declarant is (almost) always a non-party witness. In contrast, as the First Department noted, the court hearing Zalk's case could have ordered that Zalk make monetary restitution to Ruth's daughters, meaning that the admission of Zalk's testimony could clearly harm their interests. Unfortunately, the Court of Appeals failed to address this point.
At best, I will grant that the language of the New York Dead Man's Statute is ambiguous, which should have forced the Court of Appeals to consider the purpose of the Statute, which, as I noted above, is to protect a deceased's estate from plundering through false statements. And yet, the Court of Appeals rejected out of hand the proposition that the Dead Man's Statute "foreclose[s] testimony that potentially cuts against these parties' interests in a contingent future proceeding." In other words, it rejected an interpretation of the Dead Man's Statute which effectuated the purpose behind the Statute, which is to protect the deceased's estate.
So, what do readers think? Am I way off base, or did the Court of Appeals commit serious error?
June 17, 2008 | Permalink
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