Calendar Date: June 5, 2018Before: Garry, P.J., Egan Jr., Aarons, Rumsey and Pritzker, JJ.__________Ofshtein Law Firm, PC, New York City (Suzy Yengo ofcounsel), for appellants.Barbara D. Underwood, Attorney General, Albany (LauraEtlinger of counsel), for respondent.__________Garry, P.J.Appeal from a judgment of the Supreme Court (Ferreira, J.),entered April 25, 2016 in Albany County, which dismissedpetitioners’ application, in a proceeding pursuant to CPLRarticle 78, to review determinations of respondent denyingpetitioners’ requests for reimbursement.Petitioners each applied for reimbursement from respondentbased upon attorney Jarrett Haber’s involvement in a scheme toobtain payment from petitioners to invest in a nonexistent realproperty transaction. Respondent is vested with the obligationof promoting public confidence and integrity within the legalprofession “by reimbursing losses caused by the dishonest conductof attorneys admitted and licensed to practice law in the courtsof New York State” (22 NYCRR 7200.1). Respondent deniedpetitioners’ applications on the basis that they failed todemonstrate an eligible loss arising “from a prior orcontemporaneous attorney-client relationship.” Uponreconsideration, respondent confirmed its initial determinations.Petitioners commenced this CPLR article 78 proceeding to annulthe determinations, and Supreme Court dismissed the petition,finding that a rational basis existed for respondent’sdeterminations. Petitioners appeal.By way of background, in December 2006 petitioner John W.Yengo Jr. met Justin Boivin, owner of Harvard Square Development(hereinafter HSD), who invited Yengo to participate in atransaction to purchase property ostensibly owned by the UnitedStates Department of Housing and Urban Development (hereinafterHUD). Yengo was thereafter made aware of a purported salescontract between HSD and HUD, which listed Haber as the agent whowould hold HSD’s earnest money deposit. In February 2007, Yengoentered a partnership agreement with HSD to purchase the propertyand agreed to contribute $600,000 to the transaction. Yengo inturn recruited petitioner Sanford Weiss to provide $200,000 ofhis $600,000 contribution. After numerous delays in closing thetransaction, petitioners ultimately learned that the property hadnever existed. They then contacted law enforcement authoritiesand applied for reimbursement from respondent.1Respondent denied the claim on the basis that there wasinadequate evidence documenting Haber’s service as an attorney inany legal matter either prior to or in the course of petitioners’investment activity with him, or that the investment arose out ofan attorney-client relationship. Noting that the only purchasernamed in the purported January 2007 sales contract was HSD, andthat the contract identified Haber as the attorney who would holdthe down payment for HSD, respondent determined that nocompensation could be made arising from Haber’s “fiduciaryobligations as an escrow agent when he was not acting as[petitioners'] attorney or in the practice of law.”Respondent has “the sole discretion to determine the meritsof claims presented for reimbursement, the amount of suchreimbursement and the terms under which such reimbursement shallbe made” (Judiciary Law § 468–b [4]), and a claimant bears theburden “to provide satisfactory evidence of an eligible loss” (22NYCRR 7200.8 [b]; see Matter of Pappas v Lawyers’ Fund for ClientProtection, 60 AD3d 1195, 1196 [2009], lv denied 12 NY3d 713[2009]). “[L]osses arising from financial transactions withattorneys that do not occur within an attorney-clientrelationship and the practice of law” are ineligible forreimbursement (22 NYCRR 7200.8 [d]; see Matter of Pappas vLawyers’ Fund for Client Protection, 60 AD3d at 1196; Matter ofHaskins v Lawyers Fund for Client Protection, 286 AD2d 440, 440[2001]). In reviewing a determination by respondent, “thisCourt’s review is limited to deciding whether respondent’sdetermination is arbitrary and capricious, lacks a rational basisor reflects an abuse of discretion” (Matter of Pappas v Lawyers’Fund for Client Protection, 60 AD3d at 1196 [internal quotationmarks and citation omitted]).Respondent found that the absence of a retainer agreement,evidence of any payments made to Haber for legal work, or anyother documentary evidence of an attorney-client relationship, inconnection with other circumstances set forth in the record,indicated that petitioners’ losses were not incurred within anattorney-client relationship with Haber. Neither petitioner wasincluded as a party to the purported contract for sale of the HUDproperty. Although Yengo entered into a partnership with HSDwith respect to the property, that partnership was created afterthe execution of the contract for sale and was not a party to thetransaction. In addition, the partnership agreement made noreference to Haber acting as that entity’s attorney. Theforegoing provides a rational basis to support respondent’sdetermination that petitioners’ losses did not occur within anattorney-client relationship and the practice of law (see Matterof Pappas v Lawyers’ Fund for Client Protection, 60 AD3d at1197).We also reject petitioners’ contention that respondent’sdetermination was arbitrary and capricious because it hasreimbursed similar claims in the past. Although respondent isauthorized to reimburse non-represented parties where, inrespondent’s discretion, a “sufficient nexus” exists between anattorney’s dishonest conduct and the practice of law (22 NYCRR7200.8 [a] [3]), petitioners failed to demonstrate thatrespondent has reimbursed investors in a real propertytransaction who were neither parties to the transaction at issuenor in an attorney-client relationship with the attorney whosedishonest conduct gave rise to the claim. We have reviewedpetitioners’ remaining arguments and find them to lack merit.Egan Jr., Aarons, Rumsey and Pritzker, JJ., concur.ORDERED that the judgment is affirmed, without costs.ENTER:Robert D. MaybergerClerk of the Court
