Matarazzo Blumberg & Associates, P.C. v. Abramovitz

In a proceeding pursuant to CPLR article 75 to permanently stay arbitration, the petitioners appeal from an order of the Supreme Court, Kings County (Schneier, J.), dated November 8, 2001, which denied the petition. Ordered that the order is reversed, on the law, without costs or disbursements, the petition is granted, and the arbitration is permanently stayed. In a decision and order in a related proceeding, this Court previously determined that the agreement between the petitioners and the late Melvin Ungar was an illegal fee-splitting agreement (see Matter of Ungar v Matarazzo Blumberg & Assoc., 260 AD2d 485). Contrary to the respondents’ contention, the agreement violates Judiciary Law § 491 in that it clearly contemplates the payment of a share of legal fees to a nonlawyer as compensation for the procurement of clients. Since the agreement is illegal and unenforceable, the Supreme Court should have granted a stay of arbitration of the claims arising out of its alleged breach (see Durst v Abrash, 22 AD2d 39, affd 17 NY2d 445; 52 Flavors v Baker & Confectionery Salesclerks Union, Local 150 of Greater N.Y., Retail Clerks Intl. Assn., AFL-CIO, 46 AD2d 875; Matter of Toffler v Pokorny, 157 Misc 2d 703). Under the circumstances, the petitioners did not waive their right to seek a stay of arbitration (see Matter of [587] Toffler v Pokorny, supra; see also Matter of Land of the Free v Unique Sanitation, 93 NY2d 942). Ritter, J.P., Altman, H. Miller and Adams, JJ., concur.