text:
    [631 NE2d 577, 609 NYS2d 571]
    The People of the State of New York, Respondent, v Victor Breland, Appellant.
    Argued February 16, 1994;
    decided March 22, 1994

      POINTS OF COUNSEL

      Richard L. Herzfeld, New York City, for appellant.
    I. The prosecution failed to adequately corroborate the accomplice testimony against appellant. (People v Moses, 63 NY2d 299;
      People v Tillotson, 63 NY2d 731; People v Cona, 49 NY2d 26; People v Pons, 159 AD2d 471; People v Goldfeld, 60 AD2d 1; People v Chamberlain, 38 AD2d 306; People v Hayes, 37 AD2d 375; People v Ohlstein, 54 AD2d 109, 44 NY2d 896.) II. The court’s conclusion that Ashton’s identification of appellant was merely confirmatory, based upon his familiarity with appellant was in error; alternatively, the procedure employed by the court was fundamentally defective. (People v Rodriguez, 79 NY2d 445; People v Williamson, 79 NY2d 799; People v Collins, 60 NY2d 214; People v Tas, 51 NY2d 915; People v Boyd, 140 AD2d 704; People v Newball, 76 NY2d 587; People v Gissendanner, 48 NY2d 543; People v Jackson, 159 AD2d 640; People v Jones, 153 AD2d 956.) III. The court’s restriction of defense counsel’s examination of a defense witness violated appellant’s statutory and constitutional rights and deprived him of a fair trial. (People v Hudy, 73 NY2d 40; People v Cade, 73 NY2d 904; People v Pavao, 59 NY2d 282; People v Green, 156 AD2d 465; Davis v Alaska, 415 US 308; Chambers v Mississippi, 410 US 284; People v Carter, 37 NY2d 234; People v Gilliam, 45 AD2d 744, 37 NY2d 722; People v Gaskin, 170 AD2d 458; People v Billups, 132 AD2d 612.) IV. The court erred in refusing to charge the jury regarding the interest of John Jamison, a prosecution witness who testified in exchange for a lenient sentence. (People v Strawder, 124 AD2d 758; People v Jackson, 74 NY2d 787.) V. The charges against appellant arising out of the Smith homicide were improperly joined. (People v Stanley, 81 AD2d 842; People v Pilon, 30 AD2d 365; People v Papa, 47 AD2d 902.) VI. The refusal to authorize the services of a paralegal assistant deprived appellant of his Sixth Amendment rights of effective assistance of counsel and due process of law. (Ake v Oklahoma, 470 US 68; People v Irvine, 40 AD2d 560; People v Vale, 133 AD2d 297.) VII. The court’s refusal to question the jury regarding potential exposure to inflammatory newspaper articles was reversible error. (People v Rivera, 26 NY2d 304; People v Genovese, 10 NY2d 478; People v Costello, 104 AD2d 947; People v Shaw, 92 AD2d 623; People v Cooper, 78 NY2d 476; People v Ventimiglia, 52 NY2d 350; People v Major, 154 AD2d 225; People v Lombardi, 139 AD2d 767.) VIII. The court erred in refusing to grant the defense request for production of the identifying witnesses at the Wade hearing. (People v Chipp, 75 NY2d 327; People v James, 159 AD2d 723.)

      Charles J. Hynes, District Attorney of Kings County, Brooklyn (Victor Barall and Roseann B. Mackechnie of counsel), for respondent.
    I. The People sufficiently corroborated the testimony of defendant’s accomplices to support his conviction on all charges. (People v Wing, 77 NY2d 851; People v Cobos, 57 NY2d 798; People v Henderson, 298 NY 462; People v Goldfeld, 60 AD2d 1; People v Fielding, 39 NY2d 607; People v Vedder, 98 NY 630; People v Dorta, 46 NY2d 818; People v Beaudet, 32 NY2d 371; People v Moses, 63 NY2d 299; People v Kress, 284 NY 452.) II. The affirmed finding of the trial court, that Willie Ashton’s pretrial identification of defendant was confirmatory, is supported by the record and therefore is beyond the scope of this Court’s review. Moreover, any error in permitting Ashton to make an in-court identification was harmless. (People v Rodriguez, 79 NY2d 445; People v Collins, 60 NY2d 214; People v Myrick, 66 NY2d 903; People v Tas, 51 NY2d 915; People v Gissendanner, 48 NY2d 543; United States v Maldonado-Rivera, 922 F2d 934; People v Wilson, 64 NY2d 634; People v Bell, 63 NY2d 796; People v Dickerson, 50 NY2d 937; People v Newball, 76 NY2d 587.) III. The trial court’s limitations on the examination of Oswald Dawkins were entirely warranted and did not deprive defendant of a fair trial. (People v Duncan, 46 NY2d 74; People v Crimmins, 36 NY2d 230; People v Culhane, 45 NY2d 757; People v Mayrant, 43 NY2d 236; People v Bethune, 105 AD2d 262; People v Alvino, 71 NY2d 233; People v George, 67 NY2d 817; People v Hudy, 73 NY2d 40; People v Pavao, 59 NY2d 282; People v Reynoso, 73 NY2d 816.) IV. Defendant’s claim that the trial court erred in declining to charge the jury specifically on the possible interest of John Jamison is unpreserved for this Court’s review. Moreover, any error in the court’s charge was harmless. (People v Jackson, 76 NY2d 908; People v Canty, 60 NY2d 830; People v Jackson, 74 NY2d 787; People v Irrizary, 180 AD2d 822; People v Sherman, 156 AD2d 889; Perrin v Winne, 123 AD2d 610; People v Bryant, 59 NY2d 786.) V. The Wayne Smith murder was properly joined with the other crimes charged in the indictment. Additionally, defendant’s claim that it was improper for him to have been tried jointly with his codefendants is unpreserved and meritless. (United States v Simmons, 923 F2d 934; United States v Minicone, 960 F2d 1099; People v Bongarzone, 69 NY2d 892; People v Quartieri, 171 AD2d 889; People v Casiano, 138 AD2d 892; People v Walker, 71 NY2d 1018; People v Russell, 71 NY2d 1016.) VI. The Court below did not abuse its discretion in refusing to authorize the expenditure of public funds for paralegal services. (Johnson v Harris, 682 F2d 49; Ake v Oklahoma, 470 US 68; People v Vale, 133 AD2d 297; People v Brown, 136 AD2d 1; People v Marlowe, 167 AD2d 692; People v Anderson, 127 AD2d 885; People v Irvine, 40 AD2d 560.) VII. The trial court was not required to question the jury every time an article about this case appeared in the newspaper. (People v Rivera, 26 NY2d 304; People v Costello, 104 AD2d 947; People v Berg, 59 NY2d 294; United States v Casamento, 887 F2d 1141; People v Moore, 42 NY2d 421; People v Genovese, 10 NY2d 478; People v Hardwick, 137 AD2d 714; United States v Chang AnLo, 851 F2d 547; People v Testa, 61 NY2d 1008; People v Sullivan, 167 AD2d 564.) VIII. Defendant was not entitled to the production of the identifying witnesses at the Wade hearing. (People v Chipp, 75 NY2d 327; People v Peterkin, 75 NY2d 985; People v James, 159 AD2d 723; People v Watts, 130 AD2d 695; People v Mallory, 126 AD2d 750.)
   OPINION OF THE COURT

Bellacosa, J.

Appellant Victor Breland was a key operative in a major crack cocaine network spread principally through Brooklyn. With the assistance of confederates, he committed a series of serious crimes during several months in 1988, for which he was jointly prosecuted. Breland was found guilty by a jury after a lengthy trial of enterprise corruption; murder in the second degree (six counts); attempted murder in the second degree of Willie Ashton; assault in the first degree; and criminal possession of a weapon in the second degree (four counts). The Appellate Division affirmed and a Judge of this Court granted him leave to appeal.

An affirmance of the unanimous order of the Appellate Division upholding the judgment of conviction is warranted. We address, as the only issues meriting discussion and analysis, the corroborative evidence under CPL 60.22 and a notice and identification feature arising under CPL 710.30.

L

Shirley Bibbs, an employee beautician, and James Hamilton, Sr., the father of Breland’s rival drug lord, James Hamilton, Jr. (the target of reprisal who happened not to be present), were shot to death by Breland and an accomplice, Johnny Ray Robinson, shortly after noon on March 31, 1988 in the Glamorama Beauty Parlor. Accomplices of appellant Breland (not those jointly tried with him) gave confirmatory detailed accounts of the calculated assault designed to execute James Hamilton, Jr. A caravan of three cars containing the perpetrators assembled at Breland’s house. He supplied everyone with the guns and instructed several members concerning their role in firebombing the Glamorama premises as an aftermath to the attack. A new confederate, Willie Ashton, aged 17, who was stationed as an outside lookout and who was to toss the Molotov cocktail, testified at Breland’s trial. Breland argues that Ashton remained an accomplice at law (like all the other testifying accomplices) throughout the criminal adventure even though Breland, as he exited the Glamorama shop after the shootings inside, shot at a very close distance and seriously wounded Ashton and shot to death the other lookout, Mitchell Rich. No firebombing took place, as the two designated firebomb tossers were shot by Breland in his plan to eliminate witnesses against him, even if they happened to be confederates.

One week later, on April 6, 1988, as another aftermath of the murders inside and outside the Glamorama shop, appellant Breland also personally executed a man named Joseph Lovell. His role in the over-all criminal enterprise was as a front for all the vehicles used in the crack cocaine business. They were registered in Lovell’s name, including vehicles used in the Glamorama attack. Breland duped Lovell into driving with him and another confederate to an isolated street in the gang’s principal territory in Brownsville. Once out of the car, Breland turned and shot Lovell in the face at a distance of 12 to 18 inches, killing him instantly. The accomplices’ accounts of this murder and of the Glamorama shootings is damning and varied with eyewitness, confessional and circumstantial aspects. As to the Lovell murder, the requisite tending-to-connect links for CPL 60.22 purposes are different from those presented to support the conviction on the Glamorama killings.

Our careful scrutiny of the varieties of nonaccomplice evidence compiled in a lengthy record convinces us that the corroborative links to Breland are sufficient as to both related sets of killings. While the independent evidence might not alone be enough to convict Breland on either murder, it respectively supports the several accomplices’ testimony and other forms of evidence, and satisfies our established precedents and principles as to all the crimes for which Breland stands convicted.

Hi

We reject the notion that Ashton should be deemed Breland’s accomplice as a matter of law to Breland’s attempted murder of Ashton. That defies logic and reason, and is contrary to the plain language and purport of CPL 60.22. Also, it is not a conclusion compelled or supportable within the carefully confined rationales of People v Cona (49 NY2d 26) and People v Cobos (57 NY2d 798).

Breland’s attempted murder of his erstwhile accomplice, Ashton, constitutes a subsequent independent criminal frame in a series of violent criminal scenes and acts. His own shooting of Ashton outside the beauty parlor severed, in the most profound legal and actual sense, Ashton’s initial accomplice relationship to him. Those exit shootings are legally discrete for accomplice corroboration purposes from the slayings inside the Glamorama parlor. Indeed, Breland’s disengagement from the murders inside the shop and his decision to eliminate even his own confederates as witnesses, fundamentally altered the legal relationship and operative evidentiary rubrics. That being so, Ashton’s testimony was freed of the customary accomplice corroboration inhibitions.

The evidence that Ashton heaped upon a mountain of evidence from unquestionable accomplices readily satisfies the tending-to-connect, nonaccomplice evidence nexus that supports and validates the accomplices’ testimony implicating Breland in the murders of the two nontarget individuals inside Glamorama (see, People v Steinberg, 79 NY2d 673; People v Moses, 63 NY2d 299; People v Hudson, 51 NY2d 233; People v Daniels, 37 NY2d 624; People v Morhouse, 21 NY2d 66; People v Dixon, 231 NY 111). Especially notable, as the Appellate Division observed, is "Ashton’s testimony regarding his own attempted murder * * * [corroborating] the accomplice testimony of Gladden and Easterling that the defendant had only moments before used the same weapon inside the beauty parlor to kill Bibbs and Hamilton” (People v Breland, 191 AD2d 500, 501 [emphasis in original]).

We have recently summarized some of the governing standards as follows:

"The corroborative evidence need * * * not establish all the elements of the offense (CPL 60.22 [1]; People v Hudson, 51 NY2d, at 238, supra; People v Cunningham, 48 NY2d 938, 940). Seemingly insignificant matters may harmonize with the accomplice’s narrative so as to provide the necessary corroboration (People v Bretti, 68 NY2d 929, 930; People v Moses, 63 NY2d, at 306, supra; People v Cunningham, 48 NY2d, at 940, supra).” (People v Steinberg, 79 NY2d, at 683, supra; see also, People v Goldfeld, 60 AD2d 1, 6.)

We are also satisfied that enough nonaccomplice evidence tends to connect Breland to the Lovell murder. Lovell could potentially be traced to implicating Breland in a host of criminal activities by official motor vehicle records ties. As noted, New York’s accomplice corroboration protection, while persistently unique, requires only enough nonaccomplice evidence to assure that the accomplices have offered credible probative evidence (People v Steinberg, 79 NY2d 673, supra). The corroborative glue does not require independent proof of the elements of the crime to sustain a conviction; it just has to bind the accomplice evidence to the defendant.

In this case, the People supplied several strands of corroborative nonaccomplice evidence. Independent evidence from Emergency Medical Service and police and medical personnel as to the precise location of Lovell’s body at the place of execution and the location of the fatal gunshot wounds corresponded with the details of the accomplice who accompanied and aided Breland in the Lovell killing and who testified against him at trial. The vehicle registration course-of-dealing that connected Breland and his confederates to Lovell and to the Glamorama siege is also significant. It provides an objective, strong, verifying synapse to the over-all and particular criminal acts of the enterprise and of Breland. Woven into that is the testimony of a United Parcel Service driver making a nearby delivery at the time of the Glamorama shootings. He provided details to tie the getaway vehicle by license plate number to Lovell. The United Parcel Service fellow also identified a third lookout accomplice, Winston Easterling, who, in turn, at trial implicated Breland to a number of murders, including those at issue on this appeal. Indeed, he testified that Breland confessed the Lovell murder to him while they were both confined at Rikers Island.

Additionally, the Ashton and Rich "lookout” shootings reflect Breland’s common plan or scheme, unleashed to eliminate weak links and witnesses to his indiscriminate killings inside Glamorama. We need not, however, adopt a view that simple or mere motive evidence alone can suffice as corroborative evidence in accomplice situations (see, People v Ohlstein, 54 AD2d 109, affd 44 NY2d 896), because there is enough additional material here which, when taken together, fulfills a standard application of our governing principles. We said in People v Morhouse:

"As we indicated in People v. Fiore (12 N Y 2d 188, 201), the corroboration requirement of section 399 of the Code of Criminal Procedure is fully met when there is some nonaccomplice evidence 'fairly tending to connect the defendant with the commission of the crime’ (quoting from People v. Elliott, 106 N. Y. 288, 292). The corroboration need not, as must circumstantial evidence, lead exclusively to the inference of the defendant’s guilt. As this court has noted, even Matters in themselves of seeming indifference * * * may so harmonize with the accomplice’s narrative as to have a tendency to furnish the necessary connection between the defendant and the crime.’ (People v. Dixon, 231 N. Y. 111, 116-117; see, also, People v. Crum, 272 N. Y. 348, 353-354; People v. Malizia, 4 N Y 2d 22, 27; People v. Reddy, 261 N. Y. 479, 484.)” (People v Morhouse, 21 NY2d 66, 74, supra [emphasis added]; see also, People v Henderson, 298 NY 462, 467.)

While the corroborative evidentiary details are not directly probative of the ultimate facts in connection with material facets of the elements of the crimes to be proved, they are standard confirmatory ties. It must be emphasized that proof of the elements of the crimes is not the determinative template of analysis here, and much less evidence and of a distinctly inferior quality is sufficient to meet the slim corroborative linkage to otherwise independently probative evidence from accomplices. In this case, the corroborative strands support overwhelming proof from the accomplices as to each element of all the counts beyond a reasonable doubt (compare, People v Booden, 69 NY2d 185, 187).

In sum, this record contains specific, separate and significant indicia of reliability with respect to the overwhelming evidence of guilt from the accomplices’ testimony, braced by unusually interlaced facets of a common motive. The whole of the record evidence thus authenticates the veracity of the vivid descriptions of Breland’s complicity in all the interrelated murders, including the assassination of Lovell, from many accomplices.

¡IL

We also reject appellant’s additional argument of procedural irregularity arising out of claimed suggestibility by the police of the identification of Breland by Ashton. The argument finds no support in this record or in the governing authorities. Neither CPL 710.30 nor our precedents compels the relief Breland demands in this respect, because while Ashton’s viewings of Breland’s face and features, as described in the Rodriguez hearing (People v Rodriguez, 79 NY2d 445), may have been relatively brief, they could not have been more intense or focused. Ashton especially noticed Breland’s large arms, his face and his stature. The viewing constitutes the kind of special prior relationship that provides assurance it was not, in these circumstances, the product of police suggestion (see, People v Tas, 51 NY2d 915; People v Gissendanner, 48 NY2d 543). Ashton was meeting a self-described lead assassin and Ashton was joining him in a violent criminal expedition. By common experience and understanding, the circumstances of their meetings would etch Breland’s features unforgettably in Ashton’s senses and memory cells. Moreover, some significance may surely be given to Ashton’s also coming face to face with Breland again, only a few feet apart, at the moment of his own possible death at Breland’s hand as Breland departed the Glamorama premises. The escalation of violence by Breland killing Rich in front of Ashton and wounding Ashton in an effort to eliminate witnesses against him provides a dramatic finale to any cognizable claim or concern about police suggestibility of Ashton’s identification. He needed no one to remember Breland.

We have examined appellant’s many other assertions on appeal and conclude that they are without merit and do not warrant further discussion.

Accordingly, the order of the Appellate Division afiirming the judgment of conviction against persistent violent offender Breland should be affirmed.

Chief Judge Kaye and Judges Simons, Smith, Levine and Ciparick concur; Judge Titone taking no part.

Order affirmed.


source: Caselaw Access Project

author: Levine, J.

license: Public Domain

text:
    [632 NE2d 434, 610 NYS2d 125]
    In the Matter of Patricia Schwartfigure, Appellant, v Thomas F. Hartnett, as Commissioner of the New York State Department of Labor, Respondent.
    Argued February 16, 1994;
    decided March 22, 1994

      POINTS OF COUNSEL

      Richard Gardner, Canton, for appellant.
    I. Appellant was directly affected by the Department’s recoupment policy and therefore should be able to challenge the Department’s lack of compliance with the State Administrative Procedure Act. (Matter of Dairylea Coop, v Walkley, 38 NY2d 6; Matter of City of New York v City Civ. Serv. Commn., 60 NY2d 436; Matter of Sun-Brite Car Wash v Board of Zoning & Appeals, 69 NY2d 406; Society of Plastics Indus. v County of Suffolk, 77 NY2d 761; Boryszewski v Brydges, 37 NY2d 361; Matter of Sheehan v Ambach, 136 AD2d 25; Matter of Industrial Liaison Comm. v Williams, 72 NY2d 137; Matter of Metropolitan Assn. of Empl. Agents v Gourdine, 108 AD2d 633; Siegal v New York State

      Div. of Hous. & Community Renewal, 143 AD2d 430.) II. The recoupment program of the Department is a "rule” for purposes of the State Administrative Procedure Act. (Matter of Roman Catholic Diocese v New York State Dept. of Health, 109 AD2d 140, 66 NY2d 948; Matter of Krauskopf v Perales, 139 AD2d 147, 74 NY2d 730; Matter of Connell v Regan, 114 AD2d 273; People v Cull, 10 NY2d 123; Matter of Jones v Smith, 64 NY2d 1003; Losey v Roberts, 677 F Supp 101.) III. The Department lacks the substantive authority to establish this recoupment policy. (Morissette v United States, 342 US 246; NLRB v Amax Coal Co., 453 US 322; Matter of Van Teslaar v Levine, 35 NY2d 311; Braschi v Stahl Assocs. Co., 74 NY2d 201; Matter of Leirer v Caputo, 181 AD2d 119, 81 NY2d 455; Matter of Couch v Perales, 78 NY2d 595; Matter of Shufelt v Beaudoin, 116 AD2d 422; Matter of Carlton v Regan, 98 AD2d 544, 63 NY2d 1011.)

      G. Oliver Koppell, Attorney-General, Brooklyn (Maryellen Weinberg, Jerry Boone, Peter H. Schiff and Jane Lauer Barker of counsel), for respondent.
    I. Respondent acted within his authority in adopting the set-off policy. The 1983 amendment of Labor Law § 597 (4) removed the limitation on the Department’s recovery of nonwillful overpayments and expanded the Department’s rights of recovery, by giving it a right of civil action, in addition to restoring its right of setoff. (Matter of Memorial Hosp. v Axelrod, 68 NY2d 958; Finger Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471; People v Duggan, 30 AD2d 736; Matter of Warren, 53 NY2d 118; Matter of Canfield, 126 Misc 2d 900; Matter of 3 Lafayette Ave. Corp. v Comptroller of State of N. Y., 186 AD2d 301, 81 NY2d 705; Matter of Leirer v Caputo, 81 NY2d 455; Matter of Cortlandt Nursing Home v Axelrod, 66 NY2d 169, 476 US 1115; Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30; Matter of Mayflower Nursing Home v Office of Health Sys. Mgt., 88 AD2d 192, 59 NY2d 935.) II. The Court below properly held that the policy not to collect more than 50% of current benefits was not subject to the rule-making requirements of the State Administrative Procedure Act. (Matter of Elmira Bus. Inst. v New York State Dept. of Educ., 116 AD2d 133, 70 NY2d 758; People v Cull, 10 NY2d 123; Dubendorf v New York State Educ. Dept., 97 Misc 2d 382, 71 AD2d 837; Matter of Connell v Regan, 114 AD2d 273; Matter of Guile v State Univ., 49 AD2d 1022; Corliss v Solomon, 75 AD2d 837; Matter of Police Conference v Municipal Police Training Coun

      cil, 73 AD2d 712, 51 NY2d 810; Matter of Marchi v Acito, 77 AD2d 118; Matter of Kugler v Board of Trustees, 45 Misc 2d 239; Matter of Pell v Board of Educ., 34 NY2d 222.)
   OPINION OF THE COURT

Levine, J.

In 1988, petitioner was originally found qualified for and began to receive unemployment insurance benefits. The initial determination was overruled by the Unemployment Insurance Appeal Board in December 1989, however, and a notice of determination was sent to petitioner informing her that she was required to repay a total of $2,112 in benefits which had been erroneously overpaid to her. This overpayment was not found to be due to any willful misrepresentation or other violation on the part of petitioner. Petitioner chose not to appeal the Board’s determination.

In January 1991, petitioner again applied for and was found qualified to receive unemployment benefits. However, when she began receiving benefits in February 1991, respondent, in accordance with long-standing policy, paid petitioner only 50% of the benefits for which she was eligible, setting off the remaining 50% to recover the previous overpayment. An offer by petitioner to repay the prior overpayment in lesser installments was rejected by respondent.

Petitioner commenced this hybrid declaratory judgment and CPLR article 78 proceeding seeking, inter alla, a declaration that respondent’s method of recoupment violated Labor Law § 597 (4), and that the recoupment policy constituted a "rule” within the meaning of the State Administrative Procedure Act such that respondent was required to propose and promulgate the policy pursuant to the requirements of that Act. Supreme Court dismissed the petition and petitioner appealed. The Appellate Division affirmed (193 AD2d 907), holding that a 1983 amendment to Labor Law § 597 (4) restored respondent’s common-law right of setoff and that petitioner had no basis to challenge the method by which respondent exercised that right. This Court granted petitioner leave to appeal, and we now reverse.

As to petitioner’s first argument on this appeal, that respondent’s method of recoupment contravenes Labor Law § 597 (4), we agree with the Appellate Division that the 1983 amendment to that statute restored respondent’s common-law right of setoff to recoup funds erroneously paid to claimants. We have previously held that, under proper circumstances, an administrative agency possesses a common-law right of recoupment to recover erroneous payment of public funds (see, Matter of Leirer v Caputo, 81 NY2d 455; Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30; see also, Matter of Mayflower Nursing Home v Office of Health Sys. Mgt, 88 AD2d 192, affd 59 NY2d 935), consistent with the strong public policy of this State to recover public funds improperly received (see, Matter of Cortlandt Nursing Home v Axelrod, 66 NY2d 169, 182, cert denied 476 US 1115). Prior to 1983, Labor Law § 597 (former [4]) totally abrogated respondent’s right to recoup benefits overpaid through no fault of the recipient, specifying that a new determination resulting in a loss of eligibility for benefits:

"shall not affect the rights to any benefits already paid under the authority of the prior determination or decision provided they were accepted by the claimant in good faith and the claimant did not make any false statement or representation and did not wilfully conceal any pertinent fact in connection with his claim for benefits.”

In 1983, the Legislature repealed this provision (L 1983, ch 415, § 9), substituting present Labor Law § 597 (4) which provides:

"[wjhenever a new determination * * * results in a decrease or denial of benefits previously allowed, the commissioner shall have a right of action for recovery of moneys paid pursuant to the prior determination or decision.”

Petitioner urges that the legislative grant of a "right of action” in the revised section 597 (4) merely authorizes recovery of overpayments through a civil suit, and thus provides no warrant for respondent’s method of recoupment by setoff. However, although respondent’s statutory remedy to recoup overpaid funds may thus be limited to a civil suit as petitioner contends, we conclude that the Legislature’s repeal of the previous ban on recoupment, in conjunction with its statutory recognition of a valid claim against any overpayment, effectively restored respondent’s common-law right of setoff to recoup those erroneously paid funds. Here, where the fact and amount of overpayment to petitioner were determined and made definite by a fair adjudicative procedure (cf., Matter of Leirer v Caputo, supra, at 459-460), this right of recoupment may properly extend to the recapture of funds through setoff by respondent in this case.

Although respondent had a right of setoff to recover over-payments of benefits to petitioner, we disagree with the view of the majority at the Appellate Division that petitioner has no standing to challenge the manner in which respondent exercises that right. Respondent argued successfully before the Appellate Division that, since respondent could have withheld 100% of the second award of benefits until the overpayment was recouped, petitioner was not aggrieved by respondent’s policy to retain only 50% of those benefits. We agree with the partially dissenting opinion of Justice Yesawich, Jr., at the Appellate Division that the existence of the right of setoff must be seen as distinct from the particular manner in which the administrative agency here chose to implement that right. In the absence of any applicable statutory exception, the procedure chosen by the agency to implement its right of setoff is circumscribed by the rule-making requirements of the State Administrative Procedure Act. It follows that if under the State Administrative Procedure Act respondent’s 50% recoupment policy required the promulgation of a rule, petitioner, to whom the policy is being directly applied, has standing to challenge respondent’s noncompliance with the State Administrative Procedure Act, notwithstanding that a more stringent policy might have been implemented.

Section 102 (2) (a) (i) of the State Administrative Procedure Act defines a "rule” as "the whole or part of each agency statement, regulation or code of general applicability that implements or applies law, or prescribes a fee charged by or paid to any agency or the procedure or practice requirements of any agency”. In Matter of Cordero v Corbisiero (80 NY2d 771), we adopted for purposes of determining what constitutes a "rule” under the State Administrative Procedure Act the criterion for constitutional filing purposes articulated in Matter of Roman Catholic Diocese v New York State Dept. of Health (66 NY2d 948) embracing "a fixed, general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers” (id., at 951). Respondent’s 50% set-off policy for nonwillful overpayments is a rigid, numerical policy invariably applied across-the-board to all claimants without regard to individualized circumstances or mitigating factors, and as such falls plainly within the definition of a "rule” for State Administrative Procedure Act purposes. The policy cannot be characterized as concerning only the internal management of the agency (see, State Administrative Procedure Act § 102 [2] [b] [i]), as the recoupment undertaken thereby directly and significantly affects that segment of the public over which respondent exercises direct authority (cf., Matter of Krauskopf v Perales, 139 AD2d 147, affd 74 NY2d 730 for reasons stated below). We therefore conclude that the policy, in its present form and manner of application, is subject to the rule-making procedures set forth in the State Administrative Procedure Act (see, § 202).

Respondent’s setoff of 50% of petitioner’s benefits having been accomplished pursuant to an administrative rule not properly promulgated under the State Administrative Procedure Act, petitioner is entitled to a determination and recovery of the amount of benefits which would not have been set off had petitioner’s individual facts and circumstances at the time the benefits were payable been considered by respondent.

Accordingly, the order of the Appellate Division should be reversed, with costs, respondent’s 50% set-off policy declared invalid and the case remitted to Supreme Court with directions to remand to respondent for further proceedings in accordance with this opinion.

Chief Judge Kaye and Judges Simons, Bellacosa, Smith and Ciparick concur; Judge Titone taking no part.

Order reversed, etc.


author: Simons, J.

text:
    [632 NE2d 437, 610 NYS2d 128]
    Sheldon H. Solow et al., Appellants, v W. R. Grace & Company, Respondent.
    Argued February 8, 1994;
    decided March 24, 1994

      POINTS OF COUNSEL

      Stroock & Stroock & Lavan, New York City (Charles G. Moerdler, Joseph L. Forstadt, Joseph J. Giamboi and Amanda F. Shechter of counsel), for appellants.
    Barbara Billauer’s prior retention as a consultant to prepare Dr. Seaton during her tenure at Stroock does not provide a basis for disqualifying Stroock from representing Solow in this matter. (Schmidt v Magnetic Head Corp., 101 AD2d 268; Magjuka v Greenberger, 46 AD2d 867; Fischer v Deitsch, 168 AD2d 599; Hunkins v Lake Placid Vacation Corp., 120 AD2d 199; Saftler v Government Empls. Ins. Co., 95 AD2d 54; Cardinale v Golinello, 43 NY2d 288; Amrod v Doran, 107 AD2d 575; Greene v Greene, 47 NY2d 447; Niesig v Team I, 76 NY2d 363; S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437.)

      Cahill Gordon & Reindel, New York City (John R. Vaughan, P. Kevin Castel, Marshall Cox and William F. Dahill of counsel), for respondent.
    I. The Court below correctly applied this Court’s Cardinale ruling. (Cardinale v Golinello, 43 NY2d 288; T. C. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265; Cooke v Laidlaw Adams & Peck, 126 AD2d 453; Forest Park Assocs. Ltd. Partnership v Kraus, 175 AD2d 60; Matter of Hof, 102 AD2d 591; Forbush v Forbush, 107 AD2d 375; Flaum v Birnbaum, 107 AD2d 1087; Gabri v County of Niagara, 127 Misc 2d 623; Nichols v Village Voice, 99 Misc 2d 822; Chinatown Apts. v New York City Tr. Auth., 100 Misc 2d 495.) II. The Court should retain its bright line standard for disqualifying lawyers and law firms for conflict. (Cardinale v Golinello, 43 NY2d 288; Saftler v Government Empls. Ins. Co., 95 AD2d 54; Amrod v Doran, 107 AD2d 575; Letizia v Letizia, 117 AD2d 587; Rotante v Lawrence Hosp., 46 AD2d 199; Flaum v Birnbaum, 107 AD2d 1087; Desbiens v Ford Motor Co., 81 AD2d 707; Messina v Messina, 175 AD2d 866; Macro Cash & Carry Corp. v Berkman, 81 AD2d 783.) III. The courts below were plainly correct in ruling that the Enterprise case and this case are substantially related. (Major v Waverly & Ogden, 7 NY2d 332.) IV. Stroock itself owes a duty of loyalty to its former client Grace. (Cardinale v Golinello, 43 NY2d 288.) V. The American Bar Association Model Rules of Professional Conduct have no application to New York law affecting the disqualification of lawyers for conflict. (Cardinale v Golinello, 43 NY2d 288.)
   OPINION OF THE COURT

Simons, J.

Stroock & Stroock & Lavan represent plaintiffs in this action to recover damages for asbestos contamination resulting from the use of fireproofing materials manufactured by defendant W. R. Grace & Co. Stroock had previously defended Grace in an action entitled City of Enterprise v Grace & Co. (Cir Ct, Coffee County, Ala, Civ No. 85-87), which also involved the contamination of a premises by asbestos. Thus, Grace moved to disqualify the Stroock firm from participating in the present action and the issue is whether it is entitled to that relief.

The courts below disagreed on the question. Supreme Court held that there was a substantial relationship between the issues in the current litigation and those in City of Enterprise, but denied the motion to disqualify, deciding that Stroock had successfully established that the attorneys presently with the firm had not been privy to any confidences or secrets of Grace acquired during the prior representation. The Appellate Division, relying on our decision in Cardinale v Golinello (43 NY2d 288), held that there was an irrebuttable presumption that all the firm’s attorneys had knowledge of confidential information learned during its prior representation of Grace in the City of Enterprise matter. Accordingly, it reversed and certified the following question: "Was the order of this Court, which reversed the order of the Supreme Court, properly made?”

I.

A lawyer may not both appear for and oppose a client on substantially related matters when the client’s interests are adverse (see, Greene v Greene, 47 NY2d 447, 451). Thus, a single practitioner who had previously represented defendant in this matter, would be disqualified from representing plaintiff. The rule has been extended to provide that if one attorney in a firm is disqualified from representing a client, then all attorneys in the firm are disqualified (Cardinale v Golinello, supra). This is so because there is an irrebuttable presumption of shared confidences among attorneys employed by the firm which forecloses the firm from representing others in the future in substantially related matters.

The rule fully implements attorneys’ fiduciary duties of loyalty and confidentiality to the client and their ethical obligation to avoid the appearance of impropriety. In the case before us, however, the attorney who represented Grace in the prior matter, one of 372 attorneys employed by Stroock, left the firm well before it was retained in this litigation. In these circumstances, Stroock contends that the strict enforcement of the irrebuttable presumption rule gives too much weight to those ethical concerns and unduly impairs related policy objectives involving the right of clients to select counsel of their choice and favoring the mobility of attorneys. It maintains that it should be able to avoid disqualification by demonstrating that the remaining attorneys have no knowledge of the client’s prior matter; that the client’s confidences and secrets, if any there were, left with the departing partner. For the reasons which follow, we conclude Stroock is correct. We, therefore, reverse the order of the Appellate Division and answer the certified question in the negative.

II.

Stroock was retained as cocounsel in this case in 1992, some five years after the action was commenced, by plaintiffs’ attorney-of-record. Earlier it had represented Grace in work performed principally by attorney Barbara Billauer. She had been a partner at Anderson Russell Kill & Olick from 1982 to 1986 and while there had represented Grace as a defendant in asbestos lawsuits. In 1986 Ms. Billauer left the Anderson office and became a partner at Stroock. She remained there until 1990. During that time, in the six months between September 30, 1986 and March 18, 1987, Stroock performed work on behalf of Grace in the City of Enterprise litigation.

The retention of Stroock in City of Enterprise was made, on Grace’s behalf, by the Boston law firm of Goodwin, Procter & Hoar, counsel defending Grace nationally in asbestos matters. The Goodwin firm hired Stroock for the limited purpose of preparing Dr. Seaton, an independent expert retained by Grace, for deposition and possible testimony. Ms. Billauer, assisted by a first-year associate and several paralegals, was responsible for the matter and reported to Stroock partners Jay Mayesh and Joseph Forstadt. She and the associate and paralegals who assisted her have all left Stroock. While Mr. Forstadt remains and is expected to play a major role in Stroock’s current representation of plaintiffs, Supreme Court found that his role in the City of Enterprise litigation was negligible. Indeed, billing records show that neither Mr. Mayesh nor Mr. Forstadt billed any time to Grace on the matter. Joseph Giamboi, a Stroock first-year associate at the time of the Enterprise litigation, billed 30 minutes to Grace. Mr. Giamboi stated in his affidavit that he had been involved in planning a presentation on asbestos at the time and, for that purpose, he had reviewed copies of published articles concerning the subject which were in the City of Enterprise files. He denies having reviewed any confidential information concerning Grace or its expert. However, like Mr. Forstadt, Mr. Giamboi is actively involved in the current litigation and is scheduled to depose several Grace experts.

A Stroock associate who reviewed the files relating to the City of Enterprise matter, stated in the moving papers that they contained only published articles about asbestos and contained no confidential or proprietary information concerning Grace. Ms. Billauer also swore that her representation of Grace while at Stroock consisted solely of drafting a hypothetical direct trial examination of Dr. Seaton and preparing him for trial. This preparation, she stated, was based exclusively on her collection and review of public documents on the subject and Dr. Seaton’s medical expertise. Finally, Ms. Billauer stated that the only people with whom she might have discussed her prior representation of Grace while at Anderson Russell were a first-year associate and a paralegal, both of whom have since left Stroock. The statements in these affidavits were corroborated by the evidence contained in Stroock’s computerized billing records. Based upon this, Stroock maintains that it has rebutted any claim that its representation of plaintiff will compromise confidences of Grace and that because it has done so it should not be disqualified.

In denying Grace’s motion, Supreme Court reasoned that while the presumption of knowledge among attorneys in a firm is irrebuttable so long as the attorney who worked on the prior matter remains at a firm, the presumption that those remaining are aware of client confidences in cases they themselves did not handle is rebuttable after the affected attorney leaves and that Stroock had sufficiently rebutted it in this case. The Appellate Division, in reversing, believed that the possibility that client confidences had been shared could not be discounted, and that, absent client consent, Stroock should be disqualified.

III.

A party seeking to disqualify an attorney or a law firm, must establish (1) the existence of a prior attorney-client relationship and (2) that the former and current representations are both adverse and substantially related (Cardinale, supra, at 295-296; see also, T. C. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265, 268, rearg denied 125 F Supp 233; Developments in the Law, Conflicts of Interest in the Legal Profession, 94 Harv L Rev 1244, 1318 ["Conflicts of Interest”]). Assuming that the former client has satisfied that burden, what effect are courts to give the presumption of disqualification under the present circumstances: is the issue concluded or may the client’s former law firm rebut the presumption?

Analysis begins with examining the purposes of the rule. The irrebuttable presumption is employed to fully protect client confidences and secrets, to offer a clear test which is easy to administer and to avoid an appearance of impropriety on the part of the attorney or the law firm.

First among these concerns is the protection of client confidences. An attorney may not disclose or use adversely information confided by former or current clients (Code of Professional Responsibility DR 4-101 [B] [22 NYCRR 1200.19 (b)]; and see, Code of Professional Responsibility DR 5-108 [A] [2] [22 NYCRR 1200.27 (a) (2)]). When an attorney represents a party against a former client the current client’s interest in vigorous representation potentially threatens the former client’s expectation of confidentiality. The rule is designed to free the former client from any apprehension that matters disclosed to an attorney will subsequently be used against it in related litigation (see, Cardinale, 43 NY2d, at 295; Code of Professional Responsibility DR 4-101). Thus, the Code imposes a continuing obligation on the attorney to respect the client’s confidences, even after a matter has concluded. The use of an irrebuttable presumption of disqualification insures that this obligation is enforced and that client confidences and secrets will never be misused in substantially related and adverse litigation.

Second, the rule avoids the "appearance of impropriety” on the part of the attorney or the law firm. Whether a conflict actually exists could be determined by a hearing but the rule requires disqualification even when there may not, in fact, be any conflict of interest so that any suggestion of impropriety is avoided (see, Cardinale, 43 NY2d, at 296; Code of Professional Responsibility Canon 9; Conflicts of Interest, op. cit., at 1358-1359; Note, Attorney Disqualification: The Case for an Irrebuttable Presumption Rebutted, 44 Alb L Rev 645, 649-650). An irrebuttable presumption of disqualification is favored over a hearing because it avoids the danger that an inquiry may destroy the very confidences sought to be protected (see, NCK Org. v Bregman, 542 F2d 128, 134-135; Conflicts of Interest, op. cit., at 1329).

Finally, the rule provides a test which, because of the ease of its application, becomes a strong aid in self enforcement among members of the legal profession.

Thus, this per se rule of disqualification protects all of the ethical concerns implicated by successive representations. It does so, however, at a substantial cost to current clients, to the public-at-large and to the legal profession. It is unnecessarily preclusive because it disqualifies all members of a law firm indiscriminately, whether or not they share knowledge of former client’s confidences and secrets. As a result the rule may cause a current client to face significant hardships when the chosen attorney is disqualified, thus depriving the client of the specialized knowledge of counsel of choice and forcing the client to familiarize a new attorney with the matter.

Moreover, because of the rigor of the rule, motions to disqualify are frequently used as an offensive tactic, inflicting hardship on the current client and delay upon the courts by forcing disqualification even though the client’s attorney is ignorant of any confidences of the prior client. Such motions result in a loss of time and money, even if they are eventually denied. This Court and others have expressed concern that such disqualification motions may be used frivolously as a litigation tactic when there is no real concern that a confidence has been abused (see, S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437, 443; Melamed v ITT Cont. Baking Co., 592 F2d 290, 295).

A per se disqualification rule also conflicts with public policies favoring client choice and restricts an attorney’s ability to practice (see, Denburg v Parker Chapin Flattau & Klimpl, 82 NY2d 375, 380; Cohen v Lord, Day & Lord, 75 NY2d 95, 98). While those concerns are not sufficient to override the important ethical considerations which underlie the rule, it is a fact of life that many attorneys in today’s society spend a substantial portion of their careers with large firms such as Stroock. To attach to those attorneys an irrebuttable presumption that they have knowledge of all the business the firm handled during their employment, and thus are disqualified from later appearing in matters substantially related to any part of it, seriously disadvantages them and the clients who wish to retain them.

IV.

Our decision in Cardinale v Golinello (43 NY2d 288, supra) and the Second Circuit’s decision in Silver Chrysler Plymouth v Chrysler Motors Corp. (518 F2d 751) present two different settings illustrating these competing interests in disqualification cases. As the decisions suggest, the purposes of the irrebuttable presumption may be satisfied in different ways depending on the nature of the law firm and the character of its practice. In smaller, more informal settings the imputation of knowledge as a matter of law is necessary to protect the client and avoid the appearance of impropriety. In other circumstances the risk of conflict is so minimal that the danger of it occurring is outweighed by policy considerations militating against an irrebuttable presumption.

In Cardinale, a partner in Halperin, Somers & Goldstick, P. C., had represented defendant Golinello in connection with the purchase of corporate capital stock. After the transaction had been completed, attorney Charles Schiller joined the Halperin firm. The firm continued to represent defendant after Schiller’s arrival, but Schiller did not render legal services on Golinello’s behalf. Schiller subsequently left the Halperin firm and became associated with the law firm of King & King. Thereafter, plaintiffs retained the King firm in connection with claims against Golinello and members of the Halperin firm arising out of the earlier stock purchase. Upon learning that Schiller had been retained by the King firm to handle the matter, defendant Golinello moved to disqualify both the King firm and Schiller.

We began our analysis by noting that Halperin was "a small firm whose activities were characterized by an understandable informality” in which "there was a 'constant cross-pollination’ ” and " 'cross current of discussion and ideas’ ” among the employees (Cardinale, supra, at 292). Given that atmosphere, we believed Schiller had likely become aware of confidential information concerning Golinello while with Halperin. Indeed, it was of "no moment” that Schiller had never rendered legal services to Golinello, we said, because, by being an attorney associated with Golinello’s attorney, the possibility was simply too great that he had wittingly or unwittingly acquired confidential information concerning Golinello. We also expressed concern over the appearance of impropriety, for if Schiller were allowed to represent plaintiffs in the current action, laypersons might well believe that he was being hired not only because of his legal talent, but also because of confidential information that he possessed.

We concluded, therefore, that Schiller was properly disqualified from the current litigation. No inquiry was required: disqualification arose "simply from the fact that the lawyer, or the firm with which [the lawyer] was then associated, represented the former client in matters related to the subject matter of the second representation” (Cardinale, supra, at 295). The King firm was similarly disqualified under the principle that if one attorney in a firm is barred from representing a client, then all attorneys in a firm are likewise precluded from such representation.

Our holding in Cardinale reflected the prevailing understanding that the duty of loyalty owed to a former client and the avoidance of even an appearance of impropriety are so important that any harm associated with disqualification was minimal when compared with furthering those goals (see generally, T. C. Theatre Corp., supra; Note, Federal Courts and Attorney Disqualification Motions: A Realistic Approach to Conflicts of Interest, 62 Wash L Rev 863, 875-876). Our determination did not rest on the size of the firm or the number of lawyers it employed, although those factors were relevant. It was based upon our recognition that in firms such as Halperin attorneys are so intimately acquainted with all the work in the office that they can be expected to share client confidences and ideas about how to handle client problems as a matter of course (Cardinale, at 292; see also, Conflicts of Interest, op. cit, at 1355). Thus, we found unpersuasive Federal decisions dealing with law firms of a different type and rejected them without discussion.

One of those Federal decisions was Silver Chrysler Plymouth v Chrysler Motors Corp. (supra). It involved a firm of quite different makeup and practice. In Silver Chrysler, attorney Schreiber was associated with the Hammond law firm, which was representing Silver Chrysler in its action against Chrysler. Schreiber had previously been associated with the firm of Kelley, Drye & Warren, which had represented Chrysler for many years. Upon learning that Schreiber had worked on several Chrysler matters while at Kelley Drye, Chrysler moved to disqualify him and his new firm.

The Second Circuit began its analysis, as this Court had in Cardinale, by reviewing the type of firm involved and the nature of its work. At the time Kelley Drye, unlike the Halperin firm in Cardinale, was a firm of some 80 lawyers segregated into different departments. The court reasoned from this that it would be "absurd” to assume that upon entry into the firm an attorney, by "osmosis,” became aware of every client of the firm and shared in all of the client confidences and secrets which the firm, as a whole, possessed. Because of this the Second Circuit held that the presumption of disqualification should be a rebuttable one; quite simply, it said, there are valid reasons for differentiating "between lawyers who become heavily involved in the facts of a particular matter and those who enter briefly on the periphery” (id., at 756). The court reasoned that to apply the remedy of disqualification when there is no realistic chance that confidences were disclosed would go far beyond the purposes of a strict disqualification rule (id., at 757).

V.

As these decisions illustrate, any fair rule of disqualification should consider the circumstances of the prior representation. If an attorney has represented a client in an earlier matter and then attempts to represent another in a substantially related matter which is adverse to the interests of the former client, the presumption of disqualification is irrebuttable. Thus, if Ms. Billauer had attempted to represent plaintiffs in their current action against Grace, she would be disqualified from doing so and the imputation of shared confidences with her partners might be so obvious from the facts that her new firm would also be disqualified as a matter of law (see, Cardinale v Golinello, supra).

In this matter, however, Stroock seeks to represent plaintiffs and Ms. Billauer, who handled the Grace matter while at Stroock, has moved to another firm. Under these circumstances the ethical considerations which support a per se disqualification rule have considerably less force and may be overridden by competing policy concerns. In this situation the court must presume that the rights of the former client are jeopardized by Stroock’s subsequent representation of plaintiffs, but Stroock should be allowed to rebut that presumption by facts establishing that the firm’s remaining attorneys possess no confidences or secrets of the former client. That procedure does no violence to our existing rules. In firms characterized by the informality exhibited by the Halperin firm in Cardinale, disqualification will be imposed as a matter of law without a hearing. If the firm can demonstrate prima facie that there is no reasonable possibility that any of its other attorneys acquired confidential information concerning the client, a hearing should be held after which the court may determine that disqualification may be unnecessary. The evidence must be sufficient, however, to establish that the former client’s interests are fully protected and to overcome any suggestion of impropriety.

The record in this case establishes that the only matter handled by Stroock for Grace was the preparation of Dr. Seaton as an expert witness in the City of Enterprise litigation. The people primarily responsible for handling that matter left the firm several years prior to this current representation, and the attorneys remaining at Stroock had, at most, limited contact with the City of Enterprise matter. Moreover, the informality which was the hallmark of the Halperin firm in Cardinale, is not usually found in large, departmentalized firms such as Stroock and that suggests that representation is permissible.

Accordingly, the order of the Appellate Division should be reversed, with costs, defendant’s motion to disqualify the law firm of Stroock & Stroock & Lavan from representing plaintiffs in this action denied, and the certified question answered in the negative.

Chief Judge Kaye and Judges Bellacosa, Smith, Levine and Ciparick concur; Judge Titone taking no part.

Order reversed, etc.

       That part of Silver Chrysler which held that orders denying disqualification motions are appealable was overruled by Armstrong v McAlpin (625 F2d 433, 440), which was vacated on the interlocutory appeals issue in McAlpin v Armstrong (449 US 1106).


author: Chief Judge Kaye.

text:
    [632 NE2d 443, 610 NYS2d 134]
    In the Matter of Newark Valley Central School District, Appellant, v Public Employment Relations Board et al., Respondents.
    Argued February 16, 1994;
    decided March 24, 1994

      POINTS OF COUNSEL

      Hogan & Sarzynski, Binghamton (John P. Lynch and John B. Hogan of counsel), for appellant.
    I. The Legislature granted to the Commissioner of Education control over school district transportation facilities. Public Employment Relations Board (PERB) is ousted from jurisdiction. (Boreali v Axelrod, 71 NY2d 1; Syracuse Teachers Assn. v Board of Educ., 35 NY2d 743; Matter of Cohoes City School Dist. v Cohoes Teachers Assn., 40 NY2d 774.) II. PERB’s decision need not be shown deference. The Education Law is outside their area of expertise. III. Environmental tobacco smoke is a recognized health hazard. The school board has a responsibility to limit children’s exposure to such smoke.

      David P. Quinn, Albany, and Ernest F. Hart for Public Employment Relations Board, respondent.
    I. The broad scope of collective bargaining under the Taylor Law is limited only by plain and clear prohibitions in statutory or decisional law or by public policy embodied in constitutional or statutory law. (Matter of Cohoes City School Dist. v Cohoes Teachers Assn., 40 NY2d 774; Matter of Incorporated Vil. of Lynbrook v New York State Pub. Empl. Relations Bd., 48 NY2d 398; Board of Educ. v Associated Teachers, 30 NY2d 122; Matter of

      Board of Educ. v New York State Pub. Empl. Relations Bd., 75 NY2d 660; Matter of Webster Cent. School Dist. v Public Empl. Relations Bd., 75 NY2d 619; Matter of City School Dist. v New York State Pub. Empl. Relations Bd., 74 NY2d 395; Syracuse Teachers Assn. v Board of Educ., 35 NY2d 743; Matter of Port Jefferson Sta. Teachers Assn. v Brookhaven-Comsewogue Union Free School Dist., 45 NY2d 898.) II. Education Law § 3624, as implemented by regulation of the Commissioner of Education, does not plainly or clearly direct school districts to ban employee smoking in empty school buses. (Boreali v Axelrod, 71 NY2d 1; Ten Hoeve v Board of Educ., 97 AD2d 678, 64 NY2d 1036; State Div. of Human Rights [Giannovola] v Le Roy Cent. School Dist., 107 AD2d 153, 65 NY2d 610.) III. The public policy of the Public Health Law does not foreclose negotiations concerning employee smoking in empty school buses. IV. PERB’s determination that the District violated Civil Service Law § 209-a (1) (d) is legally permissible and was properly based on sound construction of the Education Law and the Public Health Law. (Matter of Board of Educ. v New York State Pub. Empl. Relations Bd., 75 NY2d 660.)

      Ivor R. Moskowitz, Albany, Bernard F. Ashe and Rocco A. Solimando for Newark Valley Cardinal Bus Drivers, NYSUT/ AFT/AFL-CIO, Local 4360, respondent.
    I. It is well settled that PERB has broad power to consider and determine improper practice charges. (Matter of West Irondequoit Teachers Assn. v Helsby, 35 NY2d 46; Matter of City of Albany v Helsby, 29 NY2d 433; Matter of Incorporated Vil. of Lynbrook v New York State Pub. Empl. Relations Bd., 48 NY2d 398; Matter of Public Empls. Fedn. v Public Empl. Relations Bd., 93 AD2d 910; Matter of Syracuse Hancock Professional Firefighters Assn. v Newman, 110 AD2d 256.) II. Bargaining over smoking in the workplace is a term and condition of employment and a mandatory subject of bargaining. (Board of Educ. v Associated Teachers, 30 NY2d 122; Syracuse Teachers Assn. v Board of Educ., 35 NY2d 743; Matter of Susquehanna Val. Cent. School Dist. [Susquehanna Val. Teachers’ Assn.], 37 NY2d 614; Matter of Young v Board of Educ., 35 NY2d 31; Matter of Port Jefferson Sta. Teachers Assn. v Brookhaven-Comsewogue Union Free School Dist., 45 NY2d 898; Matter of Board of Educ. v Merrick Faculty Assn., 65 AD2d 136; Matter of Union Free School Dist. No. 2 v Nyquist, 38 NY2d 137; Matter of Howard v Wyman, 28 NY2d 434.) III. There is no freestanding public policy, nor any statute or regulation against smoking which supports the District’s actions. (Boreali v Axelrod, 71 NY2d 1; Syracuse Teachers Assn. v Board of Educ., 35 NY2d 743; Matter of Susquehanna Val. Cent. School Dist. [Susquehanna Val. Teachers’ Assn.], 37 NY2d 614; Matter of Rush-Henrietta Cent. School Dist. v Newman, 151 AD2d 1001, 75 NY2d 704; Board of Educ. v Associated Teachers, 30 NY2d 122.)

      Jay Worona, Albany, and Joseph B. Porter for New York State School Boards Association, Inc., amicus curiae.

    Education Law § 3624 and 8 NYCRR 156.3 (g) (5) preempt a school district’s obligation under the Taylor Law to engage in negotiations over a ban on smoking on school buses when such buses are not in use for the transportation of students. (Syracuse Teachers Assn. v Board of Educ., 35 NY2d 743; Matter of Susquehanna Val. Cent. School Dist. [Susquehanna Val. Teachers’ Assn.] 37 NY2d 614; Matter of Cohoes City School Dist. v Cohoes Teachers Assn., 40 NY2d 774; Matter of Rush-Henrietta Cent. School Dist. v Newman, 151 AD2d 1001; Matter of City School Dist. v New York State Pub. Empl. Relations Bd., 74 NY2d 395; Matter of Newark Val. Cent. School Dist. v Public Empl. Relations Bd., 189 AD2d 229.)
   OPINION OF THE COURT

Chief Judge Kaye.

The issue before us is whether a ban on smoking by school bus drivers when no students are on board should have been collectively bargained, as a term or condition of employment, or was preempted by statute or policy and therefore properly adopted by the school district unilaterally. We conclude, as did the Appellate Division, that the matter was subject to collective bargaining.

I.

In early 1990, appellant Newark Valley Central School District adopted a smoking ban designed to promote the general policy against smoking in open areas of schools "[i]n accordance with Public Health Law, Article 13-E, 1399-0 (6),” the State legislation addressing the risks of secondhand smoke. Appellant’s resolution, however, also included a rule banning smoking in school buses, whether or not students were present. After denial of a demand to negotiate, the bus drivers filed an improper practice charge with the Public Employment Relations Board (PERB), alleging violation of Civil Service Law § 209-a (1) (d).

The matter was referred on stipulated facts to an Administrative Law Judge (ALJ), who rejected the District’s contention that PERB was bound by the decision of the Appellate Division in Matter of Rush-Henrietta Cent. School Dist. v Newman (151 AD2d 1001, lv denied 75 NY2d 704). In that case the Fourth Department held a regulation of the Commissioner of Education (8 NYCRR 156.3 [g] [5]), promulgated pursuant to Education Law § 3624, preempted the obligation of a school district to negotiate a ban on smoking in school buses.* Finding that neither the Education Law nor Public Health Law article 13-E required appellant’s rule, the ALJ concluded that it was subject to negotiation.

PERB confirmed the ALJ’s determination, rejecting the District’s additional contention that its rule was justified by "an inherent, residual core of policy or right which permits it to avoid a bargaining duty if it acts in the name of the students’ health and safety” (see, Matter of Board of Educ. v New York State Pub. Empl. Relations Bd. (75 NY2d 660, 667). PERB concluded that article 13-E of the Public Health Law and existing regulations reflected the entirety of the State’s current public policy concerning secondhand smoke risks, and that no additional facts in the record supported the conclusion that smoking in a bus necessarily presents a health hazard when there are no passengers.

The District then instituted this CPLR article 78 proceeding seeking annulment of PERB’s determination. Supreme Court granted the petition, holding that the Commissioner of Education’s smoking regulation preempted a school district’s obligatian to negotiate a blanket prohibition against smoking on its buses. The Appellate Division, Third Department, reversed, concluding that neither the statute nor the regulations prohibited collective bargaining. We agree.

II.

The scope of our review is well settled. We accord deference to PERB, as the agency charged with implementing the Taylor Law (Civil Service Law art 14), as to matters falling within the agency’s special competence developed in administering the statute — whether, for example, a particular matter is a term or condition of employment (see, Matter of Board of Educ. v New York State Pub. Empl. Relations Bd., 75 NY2d 660, 667, supra, citing Matter of West Irondequoit Teachers Assn. v Helsby, 35 NY2d 46, 50; Matter of Rosen v Public Empl. Relations Bd., 72 NY2d 42, 47). Deference to PERB is not required, however, if the issue is one of statutory interpretation, dependent on discerning legislative intent, as statutory construction is the function of the courts (Matter of Rosen v Public Empl. Relations Bd., 72 NY2d, at 47-48, supra). Because the question whether the District’s duty to negotiate a smoking policy was preempted by statute or policy is an issue of law, we must independently examine whether smoking on school buses was a prohibited bargaining subject (see, Matter of City School Dist. v New York State Pub. Empl. Relations Bd., 74 NY2d 395, 402).

"Preemption,” in the Taylor Law context, means that collective bargaining of terms and conditions of employment is prohibited because a plain and clear bar in statute or policy involving " 'an important constitutional or statutory duty or responsibility’ ” leaves an agency with no discretion as to how an issue may be resolved (Matter of Board of Educ. v New York State Pub. Empl. Relations Bd., 75 NY2d 660, 668, supra). In the absence of such a law or policy, a subject may be negotiated.

Examination of the statutory and regulatory schemes which purport to address smoking compels the conclusion that the subject of smoking by school drivers on empty buses is not preempted. Education Law § 3624, and the Commissioner’s implementing regulation (8 NYCRR 156.3 [g] [5]), speak to conduct that might "impair the safe operation of * * * transportation facilities while actually being used for the transport of pupils” (8 NYCRR 156.3 [g] [5] [emphasis added]). The District therefore cannot look to the Education Law as authority to regulate driver conduct when buses are not actually being used for the transport of pupils — in other words, when students are not on board.

Nor are the Education Law provision and its implementing regulation aimed at eliminating dangers posed to pupils by secondhand smoke. Whether smoking drivers do or do not present a health hazard to students who later board the bus, an issue we do not reach, the grant of regulatory authority pursuant to Education Law § 3624 is limited to activities that might distract the driver from safe driving practices. This is apparent from the prohibition on eating and drinking, which carry no secondhand risk to students, but might cause the driver to lose concentration on the task of operating the bus. Negotiation of smoking restrictions while students are not on board is therefore not prohibited by Education Law § 3624 or 8 NYCRR 156.3 (g) (5).

Regulation of the environmental hazard caused by secondhand smoke is unquestionably the concern of Public Health Law article 13-E (see especially, L 1989, ch 244, § 1). This legislation likewise does not preclude negotiation over the issue of smoking on school buses in the absence of pupils. The statutory scheme contains no explicit or implied prohibition against smoking under such a circumstance. Far from supporting the District’s claim of preemption, Public Health Law § 1399-0 (6) (d) permits smoking by a driver of a vehicle that has no passengers. While Public Health Law § 1399-0 (1) (g) prohibits smoking in "public means of mass transportation,” smoking in buses is prohibited only "when occupied by passengers.” Most decisive of the issue before us, therefore, is section 1399-0 (6) (i) of the Public Health Law, mandating that any smoking restrictions above the statutory minimum be subject to collective bargaining.

What remains for determination is whether negotiation is nevertheless preempted by a compelling public policy. While we have acknowledged the theoretical possibility that a policy rooted in " 'an important constitutional or statutory duty or responsibility’ ” may require it, we have never found preemption on the strength of a policy alone (Matter of Board of Educ. v New York State Pub. Empl. Relations Bd., 75 NY2d 660, 667-668, supra).

Secondhand smoke unquestionably poses health hazards, a reality acknowledged in article 13-E of the Public Health Law. The extent to which residual smoke would present such risks, if indeed any is present in the buses, is unresolved. The Legislature, while acting forcefully to protect against certain secondhand smoke, has not deemed residual smoke in vehicles to warrant regulation. We conclude that at the present time there is no compelling public policy regarding residual smoke that would justify a refusal to negotiate a change in the District’s smoking policy.

Because regulation of smoking affects a term or condition of employment (as determined by PERB, and unchallenged), and because a rule affecting smoking on empty buses is not mandated by law or policy, we conclude that appellant’s unilateral action was improper.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Judges Simons, Bellacosa, Smith and Ciparick concur; Judges Titone and Levine taking no part.

Order affirmed, with costs.

      . Although the rule’s stated prohibition was limited to smoking in "district vehicles occupied by more than one person unless the occupants of such vehicle agree that smoking may be permitted,” appellant has stipulated that the District’s intent was to ban smoking on school buses in all circumstances.

      . Education Law § 3624, entitled "Drivers,” authorizes the Commissioner to implement rules and regulations concerning — "but not limited to” —smoking, eating and drinking "and any and all other acts or conduct which would otherwise impair the safe operation of such transportation facilities while actually being used for the transport of pupils.” The regulation, 8 NYCRR 156.3 (g) (5), which is included within a section entitled "Safety regulations for drivers and pupils,” provides: "Drivers shall not smoke, eat or drink any liquid, or perform any act or conduct themselves in any manner which may impair the safe operation of a school bus while such vehicle is transporting pupils.”

      . Significantly, a bill to amend Education Law § 3624 to prohibit smoking on buses regardless of the actual presence of pupils recently passed the Assembly (see, 1993 NY Assembly Bill A 727).

      . While the District contends that residual smoke could affect the safety of students when the bus is actually being used for their transport, such a risk was not stipulated to before PERB. The scope of our review is, of course, limited to what was before the agency (Matter of Rosen v Public Empl. Relations Bd., 72 NY2d 42, 47, supra).

      . Indeed, at oral argument the District abandoned its contention that its rule was supported by Education Law § 3624.

      . We note that a bill to amend article 13-E to forbid smoking on "any vehicles used to transport children or school personnel” and to eliminate smoking on all buses even when unoccupied by passengers recently passed the State Assembly (see, 1993 NY Assembly Bill A 7139-D).


text:
    [632 NE2d 861, 610 NYS2d 455]
    Thomas P. Hoke, as Commissioner of the Broome County Department of Social Services, Appellant, v Angela Ortiz, Respondent. Cenesky, Alenik, Stefanski & Pool, Nonparty Respondent.
    Argued February 9, 1994;
    decided March 22, 1994

      POINTS OF COUNSEL

      Philomena M. Stamato, Binghamton, for appellant.
    I. In accord with Social Services Law § 104, Broome County’s Supreme Court properly granted Broome County’s Department of Social Services summary judgment. (Kidney v Kolmar Labs., 652 F Supp 15, 808 F2d 955; Baker v Sterling, 39 NY2d 397; Matter of Verbal v Perales, 176 AD2d 805; Matter of Lutz v Amrhein, 151 AD2d 672; Fulton County Natl. Bank & Trust Co. v Call, 117 Misc 2d 39; Snell v Wyman, 281 F Supp 853, 393 US 323; Hodson v Bloise, 173 Misc 69; Tolley v Maliswaski, 159 Misc 89; Matter of Colon, 83 Misc 2d 344; Matter of Thurston v Durose, 76 NY2d 683.) II. As a preferred creditor, Broome County’s Social Services Department is entitled to recover the full $50,000 windfall from respondent and has priority over attorney fees as a matter of law. (Mayeri Corp. v Shea & Gould, 112 Misc 2d 734; People v Keeffe, 50 NY2d 149; Adán v Abbott, 114 Misc 2d 735; Koutrakos v Long Is. Coll. Hosp., 47 AD2d 500, 39 NY2d 1026; Rahl v Hayes 73 Corp., 117 Misc 2d 571, 99 AD2d 529, 63 NY2d 609; Kussack v Ring Constr. Corp., 1 AD2d 634, 4 NY2d 1011; Matter of Colon, 83 Misc 2d 344; Petition of Rosenman & Colin, 674 F Supp 107, 850 F2d 57; Matter of Schanzer, 7 AD2d 275, 8 NY2d 972; Glassberg v All City Ins. Co., 72 Misc 2d 651.)

      Charlotte Bunzey, Binghamton, for Angela Ortiz, respondent.
    I. The decision of the court below was correct and should be affirmed by this Court. (Matter of Colon, 83 Misc 2d 344; Lukhard v Reed, 481 US 368; Gardenbring v Jenkins, 485 US 415; Philadelphia Citizens in Action v Schweiker, 669 F2d 877; Wylie v Kitchin, 589 F Supp 505; Faught v Heckler, 736 F2d 1235; Sutter v Perales, 103 AD2d 1029; Queal v Perales, 126 Misc 2d 692, 122 AD2d 542; Hutchins v Perales, 122 AD2d 541; Knapton v Kitchin, 113 AD2d 540.) II. Ms. Ortiz’s attorneys are clearly entitled to their fees. (Rahl v Hayes 73 Corp., 117 Misc 2d 571, 99 AD2d 529; Kussack v Ring Constr. Corp., 1 AD2d 634, 4 NY2d 1011; Matter of Colon, 83 Misc 2d 344; People v Keeffe, 50 NY2d 149.)

      Cenesky, Alenik, Stefanski & Pool, Johnson City (James A. Mack and John F. Cenesky of counsel), nonparty respondent pro se.

    I. Appellant had no enforceable right to that portion of the Ortiz settlement in the hands of the law firm. (Matter of Colon, 83 Misc 2d 344.) II. The law firm is entitled to its fees earned in obtaining the settlement. (Wood v Young, 141 NY 211; Bowling Green Sav. Bank v Todd, 52 NY 489; Matter of Pierce, 106 AD2d 892; Matter of Lambert, 87 AD2d 818; Matter of Babcock, 230 App Div 323; People v Keeffe, 50 NY2d 149.) III. Case law clearly shows the firm properly received its fee. (Rahl v Hayes 73 Corp., 117 Misc 2d 571, 99 AD2d 529, 63 NY2d 609.) IV. Public policy favors that the law firm be paid for its efforts in negotiating this settlement.

      Scheine, Fusco, Brandenstein & Rada, P. C, Woodbury (Joan S. O’Brien of counsel), for New York State Trial Lawvers Association, amicus curiae.

    I. Appellant improperly meddled in the settlement process on February 25, 1993 because it was neither a lienholder nor a judgment creditor. (Baker v Sterling, 39 NY2d 397; Deary v Guardian Loan Co., 534 F Supp 1178; McCahey v L.P. Investors, 593 F Supp 319, 774 F2d 543.) II. Appellant prematurely instituted a suit under section 104 of the Social Services Law because defendant did not "have” personal property on the date the suit was instituted. (Matter of Pierce, 106 AD2d 892.) III. Defendant’s law firm had a retaining lien upon the funds collected in its professional capacity. (Wood v Young, 141 NY 211; Bowling Green Sav. Bank v Todd, 52 NY 489.) Public policy considerations should uphold the awarding of legal fees in this case. (Baker v Sterling, 39 NY2d 397; Becker v Huss Co., 43 NY2d 527; Matter of Kelly v State Ins. Fund, 60 NY2d 131; Matter of Curtin v City of New York, 287 NY 338; Koutrakos v Long Is. Coll. Hosp., 47 AD2d 500, 39 NY2d 1026; Kussack v Ring Constr. Corp., 1 AD2d 634, 4 NY2d 1011.)

      G. Oliver Koppell, Attorney-General, Albany (Jerry Boone, Peter H. Schiff and Siobhan S. Crary of counsel), for New York State Department of Social Services, amicus curiae.

    The court below erred when it concluded that the "lump sum rule”, which governs eligibility for public assistance, abrogates Social Services Law § 104, which expressly authorizes recovery of past assistance. (Matter of Thurston v Durose, 76 NY2d 683; Baker v Sterling, 39 NY2d 397; McCheyne v Tompkins County Dept. of Social Servs., 165 AD2d 470.)
   OPINION OF THE COURT

Chief Judge Kaye.

Angela Ortiz, a public assistance recipient, and the Department of Social Services (DSS) assert competing claims to the proceeds of a settlement of a personal injury case brought by Ortiz. Ortiz, respondent on this appeal, wishes to retain her portion of the proceeds (net of counsel fees) and terminate future financial assistance, while appellant DSS claims the entire amount in consideration of past benefits paid. We conclude that under Social Services Law § 104 (1) DSS may recoup the settlement proceeds (net of counsel fees) and modify the Appellate Division order accordingly.

I.

Since 1987 public assistance has been the sole means of support for respondent and her three children. According to DSS, the Ortiz family has received benefits totalling more than $56,000.

In October 1991, after she was injured in an automobile accident, Ortiz retained the law firm of Cenesky, Alenik, Stefanski & Pool to pursue a personal injury claim against the driver of the vehicle in which she was a passenger, and signed a contingency fee agreement obligating her to pay the firm one third of any recovery. Ortiz’s medical expenses were covered by no-fault insurance, and she suffered no permanent injury.

In January 1992, Ortiz sought recertification to continue receiving public assistance. During the process, she was asked in a questionnaire and by a DSS interviewer whether she expected to receive a lawsuit settlement, and each time she answered no. Ortiz read and signed a statement agreeing to inform DSS of any change in her income. Ortiz explains that she had been advised by her attorneys that recovery was remote, and that she intended to notify DSS if she ever recovered on her claim.

Thereafter, on February 25, the driver’s insurer, Allstate Insurance Co., settled Ortiz’s claim for $50,000. Before a check could be issued, DSS contacted Allstate and represented that it had a lien on the settlement proceeds. Allstate accordingly tendered to the Cenesky firm a settlement check in the amount of $50,000 payable to DSS, Ortiz and the firm.

Appellant then commenced this action against Ortiz under Social Services Law § 104 (1) seeking recoupment of past public assistance and obtained a temporary restraining order (TRO) against disbursement of the settlement proceeds. Ortiz in turn sought summary judgment ordering DSS to endorse the check, and DSS cross-moved for summary judgment in the amount of $50,000. Supreme Court, holding that DSS in fact had no lien against the settlement proceeds at the time it had its name added to the check, granted summary judgment to DSS for the settlement proceeds less the agreed attorneys’ fees, and ordered Allstate to disburse the funds $33,217.09 to Ortiz and $16,782.91 to the Cenesky firm. The court dissolved the TRO, and the firm — not a party to the action and unaffected by a stay pending appeal — received its fee.

Ortiz appealed the $33,217.09 judgment against her on the ground that Social Services Law § 131-a (12), requiring DSS to terminate future benefits to a public assistance household in receipt of a lump sum, entitled her to retain the sum if she chose. DSS cross-appealed, demanding the entire $50,000 from her.

The Appellate Division modified by reversing the award of summary judgment to DSS, concluding that Social Services Law § 131-a (12) precluded DSS from proceeding under Social Services Law § 104. The court further held that the Cenesky firm had a valid retaining lien on the settlement proceeds, and accordingly affirmed the $16,782.91 judgment in its favor, noting that it did so for the purpose of preventing the failure of the law firm to have protected its own interests by filing a Judiciary Law § 475-a notice from prejudicing defendant by leaving her with a debt she could not possibly pay. We granted leave and now reinstate the order of Supreme Court.

II.

At common law, past public assistance could not be recovered from the recipient, as charity, deemed freely given, did not engender any reciprocal obligation (see, City of Albany v McNamara, 117 NY 168, 174; see also, Baker v Sterling, 39 NY2d 397, 401; Graham, Public Assistance: The Right to Receive; The Obligation to Repay, 43 NYU L Rev 451, 478 [1968]). Departing from that principle with "the most restrictive recovery provisions in the nation” (see, Graham, op. cit., at 481), the Social Services Law has long authorized DSS, at its option, to bring a recoupment action against an aid recipient discovered to have resources, to recover assistance received during the preceding 10 years (Social Services Law § 104 [1]; Baker, 39 NY2d, at 401; accord, Matter of Thurston v Duróse, 76 NY2d 683). The receipt of public assistance, under the statute, constitutes an implied contract to repay those amounts (Social Services Law § 104 [1]).

Respondent contends that section 104 (1) was superseded in 1985 by enactment of the "lump sum rule” (L 1985, ch 42, § 10), which provides that "No public assistance household having income which ** * * exceeds the household standard of need, because of the receipt in any month of a nonrecurring lump sum of earned or unearned income, shall be eligible for [assistance] for a period equal to the full number of months derived by dividing” the lump sum by the family’s monthly public assistance benefit (Social Services Law § 131-a [12] [a]; see also, 18 NYCRR 352.29 [h] [1]). Respondent argues that this provision gives her the option to retain the sum and free herself from public assistance.

The lump sum rule, however, enacted in compliance with Federal law, serves a different objective (see, Pub L 97-35, 98-369; see also, 42 USC § 602 [a] [17]; Sutter v Perales, 103 AD2d 1029, 1029, affd 64 NY2d 1095; Note, The Effect of the Federal Availability Principle on State AFDC Asset-Transfer Rules, 89 Colum L Rev 580, 592-593 [1989]).

Under prior law, a lump sum was considered income in the month in which it was received, and a resource thereafter, which Congress perceived as giving recipients an incentive to spend the sum in the first month in order to remain eligible for future assistance (see, S Rep No. 139, 97th Cong, 1st Sess 436, 505, reprinted in 1981 US Code Cong & Admin News 396, 702, 771). The lump sum rule was enacted to encourage recipients to budget the sum, mandating their ineligibility for continuing benefits during a period measured by their determined monthly standard of need (id.). There is no indication in the statute or its legislative history that this provision was intended to limit DSS’ independent authority to seek recoupment.

The right of DSS to commence an action under section 104 to recover a lump sum is unqualified — DSS "may bring [an] action” if the recipient received assistance within the preceding 10 years. Section 131-a (12), by contrast, describes the procedure to be followed in the event of "receipt in any month of a nonrecurring lump sum,” which automatically terminates benefits for a prescribed period. Read together, the statutes thus allow DSS the option to commence suit to recover the cost of past benefits and continue future assistance, or permit the aid recipient to retain the lump sum and terminate future benefits for the defined period. This conclusion is further supported by the fact that DSS permits a recipient subject to termination to surrender the sum voluntarily and remain eligible for benefits (see, 18 NYCRR 352.29 M).

While respondent makes a cogent argument for retaining the settlement proceeds and ending her family’s welfare dependency, the Legislature has placed that initial choice with DSS, for reasons made clear by the statutory scheme. DSS is obligated to use public funds, which are not unlimited, to meet the needs of all aid recipients. It is charged with responsibility "to eliminate or reduce the need for public assistance, rehabilitate the client and conserve public funds through assignment and recovery” (see, 18 NYCRR 352.23 [a]) and to "restore such persons to a condition of self-support” (Social Services Law § 131 [1]). To meet these important public and private purposes, DSS has been given the choice initially either to seek recoupment or to permit retention of a lump sum by the aid recipient.

DSS is not obligated to seek recoupment of a lump sum; DSS may instead choose to allow an aid recipient to retain a lump sum, which automatically suspends future entitlements. This statutory discretion permits DSS to determine in the first instance whether a particular lump sum justifies litigation; DSS might, for example, conclude that small lump sums are better handled by suspending future benefits for a brief time. And it permits DSS — knowing each aid recipient’s circumstances — to assess whether the recipient can successfully budget the sum through a period of mandated future ineligibility. In the present case, had DSS not sought recoupment but permitted her to retain the $33,217.09, Ortiz would have been ineligible for public assistance for more than four years.

We therefore conclude, as did Supreme Court, that DSS was entitled to summary judgment against Ortiz.

III.

The remaining issue concerns the portion of the recovery ($16,782.91) attributable to counsel fees. No one disputes the amount of the fee, long ago paid over to the law firm, which was not made a party to this action. The question on appeal therefore is whether DSS will have a judgment against Ortiz for $33,217.09, or for the full $50,000. In the circumstances presented we agree with Supreme Court and the Appellate Division that Ortiz should not suffer this prejudice and that DSS’ recovery against her should be limited to $33,217.09.

Where an attorney undertakes to settle a claim prior to commencement of an action, Judiciary Law § 475-a provides for a statutory lien upon service of a notice of lien, which attaches to any recovery and thus secures the attorney’s right to compensation. The Cenesky firm acknowledges that it failed to seek a statutory lien on Ortiz’s personal injury claim. Rather, the firm argues that the Appellate Division properly gave effect to a retaining lien in its favor and accorded priority to that lien over DSS’ claim to the settlement proceeds.

A common-law retaining lien, also known as a general possessory lien, entitles the attorney "to retain all papers, securities or money belonging to the client” that come into the attorney’s possession in the course of the representation, as security for payment of attorneys’ fees (see, People v Keeffe, 50 NY2d 149, 155; see also, 1 Warren’s Weed, New York Real Property, Attorneys at Law, § 6.02 [4th ed]). Because the settlement check issued by Allstate was given to the Cenesky firm and remained in its possession, we agree that the firm acquired a valid retaining lien on the check.

Because a retaining lien is enforceable only by possession, however, that lien cannot be satisfied out of the moneys retained (Matter of Cooper [McCauley], 291 NY 255, 260; 1 Warren’s Weed, New York Real Property, Attorneys at Law, § 6.03 [4th ed]; Note, Attorney’s Retaining Lien Over Former Client’s Papers, 65 Colum L Rev 296, 298 [1965]). Thus, contrary to the assertion of the Cenesky firm, the existence of a valid retaining lien on the check did not itself accord the firm an enforceable prior right to the settlement proceeds (see also, Note, Attorney’s Retaining Lien Over Former Client’s Papers, op. cit., at 300).

The law firm thus had no lien at the time the check was issued, but, as the parties agree, neither did DSS. Rather, DSS claims priority under the statute, which provides that in a recoupment action pursuant to section 104, DSS "shall be deemed a preferred creditor” (Social Services Law § 104 [1]). DSS became a preferred creditor under the statute only upon commencement of its section 104 recoupment action and did not have that status when the check was issued.

In the circumstances presented, DSS’ claim for a full $50,000 judgment against Ortiz should be denied. But for DSS’ mistaken advice to Allstate, the fees would have actually been paid over to the law firm, as the client directed, before the present action was commenced. Because the Cenesky firm should have and would have been paid out of the settlement proceeds, Ortiz did not "have * * * property” subject to recoupment in excess of her $33,217.09 share (Social Services Law § 104 [l]). When DSS commenced suit against Ortiz four days after the check was issued, it acquired preferred creditor status only as to her share of the proceeds.

Finally, we cannot ignore the implications of a contrary conclusion. By affording priority to an attorneys’ lien over DSS’ statutory lien (see, Social Services Law § 104-b [9]), the Legislature made clear its intention that attorneys should not be discouraged from representing public assistance clients. The interests of public assistance recipients, and ultimately the public, are served by helping to assure that aid recipients will have representation in pursuing claims for wrongdoing. Allowing DSS priority to the attorneys’ fees in this case undermines that objective.

Accordingly, the order of the Appellate Division should be modified, without costs, by reinstating the order of Supreme Court, Broome County, and, as so modified, affirmed.

Judges Simons, Bellacosa, Smith and Ciparick concur; Judges Titone and Levine taking no part.

Order modified, without costs, by reinstating the order of Supreme Court, Broome County, and, as so modified, affirmed.

      . Section 104 (1) provides: "A public welfare official may bring action or proceeding against a person discovered to have real or personal property * * * if such person, or any one for whose support he is or was liable, received assistance and care during the preceding ten years, and shall be entitled to recover up to the value of such property the cost of such assistance or care.”

      . Respondent’s citations to administrative memoranda and informational booklets reveal both that the budgeting option is available after the recipient has been permitted to retain a lump sum (see, Social Services Law § 131-a [12]; 18 NYCRR 352.29 [h] [1], [3]), and that DSS may seek recoupment at the outset (see, e.g., "What You Should Know About Your Rights and Responsibilities”). Similarly, respondent’s reliance on the stipulation in Woodruff v Perales (US Dist Ct, WD NY, Jan. 10, 1986, Curtin, J.) is misplaced. DSS agreed to give notice to recipients permitted to retain lump sums of the future period during which they would remain ineligible for public assistance.

      . DSS is entitled to a statutory lien against the recovery on the personal injury claim of an aid recipient upon service and filing of notice (Social Services Law § 104-b). However, it is undisputed that DSS did not satisfy the statutory requirement in this case. Because the lien may not exceed the total amount of assistance furnished after the date of injury (see, Social Services Law § 104-b [1]), it would not have afforded DSS a full recovery in any event.

      . Indeed, the firm — not made a party to the recoupment action — was paid immediately upon dissolution of the TRO erroneously granted in favor of DSS.