A power of attorney is an essential document in estate planning. Every adult should have one to ensure that someone they trust will handle their financial and legal matters if they are incapacitated or otherwise unable to take care of such issues themselves. While the person holding the power of attorney typically has broad authority, there are limits as demonstrated in a recent New York court decision which involved the right of an agent holding a power of attorney to appear in litigation on behalf of the principal.

By executing a power of attorney, a person (the principal) appoints someone (an agent or “attorney-in-fact”) to act on his/her behalf in some or all of a variety of areas, including to handle transactions involving real estate, banking, business, personal matters, health care, government benefits and tax matters. New York General Obligations Law § 5-1502A-N provides detailed explanations of what falls within each of the broad categories identified in the standard “short form” power of attorney. In addition, you can grant broader authority to your agent than what is listed in the form, including allowing your agent to make gifts of your assets to himself/herself. Importantly, an agent must act within the scope of the authority granted and in the best interests of the principal.

One common area of confusion concerns an agent’s ability to act for the principal in “claims and litigation.” An agent may hire counsel to pursue or defend claims on the principal’s behalf and may make litigation decisions regarding settlements and other matters. However, one thing that an agent cannot do is appear in a lawsuit “pro se” for the principal. This means that the agent cannot bring or defend a lawsuit on the principal’s behalf without a lawyer, even though the principal would be entitled to appear pro se in his/her own behalf. 

The reason for this is that Judiciary Law § 478 prohibits the “unauthorized practice of law,” whereby a non-attorney appears on behalf of anyone other than himself in litigation. Even though an agent with a power of attorney is referred to as an “attorney-in-fact” for the principal, he/she is not someone hired by the principal to act as an “attorney” as defined by the Judiciary Law. 

This limitation on an agent’s authority was addressed in a recent decision of the New York Supreme Court, Appellate Division Second Department in Discover Bank v. Gilliam. The bank sued the Defendant to collect on an unpaid credit card balance. It filed a complaint and then a motion for summary judgment asking the court to rule that the Defendant was liable for the money. The Defendant’s husband, who had been appointed as his wife’s attorney in fact/agent, filed an answer to the complaint and opposed the summary judgment motion on her behalf without hiring an attorney.

The trial court struck the answer and opposition to the motion filed by the husband and granted summary judgment to the bank on the grounds that the husband could not appear pro se as the attorney-in-fact of his wife. The Appellate Division agreed with the trial Court’s decision to strike the answer and opposition. However, in a show of leniency, the appellate court reversed the grant of summary judgment, and instead sent the case back to the lower court to give the husband the opportunity to hire an attorney or allow the wife to appear pro se on her own behalf.

Both a principal and agent must understand the scope of an agent’s powers and should consult a lawyer for advice. If you need assistance with a power of attorney or other estate planning, contact one of our attorneys.