IN RE: MATARAZZO BLUMBERG & ASSOCIATES (2002)

In a proceeding pursuant to CPLR article 75 to permanently stay arbitration, the petitioners appeal from an order of the Supreme Court, Kings County (Schneier, J.), dated November 8, 2001, which denied the petition.

ORDERED that the order is reversed, on the law, without costs or disbursements, the petition is granted, and the arbitration is permanently stayed.

In a decision and order in a related proceeding, this court previously determined that the agreement between the petitioners and the late Melvin Ungar was an illegal fee-splitting agreement (see Matter of Ungar v. Matarazzo Blumberg & Assocs., 260 A.D.2d 485, 688 N.Y.S.2d 588).   Contrary to the respondents' contention, the agreement violates Judiciary Law § 491 in that it clearly contemplates the payment of a share of legal fees to a nonlawyer as compensation for the procurement of clients.   Since the agreement is illegal and unenforceable, the Supreme Court should have granted a stay of arbitration of the claims arising out of its alleged breach (see Durst v. Abrash, 22 A.D.2d 39, 253 N.Y.S.2d 351, affd. 17 N.Y.2d 445, 266 N.Y.S.2d 806, 213 N.E.2d 887;  52 Flavors v. Baker & Confectionery Salesclerks Union, Local 150 of Greater N.Y., Retail Clerks Intl. Assn., AFL-CIO, 46 A.D.2d 875, 362 N.Y.S.2d 166;  Matter of Toffler v. Pokorny, 157 Misc.2d 703, 598 N.Y.S.2d 445).   Under the circumstances, the petitioners did not waive their right to seek a stay of arbitration (see Matter of Toffler v. Pokorny, supra;  see also Matter of Land of the Free v. Unique Sanitation, 93 N.Y.2d 942, 693 N.Y.S.2d 70, 715 N.E.2d 98).