Andrew Lavoott Bluestone ()
A recent Judiciary Law §487 case in the Western District of New York has violently shaken the basic understanding of the elements of this common-law cause of action. We predict a Second Circuit case, and potentially a Certified Question to the New York Court of Appeals. Here are the particulars.
Attorneys are interlaced throughout our country and world. In the United States litigation is rampant, all-encompassing and shot through with discontent. Clients are looking for superior work and fair pricing. Attorneys are interested in getting work, succeeding at that work and being paid. It is both obvious and simple to say that the two sets of desires do not always mesh.
When expectations are not met, there are a series of well-trodden paths down which the clients and the attorneys move. Legal malpractice claims are mirrored in attorney fee law suits. There is a symmetry to it all, from a perspective far enough above the fray to have a clear picture of the whole scene.
From the client perspective, legal malpractice is the tool to deal with attorney failure to adhere to an accepted standard of care. Mostly about mistakes, human or not legal malpractice does not deal directly with deceit.
To put this all in focus, people live perhaps 100 years. Our laws have been a very long time in production and change. When one looks at the rotunda ceiling at 60 Centre Street, it chronicles the Assyrian, Egyptian, Hebraic, Persian, Greek and Roman law systems, moving on to the Frankish, English and early colonial. This time period covers 2500 BC to present.
One continuing concern through the ages has been attorney deceit. The fiduciary relationship between attorney and client is based upon the attorney’s superior knowledge of law and situational details, such that the attorney owes the client a greater loyalty than one finds in the marketplace. The lesson is that attorneys can take advantage of the client much more readily than the client can take advantage of the attorney.
Judiciary Law §487 is rooted in ancient common law and regulates attorney conduct. It defines acts intended to deceive the court or any party as a misdemeanor and sets treble damages as a penalty. It specifically deals with attorney deceit, not good faith mistakes. JL§487 is not a statute … it’s the common law. It became part of New York’s common law as part of the “Colonial-era incorporation or ‘reception’ of English law into New York law.” The common law of England and its statutes which were accepted by New York in 1787 became the common law of New York.
Over recent years, Judiciary Law §487 has burst into prominence and scholarly acceptance after the Court of Appeals decided Amalfitano v. Rosenberg, 12 N.Y.3d (2009) in February 2009. Refinements have followed. A longer discussion of JL§487 can be seen at “Judiciary Law §487 Cases on the Rise after ‘Amalfitano’,” N.Y.L.J., Sept. 25, 2014. The Court of Appeals held in Amalfitano that an intent to deceive, rather than a completed deception, is all that is necessary to trigger a successful Judiciary Law §487 case. In Amalfitano, the Court of Appeals held that when a party commences or continues an action grounded in a material misrepresentation of fact, the opposing party is obliged to defend or default and necessarily incurs legal expenses. Because the lawsuit could not have gone forward in the absence of the material misrepresentation, legal expenses in defending the lawsuit may be treated as the proximate result of the misrepresentation.
All well and good. However, a case from the U.S. District Court for the Western District of New York, with a Magistrate’s report authored by Magistrate Hugh B. Scott, has rocked the JL §487 world. Bounkhoun v. Barnes et al., Case No. 15-cv-631A, now awaits a decision by District Judge Joseph Arcara whether to accept the recommendation.
Magistrate Scott recommended that an otherwise appropriate JL §487 claim be dismissed because no criminal conviction of the attorney had been obtained, nor had all elements of a criminal infraction by the attorney been shown. To say that this finding is unprecedented is a vast understatement.
A little background first. Melcher v. Greenberg Traurig, 2016 NY Slip Op 00274 (Melcher II) recently returned to the First Department on appeal from Supreme Court’s denial of summary judgment to defendants. This time the Appellate Division forcefully and clearly held that it can be proper to “assert a Judiciary Law §487 claim in separate action rather than seeking leave to assert a claim against the attorney defendants [in the underlying] action.” Id. Furthermore, even if deceit is raised in the underlying action, it does not preclude the later JL §487 case. The First Department distilled the basis of a good JL §487 claim. The Melcher claim arose from the extraordinary handling of a paper document around which the entire case turned—a 1998 amendment to a law firm partnership agreement changing the formula for dividing profits. Melcher denied that the amendment even existed when his partner claimed it did. When the time came to examine it forensically, it was reported burned in a kitchen fire. The signature page was “singed.” After trial, the First Department directed that a hearing be held on Melcher’s claim that Brandon Fradd had “fabricated, backdated and intentionally burned” the paper amendment. It was asserted that the law firm relied on the paper amendment and argued its veracity.
Another Judiciary Law case of recent importance was Facebook v. DLA Piper, 2015 NY Slip Op 09602. Facebook alleged that Mr. Ceglia fabricated a contract in which he claimed credit for the creation of Facebook and that the attorneys knew or should have known it was fabricated. Facebook unsuccessfully filed a motion to reargue or for leave to appeal to the Court of Appeals after reversal and dismissal of its JL§487 case on CPLR 3211 grounds in the First Department. The court wrote: “Relief under a cause of action based upon Judiciary Law §487 is ‘not lightly given’ [citation omitted] and requires a showing of ‘egregious conduct or a chronic and extreme pattern of behavior.’” Other cases use the term “chronic and extreme pattern of legal delinquency.”
Claims in the case were incendiary: that Ceglia hired Mark Zuckerberg to design a website for a company called Street Fax in April 2003. Later that year, in December, “Zuckerberg conceived of Facebook, which he launched on February 4, 2004.” Id Some six years later, Ceglia filed a complaint in Allegheny County Supreme Court saying that Ceglia had hired Zuckerberg to create “The Face Book” and so acquired 50 percent of any expansion of “The Face Book” along with an additional 1 percent interest for each day the website was delayed beyond Jan. 1, 2004.
Soon, a forensic consultant discovered the original Street Fax contract on Ceglia’s computer and concluded that it had been altered. The Kasowitz law firm, then on the case, immediately withdrew. It alerted other attorneys, including DLA Piper, that the contract was a forgery. Id Somewhat later, DLA Piper withdrew. Next came the Milberg defendants who entered and left the case. Ceglia was then indicted for mail fraud and fled the jurisdiction. He remains a fugitive.
Facebook had its scent of scienter and criminality. But is criminality necessary? In Bounkhoun, Magistrate Scott concluded that a misdemeanor conviction of the attorney, or at a minimum all the elements of a criminal offence against the attorney are required. Magistrate Scott wrote: “The Court is not aware of any prosecution of defendants under Section 487, and plaintiff in any event has not pled nearly enough detail to show that defendants might have fulfilled all of the elements of Section 487 and might be guilty of a misdemeanor. Without fulfillment of the elements of a criminal offense under Section 487, and a resulting conviction, this case presents no criminal prerequisite that treble damages can be ‘in addition to.’”
The Magistrate dissected Looff v. Lawton, 14 Hun. 588, 589 App. Div. 1878 and recommended to the district court that the Judiciary Law §487 claim be dismissed as there was no conduct which led to an actual criminal conviction, nor upon examination provided probable cause to support a criminal accusation. But has this been the law in New York?
Decidedly not. As the Magistrate recognized, this has never been the stated legal standard. As examples, in the First Department, Schindler v. Issler & Schrage, 262 A.D.2d 226, 228 (1st Dept. 1999) explicitly and specifically states that “although a violation of section 487 is also a misdemeanor, a criminal conviction is not a condition precedent to a civil action pursuant to the section. It cites Wiggin v. Gordon, 115 Misc.2d 1071 (Civ. Ct. Queens, 1982). The magistrate glossed over this decision.
In the Second Department we have the curious case of Dupree v. Voorhees, 68 A.D.3d 807 (2d Dept. 2009). There, a partner of an attorney was held in the case based solely upon partnership principles, where the attorney did not participate in or ratify the wrongdoer’s action. In a criminal accusation, there can be no accomplice liability without some “acting-in-concert” proofs.
In the Third Department, an attorney who advised his client how to get out of bequeathing real property to his children at death violated Judiciary Law §487 and summary judgment was granted against him in Mokay v. Mokay, 67 A.D.3d 1210, 1213 (3d Dept. 2009).
In the Fourth Department, Judiciary Law §487 claims were preserved for trial on a claim that after a case was dismissed for failure to file a note of issue, the attorneys pressured the clients into signing a stipulation of discontinuance, the purpose of which was to insulate the attorneys from a potential legal malpractice claim. Scarborough v. Napoli, Kaiser & Bern, 63 A.D.3d 1531,1532 (4th Dept. 2009).
In real life there is a “dearth of criminal prosecutions” for misdemeanor based upon Judiciary Law §487. Peo. v. Canale, 240 A.D.2d 839 (3d Dept. 1997). We believe that the Western District case will go to the Second Circuit, no matter how it is decided, and may be taken up by the New York Court of Appeals on a certified question.