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Lawyers and others who manufactured testimony in personal injury cases are individually liable for reimbursing a defendant that made settlement payments, the Appellate Division, 1st Department, said Tuesday. The New York City Transit Authority is entitled to $1.78 million from the lawyers and private investigators who were convicted of racketeering in federal court over their solicitation of false testimony in 18 cases, including two against the agency. In an issue of first impression, the unanimous panel ruled that fraud in the establishment of liability required the reimbursement, even though the false testimony may not have been the sole reason for the defendant’s settlement of the lawsuit. Tuesday’s opinion, signed by Justice Angela M. Mazzarelli, stemmed from a 1992 federal racketeering conviction of attorney Morris J. Eisen, two other lawyers and two private investigators. They were found guilty of arranging and paying for false testimony, fabricating evidence and paying off unfavorable witnesses. In New York City Transit Authority v. Morris J. Eisen PC, 1305, the Transit Authority sought to recover monies it paid out to two personal injury plaintiffs based on evidence that was fabricated. Both of the cases in question were litigated in the 1980s. In one case, the Transit Authority agreed to settle a claim for $1 million. In the other, a jury found the agency liable to the Eisen firm’s client for $780,000. Both personal injury cases were part of the record in the federal racketeering trial. In the first case, a witness was “pressured” and “instruct[ed] … to fabricate” testimony that a bus driver waved his hand to indicate to the plaintiff that it was safe to cross the road, before she was struck by a hit-and-run driver. In the second case, a federal jury found that people from the Eisen firm coached a friend of the plaintiff to support the plaintiff’s version of facts, and then paid the witness for his testimony. The plaintiff’s mother, the federal jury also found, had been coached to give perjured character testimony in favor of her son. FALSE FACTS, REAL THREAT Manhattan Supreme Court Justice Robert D. Lippmann ruled, and the appeals panel on Tuesday agreed, that the Transit Authority’s complaint to recover the payouts is not an improper collateral attack on the judgments and settlements in the personal injury cases. The Transit Authority, Mazzarelli wrote, settled the $1 million case in justified reliance on the facts manufactured by the Eisen firm lawyers. The Appellate Division rejected the argument that the settlement was agreed to because of the agency’s potential exposure to $2.2 million in damages. “[T]he prospect of a large damage award was only a threat to NYCTA upon a finding of liability,” Mazzarelli said. “Given NYCTA’s justified belief that the perjured testimony exposed it to liability … it is entitled to restitution of the full $1 million paid pursuant to the fraudulently procured settlement agreement.” In the second case, where the Transit Authority paid $780,000 to satisfy a jury award, that verdict was improperly procured, and “there was no non-fabricated support” for the plaintiff’s theory of liability, the appeals court said. “As there was no authentic factual basis for the jury’s finding of liability, summary judgment on behalf of NYCTA on its common-law fraud claim … is appropriate,” Mazzarelli wrote. Eisen and four others associated with the firm are now responsible for paying back $1.78 million to the Transit Authority. They are Joseph Napoli, who was of counsel to the firm and its principal trial attorney; Harold M. Fishman, also of counsel; and private investigators Alan Weinstein and Marty Gabe. In a footnote, the court said that the claims against Napoli are being held in abeyance pending an ongoing Bankruptcy Court proceeding. The Eisen firm is also a defendant in the Transit Authority’s lawsuit, but the 1st Department opinion applied only to the liability of the three attorneys and two investigators who were convicted in the federal action. The three Eisen firm lawyers have since been disbarred. The 1992 2nd U.S. Circuit Court of Appeals decision upholding their racketeering conviction described the firm as “a large Manhattan law firm that specialized in bringing personal injury suits on behalf of plaintiffs.” United States v. Morris J. Eisen, 974 F2d 246 (1992). Joining Mazzarelli on the panel were Justices Milton L. Williams, Peter Tom, Israel Rubin and David Friedman. Representing the Transit Authority were Steve S. Efron and Renee L. Cyr, both of Manhattan, and Wallace D. Gossett, a lawyer with the Transit Authority. Defense counsel for Mr. Eisen and the Eisen firm was Thomas R. Newman, of Luce, Forward, Hamilton & Scripps.

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