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In an unusual case arising from an earlier legal malpractice litigation, a Manhattan judge has ruled that one lawyer may sue another for defamation over statements made in a complaint, at an arbitration hearing and to the New York Law Journal. Manhattan litigator Michael A. Lacher claimed in a suit filed last June that Thomas E. Engel, another litigator, had defamed him in a 2003 suit on behalf of a former client of Lacher’s. The suit for fraud, breach of contract, breach of fiduciary duty and malpractice claimed Lacher padded his bills and visited gambling and dating Web sites while he was supposed to be working. Most statements made in the course of legal proceedings are considered absolutely privileged and Engel moved to dismiss the suit on such grounds. But in largely denying Engel’s motion to dismiss, Supreme Court Justice Shirley Kornreich said that while most of his statements were privileged, some might have gone too far. Those statements were “superfluous and incendiary allegations of criminal conduct, which are not protected,” she wrote in Lacher v. Engel, 109525/04. Lacher and his small firm, Lacher & Lovell-Taylor, were hired in 2001 by Erik Postnieks, the chief executive of Parametric Capital Management, a hedge fund. The fund was at the time involved in an arbitration over the terms by which the Berners, a wealthy family, had engaged Postnieks to invest some of their money. In June 2003, Parametric fired Lacher and replaced him in the arbitration with Engel, a partner at the small firm of Engel & McCarney, who filed suit against Lacher that July. The suit claimed that Lacher billed Parametric more than $3 million while providing only minimal explanations of how those fees were incurred. The complaint cited Parametric’s monitoring of Internet use within its offices, where Lacher and his lawyers worked, in charging that Lacher did not actually work the hours he billed. The suit, which had asked for $3.7 million in compensatory damages and $10 million in punitives, was dismissed in November 2003 by Kornreich, who said the claims of fraud in particular were “bare allegations” lacking any detail concerning the alleged wrongs. She also noted that claims for breach of fiduciary duty and legal malpractice were not ripe because the arbitration was ongoing. She gave leave to replead those claims. Earlier in the year, the arbitration resulted in a $16 million award for the Berners. Revived malpractice and fiduciary duty claims against Lacher are pending. In his defamation complaint, in which he asks for $5 million in compensatory damages and $20 million in punitives, Lacher said the original malpractice suit “was motivated by [Engel's] knowledge that his small firm was not competent to handle the arbitration proceeding and his need to divert the client’s attention from a likely adverse result due in large part by that incompetence.” Lacher argued that the privilege for statements made in a judicial proceeding should not apply because Engel’s statements “were completely immaterial and impertinent to the litigation” and “were intentionally and solely designed and published to defame and disparage Lacher.” Kornreich said most of the statements Engel made in his complaint were pertinent to the legal issues raised in the case and were therefore privileged. But she excepted as possibly defamatory Engel’s statement in the complaint that Lacher had used provisions of his retainer agreement “as a club with which to extort immediate payment.” She also said Engel’s claim that Lacher “defrauded” his clients could form the grounds of a defamation suit. She also said some statements Engel made about Lacher at a July 17, 2003, arbitration panel were possibly defamatory. At the hearing, Engel had argued for an extension on the grounds that Lacher’s fraud as prior counsel had hampered his own preparations in the matter. “[I]t became utterly clear to me also that in addition to being a thief, Lacher was a liar and a litigious one at that,” Engel said, according to a transcript of the hearing. “It was obvious to me, I should say as well, that Mr. Lacher was sort of a pathological character,” Engel added at the hearing. “And the less I had to do with him the better.” Kornreich wrote: “[D]efendant’s statements accusing Lacher of fraud and calling him a ‘thief,’ a ‘liar,’ and a ‘pathological character,’ had no place in the legal proceedings. Thus, defendant’s motion to dismiss must be denied as to these statements.” Lacher also sued over comments Engel made to the Law Journal for a July 3, 2003, story about the malpractice suit. Engel said in an interview at the time: “My client was very poorly served by a member of my profession for whom duty came well after other aims and interests.” Lacher also was interviewed for the story and provided his view that the suit was a “complete fabrication” and was “designed to evade the time and scheduling constraints of the arbitration.” Statements made by lawyers to the media are not protected by the privilege afforded statements made in legal proceeding, and Kornreich said she could not determine, as a matter of law, that the statement was Engel’s constitutionally protected opinion. Among the factors needed to make such a determination, she said, was whether the context of the statement in the paper “would signal readers that the information therein is opinion rather than fact.” Lester Brickman, a professor of legal ethics at the Benjamin N. Cardozo School of Law, said that, because of the privilege, defamation suits based on statements made in court or in legal complaints are extremely rare. He said Engel’s comments in his complaint and to the Law Journal struck him as being no worse than the jabs opposing lawyers frequently take at one another. But he said Engel’s statements in the arbitration hearing that Lacher was a “thief” and “liar” may have crossed a line. “The level of coarseness and aggression in the profession has clearly risen,” he said, “but the statements made in arbitration could possibly exceed the threshold sufficiently to merit a disciplinary inquiry.” Both lawyers are fairly prominent litigators. Lacher was a longtime member of the Appellate Division, 1st Department’s Disciplinary Committee. Engel was former assistant chief of the criminal division of the Southern District U.S. Attorney’s Office. Through his lawyer Edward Safran, Lacher declined to comment on the case yesterday. Engel, who is represented by John Horan of New York’s Fox Horan & Camerini, said he had no regrets over his actions. “When it comes to Mr. Lacher, my conscience is not only clean, it’s immaculate,” he said.

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