In our last column, we wrote about a troubling pattern in Judiciary Law §487 decisions. Anita Bernstein & John Crain, Here’s a Good Judiciary Law §487 Question for the Second Circuit to Certify in ‘Bounkhoun’, NYLJ (Dec. 3, 2018). New York judges, we showed, are imposing burdens on §487 plaintiffs that are absent in the statute.
Section §487 does not require “chronic and extreme” misconduct, “egregious” attorney misbehavior, or intentional deceit. Nor does §487 impose any procedural hurdles on plaintiffs seeking redress. It is courts, both state and federal, that have generated these demands.
We understand what motivates these impositions. The §487 cause of action looks generous to clients who complain about attorney deceit, especially in contrast to New York case law that compel plaintiffs who allege non-§487 deceit to prove materiality and reasonable reliance. ACA Financial Guaranty v. Goldman, Sachs & Co., 25 N.Y.3d 1043, 1044 (2015) (emphasizing reasonable-reliance element); Weinberg v. Sultan, 142 A.D.3d 767, 769 (1st Dep’t 2016) (attorney defendants; dismissed for lack of materiality).
Section 487, by saying nothing about reliance or materiality, implicitly waves away judicially created demands that burden parallel common law claims. Trebling the price of wrongdoing is another relatively rare gift for plaintiffs. See Anita Bernstein, Treble Damages in New York: A Field Guide, NYLJ (April 13, 2017). Considerations like these make it reasonable for New York judges to worry that §487 over-indulges weak claims.
They have identified a real problem. We have a better solution. So do they! Our fix is present in some case law when you look for it.
Instead of compelling plaintiffs to prove judge-made add-ons not found in the statute, New York courts hearing §487 claims should maintain focus on particularity pleading as provisioned in CPLR 3016(b). Two high court decisions furnish excellent role models.
As we remarked in our last column, §487 case law by the Court of Appeals is unfortunately scant. The court has, however, given good clear guidance on what pertains closely to this statute: how to plead fraud. Because the most frequently litigated segment of §487 addresses attorney deceit, the two cases, Pludeman v. Northern Leasing Sys., 10 N.Y.3d 486 (N.Y. 2008) and Sargiss v. Magarelli, 909 N.E.2d 573 (N.Y. 2009), align closely with what §487 is about.
What CPLR 3016(b) Expects to See in §487 Pleadings
“Where a cause of action or defense is based upon misrepresentation, fraud, mistake, wilful default, breach of trust or undue influence,” says CPLR 3016(b), “the circumstances constituting the wrong shall be stated in detail.” This rule, known as “particularity pleading,” see Weinstein Korn & Miller CPLR Manual 19.09(b), applies to §487 because §487 remedies attorney fraud, willful default, and breach of trust.
In Pludeman, the Court of Appeals said what it means to state circumstances in detail: The complaint must “allege the basic facts to establish the elements of the cause of action.” 10 N.Y.3d at 492.
“[U]nder section 3016(b),” the court continued, “the complaint must sufficiently detail the allegedly fraudulent conduct.” Sufficient detail “should not be confused with unassailable proof of fraud,” however. Id. Sargiss builds on the foundation of Pludeman by reaffirming its construction of CPLR 3016 and going on to distinguish successful pleading from the inadequate kind.
Isaac and Frieda Sargiss divorced in 1996. Soon after the death of Isaac eight years later, Frieda brought an action against Isaac’s estate, his brother, his brother’s wife, and his brother’s corporation, alleging fraud in representations Isaac made about as to his net worth during divorce proceedings. 12 N.Y.3d at 575-76. Defendants moved to dismiss the complaint as failing to fulfill CPLR 3016 particularity.
They prevailed in both Westchester Supreme and the Second Department, but the Court of Appeals undid their win. Chief Judge Lippman, writing for the court, concluded that Frieda had alleged enough to suggest that the estate, the brother, and the corporation had joined a scheme wherein Isaac pretended he had sold the corporation to his brother. Id.
Particularity analysis defeated the claim of Frieda against her former sister-in-law, however. “[N]othing asserted in the complaint or in the parties’ submissions on the motion to dismiss that implicates Alice Sargiss in the alleged fraud,” wrote the court, “and, accordingly, the complaint was properly dismissed as against her.” Id. at 532.
Sargiss as follow-up to Pludeman guides judges who review §487 complaints. Questions for them: What deceit is the plaintiff alleging? How might a reader of the complaint infer the elements of this cause of action? As Sargiss shows, the correct response to a 3016(b) dismissal motion can vary from defendant to defendant within one action.
Particularity analysis effectively separates claims that deserve judicial attention from those that don’t. Section 487 case law shows how. Here are examples.
Five §487 Decisions That Use Particularity Pleading Well
In Bill Birds v. Stein Law Firm, P.C., 164 A.D.3d 635 (2d Dep’t 2018), plaintiff accused defendant lawyers of deceit after they’d prosecuted a trademark claim for the plaintiff that failed. According to the §487 complaint, defendants intentionally misrepresented the strength of the trademark claim to lure the plaintiff into retaining them. Ostensible damages were the legal fees that plaintiff paid defendants. Id. at 636.
No good, said the Second Department. That an action failed in court does not of itself show that the lawyers who recommended it committed deceit that harmed their clients. Id. at 639.
This point is of general interest, because when the Bill Birds company concluded in hindsight that its lawyers must have maneuvered it into doomed litigation to grab fee revenue, it was not alone among disappointed clients. But sometimes a loss (which can happen in a transaction too, not just litigation) is just a loss. Failure alone does not necessarily demonstrate attorney deception. Bill Birds marred its analysis by repeating the misplaced extra-statutory “chronic and extreme” criterion that we condemned in last month’s column, id. at 637, but the decision deserves plaudits on CPLR 3016 particularity.
Albano v. Dersovitz, 941 N.Y.S.2d 536 (Sup. Ct. 2011), from Nassau Supreme, admirably follows the lead of Sargiss to sort good from bad in reviewing a 3016(b) dismissal motion. In his complaint the plaintiff accused defendants of presenting false and fraudulent documents to a court and making a fraudulent claim against a third person, one Bernstein (no relation).
This accusation, wrote Judge Warshawsky in granting defendants’ motion to dismiss, was “wholly lacking in details as to what documents were altered, forged or false, or in what manner the claims against Bernstein were fraudulent. Certainly, the judgment against Bernstein is not fraudulent.” Particularly pleading defeated the §487 claim in Albano without resort to extra-statutory criteria.
Next up: Facebook v. DLA Piper (US), 134 A.D. 3d 610 (1st Dep’t 2015). One of us admits having spoken an unkind word or two about this decision a couple of years ago. Anita Bernstein, First Department Rolls Own Criteria for a Judiciary Law §487 Claim, NYLJ (Dec. 8, 2016). In the annals of CPLR 3016 particularity pleading, however, Facebook is exemplary. Plaintiffs alleged that defendant attorneys knew about a forgery, but their support for this claim, a letter, “was dated two days after the amended complaint was filed.” Id. at 615 (emphasis in original). “Moreover,” wrote the First Department, “plaintiffs offer no support for their claim that defendants had actual knowledge of the fraudulent nature of the claim.” Id.
We have two more role models. Goldner v. Sullivan, Gough, Skipworth, Summers & Smith, 105 A.D. 2d 1149 (4th Dep’t 1984), was decided long before Amalfitano v. Rosenberg, 12 N.Y.3d 8 (2009), the decision that launched the modern §487 age. Readers might think of it as an ancient artifact.
But Goldner gets §487 particularity exactly right. “There is no allegation of any specific fraudulent or deceitful communication or statement either to the court or to the grand jury,” the Fourth Department observed, citing CPLR 3016. “[L]eave is granted to replead if plaintiffs are so minded.” 105 A.D.2d at 1150.
Lest readers think that particularity pleading is a swift ticket to the gallows for §487 plaintiffs, we mention Armstrong v. Blank Rome, where both the trial court and the First Department agreed that the plaintiff’s complaint cleared the particularity hurdle. Kristina Armstrong brought a §487 action accusing her divorce lawyers of “throw[ing] her under the bus,” Armstrong, N.Y. Sup., 2014 WL 912263, at *1. They chose to harm her, she said, because their loyalties lay with Morgan Stanley, her husband’s employer and a client they favored over her.
“[T]he complaint alleges numerous acts of deceit by defendants,” wrote the First Department. 126 A.D.3d at 428. Many of these behaviors as related in the trial court opinion look more like omissions than acts—the plaintiff put strong emphasis on her assertion that Blank Rome lawyers did not disclose their conflict of interest—but they also include a claim that defendants “continuously deceived” the plaintiff “as to the lack of value of Mr. Armstrong’s securities licenses,” a deception that she priced with particularity, $8,035,500.00. Armstrong, N.Y. Sup., 2014 WL 912263, at *3.
Our praise of particularity pleading as a principled constraint on Judiciary Law §487 claims acknowledges the reality that New York courts are not always commendably attentive to its rigors. Sometimes they throw out a §487 claim for failing to satisfy CPLR 3016 without telling readers how the pleading lacked sufficient particularity. See, e.g., Jean v. Chinitz, 163 A.D.3d 497 (1st Dep’t 2018); Betz v. Blatt, 116 A.D.3d 813, 817 (2d Dep’t 2014); Putnam Cty. Temple & Jewish Ctr. v. Rhinebeck Sav. Bank, 87 A.D.3d 1118, 1120 (2d Dep’t 2011).
Judges might well prefer to keep their published decisions short, of course. But when they explain how a pleading delivered the “who, what, where and when” that CPLR 3016 always needs to hear, see David Owen and Adam Mintz, Pleading Fraud with Particularity, NYLJ (July 14, 2014), lawyers and clients who weren’t there for the deception gain helpful information about what makes a claim good or bad.
Anita Bernstein is the Anita and Stuart Subotnick Professor of Law at Brooklyn Law School. John Crain is a student at Brooklyn Law.