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"Fraud on the Court" and the Threat of Treble Damages: The Rise of Judiciary Law § 487 Claims Against Attorneys

Shutterstock_556915846In 1999, United States District Court Judge Deborah A. Batts referred to New York’s Judiciary Law § 487, a punitive statute that allows an injured party to recover treble damages from an attorney who has engaged in willful misconduct, as “little known and seldom used.”¹ Until 2009, Judge Batts’ characterization of Judiciary Law § 487 held true. Batts’ analysis, and the legal landscape in reference to Judiciary Law § 487, all changed after the Court of Appeals’ 2009 landmark decision in Amalfitano v. Rosenberg.

 

The Amalfitano Decision


The Court of Appeals (Judge Susan Phillips Read, writing for a unanimous 6-0 Court) ruled that Judiciary Law § 487 does not derive from common law fraud, but instead evolved from and can be traced back to the First Statute of Westminster (a statute enacted by the English Parliament at Westminster in 1275 during the reign of King Edward I). (The 1275 Statute, which dealt with many facets of English Civil and Criminal law, inter alia set penalties of imprisonment for a year and a day and a lifetime ban from court for pleaders engaging in “any manner of Deceit or Collusion in the King’s Court” or efforts to “beguile the Court” or parties to its proceedings).

Judge Read held that in 1787, the fledgling New York Legislature adopted a “strikingly similar” a statute and that laws like it had remained effective in New York ever since. New York’s Legislature added the penalty of a misdemeanor to deceiving the courts in 1836 and, in 1881, prescribed the forfeiture of treble damages to attorneys for deceiving the court. The statute was transferred from Penal Law to Judiciary Law and numbered § 487 in 1965. “There it remains today, the modern-day counterpart of a statute dating from the first decades after Magna Carta; its language virtually (and remarkably) unchanged from that of a law adopted by New York’s Legislature two years before the United States Constitution was ratified,” Judge Read wrote.

Accordingly, the New York Court of Appeals held that § 487 is a “unique statute of ancient origin” and not a codification of common law fraud. Thus, Judge Read wrote, “The operative language at issue, ‘guilty of any deceit,’ focuses on the attorney’s intent to deceive, not the deceit’s success” [emphasis added]. Judge Read continued that to limit forfeiture of treble damages under § 487 to only successful deceits would “run counter to the statute’s evident intent to enforce an attorney’s special obligation to protect the integrity of the courts and foster their truth-seeking function.”

By finding that deceitful conduct need not be successful to fall under the forfeiture ambit of § 487, Read, answering the second certified question, found that recovery of treble damages does not depend on whether or not a court was able to ‘see through’ the attempted material misrepresentation of fact in a complaint (the mere existence of such misrepresentation was sufficient).

 

Impact of the Amalfitano Decision


The Amalfitano decision has encouraged legal malpractice plaintiffs to assert treble damages claims against attorneys. The proof is in the pleadings: the likelihood of cases invoking Judiciary Law § 487, and the likelihood of those cases surviving a motion to dismiss, have both risen between 2010 and 2015². Claims simply invoking Judiciary Law § 487 have doubled during this five year stretch.³ Plaintiffs will now only need to demonstrate that the attorney tried to deceive the court or an adversary, even if that attempt fails.


Indeed, there are a plethora of cases in over the past few years that, prior to Amalfitano, would not have seen the light of discovery. In Dupree v. Voorhees, a Plaintiff alleged that in an underlying divorce action, her ex-husband’s attorney made misrepresentations in applying for a receivership order and intended to deceive the court in connection with that application. Dupree v. Voorhees, 2017 N.Y. App. Div. LEXIS 6010 (2d. Dept. 2017). Although the Plaintiff lost at a bench trial, the case did, in fact, go to trial. In a December 2015 ruling, the Second Department refused to grant a motion to dismiss a Judiciary Law § 487 claim because the Plaintiff development company raised a triable issue of fact concerning whether or not defendant attorney and his firm deliberately misrepresented to a member of an LLC the status of a conveyance of properties. See Ginsburg Dev. Cos., LLC v Carbone, 134 A.D.3d 890, 22 N.Y.S.3d 485 (2d. Dept. 2015). In 2013, the Second Department reversed a trial court’s decision to grant dismissal of a Plaintiff’s Judiciary Law § 487 claim after defendant, an attorney, lied about his client (Plaintiff)’s failure to pay litigation expenses in order to be relieved as counsel; Plaintiff was able to raise a triable issue of fact concerning the same in his amended complaint. Palmieri v. Biggiani, 108 A.D.3d 604, 970 N.Y.S.2d 41 (2d. Dept. 2013).


There are, however, limits to the applicability of Judiciary Law § 487, despite its expanded use in a post-Amalfitano world. Judiciary Law § 487 does not apply to attorney misconduct during an arbitral proceeding, because the statute only applies to conduct deceiving “the court or any party.” Doscher v Mannatt, Phelps & Phillips, LLP, 148 A.D.3d 523, 524, 48 N.Y.S.3d 593 (1st Dept. 2017). Similarly, Judiciary Law § 487 does not apply to the filing of a petition with an administrative agency, regardless of whether it is a state agency or a federal agency. Kallista, S.A., and Linda Gillette Parodi, Plaintiff, against White & Williams LLP, Randy Friedberg, and Does 1 Through 10, Defendants., 51 Misc. 3d 401, 27 N.Y.S.3d 332 (Westchester Co. Sup. Ct. 2016). Municipal attorneys remain immune from Judiciary Law § 487 claims. Mazzone v. Town of Southampton, 2017 U.S. Dist. LEXIS 118281 (E.D.N.Y. 2017). Additionally, attorneys who are parties to an action, and not acting in their capacity as attorneys, are clearly not subject to Judiciary Law § 487 claims. Seldon v Spinnell, 95 A.D.3d 779, 945 N.Y.S.2d 666 (App. Div. 1st Dept. 2012); see also Mohyi v Karen G. Brand, P.C., 2017 N.Y. Misc. LEXIS 319 (Sup. Ct. N.Y. Co. 2017) (Judiciary Law § 487 does not apply to statements made by a witness in an action, who happens to be an attorney).


In sum, the once-derided Judiciary Law § 487 has emerged as a viable mechanism for Plaintiffs to seek punitive damages against their attorneys. While the jury is still out on the increased likelihood of securing a judgment on a Judiciary Law § 487, it is clear that Amalfitano has made it much harder for New York-based attorneys to dismiss Judiciary Law § 487 claims asserted against them, and has enabled Plaintiffs to use this harsh mechanism more regularly.

 

¹Gaddy v. Eisenpress, 1999 U.S. Dist. LEXIS 19710 (S.D.N.Y. 1999).

²“Judiciary Law § 487: Potency of Clims Has Grown Since ‘Amalfitano’”, by Matthew J. Herrington and Michael C. Miller. New York Law Journal, Volume 254, No. 62, September 29, 2015. http://www.steptoe.com/assets/htmldocuments/NYLJ%20Steptoe.pdf

³Id.
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This article was prepared by Andrew R. Jones, Esq. and Daniel Butler of the New York City-based law firm of Furman Kornfeld & Brennan LLP. Andrew and Dan work as part of a team of 15 lawyers and paralegals devoted to the defense of attorneys and other professionals in malpractice and disciplinary matters. For more information about the above topic or the authors, please visit: www.fkblaw.com.

We trust that the above article was useful and thought provoking; however, please note that it is intended a general guide and opinion only, not a complete analysis of the issues addressed, and readers should always seek specific legal guidance on particular matters.

For more information on LPL coverage generally, contact USI Affinity today.

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