NY Court of Appeals Issues New Decision Regarding Judiciary Law § 487 Claims

April 13, 2020 | Jonathan B. Bruno | Professional Liability

The New York State Court of Appeals recently issued an important opinion on a question that often arises in legal malpractice cases: What consequences befall attorneys who encourage their client to bring a case that they know is meritless? In Bill Birds, Inc. et al. v. Stein Law Firm, P.C., 2020 N.Y. Slip Op. 02125 (2020), the plaintiffs claimed that their attorneys lied to them about the merits of a potential trademark action, inducing them to bring the case solely to generate legal fees, knowing that it would not be successful. The Court of Appeals held that misrepresentations made to a client in order to induce them to bring a meritless action cannot support a claim for treble damages under Judiciary Law § 487 so long as the pleadings filed with the court do not contain any misrepresentations of fact.

New York Judiciary Law 487(1) imposes civil and criminal liability on any attorney who “[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party.” It has long been recognized that an attorney’s client can be a “party” for the purposes of this statute. Importantly, if an attorney is found to have violated Section 487, a court may impose treble damages, making the consequences for a violation of this rule dire. In a claim for treble damages pursuant to this rule, it does not matter whether the attorney was successful in deceiving the court or a party. What matters is the attorney’s intent to deceive.

In Bill Birds, the plaintiffs alleged that their attorneys deceived them into believing they had a viable trademark claim against General Motors (GM) regarding certain trademarks that GM had previously licensed to the plaintiffs. The plaintiffs, relying on their attorneys’ advice, filed an action against GM and incurred $25,000 in attorneys’ fees. However, the plaintiffs later learned that their agreements with GM, upon which the lawsuit was based, contained a clause that prohibited them from bringing an action against GM regarding the ownership of intellectual property. Their suit was dismissed, and their attorneys failed to advise them of the dismissal for nine months. The plaintiffs then sued their attorneys for legal malpractice, fraud, breach of contract and a violation of Judiciary Law § 487. The only issue that reached the New York Court of Appeals was whether inducing the plaintiffs to bring a meritless lawsuit in order to generate a legal fee constituted a violation of Judiciary Law § 487.

The Court of Appeals found that even if the plaintiff’s attorneys did trick the plaintiffs into bringing a frivolous lawsuit, their actions did not constitute a violation of § 487. In reaching its decision, the Court distinguished two types of frivolous actions: (1) cases in which court filings contain misrepresentations of fact; and (2) cases in which court filings contain “nonmeritorious legal arguments” but no misrepresentations of fact. The Court relied on two prior decisions in making this distinction. In Looff v. Lawton, 97 NY 478 (1884), the Court of Appeals held that allegations that an attorney provided “false and untrue” legal advice to induce plaintiffs to bring an unnecessary lawsuit, motivated solely by the attorney’s desire to collect a large fee, did not constitute a violation of Section 487 because the misleading advice preceded the action and the statute applies only to conduct that occurs in the context of “an action pending in a court.” By contrast, in Amalfitano v. Rosenberg, 12 N.Y.3d 8 (2009), the attorneys misrepresented a key fact in the complaint and did not just make misrepresentations to the clients in counseling them to bring a lawsuit. In that case, the attorneys were found to have violated Section 487 because the alleged misrepresentations were made during the pendency of the action.

The Court likened the situation in Bill Birds to the situation in Looff. While the attorneys may have engaged in misconduct with regard to their legal advice to the plaintiffs, the Court’s majority found this misconduct occurred solely before the case was filed – meaning that the plaintiffs were not yet a “party” and any deception that may have been committed is not actionable under the statute. It should be noted that the lengthy dissent disagreed and felt strongly that the allegations in the complaint filed by the defendant attorneys were false, in that in order to make the claims at all, the attorneys may have misrepresented the content of the plaintiff’s agreement with GM, bringing this case in line with Amalfitano.

This decision has several important implications. First, the Court of Appeals appears to be saying that attorneys are not deceiving a court when they knowingly bring cases that lack any merit, so long as the factual allegations are not misrepresented in their filings. This potentially opens the door to more frivolous litigation, as treble damages may no longer act as a deterrent to this type of conduct. Second, the decision may make a Judiciary Law § 487 claim harder to prove if the allegation is that the attorney somehow misled the client regarding the merits and/or value of their case, but where no misrepresentations were made during a pending lawsuit or filed with the court. Finally, the disagreement between the majority and the dissent over whether the allegations in the complaint in Bill Birds constituted an intent to deceive the court highlights the thin line separating cases that are deceitful for the purposes of Section 487 and those that simply lack legal merit. There will likely be substantial litigation going forward regarding the question of whether particular allegations are just non-meritorious legal statements or statements that either explicitly or impliedly misrepresent some material fact.

While the Court’s decision in Bill Birds may defeat a Judiciary Law § 487 claim when court filings do not contain misrepresentations, attorneys must still be mindful that they can still be liable for malpractice, fraud and/or violating professional rules of conduct if they mislead their clients or “trick” them into bringing frivolous lawsuits that cause their clients damages.

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