Commercial Division Blog

Posted: March 29, 2014 / Categories Commercial, Law Firms and Professional Ethics

Judiciary Law Section 487 Claims Must Be Brought in Forum in Which Misconduct Occurred

On March 20, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Alliance Network, LLC v. Sidley Austin LLP, 2014 NY Slip Op. 50430(U), dismissing Judiciary Law Section 487 claims because they were not brought in the action in which the alleged misconduct occurred.

In Alliance Network, the plaintiffs brought a number of claims relating to a failed real estate development, including claims against several lawyers and law firms alleging that they had violated Judiciary Law § 487 in an earlier, related litigation. The court dismissed those claims, explaining:

Section 487 of the Judiciary Law provides that an attorney who is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party shall forfeit to the party injured treble damages, to be recovered in a civil action. The Attorney Defendants seek dismissal of Plaintiffs' Section 487 claim on several grounds, including failure to state a claim. However, before delving into the parties' arguments as to each of the misrepresentations alleged, there is a threshold issue that troubles the Court and requires dismissal of Plaintiffs' claims.

Each of the misrepresentations highlighted by Plaintiffs occurred in separate litigations, and for two of the three categories of misrepresentations, occurred before different judges. The pleading here does not allege that Plaintiffs sought redress for these purported misrepresentations in these other actions. Further, the Amended Complaint does not allege that Plaintiffs know anything now that they did not know when the alleged deceit occurred. While Plaintiffs allege that Defendants were deceiving courts by misrepresenting facts in briefing and oral argument — and deceiving Plaintiffs themselves by breaching a stipulation — Plaintiffs never filed motions for contempt, never sought to enforce the allegedly breached stipulation, and never raised these allegations of deceit before the courts where the deceit, in fact, allegedly occurred.

The First Department has held that a party's remedy for a violation of Section 487 stemming from an attorney's actions in a litigation lies exclusively in that lawsuit itself, not a second plenary action. The same logic applies here. Plaintiffs' Section 487 claim is not properly before this Court in this action. Instead, Plaintiffs should have sought their remedies in the cases in which the wrongdoing allegedly was committed.

Plaintiffs acknowledge this line of First Department cases in their briefing but attempt to sidestep it. For example, Plaintiffs argue that Yalkowsky is distinguishable, since in that case, a judgment had been entered in the underlying action. However, the First Department did not premise its ruling in Yalkowsky on the existence of a judgment in the prior lawsuit. The judgment itself was of no dispositive weight. Instead, where plaintiffs' allegations stem from defendant-attorneys' alleged misconduct in connection with a fee dispute in Civil Court, the First Department concluded that plaintiffs' remedy, if any, for that Section 487 claim lay in the Civil Court action.

Further, Plaintiffs maintain that this action falls under an exception to Yalkowsky, allowing for a second action to proceed where the fraud in the underlying action was merely a means to the accomplishment of a larger fraudulent scheme. However, this exception only applies where the larger fraudulent scheme is greater in scope than the issues determined in the prior proceeding. Here, the alleged fraudulent scheme pertains to the Attorney Defendants' advocacy in support of enforcing the arbitration. No greater scheme is alleged. While Plaintiffs contend that the Attorney Defendants have engaged in a war of attrition" for the Alliance Brothers' personal gain, they offer no facts to support this allegation. Instead, all facts as pleaded with regard to the Attorney Defendants pertain to their advocacy with regard to the arbitration award and its enforcement. Therefore, Plaintiffs' attempt to circumvent Yalkowsky fails, and their Section 487 claim is dismissed.

(Internal quotations and citations omitted) (emphasis added). The court also went on to hold that Section 487 applies only to conduct in New York courts, and no cause of action arises from alleged misconduct in other courts.