Judiciary Law § 487 Claims Against Foreclosure Counsel: No Claim Preclusion, No Collateral Attack, and Accrual When Damages Are Inferable (with Continuing-Wrong Tolling)

Case: Jacobson v Fein, Such & Crane, LLP, 2026 NY Slip Op 03429 (App Div, 2d Dept June 3, 2026).
Posture: Appeal from an order denying, in relevant part, dismissal under CPLR 3211(a)(1), (5), and (7) of multiple causes of action including Judiciary Law § 487 claims against foreclosure counsel.

1. Introduction

This decision addresses whether a borrower who lost a foreclosure action may bring a later civil action against the foreclosing lender’s attorneys for alleged litigation deceit under Judiciary Law § 487. The plaintiff, Yosef Yitzchak Jacobson, alleged that the attorneys for Truist Bank (formerly BB&T) committed “fraudulent and deceitful acts” in the foreclosure action that culminated in a judgment of foreclosure and sale. The attorney defendants sought dismissal, arguing (among other grounds) claim preclusion (res judicata), issue preclusion (collateral estoppel), impermissible collateral attack on the foreclosure judgment, and statute-of-limitations defects.

The Second Department’s opinion is significant for its practical roadmap on (i) when foreclosure counsel are (and are not) in “privity” with the foreclosure plaintiff for preclusion purposes, (ii) why § 487 damages claims are not automatically treated as collateral attacks on a foreclosure judgment, and (iii) how accrual and the continuing wrong doctrine can preserve § 487 claims even when the alleged deceptive conduct began years earlier.

2. Summary of the Opinion

The Appellate Division affirmed the order denying dismissal of the first through ninth and eleventh causes of action against the attorney defendants. In substance, the court held:

• Res judicata: The foreclosure judgment did not bar this later action against the lender’s attorneys because they were not parties to the foreclosure action and were not in privity with a party there.
• Collateral estoppel: Issue preclusion did not apply because the foreclosure action did not “consider or decide” the alleged fraud by counsel.
• No improper collateral attack: The § 487 claims, as pleaded, were not an impermissible collateral attack on the foreclosure judgment.
• Limitations/accrual and continuing wrong: The § 487 causes of action accrued no earlier than October 15, 2018 (entry of the foreclosure judgment), when damages could be reasonably inferred; and, in any event, allegations of a “series of continuing wrongs” could invoke the continuing wrong doctrine such that accrual is deemed to be the date of the last wrongful act (alleged to be after entry of the foreclosure judgment).

3. Analysis

3.1 Precedents Cited

A. Res judicata, privity, and why foreclosure counsel are not automatically bound

• Babad v Oratz (quoting Goldstein v Massachusetts Mut. Life Ins. Co.; citing Luis v Kocherlakota) supplies the governing articulation of res judicata: a merits disposition bars later litigation of claims arising out of the same transaction that were or could have been raised earlier, as between the same parties or those in privity.
• Green v Santa Fe Indus., Bravo v Atlas Capital Group, LLC, and Watts v Swiss Bank Corp. define “privity” functionally—focusing on whether the nonparty’s interests were represented, whether it controlled the prior litigation, or whether some successor/representational relationship exists.
• Applying those principles, the court relied on Izmirligil v Steven J. Baum, P.C. and also cited Urias v Daniel P. Buttafuoco & Assoc., PLLC to reinforce the proposition that a party’s attorneys are not, merely by being counsel in the prior case, in privity with the client for preclusion purposes. This is the key move that prevents the foreclosure judgment from automatically extinguishing later § 487 claims against the attorneys.

B. Collateral estoppel and the “identical issue necessarily decided” requirement

• The court again cited Babad v Oratz (quoting Ryan v New York Tel. Co.) for the core test: collateral estoppel precludes relitigation only of an issue “clearly raised” and “decided” in the prior action.
• Matter of A. Ottavino Prop. Corp. v Incorporated Vil. of Westbury is cited for the same framework.
• Fowler v Indymac Bank, FSB is used for the burden allocation: the proponent must show identical issue necessarily decided and decisive; the opponent may show lack of a full and fair opportunity.
• On application, the panel cited Altman v Orseck and Melcher v Greenberg Traurig LLP (Appellate Division) for the proposition that a prior action’s judgment does not collaterally estop later claims where the alleged attorney fraud/deceit was not actually litigated and determined there. Here, the foreclosure action did not decide whether the attorney defendants committed deceit; thus, issue preclusion failed.

C. The nature of Judiciary Law § 487: distinct from common-law fraud

• The court quoted the statute and cited Urias v Daniel P. Buttafuoco & Assoc., PLLC and Melcher v Greenberg Traurig LLP (Appellate Division) for the statutory elements: deceit or collusion with intent to deceive the court or any party, with treble damages for the injured party.
• Critically, citing Bill Birds, Inc. v Stein Law Firm, P.C. and Amalfitano v Rosenberg, the court reiterated that § 487 is “similar to fraud” but “not a codification of common-law fraud.” This matters because litigants sometimes import fraud pleading rules and reliance concepts too rigidly into § 487 analyses.

D. Statute of limitations and accrual: six years, tied to inferable damages; continuing wrong doctrine available

• For limitations, the court relied on Melcher v Greenberg Traurig, LLP (Court of Appeals) to confirm § 487 claims are governed by the six-year period in CPLR 213(1), and cited Catsiapis v Pardalis & Nohavicka, LLP as consistent Second Department authority.
• For accrual and the damages element, the court cited Langton v Sussman & Watkins and Maroulis v Sari M. Friedman, P.C. for two linked propositions: (i) injury is essential, and (ii) a complaint must plead facts from which damages attributable to the attorney’s conduct may be “reasonably inferred.”
• The court then held that accrual occurred “no earlier than October 15, 2018,” when the foreclosure judgment was entered, because that is when damages could be reasonably inferred from the alleged deceit.
• As an alternative/overlay, the court invoked the continuing wrong doctrine, quoting Affordable Hous. Assoc., Inc. v Town of Brookhaven and citing York v York, to toll the limitations period where there is a “series of continuing wrongs,” deeming accrual to be the last wrongful act.
• Applying that doctrine, and citing Davis v Farrell Fritz, P.C. and Palmeri v Willkie Farr & Gallagher LLP, the court accepted the pleading that counsel made “initial and continued false representations” to the court, supporting continuing-wrong treatment and an accrual date after the foreclosure judgment.

E. Collateral attack doctrine: damages claims vs. undoing judgments

• The attorney defendants invoked the general rule (quoted from Stewart v Citimortgage, Inc., quoting Specialized Indus. Servs. Corp. v Carter) that a party who lost a case due to alleged fraud or false testimony cannot collaterally attack the judgment via a separate damages action against the party who offered false evidence.
• The court distinguished that principle on these pleadings, citing Kimbrook Rte. 31, L.L.C. v Bass and Melcher v Greenberg Traurig LLP (Appellate Division), concluding that a Judiciary Law § 487 action can proceed as a damages remedy for litigation deceit without necessarily functioning as an improper attempt to invalidate the prior judgment.

3.2 Legal Reasoning

A. Why res judicata failed

Res judicata typically bars later claims arising from the same transaction, but only as between the same parties or those in privity. The court’s reasoning is formal but practical: foreclosure counsel are not automatically “the same party” as the bank, and “privity” requires more than an attorney-client relationship. By emphasizing the absence of party status and privity, the court preserved room for § 487 to operate as a check on attorney conduct even when the underlying litigation is concluded.

B. Why collateral estoppel failed

Collateral estoppel requires that the identical issue was necessarily decided. Foreclosure actions decide whether the plaintiff has standing, whether the note and mortgage are enforceable, defaults, amounts due, and entitlement to foreclosure relief. They do not, as a matter of course, adjudicate whether counsel engaged in deceit—unless that issue is specifically raised and determined. The court treated the alleged attorney fraud as an issue that was not actually decided in the foreclosure action; therefore, the “necessarily decided” condition was not met.

C. Why the claims were not an improper collateral attack

New York courts are cautious about attempts to relitigate losses through separate damages suits. But the Second Department accepted that a § 487 action can be framed as a damages claim for attorney deceit rather than an effort to overturn the foreclosure judgment itself. The opinion implicitly distinguishes between:

• Relief that nullifies or contradicts the judgment (more likely an impermissible collateral attack), and
• Relief that compensates for distinct injury caused by deceitful litigation conduct (potentially permissible under § 487).

D. Accrual and continuing wrongs in litigation-deceit contexts

The opinion connects accrual to the statutory requirement of injury: without reasonably inferable damages, the claim is not complete. Here, the court deemed the entry of the foreclosure judgment (October 15, 2018) as the earliest point at which damages could be inferred from the alleged deceit that “resulted in” that judgment.

Importantly, the court also endorsed a continuing-wrong theory where the complaint alleges not a single misrepresentation, but a series—“initial and continued false representations”—to the court. On that theory, the limitations clock is deemed to run from the last wrongful act, which the court understood to have occurred after entry of the judgment.

3.3 Impact

A. Practical effect in foreclosure-adjacent litigation

The decision lowers procedural barriers to § 487 suits against foreclosure counsel in the Second Department when the plaintiff pleads (i) nonparty/privity facts defeating preclusion, (ii) an issue not actually litigated in foreclosure (attorney deceit), and (iii) damages inferable at judgment or later, potentially coupled with continuing misrepresentations.

B. Clarifying “privity” limits for attorneys

By holding that foreclosure counsel are “neither parties” nor in privity with the foreclosure plaintiff for res judicata purposes, the court signals that attorneys do not automatically inherit the preclusive shield of their clients’ judgments. That has broader consequences beyond foreclosures, strengthening the independence of statutory attorney-misconduct claims from underlying merits judgments.

C. Limitations strategy: pleading “series of continuing wrongs”

The opinion incentivizes careful pleading of a sequence of deceptive acts (rather than a single act) to invoke the continuing wrong doctrine, especially where the litigation spans years. At the same time, it underscores that conclusory “continuing” labels are insufficient; the plaintiff must plead repeated wrongful conduct (here, repeated false representations to the court).

D. Boundary-drawing: damages actions vs. judgment integrity

The court’s acceptance that § 487 damages claims can proceed without being deemed collateral attacks will likely be cited by plaintiffs to keep such actions alive post-judgment. Defendants, in turn, will likely focus on demonstrating that the pleaded damages theory necessarily depends on declaring the prior judgment wrong—an argument the opinion suggests may be case-specific rather than categorical.

4. Complex Concepts Simplified

• Res judicata (claim preclusion): If you already litigated (or could have litigated) a claim arising from a transaction, you generally cannot sue again over it against the same party (or someone legally equivalent, i.e., in “privity”).
• Privity: A close, legally meaningful relationship where the nonparty’s interests were represented in the prior case (e.g., successors, controllers of litigation). Merely being someone’s attorney does not automatically create privity for all purposes.
• Collateral estoppel (issue preclusion): You cannot re-argue the same issue if it was actually raised, necessarily decided, and you had a full and fair chance to contest it.
• Collateral attack: An attempt to undermine a judgment in a separate case rather than through direct appeal or proper procedural mechanisms. A damages claim can be permissible if it does not functionally require invalidating the earlier judgment.
• Judiciary Law § 487: A New York statute imposing liability (including treble damages) on attorneys who engage in deceit or collusion with intent to deceive the court or a party.
• Accrual: When the legal claim “starts” for statute-of-limitations purposes. Here, the court tied it to when damages could be reasonably inferred.
• Continuing wrong doctrine: If wrongful acts continue as a series, the clock may run from the last wrongful act rather than the first.
• CPLR 3211(a)(1), (5), (7): New York motion-to-dismiss grounds for (1) documentary evidence, (5) defenses like statute of limitations/res judicata, and (7) failure to state a claim.

5. Conclusion

Jacobson v Fein, Such & Crane, LLP reinforces that Judiciary Law § 487 serves as an independent statutory remedy for attorney deceit in litigation, not automatically extinguished by the client’s prior judgment. The Second Department held that foreclosure counsel were not in privity with the foreclosure plaintiff for res judicata purposes, that the foreclosure case did not decide the attorney-deceit issues for collateral estoppel purposes, and that properly pleaded § 487 damages claims need not be treated as impermissible collateral attacks on the foreclosure judgment. On timeliness, the court tied accrual to when damages could be reasonably inferred—no earlier than entry of the foreclosure judgment—and recognized that a pleaded series of ongoing misrepresentations may invoke the continuing wrong doctrine to extend accrual to the last wrongful act. Together, these holdings provide a plaintiff-friendly framework for post-judgment § 487 litigation while preserving doctrinal guardrails grounded in privity, actually-litigated issues, and injury-based accrual.