AMALFITANO v. ROSENBERG

Citation Codes

Equivalent Citations

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Docket Number

No. 3.

Attorney(S)

Scheichet Davis, P.C., New York City ( William J. Davis of counsel), for appellant. Judiciary Law § 487 requires the elements of fraud or deceit for a civil action, which do not include an "attempt." ( Barclay Arms v Barclay Arms Assoc., 74 NY2d 644; Niagara Mohawk Power Corp. v Testone, 272 AD2d 910; People v Oishei, 20 Misc 163; New York City Tr. Auth. v Morris J. Eisen, P.C., 276 AD2d 78; O'Connor v Dime Sav. Bank of N.Y., 265 AD2d 313; Werner v Ratal Country Club, 234 AD2d 659; Manna v Ades, 237 AD2d 264.) Llorca Hahn LLP, New York City ( Richard E. Hahn of counsel), for respondents. I. A lawsuit for treble damages may be maintained under Judiciary Law § 487 based upon an attempted but unsuccessful deceit upon a court. ( Looff v Lawton, 97 NY 478; Kuelling v Roderick Lean Mfg. Co., 183 NY 78; Aymes v Gateway Demolition Inc., 30 AD3d 196; Barclay Arms v Barclay Arms Assoc., 74 NY2d 644; People v Oishei, 20 Misc 163; New York City Tr. Auth. v Morris J. Eisen, P.C., 276 AD2d 78; O'Connor v Dime Sav. Bank of NY, 265 AD2d 313; Werner v Katal Country Club, 234 AD2d 659; Carney v Philippone, 1 NY3d 333; Matter of Colonial Liq. Distribs. v O'Connell, 295 NY 129.) II. The costs incurred in defending a suit predicated on a materially and intentionally false fundamental misrepresentation are recoverable under Judiciary Law § 487 even if the court never acted on the belief that the misrepresentation was true. ( Country-Wide Ins. Co. v National R.R. Passenger Corp., 6 NY3d 172; Retail Software Serus. v Lashlee, 71 NY2d 788; Yesil v Reno, 92 NY2d 455; Aymes v Gateway Demolition Inc., 30 AD3d 196; Kaplan v Democrat Chronicle, 266 AD2d 848.) III. Armand Rosenberg's filing of the complaint falsely alleging standing when none existed and the subsequent submission of knowingly and materially false affidavits did work a deceit on the court, and therefore the certified questions should be altered accordingly ( Matter of Schildhaus, 23 AD2d 152; Schindler v Issler Schrage, 262 AD2d 226; Guardian Life Ins. Co. of Am. v Handel, 190 AD2d 57; Salouaara v Eckert, 222 F3d 19.) IV. Answering the questions certified in the affirmative will not "open the floodgates to litigation." ( Enright v Eli Lilly Co., 77 NY2d 377.) V. Any negative answer to certified question No. 2 should be limited to the issue of expenses incurred by Vivia and Gerald Amalfitano prior to the appeal on which the Appellate Division was found to have been actually defrauded, because this Court would exceed its jurisdiction if it also considered matters already decided by the Second Circuit which granted recovery with respect to expenses incurred after the appeal, through discovery and trial. Jeffrey A. Jannuzzo, New York City, for James L. Melcher, amicus curiae. The 28 other statutes that disjunctively employ the term "deceit" establish that it is distinct from "fraud." ( Matter of Bliss v Bliss, 66 NY2d 382; Rangolan v County of Nassau, 96 NY2d 42; Matter of Tonis v Board of Regents of Univ. of State of N.Y., 295 NY 286; Matter of Gerald R.M., 12 AD3d 1192; McSweeney v Bazinet, 269 App Div 213, 295 NY 797; Fleming v Graham, 10 NY3d 296.)

Judges

Susan Phillips Read

Acts

Judiciary — Attorneys And Counsellors — Misconduct by attorneys

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Smart Summary

Factual and Procedural Background

The United States Court of Appeals for the Second Circuit certified two questions to the New York State Court of Appeals concerning the application of Judiciary Law § 487. These questions arose from defendant Armand Rosenberg's appeal of a judgment by the United States District Court for the Southern District of New York, which found Rosenberg violated section 487 and awarded plaintiffs Vivia and Gerard Amalfitano treble damages for costs incurred defending a lawsuit Rosenberg brought on behalf of Peter Costalas. The underlying lawsuit accused the Amalfitanos of fraudulently purchasing the Costalas family business partnership known as 27 Whitehall Street Group. The Second Circuit sought clarification on whether a claim under section 487 can be based on an attempted but unsuccessful deceit upon a court, and whether costs defending a lawsuit based on a material misrepresentation can be recovered even if the court never believed the misrepresentation.

The detailed facts and circumstances of the underlying litigation and Rosenberg's conduct are set out in the District Court's decision and the Second Circuit's certification opinion.

Legal Issues Presented

Can a successful lawsuit for treble damages brought under N.Y. Judiciary Law § 487 be based on an attempted but unsuccessful deceit upon a court by the defendant?
In the course of such a lawsuit, may the costs of defending litigation instituted by a complaint containing a material misrepresentation of fact be treated as the proximate result of the misrepresentation if the court upon which the deceit was attempted at no time acted on the belief that the misrepresentation was true?

Arguments of the Parties

Appellant's Arguments

Judiciary Law § 487 requires actual fraud or deceit, not merely an attempt.
Section 487 should be interpreted in line with common-law fraud principles, which require that the plaintiff be actually deceived and damaged.
The trial judge was never deceived by the misrepresentation regarding Peter Costalas’s partnership status, so no cause of action under section 487 exists for attempted deceit.

Respondents' Arguments

A lawsuit for treble damages under Judiciary Law § 487 may be maintained based on an attempted but unsuccessful deceit upon a court.
Costs incurred defending litigation based on a materially and intentionally false fundamental misrepresentation are recoverable even if the court never believed the misrepresentation.
The filing of a complaint falsely alleging standing and submission of knowingly false affidavits constitutes deceit on the court.
Answering the certified questions affirmatively will not lead to an unmanageable increase in litigation ("floodgates").
Any negative answer on the second question should be limited to expenses incurred before the appeal where actual fraud was found, respecting jurisdictional limits.

Amicus Curiae Arguments

The term "deceit" as used in various statutes is distinct from "fraud," supporting a broader interpretation of deceit under Judiciary Law § 487.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Looff v Lawton, 97 NY 478	Interpretation of "deceit" in Judiciary Law § 487 as broader than common-law fraud and encompassing attempted deceit.	Supported expansive reading of "deceit" indicating liability for attempts to deceive courts by attorneys.
Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403	Common-law fraud requires actual deception and damage to plaintiff.	Distinguished from Judiciary Law § 487, which focuses on intent to deceive rather than success.
Amalfitano v Rosenberg, 428 F Supp 2d 196	District Court decision finding violation of Judiciary Law § 487 and awarding treble damages.	Basis for the certified questions and appellate review.
Amalfitano v Rosenberg, 533 F3d 117 (2d Cir 2008)	Certified questions to New York Court of Appeals regarding application of Judiciary Law § 487.	Triggered the review and clarification of the statute’s scope regarding attempted deceit and recoverable costs.
Country-Wide Ins. Co. v National R.R. Passenger Corp., 6 NY3d 172	Recovery of costs as proximate result of misrepresentation.	Supported respondents' position that costs defending a suit based on misrepresentation are recoverable even if court did not believe the misrepresentation.
Retail Software Servs. v Lashlee, 71 NY2d 788	Similar principle on recoverability of costs in litigation involving misrepresentation.	Reinforced the scope of recoverable damages under Judiciary Law § 487.
Enright v Eli Lilly Co., 77 NY2d 377	Addressed concerns about opening floodgates to litigation.	Court held that answering certified questions affirmatively would not cause undue proliferation of claims.
Matter of Schildhaus, 23 AD2d 152	Deceit on the court through false affidavits and allegations.	Supported finding that Rosenberg's conduct constituted deceit on the court.
Schindler v Issler Schrage, 262 AD2d 226	Similar application of deceit principles regarding false filings.	Further supported respondents' argument about deceit on the court.
Guardian Life Ins. Co. of Am. v Handel, 190 AD2d 57	Application of deceit and sanctions in litigation context.	Used to illustrate the nature of deceit actionable under section 487.
Salouaara v Eckert, 222 F3d 19	Federal precedent recognizing deceit standards.	Supported the broader interpretation of deceit under Judiciary Law § 487.
Matter of Bliss v Bliss, 66 NY2d 382	Distinction between deceit and fraud in statutory context.	Amicus curiae cited to argue that deceit is a distinct concept from fraud.
Rangolan v County of Nassau, 96 NY2d 42	Statutory interpretation of deceit as distinct from fraud.	Supported amicus argument on statutory language.
Matter of Tonis v Board of Regents of Univ. of State of N.Y., 295 NY 286	Statutory interpretation regarding deceit.	Reinforced amicus curiae’s position on the statutory meaning of deceit.
Matter of Gerald R.M., 12 AD3d 1192	Distinction of deceit and fraud in statutory settings.	Used by amicus to clarify statutory interpretation.
Fleming v Graham, 10 NY3d 296	Interpretation of deceit in statutory context.	Supported the amicus curiae’s argument on statutory language.

Court's Reasoning and Analysis

The Court examined the statutory history and language of Judiciary Law § 487 and concluded that it is not a codification of common-law fraud but rather a unique statute of ancient origin, rooted in criminal law principles dating back to the 13th century Statute of Westminster. The statute’s operative language focuses on an attorney’s intent to deceive the court or a party, rather than on whether the deceit was successful. The Court emphasized that the statute was previously part of the penal law, which typically punishes attempts as well as completed offenses, supporting the conclusion that liability under section 487 extends to attempted deceit.

The Court rejected the appellant’s argument that recovery requires actual deception of the court, noting that limiting liability to successful deceit would undermine the statute’s purpose of protecting the integrity of the courts and ensuring attorneys’ special obligations. The Court also held that costs incurred defending litigation based on a material misrepresentation are recoverable as a proximate result of the misrepresentation, even if the court never believed the misrepresentation, because the opposing party must defend or default, necessarily incurring expenses.

The Court further limited its ruling on the second question to costs incurred before the appeal where actual deceit was found, respecting jurisdictional boundaries and prior rulings by the Second Circuit.

Holding and Implications

The Court answered both certified questions in the affirmative.

Specifically, the Court held that a successful lawsuit for treble damages under Judiciary Law § 487 may be based on an attempted but unsuccessful deceit upon a court. Additionally, costs incurred defending litigation instituted by a complaint containing a material misrepresentation are recoverable as proximate damages even if the court never believed the misrepresentation was true.

The direct effect of this decision is to allow plaintiffs to recover treble damages for attorneys’ deceitful conduct that includes attempts to deceive, not only successful deceit, thereby reinforcing attorneys’ duty of candor to the courts. The ruling also clarifies that legal costs defending against suits grounded in material misrepresentations are recoverable, promoting accountability. The Court noted no new precedent beyond its interpretation and application of this ancient statute.

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VIVIA AMALFITANO et al., Respondents, v. ARMAND ROSENBERG, Appellant.

OPINION OF THE COURT

READ, J.

The United States Court of Appeals for the Second Circuit has certified two questions to us regarding the application of section 487 of the Judiciary Law insofar as it provides that

"[a]n attorney or counselor 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 . . .

"[i]s guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action."

The questions arise out of defendant Armand Rosenberg's appeal from a judgment of the United States District Court for the Southern District of New York, finding that Rosenberg violated section 487 and awarding plaintiffs Vivia and Gerard Amalfitano three times their costs to defeat a lawsuit brought by Rosenberg on behalf of Peter Costalas ( Amalfitano v Rosenberg, 428 F Supp 2d 196 [SD NY 2006]). The lawsuit accused the Amalfitanos of fraudulently purchasing what remained of the Costalas family business, a partnership known as 27 Whitehall Street Group. On appeal, the Second Circuit concluded that it could affirm the District Court's judgment "in its entirety" only if, in addition to Rosenberg's actual deceit of the Appellate Division, his "attempted deceit" of the trial court — "the false allegations in the complaint in the Costalas litigation" representing that Peter Costalas was a partner in 27 Whitehall Street Group — would "support[] a cause of action under section 487 and was the proximate cause of the Amalfitanos' damages in defending the litigation from its inception" ( Amalfitano v Rosenberg, 533 F3d 117, 125 [2d Cir 2008]).

The facts and circumstances of the underlying litigation and Rosenberg's conduct are set out in detail in the District Court's decision and the Second Circuit's certification opinion.

I. Certified Question No. 1 "Can a successful lawsuit for treble damages brought under N.Y. Jud. Law § 487 be based on an attempted but unsuccessful deceit?" ( 533 F3d at 126.)

Rosenberg equates forfeiture under Judiciary Law § 487 with a tort claim for fraud. And under New York common law, "[t]o maintain an action based on fraudulent representations . . . in tort for damages, it is sufficient to show that the defendant knowingly uttered a falsehood intending to deprive the plaintiff of a benefit and that the plaintiff was thereby deceived and damaged" ( Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403, 406-407 [emphasis added]). Thus, Rosenberg argues, section 487 does not permit recovery for an attempted but unsuccessful deceit practiced on a court. And here, the trial judge was concededly never fooled by misrepresentations regarding Peter Costalas's partnership status.

As the District Court correctly observed, however, Judiciary Law § 487 does not derive from common-law fraud. Instead, as the Amalfitanos point out, section 487 descends from the first Statute of Westminster, which was adopted by the Parliament summoned by King Edward I of England in 1275. The relevant provision of that statute specified that

"if any Serjeant, Pleader, or other, do any manner of Deceit or Collusion in the King's Court, or consent [unto it,] in deceit of the Court [or] to beguile the Court, or the Party, and thereof be attainted, he shall be imprisoned for a Year and a Day, and from thenceforth shall not be heard to plead in [that] Court for any Man; and if he be no Pleader, he shall be imprisoned in like manner by the Space of a Year and a Day at least; and if the Trespass require greater Punishment, it shall be at the King's Pleasure" (3 Edw, ch 29; see generally Thomas Pitt Taswell-Langmead, English Constitutional History, at 153-154 [Theodore F.T. Plucknett ed, Sweet Maxwell, 10th ed 1946]).

Five centuries later, in 1787, the Legislature adopted a law with strikingly similar language, and added an award of treble damages, as follows:

" And be it further enacted . . . [t]hat if any counsellor, attorney, solicitor, pleader, advocate, proctor, or other, do any manner of deceit or collusion, in any court of justice, or consent unto it in deceit of the court, or to beguile the court or the party, and thereof be convicted, he shall be punished by fine and imprisonment and shall moreover pay to the party grieved, treble damages, and costs of suit" (L 1787, ch 35, § 5).

In 1830, the Legislature carried forward virtually identical language in the Revised Statutes of New York, prescribing that

"[a]ny counsellor, attorney or solicitor, who shall be guilty of any deceit or collusion, or shall consent to any deceit or collusion, with intent to deceive the court or any party, shall be deemed guilty of a misdemeanor, and on conviction shall be punished by fine or imprisonment, or both, at the discretion of the court. He shall also forfeit to the party injured by his deceit or collusion, treble damages, to be recovered in a civil action" (2 Rev Stat of NY, part III, ch III, tit II, art 3, § 69, at 215-216 [2d ed 1836]).

The Legislature later codified this misdemeanor crime and the additional civil forfeiture remedy as section 148 of the Penal Code of 1881, providing that

"[a]n attorney or counselor 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 as prohibited by section 70 of the Code of Civil Procedure; . . .

"[i]s guilty of a misdemeanor, and in addition to the punishment prescribed therefor by this Code, he forfeits to the party injured treble damages, to be recovered in a civil action" (L 1881, ch 676, § 148 [1]).

Section 70 of the Code of Civil Procedure, cross-referenced in section 148, similarly stated that "[a]n attorney or counsellor, who is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or a party, forfeits, to the party injured by his deceit or collusion, treble damages. He is also guilty of a misdemeanor." The derivation note accompanying section 70 includes the following comment: "As to the meaning of the word, `deceit', as used in this section, see Looff v. Lawton, 14 Hun, 588" (Code of Civil Procedure of the State of New York with Notes by Montgomery H. Throop [Weed, Parsons and Company 1881]).

In Looff, the plaintiffs accused their attorney of gulling them into bringing an unnecessary lawsuit, motivated solely by his desire to collect a large fee to represent them. In discussing the meaning of the word "deceit" in section 70 (and, by extension, section 148), the General Term of the Supreme Court opined that the Legislature intended an expansive reading rather than "confining the term to common law or statutory cheats" ( Looff v Lawton, 14 Hun 588, 589 [2d Dept 1878]). To support this interpretation, the court reasoned that because there was already a civil action at common law for fraud and damage that an injured party might pursue,

"[t]here was no occasion . . . for another statute to punish, or to give an action for the ` deceit' of lawyers, unless the Legislature intended that that class of persons should be liable for acts which would be insufficient to establish a crime or a cause of action against citizens generally. The statute is limited to a peculiar class of citizens, from whom the law exacts a reasonable degree of skill, and the utmost good faith in the conduct and management of the business intrusted to them . . . To mislead the court or a party is to deceive it; and, if knowingly done, constitutes criminal deceit under the statute cited" ( id. at 590).

Section 148 was subsequently recodified as section 273 of the Penal Law of 1909. In conjunction with the Legislature's adoption of the revised Penal Law of 1965, section 148 was transferred from the Penal Law to the Judiciary Law as section 487 ( see L 1965, ch 1031, § 123). 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.

As this history shows, section 487 is not a codification of a common-law cause of action for fraud. Rather, section 487 is a unique statute of ancient origin in the criminal law of England. The operative language at issue — "guilty of any deceit" — focuses on the attorney's intent to deceive, not the deceit's success. And as the District Court pointed out, section 487 was for many years placed in the state's penal law, which "supports the argument that the more appropriate context for analysis is not the law applicable to comparable civil torts but rather criminal law, where an attempt to commit an underlying offense is punishable as well [as] the underlying offense itself ( Amalfatino, 428 F Supp 2d at 210). Further, to limit forfeiture under section 487 to 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.

II. Certified Question No. 2

"In the course of such a lawsuit, may the costs of defending litigation instituted by a complaint containing a material misrepresentation of fact be treated as the proximate result of the misrepresentation if the court upon which the deceit was attempted at no time acted on the belief that the misrepresentation was true?" ( 533 F3d at 126.)

In light of our answer to the first question, recovery of treble damages under Judiciary Law § 487 does not depend upon the court's belief in a material misrepresentation of fact in a complaint. When a party commences an action grounded in a material misrepresentation of fact, the opposing party is obligated to defend or default and necessarily incurs legal expenses. Because, in such a case, the lawsuit could not have gone forward in the absence of the material misrepresentation, that party's legal expenses in defending the lawsuit may be treated as the proximate result of the misrepresentation.

Accordingly, the certified questions should be answered in accordance with this opinion.

Judges CIPARICK, GRAFFEO, SMITH, PIGOTT and JONES concur; Chief Judge LIPPMAN taking no part.

Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.27 of the Rules of Practice of the Court of Appeals ( 22 NYCRR 500.27), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in accordance with the opinion herein.