Wrong Plaintiff Wrong Defendant Beware a Motion for Sanctions 8 08

7/29/2019 Wrong Plaintiff Wrong Defendant Beware a Motion for Sanctions 8 08

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Everylawyerwhoinitiatesanactionshouldbecarefultoconfirmthathehastherightdefendant,and,also,thathisclienthasstandingtosuethisdefendant.Inanactiontorecoverforpersonalinjuries,for

example,heshouldavoidnaminganyoneasadefendantuntilhehasreasonableproofthattheputative

defendantcausedorcontributedtotheaccident,orwasresponsibleforpreventingit.

Andifthelawyereitherbecausehefailsinhisobligationtoinvestigateorstubbornlyignoresthefacts

receivesnoticefromthedefendantorhisattorney,orinapleadingordeposition,indicatingthathehas

namedthewrongdefendantorthathisclientlacksstanding,heshouldimmediatelystoptodetermine

whetherheisjustifiedinproceedingorwhetherthewisercoursewouldbetodiscontinue.

Thelawyerwhoignoresthesebasicprinciplesrisksbothamotionforsanctionsandthepossibilityofa

disciplinarycomplaint.

MotionforSanctionsTheriskofjudicialsanctionswasillustratedbythedecisionofSupremeCourtJudgeArthurM.Schackin

Robertsonv.UnitedEquitiesInc.,#35718/04,NewYorkLawJournal,July11,2008. TheproperdefendantintheactionwasunitedEquitiesCorp.(UEC),notunitedEquitiesInc.(UEI),asallegedbyplaintiff.

RelyingonanaffidavitbyUEIspresidentthatUECandUEIwerenotthesameentity,JudgeSchack

awardedsummaryjudgmenttoUEIandorderedahearingtodetermineifplaintiffRobertsonandhis

attorney,ReginaFelton,hadengagedinfrivolousconductbycontinuingtheactionagainstUEI.

TheCourtcitedthefollowingfacts:1)Ms.FeltonhadignoreddocumentaryevidenceabsolvingUEIand

refusedtoacknowledgehermistake;2)inhisaffirmation,defendantsattorneyhaddescribedhisrolein

formingUEIandhaddeniedthatithadeverownedpropertyinKingsCounty(apparentlyafactessential

toplaintiffslawsuit);3)defendantsattorneyhadcalledplaintiffsattorneytotellhershehadthewrong

party,butshehadinsistedthatdefendantanswerthecomplaintnevertheless;4)oneofdefendants

attorneyshadsentnumerouslettersandfaxestoplaintiffsattorneyshowinghermistake;5)plaintiffs

attorneyhadrefusedtodiscontinuetheactionevenaftershelearnedofhermistake.

TheCourtconcluded:

Ms.Felton,forreasonsunknowntotheCourt,persistentlycontinuedtheactionagainstUEI,the

wrongdefendant.

This

forced

UEI

to

continue

to

litigate

this

matter

and

incur

wasteful

litigation

relatedexpenses.

[Her]failuretodiscontinuetheinstantactionagainstUEI,afterbeingpresentedwithclear

evidencethatUEIwasthewrongcorporationsued,isfrivolous(citing22NYCRR1301.1).

NYPRR | August 2008

Wrong Plaintiff? Wrong Defendant? Beware a Motionfor Sanctions

BY LAZAR EMANUEL


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TheLawofSanctionsIntheNewYorkstatecourts,theawardofsanctionsisdiscretionarywiththecourts.Sanctionsare

controlledby22NYCRR1301.1,whichwasadoptedbytheCourtsinitscurrentformonMarch1,1998.

Theruleprovides:

(a)

The

court,

in

its

discretion,

may

award

to

any

party

or

attorney

in

any

civil

action

or

proceeding...costsintheformofreimbursementforactualexpensesreasonablyincurredand

reasonableattorneysfees,resultingfromfrivolousconductasdefinedinthisPart.Inadditionto

orinlieuofawardingcosts,thecourt,initsdiscretion,mayimposefinancialsanctionsuponany

partyorattorneywhoappearsinacivilactionorproceedingwhoengagesinfrivolousconduct

asdefinedinthisPart,whichshallbepayableasprovidedinsection1301.3ofthisPart.

(b)omitted

(c)Forpurposesofthispart,conductisfrivolousif:

(1)itiscompletelywithoutmeritinlawandcannotbesupportedbyareasonable

argumentforanextension,modificationorreversalofexistinglaw;(2)itisundertakenprimarilytodelayorprolongtheresolutionofthelitigation,orto

harassormaliciouslyinjureanother;or

(3)itassertsmaterialfactualstatementsthatarefalse.

Inotherwords,sanctionsmaycomeintwoforms:1)asreimbursementtotheaggrievedpartyofhis

actualexpensesandreasonableattorneysfees;and2)inadditiontoorinlieuofcosts,asadiscretionary

financialassessmentorpenaltyagainstapartyoranattorneywhoengagesinfrivolousconduct,ina

sumnottoexceed$10,000.

When22NYCRR130wasfirstadoptedbytheCourtsonMarch1,1998(StifferSanctionsforFrivolousLitigationConduct,NYPRRApril,1998),RoySimonpredicted:

Theamendedrulewillatfirstmakelawpracticemoredifficult,especiallyforsolepractitioners.

Butinthelongrun,ifcourtsreallyenforcethenewrule,itshouldcutdownonfrivolous

litigationandfrivolouslitigationtactics.Thatshouldreducethecostsoflitigationforclientsand

leavelawyersandjudgesmoretimetothinkaboutthemeritsofcasesratherthanbythemethods

bywhichtheywerelitigated.

InRobertson,JudgeSchackawardeddefendantUEIcostsandexpensesintheamountof$13,287.50and

directedthattheybepaidpersonallybyMs.Felton.Theamountwasbasedupontimesheetssubmitted

byUEIsattorneysfortimespentbythemfollowingthedepositionofUEIspresident(supra),whenMs.

Feltonlearned

conclusively

that

UEI

was

not

aproper

defendant.

Defendants

attorneys

had

submitted

timesheetstotaling$25,086.25,butsomeofthattimewasforservicespriortothedeposition.

JudgeSchackdenieddefendantsapplicationforfinancialsanctions:


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Thecourt,initsdiscretion,isonlyawardingcoststoUEI,andnotsanctioningMs.Felton,because

the$13,287.50awardofcostsisasufficientpenalty.

CasesCitedbytheCourtJudgeSchackcitedseveralcasestosupporthisdecision.InGuttridgev.Schwenke,155Misc.2d317(SupCt.

Westchester

Cty.

1992),

plaintiff

persisted

in

pursuing

a

claim

for

money

due

under

a

contract

after

thedefendantpresenteddocumentaryevidencethattheclaimhadbeenpaid.ThecourtinGuttridgesaid:

Plaintiffscounselmustsharetheblameforsuchfrivolousconductasitwasalsohis

responsibilityinpreparingandverifyingthecomplaint,andinconductingthislitigation,tomake

diligentinquiryintothefactsandtodiscontinuelitigationwhenitbecameapparentitlackedany

merit.Thefrivolousconductbyplaintiffsandtheirattorneyhasnotonlyburdeneddefendantby

forcinghimtoincurlegalexpensesindefenseofneedlesslitigation,ithasburdenedthecourtby

havingtointerveneondefendantsbehalf.anawardofcostsandsanctionsisneededherenot

onlytocompensatedefendant,buttodeterabuseofthejudicialsystemandtoensuretheorderly

administrationofjustice.

MostdecisionsawardingcostsunderSection130.11relyonthesametwofactorsforsupport:1)the

financialburdenimposedonthedefendantbyforcinghimtodefendagainstaspuriousclaim,and2)the

proceduralandadministrativeburdensimposeduponthecourtsthemselvesintheirinquiryintothe

meritsofthecomplaint.

Thus,inLevyv.CarolManagementCorporation,260aD2d27(1stDept1999),thecourtsaid,22NYCRR130.11allowsustoexerciseourdiscretiontoimposecostsandsanctionsonanerrantpartyand

[s]anctionsareretributive,inthattheypunishpastconduct.Theyarealsogoaloriented,inthatthey

areusefulindeterringfuturefrivolousconduct,notonlybytheparticularparties,butalsobytheBarat

large.

PerhapsthestrongeststatementofacourtsirritationwithafrivolousclaimoccurredinWeinstockv.Weinstock,253aD2d873(2dDept1998).Holdingthatanappealwascompletelywithoutmerit,the

courtsaid,[w]ethereforeawardthemaximumauthorizedamountasasanctionforthisconduct(see,22

NYCRR1301.1)callingtomindthatfrivolouslitigationcausesasubstantialwasteofjudicialresourcesto

thedetrimentofthoselitigantswhocometotheCourtwithrealgrievances.

JudgeSchackSpeaksAgainCuriouslyenough,whileIwasintheprocessofwritingthisarticle,andlessthanaweekafterhis

decisioninRobertson,JudgeSchackdecidedanothercaseinvolvingfrivolouspleadingbyaplaintiffand

beganhisinquiryintopossiblesanctionsagainstplaintiffsattorneys.WellsFargoBankv.Reyes,#5516/08,New

York

Law

Journal,

July

15,

2008.

This

time,

the

defendant

was

the

right

defendant,

but

the

plaintiff

wasthewrongplaintiff.

WellsFargobroughtanactiontoforecloseonamortgageaffectingpropertyinBrooklynownedby

defendantReyes,whohadallegedlydefaultedinhispayments.UnabletofindandserveReyes,Wells

Fargomovedexparteforserviceofasupplementalsummonsbypublication.


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JudgeSchackconductedhisowninquiryintotherecordsoftheautomatedCityregisterComputer

System(ACRIS)maintainedbytheNewYorkCityregisterandconcludedthatWellsFargodidnotown

theReyesmortgageandhadneverownedit.Indeed,therecordsshowedthatthemortgagewasheldby

anothermortgagee.

JudgeSchackproceededtodenyWellsFargosmotionforasupplementalsummonswithprejudice,and,

adheringtothesamepolicyhehadusedinRobertson,supra,hesettheissueofpossiblesanctionsagainst

WellsFargosattorneysdownforhearing.

AnnoyedbywhathecalledthechutzpahofWellsFargosattorneyinchallengingtheefficiencyofthe

officeoftheKingsCountyClerkandininsistingonherinterpretationoftherulescontrollingpublication

ofthesupplementalsummons,JudgeShracksaid,quotingtheattorneysownlanguage:

Ms.McLoughlinneedstobecognizantthatthemakingofamotionbyanattorneywho

representsaclientthatallegestobeaplaintiffinaforeclosureaction,andwhoinrealityisnota

plaintiff,imposesanundueburdenupontheCourtscalendarand[thewasteofthecourts

time]undermines

judicial

economy.

TheCourtisgravelyconcernedthatitexpendedscarceresourcesonamotionbyWellsFargo,

whichisnottheownerandhasneverbeentheowneroftheReyesmortgage.WellsFargohas

nostandingintheinstantaction.Ms.McLaughlin[sic]andherfirmwillhavetoexplaintothe

CourtwhythisCourtshouldnotsanctionthemformakingafrivolousmotionpursuantto22

NYCRR130.11.

JudgeSchackreviewedalineofcasesholdingthataplaintiffmusthavestandingtosuebeforehemay

properlyinitiatealawsuitagainstanyone.Inactionstoforeclose,forexample,theplaintiffmustshow

threedistinctelements:1)theexistenceofthemortgageandofanoteestablishingthedebt;2)thatitisthe

ownerof

the

mortgage;

and

3)

that

the

defendant

has

defaulted

in

his

payments.

Campaignv.Barba,23

aD3d327(2dDept2005).

JudgeSchackquotedProf.DavidSiegel,NYPractice4thEd.,136,p.232:

[i]tisthelawspolicytoallowonlyanaggrievedpersontobringalawsuit.awantofstanding

tosue,inotherwords,isjustanotherwayofsayingthatthisparticularplaintiffisnotinvolved

inagenuinecontroversy,andasimplesyllogismtakesusfromtheretoajurisdictional

dismissal:(1)thecourtshavejurisdictiononlyovercontroversies;(2)aplaintifffoundtolack

standingisnotinvolvedinacontroversy;and(3)thecourtsthereforehavenojurisdictionof

thecasewhensuchaplaintiffpurportstobringit.

TheCourtwasespeciallyconcernedtoundothelispendensfiledbyWellsFargoagainstthereyes

premises.Pointingoutthatalispendensisanextraordinaryprivilegedesignedtomaintainthestatus

quoanteinanactioninvolvingadisputeoverrealproperty,andthattheprivilegecanbelostifabused

[DaSilvav.Musso,76NY2d436(1990),quotingProf.Siegel],JudgeSchackcancelledthelispendensintheexerciseoftheinherentpoweroftheCourt.


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Indirectingthattheissueofsanctionsbedeterminedataspecialhearing,JudgeSchackretracedthe

historyof 22NYCRR130.11anddiscussedsomeofthesamecaseshehadreliedonintheRobertson

matter.(See,Levyv.CarolManagementCorporation,supra.)ThehearinginWellsFargoisscheduledforaugust1.Wewillreporttheoutcome.

Violationof

Disciplinary

Rules

Omittedfrombothhisopinions(RobertsonandWellsFargo,supra),wasanydiscussionbyJudgeSchack

ofatleasttwootherruleswhichbearontheissueoffrivolousconduct,and,therefore,ontheissueof

sanctions.

DR7.102oftheNewYorkCodeprovidesasfollows:

A. Intherepresentationofaclient,alawyershallnot:

1.Fileasuit,assertaposition,conductadefense,delayatrial,ortakeotheractiononbehalfof

theclientwhenthelawyerknowsorwhenitisobviousthatsuchactionwouldservemerelyto

harassormaliciouslyinjureanother.

2.Knowinglyadvanceaclaimordefensethatisunwarrantedunderexistinglaw,exceptthatthe

lawyermayadvancesuchclaimordefenseifitcanbesupportedbygoodfaithargumentforan

extension,modification,orreversalofexistinglaw.

3.Concealorknowinglyfailtodisclosethatwhichthelawyerisrequiredbylawtoreveal.

5.Knowinglymakeafalsestatementoflaworfact.

6.Participateinthecreationorpreservationofevidencewhenthelawyerknowsoritisobvious

thattheevidenceisfalse.

7.Counselorassisttheclientinconductthatthelawyerknowstobeillegalorfraudulent.

8.KnowinglyengageinotherillegalconductorconductcontrarytoaDisciplinaryrule

DR7.102(a)(1)and(a)(5)areespeciallycrucialbecause,together,theycompelalawyertoinvestigatethe

factsthoroughlybeforeheinitiatesalawsuit.Otherwisehecannotlaterdisclaimknowledgeoffacts

whichmakeitobviousthathisactionwouldservemerelytoharassormaliciouslyinjureanother.If

theplaintiffsattorneyinRobertson,supra,hadstoppedtothink,shewouldhaverecognizedthattwo

differentcorporationsmighthavethesamenameexceptforthecorporateappellationsInc.orCorp.;

andiftheattorneyforWellsFargohadstoppedtothink,shewouldhavesearchedthetitlerecordsto

confirmthat

they

listed

Wells

Fargo

as

the

Reyes

mortgagee.

DR7.102(a)mustbeinterpretedinthelightof22NYCRR1301.1a.(a),(b),whichrequirealawyerwho

servesacomplaintonanotherpartytosignthecomplaint,andwhichconstruethelawyerssignatureascertificationthattothebestof[his]knowledge,informationandbelief,formedafteraninquiry

reasonableunderthecircumstances,(1)thepresentationofthepaperorthecontentionsthereinarenot


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frivolousasdefinedinsection1301.1(c)ofthisSubpart(see,definitionofthetermfrivolous

conduct,supra.)

AlsorelevanttoanyinquiryintosanctionableconductareDR2109(a)(1)andDR2110(B)(1).DR2

109(a)(1)prohibitsalawyerfromrepresentinganewclientifsheknowsoritisobviousthattheclient

wishestobringalegalaction,conductadefense,orassertapositioninlitigationmerelyforthe

purposeofharassingormaliciouslyinjuringanotherperson.ThedifferencebetweenDR2109(a)(1)and

DR7102(a)(1)isthatitcontrolswhetheralawyeracceptsanengagementinthefirstplace,whileDR7

102(a)(1)appliestothelawyersconductinlitigation.

DR2110(B)(1)and(2)controltwoofthecircumstancesrequiringalawyersmandatorywithdrawalfrom

employmentwhenever(1)heisrepresentingaclientbeforeatribunal(withthecourtspermissionif

permissionisrequiredbyitsrules),or(2)heisrepresentingaclientinothermatters.Thecircumstances

are:

1.Thelawyerknowsoritisobviousthattheclientisbringingthelegalaction,conductingthe

defense,orassertingapositioninthelitigation,orisotherwisehavingstepstaken,merelyforthe

purposeof

harassing

or

maliciously

injuring

any

person.

2.Thelawyerknowsoritisobviousthatcontinuedemploymentwillresultinviolationofa

disciplinaryrule.

Theserulesreinforcealawyersobligationtomakesureofthefactshisclientisrelyingonbeforehe

serveshiscomplaintandalsohisobligationtorespondreasonablytoopposingcounselwhoraises

questionsabouttheplaintiffsstandingoraboutthedefendantsresponsibilityinthematter.Ofthetwo,

theobligationtorespondtoareasonablerequestfordiscontinuancebyopposingcounselisthemore

critical.Courtsareapttoexcuseamistakewhichisrecognizedandrectified;theyarenotassympathetic

whenamistakeisconfirmedbutperpetuated.

Butthecourtsgenerallyhavenotextendedtheireffortstocontrolfrivolouslitigationbyreferring

offendinglawyerstothedisciplinaryauthorities.Theyhavebeensatisfiedtousethepressureofthe

pocketbookinsteadofthepainofdiscipline.

InhisannualcommentaryandreviewofdecisionsontheDisciplinaryRules(SimonsNewYorkCodeofProfessionalResponsibilityAnnotated),RoySimoncitesonlyahandfulofcasesinwhichsanctionshaveledtodiscipline.Fewofthesecasesinvolvedafrivolouspleading,whetherbyaplaintiffwholackedstanding,orbyaplaintiffagainstthewrongdefendant.Sanctions,however,canbeapowerful

disciplinaryweapon.InHaasv.A.C.andS.Inc.,NYLJ,April6,2004,thefirmofWeitzandLuxenbergwassanctioned$500forfailuretodiscontinueaclaimafteritbecameclearthattheplaintifflacked

standing.

In

Ferrarov.

Gordon,

1

a.D.3d

595

(2d

Dept

2003),

the

Court

reversed

the

denial

of

sanctions

wheretheproceedingwasfrivolousandwasdesignedtoharassvariousdefendants.

OnSeptember17,1997,thefourappellateDivisionsadoptedappendixato22NYCRRPart1200.Entitled

StandardsofCivility,theappendixdefinestheconductexpectedofNewYorklawyers.ThePreambleto

theappendixemphasizesthattheStandardsare:


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principlesofbehaviortowhichthebar,thebenchandcourtemployeesshouldaspire.Theyare

notintendedasrulestobeenforcedbysanctionordisciplinaryaction,noraretheyintendedto

supplementormodifytheCodeofProfessionalresponsibilityanditsDisciplinaryrules,or

anyotherapplicableruleorrequirementgoverningconduct.

SeveraloftheStandardsdefiningalawyersdutiestootherlawyers,litigantsandwitnessesare,however,

relevanttotheinterestofthecourtsindiscouragingfrivolouslitigation.Amongalawyersdutiesas

expressedintheSectionentitledLawyersDutiestootherLawyers,LitigantsandWitnessesare:

II.Whenconsistentwiththeirclientsinterests,lawyersshouldcooperatewithopposingcounsel

inanefforttoavoidlitigationandtoresolvelitigationthathasalreadycommenced.

IV.Alawyershouldpromptlyreturntelephonecallsandanswercorrespondencereasonably

requiringaresponse.

VI.Alawyershouldnotuseanyaspectofthelitigationprocess,includingdiscoveryandmotion

practice,asameansofharassmentorforthepurposeofunnecessarilyprolonginglitigationor

increasinglitigation

expenses.

IX.Lawyersshouldnotmisleadotherpersonsinvolvedinthelitigationprocess.

ConclusionAlawyerwhoplanstoinstituteanewlitigationandwhowishestoavoidthethreatofsanctionsandof

professionaldisciplineshouldbesureoftwofacts:1)thathisclienthasstanding;and2)thatthe

defendantinhissightsistherightdefendant.

____________________________________________________________________________________________LazarEmanuelisthepublisherofNYPRR.

Copyright 2008

The New York Professional Responsibility Report (NYPRR)

Documents

Wrong Plaintiff Wrong Defendant Beware a Motion for Sanctions 8 08