There have been lingering questions about procedural aspects of Judiciary Law 487 that have never been completely explained. One earlier question, answered in 2014 was the length of the statute of limitations, 3 years or 6 years. That question was answered by the Court of Appeals and is 6 years.
Melcher v Greenberg Traurig LLP 2016 NY Slip Op 00274 Decided on January 19, 2016
Appellate Division, First Department in its various “iterations” has been a fountainhead of rules in Judiciary Law §487 law. Today, on remand after the Court of Appeals, and after motion practice in the Supreme Court, the First Department explains when a 487 claim has to be made in the underlying case and when it may be brought in a plenary action.
“Turning now to defendants’ Judiciary Law § 487 argument, we find that under the circumstances presented, it was proper for Melcher to assert a Judiciary Law § 487 claim in a separate action, rather than seeking leave to assert a claim against the attorney defendants in the Apollo action.
Judiciary Law § 487(1) provides, among other things, 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 . . . forfeits to the party injured treble damages, to be recovered in a civil action.” A plaintiff may bring an action to recover damages for attorney deceit regardless of whether the attorney’s deceit was successful (Amalfitano v Rosenberg, 12 NY3d 8 [2009]). Further, the plaintiff in a section 487 case may recover the legal expenses incurred as a proximate result of a material misrepresentation in a prior action (see Pomerance v McGrath, 124 AD3d 481, 485 [1st Dept 2015], lv dismissed 25 NY3d 1038 [2015]).
First of all, we do not credit defendants’ argument that because Melcher raised the same claims in his motions in the Apollo action, he is now precluded from asserting a section 487 claim in this action — that is, that Melcher is improperly engaging in “claim splitting.” A party invoking the narrow doctrine against splitting a cause of action must show that the challenged claim raised in the second action is based upon the same liability in the prior action, and that the claim was ascertainable when the prior action was commenced (see Murray, Hollander, Sullivan & Bass v HEM Research, 111 AD2d 63, 66 [1st Dept 1985]; Solow v Avon Prods., 56 AD2d 785 [1st Dept 1977], affd 44 NY2d 711 [1978]). However, if the liabilities or claims alleged in the two actions arise from different sources, instruments, or agreements, the claim splitting doctrine does not apply (see Murray, Hollander, Sullivan & Bass, 111 AD2d at 66-67; see also 1050 Tenants Corp. v Lapidus, 118 AD3d 560, 560-561 [1st Dept 2014]).
Here, Melcher alleged in the Apollo action that Apollo Management and Fradd breached a contract and engaged in fraud by preventing him from receiving partnership profits. The basis for Melcher’s attorney deceit claim against GT and Corwin did not arise until after Fradd had burned the amendment, while the Apollo action was pending. Therefore, the claims asserted against Fradd and Apollo Management in the Apollo action did not arise from the same nucleus of facts as the section 487 claim in this action. On the contrary, the remedy sought against the defendant attorneys in this case is entirely distinct from the remedy sought against their former clients in the Apollo action. Indeed, the Judiciary Law claim did not even exist when plaintiff commenced the Apollo action (see 1050 Tenants, 118 AD3d at 560-561). Accordingly, plaintiff is not claim splitting when he brings section 487 claims against GT and Corwin in this action.
Nor is plaintiff collaterally estopped from litigating the issue of the alleged deceit in this [*4]action, as that issue was never fully litigated and decided in the Apollo action (see Kaufman v Eli Lilly & Co., 65 NY2d 449, 455-456 [1985]; Americorp Fin., L.L.C. v Venkany, Inc., 102 AD3d 516, 516 [1st Dept 2013]). To be sure, Melcher made a motion to strike defendants’ pleadings in the Apollo action on the basis that the disputed amendment was a fabrication (see Melcher v Apollo Med. Fund Mgt. L.L.C., 52 AD3d 244, 245 [1st Dept 2008]). However, a motion is not a cause of action, but rather, is a request for relief; the complaint in the Apollo action never contained a cause of action alleging that the defendants had relied on a fabricated document (see Melcher, 105 AD3d at 19). Moreover, this Court explicitly found on the postverdict appeal that plaintiff’s “allegations of fraud and deceit remain[ed] unaddressed” because the defendants had decided not to rely on the allegedly fabricated document (id. at 25). The matter was therefore remitted for an evidentiary hearing on those issues. But before the hearing could take place, Melcher reached a settlement with Fradd, specifically excluding the pending Judiciary Law § 487 claim against defendants here.
Similarly, it is true that Melcher, in the Apollo action, moved to disqualify GT and Corwin for their alleged fraud on the court. Nonetheless, Melcher never amended his complaint in that action to include “fraud on the court” claims predicated upon section 487. Defendants also never sought to consolidate this action with the Apollo action while they were both pending, even though they were before the same judge. Under these circumstances, defendants cannot advance a credible argument that the matter has already been fully litigated and decided.
Finally, defendants argue that according to our case law, a Judiciary Law § 487 claim brought in a separate action must be dismissed because a plaintiff’s remedy lies exclusively in the underlying lawsuit itself. Hence, defendants argue, Melcher should have moved under CPLR 5015 to vacate the civil judgment in the Apollo action on the ground of fraud, rather than beginning a second plenary action collaterally attacking the judgment in the Apollo action.
We reject this argument. In contrast to the situations in the cases on which defendants rely, Melcher does not, in fact, seek by this action to collaterally attack any prior adverse judgment or order on the ground that it was procured by fraud; if that were the case, the appropriate remedy generally would be to seek vacatur under CPLR 5015 (see e.g. Yalkowsky v Century Apts. Assoc., 215 AD2d 214, 215 [1st Dept 1995] [plaintiff alleged that the defendant’s attorney in a Civil Court proceeding had made a misrepresentation to the Civil Court, resulting in dismissal of the plaintiff’s constructive eviction claim]; see also Melnitzky v Owen, 19 AD3d 201 [1st Dept 2005] [section 487 claim properly dismissed where the plaintiff claimed that the defendant deceived Civil Court, which was hearing his malicious prosecution claim, by concealing rulings by Supreme Court]). Instead, plaintiff here seeks to recover lost time value of money and the excess legal expenses incurred in the Apollo action as a proximate result of defendants’ alleged deceit; this course of action is permissible in a separate action under the Judiciary Law (Amalfitano, 12 NY3d at 15).
The language of section 487 supports this conclusion, because that section does not require that the claim be asserted in the same action in which the violation occurred. Rather, the section simply provides that an attorney who has practiced a deception will be liable for treble damages “to be recovered in a civil action” (see Four Star Stage Light. v Merrick, 56 AD2d 767, 768 [1st Dept 1977] [holding that a section 487 claim brought in a second action should survive a motion to dismiss because it was adequately pleaded]; see also Pomerance v McGrath, 124 AD3d at 485 [finding that “it was not improper for plaintiff to bring a Judiciary Law § 487 claim in this action even though it is based on alleged deceit in a prior action,” but denying leave to add this claim on other grounds]; Armstrong v Blank Rome LLP, 126 AD3d 427 [1st Dept 2015] [section 487 claim brought in a second action alleging an undisclosed conflict of interest for an attorney who represented a litigant in divorce proceedings was adequately pleaded and should survive a motion to dismiss]). In fact, a court may not grant a motion for leave to amend a complaint to add a section 487 claim in the action in which the violation occurs, particularly if adding that claim would “require the disqualification of counsel and prejudice [the defendant’s] right to be represented by attorneys of its choice” (360 W. 11th LLC v ACG Credit Co. II, LLC, 90 AD3d 552, 554 [1st Dept 2011]). Those very concerns would, in fact, have been present in this case.
Our decision in Zimmerman v Kohn (125 AD3d 413 [1st Dept 2015], lv denied 25 NY3d 907 [2015]) does not compel a different result. In that case, the IAS court dismissed the section 487 claim on the basis that the plaintiffs’ remedy for a violation of that section lay exclusively in the underlying federal action, not in a separate plenary action (Zimmerman v Kohn, 2014 WL 1490936, *2-3 [Sup Ct, NY County, April 11, 2014, No. 652826113]). However, on appeal, this Court did not address that issue at all. Instead, we held only that dismissal of the section 487 claim was warranted because the plaintiffs, after settling the prior action, paid their counsel based on a contingency fee arrangement, and therefore could not show that the defendants’ misrepresentations proximately caused them any injury (Zimmerman, 125 AD3d at 414).”