Wrong Plaintiff? Wrong Defendant?

Beware a Motion for Sanctions BY LAZAR EMANUEL

NYPRR | August 2008

Everylawyerwhoinitiatesanactionshouldbecarefultoconfirmthathehastherightdefendant,and,
also,thathisclienthasstandingtosuethisdefendant.Inanactiontorecoverforpersonalinjuries,for example,heshouldavoidnaminganyoneasadefendantuntilhehasreasonableproofthattheputative defendantcausedorcontributedtotheaccident,orwasresponsibleforpreventingit. Andifthelawyereitherbecausehefailsinhisobligationtoinvestigateorstubbornlyignoresthefacts receivesnoticefromthedefendantorhisattorney,orinapleadingordeposition,indicatingthathehas namedthewrongdefendantorthathisclientlacksstanding,heshouldimmediatelystoptodetermine whetherheisjustifiedinproceedingorwhetherthewisercoursewouldbetodiscontinue. Thelawyerwhoignoresthesebasicprinciplesrisksbothamotionforsanctionsandthepossibilityofa disciplinarycomplaint.

MotionforSanctions
TheriskofjudicialsanctionswasillustratedbythedecisionofSupremeCourtJudgeArthurM.Schackin Robertsonv.UnitedEquitiesInc.,#35718/04,NewYorkLawJournal,July11,2008.Theproperdefendantin theactionwasunitedEquitiesCorp.(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.ThisforcedUEItocontinuetolitigatethismatterandincurwastefullitigation relatedexpenses. [Her]failuretodiscontinuetheinstantactionagainstUEI,afterbeingpresentedwithclear evidencethatUEIwasthewrongcorporationsued,isfrivolous(citing22NYCRR1301.1).

TheLawofSanctions
IntheNewYorkstatecourts,theawardofsanctionsisdiscretionarywiththecourts.Sanctionsare controlledby22NYCRR1301.1,whichwasadoptedbytheCourtsinitscurrentformonMarch1,1998. Theruleprovides: (a)Thecourt,initsdiscretion,mayawardtoanypartyorattorneyinanycivilactionor 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(StifferSanctionsforFrivolous LitigationConduct,NYPRRApril,1998),RoySimonpredicted: Theamendedrulewillatfirstmakelawpracticemoredifficult,especiallyforsolepractitioners. Butinthelongrun,ifcourtsreallyenforcethenewrule,itshouldcutdownonfrivolous litigationandfrivolouslitigationtactics.Thatshouldreducethecostsoflitigationforclientsand leavelawyersandjudgesmoretimetothinkaboutthemeritsofcasesratherthanbythemethods bywhichtheywerelitigated. InRobertson,JudgeSchackawardeddefendantUEIcostsandexpensesintheamountof$13,287.50and directedthattheybepaidpersonallybyMs.Felton.Theamountwasbasedupontimesheetssubmitted byUEIsattorneysfortimespentbythemfollowingthedepositionofUEIspresident(supra),whenMs. FeltonlearnedconclusivelythatUEIwasnotaproperdefendant.Defendantsattorneyshadsubmitted timesheetstotaling$25,086.25,butsomeofthattimewasforservicespriortothedeposition. JudgeSchackdenieddefendantsapplicationforfinancialsanctions:

Thecourt,initsdiscretion,isonlyawardingcoststoUEI,andnotsanctioningMs.Felton,because the$13,287.50awardofcostsisasufficientpenalty.

CasesCitedbytheCourt
JudgeSchackcitedseveralcasestosupporthisdecision.InGuttridgev.Schwenke,155Misc.2d317(Sup Ct.WestchesterCty.1992),plaintiffpersistedinpursuingaclaimformoneydueunderacontractafter thedefendantpresenteddocumentaryevidencethattheclaimhadbeenpaid.ThecourtinGuttridge said: 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,22NYCRR 130.11allowsustoexerciseourdiscretiontoimposecostsandsanctionsonanerrantpartyand [s]anctionsareretributive,inthattheypunishpastconduct.Theyarealsogoaloriented,inthatthey areusefulindeterringfuturefrivolousconduct,notonlybytheparticularparties,butalsobytheBarat large. PerhapsthestrongeststatementofacourtsirritationwithafrivolousclaimoccurredinWeinstockv. Weinstock,253aD2d873(2dDept1998).Holdingthatanappealwascompletelywithoutmerit,the courtsaid,[w]ethereforeawardthemaximumauthorizedamountasasanctionforthisconduct(see,22 NYCRR1301.1)callingtomindthatfrivolouslitigationcausesasubstantialwasteofjudicialresourcesto thedetrimentofthoselitigantswhocometotheCourtwithrealgrievances.

JudgeSchackSpeaksAgain
Curiouslyenough,whileIwasintheprocessofwritingthisarticle,andlessthanaweekafterhis decisioninRobertson,JudgeSchackdecidedanothercaseinvolvingfrivolouspleadingbyaplaintiffand beganhisinquiryintopossiblesanctionsagainstplaintiffsattorneys.WellsFargoBankv.Reyes,#5516/08, NewYorkLawJournal,July15,2008.Thistime,thedefendantwastherightdefendant,buttheplaintiff wasthewrongplaintiff. WellsFargobroughtanactiontoforecloseonamortgageaffectingpropertyinBrooklynownedby defendantReyes,whohadallegedlydefaultedinhispayments.UnabletofindandserveReyes,Wells Fargomovedexparteforserviceofasupplementalsummonsbypublication.

 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]underminesjudicialeconomy. TheCourtisgravelyconcernedthatitexpendedscarceresourcesonamotionbyWellsFargo, whichisnottheownerandhasneverbeentheowneroftheReyesmortgage.WellsFargohas nostandingintheinstantaction.Ms.McLaughlin[sic]andherfirmwillhavetoexplaintothe CourtwhythisCourtshouldnotsanctionthemformakingafrivolousmotionpursuantto22 NYCRR130.11. JudgeSchackreviewedalineofcasesholdingthataplaintiffmusthavestandingtosuebeforehemay properlyinitiatealawsuitagainstanyone.Inactionstoforeclose,forexample,theplaintiffmustshow threedistinctelements:1)theexistenceofthemortgageandofanoteestablishingthedebt;2)thatitisthe ownerofthemortgage;and3)thatthedefendanthasdefaultedinhispayments.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],JudgeSchackcancelledthelispendensin theexerciseoftheinherentpoweroftheCourt.

Indirectingthattheissueofsanctionsbedeterminedataspecialhearing,JudgeSchackretracedthe historyof22NYCRR130.11anddiscussedsomeofthesamecaseshehadreliedonintheRobertson matter.(See,Levyv.CarolManagementCorporation,supra.)ThehearinginWellsFargoisscheduledfor august1.Wewillreporttheoutcome.

ViolationofDisciplinaryRules
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 confirmthattheylistedWellsFargoastheReyesmortgagee. DR7.102(a)mustbeinterpretedinthelightof22NYCRR1301.1a.(a),(b),whichrequirealawyerwho servesacom plaintonanotherpartytosignthecomplaint,andwhichconstruethelawyerssignatureas certificationthattothebestof[his]knowledge,informationandbelief,formedafteraninquiry reasonableunderthecircumstances,(1)thepresentationofthepaperorthecontentionsthereinarenot

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 purposeofharassingormaliciouslyinjuringanyperson. 2.Thelawyerknowsoritisobviousthatcontinuedemploymentwillresultinviolationofa disciplinaryrule. Theserulesreinforcealawyersobligationtomakesureofthefactshisclientisrelyingonbeforehe serveshiscomplaintandalsohisobligationtorespondreasonablytoopposingcounselwhoraises questionsabouttheplaintiffsstandingoraboutthedefendantsresponsibilityinthematter.Ofthetwo, theobligationtorespondtoareasonablerequestfordiscontinuancebyopposingcounselisthemore critical.Courtsareapttoexcuseamistakewhichisrecognizedandrectified;theyarenotassympathetic whenamistakeisconfirmedbutperpetuated. Butthecourtsgenerallyhavenotextendedtheireffortstocontrolfrivolouslitigationbyreferring offendinglawyerstothedisciplinaryauthorities.Theyhavebeensatisfiedtousethepressureofthe pocketbookinsteadofthepainofdiscipline. InhisannualcommentaryandreviewofdecisionsontheDisciplinaryRules(SimonsNewYorkCodeof ProfessionalResponsibilityAnnotated),RoySimoncitesonlyahandfulofcasesinwhichsanctionshaveled todiscipline.Fewofthese casesinvolvedafrivolouspleading,whetherbyaplaintiffwholacked standing,orbyaplaintiffagainstthewrongdefendant.Sanctions,however,canbeapowerful disciplinaryweapon.InHaasv.A.C.andS.Inc.,NYLJ,April6,2004,thefirmofWeitzandLuxenberg wassanctioned$500forfailuretodiscontinueaclaimafteritbecameclearthattheplaintifflacked standing.InFerrarov.Gordon,1a.D.3d595(2dDept2003),theCourtreversedthedenialofsanctions wheretheproceedingwasfrivolousandwasdesignedtoharassvariousdefendants. OnSeptember17,1997,thefourappellateDivisionsadoptedappendixato22NYCRRPart1200.Entitled StandardsofCivility,theappendixdefinestheconductexpectedofNewYorklawyers.ThePreambleto theappendixemphasizesthattheStandardsare:

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 increasinglitigationexpenses. IX.Lawyersshouldnotmisleadotherpersonsinvolvedinthelitigationprocess.

Conclusion
Alawyerwhoplanstoinstituteanewlitigationandwhowishestoavoidthethreatofsanctionsandof professionaldisciplineshouldbesureoftwofacts:1)thathisclienthasstanding;and2)thatthe defendantinhissightsistherightdefendant. ____________________________________________________________________________________________ LazarEmanuelisthepublisherofNYPRR.
Copyright 2008 The New York Professional Responsibility Report (NYPRR)