This particular statute has a rich, long history and may be the oldest statute still in use. The present section derives from the 1275 First Statute of Westminster, passed by Parliament under King Edward I. That statute was copied almost verbatim in 1787 by the New York Legislature two years before the U.S. Constitution.
Decided cases go as far back as 1884 in Looff v. Lawton, 14 Hun, 588; 97 NY 478. In Looff, the Court of Appeals held that this predecessor statute required that deceit be undertaken in an ongoing litigation in a real estate transaction. As we see from today’s Court of Appeals, the statute remains vital.
The entire statute was trimmed with certain portions remaining in the Penal Law. Section 487 replaced former Penal Law §273. Lazer Elec. Corp v. Cecci, 1997 US Dist Lexis 8052 (SDNY 1997). The new Judiciary Law section now concerns attorneys alone.
There are four elements to the statute. One is deceit. The actions complained of must transcend mere negligence or mis-advice.
The second is that the deceit be directed at the court or a party. The deceit must have taken place during an ongoing litigation, although there is a suggestion that it may be sufficient if there is a probable future litigation that will ensue.
The alternative third requirement is a “chronic” pattern of “extreme” deceptive practice, in the situation where there is no deceit directed at the court. This pattern must, as one suspects, be significant, long, and very demonstrable.
The fourth requirement is that damages flow from the deceit or deceptive practice. In the absence of such proximate cause, or alternatively, in the absence of compensable underlying damages, there can be no recovery.
The statute is subject to a three year statute of limitations. Kuske v. Gellert & Cutler, P.C., 247 AD2d 448 (2d Dept. 1998); Jorgensen v. Silverman, 224 AD2d 665 (2d Dept. 1996).
Granting §487 Relief
In Shindler v. Issler & Schrange, P.C., 262 AD2d 226 (1st Dept. 1999), the attorney knew that in an Arizona proceeding a court restricted decedent’s bank accounts against withdrawals except upon prior order of the court. Knowing this, the attorney represented a client in New York, moved solely against Citibank and without notice to the estate obtained a declaratory judgment that the account was sole property of the client, and not the estate.
The attorney’s acts diverted the account away from the estate and to the client. The Appellate Division determined the conduct of the defendant attorney clearly fell within the ambit of §487, and that he “knowingly withheld crucial information from the declaratory judgment court.” Silence, when one has a duty to speak, was the equivalent of fraudulent concealment, which is the equivalent of affirmative misrepresentation of fact.
A different and bizarre case in which the court upheld application of Judiciary Law §487 is Guardian Life Insurance Co. v. Handel, 190 AD2d 57 (1st Dept. 1993). The facts read as if from a movie script. A businessman is found at the bottom of a pool at a small resort in Acapulco. A fellow guest who happens to be a physician expresses the view that death was by heart attack. A second resort guest becomes the attorney involved for the widow. However, the local coroner ruled the death to be by drowning. At issue will be whether benefits will be payable under an accidental death life insurance policy.
The insurance carriers wanted an autopsy. The widow, represented by Handel, refused. As it happened, Handle had been part of the vacation party and was present at the discovery of the body. He files an embalming certificate, which is later alleged to be false. The widow sues and wins insurance proceeds. Not satisfied with the insurance proceeds and interest, she sues for intentional infliction of emotional distress. Later she discontinued the action.
Now, the insurance companies alleges that an embalming certificate issued in Mexico was a fraud, and that the original action was a sham, designed solely to allow the decedent to decompose so much that no autopsy could ever be performed. The insurance company charges that Handel knew and participated in this fraud and the court permits Judiciary Law §487 claims to continue.
Another well-known New York case is Izko Sportswear Co. Inc. v. Flaum, 20 AD3d 392 (2d Dept. 2005). There the attorney represented Izko Sportswear Co. Inc., in a Chapter 11 bankruptcy. Defendant attorney filed the usual affidavit stating that he had no connection with Izko or its creditors.
However, the firm had actually previously represented one of the creditors and tipped it that Izko was going to file a Chapter 11 petition, revealing confidential information. The creditor then prosecuted Izko as landlord. This allegation of deceit and violation of Judiciary Law §487 survived dismissal motions. “A violation of Judiciary Law §487 may be established either by the defendant’s alleged deceit or by an alleged chronic, extreme pattern of legal delinquency by the defendants.”
Another successful application of §487 concerned an attorney who backdated medical malpractice retainers so the attorney had the benefit of the 33.3 percent contingent fee rather than the later sliding fee. The court found a fraudulent breach of the retainer agreement, and dishonest conduct. The clients were awarded summary judgment on their claim for conversion and breach of the retainer agreement, and the jury found in favor of the client on §487 claims. Matter of Harley, 298 AD2d 49 (1st Dept. 2002).
Denying §487 Relief
Far more common than successful §487 cases are the unsuccessful cases. They may be broken down into several categories.
Cases have been denied because the claims did not arise in a pending case. Banker’s Trust Co. v. Cerrato, Sweeney, Cohn, Stahl & Vaccaro, 187 AD2d 384 (1st Dept. 1992); Beshara v. Little, 215 AD2d 823 (2d Dept. 1995); Costalas v. Amalfitano, 305 AD2d 202 (1st Dept. 2003); Henry v. Brenner, 271 AD2d 647 (2d Dept. 2000); Manna v. Ades, 237 AD2d 264 (2d Dept. 1997); Werner v. Katal Country Club, 234 AD2d 659 (3d Dept. 1996).
As a denial case, Banker’s Trust Co. is instructive. Here the allegations were that the firm misappropriated and converted the proceeds of a lawsuit by failing to notify plaintiff the case had been settled, and diverting the monies to another client of the law firm.
On appeal, the Appellate Division held that a triable issue remained whether the law firm knew of an assignment. It determined that “the nexus between aider and abettor and the primary fraud is made out.”
However, even in the face of this finding, the Judiciary Law §487 claim was dismissed as “the alleged deceit did not occur during the pending judicial proceeding in which plaintiff was a party.”
Cases have been dismissed because the behavior was not extreme enough. Bridges v. 725 Riverside Drive Inc., 119 AD2d 789 (2d Dept. 1986); Gonzalez v. Gordon, 233 AD2d 191 (1st Dept. 1996); Est. of Steinberg v. Harmon, 259 AD2d 318 (1st Dept. 1999); Tawil v. Wasser, 21 AD3d 948 (2d Dept. 2005).
Cases have also been dismissed because there was no privity between the plaintiff and the attorney, although this seems to go against the “any party” language found elsewhere. Mecca v. Shang, 258 AD2d 569 (2d Dept. 1999).
Lastly, aside from those many cases in which the court determined that there were insufficient allegations, several have been dismissed on the basis that there was no compensatory award, and hence no treble damages. Kaiser v. Van Houten, 12 AD3d 1012 (3d Dept. 2004); Manna v. Ades, 237 AD2d 264 (2d Dept. 1997); Stanski v. Ezersky, 228 AD2d 311 (1st Dept. 1996).
‘Chronic Delinquency’
Almost all the cases subscribe to a blanket requirement that defendant “engaged in chronic, extreme pattern of legal delinquency” in a transactional setting or deceit to the court in a litigative setting. Breaking away from that blanket assertion is a decision by Judge Denise Cote of the Southern District of New York in Trepel v. Dippold, 2005 U.S. Dist Lexis 8541.
This decision cuts new ground in its analysis of §487. The judge wrote:
The court noted that the phrase “chronic, extreme pattern of legal delinquency” was first found in Wiggin v. Gordon, 115 Misc 2d 1071 (NY City Civ. Ct. 1982), and “has been repeated without analysis ever since.”
To be sure, there are cases holding to the contrary, and they are cited by the Trepel court. In Savitsky v. Mazzella, 2004 U.S. Dist Lexis 22104 (SDNY 2004), the plaintiff was not permitted to amend the complaint on the §487 claim because it would be “futile” to do so; in Havel v. Islam, 272 AD2d 210, (1st Dept. 2002), the horribly battered and disfigured wife’s claim was dismissed because “the complaint failed to establish a chronic and extreme pattern of legal delinquency [citations omitted] or that the actions of the attorney defendants caused plaintiff damages.”
But, review of the cases reveals a difference between results in federal district court and state court. Some practitioners propose that the basic issue of court congestion and case load between the federal and state systems causes differential handling of motions and trials.
On a textual analysis, the question of Judiciary Law §487 often rates a single line or two in state decisions, while in federal rulings there are much fuller discussions.
Here, we see differential analysis of the vitality of Judiciary Law §487 cases. The divergence between federal treatment of Judiciary Law §487 and state treatment seems to be widening, with district courts allowing plaintiff greater leeway in prosecuting these cases. State courts appear to be much more restrictive, and to allow a claim only in the most dire and obvious circumstances.
Andrew Lavoott Bluestone is a sole practitioner in New York City concentrating in legal malpractice litigation. He is the author of the New York Attorney Malpractice Blog at blog.bluestonelawfirm.com.
