Bill Birds, Inc. v. Stein Law Firm, P.C.

• Decision Date: 31 March 2020
• Docket Number: No. 19,19
• Citation: Bill Birds, Inc. v. Stein Law Firm, P.C., 35 N.Y.3d 173, 149 N.E.3d 888, 126 N.Y.S.3d 50 (N.Y. 2020)
• Parties: BILL BIRDS, INC. et al., Appellants, v. STEIN LAW FIRM, P.C. et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

35 N.Y.3d 173

149 N.E.3d 888

126 N.Y.S.3d 50

BILL BIRDS, INC. et al., Appellants,

v.STEIN LAW FIRM, P.C. et al., Respondents.

No. 19

Court of Appeals of New York.

March 31, 2020

OPINION OF THE COURT

Chief Judge DiFIORE.

The singular issue before us in this appeal is whether the Appellate Division erred in dismissing plaintiffs' claim under Judiciary Law § 487(1) against their former attorneys who allegedly induced them to bring a meritless lawsuit in order to generate a legal fee. Defendants met their initial burden on summary judgment with respect to whether their alleged deceit occurred during the pendency of litigation, and plaintiffs failed to raise a triable issue of fact on that issue in response. We therefore affirm the Appellate Division order granting summary judgment dismissing the complaint.

Defendants, attorney Mitchell Stein and his law firm, Stein Law P.C., represented plaintiffs Bill Birds, Inc., which manufactures decorative metal automobile parts, and its president in a trademark dispute against General Motors, Service Parts Operation (GM) and Equity Management, Inc. (EMI). After the complaint in that action was dismissed, plaintiffs commenced this action against defendants alleging, as relevant here, a violation of Judiciary Law § 487(1).¹

Plaintiffs alleged that defendants advised them that GM had possibly abandoned the trademarks GM had licensed to plaintiffs for over a decade, advising plaintiffs that they had meritorious claims against GM. Based on this advice, plaintiffs commenced the underlying federal trademark action against GM and EMI in the United States District Court for the Eastern District of New York, incurring $25,000 in attorney fees. Plaintiffs alleged that the underlying action—which was dismissed as commenced in an improper venue based on a forum selection clause in plaintiffs' licensing agreements with GM—clearly lacked merit, in part because a provision in the licensing agreement prohibited plaintiffs from challenging GM's ownership of the relevant intellectual property. Plaintiffs further alleged that defendants concealed the dismissal of the underlying action for approximately nine months and subsequently lied about the reason for the delay, claiming that the federal court did not release its decision promptly.

After answering the complaint, defendants moved for summary judgment, arguing, among other things, that the Judiciary Law § 487 claim must be dismissed because plaintiffs failed to allege any misrepresentations made in the context of ongoing litigation. Plaintiffs opposed the motion, submitting affidavits alleging essentially the same conduct described in the complaint. In addition, plaintiffs submitted an expert affidavit from an attorney who averred that defendants' legal advice regarding GM's rights to the licensed trademarks was incorrect and that defendants induced plaintiffs into litigation under "false pretenses."

Supreme Court granted defendants' motion for summary judgment in part, dismissing the legal malpractice, breach of contract and fraud claims, but denied the motion with respect to the section 487 claim, concluding that plaintiffs' expert affidavit raised triable issues of fact. Defendants appealed from so much of the order of Supreme Court that denied summary judgment on the section 487 claim, and the Appellate Division reversed, insofar as appealed from by defendants, and granted defendants summary judgment on that claim, dismissing the complaint in its entirety ( 164 A.D.3d 635, 82 N.Y.S.3d 91 [2d Dept. 2018] ). The court reasoned, inter alia, that plaintiffs failed to allege that defendants intended to deceive the court or any party, as required by the statute. This Court granted plaintiffs' motion for leave to appeal ( 32 N.Y.3d 913, 93 N.Y.S.3d 259, 117 N.E.3d 818 [2019] ).

Under Judiciary Law § 487(1), an attorney "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" is guilty of a misdemeanor and may be liable to the injured party for treble damages in a civil action. In our decisions in Amalfitano v. Rosenberg , 12 N.Y.3d 8, 874 N.Y.S.2d 868, 903 N.E.2d 265 [2009] and Melcher v. Greenberg Traurig, LLP , 23 N.Y.3d 10, 988 N.Y.S.2d 101, 11 N.E.3d 174 [2014], we examined the ancient origins of section 487, noting that the claim could be traced back to old English common law and was first codified in 1275 ( Amalfitano , 12 N.Y.3d at 12, 874 N.Y.S.2d 868, 903 N.E.2d 265 ; Melcher , 23 N.Y.3d at 14–15, 988 N.Y.S.2d 101, 11 N.E.3d 174 ). The original statute made it a criminal offense for a "Pleader" to engage in "Deceit or Collusion in the King's Court" ( Amalfitano , 12 N.Y.3d at 12, 874 N.Y.S.2d 868, 903 N.E.2d 265 ). The law was carried over to colonial New York and, as early as 1787, a New York statute similarly stated that any attorney guilty of deceit or collusion "in any court of justice" shall be punished ( id. ). "[V]irtually identical" language proscribing intentional deceit by attorneys was codified in both the civil and penal law in the 1800s, and subsequently transferred to the Judiciary Law in 1965 ( id. at 12–13, 874 N.Y.S.2d 868, 903 N.E.2d 265 ).

Similar to fraud, Judiciary Law § 487 —covering intentional deceit and collusion—imposes liability for the making of false statements with scienter. But in light of the history of the statute, we concluded in Amalfitano that Judiciary Law § 487 is not a codification of common law fraud and therefore does not require a showing of justifiable reliance ( id. at 12, 14, 874 N.Y.S.2d 868, 903 N.E.2d 265 ). In other words, liability under the statute does not depend on whether the court or party to whom the statement is made is actually misled by the attorney's intentional false statement ( id. at 14, 874 N.Y.S.2d 868, 903 N.E.2d 265 ). Given the requirement that the conduct involve "deceit or collusion" and be intentional, liability under the statute does not extend to negligent acts or conduct that constitutes only legal malpractice, evincing a lack of professional competency. Indeed, because a violation of section 487 is a crime, we must be circumspect to ensure "that penal responsibility is not extended beyond the fair scope of the statutory mandate" ( People v. Hedgeman , 70 N.Y.2d 533, 537, 523 N.Y.S.2d 46, 517 N.E.2d 858 [1987] [quotation marks and citation omitted] ).

In Looff v. Lawton , this Court held, under a predecessor statute that employed substantially the same language now found in Judiciary Law § 487(1), that allegations that an attorney provided "false and untrue" legal advice to induce plaintiffs to bring an unnecessary lawsuit, motivated solely by the attorney's desire to collect a large fee, did not state a claim because the statute applied only to conduct that occurs in the context of "an action pending in a court"—not misleading advice preceding an action ( 97 N.Y. 478, 480, 482 [1884] ). We explained that, because the purported deceit occurred before the judicial action was commenced, "there was no court or party to be deceived within the meaning of the statute" ( id. at 482 ). In contrast, the conduct underlying the claim in Amalfitano —the making of a false statement of fact in the complaint regarding the client's partnership status in a family business (see Amalfitano , 12 N.Y.3d at 11, 874 N.Y.S.2d 868, 903 N.E.2d 265 )—fell squarely within the scope of the statute because the misrepresentations at issue there were made in the context of an action pending in court.

As reflected in our decisions in Looff and Amalfitano , the purpose of Judiciary Law § 487(1) is to safeguard an attorney's special obligation of honesty and fair dealing in the course of litigation—a pillar of the profession. Our legal system depends on the integrity of attorneys who fulfill the role of officers of the court, furthering its truth-seeking function (see Amalfitano , 12 N.Y.3d at 14, 874 N.Y.S.2d 868, 903 N.E.2d 265 ). Thus,

"[t]he 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 [e]ntrusted to them ... To mislead the court or a party is to deceive it; and, if knowingly done, constitutes criminal deceit under the statute" ( id. at 14, 874 N.Y.S.2d 868, 903 N.E.2d 265, quoting Looff v. Lawton , 14 Hun 588, 590 [2d Dept. 1878] [emphasis added] ).

Moreover, the language of the statute is aimed at a particular type of deceit or collusion—done by an attorney with the intent to mislead the court or a party (see id. ; Looff , 97 N.Y. at 482 ). While attorneys must zealously advocate for their clients, such deception or collusion is antithetical to appropriate advocacy, functioning as a fraud on the court or a party. Given the statute's origins and purpose, it provides a particularized civil remedy, and criminal liability, for a specialized form of attorney misconduct occurring during the pendency of litigation (see id. ).

Here, viewing the facts in the light most favorable to plaintiffs (see De Lourdes Torres v. Jones , 26 N.Y.3d 742, 763, 27 N.Y.S.3d 468, 47 N.E.3d 747 [2016] ), defendants established prima facie entitlement to judgment as a matter of law on the Judiciary Law § 487(1) claim by demonstrating that plaintiffs failed to allege that defendants engaged in deceit or collusion during the course of the underlying federal intellectual property lawsuit against GM and EMI.² In response, plaintiffs failed to satisfy their burden to establish material, triable issues of fact ( id. ). The affidavits plaintiffs submitted in opposition to summary judgment did not allege that defendants committed any acts of deceit or collusion during the pendency of the underlying federal lawsuit. To the extent defendants were alleged to have made deceitful statements, plaintiffs' allegation that defendants induced them to file a meritless lawsuit based on misleading legal advice preceding commencement of the...