A lawyer who made material misrepresentations in a lawsuit may be sued under New York's 'attorney deceit' statute, even if there was only a single act of misrepresentation.
The suit, brought by Canon, the camera and photocopier company, involves accusations that a New York attorney and his firm colluded with their clients during a dispute over a Canon dealership. Canon claims that the attorney knowingly filed false papers with the court during litigation over the dealer agreement, Bloomberg reports, in a story that comes to our attention by way of the ABA Journal.
Just One Instance of Deception Can Do
A handful of states have laws against attorney collusion or deception. New York's statute, Judiciary Law Section 487, criminalizes such collusion and allows for the recovery of treble damages in civil litigation. It is, as Law360 characterizes it, a law that "looms over every litigator in hotly contested state and federal cases in New York."
Under the Canon decision, a single instance of fraud may support a Section 487 claim, "if sufficiently egregious and accompanied by an intent to deceive". The court rejected the argument that lawyers could not have the intent to deceive if they are merely acting on behalf of their clients.
"An attorney that has knowingly and intentionally filed material misrepresentations with a court in order to induce the court to take an action that it would not otherwise take cannot stand behind vigorous advocacy as an excuse," the court explained.
High Stakes for Lawyers Facing Section 487 Suits
Canon isn't the only business that's turned to Section 487 to go after lawyers. This summer, a federal court similarly allowed Facebook's Section 487 claims to go forward against attorneys who represented Paul Ceglia in his lawsuit against Facebook and Mark Zuckerberg.
In 2010, Paul Ceglia became famous when he sued Mark Zuckerberg, alleging that he was entitled to 84 percent of Facebook. Ceglia, a wood-pellet salesman, said he had a contract with Zuckerberg that entitled him control over the company. His case didn't stand up, however, and it didn't take long for his lawyers, then the courts, to realize that the claim was fraudulent.
Ceglia is now a fugitive on the lam and Facebook's attorneys turned to Ceglia's former attorneys for their revenge. The company has sued four law firms and nine individual lawyers under the New York law.
Section 487 suits can be particularly damaging to attorneys. As David F. Bayne and Steven M. Cordero write on Law360:
Although defense costs and settlements are normally covered by professional liability policies, Section 487 judgments are not, thereby imposing considerable pressure on the unfortunate practitioner sued for such claims to dispose of them. Even if a dubious case settles, the lawyer may suffer with higher insurance premiums. The statute also imposes a degree of reputational risk to a lawyer not associated with claims of legal malpractice, breach of fiduciary duty or even fraud because the attorney defendant in a Section 487 claim stands accused of intentionally deceiving, or attempting to deceive, a litigant or the court and thereby subverting the judicial process, which the lawyer has sworn to protect. Thus, the stakes for counsel under Section 487 could not be higher.
Section 487 suits have become an increasingly popular in recent years. With the court's recent ruling in the Canon litigation, that trend may only accelerate.
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