| Melcher v Greenberg Traurig, LLP |
| 2013 NY Slip Op 00256 [102 AD3d 497] |
| January 17, 2013 |
| Appellate Division, First Department |
| James L. Melcher, Respondent, v GreenbergTraurig, LLP, et al., Appellants. |
—[*1] Jeffrey A. Jannuzzo, New York, for respondent.
Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), enteredNovember 14, 2011, which denied defendants' motion to dismiss the complaint on statuteof limitations grounds, reversed on the law, without costs, the motion granted and theamended complaint dismissed in its entirety. The Clerk is directed to enter judgmentaccordingly.
This action was commenced on June 25, 2007. Plaintiff's sole cause of action isbased on Judiciary Law § 487, which provides for an award of treble damages toan injured party where an attorney "[i]s guilty of any deceit or collusion, or consents toany deceit or collusion, with intent to deceive the court or any party" (Judiciary Law§ 487 [1]). At all relevant times, defendant Greenberg Traurig, LLP (GT) andLeslie Corwin, a partner therein, were the attorneys for Apollo Medical FundManagement L.L.C. and its principal, Brandon Fradd, in an action that plaintiff broughtagainst them in 2003 (the Apollo Management action). Plaintiff brought the ApolloManagement action to recover his membership share of profits under Apollo's 1998operating agreement.
In the instant complaint, it is alleged that at a January 27, 2004 meeting, Corwinrepresented to plaintiff and his counsel that plaintiff's case lacked merit because hismembership rights to a share of Apollo's profits had been drastically diminished by apurported May 21, 1998 amendment of the operating agreement. Corwin told plaintiffand his counsel that he personally confirmed the authenticity of the amendment with JackGovernale, the lawyer said to have drafted it. The amended complaint describes thisJanuary 27, 2004 statement it attributes to Corwin as "an outright lie." Plaintiff allegesthat at the meeting and by letter faxed the same day, his counsel requested thatdefendants make the signed original of the claimed amendment available for forensicchemical testing that would have enabled plaintiff's experts to determine the time framewhen any ink found on the document was applied. As stated in the amended complaint,chemical testing would have established to a scientific certainty that the purportedamendment was a "back-dated forgery."
According to the amended complaint, Fradd informed Corwin by email datedFebruary 1, 2004, that he had accidentally set fire to the two-page amendment whilemaking tea. Specifically, Fradd allegedly advised Corwin that the top page had beendestroyed and the bottom page singed. Nevertheless, on February 17, 2004, GT andCorwin made a motion on behalf of their clients for an order dismissing the ApolloManagement complaint pursuant to [*2]CPLR 3211 (a)(1) on the basis of a defense founded upon documentary evidence consisting of thepurported amendment of the operating agreement. This motion was made whileplaintiff's February 5, 2004 motion to compel the production of the claimed originalamendment was sub judice. On the February 23, 2004 hearing date of plaintiff's motionto compel, Corwin allegedly represented to the motion court that he was holding theoriginal of the amendment in escrow but did not disclose to the court the burning thathad been reported by Fradd. The amended complaint alleges that "[d]efendants made thefalse and misleading statement to the Supreme Court that they were holding the originals'in escrow' to mislead the Supreme Court that the document was safe and had not beentampered with, when the truth was the opposite. Defendants falsely and misleadinglyrepresented to the Supreme Court that they were holding the originals 'in escrow' withintent to deceive, to prevent the Supreme Court and plaintiff from ever discovering thatthe 'amendment' had been burned under highly suspicious circumstances, that the files ofthe law firm that supposedly drafted it contained no evidence that it ever existed, and thatthe lawyers who supposedly drafted it had no knowledge of it."
An "action to recover upon a liability, penalty or forfeiture created or imposed bystatute" must be commenced within three years (CPLR 214 [2]). A cause of action underJudiciary Law § 487 is purely statutory in nature and therefore subject to thethree-year statute of limitations. Judiciary Law § 487 "is a unique statute of ancientorigin in the criminal law of England" (Amalfitano v Rosenberg, 12 NY3d 8, 14 [2009]).
The next question is when plaintiff's cause of action accrued. An action seekingdamages under Judiciary Law § 487 must be commenced within the longer ofthree years from the time of the underlying deceit or collusion or within two years fromthe time the deceit or collusion was discovered, or with reasonable diligence, could havebeen discovered (CPLR 214 [2]; see CPLR 203 [g]; cf. Sargiss v Magarelli, 12NY3d 527, 532 [2009]). Accordingly, there is no merit to plaintiff's argument thatthe statute of limitations does not begin to run until the conclusion of the underlyingcase. As the motion court correctly found, plaintiff knew of GT's and Corwin's allegeddeceit concerning Fradd's destruction of the purported amendment more than three yearsbefore this action was commenced. Specifically, by letter to the motion court datedMarch 20, 2004, plaintiff's counsel complained of "the defendants' concealment ofmaterial facts and misleading representations" in connection with the aforementionedmotion to compel the production of the original document. In the letter, plaintiff'scounsel acknowledged that on March 18, 2004, he was made aware of Fradd's claimeddestruction of the original first page of the purported two-page amendment. Plaintiff'scounsel also noted that at the February 23, 2004 hearing, Corwin assured the court thathe had the original amendment in his personal possession while concealing theinformation about Fradd's claimed destruction of the document. The letter also accusedGT and Corwin of misleading plaintiff about the fact that they had hired their own inktesting expert. The letter further suggested that GT and Corwin deceived their inkchemistry expert by having him unwittingly render a report on his examination of aphotocopy that was apparently passed off to him as the supposed original amendment ofthe operating agreement.
We do not share the dissent's footnoted view that plaintiff's March 20, 2004 letter didnot accuse GT and Corwin of collusion or deceit under Judiciary Law § 487because it merely spoke of concealment on their part. On the contrary, the then-existingCode of Professional [*3]Responsibility DR 7-102 (a) (3)(former 22 NYCRR 1200.33 [a] [3]) imposed upon attorneys, as officers of the court, anobligation to disclose crucial information to a tribunal (see Schindler v Issler &Schrage, 262 AD2d 226, 228-229 [1st Dept 1999], lv dismissed 94 NY2d791 [1999]). An attorney's withholding of crucial information from a court falls withinthe proscription of Judiciary Law § 487 (id.). Stated differently, anattorney's concealment from a court of a fact he or she is required by law to disclose istantamount to the assertion of a false material fact (see Matter of Shearer, 94 AD3d 128 [1st Dept 2012]).Accordingly, Corwin's concealment from the court of information regarding the claimedincineration of the purported document upon which he based his clients' motion todismiss the Apollo Management complaint was actionable under the statute.Notwithstanding the dissent's position, for purposes of Judiciary Law § 487, itdoes not matter whether the concealed information would "have altered the determinationof defendants' motion to dismiss." The statute's application is not limited to successfuldeceits (Amalfitano v Rosenberg, 12 NY3d at 11-14). That is because thestatute's "evident intent" is "to enforce an attorney's special obligation to protect theintegrity of the courts and foster their truth-seeking function" (id. at 14).Therefore, the concealment recounted in plaintiff's March 20, 2004 letter would haveconstituted a significant breach of Corwin's duty as an attorney. This action istime-barred by reason of plaintiff's admitted awareness of the alleged concealment formore than three years before he filed suit.
We also reject plaintiff's argument that the accrual date was extended by GT's andCorwin's subsequent alleged cover-up of their deceit on the court. Within the analogouscontext of a fraud action, this Court held: "A new cause of action for fraud does notaccrue each time a plaintiff discovers new elements of fraud in a transaction or newevidence to prove such fraud. Where there is knowledge of facts sufficient to suggest to aperson of ordinary intelligence the probability that he [or she] has been defrauded, a dutyof inquiry arises and may thus start the running of the statute" (Augstein v Levey,3 AD2d 595, 599 [1st Dept 1957], affd 4 NY2d 791 [1958] [internal quotationmarks and citation omitted]). The accrual date was not extended here because, as notedabove, plaintiff was aware of the basic facts relative to defendants' alleged deceit morethan three years before this action was commenced. For the same reason, we find that themotion court erroneously determined that GT and Corwin were equitably estopped fromasserting the statute of limitations as a defense. The doctrine of equitable estoppel doesnot apply here because plaintiff has not met the fundamental requirement of establishingthat subsequent and specific actions by defendants somehow kept him from timelybringing suit (see Corsello vVerizon N.Y., Inc., 18 NY3d 777, 789 [2012]). Equitable estoppel isinapplicable for the additional reason that plaintiff does not allege an act of deceptionseparate and apart from the ones upon which he sues (id.).Concur—Gonzalez, P.J., Saxe and DeGrasse, JJ.
Freedman and Román, JJ., dissent in a memorandum by Román, J., asfollows: Because I believe that plaintiff's cause of action pursuant to Judiciary Law§ 487 accrued within the three year statute of limitations prescribed by CPLR 214(2), this action was timely commenced, the motion court properly denied defendants'motion to dismiss, and therefore I [*4]dissent.
Pursuant to Judiciary Law § 487 an attorney who engages in "deceit orcollusion, or consents to any deceit or collusion, with intent to deceive the court or anyparty . . . [i]s guilty of a misdemeanor, and in addition to the punishmentprescribed therefor by the penal law, he forfeits to the party injured treble damages, to berecovered in a civil action" (Judiciary Law § 487 [1]). While we previously heldthat a cause of action pursuant to Judiciary Law § 487 did not give rise to "aunique form of liability unknown at common law," and was thus governed by a six-yearstatute of limitations (Guardian Life Ins. Co. of Am. v Handel, 190 AD2d 57,62-63 [1st Dept 1993]), it is now well settled that Judiciary Law § 487 "is not acodification of a common-law cause of action for fraud. Rather, section 487 is a uniquestatute of ancient origin in the criminal law of England" (Amalfitano v Rosenberg, 12NY3d 8, 14 [2009]). Accordingly, pursuant to CPLR 214 (2), a cause of actionpursuant to Judiciary Law § 487 is "an action to recover upon a liability, penalty orforfeiture created or imposed by statute," and is thus governed by a three-year statute oflimitations.
Here, plaintiff's complaint, the allegations of which must be taken as true on amotion to dismiss (Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414[2001]; Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998]), alleges manyinstances of deceit by Brandon Fradd, a principal of Apollo Management Medical Fund,L.L.C., e.g., the intentional destruction of evidence by burning the amendment whichpurportedly diminished plaintiff's share of Apollo Management's profits. However,according to the complaint, actual deceit by defendant Leslie D. Corwin, legal counsel toFradd and Apollo Management, giving rise to plaintiff's cause of action pursuant toJudiciary Law § 487, first occurred on January 27, 2004. On that date, Corwin, inthe course of representing Fradd and Apollo Management, stated that he had contactedJack Governale, prior counsel to Apollo Management, and had personally confirmed thatthe amendment that diminished plaintiff's share of Apollo Management's profits wasauthentic and had in fact been drafted by Governale. According to the complaint,however, plaintiff did not become aware that Corwin's assertions were false untilDecember 7, 2005 when Governale was deposed and testified that he knew nothingabout the amendment at issue and that his files contained no indication of any suchamendment. Plaintiff pleads that when Governale denied drafting the amendment, it thenbecame clear that Corwin could not have verified the amendment's authenticity withGovernale as he previously represented and that therefore, Corwin, with his statementson January 27, 2004, had deceived him.
"A cause of action accrues, for the purpose of measuring the period of limitations,when all of the facts necessary to the cause of action have occurred so that the partywould be entitled to obtain relief in court" (Matter of Motor Veh. Acc. Indem. Corp.v Aetna Cas. & Sur. Co., 89 NY2d 214, 221 [1996] [internal quotation marksomitted]). Accordingly, given the allegations in [*5]thecomplaint, plaintiff's cause of action could not have accrued until December 7,2005.[FN*] While Corwin's representation on January 27, 2004 was allegedly subterfuge, whichviolated Judiciary Law § 487, plaintiff did not become aware of this allegeddeception until December 7, 2005, when Governale was deposed. Therefore, it was notuntil this date, when all the facts necessary to a cause of action pursuant to Judiciary Law§ 487 were known that plaintiff's cause of action accrued. Specifically, it was onthat date that the realization that plaintiff had been deceived by Corwin occurred.Because "[a]n action is commenced by filing a summons and complaint or summons withnotice" (CPLR 304 [a]), plaintiff, who filed his summons with notice on June 25, 2007,less than two years after his cause of action against defendants accrued, timelycommenced this action. Defendants' motion to dismiss was therefore properly denied.
While I agree with the majority's assertion that silence on certain issues may verywell constitute fraudulent concealment such that an attorney who knowingly withholdscrucial information from the court violates Judiciary Law § 487 (Schindler vIssler & Schrage, 262 AD2d 226, 229 [1st Dept 1999], lv dismissed 94NY2d 791 [1999]), I disagree that defendants' failure to apprise the court that theagreement at issue had been destroyed was crucial information such that the failure todisclose violated Judiciary Law § 487.
The facts here and those in Schindler are inapposite. In Schindler, thedefendant, an attorney, who represented a client in a declaratory judgment actionregarding money held in a bank account, violated Judiciary Law § 487 by failingto advise the court that the client had already been held in contempt by another court forwithdrawing the very money at issue and that a judgment had been issued against theclient for those sums (id. at 227). Certainly, this information, a prior order fromanother court, was crucial and would likely have been dispositive to the court in thedeclaratory judgment action. Thus, the failure to disclose this information to the courtwas, insofar as designed to alter the outcome of the litigation, fraudulent concealment inviolation of Judiciary Law § 487.
By contrast, here, the allegations against defendants in plaintiff's counsel's letterdated March 24, 2004 merely accused them of failing to voluntarily disclose that anoriginal document had been destroyed. While this document was indeed the crux of theaction brought by plaintiff against Fradd and Apollo Management, defendants wereunder no legal obligation to disclose that it had been destroyed at that particular juncture.Certainly nothing in the CPLR required the voluntary disclosure of this information.Moreover, since the CPLR does not require the submission of original documents on amotion to dismiss, any claim that the failure to disclose here was, as in Schindler,designed to affect the outcome of the already submitted motion is baseless. Thus,because, here, absent a direct inquiry, defendants had no obligation to [*6]affirmatively disclose or volunteer that the originalagreement had been destroyed by Fradd, any claim of fraudulent concealment stemmingfrom the aforementioned failure to disclose is baseless and therefore plaintiff's claimpursuant to Judiciary Law § 487 could not have accrued, as asserted by themajority, on March 20, 2004. Accordingly, I would affirm the motion court's decision.
Footnote *: Contrary to themajority's assertion, a letter to the court by plaintiff's counsel dated March 20, 2004, didnot accuse the defendants of collusion or deceit under Judiciary Law § 487.Instead, the letter only accused Fradd and Apollo Management of concealment inconnection with an already submitted motion to dismiss and merely accused thedefendants of omissions to the court in connection therewith. Accordingly, these facts donot, as argued by defendants, evince that plaintiff was aware of defendants' deception asearly as March 20, 2004 so as to constitute accrual of his cause of action pursuant toJudiciary Law § 487.