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The Nightmare of Section 487

 Most lawyers are generally familiar with the standards of practice, departures from which make them vulnerable to claims of legal malpractice.*  Unlike their bretheren in the medical profession who have felt under attack for decades from lawyers who sued them for medical malpractice, leading to a nationwide effort for tort reform, because lawyers in essence make up the rules, they have been insulated from the kind of “crisis” affecting the medical field.  But life is long, the wheel turns, and Judiciary Law §487 promises to make life as a lawyer more uncomfortable than any doctor ever felt. The full text of Judiciary Law §487 reads:An attorney or counselor who:
  1. Is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party; or,
  2. Willfully delays his client’s suit with a view to his own gain; or willfully receives any money or allowance for or on account of any money which he has not laid out, or becomes answerable for,
Is guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action.This section of the Judiciary Law has a long history and its modern day counterpart is virtually unchanged from its ancient roots.  It was written into the Judiciary Law in 1965 but goes back to early American Penal Codes.  The legal principles behind the statute actually go back to English law enacted in the time of the Magna Carta, a history more interestingly described in the recent Court of Appeals decision in Amalfitano v. Rosenberg decided February 12, 2009. [1] What lawyers need to know is that the statute’s application is interpreted, not in the civil torts context, but in criminal law.  What the Court of Appeals said in this regard is that:* Indeed the Rules of Professional Conduct require that a lawyer should provide “competent representation” which “requires the legal knowledge, skill, thoroughness and preparation reasonable necessary for the representation.”  (Rule 1.1(a))Section 487 is not a codification of a common law cause of action for fraud.  Rather, section 487 is a unique statute of ancient origin in the criminal law of England.  The operative language at issue – “guilty of any deceit” – focuses on the attorney’s intent to deceive, not the deceit’s success.  And as the District Court pointed out, section 487 was for many years placed in the state’s penal law, which “supports the argument that the more appropriate context for analysis is not the law applicable to comparable civil torts but rather criminal law, where an attempt to commit an underlying offense is punishable as well as the underlying offense itself” (Amalfatino, 428 F Supp 2d at 210).  Further, to limit forfeiture under section 487 to successful deceits would run counter to the statute’s evident intent to enforce an attorney’s special obligation to protect the integrity of the courts and foster their truth-seeking function.[2]****All practicing lawyers should read the Amalfitano federal southern district decision of Judge Buchwald which shines a detailed light into how a lawyer can get into so much trouble under section 487. [3] That decision details “a litany of misconduct by Rosenberg” [the lawyer] including failing to investigate the circumstances behind an agreement his client had signed years before, merely relying on his client’s account of circumstances, and filing a lawsuit on behalf of his clients against family members his client had defrauded years before, and Rosenberg knew this because he had been involved in the legal maneuverings and litigation which arose out of his client’s past misdeeds.It would be a mistake to read the history of Amalfitano and conclude that the Court of Appeals decision was inevitable, for after all, Rosenberg clearly engaged in a “chronic pattern of deceit” proof of which is necessary to establish violation of §487.  But what if for example there is arguably only one act, for example, merely relying on what the client told you and instituting suit without engaging in some prior due diligence check of the facts.  There is case law, which the district court in Amalfitano mentioned, which indicates that a “single act or decision, if sufficiently egregious and accompanied by an intent to deceive, is sufficient to support liability.”[4] When the case reached the Second Circuit, writing for the court Judge Robert Sack noted some disagreement among courts in New York as to whether you have to prove a “chronic pattern of deceit” or whether a “single intentional act” is sufficient.  When the Second Circuit certified the case to the State Court of Appeals, it was asked to clarify this interpretation of the statute.  However, there was no reference to this issue in the Court of Appeals decision, except by its description of the history of the case in the district court which found a “persistenct pattern of unethical behavior.” [5]In Amalfitano, not only did Rosenberg’s defense of attempted but unsuccessful deceit fail, but so did his argument that Plaintiff’s litigation expenses were not proximately caused damages.  He, therefore became liable for $89,415.18 in Plaintiff’s litigation costs, but then, pursuant to §487, this was trebled to $268,245.54.  It is important to note that damages such as these are not indemnified by professional liability policies.  To make matters worse for Rosenberg, his actions were then reported by the court to Grievance.Although damages under §487 are not indemnified under professional liability policies, defense of such claims might be, particularly if they arise within the context of a broader lawsuit to recover for damages arising out of legal malpractice.  It is the impression of this writer that a trend is developing in which section 487 claims are being thrown into the mix of the standard malpractice allegation (negligence, breach of fiduciary duty, conflicts of interest, violations of disciplinary rules, breach of contract, fraud).  Not only that, one is starting to see motions to amend complaints adding section 487 claims years after the lawsuit for malpractice was filed, and being granted on the relation back theory and that, absent prejudice, amendments of pleadings should be liberally granted.  See for example, Cinao v. Reers[6],  in which 6 years after the complaint was filed, the court granted the amendment, noting that discovery was still ongoing.Hardly a week goes by that the New York Law Journal doesn’t report on yet another lawyer being suspended, disbarred or jailed for criminal activity.  Prominent and celebrity lawyers are part of this mix.  A couple of years ago I started keeping count because in my time as a lawyer I had never seen such an epidemic of miscreants coming out of our profession.  I have lost count, the list being too long.  But section 487 promises to ensnare otherwise good and decent lawyers.  True, the history of the statute has ancient roots, and is there for good reason.  But the imagination and creativity of lawyers may well turn section 487 into a more painful liability for lawyers than we ever imagined.[1] Amalfitano v. Rosenberg, ________________________[2] Amalfitano, Supra @ ____________________[3] Amalfitano federal southern district decision of Judge Buchwald, 428 F Supp.2d _______________[4] 428 F Supp 2d at __________________[5] Amalfitano, Supra at ______________________[6] Cinao v. Reers, NYLJ January 22, 2010, Page 23, Col 3)  

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