December 12, 2008
Disbarment For Frivolous Suit
An attorney who had filed an action seeking $6.8 billion against a number of corporations, governmental entities and financial institutions alleging "theft, retention and sale of of artwork looted during the Holocaust" was disbarred by the New York Appellate Division for the First Judicial Department. A federal district court had dismissed the underlying case as " little more than an end run" around litigation that had been resolved in a comprehension settlement against Bank Austria.
The court here noted:
Judge Kram granted Bank Austria's motion to sanction respondent, finding that the lawsuit, being "entirely without color", was frivolous and in bad faith in violation of Rule 11. Judge Kram commented on, among other things, respondent's lack of preparation and professionalism, his "glaringly inadequate filings," and the fact that he deceived the court of "critical facts" concerning the previous class action settlement against Bank Austria in which he had substantially participated (2005 US Dist LEXIS 17411, *12). Judge Kram stated that the pleadings contained flagrant misrepresentations, that respondent falsely claimed that he was a member of the plaintiff organization AHVRAM, and that respondent attempted to circumvent the Bank Austria settlement. Judge Kram further noted that respondent, through AHVRAM, was prosecuting actions against at least six governments or entities, and stated that the findings were "bolstered by the fact that this case appears to be part of a pervasive and disturbing trend." (2005 US Dist LEXIS 17411, *18). Finally, Judge Kram stated that respondent engaged in champerty in violation of Judiciary Law § 488 and DR 5-103, based on her conclusion that respondent purchased interests in stolen artwork solely for the purpose of bringing lawsuits involving that artwork (2005 US Dist LEXIS 17411, *17). Judge Kram fined respondent $5,000 to be paid immediately to the court, and ordered him to pay his adversary's litigation costs and fees.
Respondent moved for reconsideration of and a stay of the court's rulings, which the court denied on November 17, 2005. The court further determined that respondent owed Bank Austria a total of $345,520.64 in litigation costs and expenses, and ordered him to immediately pay the $5,000 fine or post a bond. On December 1, 2005, judgment was entered against respondent and in favor of the defendant in the amount of $345,520.64. On January 13, 2006, the U.S. Court of Appeals issued a mandate dismissing respondent's appeal of Judge Kram's August 19, 2005 sanction order and deemed any pending motions moot.
The court had earlier granted an unopposed petition to accord collateral estoppel effect to the findings of the district court. A hearing panel in the disciplinary case found that the lawyer had made false submissions to the district court and had engaged in a pattern of misconduct.The court here agreed that the lawyer had known that the putative plaintiff in the case he had brought did not exist and that the relief sought had already been secured. (Mike Frisch)
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I find this case deeply disturbing.
Firstly, I’ll make the same point I made recently in another case. Why was the trial court not able to deal with this issue within the litigation itself and didn’t that court do exactly that when it ordered Rule 11 damages of and a fine totalling $350K? How many lawyers will not sit up and take note of an order like that and the bankruptcy that will surely soon follow? So why did the First Department feel the need to ‘pile it on’?
Secondly, the trial court judge ordered the respondent to pay immediately the $5K fine. Presumably it was the failure to pay the fine that resulted in Circuit Court then dismissing the appeal. So the respondent was denied all opportunity to contest the trial court judge’s findings. Indeed, was likely the intent of the trial court judge in making the order which seems totally inappropriate. Why should he have been denied an appeal of her determination? The First Department then ordered that the findings be afforded collateral estoppel treatment in the disciplinary proceeding so the respondent was denied every opportunity to challenge the trial court’s conclusions. The entire discipline rests of what one trial judge said.
Thirdly, at least from the quoted sections, what the trial court just said seems long on verbosity and short of facts. Phrases such as “entirely without color”. “glaringly inadequate filings,” “bolstered by the fact that this case appears to be part of a pervasive and disturbing trend”, “flagrant, repetitive, and blatant”. “careless abdication of his duties as a lawyer” and “little more than an end run” are all either conclusory or irrelevant. Indeed, as for the claim that he attempted to make an end-run around a settlement agreement, isn’t finding and prosecuting new causes of action something that we reward lawyers for?
Fourthly, the respondent made a motion to compel the Committee to produce the record and a motion to disqualify the Hearing Panel. The First Department totally ignored both motions. Both of these motions appear to raise very serious issues. If the title of the first motion is to be taken at face value, then the respondent had no access to the record before the Committee. How can that ever be acceptable? And how can the First Department ever ignore a motion so serious as one arguing disqualification which goes to whether the Hearing Panel was even able to consider the matter? From the little that is in the opinion, it is clear that the respondent made some very serious allegations (which were, in turn, cited as further cause for his disbarment – a clear Ruffalo violation – rather than being considered on their merits).
Finally, is disbarment really an appropriate sanction for this conduct? I have a hard time accepting that it is. As I said before, I think that this matter was adequately resolved by the trial court through its Rule 11 order.
The overall impression is that this is a political decision in which the First Department dealt with a lawyer which the judiciary felt to be troublesome rather than a legal decision applying the law. This is all about the brotherhood of the judiciary. But I’ve come to expect nothing else from the First Department.
Posted by: FixedWing | Dec 12, 2008 9:30:22 AM