Thursday, February 12, 2009

Treble Damages For Lawyer Fraud

In answering two questions certified by the United States Court of Appeals for the Second Circuit, the New York Court of Appeals held that a lawyer who had filed a suit that accused the opposing parties of fraudulently purchasing a partnership could be liable for three times costs of defending the suit under New York Judiciary Law section 487, which provides for treble damages when a lawyer is guilty of deceit or collusion. The opposing parties sued the lawyer in federal court and the lawyer had appealed the damage award, contending that he could not be liable under a common law fraud theory because "the trial judge was...never fooled by misrepresentations [made by the lawyer]."

The court here concluded that the section at issue did not describe common law fraud; rather, the New York statute has it origins the the first Statute of Westminster, adopted in 1275: "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."

As "the lawsuit [filed by the attorney] could not have gone forward in the absence of the material misrepresentation, that party's legal expenses in defending the lawsuit may be treated as the proximate cause of the misrepresentation." (Mike Frisch)

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