Tuesday, May 4, 2010

Damages For Sullied Reputation

A case decided on May 3 by the Massachusetts Supreme Judicial Court affirmed abuse of process and malicious prosecution claims brought by an attorney who had represented a divorce client. The attorney had been sued by the opposing husband, his business partner, and their corporation. the court summarized the facts: 

The defendants-in-counterclaim, Millennium Equity Holdings, LLC (Millennium), and two of its partners, David Rabinovitz and Joseph P. Zoppo (collectively defendants), appeal from the decision of a Superior Court judge holding them liable for abuse of process and the malicious prosecution of Attorney Edward M. Mahlowitz. The underlying dispute in this bitter litigation arose when Mahlowitz, representing Rabinovitz's wife in her divorce action against Rabinovitz, obtained an attachment on her behalf in the Probate and Family Court on Rabinovitz's interest in property owned by Millennium. The attachment was secured after the wife discovered by happenstance that Rabinovitz was concealing from her the imminent sale of the property.

The defendants made no attempt to dissolve or modify the attachment in the Probate and Family Court, despite ample opportunity and specific court rules permitting them to do so. Rather, eighteen months after the attachment had issued, and approximately one year after the attachment had been dissolved, Rabinovitz, Zoppo, and Millennium brought suit against Mahlowitz for abuse of process, malicious prosecution, and interference with contractual rights for obtaining the attachment. After failing to secure dismissal of the lawsuit, Mahlowitz counterclaimed against the defendants for abuse of process and malicious prosecution in connection with their suit against him.

After an eight-day, jury-waived trial in the Superior Court on the defendants' abuse of process claim, and on Mahlowitz's counterclaims, the judge ruled in favor of Mahlowitz both on the defendants' claims against him and on his counterclaims against them, awarding damages to Mahlowitz for the latter. She denied Mahlowitz's motion for sanctions pursuant to Mass. R. Civ. P. 11, 365 Mass. 753 (1974), against Robert S. Sinsheimer, the attorney representing Rabinovitz, and Isaac H. Peres, the attorney representing both Zoppo and Millennium at trial.

The Appeals Court reversed the judgment in favor of Mahlowitz on his counterclaims; it otherwise affirmed the trial judge in all respects. Millennium Equity Holdings, LLC v. Mahlowitz, 73 Mass.App.Ct. 29 (2008). None of the defendants sought further appellate review. We granted Mahlowitz's application for further appellate review on his counterclaims against the defendants, as well as the judge's order denying his request for sanctions.

Contrary to the defendants' assertion that the judge's findings were replete with error, we first conclude that the record supports Mahlowitz's claim of abuse of process against Rabinovitz. Specifically, the evidence, including the reasonable inferences therefrom, supports the judge's conclusion that the only motivation Rabinovitz had in bringing his lawsuit against Mahlowitz was to cause the removal of Mahlowitz as counsel for his wife in their divorce action. The judge also acted within proper bounds as a finder of fact in concluding that Zoppo and Millennium acted in concert with Rabinovitz to that same end. We thus affirm Mahlowitz's abuse of process claim against all of the defendants.

Mahlowitz's malicious prosecution claim is substantially similar to his abuse of process claim, and his damages under each are identical. Because we affirm the judgment on the abuse of process claim, we need not and do not reach Mahlowitz's malicious prosecution claim against the defendants.

As to damages, we conclude that the judge made errors in her evaluation of some aspects of the damages that require remand for recalculation of two discrete issues pertaining to damages alone. Last, we agree with the judge that Mahlowitz has not met his burden of proving that Peres and Sinsheimer acted in bad faith in representing the defendants in their claims against Mahlowitz, and that he is not entitled to sanctions against them.

Among other things, the court affirmed the award for damages to the attorney's reputation:

We are in full accord with the judge's observation that "an attorney is not much more than his reputation and that once sullied it is very difficult ... to undo the tarnish." The judge found that several pieces published about the lawsuit in Massachusetts Lawyers Weekly, "damaged Mr. Mahlowitz, both in the esteem with which he is held in the community of divorce lawyers and judges in the Probate Court." In particular, Mahlowitz testified that since the appearance of the Massachusetts Lawyers Weekly items, he had not received any appointments from Probate and Family Court judges in Middlesex County, who had often appointed him in the past. This evidence alone is compelling: we cannot imagine a more damaging result for an attorney than the loss of his credibility on the part of judges before whom he routinely must appear.

The judge additionally found, and we agree, that the publications in Massachusetts Lawyers Weekly were a foreseeable consequence of the lawsuit, and that the adverse publicity against Mahlowitz was "orchestrated," at least in part, by Rabinovitz. Among the four items published in that newspaper, one was a letter to the editor from Rabinovitz that sharply criticized Mahlowitz's conduct as dishonest, and suggested that he had lied to a judge in the Probate and Family Court. Although one article was arguably in favor of Mahlowitz-- remarking that it was "scary" that lawyers could be sued for abuse of process when placing ordinary liens in the course of divorce proceedings--the judge's finding that the widespread publicity about the case in the legal community damaged Mahlowitz's reputation is well supported.

The defendants nevertheless assert that Mahlowitz cannot recover for harm to reputation because he did not prove "real business loss" or other pecuniary harm resulting from damage to his reputation. We do not discern authority for such a requirement in this context, nor have the defendants directed us to any relevant source. In the context of defamation, we have explained that actual injury is "not limited to out-of-pocket loss" but instead includes "impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering."...Here, Mahlowitz can recover for intangible harm to his reputation separate from and in addition to any loss of business or other pecuniary harm he may have suffered. There was no error. (citations and footnotes omitted)

The case is Millenium Equity Holdings LLC and others v. Mahlowitz. (Mike Frisch)


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