Friday, January 10, 2014

Agreement That Creates Incentive To Falsely Testify Is Void

A trial court decision that denied sanctions against a plaintiff and his attorney was affirmed by the New York Appellate Division for the First Judicial Department.

Th court found that the agreement between the plaintiff and a defendant was void on public policy grounds

In an attempt to settle the claims and counterclaims between them, plaintiff and defendant Emanuel Panitz entered into a Memorandum of Understanding (MOU) pursuant to which Panitz's legal fees would be paid, provided that the claims of defendants Allan Klein, Lobby Design Group, and Steeltech SA (the LDG defendants, collectively) failed. In exchange for this, Panitz assigned plaintiff his remaining cross claims against the LDG defendants. This agreement is void and unenforceable as against public policy. Although his claims against plaintiff have been settled, Panitz is still a witness in this action. Permitting the MOU to stand as it is, with the payment of Panitz's legal fees conditioned on the failure of his former co-defendants' claims, creates an incentive for Panitz to falsify his testimony, an incentive that has long been disfavored (see e.g. Caldwell v Cablevision Sys. Corp., 20 NY3d 365, 371 [2013], citing Bergoff Detective Serv. v Walters, 239 App Div 439, 442-443 [1st Dept 1933]).

We perceive no basis for sanctioning plaintiff or its counsel.

The court here modified the trial court order, which had found the MOU proper. (Mike Frisch)

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