Allegations That Complaint is Based on False Statement Basis for Judiciary Law Counterclaim

On July 9, 2019, Justice Borrok of the New York County Commercial Division issued a decision in Gerard Fox Law, P.C. v. Vortex Group, LLC, 2019 NY Slip Op. 32065(U), holding that allegations that a complaint was based on false allegations of fact are a sufficient basis for a Judiciary Law claim, explaining:

To state a cause of action for violation of Judiciary Law § 487, a party must plead intentional deceit and damages proximately caused by the deceit. To be actionable, the alleged deceit must have occurred during a pending judicial proceeding. Allegations of deceit or an intent to deceive must be stated with particularity. Where a cause of action under Judiciary Law § 487 is based on allegations of false statements in pleadings, a party may prevail by establishing that the lawsuit could not have gone forward in the absence of the material misrepresentation, and that party's legal expenses may be treated as the proximate result of the misrepresentation.

This counterclaim is based on Gerard Fox's statements made in its complaint and in its opposition to Kato's motion for summary judgment in a related action. Vortex asserts that Gerard Fox knowingly made several false statements concerning the underlying events in this matter as contrived predicates for its claims with the intent to deceive the Court. For example, Paragraph 2 of the Complaint provides:

Specifically, in the Fall of 2015, [Gerard Fox] sought to lease space with room for five to six offices and a conference room, within its monthly budget of $28,000 - $30,000. [Gerard Fox] spelled out its needs and budget in writing, and reinforced those points during lengthy face-to-face meetings. Vortex, however, had a difference agenda. Viewing [Gerard Fox] as an out-of-town "yokel" it could work for a fat commission, Vortex upsold [Gerard Fox] from the get-go. Vortex exclusively presented options far outside of [Gerard Fox's] price range, including a space in "Tower 49," located at 12 East 49th Street, New York, New York. To encourage [Gerard Fox] to rent office space beyond its budget, Vortex represented falsely that the rent was below-market and a great deal.

The documentary evidence reveals that these statements, which reflect the gravamen of Gerard Fox's allegations, are not only misleading, but also demonstrably false. Vortex's space report, which sets forth the properties that Vortex presented to Gerard Fox, illustrates that 10 of the 12 properties were within Gerard Fox's stated budget. Therefore, this lawsuit is premised on material misrepresentations of fact and, as a proximate result of those misrepresentations, Vortex was compelled to defend the action and incur legal fees. Assuming Vortex's allegations to be true and affording Vortex every favorable inference, the counterclaim for violation of § 487 is adequately pled to survive dismissal.

(Internal quotations and citations omitted).

Part of being a good litigator is thinking of winning arguments other lawyers miss. However, courts have little patience for lawyers who cross the line from creative to making frivolous arguments or who attempt to mislead the court. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding whether a lawyer has crossed the line from creative to sanctionable.