Opinion
Index No. 156597/13
07-22-2013
MICHAEL FLOMENHAFT, Plaintiff, v. ANDREW G. FINKELSTEIN, ANDREW G. FINKELSTEIN, PC, and FINKELSTEIN & PARTNERS, LLP, Defendants.
For plaintiff: Stephen D. Chakwin, Esq. The Flomenhaft Law Firm PLLC 90 Broad St. Ste. 1900 New York, NY 10006 212-285-0011 For defendants: Ann R. Johnson, Esq. Finkelstein & Partners, LLP 1279 Rt. 300 Newburgh, NY 12551 845-563-9446
Mot. seq. no. 001
DECISION AND ORDER
BARBARA JAFFE, J. For plaintiff:
Stephen D. Chakwin, Esq.
The Flomenhaft Law Firm PLLC
90 Broad St. Ste. 1900
New York, NY 10006
212-285-0011
For defendants:
Ann R. Johnson, Esq.
Finkelstein & Partners, LLP
1279 Rt. 300
Newburgh, NY 12551
845-563-9446
By notice of motion, defendants move pursuant to CPLR 3211(a) for an order dismissing counts one and two of the complaint, striking the request for punitive damages, and imposing sanctions. Plaintiff opposes and by cross motion moves for an order granting him leave to amend his summons with notice and/or complaint.
I. BACKGROUND
On May 2, 2005, non-party Joel Harrison retained defendant Finkelstein & Partners, LLP (F&P) to represent him in a personal injury case. Soon thereafter, F&P brought the action in Broome County Supreme Court. Plaintiff, who had moved his practice to defendant Jacoby & Meyers, LLP (J&M) in April 2009, was also named counsel to F&P, and was assigned as lead trial attorney on the Harrison matter.
Eight months later, on December 28, 2009, plaintiff abruptly resigned from J&M. Shortly thereafter, on January 25, 2010, Harrison discharged F&P and retained plaintiff to represent him on the personal injury matter.
In March 2010, J&M commenced an action against plaintiff and his law firm in Orange County, based on a loan it had allegedly made to him. That action was transferred to this court (Index No. 403550/10).
On June 16, 2010, Harrison discharged plaintiff and re-retained F&P on his personal injury action.
On August 6, 2010, during the pendency of the personal injury action, Harrison, represented by F&P, brought an action in Broome County Supreme Court against plaintiff, advancing in his verified complaint causes of action for conversion, breach of fiduciary duty, legal malpractice, and fraud, based on allegations that plaintiff had induced him to obtain litigation funding for the personal injury action and then converted the proceeds to his own use. (NYSCEF 9).
On September 24, 2010, based on actions allegedly taken against him by F&P and J&M following his December 2009 resignation, plaintiff filed an action in this court for libel per se and slander per se against the two firms and certain of their partners, and sought punitive damages (Index No. 150293/10, NYSCEF 1; hereinafter, first New York County action).
On October 27, 2010, Silvia Rodriguez, a former client of plaintiff, who retained J&M when plaintiff moved his practice there, commenced an action in Bronx County Supreme Court against J&M, F&P, certain of their individual partners, and others, in connection with their representation of her in the personal injury action. That action was transferred to this court. (Index No. 114132/10, NYSCEF 2).
On February 7, 2011, plaintiff filed an amended verified complaint in the first New York County action against the two firms. (Index no. 150293/10, NYSCEF 10).
In December 2011, F&P settled Harrison's personal injury action.
On July 26, 2012, Harrison discharged F&P and discontinued his Broome County action against plaintiff.
By decision and order dated June 23, 2013,1 dismissed plaintiff's cause of action for libel per se and struck his request for punitive damages in the first New York County action. (Index No. 150293/10, NYSCEF 40).
Harrison, represented by plaintiff, commenced an action against F&P and others in Broome County, alleging causes of action for legal malpractice, fraud, and related counts arising from F&P's representation of Harrison in the Broome County personal injury action (Broome County Index no. 0078/13). The amended complaint in that action, dated January 20, 2014, is not verified. (NYSCEF 19).
II. PROCEDURAL BACKGROUND OF THIS CASE
On July 19, 2013, plaintiff commenced this action by filing a summons with notice stating that the nature of the action and relief sought was "to recover damages for slander per se committed on July 23, 2012 . . . ." (NYSCEF 1). He served it on defendants on November 15, 2013. On November 26,2013, defendants served a demand for the complaint, which plaintiff filed on December 16, 2013. (NYSCEF 2, 3, 5).
Plaintiff alleges in his first cause of action, for slander per se, that on July 23, 2012, the day before Harrison was to be deposed in his August 2010 Broome County action against plaintiff, Finkelstein allegedly told Harrison that plaintiff "took your money and used it for his personal use." (NYSCEF 5). In his second cause of action, for fraud, plaintiff alleges that Finkelstein knowingly, falsely, and with reckless disregard for the truth, told Harrison, in order to deceive and harm plaintiff, that plaintiff had misappropriated for his own use funds that Harrison had borrowed, at plaintiff's instance, from a litigation funding company to finance the Broome County personal injury case, and that based on those false statements, Harrison sued plaintiff and his firm for conversion and related offenses. Alleging that defendants had acted with malice, in addition to seeking damages for having to respond to and defend a meritless lawsuit, plaintiff seeks punitive damages. (Id.). In support thereof, he relies on defendants' conduct as alleged, as well as "Finkelstein's hatred, ill will, and spite" toward him, and reiterates allegations he made in the first New York County action.
In lieu of an answer, defendants move pursuant to CPLR 3211(a)(7) for an order dismissing plaintiff's cause of action for defamation for a failure to state of cause of action, and pursuant to CPLR 3211(a)(8) for an order dismissing the cause of action for fraud, claiming a lack of jurisdiction. In the alternative, defendants seek a dismissal pursuant to CPLR 3211(a)(5) and 7, arguing, respectively, that the claim is time-barred and does not state a cause of action. (NYSCEF 8). Plaintiff opposes.
III. DISCUSSION
A. Failure to state a cause of action for defamation
1. Contentions
Defendants argue that Finkelstein's statement to Harrison is not defamatory because it does not constitute a publication and that even if it did, it is absolutely privileged because it is pertinent to a judicial proceeding, namely, Harrison's Broome County action against plaintiff. They thus contend that plaintiff fails to state a cause of action. (Id.).
Plaintiff's counsel denies that the statement is privileged because Harrison's lawsuit against plaintiff was a "sham," brought solely to defame him. Counsel also alleges that "Mr. Harrison eventually realized that he had been duped and used [by Finkelstein], discontinued the lawsuit and discharged Finkelstein and his firm" (NYSCEF 18), and observes that Harrison then sued F&P, arguing that the determination of whether the privilege applies in these circumstances is a jury issue. (Id.).
In reply, defendants stress the importance of the privilege in the face of the bare assertion that the lawsuit was a sham, and argue that Harrison's discontinuance of the suit against plaintiff is immaterial. (NYSCEF 21).
2. Analysis
Pursuant to CPLR 3211(a)(7), a party may move at any time for an order dismissing a cause of action asserted against it on the ground that the pleading fails to state a cause of action. In deciding the motion, the court must liberally construe the pleading, accept the alleged facts as true, and accord the non-moving party the benefit of every possible favorable inference. (Nonnon v City of New York, 9 NY3d 825 [2007]; Leon v Martinez, 84 NY2d 83, 87 [1994]). The court need only determine whether the alleged facts fit within any cognizable legal theory. (Id.; Siegmund Strauss, Inc. v E. 149th Realty Corp., 104 AD3d 401 [1st Dept 2013]). The standard is whether the pleading states a cause of action, not whether the proponent has a cause of action. (Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]; Sokol v Leader, 74 AD3d 1180, 1180-1181 [2d Dept 2010]).
The elements of a cause of action for defamation are: "(1) a false statement that is (2) published to a third party (3) without privilege or authorization, and that (4) causes harm, unless the statement is one of the types of publications actionable regardless of harm." (Stepanov v Dow Jones & Co., Inc., AD3d , 987 NYS3d 37, 41-42 [1st Dept 2014]; Dillon v City of New York, 261 AD2d 34, 38 [1st Dept 1999]). Whether a statement is defamatory constitutes "a legal question to be resolved by the court in the first instance." (Golub v Enquirer/Star Group, Inc., 89 NY2d 1074, 1076 [1997]; Aronson v Wiersma, 65 NY2d 592, 593 [1985]). Whether an alleged defamatory statement is privileged also constitutes a question of law for the court. (People ex rel Bensky v Warden of City Prison, 258 NY 55, 60 [1932]; Sexter & Warmflash, PC v Margrabe, 38 AD3d 163, 173 [1st Dept 2007]).
It is well-settled that "a statement made in the course of legal proceedings is absolutely privileged if it is at all pertinent to the litigation." (Sexter, at 171). The privilege "applies to statements made in or out of court, on or off the record, and regardless of the motive with which they were made." (El Jamal v Weil, 116 AD3d 732 [2d Dept 2014]; Sexter, 38 AD3d at 171). The privilege does not extend to statements that are not pertinent to the proceedings. (Youmans v Smith, 153 NY 214, 219 [1897]). Courts are liberal in applying the privilege even where the statement is only possibly pertinent to the proceedings "because the due administration of justice requires that the rights of clients should not be imperiled by subjecting their legal advisers to the constant fear of suits for libel or slander." (Youmans, 153 NY at 219-220).
Here, accepting as true the allegations contained in the complaint, as I must on this motion, as the defamatory statement is alleged to have been made by Finkelstein to Harrison the day before Harrison was to be deposed in his action against plaintiff, it was made in the course of a legal proceeding, a proposition not challenged by plaintiff. And, as the statement pertains to the allegations set forth in that legal proceeding, it is absolutely privileged.
Given the absence of an essential element in the complaint, namely, that the statement was not privileged, and in light of the failure to allege therein that the action was filed solely to defame plaintiff, the complaint is deficient on its face. (See Khandalavala v Artsindia.com, LLC, 2014 NY Slip Op 30939[U] [Sup Ct, New York County 2014] [motion to dismiss granted where no facts alleged to establish that action filed solely to publish defamatory statements]).
Although CPLR 3211 permits the submission of affidavits to remedy defects in a complaint in opposition to a motion to dismiss, plaintiff does not do so. (Cf. Credit Agricole Corporate v BDC Finance, LLC, 2012 WL 3919680 [Sup Ct, New York County 2012], affd on other grounds 114 AD3d 552 [2014] [absolute privilege not rebutted by unsupported and conclusory allegation that action a sham]). Counsel's affirmation fails in that regard.
Even if the complaint was not deficient, the result would be the same.
Where a legal proceeding is brought solely to defame the defendant under cover of the litigation privilege, an inference of express malice may be reasonably drawn, and the privilege may be disregarded. (Halperin v Salvan, 117 AD2d 544 [1st Dept 1986]). In Halperin, the Court, relying on Youmans and notwithstanding a vigorous dissent, upheld against dismissal an action for libel brought against an attorney for bringing a baseless lawsuit notwithstanding the assertion of the privilege, holding that because the plaintiff's allegation of malicious intent was "arguably substantiated by the inflammatory language describing the purported class in the caption of the complaint and the defendants' failure to take any action in prosecuting their lawsuit," the applicability of the privilege was a jury question. (Id., at 548; see Sexter, 38 AD 3d at 172, n 5 [recognizing, without addressing, Halperin as "one of this court's precedents" that suggests that privilege inapplicable to sham lawsuit commenced for sole purpose of defaming adversary]).
In practice, however, the privilege remains vigorous (Pandozy v Tobey, 2007 WL 3010333 [SD NY 2007], affd on other grounds 335 Fed Appx 89 [2d Cir 2009] [characterizing Halperin as "an aberration" that "misstates long-settled New York law on the subject" of absolute privilege inhering in statements made during course of and pertinent to legal proceedings notwithstanding malicious motive of speaker]; Levin v Epshteyn, 43 Misc 3d 1211 [A], * 9, 2014 NY Slip Op. 50573[U] [Sup Ct, Kings County 2014] [same]; Gingko Production v The Guardian Life, 2007 NY Slip Op. 32203 [U] [Sup Ct, New York County 2007] [same]; Ticketmaster Corp. v Lidsky, 1996 WL 34574643 [Sup Ct, New York County 1996] [same]), and is successfully invoked notwithstanding the merits of the underlying action (Lacher v Engel, 33 AD3d 10 [1st Dept 2006]). As the Court in Lacher noted:
If the privilege existed only in cases that were ultimately sustained, none of the persons whose candor is protected by the rule—parties, counsel or witnesses—would feel free to express themselves. They would, in any case of alleged wrongdoing, face a penalty potentially more severe than sanctions or the imposition of fees.(Id., at 14).
In short, Halperin appears to have waned in precedential value, and when it is cited, it is distinguished. (Lacher, 33 AD3d at 14; Casa de Meadows Inc. [Cayman Islands] v Zaman, 76 AD3d 917 [1st Dept 2010]; Sexter, 38 AD3d at 171-172). Here too, Halperin is distinguishable as Harrison's lawsuit against plaintiff contained no inflammatory allegations and it was discontinued after almost two years of vigorous litigation. (See Lacher, 33 AD3d 10 [even though complaint dismissed for failure to state claim, no proof offered that action a sham or brought solely out of malicious motive given vigorous pursuit of it]).
B. Fraud
1. Lack of jurisdiction
a. Contentions
Defendants assert that as plaintiff failed to mention the fraud claim in his summons with notice, the second cause of action must be dismissed notwithstanding defendants' agreement not to raise jurisdictional defenses in their answer, observing that the agreement does not encompass a motion to dismiss. (NYSCEF 8).
Plaintiff rejects defendants' argument, insists that defendants are estopped from moving to dismiss on this ground by their agreement not to raise jurisdictional defenses in their answer, and otherwise maintains, relying on CPLR 305(c), that the summons may be amended absent prejudice to a substantial right of defendants. He also indicates that if the claim is dismissed, he will bring another action for it and move to consolidate it with this action. (NYSCEF 18).
In reply, defendants maintain that plaintiff's claim for fraud constitutes an improper attempt at pleading his time-barred cause of action for defamation, and that it is Harrison who is the alleged victim of fraud, not plaintiff. Thus, the element of reliance is lacking. (NYSCEF 21).
b. Analysis
An action may be commenced with the service of a summons with notice. Pursuant to CPLR 305(b), "[i]f the complaint is not served with the summons, the summons shall contain or have attached thereto a notice stating the nature of the action and the relief sought . . ." Absent notice of the nature of the action, the summons is ineffective and constitutes a jurisdictional defect that can be neither corrected nor amended under CPLR 305(c). (Vincent C. Alexander, Practice Commentaries, McKinney's Cons Laws of NY, CPLR 305). And where the description of the nature of the action is deficient, "like omission of the notice altogether," the deficiency constitutes a jurisdictional defect. (Id.).
A court reviewing the sufficiency of a notice endorsed in a summons must examine whether the notice informs the defendant of the cause of action set forth in the complaint. For example, in Drummer v Valeron Corp., the Court held that a notice endorsed on a summons informing that "[t]he object of this action is to recover for the acts and omissions of the defendant and its subsidiaries which were the proximate cause of injuries and damages sustained by the plaintiff herein," did not inform the defendant that the action was for negligence, observing that the term "proximate cause" is an element not only of negligence but of other causes of action. (154 AD2d 897 [4th Dept 1989], lv denied 75 NY2d 705).
Here, plaintiff provided notice of a cause of action for defamation alone, omitting any notice that he would also interpose a cause of action for fraud, a claim that, although also arising from Harrison's lawsuit against plaintiff, is based on an entirely different incident. Even if the fraud was based on the same incident, however, as in Drummer, supra, the notice provides no reason to believe that a fraud was being alleged as well as a defamatory statement, as one may defame another without committing fraud. Moreover, the alleged fraud occurred well over a year earlier. (Cf. Fitzpatrick v Slagowitz, 201 AD2d 614 [2d Dept 1994] [plaintiff's failure to also set forth in notice additional theory arising from same incident not a jurisdictional defect since verified complaint alleging additional theory was served within one year of incident]).
Thus, plaintiff's omission of any notice of fraud in his summons constitutes a jurisdictional defect that can be neither corrected nor amended, and CPLR 305(c) is inapposite. As a pre-answer motion to dismiss is not an answer, defendants are not precluded by an agreement not to raise jurisdictional defenses in their answer.
Given this result, I need not address defendants' other grounds for moving to dismiss the second cause of action.
C. Punitive damages
As the complaint is herein dismissed, there can be no punitive damages.
D. Sanctions
Based on their arguments, defendants ask that sanctions be imposed on plaintiff for bringing a frivolous action. (NYSCEF 8). Plaintiff denies having brought a frivolous action and asserts that his arguments in support are all reasonable. (NYSCEF 18).
Pursuant to 22 NYCRR § 130-1.1, the court may award attorney fees to sanction frivolous behavior, which is defined as that which is, in pertinent part, "completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law" or "is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another." (22 NYCRR § 130-1.1[c][1], [2]). Sanctions may be imposed on the party or attorney or both. (22 NYCRR § 130-1.1[b]).
Although the dismissal of an action alone may not evidence frivolousness, and while there exists an exception to the application of the litigation privilege where a lawsuit is brought as a sham, plaintiff's reliance on that exception is completely without merit, as are his attempts to save from dismissal his cause of action for fraud and his prayer for punitive damages. It is also reasonably inferred that plaintiff's opposition to this motion was undertaken primarily to delay or prolong the instant litigation, and that the action was undertaken to harass or maliciously injury defendants. Thus, sanctions are appropriate. As plaintiff is an attorney, it is also reasonably inferred that he has guided this litigation. Consequently, the sanctions are imposed on him and not counsel.
IV. CONCLUSION
Accordingly, it is hereby
ORDERED, that defendants' motion to dismiss plaintiff's complaint is granted in its entirety; it is further
ORDERED, that defendants' motion for an order imposing sanctions on plaintiff in the form of court costs and expenses in connection with this entire action is granted, and defendants are directed to submit to this court proof of their costs and expenses along with an affirmation regarding same within 30 days of the date of this decision and order ; and it is further
ORDERED, that plaintiff's cross motion for leave to amend his complaint is denied.
ENTER:
/s/_________
Barbara Jaffe, JSC
DATED: July 22, 2013
New York, New York