Legal Ethics

Lawyer may be sued under attorney deceit statute for lawsuit misrepresentation, federal judge says

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A lawyer and his law firm may be sued under New York’s attorney deceit statute for alleged false statements in a lawsuit, even if there was no pattern of misrepresentation, a federal judge has ruled.

U.S. District Judge Paul Crotty ruled Feb. 21 that a “sufficiently egregious” action motivated by an intent to deceive a court is enough to support a claim under the statute, the ABA BNA Lawyers Manual on Professional Conduct reports.

According to the Lawyers Manual, “the ruling highlights the potential for big claims against New York lawyers who file court papers that make factual assertions directly contrary to facts stated in other materials prepared for the client.”

According to a story published last year by Law360 (sub. req.), judgments under the statute are not covered by professional liability insurance, “thereby imposing considerable pressure on the unfortunate practitioner sued for such claims to dispose of them.” The story reports that the statute “provides a potent weapon for retaliatory lawsuits and has become increasingly popular among litigants seeking to target their adversary’s counsel.”

The statute makes it a misdemeanor for an attorney to use deceit or collusion with an intent to deceive a court or any party. Injured parties can recover treble damages in a civil action.

Crotty’s decision allowed Canon USA to add an attorney deceit claim to its lawsuit claiming a lawyer and his law firm helped their clients defraud Canon to obtain a business equipment dealership.

Canon had refused to grant a dealership to the clients because of prior arrests in an alleged fraud scheme, then granted a dealership to a corporation that concealed their involvement, the Canon lawsuit alleged.

Though the lawyer had prepared papers revealing corporate stock was being held for the two clients, the lawyer filed an affidavit by the corporation’s nominal president denying the fact, Canon alleged. The affidavit had been filed in a lawsuit seeking restoration of the dealership.

The case is Canon USA Inc. v. Divinium Technologies.

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