Opinion
July 26, 1994
Appeal from the Civil Court of the City of New York, New York County, Louis B. York, J.
Finkelstein, Borah, Schwartz, Altschuler Goldstein, P.C., New York City (Jeffrey R. Metz of counsel), for Finkelstein, Borah, Schwartz, Altschuler Goldstein, P.C., appellant.
Karlsson Ng, P.C., New York City (Kent Karlsson of counsel), and Finder, Novick, Kerrigan Anderson, New York City, for respondents.
Orders entered July 14, 1992 modified by vacating the sanction awards against appellant Finkelstein, Borah, Schwartz, Altschuler Goldstein, P.C., and by reducing the sanction against appellant Ray L. LeFlore to the sum of $1,000 for each proceeding; as modified, orders affirmed, without costs.
The landlord of the subject apartment building commenced 62 separate summary proceedings for nonpayment of rent, in which respondent tenants sought rent abatements for an alleged breach of the warranty of habitability. The proceedings were jointly tried over a period of 16 weeks; generated a number of intermediate appeals and related litigation; and culminated in rent abatement awards of 5% for conditions in the dwelling's public areas, and additional offsets in varying amounts to certain tenants for conditions within their individual apartments (Solow v Wellner, 150 Misc.2d 642, mod 154 Misc.2d 737, mod 205 A.D.2d 339 [1st Dept]). The present appeals concern a posttrial award of sanctions under 22 N.Y.CRR part 130 against appellant Finkelstein, Borah, Schwartz, Altschuler Goldstein, P.C. (Finkelstein, Borah), landlord's attorney of record, in the amount of $250 per case, and sanctions against appellant Ray L. LeFlore, landlord's trial counsel, in the amount of $3,000 per case.
There is ample evidence in the record to support the imposition of monetary sanctions against LeFlore for "frivolous conduct" within the contemplation of 22 N.Y.CRR part 130, i.e., conduct "undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another" ( 22 NYCRR 130-1.1 [c] [2]). In particular, counsel's vexatious behavior, which included protracted argument on matters previously ruled upon by the court despite repeated warnings to stop, and persistent refusal to adhere to the trial court's ruling, disrupted the proceedings and constituted the type of delaying tactics and harassment for which the imposition of sanctions is appropriate.
Moreover, it is clear that LeFlore's argumentative and obstructionist tactics throughout the course of the joint trial unduly prolonged the resolution of each individual proceeding and the litigation as a whole, and unnecessarily taxed the resources of the court as well.
Since a joint trial preserves the integrity of the several actions and requires the entry of separate judgments and bills of costs in each case (Bank of N.Y. v Rodgers, 40 A.D.2d 777; Siegel, N Y Prac § 127 [2d ed]), Civil Court acted within its authority and discretion when it imposed sanctions in each of the proceedings tried to completion. The amount of the sanctions awarded in each proceeding, to wit, $3,000, did not exceed the maximum permissible sanction of $10,000 "in any action or proceeding" ( 22 NYCRR 130-1.2; see, Leventritt v Eckstein, 206 A.D.2d 313 [1st Dept] [sanctions of $10,000 each imposed against party and her counsel]; compare, Matter of Entertainment Partners Group v Davis, 155 Misc.2d 894, affd 198 A.D.2d 63 [1st Dept] [sanctions of $10,000 imposed against each of three defendants pursuant to statutory analogue CPLR 8303-a]). In our own discretion, however, we reduce the award in each case to the sum of $1,000, an amount we deem commensurate with the prejudicial effect of counsel's misconduct.
Because of the complexity of the litigation, two law firms, appellant Finkelstein, Borah and Lerner, Lapidus Franquina, were permitted to appear as attorney(s) of record. No sanctions were imposed upon the Lerner firm, on the ground that it did not actively participate in the trial. A different result was reached as to Finkelstein, Borah, the trial court reasoning that the latter's furnishing of support staff to LeFlore, and the drafting of a posttrial memorandum, "freed" LeFlore to engage in disruptive and dilatory activities.
So much of 22 N.Y.CRR part 130 as provides for the payment of sanctions by an attorney to the State's Lawyers' Fund for Client Protection ( 22 NYCRR 130-1.3) is penal in nature. Under familiar principles of statutory analysis, such provisions are accorded a narrow, and not expansive, construction (McKinney's Cons Laws of NY, Book 1, Statutes §§ 271, 273). While an award of sanctions may be made against an attorney personally or upon a law firm with which that attorney is associated ( 22 NYCRR 130-1.1 [b]), we have not been referred to any authority imputing the sanctionable conduct of outside trial counsel to counsel of record for the present purposes. In this regard, it is instructive to note that the analogous provision in the amended Federal Rules of Civil Procedure permits the imposition of sanctions only upon attorneys or law firms that have violated the court rules or "are responsible for the violation" (Fed Rules Civ Pro, rule 11 [c]).
As acknowledged in the opinion below, LeFlore was clearly in control of the management of the litigation on landlord's behalf once the trial commenced. The trial court did not find that any member of Finkelstein, Borah individually engaged in "frivolous conduct" as defined in 22 N.Y.CRR part 130. On this record, we hold that such professional support services as Finkelstein, Borah may have provided at trial were not calculated to, and did not, promote the improper conduct of LeFlore. Nor did the law firm's limited role at trial rise to that level which should subject it, vicariously, to liability for trial counsel's violation of 22 NYCRR part 130.
Accordingly, the imposition of sanctions against Finkelstein, Borah is vacated in its entirety. In reaching our conclusion, we have expressly not considered conduct which occurred prior to the January 1, 1989 effective date of 22 N.Y.CRR part 130. The rule applies only to acts occurring on or after its effective date (Frerks v Iandoli, 147 A.D.2d 672).
LeFlore was trial counsel to Finkelstein, Borah, Schwartz, Altschuler and Goldstein, P.C. (Finkelstein, Borah), a presumably volitional arrangement. A Finkelstein, Borah partner was present throughout the proceedings which have by now been roundly criticized by numerous courts including the Appellate Division. (See, e.g., Solow v Wellner, 157 A.D.2d 459 [1st Dept 1990].) At no time did Finkelstein, Borah seek to terminate the relationship, or to control LeFlore. To the contrary, it provided support staff which permitted LeFlore, on its behalf, and on behalf of its client, to engage in an outrageous and indefensible waste of court time and the time and resources of the tenants.
Significantly, both Supreme Court and appellate criticism of LeFlore's behavior occurred during the seemingly endless trial. Thus Finkelstein, Borah was on notice of the seriousness of its trial counsel's behavior which, the record clearly demonstrates, continued unabated if not actually increased.
By virtue of its relationship and its acquiescence in (if not its encouragement of) LeFlore's tactics, I would, if not constrained by the language of 22 N.Y.CRR part 130, uphold the imposition of sanctions against Finkelstein, Borah. To do otherwise sends a clear message to law firms which seek to use intimidation and delay against their opponents that trial counsel such as LeFlore may be safely retained to do their "dirty work," without fear of vicarious liability.
As the majority opinion appropriately notes, 22 N.Y.CRR part 130 must be narrowly, not expansively, construed. Since 22 NYCRR 130-1.1 (b) speaks in the disjunctive, i.e., "Where the * * * sanction is against an attorney, it may be against the attorney personally or upon a partnership, firm", there is no basis for the imposition of vicarious liability as well as a sanction on the actually offending attorney. Thus, having approved sanctions against LeFlore, there is no power to impose sanctions against any other entity.
This is not the first instance in which LeFlore has apparently been engaged by a law firm in a manner which results in sanctions to him, but not to it. (See, Pavelic LeFlore v Marvel Entertainment, 493 U.S. 120 [1989].)
It is interesting to note that the Federal courts were, until recently, confronted with the same limitation on their ability to impose vicarious liability on firms which employed or utilized obstructive counsel. (See, Pavelic LeFlore v Marvel Entertainment, 493 U.S. 120 [construing Fed Rules Civ Pro rule 11 to exclude sanctions against law firm of attorney signing groundless complaint].) In response to that decision, rule 11 was amended to presumptively impose such liability for sanctions, now reading: "Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates and employees." (Fed Rules Civ Pro, rule 11 [c] [1] [A], as amended Apr. 22, 1993, eff Dec. 1, 1993; see, Advisory Committee Notes, rule 11, reprinted in USCS Court Rules, at 135 [1994 Cum Supp].)
Adoption of a similar provision in 22 N.Y.CRR part 130 would close the loophole which Congress recognized on the Federal level after its review of the prior unsatisfactory limitations on the application of rule 11. Presumptive vicarious liability of law firms for sanctions would further the goals of 22 N.Y.CRR part 130, insure greater judicial control and more effectively enforce the obligation of counsel to act appropriately, as officers of the court. Until such amendment, however, I must reluctantly join the majority in reversing the sanctions imposed on Finkelstein, Borah below.
While I agree that trial counsel's objectionable conduct was sanctionable, I respectfully dissent from so much of the majority opinion as permits, in the aggregate, the imposition of sanctions in the amount of $62,000 upon trial counsel in these jointly tried nonpayment proceedings. For the benefit of the court and the parties, the proceedings were tried together because of the presence of common questions of law and fact relating to tenants' habitability claims. Manifestly, the cases were treated as one litigation at nisi prius, and sanctions were assessed by the court because of a general pattern of trial misconduct not attributable to or divisible among the individual cases. 22 NYCRR 130-1.2 provides: "In no event shall the total amount of costs awarded and sanctions imposed exceed $10,000 in any action or proceeding". If the several nonpayment proceedings had been consolidated under one caption, it is clear that sanctions in excess of $10,000 would not have been authorized. The fact that the mechanism of a joint trial was utilized instead should not allow for the pyramiding of sanctions beyond the intended $10,000 maximum, thus exacting a cumulative penalty which could not have been reasonably contemplated at the time 22 N.Y.CRR part 130 was promulgated.
Carried to its ultimate conclusion, a total sanctions award of $620,000 would be cognizable in these proceedings, an amount surely confiscatory under any view.
Absent a statute or court rule, there is no inherent power to impose sanctions for frivolous litigation or conduct (Matter of A.G. Ship Maintenance Corp. v Lezak, 69 N.Y.2d 1). The Court of Appeals has instructed that "it [is] prudent to proceed cautiously in this area" (Matter of Minister of Refm. Prot. Dutch Church v 198 Broadway, 76 N.Y.2d 411, 415). That admonition will best be heeded by strictly construing a court rule that is in derogation of the common law, and by carefully observing its monetary limits for sanctions within the same litigation.
Accordingly, the order below, insofar as it relates to appellant LeFlore, should be modified to the extent of reducing the total sanction to the sum of $10,000.
McCOOE and GLEN, JJ., concur; GLEN, J., concurs in a separate memorandum; PARNESS, J.P., dissents in part in a separate memorandum.