Court Opinion

ID: 4398517
Source: CourtListenerOpinion
Date Created: 2019-05-20 14:00:18.458393+00
Date Added: 2024-06-11T14:02:15.340813
License: Public Domain

18-2803-cv
Oorah, Inc. v. Kane Kessler, P.C.

                                    UNITED STATES COURT OF APPEALS
                                       FOR THE SECOND CIRCUIT

                                          SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 20th day of May, two thousand nineteen.

PRESENT:             JOSÉ A. CABRANES,
                     PETER W. HALL,
                                  Circuit Judges,
                     TIMOTHY C. STANCEU,
                                  Judge.*

OORAH, INC.,

                               Plaintiff-Appellant,                          18-2803-cv

                               v.

KANE KESSLER, P.C., GERARD SCHIANO-STRAIN,
ESQ.,

                               Defendants-Appellees,

JOHN DOES 1-10, BIRCH COMMUNICATIONS, INC.,
RONALD KUZON,

                               Defendants.

     *
     Judge Timothy C. Stanceu, of the United States Court of International Trade, sitting by
designation.

                                                       1
FOR PLAINTIFF-APPELLANT:                                    STEVEN G. STORCH (John W. Brewer and
                                                            Casey J. Hail, on the brief), Storch Amini
                                                            P.C., New York, NY.

FOR DEFENDANTS-APPELLEES:                                   RACHEL AGHASSI (A. Michael Furman
                                                            and Spencer A. Richards, on the brief),
                                                            Furman Kornfeld & Brennan LLP, New
                                                            York, NY.

       Appeal from an August 23, 2018 judgment of the United States District Court for the
Southern District of New York (Paul A. Engelmayer, Judge).

     UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the District Court be and hereby is
VACATED IN PART AND REMANDED.

         Plaintiff-Appellant Oorah, Inc. (“Oorah”) appeals from a judgment of the District Court
dismissing with prejudice, pursuant to Federal Rule of Civil Procedure 12(b)(6), its claim under New
York Judiciary Law § 4871 against Defendants-Appellees Kane Kessler P.C. and Gerard Schiano-
Strain (jointly, “Kane Kessler”).2 We assume the parties’ familiarity with the underlying facts, the
procedural history of the case, and the issues on appeal.

         “We review de novo the grant of a Rule 12(b)(6) motion to dismiss for failure to state a claim,
accepting all factual allegations as true and drawing all reasonable inferences in favor of the
plaintiff.” Dettelis v. Sharbaugh, 919 F.3d 161, 163 (2d Cir. 2019) (internal quotation marks omitted).

        Upon de novo review, we conclude that the District Court erred in dismissing Oorah’s § 487
claim on the basis that “New York law requires that claims under Section 487 be brought in the
underlying action where the attorney misconduct occurred, unless the misconduct is part of a
broader fraudulent scheme.” SPA 8–9. Under New York law, the relevant distinction appears to be
whether or not the party seeking relief under § 487 prevailed in the underlying action. Thus, where
the plaintiff does not seek to collaterally attack the judgment because he prevailed in the underlying
action, he may bring a separate, plenary action alleging a violation of § 487. See, e.g., Kimbrook Route

    1
      Section 487 provides that any attorney who “[i]s guilty of any deceit or collusion, or consents
to any deceit or collusion, with intent to deceive the court or any party” or who “[w]illfully delays his
client’s suit with a view to his own gain” may be held liable by the “party injured” for “treble
damages, to be recovered in a civil action.” N.Y. JUD. LAW. § 487.
    2
      The District Court also dismissed with prejudice claims of fraudulent conveyance and breach
of fiduciary duty against Kane Kessler and other defendants. Oorah has limited its appeal to the
District Court’s dismissal of the § 487 claim against Kane Kessler.

                                                    2
31, L.L.C. v. Bass, 47 N.Y.S.3d 203, 204 (4th Dep’t 2017) (“Although plaintiffs were aware of the
alleged misconduct during the pendency of the prior foreclosure action, they are not precluded from
bringing a plenary action alleging a violation of Judiciary Law § 487 provided that they are not
collaterally attacking the judgment from the prior action. Indeed, the language of the statute does
not require the claim to be brought in a pending action.” (internal citations omitted)). By contrast,
where a losing party seeks to challenge or otherwise undo the underlying judgment, he must
generally seek vacatur of the fraudulently procured judgment, unless he alleges that the attorney’s
misconduct was part of a broader fraudulent scheme, greater in scope than the issues determined in
the underlying proceeding. See Specialized Indus. Servs. Corp. v. Carter, 890 N.Y.S.2d 90, 92 (2nd Dep’t
2009) (“Generally, a party who has lost a case as a result of alleged fraud or false testimony cannot
collaterally attack the judgment in a separate action for damages against the party who adduced the
false evidence, and the plaintiff’s remedy lies exclusively in moving to vacate the default judgment.
Under an exception to that rule, a separate lawsuit may be brought where the alleged perjury or
fraud in the underlying action was merely a means to the accomplishment of a larger fraudulent
scheme which was greater in scope than the issues determined in the prior proceeding.” (internal
citations and quotation marks omitted)); see also Melcher v. Greenberg Traurig LLP, 24 N.Y.S.3d 249,
256 (1st Dep’t 2016) (“[Plaintiff] does not, in fact, seek by this action to collaterally attack any prior
adverse judgment or order on the ground that it was procured by fraud; if that were the case, the
appropriate remedy generally would be to seek vacatur under CPLR 5015.”); Seldon v. Bernstein, 503
F. App’x 32, 33 (2d Cir. 2012) (non-precedential summary order) (“[A] party who has lost a case as a
result of alleged fraud or false testimony cannot collaterally attack the judgment in a separate action
for damages against opposing counsel under § 487. The rule is generally limited to situations where .
. . the losing party was aware of the alleged misconduct at the time of the prior action.” (emphasis
added) (internal citations and quotation marks omitted)). In sum, while the court where the alleged
misconduct occurred may be better positioned than a federal court sitting under diversity
jurisdiction to assess the merits of a § 487 claim, the District Court misread New York state law to
require a prevailing party to file its § 487 claim in the pending underlying state action.

         Here, Oorah is the prevailing party. See Oorah, Inc. v. Covista Commc’ns Inc., 52 N.Y.S.3d 347
(1st Dep’t 2017) (reversing the New York Supreme Court’s entry of judgment for Covista and
dismissing Covista’s counterclaim). Contrary to the District Court’s conclusion, Oorah does not seek
to collaterally attack a prior adverse judgment or order.3 Rather, it seeks to recover damages for

    3
      Oorah’s complaint faults Kane Kessler for “delay[ing] Oorah’s ability to obtain and enforce a
judgment on its claim before Covista rendered itself judgment-proof.” J.A. 32 ¶ 64. The District
Court construes this allegation as a “collateral attack” because it constitutes an attempt by Oorah to
“hold [Kane Kessler] liable for Oorah’s purported inability to enforce the judgment against Birch
and Covista.” SPA 9 n.3. Even assuming arguendo that Oorah seeks to hold Kane Kessler liable for
the judgment it is now unable to recover from Covista and Birch, that simply goes to the issue of
whether such expenses may be treated as the proximate result of Kane Kessler’s alleged

                                                    3
additional legal costs incurred as a result of Kane Kessler’s alleged misconduct. See App. 32 ¶ 64.
Accordingly, we vacate the District Court’s dismissal with prejudice of Oorah’s § 487 claim against
Kane Kessler and remand for further proceedings consistent with this order.

                                          CONCLUSION

        For the foregoing reasons, we VACATE IN PART AND REMAND the August 23, 2018
judgment of the District Court for further proceedings consistent with this order. Each party to bear
its own costs on appeal.

                                                       FOR THE COURT:
                                                       Catherine O’Hagan Wolfe, Clerk of Court

misrepresentations; it does not evince an intent to undo or otherwise attack any prior adverse
judgment or orders. See Melcher, 24 N.Y.S.3d at 255 (“[T]he plaintiff in a section 487 case may
recover the legal expenses incurred as a proximate result of a material misrepresentation in a prior
action.”).

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