Seldon v Flomenhaft
Annotate this CaseDecided on December 21, 2006
Civil Court of the City of New York, New York County
Philip Seldon, Assignee of the Legal Rights and and Claims of Astrid Heeren, Plaintiff,
against
Michael Flomenhaft, et al., Defendants.
300687 TS 2005
For plaintiff pro se
Philip Seldon
1474 Third Avenue
New York, NY 10028
For defendants pro se
Michael Flomenhaft, Esq.
Flomenhaft & Cannata, LLP
90 Broad Street, 17th Floor
New York, NY 10004
Barbara Jaffe, J.
In a decision and order dated September 20, 2006, I held that plaintiff/assignee Philip Seldon (Seldon) had engaged in frivolous litigation. On November 2, 2006, at a hearing held before me in aid of determining the amount of costs and/or sanctions to be paid by Seldon, I gave him an additional opportunity to be heard as to whether costs and/or sanctions should be imposed. Before the hearing commenced, the parties agreed that there were no factual issues needing resolution on the issue of whether Seldon had engaged in the unauthorized practice of the law.
I. SANCTIONS
Seldon testified that he was unaware that the legal malpractice action was foreclosed by his assignor's motion for attorney fees and that he went forward with it based on advice given him by an unidentified lawyer with whom he had consulted at the New York City Bar Association's legal referral clinic. Although the legal malpractice action had been dismissed by a justice of the state supreme court, the dismissal was subsequently vacated by another justice. The details relating to the litigation are fully set forth in my September 20 decision. [*2]
Pursuant to the Rules of the Chief Administrator of the Courts, this court has discretion to award to any party or attorney in a civil action or proceeding before it costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney fees resulting from frivolous conduct, and/or impose financial sanctions upon any party or attorney who engages in frivolous conduct. (22 NYCRR § 130-1.1[a]). The Rules permit an award of sanctions and/or costs to be imposed even on a pro se litigant. (Sud v Sud, 227 AD2d 319 [1st Dept 1996] [pro se litigant sanctioned for bringing action based on claims that had been previously dismissed on merits]; Melnitzky v Uribe, 8 Misc 3d 1029[A], 2005 NY Slip Op 51349[U] [Sup Ct, New York County 2005] [same]).
Frivolous conduct is defined in the Rules, in pertinent part, as conduct that is "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]). In determining whether conduct is frivolous, the Rules require that I also consider: 1) the circumstances under which the conduct took place, including the time available for investigating the legal or factual basis of the conduct; and 2) whether or not the conduct was continued when its lack of legal or factual basis was apparent, should have been apparent, or was brought to the attention of counsel or the party. (22 NYCRR § 130-1.1). Sanctions may not be imposed, however, where a party asserts "colorable, albeit unpersuasive, arguments in good faith and without an intent to harass or injure." (Yenom Corp. v 155 Wooster St. Inc., 33 AD3d 67 [1st Dept 2006]).
Although a pro se litigant ought not be able to rely on the advice of a lawyer consulted at a bar association's legal referral clinic and thereby avoid the imposition of sanctions or costs for frivolous litigation, here, Seldon received mixed messages. On the one hand, a justice of the state supreme court dismissed his action and gave him ample reason to believe that the legal malpractice action had no merit, whereas another justice granted his motion to vacate the dismissal, thereby permitting him to infer that the action may have had merit after all. Although Seldon's testimony concerning the advice given him by the unidentified lawyer at the clinic has little if any probative value, I do not find it incredible. Thus, to the extent that it added to Seldon's understanding that the action may have had some merit, I find that there exists an insufficient basis for concluding that Seldon continued to litigate the malpractice action "when its lack of legal or factual basis was apparent to" him, "should have been apparent to" him, or was brought to his attention. (22 NYCRR § 130-1.1).
I therefore decline to impose sanctions or costs.
II. UNAUTHORIZED PRACTICE OF THE LAW
Defendants also assert that in prosecuting the legal malpractice action, Seldon is engaged in the unauthorized practice of the law. They argue that as Seldon purchased the malpractice action from Heeren for $1,000 and 10 percent of the proceeds, leaving the lion's share to Heeren, he obtained a fee for his services, not an assignment. Seldon disagrees, alleging that he and Heeren have been close friends for more than 12 years and that Judiciary Law § 489 is inapplicable because he is neither a collection agency nor a corporate entity. (Letter of Philip Seldon, dated Aug. 15, 2006).
The agreement between Seldon and Heeren provides as follows: [Heeren], Assignor, in consideration of the sum of ONE THOUSAND DOLLARS [*3]($1,000) PLUS 90% OF THE PROCEEDS OF LEGAL ACTION AGAINST [defendants] AND THE UTICA INSURANCE COMPANY AFTER LEGAL COSTS MINUS ONE THOUSAND DOLLARS ALREADY PAID, the receipt of ONE THOUSAND DOLLARS AS A NONREFUNDABLE PAYMENT ON ACCOUNT hereby acknowledged, has sold, does grant, assign and convey unto [Seldon] the following:The legal rights and claims of [Heeren] against defendant, with the exclusion of any and all other matters, legal rights and/or claims which do not pertain to [defendants] and the Utica Insurance Company.
Judiciary Law § 489 (1) provides that: [n]o person . . . engaged directly or indirectly in the business of collection and adjustment of claims, and no corporation or association, directly or indirectly . . . shall . . . take an assignment of, or be in any manner interested in buying or taking an assignment of a. . . thing in action, or any claim or demand, with the intent and for the purpose of
bringing an action or proceeding thereon . . .
An assignment of an action is valid "[i]f, as between the assignor and assignee, the transfer is complete, so that the former is divested of all control and right to the cause of action, and the latter is entitled to control it and receive its fruits, the assignee is the real party in interest." (Spencer v Standard Chemicals & Metals Corp., 237 NY 479 [1924]).
Absent any evidence that Seldon is "engaged directly or indirectly in the business of collection and adjustment of claims," he cannot be found to have violated Judiciary Law § 489 by obtaining an assignment of Heeren's claim and prosecuting it. Rather, as Heeren has been "divested of all control and right to the cause of action, and [Seldon] is entitled to control it and receive its fruits," Seldon is the real party in interest and thus, is not engaged in the unauthorized practice of law. To the extent that Rutherford v State of NY Div. of Housing and Community Renewal, 4 Misc 3d 1029(A), 2004 NY Slip Op 51116(U) (Sup Ct, NY County 2004), is to the contrary, I find it distinguishable; otherwise, I decline to follow it.This constitutes the decision and order of the court.
___________________________
Barbara Jaffe, JCC
DATED:December 21, 2006
New York, New York
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