Matter of Namdar (LB Kaye Intl. Realty Commercial Servs. Inc.)
Annotate this CaseDecided on December 6, 2005
Supreme Court, New York County
In the Matter of the Arbitration Between Anita Namdar, Petitioner, and
LB Kaye International Realty Commercial Services, Inc., Respondent.
107366/05
Lewis Bart Stone, J.
On October 2005, this Court held a hearing, as required by New York Court Rules ("Rules") §130-1.1(d) (29 NYCRR), to determine whether sanctions should be imposed on the respondent, LB Kaye International Realty Commercial Services, Inc., ("LBK") and/or its counsel Laurence Gottlieb, Esq. ("Gottlieb"), pursuant to Rules §130-1.1, for having engaged in frivolous conduct by interposing a Cross Motion in a Special Proceeding (the "Proceeding") then pending before this Court. At the hearing, the parties presented witnesses at the end of the hearing the Court heard the legal arguments.
The Proceeding was commenced by petitioner, Anita Namdar ("Namdar"), pursuant to Civil Practice Law and Rules ("CPLR") Article 75 to confirm an arbitration award in her favor rendered against LBK. The dispute arose out of Namdar's claim against LBK for a share of certain brokerage commissions under an agreement between her and LBK. In the Proceeding, LBK interposed a Cross Motion to dismiss, which the Court found meritless and dismissed, pursuant to a Decision and Order of August 17, 2005 (the "Decision"). Namdar also asserted in her response to the Cross Motion that such Cross Motion was frivolous and sought sanctions. It appearing to the Court that such may be the case, the Court ordered a hearing to determine whether such cross motion was frivolous within the meaning of Rules §130-1.1 so as to be sanctionable, and if so, what sanctions, if any to impose, and upon whom.
Rules §130-1.1 provides that the Court, in its discretion, may impose sanctions for frivolous conduct by any party or attorney in a civil action or proceeding. Under such rule, "conduct is frivolous if 1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law; 2) it is undertaken primarily to delay or prolong the resolution of the [*2]litigation, or to harass or maliciously injure another; or 3) it asserts material factual statements that are false." These findings may be made in the disjunctive and a finding of anyone may support the imposition of sanctions.
Based on the facts found by the Court as set forth below, this Court finds that sanctions should be imposed in this case against Gottlieb but not against LBK.
Although all three grounds for the finding of frivolity were urged by Namdar, this Court has, after the hearing, concluded that only the first ground, the lack of any merit and support by a reasonable argument for extension, modification or reversal of existing law, has been established. Such finding constitutes sufficient basis for the imposition of sanctions. The Court is unable to conclude, upon the record, as will be discussed below, that the primary purpose for such Cross Motion was to delay or prolong the resolution of the case. Further, although the Court finds that counsel for both parties may have been less than crisp in their presentation of facts as should be required of members of the bar, the misstatements, errors or exaggerations of facts do not reach the level of materiality so as to cross the line and become sanctionable under the third test.
The Cross Motion asserted three grounds to dismiss the petition or set aside the Award, 1) that proper service of the petition was not accomplished, 2) the arbitrator exceeded its authority, and 3) the arbitrator was biased or corrupt. In the Decision, the Court found all three meritless for reasons set forth therein.
Not all defenses which are found to be meritless are frivolous. In fact, in almost every litigation, some positions of parties are routinely rejected as an inherent part of the process. To hold an unsuccessful litigant liable to sanction for merely losing is not appropriate. There is a point, however, where a line must be drawn to allow the courts to function in a proper manner, and not to be bogged down by meaningless and continuous obstacles from reaching a prompt and proper result. That line is set forth in Rules §130.1.1, where a meritless assertion having no reasonable basis for support, either under existing law or under a plausible extension, interpretation or reversal of existing law, can be the basis for sanctions.
While the Court can, on the papers, determine that positions are untenable under existing law, it is appropriate, before sanctions are to be imposed, to determine what basis there might be for a reasonable extension or reversal of existing law. Such inquiry was made during the hearing.
Jay J. Gurfein, Esq., ("Gurfein") counsel for Namdar, Gottlieb, and Lewis B. Kaye ("Kaye"), the principal of LBK,testified at the hearing. In connection with claims of bias at the arbitration hearing, the parties presented conflicting testimony [*3]as to what occurred at the hearing. The Court need not determine what actually occurred at the hearing, however, as whatever happened is not relevant to the lack of merit of the Cross Motion. The Cross Motion was without merit because LBK failed to raise the bias issue in a timely fashion, either initially with the arbitrator before the award or subsequently, after the award in the application which LBK had made to the arbitrator for reconsideration. Gottlieb was unable to articulate any basis for an extension of existing law or reasonable grounds for reversal for the support of any of the three grounds. His articulated assumption at the sanctions hearing that the arbitrator had exceeded its powers because an arbitrator was not supposed to make an erroneous finding shows a complete lack of understanding of the arbitration process and the review of arbitration awards. This showing is reinforced by Gottlieb's concession that he had never participated in an arbitration case during the entire course of his twenty-year practice other than this case , and, obviously had not participated in any proceeding to set aside an arbitration award. His awareness of the principle waiver of objections to service by cross motion and to the need to preserve claims of bias were equally minimal. Further, his testimony indicated that he made minimal inquiry into the law of arbitration before filing his Cross Motion.
Kaye also testified at the hearing. Given that Kaye, had in his affidavit submitted in support of the Cross Motion, claimed substantial expertise in and familiarity with arbitration, this Court initially included Kaye in its possible list of persons who might be subject to sanctions for interposing frivolous objections in this case. Namdar's counsel also urged that Kaye was aware of rules governing improper claims of bias of an arbitrator by reason of LBK being a participant in prior litigation entitled Matter of Herskovitz (L.B.Kaye Associates, Ltd), 170 AD2d 272 (1st Dept. 1991).
Kaye's testimony showed that his sole personal experience in arbitration, prior to this case, was limited to the Herskovitz matter. Thus, Kaye's claims of his expertise as set forth in the Cross Motion, seems no more than an exercise of rodomontade on his part. Further, based on both the reported decision of the Appellate Division in Herskovitz and Kaye's testimony at the hearing, I cannot find that Kaye's experience in Herskovitz educated him sufficiently in the law of arbitration so as to hold him sanctionable here. Herskovitz involved the propriety of an adjournment by the arbitrator, an issue not relevant to those involved in this case. While the First Department ruled against LBK, LBK had prevailed in the Supreme Court, whose decision was reversed on specific facts relating to a type of alleged impropriety wholly different then those here.
While as a result of the hearing this Court finds no basis for imposing sanction [*4]on Kaye, this Court finds that sanctions should be imposed on Gottlieb.
As indicated above, Gottlieb, notwithstanding his minimal experience and expertise, interposed substantive, unfounded objections in this case.
Interposing meritless objections against an application to confirm an arbitration award is particularly inappropriate. New York has a strong public policy to encourage arbitration. To the extent each arbitration proceeding must run the gauntlet of a subsequent court hearing on unfounded or frivolous objections to confirmation, such policy is compromised. Grounds to challenge an award exist, and the courts must be open to hear them. However, lest the cost and delay of a litigated court proceeding be added to the "cost" of arbitration in every case, frivolous objections to a confirmation must be strongly discouraged.
Gottlieb, undoubtedly, on the request of Kaye and LBK, his client, acted to and challenge the award. As an officer of the court he cannot hide behind or rely on a non-lawyer client, whether or not his client was an expert in arbitration. As an officer of the Court, he had an obligation to ascertain, before filing papers, whether there was any merit to his claims, and to say no to his client, if there were none. As a tyro in this area, he was especially obligated to read and learn what Article 75 proceedings are about so that Namdar would not have to incur the expense and delay of responding to his half-baked positions.
Because Courts must always, if a claim is made, hear it, counsel has the obligation, whenever a client wants a result, to advise the client when it is wrong and when the client's position is untenable. Where counsel is not so constrained, counsel can always cause some delay by a frivolous assertion. Sanctions exist to cut this abuse. On the other hand, as this Court finds that Gottlieb's actions were based upon his lack of familiarity with the law, and to have been frivolous for such reason, it cannot ascribe to him any cunning intent to purposefully delay the matter.
This Court therefore, following such hearing, imposes sanctions on Gottlieb, as follows. There is imposed on Gottlieb a sanction of $250.00 which shall, pursuant to Rules §130-1.3, be deposited with the Lawyers' Fund for Client Protection. This Court will send a copy of this Decision and Order to the Fund as required by the Rules.
In addition, this Court, in its discretion, awards to Namdar as against Gottlieb, a reimbursement of Namdar's actual expenses reasonably incurred and reasonable attorney's fees, resulting from Gottlieb's frivolous activity in this matter. Such amount shall be the reasonable amount of legal fees and disbursements paid or payable by Namdar for services of her attorney, commencing with the interposition of Kaye's objection to confirmation on July 11, 2005, and ending as of the date of the [*5]issuance of the Decision and Order of the Court confirming the Award on August 17, 2005.
Namdar is directed to submit a statement of such fees and disbursements for entry of judgment on ten days notice to Gottlieb, who may within such ten-day period request a hearing by the Court on the propriety of such statement, in which event, this Court will advise the parties of a hearing date solely to determine the amount of fees and disbursements payable to Namdar.
This is the Decision and Order of the Court.
DATED:DECEMBER 6, 2005
NEW YORK, NEW YORK
Hon. Lewis Bart Stone
Justice of the Supreme Court
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