SUPREME COURT OF THE STATE OF NEW YORK APPELLATE DIVISION, FIRST DEPARTMENT FACEBOOK, INC. and MARK ELLIOT ZUCKERBERG, Plaintiffs-Respondents, -against- DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WEXLER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; and JENNIFER L. YOUNG, Defendants-Appellants. Index No. 653183/14 NOTICE OF MOTION FOR REARGUMENT OR, IN THE ALTERNATIVE, LEAVE TO APPEAL TO THE COURT OF APPEALS PLEASE TAKE NOTICE, that upon the annexed Memorandum of Law in Support of Plaintiffs-Respondents’ Motion for Reargument or, in the alternative, Leave to Appeal the Decision and Order of this Court entered on December 29, 2015, the undersigned will move this Court, at the Courthouse located at 27 Madison Avenue, New York, New York, at 10:00 a.m. on February 12, 2016, for an order providing the following relief: (a) pursuant to CPLR 2221 and 22 NYCRR 600.14(a), granting reargument of this Court’s December 29, 2015 Decision and Order, and, upon reconsideration, reversing same; or (b) pursuant to CPLR 5601 et seq. and 22 NYCRR 600.14(b), granting leave to appeal to the Court of Appeals; and,
Transcript
SUPREME COURT OF THE STATE OF NEW YORK APPELLATE DIVISION, FIRST DEPARTMENT FACEBOOK, INC. and MARK ELLIOT ZUCKERBERG,
Plaintiffs-Respondents,
-against-
DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WEXLER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; and JENNIFER L. YOUNG,
Defendants-Appellants.
Index No. 653183/14
NOTICE OF MOTION FOR REARGUMENT OR, IN THE ALTERNATIVE, LEAVE TO APPEAL TO THE COURT OF APPEALS
PLEASE TAKE NOTICE, that upon the annexed Memorandum of Law in
Support of Plaintiffs-Respondents’ Motion for Reargument or, in the alternative,
Leave to Appeal the Decision and Order of this Court entered on December 29,
2015, the undersigned will move this Court, at the Courthouse located at 27
Madison Avenue, New York, New York, at 10:00 a.m. on February 12, 2016, for
an order providing the following relief:
(a) pursuant to CPLR 2221 and 22 NYCRR 600.14(a), granting reargument of this Court’s December 29, 2015 Decision and Order, and, upon reconsideration, reversing same; or
(b) pursuant to CPLR 5601 et seq. and 22 NYCRR 600.14(b), granting leave to appeal to the Court of Appeals; and,
SUPREME COURT OF THE STATE OF NEW YORK APPELLATE DIVISION – FIRST DEPARTMENT FACEBOOK, INC. and MARK ELLIOT ZUCKERBERG,
Plaintiffs-Respondents,
-against-
DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WEXLER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; and JENNIFER L. YOUNG,
Defendants-Appellants.
Index No. 653183/14
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS-
RESPONDENTS’ MOTION FOR REARGUMENT OR, IN THE ALTERNATIVE, LEAVE TO APPEAL
Professor Geoffrey C. Hazard, Jr. Emeritus Professor of Law UNIVERSITY OF PENNSYLVANIA LAW SCHOOL UC HASTINGS COLLEGE OF LAW 200 McAllister Street San Francisco, CA 94102 (415) 565-4800 Avraham C. Moskowitz M. Todd Parker MOSKOWITZ & BOOK, LLP 345 Seventh Avenue, 21st Floor New York, New York 10001 (212) 221-7999
Mark C. Hansen Kevin B. Huff Michael N. Nemelka KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C. 1615 M Street, N.W., Suite 400 Washington, D.C. 20036 (202) 326-7900
Attorneys for Plaintiffs-Respondents Facebook, Inc. and Mark Elliot Zuckerberg
TABLE OF CONTENTS
TABLE OF AUTHORITIES ................................................................................... iii
FACTUAL ALLEGATIONS IN THE COMPLAINT .............................................. 5
Zuckerberg and Ceglia Signed the Street Fax Contract .................................. 5
Zuckerberg Founded Facebook ....................................................................... 5
Ceglia Created a Forgery and Filed a Fraudulent Lawsuit Based on It .......... 6
DLA and Lippes Joined the Case .................................................................... 6
It Was Obvious to DLA and Lippes that Ceglia’s Case Was A Fraud ........... 7
Kasowitz Discovered Proof of the Forgery and Gave It To Defendants ........ 8
DLA and Lippes Pursued the Lawsuit Despite Knowing the Truth .............11
The Milberg Defendants Furthered the Fraudulent Case ..............................12
The Federal Courts Have Repeatedly Held Ceglia’s Claim Was A Fraud ..............................................................................................................13
PROCEDURAL HISTORY .....................................................................................14
I. Reargument or Leave to Appeal Should Be Granted Because This Court Applied an Incorrect Pleading Standard Requiring Conclusive Proof of Fraud for Lawyer Liability ..............................................................17
A. The Complaint Meets the Proper Pleading Standard by Pleading Facts Supporting A Reasonable Inference of Knowledge ..................18
B. This Court Imposed an Incorrect Pleading Standard Requiring Conclusive Proof of Fraud ..................................................................21
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C. The Pleading Standard for Lawyer Liability Is An Issue of State-Wide Importance ........................................................................24
II. Reargument or Leave to Appeal Should Be Granted Because This Court Applied an Incorrect Standard for Considering and Weighing Conflicting Evidence on a Motion to Dismiss ..............................................26
A. This Court Incorrectly Held that It Could Consider Material Outside the Complaint that It Believed “Disproved” Facts Alleged in the Complaint ....................................................................26
B. This Court Incorrectly Held that It Could Weigh Evidence and Make Findings on Contested Facts on A Motion to Dismiss .............29
Courts Reconsider Rule Permitting Use of Affidavits on CPLR 3211(a)(7) Motion, N.Y.L.J., Jan. 20, 2015 ......................................................................... 27
Geoffrey C. Hazard, Jr. et al., The Law of Lawyering: A Handbook on the Rules of Professional Conduct (4th ed. 2015) ................................................................................ 24, 34
John R. Higgitt, High Court Signals a Potential Change in Practice With CPLR 3211(a)(7), N.Y.L.J., July 31, 2013 ...................................................................................... 27
INTRODUCTION
The Defendant lawyers and law firms prosecuted a lawsuit against Facebook
and its founder Mark Zuckerberg with full knowledge that the lawsuit was based
entirely on a forged contract. It is undisputed that the contract was a forgery and
the case was a fraud. The federal courts hearing the case dismissed it as a fraud on
the court by clear and convincing evidence. Defendants’ client, Paul Ceglia, was
indicted by a federal grand jury and fled the jurisdiction rather than face charges
that he forged the contract to extort an unwarranted settlement from Facebook.
At issue in this case is the standard for pleading a claim that lawyers have
knowingly prosecuted a fraudulent lawsuit. The Complaint alleges that the
Defendant lawyers actually knew that their client’s purported contract with
Zuckerberg for an 84% ownership interest in Facebook was a forgery. The
Complaint alleges in detail why the lawyers knew the lawsuit was a fraud: Ceglia
was a convicted felon and fraudster; Facebook had publicly and vigorously
disputed the existence of Ceglia’s claimed contract from the outset; the document
was suspicious on its face; and Ceglia’s story that he forgot for years that he was
the billionaire majority owner of one of the world’s most valuable companies
belied common sense.
The Complaint further alleges that, in addition to the above evidence of
Ceglia’s fraud, Defendants were presented with a smoking gun: Their co-counsel
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at the Kasowitz law firm discovered electronic documents on Ceglia’s own
computer proving that Ceglia’s purported contract was fabricated from an earlier
authentic contract that had nothing to do with Facebook. Kasowitz immediately
recognized from this discovery that Ceglia’s lawsuit was a fraud – and resigned the
same day. Kasowitz then warned Defendants orally and in writing that this
discovery “established” that the purported contract was “fabricated.” Despite all
this proof of fraud, Defendants continued to litigate Ceglia’s false claims.
After the federal courts dismissed Ceglia’s lawsuit as a fraud on the court,
Plaintiffs Facebook and Zuckerberg brought the present lawsuit against the
Defendant lawyers for malicious prosecution and attorney deceit under New York
Judiciary Law § 487. Three sets of Defendants moved to dismiss under CPLR
3211. After extensive briefing and argument, Justice Eileen Rakower held in a
well-reasoned opinion that, taking the Complaint’s allegations as true, Plaintiffs
stated claims for malicious prosecution and violation of § 487.
This Court reversed, holding that, despite the extraordinary evidence that
Defendants knew about the fraud, they were nevertheless privileged as a matter of
law to continue to pursue Ceglia’s false claims because there was “no conclusive
proof” of fraud. In so holding, this Court turned the CPLR 3211 pleading standard
on its head by considering evidentiary material from outside the Complaint to
resolve disputed facts and find that Defendants “conducted a quite thorough
3
investigation” sufficient to rebut the well-pleaded allegations that they
affirmatively knew from their co-counsel and other evidence that Ceglia’s case was
based on a forgery. As a result, the Court dismissed the Complaint for failing
sufficiently to allege that the Defendants lawyers acted without probable cause (for
malicious prosecution) and with the intent to deceive (for § 487).
Plaintiffs respectfully request that this Court grant reargument or, in the
alternative, leave to appeal to the Court of Appeals for two independent reasons:
First, this Court’s decision sets a new heightened pleading standard
requiring conclusive proof of fraud for lawyers to be liable for malicious
prosecution and attorney deceit under § 487. This new pleading standard is
inconsistent with decisions of the Court of Appeals, is contrary to the rules of
professional responsibility, and effectively immunizes lawyers who proceed in the
face of clear evidence of fraud. Under the correct standard, the Complaint pleads
facts more than sufficient to support an inference that Defendants knew that the
claim they were pursuing was fraudulent. This issue is important to the integrity of
the judiciary and the regulation of the conduct of lawyers. See infra Part I.
Second, this Court also applied incorrect standards for considering materials
outside a complaint to resolve factual disputes on a motion to dismiss. The Court
considered and credited Defendants’ assertions that they “investigated” Ceglia’s
claim. By doing so, this Court acted contrary to Court of Appeals case law
4
restricting the use of outside evidence on a motion to dismiss. In addition, the
Court relied on the outside materials expressly to weigh the evidence and make
factual findings that Defendants’ so-called “investigation” was “quite thorough.”
Such fact finding on a motion to dismiss is inappropriate. Plaintiffs are entitled to
discovery to test Defendants’ self-serving assertions. And here, the Court’s finding
was unsupported by the record. No evidence was submitted as to what Defendants
did to investigate, when they did it, or what their conclusions were. The
submissions that this Court credited were advocacy pieces that failed to even
address what the lawyers now claim they were “investigating” – the discovery of
the real contract establishing that Ceglia’s claimed document was a forgery. See
infra Part II.
QUESTIONS PRESENTED
1. Is the proper pleading standard for lawyer liability for malicious
prosecution and attorney deceit under Judiciary Law § 487 “conclusive proof of
fraud,” as this Court held, or allegations “sufficient to permit a reasonable
inference” that the lawyer knew about the fraud, as the Court of Appeals has held?
2. Does Miglino v. Bally Total Fitness of Greater New York, Inc., 20
N.Y.3d 342 (2013), prohibit a court from considering evidentiary material from
outside the complaint to dispute pleaded facts on a motion to dismiss?
Alternatively, if a court is allowed to consider such evidentiary material, must that
5
material “conclusively establish” that the pleaded facts are false, or is a court
allowed to weigh the evidence and make findings of fact on disputed issues, as this
Court did?
FACTUAL ALLEGATIONS IN THE COMPLAINT
The Complaint alleges that each Defendant law firm played a central role in
pursuing Ceglia’s fraudulent lawsuit despite knowing it was based on a forgery.
Zuckerberg and Ceglia Signed the Street Fax Contract
On April 28, 2003, before Facebook was conceived, Zuckerberg signed a
two-page written contract with Ceglia in which Zuckerberg agreed to help develop
a website for insurance adjustors called StreetFax.com (“Street Fax contract”).
¶¶ 23-28.1 Zuckerberg performed the work on the Street Fax website but Ceglia
failed to pay most of what was owed. When Zuckerberg pressed for payment,
Ceglia emailed the Street Fax contract to his lawyer to discuss whether to pay
Zuckerberg. ¶¶ 29-32. These emails and the attached contract established that the
Street Fax contract existed at the time and that the parties’ relationship related only
to Street Fax, not Facebook. ¶¶ 10, 32-33, 59, 88.
Zuckerberg Founded Facebook
In December 2003, months after entering into the Street Fax contract,
Zuckerberg conceived of Facebook. ¶ 34. He launched the website on February 4,
1 “R.” denotes the record on appeal. “¶” denotes paragraphs in the Complaint at R.40-78.
6
2004. Id. Facebook rapidly grew into a worldwide success. ¶¶ 35-37. By 2010,
Facebook was worth billions and rumors swirled that it planned to go public. ¶ 38.
Ceglia Created a Forgery and Filed a Fraudulent Lawsuit Based on It
Around 2010, Ceglia hatched a scheme to extort Zuckerberg and Facebook
by falsely claiming an ownership interest in Facebook based on a forged contract.
Ceglia took the Street Fax contract and doctored it to make it read as though he had
contracted for an 84% ownership interest in Facebook. He retitled this forgery the
“Work for Hire” document. ¶¶ 39-47.
Using this forgery, on June 30, 2010, Ceglia and his lawyer, Defendant Paul
Argentieri, filed a lawsuit against Facebook and Zuckerberg in Allegany County
Supreme Court, claiming that the forged Work for Hire document entitled Ceglia
to 84% of Facebook. ¶¶ 40-41.
With no notice to Facebook or Zuckerberg, Ceglia fraudulently used the
forged document to obtain from the Allegany court an ex parte temporary
injunction freezing all of Facebook’s assets and stock. The court was not told
about the forgery or given the real Street Fax contract, which would have revealed
the forgery, and so was duped into granting the injunction. ¶¶ 41, 48-49.
DLA and Lippes Joined the Case
In early 2011, Ceglia and Argentieri decided that they needed the assistance
of bigger law firms. ¶ 55. Argentieri sent a pitch document (called the “Lawsuit
7
Overview”) to “multiple top tier law firms” to recruit them to join the suit, with the
goal of conducting “immediate settlement negotiations.” ¶¶ 55-58. The firms were
offered a contingency fee to share in any recovery. Id. Seeing the possibility of a
quick contingency score, several law firms signed on, including the DLA and
Lippes Defendants and the Kasowitz law firm. ¶ 58.
It Was Obvious to DLA and Lippes that Ceglia’s Case Was A Fraud
When DLA and Lippes agreed to join Ceglia’s fraudulent lawsuit in March
2011, they were faced with numerous facts showing – to any reasonable lawyer
acting in good faith – that Ceglia’s claim was fraudulent:
To begin with, it was public information that their new client, Ceglia, was a
convicted felon with a history of petty frauds. Ceglia had pled guilty to a first-
degree felony drug charge. ¶ 19. Ceglia recently had been publicly charged by the
New York Attorney General with consumer fraud for selling wood pellets for
heating to customers, accepting payment, but never delivering the pellets. Id.
Facebook had maintained vociferously from the beginning that Ceglia’s
claimed contract was a forgery. ¶ 54. The press agreed; a news story published
prior to DLA and Lippes joining the case described Ceglia’s claimed contract (in
the headline) as “Almost Certainly A Forgery.” ¶ 46.
A review of the fake Work for Hire document revealed visual discrepancies
strongly suggesting fraud. All the terms relating to Facebook appeared on the first
8
page; the signatures were on the second page. The font and formatting of the
indents, margins, and columns were different on the two pages. ¶ 44. The Second
Circuit later held that many of these font and formatting “irregularities” “are
apparent to the naked, untrained eye.” R.1056-57.
The forgery was also betrayed by historical impossibilities. For example, it
was a matter of public record that Zuckerberg did not conceive of Facebook until
months after the date of the forgery. ¶ 45.
DLA and Lippes also knew that Ceglia’s story made no sense. He publicly
claimed that he had forgotten for more than six years that he was a billionaire co-
owner of one of the world’s most valuable companies, but came across his
“contract” when he was searching through his papers to respond to the New York
Attorney General’s charges of consumer fraud in the sale of wood pellets. ¶ 47.
Kasowitz Discovered Proof of the Forgery and Gave It To Defendants
Shortly after DLA and Lippes joined the case, the most devastating proof of
the forgery arrived from Ceglia’s own computer: On March 30, 2011, Defendants’
co-counsel at Kasowitz discovered on Ceglia’s hard drive the authentic Street Fax
contract attached to the contemporaneous emails from Ceglia to his lawyer. ¶ 32.
This smoking-gun discovery of the real Street Fax contract and emails
established beyond doubt that Ceglia’s claimed Work for Hire document was a
forgery. ¶ 59. None of the Defendants has ever had any explanation for the
9
existence of the real Street Fax contract. Both contracts could not be real – no one
has ever claimed they could be. They both bear the same date and cover the same
Street Fax work. The difference is that the forged Work for Hire document is
visibly altered to include made-up terms relating to Facebook. Objective
electronic evidence (namely, that the real contract was found on Ceglia’s computer
attached to contemporaneous emails from Ceglia to his lawyer) proved that the
only real contract in existence at the time was the Street Fax contract that had
nothing to do with Facebook. ¶¶ 23-33, 59.
A visual comparison of the two documents (both of which all Defendants
possessed), confirmed the forgery. The real Street Fax contract appears normal
with consistent font, formatting, and spacing. By contrast, the fake Work for Hire
document has inconsistent font, formatting, and spacing on the first page where the
terms relating to Facebook appear. This simple comparison reveals that Ceglia
altered the real Street Fax contract to add in made-up terms relating to Facebook,
but that he had to adjust the font and formatting in order to squeeze in all the new,
fake, terms. ¶¶ 43-44.
A comparison of the terms of the two documents also exposed the forgery:
Defendants knew from the Lawsuit Overview that Ceglia had sent a check to
Zuckerberg for $3,000, R.326 – more than the total payment called for by the fake
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Work for Hire document ($2,000), but the precise amount of the first installment
called for by the real Street Fax contract. ¶ 46.
Kasowitz immediately recognized the inescapable implication of its
discovery – namely, that Ceglia’s document was a forgery and the lawsuit was a
fraud. ¶¶ 59-60, 67. The very same day of its discovery (March 30, 2011),
Kasowitz withdrew as counsel to Ceglia. ¶ 60.
Next, Kasowitz informed its co-counsel, including DLA and Lippes, that it
had discovered the real contract proving the fraud. ¶¶ 59-61. The Complaint
alleges that before DLA and Lippes filed an amended complaint on April 11, 2011,
Kasowitz orally informed them that it had discovered the real contract and that this
meant the entire lawsuit was based on a forgery. Id.
Two days later, on April 13, 2011, Kasowitz sent a letter to DLA and Lippes
attaching the proof of the fraud – the real Street Fax contract and contemporaneous
emails. ¶ 67. Lest there be any doubt, the letter informed DLA and Lippes of the
implication of this discovery: It “established that page 1 of the [purported
contract] is fabricated.” Id. (emphases added); R.1192.2 Kasowitz also stated that,
as a result, it had “immediately” withdrawn from the case. Id. Kasowitz then
warned Defendants of their “obligations” under N.Y.R.P.C. Rule 3.3, which
2 Since filing the Complaint, Plaintiffs have learned from Ceglia’s criminal case that
Kasowitz wrote a previous letter to DLA on the same day that DLA and Lippes filed the amended complaint (April 11, 2011). That letter also informed DLA about Kasowitz’s discovery of the fraud. R.1031. DLA was thus informed about the fraud twice in writing.
11
provides that a lawyer has a duty to correct false statements made to a court. ¶ 67
& n.1.
DLA and Lippes Pursued the Lawsuit Despite Knowing the Truth
Despite this proof of forgery, DLA and Lippes nevertheless filed an
amended complaint on April 11, 2011, reiterating Ceglia’s false claims. ¶¶ 62-63.
They attached the forged document, represented that it was authentic, and
demanded an ownership stake in Facebook. ¶ 63.
The amended complaint also added new false evidence by purporting to
quote (but not attaching) new “emails” between Zuckerberg and Ceglia discussing
Facebook. ¶ 64. These “emails” were clearly fake. They were not even emails,
but Microsoft Word documents typed to look like emails. They contained
incorrect time zone stamps, formatting discrepancies, and other errors. ¶¶ 65-67.
After filing the complaint, and after receiving the Kasowitz letter and
evidence, DLA and Lippes continued to prosecute the fraudulent case, even
attaching the fake “contract” to motions and filings to the court in June 2011 –
about two months after receiving the Kasowitz letter. ¶¶ 74, 76. They also
continued to hide the real Street Fax contract from the Court. Id. ¶ 77.
As part of a strategy to force an early and unwarranted settlement, DLA
made numerous false statements in the press, vouching for Ceglia’s claim. DLA
12
went so far as to issue a public threat: “Anyone who claims this case is fraudulent
and brought by a scam artist will come to regret those claims.” ¶ 69.
Months later, on the eve of a discovery hearing in June 2011, DLA and
Lippes abruptly withdrew from the case without explanation. ¶ 77. They never
informed the court about the truth or the existence of the real contract given to
them by Kasowitz. Id.
The Milberg Defendants Furthered the Fraudulent Case
On March 5, 2012, the Milberg Defendants entered appearances. ¶ 92. By
that time, Facebook had finally obtained in discovery the authentic Street Fax
contract and the emails attaching it. ¶¶ 88-89. Milberg was aware of the same
facts known to DLA and Lippes, including the Kasowitz letter; Milberg bragged to
the press that it had looked at “all of the information available” before joining the
case. ¶ 92. With no rational way to explain away the existence of the real contract,
Milberg publicly made the outlandish claim that Zuckerberg somehow “hack[ed]”
into Ceglia’s computer and planted the (real) Street Fax contract. ¶ 94. This
“hacking theory” is so ridiculous that none of the Defendants has tried to defend it
in this case. The federal court that later dismissed Ceglia’s case as a fraud rejected
this “hacking” theory as “beyond absurd.” Ceglia v. Zuckerberg, 2013 WL
1208558, at *21 (W.D.N.Y. Mar. 26, 2013).
13
Milberg furthered the fraud by keeping the claim alive and continuing the
campaign in the press. ¶¶ 20, 92-96, 110. Milberg filed multiple briefs with the
court asserting that the forgery was legitimate and seeking to prevent disclosure of
documents that led to production of the bombshell Kasowitz letter. ¶¶ 95-96. On
May 30, 2012, Milberg abruptly withdrew from the case. Id. Like the other
Defendants, Milberg did not tell the court the truth. ¶¶ 11, 68, 97.
The Federal Courts Have Repeatedly Held Ceglia’s Claim Was A Fraud
Facebook and Zuckerberg moved to dismiss Ceglia’s lawsuit as a fraud on
the court. The federal district court agreed, finding that – by clear and convincing
evidence – Ceglia’s Work for Hire document was forged. ¶¶ 102-104. The court
held that the discovery of the real Street Fax contract and emails on Ceglia’s
computer – the very same evidence Kasowitz gave to Defendants – proved that the
purported contract was a fake. Ceglia, 2013 WL 1208558, *23. The court also
discussed other evidence of the fraud, such as the historical impossibilities; the
text, font, and formatting discrepancies on the face of the forged document;
Ceglia’s far-fetched story; etc. Id.; see also ¶¶ 19, 40-47.
The Second Circuit affirmed, holding that “clear and convincing evidence”
had established that “the Work for Hire document at the foundation of [Ceglia’s]
suit is a forgery.” R.1056-57. Like the district court, the Second Circuit held that
“the discovery of the real StreetFax contract . . . puts the lie to Ceglia’s claim.”
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R.1057. The court also held that many of the font and formatting “irregularities”
in the forged document “are apparent to the naked, untrained eye” and that
Ceglia’s story was so outlandish that it “belies common sense.” R.1056-57.
A federal grand jury indicted Ceglia for federal wire fraud for his false claim
against Facebook and Zuckerberg. ¶ 101. Two federal judges overseeing the
criminal case found probable cause that Ceglia had committed fraud, with one
describing the proof as “overwhelming.” ¶ 100. Judge Vernon Broderick, in
Ceglia’s criminal case, held that certain communications involving the DLA
Defendants were subject to the crime-fraud exception to the attorney-client
privilege because they were made “in furtherance of” Ceglia’s fraud. R.1030-40.
Ceglia’s federal criminal trial was scheduled to start on May 4, 2015. Rather
than face justice, Ceglia cut off his ankle monitoring bracelet, and fled the
jurisdiction. He remains a fugitive.
PROCEDURAL HISTORY
On October 20, 2014, Facebook and Zuckerberg brought this action for
malicious prosecution and attorney deceit under Judiciary Law § 487 against four
sets of lawyers who played central roles in pursuing Ceglia’s fraudulent claims –
the Argentieri, DLA, Lippes, and Milberg Defendants.
On December 29, 2014, the DLA, Lippes, and Milberg Defendants filed
motions to dismiss. After reviewing 246 pages of briefing and hearing almost
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three hours of oral argument, Justice Rakower denied Defendants’ motions to
dismiss in a well-reasoned nine-page opinion. Accepting as true the allegations in
the “four corners” of the Complaint, Justice Rakower held that the Complaint’s
allegations of Defendants’ knowledge, including Kasowitz’s discovery and
disclosure of the fraud to Defendants, were sufficient to allege a lack of probable
cause for malicious prosecution and intent to deceive under § 487. R.30-36.
This Court reversed, holding as a matter of law that Defendants had probable
cause to pursue Ceglia’s concededly fraudulent lawsuit and had no intent to
deceive in doing so. The Court stated that the Complaint failed to plead
“conclusive proof of fraud,” a pleading standard with no support in New York law.
Facebook, Inc. v. DLA Piper LLP (US), No. 653183/14, Decision and Order (1st
Dep’t Dec. 29, 2015) (“Decision”) at 12 (attached hereto as Exhibit A). The Court
dismissed as “conclusory” the Complaint’s detailed and specific allegations about
Kasowitz’s discovery of the fraud, how and when it sent the proof of fraud to
Defendants, and what exactly the letter said. Id. at 9.
The Court also looked outside the four corners of the Complaint to
determine if “evidentiary material submitted” by Defendants “disproved” the
allegations that they knew about Ceglia’s fraud. Id. The Court credited
Defendants’ assertions that they conducted an “investigation” into Ceglia’s claims
16
– even though the record contained no evidence regarding when this so-called
investigation was conducted, what steps were taken, or what the conclusions were.
The only information Defendants submitted about the “investigation” was an
affidavit from Ceglia swearing the fake contract was real and a handful of expert
reports submitted in the Ceglia Action. Critically, none of these experts opined
that the fake Work for Hire document was the authentic contract; nor did they
address the existence of the real Street Fax contract. Instead, the experts opined on
peripheral matters – such as that the two pages of the fake contract had been
stapled together and one page was on top of the other page when handwriting was
made on the top page. All of their conclusions were fully consistent with the Work
for Hire document being a forgery. One of the experts opined that Ceglia had
passed a polygraph examination, but the record did not disclose the questions he
was asked, including whether he was asked about the real Street Fax contract.
This Court nevertheless expressly weighed the evidence and made a factual
finding that Defendants conducted “a quite thorough investigation after being
advised of Kasowitz’s findings.” Id. at 9-10, 12. As a result, the Court concluded
as a matter of law that Defendants had done nothing wrong in pursuing Ceglia’s
fraudulent lawsuit. Based on this judicial fact-finding, the Court granted
Defendants’ CPLR 3211 motions to dismiss. Id. at 11, 12.
17
ARGUMENT
A motion for reargument should be granted upon the movant’s showing that
the Court “overlooked or misapprehended” relevant facts or law. CPLR
2221(d)(2). Leave to appeal is appropriate if the issue (1) is novel or of public
importance, (2) presents a conflict with prior decisions of the Court of Appeals, or
(3) involves a conflict among the departments of the Appellate Division. 22
NYCRR 500.22(b)(4).
These requirements are satisfied here because (1) this Court’s decision
incorrectly imposes a heightened pleading standard requiring conclusive proof of
fraud for lawyer liability; and (2) this Court applied the wrong standards under
CPLR 3211 by improperly (a) considering material outside the Complaint, and
(b) resolving factual disputes on a motion to dismiss. For these reasons, this Court
should grant either reargument or leave to appeal to the Court of Appeals.
I. Reargument or Leave to Appeal Should Be Granted Because This Court Applied an Incorrect Pleading Standard Requiring Conclusive Proof of Fraud for Lawyer Liability
The central question presented in this case is the proper pleading standard
for lawyer liability for malicious prosecution and attorney deceit under Judiciary
Law § 487. The Complaint pled that Defendants possessed facts irrefutably
“establishing” that Ceglia’s claimed contract was “fabricated.” Despite these
allegations, this Court dismissed Plaintiffs’ claims because it held, as a matter of
18
law on a motion to dismiss, that Plaintiffs did not “demonstrate” “conclusive
proof” of fraud. Decision at 9-12. Such an unprecedentedly high pleading
standard effectively grants immunity to lawyers and is directly contrary to the
Court of Appeals’ standards for pleading knowledge. This Court should reconsider
its holding or, alternatively, grant leave to appeal so the Court of Appeals can
address this important issue.
A. The Complaint Meets the Proper Pleading Standard by Pleading Facts Supporting A Reasonable Inference of Knowledge
1. To plead a claim for malicious prosecution, a plaintiff must allege that
the defendant lacked probable cause for pursuing the lawsuit. Similarly, to plead a
claim for attorney deceit under Judiciary Law § 487, plaintiff must allege that the
lawyer intended to deceive when making a false statement to a court. Both
elements are satisfied by an objective showing that a reasonable person would
know that the claim was false based on the circumstances known to the person.3
At the pleading stage, the question is whether the Complaint has pled facts
“sufficient to permit a reasonable inference” that the lawyer knew about the fraud.
Pludeman v. Northern Leasing Sys., Inc., 10 N.Y.3d 486, 492 (2008); see also
3 See Burt v. Smith, 181 N.Y. 1, 5-6 (1905) (test for lack of probable cause is whether
defendant lacked “any reasonable cause, such as would persuade a man of ordinary care and prudence to believe in the truth of the charge”); Parkin v. Cornell Univ., 78 N.Y.2d 523, 529 (1991) (test is “whether reasonable persons would have concluded from the circumstances known to defendants” that plaintiffs were liable in the underlying action); Amalfitano v. Rosenberg, 12 N.Y.3d 8, 14 (2009) (test for intent to deceive under Judiciary Law § 487 is whether defendant lawyer knew that statement to the court was false or misleading).
19
Polonetsky v. Better Home Depot, Inc., 97 N.Y.2d 46, 55 (2001) (complaint
adequately alleged defendant knew about fraud because the court was “unable to
say that a jury could not infer his knowledge of or participation in the fraudulent
scheme”).4 Ordinarily, the only way to allege knowledge of fraud is through
circumstantial evidence; direct evidence of fraud is usually (as here) in the
exclusive possession of the defendant. Pludeman, 10 N.Y.3d at 491-92. As a
result, “unassailable proof of fraud” need not be pled in the Complaint. Id.
2. Here, the Complaint alleged facts supporting more than a reasonable
inference that Defendants knew Ceglia’s claim was a fraud based on a forged
contract. When Defendants joined the case, they were aware of numerous facts
from which a jury could infer that they knew about Ceglia’s fraud: Ceglia was a
convicted felon and fraudster; Facebook had vigorously asserted the contract was
forged; the press had concluded the contract was forged; the contract contained
formatting irregularities that were “apparent to the naked, untrained eye” (as the
Second Circuit held (R.1057)); and Ceglia’s story belied common sense. Shortly
after Defendants joined the case, Kasowitz’s smoking-gun discovery of the real
4 See also Sargiss v. Magarelli, 12 N.Y.3d 527, 531 (2009) (knowledge of fraud
adequately pled “when the facts are sufficient to permit a reasonable inference” of knowledge); Houbigant, Inc. v. Deloitte & Touche LLP, 303 A.D.2d 92, 99 (1st Dep’t 2003) (plaintiffs need not “establish the truth” of their allegations of knowledge, they “need only allege specific facts from which it is possible to infer defendant’s knowledge of the falsity of its statements”); id. at 98 (“[I]t should be sufficient that the complaint contains some rational basis for inferring that the alleged misrepresentation was knowingly made.”).
20
contract on Ceglia’s own computer laid to rest any doubts that Ceglia’s case was
based on a forgery. ¶¶ 23-33, 59.
Kasowitz immediately recognized the inescapable implication of its
discovery and withdrew as counsel the very same day. ¶ 60. Kasowitz informed
Defendants both orally and in writing of its discovery. Kasowitz gave DLA and
Lippes the real contract and associated emails that proved the fraud. Kasowitz was
unequivocal in what this evidence proved – it “established that page 1 of the
[purported contract] is fabricated.” ¶ 67 (emphases added); R.1192.5
These detailed and specific allegations easily support a reasonable inference
that Defendants knew Ceglia’s claim was based on a forged contract. Kasowitz is
the perfect model for what an objectively reasonable law firm would do in the face
of this overwhelming proof of fraud – it immediately concluded Ceglia’s claim
was a fraud and withdrew the same day it obtained this evidence. Defendants
5 The Court chose to ignore the allegation that Kasowitz orally informed DLA and Lippes
about the fraud before they filed the amended complaint because that allegation was made on “information and belief.” Decision at 11-12. But the timing is legally irrelevant because, under New York law, it is malicious prosecution to initiate or continue a malicious prosecution without probable cause. See Broughton v. State, 37 N.Y.2d 451, 457 (1975). It is undisputed that DLA and Lippes continued to pursue the case for months after everyone agrees they received the Kasowitz letter warning them of the fraud. Specifically, after receiving the Kasowitz letter, DLA and Lippes submitted the forged document to the court in June 2011 without telling the court about the existence of the real Street Fax contract or Kasowitz’s findings of fraud. ¶ 74. In any event, the allegation that they were told orally before they filed the amended complaint is an entirely fair inference from the other pleaded facts: Kasowitz made its discovery well before the amended complaint was filed and could be expected to promptly convey such a bombshell discovery to its co-counsel who were working on the amended complaint. ¶¶ 58-59.
21
knew what Kasowitz knew;6 so a reasonable juror could certainly reach the
conclusion (as Kasowitz did) that this information “established” fraud.
B. This Court Imposed an Incorrect Pleading Standard Requiring Conclusive Proof of Fraud
Despite the Complaint’s well-supported allegations that Defendants knew
about Ceglia’s fraud, this Court dismissed Plaintiffs’ claims as a matter of law
because the Complaint failed to “demonstrate” conclusive proof of fraud. This
Court therefore imposed a much higher pleading standard than the “reasonable
inference” standard that Court of Appeals precedent requires. The Court was
explicit on this new standard in discussing the § 487 claim. In dismissing
Kasowitz’s discovery and warnings to Defendants, the Court held that “there was
no conclusive proof of Ceglia’s fraud that rendered their representation deceptive.”
Decision at 12 (emphasis added). Similarly, in dismissing the malicious
prosecution claim, the Court held that Plaintiffs had to “demonstrate,” and not
simply allege, that the suit lacked probable cause. Id. at 10.
While the Court paid lip service to the correct pleading standard, the Court’s
language and analysis confirm that it applied a new rule requiring conclusive proof
of fraud for lawyer liability. The Court reasoned that, even in the face of
6 Milberg concededly possessed the real Street Fax contract and the emails attaching it.
¶¶ 88-89, 92. The Complaint also adequately alleged that Milberg possessed the Kasowitz letter, as is clear from the Complaint’s allegations that (1) Milberg claimed to have reviewed “all of the information available” before joining the case, which of course would include the Kasowitz letter, and (2) Milberg resisted the discovery that led to the Kasowitz letter. ¶¶ 92, 96.
22
overwhelming proof of fraud, a lawyer is privileged to prosecute a lawsuit as a
matter of law so long as the lawyer can point to some fig leaf justifying the claim.
Here, even though Defendants’ own co-counsel discovered the fraud, gave
them the evidence proving fraud, and told them that the evidence proved fraud, the
Court nevertheless gave the lawyers a free pass on a motion to dismiss by relying
on their self-serving (and untested) assertion that they “investigated” Ceglia’s
claims. Id. at 9-12.7 By that approach, the Court set the bar for lawyer liability so
high that no claim could ever meet it. Any lawyer can claim to have conducted an
“investigation.” On a motion to dismiss, before any discovery, it is impossible for
a plaintiff to test such an assertion. Such a pleading rule effectively grants legal
immunity to lawyers from malicious prosecution and liability under § 487, unless
the plaintiff can plead facts showing that the client confessed the fraud to the
lawyer – something that will almost never occur.
There is no support for this Court’s requirement that, on a motion to dismiss,
a plaintiff must “demonstrate” “conclusive proof of fraud.” To our knowledge, no
7 This Court also improperly relied on a “presumption” of probable cause from the ex
parte preliminary injunction issued by the Allegany court at the outset of Ceglia’s lawsuit. Such a conclusion was contrary to the Court of Appeals’ repeated holdings that any presumption of probable cause arising from a court order is overcome when the order was procured by “fraud, perjury or the misrepresentation or falsification of evidence.” Broughton, 37 N.Y.2d at 456; Gisondi v. Town of Harrison, 72 N.Y.2d 280, 285 (1988). Here, it has already been determined by the federal courts that the ex parte injunction was procured by fraud and the falsification of evidence – namely, the order was issued based on the forged Work for Hire document. ¶¶ 42-48. Therefore, the injunction (which was issued ex parte and so never tested by the adversary process) cannot create a presumption of probable cause.
23
court in New York (or anywhere else) has ever imposed such an extreme pleading
requirement for malicious prosecution or Judiciary Law § 487. “Proof” need not
be “demonstrated” at the pleading stage: “To require a ‘showing’ of an evidentiary
nature . . . on a CPLR 3211 dismissal motion improperly imports a summary
judgment standard into the orbit of CPLR 3211 analysis, and is beyond what is
required to uphold the sufficiency of a pleading.” Houbigant, Inc. v. Deloitte &
Touche LLP, 303 A.D.2d 92, 98 (1st Dep’t 2003).
Moreover, even in fraud cases that are subject to CPLR 3016(b)’s
particularity requirement, conclusive proof is not required. In Pludeman, the Court
of Appeals rejected any requirement of “unassailable proof of fraud” at the
pleading stage for a fraud claim. 10 N.Y.3d at 492. Instead, it is enough for a
complaint to plead facts “sufficient to permit a reasonable inference” of fraud. Id.
The standard for pleading malicious prosecution and violation of § 487 should not
be higher than the standard for pleading fraud (which is subject to a statutory
particularity requirement). Lawyers do not get to build a special wall around their
own actions to protect them from judicial scrutiny.
This Court’s heightened pleading standard for lawyers is also inconsistent
with the New York Rules of Professional Conduct. Those rules prohibit a lawyer
from “knowingly” making a false statement to the court. Rule 3.3. The rules make
clear that “knowledge may be inferred from circumstances.” Rule 1.0(k). As the
24
leading treatise on legal ethics states: “[C]ircumstantial evidence must . . . be the
(sole) basis for inferring a lawyer’s actual knowledge or belief, where that is the
relevant legal standard. It is impossible to look into a lawyer’s head, and it is
unacceptable simply to take his word for his own state of mind when the probity of
his own conduct is at issue.” Geoffrey C. Hazard, Jr. et al., The Law of Lawyering
§ 1.24 (4th ed. 2015). Yet that is precisely what this Court did – it took the
lawyers’ word that they “investigated” Ceglia’s claim and concluded that there was
a basis for it despite the objective documentary evidence of fraud.
C. The Pleading Standard for Lawyer Liability Is An Issue of State-Wide Importance
The appropriate standard for holding lawyers liable for bringing fraudulent
lawsuits is manifestly an issue of public importance. A critical purpose of the tort
of malicious prosecution and the statutory prohibition of attorney deceit under
§ 487 is to regulate the conduct of lawyers and protect the integrity of the judicial
system. As the Court of Appeals held in Amalfitano v. Rosenberg, the purpose of
§ 487 is to “enforce an attorney’s special obligation to protect the integrity of the
courts and foster their truth-seeking function.” 12 N.Y.3d 8, 14 (2009). The Rules
of Professional Conduct protect similar interests: “Lawyers have a special
obligation to protect a tribunal against criminal or fraudulent conduct that
undermines the integrity of the adjudicative process.” Model Rules Prof’l Conduct
§ 3.3, cmt. [12] (Am. Bar Ass’n 2015).
25
Although vigorous advocacy is necessary for our adversary system, that
system cannot operate properly if lawyers pursue fraudulent claims using false
evidence. See Honzawa v. Honzawa, 268 A.D.2d 327, 331 (1st Dep’t 2000)
(malicious prosecution case; “[a] lawyer must not . . . us[e] false evidence, or
assist[] a client with the aid of evidence he knows to be false”); Mazel 315 W. 35th
LLC v. 315 W. 35th Assocs., LLC, 120 A.D.3d 1106, 1107 (1st Dep’t 2014) (§ 487
case; where attorney filed lawsuit based on false property records, the “contention
that he is immune from liability because he was merely engaged in zealous
advocacy is unavailing”).
This Court’s grant of effective immunity to lawyers will incentivize lawyers
to bring meritless lawsuits safe in the knowledge that so long as there is no
“conclusive proof” that they knew the claim was bogus, they are immune not just
from liability but even from having to defend their actions on the merits. The
dividing line between legitimate advocacy and knowing pursuit of a fraudulent
lawsuit is an issue important to the integrity of the bar and the judicial system. For
the reasons discussed above, this Court should revisit its new heightened pleading
rule for lawyers or grant leave for the Court of Appeals to review it.
26
II. Reargument or Leave to Appeal Should Be Granted Because This Court Applied an Incorrect Standard for Considering and Weighing Conflicting Evidence on a Motion to Dismiss
This Court also applied the wrong standards for considering and weighing
conflicting evidence on a motion to dismiss. The Court improperly held that it
could consider materials from outside the Complaint submitted by Defendants and
weigh that information against the allegations in the Complaint to resolve factual
disputes on a motion to dismiss. This is an independent basis for reargument or
leave to appeal.
A. This Court Incorrectly Held that It Could Consider Material Outside the Complaint that It Believed “Disproved” Facts Alleged in the Complaint
In Miglino v. Bally Total Fitness of Greater New York, Inc., 20 N.Y.3d 342,
the Court of Appeals addressed the extent to which materials from outside the
complaint can be considered on a motion to dismiss under CPLR 3211(a)(7). The
case involved a claim for negligence against a health club by the estate of a club
patron who had died of a heart attack. The plaintiff claimed that the club breached
its duty of care by failing to render life-saving aid. The club moved to dismiss and
submitted an affidavit from an employee who asserted that he had rendered
appropriate aid. The Court held that a motion to dismiss under CPLR 3211(a)(7)
“limits us to an examination of the pleadings to determine whether they state a
cause of action.” Id. at 351. The Court refused to consider the employee’s
27
affidavit, stating that “this matter comes to us on a motion to dismiss, not a motion
for summary judgment. As a result, the case is not currently in a posture to be
resolved as a matter of law on the basis of the parties’ affidavits, and [the plaintiff]
has at least pleaded a viable cause of action at common law.” Id.
Miglino can (and should) be read to prohibit any consideration of evidentiary
material from outside the complaint to dispute pleaded facts on a motion to
dismiss. Commentators have debated Miglino’s effect on the older rule set forth in
Rovello v. Orofino Realty Co., 40 N.Y.2d 633 (1976), that such submissions can be
considered in the rare and narrow circumstances where they “conclusively
establish” that plaintiff has no cause of action at all. See, e.g., CPLR 3211
Supplemental Practice Commentaries C3211:25; John R. Higgitt, High Court
Signals a Potential Change in Practice With CPLR 3211(a)(7), N.Y.L.J., July 31,
2013 at 4, col. 1; Patrick M. Connors, Courts Reconsider Rule Permitting Use of
Affidavits on CPLR 3211(a)(7) Motion, N.Y.L.J., Jan. 20, 2015 at 3, col. 1.8
But even assuming Rovello’s rule survives, this Court never held that
Defendants’ submissions “conclusively established” that they did not know about
8 Adding to the confusion on the proper standard, Guggenheimer v. Ginzburg, suggested
that a court may consider a defendant’s affidavits on a motion to dismiss if those affidavits “negate[] beyond substantial question” the allegations in the complaint. 43 N.Y.2d 268, 275 (1977). But even under Guggenheimer, this Court dropped the critical requirement that the material from outside the complaint negate its allegations “beyond substantial question” and instead looked to whether Defendants’ submissions merely “negated” allegations in the Complaint. Decision at 7. The standard applied by this Court permitted it to weigh disputed evidence and make fact findings – a plain violation of Miglino, Rovello, or Guggenheimer.
28
Ceglia’s fraud. Nor could it have done so given the allegations that Kasowitz
discovered the fraud and told the Defendants about it, as well as the other
allegations demonstrating that the lawyers knew about the forgery. Instead, this
Court used the material to resolve factual disputes on a motion to dismiss.
This use of materials outside the complaint is precisely what CPLR
3211(a)(7) prohibits: A court cannot take factual material from outside the four
corners of the complaint, weigh it against the allegations in the complaint, and
make factual findings on a motion to dismiss. Such a result is contrary to both
Miglino and Rovello. See, e.g., Sargiss v. Magarelli, 12 N.Y.3d 527, 531 (2009)
(rejecting defendant’s affidavits in support of motion to dismiss on fraud claim
because “these merely raise factual issues not properly decided on a motion to
motion to dismiss § 487 claim based on lawyer submitting forged letter and
rejecting affidavit submitted to disprove the forgery).
This case presents an opportunity for the Court of Appeals to resolve the
uncertainty over the proper standard for considering materials from outside the
complaint. Despite Miglino’s attempt to clarify this area of the law, there is still
confusion on this point. As stated in the commentary to CPLR 3211, “[a]fter 52
years on the civil procedure scene, one would think that the role of this critical
litigation device would be well-defined. But it is not. . . . [D]ifferent courts at
29
different times have offered different takes on the proper function of CPLR
3211(a)(7).” CPLR 3211 Supplemental Practice Commentaries C3211:25. This
Court should permit leave to appeal so that the Court of Appeals can resolve this
important question under CPLR 3211(a)(7).
B. This Court Incorrectly Held that It Could Weigh Evidence and Make Findings on Contested Facts on A Motion to Dismiss
In addition to improperly considering evidence from outside the Complaint,
the Court weighed the evidence and made factual finding on disputed issues on a
motion to dismiss, contrary to Court of Appeals precedent. This is another
independent basis for reargument or leave to appeal.
1. The Court of Appeals has repeatedly held, specifically in the context
of the probable cause element of malicious prosecution, that “where it is
demonstrated that there is a dispute about either the true state of facts, or the
inference to be drawn by a reasonable person from the facts which led to the
prosecution, the uniform rule has been to require there be a factual resolution at a
trial.” Munoz v. City of New York, 18 N.Y.2d 6, 11 (1966). The rule is the same
for the intent to deceive element under § 487. See, e.g., Mazel, 120 A.D.3d at 1107
(denying summary judgment on intent element of section 487 claim because
defendant’s assertions “that he did not intend to deceive the court” “merely raise[d]
issues of fact”).
30
Here, the Court failed to take as true the Complaint’s detailed and specific
allegations about Kasowitz’s discovery of the fraud. Instead, the Court described
these allegations as “conclusory.” Decision at 9. That is an insupportable
description given that the Complaint sets out the specific date the lawyers were
told about the fraud (April 13, 2011), the method of communication (letter), the
sender (Kasowitz), the recipients (DLA and Lippes Defendants), and quotes the
specific content of the communication (Kasowitz discovered documents on
Ceglia’s computer that “established” the claimed contract was “fabricated”).
Moreover, the Court resolved factual disputes rather than denying the
motion to dismiss as required by Court of Appeals’ precedent. The Complaint
alleged that the Kasowitz letter, the evidence of the real contract, the obvious signs
of fraud, and the implausibility of Ceglia’s story, “established” that Ceglia’s claim
was a fraud. ¶¶ 60, 67. Plaintiffs also contended, in response to Defendants’
submissions, that Defendants’ claimed “investigation” was a transparent attempt to
paper over Ceglia’s fraud, given that none of the “experts” opined that the fake
document was the real contract and none was asked about the real Street Fax
contract. By contrast, Defendants asserted that they conducted a genuine
investigation that gave them comfort that the objective electronic evidence found
on Ceglia’s computer (somehow) did not “establish” that Ceglia’s claimed contract
was a forgery and that Kasowitz was wrong to reach that conclusion.
31
Given this fundamental dispute about the facts and the inferences to be
drawn from the facts, this Court should have denied the motion to dismiss on that
ground alone. See, e.g., Munoz, 18 N.Y.2d at 11. Instead, the Court weighed the
competing evidence and expressly made a factual finding – that the lawyers
conducted “a quite thorough investigation” and therefore had probable cause to
proceed. Decision at 9-10. Such a holding is contrary to Munoz and other Court of
Appeals cases prohibiting resolution of disputed facts on a motion to dismiss.
2. In any event, the Court’s factual findings were fundamentally flawed.
As an initial matter, Defendants’ claim of an investigation was unsupported and
untested. Defendants never explained the scope of their investigation, what they
did, or what they concluded. And Plaintiffs never had any discovery to test this
assertion of an “investigation.”
In fact, Defendants’ entire story was incoherent: They asserted that their
investigation gave them comfort that Ceglia’s claim was legitimate. But they
never explained why Kasowitz’s conclusion of fraud was wrong. They had (and
still have) no explanation for the existence on Ceglia’s own computer of the real
contract attached to contemporaneous emails. And they never explained why, if
their investigation gave them such comfort, they nevertheless silently withdrew
from the case before their assertions were put to the test. If anything, the fact that
they withdrew suggests that they knew all along that Kasowitz was right – Ceglia’s
32
claim was a fraud. When it became clear that they could not obtain a quick
contingency score, they withdrew before the fraud claim to light. The Court
ignored all these discrepancies and improperly resolved these factual disputes as a
matter of law.
Moreover, none of the information Defendants submitted to the Court
reflects any genuine investigation. To the contrary, Defendants submitted
advocacy materials filed in the Ceglia Action, none of which addressed the
fundamental dispute in the case. None of the hired-gun experts relied on by
Defendants was willing to opine that the Work for Hire document was genuine.
Nor did any of them even address the real Street Fax contract discovered by
Kasowitz – the central question the lawyers now say they were “investigating.”
Instead, the experts gave peripheral opinions that were so meaningless that
the only reasonable conclusion is that they were carefully crafted to dodge the
truth. For example, John Osborn opined that the second page of the Work for Hire
document was “underneath the first page” when handwriting was made on the first
page. R.375-78. This conclusion is consistent with forgery. It said nothing about
when the handwriting was made, whether the two pages comprised a single
document, or whether the document was an authentic contract.9
9 All of the other expert opinions submitted by Defendants were similarly irrelevant.
None of them opined that the Work for Hire document was authentic or addressed the real Street Fax contract. Valery Aginsky (submitted by DLA and Lippes) opined that the inks used on the
33
Similarly, the polygraph of Ceglia, on which this Court repeatedly relied, did
not give the lawyers probable cause as a matter of law. Defendants did not
disclose the questions Ceglia was asked, so there is no evidence that he was even
asked about the real Street Fax contract or how it came to be on his own computer
attached to contemporaneous emails to his lawyer. In any event, polygraphs are so
unreliable as to be inadmissible in New York. See People v. Scott, 88 N.Y.2d 888,
891 (1996). It follows that a polygraph cannot establish as a matter of law that the
lawyers had probable cause to believe Ceglia’s story in the face of objective
evidence proving he was lying.
As is clear from a careful review of Defendants’ equivocal evidentiary
submissions, they certainly did not provide probable cause as a matter of law. That
is especially so here, where Defendants already possessed the real Street Fax
contract and contemporaneous emails that “established” that Ceglia’s claimed
contract was “fabricated.” The lawyers could not “cure” this knowledge by
obtaining irrelevant opinions that failed to address the elephant in the room – the
two pages of the fake document appeared consistent based on “limited” testing. R.391-95. John H. Evans (submitted by DLA and Lippes) opined that two data fields in the Word documents containing Ceglia’s purported “emails” bore dates close to the dates on which Ceglia supposedly copied his “emails.” R.365-71. Larry Stewart (submitted only by Milberg after DLA and Lippes withdrew) made a “preliminary” conclusion that the two pages of the fake document were on the same size paper with consistent color and texture, printed with the same toner, etc. R.673-74. James Blanco (also Milberg only) made a “preliminary” conclusion that the staple holes for the two pages aligned, page 1 was on top of page 2 when handwriting was made on the first page, etc. R.676-83. The federal court in Ceglia’s lawsuit rejected many of these same opinions, dismissing them as “sophomoric” (Blanco), “misleading” (Stewart), “irrelevant” (Blanco), and “ignor[ing] . . . reality” (Blanco). Ceglia, 2013 WL 1208558, *27, 38, 40.
34
discovery of the real contract on Ceglia’s own computer. See, e.g., Crews v.
County of Nassau, 996 F. Supp. 2d 186, 196 (E.D.N.Y. 2014) (officer knew
accused had airtight alibi because he was in jail at time of crime; officer therefore
could not obtain probable cause from other available facts such as eyewitness
identification). As stated in the Hazard treatise on legal ethics: “[T]here comes a
point where only brute rationalization, moral irresponsibility, and pure sophistry
can support the contention that the lawyer does not ‘know’ what the situation is.”
Hazard, supra, § 1.24.10
This Court ignored all the problems with the evidence submitted by
Defendants and concluded as a matter of law – prior to any discovery – that
Defendants conducted “a quite thorough investigation” sufficient to overcome the
objective evidence from Kasowitz. The Court should correct that error or, in the
alternative, grant leave to appeal to the Court of Appeals so that it can clarify the
proper standards under CPLR 3211.
10 The federal judge in Ceglia’s criminal case rejected virtually the same argument on
which this Court relied here. Ceglia moved to dismiss the indictment, arguing that his lawsuit was “not objectively baseless,” pointing to these same expert opinions. The federal court disagreed and denied the motion to dismiss. The court explained that Ceglia – like the Defendant lawyers here – was “challeng[ing] the sufficiency of the Government’s proof rather than the Indictment’s allegations.” R.606.
EXHIBIT A
SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK
FACEBOOK, INC. and MARK ELLIOT ZUCKERBERG,
Plaintiffs,
- against -
DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WEXLER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; JENNIFER L. YOUNG,
Defendants.
Index No. 653183/2014
NOTICE OF ENTRY OF ORDER
PLEASE TAKE NOTICE THAT, on December 29, 2015, the Supreme Court, Appellate
Division, First Department, entered an Order (the “December 29 Order”) granting the appeals
taken by Defendants DLA Piper LLP (US) (“DLA”), Christopher P. Hall, John Allcock, Robert
W. Brownlie, and Gerard A. Trippitelli (collectively, the “DLA Defendants”), Milberg LLP,
Sanford P. Dumain, and Jennifer L. Young (collectively, the “Milberg Defendants”), and Lippes
Mathias Wexler Friedman LLP, Dennis C. Vacco, and Kevin J. Cross (collectively, the “Lippes
Defendants” and together with both the DLA Defendants and the Milberg Defendants, the
“Moving Defendants”) from the trial Court’s May 11, 2015 Order, and dismissing Plaintiffs’
claims against the Moving Defendants. A true and correct copy of the December 29 Order is
attached hereto as Exhibit A.
Dated: New York, New YorkDecember 29, 2015
FILED: NEW YORK COUNTY CLERK 12/29/2015 05:36 PM INDEX NO. 653183/2014
NYSCEF DOC. NO. 206 RECEIVED NYSCEF: 12/29/2015
DONTZIN NAGY & FLEISSIG LLP
/s/ Jason A. KolbeMatthew S. Dontzin Tibor L. Nagy, Jr.David A. FleissigJason A. KolbeElina Druker980 Madison AvenueNew York, New York 10075Telephone: (212) 717-2900Facsimile: (212) 717-8088
Counsel for DLA Piper LLP (US), Christopher P. Hall, John Allcock, Robert W. Brownlie, and Gerard A. Trippitelli
16162 Facebook, Inc., et al., Index 653183/14Plaintiffs-Respondents,
-against-
DLA Piper LLP (US), et al,Defendants-Appellants,
Paul Argentieri & Associates, et al.,Defendants._________________________
Dontzin Nagy & Fleissig LLP, New York (Tibor L. Nagy, Jr. ofcounsel), for DLA Piper LLP (US), Christopher P. Hall, JohnAllock, Robert W. Brownlie and Gerard A. Trippitelli, appellants.
Brown Rudnick LLP, New York (Sigmund S. Wissner-Gross ofcounsel), for Lippes Mathias Wexler Friedman LLP, Dennis C. Vaccoand Kevin J. Cross, appellants.
Joseph Hage Aaronson LLC, New York (Gregory P. Joseph ofcounsel), for Milberg LLP, Sanford P. Dumain and Jennifer L.Young, appellants.
Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.,Washington, DC (Kevin B. Huff of the bar of the District ofColumbia, admitted pro hoc vice, of counsel), for respondents.
_________________________
Order, Supreme Court, New York County (Eileen A. Rakower,
J.), entered May 11, 2015, which denied the pre-answer motions of
defendants-appellants DLA Piper LLP (US), Christopher P. Hall,
John Allcock, Robert W. Brownlie, and Gerard A. Trippitelli
(collectively the DLA Piper defendants); Milberg LLP, Sanford P.
Dumain and Jennifer L. Young (collectively, the Milberg
55
1
defendants); and Lippes Mathias Wexler Friedman LLP, Dennis C.
Vacco and Kevin J. Cross (collectively, the Lippes defendants) to
dismiss the complaint under CPLR 3211(a)(7), unanimously
reversed, on the law, without costs, the motions granted, and the
complaint dismissed. The Clerk is directed to enter judgment
accordingly.
This case arises from dealings dating back over a decade
between plaintiff Mark Elliot Zuckerberg and nonparty Paul
Ceglia. The underlying facts of this case are as follows:
On April 28, 2003, Ceglia hired Zuckerberg to design a
website for a company called Street Fax, Inc. Ceglia and
Zuckerberg executed a two-page contract (the Street Fax Contract)
and Zuckerberg performed some work under the contract, although
he was not paid in full by Ceglia.
In December 2003, Zuckerberg conceived of Facebook, which he
launched on February 4, 2004.
On June 30, 2010, Ceglia, through defendant attorney Paul
Argentieri, filed a complaint in Allegheny County Supreme Court
against Facebook and Zuckerberg (the Ceglia action), alleging
that on April 28, 2003, Zuckerberg and Ceglia purportedly entered
into a “Work For Hire Contract.” This purported contract
allegedly reflected Ceglia’s agreement to pay Zuckerberg for
56
2
developing the Street Fax website and a separate website with the
working title of “The Face Book,” and Ceglia’s purported
acquisition of a 50% interest in the software, programming
language and business interests derived from any expansion of The
Face Book, along with an additional 1% interest for each day the
website was delayed beyond January 1, 2004. At the time they
filed the complaint, Ceglia’s representatives obtained an ex
parte TRO from the court restraining Facebook from transferring,
selling, or assigning any assets owned by it. The TRO was served
on Facebook on July 6, 2010, and expired on or before July 23,
2010.
On July 9, 2010, the case was removed to federal court based
on diversity jurisdiction. From the outset of the litigation,
Zuckerberg took the position that the Work For Hire Contract was
a forgery and the Ceglia action was fraudulent.
In early 2011, Ceglia and Argentieri offered a contingency
fee arrangement to various law firms via a “Lawsuit Overview”
document, which mapped out the strategy and bases of the lawsuit.
Several law firms, including the DLA Piper and the Lippes
defendants, as well as Kasowitz, Benson, Torres and Friedman, LLP
(Kasowitz), agreed to represent Ceglia.
On March 30, 2011, a forensic e-discovery consultant
57
3
working with Kasowitz discovered the original Street Fax Contract
on Ceglia’s computer hard drive and concluded it had been altered
to create the “Work For Hire Contract” by adding references to
Facebook. Kasowitz notified Argentieri of these findings several
times and immediately withdrew as Ceglia’s counsel.
On April 11, 2011, the DLA Piper and the Lippes defendants
(DLA-Lippes) filed an amended complaint in the Ceglia action
repeating Ceglia’s claims against Facebook based on the Work For
Hire Contract, and quoting, but not attaching, purported emails
between Zuckerberg and Ceglia discussing the development of
Facebook.
On April 13, 2011, Kasowitz sent a letter to the DLA-Lippes
defendants, informing them that on March 30, it had seen
documents on Ceglia’s computer that established that the Work For
Hire Contract was a forgery and that it had communicated these
findings to Argentieri on March 30, April 4, and April 12. The
letter further stated that Kasowitz would agree, pending an
investigation that defendant Vacco of Lippes Mathias had promised
to undertake, to refrain from reporting its findings to the
Federal Court.4 This investigation was indeed undertaken as
4The complaint in the instant action alleges, on informationand belief, that shortly after notifying Argentieri of its
58
4
discussed infra.
On June 2, the parties moved and cross-moved for expedited
discovery concerning the Work For Hire Contract, complete with
affidavits and expert evidence both for and against the
authenticity of the contract. On June 29, on the eve of the
hearing for expedited discovery, the DLA-Lippes defendants
withdrew from the case without explanation.5 The Federal
Magistrate ordered expedited discovery into the authenticity of
the Work For Hire Contract and the purported emails.
During the expedited discovery period, Ceglia hired the
Milberg defendants, which first entered an appearance on March 5,
2012. They moved to withdraw from representing Ceglia on May 20,
2012.
On November 26, 2012, Ceglia was indicted for mail and wire
fraud as a result of his scheme to defraud plaintiffs. He
subsequently fled the jurisdiction and is currently a fugitive.
On March 26, 2013, following discovery, the Federal
findings, and prior to April 11, 2011, the date the amendedcomplaint in the Ceglia action was filed, Kasowitz advised theDLA and Lippes defendants what had been discovered concerning theStreet Fax Contract.
5Ceglia was represented by 23 other attorneys after the DLA-Lippes defendants withdrew.
59
5
Magistrate recommended that the District Court dismiss the Ceglia
action with prejudice, finding that the Work for Hire Contract
and purported emails were all forgeries and that the lawsuit was
a massive fraud on the court. This recommendation was adopted by
the District Court on March 25, 2014, and the complaint was
dismissed.
Based on these factual allegations, plaintiffs commenced the
instant action, asserting claims for malicious prosecution and
attorney deceit against defendants-appellants (defendants), among
others, alleging that they initiated the Ceglia lawsuit without
probable cause, and thereafter continued it even as they knew, or
reasonably should have known, that it was fraudulent, without
merit, and based on fabricated evidence from the moment the
original complaint was filed and at all times while the action
was pending.
Defendants moved to dismiss the complaint, alleging, among
other things, that the allegations regarding malicious
prosecution failed to demonstrate that they acted with “actual
malice,” that they lacked “probable cause” to maintain the
action, or that plaintiffs sustained a “special injury.” With
respect to the claims brought under Judiciary Law § 487 for
attorney deceit, defendants argued that the complaint should be
60
6
dismissed because it failed to allege with the requisite
particularity that they intended to deceive the court or
plaintiffs, that they engaged in a chronic and extreme pattern of
legal delinquency, or that they were aware of the fraud and
deceit during the Ceglia action. Plaintiffs opposed those
respective motions and the motion court denied all motions. For
the following reasons, we now reverse.
On a motion to dismiss pursuant to CPLR 3211, we must accept
as true the facts as alleged in the complaint and accord
plaintiffs the benefit of every favorable inference (see Sokoloff
v Harriman Estates Dev. Corp., 96 NY2d 409, 414 [2001]).
However, “[f]actual allegations presumed to be true on a motion
pursuant to CPLR 3211 may properly be negated by affidavits and
documentary evidence” (Wilhelmina Models, Inc. v Fleisher, 19
AD3d 267, 269 [1st Dept 2005], citing Biondi v Beekman Hill House
dismissed 85 NY2d 924 [1995]). In this context, the Court of
Appeals has stated as follows:
“Probable cause is the knowledge of facts, actual orapparent, strong enough to justify a reasonable man in the belief that he has lawful grounds for prosecuting the defendant in the manner complained of.
The want of probable cause does not mean the want of any cause, but the want of any reasonable cause, such as would persuade a man of ordinary care and prudence to believe in the truth of the charge” (Burt v Smith, 181 NY1, 5-6 [1905]).
In a malicious prosecution action, the burden of proof to
establish a want of probable cause is on the plaintiffs (id. at
62
8
10).
Here, the Allegheny court’s granting of a TRO at the
inception of the Ceglia action, prior to any of the defendants’
representation of Ceglia, created a presumption that Ceglia had
probable cause to bring the case. This presumption must be
overcome by specifically pleaded facts (see Hornstein v Wolf, 67
NY2d 721, 723 [1986]). Moreover, a plaintiff’s factual
allegations regarding lack of probable cause and malice may be
disproved by the evidentiary material submitted by defendant in
support of a motion to dismiss (Shaffer v Gilberg, 125 AD3d 632,
635 [2d Dept 2015]).
Applying these principles to this case, we find that the
allegations in the instant complaint concerning defendants’ lack
of probable cause are entirely conclusory, and are thus
inadequate to support the lack of probable cause element of the
malicious prosecution claim (see Web Mgt. v Sphere Drake Ins.,
Upon the foregoing papers, it is ordered that this motion is
Dated: I JI S-I
MAY 1 1 2015
I No(s)·----.----
1 I No(s). _____ _
1. CHECK ONE:..................................................................... D CASE DISPOSED l&..NON-FINAL DISPOSITION
2. CHECK AS APPROPRIATE: ........................... MOTION IS: 0 GRANTED 0 DENIED 0 GRANTED IN PART '.
3. CHECK IF APPROPRIATE: ................................................ 0 SETILE ORDER [J SUBMIT ORDER
0DONOTPOST 0 FIDUCIARY APPOINTMENT J REFERENCE
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 15 ------------------------------------------------------------------)( F ACEBOOK, INC. and MARK ELLIOT ZUCKERBERG,
Plaintiffs,
- v -
DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WE)(LER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; and JENNIFER L. YOUNG,
Defendants. ------------------------------------------------------------------)( HON. EILEEN A. RAKOWER, J.S.C.
Index No. 653183/2014
DECISION and ORDER
Mot. Seq. #002, #003,#004
This is an action for malicious prosecution and violation of New York Judiciary Law § 487 arising from various law firms and attorneys' alleged participation in a fraudulent breach of contract lawsuit against plaintiffs, Facebook, Inc. ("Face book") and Mark Elliot Zuckerberg ("Zuckerberg") (collectively, "Plaintiffs"). Non-party Paul Ceglia ("Ceglia") filed the underlying breach of contract action in June 2010 in the Supreme Court of Allegany County, New York, under the caption, Paul D. Ceglia v. Mark Elliot Zuckerberg and Facebook, Inc., No. 1 O-cv-00569-RJA (W.D.N.Y.) (the "Ceglia Action") 1• Plaintiffs claim that Ceglia forged the purported contract document in issue in that case, and that defendants, DLA Piper (US) ("DLA Piper"), Christopher P. Hall ("Hall"), John Allcock ("Allcock"), Robert W. Brownlie ("Brownlie"), Gerard A. Trippitelli ("Trippitelli") (and together with DLA Piper, Hall, Allcock, and Brownlie, the
1 The Ceglia Action was removed to federal court based upon diversity jurisdiction.
1
"DLA Defendants"), Paul Argentieri & Associates ("P A&A"), Paul A. Argentieri ("Argentieri") (and together with PA&A, the "Argentieri Defendants"), Lippes Mathias Wexler Friedman LLP ("LMWF"), Dennis C. Vacco ("Vacco"), Kevin J. Cross ("Cross") (and together with LMWF and Vacco, the "Lippes Defendants"), Milberg LLP ("Milberg"), Sanford P. Dumain ("Dumain"), and Jennifer L. Young ("Young") (and together with Mil berg and Dumain, the "Mil berg Defendants") (collectively, "Defendants"), are various law firms and attorneys who pursued the Ceglia Action, on Ceglia's behalf, with knowledge that the subject document was forged.
The DLA Defendants, Lippes Defendants, and Milberg Defendants, (collectively, the "Moving Defendants") now move (Mot. Seq. #002, #003, #004, respectively) for Orders, pursuant to CPLR § 321 l(a)(7), dismissing Plaintiffs' complaint against Moving Defendants for failure to state a cause of action as against these defendants.
Plaintiffs oppose.
Oral Argument was heard on Moving Defendants' motions to dismiss on April 21, 2015.
CPLR § 3211 provides, in relevant part:·
(a) a party may move for judgment dismissing one or more causes of action asserted against him on the ground that:
(7) the pleading fails to state a cause of action.
In determining whether dismissal is warranted for failure to state a cause of action, the court must "accept the facts alleged as true ... and determine simply whether the facts alleged fit within any cognizable legal theory." (People ex rel. Spitzer v. Sturm, Ruger & Co., Inc., 309 AD2d 91 [lst Dep't 2003] [internal citations omitted]; CPLR § 3211 [a][7]).
As for Plaintiffs' first cause of action, for malicious prosecution, the tort of malicious prosecution requires proof of: (I) the commencement or continuation of a proceeding by the defendant against the plaintiff; (2) the termination of the proceeding in favor of the plaintiff; (3) the absence of probable cause for the proceeding; and, ( 4) actual malice. (Wilhelmina Models, Inc. v. Fleisher, 19 A.D.3d 267, 269 [1st Dep't 2005] quoting Broughton v State of New York, 37 N.Y.2d 451,
2
457 [1975]). In addition, in order to sustain a cause of action for malicious civil prosecution, the plaintiff must allege and prove "special injury." (Engel v. CBS, Inc., 93 N.Y.2d 195, 201 [1999]). Such legal action may be civil in nature, so long as the action "interferes in some way" with the plaintiffs person or property. (Purdue Frederick Co. v. Steadfast Ins. Co., 40 A.D.3d 285, 286 [1st Dep't 2007]). A malicious civil prosecution, therefore, "is one that is begun in malice, without probable cause to believe it can succeed, and which, after imposing a grievance akin to the effect of a provisional remedy, finally ends in failure." (Engel v. CBS, Inc., 93 N.Y.2d 195, 206 [1999]).
Here, Plaintiffs' complaint alleges that, "in or about June 2010, Ceglia and Argentieri formed a scheme to extort a settlement payment from Facebook by filing a false lawsuit against Facebook based on forged documents claiming Ceglia owned an 84 percent interest in Facebook". (Compl. ii 39). Plaintiffs' complaint alleges that on or about June 30, 2010, Ceglia, through Argentieri, filed an action against Facebook in the Supreme Court of Allegany County, New York, seeking damages allegedly owed under the documents in question (the "Ceglia Action"). (Compl. iii! 39-40). Plaintiffs' complaint alleges that, in connection with the Ceglia Action, Ceglia sought and obtained a temporary injunction against Facebook, which "'enjoined and restrained [Facebook] from transferring, selling, [or] assigning any assets, stocks, [or] bonds, owned, possessed and/or controlled by [Facebook]'". (Compl. iii! 48-49).
Plaintiffs' complaint alleges that the injunction remained in effect after Facebook and Zuckerberg removed the Ceglia Action to the United States District Court for the Western District of New York on July 9, 2010. (Compl. ii 50). Plaintiffs' complaint further asserts that, "[s]everal lawyers and law firms signed on to help Ceglia pursue his claims, including Aaron H. Marks [('Marks')] of the firm Kasowitz, Benson, Torres & Friedman LLP [('Kasowitz')] in New York City; [the DLA Defendants]; and [the Lippes Defendants]". (Compl. ii 58).
However, Plaintiffs' complaint alleges, on March 30, 2011, Marks discovered certain evidence on Ceglia's computer hard drive allegedly proving that the so-called contract in issue in the Ceglia Action was forged. (Compl. ii 59). Plaintiffs' complaint alleges that Kasowitz communicated these findings to Argentieri and immediately withdrew as counsel for Ceglia. (Compl. ii 60). Plaintiffs' complaint alleges that, "[b ]eginning on or around March 30, 2011, and continuing through mid-April, Marks repeatedly communicated with his former co-counsel about his findings and stated that he intended to notify the court of the fraud". (Compl. ii 61). Plaintiffs' complaint asserts, "prior to April 11, 2011, Marks told attorneys from
3
DLA Piper [and] Lippes Mathias ... "about the evidence allegedly recovered from Ceglia's computer. (Compl. if 61).
Additionally, Plaintiffs' complaint alleges that on April 14, 2011,Marks wrote a letter "to several of Ceglia's lawyers to memorialize his prior discoveries and communications regarding [this evidence]". (Compl. if 67). More Speficially, Plaintiffs' complaint asserts:
The Letter was addressed to Vacco of Lippes Mathias and copied at least Argentieri of Argentieri & Associates, Brownlie and Trippitelli of DLA Piper, and Cross of Lippes Mathias. Marks wrote that, on March 30, [Marks] had seen documents on Ceglia' s computer "that established that page 1 of the ... [purported contract] is fabricated."
(Compl. if 67 [emphasis added]). Plaintiffs' complaint further asserts that, in this same letter, "Marks memorialized that he had communicated his findings to Argentieri 'on March 30 and April 4' and in an 'April I 2 letter."' (Compl. if 67).
Plaintiffs' complaint alleges that DLA Defendants and Lippes Defendants entered appearances for Ceglia in the Ceglia Action, "[ o ]n April I I, 20 I I-after (on information and belief) Marks and the Kasowitz lawyers had notified their co-counsel that they had discovered [evidence of forgery] on Ceglia's [hard drive] and that Ceglia's claims were fraudulent". (Compl. if 62). Plaintiffs' complaint further asserts:
Also on April I 1, 201 I, Ceglia's new team oflawyers filed a 25-page amended complaint (the "Amended Complaint") that repeated Ceglia's false claims. The Amended Complaint was signed by Hall of DLA Piper and also listed as counsel Allcock, Brownlie, and Trippitelli otDLA Piper; Vacco and Cross of Lippes Mathias; and Argentieri. Like the original Complaint, the Amended Complaint attached a 'copy of the forged [contract document] as an exhibit, represented that the [this document] was authentic, and claimed that Zuckerberg had breached the purported contract.
(Compl. if 63).
4
Plaintiffs' complaint alleges that the DLA Defendants and the Lippes Defendants actively litigated the Ceglia Action until June 28, 2011, when they "abruptly withdrew" as counsel for Ceglia. (Compl. irir 63-77). During that time, Plaintiffs' complaint asserts, Facebook and Zuckerberg, and Ceglia, filed motions and cross motions for expedited discovery. (Compl. irir 73-74). Plaintiffs' complaint alleges that, "[t]hroughout the expedited discovery period, Ceglia continued to rotate in different lawyers. On March 5, 2012, Defendants Dumain and Young ofMilberg entered appearances in the Ceglia action." (Compl. irir 92).
Plaintiffs' complaint asserts that on March 26, 2012, Facebook and Zuckerberg moved to dismiss the Ceglia Action, and to stay discovery in that action pending a decision on Facebook and Zuckerberg's dispositive motion. (Compl. ir 93). Plaintiffs' complaint alleges that Dumain participated in the hearing on Facebook and Zuckerberg's motion to stay discovery. (Compl. ir 95). Plaintiffs' complaint asserts, "Dumain and Young moved to withdraw from the Ceglia action on May 30, 2012. During the time period they were of record for Ceglia, they appeared as counsel on various discovery motions." (Compl. if 96).
Plaintiffs complaint also alleges:
On March 26, 2013, the United States Magistrate Judge presiding over the Ceglia action issued a 155-page written opinion recommending that the district court exercise its inherent power to dismiss the case with prejudice. The Magistrate Judge ruled that dismissal was warranted because the purported contract and emails were forgeries, and the entire lawsuit was a massive fraud on the court. He found "it [was] highly probable and reasonably certain that the Work for Hire Document and the supporting e-mails were fabricated for the express purpose of filing the instant action." He further ruled that dismissal was warranted based on Ceglia' s contumacious destruction of evidence.
(Compl. if 102). The District Court adopted the Magistrate's recommendation on March 25, 2014. (Compl. if 104).
Accepting Plaintiffs' allegations as true, the four comers of Plaintiffs' complaint adequately plead the commencement or continuation of a proceeding by the Moving Defendants against Plaintiffs; and the termination of that proceeding in
5
Plaintiffs' favor. Moving Defendants do not dispute these elements. As far as the disputed elements of lack of probable cause and malice are concerned, viewing Plaintiffs' complaint in the light most favorable to Plaintiffs, Plaintiffs' complaint adequately alleges that Moving Defendants knew that the contract in issue in the Ceglia Action was forged. Accepting Plaintiffs' allegations as true, Plaintiffs' complaint adequately pleads that Moving Defendants knew that there was no basis-and therefore no probable cause-for Ceglia's claims. (Chappelle v. Gross, 26 A.D.2d 340, 343 [1st Dep't 1966]; see also Crews v. Cnty. of Nassau, 996 F. Supp. 2d 186, 208 [E.D.N.Y. 2014]). While lack of probable cause and malice are separate elements of a malicious prosecution claim, "a jury may, but is not required to, infer the existence of actual malice from the fact that there was no probable cause to initiate the proceeding." (Martin v. Albany, 42 N.Y.2d 13, 17 [1977]). Insofar as Plaintiffs' complaint adequately alleges that Moving Defendants lacked probable cause to pursue the underlying action, the four comers of Plaintiffs' complaint are sufficient to plead the existence of actual malice as against Moving Defendants.
In addition, accepting Plaintiffs' allegations as true, the four comers of Plaintiffs' complaint adequately allege a special injury in the form of a temporary injunction obtained against Facebook in the Ceglia Action (the "TRO"). As the Court of Appeals explains, "[s]ince the role that the special injury requirement fulfills is that of a buffer to insure against retaliatory malicious prosecution claims and unending litigation . . . a verifiable burden substantially equivalent to the provisional remedy effect can amount to special injury." (Engel, 93 N.Y.2d at 205 [ 1999]). In other words, "what is "special' about special injury is that the defendant must abide some concrete harm that is considerably more cumbersome than the physical, psychological or financial demands of defending a lawsuit." (Id.). The imposition of a provisional remedy is sufficient to meet this standard2 . (Id.).
Moving Defendants argue that they played no role in obtaining the TRO, and that, as a result, Plaintiffs' complaint does not plead a special injury vis-a-vis Moving Defendants. Moving Defendants also point out that they did not enter appearances in the Ceglia Action until after the TRO was lifted. This raises the question whether a special injury must persist throughout the entirety of a prosecution in order to satisfy the special injury requirement of a malicious prosecution claim. This Court concludes that it does not. Rather, a special injury, once inflicted, constitutes a "concrete harm that is considerably more cumbersome than the physical,
2 Plaintiffs further argue that Moving Defendants engaged in a campaign a public campaign to cloud title to Facebook, which created a burden on Plaintiffs' business "substantially equivalent" to that imposed by the provisional remedy of a /is pendens.
6
psychological, or financial demands of a lawsuit", whether or not this harm remains in full effect for the duration of the suit. (Engel, 93 N.Y.2d at 205).
Moving Defendants' argument also raises a separate question, as to whether a plaintiff may state a claim for malicious prosecution against a defendant who had yet to prosecute the underlying action at the time the alleged special injury took place. A plaintiff may state a claim for malicious prosecution against a defendant who does not commence, but merely continues, an action against the plaintiff. (Broughton v. State, 37 N.Y.2d 451, 457 [ 1975] ["The elements of the tort of malicious prosecution are: (1) the commencement or continuation of a . . . proceeding by the defendant against the plaintiff, .... "] [emphasis added]). Similarly, this Court finds that the defendant in an action for malicious prosecution need not institute the requisite special injury, so long as the defendant continues the vehicle in which the special injury took place. Where a defendant continues to prosecute an action in which a special injury has occurred, the special injury requirement's function as a "buffer" against excess litigation is not diminished, provided that the other elements of a malicious prosecution claim are met. (Engel, 93 N.Y.2d at 205). Here, accepting Plaintiffs' allegations as true and drawing all inferences in favor of the non-moving party, Moving Defendants had knowledge of the Ceglia Action's procedural history, knew of the TRO, and joined Argentieri Defendants in prosecuting the Ceglia Action as it continued.
Accordingly, accepting Plaintiffs' allegations as true and drawing all inferences in favor of the non-moving party, the four comers of Plaintiffs' complaint adequately plead a cause of action for malicious prosecution against Moving Defendants.
Turning now to Plaintiffs' second cause of action, for violation of New York Judiciary Law § 487, pursuant to Judiciary Law § 487, any attorney or counselor who "is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party" is "guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action." (Jud. Law § 487).
Section 487' s "evident intent" is "to enforce an attorney's special obligation to protect the integrity of the courts and foster their truth-seeking function." (Amalfitano v. Rosenberg, 12 N.Y.3d 8, 14 [2009]). Thus, allegations that defendant deceived or attempted to deceive the court with fictitious documents may be sufficient to state a cause of action for violation of Judiciary Law § 487. (Maze! 315 W 35th LLC v. 315 W 35th Assoc. LLC, 120 A.D.3d 1106, 1107 [1st Dep't 2014]
7
["Plaintiffs evidence showing that defendant presented false assignment documents for recordation in the City Register and sent a letter to the justice stating falsely that his client was the true owner of the notes and mortgages establishes an egregious act of intentional deceit of the court sufficient to support the cause of action."]; Kur man v. Schnapp, 73 A.D.3d 435, 435 [1st Dep't 2010] ["Plaintiff stated a cause of action under Judiciary Law § 487 by alleging that defendant deceived or attempted to deceive the court with a fictitious letter addressed to him from the former licensing director of the City's Taxi and Limousine Commission (TLC) that stated, inter alia, that plaintiff was under a lifetime ban on owning any licenses with the TLC."]).
Here, Plaintiffs' complaint alleges that Moving Defendants maintained a breach of contract action as against Facebook and Zuckerberg even though Moving Defendants knew that the contract in issue in that action was a forgery. (Compl. 60-61, 67, 113 ). Plaintiffs' complaint further alleges that Moving Defendants filed discovery motions and made arguments in court in reliance on the authenticity of a purported contract document that Moving Defendants knew to be forged. (Compl. irir 74-75; 95-96).
Accepting Plaintiffs' allegations as true and drawing all inferences in favor of the non-moving party, Plaintiffs' complaint adequately alleges that Moving Defendants deceived or attempted to deceive the court presiding over the Ceglia Action with fictitious documents. Accordingly, viewing Plaintiffs' complaint in the light most favorable to Plaintiffs, the four corners of Plaintiffs' complaint are sufficient to state a cause of action for violation of Judiciary Law § 487 as against Moving Defendants, for purposes of surviving a motion to dismiss at this early stage of litigation.
Wherefore it is hereby,
ORDERED that the DLA Defendants' motion (Mot. Seq. #002) to dismiss Plaintiffs' complaint is denied; and it is further
ORDERED that the Lippes Defendants' motion (Mot. Seq. #003) to dismiss Plaintiffs' complaint is denied; and it is further
ORDERED that the Milberg Defendants' motion (Mot. Seq. #004) to dismiss Plaintiffs' complaint is denied; and it further
ORDERED that Moving Defendants are directed to answer Plaintiffs' complaint within 20 days of receipt of a copy of this Order with notice of entry.
8
This constitutes the decision and order of the court. All other relief requested is denied.
DATED: May \ \ 2015
flAY 1 1 2015 '-EILEEN A. RAKOWER, J.S.C. """---.
9
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK
FACEBOOK, INC. and MARK ELLIOT ZUCKERBERG,
Plaintiffs,
- against - DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WEXLER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; JENNIFER L. YOUNG,
Defendants.
Index No. 653183/2014
Hon. Eileen Rakower NOTICE OF APPEAL
�
PLEASE TAKE NOTICE that Defendants DLA Piper LLP (US); Christopher P. Hall;
John Allcock; Robert W. Brownlie; and Gerard A. Trippitelli (collectively, the “DLA
Defendants”), hereby appeal to the Appellate Division, First Department, of the Supreme Court
of the State of New York, from that part of the attached Decision and Order of the Honorable
Eileen A. Rakower dated May 11, 2015 (the “Order”), entered in the Office of the County Clerk
on May 11, 2015, that denied the DLA Defendants’ motion to dismiss Plaintiffs’ Complaint.
This is an enumerated appeal.
INDEX NO. 653183/2014
NYSCEF DOC. NO. 182 RECEIVED NYSCEF: 05/18/2015
Dated: New York, New York May 18, 2015
� � � � � �� DONTZIN NAGY & FLEISSIG LLP
By: /s/ Matthew S. Dontzin Matthew S. Dontzin Tibor L. Nagy, Jr. David A. Fleissig Jason A. Kolbe 980 Madison Avenue New York, NY 10075 Telephone: (212) 717-2900 Facsimile: (212) 717-8088 Counsel for DLA Piper LLP (US), Christopher P. Hall, John Allcock, Robert W. Brownlie, and Gerard A. Trippitelli
To: KELLOGG, HUBER, HANSEN,
TODD, EVANS & FIGEL, P.L.L.C. Mark C. Hansen Kevin B. Huff Michael N. Nemelka W. Joss Nichols 1615 M St., NW, Suite 400 Washington, D.C. 20036 MOSKOWITZ & BOOK, LLP Avraham C. Moskowitz M. Todd Parker 345 Seventh Ave., 21st Floor New York, New York 10001 Attorneys for Plaintiffs Facebook, Inc. and
Mark Elliot Zuckerberg �
�
�
�
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK
FACEBOOK, INC. and MARK ELLIOT ZUCKERBERG,
Plaintiffs,
- against - DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WEXLER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; JENNIFER L. YOUNG,
Defendants.
Index No. 653183/2014
Hon. Eileen Rakower
AFFIRMATION OF SERVICE
�
� I hereby certify that on May 18, 2015, I caused true and correct copies of (1) the Notice of Appeal and (2) the Pre-Argument Statement to be served upon all parties of record via electronic filing (“ECF”), e-mail, and first-class U.S. mail: Dated: New York, New York
May 18, 2015 DONTZIN NAGY & FLEISSIG LLP
By: /s/ Jason A. Kolbe Jason A. Kolbe 980 Madison Avenue New York, NY 10075 Telephone: (212) 717-2900 Facsimile: (212) 717-8088 Counsel for DLA Piper LLP (US), Christopher P. Hall, John Allcock, Robert W. Brownlie, and Gerard A. Trippitelli
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------------------------------------x FACEBOOK, INC. AND MARK ELLIOT ZUCKERBERG,
Index No. 653183/2014
Plaintiffs,
Hon. Eileen A. Rakower
- against -
IAS Part 15
DLA PIPER LLP (US); CHRISTOPHER P. HALL; JOHN ALLCOCK; ROBERT W. BROWNLIE; GERARD A. TRIPPITELLI; PAUL ARGENTIERI & ASSOCIATES; PAUL A. ARGENTIERI; LIPPES MATHIAS WEXLER FRIEDMAN LLP; DENNIS C. VACCO; KEVIN J. CROSS; MILBERG LLP; SANFORD P. DUMAIN; AND JENNIFER L. YOUNG,
PLEASE TAKE NOTICE that Milberg LLP, Sanford P. Dumain, and Jennifer L.
Young (collectively, the “Milberg Defendants-Appellants”), by their undersigned counsel,
hereby appeal to the Supreme Court of the State of New York, Appellate Division, First
Department, from the portions of the annexed decision and order of the Honorable Eileen A.
Rakower, Justice of the Supreme Court of the State of New York, New York County dated May
11, 2015 (NYSCEF No. 177), denying the Milberg Defendants-Appellants’ motion to dismiss all
claims against them. Plaintiffs have not served notice of entry of the decision and order.
To: KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C
Mark C. Hansen Kevin B. Huff Michael N. Nemelka W. Joss Nichols 1615 M St., NW, Suite 400 Washington, D.C. 20036
INDEX NO. 653183/2014
NYSCEF DOC. NO. 185 RECEIVED NYSCEF: 05/18/2015
2
MOSKOWITZ & BOOK, LLP Avraham C. Moskowitz M. Todd Parker 345 Seventh Ave., 21st Floor New York, New York 10001 Attorneys for Plaintiffs Facebook, Inc. and
Mark Elliot Zuckerberg
Dated: May 18, 2015
Respectfully submitted,
JOSEPH HAGE AARONSON LLC
/s/ Gregory P. Joseph Gregory P. Joseph Douglas J. Pepe Jeffrey H. Zaiger 485 Lexington Avenue, 30th Floor New York, New York 10017 (212) 407-1200 Attorneys for Milberg LLP, Sanford P. Dumain, and Jennifer L. Young
