SGM Holdings LLC v. Andrews

Background

The case concerns a claim under Section 487 of the New York Judiciary Law. That statute provides for treble damages against an attorney or counselor who engages in, or consents to, deceit or collusion intended to deceive a court or party. The plaintiffs allege that the defendants violated Section 487 by making deceitful statements in an earlier federal lawsuit.

The defendants are A. James Andrews, Richard Gaines, and Karl Schledwitz. The opinion states that they are alleged to be residents of Tennessee. Andrews and Gaines had been admitted to the federal court in the earlier lawsuit after representing that they were members in good standing of the Tennessee bar. Schledwitz was not admitted to that federal court in the earlier lawsuit; he signed the original complaint, which was filed in the Western District of Tennessee before the case was transferred to the Southern District of New York. The opinion states that there appeared to be no allegation that any defendant was or had been admitted to the New York bar, or that any defendant had practiced before a New York state court as relevant to the case.

The matter was reassigned to Judge Marrero on April 15, 2024. A trial was scheduled to begin on July 29, 2024. The court stated that it had an obligation to confirm its subject-matter jurisdiction, meaning its legal authority to hear the case.

Issues identified by the court

The court ordered briefing on four groups of questions:

1. Whether Section 487 applies to an attorney who is not admitted to the New York bar when the relevant conduct occurred only before a federal court. The court also asked whether, if Section 487 does not apply, it therefore lacks subject-matter jurisdiction.

2. Whether Section 487 has ever been enforced against an attorney who was not admitted to the New York bar for conduct occurring solely before a federal court.

3. Whether Section 487 is preempted, or overridden, in federal court by Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, or another federal-law provision. The court also asked whether preemption would mean that it lacked subject-matter jurisdiction.

4. If the court does have subject-matter jurisdiction, whether these issues nevertheless prevent the plaintiffs from stating a claim for which relief can be granted. The court noted that a district court may dismiss a complaint on that basis after giving the plaintiff an opportunity to be heard.

Order and current status

Judge Victor Marrero ordered the parties to submit briefs addressing these questions. Each brief may not exceed fifteen double-spaced pages, and the briefs were due within seven days of the order. This order does not state a final decision on jurisdiction, preemption, whether Section 487 applies, or whether the plaintiffs have stated a legally sufficient claim.