DONALD S. ENGEL, APPELLANT, ENGEL & ENGEL, PLAINTIFF, v. CBS, INC., MOSES & SINGER, AND STANLEY ROTHENBERG, RESPONDENTS.
93 N.Y.2d 195, 711 N.E.2d 626, 689 N.Y.S.2d 411 (1999).
April 6, 1999
USCOA,2 No. 54
[99 NY Int. 0051]
Decided April 6, 1999
This opinion is uncorrected and subject to revision before publication in the New York Reports.
Donald S. Engel, for appellant.
Thomas J. Kavaler, for respondents.
Committee on Professional Responsibility of the
Association of the Bar of the City of New York, amicus curiae.
The United States Court of Appeals for the Second Circuit certified the following question to this Court for resolution.
"Whether an attorney, sued by his client's adversary for the purpose of interfering with the attorney's zealous representation of hisclient, and whose representation is actually undermined by the suit, may satisfy the required element of special injury in an action for malicious prosecution of a civil ebony porn lawsuit under New York law where no provisional remedy is had against him."
Plaintiff, Donald Engel, an attorney who was sued by his client's adversary, CBS, Inc., argues that New York has never required special injury as an element of a malicious prosecution cause of action. Our review of New York case law indicates otherwise, and we decline to overrule those cases that have instilled proof of special injury as a necessary component of a malicious prosecution claim. Indeed, the certified question assumes the existence of the special injury requirement and focuses on what adverse consequences resulting from a civil suit could amount to a special injury. We thus perceive the certified question to be asking whether New York law limits this special injury to proof that a provisional remedy was imposed in a prior civil action. Although New York cases do state that interference with person or property the usual consequences of a provisional remedy constitute special injury, New York law does not confine special injury to the imposition of a provisional remedy.
Notwithstanding this clarification, under the specific facts given to this Court on the certified question, Engel has not shown the requisite added grievance. Engel's allegations, as characterized by the Second Circuit, do not allow the inference that his representation of Scholz was actually undermined. Although other cases certainly may present situations where alawyer sued will have his or her ability to represent a client sufficiently undermined to allow an inference of special injury, the factual allegations of injury here, which we are bound to accept, are not enough to constitute such special injury. Construing the question in this way, we answer the certified question in the negative.
The history of this case reaches back to October 1983, when CBS, Inc. sued the rock group Boston and its leader Donald
Thomas Scholz for breach of contract in U.S. District Court for the Southern District of New York. Scholz hired Engel to represent and defend him and the group against CBS's claims. Boston and Scholz then counterclaimed for, among other things, breach of contract. During the pendency of this action, Engel successfully negotiated a contract with MCA Records on Scholz's behalf, which provided that MCA would handle Boston's next album. In August of 1994, CBS brought a second action again in U.S. District Court against MCA, Scholz, Engel and others alleging breach of contract and copyright infringement based on the MCA deal. It is this second action brought against Engel directly that forms the basis of his current malicious prosecution claim.
According to the deposition testimony of its then President, CBS instituted the action against Engel, at least in part, to dissuade Engel from representing Scholz in the mannerthat he had been representing him up to that point. Engel in describing the consequences, claims that the action created almost insurmountable conflicts of interest. Although Scholz agreed to continue to be represented by Engel after being informed of the conflicts, Engel alleges, as set forth in the facts provided by the certified question, that rendering effective service to Scholz became more onerous and responding to discovery requests more burdensome, and that he had to absorb these costs himself. He further alleges that at least one potential client among possible others were dissuaded from hiring him, and in a general way, that he suffered emotional and financial harm tied to possible damage to his reputation.
After CBS's injunction request was denied, the court granted Engel's motions for summary judgment, resulting in his being dismissed as a defendant from the case. The judge considered awarding Engel attorney's fees, stating that he was "outraged by the suggestion here contained in [CBS's] complaint that an attorney can be effectively immobilized from representing a client by naming him as defendant," but ultimately did not award such fees. Thereafter, the two actions brought by CBS were consolidated. Notwithstanding the purported conflicts of interest, the case proceeded to a lengthy trial, which resulted, according to Engel, in a "very, very favorable result." Scholz won recovery of approximately $6,500,000 from CBS.
After being dismissed as a defendant from the case, Engel and his law firm, Engel & Engel, commenced the current malicious prosecution action in U.S. District Court for the Central District of California. The federal court in California granted CBS's motion for summary judgment, holding that CBS had probable cause to sue Engel in the underlying action. The U.S. Circuit Court of Appeals for the Ninth Circuit, however, reversed this holding on appeal and determined that no probable cause existed to sue Engel (981 F2d 1076). The Circuit Court of Appeals also held that New York rather than California law applied in the case, and gave Engel the opportunity to amend his complaint to meet New York's "heightened injury" requirement for malicious prosecution claims.
The case was then transferred to Southern District of New York, which, after a thorough review of New York law, granted CBS's motion for summary judgment. The court placed great reliance on the phrase "interference with person or property" and although special injuries, in its view, were not necessarily limited to provisional remedies, Engel's claims of interference with an attorney client relationship were not enough. After Engel's appeal to the Second Circuit Court of Appeals, this Court accepted the certified question to provide some needed clarification of the special injury requirement under New York law.
There is no doubt that a compelling argument can be made to consign the special injury requirement to the history books. The requirement had its genesis in England, and the original reasons for it do not predominate in this country. In England, a defendant need not worry about being saddled with the costs of a successful defense. The English rule is that generally the loser must pay the winner's attorneys fees. Thus, an English plaintiff who brings a frivolous suit does so at the peril of paying his adversary's litigation expenses ( see generally, Wade, Frivolous Litigation: A Study of Tort Liability and Procedural Sanctions, 14 Hofstra L Rev 433, 440 441; Mallor, Attorneys' Fees for Abuses of the Judicial System, 61 NC L Rev 613). It was only where an English defendant endured some special injury that the action for malicious prosecution was needed ( see, Willard v Holmes, Booth & Haydens, 142 NY 492, 495). Otherwise, the English defendant really did not suffer redressable harm.
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On this side of the Atlantic, the rule on fee allocation comes with no built in disincentive to frivolous litigation. In American courts, each side must typically bear its own expenses. Perhaps as a result, the Second Restatement of Law of Torts finds no place for the special injury requirement (Restatement [Second] Torts