Attorney Has No Liability For Talking Client Into Filing Meritless Lawsuit.

• Author: Rogak, Lawrence N.

New York's top court ruled today that an attorney faces no liability or penalty of any kind for giving a client bad advice that induces him to file a lawsuit that has no legal merit.

Plaintiffs, a New York corporation that manufacturers and distributes decorative metal automotive parts for antique autos, alleged that defendants, their former law firm, advised them that GM had possibly abandoned the trademarks GM had licensed to plaintiffs for over a decade, advising plaintiffs that they had meritorious claims against GM. Based on this advice, plaintiffs commenced the underlying federal trademark action against GM and EMI in the United States District Court for the Eastern District of New York, incurring $25,000 in attorney fees. Plaintiffs alleged that the underlying action--which was dismissed as commenced in an improper venue based on a forum selection clause in plaintiffs' licensing agreements with GM--clearly lacked merit, in part because a provision in the licensing agreement prohibited plaintiffs from challenging GM's ownership of the relevant intellectual property (the forum clause required all suits to be brought in Michigan). Plaintiffs further alleged that Stein concealed the dismissal of the underlying action for approximately nine months and subsequently lied about the reason for the delay, claiming that the federal court did not release its decision promptly.

In February 1995, under a licensing agreement with General Motors, plaintiff acknowledged, GM's title to certain trademarks and manufacturing technology and agreed not to attack or impair GM's intellectual property rights. After eleven years of renewing the agreement, plaintiff became concerned that he was being "treated unfairly by GM." He sought legal advice from defendant Stein Law Firm, P.C., regarding Bill Birds' ownership of trademarks and copyrights ostensibly covered by the agreements. According to plaintiffs, Stein represented that they thoroughly researched this area of the law and concluded that GM did not own the rights licensed to Bill Birds. On the strength of this advice, plaintiffs chose not to renew the agreement with GM.

After their suit against GM was dismissed, Plaintiffs sued Stein, alleging legal malpractice, breach of contract and fraud claims, and also a claim under New York's Judiciary Law section 487. Judiciary Law [section] 487--covering intentional deceit and collusion--imposes liability on attorneys for intentionally making of false statements...