Berry v Batash
Attorneys and Parties
Brief Summary
Civil litigation and attorney conduct arising from a prior fraud action, including whether later tort claims had to be asserted as counterclaims in the earlier case and whether a client can be vicariously liable for allegedly defamatory statements made by counsel during litigation.
The Supreme Court dismissed the defamation claim against Jon Batash and also dismissed the abuse of process, injurious falsehood, intentional infliction of emotional distress, and Judiciary Law § 487 claims on the ground that they could have been asserted as counterclaims in the prior action. It also denied as academic Berry's motion under CPLR 3211(b) [rule permitting dismissal of defenses] and CPLR 3211(a)(7) [rule permitting dismissal for failure to state a cause of action].
The Appellate Division reversed the dismissal of the abuse of process, injurious falsehood, intentional infliction of emotional distress, and Judiciary Law § 487 claims, and reinstated Berry's motion attacking Batash's affirmative defenses and counterclaim. It left intact the dismissal of the defamation claim against Batash.
New York is a permissive counterclaim jurisdiction under CPLR 3011 [rule defining pleadings] and CPLR 3019 [rule governing counterclaims and cross-claims], so Berry was not required to assert those claims in the prior action because success on them would not impair rights established there. But the alleged defamatory statements by Batash's attorney were absolutely privileged because they were pertinent to the prior judicial proceeding, leaving no primary liability against the attorney and therefore no vicarious liability against Batash.
Background
Batash previously sued Berry and others, alleging that Berry helped fraudulently induce him to invest $600,000 in a failing business. While that prior action was still pending, Berry brought this separate Nassau County action against Batash and Batash's attorney, Eran Regev, alleging abuse of process, defamation, injurious falsehood, intentional infliction of emotional distress, and violation of Judiciary Law § 487. Berry later discontinued the defamation claim against Regev. In the prior action, Berry eventually obtained dismissal of the second amended complaint insofar as asserted against him.
Lower Court Decision
The Supreme Court treated the defamation discontinuance against Regev as also disposing of the defamation claim against Batash, because the alleged statements were made only by Regev. The court further dismissed the remaining challenged causes of action against Batash and Regev on the theory that Berry should have asserted them as counterclaims in the prior action, and denied Berry's motion against Batash's affirmative defenses and counterclaim as academic.
Appellate Division Reversal
The Appellate Division modified. It agreed that the defamation claim against Batash was properly dismissed because statements made by counsel during a judicial proceeding are absolutely privileged when pertinent to the issues, and without primary liability against Regev there could be no vicarious liability against Batash. However, it held that the lower court erred in dismissing the other claims merely because Berry could have raised them as counterclaims. Since New York generally permits, rather than requires, counterclaims, and Berry's separate claims would not impair any rights established in the prior action, those claims were not barred. The court remitted the matter for the Supreme Court to consider the other grounds raised by Batash and Regev for dismissal and to decide Berry's motion regarding affirmative defenses and the counterclaim.
Legal Significance
The decision reinforces two rules of New York practice. First, under CPLR 3011 and CPLR 3019, omitted counterclaims usually may be brought later in a separate action unless they would undermine rights established in the first case. Second, the absolute privilege protecting pertinent statements made in judicial proceedings bars defamation claims based on such statements and also defeats derivative vicarious liability claims against the client.
A party in New York usually does not lose related tort claims by failing to plead them as counterclaims in an earlier action, but claims based on an attorney's pertinent litigation statements will fail where the statements are absolutely privileged.