Corruption in the First Department McGuire’s  Conduct Raises Questions

Correction: Judge Cote did not lift the sanctions, she invited a motion to lift the sanction. The change is noted in bold in the last paragraph of the story.

The circumstances surrounding the forced resignation of Melissa Ringel on April 20th , who had headed the Appellate Division, First Department’s program for mediating appeals has raised questions about former Appellate Division Justice James M. McGuire’s conduct after he left the bench in 2011 and joined the Dechert law firm. He is now a partner at Holwell Shuster & Goldberg.

Ringel resigned following the release of a report  by the Office of Court Administration’s (OCA) faulting her and her husband, Frank Esposito, for issuing an unauthorized “opinion,” which aided one of Esposito’s clients.  The (OCA) Inspector General’s report rebuked her for conduct that was “extremely troubling and at the very least creat[ing] an appearance of impropriety.”

Ringel’s conduct was highly irregular. She acted to aid Esposito’s client without a referral for mediation from a panel of the court, according to her deposition testimony. Her job as chief mediator for the court was to enable it to pare down its caseload by attempting to mediate appeals had been assigned to panels, who believed them to be appropriate for a negotiated resolution.

Moreover, the manner in which Ringel freelanced the mediation violated one of the basic norms of the American jurisprudence: that all parties (except in an extreme emergency) must be informed of court proceedings and be given an opportunity to be heard.

Questions about McGuire’s conduct are raised because he used Ringel’s opinion, despite being aware of its defects, to advance a client’s appeal before the Appellate Division, First Department.

McGuire did not respond to an email requesting comment.

The principal players in this tangled legal dispute were an elderly couple, Norma and Michael Knopf , who had invested funds they had been awarded, after their son had been killed in a plane crash, with a hedge fund manager and realtor, Michael Hayden Sanford. Sanford had hired Esposito as his lawyer, who, acting as a go-between with his wife, secured from her an “opinion,”  which served Sanford’s legal needs.

The Knopfs had claimed that Sanford had subsequently promised to treat those funds instead as a loan and to give them a mortgage upon five townhouse apartments he owned. He never did so, and in December, 2014, the Appellate Division, First Department awarded the Knopfs summary judgment. Two years later, their damages were set at $10 million.

What ensued was a fierce battle that was fought out on two fronts, with the Knopfs initially filing a state case, which has spawned five appeals to the First Department since 2014. More recently, they filed a federal action in Southern District of New York. That case was assigned to Judge Denise L. Cote and is currently on appeal to the Second Circuit Court of Appeals, which is based in Manhattan.

Following up on their initial victory in the First Department, the Knopfs secured an interim order on Oct. 22, 2015 from a single judge of the First Department, Justice John Sweeney Jr., which required that any proceeds Sanford might receive from the sale of a townhouse apartment on E. 67th St. be placed in escrow. Two months later, on Dec. 29, a full panel embraced Sweeney’s preliminary order.

Those two orders in late 2015 became the fulcrum point of the litigation in both courts.

On Feb. 1, 2015, Sanford sold the E. 67th St. apartment for $3 million without putting any of the proceeds in escrow. To justify his doing so, he asserted the “opinion” that Esposito secured from Ringel, which concluded that the two orders had been dissolved—“mooted” in legal jargon—as a consequence of an intervening order issued by the First Department.

In fact, without the “opinion,” Sanford’s buyer had balked (Feldman March 14, 2016, para 7) deposition at going through with the sale, and only relented after Sanford had obtained Ringel had provided her extra-curricular opinion provided by Ringel.

To get around the First Department’s escrow orders, Sanford needed a counterweight so that he too could claim to be operating under an aura of legality. That suggests why he sought out Ringel’s opinion via his lawyer, Esposito, who was her husband.

Not only did Sanford retain Esposito, but he set up his fee arrangement in a manner that gave Ringel a financial incentive to issue an “opinion” that came out his way. Deposition testimony  makes it clear that her husband would only get paid after the sale of the apartment. In fact, Sanford testified at his deposition that he lacked the funds to pay Esposito and expressly stated that he would pay Esposito out of the proceeds of the sale of his apartment. In total, Sanford paid Esposito $102,500 out of the funds received from the sale.

After being briefed about the matter by Esposito, Ringel agreed to accept a phone call from two other lawyers, who were also working for Sanford—Edward S. Feldman and Nathaniel H. Akerman. Feldman made a contemporaneous memorandum of the conversation which took place two weeks prior to the sale of Sanford’s house.

Feldman’s memo memorialized Ringel’s legal conclusion that both orders had been mooted. It also plainly stated that the participants were limited to Ringel, Ackerman and Feldman. No mention is made of a lawyer for the Knopfs being present.

 

McGuire’s Involvement

 Ringel, who had been McGuire’s clerk for several years while he sat in the First Department, alerted him to Sanford’s pressing need for representation in a proceeding to set the amount of the Knopfs’ damages. In her email, she explained that Esposito was working on a matter, with between $12 and $16 million at stake. After Esposito and McGuire conferred, Sanford brought him aboard his legal team, paying him a $500,000 retainer on Feb. 6, 2016.

About three weeks later, First Department Justice Karla Moskowitz issued an order that appeared to extend the earlier First Department escrow order to McGuire’s retainer account, upon the ground that it too had been paid from the proceeds of the sale of the 67th St. townhouse. Moskowitz’s order did not specify which account was being added to the earlier order.

The December 2015 order, however, had expressly applied to the proceeds that Sanford received from the sale of the 67th St. apartment. Moskowitz’s order was specific in directing that  “money remaining as of today at 3:45 p.m.” shall be placed in escrow but did not specify that McGuire’s retainer  was subject to her order. .

The Knopfs and Sanford litigated the issue of whether McGuire’s retainer was covered,  but the First Department rendered the dispute irrelevant when it ordered on March 24, 2016 that all proceeds from the townhouse sale be frozen.

About a month later, McGuire appeared in a proceeding before the First Department and offered the Feldman memo in mounting a defense that Sanford had been acting upon the advice of counsel. The problem with this was that the memo stated on its face that Ringel was the source of the “opinion.” (See McGuire’s affidavit, dated March 8, 2016 at para. 20,22). That knowledge, combined with the Ringel’s expressly having told him in an email that Esposito, whom he knew to be her husband,  should have alerted McGuire to the dangers of using the Feldman memo in the First Department.

Moreover, Ringel’s opinion fit Sanford’s needs like a glove. It allowed him to sell the townhouse free of any restraints obtained by the Knopfs even though a full panel of the First Department had come to the opposite conclusion six weeks AFTER the ruling she concluded had barred such a result. In effect, her faux opinion purported to render a subsequently ruling, issued by the court for which she worked, to have been erroneously issued.

For a lawyer of McGuire’s caliber that conclusion should have fallen into the category of too-good-to-be-true. During the course of his career he had been deputy chief of the Manhattan District Attorney’s Appeals Bureau, Counsel to Governor George Pataki and an Appellate Division justice for six years.

 

*       *       *       *       *

 

The Inspector General’s report credited the Knopfs’ lawyer, Eric Berry, a solo practitioner, with first bringing to public light the Ringel-Esposito-Sanford nexus. That came in the federal lawsuit being handled by Judge Cote, which Berry filed on Aug. 2, 2017. Berry followed up three months later with a parallel complaint to the Inspector General’s Office.

Judge Cote had initially dismissed the Knopfs’ federal claims and assessed $197,000 in sanctions against the Knopfs and Berry.    After the OCA Inspector General’s Office issued its report on April 23, Cote invited a motion to reconsider her dismisssal of the Knopfs suit and her imposition of sanctions.  Ironically, had the Knopfs’ appeal not been pending before the Second Circuit, the Inspector General’s report would have remained under wraps.

 

 

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1 Comment

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One response to “Corruption in the First Department McGuire’s  Conduct Raises Questions

  1. Thomas Hoffman, Esq.

    Dan,

    Another piece of excellent investigative reporting. Thanks for all you do.

       Tom

    Thomas Hoffman, Esq. 37 Elaine Terrace Yonkers, New York 10701 212-581-1180 917-589-6156 thoff93452@aol.com

     This message and any attachments may contain confidential or privileged information and is only for the use of the intended recipient of this message.  If you are not the intended recipient, please notify the sender by return email and delete or destroy this and all copies of this message and all attachments.  Any unauthorized disclosure, use, distribution or reproduction of this message or any attachments is prohibited and may be unlawful.

     

      

     

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