Court Finds No Basis to Infer that Attorney Had Authority to Represent Party in An Action

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Posted on: Apr 12 2023

In today’s article, we address the question: When is an attorney authorized to act on behalf of a party? As one would expect, when the client says so, a lesson learned by the parties in Gibson, Dunn & Crutcher LLP v. Koukis, 2023 N.Y. Slip Op. 01863 (1st Dept. Apr. 11, 2023) (here).

The primary issue in Gibson Dunn was whether the default judgment entered against defendant George Koukis in July 2019 should be vacated, and the complaint dismissed as against him, on the ground that Koukis — a domiciliary of Switzerland — was not subject to the motion court’s jurisdiction.

Gibson Dunn represented Be In, Inc. (“BII”) in arbitration against Google. Apparently, BII failed to pay Gibson Dunn for its fees and expenses. Consequently, Gibson Dunn commenced an arbitration to recover those fees and expenses. Gibson Dunn prevailed and obtained a judgment confirming the arbitration award in its favor (the “judgment”). Thereafter, Gibson Dunn domesticated the judgment in New York Supreme Court.

During a postjudgment deposition, a representative of BII testified that defendants had stopped funding the company and had drained the company’s bank accounts so that the company was insolvent. According to the representative, a family member of BII had transferred his equity interest to another for no consideration, and other family members had transferred their shares to another for no consideration, leaving one family member with an 85% interest and Koukis with 15% of the remaining shares.

Plaintiff commenced an action against BII’s shareholders — including Koukis — to enforce the judgment (i.e., to recover the unpaid fees that it earned in representing BII). Gibson Dunn asserted claims of fraudulent conveyance against BII and defendants and alter ego/misuse of the corporate form against defendants. Plaintiff alleged, among other things, that defendants had undercapitalized BII, had made fraudulent transfers with the intent to hinder Gibson Dunn’s collection efforts, and had abused the corporate form by holding no board meetings, maintaining no financial records or office space, and by conveying BII’s shares for no consideration and moving assets into personal bank accounts. Gibson Dunn effectuated service on defendants by delivering the summons and complaint to the executive director and chief financial officer of BII, and then mailing copies to the same address.

Plaintiff argued, among other things, that Koukis was subject to the motion court’s jurisdiction by virtue of a December 2017 stipulation “waiv[ing] any defenses based on service of process or lack of personal jurisdiction” that was executed by Gil Santamarina, Esq., an attorney who appeared in the action claiming to represent all defendants in opposition to plaintiff’s motion for entry of a default judgment. Koukis submitted a declaration denying that he ever authorized codefendant Joseph D’Anna to retain Santamarina to represent him and further denying that he ever communicated with Santamarina at any time before December 16, 2019, when Koukis sent Santamarina an email stating, “I have not authorized you to represent me in any legal or other matters.” Koukis averred that he was not even aware of Santamarina for any significant period of time prior to his December 16, 2019 email.

The motion court granted Koukis’s motion to vacate the default judgment and dismissed the complaint on the grounds that the appearance of counsel was unauthorized, denied so much of the motion as based on lack of jurisdiction, and set the matter down for a traverse hearing to determine whether service was proper pursuant to CPLR § 308(2). The motion court also granted Koukis’s motion to quash postjudgment subpoenas and denied plaintiff’s cross motion to permit alternate service of the subpoenas as premature.

On appeal, a majority of the panel for the Appellate Division, First Department modified the motion court’s order to vacate the default judgment and dismissed the complaint based on lack of jurisdiction, and otherwise affirmed the order.

The majority held that the “motion court correctly found that there was no basis to conclude that Koukis authorized Santamarina to appear and waive all jurisdictional defenses on his behalf”.¹ The majority found dispositive the email from Koukis to Santamarina wherein he specifically stated that “‘I have not authorized you to represent me in any legal or other matters.’”² The majority also found relevant Koukis’s averment that “he never communicated with Santamarina and that he never represented him”.³ In fact, noted the majority, “there [was] no indication in the record that Koukis was even aware of Santamarina for any significant time prior to his December 16, 2019 email”.⁴ Speaking to the dissent, the majority explained that “[t]he two November 2019 emails referenced by the dissent were not from or to Santamarina and made no mention of any representation by Santamarina”.⁵

However, with regard to the jurisdictional allegations that “Koukis participated in the allegedly fraudulent conveyance to hinder legitimate creditors such as plaintiff,” the majority held that such allegations were insufficient.⁶ “The complaint”, said the majority, was “devoid of any specific allegations involving Koukis” and any “allegations as to which [BII] assets were transferred to Koukis and/or when they were transferred”.⁷

The dissent “disagree[d] with the majority’s assertion that there [was] ‘no basis’ in the record for an inference that Santamarina had authority to represent Koukis in [the] action”.⁸ “The majority”, said the dissent, “overlook[ed] certain November 2019 emails that plainly raise[d] an issue of fact in this regard” an issue, noted the dissent, that “should be resolved by a hearing pursuant to CPLR 2218”.⁹ Those emails, said the dissent, “suffice to raise a triable issue of fact as to whether Koukis had given such authority, whether expressly or through knowing acquiescence in the representation as it continued through an extended period of time”.¹⁰

Footnotes

Slip Op. at *2 (citing, Amusement Sec. Corp. v. Academy Pictures Distrib. Corp., 251 A.D. 227, 229 (1st Dept. 1937)).
Id.
Id.
Id.
Id.
Id.
Id. (citing, CIBC Mellon Trust Co. v. HSBC Guyerzeller Bank AG, 56 A.D.3d 307, 308-309 (1st Dept. 2008)).
Id. at *3.
Id. CPLR § 2218 provides that “[T]he court may order … an issue of fact raised on a motion” to be “separately tried by the court or a referee”.
Id. at *4.

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.