INDEX NO 452564/2022
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NYSCEF DOC NO 1264 :
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
PEOPLE OF THE STATE OF NEW Index No. 452564/2022
, ,
YORK by LETITIA JAMES Attorney
General of the State of New York ,
Plaintiff, Hon . Arthur Engoron
-against
DONALD J. , et
TRUMP al . ,
Defendants .
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF'S
MOTION FOR SANCTIONS
The People of the State of New York , by Letitia James , Attorney General of the State of
New York , respectfully submit this memorandum of law in support of their motion for sanctions
pursuant to 22 N.Y.C.R.R. § 130-1.1 based on frivolous conduct by Defendants and their counsel
in asserting legal arguments in connection with the parties ' pending dispositive motions that were
previously rejected by this Court and the First Department in this action .
PROCEDURAL HISTORY
A. Plaintiff's Preliminary Injunction Motion
to Show Cause entered on October 13 , 2022 , a preliminary
By Order Plaintiff moved for
injunction and expedited preliminary conference ( NYSCEF No. 119 ) ( " PI Motion " ) . In opposing
Plaintiff's PI Motion , Defendants argued that the Attorney General had no standing or capacity to
maintain this action under Executive Law §63 ( 12 ) because there was no harm , and in particular no
harm to the public , relying on cases brought under the parens patriae doctrine and the decision in
People v.Domino's Pizza , Inc , Index No. 450627/2016 , 2021 WL 39592 ( Sup . Ct .
N.Y. Cty . Jan.
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5 , 2021 ) . See Memorandum to Plaintiffs for a Preliminary
of Law in Opposition Application
Injunction and Expedited Preliminary Conference ( NYSCEF No. 126 ) ( “ PI Opp . Br .” ) at 8-11
(arguing that the Attorney General “ has no right to intervene " in the Defendants ' “ internal affairs
and management . . . and private contractual rights between [ Defendants ] and corporate counter
parties " as "those are private matters between sophisticated commercial parties , not matters of
public interest . ") .
Defendants also contended in the same brief that Donald J Trump's Statements
.
of
Financial Condition (" SFCs ") , " and the disclaimers explicitly set forth therein , conclusively
establish a defense a a matter of law to the Executive Law § 6 ( 12 ) fraud claim alleged in the
s 3
Complaint ” because it " forecloses Plaintiff from claiming any corporate counter party reasonably
relied in any material way on the information contained in the SoFCs . " Id . at 13 .
This Court soundly rejected these three arguments in its decision granting Plaintiff's PI
Motion . People of the State of New York v . Trump , No. 452564/2022 , 2022 WL 16699216 , at * 2
I")
(Sup . Ct . N.Y. Cty . Nov. 03 , 2022 ) (" Trump (NYSCEF No. 183 ) ( rejecting Defendants '
positions " that OAG has neither standing nor legal capacity to bring this action , " OAG must “ meet
the elements required to bring a parens patriae action to sue " under § 6 ( 12 ) , and § 6 ( 12 ) actions
3 3
are limited to cases involving consumer protection ) . As the Court explained , there is no need for
the Attorney General to show any public harm or the quasi -sovereign interest required under
parens patriae because " the New York legislature has specifically empowered the Attorney
General to bring [ an Executive Law § 63 ( 12 ) ] action in a New state court , " and Defendants
York '
attempt to restrict § 63 ( 12 ) to consumer fraud cases " is wholly without merit . " Id .
Further , the Court held that the disclaimer language in the SFCs did not provide any defense
at all to Defendants because the language “ makes abundantly clear that Mr. Trump was fully
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responsible for the information contained within the SFCs " and that "allowing blanket disclaimers
to insulate liars from liability would completely undercut " the " important function " that SFCs
serve " in the real world . " Id . at * 3 . Indeed , the Court noted that even under the cases Defendants
cited , they could not use the disclaimer as a defense because " the SFCs were unquestionably based
on information peculiarly within ” their knowledge . Id . The Court also noted that even if there were
a “ public harm ” requirement , this case would satisfy that requirement because the People have
articulated " a quasi - sovereign interest that touches a substantial segment of the population and is
I
distinct from the interests of private parties . " Trump , 2022 WL 16699216 , at * 2 ( citing cases ) .
B. Defendants ' Motions to Dismiss
On November 21 , 2022 , Defendants filed motions to dismiss ( NYSCEF Nos . 195 , 198 ,
201 , 210 , 220 , 224 ) ( " Motions to Dismiss " ) . Defendants again raised these same three arguments
to Dismiss . See , e.g. , Memorandum
in support of their Motions of Law in Support of the motion
to Dismiss of Defendants , The Trump Organization , Inc. , Trump Organization LLC , and Donald
J. Trump (NYSCEF No. 197 ) ( " MTD Moving Br .") at 3-11 ( Point I - " The NYAG Lacks Standing
to " ) , 11-13 ( Point
Bring This Action II - " The NYAG Is Without Capacity to Bring the Suit " ) , 21
22 ( Point III – “ Plaintiff's Fraud Claims are Barred by Documentary Evidence and Fail to State a
Claim " ) .
The Court rejected these arguments for a second time , noting that they " were borderline
frivolous even the first time defendants made them , " and observed that reading Defendants ' brief
" was , to quote the baseball sage Lawrence Peter ("Yogi ” ) Berra , ‘ Deja vu all over again . 999 People
v. Trump , No. 452564/2022 , 2023 WL 128271 , at * 2 (
N.Y. Sup . Ct . Jan. 06 , 2023 ) ( “ Trump ”
II )
453-458 ) ( holding § 63 ( 12 ) “ is tailor -made for Attorney
(NYSCEF Nos that Executive Law
General Enforcement actions such as the instant one , foreclosing any rational arguments against
capacity and standing " and that the disclaimers " shifted responsibility directly on to certain
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defendants " ) , aff'd in part and rev'd in part on other grounds , 217 A.D.3d 609 ( 1st Dep't 2023 )
III')
'
. The Court went further to admonish Defendants ' counsel for raising these
(" Trump
arguments for a second time , noting that “ sophisticated defense counsel should have known
better . " Trump , 2023 WL 128271 , at * 4 . After noting that such conduct may warrant an “ award
II
costs and financial sanctions against an attorney or party , " the Court exercised its discretion
[of]
and declined to do so , concluding they were unnecessary in light of the Court “ having made its
point . " Id . In its decision denying the Defendants ' Motions to Dismiss , the Court also rejected
Defendants ' additional argument that Plaintiff has no valid claim for disgorgement under § 63 ( 12 ) ,
holding that " disgorgement of profits i a form of damages " available in this § 63 ( 12 ) action . See
s
, at * 5 .
Trump , 2023
WL 128271
II
the Court's decision denying their Motions to Dismiss , Defendants raised ,
On appeal from
among other points , their standing , capacity , and disgorgement arguments , all of which were
unanimously rejected by the First Department :
The New York Legislature enacted Executive Law § 63 ( 12 ) to
combat fraudulent and illegal commercial conduct in New York .
Under this provision , " [ w ]henever any person shall engag in
repeated e
fraudulent or illegal acts or otherwise demonstrate
persistent fraud or illegality in the carrying on , conducting or
transaction of business , the attorney general may apply , in the name
of the people of the state of New York , to the supreme court of the
stateof New York " for disgorgement and other equitable relief . The
Attorney General is not suing on behalf of a private individual , but
is vindicating the state's sovereign interest in enforcing its legal
code including its civil legal code within its jurisdiction . We
have already held that the failure to allege losses does not require
dismissal of a claim for disgorgement under Executive Law
§ 63 ( 12) .
Trump , at 610–11 ( internal citations omitted ) ( emphasis added ) . Defendants did
217 A.D.3d
III
not seek leave to appeal the decision by the First Department .
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C. The Parties ' Pending Dispositive Motions
4 , 2023 , Defendants moved for summary judgment ( NYSCEF No. 834 ) and
On August
( NYSCEF No. 765 ) . Despite the Court's prior
Plaintiff moved for partial summary judgment
rulings and admonition , Defendants exhume their previously -rejected standing , capacity ,
disclaimer , and disgorgement arguments in support of their motion and in opposition to Plaintiff's
motion .
as an issue
In their summary judgment brief , Defendants contend that , " whether framed of
standing or capacity , the scope of NYAG's authority depends upon a public interest nexus "
( or threat
requiring " some harm of harm ) suffered by the People ( i.e. , the public at large ) . "
Memorandum of Law in Support of Defendants ' Motion for Summary Judgment , dated August 4 ,
2023 ( NYSCEF No. 835 ) ( “ Defs . MOL ” ) , at 22. They add that this “ public interest ” concept “ is
reinforced by the doctrine of parens patriae , " which they contend " is fully applicable to actions
63 ( 12 ) . " Id .
brought under at 22 n.10 . Defendants further argue in the same brief that the
accountant's letter inserted at the beginning of each SFC has disclaimer language that puts users
" on complete notice not to rely upon them , ” id . at 42 , effectively insulating them from any liability
for false and misleading statements and values in the SFCs , and that disgorgement “ is not available
under §63 ( 12 ) or the underlying statutory claims , " id . at 58 .
Defendants raise these same arguments in their recently -served joint brief opposing
Plaintiff's partial summary motion . See Defendants ' Brief in Opposition to Plaintiff's Motion for
Partial Summary Judgment , dated September 1 , 2023 , at 52-57 ( Point III.A— “ The NYAG Lacks
Authority To Maintain Suit " ) , 58-59 ( arguing Mazars disclaimer , among other language in the
SFC , put users of the SFCs " on complete notice to seek additional information " ) , 69-72 (Point
IV " The NYAG Is Not Entitled To Disgorgement As A Matter Of Law" ) .
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ARGUMENT
I. SANCTIONS ARE WARRANTED AGAINST DEFENDANTS AND THEIR
COUNSEL FOR FRIVOLOUS CONDUCT
The Court has the discretion to " impose financial sanctions upon any party or attorney in a
civil action or proceeding who engages in frivolous conduct , " and may impose sanctions " against
both . " 22 N.Y.C.R.R. § 130-1.1 ( a ) and (b ) . Conduct is frivolous
if : " ( 1 ) it is completely without
merit in law and cannot be supported by a reasonable argument for an extension , modification or
reversal of existing law ; ( 2 ) it is undertaken primarily to delay or prolong the resolution
of the
litigation , or to harass or maliciously injure another ; or ( 3) it asserts material factual statements
that are false . " 22 N.Y.C.R.R. § 130-1.1 ( c) . In determining whether conduct is frivolous , the Court
shall consider , among other things , " whether or not the conduct was continued when its lack of
legal or factual basis was apparent , should have been apparent , or was brought to the attention of
counsel or the party . " Id .
Here , the lack of legal bases for Defendants ' standing , capacity , disclaimer , and
disgorgement arguments should have been readily apparent to Defendants and their counsel from
the prior rulings of this Court and the First Department . Indeed , a to the standing , capacity , and
s
disclaimer arguments , this Court already “ brought to the attention of counsel [ and] the part[ ies ] "
id . , that these arguments were " borderline frivolous " and sanctionable when raised for the second
time on Defendants ' Motions to Dismiss , Trump , 2023 , at * 4 . Under
WL 128271 these
II
circumstances , the Court should impose sanctions against Defendants and their counsel . See Levy
v . Carol Mgmt . Corp. , 260 A.D.2d 27 , 34 ( 1st Dep't 1999 ) ( affirming an award of sanctions where
record was "replete " with circumstances where frivolous nature of the conduct was brought to the
attention of the parties or counsel ) ; Gassab v . R.T.R.L.L.C. , 69 A.D.3d 511 , 513 ( 1st Dep't 2010 )
(affirming trial court's imposition of costs and sanctions against plaintiff " after having been
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warned by the motion court that his motion to vacate barely escaped the imposition of costs and
sanctions " ) .
Further , because Defendants and their counsel were previously admonished by the Court
that their conduct in raising previously -rejected arguments was frivolous and sanctionable , and
because defense counsel should have known better ," Trump , 2023 ,
" sophisticated WL 128271
II
at * 4 , the Court should impose sanctions against Defendants and their counsel in the maximum
allowable sum a follows : ( i ) against all Defendant collectively in the total amount of $ 10,000 , to
s
be deposited with the Clerk to the Commissioner
of the Court for transmittal of Taxation and
Finance ; and ( ii ) against all attorneys on Defendants ' briefs in support of , and opposition to , the
pending dispositive motions collectively in the total amount of $ 10,000 , to be deposited with the
Lawyers ' Fund for Client Protection . See 22 N.Y.C.R.R. § 130-1.2 , 130-1.3 ; Leventritt v.
§
Exkstein , 206 A.D.2d 313 , 314 ( 1st Dep’t 1994 ) ( holding trial court " properly imposed monetary
sanctions of $ 10,000 each upon plaintiff and her counsel " for frivolous conduct ) ; Cattani v .
Marfuggi , 26 Misc.3d 1053 , 1060 ( Sup . Ct . N.Y. Cty . 2009 ) ( imposing sanctions on " both plaintiff
and his counsel " where " the lack to plaintiff's
of merit " of plaintiff's arguments " was brought and
his counsel's attention , and they persisted" ) ; cf Entm't Ptns . Group , Inc. v . Davis , 198 A.D.2d 63 ,
.
64 ( 1st 1993 ) ( sanctions of $ 10,000 imposed against “ each of the individual defendants "
Dep't
pursuant to statutory analogue CPLR 8303 - a ) .
CONCLUSION
Based on the foregoing , the People respectfully request that the Court grant Plaintiff's
motion for sanctions against Defendants and their counsel , along with such other and further relief
the Court deems necessary and appropriate .
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Dated : New York , New York
September 5 , 2023
Respectfully submitted ,
LETITIA JAMES
Attorney General of the State of New York
By
:
/ s / Andrew Amer
Andrew Amer
Colleen K. Faherty
Alex Finkelstein
Sherief Gaber
Wil Handley
Eric R. Haren
Mark Ladov
Louis M. Solomon
Stephanie Torre
Kevin C. Wallace
Office of the New York State Attorney
General
28 Liberty Street
New York , NY 10005
Phone : ( 212 ) 416-6127
andrew.amer@ag.ny.gov
Attorney for the People of the State of New
York
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CERTIFICATION
Pursuant to Rule 202.8 -b of the Uniform Civil Rules for the Supreme Court & the County
Court ("Uniform Rules " ) , I certify that , excluding the caption , signature block , and this
certification , the foregoing Memorandum of Law contains 2,070 words , calculated using Microsoft
the Court's rules .
Word , which complies with
Dated : New York , New York
September 1 , 2023
LETITIA JAMES
Attorney General of the State of New York
By : / s / Andrew Amer
Andrew Amer
Office of the New York State Attorney
General
28 Liberty Street
New York , NY 10005
Phone : ( 212 ) 416-6127
andrew.amer@ag.ny.gov
Attorney for the People of the State of New
York
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