SGM Holdings LLC et al v. Andrews et al

Filing 260

ORDER: Accordingly, the parties are hereby ORDERED to submit additional briefing to the Court as described below. The parties are hereby ORDERED to submit briefs not exceeding fifteen (15) double-spaced pages to the Court. The briefs shall address the following questions: As further set forth by this Order. The parties' briefs shall be submitted to the Court no later than seven (7) days from the date of this Order. SO ORDERED. (Signed by Judge Victor Marrero on 7/1/2024) (tg)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

7/1/24

SGM HOLDINGS LLC, et al.,

15 Civ. 8142 (VM)

Plaintiffs,

ORDER

- against A. JAMES ANDREWS, et al.,
Defendants.
VICTOR MARRERO, United States District Judge.

This

matter

was

reassigned

to

this

Court

from

the

Honorable Paul A. Crotty on April 15, 2024. A trial is
scheduled to begin July 29, 2024. At the same time, the Court
is

obligated

to

confirm

that

it

has

subject

matter

jurisdiction over this action. See Sheung Wan Gallery Ltd. v.
Kagan, No. 23 Civ. 2519, 2024 WL 196671, at *4 (S.D.N.Y. Jan.
18, 2024) (stating that a court “may raise [the] issue of
subject matter jurisdiction sua sponte”). Accordingly, the
parties are hereby ORDERED to submit additional briefing to
the Court as described below.
I.

BACKGROUND

First, the Court briefly sets forth relevant background.
The lone claim or claims in this suit are asserted under
Section 487 of the New York State Judiciary Law (“Section
487”). See generally SGM Holdings LLC v. Andrews, No. 15 Civ.
8142, 2023 WL 6214238 (S.D.N.Y. Sept. 25, 2023) (Crotty, J.)
1

(denying

motions

defendants

in

for

this

summary
case:

A.

judgment).
James

There

Andrews

are

three

(“Andrews”),

Richard Gaines (“Gaines”), and Karl Schledwitz (“Schledwitz”
or, together with Andrews and Gaines, “Defendants”).
This matter arises out of a previous case litigated
before Judge Crotty: DNV Investment Partnership v. Premier
Natural Resources LLC, No. 15 Civ. 1255 (the “DNV Action”).
In May 2020, Judge Crotty granted summary judgment in favor
of defendants in the DNV Action, and the DNV Action was
closed. The Defendants here are three lawyers who represented
plaintiffs in the DNV Action; plaintiffs here were defendants
in the DNV Action. See SGM Holdings, 2023 WL 6214238, at *1.
Section 487 provides that an “attorney or counselor” who
is “guilty of any deceit or collusion, or consents to any
deceit or collusion, with intent to deceive the court or any
party” is liable for “treble damages, to be recovered in a
civil action” by “the party injured.” N.Y. Jud. Law § 487(1).
Plaintiffs here allege that Defendants violated Section 487
by making “deceitful statements” in the DNV Action. SGM
Holdings, 2023 WL 6214238, at *1.
Defendants are alleged to be residents of Tennessee. In
the DNV Action, Andrews and Gaines were admitted to this Court
pro hac vice after they both represented that they were
members in good standing of the bar of the State of Tennessee.
2

Schledwitz was not admitted to this Court pro hac vice in the
DNV Action; he signed the original complaint, which was filed
in the Western District of Tennessee before the DNV Action
was transferred to this District. There appears to be no
allegation in this case that any of the Defendants is, or
ever was, admitted to the bar of the State of New York. There
likewise appears to be no allegation in this case that any of
the Defendants practiced before any New York State court, at
least as relevant here.
II.

QUESTIONS TO BE ADDRESSED BY THE PARTIES

The parties are hereby ORDERED to submit briefs not
exceeding fifteen (15) double-spaced pages to the Court. The
briefs shall address the following questions:
1. Does Section 487 apply to an attorney who is not
admitted to the bar of the State of New York and whose

relevant conduct took place before only a federal court?
See Schertenleib v. Traum, 589 F.2d 1156, 1166 (2d Cir.
1978)

(holding

that

Section

487

does

not

apply

extraterritorially and that it regulates “the conduct of
litigation

before

the

New

York

courts”

(emphasis

added)); Cinao v. Reers, 893 N.Y.S.2d 851, 859 (Sup. Ct.
Kings Cnty. 2010) (declining to follow Schertenleib with
respect to extraterritoriality but on the basis that a
“New York court has sufficient interest in supervising

the conduct of attorneys admitted before its bar . . .
to apply [Section 487] to the attorney’s conduct no

3

matter

where

the

[underlying]

action

is

pending”

(emphasis added)). If not, does the Court lack subject
matter jurisdiction over this action?

2. Has Section 487 ever been enforced against an attorney

who was not admitted to the bar of the State of New York
solely for conduct that took place before a federal
court?

3. In federal court, is Section 487 preempted by
•

Federal Rule of Civil Procedure 11 (allowing for
sanctions
against
attorneys
under
certain
circumstances),

•

28 U.S.C. § 1927 (same), or

•

any other provision of federal law?

If so, does the Court lack subject matter jurisdiction
over this action? Cf. Klingsberg v. Council of School
Supervisors and Adm’rs–Local 1, 122 N.Y.S.3d 335, 337

(App. Div. 2d Dep’t 2020) (holding that lower court
lacked subject matter jurisdiction because federal law
preempted Section 487 claim).

4. If the Court does have subject matter jurisdiction
over

this

action,

do

the

issues

identified

above

nevertheless preclude plaintiffs here from stating a
claim upon which relief can be granted? See Thomas v.
Scully, 943 F.2d 259, 260 (2d Cir. 1991) (per curiam)
(stating that district courts have “the power to dismiss
a complaint sua sponte for failure to state a claim on
which relief can be granted” as long as the plaintiff
has “an opportunity to be heard”).

4

The parties’ briefs shall be submitted to the Court no
later than seven (7) days from the date of this Order.
SO ORDERED.
Dated:

1 July 2024
New York, New York

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