On April 2, 2024, the First Department issued a decision in Talos Capital Designated Activity Co. v. 257 Church Holdings LLC, 2024 NY Slip Op. 01786, holding that a court’s disagreements with counsel’s litigation positions is an insufficient basis for imposing sanctions, explaining:
Conduct is frivolous if it is completely without merit in law, undertaken primarily to delay or prolong the resolution of the litigation, or asserts material factual statements that are false. Here, the record does not support an award of sanctions under any of the prongs. The conduct that Supreme Court found sanctionable does not rise to the level of being frivolous. Supreme Court took issue with counsel’s statement that a document squarely addressing the question of timing did not exist. According to Supreme Court, based on its in camera review of documents, there were communications in which the timing of the payment would have been mentioned if it were in fact due on a date other than the five-year paydown date. Supreme Court disagreed with Ashkenazy’s counsel’s interpretation of the documents, and did so by relying on the absence of a statement in the documents rather than an overt statement contained in the documents. Counsel put forth its interpretation of the documents exchanged during discovery — namely, among other things, Ashkenazy’s personal interpretation of the contract, Ashkenazy’s deposition testimony, and the deposition testimony of Ashkenazy’s drafting counsel — and then made arguments based on its interpretation. Those arguments were not completely devoid of merit. Nor is there any indication in the record that counsel’s interpretation and arguments were made in bad faith. The fact that the court took a different view of the evidence is not grounds for sanctions. We note that Ashkenazy’s withdrawal of his appeal precludes any possibility for counsel to vindicate its conduct.
Moreover, the record does not support the finding that counsel delayed resolution of this case. Discovery in this case began in earnest in July 2022, after we found the loan agreement ambiguous as to the timing of Ashkenazy’s payment obligation under the guaranty. This action concluded upon Supreme Court’s June 5, 2023 decision and order, a mere 11 months after the implementation of an expeditious discovery schedule.
Nor does counsel’s April 28, 2023 letter submitted to Supreme Court concerning our April 27, 2023 decision support an award of sanctions. First, Ashkenazy’s counsel was responding to plaintiff’s letter. Second, counsel provided its interpretation of this Court’s decision and order. Counsel’s interpretation of a decision is not grounds for sanctions, but rather, is what is expected during the course of litigation.
Lastly, the imposition of sanctions for conduct before this Court was not within Supreme Court’s authority.
(Internal quotations and citations omitted).