"Mr. Fagan simply has no grasp of the truth"

NY Laywer Famed for Holocaust Suits Disbarred for Not Paying Sanctions, Fees
The New York Law Journal by Noeleen G. Walder - December 12, 2008

An attorney well known for representing Holocaust survivors has been disbarred after he neglected to pay sanctions imposed by a federal judge in a multi-billion-dollar lawsuit against Bank Austria Creditanstalt AG and other entities. In an August 2005 decision excoriating Edward Davis Fagan, Southern District Judge Shirley Wohl Kram fined the lawyer for having a financial interest in the outcome of the $6.8 billion action and trying to circumvent a $40 million payment made by Bank Austria to Holocaust survivors and their heirs. Several months later, the judge denied Mr. Fagan's bid to reargue Association of Holocaust Victims for Restitution of Artwork & Masterpieces, a/k/a "AHVRAM" v. Bank Austria Creditanstalt, No. 04 Civ. 3600, and ordered the attorney to pay Bank Austria nearly $350,000 in attorney's fees.

Yesterday, in Matter of Edward D. Fagan, M-2732, M-3148, M-3193, a unanimous panel of the Appellate Division, First Department, held that Mr. Fagan's failure to pay the bulk of the $5,000 sanction and all of the money owed to Bank Austria, his "pattern of prior sanctions for unprofessional conduct" and his "lack of contrition" made him unfit to practice law. In addition to the money Mr. Fagan owes as a result of the case before Judge Kram, he has failed to pay more than $20,000 in sanctions and fees imposed by three other federal judges, the panel said. Mr. Fagan said in an interview yesterday that he plans to immediately move for a rehearing and reargument and will take the case to the Court of Appeals, if necessary. Mr. Fagan claimed that he had new evidence that Bank Austria and its counsel, Charles G. Moerdler of Stroock & Stroock & Lavan, had lied to Judge Kram. Among other things, he said, they "failed to fully disclose" that two stipulations made subsequent to the settlement with Bank Austria permitted him to go forward with his suit. Mr. Moerdler vehemently denied making any misrepresentations to the court. "Mr. Fagan simply has no grasp of the truth," Mr. Moerdler said yesterday. In an Oct. 8 order, Judge Kram permitted Mr. Fagan to file a motion for reconsideration of her prior rulings. Mr. Fagan, who began his career as a personal injury attorney, gained fame in the mid-1990s as the first attorney to sue the German, Swiss, and Austrian banks for allegedly stealing money from Holocaust victims. According to Mr. Moerdler, Mr. Fagan obtained several million dollars in attorney's fees from the suits.

In 2004, Mr. Fagan filed a $6.8 billion suit accusing a number of corporations, governmental entities and financial institutions, including Bank Austria, of stealing and selling artwork looted during the Holocaust. In August 2005, Judge Kram dismissed the action, which she said was "little more than an end run around" an earlier class action settlement agreement reached in In Re Austrian and German Bank Litig., 80 F. Supp. 2d 164. In addition to filing "glaringly inadequate pleadings," misleading the court about the scope of the prior settlement, and falsely claiming that he was a member of a plaintiff organization that did not exist, Judge Kram held that Mr. Fagan had committed champerty by having a financial stake in the artwork of which he accused Bank Austria of stealing. The judge fined Mr. Fagan $5,000 and ordered him to pay all of Bank Austria's litigation fees in connection with the suit.

On Nov. 17, 2005, Judge Kram refused to stay the judgment or reconsider her August decision, and directed Mr. Fagan to pay his fine "without delay" or post bond. Citing his "careless abdication of his duties as a lawyer," she also concluded that Mr. Fagan owed $345,520 in attorney's fees to Bank Austria. On April 2, 2007, after granting the disciplinary committee's unchallenged petition giving collateral estoppel effect to Judge Kram's findings, the First Department held that Mr. Fagan had violated a number of disciplinary rules prohibiting an attorney from disregarding a court's rulings, engaging in conduct involving dishonesty, fraud, misrepresentation or deceit, and acquiring a proprietary interest in the subject of the litigation. In hearings before the disciplinary committee, the committee contended that Mr. Fagan had never paid the $5,000 sanction or attorney's fees to Bank Austria. The committee also cited four prior instances since 1994 in which Mr. Fagan had been either reprimanded or sanctioned for misconduct.

Most recently, in August 2007, Southern District Judge Shira Scheindlin disqualified Mr. Fagan from representing plaintiffs in a suit brought by relatives of six Americans who died in a ski train fire in Kaprun, Austria. After noting that Mr. Fagan, who had filed for personal bankruptcy, had a personal interest in the litigation's outcome and made false representations to the court, Judge Sheindlin slapped the attorney with a $5,000 fine. Mr. Fagan argued that two of the sanction rulings cited by the disciplinary committee were being appealed. While he admitted to the hearing panel that he had only paid $250 of the $5,000 fine and none of Bank Austria's fees, he characterized his failure to comply with the judge's orders as "procedural violations." According to the decision, Mr. Fagan said he could not afford to pay the sanction and blamed his conduct before Judge Kram on a difficult divorce. He said he should not have taken on the $6.8 billion action because he already was saddled with a heavy case load, but feared that the litigation would be compromised if he relinquished control of the matter, the panel noted. Despite asking for and receiving more than one extension from the disciplinary committee to bolster his case, Mr. Fagan failed to submit a brief on mitigation or new evidentiary materials. On May 14, the hearing panel found Mr. Fagan's "sparse" mitigation evidence "insufficient to overcome the seriousness of his violations and the overwhelming aggravating evidence" and recommended that Mr. Fagan be disbarred. The First Department agreed.

Mr. Fagan "knew that the plaintiff AHVRAM did not exist and that the relief he sought had already been obtained by settlement in another action," the panel held. "In light of the significant aggravating factors, including respondent's pattern of prior sanctions for unprofessional conduct . . . his failure to pay sanctions and fees imposed, and lack of contrition or acknowledgment of wrongdoing . . . and the absence of little if any mitigation, respondent is unfit to practice law," the panel concluded. Mr. Moerdler said yesterday, "It is always sad and tragic when a lawyer is disbarred." In Mr. Fagan's case, "it is even more so because there was a time when he was a serious champion of Holocaust victims and he was a person who helped start the proceeding to try and recover the . . . property that Holocaust victims lost. Thereafter, he seems to have gone off the rails and that's really too bad." In response to Mr. Fagan's recent motion for reconsideration, Bank Austria has requested that further sanctions be imposed against him, and asked the court to enjoin him from filing any more claims that are precluded by the Bank Austria settlement. Justices Angela M. Mazzarelli, Richard T. Andrias, John W. Sweeny Jr., James M. McGuire, and Dianne T. Renwick sat on the panel.