A lawyer who’d been widely and scathingly criticized over his handling of a case — unfairly he thought — proceeded to sue bloggers and journalists for defamation, so many that the total of defendants reached 74. It’s over now, but a New York state judge declined to award sanctions, which may possibly say something about the difficulty of obtaining sanctions under today’s prevailing legal standards, especially in New York. [Tom Crane, San Antonio Employment Law Blog; Popehat ("Our legal system is so broken that it can take years to resolve even the most patently vexatious, harassing, and incompetently prosecuted lawsuits like this one.")]
P.S. “Loser pays would have been valuable here. Costs to each defendant would teach a memorable lesson.” [@erikmagraken]
To allege scienter (intent or knowledge of wrongdoing) in securities fraud cases, lawyers sometimes avow to the court that they have one or more confidential sources who tipped them off to the wrongdoing. If the court accepts this story, they may keep a case alive for which there would otherwise be no or inadequate evidence. Trouble is, the confidential informants can be, if not entirely a mirage, then flimsier on inspection than the court might have assumed. Cory Andrews of WLF tells of a recent ruling by Judge Richard Posner in a case called City of Livonia Employees’ Retirement System v. Boeing:
Seeking hundreds of millions of dollars in damages, plaintiffs filed a putative class action alleging that Boeing Company, along with its CEO and the head of its commercial aircraft division, committed securities fraud in violation of federal law. The district judge dismissed the complaint for failing to allege sufficient facts to properly plead the requisite scienter for fraud. Not to be deterred, plaintiffs promptly filed an amended complaint, but this time with detailed bombshell revelations from a confidential source. Ultimately, however, the allegations in the amended complaint could not withstand even the slightest scrutiny.
As Posner describes it:
The plaintiffs’ lawyers had made confident assurances in their complaint about a confidential source — their only barrier to dismissal of their suit — even though none of the lawyers had spoken to the source and their investigator acknowledged that she couldn’t verify what (according to her) he had told her.
Their failure to inquire further puts one in mind of ostrich tactics —of failing to inquire for fear that the inquiry might reveal stronger evidence of their scienter regarding the authenticity of the confidential source than the flimsy evidence of scienter they were able to marshal against Boeing.
Noting that the same law firm [Robbins Geller Rudman & Dowd] had been accused of “similar conduct” in three other reported cases, Posner [on behalf of a unanimous panel] remanded the matter back to the district judge, who would be in a better position to calculate a dollar amount for Rule 11 sanctions.
Although our system is (alas) set up to make it very difficult for defendants to recover legal fees from losing plaintiffs, it is not too surprising that this case would be an exception given a judge’s scathing findings against the plaintiffs’ conduct — not to mention the recent agreement by the ASPCA, one of the animal rights groups, to pay the Ringling owner $9.3 million. [ABA Journal]
Durable as a matter of folk law though carrying no weight at all within most courts as actually constituted, various widely circulated theories (“free man,” “sovereign citizen,” etc.) purport to establish a right of litigants to escape courts’ ordinary jurisdiction; sometimes it’s also alleged that tax laws and other longstanding enactments are flawed and of no binding effect. Last month a Canadian jurist by the name of J.D. Rooke handed down an opinion anatomizing different varieties of “Organized Pseudolegal Commercial Argument” ["OPCA"] seized on as a basis for vexatious litigation [Meads vs. Meads, Court of Queen's Bench of Alberta, Sept. 18]
P.S. A glimpse of the “sovereign citizen” scene in the U.S., h/t Lowering the Bar.
“A federal judge in Indiana ordered lawyers including the prominent firm of Motley Rice to pay ITT Educational Services almost $400,000 in legal fees for pursuing a ‘frivolous’ lawsuit the judge said was ‘based on a completely false story.’” In line with the reluctance of American judges to award Rule 11 sanctions, the judge awarded only a small fraction of the defendant’s actual outlay in attorney’s fees, which ran into many millions. Motley Rice is a chief beneficiary of the ongoing income stream of the tobacco litigation fees, which return $500 million a year to an assortment of plaintiff’s firms. [Dan Fisher, Forbes]
Locked in litigation with the Associated Press over whether his famous poster improperly infringed on the copyright of the news photograph on which it was based, Shepard Fairey did not conduct himself well. According to U.S. Attorney Preet Bharara, Fairey “went to extreme lengths to obtain an unfair and illegal advantage in his civil litigation, creating fake documents and destroying others in an effort to subvert the civil discovery process.” [AP]
Longtime Twin Cities attorney John Murrin lost money in a dodgy business deal, and started out by pressing what critics agree were some meritorious complaints arising from it. But courts began to look askance as he added more and more actions, pleadings and (nearly four dozen) defendants. Now a sanctions order has resulted in a bankruptcy proceeding. ["Lawyer's tactics leave him bankrupt," Minneapolis Star-Tribune].
To quote the court: Texas lawyer Evan Stone, mass-suing file-sharers and seeking to uncover their identities, “asked the Court to authorize sending subpoenas to the ISPs. The Court said ‘not yet.’ Stone sent the subpoenas anyway.” [ArsTechnica, Volokh]
A court has dismissed the Illinois action, saying that to let such cases proceed “could potentially open the floodgates to subject family childrearing to … excessive judicial scrutiny and interference.” [Chicago Tribune/SLT; Volokh]
The Lawsuit Abuse Reduction Act (LARA), versions of which have been discussed in this space for years, would reverse the 1993 gutting of Rule 11, the federal rule providing sanctions for baseless lawsuits, and would thus establish that lawyers, like other professionals, should expect to be responsible for compensating those they injure by negligence or worse. Early this month LARA won the approval of the House Judiciary Committee, but is unlikely to prevail (this term, at least) in the more Litigation-Lobby-friendly Senate. [Stier, ShopFloor; earlier here, etc.]
Copyright troll tripped up:
A federal judge in Las Vegas today issued a potentially devastating ruling against copyright enforcer Righthaven LLC, finding it doesn’t have standing to sue over Las Vegas Review-Journal stories, that it has misled the court and threatening to impose sanctions against Righthaven. … [U.S. District Court Judge Roger] Hunt’s ruling today came in a 2010 Righthaven lawsuit against the Democratic Underground, operator of a big political website.
One of DU’s message board posters had reprinted without permission, but with link and credit, four paragraphs’ worth of an article under copyright to the Las Vegas Review-Journal, which is one of a number of newspapers with working agreements with RightHaven. And this part’s interesting:
In their counterclaim [which Judge Hunt allowed to proceed], attorneys for the Electronic Frontier Foundation (EFF), a digital free speech group based in San Francisco, hit Righthaven and Stephens Media with allegations of barratry (the alleged improper incitement of litigation); and champerty (an allegedly improper relationship between one funding and one pursuing a lawsuit)….
Some fans of entrepreneurial lawyering in the academy and elsewhere have sought to portray rules against barratry and champerty as wrongheaded survivals of a much older approach to the role of the legal profession. But it looks as if EFF — no one’s idea of a Blackstone-reading antiquarian club — just put those rules to powerful use. [Las Vegas Sun]
P.S. Bloggers who settled wonder: can we get our money back?
The First Amendment notwithstanding, wealthy and powerful litigants in this country often exercise the tactical power “to bully those who publicly criticize them into silence by filing frivolous lawsuits that the critics can’t afford to litigate,” with defamation lawsuits being a particularly favored means of such bullying. The majority of states have moved to enact “anti-SLAPP” laws aimed at curtailing this tactical exercise through the application of sanctions or otherwise, but such laws are often quite weak, sometimes applying only, for example, to speech aimed at petitioning the government on public matters. Now Texas lawmakers are considering what would be one of the nation’s strongest laws, protecting “communication made in connection with a matter of public concern” and including statements made in non-public forums, such as emails. The website SLAPPED in Texas has compiled a list of speech-chilling lawsuits in the Lone Star State, including the oft-criticized suit by a real estate developer against author and eminent domain critic Carla Main. [Arthur Bright/Citizen Media Law, Paul Alan Levy/CL&P]
A California court rules that attorneys who file unjustified suits aimed at speech or political activity can’t be made to pay the other side’s fees. If you’re a victim of such an action, you still might get lucky and collect from the client who instigated it. [Cal Attorneys Fees]
In New Haven, federal judge Janet Bond Arterton has granted sanctions against two leading plaintiff’s securities firms, Labaton Sucharow and Barroway Topaz Kessler Meltzer & Check, in an unsuccessful class action against Star Gas. “Arterton agreed with Star’s counsel from Skadden, Arps, Slate, Meagher & Flom that the class’ claims were almost entirely without merit, and that Labaton and Barroway knew as much early in the litigation. She ordered the plaintiffs firms to pay all of Star’s attorney fees and costs.” [Frankel, American Lawyer, ruling, PDF, courtesy American Lawyer]