Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘sanctions’

“Massive lawsuit against bloggers is reined in”

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]

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Judge Posner and the elusive confidential informant

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.

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“Animal rights groups to pay attorney fees after losing suit against Ringling Bros. producer”

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]

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Varieties of “you lack jurisdiction” eccentricity

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.

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May 7 roundup

  • NY lawyer sanctioned $10K for behavior at deposition [Debra Cassens Weiss, ABA Journal]
  • Obvious dangers and the W.V. frat-house rear-launched bottle rocket case [Popehat, earlier here, here]
  • Review of Liberty’s Refuge, new book on freedom of assembly by Washington U. lawprof John Inazu [Anthony Deardurff, Liberty Law]
  • If forfeiture and asset freeze can be deployed in a copyright enforcement case, where will they strike next? [Timothy Lee, Cato]
  • Hard-hitting Kim Strassel column on Al “Crucify Them” Armendariz [WSJ, earlier] Exxon CEO Rex Tillerson: “If you want to live by the precautionary principle, then crawl up in a ball and live in a cave.” [Coyote] Washington Post on the case for the Keystone pipeline [Adler]
  • Losing two looks like carelessness: second Durham County D.A. removed from office for misconduct [Volokh, KC Johnson]
  • Why won’t the Eighth Circuit recognize fraudulent misjoinder? [Beck]

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“Judge Slaps Motley Rice With Fees Over ‘Frivolous’ Lawsuit”

“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]

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“Obama ‘HOPE’ poster artist pleads guilty to contempt”

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]

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Hard times for “DIAL L-A-W-Y-E-R-S” founder

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].

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