ATTORNEYS AND REPRESENTATIVES
[Last Updated Jan. 16, 2013]
[For the issue of attorney-client privilege when the complainant is an attorney, see Privileges ]
FEDERAL COURT DECISIONS
MALPRACTICE SUIT FOR FAILURE TO TIMELY FILE SOX SECTION 806 COMPLAINT CANNOT BE MAINTAINED WHERE COMPLAINANT WAS NOT A COVERED EMPLOYEE UNDER SOX
In Mart v. Gozdecki, Del Giudice, Americus & Farkas LLP , No. 12 C 2496, 2012 WL 5830627 (N.D.Ill. Nov. 16, 2012), the Plaintiff sued his former law firm for malpractice for failure to file the Plaintiff's SOX claim in a timely fashion. The Defendant sought dismissal of the malpractice suit on the ground that the Plaintiff's SOX claim lacked merit because the Respondent was a non-publicly traded subsidiary of a publicly traded company, and non-publicly traded subsidiaries were not covered by the SOX whistleblower provision prior to the Dodd-Frank amendments to SOX. The validity of this defense depended on whether the pre-amendment version of the SOX whistleblower provision covered non-publicly traded subsidiaries. The court first looked to the plain language of the statute and found that its coverage was unambiguously limited to publicly traded companies. The court further held that even if the statutory text was ambiguous, other tools of statutory construction suggested that pre-amendment section 806 did not protect employees of privately held subsidiaries. The court was not persuaded by other federal court and an ALJ decision that held otherwise. The court also was not persuaded by the ARB's decision in Johnson v. Siemens Building Technologies, Inc. , ARB No. 08-032, ALJ No. 2005-SOX-15 (ARB Mar. 31, 2011) (2011 WL 1431986) and the district court's decision in Leshinsky v. Telvent GIT, S.A. , --- F. Supp. 2d ---, 2012 WL 2686111, at **8-17 (S.D.N.Y. July 9, 2012), that the Dodd-Frank amendment was meant only to clarify existing law. The court found that those decisions skipped the fundamental step of analyzing whether the statute was ambiguous, and that the vast majority of ALJs and federal courts that have reached the issue have concluded that section 806 did not extend protection to employees of privately held subsidiaries, absent circumstances not present in the instant case. The court concluded that Dodd-Frank alters, rather than clarifies, section 806 of SOX. The court applied the principle of anti-retroactivity set forth in Landgraf , and found that the Dodd-Frank amendment did not have retroactive effect. Thus, the Plaintiff was not a covered employee under section 806 of SOX, and he could not therefore demonstrate that he was damaged by his former attorneys' failure to timely file the SOX claim. Thus, the legal malpractice claim failed as a matter of law.
DISTRICT COURT IMPOSED AN ATTORNEY FEE SANCTION UNDER SOX WHERE THERE WAS OVERWHELMING EVIDENCE THAT PLAINTIFF'S COUNSEL RELIED ON FORGED DOCUMENTS IN HIS OPPOSITION TO SUMMARY JUDGEMENT
In Davis v. Home Depot U.S.A., Inc . , No. 09-162 (D.Md. Mar. 16, 2010) (case below 2006-SOX-17), the plaintiff filed a action against Home Depot alleging that his firing from Home Depot for absenteeism was a pretext for an unlawful discharge under SOX. In order to prove his claim the plaintiff had to persuade the Court the his discharge was not due to absenteeism. Home Depot moved for summary judgment supported by declarations and sworn testimony which confirmed the plaintiff's multiple absences and further alleged that the plaintiff had forged medical statements to have his absences excused. Both parties submitted evidence as to the validity of the medical statements. The District Court granted Home Depot's motion for summary judgment finding that the plaintiff had submitted forged medical documents.
Home Depot then filed a Motion for Sanctions of Attorney's fees pursuant to 28 U.S.C. § 1927 seeking to have the plaintiff's counsel personally satisfy the excess attorney's fees reasonably incurred by Home Depot as a consequence of the plaintiff's counsel's sponsorship of the documents "known by him to be false, or if known to be false, based on highly suspect testimony that he could have easily determined to be false upon reasonable inquiry." The Court granted the motion finding that there was overwhelming evidence that plaintiff's counsel, in bad faith, relied on forged documents and perjured testimony in his opposition to summary judgment.
ADMINISTRATIVE LAW JUDGE DECISIONS
DISQUALIFICATION OF COUNSEL; CHOICE OF LAW; CONFLICT OF INTEREST; LAWYERS CALLED AS WITNESSES; MISCONDUCT IN OTHER FORUMS; LACK OF GOOD FAITH IN FILING OF MOTION
In Gallagher v. Granada Entertainment USA , 2004-SOX-74 (ALJ Oct. 19, 2004), the Complainant moved to disqualify the Respondents' trial counsel, as well as that counsel's law firm based on a variety of alleged conflicts of interest, misrepresentations, and violations of state professional responsibility rules. The most prominent charges were that the Complainant had served as the Respondent's in-house counsel supervising matters assigned to the Respondents' law firm as outside counsel, and that he intended to call the Respondent's trial counsel and other lawyers from her firm as trial witnesses.
The ALJ easily disposed of the conflict of interest issue finding the Complainant had not alleged facts showing that he personally was a client of Respondent's law firm. The other grounds asserted for disqualification, however, were more difficult.
The ALJ initially addressed the question of determining the applicable standards, OALJ being an administrative court with nationwide jurisdiction and without DOL regulations adopting a detailed ethics code for lawyers who litigate at OALJ nor a choice of law provision for lawyers who practice before OALJ. The ALJ reviewed relevant statutory, regulatory and decisional law, and concluded that the rules for the federal district court where the matter would be litigated should be applied in a SOX whistleblower case. In the instant case, that court would be the federal district court for the Central District of California, which has by local rule adopted standards of professional conduct which incorporate California law and the ABA Model Rules of Professional Conduct as guides.
In regard to the lawyer as witness issue, the ALJ determined that the California rule distinguishes between cases tried before a jury and those tried before a judge; the California rule does not disqualify a lawyer who testifies before a judge. Moreover, the rule does not apply to lawyers in an advocate's firm.
The Complainant also alleged several instances of purported misconduct by the Respondent's lawyers before OSHA or in other forums. The ALJ held, however, that "[e]xclusion under 29 C.F.R. § 18.36(b) ought to be limited to instances of ethical misconduct that prejudiced the movant at OALJ, or that cause the lawyer to have been disciplined by another court or agency. * * * A disqualification motion under 29 C.F.R. § 18.36(b) is not an occasion to examine the ethics of selected members of a law firm for actions they took as counsel in other cases, or in ... corporate restructuring."
Finally, the ALJ noted that the motion for disqualification had not been supported by any proof, failed to acknowledge relevant California law despite arguing that California law applied, and cited non-existent ethics rules -- which in concert led the ALJ to conclude that the motion had not been filed in good faith.
ALJ AUTHORITY TO CONTROL LITIGATION; IMPOSITION OF REQUIREMENT OF CERTIFICATION OF GOOD FAITH ATTEMPT TO RESOLVE DISPUTES BEFORE SEEKING INTERVENTION OF THE ALJ
In Davis v. The Home Depot , 2006-SOX-17 (ALJ Dec. 19, 2006), the ALJ found it necessary to impose rules of behavior in regard to the filing of motions based on the manner in which the litigation had proceeded, with almost any dispute resulting in the filing of a motion and several counter-motions. The ALJ ordered that, prior to the filing of a motion, counsel must first contact opposing counsel and attempt, in good faith, to reach a resolution without the intervention of the court. Then, only if that attempt failed, would the ALJ entertain a motion. Such a motion, however, was required to include an explicit statement of the steps taken by the party in an attempt to resolve the matter and a certification that the all good faith measures were taken in an attempt to avoid the filing of the motion. Finally, the ALJ quoted the Ninth Circuit in Mattel, Inc. v. MCA Records , 296 F.3d 894, 908 (9th Cir. 2002): "The parties are advised to chill."