Monday, April 6, 2009
Federal Court in Nevada Sanctions California Firm, Attorneys
By SHERRI M. OKAMOTO, Staff Writer
A federal magistrate in Nevada has imposed sanctions against a California firm, two attorneys and their client for weaving a “Byzantine web of misconduct” stemming from a 2006 copyright infringement case.
In a decision filed Tuesday, U.S. Magistrate Judge Valerie P. Cooke of the District of Nevada found that former Liner Grode Stein Yankelevitz Regenstreif & Taylor LLP attorney Deborah Klar and current junior partner Teri Pham engaged in conduct that was “willfully reckless, intended to harass, done for an improper purposes, and…suffused with bad faith.”
The pair represented Dennis Montgomery in a January 2006 suit by eTreppid Technologies, a small Reno, Nev.-based software company which has won millions of dollars in classified federal defense and intelligence contracts, which claimed Montgomery misappropriated trade secrets when he departed the company.
After the case was removed from state to federal court, Montgomery filed a parallel claim that the company had violated his software-compression technology copyright.
Massachusetts attorneys Michael J. Flynn and Carla A. DiMare were admitted pro hac vice to represent Montgomery in the consolidated actions, but later moved to withdraw, claiming Montgomery owed more than $635,000 in past due fees and costs, and had engaged in conduct that made him difficult to represent.
Under Nevada law, Flynn filed for a retaining lien over the client files until Montgomery paid his outstanding bill, but the government—which invoked the military and state secrets privilege in the proceedings—sought to impose conditions on the withdrawal related to documents in Flynn’s client files.
Liner Grode—then Liner Yankelevitz Sunshine Regenstreif LLP—stepped in as replacement counsel in July 2007, and Klar and Pham objected to the government’s potential access to Montgomery’s file. They requested that Flynn and DiMare be ordered to surrender the client files upon entry of the order granting their motion to withdraw.
Klar and Pham subsequently filed a complaint for preliminary and injunctive relief in the Los Angeles Superior Court, demanding the client files and seeking sanctions against Flynn for allegedly misrepresenting himself as a California attorney to Montgomery.
They also filed an application to arbitrate Flynn’s fee dispute with the San Diego County Bar Association and a complaint with the Massachusetts Bar Association, asking it to investigate allegations that Flynn had engaged in misconduct and improperly represented himself as licensed to practice law in California.
Both Flynn and DiMare operate offices in Boston and Rancho Santa Fe, but only DiMare is admitted to the California State Bar.
All of Klar and Pham’s motions and cases were eventually dismissed, and Flynn and DiMare asked the district court in Nevada to issue sanctions against the Liner Grode attorneys.
Cooke found that Klar and Pham had “willfully abused the judicial process in this court and elsewhere…to delay or disrupt this litigation to gain a tactical advantage,” and determined that the attorneys’ conduct had unreasonably and vexatiously increased the quantity of litigation in order to exploit legitimate legal proceedings to harass Flynn.
“Their distain for the legal process and for their duties as officers of the court is disheartening and sanctionable,” Cooke noted. “The court cannot allow attorneys who practice before it to operate as hired bounty hunters who—armed with extensive resources—take it upon themselves to manipulate the legal system with impunity.”
She further opined that Linear Grode “failed their clients, the legal system and the legal profession by allowing Ms. Klar to engage unchecked in scorched earth litigation tactics,” and by not replacing her as lead counsel until July 2008.
Cooke ordered sanctions of $204,411.00 against Klar, Pham, the firm and Montgomery, in addition to $201,990 in fees and costs.
The magistrate further ordered the two to perform a combined total of 300 hours of pro bono work, and barred them from applying to practice pro hac vice in the District of Nevada for five years.
She also referred potential Rules of Professional Conduct violations by Klar and Pham to the Nevada and California State Bar Associations.
A spokesperson for Liner Grode, which maintains offices in Los Angeles and San Francisco said the 75-member firm “has always prided itself on abiding by the highest of ethical standards,” and said the firm was “extremely disappointed and surprised” by Tuesday’s decision. The spokesperson added that the firm intended to lodge an objection to the magistrate’s order with the district court.
Klar said that the firm had filed an appeal on behalf of Montgomery, and due to the pending appeal, declined to comment further.
DiMare said that she hoped the magistrate’s decision “will deter future attorney misconduct.” Flynn and Pham could not be reached for comment.
The case is Montgomery v. eTreppid Technologies LLC, 06-0056.
Copyright 2009, Metropolitan News Company