Thursday, April 8, 2010
Judge Reverses Sanctions Against Law Firm, Attorneys
By a MetNews Staff Writer
A U.S. District Judge in the District of Nevada has rejected a $200,000 sanctions award recommended by a magistrate judge against a California firm and two of its former attorneys.
Judge Philip M. Pro on Monday affirmed the objections of Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP and Los Angeles attorneys Deborah Klar and Teri Pham to U.S. Magistrate Judge Valerie P. Cooke’s ruling, without prejudice.
The ruling arose out of a 2006 dispute between Dennis Montgomery and eTreppid Technologies, a small Reno, Nev.-based software company, over the ownership of certain computer software codes.
Montgomery retained Massachusetts attorneys Michael J. Flynn and Carla A. DiMare to represent him in the dispute, but his attorneys later moved to withdraw, claiming Montgomery owed more than $635,000 in past-due fees and costs. They filed for a retaining lien over the case files until Montgomery paid his outstanding bill.
After Liner Grode—then Liner Yankelevitz Sunshine Regenstreif LLP—stepped in as replacement counsel, Klar and Pham filed a complaint for preliminary and injunctive relief in the Los Angeles Superior Court, demanding the client files.
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 State Bar of California.
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 acted in bad faith in their efforts to secure Montgomery’s files from his former attorneys and Cooke ordered sanctions of $204,411 against Klar, Pham, the firm and Montgomery, in addition to $201,990 in fees and costs.
The magistrate further ordered the attorneys 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.
Pro, however, said that Cooke’s order as to the firm was contrary to law because she purported to impose sanctions against Liner Grode pursuant to 28 U.S.C. § 1927, which applies only to an “attorney or other person admitted to conduct cases in any court of the United States.”
Because a law firm is not an attorney or a person admitted to conduct cases in federal courts, Pro reasoned that the plain terms of the statute prohibit Sec. 1927 sanctions from being imposed against a law firm.
The judge also concluded that the sanctions against Klar and Pham violated the attorneys’ due process rights since they had not been given adequate notice.
He noted that the magistrate judge’s order setting the evidentiary hearing on the issue of sanctions compelled both attorneys to attend, but their names were listed along with Flynn’s name as parties whose presence was required. Pro reasoned that this would not have alerted Klar or Pham to the possibility that they were personally facing the possibility of sanctions.
The case is Montgomery v. eTreppid Technologies, LLC, 3:06-CV-00056-PMP-VPC.
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