Welcome to Module 4-P.

Law Firms Threatened by Fat Chameleons.

chamelionChameleon attorneys are lawyers who blend with, act, and think just like their clients to a fault. They do not disagree with them, even when they are wrong and obviously need legal guidance. They are mere yes-men. Chameleon attorneys accept their clients’ unlawful schemes instead of trying to persuade them to change their ideas and actions to conform to the law. Chameleon attorneys do not exercise independent judgment as a lawyer. They just try to rationalize and hide. Chameleon lawyers are not real lawyers at all. They may look good and sound good, but there is no substance in their words. It is all a disguise designed to hide and protect their clients. They change colors from day to day, client to client. Wherever they go, they do and say just what the client wants to hear, not what the law requires. Chameleon lawyers will say and do anything to please their client, include lie to opposing counsel and the court. They then try to justify their actions under deluded notions of zealous service and devotion to their clients. This class explores this seldom talked about subject and a case where the judge caught on and imposed sanctions.

Chameleon lawyers perform a severe disservice not only to our system of justice, which is based on lawyer honesty and integrity, but also to their clients. The clients often think they are being served, and served quite well. They are then shocked when those services later lead to a default judgment or worse. In litigation, we have long had another, more blunt nick-name for such lawyers. It pertains to the world’s oldest profession.

chameleons

Since chameleon attorneys almost always agree with their clients, their Johns, they are naturally well liked by the people and corporations they serve. The clients may feel like they are being served way beyond their expectations. They are pleased to pay them well for their services. Clients may even start to believe that that is what all good lawyers do. For this reason, some chameleons become quite successful and develop fat books of business. They help law firms to prosper financially, at least in the short term, and so firm management is often tempted to overlook their moral and professional shortcomings. This is a big mistake.

Chameleon attorneys are not only dangerous to their clients and to our system of justice, which depends on the legal profession to guide, not hide, but also to the law firms that employ them. One large law firm in Indianapolis, Indiana, discovered this the hard way when they read the final default judgment entered by U.S. District Court Judge Larry J. McKinney in 1100 West, LLC v. Red Spot Paint & Varnish Co., Case No. 1:05-cv-1670-LJM-JMS (S.D. In. June 5, 2009).

1100 West v. Red Spot Paint & Varnish

Judge McKinney entered a default judgment against that law firm’s client, the Red Spot Paint & Varnish Co., as a sanction for its discovery violations. That’s bad for law firm business, but it gets worse. The Judge also awarded attorneys fees and costs against the client and the law firm. He also bluntly labeled their lawyers as mere chameleons, indistinguishable from their clients. Here is the court’s conclusion at page 63 of the judgment:

The Court concludes that Red Spot’s conduct can only be described as contumacious, wilful, and egregious. BME compounded the problem by, like a chameleon, becoming indistinguishable from its client and allowing Red Spot, namely Storms and Henry, to evade the truth. Through its defiant conduct, Red Spot has forfeited the right to have the issues determined on the merits. Therefore, the Court must conclude that only the most onerous sanction, default, can remedy Red Spot’s violation of the rules of discovery; Fed. R. Civil P. 37(b)(2)(A)(vi); 37(c)(1); or can remedy Red Spot’s complete disregard of the legal process as protected by the inherent authority of the Court. Greviskes, 417 F.3d at 758-59. The Court, therefore, GRANTS 1100 West’s Motion for Sanctions.

Judge McKinney’s ruling should be a wake-up call to law firms everywhere. They must take steps to train and police their attorneys, even shareholders, even ones with big books of business. No attorneys handling contested matters should be permitted to succumb to the temptation of chameleon-like over identification with clients such that they help them to evade the truth.

This temptation most often comes in discovery, both paper and electronic (in this case it was paper), because that is the time in the litigation process when some clients want to hide the truth. This is when the morale fiber of an attorney is tested, when you discover if you are Man enough to stand up to a powerful client who pays your bills. A real lawyer has the courage to distinguish them-self by providing honest advice on the law, even if that is not what the client wants to hear. A real lawyer is not co-opted by dishonest plans. This may not make you popular with naive clients, but our system of justice depends on the truth tellers and is endangered by the chameleons.

Chameleon

The desires of litigants to hide the truth is understandable. After all, they are caught up in a battle and they hire a lawyer to advise them on the law. If the lawyer goes along with their desire to evade the truth, then it must be lawful. No, I do not blame the clients. I blame the chameleon lawyers who mislead their clients by not guiding them to do what the law requires, disclosure of the truth. I applaud Judge McKinney for his honest, blunt talk and ever tougher action. I predict more judges will follow. They are fed up with chameleon lawyers. Law firms need to take heed of the sanctions and killer publicity the Indianapolis firm suffered as a result of their chameleons.

You do not want to have to make public statements after the fact, like this firm did. According to the Indiana Lawyer Daily, and the ABA Journal, the managing partner of the firm issued a statement after the ruling saying:

This remains a pending matter and we intend to work diligently to seek an appropriate resolution. We have taken this matter extremely seriously and took prompt action to address the issues described in the Court order. The two principal litigators involved in this case are no longer associated with the firm.

No longer associated with the firm. High time. Yet, for how many years were these same lawyers tolerated? The firm should have looked at them more closely long before this. According to the Indiana Lawyer, two of their partners were “asked to leave late last year because of this case.” Another partner still remains with the firm under undisclosed conditions. Another associate named in the 101 West opinion is no longer listed on the firm’s website. The blog, Practical Paralegalism, claims that the named associate was fired. The fate of the paralegal named in the opinion is unknown. So too are the amount of sanctions the firm will have to pay. That awaits further hearings, but it will likely be quite substantial.

Law Firms Must Guide, Not Help Hide

The defendants in this environmental contamination case were trying to hide the fact that they had used chemicals called TCE and PCE at their paint and varnish factory. That was the failed big cover-up that led to these sanctions. It was obvious to the judge that the defendant’s lawyers went along with their client’s hide-the-ball scheme. The law firm’s explanations were lame at best, even though some were creative, especially their attempt to blame the disappearance of key documents on questionable astrophysics: “documents fell into a black hole and [BME was] not aware of the fact that [it] had the documents other than in the limited capacity of the very limited review.” Id. at 14. So much for the black hole defense!

Here is the Judge’s findings concerning the law firm’s chameleon handling of its discovery responsibilities in this case. Judge McKinney’s description of the law firm’s activities (identified in this quote as BME), including shareholders, associates, and paralegals alike, bears close scrutiny:

But, BME, through both Cueller and VanRheenan and, to a lesser extent, Lucas, had opportunities to steer Red Spot, particularly Henry and Storms, on a different path and it never did. If all BME had was one individual who wished to ignore a small amount of information, it would be one thing. In this case, however, the evidence that Red Spot had used TCE and/or PCE was too pervasive for BME to continue to ignore. …

At this point, BME had heard enough deposition testimony, had questioned enough of Red Spot’s discovery responses itself, and had heard enough information from historical employees to guide Red Spot to make complete disclosure about any use of TCE or PCE on the property that it knew so that the lawyers could argue and a fact finder could determine the merits of the case. Yet, BME pressed on with Red Spot’s litigation strategy that neither of those two materials was ever used on the Red Spot property. On March 28, 2007, BME filed a brief in which it asserted that Red Spot had never used TCE. …

But, Cueller and Henry had just been refreshed about the fact that Red Spot had used Super Ad-It, which contained 10% PCE. Apparently, this made no difference because Storms testified on May 24, 2007, that Red Spot did not use TCE or PCE on its property. Cueller represented Storms at this deposition. Again, BME had an opportunity to guide Red Spot to make a complete disclosure and it did not.

On May 25, 2007, Henry and/or Cueller contacted several Red Spot employees to inquire about TCE and PCE usage at Red Spot. Jones told them he was sure PCE was used in the lab degreaser. (Pl.’s Ex. 48, at BME00142.) Jansen concurred. (Id. at BME00144.) The time frame of Jones’ and Jansen’s recollections was from 1968 to 1980. (Id.) Cueller was aware of this information. But she never disclosed it to 1100 West in responses to discovery requests or in response to this Court’s order to supplement discovery, and she never encouraged Henry to explain what she had learned in her next Rule 30(b)(6) deposition. …

Even given that VanRheenen’s health was suffering at this time, Klein, a highly knowledgeable associate, and at least one paralegal knew about the file and did nothing. Cueller’s failure to keep track of an associate’s work on the case in the absence of VanRheenen is equally troubling, particularly when Cueller was the self-proclaimed “litigation counsel.” Red Spot and BME cannot make an argument to the effect that the waste manifests in the EPA RCRA file were outside the time frames specified by 1100 West’s discovery requests. Again, this was another opportunity for BME to guide its client to make disclosures, but BME did not.

In addition, BME attorneys had sat through Henry’s depositions, BME attorneys had questioned the thoroughness of Henry’s production of documents, and a BME attorney had physically visited the room where Henry had searched for documents. Even in the face of Storms’ insistence that Red Spot did not currently use TCE or PCE, there was enough historical information for BME to insist that Red Spot dig deeper. Being a zealous lawyer does not mean zealously believing your client in light of evidence to the contrary. Moreover, when BME obtained the EPA RCRA file, there is no excuse for BME’s failure to ensure that “responsive” documents therein did not get to 1100 West.

The Court notes that it may be unusual to sanction a law firm for conduct that violates the Federal Rules of Civil Procedure. However, in this case, where three partners of the firm had knowledge of its client’s apparent disregard for those rules and failed to properly supervise an associate and paralegal who had knowledge of adverse facts that remained undisclosed to the opposing party, the Court can only conclude that the firm must be held accountable under its inherent authority to deter such conduct in the future. See Chambers, 501 U.S. at 45.

In summary, at least starting in the summer of 2006, BME skated the edge of its responsibility to its client, to 1100 West, and to the Court under the Federal Rules of Civil Procedure to disclose relevant information as well as information likely to lead to relevant information. BME also failed in its responsibility to be candid with the Court by making statements in Court filings that it knew were misrepresentations at best and false at worst.

This kind of behavior by lawyers undermines the American system of justice, depending as it does on the honesty and candor of the legal professionals who work in the system. The judge was forced to impose harsh sanctions on both the clients and the law firm. The entry of a default judgment, waiver of privilege, and imposition of liability for fees and costs on both client and attorneys is very severe, but to let the law firm off with a warning, and “boys will be boys” smile, sends the wrong message. Those days are over. Law firms need to clean up their act before the judges do it for them in a decision like this.

U.S. v. Cinergy, et al.

Judge KcKinney has seen lawyer misconduct before, all judges have. But misconduct in high-stakes environmental cases was especially fresh in Judge McKinney’s mind. He had issued an order just a few months earlier in another pollution case, U.S. v. Cinergy, et al. Case No. 1:99-cv-1693-LJM-JMS (N.D. In. Dec. 18, 2008), where he concluded that:

Cinergy and its lawyers committed misconduct when they failed to disclose a consulting agreement (the “Agreement”) Cinergy had entered into with one of its fact witnesses, Robert Batdorf (“Batdorf”); when they allowed Batdorf to testify at trial that he was unemployed and emphasized that misstatement in front of the jury; and when Cinergy relied on the misrepresentation as a theme during the trial.

Judge McKinney then ordered the attorneys for Cinergy to appear before him for the possible imposition of disciplinary actions against them (but not their law firm):

Pursuant to Southern District of Indiana Local Rule 83.5(f), Southern District of Indiana Rule of Disciplinary Enforcement V, and the inherent authority of the Court, Cinergy and each one of its counsel of record as of May 5, 2008, shall appear before the Court to SHOW CAUSE why Cinergy’s counsel should not be suspended immediately from practice before this Court, and why Cinergy and its counsel should not be ordered to pay for plaintiff’s, the United States of America, and plaintiff-intervenors’, the State of New York, the State of New Jersey, the State of Connecticut, Hoosier Environmental Council, and Ohio Environmental Council (collectively, “Plaintiffs”), attorneys’ fees for bringing this matter to the Court’s attention through a Motion for New Trial. Each of Cinergy’s attorneys of record as of May 5, 2008, shall submit on or before Friday, January 9, 2009, a written statement of his or her knowledge of the Agreement including a date upon which such information was made known to him or her.

Tough talk to be sure, but at the hearing the judge was lenient. Although he set aside the judgment, he imposed no sanctions against the attorneys. This is explained in his January 3, 2009, Order:

The publishing of this and prior orders is sufficient. Further proceedings would create time consuming litigation threatening to overtake the issues of the case and draw time and energy away from the Court’s and the attorneys’ task of bringing this litigation to a close with as little delay as possible. No disciplinary action is recommended by this Court.

The Court reminds counsel that ours is a system of dispute resolution that relies very heavily on the integrity of the means and on the empirically sound and historic theory that if the means are just the end is just. The means upon which we all rely include the rules of evidence, the rules of procedure and the rules of professional conduct. While we sometimes narrowly refer to the system as a whole as an adversary system, we are all called upon to remember that a lawyer has a duty of candor to the court, not just a duty of advocacy for the client. In an effort to zealously advocate for the client, lawyers can forsake their duty of objectivity and become like chamaeleons, indistinguishable from their clients. It is upon this over advocacy that the Court blames the otherwise untenable position that an individual who has signed a consultant agreement and is being paid some $200.00 per hour plus expenses can wholly truthfully state that he is unemployed. Whether this is sanctionative non-professional behavior as well as over advocacy is not a question this Court will pursue further on the facts before it. For this reason no further action will be taken against any of the three mentioned lawyers.

Obviously, the publishing of this and prior orders was not sufficient to deter such conduct by attorneys in Indianapolis as Judge McKinney had hoped. This background helps explain why he reacted with no mercy to different attorneys in the 1100 West case. He had by then learned that chameleon attorneys have no ears to hear his warnings. They are deafened by greed and misguided notions of zealous advocacy.

Judge McKinney correctly surmised that the only way to stop chameleon attorneys is to get the attention of their law partners and hope they will stop them. That he did with the monetary sanctions against the law firm in 1100 West. Judge McKinney’s strategy apparently worked because the firm admits that at least some of its professionals who were involved with the discovery in the case are no longer associated with the firm.

Conclusion

Money talks and big money screams. I predict that relatively big money sanctions will be awarded against the Indianapolis firm later this year. Law firms throughout the country will sit up and take notice of 1100 West v. Red Spot Paint & Varnish, if they have not already. Management will take better care to know the reputation of its litigators, not just their numbers. They should listen to any subtle and not so subtle hints that judges may give to them about their performance and moral integrity. If either are lacking, firms should take immediate remedial action. It is not only the right thing to do, it is prudent risk management. Does that mean fire them all? No. Certainly not. And one cannot help but wonder if the Indianapolis firm would have taken a different approach if the economy had been better.

No, the answer lies in training and counseling. It lies in developing a strong firm culture of integrity, not just profitability. Every associate should be taught straight out of law school that “being a zealous lawyer does not mean zealously believing your client in light of evidence to the contrary.” They should be taught by both words and deeds that lawyers must guide, not hide.

All participants in the justice system – lawyers, judges, and paralegals alike – must understand the difference between Man and chameleon. They should understand what can happen when fat chameleons invade a firm. 1100 West shows that chameleons can not only lead to default judgments, but also monetary sanctions and shame against the firm. Ethics programs should get real and speak plainly as Judge McKinney has done in 1100 West and as I try to do each week in this blog.

 ___________

SUPPLEMENTAL READING: Carefully read the case and all links.

EXERCISE: If you are working for a Chameleon, don’t let yourself get pulled down the rat hole. Be a Man, not a mouse. Stand up to corruption. Maybe you should scout around for another job, or another client. Don’t get pushed into doing something you know is wrong. It’s your reputation at stake. There are plenty of honest clients, lawyers and firms out their to work with or work for. We all have to stand up to corruption, and the place to start is with yourself.

Students are invited to leave a public comment below. Insights that might help other students are especially welcome. Let’s collaborate!

Copyright Ralph Losey 2015

 

Ralph Losey is a practicing attorney who specializes in electronic discovery law. He is a principal in a U.S. law firm with over 50 offices & 800 lawyers where he supervises electronic discovery work and litigation support. Ralph has written over two million words on law and technology, including six books on electronic discovery. His latest books are "E-Discovery for Everyone" (ABA 2017) and "Perspectives on Predictive Coding" (ABA 2017) (ed. & contributor). His blog is widely read in the industry: "e-DiscoveryTeam.com." Ralph is the founder and principal author of "Electronic Discovery Best Practices" and "e-Discovery Team Training," a free online course covering all aspects of e-discovery. Ralph's sub-speciality is the search and review of electronic evidence using multimodal methods, including artificial intelligence. He also has a free online training program to teach these advanced methods - the "TAR Course." Ralph has devoted a month of his time each year since 2013 to research and test various AI-enhanced document review methods. In 2015 and 2016 Ralph and his Team participated in the TREC Total Recall Track experiments sponsored by the National Institute of Standards and Technology. Ralph has been involved with computers and the law since 1978. His full biography is found at RalphLosey.com. Ralph is the proud father of two children, Eva M. Losey and Adam Colby Losey, a high-tech lawyer married to another e-discovery lawyer, Cat Jackson Losey, and, best of all, Ralph has been married since 1973 to Molly Friedman Losey, a mental health counselor and life-long friend.

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