Playing by the Rules

You may not like the rules.  You may think the rules are unfairly applied.  But here is a case that makes it clear that  (a) the failure to follow the rules can have significant consequences and (b) if you make a mistake it is important not to make matters worse.

Wade v. Soo LIne RR Corp. is a case out of the Seventh Circuit Court of Appeals.  The appellate court affirmed dismissal of the plaintiff’s case because of conduct by the plaintiff’s lawyer.  Here is a brief summary of the conduct at issue:

Soo Line argued, first, that Brugess and his firm made improper payments to [medical provider] TOS to influence its diagnosis of Wade, and, second, that Wade had tried to conceal these damaging documents and, even after being caught, tried to conceal them again and, when their absence was detected once more, tarried in turning them over. The district court concluded that the money was payment for an independent medical examination rather than a kickback, and while “not per se improper”, was “certainly an unsavory ‘sweetening of the deal.’ ” The court ruled that, although the payments did not themselves merit sanctions, failure to turn over highly relevant documents justified not only dismissal with prejudice but also an order requiring Brugess to pay Soo Line’s fees and costs. In the district court’s view, the dismissal would not hurt Wade, because “[g]iven the documents uncovered by Mohan, the grant of summary judgment for Soo Line is almost a foregone conclusion.”

Shoud the case have dismissed?  Here is the 7th Circuit’s ruling on that issue:

Wade didn’t assert a privilege or even say that the documents had been withheld by mistake. The district court could and did conclude that Brugess (or someone else on the plaintiff’s legal team) deliberately concealed documents known to favor the adversary; that’s sufficient evidence of bad faith. Attorneys’ actions are imputed to their clients, even when those actions cause substantial harm. A litigant bears the risk of errors made by his chosen agent. E.g., Pioneer Investment Services Co. v. Brunswick Associates L.P., 507 U.S. 380, 396–97 (1993); Johnson v. McBride, 381 F.3d 587 (7th Cir. 2004); United States v. 7108 West Grand Avenue, 15 F.3d 632 (7th Cir. 1994). Sanctions for misconduct are within the discretion of district judges, National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639 (1976); In re Golant, 239 F.3d 931 (7th Cir. 2001), and dismissing this case was not an abuse of discretion.

The plaintiff’s lawyer was ordered by the district court to pay sanctions of $110,000.  The lawyer said  that Rule 37 allows sanctions to be imposed on parties, not their counsel.  Interesting position – punish my client, not me.  The Court of Appeals was not impressed.

Maybe Wade could have shifted the expense to Brugess in turn. A lawyer whose misconduct results in sanctions against his client has committed malpractice; if Wade did end up liable on account of Brugess’s misconduct, he would have a claim against Brugess for (at least) the  amount of the sanctions. (Why make the argument in the first place, then? Does it affect whether Hoey & Farina’s malpractice insurer pays?) The possibility that Wade could shift the cost of the sanctions back onto Brugess, however, does not mean that Wade has nothing at risk from his lawyers’ argument. If Brugess had agreed to indemnify Wade for any sanctions assessed against him (and Brugess were sure to be solvent), then there would be no conflict, but that doesn’t seem to have happened. We learned after argument that Wade and Hoey & Farina had negotiated toward a settlement of Wade’s possible malpractice claim, but apparently no settlement was reached. For all we know Brugess intends to fight any attempt to collect the monetary sanction from him.

When we asked Brugess at oral argument about the conflict of interest, he noted that Wade had additional representation after the district court’s decision. Wade’s supplemental lawyer, Robert A. Montgomery, apparently engaged to negotiate toward settlement of Wade’s potential malpractice claim, told us by an affidavit filed after argument that Wade had consented to the filing of a joint brief with Brugess. Yet the only lawyers listed on Wade’s two briefs are Steven P. Garmisa, George T. Brugess, Richard A. Haydu, and Frank E. Van Bree, all of Hoey & Farina. Circuit Rule 26.1 requires all attorneys representing a private party to file a disclosure statement giving, among other things, the names of all firms that represented that party in the trial court or are expected to do so in the court of appeals. While four attorneys from Hoey & Farina filed statements under the Rule, none of them listed any other firm. And while the Rule requires that “[e]very attorney for a non-governmental party or amicus curiae . . . must file a statement under this rule”, Cir. R. 26.1(a), Montgomery did not file a disclosure statement. Fortunately his role, at last revealed, has notcaused a belated recusal.

Montgomery’s affidavit stated that he had read the final brief—complete with an argument that would leave Wade personally responsible for any financial sanction—and “did not feel that corrections, deletions, or additions needed to be made.” His affidavit does not say that he consented on Wade’s behalf to this conflict of interest (or had authority to do so), that he discussed the brief’s contents with Wade, or that he thought the brief’s arguments to be in Wade’s best interests. Montgomery’s failure to look after his client’s welfare, however, does not excuse Brugess’s and his partners’ violation of their duty to place their client’s well-being above their own. His negligence doesn’t justify their misconduct.

Now what?

The judgment of the district court is affirmed except for the amount of fees and costs awarded to Soo Line; that portion of the judgment is vacated and remanded for recalculation. Wade’s attorneys, Steven P. Garmisa, George T. Brugess, Richard A. Haydu, Frank E. Van Bree,
and Robert A. Montgomery, are ordered to show cause by September 19, 2007 why they should not be disciplined by this court pursuant to Fed. R. App. P. 46(b)–(c) for conduct unbecoming members of the bar. We will forward a copy of this opinion to the Northern District of Illinois and the Attorney Registration and Disciplinary Commission of Illinois for such consideration as they deem appropriate.

Other than this opinion, August 29, 2007 was a good day for these lawyers.  Read the entire opinion here.