PSD WINS 11TH CIRCUIT APPEAL IMPOSING $422,433 IN SANCTIONS AGAINST OPPOSING COUNSEL

On March 19, 2019, a federal appellate court issued a decision affirming a sanctions award against opposing counsel in the full amount of $422,433.

PSD Discovers Misappropriation of Documents

During two related employment lawsuits in the Southern District of Florida, PSD represented a health care company, EDCare Management. In the course of discovery, it became clear that the plaintiff, a former Executive Assistant, had removed and retained documents that belonged to EDCare. As the appellate court described: “Although the defendants had sent Eldredge a written request for the return of company property and the Amlong firm [which represented her] a civil-theft demand letter, Eldredge and
her lawyer failed to disclose the EDCare documents in their possession and then used some of these confidential records during a deposition. … [The trial court] ordered Eldredge to conduct a diligent search, to return to the defendants all company property in her possession, and to provide an affirmative statement that she has turned over all company property in
her possession. In response to the magistrate judge’s order, Eldredge produced three boxes of documents, two thumb drives, and a disk, almost all of which contained confidential EDCare information.”

PSD Lawyers Obtain Waiver of Privilege from Plaintiff

PSD lawyers negotiated the dismissal of claims against EDCare and exchanges of releases with Eldredge, while she also waived her attorney-client privilege so that sanctions could be pursued against her counsel. The waiver resulted in a massive unraveling of case-long scheme by Eldredge and her counsel to withhold a massive amount of materials that she had retained.

PSD WINS $422,433 IN SANCTIONS AGAINST OPPOSING COUNSEL

PSD persuaded the trial court that the cases were essentially frivolous ab initio and that misconduct so permeated the case that an award of fees from near the outset of the action was appropriate. The Eleventh Circuit Court of Appeals affirmed the entirety of the award issued by the trial court.

LAW360 reported the successful appellate win by PSD and EDCare. Lead counsel on the case, founding PSD partner Barry Pollack, was quoted in the article: “Today’s decision makes clear what most people learn in kindergarten. You are not allowed to take what belongs to others. Especially if you are a lawyer.”

PSD represented a corporation in the District of Massachusetts accused of False Claims Act violations and retaliation under federal and state laws. The Complaint alleged that plaintiff was hired by the corporation, which was in turn allegedly compensated through Medicare, Medicaid and Mass Health. Plaintiff further alleged that assessments were not done, were done less often than required for the patients for at minim the last three years and potentially longer.

PSD successfully argued that the plaintiff failed to state a claim under federal or state law. A copy of the federal court opinion dismissing the False Claims Act and retaliation claims can be found at this link: Federal Court Dismissal Order

PSD represented a former employer in the District of Maryland. The former employee brought claims that the employer violated the False Claims Act, that certain officers conspired to violate the False Claims Act, and that the employer fired the employee in retaliation for her reporting wrongdoing and refusing to violate the law herself. The federal court dismissed all claims with prejudice. A copy of the opinion can be found at this link: 181028 Memorandum Opinion and Order Dismissing with Prejudice

PSD made a novel argument over the language in the specific claim forms and focused on the lack of quality of the plaintiff’s reporting of the issue.

In a 5-page decision, a federal judge in the Southern District of New York dismissed two individual defendants from a complex commercial litigation. An underlying dispute arose from a sale of an 81% interest in a company holding certain railway property and assets with an enterprise value of more than $180 million. An affiliate of the seller has a separate pending action against the buyer based on allegations that the buyer has knowingly aided and abetted breaches of fiduciary duty. In a separate action, Plaintiffs brought certain claims against a Canadian citizen and a Florida citizen who were the indirect beneficial owners of the seller.  The federal court granted the individuals’ motion to dismiss on personal jurisdiction grounds. The court explained:

“Plaintiffs misleadingly suggest that the SPA was ‘the genesis of all the disputes between the parties.’ (Pl.’s Opp’n 10). Yes, the SPA is the ‘genesis’ of all Plaintiffs’ claims insofar as it is how CMC Acquisition acquired an interest in CMC Industries. But that aside, CMC Industries’s claim against the Individual Defendants has nothing to do with the SPA. The claim does not involve the parties to the SPA, it does not allege breach of the SPA, and it does not call for interpretation of the SPA; instead, it involves an internal corporate governance dispute between a Texas corporation and foreign shareholders of that corporation governed by Texas law. Notably, elsewhere, CMC Acquisition itself has conceded that ‘the SPA includes no provision concerning the post-acquisition management of CMC or TRT LeaseCo,’ (Docket No. 54, at 17), rendering it irrelevant to the corporate governance dispute underlying the claim against the Individual Defendants. That is correct — and defeats Plaintiffs’ reliance on the SPA for personal jurisdiction over the Individual Defendants. ‘Where, as in the present action, the rights being asserted do not originate from the contract containing the forum selection clause, the clause does not apply.’”

PSD’s clients’ claims related to corporate governance and contract issues remain pending in both federal actions. A copy of the September 14, 2018 decision can be found here: 180914 Memorandum Opinion and Order

The Governor’s office, state Senate and House conferred upon PSD recognition for its launch of the PSD International Child Rescue Project at an event hosted at PSD’s Back Bay offices.

PSD Boston and New York class action lawyers won their opposition to a motion to dismiss before Chancellor Bouchard in the Delaware Chancery Court. PSD represents a medical device innovator, Ken Carr, who is the corporate founder of a medical device technology company. Carr suffered dilution of his holdings and the effects of a blown warrant sale to a major manufacturer. The court issued the 62-page Memorandum Opinion on March 26, 2018.

Novel Corporate Law Issues

The case presented several novel issues of Delaware law. In its written opinion, the Court rejected the suggestion by defense counsel that warrants cannot trigger Revlon duties. The court also found demand on the board excused as futile. As a result, the court left in the case both direct and derivative claims.The lengthy ruling keeps the majority stockholder group and certain affiliates of it in the case. The court will likely soon set a schedule for class action briefing and a trial.

The court explained: “Equity-Link and Binks support the proposition that it would be appropriate to
apply the intermediate scrutiny of Revlon, at least in certain circumstances, to evaluate a board’s decision to grant a third-party an option to acquire control of a corporation, as opposed to a decision to sell the corporation outright. Indeed, if that were not the case, a party could seek to evade the special protections Revlon affords stockholders through creative structuring of a transaction (e.g., an unconditional, immediately exercisable option to purchase the entire company) that in substance is equivalent to an outright sale of the corporation. That would be an absurd result.”

The case involves warrants priced in the tens of millions of dollars. The warrants had exercise prices and threshold payments that involve more than $100 million.

Lead Counsel

Boston and New York class action lawyers, and PSD founding partners, Barry Pollack and Joshua Solomon have served as lead counsel for Carr. Pollack argued the motion back in December 2017.

170327 Memo of Decision and Order on Pl’s Emergency Special Motion to Dismiss Defs’ Counterclaims

161012 Memorandum of Decision and Order on Fraen Motion for Summary Judgment

QHS SJC Decision