IN RE GIRARDI Nos. 08-80090, 03-57038
In Re: THOMAS V. GIRARDI, Esq.; WALTER J. LACK, Esq.; PAUL A. TRAINA, Esq., et al., Respondents. SONIA EDUARDA FRANCO FRANCO; et al., Plaintiffs-Appellants, v. DOW CHEMICAL COMPANY; et al., Defendants-Appellees.
United States Court of Appeals, Ninth Circuit.
Filed July 13, 2010.
Thomas V. Girardi, Howard B. Miller, Girardi & Keese, Walter J. Lack, Paul A. Traina, Sean A. Topp, Engstrom, Lipscomb & Lack, Los Angeles, CA, for plaintiffs-appellants.
Michael P. Fordas, Kirkland & Ellis, Chicago, IL, for defendant-appellee Dow Chemical Co.
David W. Ogden, Wilmer, Cutler Pickering Hale & Dorr, Washington, DC, for defendant-appellee Shell Chemical Co.
Alan E. Friedman, Jones Day, Los Angeles, CA, for defendant-appellee Dole Food Co., Inc.
Thomas J. Nolan, Skadden, Arps, Slate, Meagher & Flom, Los Angeles, CA, for respondents Thomas V. Girardi and Girardi & Keese.
Robert C. Baker, Baker, Keener & Nahra, Los Angeles, CA, for respondents Walter J. Lack, Paul A. Traina, Sean A. Topp, and Engstrom, Lipscomb & Lack.
Before: William A. Fletcher, Marsha S. Berzon, N. Randy Smith, Circuit Judges.
We must decide the appropriate discipline in the case of respondents Thomas V. Girardi, Walter J. Lack, Paul A. Traina, and a junior associate in Lack's firm. Respondents attempted to enforce a putative foreign judgment for $489 million in district court but failed. They undertook and main-tained an appeal to this court although they knew, at least by the time defendants filed a motion to supplement the record in this court, that the document they offered as evidence of that judgment was spurious.
The factual and procedural background of the case is complicated but essentially uncontested.
On November 13, 2000, Lack and Girardi agreed to engage in one such legal joint venture, signing a Master Fee Agreement with the Nicaraguan law firm of Ojeda Gutierrez and Espinoza (the "Ojeda Firm") to represent Nicaraguan claimants in litigation concerning the effects of the pesticide Dibromochlorpropane (DBCP) on banana plantation workers. Lack and the Lack Firm would have complete responsibility for the complaint and all other filings in the case.
In September 2001, Sonia Eduarda Franco and 465 other Nicaraguan plaintiffs sued several American companies for injuries allegedly caused by the companies' use of DBCP on banana plantations in Nicaragua. Lack coordinated with the Ojeda firm, drawing upon his knowledge and experience with other pending DBCP litigation around the world. Lack identified five proper defendants: Dole Food Company, Shell Oil Company, Shell Chemical Company, Dow Chemical Company, and Standard Fruit Company. The Nicaraguan complaint, however, named as defendants Dole Food Corporation and Shell Oil Company, but not Dole Food Company or Shell Chemical Company. While the Nicaraguan complaint mentions "Dole Food Company," it lists "Dole Food Corporation," and not "Dole Food Company" as a defendant in the action, although there is no such entity as "Dole Food Corporation."
Despite the misidentification, the complaint was served on Dole Food Company at its corporate headquarters in West-lake, California. Dole Food Company authorized Dr. Roberto Arguello Hurtado, its Nicaraguan counsel, to appear in the Nicaraguan proceeding on behalf of Dole Fresh Fruit Company, another Dole entity that was currently doing business in Nicaragua, but which did not exist at the time of the events described in the complaint and which was not named in the complaint. For that reason, Plaintiffs' Nicaraguan lawyer, Angel Espinoza, moved successfully, on October 25, 2002, to exclude Dole Fresh Fruit Company from the proceedings. Realizing the problem with the complaint, Espinoza petitioned the Nicaraguan court on November 12, 2002, to change the names of Defendants from Dole Food Corporation and Shell Oil Company to Dole Food Company and Shell Chemical Company. As far as the record shows, the Nicaraguan judge never ruled on that petition.
Following the court's exclusion of Dole Fresh Fruit Company from the case, Dole Food Company authorized Dr. Hurtado to appear on behalf of Dole Food Company. Dr. Hurtado represented to the Nicaraguan court that Dole Fresh Fruit Company was confused by the initial complaint, and continued to be concerned that Plaintiffs' failure to sue the right person "could lead to injuries to its rights." On November 25, 2002, the Nicaraguan court denied Hurtado's intervention on behalf of Dole Food Company because the complaint was "not brought against" Dole Food Company. The Judicial Notice further advised that the rights of Dole Food Company should be "exercised through relevant channel."
On December 11, 2002, the Nicaraguan court issued a $489 million default judgment ("Judgment") against (in English) "Dole Food Corporation" and "Shell Oil Company." The Judgment did not mention Shell Chemical Company, nor did it name Dole Food Company as a judgment debtor. Although the Judgment referred to Dole Food Company, it did so only to describe Hurtado's attempted intervention and to restate that Dole Food Company was not one of the defendants named in the complaint.
Angel Espinoza was the main lawyer at the Ojeda Firm handling the Franco case. The lawyers at the Lack Firm never spoke with him, instead communicating only with Walter Gutierrez, the English-speaking nonlawyer-administrator of the Ojeda firm. Lack had communicated extensively with Gutierrez throughout the Nicaraguan proceedings, and he did so again when he learned in January 2003 that the Dole Food Company claimed that the Judgment named Dole Food Corporation, not Dole Food Company. In an email to Gutierrez, Lack emphasized that
On January 23, 2002, at Espinoza's request, the Nicaragua court issued the "Ejecutoria," or Writ of Execution, to Plaintiffs' counsel. The Writ, like the Judgment, named "Dole Food Corporation" and "Shell Oil Company," in English, as judgment debtors, and, like the Judgment, described the court's rejection of Hurtado's attempt to intervene on behalf of Dole Food Company because his client was not one of the companies named in the complaint.
On January 27, 2003, Gutierrez notified Lack and Girardi by email that he "had arrived back in the US," and that he would like to meet with them to discuss, among other things, the "[a]ctual correction [sic] translation of the judgment and execution thereof[.]" There is no evidence Gutierrez produced either the Judgment or the Writ of Execution at the January meeting, and Respondents deny that the documents were provided to any of the Lack attorneys over the next several months. On the other hand, there is also no evidence that Lack, Girardi, or anyone from their firms asked to see the Judgment or the Writ of Execution, even though Lack knew that they needed a judgment against the correct entity for a United States enforcement action to succeed.
On April 24, 2003, a Nicaraguan notary public, Miguel Angel Caceres Palacios, issued the Notary Affidavit that would prove central to this case. The Notary Affidavit begins with the statement that Angel Espinoza, accompanied by a translator, presented the notary with the following document, i.e., the Writ of Execution. The Notary Affidavit purports to provide an exact Spanish-language transcription of the Writ, but it contains significant differences. Where the names "Dole Food Corporation" and "Shell Oil Company" appear in the Writ in English, the Notary Affidavit substitutes, also in English, "Dole Food Company" and "Shell Chemical Company." Because of this substitution, the Notary Affidavit is facially inconsistent, stating both that the Dole Food Company is a judgment debtor, and that the Dole Food Company was denied the opportunity to appear because it was not one of the companies sued.
On May 14, 2003, Lack and Girardi filed an action in Los Angeles Superior Court under California's Recognition Act, the statute that at the time governed enforcement of foreign money judgments. See Cal. Civ. Proc. Code §§ 1713-1713.8 (repealed 2007). The Complaint attached the Notary Affidavit as "Appendix A" and identified the document as the Writ itself. "Appendix A," however, did not contain the entire text of the Notary Affidavit, as it omitted the entire Spanish-language introductory paragraph identifying the document as a transcription. The Complaint was misleading in other respects, as it stated that the Nicaraguan court "entered judgment. . . against all defendants," although Lack knew the original Judgment named Dole Food Corporation and not Dole Food Company, and he had no basis for concluding that the problems he had identified in January had in fact been cured or that the name changes appearing in the Notary Affidavit were approved by any court. Moreover, the Complaint stated that "[t]he original certified copy of the Writ of Execution is within the custody of Plaintiffs' counsel," although Lack now maintains that he did not in fact have even a copy of the Writ until April, 2005, as described below.
On June 25, 2003, at Defendants' request, Lack sent defense counsel a complete copy of the Notary Affidavit, stating that earlier, "we deleted certain portions of the Spanish part since they were deemed superfluous to the Judgement [sic]." Armed with a copy of the complete Notary Affidavit, Dow Chemical Company ("Dow") and Shell Chemical Company ("Shell") removed the action to federal court on July 17, 2003. Dow and Shell argued in their Notice of Removal that although Dole Food Company, a California corporation, was a local defendant, there was nevertheless complete diversity because Dole Food Company was fraudulently joined. Contrary to the representation in the Complaint and "Appendix A," Dole Food Company was not a party to the Nicaraguan proceeding and so Dole Food Company could not be — and was not — subject to the default judgment. Moreover, Dow and Shell maintained that "Appendix A" to Plaintiffs' Complaint was not the Writ but a "facially inaccurate post hoc recitation of the judgment, incorporated within a transcribed and translated version of a writ of execution, all contained in a form secured ex parte from a notary public." The Notice of Removal also contained originals and English translations of the Judgment itself, the complete Notary Affidavit, and additional documents from the Nicaraguan litigation demonstrating that Dole Food Corporation, not Dole Food Company, was the defendant in those proceedings. On July 24, 2003, Defendants moved to dismiss the complaint, citing the same infirmities, and pointing out that "Appendix A" was "at least four steps removed from the actual Judgment."
On August 14, 2003, Plaintiffs moved to remand the action to state court and filed a reply to Defendants' motion to dismiss. In their Motion to Remand, Plaintiffs, as they did in the Complaint, falsely asserted that the Complaint attaches "[t]he actual Judgment/Writ of Execution which names Dole Food Company Inc. as a party," and that the Writ named Dole Food Company and Shell Chemical as judgment debtors. Although Lack's signature appeared on Plaintiffs' Motion to Remand, Opposition Brief to Defendants' Motion to Dismiss, and Reply to Defendants' Opposition to Plaintiffs' Motion to Remand, the primary responsibility for preparing these briefs fell on Respondent Paul Traina, who had been a member of the Lack firm since 1996. Traina's briefing argued that the district court could not reach the merits of the enforcement action, even as it repeated the false characterization of the document that was the entire basis for that action. To support the inaccurate statements, Respondents attached three declarations to their reply brief: an "expert" declaration from Lorena Centeno, a California lawyer who had graduated from a Nicaraguan law school; a declaration from Orlando Corrales Mejia, a former Vice President of the Nicaraguan Supreme Court; and a declaration from Espinoza of the Ojeda Firm.
On October 16, 2003, District Judge Manella denied Plaintiffs' Motion to Remand, finding that Dole Food Company, the "local defendant" that would have destroyed diversity, was not a party to the Nicaraguan judgment because Plaintiffs' alleged "translated version of the Writ of Execution" was actually executed three months after the Writ issued, contained no assurance of its accuracy, and "recites facts inconsistent with the naming of Dole Food Company Inc. as a party to the underlying action." Franco v. Dow Chemical Co., 2003 WL 24288299, at *3 (C.D. Cal. Oct. 20, 2003). Judge Manella concluded the Notary Affidavit was "suspect, not only because it changes the names of two parties that appeared in English in the Judgment, but because it contradictorily orders `Dole Food Company Inc.' to pay, while reciting that neither `Dole Food Company' nor `dole [sic] Food Company, Inc.' was a party to the action." Id. at *4. Judge Manella also noted that Plaintiffs' Complaint failed to comply with the plain language of the Recognition Act, insofar as the Act provides a mechanism for enforcing judgments, not writs of execution. See id. at *5. The district court also granted Defendants' Motion to Dismiss.
On November 20, 2003, Respondents filed a notice of appeal to the Ninth Circuit. Lack and Traina delegated the duty of drafting the Opening Brief to a junior associate, who had less than two years's experience as a lawyer and no previous appellate experience. On April 30, 2004, Respondents filed an Opening Brief that repeated false statements made before the district court, declaring that "Appendix A" was the January 2003 Writ, that the January 2003 Writ names Dole Food Company and Shell Chemical Company as judgment debtors, that the "Writ," (which is what Respondents continued to call the Notary Affidavit), is "dispositive of the fact that Dole Food Company is a proper defendant,"and that the December 11, 2002 Judgment named Dole Food Company and Shell Chemical Company as defendants.
Defendants filed their Appellees' Brief on June 30, 2004, again arguing that "it is obvious that plaintiffs have not stated a cause of action to enforce the Nicaraguan judgment against Dole Food Company, Inc., for the simple reason that this entity was not named in the underlying Nicaraguan complaints or judgment and was affirmatively denied an opportunity to participate in the Nicaraguan proceedings for just that reason[.]" Defendants also noted that on May 18, 2004, during the pendency of this appeal, the Nicaraguan court had issued another writ of execution in conjunction with efforts to enforce the same judgment against assets located in Venezuela, and the new writ confirmed that neither Dole Food Company nor Shell Chemical Company were parties to the original judgment.
On August 9, 2004, the junior associate sent Traina a memo in which he expressed his concerns about the viability of their position, noting that the firm risked exposure to a motion under Federal Rule of Appellate Procedure 38, which would provide for an award of damages and double costs if their appeal were found to be frivolous. Traina, in consultation with Lack, responded to the junior associate's concerns about the basis of their case, and the associate drafted a reply brief which was filed on August 13, 2004. The reply brief argued that "plaintiffs' Complaint had properly alleged that plaintiffs have a final judgment for a sum of money in their favor against Dole."
While the appeal was pending, the same parties were engaged in a related case in district court, a declaratory relief action that Shell had brought against the Franco plaintiffs. In the course of discovery in that proceeding, Shell sought a copy of the January 23, 2003 Writ of Execution. Respondents vigorously opposed those efforts, but on April 15, 2005, were required to deliver the original January 2003 Writ, which had been in the possession of the Ojeda firm, to Shell, and Shell shared the document with its co-defendants in the Franco case. The Franco Defendants moved to supplement the record in the pending Ninth Circuit appeal with the Writ, which demonstrates on its face that Plaintiffs had been misrepresenting its contents. They also moved for sanctions for (1) filing a frivolous appeal and (2) making false statements. Respondents unsuccessfully opposed the motion to supplement the record and filed a counter-motion for sanctions.
Around July 6, 2005, only a week before oral argument, Howard B. Miller, a member of the Girardi Firm, was asked to argue the appeal. After reviewing the record for six to eight hours, Miller determined that the appeal should be dismissed, because the case had been argued entirely on the mistaken premise that the Writ named the Dole Food Company, a thesis contradicted by the recently produced original writ. Respondents dismissed the Franco appeal on July 11, 2005.
On August 25, 2005, this Court issued its order to show cause, directed to Girardi, Miller, Lack, Traina, the junior associate, and the two law firms representing Plaintiffs in the Ninth Circuit. The order directed Respondents to show cause "why it or he should not be required to reimburse the appellees for fees and expenses incurred in defending this appeal, and why it or he should not be suspended, disbarred, or otherwise sanctioned, under Federal Rules of Appellate Procedure 38 and 46 and 28 U.S.C. § 1912 and § 1927, for filing a frivolous appeal, falsely stating that the writ of execution issued by the Nicaraguan court named Dole Food Company, Inc. as a judgment debtor, falsely stating that the writ corrected mistakes in the judgment, and falsely stating that the notary affidavit constituted an accurate translation of the writ."
On March 28, 2006, the Panel directed that the order to show cause be discharged as to Respondent Howard Miller, and it appointed Judge Wallace A. Tashima of this court as Special Master to oversee further proceedings. After extensive discovery and briefing, Judge Tashima presided from October 22nd to 25th, 2007, over a four-day trial of the issues relevant to the order to show cause. On March 21, 2008, Judge Tashima filed a detailed report addressing the motion for sanctions, in which he concluded that Girardi had "recklessly" made false statements to the Ninth Circuit, while the three Respondents from the Lack firm had done so "knowingly, intentionally and recklessly." Judge Tashima recommended imposing sanctions totaling $390,000. The Respondents have stated that they are prepared to accept the monetary sanctions recommended by Judge Tashima.
On the same day, Judge Tashima filed under seal a brief Supplemental Report addressing the question of attorney discipline. The Supplemental Report incorporated the findings and conclusions of Judge Tashima's main report and recommended that a "disinterested prosecutor" be appointed if the Panel deemed further proceedings necessary. In response to the Supplemental Report, the three Lack firm Respondents filed objections to the findings and conclusions of the first Report insofar as they were incorporated in the Supplemental Report, and all four Respondents requested the opportunity to present further evidence in mitigation. The Panel appointed Professor Rory K. Little as Independent Prosecutor on July 10, 2008.
On May 12, 2009, Professor Little filed his report detailing his own investigation and review of Judge Tashima's record. Professor Little stated his belief that "the Respondents did not really contest the material facts in the [Special Master's] Report and Supplemental Report, so much as they wished to dispute the inferences and legal conclusions drawn from those facts, and emphasize some other facts not included in either Report although developed at trial." Professor Little's report stated that Respondents did not dispute that the three statements set forth in the order to show cause were in fact false and "that the Respondents acted at least recklessly in failing to detect those falsities and permitting them to appear in their [o]pening appellate brief and to stand uncorrected even through the date of oral argument in July 2005." The report also concluded that Judge Tashima's findings regarding the Respondent's states of mind "are accurate and provable by clear and convincing evidence." The balance of Prof. Little's report outlined proposed discipline to which the Respondents were prepared to stipulate.
On October 7, 2009, Judge Tashima filed a corrected version of his March 21, 2008 report. We adopt in full Judge Tashima's findings of fact, conclusions of law, and recommendations with respect to sanctions under Federal Rule of Appellate Procedure 38 and 28 U.S.C. § 1912 and § 1927 as they appear in that corrected version.
2. Applicable Legal Standard
"A member of the court's bar is subject to suspension or disbarment by the court if the member . . . is guilty of conduct unbecoming a member of the court's bar." Fed. R. App. P. 46(b)(1)(B); see Gadda v. Ashcroft, 377 F.3d 934, 947 (9th Cir. 2004) (listing examples of "conduct unbecoming"). Furthermore, the court "may discipline an attorney who practices before it for conduct unbecoming a member of the bar or for failure to comply with any court rule." Fed. R. App. P. 46(c). A court need not find intentional conduct to discipline an attorney for conduct unbecoming a member of the bar pursuant to Federal Rule of Appellate Procedure 46; lack of diligence that impairs the deliberations of the court is sufficient. See Gadda, 377 F.3d at 947.
"Conduct unbecoming a member of the court's bar" means "conduct contrary to professional standards that shows an unfitness to discharge continuing obligations to clients or the courts, or conduct inimical to the administration of justice." In re Snyder, 472 U.S. 634, 645 (1985); see also Gadda, 377 F.3d at 946. In addition to case law and applicable court rules, the court may consider codes of professional conduct in determining whether an attorney's conduct falls below the standards of the profession. See In re Snyder, 472 U.S. at 645, 646 n.7 (referring to state rules of professional conduct, and the American Bar Association's ("ABA") Model Rules of Professional Conduct and Model Code of Professional Responsibility).
Here, the conduct identified in the order to show cause clearly constitutes "conduct unbecoming a member of the court's bar," because it violates the ABA's Model Rules as well as California rules of professional conduct. See Model Rule 3.1 ("A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law."); Model Rule 3.3(a) ("A lawyer shall not knowingly . . . make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer"); Cal. Rule Prof. Conduct 5-200 ("In presenting a matter to a tribunal, a member: (A) Shall employ, for the purpose of maintaining the causes confided to the member such means only as are consistent with truth; (B) Shall not seek to mislead the judge, judicial officer, or jury by an artifice or false statement of fact or law[.]"); see also Cal. Bus. & Prof. Code § 6068(d) (codifying lawyer's duty not "to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law.").
In assessing the appropriateness of a particular disciplinary sanction, this court may consider, although it is not bound by, the ABA's Standards for Imposing Lawyer Sanctions, which were promulgated to aid enforcement of the ABA's Model Rules of Professional Conduct. See United States v. Swanson, 943 F.2d 1070, 1076 (9th Cir. 1991); see also ABA Joint Comm. on Prof'l Standards, Standards for Imposing Lawyer Sanctions (1984, rev. 1992), available at http://www.abanet.org/cpr/regulation/standards_sanctions.pdf ("Standards"). Under these standards, a court should generally consider: (a) the duty violated; (b) the lawyer's mental state; (c) the actual or potential injury caused by the lawyer's misconduct; and (d) the existence of aggravating or mitigating factors. See Standards § 3.0. The Standards also set out various forms of suggested discipline based on the type of misconduct involved. See id. §§ 4.0-8.4.
Although we are concerned here only with Respondents' conduct in this court, the entire course of Respondents' effort to enforce the Nicaragua judgment is relevant to determining Respondents' culpability. As outlined above, the history of the enforcement proceedings includes several crucial moments where a reasonable attorney would have, at a minimum, inquired further about the bona fides of the document that was the basis of the action he was prosecuting. At some point, failing to do so becomes willful blindness.
The official comments to Model Rule 3.1 recognize that an attorney may not know whether his claims are viable when he files an action, but he has a duty to investigate the legal and factual bases of his claims:
Model Rule 3.1, cmt. 2; see also Holgate v. Baldwin, 425 F.3d 671, 676-77 (9th Cir. 2005) (reviewing circuit precedent that a "frivolous" filing in the context of Rule 11 is one "that is both baseless and made without a reasonable and competent inquiry").
As early as January 2003, respondents Lack and Girardi were aware that the Nicaraguan Judgment named the wrong defendant and that the discrepancy could doom any enforcement action in American courts. Even if neither Respondent saw the actual Judgment or Writ of Execution in 2003, the receipt of the Notary Affidavit, erroneously identified as the Writ and attached to the Superior Court Complaint as "Appendix A," should have prompted further investigation, because it contained the inconsistent statements that Dole Food Company was a judgment debtor and that it was not a party to the case. Moreover, the Complaint contained the false statement that the Lack firm had the original of the Writ of Execution, when it did not.
Respondents' subsequent actions were more obfuscation than investigation. Confronted with Defendants' Notice of Removal and Motion to Dismiss, which detailed accurately how "Appendix A" was several removes from the actual Judgment Plaintiffs sought to enforce, Respondents doubled down on their increasingly untenable position. By his own admission, Respondent Traina did virtually nothing to investigate and determine the veracity of the statements made in the Complaint, even though the Notary Affidavit, on its face, presents questions as to its authenticity and even though Defendants' central argument called into question the accuracy of the statements made in Plaintiffs' Complaint.
Even if Respondents felt confident in dismissing their adversaries' arguments, Judge Manella's careful and detailed decision should have given them pause in pursuing an appeal, as it laid bare the fundamental and fatal flaws in their enforcement action and in the Notary Affidavit attached to the Complaint. Respondents have consistently argued that the appeal was taken in good faith because it reasonably challenged the district court's jurisdiction to weigh the evidence relevant to the allegedly false joinder of Dole Food Company. This argument is unavailing. Even if Respondents' interpretation of Ninth Circuit case law on fraudulent joinder were correct — an issue we do not reach — Respondents advanced their jurisdictional arguments in briefing that relied upon false statements about the documents central to their enforcement action. Moreover, the false statements were now being made in the face of new evidence, such as the second writ of execution used to enforce the Nicaraguan judgment in Venezuela, that called into question Respondents' version of events.
By the time Respondents were forced in the related declaratory relief action in April 2005 to produce the original Writ of Execution, it would seem impossible to maintain the validity of "Appendix A" — the linchpin of the entire enforcement action — as an accurate representation of the Judgment and the Writ. Respondents nevertheless resisted efforts to produce the Writ or to allow this court to weigh its considerable relevance. In their Opposition to Appellees' Motion to Supplement the Record, Respondents reiterated the narrow jurisdictional basis of their appeal, but that argument was again made in conjunction with a defense of "Appendix A," the spurious document identified as the Writ.
This recap of the red flags Respondents ignored in their two-year quest to enforce the $489 million Nicaraguan Judgment underlines the central difficulty in assessing Respondents' culpability and therefore the appropriate discipline. The ABA Standards emphasize the lawyer's mental state. Respondents' states of mind clearly evolved over time. Respondents were obviously more culpable in opposing Appellees' Motion to Supplement the Record than they were at earlier stages in the proceedings, although many of the events that occurred in district court should have put them on notice that their position was untenable and that any appeal would be frivolous.
In their proposed stipulation with Professor Little, Respondents accepted only that their behavior was reckless, although Professor Little noted that in his view, the evidence could support Judge Tashima's characterization of the conduct of Lack, Traina and the junior associate as intentional and knowing. At the subsequent hearing before us, at which they appeared in person, both Lack and Traina strongly disavowed any intent to mislead the court. This position no doubt reflects Respondents' sincere wish that their statements about the Notary Affidavit had been true. Unfortunately, even if Respondents only "chose to state as a fact what was at the best a guess and a hope, [they] engaged in misrepresentation." In re Curl, 803 F.2d 1004, 1006 (9th Cir. 1986), overruled on other grounds, Partington v. Gedan, 923 F.2d 686 (9th Cir. 1991) (en banc).
We have explained why misrepresentation cannot be taken lightly:
In re Boucher, 837 F.2d 869, 871 (9th Cir. 1988) (order). We have also held that the court need not find squarely intentional conduct to impose serious discipline pursuant to Rule 46(c) for misrepresentations made to the court. See DCD Programs, Ltd. v. Leighton, 846 F.2d 526, 528 (9th Cir. 1988) (order).
The ABA Standards provide a range of discipline for mis-representations to a court, and the degree of discipline depends, in large measure, on the lawyer's mental state:
Standards, §§ 6.11-6.14.
On the record before us, the conduct of the various Respondents falls somewhere between Standards § 6.12 and § 6.13. As Judge Tashima explained in assessing sanctions under 28 U.S.C. § 1927, all of the Respondents were reckless in failing to verify the truth of the statements made to this court about the Notary Affidavit and the Judgment it purported to represent. The ABA Standards do not, however, recognize the mental state of "recklessness."
As Judge Tashima explained, Girardi is in a different position from the other Respondents because he took almost no active part in the actual proceedings to enforce the Nicaraguan Judgment. Girardi's practice of authorizing the Lack firm to sign his name on briefs that turned out to contain falsehoods may raise separate ethical questions, but with respect to the specific misrepresentations identified in the order to show cause, Girardi's proven conduct is at most reckless, and the recklessness inheres in his mode of practice, not in any specific action he took in the enforcement action or the appeal. We will therefore formally reprimand Girardi for his recklessness in determining whether statements or documents central to an action on which his name appears are false.
The three Respondents from the Lack firm cannot, like Girardi, rely on a claim of ignorance. The history of the enforcement action demonstrates the multiple occasions on which they chose to remain willfully blind to the fact that they were making false statements. By the time they appeared in this court, the attempt to salvage their case became indistinguishable from a knowing submission of false documents. Suspension is the appropriate discipline for these Respondents.
The ABA Standards set out aggravating and mitigating factors that justify an increase or reduction in the degree of discipline to be imposed. See Standards §§ 9.2, 9.3. All of the Respondents have submitted extensive mitigation materials that attest to excellent reputations in the legal community and, for Girardi, Lack and Traina, lengthy records of successful practice, with no prior incidents of discipline. See Standards § 9.32(a),(g). Each Respondent has been cooperative throughout disciplinary proceedings, and each states that he is genuinely remorseful. See Standards §§ 9.32(e)(l). Under the ABA Standards, however, substantial legal experience may also be an aggravating factor, because an experienced attorney should know better than to engage in conduct that merits discipline. See Standards § 9.22(i).
With respect to Respondents Lack and Traina, we conclude that the mitigating factors can affect only the length of the suspension we impose. Although Lack's involvement in the enforcement proceedings was more long-standing than Traina's, each was specifically responsible for the falsehoods presented to this court. Consequently, each is suspended from the practice of law in this court for six months, effective on the filing date of this order. Fed. R. App. P. 46(c). Respondents Lack and Traina may each file a petition for reinstatement after the period of suspension pursuant to Ninth Circuit Rule 46-2(h). Each shall file the petition using this docket number and include evidence that he is in good standing, with no discipline pending, in all courts and bars to which he is admitted.
With respect to the third Lack firm Respondent, whom we have identified simply as "the junior associate," we find additional, significant mitigating factors. The ABA Standards identify inexperience in the practice of law as a mitigating factor, see Standards § 9.32(f), but we are more influenced by his earnest, albeit unsuccessful, effort to persuade his more-experienced colleagues not to continue their frivolous appeal. We will privately reprimand the junior associate for allowing his superiors to overcome his sound instincts and for his role in drafting briefs that contained false statements.
Respondents in this case have been respected members of the bar, and each has presented significant mitigating evidence. Their conduct in this case, however, cannot be excused on that basis, given their culpability and the substantial injury their conduct caused the opposing parties and this court. We have carefully considered the recommendations of Judge Tashima and Professor Little, who have made our task substantially easier and whose assistance we gratefully acknowledge. We impose discipline as follows:
THOMAS V. GIRARDI is formally reprimanded.
WALTER J. LACK and PAUL A. TRAINA are suspended from practice before the Ninth Circuit for six months.
TASHIMA, Circuit Judge:
PROCEDURAL AND FACTUAL BACKGROUND
Based on the record in these proceedings, the Special Master makes the following findings of fact:
Thomas V. Girardi and Walter J. Lack are Los Angeles-based lawyers who have known each other for 30 years and have practiced law together for 25 years. Tr. 417:25-18:2.
Typically, in the cases they take on jointly, Girardi and Lack divide responsibilities between their respective law firms, Girardi & Keese (the "Girardi Firm") and Engstrom, Lipscomb & Lack (the "Lack Firm"). Tr. 422:14-23:8. In some cases, the Girardi Firm has the primary responsibility; in others, the Lack Firm has the primary responsibility. Tr. 422:14-:21. On November 13, 2000, Lack and Girardi agreed to engage in one such legal joint venture, signing a Master Fee Agreement with the Nicaraguan law firm of Ojeda Gutierrez and Espinoza (the "Ojeda Firm") to represent Nicaraguan claimants in DBCP
I. THE NICARAGUAN PROCEEDINGS
In September 2001, Sonia Eduarda Franco and 465 other Nicaraguan plaintiffs sued several American companies for injuries allegedly caused by the companies' use of DBCP on banana plantations in Nicaragua. TE-5-112 to -117 (Spanish); TE 5-134 to -165 (English). Lack coordinated with the Nicaraguan counsel, directing them "as to who [Lack] knew, based upon our other pending litigation around the world, the proper party defendants were." Tr. 103:24-104:3. To Lack, the proper defendants were five in number: Dole Food Company, Shell Oil Company, Shell Chemical Company, Dow Chemical Company, and Standard Fruit Company. Tr. 104:6-05:2. The Nicaraguan complaint, however, named as defendants Dole Food Corporation and Shell Oil Company, but not Dole Food Company or Shell Chemical Company. TE 5-117 (Spanish); TE 5-140 (English).
Facing service of a complaint that listed Dole Food Corporation as a defendant, Dole Food Company authorized Dr. Roberto Arguello Hurtado, Dole Food Company's Nicaraguan counsel, to appear in the Nicaraguan proceeding on behalf of Dole Fresh Fruit Company, a Dole entity. See Tr. 306:6-09:4. Because Plaintiffs believed that Dole Fresh Fruit Company did not operate in Nicaragua when the banana plantations were in operation, Angel Espinoza,
Realizing the problem with the complaint, Espinoza petitioned the Nicaraguan court on November 12, 2002, to change the names of Defendants from Dole Food Corporation and Shell Oil Company to Dole Food Company and Shell Chemical Company. TE 122-04 (English), 122-01 (Spanish). The Nicaraguan judge never ruled on that petition.
Following the court's exclusion of Dole Fresh Fruit Company from the case, Dole Food Company authorized Dr. Hurtado, to appear on behalf of Dole Food Company. Tr. 317:11-:15, 318:8-:13. Dr. Hurtado represented to the Nicaraguan court that Dole Fresh Fruit Company was confused by the initial complaint, continued to be concerned that Plaintiffs failure to sue the right person "could lead to injuries to its rights," and therefore, Dr. Hurtado sought to "APPEAR ON BEHALF OF [HIS] PRINCIPAL, DOLE FOOD COMPANY, TO RATIFY ALL ACTIONS OF DOLE FRESH FRUIT COMPANY IN THE CLAIM FILED AND NOTIFIED TO DOLE FOOD CORPORATION, INC." TE 174-04 to -05 (English) (emphasis in translation reflects emphasis in original); see also TE 174-01 to -03 (Spanish).
In order to appear in a DBCP lawsuit in Nicaragua, Nicaraguan Law 364 requires that a defendant post a US $100,000 bond, which Dole Fresh Fruit Company did before Dr. Hurtado appeared on behalf of that entity. See TE 332-01 to -05. Dole Food Company, however, did not want to post an additional $100,000 to appear as Dole Food Company;
The Nicaraguan court, on November 25, 2002, denied Dole Food Company's intervention because the complaint was "not brought against" Dole Food Company. TE 5-170 (Spanish), 5-175 (English). The Judicial Notice states:
TE 5-170 (Spanish), 5-175 (English) (emphasis added).
On December 11, 2002, the Nicaraguan court issued a $489 million judgment ("Judgment") against Dole Food Corporation and Shell Oil Company. TE 12-011 (Spanish), 12-031 (English). The Judgment did not mention Shell Chemical Company, nor did it name Dole Food Company as a judgment debtor. Although the Judgment referred to Dole Food Company, it did so only to restate that Dole Food Company was not one of the defendants named in the complaint:
TE 12-006 (Spanish), 12-026 (English).
Lack learned by January 15, 2003 that Dole Food Company claimed that the Nicaraguan Judgment named Dole Food Corporation, not Dole Food Company. In an email to Gutierrez, Lack stated that the Judgment was "against the wrong entity." TE 43; see also TE 19. As Lack put it in his January 15 email
TE 43; see also TE 19.
On January 23, 2002, at Espinoza's request, the Nicaragua court issued the "Ejecutoria," or Writ of Execution,
On January 27, 2003, Gutierrez notified Lack and Girardi by email that he "had arrived back in the US," and that he would like to meet with them to discuss, among other things, the "[a]ctual correction [sic] translation of the judgment and execution thereof[.]" TE 131-001. Lack annotated, in his own handwriting, his copy of the email, noting that there was a "Meeting w/ W.G. & TVG — discussed all issues: 2 hrs. 1/28 5:00PM — Principe [sic]." Id.; Tr. 177:17-78:24. Lack admits that a meeting took place, that Girardi attended the meeting,
In preparation for another meeting, on March 18, 2003, Gutierrez faxed to Lack and Girardi a document Gutierrez characterized as "[his] report before our meeting[.]" TE 24-001. In it, he reported:
TE 24-001 to -002.
Two days after transmission of this "report," March, 20, 2003, Gutierrez brought the Writ to Los Angeles.
Back in Nicaragua, Gutierrez claims to have prepared copies of the Writ, including a translation, and sent them to Lack and Girardi. As noted in an email he sent to Lack and Girardi on March 28, 2003:
Gutierrez followed this up with another email to Lack and Girardi on April 1, 2003:
Gutierrez followed this with yet another email to Lack and Girardi on April 2, 2003, which evinces an understanding on Gutierrez's part that Lack and Girardi had received the package containing the Writ:
Despite admitting that he received the emails, and despite testifying that he never responded to the emails, Lack contends that he never received the Writ, claiming that he "had our Spanish-speaking law clerk call [Gutierrez] and tell him, `We don't know what you are talking about. Nothing came here.'" Tr. 116:21-17:16, 183:16-:22, 197:7-:9.
Lack further testified that he believed that Gutierrez was essentially acting out an email ruse: Lack contends that Gutierrez did not send the Writ, because "he was getting extreme pressure from the Union in Nicaragua who knew he had obtained a judgment, and so he was able to show them these e-mails and say it's the lawyers in United States that are slowing everything up. But I had not yet received the translation." Tr. 117:20-:25.
Thus, there are only one of two conclusions to be drawn: either Lack received the Writ in 2003—long before 2005, the year he claims to have first seen the Writ—or, Lack learned in 2003 that Gutierrez would create an elaborate deception in order to shield himself from pressure.
On April 18, 2003, Peter M. Schwartz,
TE 29. Schwartz continued:
TE 29. This, of course, suggests that Lack, or at least the Lack Firm, had possession of the Judgment and a certified translation, and that "errors" were known to the Lack Firm.
On April 24, 2003, a Nicaraguan notary public, Miguel Angel Caceres Palacios,
TE 14-001 (Spanish), 5-359 (English).
The Notary Affidavit, therefore, purports to provide an exact transcription of the Writ. The Notary Affidavit, however, is not an exact transcription. Where the names "Dole Food Corporation" and "Shell Oil Company" appear in the Writ, the Notary Affidavit substitutes "Dole Food Company" and "Shell Chemical Company." Compare TE 13-016, with TE 14-016. Because of the substitution of Dole Food Company for Dole Food Corporation, the Notary Affidavit states both that Dole Food Company is a judgment debtor, see e.g., TE 02-033, and that Dole Food Company was denied the opportunity to appear because it was "not one of the companies sued," TE 02-028.
II. THE STATE COURT AND DISTRICT COURT PROCEEDINGS
Armed with the Notary Affidavit,
First, the complaint attached the Notary Affidavit as Appendix A. Appendix A, however, does not contain the entire text of the Notary Affidavit; rather, the entire introductory paragraph, quoted above, is excised from the version found in Appendix A. See supra p. 10024; TE 14-001 (Spanish), 5-359 (English). The missing introductory paragraph explicitly states that the document is (1) an affidavit by a notary public, (2) a transcription of the Writ, and (3) was issued on April 23, 2003. Id. Instead, the complaint states that Appendix A is the Writ itself. See TE 2-012 to -13 ("On December 11, 2002 a final judgment was entered by the Third Civil District Court for Managua, Nicaragua. Subsequently, on January 23, 2003, a Writ of Execution issued which incorporated the judgment in haec verba, a copy of which is attached hereto as Appendix `A.'").
Second, the complaint states that the Nicaraguan court "entered judgment . . . against all defendants." TE 2-010. Lack, however, knew that the judgment named Dole Food Corporation and not Dole Food Company, see TE 43 (saying that he was "very concerned" about the Judgment and that it must name "Dole Food Company"); see also TE 19:001 (same); Tr. 174:21-75:7 (testifying that he told Gutierrez to fix the judgment), and Lack never saw a judgment naming Dole Food Company, see Tr. 175:24-76:13. Lack also testified that Gutierrez never told him that the name changes appearing in the Notary Affidavit were approved by the court. See Lack Dep. 158:11-:20.
Third, the complaint states that "[t]he original certified copy of the Writ of Execution is within the custody of Plaintiffs' counsel[.]" TE 02-013. Lack, however, repeatedly testified that he never saw the Writ. See, e.g., Tr. 176:11-:13. Indeed, Gutierrez testified that he took the Writ, after it was issued, "back to Nicaragua and showed it to the banana workers." Gutierrez Dep. 144:12-:13.
On June 25, 2003, at Defendants' request, Lack sent defense counsel a complete copy of the Notary Affidavit. See TE 352-001. As Lack stated in his letter:
On July 17, 2003, then possessing a copy of the complete Notary Affidavit, Dow Chemical Company ("Dow") and Shell Chemical Company ("Shell") removed the action to federal court. See TE 005-001 to -027. In their notice of removal, Dow and Shell argued that although Dole Food Company, a California corporation, was a local defendant, there, neverthe less, was complete diversity because Dole Food Company was fraudulently joined. See TE 005-014 ("Under § 1441(b), removal on the basis of diversity is unavailable if one of the properly joined defendants `is a citizen of the State in which such action is brought.' If a party is fraudulently joined, however, its presence as a resident defendant is ignored for removal purposes.'"). The removal notice identified, in July 2003, all of the problems with Respondents' actions: it states that (1) Dole Food Company was incorrectly substituted for Dole Food Corporation, see TE 05-015 ¶ 13; (2) Dole Food Company was denied intervention in the Nicaraguan proceeding because it was not a party, see TE 005-018 ¶ 19; and (3) Appendix A is not the Writ, but is a "facially inaccurate post hoc recitation of the judgment, incorporated within a transcribed and translated version of a writ of execution, all contained in a form secured ex parte from a notary public," TE 05-021 ¶ 23.
Moreover, attached to the Notice of Removal were originals and English translations of the Judgment itself, see TE 52-03 to -220 (Spanish), 5-222 to -240 (English), the complete Notary Affidavit, see TE 5-306 to -356, the November 25, 2002 Judicial Notice which states that "the complaint heard in this case was not brought against" Dole Food Company, see TE 5-170 (Spanish), 5-175 (English), and a copy of one of the Nicaraguan complaints, which lists Dole Food Corporation, but not Dole Food Company, as a defendant, see TE 5-112 to -130 (Spanish), 5-135 to -160 (English).
On July 24, 2003, Defendants moved to dismiss the complaint. See TE 72. The motion to dismiss, like the notice of removal, pointed out that the Notary Affidavit attached as Appendix A was not the Writ,
On August 8, 2003, Gutierrez emailed Lack and Girardi concerning the actual names on the Judgment:
On August 11, 2003, the clerks of the Nicaraguan court issued an order confirming that Dole Food Corporation and Shell Oil Company were the judgment debtors:
TE 705E.5850 (English); see also TE 705S-5794 (Spanish); Espinoza Dep. 124:16.
Despite this, on August 14, 2003, Plaintiffs moved to remand the action to state court and filed a reply to Defendants' motion to dismiss. See TE 73. In their Motion to Remand, Plaintiffs, as they did in the Complaint, falsely assert that the Complaint attaches "[t]he actual Judgment/Writ of Execution which names Dole Food Company Inc. as a party,"
Although Lack's signature appeared on Plaintiffs' Motion to Remand, Opposition Brief to Defendants' Motion to Dismiss, and Reply to Defendants' Opposition to Plaintiffs' Motion to Remand, the "primary responsibility" for preparing these briefs fell on Respondent Paul Traina.
Instead, Respondents filed the reply brief, which as noted, repeated the inaccurate statements appearing in the Complaint. To support the inaccurate statements, Respondents attached three declarations to their reply brief: an "expert" declaration from Lorena Centeno, a California lawyer who had graduated from a Nicaraguan law school, a declaration from Orlando Corrales Mejia, a former Vice President of the Nicaraguan Supreme Court, and a declaration from Espinoza of the Ojeda Firm.
Lorena Centeno graduated from a Nicaraguan law school in 1983, but had never practiced law in Nicaragua
TE 75-043 to -44.
In forming her opinions and conclusions, Centeno declared that she had reviewed the Nicaraguan judgment, the Writ, the Complaint, the Motion to Remand, and Defendants' Opposition to Motion to Remand. See TE 75-043. In fact, she did not review any of Defendants' motions or the complete Notary Affidavit. See Centeno Dep. 95:1-96:15, 98:15-:24; TE 84. Traina also did not ask her whether Appendix A was the Writ of Execution. See Centeno Dep. 57:14-58:18; Traina Dep. 114. Indeed, when she was deposed and shown the Notary Affidavit, she testified that the Notary Affidavit was not a court-issued document. Centeno Dep. 95:1-96:9.
The Centeno declaration was drafted by the Lack Firm, which faxed it and a few Nicaraguan documents to Centeno only two days before the declaration was to be filed. See Tr. 567:6-:15 (noting that the initial draft was sent on September 17 and the reply brief including the declaration was filed on September 19); TE 82 (copy of the initial draft marked-up with Centeno's handwritten changes).
On September 18, 2003, the day before her declaration was filed, Centeno emailed Traina telling him that his draft declaration was "inaccurate." TE 77-001. Specifically, paragraphs 5 and 6 of the draft stated that "plaintiffs motion sought to have Dole Food Corporation changed to reflect the names of the true defendant, Dole Food Company, Inc. The Nicaraguan court ruled on plaintiffs' motion April 9, 2003. The court granted the motion and issued an order allowing the typographical errors to be corrected." TE 82-006. Centeno, in her email, told Traina that those paragraphs and the attached motion "CONFUSES THE PROCESS," because the motion, as she read it, "means that they are [attempting to] amend[ ] the original Complaint." TE 77-001. Centeno began her email stating that "[i]t is too bad I has [sic] such a short notice to research this better," TE 077-001, and closes with "[a]lso, I have not read the Judgment and the Writ of Execution. With the documents I have seen, the declaration is inaccurate. If you could get more time to file this Declaration I believe it would be best to review the entire file," TE 077-002.
Traina's second expert declaration, submitted on September 19, 2003, was purportedly from Orlando Corrales Mejia,
Traina, and not Mejia, however, drafted Paragraph 4, and Traina never spoke with Mejia about the contents of the "Mejia Declaration." See Traina Dep. 126:25-28:10. Traina testified at his deposition:
Traina Dep. 126:25-31:21.
Mejia, however, testified at his deposition that he first saw the declaration in January 2007 when it was brought to him by Respondents,
Respondents' final declaration, which states that the naming of Dole Food Corporation in the Complaint was "simply a clerical error," was from Espinoza. TE 73-029 ¶ 6. The Declaration also states that Dole Food Company, Inc.'s request to appear was denied as untimely, TE 73-030 ¶ 15, that Dole Food Corporation was erroneously identified in the Judgment, characterizing this as a "typographical error[ ]," TE 73-031 ¶ 17, that the Writ "supercedes the judgment," TE 73-031, and that the Nicaraguan court used the Writ to correct "certain spelling errors," such as changing "Dole Food Corporation" to "Dole Food Company," TE 73-031 ¶ 21.
Like the other declarations, the Lack Firm drafted this one as well. Traina Dep. 84:23-85:9 ("I believe it was by Stephen Terrell of our office[.]), 105:20-06:4 ("Mr. Espinoza['s declaration], I believe it was myself and Stephen Terrell [who drafted it.]). Traina never spoke with Espinoza about his declaration. See Traina Dep. 72:16-73:9 ("I never had any conversations with Nicaraguan counsel. I had all my conversations with Walter Gutierrez[.]"). After it was drafted, the declaration was sent, in English, to Espinoza, and he signed it, accepting the document as drafted, without making any revisions of his own.
When Espinoza was deposed, he testified that he was unaware that the declaration stated that the court had corrected "errors" in the Judgment. Espinoza Dep. 146:15-47:5. His testimony conflicted with the declaration in other respects: Espinoza testified that he believed that both the Judgment and Writ of Execution named Dole Food Corporation and Shell Oil Company as judgment debtors, see Espinoza Dep. 49:20-52:16 (testifying that he realized at the time that the judgment was issued that it named Dole Food Corporation), 86:21-89:21 (testifying that the Writ of Execution named Dole Food Corporation and Shell Oil Company as the judgment debtors), that the Notary Affidavit is not a court-issued Writ, Espinoza Dep. 86:21-87:16, 97:2-:17, that it was improper for the Notary Affidavit to name judgment debtors different from the Judgment and the Writ, Espinoza Dep. 107:12-108:10, that he did not know who made the change in names in the Notary Affidavit, Espinoza Dep. 123:11-:15, that Respondents never asked him how the name changes in the Notary Affidavit occurred, Espinoza Dep. 124:8-:12, that Judge Benavente, the Nicaraguan judge, named Dole Food Corporation in the Judgment and the Writ, Espinoza Dep. 121:12-:14, that the judge never changed the names, that Espinoza never told anyone that the Judge changed the names in the Judgment or the Writ, Espinoza Dep. 121:22-22:7, and that the Nicaraguan court never issued an order naming Dole Food Company or Shell Chemical Company as judgment debtors, Espinoza Dep. 221:11-:21.
On October 16, 2003, District Judge Manella denied Plaintiffs' Motion to Remand, finding the following:
TE 006-003 to -004 (internal citations omitted). In granting the motion, Judge Manella accurately described the situation: "Plaintiffs attempt to enforce a $489.4 million judgment against a non-party based on an affidavit that purports to be a translation of a writ of execution." TE 006-008. The district court also granted Defendants' Motion to Dismiss, characterizing the Notary Affidavit as "suspect." TE 48-008.
III. THE NINTH CIRCUIT PROCEEDINGS
On November 20, 2003, Respondents filed a notice of appeal to the Ninth Circuit. TE 665. They did so without taking any steps to investigate Defendants' arguments and the district court's findings and conclusions about the Judgment, the Writ, and the Notary Affidavit. Traina in his deposition:
Traina Dep. 142:11-43:12; see also id. 144:6-:16 (testifying that Traina consulted with no Nicaraguan lawyers about the validity of the Notary Affidavit). The Declarations of course were drafted by Traina and other lawyers at the Lack Firm, without speaking to two of the declarants. See supra pp. 10034-43.
Lack and Traina delegated the duty of drafting the Opening Brief to the young associate,
On April 22, 2004, just days before filing the Opening Brief, Lack and Girardi signed an agreement to enforce, in Venezuela, the same Nicaraguan Judgment at issue in this case. That agreement stated that the Nicaraguan judgment named "Dole Food Corporation, Inc." and "Shell Oil Company":
On April 30, 2004, Respondents
On May 10, 2004, pursuant to Plaintiffs' efforts to enforce the Judgment in Venezuela, Espinoza obtained a second Writ of Execution from the Nicaraguan court. TE 125; Espinoza Dep. 159:5-:14, 159:19-60:22. That Writ again named Dole Food Corporation and Shell Oil Company as the judgment debtors: "SONIA EDUARDO FRANCO FRANCO Y OTROS, CONTRA LOS SOCIEDADES DOW CHEMICAL, SHELL OIL COMPANY, STANDARD FRUIT AND VEGETABLES CO. INC. Y DOLE FOOD CORPORATION[.]" TE 125-001.
Defendants filed their Appellees' Brief on June 30, 2004, again arguing that "it is obvious that plaintiffs have not stated a cause of action to enforce the Nicaraguan judgment against Dole Food Company, Inc., for the simple reason that this entity was not named in the underlying Nicaraguan complaints or judgment and was affirmatively denied an opportunity to participate in the Nicaraguan proceedings for just that reason[.]" TE 60-023 (internal citations omitted).
On August 9, 2004, the young associate sent Traina a memo:
According to the young associate, Traina discussed the memo with him after discussing it with Lack, and following their conversation, the associate became comfortable that there were good-faith arguments available to Respondents, and proceeded to draft the Reply Brief, see Assoc. Dep. 156:8-58:24, which was filed on August 13, 2004. In the Reply Brief, however, the young associate argued that "plaintiffs' Complaint had properly alleged that plaintiffs have a final judgment for a sum of money in their favor against Dole," even though he still had not seen a copy of the Judgment. Id. 160:15-61:4.
On April 15, 2005, Respondents delivered the January 2003 Writ to Defendants. TE 688.69-.74. Respondents did so, not voluntarily, but because they were compelled to do so by a discovery order in a related case.
Following receipt of the motion for sanctions, the young associate and Traina drafted a memorandum to Lack and Girardi:
Around July 6, 2005, only a week before oral argument, because of a scheduling conflict, the young associate asked Howard B. Miller,
Miller called Girardi, recommending that the appeal be dismissed. Tr. 437:9-:16. Miller testified that, from his perspective, it was clear that Girardi had no prior knowledge that the Writ named Dole Food Corporation as the judgment debtor. Miller Dep. 42:13-44:6. Girardi agreed almost immediately that the appeal should be dismissed, id. 48:6-:8, but Lack was more resistant, Tr. 145:12-:24; Lack Dep. 76:6-78:17, 87:3. In any event, Respondents dismissed the Franco appeal on July 11, 2005. TE 692.
On July 12, 2005, the young associate, in an email to Schwartz, summarized his view of the case this way:
On August 25, 2005, this Court issued its order to show cause, ordering Respondents to show cause "why it or he should not be required to reimburse the appellees for fees and expenses incurred in defending this appeal, and why it or he should not be suspended, disbarred, or otherwise sanctioned, under Federal Rules of Appellate Procedure 38 and 46 and 28 U.S.C. § 1912 and § 1927, for filing a frivolous appeal, falsely stating that the writ of execution issued by the Nicaraguan court named Dole Food Company, Inc. as a judgment debtor, falsely stating that the writ corrected mistakes in the judgment, and falsely stating that the notary affidavit constituted an accurate translation of the writ." TE 7-001 to -002.
CONCLUSIONS AND RECOMMENDATIONS
Based on the foregoing findings of fact, the Special Master reaches the following conclusions of law and makes the following recommendations to the panel:
A. Sanctions for Excessive Costs for Unreasonably and Vexatiously Multiplying the Proceedings
Pursuant to 28 U.S.C. § 1927, "[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." To be sanctionable under § 1927, therefore, counsel's conduct must multiply the proceedings in both an "unreasonable and vexatious manner." B.K.B. v. Maui Police Dep't, 276 F.3d 1091, 1107 (9th Cir. 2002).
The key term in the statute is "vexatiously"; carelessly, negligently, or unreasonably multiplying the proceedings is not enough. While, "[o]ur cases have been less than a model of clarity regarding whether a finding of mere recklessness alone may suffice to impose sanction for attorneys' fees" under § 1927, id. at 1107, or whether there must be a finding of subjective bad faith, see Moore v. Keegan Mgmt. Co. (In re Keegan Mgmt. Co. Sec. Litig.), 78 F.3d 431, 436 (9th Cir. 1996), what is clear from our case law is that a finding that the attorney recklessly or intentionally misled the court is sufficient to impose sanctions under § 1927, see Malhiot v. S. Calif. Retail Clerks Union, 735 F.2d 1133, 1138 (9th Cir. 1984), and a finding that the attorneys recklessly raised a frivolous argument which resulted in the multiplication of the proceedings is also sufficient to impose sanctions under § 1927, see, e.g., B.K.B., 276 F.3d at 1107 ("[R]ecklessness plus knowledge was sufficient to justify the imposition of § 1927 sanctions."); Fink v. Gomez, 239 F.3d 989, 993 (9th Cir. 2001) (holding that "recklessness suffices for § 1927, but bad faith is required for sanctions under the court's inherent power"); Keegan, 78 F.3d at 436 ("[S]ection 1927 sanctions `must be supported by a finding of subjective bad faith. Bad faith is present when an attorney knowingly or recklessly raises a frivolous argument[.]" (internal citations and quotation marks omitted)); id. ("For sanctions to apply, if a filing is submitted recklessly, it must be frivolous, while if it is not frivolous, it must be intended to harass. . . . [R]eckless nonfrivolous filings, without more, may not be sanctioned.").
Therefore, regardless of whether recklessness alone suffices, see Fink, 239 F.3d at 993, or whether "[o]ur precedents plainly require more," Keegan Mgmt., 78 F.3d at 436, § 1927 sanctions are justified in this case because Respondents' filings were made in bad faith insofar as Respondents filings to the Ninth Circuit were reckless and frivolous, see, e.g., id., and because Respondents recklessly and intentionally, misled this Court, see Malhiot, 735 F.2d 1138. Each constitutes independent grounds upon which § 1927 sanctions are justified.
Respondent Giraradi recklessly, and Respondents Lack, Traina, and the young associate intentionally, misled the Ninth Circuit. We have held that recklessly or intentionally misrepresenting facts constitutes "the requisite bad faith and intentional misconduct for which sanctions under § 1927 are appropriate." Id.; accord Pac. Harbor Capital, Inc. v. Carnival Air Lines, Inc., 210 F.3d 1112, 1119 (9th Cir. 2000).
Lack knew in January 2003 that the Judgment was not against Dole Food Company; instead the Judgment was, in his words, "against the wrong entity" and that the "judgment needs to be against Dole Food Co." See TE 43; see also TE 19; Tr. 174:21-75:7 (testifying that he told Gutierrez to "fix" the Judgment). Despite this knowledge, Lack told the Ninth Circuit that Dole Food Company was named in the Judgment; he justifies this action by arguing that he relied on Gutierrez, a nonlawyer, who told him that the Judgment had been corrected. Lack knew firsthand that Gutierrez was untrustworthy, yet Lack engineered years of litigation, including this appeal to the Ninth Circuit, based solely on the assurances of Gutierrez—assurances which ran contrary to his own independent knowledge.
The young associate drafted the Opening Brief, which contends that Dole Food Company was the judgment debtor. He repeated that contention in the Reply Brief, although he knew that the Judgment was not against Dole Food Company. As he wrote in his August 9 memo to Traina, "Dole Food Company, Inc. was NOT named in the judgment." See TE 32-001 (emphasis in the original). By the time Traina finished reading the young associate's memo, Traina of course knew that Dole Food Company was not named in the Judgment. Despite this knowledge, Lack, Traina, and the young associate stated to the Ninth Circuit that Dole Food Company was named in the Judgment. Girardi also knew that the Judgment was against Dole Food Corporation, and not Dole Food Company. On April 22, 2004, days before the Respondents filed their Opening Brief with the Ninth Circuit, which argues that the Respondents had a Nicaraguan Judgment against Dole Food Company, Lack and Girardi signed an agreement with Venezuelan lawyers to enforce this same Nicaraguan Judgment in Venezuela. TE 030-001. That agreement expressly recognized that "[a] judgment for the amount of $489,400,000.00 (four hundred eighty nine million, four hundred thousand dollars) was obtained . . . against Dole Food Corporation, Inc . . . ." Despite this, Girardi contends that he was unaware of the fact that the briefs bearing his signature represented to the Ninth Circuit that Dole Food Company was named as the judgment debtor in Nicaragua, or as he put it, at "some point" he learned that "there was a problem with one of the named defendants," but he was "told that the matter had been corrected."
Respondents, including Girardi, are also subject to § 1927 sanctions for recklessly making frivolous filings to the Ninth Circuit. A "frivolous" filing is one "that is both baseless and made without a reasonable and competent inquiry." See Holgate v. Baldwin, 425 F.3d 671, 677 (9th Cir. 2005) (construing "frivolous filing" in the context of Rule 11 and quoting Keegan Mgmt., 78 F.3d at 434). That is, in the contexts of § 1927, frivolousness should be understood as referring to legal or factual contentions so weak as to constitute objective evidence of improper purpose. Cf. Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse § 27 (3d ed. 2000) (discussing frivolousness in the context of the court's inherent powers to sanction bad-faith conduct).
Respondents' factual contentions were so weak—they were baseless and made without reasonable and competent inquiry —that they provide objective evidence of improper purpose. Respondents, in their briefs to the Ninth Circuit, falsely stated that the Writ of Execution issued by the Nicaraguan court named Dole Food Company, Inc. as a judgment debtor, see TE 39-011, 39-020, 39-030, falsely stated that the Writ corrected mistakes in the Judgment, see TE 39-035, and falsely stated that the Notary Affidavit constituted an accurate translation of the Writ, see TE 39-011, 39-020, 39-030, 39-036. None of these statements has a basis or foundation in fact, and each was made without a reasonable and competent inquiry; indeed, some Respondents affirmatively knew that the statements were false.
Lack knew in January 2003 that the Judgment was not against Dole Food Company. See TE 43; see also TE 19. As Lack and the other Respondents admit, they never saw a Nicaraguan Judgment naming Dole Food Company as a judgment debtor. See Tr. 175:24-76:13. Yet, Lack made this baseless statement, without any evidence supporting this assertion. Lack contends that he was relying on Gutierrez, who assured him that the Judgment was changed; such assurances from a nonlawyer, however, especially one whose veracity Lack had reason to question, do not constitute a reasonable and competent inquiry.
The young associate drafted the Opening Brief, which contends that the Nicaragua Judgment was against Dole Food Company, without ever reviewing the Judgment. See Assoc. Dep. 100:2-:17. As noted, he knew that the Judgment was not against Dole Food Company, see TE 32-001, as did Traina. Based on the Venezuelan agreement, it is also clear that Girardi also knew that the Judgment was against Dole Food Corporation. Yet, all of these Respondents informed the Ninth Circuit that Dole Food Company was named in the Judgment; a reasonable and competent inquiry would have exposed this falsehood for what it was: baseless. Their failure to conduct any investigation provides further objective evidence of an improper purpose.
The statement that the Writ of Execution corrected mistakes in the Judgment is also frivolous; it too lacks a basis or foundation in fact and was made without a reasonable and competent inquiry. Respondents presented no evidence that the Writ corrected mistakes in the Judgment.
Traina also failed to make a reasonable and competent inquiry. Before filing briefs in the district court and the Ninth Circuit, Traina never even requested the actual Writ of Execution from the Ojeda Firm, even though it was always available to him. See Traina Dep. 193:12-94:10; see also Tr. 576:20-:23. Despite this, Traina contends that he was justified in stating to the Ninth Circuit that the Writ corrected mistakes in the Judgment because he "believed everything in the Declarations," Traina Dep. 142:11-43:12, and one of the expert declarations, ostensibly from Mejia, stated that "the judgment, as a amended [sic] is contained in the writ of execution," TE 102-001 to -002. This is a breathtaking position. Traina drafted the "expert declarations" and never spoke with Mejia, who later disowned the declaration. See Traina Dep. 126:25-28:10. Traina's contention that no further investigation was needed because he was relying on statements that he himself drafted is preposterous, and it is stunning that he continues to cling to this position.
Even if the Special Master were to accept Lack's and Traina's explanations, Lack, Girardi, Traina, and the young associate nevertheless failed to correct their filings even after it became apparent to them that the Writ did not "correct" errors in the Judgment. In June 2005, following the motion for sanctions but before the case was to be argued before the Ninth Circuit, the young associate and Traina told Girardi and Lack that the "Writ names Dole Food Corporation—not Dole Food Company." TE 69-005. Even assuming that earlier in the litigation there was some merit to the position that the Writ "corrected" errors in the Judgment, once they were informed by their own co-counsel in no uncertain terms that that was not the case, Lack and Girardi should have so informed the Ninth Circuit.
The statement that the Notary Affidavit constituted an accurate translation of the Writ was also baseless and made without any reasonable and competent inquiry. The Notary Affidavit is not an accurate translation of the Writ of Execution; where the names Dole Food Corporation and Shell Oil Company appear in the Writ, the Notary Affidavit substitutes Dole Food Company and Shell Chemical Company. Compare TE-16, with TE 14-016. Indeed, the Notary Affidavit is internally inconsistent on its face: it states both that Dole Food Company is a judgment debtor, see TE 02-033, and that Dole Food Company was denied the opportunity to appear because it was "not one of the companies sued," see TE 02-028. Respondents made this baseless claim without a reasonable and competent inquiry. Respondents never even asked their Nicaraguan counsel for the Writ, or a copy, to compare the Notary Affidavit with the Writ, nor did they consult with any of the Nicaraguan lawyers. See Espinoza Dep. 23:6-:10, 44:24-45:13, 47:24-48:15; Mejia Dep. 22:5-:11; Lack Dep. 130:5-:15, 188:7-:9; Assoc. Dep. 40:19-41:18; Traina Dep. 69:18-70:22. This, despite Judge Manella's characterization of the Notary Affidavit as "suspect." See TE 48-008. Finally, in June 2005, Respondents examined the actual Writ. Based on this, Traina and the young associate concluded for themselves and informed Lack and Girardi that "[t]hroughout this case we have argued that the [Notary Affidavit] was an accurate translation of the Writ—the actual Writ proves that in fact the translation was not accurate." TE 069-005. As noted, Respondents again failed to inform the Ninth Circuit of this realization; instead, opposing Defendants' effort to supplement the record with the actual Writ, resulting in further unreasonable and vexatious multiplication of the proceedings.
Respondents intentionally and recklessly misled this court, resulting in the unreasonable and vexatious multiplication of the proceedings. And Respondents recklessly raised frivolous arguments to this court, resulting in the unreasonable and vexatious multiplication of the proceedings.
B. Sanctions for Bringing a Frivolous Appeal
Rule 38 provides that "[i]f a court of appeals determines than an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee." Fed. R. App. P. 38. In addition to permitting sanctions against the appellant directly, Rule 38 and § 1912 permit the imposition of personal sanctions against counsel. See Hatch v. Reliance Ins. Co., 758 F.2d 409, 416 (9th Cir. 1985).
"An appeal is frivolous if the results are obvious, or the arguments of error are wholly without merit." George v. City of Morro Bay (In re George), 322 F.3d 586, 591 (9th Cir. 2003) (quoting Maisano v. United States, 908 F.2d 408, 411 (9th Cir. 1990)). On appeal, Respondents argued that the district court erred in holding that Dole was not a sham defendant because the "plaintiffs have an enforceable judgment against each of the defendants, including Dole [Food Company.]" TE 039-031. To support this, Respondents stated that "[t]he Writ of Execution, as the final word of the Nicaraguan Court, names Dole Food Company, Inc. as a judgment debtor," and that Appendix A, (the Notary Affidavit), was the Writ of Execution. TE 039-031. These factual statements were, of course, false. Without these misrepresentations, the result would be obvious: (1) Dole was not properly joined, and therefore, removal was proper; and (2) dismissal was proper because Respondents failed to attach an enforceable judgment. Respondents' appeal, therefore, was frivolous. See Optyl Eyewear Fashion Int'l Corp. v. Style Cos., Ltd., 760 F.2d 1045, 1052 (9th Cir. 1985).
Indeed, the result was obvious to the young associate, the least experienced appellate lawyer to review the case, and to Miller, the most experienced appellate lawyer to review the case. As the young associate noted in his pre-reply-brief memo, "[d]efendants will have a good argument that our Appeal is frivolous based on the claim that since Dole was never named in the Nicaraguan judgment we were aware that Dole was not a proper defendant in our enforcement action." TE 32-001. And, Miller, after less than a day of reviewing the case, concluded that the "overwhelming emphasis" on appeal was the contention that the Writ named Dole Food Company, and given that, as Miller put it, "[t]hat [contention] seemed to me to be the center of gravity on the briefs, [any] attempt to say there were other arguments given the importance of that center of gravity would not make a difference in the outcome of the appeal." Miller Dep. 94:7-96:6.
Respondents, however, argue that their appeal was not frivolous because the issue on appeal was not whether Dole was named in the Nicaraguan Judgment, but whether the district court improperly resolved factual disputes. This argument is of no avail. For one, Respondents argued to the Ninth Circuit that they had a Judgment against Dole Food Company, and the document they called the Writ of Execution was such a Judgment. And of course, the Notary Affidavit on its face states that it is an affidavit by a notary public translated in the presence of plaintiffs' counsel. Respondents did not argue that whether they had a Judgment against Dole Food Company was a disputed fact that should not be resolved by the district court. Even if they did argue the latter, the appeal is still frivolous because they knew that Dole Food Company was not named in the Judgment and the document they were peddling as a Writ of Execution was nothing more than a suspect affidavit. The core issue on appeal was whether Respondents had a Judgment against Dole Food Company. Lack and the young associate knew that Dole Food Company was not named in the Judgment, and the remaining Respondents were, at the very least, reckless in asserting that Dole Food Company was named in the Nicaraguan Judgment.
In a high-stakes gamble to enforce a foreign Judgment of nearly a half billion dollars, Respondents initiated and directed years of litigation against Defendants. Respondents efforts went beyond the use of "questionable tactics" — they crossed the line to include the persistent use of known falsehoods. This litigation was based on three falsehoods: that Dole Food Company was named as a judgment debtor by a Nicaraguan court, that the Nicaraguan court corrected any mistakes it might have made regarding Dole Food Company in its judgment by the Writ of Execution, and that Respondents had submitted the corrected Writ of Execution to the state court and the federal district court. Respondents made these false representations knowingly, intentionally, and recklessly. Their actions vexatiously multiplied the proceedings at great expense to Defendants and required the Ninth Circuit to deal with a frivolous appeal.
The court cannot and will not tolerate members of the bar employing the use of known falsehoods to further their objectives, no matter how appealing the underlying cause of their clients may be. For such conduct, Respondents should face substantial sanctions commensurate with the sums at stake, the efforts and resources expended in this litigation, and the gravity of their misconduct.
The Special Master recommends to the panel that Respondents be sanctioned by being required to reimburse Defendants for the attorneys' fees and costs incurred by Defendants in the Franco appeal,
1. Respondents Thomas V. Girardi and the Girardi Firm shall reimburse Defendants Dow Chemical Company, Dole Food Company, and Shell Chemical Company (collectively, "Defendants") their attorneys' fees and costs, but not to exceed the aggregate sum of $125,000.00.
2. Respondents Walter J. Lack and the Lack Firm shall reimburse Defendants their attorneys' fees and costs, but Lack's individual liability shall not exceed the aggregate sum of $250,000.00.
3. Respondent Paul A. Traina shall reimburse Defendants their attorneys' fees and costs, but not to exceed the aggregate sum of $10,000.00
4. Respondent [the young associate] shall reimburse Defendants their attorneys' fees and costs, but not to exceed the aggregate sum of $5,000.00.
5. Respondent the Lack Firm shall be jointly and severally liable for the sanctions imposed on Respondents Traina and the young associate so that its aggregate liability shall not exceed $265,000.00.
6. Respondents aggregate liability to each Defendant shall not exceed $130,000.00, or said Defendants' actual attorneys' fees and costs, whichever is less.
7. Counsel for Respondents and counsel for Defendants shall meet and confer and shall file a written report with the Special Master within the time to be specified by the panel on whether they have reached agreement on the sum owing from each Respondent to each Defendant. If complete agreement is not reached, their report shall set forth the issues that remain to be resolved and resolution of those remaining issues are recommitted by the panel to the Special Master.
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