IN RE GIRARDI
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.
Nos. 08-80090, 03-57038
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.
ORDERWe 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.
1. Background
The factual and procedural background of the case is complicated but essentially uncontested.1 Respondents Thomas V. Girardi and Walter J. Lack are Los Angeles-based lawyers who have practiced law together for 25 years, while maintaining separate firms. They are highly experienced and highly successful practitioners. 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"). In some cases, the Girardi Firm has the primary responsibility; in others, the Lack firm has the primary responsibility. 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.
1. The background of the case is fully set forth in the Report and Recommendation of the Special Master, the Honorable A. Wallace Tashima, a redacted copy of which is appended to this order.
2. As detailed in Judge Tashima's Report, none of these declarations provided solid support for the propositions about Nicaraguan law for which they were offered. Moreover, the declarants have subsequently claimed that they did not draft their own affidavits and that they disagreed with some of the statements made in those declarations.
3. As Judge Tashima has recused himself from further duties as Special Master, we refer the issue of sanctions to Appellate Commissioner Peter L. Shaw, who shall conduct whatever proceedings he deems appropriate and consistent with Judge Tashima's report, and who shall have authority to enter an order awarding fees, subject to reconsideration by the panel.
4. "Recklessness," of course, may have different meanings in different contexts. See, e.g., Prescod v. AMR, Inc.,383 F.3d 861, 870 (9th Cir. 2004) (per curiam) (applying California tort law identifying recklessness where "the actor has intentionally done an act of an unreasonable character in disregard of a risk known to him or so obvious that he must be taken to have been aware of it, and so great as to make it highly probable that harm would follow"); Hollinger v. Titan Capital Corp.,914 F.2d 1564, 1568-69 (9th Cir. 1990) (en banc) (defining the "recklessness" that constitutes the scienter necessary for a violation of securities law as conduct "involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it") (quotation omitted). In the instant context, recklessness might be defined as a departure from ordinary standards of care that disregards a known or obvious risk of material misrepresentation. 1. Kozinski, C.J., Reinhardt, and Berzon, JJ.
2. Pursuant to the Special Master's Order filed on October 17, 2006 (the "Bifurcation Order"), this Report and Recommendation does not address issues relating to discipline under Rule 46. The Bifurcation Order provides that "issues related solely to discipline" will be bifurcated and addressed at a later time. Bifurcation was ordered in response to Respondents' motions to disqualify Defendants from participating in these Special Master Proceedings. In those motions, Respondents contended that permitting Defendants to participate in the Special Master Proceedings would violate their right to a disinterested prosecutor, right to a full and fair hearing, and their clients' (i.e., the plaintiffs in Franco) interest in confidentiality. The Bifurcation Order was issued to protect those interests, which are implicated more with respect to potential discipline than with Defendants' motion for sanctions, while, at the same time, recognizing Defendants' right to participate in prosecuting their motion for sanctions.
3. Fed. R. Civ. P. 52(a) recognizes the sufficiency of findings of fact in narrative form, i.e., which appear in a "memorandum of decision filed by the court."
4. "Tr." refers to the Reporter's Transcript of the evidentiary hearing held in October 2007.
5. As Chief Judge Kozinski has described it:
Dibromochlorpropane [DBCP] is a powerful pesticide. Tough on pests, it's no friend to humans either. Absorbed by the skin or inhaled, it's alleged to cause sterility, testicular atrophy, miscarriages, liver damage, cancer, and other ailments that you wouldn't wish on anyone. Originally manufactured by Dow Chemical and Shell Oil, the pesticide was banned from general use in the United States by the Environmental Protection Agency in 1979. But the chemical companies continued to distribute it to fruit companies in developing nations.
Patrickson v. Dole Food Co.,251 F.3d 795, 798 (9th Cir. 2001).
6. Before signing the agreement, Lack and Girardi traveled to Nicaragua, to meet with members of the Ojeda Firm. Tr. 427:19-428:6.
7. "TE" refers to Trial Exhibits introduced into evidence at the evidentiary hearing.
8. Dole Food Corporation does not exist. TE 5-166; TE 6-003; Tr. 294:19-:23.
9. Angel Espinoza was the "main" lawyer at the Ojeda Firm handling the Franco case. The lawyers at the Lack Firm, however, never spoke with him, instead communicating only with Walter Gutierrez, the nonlawyer-administrator of the Ojeda Firm. TE 15; Gutierrez Dep. 24:5-:11; Traina Dep. 72:16-73:9; Assoc. Dep. 18:12-:24, 71:6-:17; Espinoza Dep. 23:8-:12.
10. Nor are any responses to the petition part of the Nicaraguan court record. See TE 705 (DVD copy of complete Nicaraguan court record). It should be noted, however, that several pages are missing from the record. See TE 705E.10.
11. Respondents Lack, Traina, and the young associate contend that Dr. Hurtado represented to the Nicaraguan court that Dole Food Corporation is a subsidiary of Dole Food Company. See Lack Post-Hearing Brief 10. They base this assertion on the following passage from the document which Dr. Hurtado filed, seeking to appear on behalf of Dole Food Company:
Inasmuch as the company on behalf of which I am acting today, DOLE FOOD COMPANY, has been notified of other claims by this office, although seemingly brought also against DOLE FOOD CORPORATION INC., MY PRINCIPAL IS ALARMED BY THE FACT THAT SUCH CONFUSION, CREATED BY CLAIMANT, COULD LEAD TO INJURIES TO ITS RIGHTS; NOTWITHSTANDING THE FACT THAT AS DOLE FRESH FRUIT COMPANY DID NOT EXIST AT THE TIME OF THE EVENTS; DOLE FOOD CORPORATION INC. NEVER HAD A PRESENCE OR BUSINESS IN NICARAGUA and, as both companies are subsidiaries and there has been no legal proceeding to declare the illegitimacy of the legal capacity of the power of attorney, as the defendant company never ordered to be heard, pursuant to Article 827 Pr; paragraph two and ample case law, I APPEAR ON BEHALF OF MY PRINCIPAL, DOLE FOOD COMPANY, TO RATIFY ALL THE ACTIONS OF DOLE FRESH FRUIT COMPANY IN THE CLAIM FILED AND NOTIFIED TO DOLE FOOD CORPORATION INC.
TE 174-05.
12. Michael Carter, General Counsel of Dole Food Company, testified that he did not want to post an additional deposit because he considered the Nicaragua courts to be a "fraudulent legal system." See Tr. 338:21-39:3.
13. Dole Fresh Fruit Company's $100,000 bond was not returned until after the Nicaraguan court issued a judgment. TE 12-037.
14. Respondents attempt to recast this judicial notice, arguing that despite its plain language, the judge refused Dole Food Company's intervention because it "told Dr. Hurtado to use his rights using proper legal means, depositing the money that serves as a procedural guarantee." Lack Post-Hearing Brief 11. For this notion, Respondents rely on Espinoza's deposition, in which he states:
My understanding is that the judge denied [Hurtado's] participation because he asked that everything that he had done during the past month as a representative of Dole Fresh Fruit Company be ratified in favor of his new company, Dole Fruit—I beg your pardon—Dole Food Company.
Espinoza Dep. 70:6-:12. The plain language of the notice, however, states otherwise: Dole Food Company was denied legal intervention not because it attempted to ratify Dole Fresh Fruit Company's actions, but because "the complaint heard in this case was not brought against this company [Dole Food Company]." TE 5-170 (Spanish), 5-175 (English).
15. Despite the judicial notice and the Judgment which states that Dole Food Company's lawyer's appearance was "denied because his client was not one of the companies named in the complaint," Lack argues that it was a "false representation[ ] that Dole Food Company hadn't been allowed to participate [in the Nicaraguan proceedings]." See Lack Br. 12.
16. Girardi received the email exchange which discussed issues pertaining to naming Dole Food Corporation in the Judgment, initialing the emails as they crossed his desk. Girardi Dep. 111:10-12:4, 121:7-22:1.
17. It is unclear why Lack is so adamant that Dole Food Company was "served" because Dole Food Corporation, and not Dole Food Company, was named in the initial complaint. See TE 73-044 (Spanish), 73-060 (English).
18. Lack testified that he "d[id]n't recall" whether the meeting to discuss the problems with the Judgment took place. Tr. 174:1-:2.
19. "Ejecutoria" mean Writ of Execution. See Espinoza Dep. 84:20-:22.
20. Judge Benavente signed both the Writ, see TE 13-026, and the Judgment, see TE 12-017.
21. In a later memo, Gutierrez referred to Girardi's participation at the meeting, stating that "[l]ike Mr. Girardi so wisely stated at our last meeting `. . . defendants know one these days we are going to get it right'— and we will." TE 024-003.
22. On January 31, 2003, Lack and Girardi met with Dole Food Company representatives "to discuss a possible settlement of claims pending in Nicaragua, which included the Franco action." TE 173.
23. Lack and Gutierrez agree that Lack never asked to see the Writ. See Tr. 176:21-80:19; Gutierrez Dep. 144:19-:20.
24. Gutierrez was referring to the January 2003 Writ when he stated "the other copy is a direct order from the District Court." Gutierrez Dep. 224:15-25:5.
25. Peter M. Schwartz, a California lawyer and solo practitioner, considered himself the "referring attorney," serving as the "primary liaison with the Nicaraguan law firm" and the Lack and Girardi Firms. See Schwartz Dep. 44:18-:24. Gutierrez cc'd Schwartz on his emails to Lack and Girardi.
26. Lack testified that he also did not ask Schwartz about the documents to which Schwartz refers. Tr. 199:24-200:8.
27. Mr. Caceres is also an attorney and once served as a judge. See Caceres Dep. 10:11-12:18. He was not, however, a judge when he issued the Notary Affidavit. Id.
28. Lack obtained the Notary Affidavit from Gutierrez sometime in "late April or May" 2003. Lack Dep. 39:25-40:19, 118:6-:9.
29. Girardi's signature appears on the complaint, see TE 2-015, although he may have signed or authorized Lack to sign it for him, see Girardi Dep. 152:18-:20. Moreover, Girardi testified that he signed the complaint without reading it, Tr. 431:4-:7, and that he is not sure that he understood that the complaint commenced an action to enforce a foreign judgment, Tr. 448:17-49:10. To Girardi, Lack had primary responsibility for the Franco case; therefore, he did not concern himself with the details of that litigation.
30. Lack also testified that Gutierrez provided "no explanation [as to] how it got from Shell Oil to Shell Chemical. None." Tr. 204:23-05:2.
31. As Defendants note in their motion to dismiss:
[W]hat the plaintiffs attach as Appendix A—and what they now ask an American court to "recognize"—is at least four steps removed from the actual Judgment. It is a portion of an affidavit signed by a notary public, . . ., in the presence of the plaintiffs' lead Nicaraguan attorney, . . ., and the court-appointed translator[.]
TE 72-014. And, as Defendants correctly point out in a footnote:
This is plain from the first page of the complete Notary Affidavit that the Plaintiffs did not provide to the California court, but which was later supplied to the defendants upon request.
TE 72-014 to -015 n.16.
32. The motion to remand, however, admits that "Dole Food Corporation is the entity named in the Judgment." See TE 73-016.
33. Although Lack refers to him as a "partner," Traina is, in fact, an employee of the Lack Firm and has worked for it since May 1996. See Traina Dep. 9:20-10:18.
34. Traina never asked Nicaraguan counsel if Appendix A was the Writ, as the Complaint contends, see Traina Dep. 69:18-:22, 144:6-:16; see also Espinoza Dep. 23:8-:12, nor did he even ask why, assuming that Appendix A was the Writ, it would be titled "Affidavit," see Traina Dep. 51:10-:12, 55:13-:15, 68:9-70:22, 146:24-47:3.
35. She had worked as a legal intern in Nicaragua and twice appeared in a Nicaraguan court to "defend the national army of Somoza after they were overthrown." Such representation, however, was "mandatory," and she was not compensated for that representation. Centeno Dep. 14:3-15:8.
36. Mejia is also a former Vice President of the Nicaraguan Supreme Court, although the "Mejia Declaration" did not so state. Mejia Dep. 49:19-:22. Mejia does not speak English. Mejia Dep. 8:3-:7.
37. According to Mejia, the Lack Firm sent two lawyers, including Elizabeth Crooke, to Nicaragua to confer with him before his deposition. See Mejia Dep. 10:7-11:14.
38. Espinoza does not speak or read English. Espinoza Dep. 19:21-20:3.
39. The young associate graduated from the University of San Diego Law School in 2001, and began working for the Lack Firm in January 2002. Assoc. Dep. 9:14-:20. By the time he was asked to draft the Opening Brief, he had fewer than 24 months of practice experience, see id. 24:12-:13 (testifying that Traina asked him to work on the appeal in December 2003), and no appellate experience: he had never drafted an appellate brief, had never worked on an appeal, nor had he externed or clerked for a judge, id. 26:12-:14.
40. Lack signed the brief and Girardi authorized Lack or Howard Miller, a partner in the Girardi Firm, to sign on his behalf. Girardi Dep. 62:1-62:7. Lack, Traina, the young associate, Girardi, and Miller are listed as Attorneys of Record on the Opening Brief. See TE 039-001.
41. Respondents failed to investigate to determine the veracity of Defendants' arguments and Judge Manella's findings and conclusions: Respondents never even asked their Nicaraguan counsel for the Writ, or a copy, 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.
42. Defendants discussed this Writ in their brief to the Ninth Circuit:
Indeed, defendants have recently learned that on May 18, 2004-while this appeal was pending—the Nicaraguan court granted plaintiff's request for a new Nicaraguan "writ of execution" with respect to the same judgment, and that this new writ lists neither Shell Chemical Company nor Dole Food Company, Inc. as a liable party, but instead lists the parties named in the Nicaraguan judgment, Shell Oil Company and the non-existent Dole Food Corporation, Inc. The fact that plaintiffs continue to pursue their claims against Dole Food Company, Inc. and Shell Chemical Company in this Court, knowing full well that the new writ does not list those companies as liable parties, only underscores their attempted manipulation of the judicial process.
TE 060-033.
43. The young associate testified in his deposition that he wrote this memo because as he put it: "I would say it's—[the drafting of the memo] was a knee-jerk reaction to how buried and how unhappy I was and how much I was working and everything I had to deal with, so this was my attempt to let Mr. Traina know I didn't want to work on the case. I had too many other things going on." Assoc. Dep. 138:16-:21.
44. Respondents opposed the discovery request, which resulted in the order in that related case. See TE 713.8-.13, 715.5-.9.
45. Respondents opposed the motion to supplement the record to the Ninth Circuit. See TE 26-007, 014 (arguing that the Writ "had no bearing on the issues presented on appeal" and that "expert testimony" made it proper to "rely on [Appendix A].").
46. Howard B. Miller is an appellate lawyer at the Girardi Firm. Miller graduated from the University of Chicago Law School in 1960, clerked for Justice Roger J. Traynor on the California Supreme Court, and, in addition to an active practice, has taught at the University of Southern California School of Law. Miller Dep. 11:24-13:7.
47. Girardi stated, and Lack confirmed, that he (Girardi) authorized Lack to affix Girardi's signature to the Venezuelan agreement.
48. Indeed, the August 11, 2003 order from the Nicaraguan court confirming that Dole Food Corporation was the judgment debtor directly contradicts the notion that the Writ "corrected" the judgment. See TE 705E.5850 (English); see also TE 705S-5794 (Spanish); Espinoza Dep. 124:16.
49. Of course the young associate and Traina were under the same obligation to correct the filings.
50. Indeed, Lack, in his response to the Order to Show Cause, swore that he promptly turned over the Writ to opposing counsel, TE 11-013, and did not resist its production, Tr. 223:12-:25.
51. Moreover, the notion that the appeal was not frivolous because they were challenging Judge Manella's determination that Appendix A was not the Writ is wrong for another reason. It is blackletter law that "the defendant is entitled to present facts showing the joinder to be fraudulent." Morris v. Princess Cruises, Inc.,236 F.3d 1061, 1067 (9th Cir. 2001). In other words, Judge Manella did not err in considering facts outside the pleadings. 52. "Appellate Rule 38 and § 1912 are read in pari materia to authorize the imposition of a monetary sanction for the filing and prosecution of any frivolous appeal." Joseph, supra, § 31; see, e.g. In re George I, 322 F.3d at 591; NLRB v. Unbelievable, Inc.,71 F.3d 1434, 1441 (9th Cir. 1995). For this reason, the Special Master has not separately analyzed Respondents' liability for monetary sanctions under 28 U.S.C. § 1912 apart from their liability under Rule 38. 53. Although it may well be academic because of the per-Defendant cap on the reimbursements recommended below, the Special Master includes as part of the "attorneys' fees and costs incurred by Defendants in the Franco appeal," attorneys' fees and costs incurred by Defendants in prosecuting their motion for sanctions. Whether such fees and costs are recoverable as part of the sanctions imposed is an open question in the Ninth Circuit and the other circuits appear to be divided. The Special Master believes that the better view is the one adopted in In re Tutu Wells Contamination Litig.,120 F.3d 368, 387-88 (3d Cir. 1997) (affirming a sanctions award imposed under the trial court's inherent powers that included attorney's fees incurred in the sanctions proceedings), overruled on other grounds by Comuso v. Nat'l R.R. Passenger Corp.,267 F.3d 331, 338-39 (3d Cir. 2001). The Ninth Circuit earlier held that fees and costs incurred in pursuing a Rule 11 sanctions motion are not recoverable. Lockary v. Kayfetz,974 F.2d 1166, 1177-78 (9th Cir. 1992). That holding, however, was overruled by the 1993 amendments to Rule 11, which now expressly permits such awards. See Margolis v. Ryan,140 F.3d 850, 854 (9th Cir. 1998) ("The rule in Lockary, enunciated in 1992, is no longer good law."). 54. Pursuant to the Bifurcation Order, see note 2, supra, the matter of possible sanctions/discipline under Rule 46 is addressed by a separate, sealed order.