Legal Ethics

Federal Judge: Motley Rice, 2 Other Law Firms Must Pay $395K in Legal Fees re 'Frivolous' Suit

A federal judge in Indianapolis has ordered Motley Rice and two other law firms to pay nearly $395,000 in legal fees for bringing what the judge called a frivolous whistle-blower suit “based on a completely false story.”

ITT Educational Services said it spent millions defending the False Claims Act suit, but U.S. District Judge Tanya Walton Pratt discounted what she found to be $2.7 million in legitimate legal fees because of the company’s several-year delay in deposing a key witness and then seeking the dismissal of the litigation, Forbes reports.

It appears from what the judge says in a written opinion (PDF) on Monday that Motley Rice was a latter-day addition to the team of plaintiff counsel but is being held jointly and several liable with two other law firms, the Law Offices of Timothy J. Matusheski and Plews Shadley Racher & Braun, just the same.

The fatal flaw in the suit, Forbes explains, is that a whistle-blower is supposed to provide information on which a case is then based, not receive information largely from her own counsel after the fact.

“The court easily finds that it was brought for an improper purpose—presumably, to extract a large settlement from ITT, which would otherwise be forced to incur massive legal fees,” wrote Pratt in her opinion. “On this point, the court simply cannot ignore the genesis of this lawsuit.

“Matusheski brought this lawsuit after trolling public dockets and using a private investigator to cold-call ex-employees of for-profit educational institutions who had sued their former employer. This is as unethical as it is unseemly. Specifically, Model Rule of Professional Conduct 7.3 prohibits lawyers from soliciting ‘professional employment from a prospective client when a significant motive for the lawyer’s doing so is the lawyer’s pecuniary gain.’ At its core, this was an opportunistic and attorney-driven lawsuit.”

The American Lawyer (sub. req.) also has a story.

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