Civil Procedure

Judge Says Firm Must Explain 'Fraudulent' Removals or Pony Up $25K

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A federal judge is so fed up with what he labeled a prominent defense firm’s history of “vexatious” litigation tactics that he has threatened to bar all 20 partners and five associates from practicing in the Western District of Louisiana.

That’s just one hot bubble under the skin in a blistering nine-page opinion by U.S. District Judge Tucker Melançon, who is known as a hard-core law-and-order jurist. The judge’s withering explication of the firm’s transgressions prompted beaucoup buzz among the Louisiana contingent last weekend in New Orleans at the American Association for Justice’s winter convention.

For now, Melançon is threatening several possible actions laid out in the memorandum opinion (PDF) issued Feb. 6, detailing how Matthew Ungarino engaged in a “blatant attempt to mislead this court” with claims that his corporate client had no business foothold in Louisiana and thus belongs in federal court because of diversity of jurisdiction.

The client’s own exhibits in Hollier v. Willstaff Worldwide and its filings with the Louisiana Secretary of State’s corporation database show clearly the company’s principal place of business is in Monroe, La., the judge wrote.

The opinion lists 24 other cases in the state’s three federal districts in which the Ungarino & Eckert firm had filed “improvident removals.” In some of those, the firm was hit with monetary sanctions and warned not to file baseless removals. Such removals from state to federal court are automatic—no hearings, no evidence required—so the state proceedings are halted immediately. Then the federal court sorts out the reasoning.

It is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts. Thus removals can become a cat-and-mouse game in which a plaintiff names a party having nothing to do with the matter as one of the defendants to prevent the other side from removing the matter to federal court. That court can find fraudulent joinder and keep the case or remand it.

But studies have shown a greater increase in recent years of defendants removing cases to federal court, only for them to be dispatched back to state court for erroneous removal. One researcher, a third-year student at New York University School of Law, found that most often in such situations, the plaintiffs are individuals. And the rate of their cases being remanded back to state court is higher, too, wrote Christopher Terranova in last summer’s edition of the Willamette Law Review (PDF).

He adds that “the delays and costs of that extra procedural step to federal court are more costly and burdensome for most individual plaintiffs than they are for bigger defendants with more assets.”

In the Hollier opinion, Judge Melançon gave the firm 10 days to file a memorandum saying why it should not be sanctioned $25,000 or more. The funds would come only from the pockets of New Orleans attorneys Ungarino, who brought the removal action, and the other name partner, William Eckert, who came into the case to oppose remand. If that doesn’t satisfy him, Melançon will hold a hearing and require all respondents—all 25 of the firm’s lawyers—to attend and show cause why he should not impose the monetary sanction. They also would have to show cause why he should not recommend that all judges in the district bar the respondents from practicing there.

And the firm must certify to the court that it has provided its client with a copy of the memorandum opinion, which states that if such a removal happens again, the client too will be sanctioned.

Ungarino would say only: “Our comment will be the response as the judge has ordered.”

But legal ethicist Stephen Gillers, who teaches at the New York University School of Law, said of the opinion: “Wow.”

“Depending on how the firm reacts and how judge responds to their reaction, the firm’s lawyers have to be aware that they’re flirting with risk of state disciplinary action,” Gillers says. “They have to worry that other judges will see what [Melançon] did and look with incredulity on their future conduct. This really undermines their credibility before the courts, and they’ve got to try to repair that.”

Gillers believes $25,000 is rather low considering there were more than two dozen of what the judge called “fraudulent and improper removals.”

And then there’s the state’s legal community, where pent up anger and frustration about Ungarino & Eckert is now flowing.

“Our listserv has been very busy with Mr. Ungarino,” says John deGravelles, a former president of the now-renamed Louisiana Association for Justice, the trial lawyers’ group. “They’re venting about him and asking why it took so long after all those cases listed in the judge’s opinion.”

Melançon was venting, too, adding this kicker to his opinion: “The undersigned is always loath to consider the imposition of sanctions against an attorney—especially sanctions that, based on the circumstances, may be heavy or onerous. However, based on the record of this proceeding, given the extensive history of this firm and of these attorneys, the previous sanctions imposed, and the many ‘second chances’ they have received, the court finds that consideration of the sanctions set out above warranted and necessary to not only discourage, but to prevent further improvident removals to federal court by Ungarino & Eckert, its principals and associates.”

The firm’s response is due Feb. 17.

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