RECENT VICTORIES BY
MORRIS & STONERECENT VICTORIES BY
MORRIS & STONEHopefully it goes without saying that no firm can guarantee the results of a trial. Even a great attorney can run afoul of an incompetent judge, a capricious jury, or a client who withholds essential facts. Similarly, while we identify some of the firms we have "defeated", that is in no way an indication that the opposing firm did anything but an excellent job. Morris & Stone enjoys a very successful track record. However, nothing contained on this page should be taken as a representation that your matter will achieve the same success.
These summaries are entirely accurate, but the background information has been altered where necessary to protect the confidentiality of our clients.
A Victory for Fairness[April 30, 2008 -- Pomona] Proof that no good deed goes unpunished; at least until we make it right.
A man, we'll call him Jitu, was new to this country, and unemployed. He looked up a distant relative for help, who we will call Amar. First Amar acted as matchmaker, and introduced Jitu to a woman he eventually married. Next, at the request of Jitu, Amar agreed to set up Jitu in a dry cleaning business so that he would have a job. Under the agreement, Amar would buy the business and Jitu would run it. They would be 50/50 partners, splitting all income and any profits from the eventual sale of the business. Amar signed the lease and the loan documents because Jitu had no credit, but Amar had his own full time job and had little involvement with the dry cleaning business.
Jitu ran the business for more than seven years. Two years after the sale of the business, soil and groundwater contamination was found at the site from the dry cleaning chemicals. The landlord sued Amar because only his name was on the lease, and received a mid, six-figure judgment/settlement in Federal court for the clean-up costs. Jitu refused to pay any portion of the clean-up costs, claiming that he had no liability since he had not signed the lease.
After trying for years to persuade Jitu to pay half of the clean-up costs, Amar was forced to sue his relative, and retained Morris & Stone to handle the trial. Defendant Jitu, and his attorney Michael O'Callaghan (who did a very good job at trial), relied on three arguments. First, they contended that in the partnership agreement, Amar had agreed to be responsible for "all debts and liabilities of the partnership." Next, they contended that Jitu had not been a part of the Federal action, and therefore could not be expected to pay any part of that judgment/settlement. Finally, they contended that since another party had operated the business after the sale, it could not be determined who was responsible for the contamination.
At the jury trial, we argued that Amar's agreement to be responsible for all the debts did not contemplate ground contamination, especially since as between the partners, Jitu would be the contaminator. Next, we made clear that while Jitu was not a party to the Federal action, the defense of that action by Amar was for the benefit of the partnership. Finally, we showed through photos and the application of common sense that it was more likely than not that Jitu had contributed to the ground contamination.
The jury agreed with us, and entered a verdict requiring Jitu to pay for half of the clean-up costs, past and future. Which was all our client ever wanted.
A Victory Against Spam[July 19, 2005 -- Santa Ana] "It is obvious that Pallorium is a collateral casualty in the war on spam." That is how Superior Court Judge Geoffrey T. Glass ended his ten page minute order in the case of Pallorium, Inc. v. Jared, ruling in favor of our client, Defendant Joe Jared.
In 2003 Jared was operating a website that offered a free database of reported spammers gleaned from a number of sources, as well as a means to check for open relays. An open relay is a server which can be hijacked and used by spammers to anonymously transmit their messages. Blocking a spammer by site name or address is ineffective if the spammer can run the messages through an open server.
Jared’s website, OsiruSoft, listed Pallorium’s computer as an open relay. Once so designated, Pallorium’s e-mail messages were blocked by a number of Internet Service Providers who had chosen to use Jared’s database. Pallorium denied that it ever had an open relay and sued Jared for the damages allegedly caused by Jared’s efforts to block spam.
Steven Rambam (aka Steven Rombom), a principal of Pallorium, predicted that he would have a judgment against Jared by the end of 2004, but it was not to be so. Jared had been handling his own defense, but just weeks before the trial was set to commence, he hired Aaron Morris of The Morris Law Firm to represent him at trial. Morris filed a number of motions and persuaded the court to have a limited trial on the issue of immunity under the Communications Decency Act.
At trial, Pallorium was represented by Woodland Hills attorney Gary Kurtz. Kurtz argued that Jared was liable on at least two grounds. He claimed Jared had acted in bad faith in the manner he checked for open servers and for failing to maintain a system to correct any errors. Morris argued that the Communications Decency Act was specifically designed to protect people and entities that seek to block spam, and that imposing a requirement that any spam blocking system must have an "appeal process" would eviscerate the purpose of the Act. If such were the law, spammers could beat any anti-spam system by spamming it with demands for removal from the list. Anyone seeking to develop a spam filter would need the resources to hire a staff to investigate all the claims by spammers that they are not really sending spam.
The court adopted the latter interpretation of the Act. "The Court rejects the argument that Jared’s bad faith is shown by the inefficiencies of his methodology . . . efficacy is not a consideration in determining good faith," Judge Glass stated. The court ruled in favor of Jared, thereby throwing out the case. Rambam thank you ma'am.
This case presented some challenges, because by the time Jared retained our firm, the time had long since passed for bringing motions to dispose of the action. Morris set a motion for judgment on the pleadings for the first day of trial. We knew the motion had little chance of being successful because that particular motion cannot be supported with evidence, and the proof that Jared was entitled to immunity under the Communications Decency Act required significant evidence. However, the motion was successful in piquing the Court's interest. Judge Glass continued the trial so that motion could be fully briefed and opposed, and then ordered a trial on just the issue of immunity under the Communications Decency Act. That trial lasted less than eight hours and resulted in a victory for our client Jared. It is likely that even with a contrary judgment at this bifurcated trial on the affirmative defense, Jared would have prevailed at the trial on the merits. Rambam testified that his business was disrupted because so many e-mails had been blocked by Jared's filter, but he did not produce any such e-mails, offering instead only some sort of compilation of three e-mails. Also, under cross-examination by Morris, Rambam conceded that he had other means to send e-mails, so it is doubtful Pallorium could have proven any damages.
The victory against Pallorium is gratifying, but there is a larger issue here. Pallorium argued that the Communication Decency Act was designed to punish spammers, but not to protect spam blockers. It argued that a party that strives to block spam is only protected if the spam filter is content based. In other words, if the filter can successfully block offensive e-mail of a specific type, that effort is protected. We disagreed, and argued that spam is inherently objectionable, and that a filter designed to block spam -- regardless of content -- is protected. The court agreed with our position. And while this is a trial court decision and therefore affords no precedent, such victories bolster the fight against spam.
The complete minute order can be found here.
[UPDATE -- August 8, 2005] The court had ordered that counsel for Jared was to prepare the formal judgment, and Pallorium would then have ten days to object to that proposed judgment. Counsel for Pallorium filed no objection to the proposed judgment and instead filed a document attacking the court's tentative decision. We'll give counsel credit for chutzpah in making these arguments with a straight face. The court had found immunity under two sections of the Communications Decency Act, one of which required a showing of "good faith." Pallorium argued that by sending e-mails to servers to test whether they were open, and then creating a database based on what he found, Jared was in essence illegally entering these servers for an illegal, nefarious purpose and could not have been acting in good faith. Of course Judge Glass rejected this argument out of hand. In the first place, it is wrong, but even more problematic it was never raised at trial. Parties to a trial cannot wait until after the court rules and then bring up arguments they could have made at trial. Judgment was entered in favor of Jared.
[UPDATE -- January 11, 2007] Not surprisingly, Pallorium did not go quietly into the night. It was clear from his statements at trial that Rambam was taking the case very personally. Pallorium filed an appeal, making the same claims it had made in objecting to the the trial court's tentative decision. Pallorium's counsel, Gary Kurtz, argued that the judgment in favor of Jared denied Pallorium the right to a jury trial and was defective because of Jared's alleged bad faith, again claiming that testing someone's server to see if it is an open relay somehow amounts to criminal conduct. Kurtz went for an emotional approach, trying to show the potential for mischief if someone is permitted to block e-mail based on their own definition of what constitutes spam. Pallorium continued to argue that the Communications Decency Act only protects content-based spam filters. It claimed that Jared's filter should not be protected because he had decided to block any e-mails coming from an open relay. Kurtz argued that such an over-inclusive filter could block legitimate e-mails, and therefore should not be protected. In one of our favorite passages, Kurtz makes the following emotional appeal in Pallorium's brief:
"Should a California Court immunize the conduct of the Society for Historical Review (or some other Neo-Nazi organization) if it decided to block the e-mail of the Simon Wiesenthal Center? Should a California Court immunize the conduct of the North-American Man-Boy Love Association (or some other pedophile society) if it decided to block the e-mail of the National Center for Missing and Exploited Children? Should a California court immunize the conduct of Al Qaida if it decided to block the e-mail of the C.I.A.?"
Sounds great, but this extreme language does not withstand the slightest scrutiny. Jared did not block a single e-mail going to others. Jared designed an e-mail filter for his own use and like anyone was free to set whatever restrictions he wanted on that filter. For example, you can set your e-mail system to receive e-mails only from those people listed in your address book. Can a spammer now sue you because you are blocking his efforts to explain to you the virtues of Viagra? If your spouse decides to make use of your filter, are you now liable because you have distributed a spam filter that could keep her from receiving messages from the C.I.A.? Of course not, and no emotional hypothetical will change that fact. Imagine what your inbox would contain if spam filters were limited in the manner Pallorium proposed.
After noting the diligence of The Morris Law Firm, the California Court of Appeal affirmed the judgment in favor of Jared. The Communications Decency Act immunizes "a provider . . . of an interactive computer service" who makes available to "others the technical means to restrict access to material . . . the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected." As the Court said, "whether Jared's filter was over-inclusive is irrelevant so long as he deemed the material to be 'obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable.'"
The complete Opinion of the Court of Appeal can be found here.
[UPDATE -- February 23, 2007] "The ego is not master in its own house." -- Sigmund Freud. Even a unanimous opinion by the Court of Appeal did not convince Rambam of the error of his ways. Counsel for Pallorium filed a Petition for Review with the California Supreme Court. Unlike an appeal to the Court of Appeal, which must be considered by the court if any party decides to file one, an appeal to the Supreme Court is left to the discretion of that court. A Petition for Review is not an appeal per se, but rather is a request to the Supreme Court, asking it to agree to hear the appeal.
The Petition seems doomed to failure if the problems so far are any indication. Pallorium missed the deadline for filing the Petition, and had to seek relief from the untimely filing. Permission to file a late Petition was granted, but the Petition that Pallorium then filed was missing pages and bore the wrong case number. Pallorium then had to file an errata, asking the Court to insert the missing pages. We predict the Supreme Court will not accept the matter for review.
[UPDATE -- April 11, 2007] As we predicted, after receipt of our Answer to the Petition, the California Supreme Court unanimously denied review. Jared now has a complete victory, with every judicial officer that has examined the case agreeing that he acted properly.
This case demonstrates the importance of keeping emotion out of legal decisions. Many of us have experienced the frustration of returned e-mails, blocked by an over-inclusive spam filter, but we don't then sue the person that blocked the e-mail. Making matters worse, Pallorium sued the wrong person. Jared simply offered a means to test for open servers; he didn't block any of Pallorium's e-mails. Once we explained the Communications Decency Act to Rombom and his counsel, that should have been the end of this action. Instead, Pallorium took the matter to trial and appealed all the way to the Supreme Court.
Winning the Fight for Freedom of Expression on
the Internet[October 4, 2005 -- Orange County Superior Court] After the Internet became an everyday part of our lives, Congress was faced with some crucial decisions. Take the example of someone that creates a website with a chat room or bulletin board. Let's assume the website was created by a movie buff as a forum by which others could join him in discussions about the latest and greatest films. The site becomes popular; so popular that the webmaster cannot read all the messages that are posted. Then one day, someone comes on the website and posts horrible, defamatory statements about a director of one of the movies. The director learns about the message, and since there is no way to determine who posted the messages, he sues the website operator. Should the website operator be liable for messages that are posted by others? How about if the director first demands that the website operator delete the messages. Should the operator be held liable for refusing to remove the defamatory messages?
In a wise move (even a broken clock is right twice a day), Congress decided to pass a law that would preserve the free expression of ideas on the web. Under the Communications Decency Act, a website owner who operates an interactive computer service (one where people can read and post messages) is immune from liability for anything posted on the website by others. A number of attorneys are having trouble with this concept, thinking the old common law definitions of defamation should still apply, but we are doing our best to educate them.
We recently educated the law firm of Bowman & Brooke on the finer points of the Act. Our client operates a friendly website that posts news and has a message board dealing with automobiles. A thread was started on the message board by a user, discussing the author of a number of books about collectible cars. Someone took exception to the author's books, claiming that he did not know what he was talking about and stating that he had been involved in some shady sales transactions with cars that were not what they were represented to be. Just as in our hypothetical above, the author contacted our client and demanded the the messages be removed from the bulletin board. Our client made the editorial decision not to remove the messages, determining that as a matter of policy it should not be involved in censoring the comments of subscribers to the website. The book author sued, claiming that by refusing to remove the comments, our client had ratified the comments and was thereafter responsible for them.
We defeated the lawsuit with a single motion. We sought summary judgment, claiming that our client was not only immune from liability for the messages, but that it was also immune for refusing to remove them. We argued that the Communications Decency Act would be rendered meaningless if a duty of investigation was imposed on website operators. The Act recognized that bulletin boards could not exist if the operator had to monitor and approve every message that was posted. We pointed out that the same is true if an operator must investigate every complaint about posted messages. Such a result would chill the free expression of ideas since, to avoid potential liability, website operators would soon determine that the safest course of action would be to delete any offending messages. Any potentially controversial message, even if it was just someone's opinion that a book was bad, would soon be deleted. Even worse, website operators would soon determine that message boards create too much work and exposure to liability, and remove them from their sites. This would create a dangerous impediment to the free flow of ideas. Plaintiff's counsel, Jeffrey A. Swedo, argued that even if the Act does provide protection for messages posted by someone else, the website operator must be held liable for refusing to remove the content since by doing so, he in essence "aids and abets" the person who posted the messages.
The court, Judge Robert Gallivan presiding, agreed with our interpretation of the Act and entered judgment in favor of our client. Note that this does not leave the author without a remedy. Under the Act, the creator of the content remains liable under standard defamation theories, but the web site operator must be free to offer a forum for the unfettered exchange of ideas and information.
Creative Accounting Our (future) client was in the business of buying land and building real estate projects, mostly apartment complexes. He took an investor under his wing, formed a partnership, and made him hundreds of thousands of dollars. However, the investor grew dissatisfied with splitting the profits and formed his own company. The parties entered into an agreement whereby the investor would wind down certain ongoing partnership projects and pay to our client his percentage of the profits, which were estimated to be substantial. A year later, the investor had not paid any money to our client and refused to provide an accounting.
The client retained us to sue for an accounting and the money owed to him. We soon found to our amazement that the vast majority of the projects had been undertaken on nothing but a handshake. Trusting to a fault, the client had even permitted the partner to hold all properties in his name alone. Beyond the accounting, which was a daunting task in and of itself, we had to first prove that our client was entitled to share equally in any profits.
We went to court and persuaded the judge to order the matter to an arbitrator for an accounting prior to trial. We then convinced the defendant and his counsel to make the accounting binding, so that we would not have to attempt the nearly impossible task of presenting an accounting case to a jury. The other side jumped at this chance because the defendant and his accountant had maintained all the records, and he was no doubt convinced that we would be unable to overcome any accounting he presented to the arbitrator. We even agreed that the defendant could prepare the accounting, reserving the right to prepare our own if we disagreed with the figures.
The accounting presented by defendant was a sight to behold. Every remaining property had been sold, yet according to his creative accounting our client still owed him in excess of $1 million, and he cross-complained for that amount. Imagine his attorney's shock when we announced that we would accept his accounting for purposes of the binding arbitration/accounting.
There is a legal maxim which states that a witness that is untruthful in one part of his testimony should be disbelieved in the rest of his testimony. We showed four or five key points in the accounting that were false, and thereby reduced defendant's credibility to zero. Indeed, the arbitrator even refused to accept defendant's testimony that he had incurred expenses in selling a home the parties had built on spec. Although it was reasonable to assume that costs were incurred, by that point the arbitrator was unwilling to listen to anything the defendant had to say.
Then, using defendant's own accounting, we established step by step how much he owed to our client for each project. You see, as creative as the accounting was, defendant had the sense not to lie about facts that could easily be checked through public records, such as the sale prices of the properties. The arbitrator awarded every penny we asked for.
Defendant and his counsel did everything imaginable to fight the arbitrator's findings, even claiming that a "binding accounting" only meant that said accounting would be presented to the jury to either be accepted or rejected. The case went all the way to trial, at which point our motions in limine (evidentiary motions heard just prior to trial) cut off any possible defense the defendant could offer. In a very unusual move, the defendant and his counsel stipulated to entry of judgment in our client's favor in the full amount we sought.
We soon discovered a possible reason defendant had stipulated to entry of judgment. We received a call from his accountant, stating that he had been authorized by the defendant to meet with us to discuss settlement. We responded that while we were always amenable to discussing the matter, those discussions would have to be limited to payment arrangements; we would not agree to any reduction in the amount. He was outraged and began screaming into the phone. It turned out that his "offer" was going to be that our client could walk away without paying the defendant anything. After all, he was the one that had prepared the creative accounting presented at the arbitration, and he was standing by his claim that our client owed defendant more than $1 million. According to the accountant, if forced to, defendant would appeal the case, get it reversed (difficult to do with a stipulated judgment), sue our client and this time win the $1 million. "In any event," he yelled, "I have ways to bury his assets so deep that you will never see a dime of your judgment!" No doubt, he had offered this pearl of wisdom to the defendant, who felt his accountant would make him judgment proof.
Within two months, we had recovered the full amount of the judgment, nearly half a million dollars. We mailed the accountant a dime.
The
Morris Law Firm Wins Large Judgment from Client's Former Counsel The
Morris Law Firm Wins $69,500 at Trial Without Calling a Single Witness "Because we can, that's why . . . "Our client was on his way to work early one morning, when he received a frantic phone call from his bookkeeper. His business was cash intensive, and it was the practice of the bookkeeper to run a daily activity report at the beginning of each day. On this particular day, it was discovered that $50,000 was missing from two accounts, and that the checks our client had written to customers were bouncing as a result. Our client called Bank of America to report what he thought must be a theft, only to learn that it was Bank of America that had closed his accounts and seized the funds. When he asked why, he was told, "because we can, that's why." He asked only for an explanation and a letter of apology that he could show to his customers, but Bank of America refused.
When we became involved, Bank of America offered a number of excuses for its conduct, from computer errors to a claim that the accounts had been closed because of "suspicious activity." It was not until we sued and conducted discovery that we uncovered an internal document revealing the real reason Bank of America had taken the $50,000 without notice. Although it had never had any problems with our client, Bank of America had decided that our client's business was too check intensive, requiring too much work for the bank and potentially exposing the bank to losses. We never claimed that Bank of America had to maintain our client's accounts, but there was no reason Bank of America could not have provided advanced notice so our client could have closed the accounts in an orderly manner. We repeated our client's request for a letter of explanation, so that our client could undo some of the harm to his business reputation, but Bank of America still refused, steadfastly arguing that it had every right to act as it did. We were left with no option but to sue.
Bank of America was represented by Timothy A. Lambirth of Ivanjack & Lambirth, which took the position that Bank of America was permitted to close the accounts pursuant to its disclosure statement, and therefore whatever the motivation of Bank of America, and whatever harm Bank of America might have caused, we could not establish liability because Bank of America was permitted to do what it did. When opening a deposit account at Bank of America, the customer signs a signature card which also acts as an agreement between the customer and Bank of America. The signature card states "the written information we give you is part of this agreement and tells you the current terms of our deposit accounts" and that the agreement can be changed at any time. Although it is Bank of America's policy to provide the other "written information" whenever a customer opens an account, the new customer may or may not receive this other information, depending on whether the Bank of America employee remembers to provide a copy. As a result, a new customer may enter into a contract with Bank of America, without ever having read the agreement or knowing its terms. Contained in the other, unnamed document is language which purports to give Bank of America the right to seize a customer's funds without cause and without warning.
Unfortunately for Bank of America, our client had never been provided a copy of this "other information" so it was not a part of the agreement. The jury was outraged by the conduct of Bank of America, and awarded our client $227,162. (This amount grew to $264,162 by the time we were done.) We successfully argued that Bank of America had harmed our client's business reputation by leading the check recipients to believe he had written bad checks, when in fact it was Bank of America's conduct that prevented the checks from clearing.
One humorous and very telling moment in the trial occurred during closing arguments. Bank of America's accounting expert, a CPA from a big-eight accounting firm, had testified that our client suffered no more than $17,000 in damages, and had prepared large blow-ups to show his calculations. During his closing argument, Aaron Morris put up one of the expert's blow-ups and showed that this very high-priced accountant had made a simple but significant mathematical error which, when corrected, showed that by his own calculations the damages were at least $79,000. This was not a matter of conjecture or interpretation. Quite simply, he had just put a decimal in the wrong place, so instead of multiplying 10 times 10, he had multiplied 10 times .1.
The first phase of Mr. Morris' closing argument ended at the lunch break, and at lunch a betting pool was started among the trial watchers as to how counsel for Bank of America would handle this devastating math error. There was no denying the error, so most assumed Lambirth would acknowledge it and then try to put a positive spin on it, stating perhaps that while this did change the ultimate calculation, the expert was not stating that Bank of America was actually liable for any damages. Others in the pool bet that he would just ignore the whole argument and never mention the error. No one bet on what actually happened. In his closing argument, opposing counsel put up the error, and argued, in essence, that if the expert said that 10 x 10 = 1, the jury should accept that as his expert opinion, and that there had not been any showing that 10 x 10 was not equal to 1.
The jury completely rejected the damage calculation by Bank of America's expert, and adopted the calculation by our expert, to the penny. Lambirth now works at the law firm of Aldrich & Bonnefin.
[UPDATE] Bank of America could not accept the judgment by the jury, and brought four post-trial motions asking the court to either reduce the judgment, or throw it out altogether. Bank of America abandoned one of the motions -- a motion for new trial -- since with that motion it ran the risk that plaintiff would be awarded even greater damages. However, Bank of America's counsel apparently did not realize that without a motion for new trial, they would not be able to challenge the amount of the award on appeal. The other three motions were denied by the court, leaving the full judgment in place. In a moment of candor, Bank of America's counsel referred to Aaron Morris as "one hell of a good attorney." At least, on that, we agree.
[October 11, 2001 -- Los Angeles] Still unable to understand the basis for the judgment, Bank of America appealed that judgment and the rulings on the motions discussed above. At trial, we had demonstrated that our client lost customers because of what Bank of America had done. We then showed that, on average, a certain number of potential customers would be lost through negative referrals for every existing customer that was lost. Bank of America argued on appeal that it should somehow be "credited" for those customers that were not lost since they could not have possibly given any negative referrals. Not only did this argument not make sense, it was not a proper matter for appeal since Bank of America had failed to bring a motion for new trial. The Court of Appeal rejected all of Bank of America's arguments, and affirmed the judgment in full. The opinion of the Court of Appeal can be seen here.
[October 26, 2001 -- Costa Mesa] Appellate Victory: A new attorney came into the picture at Bank of America, and apparently brought a fresh perspective. Bank of America made the wise decision not to pursue an appeal to the California Supreme Court. The bank paid the judgment in full, plus an additional $37,000 in interest and fees.
[UPDATE -- July 2002] This latest update has nothing to do with The Morris Law Firm, but we could not resist adding it to this section. The Los Angeles Times reports that 71-year-old Gloria Wicker of Clovis, New Mexico was hospitalized after receiving a letter from Bank of America informing her that her account had been frozen because she was dead! Wicker suffered chest pains "as she tried for hours to get through an aggravating series of automated phone messages to prove she was alive," the Los Angeles Times reported. Bank of America was finally persuaded to recognize that Wicker was alive and to release her funds. No doubt if the matter had gone to trial, Bank of America would have argued that it has the right to declare a customer dead, or that without the testimony of an expert it must be assumed that the customer is dead.
Repair Shop "KAO'd" After Trying to Hide Behind Technicality The Case of the Oral ParachuteWe were retained to represent a company manager, who had left his position to work for a smaller company. Concerned that he would be giving up his job security, he entered into an oral agreement with his future employer, whereby he would receive a certain sum of money if he were fired without cause within the first five years. Sure enough, the company went through some difficult times, and the manager's position was eliminated. The company denied that there was any "golden parachute" agreement, and we were retained by the manager to sue for the promised money.
This case presented a real problem. You may have heard the expression, "an oral contract is not worth the paper it is not written on." In reality, that is not the law. An oral contract is difficult to enforce because of the problems of proof it presents, but under the law an oral contract is every bit as enforceable as a written agreement.
That said, the simple fact is that most people think oral agreements are unenforceable. In fact during voir dire (jury questioning before the trial) almost every juror stated that it was their understanding that you could not sue to enforce an oral agreement -- it had to be in writing. Making things worse, the agreement seemed implausible. This was not the sort of industry that offers such a generous severance package.
Aaron Morris handled the trial, and was opposed by the Los Angeles firm of Rexon, Freedman, Klepetar & Hambleton, which had three attorneys present during the trial. After a relatively short trial, the jury returned a substantial six-figure verdict for our client. Rexon, Freedman, Klepetar & Hambleton appealed the verdict, but we persuaded the Court of Appeal to dismiss the appeal on procedural grounds.
Interestingly, having seen the way we handled this case and the trial, and the result we achieved, the defendant company (the one we just successfully sued) subsequently retained our firm, and we continue to represent it in a number of matters. There is no higher praise than having the opposing party hire you after a trial.
Oh What a Tangled Web We Weave . . .This is one of our favorite cases because all of the wrongdoers, including opposing counsel, got their just desserts.
Our client had been involved in a commercial real estate transaction some ten years earlier. Millions of dollars had been distributed, but one disgruntled investor argued about a small sum of money that was held in an escrow account for expenses. He claimed it should be distributed, while our client asserted that it was owed to him, the general manager. The parties agreed to submit the matter to arbitration, but when the day came for the hearing the investor refused to participate in the process, and thereafter sued for the approximately $35,000 in the escrow account. Pretending not to be able to find our client, the plaintiff received permission from the court to serve the complaint by publication. This procedure is somewhat of a legal fiction, which permits a plaintiff to "serve" a defendant by publishing a notice in a newspaper. That may have been fine a hundred years ago in small communities where everyone read the same paper, but now these notices are never seen by the defendants. Our client had no idea he was being sued.
Having "served" the defendant without his knowledge, the plaintiff was able to go to trial unopposed. Although the amount in controversy was just $35,000, the unopposed complaint resulted in a judgment equaling over $2 million. (With no opposition, plaintiff was able to claim everything from emotional distress to loss of profits he would have received if only he had had the $35,000 to invest.) Incredibly, despite having filed declarations with the court that the defendant was impossible to find, the day after obtaining the judgment the plaintiff was able to serve the defendant with that judgment.
We were retained at this point by the defendant to vacate the $2 million judgment. We contacted opposing counsel, and told him that we expected him to voluntarily vacate the judgment, and to agree not to take the funds from the escrow account. He orally agreed to vacate the default and agreed in writing not to seize the escrow funds. Then he reneged on both promises. We were forced to bring a motion to vacate, and told him that if he did not return the escrow funds, we would not only file a cross-complaint against his client, we would name him in the suit since he had assisted in stealing (in civil law it is called "conversion") the escrow funds.
Opposing counsel refused to return the funds to escrow, and fought us on the motion to vacate. He accused us of "posturing" and said that no judge would ever permit us to file a lawsuit against opposing counsel during litigation. He also said we would never have the judgment vacated because doing so requires a showing of possible success, and we could not meet that standard.
He was wrong on both counts. Our motion to vacate was granted, and the court rejected motion after motion brought by opposing counsel trying to dispose of our cross-complaint against him. At first opposing counsel was so incredulous, that he simply refused to recognize the judgment had been vacated. He continued his collection efforts and refused to cooperate in the discovery process. The result was thousands of dollars in sanctions against him, and a suspension from the practice of law by the State Bar.
We opted for a bench trial, and when the matter was done, not only did we defeat the claim against our client, the court entered judgment against the plaintiff/cross-defendant in the amount of $60,000 for actual damages, and an additional $100,000 in punitive damages for stealing the escrow funds. Most satisfying to us because of his theft of the escrow funds, the court awarded $78,000 in damages against opposing counsel plus an additional $3,000 in sanctions.
[UPDATE -- May 11, 2001] The plaintiff/cross-defendant in the action appealed the judgment, claiming that his attorney's incompetence had resulted in the award. The case presented an interesting issue. California law used to state that when an attorney made a mistake, that mistake was imputed to the client, since the attorney is an agent of the client. In other words, if the attorney was at fault, so was the client. That law was changed, and if an attorney is willing to file a declaration stating that he or she made a mistake, under most circumstances the trial court must grant relief from the mistake. This is referred to as a "mea culpa" declaration.
In this case, the attorney filed not one, but two lengthy declarations spelling out all of the problems he had encountered while representing the client in this case. The declarations were a sight to behold. He claimed to have suffered four computer crashes, a divorce, friends dying, partnership problems, and innumerable other life-altering situations. He even accused us of being at least partially responsible for the death of his paralegal, stating that he had lost his will to live when he failed to answer our discovery requests on time. However, even faced with these heartfelt declarations, we were able to persuade the trial court not to grant the plaintiff's motion to vacate. It was from this ruling that the plaintiff/cross-defendant was appealing.
Here is how we successfully opposed the motion to vacate and won on appeal. A mea culpa declaration must state that the judgment or order is the result of the attorney's "mistake, inadvertence, surprise or neglect." In the declarations, the attorney listed a hundred reasons why he was not able to represent the client properly, but hidden among these myriad excuses were statements indicating that he had intentionally handled the case in the manner he had because he believed that the court had no jurisdiction since the parties had agreed to arbitration. (What he failed to realize was that even if the parties had agreed to arbitration, by filing a complaint and conducting discovery, he had waived his client's right to arbitrate the matter.) We were able to bring these statements out of hiding and show them to both the trial court and the Court of Appeal. We persuaded both courts that the law permitting an attorney to file a mea culpa declaration did not apply to intentional acts. If the law was interpreted that way, then an attorney would be free to try one strategy, and if it failed, file a mea culpa declaration stating his interpretation of the law had been a mistake in order to get relief and try another strategy. Both courts agreed, and on May 11, 2001 the Court of Appeal issued its opinion, affirming the ruling of the trial court and the underlying judgment.
[UPDATE -- June 14, 2001] While the plaintiff/cross-defendant had appealed the judgment, the attorney had pursued a different course. He filed yet another complaint, claiming that the judgment against him was a result of a "fraud on the court." Still sticking to his failed trial strategy, the attorney claimed that since the matter was subject to arbitration, it was fraud for us to permit the court to enter judgment in our favor. It was a ridiculous claim, and we disposed of the case with a demurrer. We later successfully brought a motion for sanctions, asserting that the complaint had been filed in bad faith. The attorney then appealed both the dismissal of his complaint and the award of sanctions. On June 14, 2001 the Court of Appeal rejected the attorney's arguments, stating again that an attorney cannot seek relief from his own failed trial strategy, and certainly is not entitled to equitable relief.
[UPDATE -- July 23, 2001] We next heard from the attorney when he faxed a document to us, because it had previously been mailed to the wrong address. Having missed the deadline for seeking review by the California Supreme Court, the attorney wrote to the Supreme Court asking for relief from this mistakes, again blaming the omission on computer problems. The silence from the Supreme Court was deafening. With that, and the judgment now paid in full, the matter should finally be concluded.
[UPDATE -- August 4, 2002] We went to the web site for the State Bar and checked the status of the attorney in question. His status was listed as "NOT ENTITLED to practice law in California." This is different from being outright disbarred, and most likely indicates that he has been temporarily suspended as punishment for the above conduct. The legal profession stills operates in large part on the honor system. When an attorney makes a promise to another attorney to hold funds in trust, or not to pursue certain funds, that creates a fiduciary duty to the other side. Breaching that duty can have serious consequences. In this case, that lesson cost this attorney over $100,000 and the temporary loss of his license to practice law.
[UPDATE -- March 1, 2005] We checked on the status of our old friend to see how he was doing. It turned out that the suspension was for two years, starting on July 12, 2002. Thereafter, he returned to the practice of law but was disciplined again in January 2005 when it was discovered he had practiced law during his suspension.
The Third
Time Isn't Always the Charm. A simple case with a humorous ending.
Our client was sued by a former business associate for an alleged breach of contract. The plaintiff's name was "Ngo" -- pronounced "no." Keep that in mind -- it's important to the punch line.
The case was completely without merit but for reasons not important to this story, the plaintiff felt compelled to bring the action in a misguided attempt to save face. We managed to have the case dismissed just by calling plaintiff's counsel and explaining the facts. Plaintiff apparently suffered "dismisser's remorse" because she then hired a new attorney and filed the action again, only to then dismiss it again once we spoke to her new attorney. (This was not a settlement situation. She was voluntarily dismissing the complaint "without prejudice" which meant she was free to file it again.)
Third time is the charm. She found yet another attorney to file the action, but when we called this one to explain reality to him, he wouldn't listen. He said he was well aware that we had "brow-beaten" two prior attorneys into dismissing the case, but that he would not succumb. He said he would never dismiss this case. Far from being a frivolous action, he claimed that this was one of the strongest he had ever seen. He had already invested substantial time in the case based upon his client's promises that she would not under any circumstances dismiss the case. Each time we tried to explain the facts, he accused us of posturing and said that he would terminate the conversation if we continued with this behavior. We were reminded of a child that sticks his fingers in his ears and says, "la, la, la, la" to prevent hearing something he doesn't want to hear.
We did manage to get him to agree to one small concession. Without posturing or recrimination, we told him that his client would never pursue this case once she had to verbalize the claims she was making. He had already served a three-inch stack of discovery that would take our client a week to respond to, but he agreed to put that discovery on hold and "call our bluff" by submitting his client to a deposition so that she could educate us to the real facts of this case.
The plaintiff lasted a little more than an hour at her deposition. After the first break, her attorney asked for a meeting, and said that his client had instructed him to dismiss the case. This time we were able to extract a dismissal with prejudice so that she could not file the action again.
We sent a brief letter to the attorney after the action was over. It said simply, "Next time, just say Ngo."
The Morris Law Firm Saves the Life of a ClientThis was one of our more sobering calls of late. A gentleman in his 70s called, stating that he had two days to live and asking if we could help him. He was two days late in receiving badly needed dialysis, but the hospital was refusing treatment because he had never applied for Medi-Cal and could not provide any information to help track his Social Security information. Without the Social Security information, no Medi-Cal, and without Medi-Cal, no dialysis. We made a few calls, persuading the hospital to continue treatment while we solved the paperwork snafus and getting the feds to put a rush on the paperwork. Within hours he was back on dialysis, and the client credits The Morris Law Firm with saving his life.
Let's Consider That for a Moment . . . Cases sometimes are won or lost on a word. Consider this sexual harassment case we handled.
Our client was a middle manager at a company, in a position that involved a great deal of contact with the company's customers. She had worked there ten years and had a file folder full of thank you letters from satisfied customers. She had always enjoyed glowing performance reviews.
When her immediate supervisor was replaced, she continued to receive praise from her new boss, until one day when he made a pass at her and was rebuffed. Things turned instantly cold. In stark contrast to the one formal review he had given her, now it was as though she was the most incompetent manager imaginable. He put her on a 30 day action plan, but her performance was so bad (according to him) that he did not let her finish out the 30 days. After ten years of exemplary performance, our client was fired just three weeks after she rejected her supervisor's advances. We are very selective about the discrimination claims we undertake, but this was one of the clearest cases of quid pro quo sexual harassment we had ever seen.
At his deposition we asked the supervisor if he had ever received any complaints from customers about our client. He answered that he had received "thousands." Most attorneys would feel compelled to follow up on such an outrageous statement, but we quickly moved on, hoping to let this answer remain unexplained.
At trial, we called the supervisor as our first witness, even before our own client. We wanted the jury to see immediately that the supervisor had absolutely no credibility, and could offer no plausible explanation for the termination. If he changed his "thousands" answer he would look like he was trying to sandbag the plaintiff at the deposition, and if he stuck to that answer he would look like a fool.
He stuck to his answer, and claimed that in the six months that our client had worked for him, he had received "thousands" of customer complaints. So, we took him through the math. "Thousands" plural has to mean more than one thousand, so we were talking about at least two thousand. Considering days off for weekends and holidays, our client only worked 132 days during that six months. Thus, receiving thousands of complaints for 132 days meant that the supervisor had received more than 15 customer complaints about our client per day. He was obviously a saint to keep her on as long as he did. But could he produce a single document, whether an internal memo or a letter from a customer that would tend to show this incredible number of complaints? No. Keeping in mind that every customer is given an evaluation form to complete, could he produce even one customer complaint? No.
The final nail in the coffin for the defendants was what should have been an innocent internal memo. A meeting had been held to discuss company business, and minutes were taken. Our client had kept a copy of the memo because it said, "Thanks to [our client] for the great job she did on the Smith project." When we subpoenaed the defendants' records they produced this document, but in their desire to make certain they did not produce a single document that said anything positive about our client, they had altered this document to eliminate this slight praise. We showed the altered document to the jury, and watched the blood drain from opposing counsel's face (whom we believe truly did not know the document had been altered by his clients). Between the "thousands" remark and this altered document, nothing the defendants said during this trial would be believed.
Opposing counsel approached the bench and requested a recess "to revisit the possibility of settlement." Our client was thrilled with the substantial settlement amount.
"But, But Your Honor . . ." The Morris Law Firm started the year 2000 with a major victory that will go a long way toward better defining contract law in the employment context. On January 18, 2000, the California Court of Appeal granted an appeal brought by The Morris Law Firm, thereby reversing a summary judgment entered in the Los Angeles County Superior Court.
Here are the facts of the case. A high ranking manager at a large company was persuaded to leave that company to go to work for what was a smaller company, but one with a "family atmosphere." He was told that he would have a job for life. Indeed, the new company made him promise that he would not leave for at least 15 years. Since he was giving up a long term position with solid job security, the parties verbally agreed that he could only be terminated for good cause.
Two days after he reported for work, he was handed an employment package -- the same package that is distributed to entry level employees. He was told that much of it did not apply to him since he held a managerial position. Nonetheless, he was told to sign all of the forms even if they did not appear to apply to him.
One such form was entitled "Clarification Statement." This form stated that it was an application for employment, and included language to the effect that if the employee were ever hired, he would be hired as an "at-will" employee no matter what other representations were made to him. In other words, no matter what the company might promise, it would still be free to fire him without cause.
Our client had been hired to replace a retiring manager, who stayed on to assist with the transition. Apparently, that manager started to have second thoughts about retiring, and consequently took the position that the new manager was not up to the task (despite glowing reviews by the owners of the company). The old manager announced that he would stay on, and since the company did not need two people in that position, they fired our client. Our client sued for breach of his employment agreement on the grounds that he had been fired without good cause. The defendant company brought a motion for summary judgment, claiming that the Clarification Statement made clear that he was an at-will employee, and could therefore be fired without cause. The trial court agreed and granted the motion, thereby ending the case without it ever being decided on the merits. Incredibly, the client's attorneys advised him that it would not be worthwhile to pursue an appeal.
Fortunately, the client heard about us through one of our existing clients, and contacted us for a second opinion. The vast majority of appeals are not successful, but under the facts of this case, we recommended that the client appeal the court's ruling on the summary judgment motion. He retained our firm to handle the appeal.
While it may seem obvious that the case was wrongly decided, in fact the trial court's decision was in line with many appellate decisions. Inexplicably, appellate courts have lost sight of contract principles when it comes to employment cases. They are willing to accept documents signed after the agreement is entered into as evidence that the parties did not mean what they said. To win the day, we hit hard on basic contract principles, and reminded the appellate court that whatever the Clarification Statement said, it could not "rewrite" the express agreement that had already been entered into between the parties. That express, oral agreement provided that the manager could only be fired for good cause.
The respondents argued vigorously that the Clarification Statement left no doubt that the manager was an at-will employee. In their appeal brief, counsel for respondents adopted a tone of distain, claiming there was no basis for the appeal and asserting that we had not made the "right" arguments. At oral argument, Respondents' counsel grew noticeably agitated as it became clear that this Appellate Court was going to keep contract principles firmly in mind, and ever more apparent that respondents' arguments were going down in flames. The Court of Appeal was unanimous in reversing the summary judgment.
As a result of our representation of the client on appeal, he will now have his day in court, and the defendants will be forced to honor their agreement.
[UPDATE -- January 2001] Because of our victory on appeal, the case was sent back to the trial court for trial. We removed the former judge from the case -- a standard practice when you have had a judge's ruling reversed by the Court of Appeal -- and the new judge set the matter for a quick court date. With the trial date approaching, defendants agreed to settle the case for a substantial amount. Considering our client's former counsel had lost the case on summary judgment and advised the client not to bother to appeal, it was quite satisfying that we were able to correct the trial court's error and obtain significant damages for the client.
"Champagne
Wishes and Bubble-Gum Dreams "Our client was a manufacturer's representative, entitled to commissions for an order he had brought to the defendants in this case, who we will refer to as Erie Corp and CS Corp. We were adamant that the commissions were owed, because the very purpose of the agreement between our clients and the defendants was that our client was to bring business opportunities to the defendants. The order that our client had brought in resulted in millions of dollars in sales by the defendants. Defendants claimed that no commissions were due, because the order our client brought in was, in essence, just a promise to buy. They argued that since the order did not specify quantities, delivery dates, etc., it was not an order at all. A complicating factor was that our client worked for Erie, but Erie had prepared the agreement with our client so that it indicated our client was working for CS Corp. To win, we needed to make the jury understand that our client worked for both Erie Corp and CS Corp. The defendants were represented by James McCarthy from Katz, Teller, Brant & Hild, a large Cincinnati, Ohio firm, and Robert D. Rose from Rose & Associates, who joined Sheppard, Mullin, Richter & Hampton during this action. Our client was represented by Aaron Morris from our firm, and Susan Gentile from the Law Offices of Susan Gentile.
As to the issue of the commissions, the equities were so strongly in favor of our client, that we probably could have phoned-in that part of the case. Our client labored for a number of years to bring a big customer to the defendants, and two days after the agreement was entered, defendants "terminated" our client, while at the same time offering him a new, identical contract with that one big customer omitted. Counsel for defendants could do little but try to make hyper-technical arguments concerning the wording of the contract.
The much more difficult part concerned getting the jury to recognize that Erie Corp was also liable to our client, albeit under different theories, even though the written contract was seemingly with CS Corp. Both companies were owned by the same person, and we had prepared an elaborate presentation showing that while he claimed the contract was between our client and CS Corp, not Erie, he never really observed that distinction. We called him as a witness during our case presentation to lay out these facts, but he made the argument better than we could have ever hoped. Frustrated by the repeated questioning about the distinctions between CS Corp and Erie, he said repeatedly that they are one in the same. Then, in an effort to paint a picture that in his mind would make the questions seem foolish, he said that the two corporations negotiate by having him sit on one side of a table, and then he runs around to the other side of the table to answer his own questions, etc. We couldn't have said it better. In fact, that was precisely the image we had intended to use to show how silly the defendants were being when they tried to argue that Erie was not liable to our client for the services he had performed. The witness just beat us to it.
We drew a very intelligent jury, that saw through all of the smoke defense counsel tried to create. The jury awarded $500,000 to our client after just a few hours of deliberations -- an amount that will likely grow to approximately $725,000 on claims that remain to be decided by the court.
Humorous moments: Trials are no laughing matter, especially one as contentious as this. Inevitably, however, moments of levity creep in, sometimes by design as a means to break the tension, other times due to an unintended result. This trial seemed to have a disproportionate number. One of the best came from one of defendants' witnesses, a manager at Erie Corp that was called for reasons that never became apparent from his testimony. To his credit, although his testimony did not appear at all meaningful in the context of the trial, he seemed fairly candid in most of his responses. On cross-examination, Aaron Morris was taking him through a hypothetical question concerning the cost of manufacturing parts. He was writing a list of all the costs involved in manufacturing this hypothetical part, and when he reached labor costs, he asked the witness to provide the cost for manufacturing the part. The witness answered, "Well, with Erie Corp the labor costs would be about five cents." Since plaintiff was suing for the very reason that Erie Corp failed to pay commissions that were due, it was very telling that a manager from the company was testifying to how cheap the company is. Another very humorous moment came when the president of Erie Corp, who was trying so hard to convince the jury that what our client had provided was not an order, referred to it as an order during testimony and had to be corrected by his attorney.
There was a very strange and funny moment when defense counsel tried something in this closing that absolutely backfired. One common technique used by attorneys during trial is to try to create some sort of class envy, hoping it will influence the jury. Most often it is the plaintiff's attorney that will try to imply that the poor plaintiff has been harmed, and since the defendant is so rich, why not award the money requested? This technique is improper, since it is asking the jury to award damages for reasons other than the facts of the case. If a plaintiff is not owed money, it does not matter how wealthy the defendant is. In this case, defense counsel tried to employ this technique, making references to the exclusive neighborhood where the plaintiff lives, and showing how much money he had already been paid by the defendants on other orders. He even showed the small town where one of the defendants is located, to imply that making this company pay the amount requested would destroy the town, we suppose. Then one of the defense attorneys did something remarkable. He took out a check from one of the defendants, and wrote it out to our client in the amount he had requested. He then projected it on the wall to make it look huge, and said, "This is what this case is about -- the plaintiff is asking you to write a check like this." Of course, this gave us the ability to say to the jury in our closing, "Well, they've already made out the check, have them pass it over to us, and we'll be done."
We could have shut this all down at any time with an objection, but we suspected this approach was doing far more harm than good to the defendants' case. We were right. Every juror we spoke to following the case stated they had been offended by this approach. As one juror put it, "Did they think we are trailer trash? Did they think we would look at that check and say, 'Huuuwee, I ain't never seen a number that big!'"
The funniest moment, though, came in two parts. We were offering into evidence a business card that Erie Corp had printed up for our client, as one of many exhibits offered to show that our client was, in fact, working for Erie. Clearly this exhibit was relevant, and there was no possible way defendants were going to keep it out. However, they must have felt it was very damaging because they fought very hard to do just that. They brought a pretrial motion to exclude the card and they objected at the time of trial -- both without success. Apparently frustrated by their inability to prevent the card from being used in evidence, they decided on another tactic. Our client also gives out a business card that lists just his name and phone number, this one printed on a small box of "Beechies" gum (similar to "Chiclets"). They are very popular with his customers, and have become sort of a trademark. During cross-examination of our client, defense counsel asked him if he recalled the business card that had come into evidence, showing he worked for Erie Corp. Then he said, "But that isn't your only business card, is it? Isn't it true that you are INFAMOUS for giving out another type of business card.?" He started to pull something out of an envelope, and we could not imagine what "infamous" card they were talking about until out came the Beechies gum. Except perhaps to show that plaintiff works for companies other than Erie Corp, we cannot imagine why defense counsel thought these "gum cards" were relevant, nor why they would describe them as "infamous", but it gave everyone a good laugh. But the real fun came at the end of trial. Since the "gum cards" had become such a on-going joke during the trial, our client had brought in several of them on the final day. After the jury had reached its verdict and been excused, the jurors came over to congratulate our client and his attorneys and to ask questions, as is often the case. Our client pulled out his gum cards and began handing them out to the jury. Over the din of the exchange taking place between the jurors and other people in the courtroom, one of the defense attorneys began shouting at the judge, who was already leaving the courtroom. He was upset that plaintiff was handing out what he described as "gifts" to the jurors. Aaron Morris responded that it was defense counsel that had described these as "business cards" and it certainly could not be improper for a party to hand out business cards. The judge just rolled his eyes and said, "There is no motion before me" as he exited the court.
[Update: June 25, 2001 -- Costa Mesa] Defendants brought what is called a Rule 50 motion, seeking a new trial or judgment based on several claims of error. Defendants' motion was denied in all regards. Even though they utterly lost the action, one of the defendants sought costs and attorney fees, arguing that plaintiff had failed to prevail on one of several different theories of liability. The court denied that motion as well. Instead, the court added costs, attorney fees and certain other damages to the judgment for plaintiff, increasing the total judgment to over $725,000.
[Update: September 7, 2001 -- Costa Mesa] There is something to be said for tenacity, but at this point defendants must be feeling rather punch drunk from the repeated beatings. A defendant can keep the plaintiff from collecting a judgment by appealing the judgment and posting a bond. This protects the plaintiff, who is paid by the bonding company at the conclusion of the appeal. Defendants did not want to follow that procedure, and instead brought a motion for permission to put the money in an interest bearing account, with their own attorneys as the signatories! Not surprisingly, the motion was denied.
[Update: May, 2003 -- Costa Mesa] A small victory for the opposition? Defendants appealed to the Ninth Circuit. Although we won on all but one of the arguments, defendants did prevail on an ancillary issue that reduced the $725,000 judgment by approximately $80,000. However, court documents reveal that Defendants spent $140,464 in costs and attorney fees to achieve that $80,000 reduction in the judgment, for a net loss to Defendants of $54,915. Given their track record in the case, that was probably grounds to break out the champagne.
[Update: June 10, 2003 -- Costa Mesa] The two defendant corporations are owned by the same person, and the owner testified at trial that they are "interchangeable." In fact, he testified that the primary purpose of CS Corp was just to shield Erie from liability. Any distinction between these two entities was a mere fiction, and to claim that one could be a winner if the other one lost was just sophistry. Nonetheless, since one entity had managed to reduce the judgment slightly on appeal, Defendants renewed the 2001 motion for attorney fees, claiming that CS Corp had prevailed in the action. Whatever merit that motion might have had, Defendants threw it out the window be seeking to recover every penny spent by both entities defending the action. In an amazing syllogism, Defendants claimed that they are distinct entities for purposes of determining if one is a prevailing party, but that they are the same entity for purposes of calculating attorney fees. Thus, even though Erie lost, Defendants claimed they were entitled to recover the entire amount of $478,147 they spent on attorney fees and costs. The trial court denied the motion in full on the basis that it was defective for failing to specify the fees spent by the different parties. The court further stated, in essence, "what part of 'DENIED' didn't you understand the last time you brought this motion?"
Humorous detail: You are probably familiar with the use of "[sic]". When quoting someone who misspells a word or makes a grammatical error, you insert [sic] to indicate that you recognize the error, but that you are providing an exact quote. Defense counsel in this case loves to use [sic]. In our fee bills, we use semi-colons to separate the individual cost items. In a sentence, the word following a semi-colon is not capitalized. However, that rule does not apply to a list which is merely using semi-colons as a separator. Nonetheless, defense counsel could not resist putting a "[sic]" after every single such instance when we moved for attorney fees. Thus, when we brought the motions, we loaded them up with these costs lists, knowing that opposing counsel would feel compelled to quote them and put a "sic" after every single item, and knowing that this sort of nonsense really irritates judges. We can't say that it was a factor, but we won every motion for attorney fees. But we never would have anticipated how far defense counsel would go in their desire to point out perceived grammatical errors. In their second unsuccessful motion for fees, defense counsel quoted an earlier ruling by the judge. Yes, even in quoting the judge, defense counsel felt compelled to put a "sic" in his quote. Now that is a great strategy. You are attempting to persuade a judge to award nearly half a million dollars in attorney fees, and as a part of your persuasive argument you take a moment to tell him that he is an ungrammatical dunderhead. Again, there is no way to know if it was a factor, but the judge denied the motion in very strong, clear terms.
[Update: April 9, 2004 -- San Francisco] The first week of April, we received a notice from the United States Court of Appeal for the Ninth Circuit, notifying us that the latest appeal submitted by CS Corp would not be scheduled for oral argument. We have to admit that this was a little disconcerting. Not because we thought there was any chance that CS Corp would prevail, but we were concerned that perhaps we had missed something in terms of scheduling oral argument. The usual procedure is that the court sends out notice, asking if the parties want oral argument. Our first thought was that opposing counsel had failed to properly serve us with the notice from the court, which had occurred on a number of occasions during the matter. We decided to contact the court the following Monday to see what had occurred. There was no hurry, because it generally takes months before an appeal is decided. However, on Monday, our answer came in the mail. The Court of Appeal had decided unanimously that the appeal brought by Katz, Teller, Brant & Hild and Sheppard, Mullin, Richter & Hampton on behalf of CS Corp was so utterly without merit, that the parties would not even be given the opportunity to argue the matter. The Court affirmed the trial court's decision and threw out CS Corp's appeal in a half-page decision. We had argued all along that Erie and CS Corp were the same entity, and the Court of Appeal got the message. It stated simply that "The appeal is without merit. . . . [CS Corp's] interests at all times were aligned with those of its related co-defendant company, [Erie]. . . . [CS Corp] was not a prevailing party on any claim under any statute authorizing fees."
[Update: January 24, 2005 -- Los Angeles] We hope we were not somehow responsible for these subsequent shenanigans by Sheppard Mullin. We defeated their crazy claim for attorney fees, so perhaps in an effort to make up that lost revenue, Sheppard Mullin made another ridiculous claim for attorney fees in an unrelated case, and was slapped down hard by the court. Los Angeles Superior Court Judge John Shook said that Sheppard Mullin was not entitled to the $1 million it billed the City of South Gate on a relatively simple criminal defense matter. "The court finds that the fees charged the City by Sheppard Mullin were more than excessive and unreasonable transcending beyond the stratosphere into deep outer space," Shook said in a highly critical 18-page ruling. Shook said Sheppard Mullin engaged in "unreasonable and unnecessary measures" to defend the case. The judge concluded that Sheppard Mullin overstaffed the case with inexperienced attorneys, pursued misguided litigation strategies and sent South Gate confusing and redacted legal bills.
[Update: December 3, 2006 -- Santa Ana] Once again, we had to take Sheppard Mullin to the woodshed on the issue of attorney fees. In this latest case, our client was involved with others on a real estate venture. All the parties sued one another and in the end all were awarded monetary damages, although our client's monetary damages exceeded the opposition's. In American courts, both parties pay their own attorney fees, and there is no basis to recover those fees from the other side unless there is a contract or specific statute that provides for recovery of attorney fees. In this case, there was no basis for the recovery of fees. The contract between the parties contained no such provision, and there were no applicable statutes. But that didn't stop Sheppard Mullin. Although the attorneys from Sheppard Mullin had acted professionally during the trial, the firm apparently could not resist making a bogus application for fees in the end.
The attorneys located an obscure criminal statute that deals with fencing stolen goods. That statute provides that a victim of theft can bring a civil action against the thief to recover damages resulting from that theft. If a party successfully sues under this criminal statute, they can then seek attorney fees. So how could Sheppard Mullin think that such a statute would apply to a civil dispute? Sheppard Mullin's attorneys claimed that our client's failure to pay the money owed to their client amounted to theft. On that basis, they claimed the conduct fell under this criminal fencing statute, and sought nearly $400,000 in attorney fees. The claim was ridiculous, and we easily demonstrated that fact to the court. In the first place, Sheppard Mullin had never brought a claim under the criminal statute. A party can't add claims after the judgment. If that were not enough, Sheppard Mullin had not even included a claim for attorney fees in the complaint. But even if the criminal statute had applied, and assuming Sheppard Mullin had properly included a claim under that statute in the complaint and had at least mentioned that they might be seeking attorney fees, the motion for attorney fees was completely inadequate. In a motion for attorney fees, counsel must provide competent evidence of those fees. Sheppard Mullin failed to do so. The motion was denied for all the reasons set forth in our opposition.
"On second thought, can we have the $9000?"Lest we be accused of posting only our victories, here is a case that we actually lost (although, as you will see, we did not really lose when measured by the result received).
Our client obtained the patent for a very impressive product, and sought investors to help with the costs of manufacturing and marketing this new invention. One investor grew impatient with the pace of the marketing efforts and sued our client for 24 million dollars.
After we were retained, we performed an independent audit of the records of our client and all the money that the investor had contributed, and determined that for various reasons our client did, in fact, owe the plaintiff $9,000. With our client's permission, we called opposing counsel and offered to pay $9,000 in exchange for dismissal of the case. You can imagine opposing counsel's response. He accused us of acting in bad faith, and said that he had "irrefutable" evidence that would support his damages claim.
The trial was handled by Aaron Morris, who witnessed one of the greatest examples of posturing in the history of litigation. Counsel for the plaintiff adopted the theme that the case was so clearly in favor of his client, that any time spent defending against the action was an affront to justice and a waste of the court's time. When asked if he wanted to present an opening statement, opposing counsel responded, "No, the facts in this case are so clear that no opening is necessary." Then, when asked to call his first witness, counsel responded, "I don't even need to call any witnesses." He tried to win the entire case based on a bizarre motion, claiming that since our answer to the complaint denied that plaintiff had suffered $24 million in damages, we had, in effect, admitted that he had suffered $23,999,999 in damages. The judge was not impressed, and denied the unnamed motion.
The action proceeded, with counsel for plaintiff (unsuccessfully) objecting to every document we offered and every question we asked, claiming, in essence, that since it did not fit in with his theory of the case, it must necessarily be improper.
After both sides had rested, plaintiff's counsel again refused to offer any closing argument, stating it was "unnecessary." Aaron Morris presented the closing argument for defendant, after which plaintiff's counsel again waived the opportunity to present his final closing, stating that, "I didn't hear Mr. Morris say anything that needs to be rebutted."
The judge stated that, for the first time ever in all the years that he had been a judge, he was going to rule from the bench. (Normally, judges take the case "under advisement" to consider the evidence, and then issue a ruling a few days later.) He found for plaintiff, but denied all damages except for the $8,250 we had conceded. Our client could not have been happier with this "loss."
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