Justia Professional Malpractice & Ethics Opinion Summaries

This putative class action was before the court on an application for the approval of settlement of the class's claims for, among other things, breaches of fiduciary duty in connection with a merger of two publicly traded Delaware corporations. The target's largest stockholder, which acquired the vast majority of its shares after the challenged transaction was announced, objected to the proposed settlement. In addition, defendants' and plaintiffs' counsel disagreed about the appropriate level of attorneys' fees that should be awarded. The court certified the class under Rules 23(a), (b)(1), and (b)(2) with NOERS as class representative; denied BVF's request to certify the class on only an opt out basis; approved the settlement as fair and reasonable; and awarded attorneys' fees to plaintiffs' counsel in the amount of $1,350,000, inclusive of expenses. View "In re Celera Corp. Shareholder Litigation" on Justia Law

The attorney represented more than 400 plaintiffs in a class action related to the diet drug Fen-Phen. Lawyers’ fees were to be limited to 30 percent of the clients' gross recovery. The case settled for almost $200 million. Plaintiffs together received $74 million, 37 percent of the settlement; $20 million was used to establish Kentucky Fund for Healthy Living. The attorney served on the Fund’s board, for which he received $5,350 monthly. The attorney knew that the Kentucky Bar Association was investigating fee division in the case and possible unauthorized practice of law by his paralegal. The attorney subsequently applied to renew his malpractice insurance and answered "no" to questions about possible pending claims and investigations. The policy excluded coverage for dishonest acts and omissions. Members of the class subsequently filed malpractice claims and were awarded $42 million. The insurer sought a declaration that it was entitled to rescind the policy. The district court granted the insurer summary judgment and awarded $233,674.49 for its outlay on defense costs. Class members intervened to protect their ability to recover. The Sixth Circuit affirmed. Disbarment constituted a sufficient "regulatory ruling" under the dishonesty exclusion clause and there were material misrepresentations on the application. View "Continental Cas. Co. v. Law Offices of Melbourne Mills" on Justia Law

Plaintiff sued defendants in Missouri state court, on behalf of a putative class of similarly situated borrowers, alleging that defendants engaged in the unauthorized practice of law in violation of Mo. Rev. State 484.020 when they charged certain fees in the course of refinancing plaintiff's mortgage. Defendants moved the suit to federal court under the Class Action Fairness Act (CAFA), 28 U.S.C. 1332(d) and plaintiff subsequently appealed the district court's judgment. The court held that plaintiff failed to show that she was charged any fees, directly or indirectly, for legal work performed by non-lawyers. Therefore, plaintiff had not shown injury and did not have standing to bring her claim. In light of plaintiff's lack of standing, the district court should have dismissed for lack of jurisdiction rather than reaching the merits of the summary judgment motion. Accordingly, the judgment was affirmed in part, vacated in part, and remanded with instructions that the action be dismissed for lack of jurisdiction. View "Hargis v. Access Capital Funding, LLC, et al." on Justia Law

The central issue on appeal in this case arose from an order that denied a pretrial special motion to dismiss under Nevada's anti-SLAPP statute (Nev. Rev. Stat. 41.635-670), and whether that order was appealable under the collateral order doctrine as established by Supreme Court precedent. In 2009, Defendant-Appellant attorney Scott Ferrell sent demand letters to Plaintiffs-Appellees Metabolic Research, Inc. (Metabolic), at its address in Las Vegas, Nevada, and to General Nutrition Centers, Inc. (GNC), at its address in Pittsburgh, Pennsylvania. The demand letters purported to notify the recipients that they had violated California law by falsely advertising the properties and potential benefits of "Stemulite," which they marketed as a natural fitness supplement. Defendant represented that he was acting on behalf of three individuals and a class of similarly situated people, all of whom he alleged purchased Stemulite in California, in reliance on the supposed false advertising, and had not received the purported benefits. In his letters, Defendant set out his allegations, and concluded them with offers to compromise and allow Plaintiffs time to agree to an injunction. If Plaintiffs did not accept his offer, Defendant stated he would file suit. Metabolic filed suit in Nevada against Defendant and his putative class action plaintiffs charging them with extortion, racketeering and conspiracy. Defendant removed the case to the federal district court in Nevada, then moved to dismiss Metabolic's case based on Nevada's anti-SLAPP statute. In its order dismissing Ferrell’s motion, the district court found that Ferrell had not established that the demand letter to Metabolic constituted a good-faith communication in furtherance of the right to petition because it concluded that Nevada’s anti-SLAPP legislation only protected communications made directly to a governmental agency and did not protect a demand letter sent to a potential defendant in litigation. Finding that the Nevada legislature did not intend for its anti-SLAPP law to function as an immunity from suit, Defendant's motion was not immediately appealable. The Ninth Circuit held that the district court's denial of Defendant's special motion was not made in error. View "Metabolic Research, Inc. v. Ferrell" on Justia Law

Plaintiffs filed this lawsuit on behalf of a class of stockholders of Occam. Defendants moved for sanctions against all plaintiffs other than Derek Sheeler for trading on the basis of confidential information obtained in this litigation. With respect to Michael Steinhardt and the funds, the motion was granted. Consistent with prior rulings by this court when confronted with representative plaintiffs who have traded while serving in a fiduciary capacity, Steinhardt and the funds were dismissed from the case with prejudice, barred from receiving any recovery from the litigation, required to self-report to the SEC, directed to disclose their improper trading in any future application to serve as lead plaintiff, and ordered to disgorge profits. With respect to Herbert Chen, the motion was denied. View "Steinhardt, et al. v. Howard-Anderson, et al." on Justia Law

Appellants brought various claims before Financial Industry Regulatory Authority (FINRA) arbitrators against Ameriprise, a financial-services company, for, inter alia, breach of fiduciary duty, breach of contract, fraud, and negligent misrepresentation related to the decline in value of various financial assets owned by appellants and managed by Ameriprise. Ameriprise answered appellants' FINRA complaint by asserting, principally, that appellants released their claims by operation of a settlement agreement in a class-action agreement suit that had proceeded between 2004 and 2007 in the United States District Court for the Southern District of New York. After FINRA arbitrators denied Ameriprise's motion to stay appellants' arbitration, Ameriprise moved in the district court, in which the class action had been litigated and settled, for an order to enforce the settlement agreement that would enjoin appellants from pressing any of their claims before FINRA arbitrators. The district court concluded that the class settlement barred all of appellants' arbitration claims and therefore granted Ameriprise's motion and ordered appellants to dismiss their FINRA complaint with prejudice. The court held that the district court had the power to enter such an order and that several of appellants' arbitration claims were barred by the 2007 class-action settlement. Therefore, the court affirmed in part. But because the court concluded that appellants' arbitration complaint plead claims that were not, and could not have been, released by the class settlement, the court vacated in part the district court's judgment, and remanded the case for the entry of an order permitting the non-Released claims to proceed in FINRA arbitration. The court dismissed as moot appellants' appeal from the district court's denial of their motion for reconsideration. View "In Re: American Express Finance Advisors Securities Litigation" on Justia Law

Plaintiffs appealed from a decision granting defendants' motion to dismiss plaintiffs' complaints for failure to state a claim upon which relief could be granted. Plaintiffs, participants in two retirement plans offered by defendants, brought suit alleging breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Plaintiff alleged that defendants acted imprudently by including employer stock as an investment option in the retirement plans and that defendants failed to provide adequate and truthful information to participants regarding the status of employer stock. The court held that the facts alleged by plaintiffs were, even if proven, insufficient to establish that defendants abused their discretion by continuing to offer plan participants the opportunity to invest in McGraw-Hill stock. The court also held that plaintiffs have not alleged facts sufficient to prove that defendants made any statements, while acting in a fiduciary capacity, that they knew to be false. Accordingly, the judgment was affirmed. View "Gearren, et al. v. The McGraw-Hill Companies, Inc., et al." on Justia Law

Plaintiffs, participants in retirement plans offered by defendants and covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., appealed from a judgment dismissing their ERISA class action complaint. Plan documents required that a stock fund consisting primarily of Citigroup common stock be offered among the plan's investment options. Plaintiffs argued that because Citigroup stock became an imprudent investment, defendants should have limited plan participants' ability to invest in it. The court held that plan fiduciaries' decision to continue offering participants the opportunity to invest in Citigroup stock should be reviewed for an abuse of discretion and the court found that they did not abuse their discretion here. The court also held that defendants did not have an affirmative duty to disclose to plan participants nonpublic information regarding the expected performance of Citigroup stock and that the complaint did not sufficiently allege that defendants, in their fiduciary capacities, made any knowing misstatements regarding Citigroup stock. Accordingly, the court affirmed the judgment. View "Gray, et al. v. Citigroup, Inc., et al." on Justia Law

Appellants appealed the dismissal of their class action complaint against Nextel, the law firm of Leeds, Morelli & Brown, P.C. (LMB), and seven of LMB's lawyers (also LMB). Appellants were former clients of LMB who retained the firm to bring discrimination claims against Nextel. The complaint asserted that, inter alia, LMB breached its fiduciary duty of loyalty to appellants and the class by entering into an agreement with Nextel in which Nextel agreed to pay: (i) $2 million to LMB to persuade en masse its approximately 587 clients to, inter alia, abandon ongoing legal and administrative proceedings against Nextel, waive their rights to a jury trial and punitive damages, and accept an expedited mediation/arbitration procedure; (ii) another $3.5 million to LMB on a sliding scale as the clients' claims were resolved through that procedure; and (iii) another $2 million to LMB to work directly for Nextel as a consultant for two years beginning when the clients' claims had been resolved. The court held that appellants have alleged facts sufficient to state a claim against LMB for, inter alia, breach of fiduciary duty and against Nextel for aiding and abetting breach of fiduciary duty. Therefore, the court vacated and remanded for further proceedings. View "Johnson v. Nextel Communications, Inc." on Justia Law

The parties agree that the company attempted to collect an overdue hospital bill in a way that violated the Fair Debt Collection Practices Act, 15 U.S.C. 1692 and that plaintiff is entitled to statutory damages of $1,000. Plaintiff's lawyer endeavored to transform the case into a class action, and the district court, frustrated by the effort, dismissed the whole action. The Seventh Circuit held that dismissal for want of prosecution was an abuse of discretion. All of the errors at issue were the fault of the lawyer and had nothing to do with the claim. The court should have considered other alternatives before dismissal. View "Kasalo v. Harris & Harris, LTD" on Justia Law