4th Circuit upholds $1M sanction for law firm that tried to 'sabotage' federal court's authority
A federal judge had inherent power to impose a $1.05 million sanction against a Maryland law firm for asking state courts to order an end to U.S. district court litigation, a federal appeals court ruled last week. (Image from Shutterstock)
Updated: A federal judge had inherent power to impose a $1.05 million sanction against a national law firm for asking state courts to order an end to U.S. district court litigation, a federal appeals court ruled last week.
The 4th U.S. Circuit Court of Appeals at Richmond, Virginia, affirmed the sanction against Napoli Law, which was accused of breaching a contract to share attorney fees promised in a referral deal. Napoli Law had filed lawsuits in two New York state courts that sought an order for the plaintiff, the Keyes Law Firm, to dismiss the federal case.
“District courts are not powerless to act in the face of contumacious conduct so expressly designed to undercut, and even sabotage, their adjudicative authority,” the 4th Circuit said in an Oct. 24 opinion by Judge J. Harvie Wilkinson III, an appointee of former President Ronald Reagan.
Napoli Law had filed the state court suits after the district court in Maryland rejected its motion to dismiss the fee case.
“In every practical sense,” Wilkinson said, “Napoli asked a state court in New York to overrule a federal district court in Maryland. It is hard to imagine a more flagrant challenge to the district court’s authority or a more obvious spur to litigation hither and yon.”
The 4th Circuit rejected Napoli Law’s argument that federal courts only have power to sanction conduct outside the courtroom when it is in direct defiance of a court order.
“To ask a district court to foresee and expressly prohibit through court order every conceivable abuse of process is to ask it to chase its tail,” Wilkinson wrote. “Litigation is complicated enough as it is. District courts should not have to wage a sprawling, three-front war to defend their rightful role.”
Law360 and the Maryland Daily Record have coverage of the decision.
The sanction against Napoli Law followed a December 2019 verdict of more than $861,000 for the Keyes Law Firm. It also followed a previous sanction of nearly $317,000 against Napoli Law for defiance of discovery orders.
The second sanction was for the state court suits and “other bad-faith misconduct,” the appeals court said. “The full list of Napoli’s sanctioned misconduct is long and troubling. It included repeated defiance of court orders, frivolous motions, and last-minute document dumps, to name just a few examples.”
Lawyer Paul J. Napoli formed Napoli Law after the breakup of Napoli Bern Ripka Shkolnik, according to Law360. The suit by the Keyes Law Firm had claimed that the prior firm violated fee-sharing agreements for referrals of asbestos cases. The Keyes Law Firm’s suit named 17 defendants alleged to be alter egos of the original firm and lawyer Napoli, according to Law360.
Marc Bern, a former Napoli Bern name partner, settled the case and was dropped from the Keyes Law Firm suit.
In a statement to Law360, lawyer Napoli said Napoli Law and Napoli Bern are distinct entities. The appeals court disregarded the distinction and overlooked the fact that many of the underlying cases have concluded through settlement or dismissal, he said.
“Keyes consistently held the misconception that there were still tens of millions in fees outstanding, despite having already received millions, a view the jury ultimately sided with us on,” Napoli said. “In the end, it became evident that we had prevailed in the underlying case. The firm is evaluating further briefing to remedy these misconceptions.”
Louis Malick, a partner at Kramon & Graham, represented the Keyes Law Firm. He told the Maryland Daily Record that the firm is pleased with the 4th Circuit’s decision.
“It sends a strong message to certain members of the profession that the sort of tactics employed in this case will not be tolerated and that district judges have ample authority to sanction misconduct,” Malick told the Maryland Daily Record in an email.
Malick told the ABA Journal that he is “not sure what further briefing Mr. Napoli and his firms may be contemplating, as the judgment was paid” Oct. 31.
Updated Nov. 6 at 3:20 p.m. to correctly call Napoli Law a national law firm and to correctly refer to Louis Malick’s firm. Also updated to add information from Malick in the last paragraph.
