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Goldschmidt v. Paley Rothman Goldstein Rosenberg & Cooper

November 8, 2007


Appeals from the Superior Court of the District of Columbia (CA678-97) (Hon. Steffen W. Graae, Trial Judge).

The opinion of the court was delivered by: Fisher, Associate Judge

Argued April 26, 2006

Before RUIZ and FISHER, Associate Judges, and NEBEKER, Senior Judge.

Benson J. Fischer sued Howard L. Flax; the law firm which represented him (Paley, Rothman, Goldstein, Rosenberg & Cooper ("Paley Rothman")); and Paley Rothman attorney Alan S. Mark for tortious interference with a proposed financial transaction that did not materialize. The trial court granted summary judgment in favor of Paley Rothman and Mark. After a brief trial, the court then awarded Paley Rothman, Flax,*fn1 and Mark nearly $1 million in damages on their counterclaims asserting that Fischer had engaged in bad-faith litigation. A jury also awarded Flax $300,000 on his quantum meruit claim. We affirmed these judgments in Fischer v. Estate of Flax, 816 A.2d 1 (D.C. 2003) (Fischer I).

These consolidated appeals involve further disputes related to those judgments. First, the trial court denied Fischer's motion to set aside the judgments awarding damages against him for bad-faith litigation. Second, the court denied a motion by Paley Rothman and Mark to enforce a writ of attachment served upon Montgomery Bakers, Inc. (MBI), a closely held corporation in which Fischer was a shareholder and an officer. Finally, the court sanctioned Fischer's attorneys, Stanley H. Goldschmidt and Arthur G. Kahn, for their part in facilitating Fischer's bad-faith litigation. We remand for further proceedings with respect to the writ of attachment, but otherwise affirm.

I. Background

We thoroughly discussed the origins of this litigation in Fischer I, and offer an abbreviated version here. When Benson Fischer, a principal owner of Fischer Brewing Company, needed financing to expand the marketing and production of his products,his friend, Howard Flax, agreed to seek investors in exchange for a finder's fee. Flax and Fischer memorialized the arrangement in a Letter Agreement givingFlax the right to acquire up to 15% of the company's authorized stock if he found financing. Flax contacted Laidlaw & Co., an investment banking firm, which offered to underwrite an initial public offering of Fischer Brewing Company stock in exchange for a commission. After Laidlaw expressed interest, Fischer was informed that the fair practice rules of the National Association of Securities Dealers ("NASD") would prevent him from paying more than 15% of the gross offering proceeds to Flax and Laidlaw combined. Thus, Fischer could not compensate Laidlaw without either breaching his agreement with Flax or violating the NASD rules. After the Laidlaw deal fell through, Fischer's company went out of business. Fischer then filed a complaint blaming Flax and Flax's attorney, Alan Mark of Paley Rothman, for the collapse of the Laidlaw deal.

Fischer complained that Flax, Paley Rothman, and Mark tortiously interfered with Fischer's potential deal with Laidlaw. Flax, Paley Rothman, and Mark responded by asserting claims against Fischer for abuse of process (bad faith litigation). Flax filed a counterclaim for quantum meruit damages to recover the fair value of the services he provided to Fischer before the Laidlaw deal fell through. Paley Rothman and Mark also sought Rule 11 sanctions against Fischer's attorneys, Kahn and Goldschmidt,*fn2 alleging that they lacked a good faith basis in fact for making the claims in the complaint. The court initially denied the motion for Rule 11 sanctions, noting that it was premature to make a decision. After a lengthy period of discovery, the court granted summary judgment in favor of Paley Rothman and Mark,finding "there is no legally viable theory or evidence" to support Fischer's claim for tortious interference.

Speaking through his attorney, Goldschmidt, Fischer refused to proceed with trial on the remainder of his case. As a result, the court entered judgment against Fischer on each of his claims against Flax and, after a brief jury trial, entered judgment in the amount of $300,000 on Flax's claim for quantum meruit damages. Following a bench trial on the bad faith litigation counterclaims, which Fischer did not attend and in which Goldschmidt did not participate, the court awarded Paley Rothman, Mark, and Flax some $930,000 in attorney's fees and costs, together with $40,000 in punitive damages.

Almost one year after we decided Fischer I, and over three years after the trial court entered the judgments against him,Fischer filed a motion to set aside the bad faith litigation and quantum meruit judgments. That motion was denied. In an effort to collect on its judgment, which remains unpaid, Paley Rothman served a writ of attachment upon MBI, a family-owned corporation of which Fischer was an officer and shareholder. After two days of hearings, the trial court denied the motion to enforce the writ of attachment.

Paley Rothman and Mark renewed their motion for Rule 11 sanctions after summary judgment was entered against Fischer on his tortious interference claim. Once all of the judgments against Fischer were affirmed, the trial court held a hearing on the renewed Rule 11 motion. On December 1,2003, the court imposed sanctions against Goldschmidt and Kahn in the amount of $50,000 each. These appeals followed.

II. The Rule 60 (b)(6) Motion

Fischer asks us to reverse the decision denying his motion to vacate, asserting that his attorney was suffering from a mental infirmity when he refused to attend the trials himself and advised Fischer that he need not attend either.

A. Facts

Trials were scheduled on the counterclaims filed by Flax, Paley Rothman, and Mark on dates between November 1999 and May 2000, but Fischer claimed that he was too ill to attend. Although the court previously had granted a seven-week postponement at Fischer's request, it refused to approve further continuances without credible evidence of Fischer's illness. Goldschmidt failed to offer such proof and refused to proceed without his client present. Thus, trials were conducted in the absence of Goldschmidt or Fischer on the defendants' counterclaims, with the results described above.

Fischer argues that the judgments should be vacated because, unbeknownst to him, Goldschmidt was suffering from a mental illness at the time the trials were scheduled to occur. Fischer attached an affidavit to his motion, swearing that he was not aware that Goldschmidt declined an opportunity to defend against these claims in Fischer's absence. Based on several material inconsistencies in affidavits that Fischer previously had submitted to the court, Judge Graae concluded that Fischer's affidavits "are not worth the paper they are written on." Judge Graae also noted that "Mr. Fischer comes with filthy hands seeking equity," citing instances where "he knowingly made false allegations against Mr. Flax, fabricated documents, tampered with witnesses, suborned perjury, and engaged in an elaborate cover-up to hide his misconduct."

B. Standard of Review

Superior Court Civil Rule 60 (b)(6) permits a court to grant relief from a judgment under "extraordinary circumstances or where a judgment may work an extreme and undue hardship." Starling v. Jephunneh Lawrence & Associates, 495 A.2d 1157, 1161 (D.C. 1985); see also Clement v. District of Columbia Dep't of Human Services, 629 A.2d 1215, 1219 (D.C. 1993) ("in unusual and extraordinary situations justifying an exception to the overriding policy of finality"). "Whether to grant or deny a motion for relief under Rule 60 (b)(6) is committed to the sound discretion of the trial court." Puckrein v. Jenkins, 884 A.2d 46, 60 (D.C. 2005); accord, e.g., Johnson v. Marcheta Investors Ltd. Partnership, 711 A.2d 109, 111 (D.C. 1998).

"In exercising its discretion, the trial court must choose 'what is right and equitable under the circumstances and the law' and state the reasons which support its conclusion." Firemen's Ins. Co. of Washington, D.C. v. Belts, 455 A.2d 908, 909 (D.C. 1983) (quoting Johnson v. United States, 398 A.2d 354, 361 (D.C. 1979)); see Moorehead v. District of Columbia, 747 A.2d 138, 157-58 (D.C. 2000) (courts apply "equitable principles" when ruling on Rule 60 (b) motions). The party seeking to set aside a judgment under Rule 60 (b) bears the burden of demonstrating that he is entitled to such relief. McCurry ex rel. Turner v. Adventist Health System/Sunbelt, Inc., 298 F.3d 586, 592 (6th Cir. 2002) (cited in Sieverding v. American Bar Ass'n, 466 F. Supp. 2d 224, 227 (D.D.C. 2006)); United States v. International Brotherhood of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001) ("The burden of proof is on the party seeking relief from judgment . . . .").

C. Analysis

We cannot say that the trial court abused its discretion by denying Fischer's motion to vacate judgment. The court's conclusion that Fischer's affidavits "are not worth the paper they are written on" is supported by a factual record replete with examples of Fischer's untrustworthiness. As the trial court noted, Benson Fischer has "filthy hands"; he cannot expect a new trial based solely on self-serving statements made over three years after the judgments were entered against him. These judgments were issued on the merits, after a lengthy period of discovery and trials, and were eventually affirmed by this court. To allow Fischer to relitigate these issues now would violate "the overriding policy of finality" undergirding our legal system. Profitt v. Smith, 513 A.2d 216, 218 (D.C. 1986) (quoting Railway Express Agency, Inc. v. Hill, 250 A.2d 923, 925 (D.C. 1969) (citation omitted)).

Alternatively, even if we assume the statements within his affidavit are true, the materials submitted in support of Fischer's motion fall far short of establishing that Goldschmidt was incapacitated by illness or that his illness caused the judgments against Fischer. Although the memorandum in support of his motion alleges that Goldschmidt "was suffering from an involuntary organic brain state causing impaired judgment," there are no attached affidavits, reports, or other sworn materials attesting to Goldschmidt's incapacity. Moreover, to obtain relief under Rule 60 (b)(6) on the theory that an attorney's illness was an "extraordinary circumstance," the moving party must, at a minimum, show a causal nexus between the illness and the adverse ruling. See Douglas v. Kemp, 721 F. Supp. 358, 360 & n.4 (D.D.C. 1989) (the court must focus on the effect of the attorney's illness on the client's case).*fn3 In light of these omissions, we cannot say Fischer established "extraordinary circumstances" that warrant new trials.

Fischer voluntarily chose Goldschmidt as his attorney and "cannot now avoid the consequences of the acts or omissions of this freely selected agent." Link v. Wabash R.R. Co., 370 U.S. 626, 633-34 (1962). Fischer "is deemed bound by the acts of his lawyer-agent and is considered to have notice of all facts, notice of which can be charged upon the attorney." Id. at 634 (internal quotation marks and citation omitted); see Molovinsky v. Monterey Coop., Inc., 689 A.2d 531, 534 n.7 (D.C. 1997) ("clients must be held accountable for the acts and omissions of their attorneys") (internal punctuation and citation omitted). Although we have recognized an exception to this rule "where the conduct of counsel is outrageously in violation of either his express instructions or his implicit duty to devote reasonable efforts in representing his client," Railway Express Agency, Inc., 250 A.2d at 926; see also Clark v. Moler, 418 A.2d 1039, 1042 (D.C. 1980); Bond v. Wilson, 398 A.2d 21, 24-25 (D.C. 1979), "nothing in this record even approaches a situation warranting the application of this exception." Newsome v. District of Columbia, 859 A.2d 630, 631 (D.C. 2004).

Fischer's own affidavit belies any claim that he has only recently discovered his attorney's actions. Fischer recites that "I was advised by Stanley Goldschmidt not to attend the hearing on the bad faith litigation claims of the Defendants and that neither he nor anyone from his office would be present as their attendance was not required or necessary." Soon after he accepted this advice, substantial judgments were entered against him. Although the trend of the litigation obviously was unfavorable, Fischer apparently believed that their strategy ultimately would prevail. He relied upon "Mr. Goldschmidt's representations to me that I would prevail on every issue on appeal . . . ."Although Fischer's new counsel has explained the defects in Goldschmidt's legal advice, that does not change the fact that Fischer was aware of Goldschmidt's conduct. Cf. United States v. Pollard, 367 U.S. App. D.C. 386, 393, 416 F.3d 48, 55 (2005) (for purposes of federal statute of limitations, time begins to run when prisoner knows (or through diligence should know) of his attorney's conduct, not when new counsel reveals the legal significance of those facts). We will not reward a party with a new trial where he was aware of "his counsel's derelictions [but] failed to take diligent measures to protect his own interests." Joseph v. Parekh, 351 A.2d 204, 205-06 (D.C. 1976); see also Bond v. Wilson, 398 A.2d at 24 (movant must demonstrate that he "was assiduous in pursuing his claim"); Railway Express Agency, Inc., 250 A.2d at 927 (court properly denied motion to vacate where party negligently monitored the status of his case, waiting twenty months to contact attorney regarding status, only to discover that case had been dismissed due to his attorney's negligence). Except in extraordinary circumstances (not demonstrated here), "if an attorney's conduct falls substantially below what is reasonable under the circumstances, the client's remedy is against the attorney in a suit for malpractice." Link, 370 U.S. at 634 n.10.

III. The Writ of Attachment -- D.C. Code ...

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