Faison v. Thornton

863 F. Supp. 1204

Henry FAISON d/b/a Faison Associates, et al., Plaintiffs, v. Grant THORNTON, a Partnership, et al., Defendants.

No. CV-S-88-0134-LDG-(RJJ).

United States District Court, D. Nevada.

December 30, 1993.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael Singer & Bradley Shafer, Scott Bogatz and Steve Lane, for plaintiffs.

John Keith, C. Stephen Howard, Thomas Kummer, Marc Gary and James G. Duncan, for defendants.

ORDER

GEORGE, Chief Judge.

This matter is before the Court on counsel Michael H. Singer ("Singer") and Bradley J. Shafer's ("Shafer") Objection to Magistrate's Order(s) ("Objection to Magistrate's order) (# 167). Singer and Shafer also filed a Memorandum of Points and Authorities in Support of Objection (# 169). Defendant filed a Response (# 170) to the Objection to Magistrate's Order. Singer and Shafer filed a Reply (# 171) to the Response.

On July 6, 1992, the Magistrate Judge entered an Order (# 131) which found that then plaintiffs' counsel Singer and Shafer had violated Nevada Supreme Court Rule 182 ("SCR 182") by having ex parte communications with a defendant who they knew was represented by counsel. The Magistrate Judge granted defendants the following relief based on Singer's and Shafer's professional misconduct:

(1) A protective order was entered which prevented Singer and Shafer from disclosing any of the information which they obtained from these ex parte communications or from destroying any records made from these communications.

(2) Singer and Shafer were disqualified as counsel for plaintiffs.

(3) It was ordered that a hearing would be held in the future on defendants' request for reasonable attorneys' fees for having to litigate the disqualification/sanction action.

On October 7, 1993, the Magistrate Judge entered an Order (# 166) which granted to defendants reasonable attorneys' fees and expenses for having to litigate the disqualification/sanction action. The Magistrate Judge found that defendants were entitled to an award of $46,599.26 in sanctions, as this was the amount of the attorneys' fees. Singer and Shafer then filed their Objections to the Magistrate Judge's Order. Not only do Singer and Shafer object to the Magistrate Judge's October 7, 1993 Order, but they also object to the Magistrate Judge's July 6, 1992 Order, which they argue was an order interrelated to the October 7, 1993 Order.

Federal Rules of Civil Procedure ("Rule") 72(a) requires that objections to a magistrate's order be made within ten days after being served with a copy of such order, or a party may not thereafter assign as error a defect in the magistrate's order. Further, Local Rule 510-1 states the following:

A district judge may reconsider any pretrial matter referred to a magistrate judge in a civil or criminal case pursuant to Rule 500-3¹ of these rules where it has been shown that the magistrate judge's ruling is clearly erroneous or contrary to law. Therefore, any party dissatisfied with the ruling of the magistrate judge on the pretrial matter may file with the clerk and serve upon the opposing party within 10 days from the date of service of the magistrate judge's ruling specific written objections to the magistrate judge's ruling together with points and authorities in support thereof. The opposing party shall within 10 days thereafter file and serve upon the objecting party points and authorities relative to the objections.

Local Rule 510-1.

Pursuant to Local Rule 510-1 and 28 U.S.C. § 636(b)(1)(A), the Court has reviewed the Magistrate Judge's July 6, 1992 Order and his October 7, 1993 Order. As to Singer and Shafer's objections to the July 6, 1992 Order, the Court considers such objections as untimely made and therefore, the Court will not reconsider this order. Singer and Shafer argue that the July 6, 1992 Order had left open the issue of the amount of sanctions and that is why they did not object to the order until after sanctions had been entered. They argue that the two orders are so related that it was proper for them to wait until the entry of the October 7, 1993 Order before objecting to both orders.

This argument by Singer and Shafer is meritless and it is discredited by the specific objections made by them. Singer and Shafer attack the Magistrate Judge's finding that they violated SCR 182. The time to object to such a crucial finding of fact was back in July of 1992 when the finding was made and not in October of 1993, when the only issue litigated was the amount of sanctions. It simply is untenable for Singer and Shafer to argue that they waited a year and a half to object to the merits of the Magistrate Judge's findings because sanctions had not yet been entered against them. Thus, the Court will not consider any of the untimely objections made by Singer and Shafer, but it will consider objections made as to amount of sanctions.

Singer and Shafer claim that since they only technically violated SCR 182, that it is unfair to award attorneys' fees in the amount of $46,599.26 against them. They argue that their violation of SCR 182 was not an intentional disregard of ethical conduct. However, Singer and Shafer's conducting of several phone conversations and then a five hour meeting with defendant Gilman knowing full well that he was represented by counsel, is without question a flagrant violation of SCR 182. Given the egregiousness of Singer and Shafer's actions, it was certainly not unfair to require them to pay defendants' attorneys' fees of $46,599.26.

Alternatively, Singer and Shafer argue that they should be able to deduct from the amount owed $15,617.06 in attorneys' fees and expenses which were incurred by defendants' counsel in conducting the evidentiary hearing. Singer and Shafer argue that defendants' counsel is to blame for there having to be an evidentiary hearing and therefore, they should not benefit from a situation which they created. This argument is also meritless as Singer and Shafer's violation of SCR 182 foreseeably caused any subsequent legal proceedings and they should have to bear the financial burden of this litigation.

IT IS HEREBY ORDERED that the Magistrate Judge's Order of October 7, 1993 (# 166) is AFFIRMED.

ORDER

Filed July 6, 1992

JOHNSTON, United States Magistrate Judge.

This matter is before the court on defendants' Emergency Motion for a Protective Order (# 109) and the defendants' Emergency Motion for Sanctions (# 110). The plaintiffs' have filed a response entitled Answer to the Emergency Motion for Sanctions. (# 115). On April 13, 1992, and April 14, 1992, a hearing was held on the motions. The defendants argue that plaintiffs' counsel had improper ex parte communications with a defendant, and therefore sanctions should be imposed. Plaintiffs' counsel claim that their conduct was not improper and that no sanctions are warranted.

FACTS

On December 14, 1987, the plaintiffs, Henry Faison d/b/a Faison Associates, Peter Sarron, Stewart Oliver and Karen Tyres, filed a complaint charging the defendants, Grant Thornton, Fox & Company, Alexander Grant & Company, Grant Thornton, Irving J. Steinberg, Richard S. Gilman (Gilman), Clifford R. Beadle and Diane Martono (Martand) Van Son with the fraudulent and improper preparation of International Teldata Corporation's (Teldata) financial statements during the years 1980 through 1984. The plaintiffs are former stockholders of Teldata who lost significant investments as a result of the defendants' alleged fraudulent actions.

Defendant Gilman is a Certified Public Accountant who, along with the co-defendants, allegedly prepared the fraudulent financial statements at issue in this litigation. When the financial statements at issue were prepared, Gilman and the other defendants were employed by Fox and Company which merged with the accounting firm of Alexander Grant & Company. This firm subsequently changed its name to Grant Thornton.

The plaintiffs in this consolidated lawsuit are represented by Bradly J. Shafer, Esq., (Shafer) an attorney licensed to practice law in Michigan and Arizona, and Michael H. Singer, Esq., (Singer) an attorney licensed to practice law in New York and Nevada. See Answer (# 116), Exhibits B (Shafer Affidavit) and Exhibit C (Singer Affidavit). Though his communications with defense counsel have been sparse, Defendant Gilman has been concurrently represented from the beginning of this lawsuit by the firms of Vargas & Bartlett, of Las Vegas, Nevada, and the firm of Mayer, Brown and Platt of Washington, D.C. See Motion (# 110), Exhibit C (Gilman Affidavit) and Exhibit D (McCoy Affidavit). These firms are defendant Gilman's counsel of record and have filed numerous pleadings, motions and other papers as defined by Rule 7 of the Federal Rules of Civil Procedure on defendant Gilman's behalf. The following documents have been signed¹ and filed² jointly by Thomas F. Kummer, Esq., of Vargas & Bartlett and Stanley J. Parzen, Esq. and Patricia A. McCoy, Esq., of Mayer, Brown & Platt on behalf of Gilman:

a. Motion to Dismiss or Transfer (# 3), filed on January 25, 1988;

b. Motion By All Defendants to Dismiss (# 17), filed on April 19, 1988;

c. Stipulation (# 29), filed on May 9, 1988;

d. Motion of Defendants Richard Gilman, Irving Steinberg and Clifford Beadle to Dismiss Recently Served Complaints (# 35), filed on May 23, 1988;

e. Stipulation For Extension of Time For Defendants to Respond to Plaintiffs' Motion For Leave to Amend Complaint and Plaintiffs' Opposition to Defendants' Motion to Dismiss (# 36), filed on June 1, 1988 f. Defendants' Reply Memorandum in Support of Their Motion to Dismiss the First Amended Complaint and Opposition to Plaintiffs' Motion For Leave to File a Second Amended Complaint (# 39), filed on June 15, 1988;

g. Defendants' Motion For Leave to Serve In Excess of Forty Interrogatories (# 57), filed on December 28, 1988;

h. Defendants' Response to Plaintiffs' Motions For Leave For Withdrawal of Counsel and For Enlargement of

...