Sanctions — Ambiguous Law and Hidden Facts — Good Quote

One of the plaintiffs in Pafumi v. Davidson, 2008 U.S. Dist. LEXIS 67036 (S.D. Fla. Sept. 3, 2008), and one of his non-party cohorts were guilty of criminal conduct and SEC violations, so they commenced this securities fraud action, in the Court’s words, to “'misle[a]d the Court into believing that they were victims of fraud when, in fact, they were the perpetrators of the fraud.’” That the plaintiffs were going to be sanctioned was pretty clear, but what about their lawyers. The Court declined to sanction the lawyers, who had been kept in the dark as to the pending criminal and Securities and Exchange Commission proceedings until their resolution was publicly announced. The Court found that the two firms had reasonably investigated the law and facts. Quote of note:

The law is often subject to differing interpretations and Plaintiffs' counsel should not be sanctioned merely because this Court did not choose to adopt their proffered interpretation of securities law.

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