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Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
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Rule 11 and Tax Protestors (or Others Filing Suit in the Face of Unambiguous Law) — “Plaintiffs May Disagree with the State of the Law, But Rule 11 Prohibits Them from Filing Fictional Claims to Protest It”

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United States v. Vallone, 2012 U.S. App. LEXIS 20308 (7th Cir. Sept. 28, 2012):

At the conclusion of an eleven week trial, a jury convicted defendants *** of conspiring to defraud the United States by impeding and impairing the functions of the Internal Revenue Service ("IRS") and to commit offenses against the United States, along with related fraud and tax offenses. ***

This is the latest in a series of cases arising out of abusive trusts promoted by The Aegis Company ("Aegis") and its sister company, Heritage Assurance Group ("Heritage"), both based in Palos Hills, Illinois. ***

Although the Aegis system of trusts was portrayed as a legitimate, sophisticated means of tax minimization grounded in the common law, the system was in essence a sham, designed solely to conceal a trust purchaser's assets and income from the IRS, thereby reducing his apparent tax liability and defrauding the United States of revenue to which it was entitled. Pursuant to the Aegis system, "customers appeared to sell their assets to several trusts when, in fact, customers never really ceded control of their assets." Hills, 618 F.3d at 624.***

In a particularly brazen move, several of the defendants filed lawsuits against both the IRS and a number of its revenue and special agents, among others. Bartoli, Vallone, Hopper, and Dunn filed one such suit on May 8, 1997, in the Northern District of Illinois against (among others) IRS Revenue Agent James Pogue and the Illinois Attorney Registration and Disciplinary Commission ("ARDC"), which had initiated disciplinary proceedings against Bartoli based on his involvement with the trusts sold by both Heritage and Aegis. (We shall have more to say about the ARDC proceeding below.) That suit was assigned to Judge Plunkett who, after dismissing most of the defendants and granting summary judgment to Pogue, imposed Rule 11 sanctions on the four plaintiffs for filing a frivolous lawsuit. See Fed. R. Civ. P. 11. His sanctions opinion, which we later affirmed and adopted on appeal, observed:

At base, the plaintiffs filed this claim because they believe the trusts they promote should be a legal means to avoid paying taxes. They are not. Plaintiffs may disagree with the state of the law, but Rule 11 prohibits them from filing fictional claims to protest it. . . .

Bartoli v. A.R.D.C. of Ill., 1999 WL 1045210, at *3 (N.D. Ill. Nov. 12, 1999) (citations omitted), aff'd sub nom. Bartoli v. Richmond, supra, 2000 WL 687155.

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Criminal Spoliation Can Be A Due Process Violation — Defendant Must Show That (1) The Evidence Had Exculpatory Value Before It Was Destroyed, (2) Defendant Is Unable to Obtain Comparable Evidence by Reasonable Means, and (3) Bad Faith Failure to Preserve

1) Rule 11 Sanctions: “No First Amendment Exception to a Rule 11 Violation” — “[T]he First Amendment Covers Novel, Nonfrivolous Arguments, But Many Frivolous Arguments Are Also Novel” (Good Quotes) — Frivolous To Continue To Make Rejected Novel Arguments; (2) FRAP 38 Sanctions: District Court In Best Position to Set Sanctions, Attorney’s Fees and Costs

3 Prerequisites for Inherent Power and § 1927 Sanctions in Second Circuit: (1) Bad Faith, (2) Conduct That Is Entirely Without Color [Thus, An Ill-Motivated Colorable Position Appears to Be Protected in the Second Circuit], and (3) Improper Purpose— “To Gain A Strategic Advantage” Is An Improper Purpose — Due Process Satisfied by Opponent’s Motion and Multiple Court Conferences, After Which Target Was Allowed to Submit Additional Letters

Inherent Power Sanctions — Untimeliness as Laches — Laches Properly Applied to Deny Sanctions Motion — Note Waived Defenses to Laches

Rule 37(c)(1) Sanctions: Substantial Justification or Harmless Error (Ninth Circuit Factors) — Erie: When State Supreme Court Has Not Squarely Addressed an Issue, Circuit Must Predict How It Would Rule, Using Intermediate Appellate Decisions, Decisions from Other Jurisdictions, Statutes, Treatises And Restatements for Guidance

(1) Appellate Review of Inherent Power Sanctions (7th Circuit): Factual Findings Reviewed for Clear Error, Choice of Sanction for Abuse of Discretion — 4-Element Test for Reversal; (2) Sanctions and Class Actions: Monetary Sanctions Properly Imposed on Defendants for Improper Communications with Class Members (Represented Parties) — “[I]f The Class And The Class Opponent Are Involved In An Ongoing Business Relationship, Communications From The Class Opponent To The Class May Be Coercive” (Good Quote); (3) Monetary Sanctions under Goodyear v. Haeger: If Same Fact-Gathering Would Have Been Conducted Absent The Misconduct, No But-For Causation — But Only “Rough Justice” Required, “Not Accountant-Like Precision” (Good Quote) — Once Misconduct Is Clear, Time Spent Ferreting It Out Compensable under Goodyear; (4) Goodyear Did Not Overrule Long-Standing Rule That Courts May Impose Modest Civil Monetary Sanctions to Curb Litigation Abuse; (5) Appellate Jurisdiction Lacking Where Sanctioned Attorney Fails to File Notice of Appeal and Lawyer’s Intent to Appeal Not Apparent from Client’s Notice; (5) Rule 11 Improper Purpose — Party May Have Many Purposes for Pursuing Claim — As Long As Claim Is Supported by Good Faith Belief in the Merits, “A Parallel Reason Does Not Violate Rule 11” — To Deny A Motion for Sanctions, The District Court Need Not Address Every Argument: “Arguments Clearly Without Merit Can, And For The Sake Of Judicial Economy Should, Be Passed Over In Silence” (Good Quote); Non-Monetary Sanction on Counsel: Complete Twice The Required Amount Of Professional Responsibility Hours For Her Next Continuing Legal Education Cycle Imposed By The State Bar

(1) Spoliation: Sanctions Are Warranted Only If the Movant Establishes That A Reasonable Trier of Fact Could Find That The Destroyed Evidence Would Support A Claim Or Defense — § 1927 Sanctions: “Courts Often Refuse to Award Sanctions When Both Parties Contributed to the Waste of Judicial Resources” (Good Quote)

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(1) FRAP 38 Sanctions Inapt for Appeal That Is Weak — “Borderline Frivolous” — Test Is Whether Appellant Should Have Known the Appeal Had Absolutely No Chance of Success — (2) Lay Opinion Testimony under Rule 701: Nub of Helpfulness Requirement Is to Exclude Testimony When the Witness Is No Better Suited Than the Jury to Assess the Issue; (3) Appeals: No Appeal from Denial of Motion for Judgment As a Matter of Law Unless Appellant Made That Motion Before Case Was Submitted to Jury

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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