The Clouds Surrounding Rudy Giuliani Are Getting Darker

Recently, the Appellate Division of the State of New York issued an interim suspension of Rudy Giuliani’s law license on the ground that he repeatedly made false statements to courts concerning the 2020 election. This was an interim proceeding. Giuliani will get an opportunity to address the allegations at the hearing in that matter. Giuliani contests the allegations. However, the court concluded that:

“….[W]e conclude that there is uncontroverted evidence that respondent communicated demonstrably false and misleading statements to courts, lawmakers and the public at large in his capacity as lawyer for former President Donald J. Trump and the Trump campaign in connection with Trump’s failed effort at reelection in 2020. These false statements were made to improperly bolster respondent’s narrative that due to widespread voter fraud, victory in the 2020 United States presidential election was stolen from his client.”

In the Matter of Rudolph Giuliani, Case No. 2021-00506 (New York Appellate Division First Judicial Department), May 3, 2021.

The interim suspension is controversial, but it is an important opinion.

Today, another shoe dropped on Giuliani. In the case US Dominion, Inc. v. Giuliani, No. 21-cv-2013 (the sister case is US Dominion v. Powell, No. 21-cv-0040), the court held that Dominion’s claim for defamation stated a claim. When a defamation lawsuit is filed, the defendant will typically file a motion to dismiss. If the motion is granted with prejudice, the case comes to an end. If the motion is denied, the case goes forward to discovery. Dominion ultimately bears the burden of proof and, no doubt, Giuliani will contest the allegations in the Complaint. In my experience few defamation lawsuits survive a motion to dismiss. When a case does survive a motion to dismiss, that is a serious matter for the defendants.

In his motion to dismiss, Giuliani argued that Dominion did not adequately allege that it was damaged by Giuliani’s actions. The court rejected the claims and denied the motion to dismiss. Discovery will soon proceed on these claims.

“The Court is not aware of any case requiring a corporate plaintiff alleging defamation per se to plead damages specially, and by its terms Rule 9(g) does not include such a requirement. In any event, Dominion has pleaded lost profits with the particularity required by Rule 9(g). Under that rule, a defamation plaintiff must set “forth the precise nature of [its] losses as well as the way in which the special damages resulted from the allegedly false publication.” Schoen v. Wash. Post, 246 F.2d 670, 672 (D.C. Cir. 1957). Here, Dominion alleges that Giuliani made defamatory statements about its involvement in the 2020 election, that the people who believed those statements made threats to Dominion employees and board members, and that those threats required Dominion to spend more than $565,000 on private security to protect its employees. Giuliani Compl. ¶ 126. Although Giuliani contends that Dominion may satisfy Rule 9(g) only by “identifying either particular customers whose business has been lost or facts showing an established business and the amount of sales before and after the disparaging publication, along with evidence of causation,” Browning v. Clinton, 292 F.3d 235, 245 (D.C. Cir. 2002), the cases he cites merely provide examples of how a plaintiff may specifically state pecuniary harm and demonstrate that those harms resulted from defendant’s conduct. In its Complaint against Giuliani, Dominion alleges that it suffered economic harm in the form of additional expenses that it would not have incurred if not for Giuliani’s alleged defamation, as well as the loss of future contracts. See also Giuliani Compl. ¶¶ 128 (noting that Dominion has incurred $1,170,000 in expenses to mitigate harm to reputation and business); id. ¶ 135 (projecting lost profits of $200 million over the next five years when reduced to present value).25 Dominion has also alleged how those losses resulted from Giuliani’s defamatory statements. Id. ¶¶ 106–32. The Complaint therefore alleges lost profits with adequate specificity and survives Giuliani’s Motion to Dismiss.”

There will be more proceedings to come in these cases. They are important cases for anyone interested in legal ethics.

Ed Clinton, Jr.

http://www.clintonlaw.net

Dry Cleaning Lawsuit Results in 90-Day Suspension

This case was covered in the news media. it has now resulted in a 90-day suspension from the practice of law. In re Roy L. Pearson, No. 18-BG-586, June 4, 2020, District of Columbia Court of Appeals. Pearson sued his dry cleaner alleging that the dry cleaner lost a pair of his pants. The sanctions resulted from his approach to the litigation. The facts are summarized in part:

The allegations of misconduct arise from the litigation culminating in Pearson v. Chung, 961 A.2d 1067 (D.C. 2008).^[2] In that case, Pearson sued three defendants (Soo Chung, Jin Nam Chung, and Ki Y. Chung) who jointly owned and operated Custom Cleaners, a dry cleaning business. Id. at 1069. The dispute originated with Pearson’s allegation that the Chungs lost a pair of pants that he had brought to Custom Cleaners for alterations. Pearson initially demanded $1,150 in compensation. He then filed a lawsuit in the Superior Court claiming that defendants had violated the District of Columbia Consumer Protection Procedures Act, D.C. Code §§ 28-3901 to -3913 (2013 Repl. & 2019 Supp.) (“CPPA”), and committed common law fraud, negligence, and/or conversion. Pearson’s claims rested on his interpretation of three signs in the Chungs’ store: “Satisfaction Guaranteed,” “Same Day Service,” and “All Work Done on Premises.” In the initial complaint, he sought at least $15,000 in compensation for emotional distress and $15,000 in punitive damages from each defendant.

Pearson’s demands for compensation escalated dramatically as the case went on. His claims for emotional damages increased to $3,000,000 by trial. He asserted that he was entitled to $90,000 to obtain a rental car so he could travel to a different dry cleaner in the city. He claimed that he had expended 1,200 hours of work on the matter, worth $500,000 in attorney’s fees. He sought prospective relief requiring the Chungs to pay him $10,000 within twenty-four business hours if he notified them that they were not providing him with acceptable service.^[3] His damages theories often included multiplying his claims by three (for each defendant), by two (for his separate statutory and common law claims), by three (for treble damages under the CPPA), by three (for each sign), by seven (for each CPPA subsection allegedly violated), and/or by every single day that a particular sign had been on display within the statute of limitations (under his theory that each day represented a separate violation of the statute and was independently compensable). By the time the Joint Pre-Trial Statement was filed, Pearson claimed that he was owed more than $67,000,000 in compensatory and punitive damages.

Pearson’s theories of liability likewise expanded — or at least were clarified as being extremely expansive — as the litigation progressed. In his motion for partial summary judgment, Pearson claimed that the “Satisfaction Guaranteed” sign represented “an unconditional and unlimited guarantee of satisfaction, as a matter of law” (emphasis in original) so that any customer who claimed dissatisfaction, regardless of whether the claim was made in good faith, could demand any compensation whatsoever. Custom Cleaners would then have to meet that demand, no matter what it was, in order to resolve the customer’s dissatisfaction. Pearson testified at trial that this would include situations in which the Chungs — or any other provider — knew that the customer was lying and/or when the customer demanded an exorbitant amount of money, such as a trillion dollars. Respondent’s theories regarding the other two signs were similarly expansive. For example, in his trial brief, Pearson listed as an “undisputed fact” that the “Same Day Service” sign meant that “any customer request for any of defendants’ service would be completed the same day” (emphasis in original). The trial court granted judgment for the Chungs on this claim as a matter of law because Pearson’s “Same Day Service” theory was “completely unreasonable,” failing to consider any other factors, such as when customers dropped off the clothes, how many items they wanted serviced, what kind of services they were requesting, and whether customers asked for or even desired same day service.

As the case progressed, the trial court repeatedly expressed concerns about Pearson’s characterizations of case law, statutes, and the court’s own orders. In one instance, the court pointed out that Pearson had misquoted a case, attempting to imply that it had involved an identical “Satisfaction Guaranteed” sign. The court reminded Pearson that he had “an obligation to the Court to be accurate in the representations you make with regard to what cases are about.” Pearson initially conceded that he had misquoted the case and apologized, but later filed a “Correction,” attempting to rescind that admission, because he claimed that there was no “rational basis for distinguishing the meaning of the term `unconditional guarantee’ from the meaning of the term `satisfaction guaranteed’ . . . . In plaintiff’s view, . . . the two terms are indistinguishable in substance and meaning.”^[4]

The Hearing Panel and the District of Columbia Court of Appeals concluded that Pearson violated Rules 3.1 and 8.4(d). Rule 3.1 prohibits the lawyer from bringing frivolous litigation. The original claim (for the lost pants) was not frivolous. The theories of liability and the enormous demands for damages were frivolous. The explanation:

In this case, the Board took care to explain that “[a]ttorneys in the District of Columbia should not fear discipline for making aggressive and creative arguments.” It emphasized that “[f]rivolous is more than ultimately meritless, and the good faith exception to a Rule 3.1 violation allows a wide range of creative and aggressive challenges to existing law” (internal quotation marks omitted). But the Board also explained that, while a Rule 3.1 violation may not have been clear at the outset, “[a]s his lawsuit progressed, Respondent’s liability and damages arguments morphed into the preposterous.” It was “the entire course of Respondent’s extreme conduct over the course of the suit,” not a showing “that the claims were frivolous when first made,” that convinced the Board that Pearson had violated Rule 3.1.

We agree that this distinction is crucial and that, as his theories expanded and his tactics grew more extreme, respondent failed to comply with his continuing responsibility to conduct an objective evaluation of the merits of his claims. Yelverton proves instructive. The attorney in that case “filed numerous repetitive and unfounded motions in Superior Court and in this court, and . . . twice asked the trial judge to recuse himself from the case when he lacked any objective reason to do so.” 105 A.3d at 426. The Board found that Pearson’s motions and discovery practices were similarly repetitive — both during the initial litigation and during this disciplinary proceeding — and that his unfounded allegations of bias against Judge Kravitz were strikingly similar to the motion to disqualify in Yelverton.^[8] These conclusions are well supported by the record.

Pearson’s liability and damages claims compounded the mischief of his motions and discovery practice. Pearson protests that his liability claims cannot fairly be deemed frivolous, as he survived summary judgment and a motion to dismiss and was allowed to proceed to trial. The trial court also opted not to sanction him. But, while relevant, those decisions are not dispositive of whether the legal theories ultimately were frivolous.^[9] Pearson’s claims continually expanded throughout litigation and his liability and damages theories became more clear — and more outlandish — as the case progressed. As noted above, the trial court granted judgment as a matter of law rejecting Pearson’s claims based on the “Same Day Service” sign. In light of the entire record, surviving summary judgment cannot be taken as a dispositive ruling that Pearson’s theories had legal support. Instead, as noted by the trial court and quoted by the Board, once Pearson’s legal theories “clearly were articulated,” they “were unsupported in fact or in law.”

It is also true that, as a technical matter, some of Pearson’s theories presented a matter of first impression. But the lack of a definitive holding precluding a legal theory does not mean that it cannot be frivolous.^[10] “Were this not the case, a patently frivolous but novel legal argument — `novel,’ perhaps, because no litigant would dream of bringing it with a straight face — would not be sanctionable.” Ozee v. Am. Council on Gift Annuities, Inc., 143 F.3d 937, 941 (5th Cir. 1998). We agree with the Board that this is one such case. The total damages figure is shocking in itself; simply put, Pearson asked the trial court to award him $67,292,000 because of his dissatisfaction with defendants’ dry cleaning services. But the constituent parts of that $67,292,000 total are equally troubling. Pearson asked for $90,000 to rent a car, a facially disproportionate request in response to the alleged need to patronize another dry cleaner. He claimed that his emotional distress over a few common and innocuous signs and a lost pair of pants was so severe that he was entitled to $3,000,000 in damages. Perhaps most remarkable was his request for a judgment obligating the Chungs to provide him with ongoing services and to pay him $10,000 immediately based on nothing more than his own request, a demand that the Hearing Committee called “patently non-cognizable,” was made after the defendants had already taken down the signs at the heart of the controversy, was tethered to no statutory basis, and was completely out of proportion to any likely shortcoming in dry cleaning service. These damages theories were utterly frivolous, implausible to the point of having “not even a faint hope of success,” and they violated Rule 3.1. Spikes, 881 A.2d at 1125 (internal quotation marks omitted).

We agree with the Board that Pearson’s theories of liability also violated Rule 3.1. Under Pearson’s interpretation of the signs in question, “customers” acting in bad faith could bankrupt any business in the District with such a commonplace sign, as he acknowledged no requirement of good faith by the customer, no limitation on the demands the customer could make, and no allowances for “basic common sense.” Pearson v. Chung, 961 A.2d at 1075. Pearson did not make the required objective inquiry into whether his liability claims had even a faint hope of success. Instead, he did the opposite, steadfastly refusing to acknowledge contrary legal authority, engaging in extensive puffery, and pressing his preferred interpretations of the signs even after they were rebuffed by his own witnesses at trial. Indeed, even in his filings in this disciplinary case, he has continued to refer to his theories as “indisputable.” As the Hearing Committee noted, “Respondent has never, to this day, made the requisite objective appraisal.”

The court also found a violation of Rule 8.4(d) which prohibits interference with the administration of justice. A 90 day suspension was ordered.

Comment: should you have a legal ethics question, do not hesitate to call me to discuss it. My number is 312-357-1515, Extension 1.

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The ARDC Hearing Board Has Decided Novoselsky II – And Recommended Disbarment

The ARDC Hearing Board has weighed in on the second case that it filed against David Novoselsky, In re David Alan Novoselsky, 2015 PR 00007 (“Novoselsky II”). The Hearing Board has recommended that Novoselsky be disbarred.

The ARDC has been in continuous litigation with David Novoselsky since 2011. In Novoselsky I, decided on September 21, 2015, the Supreme Court ordered a six month suspension. By the time Novoselsky I was decided, the ARDC had already filed Novoselsky II.

The charges in Novoselsky II arose out of the death of Claudia Zvunca. The respondent was alleged to have engaged in a lengthy series of violations of the Rules of Professional Conduct related to the Zvunca litigation, including the filing of multiple frivolous lawsuits against other attorneys involved in the Zvunca litigation. The Hearing Board, after a trial lasting several days, found that the respondent engaged in all of the charged misconduct.

The ARDC recommended disbarment and explained the rationale for its decision as follows:

“In arriving at the appropriate discipline, we consider those circumstances which may mitigate and/or aggravate the misconduct. In re Gorecki, 208 Ill. 2d 350, 360-61, 802 N.E.2d 1194 (2003). We have little to consider in the way of mitigation in this case other than Respondent’s cooperation in these proceedings. While he expressed some regret for certain of his actions, such as remarks made to Judges Zwick and Connors, his contrition did not encompass the misconduct for which he was actually charged, that being his frivolous filings, his efforts to embarrass or burden other counsel, or his dishonest statements.

The aggravating circumstances, on the other hand, are extremely serious and expansive. Notably, Respondent did not recognize his misconduct to be improper, express remorse for his actions, or apologize to the many attorneys whose lives he disrupted. See In re Lewis, 138 Ill. 2d 310, 347-48, 562 N.E.2d 198 (1990).

We also consider the fact that Respondent’s actions were not limited to an isolated instance of misconduct; rather, he engaged in a pattern of wrongdoing which extended over the course of several years. See In re Smith, 168 Ill. 2d 269, 659 N.E.2d 896 (1995). While only two client matters were involved, Respondent’s initiation of frivolous issues and proceedings complicated those matters to extreme levels and expanded the sphere of litigation to include additional courts and judges at the trial and appellate levels in both federal and state courts.

Respondent’s motivation for engaging in the misconduct, which we see as having been purely for personal gain, is another aggravating factor we consider. As to the Zvunca proceedings, the Administrator argued throughout the hearing that Respondent was attempting to disrupt the existing attorney/client relationships in the wrongful death litigation and insert himself into the proceedings as counsel for the plaintiff in order to reap large fees for himself. We believe this to be true, but in reviewing both the Zvunca and Kuc litigation we conclude his motivation was also rooted in his own over-zealous desire to beat down and out-trick his opponents by any means and at any cost, whether that cost was to his own clients or, ultimately, to himself. His determination to control the proceedings and his refusal to accept defeat was displayed repeatedly by his filing and re-filing of meritless cases, his endless motions for substitution of judges, his specious requests for reconsideration and appeals, and other behavior which a reasonable attorney would recognize as meritless and contumacious. Not only did Respondent not recognize his initial wrongful conduct, the imposition of sanctions seemed to have no effect in reforming his behavior.

With respect to those sanction awards, the evidence showed that Respondent racked up thousands of dollars of sanctions imposed by a federal judge and two separate circuit court judges. Respondent is in bankruptcy and most of the sanction orders remain unsatisfied.

While the foregoing factors are egregious and will impact our ultimate determination, the most disturbing factor that aggravates Respondent’s conduct is the astonishing amount of harm he caused to numerous individuals, including clients and opposing attorneys. See In re Saladino,

71 Ill. 2d 263, 375 N.E.2d 102 (1978) (discipline should be “closely linked to the harm caused or the unreasonable risk created by the

lack of care”).

The list of persons or entities who were damaged by Respondent’s conduct include:

Cristina Zvunca – Respondent’s maneuverings delayed the progression of her case and her recovery. After seizing control of the litigation, he agreed to settle the case for an amount less than what had been discussed by the parties, and for less than the ultimate settlement amount;

Jeanine Stevens, Marina Ammendola and John Cushing – the attorneys spent a vast amount of time responding to Respondent’s motions and lawsuits, paid thousands of dollars in fees to other attorneys to defend them against spurious allegations, suffered increases in their malpractice insurance premiums, and had less time to spend on their other client matters;

Stevens and Ammendola – both testified they continue to suffer embarrassment and answer inquiries about the unfounded allegations made against them, which were not only personal and offensive in nature but, as to Stevens, could have subjected her to an unwarranted investigation by child services or worse;

Gus Santana – incurred attorney’s fees in defending himself against baseless motions and accusations and was embarrassed by the proceedings, which took time away from his other clients;

Eugene Kuc – received bills from Respondent’s firm which included work for the sanctions proceedings against Respondent. Further, he had to reimburse his mother’s estate when payments made to Respondent were not approved by the court and Respondent refused to refund the overage.

James Ayres – had to defend a lawsuit brought by Respondent seeking contribution for the sanctions imposed against Respondent and his law firm, and no longer has a relationship with his family member Eugene Kuc;

Multiple courts – both federal and state judges had their dockets taxed by frivolous litigation that took time away from their other cases. Judges Propes and Connors testified to the tremendous amount of time spent in reviewing pleadings and transcripts.

In addition, as discussed in a previous section, Respondent’s actions played a part in Judge Locallo’s order of September 2009 which removed the key players from the wrongful death litigation. That order was ultimately reversed, causing months of proceedings and the settlement of the case to be unwound.

As a final factor for consideration, Respondent was suspended for six months in 2015 for engaging in misconduct which included, among other things, making dishonest statements and using means that have no substantial purpose other than to embarrass or burden third parties. The misconduct in that case occurred between 2003 and 2011, and was charged in a complaint filed in 2011 and amended in 2012. The Hearing Board report indicates the Administrator was investigating Respondent’s conduct in that case and requesting information from him as early as February 2009. (Hearing Bd. Rpt. at 46, 97). The conduct charged in the present case occurred between mid-2008 and mid-2011.

Prior discipline weighs most heavily against an attorney when he or she commits additional misconduct after the Supreme Court has imposed discipline, thereby indicating a failure to learn from the previous misconduct. In re Starr, 06 CH 78, M.R. 23127 (Sept. 22, 2009) (Review Bd. at 9). Given the timing of the misconduct and prior discipline in the present case, Respondent is not a recidivist in the ordinary sense and therefore his prior discipline merits less weight than in a typical case involving a repeat offender. See In re Starr; In re Brown, 04 CH 73, M.R. 22127 (Mar. 17, 2008) (Review Bd. at 16). The Court has stated, however, that it is appropriate to consider the totality of an attorney’s discipline even when he or she is not a typical recidivist. In re Teichner, 104 Ill. 2d 150, 166-68, 470 N.E.2d 972 (1984). Further, we believe from early 2009 onward, Respondent should have been particularly cognizant of his ethical obligations since he was under investigation for his prior offenses at that time. See In re O’Brien, 2015PR00023, M.R. 28493 (Mar. 20, 2017) (Hearing Bd. at 35). Given the foregoing

circumstances, we conclude Respondent’s earlier discipline deserves some consideration, but the weight we give it is minimal compared to the other aggravating factors.

The Administrator urged us to recommend that Respondent be disbarred and cited several cases in support of her position. Respondent, on the other hand, argued that no misconduct occurred and therefore no sanction is warranted.

The Administrator presented the following cases, which we view as instructive. In In re Zurek, 99 CH 45, M.R. 18164 (Sept. 19, 2002), the attorney was disbarred for misconduct arising out of a dispute with his former employer. After filing frivolous pleadings which led to sanctions, the attorney then made false and unfounded accusations against the judge and opposing counsel. He also made offensive remarks to a deponent during a deposition. The attorney’s misconduct was aggravated by his conduct during the disciplinary proceedings, including filing frivolous pleadings. In In re Konan, 05RC1503, M.R. 20127 (May 20, 2005), a reciprocal discipline case, the attorney was disbarred for pursuing positions that lacked merit, filing an unfounded motion for sanctions, and attempting to mislead the Court. In aggravation, he showed no remorse for conduct which resulted in five sanction orders and a contempt finding, and he had been previously reprimanded. In In re Ditkowsky, 2012PR00014, M.R. 26516 (Mar. 14, 2014) the attorney was suspended for four years until further order of court for making false statements and sending hundreds of emails falsely alleging corruption and criminal conduct by guardians ad item and judges in order to gain an advantage in a guardianship proceeding. The attorney’s previous discipline twenty years earlier was given little weight.

We also considered In re Romanski, 03 CH 90, M.R. 20589 (Jan. 13, 2006) in which the attorney was suspended for three years for advancing a frivolous claim in connection with a personal dispute and then continuing to assert the claim after it was rejected by the court. He also communicated with a represented party, made misrepresentations to the court, and took actions intended to force the removal of a judge, including manufacturing a conflict that would require the judge to recuse himself. The Review Board was especially concerned with the attorney’s attempted manipulation of the court system and his inability to recognize his wrongdoing. (Review Bd. at 15). As in the instant case, the attorney expressed no remorse and refused to acknowledge the wrongfulness of his calculated plan. In contrast to the instant case, the attorney’s actions involved only one dispute, he filed no lawsuits against counsel, and the harm was confined to legal costs of the opposing party and the risk of damage to the judge’s reputation.

We are aware that cases involving frivolous pleadings or actions taken for purposes of harassment, when those actions were not accompanied by dishonesty or severe aggravating circumstances, have resulted in only mild sanctions. See In re Messina, 2014 PR00002, M.R. 28368 (Jan. 13, 2017) (Review Bd. at 22-23). Those cases do not apply here. The calculated scheme employed by Respondent in both the Zvunca and Kuc cases, which resulted in far-reaching and damaging consequences, sets this case apart. In particular, while we recognize the Zvunca case was complicated long before Respondent entered it, the tangled web that ensued was prompted by Respondent, for Respondent. As a result, several courts were burdened, progress in numerous cases was delayed, unnecessary fees were incurred, professional anxiety was induced, and professional and personal time was stolen.

Respondent knowingly engaged in a sustained campaign of unfounded litigation and manipulation and failed to conform his actions to the requirements of the professional rules after adverse rulings by courts. Despite his testimony that he has now changed and will no longer engage in destructive behavior, his failure to be deterred by sanctions and his recent activity in a federal case in Wisconsin speak to the contrary. In light of the misconduct that occurred and the relevant case law, and in order to protect the public and the integrity of the profession, we conclude that disbarment is warranted.

Accordingly, we recommend that Respondent David Alan Novoselsky be disbarred.”

Update on September 21, 2020, the Illinois Supreme Court entered an order disbarring Novoselsky.

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