Category: Rule 3.1

ARDC Hearing Board Recommends One-Year Suspension for Frivolous Litigation And False Attacks on Integrity of Judge

The ARDC Hearing Board recommended a one-year suspension for an attorney who engaged in frivolous litigation and assisted a client in committing bankruptcy fraud. In re Xydakis, 2021PR00104. The order is 81 pages long. I have done my best to summarize the key findings of the order and most important rule violations.

One of the charges asserted that the Respondent engaged in frivolous litigation on behalf of a client, Marshall Spiegel, who was the Secretary of the Board of a condominium association. “Count I charged Respondent with (1) bringing or defending a proceeding, or asserting or controverting an issue therein, with no basis for doing so that is not frivolous; (2) making statements of material fact or law to atribunal which the lawyer knows are false; (3) using means in representing a client that have no substantial purpose other than to embarrass, delay, or burden a third person; (4) engaging in conduct that is prejudicial to the administration of justice; and (5) making statements with reckless disregard as to their truth or falsity concerning the integrity of a judge, in violation of Illinois Rules of Professional Conduct 3.1, 3.3(a)(1), 4.4(a), 8.4(d), and 8.2(a), respectively, arising from his bringing and maintaining lawsuits on behalf of his client against a condominium association board and other individuals and entities.”

The Hearing Board summarized the litigation as follows:

In the fall of 2015, the president of the board of directors of the 1618 Sheridan Road Condominium Association (“Association”) resigned. At that time, Marshall Spiegel was serving as secretary of theAssociation’s board and Valerie Hall was serving as treasurer. Following the president’s resignation, Spiegel declared himself acting president, over Hall’s objections. (Ans. at par. 2.)

On October 22, 2015, Respondent filed a complaint on behalf of Spiegel, the Association, and Chicago Title Trust Co., seeking to remove Hall from the Association’s board of directors. The complaint alleged that,because Hall’s condominium unit was owned by a trust rather than by Hall herself, she was not considered a unitowner and therefore could not be a board member. The lawsuit, filed in the Chancery Division of Cook County Circuit Court, was docketed as case number 15 CH 15594. (Ans. at par. 4; Adm. Ex. 1.)

On October 26, 2015, Respondent filed a second lawsuit on behalf of the same plaintiffs for defamation,invasion of privacy, and breach of contract against Hall. The second lawsuit, filed in the Law Division of CookCounty Circuit Court, was docketed as case number 15 L 10817, and, like the first, sought to remove Hall from the Association’s board. It also added a new defendant and additional counts, including allegations that Hall wrongfully accused Spiegel of stealing her suitcases and filed a false police report in which she accused Spiegel of taking lawn furniture. (Ans. at par. 6; Adm. Ex. 3.)

On October 30, 2015, Respondent filed a first amended complaint in case number 15 L 10817, adding two new defendants and additional counts. (Ans. at par. 7; Adm. Ex. 4.) On November 2, 2015, Hall filed an answer to the first amended complaint, and attached the deed to her condominium unit. She also filed acounterclaim in which she sought a declaration that, among other things, she was a unit owner and therefore qualified to sit on the Association board; that all of the board’s actions following the former president’s resignation were proper; and that Respondent was not the Association’s authorized legal counsel and therefore had no authority to act on behalf of the Association. (Ans. at par. 8; Resp. Ex. 57.) Also on November 2, 2015, Respondent voluntarily dismissed case number 15 CH 15594. (Ans. at par. 5.)

On November 24, 2015, Respondent filed a second amended complaint in case number 15 L 10817, removing the Association as a plaintiff and adding an additional defendant and new counts, including allegations that one of the defendant unit owners spied on Spiegel and moved large water cooler bottles in front of Spiegel’s door. (Adm. Ex. 7.) On December 2, 2015, Respondent filed a counter and third-party complaint onbehalf of the plaintiffs in case number 15 L 10817 against Hall, her counsel, and the Association’s counsel,alleging that they interfered with Spiegel’s business expectancy with Respondent by filing a counterclaim that caused Spiegel’s insurance carrier to refuse to hire Respondent to defend Spiegel, which caused Spiegel to have to expend his own funds. The next day, Respondent filed a third amended complaint against the same five defendants named in the second amended complaint but adding additional counts, including allegations that one of the defendants installed horizontal blinds without prior board approval. (Ans. at par. 9; Adm. Exs. 8, 9.)

On December 31, 2015, the Association filed a complaint for declaratory and injunctive Relief against Spiegel in the Chancery Division of Cook County Circuit Court, docketed as case number 15 CH 18825. (Ans.at par. 11.) On January 11, 2016, the Association moved the court for a temporary restraining order (TRO) torestrain Spiegel from continuing to prevent the board from functioning. The court granted the Association’s TRO. (Ans. at pars. 11-13; Adm. Ex. 10.)

On February 8, 2016, Respondent filed a fourth amended complaint in case number 15 L 10817, which alleged 25 counts against 10 defendants, including Hall’s counsel and the Association’s counsel. As to theattorney-defendants, the fourth amended complaint contained the same allegations regarding interference with business expectancy that were raised in the earlier- filed counter and third-party complaint. (Ans. at pars. 15, 16; Adm. Ex. 17.)

On April 8, 2016, Respondent filed an additional lawsuit in the Law Division of Cook County CircuitCourt, which was docketed as case number 16 L 3564. (Ans. at par. 17.) In that lawsuit, Respondent brought claims on behalf of Spiegel against his neighbors, Corrine and William McClintic, alleging that the McClintics were seeking to rent their unit in the 1618 Sheridan Road building when they were not permitted to do so under the condominium declarations, and that, as a result, Spiegel suffered at least $50,000 in damages. Respondent later filed a first amended complaint in that matter, adding additional defendants and counts. (Ans. at par. 18; Adm. Exs. 18, 19.)

On May 27, 2016, the Association, the Association board, and other residents who were parties to the Spiegel litigation moved to consolidate the three active Cook County cases. On September 28, 2016, the trialcourt consolidated cases 15 CH 18825 and 16 L 3564 into case 15 L 10817. (Ans. at par. 19.)

On June 14, 2017, Judge Moira Johnson granted the defendants’ motions to dismiss all 25 counts of thefourth amended complaint in the 15 L 10817 case on the basis that none of the claims stated a cause of action, andordered Respondent to seek leave of the court to replead any amended complaint. Judge Johnson also struck all33 counts of the first amended complaint in case number 16 L 3564. (Ans. at par. 20; Adm. Ex. 22 at 70-79; Adm. Ex. 23.).”

Eventually the case was transferred to Judge Brennan who awarded sanctions exceeding $1.0 million against Respondent and his client. Sadly the conduct did not cease. “Following entry of the orders imposing sanctions on Spiegel and Respondent, a number of news outlets and online publications ran stories about the sanctions awards. In April 2020, Respondent filed nine separate complaints on behalf of The Law Offices of John Xydakis, P.C. and himself, individually, against various publications, alleging that their reporting about the sanctions award against him was defamatory. One of thecomplaints was against the Chicago Daily Law Bulletin. The Chicago Daily Law Bulletin’s article quoted attorneys John Schriver and Eugene Murphy, whom Respondent also named as defendants in that lawsuit. In May 2021, the court granted a motion to dismiss filed by Schriver and his law firm, and the case was dismissed in its entirety with prejudice. The remaining eight cases were either dismissed for want of prosecution or voluntarily dismissed by Respondent. (Ans. at pars. 43-53; Adm. Exs. 59-60, 62, 64, 66-70, 72-73, 75.)”

The Respondent also accused Judge Brennan of engaging in ex parte communications. These allegations were found to be false. “The record is devoid of any evidence whatsoever that Judge Brennan engaged in ex parte communications. Even Respondent’s own testimony shows that, at most, he became suspicious that JudgeBrennan may have communicated with another attorney when, at a hearing in February 2018, she told him that he had not listened to Judge Johnson or anyone else, and then, in another hearing in March 2018, first said thatshe had not spoken with counsel at all and then said that she had not spoken with counsel about the case. (See Tr. 1092, 1094-95.)

But mere suspicion is an insufficient basis for an attack on the integrity of a judge. “A reasonable beliefmust be based on objective facts. Thus, subjective belief, suspicion, speculation, or conjecture does notconstitute a reasonable belief.” In re Walker, 2014PR00132, M.R. 28453 (March 20, 2017) (Hearing Bd. at 21); see also Greanias, 01 SH 117 (Hearing Bd. at 43, 57) (attorney had “no factual or evidentiary basis” for her allegations, which were “no more than conjecture and personal belief;” she therefore made the allegations with reckless disregard for their truth or falsity). Moreover, itis clear from even a cursory reading of the transcript of the February 2018 hearing that Judge Brennan was referring to Respondent’s failure to abide by previous judges’ rulings when she said he did not listen to Judge Johnson or anyone else.

In addition, at the March 2018 hearing, and in stipulated testimony in this matter, Judge Brennan unequivocally denied that she had engaged in ex parte communications with any of the defense counsel. Similarly, Gene Murphy, the defense counsel with whom Respondent claims Judge Brennan communicated, denied having any ex parte communications with Judge Brennan or any of her staff. He explained that he may have had brief conversations with the judge’s clerk about administrative matters, but never talked about the substance of the case with the judge or any of her staff. He further testified that he would never do such a thing.We found Murphy to be credible and accept his testimony that he never engaged in ex parte communications with Judge Brennan or any of her staff.

The documentary evidence presented by Respondent does not alter our finding. At most, it shows that there were a few short phone calls between Murphy and Judge Brennan’s chambers, and that Murphy notedconversations with “judge’s clerk” on his billing statements. That evidence is consistent with Murphy’s testimony that he occasionally contacted Judge Brennan’s chambers about administrative matters, such as when a motion would be heard.

Because there is no objective evidence in the record that Judge Brennan engaged in ex parte communications, we find that Respondent had no reasonable basis for believing his statements to be true. He therefore recklessly disregarded the truth in making his false accusation, and in so doing, violated Rule 8.2(a).”

The Hearing Board found violations of Rule 3.1. “We find that the evidence clearly and convincingly shows that, as of November 2015 if not earlier, Respondent knew that his attack on Hall’s unit ownership and eligibility to serve on the Association board was legally and factually baseless; yet, he maintained those claims against Hall until Judge Brennan denied him leave to file the fifth amended complaint in February 2018. By this conduct, he violated Rule 3.3(a)(1).”

The Board also found a violation of Rule 8.4(d) (conduct prejudicial to the administration of justice). Based upon our findings that Respondent violated Rule 3.1, and based upon the totality of thecircumstances relating to Respondent’s filings and tactics in the Spiegel litigation, we also find that he engaged inconduct prejudicial to the administration of justice by wasting the time, money, and other resources of opposingparties, opposing counsel, and the judicial system by bringing and pursuing baseless and frivolous claims. It is apparent from the court documents and transcripts in the record that Respondent’s excessive and oppressive litigation tactics, particularly his filing of the motion seeking leave to file the fifth amended complaint, required the parties and court to expend resources to address his motion and various filings. Among other things, the defendants were required to prepare written responses to and attend another lengthy hearing on the motion for leaveto file the fifth amended complaint, and the court was required to hold a hearing and handle a subsequent motionfor reconsideration. We therefore find that the Administrator proved by clear and convincing evidence that Respondent violated Rule 8.4(d).

Comment: the Respondent was and is clearly a talented lawyer. Somehow, in my opinion, he lost sight of his role as an advocate and became so committed to winning the case at any cost that he lost sight of the rules. How is it that someone with extensive courtroom experience loses sight of the rules and embarks on a campaign of frivolous litigation and abuse of the judiciary? There must have been multiple clues delivered to him that his behavior was not appropriate, yet he persisted.

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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