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7th Circuit Upholds Dismissal of False Claims Act Case for 'Flagrant' Attorney Misconduct
The American Lawyer
August 31, 2009
When is attorney misconduct so egregious that it warrants dismissal of the client's case? That was the question for the 7th U.S. Circuit Court of Appeals in determining whether to uphold the dismissal of a False Claims Act case against Sallie Mae (and other defendants) that was thrown out for what Chicago federal district court Judge Milton Shadur described as a "virtually unbroken pattern of dilatory and irresponsible conduct" by plaintiffs lawyer Jorge Sanchez of Despres, Schwartz & Geoghegan.
On Thursday, in a 23-page opinion, the appeals court upheld Shadur's decision, ruling that a district court's power to sanction for violations of the judicial process is necessary to ensure the integrity of the court. Jeffrey Sarles of Mayer Brown argued for the defendants.
The plaintiff, Rhonda Salmeron, is a former employee of Enterprise Recovery Systems, a collection agency for student loans. In 2005, she sued ERS, claiming the company submitted false claims in connection with collections of federally guaranteed student loans. She later amended the complaint to include Sallie Mae, USA Funds and others. But over the next three years, her attorney, Sanchez, consistently missed filing deadlines and failed to show up to status conferences. Fed up with Sanchez, Shadur dismissed the suit.
The judge then agreed to reinstate the action, but issued a "final warning" to Sanchez that he would brook no future misconduct. Soon after, however, Sanchez leaked a contract services agreement between two of the defendants, Sallie Mae and USA Funds, to his client, and to a reporter for the Journal of Higher Education. The document eventually found its way to "wikileaks," a leaked document Web site.
This was the final straw. In 2008, Shadur dismissed the suit again and refused to reinstate it.
On appeal, Salmeron's lawyer at Jenner & Block, Barry Levenstam, argued that Sanchez had not erred in releasing the document because it wasn't subject to court-ordered confidentiality. The 7th Circuit rejected the argument because, it said, there was an oral agreement that the document was "attorneys' eyes only" pending Shadur's entry of a protective order.
Levenstam also argued that Salmeron wasn't warned her case would be dismissed if Sanchez leaked the document. The appeals court disagreed: "Sanchez received a 'warning shot' when, after repeatedly trying the court's patience, the district court dismissed the lawsuit without prejudice. After reinstating the suit, the court explicitly told Sanchez that he was receiving his 'final warning' and that any further misconduct was likely to result in a more drastic sanction. That warning still should have been fresh in Sanchez's mind when, just one month later, he willfully disclosed the Guarantee Services Agreement."
The court continued: "Faced with an even more flagrant offense by Sanchez after previously giving him a 'final warning,' the district court certainly was entitled to say, 'enough is enough.'"
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
