NOTICE OF CROSS-MOTION FOR SANCTIONS

Transcription

1 Case VFP Doc 179 Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Main Document Page 1 of 2 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY SCARPONE & VARGO LLC By: James A. Scarpone, Esq. Bruce D. Vargo, Esq. John B. Nance, Esq. 50 Park Place, Suite 1003 Newark, NJ Tel: (973) / Fax: (973) jscarpone@scarponevargo.com bvargo@scarponevargo.com jnance@scarponevargo.com Special Litigation Counsel to the Debtor In Re: NEWARK WATERSHED CONSERVATION AND DEVELOPMENT CORP., Debtor. NEWARK WATERSHED CONSERVATION AND DEVELOPMENT CORP., Plaintiff, Case No Hon. Vincent F. Papalia, U.S.B.J. Chapter 11 Adv. Pro. No Hon. Vincent F. Papalia, U.S.B.J. v. LINDA WATKINS-BRASHEAR, et al., Defendants. NOTICE OF CROSS-MOTION FOR SANCTIONS HEARING DATE/TIME: ORAL ARGUMENT: Wednesday, January 18, 2017 at 10:00 a.m. Requested

2 Case VFP Doc 179 Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Main Document Page 2 of 2 TO: HON. VINCENT F. PAPALIA UNITED STATES BANKRUPTCY JUDGE PLEASE TAKE NOTICE that on Wednesday, January 18, 2017 at 10:00 a.m., the Plaintiff/Debtor-In-Possession, Newark Watershed Conservation and Development Corp. ( NWCDC ), will cross-move for sanctions against counsel for the Trenk Defendants pursuant to 28 U.S.C PLEASE TAKE FURTHER NOTICE that in support of its cross-motion, the NWCDC will rely upon the Certification of Bruce D. Vargo and Memorandum of Law that accompany this Notice of Cross-Motion. A proposed form of order is also enclosed. PLEASE TAKE FURTHER NOTICE that oral argument is requested. SCARPONE & VARGO, LLC Special Litigation Counsel for the Debtor By: /s/ James A. Scarpone JAMES A. SCARPONE DATED: January 11,

3 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 1 of 27 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY SCARPONE & VARGO LLC By: James A. Scarpone, Esq. Bruce D. Vargo, Esq. John B. Nance, Esq. 50 Park Place, Suite 1003 Newark, NJ Tel: (973) / Fax: (973) jscarpone@scarponevargo.com bvargo@scarponevargo.com jnance@scarponevargo.com Special Litigation Counsel to the Debtor In Re: NEWARK WATERSHED CONSERVATION AND DEVELOPMENT CORP., Debtor. NEWARK WATERSHED CONSERVATION AND DEVELOPMENT CORP., Plaintiff, Case No Hon. Vincent F. Papalia, U.S.B.J. Chapter 11 Adv. Pro. No Hon. Vincent F. Papalia, U.S.B.J. v. LINDA WATKINS-BRASHEAR, et al., Defendants. BRIEF IN OPPOSITION TO THE TRENK DEFENDANTS MOTION TO DISMISS AND IN SUPPORT OF THE NWCDC S CROSS-MOTION FOR SANCTIONS HEARING DATE/TIME: ORAL ARGUMENT: Wednesday, January 18, 2017 at 10:00 a.m. Requested

4 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 2 of 27 INTRODUCTION This brief is submitted in opposition to the Trenk Defendants motion to dismiss and in support of the Plaintiff s cross-motion for sanctions. The motion to dismiss is based on arguments that our Affidavit of Merit is inadequate and that it is based on the Rules of Professional conduct. These arguments fail because they are based upon mischaracterizations of the claims asserted and misstatements of the controlling law. The cross-motion for sanctions is based upon misrepresentations made by counsel for the Trenk Defendants during our last conference with this Court and upon counsel s failure to identify their now untimely claims that the services rendered by the Trenk firm to the NWCDC all fall within some as yet unlabeled specialty. STATEMENT OF FACTS I. The Parties Pleadings. The Trenk Defendants motion rests on the totally unsupported and false proposition that the Trenk Defendants provided legal services to the NWCDC relating to government affairs, regulatory matters and municipal proceedings. (ECF No , at 1). Yet, in their moving papers, the Trenk Defendants do not even attempt to support this statement with relevant references to the record, and neither the Complaint nor the Trenk Answer make reference to this recently imagined specialty. Review of the Amended Complaint filed on June 24, 2016 shows the following with respect to the claims asserted against the Trenk Defendants: The Plaintiff, NWCDC, is a non-profit corporation created in 1973 which functioned pursuant to periodic contracts between it and the City of 1

5 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 3 of 27 Newark. The contracts provided funding for the NWCDC but also set limits on its activities. Moreover, as one would expect, the NWCDC s charter and by-laws imposed additional requirements and limits on the NWCDC s activities. (See ECF No. 108 at 3-15). Elnardo Webster, as a member of the Trenk firm, is identified as General Counsel to the NWCDC. (Id. at 37). Paragraph 54 summarizes the claims against the Trenk Firm and the Board of Trustees, labeling the claims as breaches of the duty of loyalty and other negligent acts. The allegations set forth in paragraphs and of the Amended Complaint detail the specific negligent acts and breaches of fiduciary duties the NWCDC is asserting. None of these allegations involve or implicate any identifiable specialty. They are focused on the responsibilities of a General Counsel to a corporate entity and breaches of that counsel s duty of loyalty to the corporation (as opposed to the specific officer or individual who hired the attorneys), as well as failures to advise management that various activities and proposed activities violated the NWCDC s charter and by-laws and its contracts with the City of Newark. Review of the Answer filed on behalf of the Trenk Defendants (ECF No. 143) shows that: They do not deny the allegations of paragraphs

6 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 4 of 27 Likewise, they do not deny paragraph 37 and the allegation that Webster was General Counsel to the NWCDC. The Trenk Defendants responses to paragraphs 54, , and contain no more than a general denial with no assertion of any specialty. The Trenk response to Count IV of the Amended Complaint the Count which sets forth the claim against the Trenk Defendants also fails to implicate any specialty. II. Relevant Procedural History. A timeline of the relevant events shows the following: Summer/Fall 2015 Pre-complaint discussions with counsel for all lawyer defendants concerning possibility of pre-complaint mediation; 11/06/2015 Complaint (ECF No. 1); 11/06/2015 Motion/Consent Order re: Mediation between NWCDC and lawyer defendants (ECF No. 2); 11/23/2015 Order proving for mediation between NWCDC and lawyer defendants (ECF No. 12); 06/24/2016 Amended Complaint (ECF No. 108); 07/28/2016 First status conference; 08/22/2016 Trenk Answer (ECF No. 143); 09/15/2016 NWCDC Discovery requests to Trenk Defendants (Vargo Cert., Exhibit B); 10/21/2016 NWCDC Affidavit of Merit (ECF No. 153); 3

7 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 5 of 27 10/25/2016 NWCDC counsel s first letter to Trenk counsel re: overdue discovery (Vargo Cert., Exhibit C); 11/03/2016 NWCDC counsel s second letter to Trenk counsel re: overdue discovery (Vargo Cert., Exhibit D); 11/23/2016 NWCDC s request for status conference (ECF No. 155); 12/13/2016 Second status conference; 12/14/2016 NWCDC counsel sends letter memorializing parties obligations following second status conference (ECF No. 166); 12/15/2016 NWCDC counsel writes third letter to Trenk counsel re: overdue discovery (Vargo Cert., Exhibit G); 12/20/ th day following filing Trenk Answer; 12/22/2016 Trenk Defendants Motion to Dismiss (ECF No. 171) 12/23/2016 Deadline selected by Trenk counsel at status conference for their production of complete discovery responses; 12/26/2016 NWCDC counsel s Brian McEvoy inquiring about status of Trenk discovery responses (Vargo Cert., Exhibit H); 12/27/2016 Application for retention of Ronald Colombo as expert witness (ECF No. 198). As shown in the above timeline, this Court conducted its second status conference on December 13, At that point, the Trenk Defendants had possession of the AOM for fifty-three days. Yet they did not raise any issues about the AOM either before or during the conference, including in response to this Court s specific inquiry at the conclusion of the 4

8 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 6 of 27 conference whether any party had any further matters to bring to the Court s attention, and counsel for Trenk said nothing. 1 (See Vargo Cert., Exhibit A, at 34). Having craftily avoided raising any question about the AOM filed by the NWCDC, counsel assured the Court and other counsel that Trenk s overdue discovery responses would be delivered by December 23, (Id. at 4-5). Counsel for Trenk also assured the Court that there would be no repetition of their failure to respond to reasonable inquiries from NWCDC counsel concerning discovery and other pre-trial matters. (Ibid.) This assurance was given in response to the Court s comments and admonition concerning prior communication failures by counsel for Trenk. The AOM statute requires service of an AOM within 120 days of the filing of the defendant s Answer. In this case, the 120 th day was December 20, On December 22, 2016 the Trenk Defendants filed their motion to dismiss. On December 23, 2016, the date on which Trenk s counsel assured us that complete discovery responses would be provided (id. at 5), we received nothing. (See Vargo Cert. at 3). On December 26, 2016, i.e., the Monday following the Friday failure to deliver, Bruce Vargo ed counsel for Trenk to inquire about the discovery. (Id., Exhibit H). Instead, counsel for Trenk, consistent with his prior conduct for which this Court politely chastised him, totally failed to respond. (Id. at 3). 1 As detailed in Point I below, the AOM statute, as applied by the Supreme Court of New Jersey, requires that the parties at a pre-trial conference in a malpractice action identify any specialty within which the services were being rendered. 5

9 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 7 of 27 We, of course, can speculate that counsel has concluded that the pending motion somehow relieves the Trenk Defendants of all pending discovery obligations. We are, however, still entitled to a response, at the very least, even though, in our opinion, they are not relieved of any discovery obligations unless and until the Court says they are. What is, of course, a much more important question is, just when did they first come to the belief that the AOM from Mr. Roth which they received fifty-three days before our December 13, 2016 conference, was insufficient. At the risk of belaboring the obvious, it seems difficult to the point of impossibility to believe that on December 13, 2016 when they described the efforts and progress they had made toward responding to our long overdue interrogatories and document requests and assured both the Court and us that they would provide complete discovery responses by December 23, 2016, counsel did not already know that they would file the motion and use it as an excuse for continuing to withhold discovery. III. December 13, 2016 Conference. The Court scheduled the December 13 th status conference to address, among other issues, the lack of discovery responses from the Trenk law firm and the lack of professionalism by Trenk s counsel, given their complete lack of any response to inquiries about their clients overdue discovery. In response to the Court s direct inquiry, Mr. McEvoy told the Court and NWCDC counsel that Trenk would provide complete discovery responses by December 23 rd a date chosen by Mr. McEvoy, which, conveniently, left just 6

10 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 8 of 27 enough time to let the 120-day period expire and still file the AOM motion before the discovery was due. following: The relevant portions of the transcript of the December 13 th hearing disclose the THE COURT: Okay. All right. So now we have everyone? I think so. All right. So we re here really because of the letter sent by Mr. Vargo. It seems very simple. I mean, I don t want to over simplify things, that, you know, that gets risky. But it says here that the discovery requests are out to the Trent [sic] DiPasquale firm, Unity Financial and Darnell Deans. Responses from Unity and Darnell Deans were due at the end of August. And Trent [sic] responses were due October 17th. It was a writing as to -- from Mr. Vargo as to where the discovery stands. And there was not even a response. No response to the discovery request and no response to the letter. So I guess I would like to hear from Mr. McEvoy first and then Mr. Mezzacca. MR. McEVOY: Certainly, Your Honor. This is Brian McEvoy. And we apologize for the delays. There have been clearly some over excessive delays in compiling the information that we require for our document production. I ve now gotten my arms around what I believe to be the totality of everything that is discoverable and appropriate and I believe we can have our production complete and our discovery responses satisfied, everything that s outstanding, to the NWCDC by next Friday. I think the 23rd we ll be in compliance. THE COURT: That s the holiday present for Mr. Scarpone and Mr. Vargo? MR. McEVOY: That s correct, Your Honor. THE COURT: December 23 rd. Okay. MR. McEVOY: With the understanding that the documents will be reviewed at our offices on the 25 th. THE COURT: Okay. 7

11 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 9 of 27 MR. SCARPONE: Judge, can we ask, Judge, what did we do to him to deserve this? THE COURT: I know. I guess the good news is that you re going to get, I heard, complete responses by December 23 rd which is, you know, a week and a half from now. Now that really begs the question of why there couldn t have been some response, a partial response. And a second question as to why there wouldn t be a response to the . And I hope that that s not the -- going to be a pattern in this case, because that s, you know, the lack of communication is something that s never good and never helps. So let s -- I hope I don t have to hear that again is what I m saying. MR. McEVOY: We ll do everything to make sure that doesn t happen, Your Honor. THE COURT: Okay. All right. That s -- I don t know what else to say about -- they said December 23 rd. Mr. Scarpone, Mr. Vargo, is there, you know, I m not going to make them do it on the 22 nd. [Vargo Cert., Exhibit A at 4:10 6:8 (emphasis added).] * * * THE COURT: Right. But now you re going to get -- it sounds like you re going to get a substantial production on the 23rd -- or actually it sounds like one substantial one and then whatever Mr. Deans has. And then I think a lot of the documents should have been produced by then. It sounds like to me. MR. SCARPONE: Certainly we expect to have enough to get the ball rolling. There may be more that we learn about later, but for now we believe we should have enough with the Trent [sic] production. With that production we should have enough to really get things started. THE COURT: Right. And then you take the you review those documents and then you notice those deps. So I guess the last issue would be whether we need to amend the scheduling order now or you want to wait a little bit on that? 8

12 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 10 of 27 MR. SCARPONE: I think we have to amend it now, Judge, we re getting -- what do we have 45 days, 50 days left? And of that we have Christmas and New Year s so basically we re looking at the month of January and we know we will not be finished during the month of January, certainly, and nor during the month of February. We need to push that schedule out. Now we could do it in a separate scheduling order now or reconvene this conference sometime late in January and see at that point how things look and how much more time everybody really needs. THE COURT: Doesn t it make sense to continue this conference until January 11th when the hearing is on the 56(d) motion and then -- maybe everyone will have agreed on a schedule by then or you ll have -- by that time you ll have gotten the documents from the Trent [sic] firm and hopefully from Mr. Deans and then you can see what s left. MR. SCARPONE: That would work, Judge. Yes. I think that s good suggestion. THE COURT: So why don t we have it also say a discovery status conference on the 11th in addition to the 56(d) motion and that ll go in the letter. Anybody have anything else they want to talk about? (No audible response) [Id. at 32:25 34:11 (emphasis added).] LEGAL ARGUMENT The Affidavit of Merit Statute ( AOM ), N.J.S.A. 2A:53A-26 to 29, has generated what the New Jersey Supreme Court has characterized as a tide of litigation and a new area of jurisprudence, Ferreira v. Rancocas Orthopedic Assocs., 178 N.J. 144, 146 (2001) and, more recently, as a veritable avalanche of litigation, Meehan v. Antonellis, 226 N.J. 216, 228 9

13 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 11 of 27 (2016). 2 From these cases one could easily get the impression that the professional liability defense bar has gotten a little over-excited by this still relatively new weapon in their arsenal and is overusing and abusing it. The present motion, we submit, reflects that unfortunate phenomenon. In Meehan, the Supreme Court of New Jersey recently summarized the purposes of the statute and how it should be applied as follows: Consistent with the dual purposes of the statute to identify and eliminate unmeritorious claims against licensed professionals and to permit meritorious claims to proceed efficiently through the litigation process the Court fashioned two equitable remedies that temper the draconian results of an inflexible application of the statute. Thus, a complaint will not be dismissed if the plaintiff substantially complied with the affidavit of merit obligations, and a complaint will be dismissed without prejudice if the plaintiff can demonstrate extraordinary circumstances that prevented compliance[.] Still, problems persisted, turning the seemingly straightforward obligations of the statute into a procedural minefield and spawning a new subset of motion practice in professional liability litigation. It was in this context that the Court declared in Ferreira that an accelerated case management conference should be conducted within ninety days of the filing of an answer to identify and address any and all issues concerning the affidavit of merit served or not served by the plaintiff. [Meehan, supra, 226 N.J. at 229. (quotations and citations omitted).] 2 Notwithstanding their well-known expertise in malpractice defense, counsel for the Trenk Defendants chose not to cite or mention the Meehan case, which was decided in August 2016 and represents the latest and most comprehensive affidavit of merit decision from the New Jersey Supreme Court. 10

14 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 12 of 27 Specifically, the Court in Ferreira had directed that: [a]t the conference, the court will address all discovery issues, including whether an affidavit of merit has been served on defendant. If an affidavit has been served, defendant will be required to advise the court whether he has any objections to the adequacy of the affidavit. If there is any deficiency in the affidavit, plaintiff will have to the end of the 120-day time period to conform the affidavit to the statutory requirements. If no affidavit has been served, the court will remind the parties of their obligations under the statute and case law. [Ferreira, supra, 178 N.J. at 155.] In Meehan, as in the present case, the issue involved the sufficiency of the AOM which the plaintiff had timely filed, not a failure to file one, thereby highlighting the importance of early specification of any objections to the AOM. The Court first decided that the like or comparable credentials requirement applicable to medical malpractice AOMs did not apply to Meehan s claim against an orthodontist. Id. at 234. The Court then considered whether the AOM statute s requirement that the affiant have particular expertise in the general area or specialty involved in the action required rejection of the AOM in that case. Emphasizing the legislature s use of the disjunctive or, the Court concluded: In most instances, we anticipate that the affiant and the professional-defendant will be similarly licensed. However, there may be circumstances when the alleged departure from the professional standard of care is within the particular expertise of two licensed professions. In such cases, in assessing the sufficiency of the affidavit of merit, a court must focus on the specific allegations of professional negligence. [Id. at 238 (citations omitted) (emphasis added).] 11

15 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 13 of 27 The point is simply that the need for particular expertise is determined by the factual basis for the claim being asserted and not by the title or any special learning the defendant may have acquired. I. No Recognized Legal Specialty is Asserted or Implicated in Either the Complaint or the Answer. As demonstrated in the Statement of Facts above, there is absolutely nothing in the Amended Complaint or in Trenk s Answer to that complaint which alleges or implicates any legally cognizable and relevant specialized legal expertise. The Trenk firm admittedly served as general counsel to the NWCDC. The services out of which the claims arise cover a wide range of general legal services, including attending board meetings and preparing the minutes, advising the board and management, negotiating and drafting contracts, representing the NWCDC in litigation and other activities referenced in the complaint. In all of these activities, they were obligated to familiarize themselves with the NWCDC s organizational documents, including its charter and by-laws, and its contracts with the City that funded it. Contrary to the strawman invented for the Trenk Defendants motion, none of these issues raise any questions of government affairs, regulatory matters, or municipal proceedings as asserted in their brief. As more fully explained in the supplemental Affidavit of Stephen Roth, Esq., 3 which we are submitting with this brief, Mr. Roth has extensive experience over a fifty-year career 3 The supplemental information we are providing now is exactly the kind of information we would have provided back in October when we served the Roth AOM had the Trenk Defendants raised their objections in a timely manner. That is the procedure the Supreme Court of New Jersey directed in both Ferreira and Meehan and which counsel for Trenk now seeks to subvert. 12

16 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 14 of 27 in which he has actively litigated the rights and duties of corporate fiduciaries as well as extensive experience on ethics and fee application committees dealing with the fiduciary obligations that lawyers owe their clients. Questions involving a lawyer s duties to his or her client when advising or assisting that client in activities that may violate the corporation s charter, by-laws or contracts with third parties are all questions that are well within Mr. Roth s broad range of experience. In the present case, as in Meehan, the defendants did not in their answer identify any legal specialty or special expertise that encompassed the services they rendered to the NWCDC. Further, in neither of the two pre-trial conferences conducted by this Court did counsel for the Trenk Defendants ever mention or raise any question of specialized legal services or the need for any specialized expertise. Rather than raise this issue at the pre-trial conferences, the latter of which occurred fifty-three days after they received the Roth affidavit, counsel for Trenk chose, strategically, to wait until the second day after expiration of the 120-day period allowed for filing the AOM, and then to file their motion for dismissal. In order to conceal their true intent and achieve this tactical advantage in the course of our December 13, 2016 conference with this Court, counsel represented that they would finally respond to our long overdue interrogatories and document requests by December 23, 2016, conveniently leaving just enough time to file their motion before the discovery was due. When, on December 26, 2016 we ed counsel requesting an explanation as to why they had failed to give us what counsel had told this Court they would give us, we received no response. This behavior, i.e., failing to give us the courtesy of a response, is both 13

17 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 15 of 27 consistent with their prior behavior for which this Court properly admonished them at the December 13, 2016 conference and disrespectful of the Court s admonition. As the Supreme Court emphasized in Meehan, what is required for proper implementation of the statute is timely and effective notice of any objections to the AOM in order to identify and resolve issues regarding the affidavit of merit. Meehan, 226 N.J. at 241. To that end, all participants must be prepared to identify at the conference the general area or specialty involved in the action and whether the defendant was providing professional services within that profession or specialty. [Ibid.] At neither of the two pre-trial conferences conducted by this Court within the 120-day period did counsel for Trenk identify any specialty involved in this case. It was only in the motion to dismiss that they asserted for the first time that, [d]uring the relevant period the Trenk Defendants provided legal services to the NWCDC relating to government affairs, regulatory matters, and municipal proceedings. (ECF No at 1). In making this assertion, the Trenk Defendants offer no evidentiary support, i.e. no affidavit or other admissible proof, and they totally ignore the actual claims set forth in the Amended Complaint which in no way implicate any special expertise in municipal law or regulations the asserted basis for the motion. As shown above, the Complaint and the Roth AOM focus on breaches of the lawyer s duty of loyalty (something common to every practitioner) and negligence in advising the NWCDC Board as to the restraints imposed by their charter and by-laws and the obligations and limits imposed by the contracts by which 14

18 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 16 of 27 the City provided funding to the NWCDC. These are duties common to all lawyers who represent a client engaged in any way in business of any kind. II. Because of Their Deliberate and Obvious Withholding of Their Objections to the Adequacy of the AOM, the Trenk Defendants Should Be Estopped from Raising Those Issues Now. In Ferreira, the plaintiff obtained a signed AOM within ten days of receiving the defendant s Answer. However, through inadvertence, he failed to serve it on defense counsel. Eighteen days after expiration of the statutory 120-day period, defense counsel brought this failure to the attention of plaintiff s counsel in a phone call. The AOM was served within hours of that phone call. 178 N.J. at 148. The Supreme Court starts its analysis by pointing out that the Court has fashioned equitable remedies to mitigate the harshness of a rigid application of the statue that would result in the dismissal of an otherwise meritorious cause of action. Id. at 147. Then, finding the case to be a suitable candidate for equitable relief, ibid., the Court went on to note that: Defendants waited until after they received the affidavit to file the dismissal motion. Under those circumstances, we conclude that defendants should be estopped from claiming entitlement to dismissal as a remedy. * * * The statute was not intended to encourage gamesmanship or a slavish adherence to form over substance. The statute was not intended to reward defendants who wait for a default before requesting that the plaintiff turn over the affidavit of merit. [Id. at (emphasis added).] 15

19 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 17 of 27 In the present case, the gamesmanship is even more transparent. Counsel for Trenk had the AOM on October 21, Yet, they waited until December 22, 2016 two days after expiration of the 120-day period and one day before they were obligated to provide long-overdue discovery responses to raise any objections to the AOM. By that point, they had the AOM for more than sixty days. Even more indicative of the gamesmanship is the fact that within the 120-day period, this Court conducted a case management conference in which it specifically asked whether the parties had any other matters to bring to the Court s attention, and counsel for Trenk said nothing. (See Vargo Cert., Exhibit A, at 34). The Roth AOM is more than adequate. It will be supplemented eventually by a full report from Professor Ronald Colombo, whose application for retention as an expert witness is pending before this Court in the bankruptcy case. (ECF No. 198). Even if this Court finds fault with the Roth AOM, the Trenk defendants should, like the defendant in Ferreira, be estopped from claiming entitlement to dismissal as a remedy. 178 N.J. at 153. III. Plaintiff Has Substantially Complied with its Affidavit of Merit Obligation. The New Jersey Supreme Court has long recognized that even where there is a defect in an Affidavit of Merit, the affidavit will be deemed to satisfy the AOM statute pursuant to the doctrine of substantial compliance where reasonable effectuation of the statute s purpose has occurred. Galik v. Clara Maas Med. Ctr., 167 N.J. 341, 356 (2001) (quoting 16

20 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 18 of 27 Cornblatt v. Barrow, 153 N.J. 218, 240 (1998)). Substantial compliance with the Affidavit of Merit statute is established through demonstration of: (1) lack of prejudice to the defending party; (2) a series of steps taken to comply with the statute involved; (3) a general compliance with the statute; (4) a reasonable notice of [plaintiff s] claim, and (5) a reasonable explanation of why there was not strict compliance with the statute. [Fink v. Thompson, 167 N.J. 551, (2001) (quoting Cornblatt, supra, 153 N.J. at 239).] All of these elements are clearly present here. The only possible prejudice the Trenk Defendants could possibly suffer if their motion to dismiss the Complaint is denied is that they would have to defend the NWCDC s claims on the merits, which, of course, is not legal prejudice. Galik, supra, 167 N.J. at 356 (quoting Mayfield v. Community Med. Assocs., P.A., 335 N.J. Super. 198, 207 (App. Div. 2000)). The Trenk Defendants have not identified any loss of evidence or undue additional defense costs that could result from allowing [the NWCDC s] case to proceed. Ibid. Indeed, preservation of evidence has been facilitated in this case due to the litigation in the Superior Court that preceded the chapter 11 filing by the NWCDC, as well as the overlapping investigations by federal prosecutors (which remain ongoing) and the New Jersey Comptroller s Office. The NWCDC has done much more than required in order to effectuate the purpose of the Affidavit of Merit statute and to comply with the statute s specific requirements. Within sixty days of the filing of the Trenk Defendants Answer, the NWCDC served and filed an Affidavit of Merit signed by a distinguished attorney with nearly fifty years of experience attesting to the merits of the allegations against the Trenk Defendants. 17

21 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 19 of 27 Moreover, we must remind the Court that the NWCDC, the Trenk Defendants, and Genova Burns engaged in a very extensive mediation with a very able retired Superior Court judge. That mediation included extensive discussion and production of documents and information by the NWCDC. The Trenk Defendants are, and have been since before the case was filed, fully informed and well aware of the substance of the claims against them. See Fink, supra, 167 N.J. at 562 (finding substantial compliance where defendant had received substantial information regarding plaintiff s claims prior to filing suit); Galik, supra, 167 N.J. at 357 (same). For reasons addressed elsewhere in this brief, the NWCDC contends that there was strict compliance with the statute. If, however, the Court is inclined to agree with the Trenk Defendants that there wasn t strict compliance, we submit that the reason for the noncompliance is obvious. The Trenk Defendants, in violation of their obligations as explained by the New Jersey Supreme Court in Ferreira and Meehan, intentionally withheld their objections to the NWCDC s Affidavit of Merit (in particular, their claimed specialty) until the 120-day period allowed by the statute had expired. Moreover, not only did counsel for the Trenk Defendants withhold their objections to the NWCDC Affidavit of Merit, they implicitly made representations to the Court and to the parties during the December 13, 2016 status conference at odds with their current position namely, that the Trenk Defendants were unaware of any problems or issues that would prevent the case from moving forward and that they would be producing complete discovery responses no later than December 23, 2016 (a date of counsel s choosing). Had the Trenk Defendants been candid about their objections to the NWCDC Affidavit of Merit during the conference (or at 18

22 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 20 of 27 any time during the seven weeks prior to the conference following their receipt of the NWCDC Affidavit of Merit), the Court and the NWCDC could have taken steps to address such objections before the running of the 120-day deadline and avoided this unnecessary motion practice. IV. The Trenk Defendants Are Not Entitled to Relief Under Baxt v. Liloia. Under New Jersey law, a violation of the Rules of Professional Conduct, standing alone, cannot serve as the basis for civil liability against an attorney. However, that is not to say, as the Trenk Defendants suggest, that the Rules of Professional Conduct have no role to play in legal malpractice cases. Indeed, in Baxt v. Liloia, 155 N.J. 190 (1998), the New Jersey Supreme Court after acknowledging the principle that civil liability against an attorney cannot rest exclusively on an RPC violation went on to observe that: Courts in New Jersey and elsewhere have recognized the relevance of the Rules [of Professional Conduct] in civil cases against attorneys. Our courts have recognized that the existence of a duty owed by an attorney may be supported by reference to an attorney s obligations under the RPCs, and that plaintiffs may present evidence that an attorney has violated the RPCs in cases claiming the attorney has breached his or her duty of care. [155 N.J. at ] Contrary to the oversimplified version of Baxt offered by the Trenk Defendants, it is clear that, properly understood, Baxt and the cases that have followed it reserve an important role for the Rules of Professional Conduct in the area of legal malpractice. As explained by the Appellate Division in Gilles v. Wiley, Maelhorn & Sirota: [W]hile we recognize that a cause of action for malpractice cannot be based exclusively on the asserted breach of an R.P.C., 19

23 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 21 of 27 nevertheless it is clear that the R.P.C.s may be relied on as prescribing the requisite standard of care and the scope of the attorney's duty to the client. Baxt v. Liloia, 155 N.J. 190, 201 (1998)[.] Thus violation of an R.P.C. has essentially the same status and function in a malpractice action as a statute that prescribes a standard of conduct has in a negligence action. Its breach is evidential of defendant's failure to comply with the required standard of care. [345 N.J. Super. 119, (App. Div. 2001) (emphasis added; additional citations omitted).] These authorities hold that an RPC violation when it is coupled with damages proximately caused by the violation, as alleged here can serve as the basis for civil liability against an attorney. In this argument, as in their AOM argument, the Trenk Defendants rely on incomplete and inaccurate statements of the governing law, combined with false, misleading and unsupported statements of the facts concerning the Roth AOM. The absurdity of the Trenk argument can best be seen by comparing the Trenk argument to Roth s referencing of RPC 1.3 and the duty of reasonable diligence. Under Roth s analysis, the allegations of the Complaint state a cause of action based on a lack of reasonable diligence. For example, the lawyer who supervised preparation and submission of the NWCDC s annual budgets to the City of Newark failed to advise his client and its Board that substantial amounts were being spent on activities not covered by the budgets, or that contracts were being executed without the benefit of public bidding in violations of the NWCDC charter. These, among other services do not, in Roth s opinion, meet the reasonable diligence standards of RPCs 1.1 and 1.3. Are the Trenk Defendants telling us that under Baxt, a lack of competence or reasonable diligence is not actionable because they are in the Rules of Professional Conduct? 20

24 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 22 of 27 V. Mr. McEvoy Should Be Sanctioned for his Vexatious and Unreasonable Behavior toward the Court and Counsel for the NWCDC. The actions and behavior of Mr. McEvoy toward this Court and toward counsel for the NWCDC justify the imposition of sanctions against Mr. McEvoy under 28 U.S.C and the inherent power of this Court. 28 U.S.C states: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct. The Third Circuit has observed that Section 1927 is short and clear [u]nlike Rule 11 and Bankruptcy Rule 9011, which are lengthy and impose specific procedural requirements with which a party seeking sanctions must comply. In re Schaefer Salt Recovery, Inc., 542 F.3d 90, 101 (3d Cir. 2008). The statute requires only that a court find an attorney has (1) multiplied proceedings; (2) in an unreasonable and vexatious manner; (3) thereby increasing the cost of the proceedings; and (4) doing so in bad faith or by intentional misconduct. Id. (quoting In re Prudential Ins. Co. America Sales Practice Litig., 278 F.3d 175, 188 (3d Cir. 2002)). The purpose of the statute is to deter an attorney from intentionally and unnecessarily delaying judicial proceedings as Mr. McEvoy has done here. Prosser v. Gerber, 777 F.3d 155, 161 (3d Cir. 2015) (citing LaSalle Nat'l Bank v. First Conn. Holding Grp., LLC, 287 F.3d 279, 288 (3d Cir. 2002)); see also Zuk v. E. Pa. Psychiatric Inst. of the Med. Coll. of Pa., 103 F.3d 294, 297 (3d Cir. 1996). Courts, including bankruptcy courts, may use this sanction 21

25 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 23 of 27 whenever lawyers bad faith conduct disrupts the administration of justice by multiplying proceedings in any court of the United States. Ibid. (quoting 28 U.S.C. 1927). Because the bankruptcy court is a unit of a district court, it too may impose 1927 sanctions. Id. at (citing In re Schaefer Salt Recovery, Inc., supra, 542 F.3d at 105). In the bankruptcy context, the proceedings include adjudication of both the bankruptcy petition and adversary proceedings, which are essentially self-contained trial[s] still within the original bankruptcy case. Id. at 162 (quoting In re Mansaray-Ruffin, 530 F.3d 230, 234 (3d Cir. 2008)); see also In re TCI Ltd., 769 F.2d 441, , (7th Cir. 1985) (affirming 1927 sanctions for filing of baseless amended complaint in adversary action during bankruptcy). Mr. McEvoy s lack of candor to this Court and to NWCDC counsel transcends what could be considered appropriate legal maneuvering and is therefore worthy of sanction. As outlined above, the Court conducted a status conference on December 13 th to address, among other issues, the lack of discovery responses from the Trenk law firm and the lack of professionalism by Mr. McEvoy, Trenk s counsel, given the complete lack of any response to inquiries about the overdue discovery. In response to the Court s direct inquiry, Mr. McEvoy told the Court and NWCDC counsel that Trenk would produce documents and discovery responses by December 23 a date chosen neither by the Court nor by NWCDC counsel, but by Mr. McEvoy, which, as already mentioned, conveniently served his planned gamesmanship. THE COURT: So I guess I would like to hear from Mr. McEvoy first and then Mr. Mezzacca. 22

26 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 24 of 27 MR. McEVOY: Certainly Your Honor. This is Brian McEvoy. And we apologize for the delays. There have been clearly some over excessive delays in compiling the information we require for our document production. I ve now gotten my arms around what I believe to be the totality of everything that s outstanding, to the NWCDC by next Friday. I think the 23 rd we ll be in compliance. THE COURT: That s the holiday present for Mr. Scarpone and Mr. Vargo? MR. McEVOY: That s correct, Your Honor. THE COURT: December 23 rd. Okay. * * * THE COURT: I guess the good news is that you re going to get, I heard, complete responses by December 23 rd which is a week and a half from now. * * * THE COURT: That s I don t know what else to say about they said December 23 rd. I m not going to make them do it on the 22 nd. [Vargo Cert., Exhibit A at 4:21 6:8.] It is now nineteen days past the date strategically chosen by Mr. McEvoy as the date the Trenk firm told this Court and us that they would provide the requested discovery, and four months since the Trenk firm first decided to disregard its discovery obligations. Instead, as shown above, Mr. McEvoy filed a motion to dismiss without first raising any concern about the sufficiency of the NWCDC s Affidavit of Merit filing during the December 13 th conference as he was obligated to do, and without providing this Court with the New Jersey Supreme Court s most recent opinion on the issue (which, we submit, undermines Mr. McEvoy s motion). 23

27 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 25 of 27 Moreover, Mr. McEvoy has continued his pattern of ignoring our communications about his overdue discovery despite his representation to this Court that he would change his behavior. THE COURT: [T]hat begs the question of why there couldn t have been some response, a partial response. And a second question as to why there wouldn t be a response to the . And I hope that that s not the going to be a pattern in this case, because that s the lack of communication is something that s never good and never helps. So let s I hope I don t have to hear that again is what I m saying. MR. McEvoy: We ll do everything to make sure that doesn t happen, Your Honor. [Id. at 5:21 6:4.] Yet, within days of promising the Court that he would discontinue this unprofessional behavior toward NWCDC counsel Mr. McEvoy ignored, and continues to ignore, an communication from NWCDC counsel sent to him on December 26 th inquiring about his failure to produce documents and discovery responses as promised. Mr. McEvoy has not even provided NWCDC counsel with the courtesy of a response. Mr. McEvoy s conduct constitutes a lack of candor to this Court and to NWCDC counsel and is a violation of the RPC 3.3 ( Candor Toward the Tribunal) and RPC 3.4 (Fairness to Opposing Party and Counsel). This lack of candor and these misrepresentations evidence an intent to delay the requested discovery and fit squarely within the unreasonable and vexatious behavior addressed by the statute. In In re Prudential, supra, 278 F.3d at , for example, the Third Circuit found that neither the district court nor the magistrate judge abused their discretion by imposing sanctions on an attorney based on the totality of the attorney s behavior, which included the 24

28 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 26 of 27 filing of a baseless motion and other inappropriate discovery tactics that multiplied the proceedings. See also Grider v. Keystone Health Plan Cent., Inc., 580 F.3d 119, 142 (3d Cir. 2009) (trial court appropriately found attorneys acted in bad faith in multiplying the proceedings based in part on inappropriate discovery tactics pertaining to the delayed production of privilege logs); Cmty. Ass'n Underwriters of Am., Inc. v. Queensboro Flooring Corp., 2014 U.S. Dist. LEXIS at *31-32 (M.D. Pa. July 3, 2014) (magistrate judge sanctions an attorney for his discovery misconduct ). Here, the totality of Mr. McEvoy s behavior his disregard of his client s discovery obligations, his representation to the Court that he would produce his client s documents and discovery demands while apparently intending to do just the opposite, his failure to inform the Court as required of the concerns over the Affidavit of Merit filed by NWCDC months earlier, even when the Court expressly asked if anyone had any other issues to discuss, his filing of a strategically timed but baseless motion designed only to further delay his client s production of documents and thus this litigation, and his failure to respond to routine and appropriate communications from NWCDC counsel constitute the type of bad faith and vexatious conduct that Section 1927 is designed to prevent. CONCLUSION Based upon the foregoing, the Court should deny the Trenk Defendants motion to dismiss and grant the NWCDC s cross-motion for sanctions. In granting the cross-motion, 25

29 Case VFP Doc Filed 01/11/17 Entered 01/11/17 11:00:00 Desc Brief In Opposition to Trenk Defendants Motion to Dismiss and in Support o Page 27 of 27 we ask the Court to impose sanctions sufficient to compensate the NWCDC for the costs of preparing the within opposition and cross-motion. SCARPONE & VARGO LLC Special Litigation Counsel to the Debtor /s/ James A. Scarpone JAMES A. SCARPONE DATED: January 11,

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