Barratry Claim Draws Sanction

The United States Court of Appeals for the Fourth Circuit affirmed in part sanctions imposed on attorneys who had represented homeowners associations and management companies for claims brought against opposing counsel

This case originated in Maryland circuit court. Appellees Richard Gordon, an attorney with the law firm of Gordon, Wolf & Carney, Chtd., and Alexa Bertinelli, an attorney with Civil Justice Inc., filed class actions on behalf of several homeowners against their homeowners’ associations and management companies (collectively, “the HOAs”), challenging the legality of promissory notes containing confessed judgment clauses (“CJPNs”) used by the HOAs when resolving disputes with homeowners over unpaid HOA fees. [Law firm] ALPS, Andrews, and Lawrence, who were the collection attorneys for the HOAs, were included as defendants in the class actions given their role in drafting and executing the CJPNs. Because attorney fees are included in the total amount of the promissory note, the collection attorneys are also third-party beneficiaries under the CJPNs.

After the underlying case was removed to federal court

Plaintiffs thereafter reached settlement agreements with the HOAs, which include a stipulation that the CJPNs are void and unenforceable. Defendants ALPS, Andrews, and Lawrence are the only remaining defendants, and they have represented themselves in this action.

Then

On March 8, 2021, ALPS, Andrews, and Lawrence (hereinafter the “third-party plaintiffs”) filed a third-party complaint against counsel for the plaintiffs, naming Gordon and his law firm, and Bertinelli and her employer, as the third-party defendants. Count I alleged that the third-party defendants engaged in a civil conspiracy to solicit clients to sue the third-party plaintiffs for their role in drafting and enforcing the CJPNs, in violation of Maryland’s criminal barratry statute. See Md. Code Ann., Bus. Occ. & Prof. § 10-604. Count II alleged that the third-party defendants intentionally and with malice interfered with the third-party plaintiffs’ rights under the CJPNs by “forc[ing]” the HOAs, “through intimidation and coercion,” to agree to voiding the promissory notes, thereby cancelling the third-party plaintiffs’ rights as express beneficiaries of the settlement contracts. J.A. 339. The third-party claim included no factual allegations of particular conduct engaged in by the third-party defendants.

The District Court granted defendants judgment on the pleadings and imposed sanctions.

The court here

We discern no abuse of discretion in the district court’s decision to award sanctions against ALPS and Andrews. The third-party complaint contained wholly conclusory claims—unsupported by factual allegations, unwarranted by existing law or a nonfrivolous argument for extending the law, and filed to harass, delay, and increase the costs of the already-protracted litigation.

Merits (or lack thereof)

The third-party complaint contained no factual allegations to support a claim that the third-party defendants violated the Rules of Professional Conduct when contacting clients, see Md. Code Ann., Bus. Occ. & Prof. § 10-604(3), or engaged in such “officious meddling” in connection with their investigation of third-party plaintiffs’ use of the illegal CJPNs. On the contrary, and as the district court aptly noted, “[p]laintiffs’ counsel—far from acting for their own personal gain—were justified in challenging the illegal confessed judgment provisions in the promissory notes.” J.A. at 402. (emphasis added).

The intentional interference claim fares even worse. The third-party plaintiffs asserted, with not a shred of factual allegations in support, that the third-party defendants intimidated, coerced and forced the HOAs to agree to rescind the promissory notes to eliminate the third-party plaintiffs’ rights under the notes. On the contrary, it is not surprising that, in light of the Goshen Run ruling, the HOAs agreed to void the CJPNs as a part of their settlement agreements with the plaintiff.

A limited remand

The district court did not, however, explain why Lawrence was “responsible for th[ose] violation[s].” Fed. R. Civ. P. 11(c)(1). Accordingly, we vacate and remand the sanctions order as applied to Lawrence for reconsideration and, if sanctions are reimposed, an explanation as to why they are appropriate.

The opinion is unpublished. (Mike Frisch)