Small Ships And Large Rudders

The Washington State Court of Appeals Division III remanded to assess the amount of sanctions for litigation misconduct

Isaac Gordon commenced a class action lawsuit against Robinhood Financial, LLC, asserting that the company’s refer-a-friend text messaging practices for acquiring new customers violated Washington’s Consumer Protection Act (CPA), chapter 19.86 RCW, and Washington’s Commercial Electronic Mail Act (CEMA), chapter 19.190 RCW.

Through discovery, it became apparent that Gordon had received the offending text message from the brother of one of his attorneys, that Gordon and two of his attorneys had manufactured his claim, that they had done this in other class action lawsuits, and that they had made false and misleading statements in pleadings designed to hide this.

Once caught, Gordon and his attorneys surreptitiously dismissed the lawsuit without prejudice. On reconsideration of the dismissal order, the trial court dismissed the lawsuit with prejudice and assessed attorney fee sanctions against Gordon and his attorneys for almost $750,000. The legal bases for these sanctions were RCW 4.84.250 (the minor claims statute), RCW 4.84.185 (the frivolous claim statute), and CR 11.

On appeal, Gordon and his attorneys argue the trial court erred when it imposed sanctions. We conclude that a class action lawsuit is not a minor claim for purposes of RCW 4.84.250—even if the putative class representative’s claim is small, and that Gordon’s claim was not frivolous within the meaning of RCW 4.84.185. We, however, conclude that the trial court did not abuse its discretion when it found that Gordon’s and his attorneys’ misconduct warranted CR 11 sanctions. We remand for the trial court to reconsider what amount of CR 11 sanctions actually are necessary to deter Gordon and his attorneys from engaging in claim manufacturing in the future.

What was discovered in discovery

Soon after Robinhood’s motion to stay, Gordon served amended interrogatory answers on Robinhood in which he admitted, contrary to his prior answers, that he had been friends with John Cameron for years and had smoked cigars, played fantasy role play and card games, and attended a concert with him. Gordon admitted to providing his telephone number to John Cameron. Gordon also produced additional screenshots of text message conversations that he had with John Cameron immediately before and after the second Robinhood referral text message. The screenshots showed light-hearted banter between the two men, making it clear they knew each other well. Gordon continued to deny that he knew the identity of the sender of the other text message.

Sanctionable conduct despite a finding that the matter was not frivolous

Here, aside from imposing CR 11 sanctions based on its reversed determination of frivolousness, the trial court imposed CR 11 sanctions because Gordon and his counsel made repeated false statements with respect to their lack of knowledge of who sent the offending text messages to Gordon. These false statements occurred in the original complaint, the amended complaint, the motion for class certification, the original discovery responses, one of Gordon’s declarations, and a declaration from Gordon’s counsel after the allegations of claim manufacturing were made. Gordon’s counsel hid the relationship between Gordon and the Cameron brothers to prevent Robinhood from learning that the class action claim was manufactured…

Our rules of professional conduct prohibit a lawyer from knowingly making a false statement of fact to a tribunal. RPC 3.3(a)(1). Filing a document in violation of the rules is a filing for an improper purpose for which CR 11 sanctions may be imposed. Watness, 11 Wn. App. 2d at 740. Here, attorneys Brian Cameron and Kirk Miller repeatedly made knowingly false statements in pleadings, including when they alleged in the original complaint that Gordon did not consent, affirmatively or otherwise, to receive the text message from Robinhood or its existing users. As noted earlier, although Gordon did not give Robinhood consent, he did give John Cameron, Robinhood’s existing user, consent to send him the text.

Remand

Had we found Gordon’s claim to be frivolous, we might have allowed this amount to stand. But because the trial court’s CR 11 sanctions were partly tied to its reversed frivolous determination, we remand for the trial court to determine what amount of sanctions actually are necessary to deter Gordon’s and his legal counsels’ claim manufacturing practices. See Biggs, 124 Wn.2d at 197-98 (noting that one purpose of CR 11 sanctions is to deter baseless filings). In making its determination, the trial court should consider the financial resources of the sanctioned individuals and firms. Although we do not disturb the trial court’s finding that “substantial sanctions” are necessary, “substantial” is a relative term. Small ships do not need large rudders to tum around.

Reuters had covered the federal court remand of the class action

The name plaintiff in the class action was bar owner Isaac Gordon who alleged that he received two unsolicited texts in which unknown senders invited him to establish a Robinhood account via the refer-a-friend program. When Robinhood’s lawyers at Davis Wright Tremaine conducted reverse searches on the phone numbers from which Gordon received the messages, they discovered that the senders had close ties to one of the lawyers who filed the class action, Brian Cameron of Cameron Sutherland. One of the texts to Gordon was from Brian Cameron’s brother, John Cameron. The other was from a friend of Brian Cameron’s son.

It gets weirder. The name plaintiff, Gordon, was a friend of the Camerons. Brian Cameron, the plaintiffs’ lawyer, frequented Gordon’s wine bar until Gordon sold the business in 2019. Gordon also regularly played Dungeons & Dragons with Brian and John. In fact, Gordon was part of a group text chain with the Camerons that predated the text in which John invited the bar owner to set up a Robinhood account. Gordon was also a plaintiff in other consumer suits filed by Brian Cameron.

(Mike Frisch)