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Fundamental Administrative Services, LLC v. Anderson

United States District Court, Fourth Circuit

August 22, 2013



James K. Bredar United States District Judge

Pending before the Court is Defendant Kristi Anderson’s motion for sanctions, including reimbursement of Anderson for her time and payment of attorney’s fees incurred in her defense of Plaintiff’s complaint and motion for temporary restraining order, disqualification of Plaintiff’s counsel, and dismissal with prejudice of the instant case. (ECF No. 16.) The motion is brought by Anderson, who formerly served as general counsel to Plaintiff Fundamental Administrative Services, LLC (“FAS”), against FAS; Linda S. Woolf, Esq., counsel for Plaintiff; Cheryl Zak Lardieri, Esq., co-counsel for Plaintiff; and the law firm of which Ms. Woolf and Ms. Lardieri are members, Goodell DeVries Leach & Dann, LLP. Defendant asserts that FAS deliberately omitted material facts and manipulated the judicial process to gain an advantage in another court. (Def.’s Mot. Sanctions Supp. Mem. 7, ECF No. 16.) Previously, the Court granted a modified version of a temporary restraining order (“TRO”) requested by FAS, and then, after being informed of later proceedings in a related bankruptcy case in the Middle District of Florida, dissolved the TRO and denied preliminary injunctive relief. (ECF Nos. 5, 13, 15.)[1] This memorandum will not recount all of the previous proceedings but incorporates the Court’s prior opinions. The Court has carefully considered the submissions of both parties but declines to award sanctions.[2]

The Court first considers Anderson’s contention that FAS made deliberate misrepresentations to this Court when it sought injunctive relief. Anderson says that

FAS concealed from this Court the fact that the Bankruptcy Court conducted numerous hearings, considered dozens of briefs, heard hours of oral argument over many months, and issued detailed discovery orders and lengthy memorandum opinions about confidentiality, privilege and work product issues relevant to the instant proceedings in this Court. FAS also concealed from this Court – not surprisingly – that it lost every battle it waged to prevent disclosure of documents to the Trustee, including twice bringing actions in other jurisdictions.

(Def.’s Supp. Mem. 8.)

Although the Court was not informed of chapter and verse of the bankruptcy proceedings, it certainly was aware that the bankruptcy proceedings and related lawsuits were a very complex affair that is far from its conclusion, and the Court naturally assumed that hearings had occurred, briefs had been filed, and opinions and orders had been issued. The bankruptcy and related proceedings and the instant case are quite different, although some, not all, of the concerns raised by FAS in this Court overlap some of FAS’s concerns in the bankruptcy proceeding. From FAS’s point of view, it was, and perhaps remains, concerned that Anderson has violated or will violate her ethical and contractual obligations to FAS by exercising control over documents that FAS asserts are the property of FAS and by sharing information she is obligated to hold in confidence. The Court understands that Anderson has said she does not intend to violate her ethical and contractual obligations to FAS, but this is only the other side in a case yet to be resolved on its merits.

In a footnote in her supporting memorandum to the motion for sanctions, Anderson has referred this Court to three orders entered by the bankruptcy court as orders FAS deliberately failed to disclose prior to the TRO hearing:

.An order entered July 12, 2012 (“Omnibus Order Establishing Discovery Procedures and Protocol for the Production of Documents and the Examination of Witnesses”)
. An order entered September 12, 2012 (“Order Denying Joint Motion to Vacate Omnibus Order, or in the alternative, for Protective Order (Doc. 275) and Amending Omnibus Order Establishing Discovery Procedures and Protocol for Production of Documents and the Examination of Witnesses (Doc. 216)”)
. An order entered October 18, 2012 (“Order Granting Motion for Rule 2004 Examination of and Production of Documents from Law Firms Representing the Debtor or THMI (Doc. 423)”)

(Def’s Supp. Mem. 13 n.11.) The Court has located the first two of these orders in Anderson’s exhibits, but has been unable to find the third order in her voluminous filing (850 pages) that is undifferentiated by tabbing and indexing, as required by Local Rule 105.5.[3]

In the July 12 omnibus order, the bankruptcy court ruled on the participation of other parties in the Bankruptcy Rule 2004 examinations noticed by the bankruptcy trustee:

13. The Trustee shall be the only party authorized to demand production of documents or examine witnesses under the terms of this Order. Subject to the Privilege and Confidentiality provisions set forth below, all Rule 2004 examinations may be observed by the Debtor and any creditor or other party-in-interest. Any person observing a Rule 2004 examination, however, may appear only by video conference or by telephone. No in-person appearances by any creditors or other parties-in-interest shall be permitted. Moreover, any party observing an examination may not ask questions, make comments on the record, object, or otherwise participate in any way in the examination, except to note on the record their appearance as an observer.
17. All claims or assertions of privilege or confidentiality, and all objections thereto, shall be preserved without further Order of this Court. If any person or entity from whom the Trustee seeks the production of documents believes the Trustee’s request is directed at privileged or confidential documents, that ...

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