Gregory Caputo v. Tungsten Heavy Powder, Inc.

96 F.4th 1111

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 14, 2024
• Docket: 22-55142
• Status: Published

Opinion

FOR PUBLICATION

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

GREGORY CAPUTO, Relator; Ex No. 22-55142 Rel. United States of America; GLOBAL TUNGSTEN & POWDERS D.C. No. CORPORATION, Relator; Ex Rel. 3:18-cv-02352-W- United States of America, AHG

Plaintiffs-Appellees, ORDER v.

TUNGSTEN HEAVY POWDER, INC., DBA Tungsten Heavy Powder and Parts, Inc.,

Defendant-Appellant,

GREGORY A. VEGA; RICARDO ARIAS; MEGAN OVERMANN GOETZ; MARINA A. TORRES; THOMAS RUBINSKY; DONALD HAGANS,

Real Parties in Interest, 2 CAPUTO V. TUNGSTEN HEAVY POWDER, INC.

and

UNITED STATES OF AMERICA, Ex Rel.,

Real Party in Interest.

Filed March 14, 2024

Before: Marsha S. Berzon, Ryan D. Nelson, and Bridget S. Bade, Circuit Judges.

Order

SUMMARY *

Sanctions

In an appeal by Tungsten Heavy Powder, Inc., from the district court’s award of attorneys’ fees, the panel (1) adopted, with some points of clarification, a special master’s factual findings, (2) adopted in full the special master’s conclusions of law and recommended sanctions and disciplinary actions, and (3) imposed sanctions and disciplinary actions, pursuant to Tungsten Heavy Powder’s stipulation and 28 U.S.C. § 1927, on Tungsten Heavy Powder and attorneys Gregory A. Vega, Ricardo Arias, and

* This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. CAPUTO V. TUNGSTEN HEAVY POWDER, INC. 3

Donald Hagens for misconduct and unreasonable and vexatious multiplication of proceedings.

COUNSEL

Marina A. Torres (argued), Halpern May Ybarra Gelberg LLP, Los Angeles, California; Ethan J. Brown and Tom Rickeman, Brown Neri Smith & Khan LLP, Los Angeles, California; for Defendant-Appellant. Jessica H. Sanderson (argued) and Sam D. Finkelstein, Volkov Law Group PC, Washington, D.C., for Plaintiffs- Appellees. Patrick Q. Hall, Law Office of Patrick Q. Hall, San Diego, California, for Real-Parties-in-Interest Gregory A. Vega and Ricardo Arias. Christopher A. Wright, Carney Badley Spellman PS, Seattle, Washington, for-Real-Party-in-Interest Megan Overmann Goetz. Alex M. Weingarten, Willkie Farr & Gallagher LLP, Los Angeles, California, for Real-Party-in-Interest, Marina A. Torres. Joseph J. Ybarra, Halpern May Ybarra Gelberg LLP, Los Angeles, California, for Real-Party-in-Interest Thomas Rubinsky. Donald Hagans, Pro Se, Las Vegas, Nevada, for Real- Party-in-Interest Donald Hagans. 4 CAPUTO V. TUNGSTEN HEAVY POWDER, INC.

Petitioners Global Tungsten & Powders Corp. (GTP) and Gregory Caputo have filed a motion for sanctions against respondent Tungsten Heavy Powder, Inc. (THP), alleging that THP filed its appeal in bad faith to delay payment of an attorneys’ fee award entered by the District Court for the Southern District of California. The motion alleges that THP misrepresented to this court when it learned of “new evidence” underlying its application for reconsideration of the fee order, the denial of which was the subject of this appeal. THP represented that on October 29, 2021, Dennis Omanoff, a former employee of THP’s corporate affiliate Tungsten Parts Wyoming, Inc. (TPW), “came forward alleging unethical and illegal conduct” by GTP’s counsel. Based in part on a January 27, 2023, filing in Wyoming district court revealing that Omanoff began cooperating with THP in May 2021, GTP and Caputo contend that THP falsely represented that it could not have discovered with due diligence the evidence presented by Omanoff before October 29, 2021. On March 30, 2023, this panel appointed Judge Richard C. Tallman of our Court as Special Master under Rule 48 of the Federal Rules of Appellate Procedure “to conduct any proceedings he deems appropriate to determine the scope of any misconduct, including knowing misrepresentations to the district court and this court, pertaining to the Omanoff affidavit, Appellant’s application for reconsideration, and this appeal.” After briefing by the parties, the production of more documents, a three-day evidentiary hearing, and closing arguments, Judge Tallman submitted his Report and Recommendation (R&R). That Report, attached to this Order, fully recounts the relevant factual background. CAPUTO V. TUNGSTEN HEAVY POWDER, INC. 5

Gregory A. Vega, Ricardo Arias, Donald Hagans, and THP filed objections. We adopt Judge Tallman’s factual findings except for the following points of clarification: 1. In Part II.A, the Report states: “In substance, TPW has absorbed all of THP’s operations and assumed its liabilities. Today, the two companies are basically indistinguishable.” R&R at 11. To the extent that this statement can be read as implying, as THP maintains in its objections, that the two companies are not legally separate, we decline to adopt that finding. Testimony indicates that THP remains legally separate from TPW. And we do not rely on the functional or operational coordination between the two companies in entering our sanctions order. 2. In Part II.F.1, the Report states:

Accordingly, the Special Master finds that based on the entirety of the evidence, Vega and Arias never communicated a belief that an appeal would lack merit to Hagans in the weeks between Judge Whelan’s order denying their motion for reconsideration and the appeal to the Ninth Circuit. Nor did they say that to Marina A. Torres. The lack of contemporaneous documentation serves as evidence suggesting that they may never have harbored these reservations at all. Instead, the Special Master finds that the reason they did not take the appeal was simply based on the fact that neither Vega nor Arias had appellate experience and felt their 6 CAPUTO V. TUNGSTEN HEAVY POWDER, INC.

time was better spent continuing to represent THP in the ongoing criminal investigation.

R&R at 37. Vega and Arias have objected to this factual finding. We neither adopt nor disavow Judge Tallman’s findings about whether Vega and Arias advised Hagans of the appeal’s merit. Instead, we conclude that the recommended sanctions against Vega and Arias under § 1927, and the recommended discipline of Vega under Rule 46(c) of the Federal Rules of Appellate Procedure, are adequately supported, whether or not this factual finding is supported by the record. Judge Tallman did not rely on the alleged failure to advise Hagans on the merits of the appeal in imposing sanctions against Vega and Arias under § 1927. Instead, he pointed to Arias’s failure to conduct diligent research and his decision to “recycle” an earlier draft of the motion for reconsideration that referred to the May 24, 2021, affidavit by substituting the October 29, 2021, date; Vega’s inadequate supervision of Arias and failure independently to assess the legal and factual basis of the Rule 60 argument; and both parties’ failure to correct misstatements of law and fact filed in the district court and with the Special Master. R&R at 79–81. The Report and Recommendation identified Vega’s failure to advise Hagans as one factor supporting individual discipline against Vega under Rule 46(c). But Vega’s failure to provide relevant information to Marina Torres concerning his knowledge of the earlier draft affidavits and his submission of a declaration to the Special Master falsely stating that his firm had no role in preparing the Omanoff affidavit were independently adequate to support the recommended discipline. Id. at 89–91. CAPUTO V. TUNGSTEN HEAVY POWDER, INC. 7

3. Finally, in Part III.A.2, the Special Master concluded that “although Marina A. Torres personally submitted frivolous arguments to the Ninth Circuit and Special Master, she did not act with the requisite bad faith—i.e., recklessness—necessary to justify monetary sanctions under § 1927.” Id. at 83. We agree with the Special Master’s overall recommendation not to impose sanctions on Attorney Torres under either § 1927 or Rule 46. Still, added exposition of Torres’s conduct is warranted. Contrary to the Special Master’s conclusion, Torres’s behavior went beyond simply “allow[ing] her name to be placed on briefs that presented frivolous arguments on appeal.” Id. at 84. As the attorney primarily responsible for researching and drafting the appellate briefs, the petition for rehearing, and the response to the motion for sanctions, Torres had the opportunity to verify the factual basis of THP’s application for reconsideration and failed to do so. Her efforts to solicit information from Hagans, Vega, and Arias about their interactions with Omanoff were cursory. Further, by the time she filed the Opening Brief in this appeal, Torres recognized that the district court’s denial of the application for reconsideration depended on an affidavit filed in the District of Wyoming but failed to thoroughly familiarize herself with that litigation. Even acknowledging that Vega, Arias, and Hagans withheld critical information from Torres concerning the extent of Omanoff’s cooperation with THP, Torres likely could have uncovered the omission by reviewing the Wyoming pleadings and THP’s district court briefs more thoroughly. Most troubling are Torres’s representations in THP’s response to the motion for sanctions. That document states: “In its Motion for Reconsideration, when Defendant first represented that Omanoff ‘came forward alleging unethical 8 CAPUTO V. TUNGSTEN HEAVY POWDER, INC.

and illegal conduct by [GTP’s counsel] related to Case No. 3:18-cv-02352-W-AHG’ on October 29, 2021, Defendant was only referring to the date the affidavit was signed and executed—not the date that Omanoff first approached TPW.” The response further represents that “In all of its filings, Defendant has, very clearly and repeatedly, said that the ‘new evidence’ was Omanoff’s signed and sworn [October 29, 2021] affidavit.” Those representations do not accurately characterize THP’s filings. For example, the application for reconsideration stated that “new evidence brought to light by Dennis Omanoff . . . show[ed GTP’s counsel] was involved in unethical and possible illegal conduct,” while the attached memorandum of points and authorities stated that Omanoff “came forward alleging unethical and illegal conduct,” language that suggests the information shared through Omanoff’s cooperation with THP was the “new evidence,” rather than the production of a particular document. THP’s opening brief on appeal—drafted by Torres—stated that Omanoff’s “testimony did not come to light until the day he came forward and [the] day the [October 29th] affidavit was signed,” and that “THP was not aware of Omanoff’s knowledge prior to October 29, 2021.” Those statements acknowledge a distinction between the affidavit and the information, testimony, or knowledge it contained, but inaccurately represent that the information, testimony, or knowledge—not just the affidavit—first came into THP’s hands when the October 29, 2021, affidavit was signed. The reply brief similarly claimed that “[i]t was only after Omanoff came forward with his affidavit that evidence of Plaintiffs’ illegal and fraudulent conduct . . . was discovered,” (falsely) suggesting that THP did not know of the misconduct before the date the October 29 affidavit was CAPUTO V. TUNGSTEN HEAVY POWDER, INC. 9

signed. And finally, THP’s petition for rehearing argued that it “had not previously been aware of the new evidence—the evidence detailed in Omanoff’s affidavit—until two days after the [attorneys’ fee] order was signed.” “The evidence detailed in Omanoff’s affidavit” and the affidavit itself are not the same. Contrary to Torres’s representations in the response to the sanctions motion, therefore, THP’s claimed “new evidence” did not refer exclusively to the affidavit itself but referred also to the information the affidavit contained. In sum, despite the district court and this panel’s statements that THP had access to most of the “new” evidence relied on in the application for reconsideration for some time before the fee order was issued, Torres “quadrupled down” on the claim that THP had discovered the new evidence only after the fee award was final. R&R at 48. And after it became clear that Omanoff had begun cooperating with THP far earlier than the signing of the October affidavit, Torres attempted to narrow THP’s “new evidence” argument to refer only to the affidavit itself, contravening the far more plausible interpretation that “new evidence” referred to the information contained within the affidavit that may have supported reconsideration of the fee award. That is, Torres repeated and further refined THP’s claims in the face of multiple decisions and motions by the petitioners highlighting its implausibility. At the same time, Torres was relatively less culpable than Hagans, Vega, and Arias, as she had not known, as they did, that there was an earlier, signed Omanoff declaration. Her errors were largely—but not only—of omission, not commission. Accordingly, while we believe that Torres ought to have exercised considerably greater care both in investigating Omanoff’s involvement and in making 10 CAPUTO V. TUNGSTEN HEAVY POWDER, INC.

representations in the appellate and motion for sanctions briefs, her conduct does not rise to the level of “bad faith” necessary to impose sanctions under § 1927. Nor are sanctions warranted under Rule 46. Having clarified those factual points, and having carefully considered the Report and Recommendation, we overrule the objections filed by Gregory A. Vega, Ricardo Arias, Donald Hagans, and THP, except as noted above. We grant Petitioners’ motion for sanctions. And we adopt in full Judge Tallman’s conclusions of law and the following recommended sanctions and disciplinary actions: THP is liable for $246,983.68. Donald Hagans is jointly and severally liable with THP for up to 50% of the above amount, not to exceed $123,491.84. Gregory A. Vega is jointly and severally liable with THP for up to 20% of the above amount, not to exceed $49,396.74. Ricardo Arias is jointly and severally liable with THP for up to 10% of the above amount, not to exceed $24,698.37. Gregory A. Vega is publicly reprimanded under Rule 46(c). The State Bar of Texas shall receive from the Clerk of Court a copy of the attached Report and Recommendation for consideration of any further discipline they deem appropriate with respect to the conduct of Donald Hagans. The State Bar of California shall receive from the Clerk of Court a copy of the attached Report and Recommendation for consideration of any further discipline they deem appropriate with respect to the conduct of Gregory A. Vega and Ricardo Arias. The United States District Court for the Southern District of California shall receive from the Clerk of Court a copy of CAPUTO V. TUNGSTEN HEAVY POWDER, INC. 11

the attached Report and Recommendation for consideration of any further discipline they deem appropriate with respect to the conduct of Gregory A. Vega and Ricardo Arias. The United States District Court for the District of Wyoming shall receive from the Clerk of Court a copy of the attached Report and Recommendation for consideration of any further discipline they deem appropriate with respect to the conduct of Megan Overmann Goetz. SO ORDERED. 12 CAPUTO V. TUNGSTEN HEAVY POWDER, INC.

APPENDIX UNITED STATES COURT OF APPEALS FILED FOR THE NINTH CIRCUIT OCT 31 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS In re: TUNGSTEN HEAVY POWDER No. 23-80039 SPECIAL MASTER PROCEEDING, No. 22-55142 ______________________________ D.C. No. GREGORY CAPUTO, Relator; et al., 3:18-cv-02352-W-AHG Southern District of California, Petitioners, San Diego

v. REPORT AND RECOMMENDATION OF THE TUNGSTEN HEAVY POWDER, INC., SPECIAL MASTER DBA Tungsten Heavy Powder and Parts, Inc.,

Respondent,

GREGORY A. VEGA; et al.,

Real Parties in Interest.

Before: RICHARD C. TALLMAN, Circuit Judge, acting as Special Master.

The Special Master herewith submits his Report and Recommendation

pursuant to the panel’s instructions.

REPORT AND RECOMMENDATION Page 1 of 102 TABLE OF CONTENTS I. INTRODUCTION & BACKGROUND .............................................................3 II. FINDINGS OF FACT ......................................................................................10 A. The Corporate Parties ..................................................................................10 B. Litigation History Between GTP and THP .................................................12 C. Developments in May and June 2021 .........................................................17 D. Developments in October and November 2021 ..........................................24 E. Judge Whelan’s Decision on the Application for Reconsideration ............29 F. THP’s Appeal to the Ninth Circuit..............................................................32 1. Seltzer Caplan’s Decision Not to Handle the Appeal............................32 2. THP’s Initial Appeal to the Ninth Circuit..............................................37 3. THP’s Petition for Panel Rehearing......................................................41 G. GTP’s Motion for Sanctions and the Appointment of the Special Master .43 H. Relevant Developments in the Wyoming Antitrust Litigation ...................49 I. Special Master Proceedings ........................................................................51 1. THP’s Opening Brief and Supporting Declarations .............................53 2. THP’s Request to Correct Its Opening Brief ........................................58 III. CONCLUSIONS OF LAW ............................................................................61 A. Monetary Sanctions .....................................................................................61 1. Sanctions Pursuant to THP’s Stipulation ..............................................62 a) Costs and Fees from the District Court Proceedings.......................64 b) Costs and Fees from the Ninth Circuit Proceedings ........................66 c) Costs and Fees Resulting from Petitioners’ Motion for Sanctions and the Special Master Proceedings ................................................68 d) Reasonableness of the Various Calculations ...................................70 2. Individual Attorney Sanctions for the Unreasonable and Vexatious Multiplication of Proceedings ...............................................................74 B. Individual Attorney Discipline ....................................................................86 1. Gregory A. Vega and Marina A. Torres ................................................87 2. Donald Hagans, Ricardo Arias, and Megan Overmann Goetz .............95 IV. SUMMARY OF RECOMMENDATIONS ...................................................98

REPORT AND RECOMMENDATION Page 2 of 102 I. INTRODUCTION & BACKGROUND

On November 24, 2021, Respondent Tungsten Heavy Powders, Inc. (“THP”)

filed an ex parte application for reconsideration of an October 28, 2021, attorneys’

fees award granted by Judge Thomas J. Whelan in the Southern District of

California. Evid. Hr’g Ex. 300. Judge Whelan granted the award in favor of

Petitioners Gregory Caputo and Global Tungsten & Powders Corporation

(collectively, “Petitioners”) in a qui tam action brought by Petitioners against THP

and settled in April 2021 for $5.6 million after the United States intervened. S.D.

Cal. Case No. 3:18-cv-02352-W-AHG, ECF No. 32.

In support of its application, THP submitted an affidavit of Dennis Omanoff

executed on October 29, 2021. Evid. Hr’g Ex. 106. The same affidavit had been

originally filed by THP’s affiliate, Tungsten Parts Wyoming, Inc. (“TPW”), in

related antitrust litigation in the District of Wyoming, pending before Judge Alan B.

Johnson. D. Wyo. Case No. 2:21-cv-00099-ABJ, ECF No. 51-2. Affiant Omanoff1

averred, among other things, that Petitioners and their qui tam counsel had engaged

in unethical, illegal, and anticompetitive conduct toward THP and TPW by

1 At the time his affidavit was filed, Dennis Omanoff was a former employee of TPW and defending himself against TPW’s claims in the related Wyoming litigation. See Ninth Cir. Case No. 23-80039, ECF Nos. 8-2, 22-4. Strangely, although Omanoff remains a nominal defendant in the Wyoming litigation, he has since been rehired effective January 1, 2023, as TPW’s CEO. Id. REPORT AND RECOMMENDATION Page 3 of 102 orchestrating corporate espionage to pilfer documents in aid of the qui tam action.

Evid. Hr’g Ex. 106.

In its ex parte application for reconsideration, THP argued that it was entitled

to relief from the attorneys’ fees award under Fed. R. Civ. P. 60(b)(2) because the

Omanoff affidavit, first filed in the District of Wyoming antitrust case, contained

“newly discovered evidence that, with reasonable diligence, could not have been

discovered in time to move for” relief under Fed. R. Civ. P. 59(b). Evid. Hr’g Ex.

300, at 2. Judge Whelan denied relief, finding that “[m]ost of the evidence was

known to [Respondent] since at least May or June 2021.” Evid. Hr’g Ex. 101, at 2.

On appeal to the Ninth Circuit, Respondent again asserted that it “was not

aware of Omanoff’s knowledge prior to October 29, 2021” because “Omanoff only

came forward after [Judge Whelan’s] order had already been signed.” Evid. Hr’g

Ex. 211, at 37. A Ninth Circuit panel consisting of U.S. Circuit Judges Marsha S.

Berzon, Ryan D. Nelson, and Bridget S. Bade affirmed the district court in a

memorandum disposition. Ninth Cir. Case No. 22-55142, ECF No. 36.

Respondent then filed a petition for panel rehearing, renewing its argument that

“Omanoff’s testimony did not come to light until the day . . . the affidavit was

signed” and that “no amount of due diligence would have uncovered” the

information contained in the affidavit. Evid. Hr’g Ex. 105, at 87. The panel denied

REPORT AND RECOMMENDATION Page 4 of 102 the petition for rehearing on January 30, 2023. Ninth Cir. Case No. 22-55142, ECF

No. 41.

On February 13, 2023, after the mandate had issued, Petitioners filed a motion

for sanctions against Respondent with the Ninth Circuit panel. Ninth Cir. Case No.

22-55142, ECF No. 43. The motion referenced a new filing that TPW had submitted

in the related Wyoming litigation, which implied that Respondent THP had been

aware of Omanoff’s information as early as May 2021. Id. (referencing D. Wyo.

Case No. 2:21-cv-00099-ABJ, ECF No. 135). On the basis of that motion, and

finding that these developments presented “significant factual issues that

warrant[ed] further proceedings,” the Ninth Circuit panel appointed the undersigned

as Special Master under Fed. R. App. P. 48 and charged the Special Master with

determining “the scope of any misconduct, including knowing misrepresentations”

that were made to the San Diego district court and the Ninth Circuit. Ninth Cir.

Case No. 23-80039, ECF No. 1.

In its first filing before the Special Master, THP maintained that Omanoff’s

October “affidavit detailed, for the first time” his various allegations. Ninth Cir.

Case No. 22-55142, ECF No. 54, at 5. However, in its June 12, 2023, opening brief

to the Special Master, THP revealed for the first time to any court that Omanoff had

prepared a draft of his affidavit for TPW in May 2021, but the draft “was shelved

and not filed” and critically “was not provided to THP’s counsel in the qui tam case.”

REPORT AND RECOMMENDATION Page 5 of 102 Evid. Hr’g Ex. 217, at 6. Accordingly, Respondent THP renewed its assertion that

its San Diego qui tam defense counsel, as opposed to TPW’s Wyoming antitrust

counsel, “had no knowledge of the information in Mr. Omanoff’s declaration, or that

Mr. Omanoff was even preparing a declaration” prior to its October 29, 2021, date

of execution and filing in Wyoming. Id. at 1. Respondent submitted supporting

declarations of various counsel and another from Omanoff to “corroborate” this

assertion. Id. at 4–12.

On June 22, 2023, ten days after filing its opening brief with the Special

Master, THP filed a request for leave to correct that brief. Evid. Hr’g Ex. 221. THP

now explained that it had “discovered that certain statements in [its] Opening Brief

[were] not accurate.” Id. at 1. Namely, THP’s newly engaged counsel for these

proceedings, Ethan J. Brown, Esq. of the law firm Brown, Neri, Smith & Khan LLP,

reported that he had “learned for the first time that the May 2021 affidavit by Dennis

Omanoff referenced in the Opening Brief was transmitted to THP’s qui tam counsel

in late May 2021.” Id. Respondent contemporaneously submitted a corrected brief

with minor edits but did not correct the declarations it had filed to corroborate its

previous false assertion that THP’s San Diego qui tam counsel, Gregory A. Vega

REPORT AND RECOMMENDATION Page 6 of 102 and Ricardo Arias from the law firm Seltzer Caplan McMahon Vitek, 2 had never

received a copy of any May 2021 affidavits.

In response to this admission, the Special Master ordered the production of

any May 2021 draft of the Omanoff affidavit and ordered THP’s counsel to submit

a declaration explaining the precise details behind the creation and transmittal of the

May 2021 draft to THP’s qui tam counsel. Ninth Cir. Case No. 23-80039, ECF

No. 18.

On July 19, 2023, THP produced documents, numerous draft affidavits, and

declarations pursuant to the Special Master’s order. Ninth Cir. Case No. 23-80039,

ECF No. 22. The documents produced revealed that: (1) at all relevant times THP

and TPW shared corporate counsel, Donald Hagans, Esq.; (2) Hagans met with

Omanoff in May 2021 in Florida and the two drafted several affidavits and

declarations; (3) four of these drafts included the California qui tam caption and

listed THP’s San Diego counsel in that matter, Gregory A. Vega and Ricardo Arias;

(4) Omanoff signed several of these drafts, including one for filing in Wyoming, and

one for potential filing in the California qui tam action; and (5) Hagans

contemporaneously transmitted the signed declarations to Vega and Arias. See id.

2 At all times relevant to these proceedings, Gregory A. Vega was the supervising partner at Seltzer Caplan McMahon Vitek, and Ricardo Arias was the associate working on the case. In 2021, Ricardo Arias was a third-year associate with the firm, having been admitted to practice law in 2018. See Evid. Hr’g Tr. vol. 2, 540– 41 (Testimony of Ricardo Arias). REPORT AND RECOMMENDATION Page 7 of 102 These productions directly contradicted THP’s repeated assertions that the October

29, 2021, Omanoff affidavit filed by TPW in the related Wyoming litigation

contained new evidence that THP could not have discovered earlier with the exercise

of reasonable diligence.

Acknowledging the gravity of these disclosures, Respondent THP

commendably offered to stipulate to the entry of the requested sanctions award. Id.

at 2; Ninth Cir. Case No. 23-80039, ECF No. 32, at 13–14. However, due to the

complex web of misrepresentations made by different counsel to various courts,

including the Special Master, questions remained as to whether counsel acting on

THP’s behalf did so knowingly and in bad faith, recklessly, or were unwittingly

induced by THP to submit the misrepresentations. Mindful that the Ninth Circuit

panel had charged the Special Master with determining “the scope of any

misconduct, including knowing misrepresentations to the district court and [the

Ninth Circuit],” Ninth Cir. Case No. 22-55142, ECF No. 48, at 4 (emphasis

added), the Special Master determined that an evidentiary hearing was necessary to

fulfill the panel’s mandate and to provide those involved with a full and fair

opportunity to be heard as to whether sanctions are warranted against individual

attorneys in addition to Respondent THP.

Accordingly, the Special Master ordered Respondent THP, corporate counsel

Donald Hagans, and several of its outside counsel to show cause as to why sanctions

REPORT AND RECOMMENDATION Page 8 of 102 should not be imposed on them for the numerous misrepresentations they caused to

be filed in various courts.3 Ninth Cir. Case No. 23-80039, ECF No. 31.

The Special Master heard testimony and received documentary evidence over

the course of a three-day hearing from August 8–10, 2023, followed by another half

day of closing arguments on September 18, 2023, after a certified transcript of the

evidentiary hearing had been supplied by court reporter Ronelle Corbey. See Ninth

Cir. Case No. 23-80039, ECF No. 83. Nine witnesses testified under oath and sixty-

six exhibits were admitted into evidence. The Special Master also received and

reviewed in camera thousands of pages of documents submitted in advance by the

parties for review to resolve assertions of attorney-client privilege and the work

product doctrine.

3 Outside counsel ordered to show cause were Megan Overmann Goetz, Esq. of Pence and MacMillan LLC (Laramie, Wyoming); Gregory A. Vega, Esq. and Ricardo Arias, Esq. of Seltzer Caplan McMahon Vitek; Marina A. Torres, Esq., formerly of Halpern May Ybarra Geldberg LLP, now of Willkie Farr & Gallagher LLP; Thomas Rubinsky, Esq. of Halpern May Ybarra Gelberg LLP; and Donald Hagans, Esq., a solo practitioner who offices in Las Vegas, Nevada. REPORT AND RECOMMENDATION Page 9 of 102 II. FINDINGS OF FACT 4

A. The Corporate Parties

Tungsten is a naturally occurring rare metal with exceptional hardness and a

very high melting point. These characteristics combine to make tungsten products

crucial to our national security and defense interests due to its usefulness in bullets,

projectiles, and other armor-piercing munitions. See Cong. Rsch. Serv., Defense

Primer: Acquiring Special Metals, Rare Earth Magnets, and Tungsten (Updated

Jan. 30, 2020). However, tungsten, which is mined and sold in powder form, must

go through a rigorous manufacturing process before it is viable for military or

commercial use. See, e.g., Tungsten Manufacturing Operations, Tungsten Parts

Wyoming, https://tungstenparts.com/tungsten-manufacturing-operations/ (last

visited Oct. 27, 2023).

Tungsten Heavy Powders, Inc. was founded as a trading company in the late

1990’s to import tungsten powder from China for distribution in the United States.

Evid. Hr’g Tr. vol. 1, 88 (Testimony of Russell Lewis). THP eventually

considered expanding into the manufacturing of tungsten products, which led to the

development of a factory in Wyoming and the birth in 2018 of a sister company,

4 To the extent findings of fact are more appropriately categorized as conclusions of law, or vice versa, each is to be treated as if set forth under the category deemed appropriate. See Tri-Tron Int’l v. A.A. Velto, 525 F.2d 432, 435–36 (9th Cir. 1975). REPORT AND RECOMMENDATION Page 10 of 102 Tungsten Parts Wyoming. Id. at 89, 163. TPW developed a process of pressing,

debinding, and sintering tungsten powder to create solid products that it could

distribute to prime defense contractors for incorporation into weapons systems. Id.

While TPW began by processing tungsten powder on behalf of THP, it ultimately

received its own license to distribute tungsten products to these contractors. Id. at

89.

THP was owned by Russell Lewis and Joseph Sery (a.k.a. “Serov”). Id. at

88. Lewis was the financier whereas Sery served as managing partner and played a

more active role in overseeing the company’s daily operations. Id. While THP still

exists as a corporate entity, the business is now defunct and ceased primary

operations in 2019. Id. at 114, 164. Lewis is the company’s only current officer

and director. Id. at 113–14. In substance, TPW has absorbed all of THP’s

operations and assumed its liabilities. Today, the two companies are basically

indistinguishable.

THP and TPW’s major competitor is Global Tungsten & Powders

Corporation (“GTP”), and the two companies (with a combined market share of

90%) have been locked in a bitter war for market dominance. See Evid Hr’g Ex.

106, at ¶ 16. These proceedings are just the latest skirmish.

REPORT AND RECOMMENDATION Page 11 of 102 B. Litigation History Between GTP and THP

Understanding the complex litigation history between THP/TPW and GTP

that led up to these proceedings is crucial to understanding who knew what, when.

In October 2017, THP filed a defamation action against GTP in the Middle

District of Pennsylvania (“Pennsylvania Defamation Litigation”). M.D. Penn. Case

No. 4:17-cv-01948-MWB, ECF No. 1. THP alleged that GTP was spreading false

and defamatory statements that THP was importing raw materials from China and

having those materials inspected in Mexico as opposed to sourcing from approved

countries and inspecting and processing those materials domestically as required by

federal procurement rules and statutes. M.D. Penn. Case No. 4:17-cv-01948-

MWB, ECF No. 13, at 6. The parties resolved the Pennsylvania litigation in

October 2019 with a sealed settlement agreement, see M.D. Penn. Case No. 4:17-

cv-01948-MWB, ECF No. 73, that included a broad written release and waiver of

all known and unknown claims, see D. Wyo. Case No. 2:21-cv-00099-ABJ, ECF

No. 75, at 3–4 (acknowledging breadth of release language).

Notwithstanding the settlement of the Pennsylvania Defamation Litigation,

Respondent THP was in fact misrepresenting the origin of its materials sold to prime

defense contractors. Evid. Hr’g Tr. vol. 3, 772 (Testimony of Donald Hagans).

REPORT AND RECOMMENDATION Page 12 of 102 Accordingly, Petitioners GTP and Gregory Caputo 5 initiated this litigation in

October 2018 by filing a sealed False Claims Act qui tam complaint in the Southern

District of California (“California Qui Tam Litigation”). S.D. Cal. Case No. 3:18-

cv-02352-W-AHG, ECF No. 1. Petitioners (called “qui tam relators” in False

Claims Act parlance), represented by the Volkov Law Group, alleged THP had

falsely certified that its tungsten had been sourced from approved places when it had

actually been sourced from China. Id. Petitioners also alleged that THP was

fraudulently testing and certifying the quality of those materials. Id.

In April 2019, TPW hired Dennis Omanoff as CEO to develop and establish

manufacturing operations at TPW’s new Wyoming factory. Evid. Hr’g Ex. 116, at

¶ 4; Evid. Hr’g Tr. vol. 1, 170 (Testimony of Dennis Omanoff). Sometime in

May 2019 the complaint in the California Qui Tam Litigation was ordered unsealed

and THP became aware that the United States Department of Justice (“DOJ”) was

now investigating the matter. Evid. Hr’g Tr. vol. 1, 170–71 (Testimony of Dennis

Omanoff). According to Omanoff, it was around this time that he discovered Joe

Sery was in fact causing false claims to be submitted to defense contractors as

alleged in the California Qui Tam Litigation and was also illegally exporting

defense-related technical data to restricted countries in violation of the International

5 Gregory Caputo was a THP employee until 2017 when he left the company to work for GTP. Evid. Hr’g Ex. 116, at ¶ 5. REPORT AND RECOMMENDATION Page 13 of 102 Traffic in Arms Regulations (“ITAR”), 48 C.F.R. § 227.675–1. Id.; see also Press

Release, U.S. Att’ys Off. S.D. Cal., Former Tungsten Heavy Powder & Parts CEO

Arrested and Charged with Unlawful Exportation of Defense Articles Including

to The People’s Republic of China (Mar. 4, 2022), available at

https://www.justice.gov/usao-sdca/pr/former-tungsten-heavy-powder-parts-

ceo-arrested-and-charged-unlawful-exportation. Although Omanoff testified

that he confronted Joe Sery with the information and that ultimately he and his staff

felt compelled to resign in July 2019, other evidence suggests that Omanoff resigned

merely for personal and financial reasons. Compare Evid. Hr’g Tr. vol. 1, 171–72

(Testimony of Dennis Omanoff) (attributing Omanoff’s resignation to the fact

that he “became aware of some serious ITAR violations . . . by Joe Sery”), with

Evid. Hr’g Ex. 1001 (indicating Omanoff resigned because “Joe [Sery] would

not accede to additional investment . . . and was impossible to work with”).

Regardless of his motivations, Omanoff contacted the Volkov Law Group,

counsel of record for Petitioners in the California Qui Tam Litigation, shortly after

his resignation. Evid. Hr’g Tr. vol. 1, 172 (Testimony of Dennis Omanoff). On

July 23, 2019, Omanoff engaged the Volkov Law Group for personal legal

representation in connection with his reporting of the misconduct by Sery and THP.

D. Wyo. Case No. 2:21-cv-00099-ABJ, ECF No. 51-3. The engagement letter

drafted by the Volkov Law Group acknowledged the possibility that conflicts of

REPORT AND RECOMMENDATION Page 14 of 102 interest between Omanoff and GTP could arise, in part due to Omanoff’s former

employment with TPW. Id. Volkov had Omanoff waive any current or future

conflicts. Id. The agreement also promised Omanoff a predetermined percentage

of the relator award if his cooperation resulted in new or novel legal claims against

THP in the California Qui Tam Litigation. Id.

On September 30, 2019, Omanoff executed a common interest agreement

with GTP and others in which he agreed to cooperate in the DOJ investigation of

THP and Sery, and to cooperate in a pending London arbitration against THP. D.

Wyo. Case No. 2:21-cv-00099-ABJ, ECF No. 51-4.

Around this time, Lewis had Sery step down from his positions at THP and

TPW, and Lewis became the majority owner of both entities. Evid. Hr’g Tr. vol.

1, 88–89 (Testimony of Russell Lewis). Lewis began playing a more active role in

TPW’s daily operations and winding down THP’s operations and revenue stream.6

Lewis also hired Donald Hagans, Esq., an attorney Lewis had worked with in

relation to Lewis’s other worldwide business interests, as “an outside lawyer” and

“consultant” to handle THP and TPW’s legal matters. Id. at 89, 95–96. Although

6 THP presently has no revenue stream and exists only on paper to satisfy its financial obligations. See Evid. Hr’g Tr. vol. 1, 113, 164 (Testimony of Russell Lewis); Evid. Hr’g Ex. 232, at ¶ 3. For all intents and purposes, the company is moribund. TPW has stepped in to rebuild the business THP lost through its corporate misconduct and to demonstrate to the United States Department of Defense that it is a presently responsible government contractor for procurement of needed war material. REPORT AND RECOMMENDATION Page 15 of 102 Lewis had final client approval authority with respect to major litigation decisions,

he delegated the vast majority of this authority to Hagans’s discretion. Id. at 95,

127–28. That included reviewing and approving all legal filings and legal bills

submitted by outside counsel, though Lewis might be consulted to approve

particularly large invoices. Id. The Special Master therefore finds that at all times

relevant to these proceedings Donald Hagans was THP and TPW’s de facto chief

legal agent. In this role, he worked directly with Russell Lewis and was tasked with

strategizing, coordinating, and orchestrating corporate litigation decisions while

overseeing outside litigation counsel on behalf of both entities. Id.; Evid. Hr’g Ex.

232; Evid. Hr’g Tr. vol. 3, 768, 784 (Testimony of Donald Hagans).

On April 30, 2020, several former TPW employees, including Omanoff, filed

suit in the District of Wyoming against both THP and TPW (“Wyoming

Constructive Termination Litigation”). D. Wyo. Case No. 2:20-cv-00073-ABJ,

ECF No. 1. The ex-employees alleged THP and TPW had defamed them and

violated the False Claims Act’s anti-retaliation provisions, which are designed to

protect whistleblowers. Id. The parties went to mediation where Omanoff and

Hagans became acquainted with each other, and the matter settled in August 2020.

D. Wyo. Case No. 2:20-cv-00073-ABJ, ECF Nos. 11, 15; Evid. Hr’g Tr. vol. 1,

173 (Testimony of Dennis Omanoff) (describing Hagans as a “voice of reason

REPORT AND RECOMMENDATION Page 16 of 102 and competency and ethics on the other side of the table” during the Wyoming

Constructive Termination Litigation mediation).

Back on the west coast, the United States intervened in the California Qui Tam

Litigation to negotiate a resolution of the case, and THP settled the damages claim

for $5.6 million on April 7, 2021. S.D. Cal. Case No. 3:18-cv-02352-W-AHG,

ECF Nos. 19–22. However, THP did not agree on the amount it would pay for

Relators’ attorneys’ fees. S.D. Cal. Case No. 3:18-cv-02352-W-AHG, ECF No.

20. On April 23, 2021, Petitioners moved for attorneys’ fees on behalf of its legal

representative, the Volkov Law Group, and THP filed its opposition brief on May

11, 2021. S.D. Cal. Case No. 3:18-cv-02352-W-AHG, ECF Nos. 25, 30. The

battle over attorneys’ fees in the California Qui Tam Litigation—which picked up

significant steam in May 2021—is where our story begins in earnest.

C. Developments in May and June 2021

At some point during the pendency of the California Qui Tam Litigation,

Hagans began to suspect that GTP and the Volkov Law Group had obtained the

sensitive facts underlying the qui tam complaint through conduct constituting

unlawful corporate espionage. See Evid. Hr’g Tr. vol. 3, 775 (Testimony of

Donald Hagans). These suspicions underlie the original antitrust complaint filed

by TPW on May 20, 2021, in the District of Wyoming against GTP, Omanoff, and

several other former TPW employees (“Wyoming Antitrust Litigation”). D. Wyo.

REPORT AND RECOMMENDATION Page 17 of 102 Case No. 2:21-cv-00099-ABJ, ECF No. 1. The complaint alleged that GTP, by and

through the Volkov Law Group, conspired with Omanoff and others to engage in

corporate espionage and various other unlawful anticompetitive acts. Id. at ¶¶ 35–

37.

Omanoff was served at his Florida residence with the summons and complaint

in the Wyoming lawsuit on Friday, May 21, 2021. Evid. Hr’g Tr. vol. 1, 191–92

(Testimony of Dennis Omanoff). Within twenty-four to forty-eight hours of being

served with the complaint, Omanoff called and left a message for TPW’s then-CEO,

J.P. Batache, indicating that he was willing to cooperate against the other named

defendants. Id. at 178, 192, 265. The message was forwarded to Russell Lewis who

returned the call. Id. at 180. Omanoff provided Lewis with information that tended

to confirm some of the allegations contained in the Wyoming Antitrust Complaint.

Id. Although suspicious of Omanoff’s motives, Lewis informed Omanoff that

Hagans would be in contact with him shortly by telephone. Id.; Evid. Hr’g Tr. vol.

1, 104–05 (Testimony of Russell Lewis).

Hagans called Omanoff on Monday, May 24, 2021. Evid. Hr’g Tr. vol. 2,

307–08 (Testimony of Dennis Omanoff); Evid. Hr’g Ex. 1001. The call lasted

between one and two hours and culminated in the two men deciding that it would be

best for them to meet in person for Omanoff to share more detailed information about

REPORT AND RECOMMENDATION Page 18 of 102 GTP, Volkov, and what he perceived as “serious wrongs that were conducted against

TPW.” Evid. Hr’g Tr. vol. 1, 182–83 (Testimony of Dennis Omanoff).

On the morning of May 25, 2021, Hagans relayed via email detailed

information he had learned about Omanoff’s allegations against GTP and the Volkov

Law Group (“Omanoff Allegations”) to Respondent THP’s California qui tam

counsel Gregory A. Vega and Ricardo Arias, and Wyoming antitrust counsel Megan

Overmann Goetz. Evid. Hr’g Ex. 1001. Hagans specifically emphasized that the

Omanoff Allegations would have “implications on a number of fronts” and that he

had already spoken about those implications with Ricardo Arias “re DOJ and Volkov

fees,” and Megan Overmann Goetz “re the WY case.” Id. In the same email, Hagans

informed Vega, Arias, and Goetz that he would be “getting affidavit(s)” from

Omanoff in Florida in the following days and asked them for “any input on

questions / answers that [they] believe[d] [would be] important and relevant.” Id.

Immediately thereafter, Hagans flew to Florida. Over a two- to three-day

period from May 26–28, 2021, Hagans and Omanoff met regarding the Omanoff

Allegations. Id.; Evid. Hr’g Tr. vol. 2, 308 (Testimony of Dennis Omanoff).

During their in-person meetings, the two men cooperatively drafted at least seven

declarations and affidavits detailing the Omanoff Allegations for use in both the

Wyoming Antitrust Litigation and California Qui Tam Litigation. See Evid. Hr’g

Exs. 112, 113, 225, 245, 302, 304, 315 (draft Omanoff affidavits); Evid. Hr’g Ex.

REPORT AND RECOMMENDATION Page 19 of 102 232, at ¶¶ 9–10 (Hagans declaration to the Special Master); Evid. Hr’g Tr. vol.

1, 186–88 (Testimony of Dennis Omanoff); Evid. Hr’g Tr. vol. 3, 805 (Testimony

of Donald Hagans).

At some point during the course of Hagans’s meeting with Omanoff in

Florida, Hagans contacted Megan Overmann Goetz—TPW’s counsel in the

Wyoming Antitrust Litigation—and asked her to copy the Omanoff Allegations that

he had shared with her via email and to paste them into a template that included the

case caption for the Wyoming matter. Evid. Hr’g Tr. vol. 2, 321 (Testimony of

Megan Overmann Goetz). Goetz instructed either a legal assistant or associate at

her firm to do so. Id. at 322. Eventually, Goetz sent back a draft affidavit to Hagans

that was prepared on her firm’s pleading paper and included the Wyoming case

caption. Id. at 323. On Friday, May 28, 2021, Omanoff executed and notarized an

affidavit on Goetz’s firm’s pleading paper for filing in the Wyoming Antitrust

Litigation. Evid. Hr’g Ex. 245. According to an agreement between Omanoff and

Hagans, Hagans was free to file notarized documents in court. See Evid. Hr’g Tr.

vol. 1, 248 (Testimony of Dennis Omanoff).

However, based on the dates of the various drafts, it appears that preparing a

declaration for use in the California Qui Tam Litigation was the first order of

business. On May 27, 2021, the day before Omanoff signed and notarized the

Wyoming affidavit, Omanoff executed various declarations on Seltzer Caplan

REPORT AND RECOMMENDATION Page 20 of 102 McMahon Vitek pleading paper, listing Gregory A. Vega and Ricardo Arias as

attorneys, and including the California Qui Tam Litigation caption. 7 See Evid. Hr’g

Exs. 112, 304, 315. The contents of these draft declarations evidence that they were

intended to support an immediate attack by THP on Petitioners’ pending attorneys’

fee application in the California Qui Tam Litigation. Id.

Hagans transmitted the final, signed declaration to Vega and Arias, and Vega

directed Arias to use it to begin preparing an ex parte application for relief from

Petitioners’ pending motion for costs and fees. Evid. Hr’g Tr. vol. 2, 428–29

(Testimony of Gregory Vega); Evid. Hr’g Tr. vol. 2, 552–53 (Testimony of

Ricardo Arias). Around this same time in May 2021, Vega and Arias also received

the signed and dated Omanoff affidavit prepared for the Wyoming litigation. Evid.

Hr’g Tr. vol. 2, 431–32 (Testimony of Gregory Vega). Unlike the final California

affidavit, which was four pages long, the final Wyoming affidavit was twelve pages

long and included substantial additional allegations. See Evid. Hr’g Exs. 245, 305.

The Special Master finds that, at the time Ricardo Arias began preparing the first

draft of the ex parte application for relief in late May 2021, he had possession of the

7 Both Gregory A. Vega and Ricardo Arias testified that they worked with Hagans in a similar fashion to Megan Overmann Goetz in that Hagans would transmit information to them and Arias would copy and paste the information onto their law firm’s pleading paper and include the relevant case caption. See Evid. Hr’g Tr. vol. 2, 421 (Testimony of Gregory Vega); Evid. Hr’g Tr. vol. 2, 545 (Testimony of Ricardo Arias). REPORT AND RECOMMENDATION Page 21 of 102 information included in both the May California affidavit and the longer May

Wyoming affidavit. Evid. Hr’g Tr. vol. 2, 431–32 (Testimony of Gregory Vega).

At Vega’s direction, Arias immediately prepared a draft of the ex parte

application. Evid. Hr’g Tr. vol. 2, 552 (Testimony of Ricardo Arias). The draft

application asserted that new evidence warranted an evidentiary hearing regarding

the Petitioners’ motion for attorneys’ fees pending before Judge Whelan in the

California Qui Tam Litigation because “[o]n May 24, 2021, THP learned that Dennis

Omanoff . . . came forward alleging unethical conduct by Volkov.” Evid. Hr’g Ex.

308 (emphasis added). At the time of this initial draft, the statements about when

THP and its counsel learned that Dennis Omanoff came forward with “new

evidence” were true. However, the draft ex parte application for relief and

accompanying Omanoff declaration were shelved for over five months.

This delay was caused in part because Hagans, Vega, and Arias testified that,

in May 2021, they still had some concerns regarding the veracity and accuracy of

the Omanoff Allegations. Evid. Hr’g Tr. vol. 2, 427–28, 431 (Testimony of

Gregory Vega); Evid. Hr’g Tr. vol. 2, 605 (Testimony of Ricardo Arias); Evid.

Hr’g Tr. vol. 3, 799, 806 (Testimony of Donald Hagans). This testimony is

supported by contemporaneous emails exchanged between Hagans, Vega, and Arias.

See Evid. Hr’g Ex. 1001. However, Arias and Vega also testified that they shelved

the May 2021 draft ex parte application in order to divert their firm’s resources

REPORT AND RECOMMENDATION Page 22 of 102 toward defending against the DOJ’s criminal investigation of THP, which was

ramping up at this time. Evid. Hr’g Tr. vol. 2, 433–34 (Testimony of Gregory

Vega); Evid. Hr’g Tr. vol. 2, 553–54 (Testimony of Ricardo Arias). Accordingly,

the Special Master finds that Hagans, Vega, and Arias chose not to file the original

draft ex parte application for an evidentiary hearing with Judge Whelan, or otherwise

alert the San Diego district court to the Omanoff Allegations, in May 2021 for

reasons that were primarily tactical in nature.

By the end of June 2021, however, Hagans was more confident in the

reliability of Omanoff as an affiant and in the veracity of the Omanoff Allegations.

Over the course of June 22 and June 23, 2021, Hagans again travelled to Omanoff’s

Florida home to reinterview him and verify the truth of the Omanoff Allegations by

asking him to confirm the allegations contained in the First Amended Complaint to

be filed in the Wyoming case. Evid. Hr’g Tr. vol. 3, 807–08 (Testimony of Donald

Hagans).

On the basis of this second meeting, on June 25, 2021, Hagans directed Goetz

to file the verified First Amended Complaint in the Wyoming Antitrust Litigation,

now joining the Volkov Law Group as a defendant. D. Wyo. Case No. 2:21-cv-

00099-ABJ, ECF No. 11. The verified First Amended Complaint contained detailed

allegations, including direct quotes, from various iterations of Omanoff’s Wyoming

affidavits. See, e.g., id. at ¶¶ 43(d), 43(f). For example, the verified First Amended

REPORT AND RECOMMENDATION Page 23 of 102 Complaint references private conversations that Omanoff allegedly had with GTP-

connected individuals, which were only later confirmed in Omanoff’s October 2021

affidavit. Compare id. at ¶ 46 (discussing misrepresentations regarding assisting

the United States Attorney’s office), with Evid. Hr’g Ex. 106, at ¶ 19(c)–(d)

(same); compare also D. Wyo. Case No. 2:21-cv-00099-ABJ, ECF No. 11, at ¶

51 (quoting a former GTP co-defendant as saying the parties could “make a lot

of money in the process” of destroying TPW), with Evid. Hr’g Ex. 106, at ¶ 30

(same). The Special Master therefore finds that Respondent THP and its San Diego

qui tam counsel, through Hagans, possessed the Omanoff evidence relevant to Judge

Whelan’s determination of Petitioners’ motion for attorneys’ fees in late-May 2021

and were confident in the veracity of that evidence by at least late-June 2021.

D. Developments in October and November 2021

In the fall of 2021, all of the defendants in the Wyoming Antitrust Litigation,

except for Omanoff and Alonso Martinez, filed motions to dismiss. During the week

of October 25, 2021, Hagans met for a third time with Omanoff at his Florida home,

this time to secure a new affidavit to use in defense of the various motions to dismiss.

Evid. Hr’g Tr. vol. 3, 808–09 (Testimony of Donald Hagans); Evid. Hr’g Tr.

vol. 1, 205–07 (Testimony of Dennis Omanoff). Omanoff executed and notarized

a new affidavit under the Wyoming case caption, and on Goetz’s pleading paper, on

Friday, October 29, 2021. Evid. Hr’g Ex. 106. However, as indicated above, most,

REPORT AND RECOMMENDATION Page 24 of 102 if not all of the information included in the October affidavit was already known to

Hagans, and therefore THP and TPW, by late June 2021. Indeed, Hagans testified

that the “June document would . . . essentially[] show everything that we had.” Evid.

Hr’g Tr. vol. 3, 810 (Testimony of Donald Hagans). Megan Overmann Goetz

filed the October Omanoff affidavit as an attachment to her opposition to

Defendants’ motions to dismiss with District Judge Alan Johnson in Wyoming the

same day that it was executed, October 29, 2021. D. Wyo. Case No. 2:21-cv-00099-

ABJ, ECF No. 51-2.

Meanwhile, on Wednesday, October 27, 2021, Judge Whelan issued his

decision granting in part Petitioners’ application for attorneys’ fees in the California

Qui Tam Litigation. S.D. Cal. Case No. 3:18-cv-02352-W-AHG, ECF No. 32.

Vega and Arias immediately emailed Hagans to notify him of Judge Whelan’s order.

Evid. Hr’g Tr. vol. 2, 440 (Testimony of Gregory Vega).

On November 1, 2021, Hagans sent Vega and Arias the October 29, 2021,

Omanoff affidavit that was filed in the Wyoming Antitrust Litigation just three days

prior. Evid. Hr’g Ex. 309. In his email, Hagans indicated that he “[w]ant[ed] to

fight” Judge Whelan’s order and was willing to do “whatever it takes,” including

filing an appeal. Id. Hagans also indicated that Vega and Arias “may be able to

claim further information came to our attention” because they had not yet presented

any of the Omanoff Allegations to the San Diego district court. Id. (“We were

REPORT AND RECOMMENDATION Page 25 of 102 ‘light’ in SD compared to Wyoming . . . on what was submitted.”) It thus appears

that this email was the first time that Hagans, Vega, and Arias considered arguing to

the San Diego district court that new evidence had come to light as a result of the

October 29, 2021, Omanoff affidavit, despite the fact that all three of the attorneys

knew virtually all of the pertinent information contained in the affidavit as early as

May 2021 and no later than June 2021. Evid. Hr’g Tr. vol. 2, 444 (Testimony of

Gregory Vega) (admitting the October Omanoff affidavit was “substantially

similar to the two declarations . . . received from Mr. Hagans back in . . . May

2021). Within “a week or two” after Hagans sent the October affidavit, Hagans

instructed Vega and Arias to begin preparing an application for reconsideration. Id.

at 445.

Soon thereafter, Arias began working on a new ex parte application for

reconsideration. The eventual motion as filed rested on arguments based on Fed. R.

Civ. P. 60(b)(2), (3), and (6).8 See Evid. Hr’g Exs. 300, 301. Arias testified that

8 Fed. R. Civ. P. 60(b) (emphasis added) states in relevant part:

Grounds for Relief from a Final Judgment, Order, or Proceeding. On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: . . . (2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; . . . (6) any other reason that justifies relief. REPORT AND RECOMMENDATION Page 26 of 102 he “researched motion for reconsideration and [Rule 60] came up and [he] added it

to [the] brief.” Evid. Hr’g Tr. vol. 2, 558 (Testimony of Ricardo Arias). Arias,

shockingly, testified that he did no further research to support his inclusion of Rule

60(b)(2) in the draft motion. Id. He did not read a single case on the meaning of the

rule. Evid. Hr’g Tr. vol. 3, 613 (Testimony of Ricardo Arias). He did not do any

research on the meaning of “newly discovered evidence.” Evid. Hr’g Tr. vol. 2,

556, 569 (Testimony of Ricardo Arias). Nor did he research what the rule meant

by “reasonable diligence.” Id. He simply read the rule and included it in the

application. Id. And, evidently, he did not read the rule very closely. Despite the

fact that Rule 60(b)(2) plainly covers “newly discovered evidence,” Arias testified

that when he included it as a basis for reconsideration he “wasn’t thinking about

newly discovered” but instead was solely focused on the fact that the October

Omanoff affidavit was “evidence that the judge hadn’t seen.” Id. at 560.

Arias’s testimony further established that he used the shelved May 2021 draft

of the ex parte application as a starting point for the renewed November application.

A comparison of the language of the two drafts sheds light on Arias’s decisions in

the creation of the November application. The May draft states: “On May 24, 2021,

THP learned that Dennis Omanoff, a former employee of Tungsten Parts Wyoming,

Inc.[] (“TPW”) from approximately April 15, 2019, to July 15, 2019, came forward

alleging unethical conduct by Volkov related to Case No. 3:18-cv-02352-W-AHG.”

REPORT AND RECOMMENDATION Page 27 of 102 Evid. Hr’g Ex. 308 (emphasis added). The November Memorandum of Points and

Authorities that was filed with the San Diego district court states: “On October 29,

2021, after this Court issued its Order, Dennis Omanoff (“Omanoff”), a former

employee of Tungsten Parts Wyoming (“TPW”)[] from approximately April 15,

2019, to July 15, 2019, came forward alleging unethical and illegal conduct by

Volkov related to Case No. 3:18-cv-02352-W-AHG.” Evid. Hr’g Ex. 301

(emphasis added).

THP’s November application thus contained a significant misrepresentative

change to the true date on which Dennis Omanoff actually “came forward.” When

questioned about the change, Arias admitted without explanation that, when he

returned to the application for reconsideration six months after preparing an initial

draft, he copied and pasted the sentence, left in the “came forward” language, “but

changed the date from May 2021 to [October] 2021.” See id.; Evid. Hr’g Tr. vol.

3, 600–01 (Testimony of Ricardo Arias).

Once Arias completed the November draft application for reconsideration,

he sent it to Vega for approval. Like Arias, Vega did not conduct any legal research

on the meaning of Fed. R. Civ. P. 60(b)(2) beyond reading its text. Evid. Hr’g Tr.

vol. 2, 448–49, 506 (Testimony of Gregory Vega). And, again, despite the

language of the Rule, Vega testified that neither he nor Arias made “any

representations to Judge Whelan about exercising due diligence” in discovering the

REPORT AND RECOMMENDATION Page 28 of 102 Omanoff evidence earlier than they alleged. Id. at 475. When pressed about why

he did not push back on the language Arias had included to support the Rule 60(b)(2)

argument, Vega restated the reasons that Arias offered during his testimony—that

he believed the rule applied because the Omanoff evidence was new to Judge

Whelan. Id. at 451, 507. Vega eventually approved the brief and had Arias forward

it to Hagans for final review. Evid. Hr’g Ex. 316. Hagans approved the draft

without changes on the day before Thanksgiving, Wednesday, November 24, 2021,

and it was filed in the Southern District of California the same day. Id. (“I have no

changes. In[sic] know that is unusual for me.”)

E. Judge Whelan’s Decision on the Application for Reconsideration

Judge Whelan denied relief on January 6, 2022, finding that “[m]ost of the

evidence was known to [THP] since at least May or June 2021” because the same

evidence was included in TPW’s “first amended verified complaint” in the

Wyoming Antitrust Litigation pending before Judge Johnson. Evid. Hr’g Ex. 101,

at 2, 6. Judge Whelan correctly identified that only two of the six allegations THP

relied on from the October Omanoff affidavit were not already disclosed in the

Wyoming litigation months earlier. See id. at 7 (“Defendant THP arguably did

not know until October 29, 2021 that Volkov allegedly paid Pazos money from

the Relators’ share of the settlement agreement . . . or that Volkov failed to

provide Omanoff with invoices for work done in this matter.”). However, Vega,

REPORT AND RECOMMENDATION Page 29 of 102 Arias, and Hagans had access to these two pieces of evidence as well through the

signed and notarized Wyoming affidavit from May 28, 2021. Evid. Hr’g Ex. 245,

at ¶¶ 20, 24(f). This all serves to underscore the fact that, despite multiple witnesses

testifying that Omanoff provided information “in stages” between May and October

2021, all of the information that THP and its counsel relied upon in support of its

November motion for reconsideration in the California Qui Tam Litigation was

known to them at the very latest by June 2021.

Vega and Arias claim that they were put on notice of their Rule 60(b)(2) error

when Judge Whelan issued his order denying their application for reconsideration.

Specifically, Vega read the case law that Judge Whelan cited in his opinion

indicating that evidence is not “newly discovered” if it “could have been discovered

with reasonable diligence,” and also that “[e]vidence in the possession of the party

before the judgment was rendered is not newly discovered.” Evid. Hr’g Ex. 101,

at 5 (citing Nishimoto v. Cnty. of San Diego, 850 F. App’x 493, 493 (9th Cir.

2021); Feature Realty, Inc. v. City of Spokane, 331 F.3d 1082, 1093 (9th Cir.

2003)); Evid. Hr’g Tr. vol. 2, 510–11 (Testimony of Gregory Vega). These case

citations apparently awakened Vega and Arias to the fact that the argument they had

made in their application for reconsideration lacked any sound legal basis. See Evid.

Hr’g Tr. vol. 2, 467–68 (Testimony of Gregory Vega); Evid. Hr’g Tr. vol. 2, 560

(Testimony of Ricardo Arias).

REPORT AND RECOMMENDATION Page 30 of 102 To his credit, in explaining his actions to the Special Master, Vega, as the

responsible partner on the matter, accepted full responsibility for the frivolity of the

Rule 60(b)(2) argument in the November application for reconsideration and

acknowledged that the “came forward” language included therein was misleading.

Evid. Hr’g Tr. vol. 2, 452–53, 455 (Testimony of Gregory Vega). Similarly, Arias

acknowledged that he “embellished” and used the Omanoff affidavit “as a spear . . .

in all this litigation,” and that he wished he could take back the “came forward”

language. Evid. Hr’g Tr. vol. 2, 569; vol. 3, 599 (Testimony of Ricardo Arias).

Finally, Hagans, for his part, indicated that he “bought” the new evidence argument

but realized from what he learned during the Special Master evidentiary hearing that

the application for reconsideration included false and misleading statements. Evid.

Hr'g Tr. vol. 3, 785–87 (Testimony of Donald Hagans).

While commendable, Vega’s, Arias’s, and Hagans’s admissions do not

entirely square with their behavior during the litigation of the application for

reconsideration. First, Petitioners’ memorandum in opposition to THP’s application

for reconsideration set forth the appropriate legal standard for when a party can

introduce “new evidence” in a motion for reconsideration long before Judge Whelan

issued his order. See S.D. Cal. Case No. 3:18-cv-02352-W-AHG, ECF No. 35, at

11. Yet after reviewing the opposition memorandum, Vega and Arias determined

that it was not necessary to either correct the arguments they had made in their

REPORT AND RECOMMENDATION Page 31 of 102 application for reconsideration or even to file a reply memorandum. Evid. Hr’g Tr.

vol. 3, 614–16 (Testimony of Ricardo Arias). Second, after Judge Whelan issued

his order, none of the relevant parties here made any effort to correct the false and

misleading statements that were put before the court.

Instead, THP made the decision to appeal Judge Whelan’s order to the Ninth

Circuit, including on Rule 60(b)(2) “newly discovered evidence” grounds.

Attorneys Vega and Arias maintained at the evidentiary hearing that they counseled

Hagans against filing an appeal, but the evidence shows this to be a disputed factual

contention which the Special Master resolves against them below.

F. THP’s Appeal to the Ninth Circuit

1. Seltzer Caplan’s Decision Not to Handle the Appeal

On February 3, 2022, Gregory A. Vega signed a Notice of Appeal filed in the

Southern District of California challenging only Judge Whelan’s order denying

THP’s application for reconsideration. Evid. Hr’g Ex. 634. But Vega and his firm,

Seltzer Caplan McMahon Vitek, were never meant to argue THP’s appeal. Instead,

Donald Hagans hired the firm Halpern May Ybarra Gelberg LLP to handle the

appeal. However, pressed for time, Hagans asked if Vega could file the NOA and

later have Halpern May substitute in as counsel of record for the case before the

Ninth Circuit. Evid. Hr’g Tr. vol. 2, 469 (Testimony of Gregory Vega). Vega

agreed. Id.

REPORT AND RECOMMENDATION Page 32 of 102 Email communications between Marc Halpern and Ricardo Arias make clear

that Halpern May was reluctant to file the Notice of Appeal themselves because of

another THP matter they had pending before Judge Whelan. Evid. Hr’g Ex. 632.

Marc Halpern did not want Judge Whelan’s first impression of his firm to be: “aren’t

you guys the ones trying to overturn my fee ruling in the Joe Serov [a.k.a. “Sery”]

case?” Id. Appellate counsel Marina A. Torres, then with Halpern May, substituted

in as counsel of record for the THP appeal on February 11, 2022. Ninth Cir. Case

No. 22-55142, ECF No. 3. While this series of events is uncontroverted, there is

considerable dispute over the reasons behind Vega’s and Arias’s decision not to take

the appeal themselves.

Vega’s and Arias’s explanation of why they did not take the appeal differs

significantly from Hagans’s and Torres’s recollections. Vega testified that, upon

reading Judge Whelan’s order and reasoning, he had a telephone conference call

with Hagans during which he told Hagans he did not believe there was any basis to

appeal and advised him against doing so. Evid. Hr’g Tr. vol. 2, 468–69 (Testimony

of Gregory Vega); see also Evid. Hr’g Tr. vol. 2, 563 (Testimony of Ricardo

Arias) (“[Gregory Vega and I] were adamant that we shouldn’t appeal. So we

conveyed that to Mr. Hagans.”). Arias later testified that he believed a majority

of the phone call with Hagans centered on the standard of review on appeal (abuse

of discretion). Evid. Hr’g Tr. vol. 3, 580 (Testimony of Ricardo Arias). Hagans,

REPORT AND RECOMMENDATION Page 33 of 102 on the other hand, plainly insisted that Vega’s and Arias’s testimony was “not true,”

and he was “never told that the appeal was inappropriate.” Evid. Hr’g Tr. vol. 3,

813 (Testimony of Donald Hagans). Instead, Hagans said the reason that Vega and

Arias did not want to do the appeal was “very simple”: it was because they “did not

do appeals.” Id. at 814. The only thing upon which Hagans appears to agree with

Vega and Arias is that the three attorneys did discuss the “difficult standard one

would have on appeal,” but he vigorously maintained that they never discussed the

fact that the Rule 60(b)(2) argument lacked merit. Id. at 855.

For her part, Marina A. Torres testified that she pulled her call records from

Halpern May and discovered a four-minute call with Ricardo Arias on February 10,

2022. Evid. Hr’g Tr. vol. 3, 635–36, 678 (Testimony of Marina Torres). Torres

testified that she asked Arias if there was anything about the case that she needed to

know. Id. at 636. Arias responded that everything she needed to know was included

in the district court record and the reason his firm did not take the case was because

they do not handle appeals. Id. Arias confirmed that he never communicated to

Torres his firm’s conclusion that there were no meritorious grounds for an appeal.

Evid. Hr’g Tr. vol. 3, 584–85 (Testimony of Ricardo Arias).

The only evidence, beyond their own testimony, that Vega or Arias said

anything to anyone about the lack of merit in an appeal is a single email from Donald

Hagans to Vega and Arias from January 28, 2022. The email says that Hagans

REPORT AND RECOMMENDATION Page 34 of 102 “[f]ully understand[s] the odds . . . and a reluctance to appeal.” Evid. Hr’g Ex. 317.

This could be interpreted to corroborate Vega’s and Arias’s testimony. However,

Hagans explained that “the odds” referenced the standard of review on appeal, which

he agreed the three of them discussed, and that “reluctance to appeal” referenced

Vega’s and Arias’s disinterest in appellate work. Evid. Hr’g Tr. vol. 3, 854–55.

Alone, both of these interpretations seem equally plausible.

Looking at the complete body of evidence, however, it appears to the Special

Master that it far more likely that Vega and Arias never communicated any

misgivings to Hagans, Torres, or anyone else about the merits of the appeal beyond

the exacting standard of review. In addition to gauging the demeanor of each witness

while they testified, including their mannerisms, ability to recall details, hostility to

the examiner, and congruity with other evidence presented during the hearing, the

Special Master also makes that factual finding from the following considerations.

For one, Vega and Arias did not produce any contemporaneous notes, emails,

correspondence, or internal memoranda memorializing their belief that an appeal

would be meritless and contrary to controlling law. For such a strong objection

conveyed to a client, such a practice is, in the undersigned’s experience handling

similar cases, routine. Moreover, Vega’s and Arias’s contention that any appeal

would be frivolous is difficult, if not impossible, to square with their testimony that

they stand by the arguments raised in their motion for reconsideration separate and

REPORT AND RECOMMENDATION Page 35 of 102 apart from the Rule 60(b)(2) “new evidence” argument. See Evid. Hr’g Tr. vol. 2,

452 (Testimony of Gregory Vega) (“I still would have brought [the motion for

reconsideration] . . . under the . . . (b)(3) section for fraud, misconduct, and the

all relief available.”); id. at 531 (“I believed the 60(b)(3) and 60(b)(6) . . . were

good arguments.”); Evid. Hr’g Tr. vol. 2, 561 (Testimony of Ricardo Arias)

(stating that he would have still brought the motion for reconsideration under

subsections 60(b)(3) and (6)).

Additionally, there is substantial evidence to support the conclusion that Vega

and Arias did not take the appeal simply because they are not appellate attorneys.

First, Arias himself testified that he has never handled an appeal, and that he believed

it had been years since Vega last did. Evid. Hr’g Tr. vol. 3, 622 (Testimony of

Ricardo Arias). Second, in an email from Ricardo Arias to Marc Halpern on

February 3, 2022, Arias stated that “[n]either Gregory A. Vega or I are appellate

attorneys . . . [and] [w]e expect that a substitution by your firm be made

expeditiously.” Evid. Hr’g Ex. 632; see Evid. Hr’g Ex. 633 (Email from Marc

Halpern to Marina Torres from February 1, 2022) (“Seltzer Caplan handled

the district court case but say they don’t really do appeals.”). Third, Hagans’s

and Torres’s testimony confirms that Vega and Arias communicated that the reason

they were not taking the appeal was due to their lack of appellate experience.

REPORT AND RECOMMENDATION Page 36 of 102 Finally, the two attorneys continued to represent THP in the ongoing federal

criminal investigation. That investigation kept their firm heavily engaged in billable

work for several months. They may well have been reluctant to push their client too

hard on this appeal in order to maintain good continuing relations with Mr. Hagans.

Accordingly, the Special Master finds that based on the entirety of the

evidence, Vega and Arias never communicated a belief that an appeal would lack

merit to Hagans in the weeks between Judge Whelan’s order denying their motion

for reconsideration and the appeal to the Ninth Circuit. Nor did they say that to

Marina A. Torres. Evid. Hr’g Tr. vol. 3, 636–37 (Testimony of Marina Torres).

The lack of contemporaneous documentation serves as evidence suggesting that they

may never have harbored these reservations at all. Instead, the Special Master finds

that the reason they did not take the appeal was simply based on the fact that neither

Vega nor Arias had appellate experience and felt their time was better spent

continuing to represent THP in the ongoing criminal investigation.

2. THP’s Initial Appeal to the Ninth Circuit

After managing partner Marc Halpern agreed to undertake the appeal on

behalf of THP, he determined that Marina A. Torres, an experienced attorney with

Halpern May, would serve as counsel of record for the case. See Evid. Hr’g Ex.

632; Evid. Hr’g Tr. vol. 3, 634 (Testimony of Marina Torres). Torres testified

that it was her practice whenever she began working on an appeal to reach out to

REPORT AND RECOMMENDATION Page 37 of 102 trial counsel and ask if there was anything particular about the case that she should

know before starting on the opening brief. Evid. Hr’g Tr. vol. 3, 635 (Testimony

of Marina Torres). She testified that this was the purpose of her call to Ricardo

Arias on February 10, 2022. As discussed above, there is some dispute over the

content of this initial call. See Evid. Hr’g Ex. 318. However, it is undisputed that

Arias did little more than ensure that Torres had the district court record. What is

certain is that he did not inform Torres about any earlier Dennis Omanoff affidavits

or raise any red flags surrounding the “new evidence” argument.

Torres also had an introductory call with Donald Hagans to discuss the case.

During this call, Torres told Hagans that she thought THP’s chances on appeal were

low but that the issues had merit based on what she knew at the time. Evid. Hr’g

Tr. vol. 3, 637 (Testimony of Marina Torres). Hagans indicated that he wanted to

move forward with the appeal regardless, partially because he believed it would give

TPW some leverage in the ongoing Wyoming Antitrust Litigation. Id. at 695–96.

In all of Torres’s conversations and email exchanges with Donald Hagans during the

preparation of the appeal, he never told her about the existence of any prior drafts of

the Omanoff affidavits or the extent of his personal engagement with Omanoff in

May or June of 2021. See id. at 638; Evid. Hr’g Tr. vol. 3, 814–15 (Testimony of

Donald Hagans). Hagans attributes this to the fact that he “bought the Kool-Aid”

with respect to Vega’s and Arias’s theory on why the October 29, 2021, Omanoff

REPORT AND RECOMMENDATION Page 38 of 102 Allegations constituted “new evidence” under Rule 60(b)(2) and therefore did not

consider those earlier communications relevant to the appeal. Evid. Hr’g Tr. vol.

3, 815–16 (Testimony of Donald Hagans).

In the end, relying on the district court record and her conversations with

Hagans, Torres prepared an opening brief for the Ninth Circuit appeal that

effectively regurgitated the arguments Vega and Arias made in their application for

reconsideration in the San Diego district court. Thus, THP doubled down on its

claim that the Omanoff Allegations were “new evidence” warranting reconsideration

of the fee award and could not have been discovered with reasonable diligence prior

to Omanoff filing his affidavit in the Wyoming Antitrust Litigation on October 29,

2021. See Evid. Hr’g Ex. 211, 28–32.

In drafting the opening brief, Torres testified that she did not thoroughly

review the Wyoming pleadings, despite the fact that those pleadings served as a

strong basis for Judge Whelan’s denial of the underlying application for

reconsideration. Evid. Hr’g Tr. vol. 3, 714 (Testimony of Marina Torres). If she

had, she may have more seriously questioned the plausibility that Mr. Omanoff could

have “only come forward” with a twelve-page affidavit and hundreds of pages of

exhibits in the two days between Judge Whelan denying the application for

reconsideration on October 27, 2021, and the affidavit’s filing in Wyoming on

REPORT AND RECOMMENDATION Page 39 of 102 October 29, 2021.9 In Torres’s defense, even if she had thoroughly studied those

pleadings, she could not have conclusively determined that Omanoff was

cooperating with TPW/THP in May or June of 2021. Only Hagans, Vega, or Arias

could have communicated that information to her—and they never did. She never

spoke or communicated with Omanoff. Evid. Hr’g Tr. vol. 3, 658 (Testimony of

Marina Torres).

Once Torres concluded drafting the brief, replete with the same false

statements about when Omanoff “came forward” and what THP knew about his

cooperation prior to October 29, 2021, she sent it to Marc Halpern for his review.

Evid. Hr’g Tr. vol. 3, 643–44 (Testimony of Marina Torres). Halpern approved

it with minor edits, after which Torres sent the brief to Hagans for final review and

approval before filing it. Id. at 644–45. Just as he did with Arias’s draft of the

application for reconsideration, Hagans approved Torres’s draft opening brief

without any edits. Id. at 645; Evid. Hr’g Ex. 605. Torres filed that brief in the

Ninth Circuit on May 4, 2022.

On December 9, 2022, a panel consisting of U.S. Circuit Judges Marsha S.

Berzon, Ryan D. Nelson, and Bridget S. Bade heard oral argument in THP’s appeal.

During her presentation, Torres did not even address the “new evidence” argument.

9 Indeed, this is an argument Petitioners made in briefing to the San Diego district court in opposition to THP’s application for reconsideration. See S.D. Cal. Case No. 3:18-cv-02352-W-AHG, ECF No. 35, at 6 n.5. REPORT AND RECOMMENDATION Page 40 of 102 Instead, she focused on what she perceived to be the “much stronger” issue in the

case, challenging Judge Whelan’s calculation of the actual fee award. Evid. Hr’g

Tr. vol. 3, 647 (Testimony of Marina Torres). In the last minute of Torres’s

rebuttal, Judge Berzon asked whether counsel was essentially abandoning the new

evidence argument, at which point Torres chuckled and acknowledged that she

“thought it best to focus most of [her] time on the first argument.” Id. at 653. Judge

Berzon commented that she thought that was a wise decision. In the end, the panel

affirmed the district court in a memorandum disposition filed on January 12, 2023.

3. THP’s Petition for Panel Rehearing

On January 26, 2023, THP filed a petition for panel rehearing, thereby tripling

down on its argument that Omanoff’s October Affidavit constituted new evidence.

See Evid. Hr’g Ex. 105. Specifically, THP argued that it “had not previously been

aware of the . . . evidence detailed in Omanoff’s affidavit [] until two days after the

order was signed” and that the panel’s disposition “ignore[d] that Omanoff’s

testimony did not come to light until the day he came forward and day the affidavit

was signed.” Id. at 6–7.

Marina A. Torres prepared the substance of the petition for panel rehearing at

the direction of Donald Hagans. Evid. Hr’g Tr. vol. 3, 655, 734–35 (Testimony of

Marina Torres). However, she left Halpern May to join her current firm, Willkie

Farr & Gallagher, as a partner roughly a week before the petition was actually filed.

REPORT AND RECOMMENDATION Page 41 of 102 Evid. Hr’g Tr. vol. 1, 48 (Testimony of Thomas Rubinsky). Thomas Rubinsky,

an associate at Halpern May, was tasked with taking the petition across the finish

line. By the time Rubinsky inherited the petition, all of the substantive arguments

were complete. Id. at 49. Having come onto the case so late, all Rubinsky did was

make some stylistic changes, check the citations, and actually file the petition with

the Ninth Circuit. Id. He billed just 2.8 hours to the matter.10 Id. at 84.

As for Hagans, he approved the petition for rehearing as a matter of course.

Evid. Hr’g Tr. vol. 3, 819–21 (Testimony of Donald Hagans). The panel denied

the petition for rehearing on January 30, 2023, and the mandate issued in the case on

February 7, 2023. Ninth Cir. Case. No. 22-55142, ECF Nos. 41–42.

10 Based on the testimony elicited during the evidentiary hearing in this matter, the Special Master issued an order discharging the Order to Show Cause with regard to Mr. Rubinsky. Ninth Cir. Case No. 23-80039, ECF No. 83. The Special Master concludes that Rubinsky did not engage in sanctionable conduct. Although Rubinsky signed and filed a petition that included material misrepresentations and false statements without conducting an inquiry into the factual bases underlying those statements, the Special Master finds that Rubinsky, as an associate at Halpern May, had little control over the merits and was effectively “thrown in at the last minute” to cover for the departure of Ms. Torres. Moreover, as this Report and Recommendation has detailed, the incomplete and misleading information available to Halpern May attorneys when the petition for panel rehearing was filed supported the arguments included therein. For these reasons, the Special Master recommends Thomas Rubinsky “remain in good standing with the Ninth Circuit Court of Appeals and that no sanctions or other disciplinary action be imposed against him.” Id. REPORT AND RECOMMENDATION Page 42 of 102 G. GTP’s Motion for Sanctions and the Appointment of the Special

Master

On February 13, 2023, GTP filed a motion for sanctions against THP with the

Ninth Circuit panel. Ninth Cir. Case. No. 22-55142, ECF No. 43. The motion was

triggered by a new filing submitted by TPW in the Wyoming Antitrust Litigation on

January 27, 2023. D. Wyo. Case No. 2:21-cv-00099-ABJ, ECF No. 135. In the

Wyoming filing, TPW now provided a timeline detailing Omanoff’s cooperation.

Id. at ¶ 3. The timeline confirmed that Omanoff began cooperating with TPW

around May 2021, after he was served with the complaint in the Wyoming Antitrust

Litigation, and that he provided TPW with “[a]ffidavits, documents, and other

evidence.” Id. Accordingly, in its motion for sanctions, GTP argued that THP’s

repeated assertion in the California Qui Tam Litigation that the October 2021

Omanoff Affidavit contained new, previously undiscoverable evidence was false,

misleading, and sanctionable. Ninth Cir. Case. No. 22-55142, ECF No. 43.

Torres testified that Marc Halpern called her at Willkie Farr to inform her

about the motion. Evid. Hr’g Tr. vol. 3, 660 (Testimony of Marina Torres).

Halpern asked if Torres would be interested in litigating the motion for sanctions

given her work on the underlying appeal. Id. at 660–61. After consulting with the

partnership at her new firm, she accepted and made a new appearance as attorney of

record for THP. Id. at 661; Ninth Cir. Case No. 22-55142, ECF Nos. 44–45.

REPORT AND RECOMMENDATION Page 43 of 102 Torres testified that the first red flag in all of this litigation was raised in her

mind when she read GTP’s motion for sanctions. Evid. Hr’g Tr. vol. 3, 657

(Testimony of Marina Torres). This was due to the substance of GTP’s argument

and also the Wyoming pleading referenced in the motion, which indicated that

Omanoff had been cooperating since May 2021. Id. at 657, 659, 661. Torres’s first

step was to call Donald Hagans. Id. at 661–62. On February 14, 2023, she followed

up with Hagans via email. See Evid. Hr’g Ex. 623. Her email, in relevant part,

stated:

It would be helpful to get a timeline of the interactions with Omanoff. [GTP is] claiming that the “admission” in the January TPW filings shows that THP knew, as early as May 2021 and prior to Oct 2021, of the new evidence that was in Omanoff’s affidavit. So the interactions during that time will be important to understand (and possibly incorporate into the briefing).

Id. Two days later, on the same email chain, she followed up and said, “I’ve begun

drafting the brief and just want to make sure I have an accurate accounting of

THP/TPW’s interactions with Omanoff.” Id.

Hagans eventually got back to Torres on February 22, 2023. In his email,

Hagans attached thirteen filings from the Wyoming Antitrust Litigation and

indicated that the filings “provide[] the full context.” Evid. Hr’g Ex. 624. The body

of Hagans’s email included several paragraphs of information that are, admittedly,

difficult to decipher. However, Hagans was adamant that GTP’s argument on the

“key issue of whether we were actively [] working with Omanoff . . . is simply not

REPORT AND RECOMMENDATION Page 44 of 102 the case.” Id. Hagans said that while he wished that he could “do more on the initial

affidavits . . . what happened is as set out by Attorney Vega and his firm.” Id. While

Hagans did hint to the fact that Omanoff was cooperating earlier than October 2021,

he stated that “much of what was provided by Omanoff was privileged,” his

cooperation came “in stages,” and the information could not be discovered or used

while Omanoff remained adverse. Id. Torres testified that she recalled Hagans

telling her that information from Omanoff came in “dribs and drabs” during the

summer of 2021, but that there were certainly no substantive interactions with

Omanoff at that time. See Evid. Hr’g Tr. vol. 3, 686, 737 (Testimony of Marina

Torres).

During the evidentiary hearing in this matter, Hagans confirmed that he did

not disclose the May affidavits to Torres in their conversations about the motion for

sanctions. Evid. Hr’g Tr. vol. 3, 856. The reasons Hagans offered for not providing

this information were contradictory. At one point he testified that he “didn’t think

[the May 2021 Omanoff affidavits] were relevant based on the legal argument that

was being presented” in Torres’s draft of the opposition to GTP’s motion for

sanctions. Id. at 824. But later, he testified that he did not tell Torres about the

affidavits because he did not remember that they existed. Id. at 856. In any event,

Hagans acknowledged that his failure to disclose the full scope of his

communications with Omanoff in May and June of 2021 to Torres or the court,

REPORT AND RECOMMENDATION Page 45 of 102 including the existence of seven or more draft affidavits created during those

months, was “bush league.” Id. at 825.

Torres took Hagans’s February 22, 2023, email to mean that the arguments

Vega and Arias made in their application for reconsideration were accurate. Evid.

Hr’g Tr. vol. 3, 667 (Testimony of Marina Torres). Still, Torres reached out to

both Vega and Arias directly to confirm that her understanding of the timeline

surrounding Omanoff’s cooperation was correct. See Evid. Hr’g Ex. 626. Torres

attached both the motion for sanctions and the memorandum of points and

authorities that Arias prepared in support of the underlying application for

reconsideration. Id. She stated:

Global Tungsten is essentially claiming that we misled the courts by claiming that Omanoff “came forward” on October 29, 2021 (the day the affidavit was signed), even though he had been cooperating with TPW since May 2021. Our opposition is due tomorrow, and I just want to make sure that I’m accurately representing the interactions with Omanoff that occurred from May 2021 to October 2021.

Id.

Arias conferred with Vega and got back to Torres with a response that the

Special Master finds deceptive and inexplicable. He said: “I spoke with [Vega], and

he confirmed we never had any interactions with Dennis Omanoff. On November

1, 2021, we received the Omanoff declaration filed in the Wyoming litigation from

Don Hagans which we subsequently included in the Motion for Reconsideration of

the Court’s Order.” Evid. Hr’g Ex. 628.

REPORT AND RECOMMENDATION Page 46 of 102 Vega and Arias both attempted to explain this communication during the

evidentiary hearing. Vega testified that he “assumed” Torres was getting the

information about the May Omanoff communications and declarations from Hagans.

Evid. Hr’g Tr. vol. 2, 521 (Testimony of Gregory Vega). Arias similarly assumed

that Torres “already knew about the . . . May affidavits.” Evid. Hr’g Tr. vol. 3, 594

(Testimony of Ricardo Arias). Arias also testified that the reason he did not

disclose the existence of any earlier draft Omanoff affidavits was because “she never

asked.” Id. at 595. Worse still, although Arias apparently recognized that the

motion for sanctions “looked serious,” he testified that he did not think he even “read

the thing.” Id. at 594.

One fact is clear: neither Vega nor Arias communicated anything to Ms.

Torres about THP’s interactions with Omanoff in May and June of 2021. This is

despite the fact that Vega testified he was well aware of the mistakes that he and

Arias had made in presenting the new evidence argument to the district court below.

Indeed, if Vega and Arias are taken at their word, when they were communicating

with Torres in February 2023, they held a firm conviction that THP never should

have appealed Judge Whelan’s order. Yet, when Torres sought their help in

responding to the motion for sanctions that had to do with the very argument Vega

and Arias apparently now realized was made in error in the first instance because of

REPORT AND RECOMMENDATION Page 47 of 102 the May and June Omanoff affidavits and communications, they still failed to

disclose that information to her.

Based on the communications she had with Hagans, Vega, and Arias, Torres

prepared the opposition to GTP’s motion for sanctions. The representations in that

opposition quadrupled down on the new evidence argument. Torres testified that

she believed the full scope of THP’s communications with Omanoff were as

represented in the underlying application for reconsideration and that any

communications TPW had with Omanoff between May and October 2021 were

incredibly “limited” and potentially even “hostile.” Evid. Hr’g Tr. vol. 3, 688

(Testimony of Marina Torres).

Still, the language in the opposition changed somewhat to incorporate

Torres’s understanding that there were at least some communications with Omanoff

during that period of time. For example, the opposition acknowledges for the first

time that there may have been some May communications between Omanoff and

TPW but that those communications were “piecemeal, conducted through layers of

attorneys, and, critically, were not statements made under penalty of perjury.” Evid.

Hr’g Ex. 214, at 19. On the witness stand, Torres maintained that when she

submitted the opposition to sanctions, she still “had no idea of the existence of any

draft declarations or affidavits.” Evid. Hr’g Tr. vol. 3, 689 (Testimony of Marina

REPORT AND RECOMMENDATION Page 48 of 102 Once again, Hagans approved her draft of the opposition to GTP’s motion for

sanctions without any edits. Id. at 672–75; Evid. Hr’g Exs. 629, 630. Torres filed

the opposition on February 23, 2023. Evid. Hr’g Ex. 214.

The Special Master finds that although Torres should have probed further into

the scope of communications with Omanoff prior to October 2021, she acted with

reasonable diligence in preparing the opposition to GTP’s motion for sanctions.

Torres’s representations in the opposition were made in good faith based on the

information she had at the time from her client and qui tam counsel. On the other

hand, the Special Master finds that, based on the interactions detailed above, Hagans,

Vega, and Arias acted with reckless disregard for the truth in their communications

with Torres surrounding GTP’s motion for sanctions.

H. Relevant Developments in the Wyoming Antitrust Litigation

Concurrently with the Ninth Circuit appeal in the California Qui Tam

Litigation, motion practice was ongoing in the Wyoming Antitrust Litigation. Goetz

filed the verified First Amended Complaint in Wyoming on June 25, 2021. D. Wyo.

Case No. 2:21-cv-00099-ABJ, ECF No. 11. The First Amended Complaint relied

significantly on the numerous draft Omanoff affidavits from May and June 2021,

and included direct quotes from those drafts, but it did not include an attached

Omanoff affidavit. Id. at ¶¶ 23, 43(d), 43(f). Later in the Wyoming litigation, Judge

Johnson granted a motion to dismiss filed by all defendants in the case except for

REPORT AND RECOMMENDATION Page 49 of 102 Dennis Omanoff and Alonso Martinez, given the broad release and waiver language

covering all known and unknown claims in the Pennsylvania litigation settlement

agreement. D. Wyo. Case No. 2:21-cv-00099-ABJ, ECF No. 75. That ruling is

now on appeal to the Tenth Circuit Court of Appeals, Case No. 23-8018.

On September 8, 2022, Goetz filed on behalf of TPW a Motion for Leave to

File a Second Amended Complaint and asked Judge Johnson to reconsider his order

granting the various defendants’ motion to dismiss. See Evid. Hr’g Ex. 206. In her

motion, Goetz made some of the same misleading arguments that appeared in Vega’s

and Arias’s application for reconsideration in the California Qui Tam Litigation.

Namely, she declared that “Omanoff broke ranks after the filing of the Plaintiff’s

First Amended Verified Complaint and then again following the Court’s Order (ECF

75).” Id. at ¶ 10; see also Evid. Hr’g Ex. 253, at ¶ 6 (“Responding Defendants

mistakenly assumed that TPW previously had access to all information held by

Mr. Omanoff. It absolutely did not . . . . TPW had no legal right to the evidence

and could not force Mr. Omanoff to provide such evidence.”).

While Goetz appears to be alluding to the fact that Omanoff provided

additional documents and evidence after she filed the First Amended Complaint, the

statement that Omanoff “broke ranks” after it was filed is simply not true. See Evid.

Hr’g Tr. vol. 2, 372 (Testimony of Megan Overmann Goetz). Goetz filed her

First Amended Complaint on June 25, 2021, after Hagans’s meetings with Omanoff

REPORT AND RECOMMENDATION Page 50 of 102 in Florida in both May and June 2021 and, critically, after Goetz herself had received

numerous draft affidavits formatted on her own firm’s pleading paper in connection

with those meetings.

To Goetz’s credit, in a filing from January 27, 2023, she provided the

Wyoming district court with a more detailed, and indeed, more accurate timeline of

Omanoff’s cooperation with TPW in the Wyoming Antitrust Litigation. D. Wyo.

Case No. 21-cv-00099-ABJ, ECF No. 135. In that filing, Goetz informed Judge

Johnson that Omanoff offered to cooperate with TPW in May 2021 and proceeded

to provide TPW with “[a]ffidavits, documents, and other evidence in stages.” Id. at

¶ 3. Accordingly, the Special Master finds that Ms. Goetz made some misleading

statements to the district court in Wyoming, particularly in TPW’s motion seeking

reconsideration of Judge Johnson’s order granting the motion to dismiss. However,

taken in context, those misrepresentations are less serious than those lodged by THP

with the district court in the California Qui Tam Litigation. Moreover, unlike

counsel in the qui tam matter, Goetz, in subsequent Wyoming filings, provided

Judge Johnson with more substantive information detailing Omanoff’s cooperation

and communication with TPW in May and June 2021.

I. Special Master Proceedings

The Ninth Circuit panel obviously recognized that understanding the facts

behind GTP’s motion for sanctions, as well as the existence of related litigation in

REPORT AND RECOMMENDATION Page 51 of 102 multiple federal districts, would be important in considering the merits of that

motion. In an order dated March 30, 2023, the panel appointed the undersigned as

Special Master under Fed. R. App. P. 48 “to conduct any proceedings he deems

appropriate to determine the scope of any misconduct, including knowing

misrepresentations to the district court and this court, pertaining to the Omanoff

affidavit, Appellant’s application for reconsideration, and this appeal.” Ninth Cir.

Case No. 23-80039, ECF No. 1, at 4. The panel observed in the Appointment Order

that:

TPW’s statement that it was cooperating with Omanoff as early as May 2021 raises serious questions about whether the repeated representations [THP] has made in this case that Omanoff’s information constituted “newly discovered evidence that, with reasonable diligence, could not have been discovered in time,” were frivolous and/or made in bad faith.

Id. at 3 (quoting Fed R. Civ. P. 60(b)(2)). The Special Master was authorized to

prepare a written report and recommendation to the panel regarding any potential

sanctions or disciplinary measures to be imposed against THP and its counsel. Id.

at 4.

The initial status conference with the Special Master took place on May 12,

2023. Ninth Cir. Case No. 23-80039, ECF No. 2. The parties filed short pre-

conference briefs stating their respective positions. See Ninth Cir. Case No. 22-

55142, ECF Nos. 54, 55. Unsurprisingly, THP’s pre-conference briefing effectively

restated the arguments Torres made in her opposition to GTP’s motion for sanctions.

REPORT AND RECOMMENDATION Page 52 of 102 The briefing did not contain any information about Omanoff affidavits from May or

June of 2021. See Ninth Cir. Case No. 22-55142, ECF No. 54; Evid. Hr’g Tr.

vol. 3, 834 (Testimony of Donald Hagans). Appearing for THP were Ethan Brown

and Tom Rickeman of the firm Brown, Neri, Smith & Khan LLP (THP’s Special

Master counsel), Marina A. Torres, Gregory A. Vega, and Ricardo Arias. Appearing

for GTP were Jessica Sanderson and Sam Finklestein of the Volkov Law Group.

Pursuant to the first status conference, the Special Master issued an order setting a

briefing schedule and scheduling a second status conference for July 7, 2023. Ninth

Cir. Case No. 23-80039, ECF No. 4.

1. THP’s Opening Brief and Supporting Declarations

Attorneys Brown and Rickeman worked on THP’s opening brief for eventual

filing with the Special Master. In preparing the opening brief, Donald Hagans

participated in interviews that Brown and Rickeman conducted with Gregory A.

Vega, Ricardo Arias, Megan Overmann Goetz, and Dennis Omanoff. Evid. Hr’g

Tr. vol. 3, 832 (Testimony of Donald Hagans). Omanoff’s May affidavits did not

come up at any point during these various interviews or conversations. Id.

Eventually, however, Hagans asked Goetz to go through her emails and files in

connection with any Dennis Omanoff communications that may have occurred in

May or June of 2021. Id. at 834; Evid. Hr’g Tr. vol. 2, 327–28 (Testimony of

Megan Overmann Goetz). That email search uncovered one draft Omanoff

REPORT AND RECOMMENDATION Page 53 of 102 affidavit from May 2021 prepared for the Wyoming Antitrust Litigation. Evid. Hr’g

Tr. vol. 3, 833 (Testimony of Donald Hagans); see Evid. Hr’g Ex. 514. However,

none of the relevant parties came forward with the May drafts of the Omanoff

affidavits prepared for the California Qui Tam Litigation, and Hagans surprisingly

testified that he did not remember that they existed at the time Brown and Rickeman

were preparing THP’s opening brief. See Evid. Hr’g Tr. vol. 3, 836–37 (Testimony

Following the initial interviews, Brown and Rickeman filed THP’s opening

brief with the Special Master on June 12, 2023. Evid. Hr’g Ex. 217. Because Goetz

had uncovered one May Wyoming affidavit, the brief revealed that Omanoff had

prepared “an earlier, un-notarized version of an affidavit in May 2021” but asserted

“[c]ritically, the May 2021 affidavit was prepared solely in connection with the

Wyoming Suit and was not provided to THP’s counsel in the qui tam case.” Id. at

5–6. THP filed supporting declarations from Dennis Omanoff, Gregory A. Vega,

Marina A. Torres, and Megan Overmann Goetz concurrently with its opening brief.

Id. at 4.

Omanoff’s declaration indicated that he began cooperating with TPW shortly

after he was served with the complaint in the Wyoming Antitrust Litigation. Evid.

Hr’g Ex. 116, ¶ 14. He further stated that he prepared and executed one draft

affidavit, but that “[n]one of the lawyers involved in the qui tam action in California

REPORT AND RECOMMENDATION Page 54 of 102 were involved in those discussions.” Id. During the evidentiary hearing, Omanoff

testified that, at the time he prepared his initial declaration for the Special Master

proceedings, he did not have any specific recollection of preparing other affidavits

for the California Qui Tam Litigation. Evid. Hr’g Tr. Vol. 1, 221 (Testimony of

Dennis Omanoff). He was unable to recall whether he or Hagans drafted the

declaration. Id. at 220–21.

Gregory A. Vega’s declaration swore that he and Ricardo Arias had “no

involvement in drafting the [October] Dennis Omanoff Affidavit” that they used in

support of their application for reconsideration and only learned that the affidavit

existed after it was filed in the Wyoming Antitrust Litigation on October 29, 2021.

Evid. Hr’g Ex. 312, at ¶¶ 4, 6. Further, Vega declared that he and Arias “did not

make any misrepresentations to the District Court.” Id. at ¶ 9. Vega testified that

the reason he did not include any information about the May Omanoff affidavits in

his declaration to the Special Master was because the May affidavits were never

presented to the San Diego district court. Evid. Hr’g Tr. vol. 2, 479 (Testimony of

Gregory Vega). At the same time, Vega said he read the Ninth Circuit’s

Appointment Order prior to preparing his declaration, which explicitly stated that

the purpose of the Special Master’s inquiry was to determine whether the repeated

allegations that Omanoff only “came forward” in October 2021 were untrue. Id. at

478; Ninth Cir. Case No. 23-80039, ECF No. 1. Arias, for his part, testified that

REPORT AND RECOMMENDATION Page 55 of 102 he was aware that Vega was making characterizations on his behalf in Vega’s

declaration, and had the chance to review it, but did not discuss with Vega the need

to make any changes to the declaration before Vega filed it. Evid. Hr’g Tr. vol. 3,

620–21 (Testimony of Ricardo Arias).

Accordingly, the Special Master finds that, once again, Vega and Arias acted

with reckless disregard for the truth of the statements included in Vega’s declaration

before the Special Master. Vega and Arias were apprised of the nature of the Special

Master’s inquiry at the status conferences they attended but failed to disclose the full

scope of Omanoff’s cooperation in the months prior to October 2021.

Rickeman emailed Megan Overmann Goetz a draft of her own declaration on

the morning of June 12, 2023. Evid. Hr’g Tr. vol. 2, 340 (Testimony of Megan

Overmann Goetz); Evid. Hr’g Ex. 511. At this point, Goetz had already been

working with a third-party IT provider searching her firm’s databases to uncover any

communications related to Dennis Omanoff’s cooperation with TPW prior to

October 2021. Evid. Hr’g Tr. vol. 2, 335–36 (Testimony of Megan Overmann

Goetz); Evid. Hr’g Ex. 501. Goetz testified that when she was asked to provide a

declaration for the Special Master proceeding, she did not have a full understanding

of what the proceedings were about. Evid. Hr’g Tr. vol. 2, 338 (Testimony of

Megan Overmann Goetz). She did not read any of the briefing in the matter, she

did not read any of the pleadings in the underlying qui tam action, and she did not

REPORT AND RECOMMENDATION Page 56 of 102 read GTP’s motion for sanctions. Id. at 338–40. According to Goetz, she simply

understood the matter as “continued back and forth between Global Tungsten and

THP.” Id. at 338.

Goetz’s final declaration included some troubling statements. First, the

declaration makes no mention of any Dennis Omanoff affidavits from May or June

of 2021. See Evid. Hr’g Ex. 500. Second, Goetz states that she had “no substantive

involvement in the preparation of the draft affidavit and provided no substantive

input on the facts contained in the draft [she] received.” Id. (emphasis added).

However, again, Goetz did not prepare the first draft of her declaration. Evid. Hr’g

Tr. vol. 2, 340 (Testimony of Megan Overmann Goetz). Eighteen minutes after

Rickeman sent Goetz a draft declaration, she returned redline edits and comments.

See Evid. Hr’g Ex. 511. Despite her contention that she had “no substantive

involvement” in the creation of the Omanoff affidavit (when it is now known that

she was in contact with Hagans throughout the entire process and provided a draft

of several Omanoff affidavits on her firm pleading paper), Goetz does acknowledge

in a marginal comment note in the red-lined edits that she was asked to “provide the

caption, do some formatting and definitely fix / correct typos.” Id. Finally, Goetz

deleted a paragraph that claimed she did not receive any evidence from Mr. Omanoff

that could have been used in a court proceeding prior to the October 29, 2021,

affidavit. Id.

REPORT AND RECOMMENDATION Page 57 of 102 To be sure, Goetz should have made a more concerted effort to uncover the

nature of the Special Master proceedings for which she was being asked to file a

declaration under the penalty of perjury. Her signed declaration includes misleading

statements about the nature and scope of her involvement that fold into a larger

pattern of widespread attorney misconduct in this case. However, the Special Master

finds that Goetz was merely negligent in allowing this declaration to have been filed

in its final form. She did not act in bad faith or with the intention to mislead the

Special Master.

2. THP’s Request to Correct Its Opening Brief

Shortly before GTP’s answer became due, THP filed a request for leave to

correct its opening brief. THP claimed that it had “discovered that certain statements

in [its] Opening Brief [were] not accurate.” Evid. Hr’g Ex. 221. Namely, THP’s

Special Master counsel “learned for the first time that the May 2021 affidavit by

Dennis Omanoff referenced in the Opening Brief was transmitted to THP’s qui tam

counsel in late May 2021.” Id. The Special Master granted THP’s motion to file a

corrected opening brief, reset the status conference for July 21, 2023, and granted

GTP additional time to file its answering brief. Ninth Cir. Case No. 23-80039,

ECF No. 12.

The basis for THP’s request to correct its opening brief came after THP’s

Special Master counsel transmitted a copy of the original opening brief to Vega and

REPORT AND RECOMMENDATION Page 58 of 102 Arias for review on June 13, 2023. Evid. Hr’g Ex. 314. In the cover email, THP’s

Special Master counsel reported that they had uncovered the May 2021 Wyoming

affidavit but made clear in their opening brief that they believed “this early affidavit

was never provided to THP’s [qui tam] counsel.” Id. Vega wrote back to inform

THP’s Special Master counsel for the first time that they had in fact received a signed

Omanoff affidavit in May 2021. 11 Id.; Evid. Hr’g Tr. vol. 2, 491 (Testimony of

Gregory Vega). Despite multiple interviews and conversations in advance of the

opening brief being filed, this was the first time that anyone had made THP’s Special

Master counsel aware of the fact that THP’s qui tam counsel was receiving

information and affidavits from Omanoff as early as May 2021. And as a result of

the corrected brief, it was the first time in these lengthy proceedings that any court

had been made aware of that fact as well.

GTP filed a timely answering brief suggesting that the Ninth Circuit could

now “impose joint and several liability on [THP] and its counsel” based on the record

before the court and particularly in light of THP’s recent admission that it had a May

2021 draft of the Omanoff Affidavit. Ninth Cir. Case No. 23-80039, ECF No. 16,

at 2. In the alternative, GTP requested that the Special Master issue an order to show

11 Despite this apparent revelation on Vega’s part, he made no effort to correct his declaration to the Special Master in which he claimed that he had not received an Omanoff affidavit prior to November 1, 2021. When asked why not at the second status conference, he froze. Ninth Cir. Case No. 23-80039, ECF No. 32, at 21. REPORT AND RECOMMENDATION Page 59 of 102 cause why sanctions should not issue, and that he question counsel under oath

regarding their knowledge of the May 2021 affidavit. Id. GTP also requested that

the Special Master require production of “all drafts of Omanoff’s affidavit.” Id. at

27.

The Special Master subsequently issued an order requiring production of “the

May 2021 draft Dennis Omanoff Affidavit along with any related drafts and

communications between THP’s qui tam counsel and TPW’s counsel.” Ninth Cir.

Case No. 23-80039, ECF No. 18. THP’s Special Master counsel was further

ordered to submit a declaration explaining the precise details behind the transmittal

of the May 2021 affidavit from TPW’s counsel to THP’s qui tam counsel. Id.

THP’s responsive filings on July 19, 2021, were nothing short of shocking.

Ninth Cir. Case No. 23-80039, ECF No. 22. THP admitted that: (1) THP and TPW

share the same corporate counsel, Donald Hagans; (2) Hagans met with Omanoff in

May 2021 and the two drafted several affidavits; (3) Hagans and Omanoff drafted,

and Omanoff executed, a notarized affidavit dated May 27, 2021, for potential filing

in the California Qui Tam Litigation; (4) Hagans transmitted that signed affidavit,

and other drafts, to THP and TPW’s outside counsel for the California Qui Tam

Litigation and for the Wyoming Antitrust Litigation. See id. Acknowledging the

gravity of these disclosures, THP offered to stipulate to the entry of sanctions against

it. Id.

REPORT AND RECOMMENDATION Page 60 of 102 Following the status conference on July 21, 2023, the Special Master then

issued an Order to Show Cause why “sanctions should not be imposed on” THP,

Gregory A. Vega, Ricardo Arias, Megan Overmann Goetz, Marina A. Torres,

Thomas Rubinsky, and Donald Hagans for the “numerous misrepresentations

[Respondent] caused to be filed in various courts.” Ninth Cir. Case No. 23-80039,

ECF No. 31. The Special Master further ordered an evidentiary hearing to convene

on August 8, 2023, in Coeur d’Alene, Idaho. Id. The following witnesses appeared

for the three-day evidentiary hearing where they testified under oath before the

Special Master subject to cross-examination: (1) Dennis Omanoff; (2) Russell

Lewis; (3) Donald Hagans, Esq.; (4) Jerry Alexander, Esq.12; (5) Megan Overmann

Goetz, Esq.; (6) Gregory A. Vega, Esq.; (7) Ricardo Arias, Esq.; (8) Marina A.

Torres, Esq.; and (9) Thomas Rubinsky, Esq.

III. CONCLUSIONS OF LAW

A. Monetary Sanctions

Petitioners’ February 13, 2023, Motion for Sanctions precipitated these

Special Master proceedings. Ninth Cir. Case No. 22-55142, ECF No. 43. In that

motion, Petitioners asked the Ninth Circuit panel to hold THP and its attorneys

jointly and severally liable for all of Petitioners’ fees and expenses incurred in this

12 Dallas antitrust attorney Jerry Alexander served as THP’s consulting counsel in the Wyoming Antitrust Litigation though he is not counsel of record there. REPORT AND RECOMMENDATION Page 61 of 102 litigation starting on October 28, 2021, the date on which the San Diego district court

entered its fee award.13 Id. at 19–21. The Real Parties in Interest in these

proceedings were provided with notice that they too may be subject to sanctions in

their individual capacity through the Special Master’s Order to Show Cause and

were provided with ample opportunity to be heard, both through extensive briefing

and a three-and-one-half-day evidentiary hearing (including closing arguments).

The Special Master concludes that monetary sanctions are appropriate as to THP and

Real Parties in Interest Donald Hagans, Gregory A. Vega, and Ricardo Arias.

1. Sanctions Pursuant to THP’s Stipulation

THP first stipulated to the entry of a monetary sanctions award against it on

July 19, 2023, stating:

THP is amenable to paying the reasonable fees and costs incurred by Petitioners in connection with (i) THP’s application for reconsideration, filed in the District Court; (ii) the limited portion of the Ninth Circuit appeal addressing the application for reconsideration (as opposed to the appeal of the District Court’s initial ruling); and (iii) Petitioners’ motion for sanctions, including fees incurred in connection with this Special Master proceeding.

Ninth Cir. Case No. 23-80039, ECF No. 22. THP requested the opportunity to

brief the “the appropriate allocation of fees incurred in connection with the Ninth

Circuit appeal” and “address the reasonableness” of Petitioners’ fees and costs. Id.

13 Petitioners reiterated this position in their updated fee application filed with the Special Master on October 13, 2023. See Ninth Cir. Case No. 23-80039, ECF No. 91, at 1. REPORT AND RECOMMENDATION Page 62 of 102 That brief was received on October 20, 2023. See Ninth Cir. Case No. 23-80039,

ECF No. 92.

Notwithstanding THP’s stipulation, the Ninth Circuit panel has the inherent

power to “fashion an appropriate sanction for conduct which abuses the judicial

process.” Chambers v. NASCO, Inc., 501 U.S. 32, 44–45 (1991). However, given

THP’s stipulation, the Special Master does not find it necessary to specifically

invoke the court’s inherent power to justify a sanctions award against THP. When

a court relies on its inherent power to impose a monetary sanction against a party, it

must make a specific finding of either “(1) a willful violation of a court order; or (2)

bad faith.” Am. Unites for Kids v. Rosseau, 985 F.3d 1075, 1090 (9th Cir. 2021);

see also Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. 101, 107 (2017) (noting

that a court may order “a party that has acted in bad faith to reimburse legal

fees and costs incurred by the other side” pursuant to its inherent power). In

addition to a bad faith finding, a court ordering compensatory monetary relief must

“apply a ‘but-for’ causation standard,” tracing the compensation back to the

sanctionable conduct of the party or attorney. Am. Unites for Kids, 985 F.3d at

1089–90.

Here, it is likely that a monetary award against THP would be justified under

the court’s inherent power, specifically as a result of the misconduct of its de facto

general counsel Donald Hagans at nearly every step of these proceedings. That said,

REPORT AND RECOMMENDATION Page 63 of 102 THP’s stipulation combined with its candor to the Special Master starting with the

appointment of new counsel for these proceedings makes reliance on the court’s

inherent power—and the attendant bad faith finding such reliance would demand—

unnecessary. Cf. Chambers, 501 U.S. at 44 (“Because of their very potency,

inherent powers must be exercised with restraint and discretion.”).

Even with THP’s stipulation, there is considerable disagreement between the

parties over the final sums that Petitioners are entitled to recover. On September 29,

2023, the Special Master ordered Petitioners to file an updated fee application and

provided THP with an opportunity to respond. Ninth Cir. Case No. 23-80039, ECF

No. 89. The resulting submissions center on whether certain expenses should be

included in a sanctions award and, more generally, the reasonableness of GTP’s

expense calculations. The total amount that GTP seeks is $325,057.49. Ninth Cir.

Case No. 23-80039, ECF No. 91, at 11.

a) Costs and Fees from the District Court Proceedings

First, Petitioners seek reimbursement for $34,140.00 in fees stemming from

the district court proceedings. This calculation is based on the time GTP spent

responding to THP’s ex parte application for reconsideration and also on bringing a

motion to enforce the district court’s initial fee award after “THP steadfastly refused

to pay the judgment and failed to request a stay or post a bond to obtain a stay

pending appeal.” Ninth Cir. Case No. 23-80039, ECF No. 91, at 2–6. THP argues

REPORT AND RECOMMENDATION Page 64 of 102 that Petitioners are not entitled to recover any fees associated with the motion to

enforce the judgment because that dispute centered on issues wholly distinct from

the “narrow issue of whether THP or its lawyers made misrepresentations to any

court regarding Dennis Omanoff’s cooperation with THP.” Ninth Cir. Case No.

23-80039, ECF No. 92, at 3. Accordingly, THP submits that the $11,885 in fees

associated with the motion to enforce should be excluded from the ultimate sanctions

award. Id. at 4.

The Special Master agrees with THP’s summation of that issue. The Ninth

Circuit Appointment Order tasked the undersigned with investigating the scope of

any misconduct “pertaining to the Omanoff affidavit” and recommending

appropriate sanctions or disciplinary measures commensurate with his findings.

Ninth Cir. Case No. 23-80039, ECF No. 1, at 4. Petitioners’ motion to enforce the

district court attorneys’ fee judgment did not concern the newly discovered evidence

argument or the Omanoff affidavit, and the Special Master thus does not weigh in

on the propriety of THP’s actions or arguments made in opposition to that motion.

See In re Yagman, 796 F.2d 1165, 1183 (9th Cir. 1986) (“[T]he amount of the

sanctions and the manner in which they are imposed cannot be inconsistent

with the purpose and directive of the authority on which the sanctions are

based.”). Accordingly, the Special Master recommends the panel reduce the amount

REPORT AND RECOMMENDATION Page 65 of 102 Petitioners seek ($34,140.00) in connection with the district court proceedings by

$11,885.00, resulting in a recommended award of $22,255.00.

b) Costs and Fees from the Ninth Circuit Proceedings

Next, the parties disagree over whether Petitioners are entitled to recover the

full amount of their fees and expenses stemming from the Ninth Circuit appeal. THP

maintains that it should only have to compensate Petitioners for the fees and

expenses they incurred in defending the “limited portion of the Ninth Circuit appeal”

that centered on whether the information contained in the Omanoff affidavit was, in

fact, newly discovered evidence under Rule 60(b)(2).14 Ninth Cir. Case No. 23-

80039, ECF No. 22. For their part, Petitioners argue that THP’s appeal to the Ninth

Circuit was entirely frivolous, entitling them to full compensation for their expenses

and fees. Ninth Cir. Case No. 23-80039, ECF No. 91, at 6–9. Petitioners rely on

Fed. R. App. P. 38 to support this request, which authorizes a court of appeals to

“award just damages and single or double costs to the appellee” if it “determines that

an appeal is frivolous.” Ultimately, Petitioners request a reimbursement of

$32,951.01. Id. at 11.

14 THP presented two primary issues on appeal to the Ninth Circuit, one centered on the Omanoff affidavit as newly discovered evidence and the other challenging the district court’s initial calculation of the fee award based on the Volkov firm’s billing practices and time entries. See Evid. Hr’g Ex. 211. REPORT AND RECOMMENDATION Page 66 of 102 Courts of appeal have discretion under Fed. R. App. P. 38 to order a petitioner

to pay the opposing party’s costs and attorneys’ fees when the petitioner brings a

frivolous appeal. “An appeal is frivolous ‘when the result is obvious or the

appellant’s arguments are wholly without merit.’” Blixseth v. Yellowstone

Mountain Club, LLC, 796 F.3d 1004, 1007 (9th Cir. 2015) (quoting Glanzman v.

Uniroyal, Inc., 892 F.2d 58, 61 (9th Cir. 1989)). But one frivolous argument,

among others, cannot alone justify a fee award under Rule 38. See Harris v. Polskie

Linie Lotnicze, 820 F.2d 1000, 1005 (9th Cir. 1987); Guam Soc’y of Obstetricians

& Gynecologists v. Ada, 100 F.3d 691, 704 (9th Cir. 1996).

THP’s appeal to the Ninth Circuit was not wholly without merit, and the scope

of the Special Master proceedings has been confined to the newly discovered

evidence argument which made up approximately one half of THP’s appeal. The

panel’s Appointment Order that vested the undersigned with the authority to conduct

these proceedings specifically concerned the “serious questions about whether the

repeated representations [THP] has made in this case that Omanoff’s information

constituted ‘newly discovered evidence that, with reasonable diligence, could not

have been discovered in time,’ were frivolous and/or made in bad faith.” Ninth Cir.

Case No. 23-80039, ECF No. 1, at 3. While an abuse of discretion standard of

review governed THP’s appeal of the district court’s initial fee award (as

differentiated from THP’s appeal of the district court’s order on the application for

REPORT AND RECOMMENDATION Page 67 of 102 reconsideration), that alone does not render the argument frivolous or wholly without

merit.

Given the limited scope of the Special Master proceedings and the lack of

substantive evidence that demonstrates THP’s appeal was wholly frivolous, an

award under Fed. R. App. P. 38 for the full amount of costs and fees GTP incurred

in connection with the Ninth Circuit appeal would be inappropriate on these facts.

Accordingly, the Special Master recommends that the panel reduce the amount

Petitioners seek ($32,951.01) for their work on the Ninth Circuit appeal by 50%,

resulting in a recommended award of $16,475.50.15

c) Costs and Fees Resulting from Petitioners’ Motion for

Sanctions and the Special Master Proceedings

Petitioners next seek reimbursement for $245,585.00 in attorneys’ fees (and

an additional $12,381.48 in costs) stemming from their work on both the Motion for

Sanctions filed before the Ninth Circuit panel and the resulting Special Master

15 In response to the Special Master’s order for GTP to provide an updated fee application, the parties submitted a joint stipulation agreeing that “50-percent is a fair and reasonable allocation of Petitioners’ costs and fees incurred during the Ninth Circuit appeal to account for their work addressing THP’s so-called ‘new evidence’ argument.” Ninth Cir. Case No. 23-80039, ECF No. 90, at 2. THP does not seek any further reduction of Petitioners fees and expenses from the Ninth Circuit appeal on reasonableness grounds and agrees to pay “$16,475.50 . . . for the 50% portion of the appeal focused on the application for reconsideration.” Ninth Cir. Case No. 23-80039, ECF No. 92, at 17. REPORT AND RECOMMENDATION Page 68 of 102 proceedings.16 Ninth Cir. Case No. 23-80039, ECF No. 91, at 11. THP first

challenges Petitioners’ inclusion of 74.9 attorney hours, or $25,477.00, billed to

work on their August 23, 2023, motion to unseal all documents that THP filed under

seal. The Special Master denied Petitioners’ motion on August 29, 2023, principally

noting that Petitioners brought it after the taking of evidence in the Special Master

proceeding had closed and finding unconvincing Petitioners’ untimely arguments

for why a wholesale document production or detailed privilege log was necessary.

Ninth Cir. Case No. 23-80039, ECF No. 85.

To be sure, the fees Petitioners have incurred throughout these Special Master

proceedings are substantial. And, unfortunately, they could have all been avoided

had it not been for THP’s repeated misrepresentations at every step of the litigation.

But THP’s misconduct did not give Petitioners carte blanche to run up their own

fees, especially once they were under the impression that all of their work would be

paid for following THP’s July 19, 2023, stipulation. Courts have the “necessary

discretion to adjust [attorneys’ fees] awarded to address excessive and unnecessary

effort expended in a manner not justified by the case.” Ballen v. City of Redmond,

466 F.3d 736, 746 (9th Cir. 2006). Here, for the reasons outlined in the Special

16 Petitioners note in their updated fee application that their request for $245,585.00 includes all fees incurred up to and including September 30, 2023. Ninth Cir. Case No. 23-80039, ECF No. 91, at 9–10. They have further indicated that they are continuing to record fees incurred after that date and will “submit those to the Ninth Circuit at the appropriate time.” Id. at 10. REPORT AND RECOMMENDATION Page 69 of 102 Master’s order denying Petitioners’ motion to unseal, Ninth Cir. Case No. 23-

80039, ECF No. 85, the Special Master concludes that those expenses were

unnecessarily incurred. The Special Master therefore recommends the panel reduce

the amount Petitioners seek ($245,585.00) in connection with their motion for

sanctions and the Special Master proceedings by $25,477.00, for a recommended

award of $220,108.00 plus an additional $12,381.48 in expenses, subtotaling

$232,489.48.

Taking into account the above reductions, the Special Master is left with the

following amounts in connection with Petitioners’ updated fee application: (1)

$22,255.00 for Petitioners’ work opposing THP’s ex parte application in the district

court; (2) $16,475.50 for Petitioners’ work on the limited portion of the Ninth Circuit

appeal focused on the newly discovered evidence argument; (3) $220,108.00 for

Petitioners’ work on their motion for sanctions and the resulting Special Master

proceedings; and (4) $12,381.48 in expenses from the Special Master proceedings.

This results in a recommendation to the Ninth Circuit panel that it grant an award of

$271,219.98, prior to any further reductions discussed below.

d) Reasonableness of the Various Calculations

THP requests further reductions on the amounts listed as (1) and (3) above.

Specifically, THP argues that the attorneys’ fees Petitioners claimed to have incurred

in connection with their work on the ex parte application for reconsideration and,

REPORT AND RECOMMENDATION Page 70 of 102 later, on the motion for sanctions and Special Master proceedings are both inflated

and impossible to parse because of what it calls Petitioners’ “block billing” practices.

Accordingly, they seek a 40% reduction on those amounts. Ninth Cir. Case No.

23-80039, ECF No. 92, at 16.

In calculating fee awards, judges are instructed to scrutinize the

“reasonableness of (a) the number of hours expended and (b) the hourly fee

claimed.” Long v. I.R.S., 932 F.2d 1309, 1314 (9th Cir. 1991). THP challenges

the hours expended but not the hourly rates of the Volkov firm’s attorneys. Having

considered the parties’ submissions in response to the Special Master’s order for

Petitioners to submit an updated fee application, the Special Master concludes that

the total number of hours Petitioner expended on its work in the district court and,

later, before the Special Master are somewhat inflated and justify a modest

adjustment. Cf. Yagman, 796 at 1184–85 (observing that sanctions awards based

on attorneys’ fees need not “rigidly apply the factors” that apply to loadstar fee

calculations, provided that the court makes an “evaluation of the fee

breakdown submitted by counsel” to assess the reasonableness of that

breakdown).

THP has submitted comparisons between the attorney hours it spent on

various stages of this litigation and the attorney hours Petitioners claim to have spent

on the same. For example, THP notes that it spent approximately 17% less time on

REPORT AND RECOMMENDATION Page 71 of 102 the Special Master proceedings than Petitioners. See Ninth Cir. Case No. 23-

80039, ECF No. 92, at 14. Moreover, THP notes that Petitioners seek

reimbursement for significant amounts of attorney time in connection with both their

opening brief and preparation for closing argument, which had fifteen-page and

twenty-minute argument caps, respectively. Id. With respect to Petitioners August

23, 2023, motion to unseal, THP trenchantly notes that Volkov attorneys billed 74.9

hours to that “uncomplicated 16-page motion” compared to their own attorneys

billing a mere 16.7 hours in their successful opposition to the same.17 Id. at 11.

Finally, the Special Master recognizes that any incentive Petitioners may have had

to mitigate their fees in connection with the Special Master proceedings was

significantly lessened following THP’s stipulation on July 19, 2023.

Based on these, and other considerations, the Special Master recommends that

the panel reduce Petitioners’ fees for their work on the ex parte application, motion

for sanctions, and Special Master proceedings by 10%, a “haircut.” See Moreno v.

City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008) (“[C]ourt[s] can impose

a small reduction, no greater than 10 percent—a ‘haircut’—based on [their]

exercise of discretion and without a more specific explanation.”). This figure

17 Although the Special Master has already recommended, supra, excluding the time billed to this motion from the amount Petitioners seek in connection with their motion for sanctions and the Special Master proceedings, it nonetheless serves as a useful example of excessive billing practices present in this case. REPORT AND RECOMMENDATION Page 72 of 102 accounts for the concerns raised in THP’s response to Petitioners’ fee application

without unduly prejudicing Petitioners in their pursuit for reimbursement of fees that

they never would have incurred in the first place but for THP’s misconduct.

In summary, the Special Master recommends the panel impose a grand total

sanction award of $246,983.68 against THP, comprised of the following individual

amounts: (1) $20,029.50 for Petitioners’ work opposing THP’s ex parte application

in the district court (incorporating a 10% reduction); (2) $16,475.50 for Petitioners’

work on the limited portion of the Ninth Circuit appeal focused on the newly

discovered evidence argument; (3) $198,097.20 for Petitioners’ work on their

motion for sanctions and the resulting Special Master proceedings (incorporating a

10% reduction); and (4) $12,381.48 in expenses from the Special Master

proceedings.

This total recommended monetary award is set forth in table form here for the

convenience of the panel.

Separate Bases of Recovery Amount

Fees associated with THP’s ex parte $20,029.50

application for reconsideration

50% of the fees from the Ninth Circuit $16,475.50

appeal

REPORT AND RECOMMENDATION Page 73 of 102 Fees from Petitioners’ motion for $198,097.20

sanctions and the Special Master

proceedings

Expenses from the Special Master $12,381.48

Total: $246,983.68

2. Individual Attorney Sanctions for the Unreasonable and

Vexatious Multiplication of Proceedings

28 U.S.C § 1927 18 vests United States courts with the power to hold attorneys

personally liable for fees and costs incurred by the other side as a result of their

misconduct. The statute authorizes the imposition of sanctions against “any lawyer

who wrongfully proliferates litigation proceedings once a case has commenced.”

Pac. Harbor Cap., Inc. v. Carnival Air Lines, Inc., 210 F.3d 1112, 1117 (9th Cir.

2000). Courts wishing to impose sanctions under § 1927 must make a finding that

18 28 U.S.C. § 1927 provides: 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. REPORT AND RECOMMENDATION Page 74 of 102 the attorney to be sanctioned acted with “subjective bad faith.” New Alaska Dev.

Corp. v. Guetschow, 869 F.2d 1298, 1306 (9th Cir. 1989).

Section 1927 is the chief statutory tool by which a court can hold individual

attorneys liable for misconduct. It does not apply to law firms, clients, corporations,

or other entities. See Kaass Law v. Wells Fargo Bank, N.A., 799 F.3d 1290, 1293

(9th Cir. 2015). However, § 1927’s language is also broad in that it can reach “any

attorney or other person admitted to conduct cases in any court of the United States”

provided they personally “multiply the proceedings in any case unreasonably and

vexatiously.” (emphasis added). The plain language of the statute thus supports

the conclusion that the attorneys of record for a specific client do not represent the

entire universe of individuals who may be sanctioned pursuant to § 1927. This

nuance is important in these proceedings given the number of different attorneys

who formally represented or otherwise counseled THP through the various stages of

this litigation and those attorneys’ various bar admissions.

To find that the Ninth Circuit panel in this case could only sanction the

attorneys who are licensed to practice before the Ninth Circuit and who did in fact

represent THP before the court would be irreconcilable with the logic of § 1927.

The statute targets conduct that “multiplies the proceedings in any case,” which

fairly encompasses conduct that results in a petition for review with a court of

appeals or, indeed, the appointment of a Special Master to conduct additional fact-

REPORT AND RECOMMENDATION Page 75 of 102 finding. 28 U.S.C. § 1927. When an attorney raises a frivolous argument with the

district court, and that issue is later appealed and re-argued to the Ninth Circuit by a

different attorney, the original attorney can still be sanctioned under § 1927 for their

role in multiplying the proceedings. See, e.g., Boyer v. BNSF Ry. Co., 832 F.3d

699, 701 (7th Cir. 2016) (noting that a § 1927 sanction is likely still appropriate

when it relates to conduct that happened to occur before a different court

because those earlier proceedings were procedurally connected to the “instant

litigation” before the sanctioning court); Raymark Indus. v. Baron, 1997 WL

359333, at *7 n.10 (E.D. Pa. June 23, 1997) (“The purpose of § 1927 is frustrated

by the imposition of sanctions in two distinct cases, not in two different courts.”

(emphasis added)). Likewise, a party’s attorney who reviews and approves

motions, applications, and briefs filed in a case is responsible for the resulting

multiplication of proceedings even when he does not sign his name to those filings

or personally argue them before the court.

Accordingly, the Special Master concludes that all of the attorneys involved

in the instant litigation may be eligible for imposition of sanctions under § 1927.

The remaining Real Parties in Interest who meet this criterion are Donald Hagans,

Gregory A. Vega, Ricardo Arias, and Marina A. Torres.19 Megan Overmann Goetz

19 Each of these individuals is an “attorney. . . admitted to conduct cases in any court of the United States.” 28 U.S.C. § 1927. Donald Hagans testified that he is admitted

REPORT AND RECOMMENDATION Page 76 of 102 does not meet this criterion. She has focused exclusively on the Wyoming Antitrust

Litigation and was not involved in the litigation before the San Diego district court

or the Ninth Circuit. The full scope of her involvement in these proceedings relates

to her filing one declaration before the Special Master, discussed supra, and

participating in the in-person evidentiary hearing. For the reasons set forth below,

the Special Master concludes that § 1927 sanctions are appropriate only as to

attorneys Hagans, Vega, and Arias.

But for Vega and Arias’s motion for reconsideration, which spawned the

utterly meritless newly discovered evidence argument that was made in at least five

different stages of this litigation, we would not be here today. “While, ‘[o]ur cases

have been less than a model of clarity regarding whether a finding of mere

recklessness alone may suffice to impose sanction[s] for attorneys’ fees’ under

§ 1927,” it is plainly clear that “a finding that the attorneys recklessly raised a

frivolous argument which resulted in the multiplication of the proceedings” justifies

§ 1927 sanctions. In re Girardi, 611 F.3d 1027, 1061 (9th Cir. 2010) (alteration

in the State of Texas and U.S. District Court for the Western District of Texas. Evid. Hr’g Tr. vol. 3, 758 (Testimony of Donald Hagans). Gregory A. Vega testified that he is admitted to practice in the State of California, the Ninth Circuit, and various other state and federal courts. Evid. Hr’g Tr. vol. 2, 411–12 (Testimony of Gregory Vega). Ricardo Arias testified that he is admitted to practice in the State of California and in three of the U.S. District Courts in California. Evid. Hr’g Tr. vol. 2, 540 (Testimony of Ricardo Arias). Finally, Marina A. Torres testified that she is admitted to practice in the State of California, the Ninth Circuit, and several other federal courts. Evid. Hr’g Tr. vol. 3, 630 (Testimony of Marina Torres). REPORT AND RECOMMENDATION Page 77 of 102 and emphasis in original) (quoting B.K.B. v. Maui Police Dep’t, 246 F.3d 1091,

1107 (9th Cir. 2002)); see also In re Keegan Mgmt. Co., Secs. Litig., 78 F.3d 431,

436 (9th Cir. 1996) (“Bad faith is present when an attorney knowingly or

recklessly raises a frivolous argument.” (internal citations and quotation marks

omitted)). Gregory A. Vega and Ricardo Arias easily satisfy this recklessness bad

faith standard with respect to the frivolous Fed. R. Civ. P. 60(b)(2) argument that

they submitted to the San Diego district court as part of their application for

reconsideration.

We have characterized frivolous arguments for the purposes of § 1927

sanctions as ones that are “baseless and made without reasonable and competent

inquiry” or made up of “legal or factual contentions so weak as to constitute

objective evidence of improper purpose.” Girardi, 611 F.3d at 1062 (internal

citations and quotation marks omitted). That is to say that when an argument is

patently lacking in any basis in either law or fact, it can be fairly characterized as

“frivolous” for the purpose of a § 1927 sanction award.

The argument that Ricardo Arias first concocted based on a cursory reading

of Fed. R. Civ. P. 60(b)(2) is a poster child for the definition of a frivolous argument.

Arias knew that Omanoff began cooperating with TPW in May 2021. He received

multiple draft Omanoff affidavits in May, some as long as twelve pages in length,

and his supervising partner Gregory A. Vega testified during the Special Master

REPORT AND RECOMMENDATION Page 78 of 102 proceedings that the May and June Omanoff affidavits were “substantially similar”

to the one they received from Hagans in October. Evid. Hr’g Tr. vol. 2, 444

(Testimony of Gregory Vega).

Had Arias read just one or two cases interpreting the meaning of “newly

discovered evidence” or “reasonable diligence,” he would have known that his Fed.

R. Civ. P. 60(b)(2) argument was frivolous. But he did not conduct any further

research into the meaning of the rule. He merely searched “motion for

reconsideration,” stumbled upon Rule 60(b)(2), and added it as a primary argument

in his draft application for reconsideration. See Evid. Hr’g Tr. vol. 2, 556–60, 569,

613 (Testimony of Ricardo Arias). Compounding Arias’s culpability is the fact

that he copied and pasted the language from the shelved May 2021 draft application

for reconsideration into the November application that was eventually filed with the

San Diego district court and conveniently changed the date on which Omanoff

“came forward” from May 24, 2021, to October 29, 2021. Evid. Hr’g Tr. vol. 3,

600–01 (Testimony of Ricardo Arias). Arias’s failure to conduct any inquiry into

the applicability of Fed. R. Civ. P. 60(b)(2), combined with his unilateral decision

to recycle old information and make it new, constitutes ample evidence of both

recklessness and frivolousness as a matter of law.

Like Arias, Vega was fully aware of the scope of Omanoff’s cooperation with

Hagans and TPW starting in May 2021. When Arias sent him the draft ex parte

REPORT AND RECOMMENDATION Page 79 of 102 application for reconsideration, riddled with misstatements of law and fact, he did

nothing to correct the errors. He testified on the stand that he simply accepted the

argument that Arias set forth in the application, that Fed. R. Civ. P. 60(b)(2) applied

because the Omanoff information would be “new to Judge Whelan.” Evid. Hr’g

Tr. vol. 2, 451, 507 (Testimony of Gregory Vega). As the supervising partner on

the THP matter, Vega cannot escape liability or accountability on account of Arias’s

exceptionally poor performance in researching and preparing the application for

reconsideration. To Vega’s credit, he does not attempt to do so. Indeed, he testified

before the Special Master that he accepted full responsibility for the

misrepresentations made in the application for reconsideration. Id. at 452–53, 455.

The Special Master accepts and appreciates the concession.

In the end, Vega signed his name to the ex parte application for relief, and

eventually, to the Notice of Appeal to the Ninth Circuit. His failure to check Arias’s

work and independently verify the facts and law included in the application for

reconsideration rise to the level of recklessness. Even without further research into

Fed. R. Civ. P. 60(b)(2), Vega, as the responsible partner, should have seen and

corrected the clear misstatement in the application for reconsideration that “[o]n

October 29, 2021, after this Court issued its Order, Dennis Omanoff . . . came

forward alleging unethical and illegal conduct by Volkov.” Evid. Hr’g Ex. 301

REPORT AND RECOMMENDATION Page 80 of 102 (emphasis added). Vega’s recklessness in filing frivolous arguments before the San

Diego district court led to the multiplication of these proceedings.

Arias’s and Vega’s conduct in preparing and filing the ex parte application

for reconsideration with the San Diego district court was, at a minimum, reckless

and, as discussed, their newly discovered evidence argument was wholly frivolous.

Moreover, the Special Master has recounted above that Vega and Arias failed to

correct any of the misstatements of law or fact that they caused to be filed with the

San Diego district court and the Special Master. These repeated failures were a

substantial and motivating factor in the resulting appeal, petition for panel rehearing,

motion for sanctions, and Special Master proceedings. These failures constitute bad

faith and justify the imposition of a substantial sanction award under § 1927.

Despite Vega’s and Arias’s role in spawning the newly discovered evidence

argument, outside general counsel Donald Hagans lies at the center of the “complex

web of misrepresentations made to various courts.” Ninth Cir. Case No. 23-80039,

ECF No. 31. He bears significant responsibility for allowing the frivolous argument

to be made in the first instance and then repeated to multiple federal judges

throughout these proceedings. He too should be sanctioned under § 1927.

First, Hagans’s conduct is sanctionable under § 1927 because he rubber-

stamped the newly discovered evidence argument in the first place. See Evid. Hr’g

Ex. 316. Second, where Judge Whelan correctly surmised that THP knew most, if

REPORT AND RECOMMENDATION Page 81 of 102 not all, of the Omanoff information well before October 29, 2021, based on filings

in the Wyoming Antitrust Litigation, Hagans knew THP had all of the Omanoff

information for a fact based on his personal role in soliciting and documenting that

information beginning in May 2021. Despite this knowledge, Hagans pressed

forward with an appeal to the Ninth Circuit, including the newly discovered evidence

argument, and failed to inform Marina A. Torres of the full scope of his interactions

with Omanoff, even when she was tasked with responding to Petitioners’ motion for

sanctions.

Even if Hagans’s testimony is true that he only became aware of the fact that

the Rule 60(b)(2) argument was false and misleading during the course of the Special

Master proceedings, see Evid. Hr'g Tr. vol. 3, 785–87 (Testimony of Donald

Hagans), it does not diminish his culpability. Nor do Hagans’s repeated assertions

that he “bought the Kool-Aid” with respect to the Rule 60(b)(2) argument, see id. at

816, or that his actions were somehow justified because THP and GTP were engaged

in a “war” with one another, see Evid. Hr’g Tr. vol. 4, 987 (Testimony of Donald

Hagans). As Hagans himself acknowledged, as an attorney for THP, it was his

responsibility to ensure the veracity of the arguments he was approving on the

company’s behalf. Evid. Hr’g Tr. vol. 3, 787 (Testimony of Donald Hagans). He

recklessly failed to fulfill that professional obligation time and again. Each time he

did so led to new appeals, new motions, new evidentiary submissions resulting in

REPORT AND RECOMMENDATION Page 82 of 102 the need for an extended evidentiary hearing, which multiplied the proceedings and

caused Petitioners to incur still more fees in their attempt to defend against frivolous

arguments. His actions in this litigation warrant a substantial sanction award under

28 U.S.C. § 1927.

Finally, the Special Master has concluded that although Marina A. Torres

personally submitted frivolous arguments to the Ninth Circuit and Special Master,

she did not act with the requisite bad faith—i.e., recklessness—necessary to justify

monetary sanctions under § 1927.

Unlike Vega, Arias, and Hagans, Torres had no personal knowledge of the

communications between Hagans and Omanoff in May and June of 2021. At no

point while she was preparing the opening brief for the Ninth Circuit appeal did

Hagans or anyone else alert her to the fact that THP had access to the information

contained in the October Omanoff affidavit any earlier than was represented to the

district court. Finally, Torres stands alone in exercising reasonable diligence and

competence in attempting to ensure the veracity of the claims she was making in her

opposition to GTP’s motion for sanctions. See Evid. Hr’g Exs. 623, 624, 626, 627,

628. Despite these efforts, Hagans, Vega, and Arias, all confirmed that everything

represented in the ex parte application for reconsideration was correct, particularly

concerning the timing of when they received the Omanoff information. Id.

REPORT AND RECOMMENDATION Page 83 of 102 Petitioners argue that Torres still acted in bad faith because she had access to

the district court order denying THP’s application for reconsideration, the public

docket in the Wyoming Antitrust Litigation, and the substantive arguments in their

own briefs. True enough. While this information likely should have caused Torres

to probe deeper into the factual basis for the newly discovered evidence argument,

particularly in the early days of the appeal, the Special Master concludes that she did

not act recklessly in raising the argument on appeal.

At worst, Torres acted negligently. In Blixseth, the court addressed the

conduct of several attorneys who were “involved to varying degrees” in pressing

their client’s frivolous appeal. Blixseth v. Yellowstone Mountain Club, LLC, 796

F.3d at 1008. In response to an order to show cause, the attorneys argued there was

some support for their theory on appeal, that they acted in good faith, and that they

each had limited roles in the appeal. Id. The court specifically noted that each of

the attorneys still “allowed their names to be placed on briefs that presented frivolous

and inflammatory arguments,” but that their conduct did not rise to the level of bad

faith, which led the court to not impose Fed. R. App. P. 38 sanctions on any of the

individuals. Id. Like the attorneys in Blixseth, Torres allowed her name to be placed

on briefs that presented frivolous arguments on appeal. But also like those attorneys,

she acted in good faith, relying on the available information that she had both from

her client and THP’s qui tam counsel. She thus did not act in bad faith, and the

REPORT AND RECOMMENDATION Page 84 of 102 Special Master concludes, at least with respect to monetary sanctions, that the

observations in this Report and Recommendation “will serve as a sufficient warning

to [her] to act more responsibly in the future.” Id.

In summary, the Special Master concludes that Real Parties in Interest Donald

Hagans, Gregory A. Vega, and Ricardo Arias acted with subjective bad faith by

recklessly raising frivolous arguments before various federal courts, leading to the

unreasonable and vexatious multiplication of these proceedings thereby justifying

individual monetary sanctions under 28 U.S.C. § 1927.20 Specifically, the Special

Master recommends holding Donald Hagans jointly and severally liable with THP

for 50% of the ultimate sanction award the panel decides upon, Gregory A. Vega

jointly and severally liable with THP for 20% of the ultimate sanction award the

panel decides upon, and Ricardo Arias jointly and severally liable with THP for 10%

of the ultimate sanction award the panel decides upon. If the panel adopts the Special

Master’s recommendations above with respect to THP’s liability pursuant to its

20 The Special Master also concludes that Hagans, Vega, and Arias were all afforded ample procedural due process protections, including reasonable notice and an opportunity to be heard. See Pac. Harbor Cap., Inc. v. Carnival Air Lines, Inc., 210 F.3d at 1118. An evidentiary hearing plainly satisfies the due process requirements for § 1927 sanctions, as does the opportunity to “brief the issue fully.” Id. All three attorneys were ordered to show cause why they should not face individual sanctions, had the opportunity to respond in writing to that show-cause order, and participated in a three-and-one-half-day evidentiary hearing before the Special Master in Coeur d’Alene, Idaho. REPORT AND RECOMMENDATION Page 85 of 102 stipulation, this would result in total individual liability not to exceed $123,491.84

for Hagans, $49,396.74 for Vega, and $24,698.37 for Arias.

B. Individual Attorney Discipline

Petitioners did not request that the Ninth Circuit panel impose disciplinary

sanctions on any of THP’s individual attorneys as part of their motion for sanctions.

However, the panel specifically contemplated that individual discipline may be

appropriate based on the information available to it at the time of its March 30, 2023,

appointment order authorizing the undersigned to conduct these proceedings. See

Ninth Cir. Case No. 23-80039, ECF No. 1, at 3–4 (quoting 9th Cir. G.O. 12.9(a);

then citing Fed. R. App. P. 46(b); and 9th Cir. R. 46-2) (“[W]e may sanction

‘counsel or a party for conduct that violates the Federal Rules of Appellate

Procedure, the Circuit Rules, orders or other instructions of the Court, the

rules of professional conduct or responsibility in effect where counsel maintains

his or her principal office or as authorized by statute.’”).

When the Special Master finally became aware of the full scope of Omanoff’s

cooperation as a result of THP’s July 19, 2023, filings, the Special Master gave

adequate notice to the Real Parties in Interest that he was considering recommending

individual discipline to the Ninth Circuit panel. See Ninth Cir. Case No. 23-80039,

ECF 31, at 3 (“[Q]uestions remain as to whether the materially misleading

arguments and representations were made knowingly, recklessly, or

REPORT AND RECOMMENDATION Page 86 of 102 unwittingly. The Special Master therefore hereby ORDERS Respondent

[THP] and counsel acting on its behalf TO SHOW CAUSE, if any they have,

why sanctions should not be imposed.”).

Again, the remaining five individual attorneys who are Real Parties in Interest

to this matter are admitted to a wide assortment of state and federal bars. Only two—

Gregory A. Vega and Marina A. Torres—are admitted to practice before the Ninth

Circuit. These diverse bar admissions have a significant impact on the panel’s

options for individual attorney discipline in this case.

1. Gregory A. Vega and Marina A. Torres

As the two attorneys licensed to practice in the Ninth Circuit, the panel has

power to discipline both Vega and Torres under the Federal Rules of Appellate

Procedure. Fed. R. App. P. 46(b) & (c), provides that a member of the Ninth Circuit

bar may be subject to suspension, disbarment, or other discipline for “conduct

unbecoming a member of the court’s bar.” The Supreme Court has noted that the

“conduct unbecoming” standard “reflects the burdens inherent in the attorney’s dual

obligations to clients and to the system of justice.” In re Snyder, 472 U.S. 634, 644

(1985). Conduct unbecoming is defined as “conduct contrary to professional

standards that shows an unfitness to discharge continuing obligations to clients or

the courts, or conduct inimical to the administration of justice.” Id. at 645. The

Ninth Circuit has found that a “lack of diligence that impairs the deliberations of the

REPORT AND RECOMMENDATION Page 87 of 102 court is sufficient” to impose discipline under Fed. R. App. P. 46. Girardi, 611 F.3d

at 1035 (citing Gadda v. Ashcroft, 377 F.3d 934, 947 (9th Cir. 2004)); see also

DCD Programs Ltd. v. Leighton, 846 F.2d 526, 528 (9th Cir. 1988); In re Hanson,

572 F.2d 192, 193 (9th Cir. 1977).

Consistent with Supreme Court direction, the Ninth Circuit has found that

attorneys demonstrate “conduct unbecoming of the court’s bar” when they violate

applicable rules of professional conduct, including both the ABA model rules and

the rules of professional conduct “adopted by the licensing authority of an attorney's

home state.” Snyder, 472 U.S. at 645 n.6; see Girardi, 611 F.3d at 1035. Further,

it is appropriate for a circuit court imposing discipline under Fed. R. App. P. 46 to

consider the ABA’s Standards for Imposing Lawyer Sanctions. See Girardi, 611

F.3d at 1035–36; United States v. Swanson, 943 F.2d 1070, 1076 (9th Cir. 1991);

ABA Joint Comm. on Prof’l Standards, Standards for Imposing Lawyer

Sanctions (1984, rev. 1992) (“ABA Standards”).

Both Vega and Torres are licensed to practice in their home state of California

and are thus bound by the California Rules of Professional Conduct. The California

Rules prohibit attorneys from “knowingly mak[ing] a false statement of fact or law

to a tribunal or fail[ing] to correct a false statement of material fact or law previously

made to the tribunal.” Cal. R. Prof. Conduct 3.3(a)(1); see also Model R. Prof.

Conduct 3.1 (“A lawyer shall not bring or defend a proceeding, or assert or

REPORT AND RECOMMENDATION Page 88 of 102 controvert an issue therein, unless there is a basis in law and fact for doing so

that is not frivolous, which includes a good faith argument for an extension,

modification or reversal of existing law.”).

As outlined in the above section related to § 1927 sanctions, Vega’s conduct

in approving Arias’s draft of the ex parte application for reconsideration

demonstrated recklessness that resulted in materially false statements of law and fact

to be filed with the San Diego district court. Regardless of whether Vega acted with

actual knowledge of the falsity of his claims, it is abundantly clear that he

demonstrated an extreme lack of diligence in reviewing and approving Arias’s draft

application for reconsideration. As the supervising partner on the matter, Vega had

an affirmative professional obligation to ensure that the claims being made in the

application for reconsideration were not frivolous, especially considering that Arias

was only a third-year associate in 2021.

Vega’s misconduct extends beyond his role in filing the application for

reconsideration. First, the Special Master has concluded that he did nothing of

substance to alert Hagans to the fact that the newly discovered evidence argument

had no merit following Judge Whelan’s order denying the application for

reconsideration. Indeed, Vega signed his name to the Notice of Appeal to the Ninth

Circuit, where that frivolous argument was made for a second time to the panel

assigned to the case. See Evid. Hr’g Ex. 634. Second, when Marina A. Torres

REPORT AND RECOMMENDATION Page 89 of 102 asked for his firm’s assistance concerning the arguments Petitioners made in their

motion for sanctions, he did nothing to alert her to the fact that he and Arias had in

fact received several draft Omanoff affidavits in May 2021. Third, before the

Special Master, THP filed an Opening Brief that falsely stated, “the May 2021

affidavit was prepared solely in connection with the Wyoming Suit and was not

provided to THP’s counsel in the qui tam case.” Evid. Hr’g Ex. 217, at 5–6. Vega

supplied a declaration under the penalty of perjury in support of that Opening Brief

in which he maintained that his firm had no role in preparing the October Omanoff

affidavit and that Arias never made any misrepresentations to the district court.

Evid. Hr’g Ex. 312, at ¶¶ 4, 6, 9. As evidenced by the discussion thus far, these

statements were false.

Vega’s explanations for his actions, particularly with respect to his conduct

and misleading statements to the Special Master, are entirely unconvincing and do

little, if anything, to mitigate his culpability. All of this adds up to a substantial

deviation from the relevant codes of professional conduct to which Vega was bound.

While Vega has had a long and honorable career, and has never before been subject

to individual sanctions, in some ways this lengthy litigation experience serves as an

aggravating factor. See Girardi, 611 F.3d at 1039 (citing ABA Standards § 9.22(i)).

Simply put, Vega should have known better. His misconduct in part caused these

proceedings to extend far longer than they should have, and the misleading Rule

REPORT AND RECOMMENDATION Page 90 of 102 60(b)(2) issue to snowball from a “throw it at the wall and see what sticks” approach

to a tangled web of deceit. See DCD Programs, 846 F.2d at 528 (finding discipline

appropriate under Fed. R. App. P. 46 when an attorney’s misrepresentations to

the court went to the “heart of the appeal”).

Our decision in Girardi, to suspend two attorneys from practice before the

circuit for six months following comprehensive special master proceedings is

instructive. But unlike the suspended attorneys in Girardi, who were involved in

the litigation from start to finish and personally responsible for their own frivolous

argument having been filed on appeal and before numerous federal judges, Vega’s

role in this litigation was more limited. See Girardi, 611 F.3d at 1039. Vega was

not intimately connected to the appeal, did not draft or personally approve

subsequent iterations of the newly discovered evidence argument, and was not

involved in the actual drafting of THP’s Opening Brief before the Special Master.

Furthermore, Vega was honest and contrite during the evidentiary hearing, not

seeking to defend his misconduct but instead taking responsibility for it, especially

as it concerns reviewing Arias’s work. While the Ninth Circuit determined that the

appropriate sanction for the two attorneys in Girardi was a six-month suspension

from practice before the Ninth Circuit, the Special Master concludes that a lesser

sanction is appropriate for Vega, and formally recommends a public reprimand

under the Court’s discretionary authority pursuant to Fed. R. App. P. 46(c).

REPORT AND RECOMMENDATION Page 91 of 102 As for Marina A. Torres, the Special Master has found that she was a party of

one in conducting some level of due diligence in response to Petitioners’ motion for

sanctions. Again, Hagans, Vega, and Arias acted with reckless disregard for the

truth in their communications with Torres surrounding THP’s response to that

motion. However, Torres’s actions during the early stages of the appeal merit some

discussion in the context of whether she should face any individual discipline.

On the one hand, there were several red flags in the district court record that

should have alerted Torres to the frivolousness of the newly discovered evidence

argument. For one, she had access to Judge Whelan’s order denying THP’s ex parte

application for reconsideration, which, knowing what the Special Master now

knows, all but “laid bare the fundamental and fatal flaws” with THP’s newly

discovered evidence argument. Girardi, 611 F.3d at 1036–37 (noting that a well-

reasoned district court opinion should have given attorneys “pause in pursuing

an appeal”). She also had access to the Wyoming Antitrust Litigation docket, on

which Judge Whelan relied heavily in his order, but testified to the Special Master

that she did not thoroughly review the pleadings in that matter. Evid. Hr’g Tr. vol.

3, 714 (Testimony of Marina Torres). This information alone should have set off

substantial alarm bells for Torres with respect to the newly discovered evidence

argument.

REPORT AND RECOMMENDATION Page 92 of 102 On the other hand, Torres provided credible evidence that she contacted

THP’s qui tam counsel and had substantial conversations with Donald Hagans

before filing THP’s opening brief. While it is not clear what the precise contours of

those conversations were, it is clear that Hagans, Vega, and Arias never informed

Torres that they had direct knowledge of the Omanoff information that served as the

basis for the newly discovered evidence argument as early as May 2021. Moreover,

Torres provided her draft Opening Brief and Petition for Panel Rehearing to Hagans

for review. On both occasions, he approved the filings without revisions, despite the

fact that he knew all of the relevant facts that today demonstrate the utter

frivolousness of THP’s newly discovered evidence argument.

While not directly applicable to Torres’s efforts, Fed. R. Civ. P. 11 provides

helpful guidance on whether those efforts constituted a reasonable inquiry into the

facts of THP’s case while preparing the appeal. For one, the advisory committee

notes caution courts from “using the wisdom of hindsight” in making reasonable

inquiry determinations and state that the determination depends on a number of

factors, including whether an attorney “depended on forwarding counsel or another

member of the bar” in preparing a pleading. Fed. R. Civ. P. 11 advisory

committee’s note to 1983 amendment; see also Townsend v. Holman Consulting

Corp., 929 F.2d 1358, 1364 (9th Cir. 1990); Miller v. Bittner, 985 F.2d 935, 939

(8th Cir. 1993). Federal courts have also found that the reasonableness of an

REPORT AND RECOMMENDATION Page 93 of 102 attorney’s inquiry also depends on “the extent of the attorney’s reliance upon his

client for the factual support for the document.” Thomas v. Cap. Sec. Servs., Inc.,

836 F.2d 866, 875 (5th Cir. 1988); see, e.g., Davis v. Crush, 862 F.2d 84, 88 (6th

Cir. 1988).

Against this backdrop, the reasonableness of Torres’s inquiry fairly implicates

her lack of first-hand knowledge and the extent to which she had to rely on her client

and trial counsel to provide her with the facts necessary to prepare THP’s appeal. It

is thus difficult for the Special Master to conclude that Torres demonstrated “conduct

unbecoming of the court’s bar” when the only people who could have informed her

about the full scope of Omanoff’s cooperation never did so when she asked. She

indeed demonstrated some poor judgment, particularly in failing to consider Judge

Whelan’s decision more carefully and forcefully tripling and quadrupling down on

the newly discovered evidence argument in THP’s petition for panel rehearing and

opposition to Petitioners’ motion for sanctions despite a number of red flags.

However, the surrounding circumstances and relative culpability of other Real

Parties in Interest—i.e., Hagans, Vega, and Arias—provides crucial context for her

actions.

Accordingly, the undersigned does not recommend the panel impose any

individual disciplinary sanctions against Ms. Torres under Fed. R. App. P. 46 and

REPORT AND RECOMMENDATION Page 94 of 102 believes the facts set forth in this Report & Recommendation will cause her to work

up her appeals more carefully in the future.

2. Donald Hagans, Ricardo Arias, and Megan Overmann Goetz

The remaining Real Parties in Interest are Donald Hagans, Ricardo Arias, and

Megan Overmann Goetz, none of whom are admitted to practice in the Ninth Circuit,

thus placing them beyond the reach of Fed. R. App. P. 46. The Court does have

broad inherent power to “fashion an appropriate sanction for conduct which abuses

the judicial process.” Chambers, 501 U.S. at 44–45. The inherent power is potent,

extending not only to conduct occurring before the court but also to “actions beyond

the court’s confines, regardless of whether that conduct interfered with courtroom

proceedings.” Am. Unites for Kids, 985 F.3d at 1088. However, the Supreme Court

explained in Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. 101, 108 (2017),

that when an inherent power sanction is punitive rather than compensatory, the court

must “provide procedural guarantees applicable in criminal cases, such as a ‘beyond

a reasonable doubt’ standard of proof.”

We unequivocally recognized the need to distinguish between compensatory

and punitive sanctions when leveraging our inherent power in Am. Unites for Kids,

985 F.3d at 1089. There, we observed that punitive sanctions are often those

“intended to vindicate the court’s authority and the integrity of the judicial process.”

Id. (quoting F.J. Hanshaw Enterprises, Inc. v. Emerald River Dev., Inc., 244 F.3d

REPORT AND RECOMMENDATION Page 95 of 102 1128, 1138 (9th Cir. 2001)). Attorney discipline is one such sanction, and thus

requires heightened criminal-level due process protections, including the

appointment of an independent prosecutor.

Given that these heightened levels of due process protections did not exist

during the Special Master proceedings, the undersigned counsels the panel against

relying on its inherent power to directly discipline any of the remaining Real Parties

in Interest.21 Instead, the Special Master recommends referring this matter to the

appropriate State Bars and federal district courts for their consideration of any

possible disciplinary proceedings.

The Findings of Fact included herein demonstrate Donald Hagans’s

dereliction of duty and patent misconduct at virtually every step of this litigation,

from approving frivolous filings, to withholding material information from THP

appellate counsel, to repeated obfuscation during the Special Master proceedings.

While various counsel for THP changed throughout the duration of the underlying

litigation, Hagans’s role as the company’s de facto general counsel overseeing all

corporate legal matters did not. Out of all the misconduct discovered in this case,

Hagans’s behavior is, by far, the most offensive. Had he been admitted to practice

21 Alternatively, if the panel disagrees, the panel could consider the appointment of a Special Prosecutor to conduct disciplinary proceedings for a more limited subset of the remaining Real Parties in Interest. Such proceedings would comport with the criminal-level due process protections required in these circumstances. The Special Master is not making that recommendation here. REPORT AND RECOMMENDATION Page 96 of 102 before the Ninth Circuit, the undersigned would have recommended a substantial

period of suspension from practice before the court under Fed. R. App. P. 46(b), if

not outright disbarment.

Accordingly, the Special Master recommends the panel certify a copy of this

Report & Recommendation to the Texas State Bar for its consideration of any

disciplinary proceedings focused on Hagans’s clear violations of the rules of

professional conduct to which he is bound as an officer of the court.

As detailed in the Findings of Fact and in connection with the Special Master’s

discussion of § 1927 sanctions, supra, Ricardo Arias’s conduct is deeply troubling.

Especially as a relatively young attorney, Arias cannot afford to make a habit out of

the egregious research practices he demonstrated in this case. Accordingly, the

Special Master recommends the panel certify a copy of this Report &

Recommendation to the California State Bar and to Judge Thomas Whelan in the

Southern District of California for further disciplinary proceedings focused on his

clear violations of the rules of professional conduct to which he is bound as an officer

of the court.

Finally, Megan Overmann Goetz’s conduct in this matter was not a model of

good lawyering. As detailed in the Findings of Fact above, her declaration in support

of THP’s Opening Brief to the Special Master mischaracterized her involvement in

the development of various Omanoff affidavits and demonstrated a lack of diligence

REPORT AND RECOMMENDATION Page 97 of 102 in informing herself of the nature of the Special Master proceedings before

submitting a misleading statement in the case under the penalty of perjury. However,

the Special Master recognizes that Goetz did not personally draft that declaration

and provided limited edits to it before THP’s Special Master counsel filed it with the

court. Moreover, her declaration stands out as troubling in part due to the long list

of other, similar misstatements in this case, over which she had no knowledge or

control.

Additionally, the Special Master commends Ms. Goetz for her role in

producing a May 2021 Omanoff affidavit that finally caused THP to bring the full

scope of Omanoff’s cooperation to the Special Master’s attention and for her honesty

and contrition throughout these proceedings. The Special Master cautions Ms.

Goetz to take more care in the future but does not recommend that the panel refer

her to any of the bars to which she is admitted for further proceedings. That said,

the Special Master recommends the panel certify a copy of this Report &

Recommendation to United States District Judge Alan B. Johnson in the District of

Wyoming to consider whether the statements made before him warrant any further

investigation.

IV. SUMMARY OF RECOMMENDATIONS

This case demonstrates that the line between “zealous advocacy” and

misrepresentations to the court can become easily blurred in the eyes of many

REPORT AND RECOMMENDATION Page 98 of 102 members of the bar. While the Special Master has not concluded that any of the

actors involved in this litigation acted with malice or the specific intent to defraud

the court, many of them nonetheless disregarded their professional obligations—set

forth in Rule 11, statutory law, and various applicable codes of professional

conduct—under the guise of litigation strategy and vigorous client defense to

influence decision-making by federal judges. The court has an obligation to itself

and, more importantly, to the public at large to protect against the kind of misconduct

replete in this record. As a result, Respondent THP and some of its individual

attorneys should face monetary sanctions and individual discipline for their

misconduct.

First, the Special Master recommends to the panel that the following entities

and individuals be required to reimburse Petitioners for the fees, costs, and expenses

incurred as a result of their misconduct.

1. Pursuant to its stipulation, Respondent THP should be held liable to

Petitioners for $246,983.68 of their reasonable attorneys’ fees, costs, and

expenses incurred in connection with: (i) THP’s ex parte application for

reconsideration; (ii) the limited portion of the Ninth Circuit appeal addressing

the application for reconsideration (as opposed to the appeal of the district

court’s initial ruling); and (iii) Petitioners’ motion for sanctions, including

fees incurred in connection with this Special Master proceeding.

REPORT AND RECOMMENDATION Page 99 of 102 2. Pursuant to 28 U.S.C. § 1927, Attorney Donald Hagans should be held jointly

and severally liable with Respondent THP for up to 50% of the above amount,

not to exceed $123,491.84.

3. Pursuant to 28 U.S.C. § 1927, Attorney Gregory A. Vega should be held

jointly and severally liable with Respondent THP for up to 20% of the above

amount, not to exceed $49,396.74.

4. Pursuant to 28 U.S.C. § 1927, Attorney Ricardo Arias should be held jointly

and severally liable with Respondent THP for up to 10% of the above amount,

not to exceed $24,698.37.

The total monetary award is set forth in table form here for the convenience

of the panel.

Party Amount

GTP’s Total Recommended Recovery $246,983.68

Amount Recoverable from Respondent $246,983.68

Tungsten Heavy Powder, Inc. (THP)

Amount Recoverable from Real Party in $123,491.84

Interest Donald Hagans, jointly and

severally

REPORT AND RECOMMENDATION Page 100 of 102 Amount Recoverable from Real Party in $49,396.74

Interest Gregory A. Vega, jointly and

Amount Recoverable from Real Party $24,698.37

in Interest Ricardo Arias, jointly and

A monetary judgment in these amounts should be entered by the Clerk of

Court if the panel adopts this Report and Recommendation.

Second, the Special Master recommends that the panel issue a public

reprimand to Attorney Gregory A. Vega pursuant to its power under Fed. R. App. P.

46(c).

Finally, the Special Master recommends to the panel that the following State

and Federal Bars should receive from the Clerk of this Court a certified copy of this

Report & Recommendation for consideration of any further discipline they deem

appropriate.

1. The State Bar of Texas, with respect to Donald Hagans’s conduct.

2. The State Bar of California, with respect to Gregory A. Vega and Ricardo

Arias’s conduct.

REPORT AND RECOMMENDATION Page 101 of 102 3. The U.S. District Court for the Southern District of California, with respect to

Gregory A. Vega and Ricardo Arias’s conduct.

4. The U.S. District Court for the District of Wyoming, with respect to Megan

Overmann Goetz’s conduct.

Respectfully submitted, October 31, 2023

REPORT AND RECOMMENDATION Page 102 of 102