Insurance Recovery Group, Inc. v. Connolly

977 F. Supp. 2d 16, 2013 WL 5512996, 2013 U.S. Dist. LEXIS 140751
District Court, D. Massachusetts·Decided September 30, 2013·No. Civil Action No. 11-10935-WGY·Published·Cited by 5 cases

Opinion

[18] MEMORANDUM AND ORDER

YOUNG, District Judge.

I. INTRODUCTION

Insurance Recovery Group, Inc. (“IRG”) moves for sanctions against the law firm of Meiselman, Packman, Nealon, Scialabba & Baker P.C.1 (“Meiselman” or the “Firm”), a present member of the Firm, D. Greg Blankinship (“Blankinship”), and an attorney formerly associated with the Firm, Joshua S. Bauchner (“Bauchner”) (collectively, the “Defendants’ Counsel”) for allegedly counseling their clients to destroy evidence sought in connection with a business-raiding suit between the clients and IRG and, by so doing, violating court-issued discovery orders. IRG additionally urges this Court to compel the Defendants’ Counsel to reimburse the costs and attorneys’ fees that it incurred in related court and arbitration proceedings.

A. Procedural Posture2

IRG filed this motion for sanctions against the Defendants’ Counsel on September 6, 2012, and appended a memorandum in support. Mot. Sanctions Against Defs.’ Att’ys, ECF No. 22; Mem. Supp. Mot. Sanctions Against Defs.’ Att’ys (“I’RG’s Mem.”), ECF No. 23. On November 2, 2012, the Defendants’ Counsel submitted a brief in opposition to IRG’s motion. Resp’ts’ Mem. Law Opp’n Pl.’s Mot. Sanctions (“Defs.’ Counsel’s Opp’n”), ECF No. 44. IRG filed a reply brief on November 21, 2012, Reply Br. Supp. Mot. Sanctions Against Defs.’ Att’ys (“IRG’s Reply”), ECF No. 52, to which the Defendants’ Counsel responded with a sur-reply brief less than a week later, Resp’t’s SurReply Mem. Law Opp’n Pl.’s Mot. Sanctions, ECF No. 55. After entertaining oral argument at a motion hearing held on November 26, 2012, the Court took the matter under advisement. Elec. Clerk’s Notes, Nov. 26, 2012, ECF No. 54.

B. Factual Background3

IRG is principally engaged in the business of providing recovery services to insurance companies and self-insured businesses seeking government reimbursement funds to offset some of the costs associated with administering workers’ compensation programs. Notice Removal, Ex. A, Verified Compl. Injunctive Relief (“Compl.”) ¶¶15, 19, ECF No. 1-2. Looking to expand into the areas of workers’ compensation, automobile subrogation, and property subrogation, IRG entered into discussions with John Connolly (“Connolly”) and Neil Salters (“Salters”), two gentlemen with a demonstrated record of experience working in the subrogation space, to explore the possibility of founding a business dedicated to the management and collection of subrogation claims. See id. ¶¶ 20-21. Following a period of negotiation, the parties formed such a business-named Insurance Subrogation Group (“ISG”) — as a subdivision of IRG, with the prospective (though not definitive) intent eventually to spin the business off as a separately operating joint venture. Id. ¶¶26, 31. In exchange for receiving monthly consulting fees and executive positions at the new company, Con[19] nolly and Salters each signed consulting agreements which contained, among other provisions, clauses prohibiting the pair of consultants from making use of any of IRG’s confidential information for improper purposes, competing directly or indirectly with IRG, soliciting any of IRG’s clients, or otherwise acting contrary to IRG’s interests. See id. ¶¶ 27-29. Two more consultants, Jonathan Ladenheim (“Ladenheim”) and Steven Ieronimo (“Ieronimo”), were later hired to manage and support ISG’s back office functions and signed consulting agreements with terms similar to those found in Connolly and Salters’s agreements. Id. ¶¶ 25, 33.

Eventually, the business relationship between IRG and the consultants at ISG soured. IRG alleged that Connolly and Salters had secret talks with an outside investor to fund a breakaway from IRG, appropriated IRG’s undisclosed claims and client information for personal gain, and diverted business to their new subrogation service company, ISG Recoveries, LLC (“ISG Recoveries”). See id. ¶¶ 72, 83, 93. Thus, on May 18, 2011, IRG filed an action against ISG Recoveries and Connolly, Salters, Ladenheim, and Ieronimo (collectively, the “consultants”) (collectively, with ISG Recoveries, the “Defendants”) in the Massachusetts Superior Court sitting in and for the County of Suffolk, id. at 36, which the Defendants removed to the District of Massachusetts just six days later.4 Notice Removal, ECF No. 1. The Defendants retained Blankinship, Bauchner, and other Meiselman attorneys to represent them in the litigation with IRG. See IRG’s Mem. 1.

One week after submitting its complaint, IRG filed an emergency motion for a preliminary injunction to enjoin the Defendants from further violating the terms of their consulting agreements. PL’s Emergency Mot. Prelim. Inj., ECF No. 2. Then-Judge Gertner granted the motion on May 26, 2011, and issued a ten-day temporary restraining order (“TRO”) against the Defendants. Elec. Order, May 26, 2011. In a preliminary injunction order inscribing the details of the TRO,5 Judge Gertner wrote the following:

Defendants ... are hereby....
....
2. Ordered, within twenty-four hours of the issuance of this Order, to return to IRG any and all confidential and proprietary information that they transmitted or removed from IRG or otherwise acquired as a result of their work for or affiliation with IRG, including without limitation customer information, claims files, materials, records, documents, electronic files, emails, electronic storage media, hard drives, mobile devices, data compilations, computers, passwords, computer programs and/or data bases, or any confidential information, including without limitation information concerning prospects, methods, inventions, ideas, developments, business plans, claims, sales, products, marketing, finances, technology and employees ... and to purge from all elec[20] tronic systems (e.g., computers) all such information----

IRG’s Mem., Ex. B, [Proposed] Prelim. Inj. (“Prelim. Inj. Order”) 2-3, ECF No. 23-2.

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Insurance Recovery Group, Inc. v. Connolly, 977 F. Supp. 2d 16, 2013 WL 5512996, 2013 U.S. Dist. LEXIS 140751 (D. Mass. 2013).

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