Wong v. Luu

34 N.E.3d 35, 472 Mass. 208
CourtMassachusetts Supreme Judicial Court
DecidedJuly 15, 2015
DocketSJC 11789
StatusPublished
Cited by21 cases

This text of 34 N.E.3d 35 (Wong v. Luu) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wong v. Luu, 34 N.E.3d 35, 472 Mass. 208 (Mass. 2015).

Opinion

Gants, C.J.

The issue presented in this case is the scope of a judge’s authority under the inherent powers of the court to order an attorney for a party to pay the other parties’ attorney’s fees as a sanction for the attorney’s misconduct where that sanction is not authorized by any statute or court rule, and where the attorney has not violated a court order or rule of procedure. We conclude that a judge may exercise the court’s inherent power to sanction an attorney with an assessment of attorney’s fees only if the attorney has engaged in misconduct that threatens the fair administration of justice and the sanction is necessary to preserve the judge’s authority to administer justice. Because we conclude that the judge abused his discretion in exercising the court’s inherent powers to sanction the attorney under the circumstances in this case, and that the attorney’s alleged misconduct was more appropriately addressed by a referral to the Board of Bar Overseers (board), we reverse the judge’s order imposing sanctions. 4

Background. Attorney Richard Goren was the attorney for Cheng Lee Co., Inc. (Cheng Lee), one of the plaintiffs in a complex litigation in the Superior Court arising out of the attempted sale of three supermarkets in the Boston area (the Super 88 stores). Eight cases, later consolidated, were brought by three groups of plaintiffs: the “trade creditors” (vendors of the Super 88 stores, including Cheng Lee, the “Hop Lee” plaintiffs, and the “Tin World” plaintiffs); the “workers” (former employees of the Super 88 stores asserting class action wage claims); and the “asset purchasers” (aggrieved attempted purchasers of the Super 88 stores). The cases were brought against three groups of defendants: the “Super 88 defendants” (corporate entities and principals of the Super 88 stores); the “Hong Kong Supermarket defendants” (the prospective purchasers of the Super 88 stores); and the “lenders” (financial institutions that lent money to the Super 88 defendants).

On December 10, 2010, counsel for all parties in the litigation appeared in court for a conference pursuant to Mass. R. Civ. R 16, *210 as amended, 466 Mass. 1401 (2013), and for an omnibus motions hearing. With the judge’s permission, counsel used the occasion instead to engage in substantive settlement discussions. They reported to the court that a potential settlement framework had been reached, and they requested that the conference be continued so that they could further develop the framework. The judge allowed the continuance and encouraged counsel’s efforts. The conference was continued a second time on the representation by counsel that substantial progress was being made towards settlement. The judge scheduled March 18, 2011, as the date on which counsel would report the terms of a final settlement to the court or proceed with the conference and hearing.

Prior to March 18, the parties had reached a final settlement agreement, which they had intended to sign and file with the court. Under the terms of the settlement agreement, the lenders agreed to release their claims to a security interest in the Super 88 store located in the Dorchester section of Boston in exchange for a release of the claims of all plaintiffs in the consolidated cases. From the proceeds of the sale of the Dorchester store to one of the asset purchasers in settlement of its claims, Cheng Lee was to receive $650,000; the Hop Lee plaintiffs were to receive $264,000; the Tin World plaintiffs were to receive $313,395; and the workers were to receive $950,000, but $500,000 would not be paid for six months. This would leave a balance of approximately $7 million for the lenders from the sale of the other two Super 88 stores.

On March 18, however, counsel appeared in court and announced that there had been a “breakdown in the settlement discussions” because, days earlier, they had learned of a solicitation letter that Goren had sent out the week before to 106 unsecured creditors of the Super 88 defendants that had been identified on a 2009 bankruptcy schedule. 5 Most of the recipients were nonparty creditors, but four of the Hop Lee plaintiffs also received the letter, as did one nonparty creditor who was represented by the attorney for Tin World.* * 6 In the letter, which was printed on the stationery of Goren’s law firm at the time, Bodoff & Associates, P.C. (Bodoff), Goren explained that he “represented] an unsecured trade creditor of Super 88 and [was] about *211 to conclude an agreement whereby [his] client will recover 100 cents on the dollar in a settlement with various parties.” The letter went on to request that the recipient complete an enclosed form if the recipient were “interested in seeking to recover [its] unpaid Super 88 invoices on a contingent fee basis.” The letter further explained, “If there is sufficient interest generated by unpaid creditors, we will bring a lawsuit against certain parties on the creditors’ collective behalf . . . .” 7 The letter both began and concluded with a request that the recipient treat the inquiry as confidential. 8

The Tin World and Hop Lee plaintiffs and the Super 88 defendants moved for sanctions against Goren on the grounds that he had violated the rules of professional conduct 9 and had interfered with the “effective administration of justice.” 10 At the sanctions hearing on April 8, the various counsel explained why Goren’s solicitation letter had derailed the settlement process. They noted that the total amount of the claims exceeded the aggregate sale prices of the three supermarkets, and that everyone understood that it was in the interest of their clients that “outsiders to the consolidated actions not be invited in on what was a finite pot of money.” As a number of the parties had agreed to compromise their claims in various ways for the sake of reaching a settlement, the prospect of additional claims caused them to renege, because *212 they had only agreed to compromise their claims on the assumption that they “were wrapping up all of the litigation,” and because “a potential involuntary bankruptcy” could have been triggered if other “potential creditors [were] alerted to the false assumption that there’s a pot of money out there that’s just waiting to be tapped.” 11 The parties had never entered into a confidentiality agreement, and there was no confidentiality provision in the proposed settlement agreement, but counsel explained that “there was no real need for a [confidentiality [agreement because it was in all of [their] own clients’ interest to keep this as quiet as possible.” 12

Goren replied that sanctions were unwarranted because he had not violated any ethical rule or court order or committed a breach of any agreement with the other parties, and because jurisdiction for sanctioning attorneys for ethical violations lies with the board. He also denied that he had had any intention to “torpedo” the settlement.

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Bluebook (online)
34 N.E.3d 35, 472 Mass. 208, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wong-v-luu-mass-2015.