Oh Sweet Blindness

A Hearing Report majority in a matter before the Massachusetts Board of Bar Overseers proposes a six-month suspension over a dissent favoring two years.

The fighting issue involved the Respondent's contention that he had not carefully read a fee petition he had signed under oath.

The issue was uncovered in reporting of The Boston Globe.

This matter arises out of the fee petition submitted by the class action counsel in the State Street Bank litigation (the “Class Action”), captioned as Arkansas Teacher Retirement System v. State Street Bank and Trust Co., civil action 11-cv-10230-MLW, in the U.S. District Court for the District of Massachusetts. The Class Action case arose from alleged overcharges of clients by State Street Bank and Trust Co. (“State Street” or the “Bank”) through hidden mark-ups and the use of foreign exchange transactions. The law firm in which the respondent, Garrett J. Bradley, was then a partner represented the plaintiff class as co-counsel with other firms.

On November 30, 2021, bar counsel filed a petition for discipline against Bradley. An amended petition for discipline was filed on December 27, 2021. The amended petition for discipline charged that the respondent’s declaration in support of his law firm’s motion for the award of attorneys’ fees and expenses (Ex. 8) in the Class Action, which he signed under oath, contained knowingly false statements of fact and therefore was a violation of Fed. R. Civ. P. 11.  If, instead, the respondent had failed to read his declaration, bar counsel charged that the respondent violated Mass. R. Prof. C. 1.3 (lack of diligence). To the extent that he knowingly made the false statements and failed to correct them or take other remedial measures in a timely manner, the amended petition charged that he violated rules 3.3(a)(1), 3.3(a)(3), 3.4(c), 8.4(c), 8.4(d) and 8.4(h). To the extent that he failed to inform the District Court in an ex parte hearing of all material facts known to him that would enable the court to make an informed decision with respect to the lodestar cross-check method of the fee-approval process, the amended petition charged that the respondent violated Mass. R. Prof. C. 3.3(d).

Majority conclusions

The majority of the committee finds that had the respondent read the declaration carefully, he would have been aware that some or all the above statements were not accurate or, in the context of the proceeding, at least misleading. However, the majority of the committee credits his testimony that he did not read the declaration carefully enough to understand what he was signing was not accurate or was misleading. Bar counsel failed to introduce any evidence to the contrary...

The respondent admitted that he failed to do anything to verify the accuracy of the information contained in his declaration. (Tr. 84-85). Although the respondent testified that he relied on those who prepared the declaration to ensure that it was accurate, he agreed that, as the signer of the document and Thornton’s managing partner, “the buck stops with me. It’s my mistake.” (Tr. 86). We find that the respondent was therefore responsible for any errors in the declaration he signed and submitted to the District Court.

As a result

Relying on the truthfulness of the sworn declarations provided by the respondent and other counsel, the District Court approved the $75,000,000 fee request.

The respondent testified that, as a result of a Boston Globe investigation, he became aware, sometime between November 2 and November 10, 2016, that the firms of Labaton and Lieff Cabraser had also included, in aggregate, all the Staff Attorneys on their firms’ fee declarations. He therefore compared the three Exhibit As of the three firms side-byside and saw the duplication. (Tr. 101-105; Ex. 16). 12 The respondent said that he “saw right away that there [were] the same names with different rates at different firms, and [he] knew that something wasn't right.” (Tr. 103).

On November 10, 2016 (about a week after the District Court issued an order approving the $75,000,000 fee award), a Labaton attorney informed the District Court by a letter (“the Labaton Letter”) that inquiries from the media had caused class counsel to realize that they had inadvertently double-counted the hours of the Staff Attorneys. (Ex. 16 at p.1 ¶1). Labaton submitted this letter on behalf of itself, the Thornton firm, and Lieff Cabraser to explain this particular error. (Id.) This error inflated what had been represented to be their collective lodestar by more than 9,300 hours and more than $4,000,000. (Ex. 16; Ex. 1, Timeline at 002; Ex. 42C).

When the respondent compared the Thornton “Exhibit A” to his declaration against the others in November 2016, he must also have observed his declaration’s exhibit identifies these individuals (plus Michael Bradley) with the designation for their “Status” as “SA”. That stands for “Staff Attorney.” Neither Exhibit A nor the body of the declaration states any of these individuals actually were employed by or contracted to one of the other lead class counsel and that the Thornton firm at most reimbursed one or the other firm for some or all of the expenses associated with these lawyers. To the contrary, the body of the declaration states the persons on Exhibit A either were or had been employed by (or contracted to) Thornton such that it was responsible for their compensation and accordingly could “claim” the value of their time in its lodestar calculation. Respondent failed to correct these misrepresentations in November 2016.

Finding

Given the respondent’s testimony and the contemporaneous Labaton Letter submitted to the District Court on behalf of Labaton, the Thornton firm, and Lieff Cabraser, the majority of the committee credits the respondent’s testimony concerning how the cost-sharing arrangement worked in connection with the Staff Attorneys. Bar counsel introduced no evidence, at least that was made clear to the majority of the committee, demonstrating the representation in the letter from Lead Counsel to that effect was not accurate. That does not, however, excuse the respondent’s declaration represented to (or was understood by) the District Court as affirming the identified attorneys were “employees” of the Thornton firm. Whatever were the details of the cost-sharing arrangement, none of these people were employees of the Thornton firm.

After further revelations by The Boston Globe, a special master was appointed

Thornton and the other class counsel agreed to the appointment of Judge Rosen as master. (Ex. 42G). After an extensive investigation, Judge Rosen filed, on May 14, 2018, a 377- page “Report and Recommendations.” (Ex. 42K). After receiving the master’s report and recommendations, the court vacated the original $75,000,000 fee award. (Ex. 42I). 

In June 2019, the District Court conducted a three-day evidentiary hearing on objections to the report that had been filed by Thornton and other Class Counsel. (Ex. 42K). Following this hearing, the District Court reduced the original fee award from approximately $75,000,000 to $60,000,000 and reallocated the amount each of the participating law firms would receive of that reduced total. (Ex. 42L)

Sanction

the majority of the hearing committee credits the respondent’s testimony that he did not knowingly make a misrepresentation of fact to the Federal Court because he did not read his declaration in its entirety before signing it. Accordingly, while he violated rules 3.3(a)(3), 3.3(d) and 8.4(d) and (h), he did not violate rules 3.3(a)(1) and 8.4(c), the latter to the extent that it was not intentional misrepresentation, but negligent misrepresentation, thus warranting a lesser sanction.

The majority recommends a six-month suspension.

Dissent

A majority of my colleagues on this hearing committee credit the respondent’s testimony that he did not read his sworn “declaration” in its entirety before signing it. However, I find this credibility determination to be inconsistent with the evidence in this case. Under our case law, a naked, unsupported credibility determination will not suffice, especially if it is inconsistent with other evidence. Therefore, I must respectfully disagree with the majority's decision in this matter.

Oath sworn

Here, the respondent signed the declaration and “declare[d] under penalty of perjury that the foregoing is true and correct.” (Ex. 8 at A-000157). Perforce, like Diviacchi, the respondent is held to have had actual knowledge and, therefore, knowingly made a false statement of fact to the federal court.

Further, I do not credit the respondent’s testimony that he did not read all of his declaration supporting the motion to award attorneys’ fees and expenses. (Ex. 8). The sworn declaration is two double-spaced pages of text (the other two pages are a caption and a signature line), so any reasonable attorney—particularly a managing partner—who was even mildly interested in the firm’s support for a request for a multi-million-dollar fee that his firm was seeking to be awarded, would have read it. I also note that the respondent was announced in early September 2016 as Thornton’s new managing partner. (Ex. 1, Timeline). Less than two weeks later, he signed the declaration. (Ex. 8). I do not believe that one of the respondent’s first acts as managing partner of his firm would be to sign a short affidavit, where his firm sought a multi-million-dollar fee, without reading all of it. I, therefore, do not credit that the respondent did not read the entirety of the two pages of content.

If not, willful blindness

To me, this case presents classic willful blindness. Among other things, the respondent knew the fee petition would include hourly rates when he knew his firm had never charged a client by the hour and when he assisted in the fabrication of a $500/hour rate for his brother, which he knew was not Michael’s usual hourly rate. This is actual knowledge, even without reading the entirety of the sworn declaration. He could have read it but did not; it was not so lengthy or complicated that it would have been entirely unreasonable for him to do so. Therefore, assuming arguendo, the respondent did not read it, but he did so, knowing it contained false information that would be submitted to the Court. In sum: (1) if the respondent did not read the declaration, that constituted willful blindness and a lack of diligence; (2) even if he did not read it, he had reason to know it contained false information because he knew it listed his brother as an employee and a “usual hourly rate” that he knew his brother had never charged; and (3) I do not believe he did not read it, because it is unreasonable not to have done so, given the brevity and importance of the declaration and his having sworn to it under oath.

Since willful blindness is the equivalent of actual knowledge, it follows ineluctably that the respondent knowingly engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation. He told the federal court that twenty-three people who did not work at his firm were employees, and he submitted an array of false “usual hourly rates,” including that for his brother Michael, which the respondent himself helped to fabricate. As in Diviacchi, supra, and other cases, this conduct violated Mass. R. Prof. C. 8.4(c).

Sanction dissent

Given that willful blindness is the equivalent of actual knowledge, and in light of the other rules violations and the factors in aggravation, I see nothing to justify a downward departure from the presumptive sanction of a two-year suspension.

Respondent formerly served in the Massachusetts House of Representatives as assistant majority leader. (Mike Frisch)