Royce v. Needle et al
Filing
244
MEMORANDUM Opinion and Order Signed by the Honorable Milton I. Shadur on 3/28/2016. Mailed notice (ao,)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MERLE L. ROYCE,
Plaintiff,
v.
MICHAEL R. NEEDLE, P.C., et al.,
Defendants.
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Case No. 15 C 259
MEMORANDUM OPINION AND ORDER
This Court's February 2, 2016 1 memorandum opinion and order ("February 2 Opinion,"
Dkt. Nos. 211 and 212) sanctioned Michael R. Needle, P.C. ("Needle, P.C."), its then (but now
former) attorney Anthony F. Fata ("Fata") and Fata's law firm, Cafferty Clobes Meriwether &
Sprengel, LLP ("Cafferty Clobes"), for having violated Fed. R. Civ. P. ("Rule") 11(b)(1) and (2)
by advancing frivolous counterclaims against (1) Needle, P.C.'s former co-counsel who is the
plaintiff in this interpleader action, Merle Royce ("Royce"), and (2) 15 of their 16 former clients
(the "Amari Group") in a now-settled underlying action. 2 Following the issuance of that opinion,
all the parties involved other than Needle, P.C. -- which did not respond to the other parties'
attempts at communication and from which this Court had heard nothing since its most recent
counsel withdrew on November 10, 2015 -- tendered a Proposed Order that would allocate the
prevailing parties' attorneys' fees equally between Needle, P.C. and Cafferty Clobes and would
1
Because all but one of the other dates referred to in this opinion were in 2016, in the
interest of simplicity all further date references will omit any "2016" year identification.
2
Their sixteenth former client, John R. Cardulo & Sons, Inc., was not involved in the
sanctions motions.
direct that Needle, P.C.'s 50% allocation be paid from its share of the disputed escrow account
(there being no doubt that it would be entitled to at least that amount).
Then on February 26 this Court issued a brief order (Dkt. No. 222) that gave Needle, P.C.
until March 11 to provide input as to the Proposed Order. After it requested and received a brief
extension, Michael Needle ("Needle") -- whom this Court had ordered to respond personally (see
Dkt. Nos. 211 and 222) because he had left his wholly-owned professional corporation without
representation by counsel for a 4-1/2 month period after its last counsel's departure from the case
in November 2015 -- delivered a March 21 Response (purportedly on behalf of Needle, P.C. 3)
that opposed the Proposed Order and that was supported by his own Declaration.
Regrettably, the arguments put forward in that submission by Needle are so lacking in
merit that this opinion will address them largely in the order presented, rather than attempting to
synthesize an orderly structure. Indeed, those arguments are largely akin to heaping Pelion upon
Ossa: Needle's current response to the sanctions-enforcement Proposed Order could well be
sanctionable in itself.
Thus Needle's contentions that the money from which the sanctions award is to be paid
should not (at least yet) be distributed to Needle, P.C. because not all payments toward that
3
When it has suited his purpose, Needle has been careful to maintain a separation
between his individual persona and that of the professional corporation, Needle, P.C., of which
he is the President and sole member. That has crested unwarranted complexities -- there is no
excuse for his most recent stonewalling in not obtaining new counsel for Needle, P.C. (this Court
had ample ground for denying his attempt to represent Needle, P.C. as to the merits of its dispute
with Royce and the Amari Group (Dkt. No. 191)). That said, however, this Court will give
Needle the benefit of the doubt in assuming that he acted in good faith in apparently viewing
Dkt. No. 222 as a direction to respond on behalf of Needle, P.C. rather than as an individual. But
that was not this Court's intention -- instead it expects to hold Needle personally responsible for
the positions advanced in his Response, and to regard Needle, P.C. as responsible (a) for its
delinquency in remaining unrepresented and (b) for whatever consequences may flow from that
delinquency.
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recovery have been made (Response at 2) are egregious examples of absolute garbage. True
enough, Section VII.2 of the October 6, 2008 Contingent Fee Agreement assures the former
clients in the underlying case that no dispute among the attorneys "will interfere with or delay
the distribution of any portion of any recovery due to any of you," but Needle shamelessly
ignores the fact that it is this interpleader action -- which Royce was compelled to bring in order
to deal with Needle, P.C.'s frivolous and now-dismissed interpretation of that Contingent Fee
Agreement -- that is delaying any distribution to those former clients, not any proposed
compensation for injuries that has deliberately been inflicted upon them. And he totally ignores
as well the fact that any disagreement between Needle, P.C. and Royce about their relative
entitlements to fees is as to their respective shares of the $1.4 million in total fees prescribed by
the Contingent Fee Agreement -- a dispute that does not at all pose any threat of the type that
Section VII.2 sought to guard against.
Nor is it for Needle to advance what he contends are the Amari Group's interests against
the attorney of its choosing or to venture that equity forbids either that attorney or Royce's
attorney to be paid before the Amari Group and Royce themselves are -- that is, while Needle
and Needle, P.C. prevent this interpleader action from being concluded (see Response at 3).
Such contentions are doubly disingenuous, given that both Royce and the Amari Group signed
off on the Proposed Order against which Needle purports to act as their self-appointed champion.
Indeed, it must be remembered that the Amari Group in particular fired Needle, P.C. as counsel
and has since then emphatically and repeatedly rebuffed his pretentions to speak for it.
Similarly, most of Needle's objections to the size of the proposed sanction betray a
cynical or pathological willingness to assert arguments without regard to whether they have any
persuasive force whatever. In candor, this Court's instantaneous reaction to Needle's labeling of
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the sanction award as "patently excessive" (Response at 4) was to classify it as bordering on the
absurd. But this opinion's more extended analysis has shifted that characterization as having
crossed the border into the realm of the truly absurd.
It is easy to see why that is so. It must not be forgotten that the difference between
Needle's distortion of the Contingent Fee Agreement (a document that he himself had drafted),
when applied to the settlement agreement that resolved the underlying litigation, would have
taken (depending on Needle's shifting positions from time to time) an amount between some
$600,000 or $800,000 at the low end and more than $1 million at the high end from the pockets
of his own clients into the pockets of the lawyers (principally Needle himself). 4 Clearly any
notion that the counsel for the Amari Group and the counsel for Royce should have met that
vigorously advanced position with a less vigorous response than they did, thus taking the risk
that their failure to go full bore might occasion a less fully analytical judicial response, makes no
sense.
Moreover, as the following discussion shows, there are other highly cogent reasons to
reject Needle's attempted second-guessing (a sort of "My own argument was so unsound that
opposing counsel should have spent less time in challenging it"). For example, in the course of
mangling the holding of this Court in a different case, 5 Needle proposes that Rule 11(b)'s
4
That result would have followed from Needle's bogus contention that Section IV.1(A)
rather than the plainly applicable Section IV.1(B) of the Contingent Fee Agreement was the
properly applicable provision.
5
Contrary to Needle's summary, the assertedly offending complaint in Donohoe v.
Consolidated Operating & Production Corp., 139 F.R.D. 626, 633 (N.D. Ill. 1991) was filed
before our Court of Appeals had rendered it unviable -- indeed, it had expressly left the decisive
issue unresolved -- and so there was a real question as to whether opposing counsel had failed to
(continued)
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requirement for reasonable inquiry before a paper is presented means that his professional
corporation should not have to pay any attorneys' fees incurred before a case later cited by this
Court was brought to his attention by opposing counsel who is trying to have that Needle, P.C.
paper tossed in the trash -- even if that later-cited case is relied on solely for an uncontroversial
canon of construction on which the merits of Needle, P.C.'s position did not particularly turn (see
Response at 4).
Even more groundlessly, under Needle's topsy-turvy brand of "reasoning" be contends
that the more frivolous the argument, the less an injured party should be able to recover in
attorneys' fees for opposing it (Response at 4). To the contrary, responsible counsel who are
required on behalf of their clients to oppose a frivolous argument must fortify their opposition
with the best available arguments, not rely on naked declarations that the frivolous argument
would fail the laugh test -- all the more so when up to $1 million or more hangs in the balance
and when Needle, P.C.'s voluminous, meandering and equivocal filings operate to frustrate
simple treatment. On that score our Court of Appeals' affirmance of an earlier sanction award by
this Court in Brandt v. Schal Assocs., Inc., 960 F.2d 640, 648 (7th Cir. 1992) (internal quotation
marks and citation omitted) could well have been written for this case:
Shallow claims may require costly replies. . . . We have little sympathy for the
litigant who fires a big gun, and when the adversary returns fire, complains
because he was only firing blanks.
And the most charitable reading of Needle's assertion that "[t]he Rule 12 proceedings to which
the sanctions pertain involved issues other than the ones for which sanctions have been
(footnote continued)
mitigate its damages by neglecting to tell the plaintiff that recent changes in the law required it to
withdraw a particular count. Nothing of the sort occurred here.
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imposed," so that not all of the time spent at those hearings should be chargeable (Response at 45), is that it cavils over minutes in fee petitions that claim over 400 hours of wasted time -- in
evident anticipation that even more hours might therefore be wasted in arguments over just how
many minutes were spent in court on those issues.
Both Royce and the Amari Group submitted detailed fee petitions justifying their requests
for $112,540.40 and $41,745.30, respectively (Dkt. Nos. 215 and 219), but Needle responds only
with vague objections that identify no particular item that should not have been billed. Though
he asserts that attorneys for Royce and the Amari Group performed some duplicative work
(Response at 5), Needle, P.C. cannot insist that parties on opposite sides of the "v." sign must
coordinate so closely that in effect they have a single counsel. In any event, it is plain from the
record that they did coordinate, so that Needle's failure to identify any instances of waste or
churning sinks his argument. And Needle has been around the block long enough to know that
the possibility that Cafferty Clobes may have settled its liability for less than its share -- if
Needle is correct that it has 6 -- does not impugn Royce's or the Amari Group's itemization of
their damages (see Response at 5).
Thus only two arguments in Needle's Response may call for further discussion. First, he
challenges the hourly rate of $350 charged by counsel for the Amari Group (Response at 5).
6
Before receiving Needle's Response this Court had begun editing the Proposed Order to
clarify (among other matters) that Cafferty Clobes would be discharged upon paying its 50%
share of the aggregate amount of the sanction and that it had agreed to pay that amount, for the
Proposed Order had spoken only of a sum certain specified in a confidential settlement
agreement. This Court does not of course presume that Needle has provided the context
necessary for understanding the statement that he attributes to a named partner at Cafferty Clobes
to the effect that said sum is actually "far less" than its 50% share (see Response at 5; N. Decl. ¶
20), but he might perhaps provide some input about that matter at the next status hearing.
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Second, he says that ordering payment from the escrow account would disadvantage him in a
way that simply ordering payment would not if the February 2 Opinion is overturned on appeal,
for then he would have to recoup money already distributed, rather than simply being excused
from making a payment never tendered (Response at 6).
Needle's silences are telling as to the hourly rate claimed by counsel for the Amari
Group, for he does not contend that the counsel has not actually charged his client $350/hour in
this case -- in fact, Needle's Declaration has attached a copy of that counsel's fee agreement that
provides for precisely that rate . Instead Needle argues only that attorney Cochran's fee in a
different case back in 2009 was just $250 an hour (see N. Decl. ¶¶ 10, 12, 14). Nor is there any
affirmation that $350 is an unreasonable hourly rate for a partner in an established and respected
Chicago law firm who has been at the bar for over 45 years. By contrast, counsel for the Amari
Group has submitted sworn declarations affirming that $350 per hour is a reasonable rate in the
Chicago market for someone of his experience handling this sort of case and is indeed his
ordinary fee -- the 2009 case was billed at a discounted rate for an insurance company, and even
then was only reduced to $300 an hour (Dkt. No. 239).
Most tellingly, Needle has blithely ignored the repeated adherence of our Court of
Appeals, in actions involving fee shifting, to the principle that the best evidence of the
reasonableness of lawyers' hourly rates is what those lawyers' clients have actually paid the
lawyers for the services involved. Here, for example, is the voicing of that teaching in TruServ
Corp. v. Flegles, Inc., 419 F.3d 584, 593 (7th Cir. 2005), with the internal quotation drawn from
an earlier Seventh Circuit case (emphasis in original):
We also note that "[c]ourts award fees at the market rate, and the best evidence of
the market value of legal services is what people pay for it. Indeed, this is not
'evidence' about market value; it is market value."
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Needle's attempt to counter that principle with a single years-old instance that bears no similarity
to the current case on a number of grounds is not just a weak reed on which to lean -- it is no
reed at all.
Hence Needle has once again put forth a bankrupt position. This Court flatly rejects his
claim of excessiveness.
As for Needle's concern that his professional corporation would be disadvantaged by
payment from the escrow account if the sanction is overturned, the negatives stemming from his
proposed alternative far outstrip the claimed danger, especially given that the default state of
affairs under his counterproposal should he continue to sit on his hands -- not even acting to
obtain new counsel -- is that no one will see any money for years. For Needle suggests instead
that any payment of the sanction imposed on his professional corporation should be delayed until
this Court eventually disposes of this interpleader action and orders disbursements from the
escrow account, at which point Needle, P.C.'s share of that account would be deposited with the
Court until Needle, P.C. has exhausted all of its appeals of both the final judgment and the
sanction (Response at 1, 7).
But the Proposed Order was devised precisely out of a reasonable apprehension that
Needle would attempt to render collection impossible by his own stubborn inaction. Needle,
P.C.'s failure -- or at this point, it is more properly labeled a refusal -- to secure counsel serves no
purpose but to impede the progress of this action on the merits, and indeed Needle has sought to
hide behind it by pretending falsely that he received no notice of proceedings related to the
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February 2 Opinion. 7 Initially the counsel for Royce and the Amari Group quite understandably
sought joint and several liability, leaving to Cafferty Clobes the hassle of dealing with its former
client. Faced with the problem of how to prevent Needle, P.C.'s delaying tactics and unable to
obtain Needle, P.C.'s involvement, the adversaries have sought the compromise position set out
in the Proposed Order -- and everyone other than Needle (and hence Needle, P.C.) has found that
approach acceptable.
Needle's counterproposal may provide ultimate payment, but at the unfair cost of
delaying it until long after the entire interpleader action is at an end. And if the ultimate order
(this Court has not yet approved either the Proposed Order or any revised version) were to
generate an interlocutory appeal, there is no suggestion that the payees would not be able to
make good on repayment (note, in fact, that the posting of a supersedeas bond or its equivalent
by Needle or Needle, P.C. -- see Fed. R. Civ. P. 62(d) -- would effectively deal with their
argument for a stay).
In sum, no even arguable case has been made that would call for a rejection of structuring
the sanction contemplated in the February 2 Opinion along the broad outlines of the Proposed
Order, with equal liability and with Needle, P.C.'s 50% share to be disbursed immediately from
the disputed escrow account. But the Proposed Order was drafted when it seemed that nothing
7
When Needle, P.C.'s most recent counsel of record withdrew from representing that
professional corporation, it no longer had a designated provision for electronic notice. But to put
the direct lie to Needle's no-notice contention, Royce and the Amari Group have shown that they
sent their fee petitions, the Proposed Order and notices of upcoming status hearings to him
directly via e-mail (Dkt. Nos. 226 at 2-3 and 228 at 2-3), and he has attempted to avoid the truth
by suggesting that he had not received proper notice (Dkt. No. 225 ¶ 2). In like fashion, he now
chides this Court as to the requirement that service must comply with Rule 77(d) (Response at
7). What irony, given the fact that it was Needle's own failure to provide Needle, P.C. with
replacement counsel that has caused the claimed noncompliance on everyone's part.
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would succeed in smoking out any responsive participation by Needle, P.C. or Needle
personally, and what has been said in this opinion calls for some reworking of the Proposed
Order -- certainly in some of its language, and perhaps in some substantive respect as well.
Accordingly this Court sets a status hearing at 9:15 a.m. April 8, 2016 to consider what
should be done. And because Needle, P.C. has been dropped from the service list since its last
attorney withdrew, the Clerk is ordered to serve notice of this order and subsequent filings on
Needle individually at his e-mail address, with Needle being responsible for the transmittal of
such notices to Needle, P.C.
__________________________________________
Milton I. Shadur
Senior United States District Judge
Date: March 28, 2016
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