Royce v. Needle et al

Filing 403

MEMORANDUM Opinion and Order; Status hearing held on 9/15/2016. To begin with two items that need no further explanation, the motions in Dkt. Nos. 370 and 389 are granted. More substantively, for the reasons and on the bases set out in this opini on, and after full deliberation, this Court orders: 1. As stated at the beginning of this opinion's discussion of the various motions, Needle is directed to respond to Royce's Dkt. No. 387 motion on or before September 29, 2016. 2. Because of the inappropriateness of Needle's conduct during the limited period since he was granted pro hac vice status, that status is revoked. 3. With that done, Royce's Dkt. No. 394 motion is granted, and Needle and Needle P.C. are ordered to ob tain responsible new counsel to represent Needle P.C. in this action on or before October 17, 2016. 4. Needle P.C.'s Second Amended Answer, Affirmative Defenses and Counterclaims and all earlier versions of that pleading submitted in response to the Complaint in this action are stricken without prejudice. 5. Because Royce's Dkt. Nos. 365 and 367 motions have targeted portions of the now-stricken Needle, P.C. pleadings, those Royce motions are denied without prejudice, but solely on moo tness grounds and without any expression of views as to their substantive merit. 6. In light of the orders in Paragraphs 4 and 5, the September 13 responses to Royce's now-mooted Dkt. Nos. 365 and 367 (those responses comprise Dkt. Nos. 392 and 396) are also stricken without prejudice. 7. This action is set for a next status hearing at 8:45 a.m. October 25, 2016, at which time the newly-obtained counsel for Needle P.C. is expected to attend. Before the October 25 date that new counsel is ordered to seek to inform himself or herself to the greatest extent possible in the limited frame available for that purpose. It is this Court's intention that the new counsel should give prompt consideration to what portions of the now-stricken pleadings by Needle P.C. can properly be considered for reassertion in compliance with the objective and subjective good faith demanded by Rule 11(b). Signed by the Honorable Milton I. Shadur on 9/19/2016:Mailed notice(clw, )

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
It was apparent from the very beginning of this action that this multiparty multi-issue
lawsuit would pose a good many complexities. But unfortunately it quickly developed that those
anticipated complexities were increased exponentially, in large part because of the pattern of
obstructionism engaged in by one of the participants, Philadelphia lawyer Michael Needle
("Needle"). 1
Matters came to a head last Thursday, September 15, when a previously scheduled status
hearing intended to address some, and to schedule others, of the substantial group of contested
motions that had been presented during the past few months (over and above other motions that
this Court had resolved during the same time frame) had been frustrated by Needle's having
preferred -- not for the first time -- to pursue his own agenda in generating work product on
suit-related matters, rather than complying with the court-ordered timetable that would have

1

Because Needle conducts his law practice through his wholly-owned professional
corporation Michael R. Needle P.C. ("Needle P.C."), that entity rather than Needle individually
is the first defendant named in this action. As will be seen, Needle has employed that distinction
in creating some of the major unwarranted complexities in the litigation.

given other counsel and this Court the intended opportunity to review his input in advance of the
hearing. This opinion is intended to memorialize, in more ordered form, the oral rulings that this
Court made during the lengthy September 15 status hearing.
Before that path is undertaken, however, an important background explanation is in
order. As already indicated in n.1, many of the problems that have been created here stem from
the fact that Needle and Needle, P.C. are two legal entities. As is his right, Needle has chosen to
operate his law business through the P.C., of which he is the sole member and its president,
rather than as a sole practitioner. That should have been a constructive factor here, because both
Needle and plaintiff Merle Royce ("Royce," who conducts his law practice as an individual) will
necessarily will be major witnesses in phases of this litigation, and such considerations as the
lawyer-witness rule and potential conflicts of interest 2 really require each to be represented by
counsel rather than self-represented. Royce has had counsel representing him from the
beginning of this case, and so did Needle P.C. initially -- but as will be explained later, when the
original counsel for Needle P.C. withdrew because of irreconcilable differences with Needle, and
when that firm's successor counsel also withdrew after an extremely brief tenure, Needle
individually failed to fill the resulting gap for several months earlier this year, effectively
shutting down the ability of the lawsuit to proceed in a realistic manner.
Now to the task of recounting the several pending motions and how this Court was
compelled to deal with them in the difficult situation fueled by Needle's latest obstructionist
2

For example, 16 other parties defendant to this action were the plaintiffs in the
underlying RICO litigation that, through success via settlement, has spawned the issues
presented in this action, while Needle, P.C. and Royce represented them in that litigation. Now
major issues in this action, importantly including (for example) the extent to which the lawyers
and their former clients will share in the $4.2 million proceeds of settlement in the RICO case,
have clearly placed them at odds.
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tactic. Because there is no particularly logical sequence for treating the several motions, they
will simply be taken up in the order that this Court's notes and the transcript of the September 15
proceedings suggest.
Royce's motion to impose certain sanctions against Needle individually has the oldest
docket number (Dkt. No. 288). Because Royce's counsel views other aspects of Needle's
conduct as also calling for an award of attorney fees (see Dkt. No. 387), Needle has now been
granted until September 29 to file a response to the new motion, so that his previously filed
Dkt. No. 346 response and the new filing will speak to the entire issue.
Next, Royce's Dkt. Nos. 365 and 367 motions (both filed back on July 22, 2016)
respectively seek to strike certain affirmative defenses and to dismiss certain counts of the
counterclaim included in Needle P.C.'s most recent pleading, one that Needle and his P.C. refer
to as the Second Amended Answer, Affirmative Defenses and Counterclaims (see Dkt. No. 382,
which Needle represents to be an unredacted refiling of the pleading filed back on October 16,
2015 as Dkt. No. 179). Dkt. Nos. 365 and 367 are the principal motions to which this Court and
the movants should have received responses by September 7 (the date set by this Court's July 29
order), in ample time for a thoughtful review before the September 15 status hearing.
Instead Needle waited until the September 7 due date to move for an extension of time to
respond to those motions (Dkt. No. 385), then amended even that motion on September 12
(Dkt. No. 389). Under the circumstances this Court was of course compelled to grant the Needle
P.C. Dkt. No. 389 motion orally at the September 15 hearing and was consequently required to
grant Royce's counsel until October 11 to reply to Needle P.C.'s belated responses (Dkt. Nos. 392
and 396), each of which was filed on September 13, with copies not having been delivered to this

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Court's chambers until September 14 -- literally the day before the hearing that had been set in
late July. 3
Before this opinion returns to the remaining matters of substance, just a few words might
be said about another motion that was included in the docket printout that this Court had
obtained in preparation for the September 15 session: Dkt. No. 370, in which counsel for the
Amari Group (comprising 15 of the 16 plaintiffs in the underlying RICO litigation) asked to
correct the record of the July 7, 2016 status hearing during which that counsel had made a
mistake in one of his oral statements. To the astonishment of this Court, Needle -- who it will be
remembered professed to be too busy to comply with the court-set timetable for his responses -found some time to prepare and file a written objection to that motion because he argued that
counsel's oral acknowledgement of the error (part of the transcript, which is not of itself a
component of the written record in the case) would suffice, so that the moving counsel's motion
was allegedly ill-considered. Only when this Court remarked on the lack of useful purpose

3

What purpose would have been served by denying Needle and his P.C. the requested
extension? And that rhetorical question remains, despite the obvious falsehood of this assertion
made by Needle on behalf of his P.C. in the Dkt. No. 385 motion for extension:
An extension until September 12, 2016 will not delay or hinder the status
conference set by Dkt. 376 for 9:00 a.m. on September 15.
Not so -- after all, if the extension had nominally been denied this Court would not have received
the Needle P.C. response on time in any event. And because a postponement of the scheduled
September 15 status hearing would have disrupted this Court's preset schedulings in other cases
on its own docket, as well as disrupting any corresponding plans of the other counsel in the case
(not to mention the difficulties posed by attempting a multiple-party resetting of the date), this
Court really had to adhere to the long-scheduled September 15 date even though it was not
possible to address the Needle P.C. filings as had been the plan. It may be worth noting (though
ruefully) that Needle himself, who was ensconced in Philadelphia and participating
telephonically, would have been the least discommoded by any rescheduling.
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served by further cluttering up the written record with such a response did Needle recede by
orally withdrawing his previously-filed response (Dkt. No. 383).
To return to matters of far greater moment in this litigation, just two days before the
September 15 hearing Royce's counsel, obviously frustrated by Needle's conduct in the case -particularly the freeze caused by his several-month failure to obtain counsel for Needle P.C. until
this Court most reluctantly granted him leave to do so personally pro hac vice (despite the fact
that doing so created obvious problems, some of which have already been adverted to in this
opinion) -- filed a well-thought-out and well-presented "Motion To Compel Needle P.C. To
Obtain New Counsel and To Report in Writing on Efforts To Obtain New Counsel" (Dkt.
No. 394).
It would serve no useful purpose for this Court to repeat the powerful and entirely
accurate presentation in that motion, which this opinion simply adopts. Instead it is worth
repeating the brief oral statement that this Court made near the beginning of the September 15
status hearing, a statement that decried the imposition of monetary sanctions as an unsatisfactory
device for altering lawyer conduct in the respects needed here:
Imposition of sanctions is far from my goal in the litigation process. As with the
distinction that is well-known to exist between civil and criminal contempt, I have
always hoped that if sanctions have to be imposed, the consequence would be to
induce a change in conduct rather than serving as punishment for past conduct.
Here the nature of Needle's irresponsible behavior cannot be permitted to paralyze this
litigation and thus to keep it from reaching the merits as to all the parties to this litigation,
including Needle and his P.C., who stand to receive the major part of the $1.4 million that this
Court's earlier rulings have held to be the lawyers' share of the $4.2 million settlement of the
underlying litigation. In that respect it is most troubling that when this Court was called on
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earlier to assess a substantial financial burden on Needle through the payment of attorneys' fees
incurred because of improper conduct on his part, that imposition has regrettably had no impact
on his continued obstructionist conduct. That being so, it is plain that some other approach must
be devised to serve a coercive purpose as to Needle's future conduct, rather than simply
considering financial impositions alone.
Conclusion
To begin with two items that need no further explanation, the motions in Dkt. Nos. 370
and 389 4 are granted. More substantively, for the reasons and on the bases set out in this
opinion, and after full deliberation, this Court orders:
1.

As stated at the beginning of this opinion's discussion of the various
motions, Needle is directed to respond to Royce's Dkt. No. 387 motion on
or before September 29, 2016.

2.

Because of the inappropriateness of Needle's conduct during the limited
period since he was granted pro hac vice status, that status is revoked.

3.

With that done, Royce's Dkt. No. 394 motion is granted, and Needle and
Needle P.C. are ordered to obtain responsible new counsel to represent
Needle P.C. in this action on or before October 17, 2016.

4.

Needle P.C.'s Second Amended Answer, Affirmative Defenses and
Counterclaims and all earlier versions of that pleading submitted in
response to the Complaint in this action are stricken without prejudice.

4

Relatedly, that last grant causes superseded Dkt. No. 385 to be denied as moot.
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5.

Because Royce's Dkt. Nos. 365 and 367 motions have targeted portions of
the now-stricken Needle, P.C. pleadings, those Royce motions are denied
without prejudice, but solely on mootness grounds and without any
expression of views as to their substantive merit. 5

6.

In light of the orders in Paragraphs 4 and 5, the September 13 responses to
Royce's now-mooted Dkt. Nos. 365 and 367 (those responses comprise
Dkt. Nos. 392 and 396) are also stricken without prejudice.

7.

This action is set for a next status hearing at 8:45 a.m. October 25, 2016,
at which time the newly-obtained counsel for Needle P.C. is expected to
attend. Before the October 25 date that new counsel is ordered to seek to
inform himself or herself to the greatest extent possible in the limited
frame available for that purpose. It is this Court's intention that the new
counsel should give prompt consideration to what portions of the
now-stricken pleadings by Needle P.C. can properly be considered for

5

This Court will retain its chambers copies of those motions and their supporting
memoranda (Dkt. Nos. 366 and 368). If and to the extent that the counsel to be retained by
Needle, P.C. in compliance with this opinion were to determine that any of the contentions in the
now-stricken Needle, P.C. pleadings should be reasserted as passing muster under Fed. R. Civ. P.
("Rule") 11(b), Royce's counsel would be entitled to reassert the corresponding contentions in
Dkt. Nos. 365 through 368 via incorporation by reference rather than having to rewrite them
anew.

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reassertion in compliance with the objective and subjective good faith
demanded by Rule 11(b). 6

__________________________________________
Milton I. Shadur
Senior United States District Judge
Date: September 19, 2016

6

It should be made plain that this opinion does not at all derogate from the force of the
arguments previously made by counsel for Royce in the Dkt. No. 365 motion to strike and the
Dkt. No. 367 motion to dismiss various aspects of Needle's then-existent responsive pleading.
New counsel for Needle P.C. will be expected to give serious consideration to the contentions
advanced there, as this Court assuredly will.
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