Fundamental Administrative Services, LLC v. Anderson
Filing
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MEMORANDUM AND ORDER denying Defendant's 16 Motion for Sanctions; directing Defendant to respond to Plaintiff's 6 amended complaint. Signed by Judge James K. Bredar on 8/22/13. (dass, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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FUNDAMENTAL ADMIN. SERVS., LLC,
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Plaintiff
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v.
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KRISTI ANDERSON,
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Defendant
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CIVIL NO. JKB-13-1708
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MEMORANDUM AND ORDER
Pending before the Court is Defendant Kristi Anderson’s motion for sanctions, including
reimbursement of Anderson for her time and payment of attorney’s fees incurred in her defense
of Plaintiff’s complaint and motion for temporary restraining order, disqualification of Plaintiff’s
counsel, and dismissal with prejudice of the instant case. (ECF No. 16.) The motion is brought
by Anderson, who formerly served as general counsel to Plaintiff Fundamental Administrative
Services, LLC (“FAS”), against FAS; Linda S. Woolf, Esq., counsel for Plaintiff; Cheryl Zak
Lardieri, Esq., co-counsel for Plaintiff; and the law firm of which Ms. Woolf and Ms. Lardieri
are members, Goodell DeVries Leach & Dann, LLP. Defendant asserts that FAS deliberately
omitted material facts and manipulated the judicial process to gain an advantage in another court.
(Def.’s Mot. Sanctions Supp. Mem. 7, ECF No. 16.) Previously, the Court granted a modified
version of a temporary restraining order (“TRO”) requested by FAS, and then, after being
informed of later proceedings in a related bankruptcy case in the Middle District of Florida,
dissolved the TRO and denied preliminary injunctive relief. (ECF Nos. 5, 13, 15.)1 This
memorandum will not recount all of the previous proceedings but incorporates the Court’s prior
opinions. The Court has carefully considered the submissions of both parties but declines to
award sanctions.2
The Court first considers Anderson’s contention that FAS made deliberate
misrepresentations to this Court when it sought injunctive relief. Anderson says that
FAS concealed from this Court the fact that the Bankruptcy Court conducted
numerous hearings, considered dozens of briefs, heard hours of oral argument
over many months, and issued detailed discovery orders and lengthy
memorandum opinions about confidentiality, privilege and work product issues
relevant to the instant proceedings in this Court. FAS also concealed from this
Court – not surprisingly – that it lost every battle it waged to prevent disclosure of
documents to the Trustee, including twice bringing actions in other jurisdictions.
(Def.’s Supp. Mem. 8.)
Although the Court was not informed of chapter and verse of the bankruptcy proceedings,
it certainly was aware that the bankruptcy proceedings and related lawsuits were a very complex
affair that is far from its conclusion, and the Court naturally assumed that hearings had occurred,
briefs had been filed, and opinions and orders had been issued. The bankruptcy and related
proceedings and the instant case are quite different, although some, not all, of the concerns raised
by FAS in this Court overlap some of FAS’s concerns in the bankruptcy proceeding. From
FAS’s point of view, it was, and perhaps remains, concerned that Anderson has violated or will
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The determinative factor for the Court’s denial of injunctive relief was not any lack of stated merit, but
the availability of an adequate forum for FAS to raise its concerns regarding privilege and confidentiality and the
Court’s desire not to intrude unnecessarily into the proceedings of that forum.
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Plaintiff FAS filed its opposition to the motion (ECF No. 18), to which Anderson filed her reply (ECF
No. 21). Anderson mentions in a footnote that attorneys Woolf and Lardieri and their law firm, Goodell DeVries
Leach & Dann, LLP, did not file a response to the sanctions motion and, therefore, asserts that Anderson’s motion is
unopposed by those persons. (Def.’s Reply 1 n.2.) However, the Court notes that the motion was only served on
Woolf and Lardieri through the Court’s ECF system in their role as counsel for FAS. (Def.’s Mot. 2; Notice of
Electronic Filing for ECF No. 16.) It does not appear to have been separately served on Woolf or Lardieri as
individuals or on the law firm. In the absence of proper service on these entities, they need not be faulted for not
responding separately. Additionally, because all of their respective interests are aligned, one response is sufficient.
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violate her ethical and contractual obligations to FAS by exercising control over documents that
FAS asserts are the property of FAS and by sharing information she is obligated to hold in
confidence. The Court understands that Anderson has said she does not intend to violate her
ethical and contractual obligations to FAS, but this is only the other side in a case yet to be
resolved on its merits.
In a footnote in her supporting memorandum to the motion for sanctions, Anderson has
referred this Court to three orders entered by the bankruptcy court as orders FAS deliberately
failed to disclose prior to the TRO hearing:
An order entered July 12, 2012 (“Omnibus Order Establishing Discovery Procedures and
Protocol for the Production of Documents and the Examination of Witnesses”)
An order entered September 12, 2012 (“Order Denying Joint Motion to Vacate Omnibus
Order, or in the alternative, for Protective Order (Doc. 275) and Amending Omnibus
Order Establishing Discovery Procedures and Protocol for Production of Documents and
the Examination of Witnesses (Doc. 216)”)
An order entered October 18, 2012 (“Order Granting Motion for Rule 2004 Examination
of and Production of Documents from Law Firms Representing the Debtor or THMI
(Doc. 423)”)
(Def.’s Supp. Mem. 13 n.11.) The Court has located the first two of these orders in Anderson’s
exhibits, but has been unable to find the third order in her voluminous filing (850 pages) that is
undifferentiated by tabbing and indexing, as required by Local Rule 105.5.3
In the July 12 omnibus order, the bankruptcy court ruled on the participation of other
parties in the Bankruptcy Rule 2004 examinations noticed by the bankruptcy trustee:
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Future filings not in compliance with this rule will result in the Court’s not considering the exhibits.
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13. The Trustee shall be the only party authorized to demand production of
documents or examine witnesses under the terms of this Order. Subject to the
Privilege and Confidentiality provisions set forth below, all Rule 2004
examinations may be observed by the Debtor and any creditor or other
party-in-interest. Any person observing a Rule 2004 examination, however, may
appear only by video conference or by telephone. No in-person appearances by
any creditors or other parties-in-interest shall be permitted. Moreover, any party
observing an examination may not ask questions, make comments on the record,
object, or otherwise participate in any way in the examination, except to note on
the record their appearance as an observer.
...
17. All claims or assertions of privilege or confidentiality, and all objections
thereto, shall be preserved without further Order of this Court. If any person or
entity from whom the Trustee seeks the production of documents believes the
Trustee’s request is directed at privileged or confidential documents, that party or
entity shall provide the Trustee with an appropriate privilege log. . . .
(Def.’s Mot. Ex. O at 13-14 (Omnibus Order, pp. 7-8) (emphasis added).)4 The Court observes
that this order only allows an entity from whom the bankruptcy trustee seeks the production of
documents to object to production of those documents on privilege or confidentiality grounds; it
does not permit anyone else to raise objections to another entity’s production of documents.
In the September 12, 2012, order, the bankruptcy court denied the motion to vacate the
omnibus order (filed by FAS and related parties and to which Anderson had filed a joinder
supporting the motion), but amended the omnibus order in the following pertinent respect:
2. (b) Paragraph 13 of the Omnibus Order is amended such that any party
named as a Defendant in the Pending Litigation may appear in person and fully
participate in the examination, including asking questions, making comments, or
raising any objection they may deem necessary on the record.
(Id. Ex. O at 21 (Order Amending Omnibus Order, p. 2).) FAS is a “defendant in the pending
litigation” and, consequently, is governed by this amendment. The Court notes paragraph 17 of
the omnibus order remained unaltered and that the amendment in the September 2012 order does
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Copies of this order and the September 12, 2012, order were initially provided by FAS to the Court as
part of an attachment to an unfiled letter to the Court on June 14, 2013, following the TRO hearing held the same
day.
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not apply to the production of documents. To the extent that Anderson argues that these orders
(the Court does not consider the October 18, 2012, order because it is not before the Court)
provide FAS with the full protection FAS was seeking in this Court, that argument is not well
founded. Certainly, none is available in the July 2012 order. The September 2012 order granted
FAS a right to participate in the Rule 2004 examinations and to make objections to questions, but
it did not offer any protection to FAS if any entity other than FAS was one from whom the
trustee sought production of FAS documents. And it did not afford FAS the right to instruct a
witness not to answer beyond what would have been understood for FAS with an FAS witness.
These shortcomings were not really an issue as long as FAS and Anderson were on the same
page.
Between the Fall of 2012 when these bankruptcy court orders were entered and June 14,
2013, the date of the TRO hearing in this Court, a period of several months ensued during which
Anderson and FAS cooperated at least on an operational level in their defenses in the bankruptcy
and related proceedings. This was evident when Anderson was deposed in December of 2012 in
Baltimore, Maryland (Anderson resides in the Baltimore metropolitan area, apparently), in
connection with the bankruptcy proceeding. It is unknown by the Court if this deposition was
considered to be a Rule 2004 examination but it is assumed so. Regardless, it was attended by
various attorneys including FAS’s Florida bankruptcy counsel, Gregory M. McCoskey, Esq., and
Anderson’s counsel in this action, Steven N. Leitess, Esq., who also represents Anderson in the
bankruptcy and related proceedings. (Id. Ex. R.) During Anderson’s deposition, attorneys
McCoskey and Leitess frequently interposed similar objections to questions and, further,
reiterated their prior opposition to any requests for Anderson to produce documents for the
reason that any documents in which the bankruptcy trustee would be interested were not
Anderson’s documents but were FAS’s documents; hence, the trustee should request production
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of documents from FAS. (See, e.g., Anderson Dep. 47:22—48:8, 57:19-25, 79:24—80:25,
90:2—93:22, Dec. 5, 2012. See also Emergency Motion by Non-Party Kristi Anderson for
Protective Order (Bkr. ECF No. 348), Case No. 8:11-bk-22258-MGW (M.D. Fla. Sept. 17,
2012), filed as attachment to FAS’s complaint in Civ. No. JKB-13-1708 (D. Md. Jun. 12, 2013,
ECF No. 1-3.) This level of cooperation did not continue, however.
In April 2013, FAS terminated Anderson’s employment, and the two formerly
cooperating parties became antagonists. The merits of that termination are not before this Court,
but the conflicting feelings of who was right and who was wrong in the employment dispute
came to the fore and seem to have colored the steps taken by both parties thereafter. After this
dramatic shift in the parties’ relationship, a dramatic shift also occurred in the legal landscape.
Anderson and the bankruptcy trustee negotiated a settlement that resolved all legal actions
brought by the trustee against Anderson, including the adversary proceedings that had originated
in bankruptcy court and been transferred to federal district court; these proceedings had been
brought against both FAS and Anderson.
In exchange for the anticipated dismissal with
prejudice of the district court actions and for the release of all claims against her or her counsel
that had been or might have been asserted by the debtor or trustee, Anderson agreed
to withdraw her objections to production of litigation files and other relevant documents
responsive to the trustee’s discovery request, preserving only her personal attorney-client
privilege and that relating to her counsel’s work product in connection with her defense
of the district court cases, her participation in the bankruptcy case, and her employment
matters;
to appear for a continuation of her Rule 2004 examination;
to produce any documents in her possession, custody, or control related to (a) the debtor’s
assets, liabilities, and business, (b) control of the debtor’s assets and operations,
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(c) potential Chapter 5 causes of action, (d) the interrelationship with other business
entities, and (e) the potential need to include other business entities or assets in the
Debtor’s bankruptcy estate, “as well as any further documents the Trustee may request in
the future, subject only to the objections of third parties to such production.”
Further, the settlement agreement allowed the trustee to move for and obtain a “bar order” from
the bankruptcy court precluding third parties from suing or making any claim against Anderson
or her counsel for complying with the anticipated order granting approval of the settlement.
Third parties included FAS. Finally, Anderson was permitted to otherwise pursue separate
resolution of claims, whether threatened or brought, by third parties, including the debtor’s
creditors and their attorneys, or other parties in all cases and venues.
(Joint Motion to
Compromise Controversy with Kristi Anderson (Bkr. ECF No. 876, June 6, 2013), filed as
attachment to FAS’s complaint (ECF No. 1-6) on June 12, 2013.)
Thus, on June 6, 2013, FAS’s former general counsel, who had previously cooperated
with FAS in the defense of bankruptcy proceedings and the related lawsuits and who regularly
and strenuously asserted privilege and confidentiality objections in tandem with FAS, indicated
to the bankruptcy court she was prepared to waive all of those objections except as she could,
individually, assert, and to provide documents when earlier she had repeatedly denied having any
documents for the reason that any such documents belonged to FAS. At that juncture, no
bankruptcy court order, of which the undersigned has been made aware, permitted FAS to
instruct a now-hostile, non-employee witness not to answer in a deposition or to object to her or
to anyone else’s production of FAS documents. Now, perhaps, these rights had been dealt with
on a practical level, but they are not enshrined in the two formal court orders to which Anderson
has directed this Court’s attention. Consequently, it would be a misstatement to say that, in its
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filings in the instant action on June 12, 2013, FAS omitted material facts about bankruptcy court
orders addressing matters of privilege and confidentiality.
In fact, defense counsel represented to this Court at the TRO hearing that FAS did have
such rights and that any objection made by FAS, if not resolved by the parties themselves, would
have to be ruled upon by the bankruptcy court judge before further testimony or production of
documents occurred. The Court took defense counsel at his word and only dissolved the TRO
and denied preliminary injunctive relief based upon his representation as to the governing
procedure in the bankruptcy and related proceedings. In hindsight, perhaps the better choice for
FAS was to have sought an order from the bankruptcy court specifically incorporating that
procedure, but this Court recognizes how quickly this turn of events occurred and does not see a
basis for sanctions premised upon FAS’s choice to seek this Court’s help in holding Anderson to
her ethical and contractual obligations.5
The Court also notes that the instant lawsuit involves more than a request for injunctive
relief regarding those obligations. It also includes a request for a declaratory judgment as to
FAS’s liability to pay Anderson’s attorney’s fees (Count II) and restitution as to prior payments
out of FAS’s funds for Anderson’s attorney’s fees (Count III). These counts are entirely separate
from any matter being addressed by the bankruptcy court and involve questions of Maryland
law. Thus, the Court will move forward on the second and third counts of the amended
complaint and hold in abeyance any proceedings in Count I (for injunctive relief) pending
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The Court takes pains to emphasize it has not formed a judgment one way or the other as to the merit of
FAS’s allegations in this regard and does not wish to imply that Anderson has certainly violated her obligations to
FAS or ever had the intent to do so. The matter remains an open question to be resolved over time.
Anderson has also premised her motion for sanctions on an exchange in open court in which FAS’s counsel
said that FAS had no standing to object to the then-proposed compromise between Anderson and the trustee;
Anderson asserts the Court was misled. (Def.’s Supp. Mem. 12.) In fact, the Court was not misled because it never
relied upon that statement in fashioning the TRO. The Court specifically excluded from the TRO FAS’s request for
the Court to prohibit Anderson from entering into the compromise, instead focusing only upon Anderson’s ethical
and contractual obligations. In short, the Court paid no attention to the statement. The point is moot. As well, the
Court is not persuaded that FAS went “judge shopping.” (See Def.’s Supp. Mem. 23.)
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resolution of related matters in the bankruptcy proceeding. To the extent Anderson has relied
upon her motion for sanctions with its accompanying request for dismissal with prejudice of the
entire case to suffice for her response under Federal Rule of Civil Procedure 12, the Court will
grant Anderson the standard response time from the date of this order in which to file her
response to the amended complaint.
One final matter must be addressed. In addressing this motion, the Court has had the
opportunity to review a body of correspondence between FAS’s counsel and Anderson’s
counsel. Although the Court well understands that legal proceedings often engender visceral
reactions between opposing parties, it is nevertheless the expectation by this Court that members
of the Court’s bar will communicate with each other in a civil and restrained fashion and avoid a
descent into name-calling or hurling accusations of misconduct or malicious intent against one
another.
The Court notes the presence of inappropriate statements in the correspondence
between counsel and cautions them to rein in themselves in future communications. As well,
counsel should show restraint in the language employed in filings with the Court, unlike some of
what has been filed to date. The Court does not wish to refer any member of its bar to its
disciplinary committee but will not hesitate to do so should counsel fall short of the Court’s
expectations. Counsel should govern themselves accordingly.
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Accordingly, it is hereby ORDERED:
1. Defendant’s motion for sanctions (ECF No. 16) is DENIED.
2. Defendant shall respond to Plaintiff’s amended complaint (ECF No. 8) within the time
allowed under the Federal Rules of Civil Procedure.
DATED this 22nd day of August, 2013.
BY THE COURT:
/s/
James K. Bredar
United States District Judge
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