argument not to exceed twenty minutes per side mr read when you're prepared you may proceed for the good morning runners my name is or will read and i along with my partner david hawker briefed on this matter on behalf of the cabbage fur and co counsel mr cornet who is at the trial t today and his associate melissa kelly briefed the issues on behalf of the individual defendants interested parties rather the individual lawyers in your honor it was decided because the constraints of time that i would make the argument today i have asked the court to allow me five minutes in rebuttal thank your honour's we are here today to ask this court to allow the individual lawyers at cabbage and the cabbage firm to reclaim the good brand names and reputations which they lost as a result of the decision made by judge pearson in this case it is clear that people get fooled and get duped every day unless we had the ability to operate with hindsight as none of us do because we are mere mortals and not gods there will be the bernie madoff's there will be the elizabeth holmes and there will be countless other ponzi we live in the murky world trying to figure things out as we walk through life in the blue of the moment and that's precisely an issue i think that the court has to address here the lawyers in this case undertook the representation of h e i health care essential and and they did so because of the fact they had been sued on march th two thousand and fourteen by a large in the country they came with the story and the story seemed to make sense the story was that we are competitors of k c i and what we do is we are able to locate used fax or some used vax on e bay and we sell them to health care institutions or we lease them to health care institutions just as k c i does only we do it much cheaper  they also came with the story that not only do we have a business that is based upon a secondary market namely e bay but we come here with a story that says casey i wanted to bias out casey i wanted to partners with us but in fact we could agree upon a price they would pay us what we wanted and now they're trying to put us out of business through that a geisha and in fact they were able to produce e mails that said that very thing so like like the the folks that i've described before the elizabeth homes in the bernie made office in the charlie ponzi they came with a story and they came with a story that made sense in fact if you look on e bay you will find that vax made by manufactured by k c i and or manufactured by smith and nephews are available on e bay it's also true as we learned during the course of the case now with standing denials made by k c i during the case that they don't sell they don't sell vax that might become available on e bay they only lease them to health care institutions still nursing facilities hospitals things like that in fact we learned that about a one thousand a year are sold not necessarily in the united states but throughout the world their company which in fact is a small company what happens over the course of the case is that there are a lot of discovery disputes there's a lot of push and shove back and forth a lot of unhappiness over whether or not people have to comply with discovery or not there is a a moment that occurs in in january of two thousand and sixteen and that is when magistrate well involvement of the north in the northern district conducts a hearing and the actually the hearing was was called because of the fact that k c i had asked for sanctions but in that again in that hearing representations were made that we've just we have produced what we have we've given you what you've asked for we have no more to give you there is push back and in the end of the day after all that happens the parties agree that they should go and you're are i again those are representations that are consistent with what the client told mr to and as they saw as a conversation ensued it was determined that maybe we should go back and talk to i've read that discourse that in fact there was concern raised that in fact things were out there that had been accounted for in addition to the fact that they had acquired that x since the been filed on an ongoing basis and i think that was the purpose of the agreement that was made and everybody left thinking that was going to happen mr reed you're representing the firm and the individuals is that right i am i'm speaking we've read all of this stuff as complicated as this one is if you get to the merits of this did the attorneys do enough to ascertain whether or not what they were being told by their clients which turned out ultimately to be false in order to be able to make the representations they made to the court so that's what i'll say is sort of the merits question of the sanctions read one of your arguments is that the individual attorneys didn't have an opportunity that the judge should have given them to be able to explain away their actions essentially that is you had it right you're not making the same argument i may have the firm are you know you are not no we because we were apprised at the time the motion was filed that it was directed directed against cabbage that in a vigil is until way way later you're out of the or even a footnote i've just asking as one member of the panel it would be helpful to me if instead of all this background that were largely from miller with if you would go right to the question of did they have an adequate opportunity to respond all right your honor and your honor there's no question about the fact that the individual lawyers were not notified until the footnote that appeared in the rip in the reply brief that they were the object of the sanction motion up until then it appeared as though the the motion proceeded on to make the decision did they have an opportunity your honor they did file affidavits because in fact they were the ones who were generally familiar with the operative facts they did file have david's but i think your honor basically it is contrary to fundamental fairness to find yourself in a reply brief only to reply brief as the object of a motion for sanctions it's not that they didn't have a chance to say something they did but i just think it is so it didn't happen it didn't matter you were in prohibited judge didn't say you may not file anything did we did we did not ask to file anything your honor after we moved to strike the footnote i'm curious why would the firm be liable if the individual attorneys hadn't acted wrongfully why wouldn't the firm be alive why would the firm be liable if the individual attorneys had acted improperly so in other words if you knew the firm was going to be subject to sanctions wouldn't it be because of the individual attorney's actions of course rather of course it was only because of what those lawyers did in the representation of h e i and ryan te and that required us to of course to tap into what they knew and what their positions were relative to the various charges that would be made and they filed affidavits accordingly that is absolutely correct your own working absolutely your honor and still are but that seems to me that it really harms your ultimate argument that the individuals didn't have a chance to respond because if the firm acts only through the individuals you've conceded the firm had an opportunity to respond  the individuals cooperated with the firm so that the firm didn't get sanctioned right bertram so we're left to speculate then as to even if we buy into your un american argument whatever that means that we speculate about what the individuals would have done had they known that they were individually subject to sanctions other than in this footnote because reading this it other than saying gosh this is unfair you don't say what they would have done had they been given an opportunity you claim they should've been given that they weren't your honor and i know what you're saying i understand that and i will say this that when we filed our defense our opposition to the motion the people that i'm talking about the individual lawyers of course pivotal players in making those in making the affidavits and making the arguments because they knew the facts and so perhaps what we should be focused upon is the nd aspect of the due process argument but i think you've cut to the quick on that your honor and that is the issue of the issue of whether or not there should have been an evident hearing granted by the judge and i would respectfully submit that there should have been an evidentiary hearing now i'm well aware of the fact that there's case law that speaks to the issue of whether or not there has to be an evidentiary issue an evidentiary hearing in every single case involving sanctions and i know the law is not that every single case has to arise is the level of requiring any help yet again you having further to yes ok real argument as i understand it is  got to do that at least in a fashion there is going to run and then the judge relied upon that while at the same time denying your clients the same opportunity that casey had or took advantage of earlier this credit o write about it but it still begs the question about are you get a hearing this would be a lot more persuasive if we had some sort of sense as to what are you going to do during a hearing that you didn't already do given the fact it looks like you had the opportunity to do it through the law firm well ok here are let me true you just agreed with all that i know i don't agree i think it's true that we did everything we could do but what you don't know what i want to focus on is is the issue of whether or not there should have been an evidentiary hearing to test the substance and the contents of the motion for sanctions filed by k c i the motion contained excerpts of evidence from certain witnesses for example rose edger she was a pivotal player in the courts determination that of the most reprehensible finding and that is that mr i'd sue engaged in the fabrication of evidence there's nothing that could be more harmful to a lawyer or to his career or to his aspirations then to have a judge say you engaged in the practice of fabricating misleading information and evidence to your thing  should have had the opportunity to put these people to the test rose edger was was not we were not present when she was deposed she was deposed she was deposed after we had left the case and she was depose counsel for k c i we were not part of that we were not privy to that we're not invited to that and then they took bits and pieces of the of the deposition and submitted them to the court let's just stop right there ok so they make sure i understand what  has said and i'm sure their counsel is going to say this morning is that cabbage knew they were subject to being sanctioned and that they were aware of these various court proceedings or they could have been aware basically now you're going one step further you're saying that there was a deposition was there any way in which cavity in which either the law firm of the individuals knew of or should have known about that deposition ignoring even whether they would have had the right to participate had they show right and the answer is no we did not know that he did not know about the nd deposition of rose edgar edger nor did we participate in it and that was then relied upon at least in part by judge pearson and that's correct your honor i got yours and relied on case here the law firm knew that they were subject to a motion for sanctions the individual defendants the motion wasn't even directed so that was not even it's not even in the ballpark but then the show one thing in the interest of full disclosure and that is that we were aware that there was going to be a hearing addressing this issue fairly that was something that we said that led one of our attorneys to appreciate the fact that there was going to be an attack against you clearly were aware because you filed definite you filed this right your honor of the brief in the morning that's my point i am going beyond what happened at the hearing that you knew of whether that was adequate or not is a different question there were things outside the hearing you didn't know no one but someone got an inkling we filed a brief not even part of the hearing i mean it's or you could go as a spectator and sit back but you're not a party to the show cause hearing because it wasn't noticed against you and i  as attorney about cabbage and the individual lawyers even though the subject of the hearing was the two principal defendants in the case the  terms of the imposition of sanctions against the was there a motion for sanctions against the because i thought judge pearson said during the show cause hearing that he was not going to address right the written motion was this is your record yes you're out of the written motion your honor was addressed to the cabbage from ok and the cabbage firm response and the cabbage firm and so at that point there's equality in terms of  and you i assume you pointed that out in your response to the motion for saying yes rather and you could have presented written evidence in addition to asking for an oral here right we asked we asked for an evidentiary hearing your honor that's what we may please the court i'm tom crist and i represent case you are usa because of most of the recitation of the facts in most of the rez recitation of the record there were just offered are entirely incorrect per the court orders i'd like to go directly to the heart of the two motions that were filed and the heat in the hearing that was had there was adverse to the defendants judge griffin you asked in focused on important issues i could back up a few months before those two hearings and two motions k c i in the beginning of two thousand and seventeen had filed a motion to show cause against the defendant that largely related to the defendant's failure failure to produce evidence in the case respond to discovery there was a long period of stay in two thousand and seventeen upon the defendant's motion due to related criminal cases against two of the defendants principals so we moved forward until june of two thousand and seventeen and had a telephone conference with defendant's counsel i was on the call as was the cabbage laufer which is referenced in the court's orders and i asked the court to set a hearing on a motion for case terminating sanctions against the defendants in shared with the court information that casey had recently discovered from the hard drive that have been secret from  i throughout the entire litigation but this time cabbage is already out this by that time cabbage was their client and the client is new counsel that's right and the court had invited them to the call because cabbage was still in the process of trying to explain activity that the cold court ultimately determined was sanctioned so why was it appropriate for a judge pearson to rely upon what happened at that hearing when there was no motion against cabbages no motion against the attorneys they're not a party they made it i don't know you can say they had enough that they could have come had they wanted to but what was their obligation to call for simply the court didn't rely on the testimony that was offered at that hearing the motion for sanctions came later and this is sequences very important in june the court said is for an august hearing on a case you guys motion for case terminating sanctions against the defendants there's no mention of back to that hearing in question because i can clarify if if you want one moment because there's a very important motion for sanctions against cabbage the omnibus motion stood on its own meaning every bit of evidence that is referred to a reference by the court in any of her orders related sanctions against cabbage is found attached to casey has motion for sanctions against catch a small amount of it was also mentioned at the other hearing so when we had our june conference with the court on which cabbage was present and the court set us for an august hearing on case terminating sanctions against the defendants the court also instructed us let her know let the court know if we discover anything else will be important to the court specifically on the hard drive that cabbage the cabbage lawyers and the defendants had secret from us so in preparing for that august hearing we found direct evidence of cabbages involvement in covering up their client's criminal enterprise so we filed a bench brief the vast majority of the bench brief relates to case terminating sanctions against the defendants a whole section of that brief identifies clear evidence for the court's later orders the c created evidence that the lawyers head had committed multiple frauds on the court we attach affidavits that they had that the cabbage firm had prepared that were knowingly false and we concluded that evidence and make clear in the bench brief this is our to make you judge understand what we have found and this additional disk and why it's important we're still not asking for a remedy against cabbage at the hearing and case terminating sanctions cabbage filed an extensive brief in response with affidavits of counsel with their citation to deposition testimony and legal argument and wrote that we haven't done anything wrong and we stand ready to prove it the court for reasons unrelated to our case continued our hearing on case terminating sanctions against the defendants until the st week of november november th of two thousand and seventeen cabbage filed a nd brief during our drive to the courthouse that again argued and provided testimony supporting their position they had done nothing wrong and again offering to at any point explain themselves they didn't come to the hearing now as a spectator you know you're  don't think i would have standing to participate in hearing just because you mention party in a parade doesn't give them notice that they find incredible what with respect that that is not what happened to the courts or as per the court's explanation what happened at that hearing was i stood at the lectern and i flipped through ten years of exhibits that have been secretive from k c i the vast majority of which related only to the defendants however some of them were e mail strings between the defendants and the cabbage lawyers in the cabbage law firm so i introduced evidence adverse to the defendants while seeking a remedy against the defendants that necessarily implicated cabbage in a few instances a week later at that hearing you were thinking only things case termination against the defendant and the district judge plea at that hearing we are not considering thanks and again kept that correct that's correct at the hearing and after the court indicated she didn't did nothing to evaluate attorney misconduct or sanctions related to attorneys or law firms at that he a week later eight days later casey i filed a completely separate motion that was a motion for sanctions with respect to attorneys completely separate motion when you think or with respect to attorneys a motion for sanctions all right but it seems to me it's against the law if the entirety of the argument to the entirety of the evidence submitted is directed at the individuals by name including communications by them were intended to make individuals i mean they're not the same they're not the same entity right but understood well since we filed a motion against a law firm and we referenced individuals it actually ought to be considered to be a motion against all law firm and the individuals because we wreckers i don't think so with all due respect john we did a lot more than reference this is this can be made a lot easier obviously if you're seeking sanctions against the firm you have to talk about what the individual  firm did because that's how the firm acts but what did you seek in relief at the end of that motion sanctions against the firm or sanctions also against the individuals both and as clarified in the reply brief your relief section of your of your motion the st motion if we argue that the two could only when it was a relief section say the final line i believe the final line asked for sanctions against a law firm so i mean we understand that then then you threw in this request for sanctions against the individuals in a reply brief but we got lots of cases that say you can't expand the scope of what you're asking for in reply briefs but the so the mere fact of that that they showed up through grief i still can't get by this concept that you are you are proceeding against the firm only and then you end up at the end for sanctions against individuals how do you explain how do we justify that per hour what the court determined here below is that because all of our allegations in the meet of all of our briefs mentioning sanctions asking for sanctions were very clear about the misconduct that were the basis of the motion for sanctions it was all directed in great detail against the individuals with the argument that the law firm should be liable for failing to supervise and control the individuals and for the withdrawal of that was done without appropriate notice to the court so all of the arguments through starting with the bench brief all of the arguments in the motion for sanctions all relate to the meat of the three individuals razor out so when was you found any case that comes even close to awarding look for one because our positions that's not what happened here you know again let's let's presume that as as the opponent has argued that despite the content of the briefs that they didn't understand that until the reply brief that they were one of the focuses of the motion for sanctions well they clearly were a focus in the sense that their actions were what were the basis of your request for sanctions against the firm but it i would just say i'm not saying i would have done the same thing they did but it but looking at it it just looks like for whatever reason you made the determination you were going to go after the firm and not the individuals for things that the individuals did that's what happened isn't it at least at that phase again not based on the hard content of the briefs that we cited to the court relied upon in her order you know we see this in other contexts all the time that you may have a general motors truck driver who gets in an accident and kills somebody rather than sue john jones the truck driver the plane of sues general motors under respond the out superior theory also thinking the deep pocket i'm going to get a bigger judgment if i go against an employer rather than the individual well john jones is always through the complaint because john jones is the guy that drove the truck did everything wrong but he can't he can't get a judgment against him individually because guess what he hasn't been sued and he might be part and parcel of the whole thing but guess what he's not sued he's not liable and usually the same thing applies to motions if you file a motion against somebody and you're going against the the employer rather than the employee well maybe you'll get get it through the employer but the employee's not on the hook i mean it's the same principle here that i bet you made a choice i certainly understand the concept well but i'm septa's it is accurate is it i mean you can sue the the employer not sue the employee and the employee if you don't sue him is not liable right that is true even though he did everything wrong sure that's exactly what you've got here is i don't i don't think it is at all based upon the content of the briefs and the content of the court's orders so the court below very clearly found that it was illogical for cabbage to make the argument that we knew you were aiming at the firm but not at us which is an argument they've made periodic lee going one way or the other sometimes they state we thought it was the lawyers who were it who should be concerned other times we thought that it was it was the law firm so the content of all of the briefs all of them focus on those three individuals in the court made specific findings about each of the individual the court also has inherent authority to sanction parties without a motion or to court when did the judge give independent notice to the individuals that she was considering sanctions other than in the final order courts where the horses left the bar rip rip repeatedly both both the magistrate judge and the district court back in two thousand and fifteen there were we filed two motions for sanctions at both hearings cabbage appeared at both hearings the court warned cabbage and the cabbage lawyers specifically the three gentlemen who were ultimately sanctioned that they could be sanctioned to ruhleben they could be sanctioned and found jointly and severally liable for case you guys attorneys fees that if any of the statements they were making were proven later to be false that the court would sanction them those individuals raise or to n y c no mention of law from the court in january of two of two thousand and sixteen set aside our motion for sanctions and again  individual lawyers the same way having filed briefs and having argued orally the district court st saw the parties in april of of april of two thousand and sixteen upon the law firm and the lawyers motion for leave to withdraw we were back in front of the court in august of that same year where the court had presided over a specific hearing at which she questioned the individual lawyers and the law firm cabochon to three ultimately sanction lawyers about the improper withdraw about their lack of candor to the court about the refusal to give the court or anyone notice and warned them all of this is then superseded by her statement on  november th or whatever that date was that the question of sanctions against the lawyers is left for another day not yet that's right it was not considered in the day in which the court i want to change the focus just a little bit so that i don't lose the opportunity to ask you this question if we run out of time i want you to assume hypothetically for a nd that we send back the question of the sanction order against the individuals for any of the reasons that we've talked about i know you disagree with that i'm not asking you to agree with that i just want you to assume that to be the case for purposes of my hypothetical at that point it seems odd to me that we would affirm the award of sanctions against the firm given that the basis of the sanctions against the firm are the actions of the individual which we're asking her to go back and and reconsider so it least to have some sort of logic here or  it would it make sense to you that if we in your mind mistakenly send this back for the individuals that we would send the firm back of the same time or is there or is there a principle basis to affirm what she'd again did against the firm but send it back as to the individuals it's an interesting question i think that the court specifically found that the lawyers in the law firm withdrew under false pretenses did not correct the record and specifically made that finding against the individuals and the law firm at a hearing that occurred or year prior to our motion for sanctions so let's wait ample grounds and just try to figure out what did the law firm do that was separate and independent from what the lawyers that allegedly committed miss conduct do per person some citations of the court failed to supervise their lawyers and there was testimony offered by catalyst but let's go to that for  a nd i mean that makes logical sense but what why would it make sense to say the firm continues to be liable for failure to supervise if when there is a testing of the allegations against the individual you find that they didn't do anything wrong then it doesn't make any sense to leave the sanctions against the firm for failing to supervise something that wasn't wrong understood i don't know how some other rw way then did to withhold to withstand the attack against the firm if in fact we send back the question of the individuals the only specific reference to the court is is that once the lawyers at kava chev admitted that they became aware of their client's criminal enterprise they explained to the court on the record that the firm internally evaluated how they would withdraw and the law firm made a decision that they would withdraw without correcting the record or giving notice or providing the disc that they had secret for a long period of time and sixteen hearing the cavaliers explain that the decision was made by their management in conjunction with their general counsel who was the one speaking and who explained that to the court and that is actually the timeframe in which the court determined attorneys feel liability for the lawyers in the law firm the time between the statements leading up to the withdraw and then the time when k c i ultimately receive the hard drive of most of the defendants data that had been secret but the only the only way that makes sense at least to me is to say that the amount of sanctions against the law firm would be the same regardless of whether the accusations against the individual stander not upon further reflection because of the one instance at the end where they withdrew and didn't and didn't act properly so if you accept the promise that that was worth three hundred thousand dollars then i understand that you're you're absolutely right but we don't know whether the judge would have sanctioned firm in that full amount had the individuals established to her satisfaction as fanciful as that may be that they didn't do all the other things they were accused of that a fair statement it could be i think there's a lot of twists there that belie the court's findings that are specifically written about the law firm and specifically written about the lawyers i do understand what you're saying but the duty of candor that's owed to the court was one of the court's main focuses here in the court found that the entire withdrawal of the firm and its counsel was done wrongfully in a way that harmed k c i for a period of months and cause them to spend their we three quarters of a one million dollars as a firm as an entity whether it's a partnership or a p c or whatever it is does the does a firm a separate duty of candor to a court as opposed to that duty that we all would acknowledge is owed by the lawyers who work for the firm that are appearing before the c here i don't believe we've looked for a case that specifically addresses that however you do have a law firm that has stated through its management that it made a decision to withdraw armed with certain information that the obviously those have to be made those decisions have to made by people those people are lawyers as well interestingly enough they made the decision based upon advice of counsel yes which they're now being sanctioned yes and there was a motion to supplement the court determined they were insufficient but the district court district court if you have not had access to any time to the x no we will stand on our briefs with respect to the cross appeal our position is essentially the court apportioned twice which is inconsistent with the good your case once apportioned the the the lawyers responsibility for fees which was substantially less th she found the defendants liable for a single apportionment permitted under rule thirty seven dollars and then after finding that the attorneys were the but for cause of seven hundred and five one thousand dollars of fees that were actually caused using that language it could not have been caused but for their misconduct the court again diminished diminished a nd time and apportioned a nd time which we contend is an abuse of discretion very limited question that and you asked whether there were any case law to establish the proposition that a person who is not been told is going to get sanctioned ends up getting sanctioned and your honor i think there's a case that approximates what you're talking the court found that the client was responsible for all the fees because of its conduct in trying to do an end run around of form shopping and so on and so forth then it also said but even though  the plaintiff didn't ask for the defendant did not ask for damages against the lawyers we find the lawyer's conduct assisted them and we would hold them twenty five percent but since you didn't ask for sanctions you only get seventy five percent of the sanctions so there was one of the issue that was raised here oh the reading decision they said the reading decision for the proposition that they should pay all the fees actually reading stands for the proposition that the guilty party the fraudulent party should pay for all the fees and in the reading case case out of the district court of montana again post hagar in that case it was just the lawyers who engage in the fraud the plaintif had no idea what was going on they were using her to cover up their prior malpractise no prior conflict of interest and the court said you're liable for everything and that was right and it's consistent with what the court did in in hager in the hangar decision the court found that eighty percent of the fees should be paid by them the good your team which consisted of a good year it's counsel in house counsel as well as its outside regional director the local council was only good for twenty percent this it same thing happened here the court is looking for gradations of involvement and in this case there is no question that the fraudulent party throughout all of this he is not god fearing he is not judge fearing he is he is brian ten a bar who who acted in fines to the law at all times he's the person who caused this we got pulled a long long in its wake we should be healthy and it's our large be responsible for no