Legal News

Judge Has Stern Words (But No Fine) for Associates at Sanctioned Firm

By Dan Slater

Last month we posted on some provocative comments made by a bankruptcy judge, who, in deciding not to impose attorney sanctions, suggested that flat-fee pricing in foreclosure proceedings was leading to shoddy, assembly-line legal work. Now we’ve got a decision where a judge did impose sanctions.

On Friday, two law firms — Buchalter Nemer and Ablitt & Charlton, along with name partner Robert Charlton — got whacked with a combined $150,000 in sanctions. In a decision regarding an order to show cause in the case, called Nosek v. Ameriquest, bankruptcy judge Joel Rosenthal found that, throughout earlier proceedings, lawyers at both firms, in representing Ameriquest, had continually represented that Ameriquest was the holder of Nosek’s mortgage, when in fact it had been assigned, at least twice, to other lenders.

Judge Rosenthal held: “At a time when mortgages and notes are bought and sold at a pace so swiftly that the assignor and assignee cannot keep up with the paperwork, had the attorneys at the Ablitt firm checked the firm’s file, they would have seen that Norwest was perhaps the real party interest. . . . The firm cannot shield itself from institutional knowledge.” Rosenthal fined the firm $25,000, and attorney Robert Charlton another $25,000. (The Buchalter firm was fined the remainder, or $100,000.)

But how about the two associates who assisted Charlton in the case? The judge took a more generous view toward them, despite the fact that each had signed documents that said Ameriquest was the holder of the mortgage, when in fact it wasn’t. “[T]he Court is mindful that young associates are often not in a position to question the assignments given to them. Because the affidavits are unclear as to what each associate was told when given the assignment, the Court will not impose monetary sanctions on [the two associates] but will let this decision serve as a warning that in the future the Court expects associates will be cognizant of and fulfill their responsibilities . . . .”

We reached out to both firms, but haven’t heard back. Of course, we’ll let you know if and when we do.

LB’ers, what say you? Should the two associates get off with only a wrist-slap? Are associates generally “not in a position to question the assignments given to them”?

Full post as published by Law Blog - WSJ.com on April 29, 2008 (boomark / email).