Frivolous Antitrust Suit Leads to Malpractice Finding

• Pages: 9-9
• Date: 01 July 2024
• Author: Anna E. Mallen
• Subject Matter: Civil Law

o reasonably prudent attor-

ney would have f‌iled a state

antitrust lawsuit premised

on the notion that two local

wedding photographers

controlled the worldwide high-end

wedding industry. According to a fed-

eral court of appeals, counsel’s decision

to do so constituted malpractice and

rendered him responsible for a sanc-

tions award against his client. ABA

Litigation Section leaders emphasize

the importance of ensuring a client’s

claims are founded in both law and fact

before initiating a lawsuit.

Lowe v. Gammon began with a state

court lawsuit f‌iled by Champion, a

wedding photography company, chal-

lenging the enforceability of an exclu-

sivity clause contained in two other

local wedding photographers’ con-

tracts. Champion retained an attorney,

Gammon, to f‌ile the lawsuit against the

photographers, alleging claims of con-

spiracy to restrain trade and tortious

interference with existing and prospec-

tive contracts.

After obtaining summary judg-

ment, the photographers f‌iled a motion

for sanctions against Champion, one

of its employees, and Gammon. The

state court awarded sanctions against

Champion only, f‌inding that it should

have known that it was groundless to

assert that two local photographers

controlled the worldwide high-end

wedding industry. The $41,518.75 sanc-

tion award was upheld on appeal.

Champion subsequently f‌iled

for bankruptcy, and the photogra-

phers f‌iled a proof of claim based on

the state court sanctions award. In

response, the bankruptcy trustee f‌iled a

malpractice action against Gammon for

initiating the state antitrust lawsuit that

led to sanctions. The bankruptcy court

refused to adopt the state courts’ hold-

ings that the initial suit was groundless,

and instead moved forward with pro-

ceedings on the malpractice claim.

Both the trustee and Gammon pre-

Frivolous Antitrust Suit Leads to

Malpractice Finding

sented expert testimony. The bank-

ruptcy court held that the trustee’s

expert had failed to meet its burden

on the standard of care expected of

Gammon and that the trustee had not

proven its malpractice claim. The dis-

trict court adopted the bankruptcy

court’s f‌indings of fact and conclusions

of law, and the trustee appealed.

The Court of Appeals for the Fifth

Circuit analyzed whether Gammon or

other reasonable attorneys would have

f‌iled the state antitrust suit after a rea-

sonable inquiry into the facts and legal

requirements of the claim. The court of

appeals noted the factual information

Gammon had at his disposal to review

and that Gammon did not personally

conduct any signif‌icant research prior

to f‌iling suit, although he did have his

associate review at least one case. The

court of appeals determined that “a

reasonable inquiry into the evidence

[Gammon] had and the law that gov-

erned a state antitrust action would

have stopped a reasonably prudent

attorney in his tracks before suing.”

Therefore, the court determined that

Gammon breached his duty of care.

The court also considered whether

Gammon’s breach was the proximate

cause of damages. The court of appeals

determined that expert testimony was

not necessary to establish causation

because the error was “so obviously

tied” to the adverse result of sanctions.

In addition, the court of appeals held

that Gammon could have foreseen the

outcome of the case based on state

law that provides for sanctions when

an attorney f‌iles a frivolous lawsuit.

Thus, the court of appeals determined

that the trustee had also established

proximate cause and reversed the f‌ind-

ings of the district court. The case was

remanded to the district court to deter-

mine damages.

“This case illustrates why it is so

important, from the outset of a case, to

make sure a client’s claims are founded

in both law and fact,” stresses Blakeley

By Anna E. Malle n, Litigation News Contributing Editor

E. Grith, Las Vegas, NV, cochair of

the Litigation Section’s Bankruptcy

& Insolvency Litigation Committee.

“While the fact-analysis can be chal-

lenging at times due to an attorney’s

reliance on their client to provide accu-

rate information, the legal analysis is

really the key to assessing whether or

not to f‌ile a case,” notes Grith.

Claims in a lawsuit should com-

port with the real-world aspects of

the involved industries. “This opin-

ion underscores how important it is

that the pleadings and allegations of

any lawsuit must be grounded in real-

ity,” comments Allison W. Reimann,

Madison, WI, cochair of the Section’s

Antitrust Litigation Committee who

agreed with the court of appeals’ con-

clusion that there was a lack of investi-

gation into the claims being pleaded.

When representing clients with a

potential antitrust action, “it’s impor-

tant to have a searching conversa-

tion with your clients, who know their

industry, and really push them on who

their competitors are, what the geo-

graphic scope of competition is, and

how easy is it to enter the market,”

Reimann advises. In addition, Reimann

notes that, “in some industries, there

can be publicly available information

that attorneys may need to look into

to assess the strength of a potential

claim.”

SUMMER 2 024 • VOL. 49 NO. 4

9 | A BA LITIGATION SECTION

ETHICS STRU GGLES IN THE LEGAL WOR LD