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March 28th, 2013

Seventh Circuit Smacks Down Prevaricating Plaintiffs with Extreme Prejudice

The U.S. Court of Appeals for the Seventh Circuit this week threw a hard fastball under the chin of plaintiffs’ lawyers from the firm of Robbins Geller Rudman & Dowd LLP for their habit of making allegations they can’t prove and quite possibly knew to be false.

The latest prevarication started back in 2009, as a 2011 Wall Street journal editorial explained, when the attorneys represented the Michigan city of Livonia’s retirement system and “sued Boeing for securities fraud related to the delivery schedule for its forthcoming  787Dreamliner, ” claiming the aircraft maker had “hoodwinked investors by withholding information about plans to delay the plane’s first flight . . .” in an effort “to prevent order cancellations.”

After the district court dismissed the plaintiffs’ first amended complaint because plaintiffs’ allegations about Boeing’s alleged fraud were “murky” and implausible, plaintiffs filed a second amended complaint, this time including allegations of a confidential source who was a purported high-level Boeing insider with knowledge of the alleged fraud.

But the source turned out to be a former contractor who was not employed at Boeing during the relevant time period, did not perform any work on the 787-8, and had no access to the alleged documents that could allegedly prove fraud.  This source testified during his deposition that plaintiffs had misrepresented his knowledge and lied about what he said, so the district court dismissed the case, ruling that plaintiffs’ counsel had made fundamental misrepresentations to the court.

With chutzpah to spare, the plaintiffs appealed, and Boeing cross-appealed, seeking sanctions.  The Seventh Circuit affirmed the district court, holding that the plaintiffs’ fraud allegations against Boeing were baseless, and that plaintiffs had misrepresented essential facts about the confidential source to the court in order to stave off dismissal of their complaint.  The court of appeals recognized that plaintiffs’ counsel had been criticized for engaging in similar misconduct in other cases, and remanded for the district court to consider “whether to impose Rule 11 sanctions on the plaintiffs’ lawyers and if so in what amount,” holding that “[r]ecidivism is relevant in assessing sanctions.”

Let’s hope the district judge throws the book at these clowns.

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