Lake Eugenie Land & Development, Inc. v. BP Exploration & Production, Inc.
824 F.3d 571
5th Cir.2016Background
- The Court-Supervised Settlement Program (CSSP) for Deepwater Horizon claims investigated misconduct by staff attorney Lionel Sutton and outside lawyers, including Jonathan Andry and Glen Lerner.
- Sutton (a CSSP employee) and his wife previously represented claimants and referred clients to Andry Lerner; while employed by the CSSP Sutton received referral payments routed through Andry and Lerner.
- Special Master Louis Freeh conducted a 66-day investigation, issued an 89‑page report finding misconduct, and recommended disqualification of Andry and Lerner from the CSSP.
- The district court held hearings, found Andry and Lerner violated multiple Louisiana Rules of Professional Conduct (including rules governing fee divisions, candor, and misconduct), disqualified them from further CSSP participation, and froze/escrowed certain earned fees.
- Andry, Lerner, and their firm Andry Lerner, L.L.C. appealed the sanctions and the denial of a motion to modify escrow restrictions; the Fifth Circuit affirmed the sanctions and left open reconsideration of escrow terms on a properly supported motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| District court's inherent authority to sanction/disqualify for CSSP misconduct | Lerner: court lacked inherent power because misconduct did not constitute direct defiance of court orders and occurred in CSSP administration | Freeh/District Court: CSSP was under the court’s continuing, exclusive supervision so inherent authority applied | Court: affirmed — district court acted within inherent authority because it retained direct, continuous jurisdiction over CSSP |
| Appointment of Special Master Freeh / due process | Lerner: lacked notice/opportunity to object to Freeh; Freeh had conflicts requiring disqualification | Freeh: Rule 53 notice requirements apply to parties; disclosures were made and objections were waived by delay | Court: waived or untimely objections; no abuse of discretion in denying disqualification |
| Access to investigative record / opportunity to confront evidence | Lerner: due process required access to all materials Freeh relied on and ability to depose CSSP employees | Freeh/District Court: Rule 53 permits court control of record and reasonable limits; relevant material was provided, magistrate conducted in camera review | Court: district court did not abuse discretion; no showing of prejudice to substantial rights |
| Application of professional rules (fee-splitting, candor, misconduct) and proportionality of sanctions | Andry/Lerner: fee divide was legitimate (quantum meruit or reflected work); statements were not knowingly false; sanctions excessive | District Court/Freeh: emails and other evidence showed knowledge of improper referral payments, false statements, and significant harm to CSSP justifying targeted disqualification | Court: affirmed violations of La. R. Prof. Conduct (1.5(e), 3.3, 8.4) and sanctions; sanctions were narrowly tailored (CSSP exclusion, escrow preserved) |
Key Cases Cited
- Resolution Trust Corp. v. Bright, 6 F.3d 336 (5th Cir.) (federal courts may enforce state professional conduct codes)
- Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) (inherent power to sanction and the need for restraint)
- F.D.I.C. v. Maxxam, Inc., 523 F.3d 566 (5th Cir. 2008) (limits on inherent-power sanctions for conduct outside court’s proceedings)
- Fed. R. Civ. P. 53 authority discussed via decisions such as Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406 (9th Cir.) (timeliness of objections to special-master appointment)
- Moore v. Willis Indep. Sch. Dist., 233 F.3d 871 (5th Cir.) (abuse-of-discretion review for discovery rulings)
- In re Sealed Appellant, 194 F.3d 666 (5th Cir.) (factors courts should consider when imposing attorney sanctions)
- Puckett v. United States, 556 U.S. 129 (U.S. 2009) (plain‑error standard components)