The opinion of the court was delivered by: CHIN
In this case, I find myself in the position of having my fairness and impartiality as a judge called into question because of my race. After I ruled against their client at trial, respondents Larry Klayman, Esq. and Paul J. Orfanedes, Esq. directed a series of questions to me inquiring (1) whether I knew John Huang and Melinda Yee, individuals involved in the recent campaign finance controversy, and (2) whether I had had any "business, political or personal dealings" with them or any other "persons related in any way to the Clinton Administration." Respondents have since conceded on the record in open court that the questions were asked of me in part because of my race:
THE COURT: You are standing there and you are telling me that you did not ask these questions of me because I am Asian-American, is that what you are telling me?
MR. KLAYMAN: I'm saying that is part of it.
THE COURT: You are conceding that that is part of it?
MR. KLAYMAN: Part of it, yes. And I'm also asking the questions --
THE COURT: You are conceding that you asked questions of the court, at least in part, because of my race?
Respondents had absolutely no basis for posing such questions to the Court. Moreover, Mr. Klayman has engaged in other conduct disrespectful of the Court. For example, in the same hearing, after purporting to advise me of my obligations under the canons of judicial ethics, Mr. Klayman suggested that I "search [my] own soul." (12/19/96 Tr. at 14, 16).
Messrs. Klayman and Orfanedes are not members of the Bar of this Court. Rather, they were both granted the privilege of appearing pro hac vice.
Because of their conduct in this case, I issued an order directing them to show cause why they should not be sanctioned or disciplined for violating Disciplinary Rules 1-102(A)(5) and 7-106(C)(6). They retained counsel, who filed a written response on their behalf.
Having reviewed the response as well as all the relevant parts of the record, and for the reasons set forth below, I find that respondents Larry Klayman, Esq. and Paul J. Orfanedes, Esq. have violated Disciplinary Rules 1-102(A)(5) and 7-106(C)(6). Consequently, they are disciplined as follows: (1) their admissions pro hac vice are hereby revoked; (2) any future applications by Messrs. Klayman and Orfanedes to appear before me on a pro hac vice basis will be denied; and (3) Messrs. Klayman and Orfanedes are hereby ordered to provide a copy of this opinion to any other judge in this District to whom they may make an application for admission pro hac vice in the future.
Plaintiff Macdraw, Inc. ("Macdraw")
imports and sells wire-drawing equipment. In 1989, it agreed to sell certain equipment to Laribee Wire Manufacturing Company, Inc. ("Laribee") for a purchase price of approximately $ 7.1 million, to be paid in four installments. Because of the size of the transaction, Laribee approached defendant CIT Group Equipment Financing, Inc. ("CIT") for financing. CIT agreed to provide financing in return for a security interest in the equipment. Laribee was required, under the terms of the agreement, to meet certain conditions on a continuing basis. One such condition was that Laribee not be in default on any loans with other financial institutions.
Eventually, all of the equipment was delivered by Macdraw to Laribee. Consequently, CIT made the first three of the four payments under the financing agreement directly to Macdraw, as instructed by Laribee, leaving only the fourth and final installment -- some $ 711,000 -- to be paid. In November 1990, Laribee acknowledged to CIT that it had "accepted" the equipment, clearing the way, from Macdraw's point of view, for the final payment. As CIT began processing the fourth installment, however, it learned that Laribee had defaulted on a loan with Bankers Trust. As a consequence, Laribee was in default under the financing agreement with CIT and CIT refused to release the final $ 711,000 to Macdraw. Laribee was not able to make the final payment itself. Hence, Macdraw was never paid the final $ 711,000.
Macdraw commenced this action against CIT in August 1991, asserting five causes of action. Laribee was not named because it had filed for bankruptcy. Notwithstanding Laribee's inability to comply with the terms of its financing agreement with CIT, Macdraw contends that CIT was required to make the final $ 711,000 payment on Laribee's behalf because (1) defendant Richard Johnston purportedly made certain promises on CIT's behalf, and (2) CIT purportedly failed to disclose to Macdraw that Laribee was in default and encountering financial problems. CIT denied the allegations.
By Memorandum Opinion and Order docketed January 18, 1994, Judge Kram: (1) denied plaintiff's motion for partial summary judgment; (2) denied plaintiff's request for a jury trial; (3) granted defendants' cross-motion to dismiss with respect to three of the five counts (leaving only the fraud and promissory estoppel claims for trial); and (4) granted defendants' cross-motion for sanctions. Macdraw, Inc. v. CIT Group Equip. Fin., Inc., 1994 U.S. Dist. LEXIS 363, 1994 WL 17952 (S.D.N.Y. Jan. 18, 1994). Among other things, Judge Kram concluded "it is apparent that 'plaintiff's counsel engaged in little or no preliminary factual and legal investigation' before bringing its motion." Id. at *20 (quoting Wrenn v. New York City Health & Hospitals Corp., 104 F.R.D. 553, 559 (S.D.N.Y. 1985)). The Court imposed sanctions under Rule 11, which Macdraw's attorneys were ordered to pay.
At an earlier point in the proceedings, Mr. Klayman wrote the Court a letter requesting leave to file a motion for voluntary recusal, pursuant to 28 U.S.C. § 455(a), on the ground that "the Court 'has prejudged the case against the plaintiff.'" Id. at *20 (quoting Letter to Hon. Shirley Wohl Kram from Larry Klayman of 5/14/92). Judge Kram reminded the parties that the Court had the power to impose sanctions for bad faith, vexatious, wanton, or oppressive conduct and directed the parties to submit proposed briefing schedule for a recusal motion. Id. at *20. No such motion, however, was ever filed.
On January 5, 1995, Macdraw, Klayman, and Klayman's firm (Klayman & Associates) appealed the imposition of sanctions to the Second Circuit. In an opinion dated January 3, 1996, the Second Circuit reversed the award of sanctions. Macdraw, Inc. v. CIT Group Equip. Fin., Inc., 73 F.3d 1253 (2d Cir. 1996). In doing so, however, the Second Circuit noted:
Our discussion should not be taken to suggest that we find the conduct of plaintiff's counsel throughout this litigation to be acceptable. Indeed, we note our sympathy with the district court's frustration; in pursuing this appeal, plaintiff's counsel submitted briefs that included inaccurate characterizations of the record and comments that we consider entirely inappropriate. There is no question that our rules permit sanctions where an attorney's conduct degrades the legal profession and disserves justice. In the face of significant abuse, a district court need not hesitate to impose penalties for unreasonable conduct and acts of bad faith. Nevertheless, it must do so with care, specificity, and attention to the sources of its power. . . .
While the appeal of the sanctions award was pending in the Second Circuit, Macdraw filed a "renewed motion" for a jury trial in the District Court. In the motion papers, signed by respondents Klayman and Orfanedes, respondents wrote:
Macdraw respectfully submits that the Court has demonstrated perhaps an unintentional, yet readily apparent, predisposition against its claims. As set forth below, the record in this matter raises legitimate cause for concern. In order to alleviate any such concern, and avoid even the appearance of judicial predisposition, Macdraw respectfully requests that the Court allow a jury trial so as to safeguard Macdraw's rights. . . .
(Pl. Mem. in Support of Renewed Motion for Jury Trial at 1). That motion was denied by Judge Kram on July 31, 1995. Thereafter, Macdraw filed with the Second Circuit a petition for a writ of mandamus directing the District Court to grant Macdraw a jury trial, which the Second Circuit denied on October 3, 1995.
On November 6, 1995, the case was re-assigned to me. Although it is not clear from the record whether Macdraw ever filed a petition for a writ of certiorari with the Supreme Court, in the summer of 1996 Macdraw advised the Court that it was prepared to proceed to trial without a jury. I conferenced the case on September 3, 1996, at which time I directed the parties to be ready for trial in November 1996.
After the submission of detailed trial briefs, the case was tried to the Court without a jury on November 6, 7, 12, and 13, 1996. Macdraw's principal witness was its president, Massimo Colella. After Macdraw rested, defendants moved for judgment as a matter of law and I reserved decision. (Trial Tr. at 302). Defendants proceeded to call two witnesses, including defendant Richard Johnston. At that point defendants renewed their motion for judgment as a matter of law, without resting. (Trial Tr. at 416). On November 12, 1996, I adjourned the trial so that I could complete my reading of the depositions before ruling on defendants' motion. (Id. at 425-33).
On November 13, 1996, I granted defendants' motion for judgment as a matter of law. Pursuant to Rule 52(c), I made findings of fact and conclusions of law. (Trial Tr. at 436-45). My decision turned largely on my credibility findings. Having heard both Johnston and Colella testify, and having reviewed all the evidence in the case, I found Johnston to be more credible than Colella. I accepted Johnston's testimony that he never made the alleged oral promises and I rejected Colella's testimony to the contrary. (Id. at 439-42). I also found that Macdraw could not have reasonably believed that CIT would commit to disbursing $ 711,000 in additional financing without assuring itself that Laribee was still in sound financial condition. (Id. at 444).
Three aspects of respondents' conduct, taken together, led me to issue the order to show cause. They are: (1) comments made by Mr. Klayman at the conclusion of trial on November 13, 1996; (2) the questions contained in a letter dated December 9, 1996, signed by both Messrs. Klayman and Orfanedes; and (3) comments made by Mr. Klayman at a conference I held on December 13, 1996, after receiving the December 9th letter. I will review each in detail.
1. The November 13, 1996 Comments
After I stated my findings and conclusions at the conclusion of the trial on November 13, 1996, Mr. Klayman expressed a desire to make post-trial motions. A colloquy with the Court ensued (Trial Tr. at 445-52), concluding with the following:
[THE COURT TO MR. KLAYMAN:] I am not going to debate this with you. I have ruled. . . .
I really don't think any additional motions are really going to help. All I am suggesting to you is that I think your view of the evidence is very different from my view of the evidence and that's fine. You have to do your job. If you want to make any motions, go ahead and make your motions, but I am not going to require any responses from CIT until I look at the motions first.
MR. KLAYMAN: Your Honor, I understand your position and I understand you have denied the motions. We will simply file a notice of appeal. But I had to say that for the record. We are not here 6 years later because we wanted to be. You are newly appointed to the bench, we are aware of the fact that you did speed this case to trial. We hope in the future this court functions better because frankly it has not functioned well --
THE COURT: Mr. Klayman, that is totally out of line. I don't know what you are doing now. I have no history with you.
THE COURT: Believe me, you are not embarrassing me. This case is five or six years old for whatever the reason. When it came to me I moved it very quickly. Your client got his day in court. That's it. For you to stand there and criticize the court gets you nowhere. I just don't understand why you are doing that. How does it help you to stand there and criticize the court?
MR. KLAYMAN: Because I am an officer of the court and I take it seriously. And criticism goes both ways. There is a First Amendment, your Honor.
THE COURT: Mr. Klayman, is there anything else you want to say?
THE COURT: Then this case is over.
(Trial Tr. at 451-52) (emphasis added).
2. The December 9, 1996 Letter
Unfortunately, however, the case was not over. Some four weeks later, I received a letter, dated December 9, 1996 (the "December 9th Letter"), addressed to me and signed by both Messrs. Klayman and Orfanedes, which stated in part:
Finally, as you may know, Mr. Orfanedes and I have been involved in very highly publicized and significant public interest litigation, Judicial Watch, Inc. v. U.S. Department of Commerce, Case No. 95-0133 (RCL) (D.D.C.), which involves a Mr. John Huang, Ms. Melinda Yee and other persons in the Asian and Asian-American communities. See Exhibit 1. Recently, we came upon a document in this case which mentions your name in the context of other prominent Asian-American appointees of the Clinton Administration. See Exhibit 2. Accordingly, could you please formally advise us whether you know either of these individuals, as well as what relationship, contacts, and/or business, political or personal dealings, if any, you have had with them, or persons related in any way to the Clinton Administration. Please also advise us if you had seen the enclosed or similar newspaper articles or press accounts before this case was tried on November 6, 7, 12 and 13, 1996.
Attached as Exhibit 1 to the December 9th Letter were eight articles from magazines and newspapers reporting on the recent controversy regarding John Huang, the Democratic National Committee, and campaign contributions. Mr. Klayman is mentioned in some of the articles. Exhibit 2 to the December 9th Letter is a computer-generated print-out of a newspaper or magazine article that appeared on November 4, 1994, more than two years ...