Seventh Ave. v. Shaf International

Going abroad?  Think that “national counsel” is going to take care of anything that comes up when you’re gone?  Get swamped when you return and take “several weeks” to wade through the e-mail that piled up in your absence?  If you’re local counsel, that might be a recipe for disaster — for your client — as the Seventh Circuit Court of Appeals held recently.

What we have here is a failure to communicate

After the plaintiff filed a trademark infringement case, the Wisconsin district court’s docket shows that just a month later the parties reached a deal and jointly moved to file a consent order resolving the dispute.  But about four months after that, the plaintiff was back in court, moving for a contempt order and asserting that the defendant had violated the consent order.

Here’s where things began to go south, according to the appeals court opinion:  The defendant’s local Milwaukee counsel received notice of the contempt motion, via the electronic docketing system (presumably PACER).  When the lawyer failed to respond, the district court scheduled a hearing.  No one showed up on behalf of the defendant.  The district court then granted the plaintiff’s motion, holding the lawyer in contempt, requiring his client to pay the plaintiff’s fees and costs, and ordering the lawyer to explain his unresponsiveness.

As the court of appeals wrote, that order “caught [the lawyer’s] attention.”  Local counsel explained that he had been “traveling internationally” when the plaintiff filed its motion for contempt, and even though he returned five days before his client’s response to that motion was due (and 26 days before the scheduled hearing), “it took him several weeks to catch up on his email.”  He saw the court’s notices only after “all response dates had passed.”

The defendant’s request for reconsideration of the contempt order also pointed to what the appeals court called a “communication breakdown between local counsel and the company’s national trademark counsel.”  Local counsel believed national counsel would be “attending to any ongoing needs in the case; national counsel apparently had a different understanding,” the court wrote.

“Deadlines matter”

The result of this mess-up?  The district court found the local counsel in contempt, and after a line-by-line analysis of the plaintiff’s attorney fees and costs for the entire case — not just the contempt proceedings — sanctioned the defendant to the tune of almost $35,000.  The Seventh Circuit easily upheld those rulings, characterizing the whole situation as “unfortunate and avoidable.”

“Deadlines matter,” wrote the court, and certainly after the district court provided a second chance to the defendant by noticing a hearing, the lower court’s reaction in issuing its contempt order was not an abuse of discretion.  Nor did the defendant’s good faith provide any immunity from sanction, the appeals court said.

And the big take-away:  “Nor, of course, can communication breakdowns serve to exempt outside counsel … from compliance with the rules, or from the penalties for failing to do so.”

Beware local counsel duties — and check your e-mail

We’ve written before about local counsel duties. and a New York City Bar ethics opinion that is a helpful cautionary road map on local counsel duties.  The bottom line is that you don’t get any free pass for being “merely” local counsel.  The extent of local counsel’s role in any particular matter should be expressly set out in a carefully-considered engagement letter with the client.  If you think that “national counsel” is going to monitor a case or a docket after some certain end point, you should additionally clarify that understanding, something the court here said would have helped.

And, hey — Model Rule 1.1 (“Competence”) and Model Rule 1.3 (“Diligence”) mean that we can’t just totally put down our practices when we go on vacation.  That was true even in the days before e-mail and PACER, when someone “back at the ranch” would be monitoring our postal mail.  Now, the available technology means there is little excuse for not being aware of court filings in real time.

As for clearing up the inevitable post-vacation backlog of e-mails, the laundry from the trip might have to wait — but that’s okay, isn’t it?