State’s high court hears case on Norfolk judge’s fine

By Michelle Washington, The Virginian-Pilot – February 26, 2008

A lawyer argued to state Supreme Court justices on Monday that a judge who fined his client more than $14,000 had no basis to do so.

Norfolk Circuit Judge Chuck Griffith ordered the sanction against lawyer John McNally in December 2006, a month after McNally’s client filed for bankruptcy the evening before the scheduled start of a jury trial on a lawsuit.

The case has been cited to legislators as a reason they should not reappoint Griffith to a second term on the bench. Griffith is scheduled for a hearing on his reappointment next week.

Daniel Warman, the lawyer who asked Griffith to impose the sanction, argued that the fine was justified by McNally’s behavior leading up to the trial.

The case involved a lawsuit with damage claims by Robert and Ellen Rey against a painting contractor, Simonz Inc. It was set for a jury trial on Nov. 15, 2006. The night before, McNally filed a bankruptcy petition for Simonz in U.S. District Court.

The federal filing meant the state trial could not proceed.

In court the next morning, Warman argued that McNally never had any intention to try the case and had deliberately delayed the bankruptcy filing to run up legal costs for the Reys.

Griffith agreed, told Warman to tally up the costs for preparation in the week before the trial, and then levied that total as a fine against McNally.

L. Steven Emmert argued the case at the Supreme Court on McNally’s behalf. He told the justices that McNally had been denied a chance to have a hearing and to argue against the sanction, despite repeated requests. Further, he said, McNally had acted appropriately and ethically.

Had McNally failed to file the necessary witness lists and exhibits leading up to the trial, he would have faced malpractice charges, Emmert said. McNally could not advise the Reys’ lawyers of Simonz’s intent to file for bankruptcy without violating attorney-client confidentiality and risking a complaint to the State Bar. He also could not remove the case from the court’s docket without the bankruptcy filing.

“This is an approach to indirectly punish the debtor by directly punishing his lawyer,” Emmert argued.

Warman focused on Griffith’s finding that McNally had intentionally tried to run up costs for the Reys.

“It’s nearly inescapable that bankruptcy was considered early on and forestalled to punish the Reys,” Warman told the justices.

Even if Warman had known far in advance that Simonz intended to file for bankruptcy, asked Justice Lawrence L. Koontz Jr., “what difference would it have made in your trial preparation until the client did file for bankruptcy?”

“Nothing,” Warman replied.

“How does that make it an unnecessary expense?” Koontz asked.

Justice G. Steven Agee noted that hundreds of lawyers in the state file bankruptcy petitions for their clients before trial, and asked if those lawyers should be sanctioned.

“They would be in jeopardy if they turned over their cards to show they just wanted to file to run up costs on the litigant,” as McNally did, Warman argued.

The justices may rule on the case in April.