RICHMOND, Va. (Legal Newsline) - A federal appeals court ordered the Napoli law firm to pay more than $1 million in sanctions, saying the prominent asbestos lawyers tried to interfere with a contract dispute by filing competing lawsuits in New York.
“It is hard to imagine a more flagrant challenge to the district court’s authority or a more obvious spur to litigation hither and yon,” said the federal appeals court in a brief decision upholding the sanctions order.
Napoli became embroiled in the suit after the Keyes Law Firm in Maryland accused it of reneging on an agreement to split fees on more than 2,000 asbestos cases Keyes referred to Napoli. While the contract suit was proceeding in federal court in Maryland, Napoli filed two identical suits in state court in New York seeking an injunction to block the federal case.
At the same time, that court ordered Napoli to pay $317,000 in sanctions for failing to comply with discovery. A jury later ordered Napoli to pay Keyes $861,000 in damages, which the Fourth Circuit affirmed in 2022.
The federal court imposed another $1 million in sanctions against Napoli for trying to obstruct proceedings, saying a “first-year constitutional law student” would know it was improper to try and get a state court to halt a federal case.
“The full list of Napoli’s sanctioned misconduct is long and troubling,” the Fourth Circuit said. “It included repeated defiance of court orders, frivolous motions, and last minute document dumps, to name just a few examples.”
Article III of the Constitution grants federal courts with the authority to “fashion an appropriate sanction for conduct which abuses the judicial process,” the appeals court said. “Without it the `judicial Power’ would be no `Power’ at all.”
Attorney Paul Napoli protested to Law360 that his firm and Napoli Bern are separate entities. Napoli split with his longtime partner Marc Bern in 2015 amid allegations of financial impropriety and a “power struggle” as Napoli fought leukemia.
This isn’t the only fee dispute stemming from Napoli’s practice of recruiting clients through referral arrangements in which it agreed to pay a portion of its fees to the originating firms.
In 2018, California lawyer Marc Willick sued Napoli with similar allegations and sought discovery from the Keyes firm to identify cases where he said he was owed fees. An ex-employee also sued for allegedly shortchanged fees.
Napoli argued a U.S. Supreme Court decision limited the sanctions power to cases in which someone violates a court order but that is incorrect, the Fourth Circuit said in its Oct. 24 decision. Not only does that decision say sanctions can be ordered for behavior “such as” violating a court order, meaning it was just one example, but other Supreme Court rulings upheld sanctions for filing competing lawsuits in state court or trying to halt proceedings in another federal court.
“Napoli asks that we embrace the proposition that a single lawsuit may routinely spawn two others,” the appeals court said. “But no. Napoli’s New York lawsuits were in direct defiance of the district court’s authority.”
The court ended with a hopeful footnote, however: “In hopes that the trial court’s sanctions award will have a reformative effect on appellants’ future conduct, we shall exercise our own discretion and decline to impose sanctions with regard to this appeal.”