August 28, 2014 Top Story

False Evidence Forces Law Firm Exit after $24 Million Verdict

Client's false testimony raises questions about appropriate remedial measures

Caitlin Haney

A $24 million verdict based on false evidence highlights the ethical issues triggered when, after a jury award, a party informs his counsel of the fabrication. LBDS Holding Company v. ISOL Technology Inc., Medivalley Inc., Heung-Kyu Lee. Since the plaintiff’s lawyer presented false material evidence to the jury, the ethics rules required counsel to take “reasonable remedial measures.” The case raises significant questions regarding what reasonable remedial measures are appropriate in this circumstance.

Retreating from Victory

In LBDS, the plaintiff brought suit in the U.S. District Court for the Eastern District of Texas, alleging breach of contract and misappropriation of trade secrets. The plaintiff, through counsel, introduced into evidence a fabricated contract and emails from a fictitious domain name created by LBDS employees to support the allegations of wrongdoing on the part of the defendant, ISOL Technology. This evidence substantiated the plaintiff’s claim that resulted in the sizable jury award.

Shortly after the award, the defendant’s counsel filed an emergency motion for sanctions against the plaintiff under Rule 11 of the Federal Rules of Civil Procedure, alleging the plaintiff manufactured and falsified evidence used in the litigation, testified falsely, and committed a fraud upon the court. Based on these allegations, the defendant requested the court set aside the verdict against ISOL Technology.

The next day the plaintiff’s lead counsel participated in a teleconference with one of the plaintiff’s principals and trial witnesses. During the conversation, the trial witness admitted that the allegations in the Motion were “essentially correct.” Specifically, the plaintiff’s counsel learned that one of the contracts relied on at trial was not authentic in that it had been altered, and certain schedules attached were forgeries.

Further, some of the plaintiff’s employees had created a fictitious domain name and sent emails from that domain so that the emails would appear to have been sent by a third party. Some of these activities began even prior to litigation when the plaintiff was negotiating with ISOL.

In response to these revelations, the plaintiff’s counsel informed its client that the plaintiff should disclose this information to the court. When the plaintiff failed to disclose the information, its counsel filed a notice to court pursuant to Texas Disciplinary Rule of Professional Conduct 3.03 and an unopposed motion to withdraw as counsel for plaintiff.

Rule 3.03 provides that “[i]f a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall make a good faith effort to persuade the client to authorize the lawyer to correct or withdraw the evidence. If such efforts are unsuccessful, the lawyer shall take reasonable remedial measures, including disclosure of the true facts.” In their motion, counsel identified the falsified contract, fictitious emails, and false testimony as different ways in which the plaintiff had deceived the court.

Identifying Problematic Evidence

Litigators can take steps to prevent similar situations with their own corporate clients. At a minimum, attorneys “dealing with a number of witnesses should compare information from each of them”; “subtle differences between the witnesses should raise a red flag,” according to Rudy Perrino, Los Angeles, CA, cochair of the ABA Section of Litigation’s Commercial and Business Litigation Committee. Along those same lines, situations like this could be avoided if attorneys “interview the supposed authors of emails and try to present them at trial” for authentication, suggests Perrino.

Lack of client cooperation can also signal evidentiary problems. If the corporate client “will not let you talk to certain people or the IT department about how email is created,” it should cause concern, according to Laura McLaughlin, Chesterfield, MO, cochair of the Section of Litigation’s Commercial and Business Litigation Committee.

With the rise of e-discovery, verifying the authenticity of documents can be easier. When documents are produced electronically, “with the proper technique attorneys can at least check the metadata to ensure what they were getting from the client was in fact the evidence they needed,” notes Perrino.

Approaching Your Client with Concerns

Of course, once attorneys identify potentially fraudulent evidence, they are presented with the difficult task of approaching the client and voicing their concerns. If the evidence has not been produced to the other side or the trier of fact, an attorney’s first obligation is to “maintain client confidences,” notes Perrino. With that in mind, Perrino then suggests “making the client aware of the perils of submitting false or fraudulent evidence.” Once the client is aware of the potential downfalls, the attorney must “attempt to persuade them to produce the true evidence and allow the lawyer to do his or her job as an advocate, or, if they refuse, withdraw,” advises Perrino.

When it comes to effective advocacy, the admissibility and reliability of evidence can greatly affect how an attorney presents the case. When having candid discussions with clients about suspicious evidence, it is important to “tell the client of your suspicion and why you have it, because at the end of the day it is part of your strategy,” notes McLaughlin. If at trial it is proved that the evidence is deficient, the fact that “you cannot use the information may affect the outcome of the case because you may have to reframe your strategy at trial,” advises McLaughlin.

Perrino notes that it is good practice to “trust but verify” that the information your client provides you is correct. When there is reason to suspect information or evidence, lawyers must be aware of their ethical duties to the client, opposing party, and the tribunal.

Caitlin Haney is an associate editor for Litigation News.

Keywords: false evidence, e-discovery, evidence, ethics

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