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1st Mariner wins fees, advantage at defamation trial

Baltimore-based 1st Mariner Bank has won a major battle in its lawsuit claiming that a law firm defamed it by mailing letters to the bank’s customers falsely stating it was facing litigation for fraudulent lending practices.

1st Mariner’s attorney, James B. Astrachan

In a scathing opinion, U.S. Magistrate Judge Susan K. Gauvey has ordered Resolution Law Group P.C. and its former trial counsel, Kandel & Associates P.A. of Baltimore, to pay more than $23,000 in attorney’s fees to 1st Mariner for not providing the bank in a timely fashion with information about RLG’s personnel, procedures and how it selected the recipients of its mailing.

RLG’s violation of pre-trial discovery rules was so great that jurors at the to-be-scheduled trial will be told of it and instructed that they may infer that any information RLG withheld would have been “unfavorable” to the firm, Gauvey said in her order last week.

1st Mariner, in its lawsuit, claims RLG’s letters insinuating wrongdoing by the bank were patently false and unlawfully advertised the firm’s mortgage-reduction services. Thus, 1st Mariner asserted, RLG’s letters damaged the lender’s reputation.

The lawsuit — alleging false advertising, defamation and unfair competition by RLG — was filed April 13, 2012, in U.S. District Court in Baltimore.

Gauvey, in her Thursday order, said Greenwich, Conn.-based RLG had engaged in “discovery tomfoolery.”

RLG’s delays and non-responses to 1st Mariner’s requests for information “impeded” the bank’s effort to get evidence supporting its allegation that the firm was not offering legitimate legal services, Gauvey wrote. RLG also “never produced sufficient information” about Marketing Smart, the company it retained to print the letters, to enable First Mariner to question it about its relationship with the firm, Gauvey added.

Defendant’s “answers [to 1st Mariner’s requests] would be comical, if they were not truly defiant of the ordered and essential precepts of discovery and resolution of disputes in our civil justice system,” Gauvey wrote in her 37-page memorandum opinion accompanying her order.

“The need for deterrence is great for this type of non-compliance,” she added. “The court and plaintiff’s counsel spent — wasted — enormous time coaxing proper responses from defendants — an especially egregious situation in that the defendants are a law firm and a lawyer,” referring to RLG’s senior attorney, R. Geoffrey Broderick Jr.

The discovery violations were so severe that “a mere imposition [of] fees is an insufficient penalty for behavior clearly calculated to deprive plaintiff of the facts of the RLG operations,” Gauvey wrote. “The most appropriate sanction for defendants’ conduct is to bring it to light in front of the jury, whose members may consider it also with all other evidence at trial.”

RLG’s attorney, Randall L. Hagen, said the sanctions appear “excessive,” and he plans to file a motion urging Gauvey to amend her order, saying RLG has given 1st Mariner contact information for past employees.

Hagen said that the discovery violations occurred before RLG retained him to succeed Kandel & Associates in July, and that he sought to correct those mistakes by responding quickly to 1st Mariner’s requests.

“I was hoping that would overcome the anger and frustration that occurred earlier in the case,” added Hagen, a Columbia solo practitioner. “It was later than she [Gauvey] wanted and she lowered the boom on my clients.”

1st Mariner’s attorney, James B. Astrachan, said Gauvey’s award of attorney’s fees and the jury instruction followed several warnings from her that RLG was not complying with discovery rules.

“The court has in my opinion been very, very patient with the defendant,” said Astrachan, of Astrachan Gunst Thomas P.C. in Baltimore.

“She gave them every single warning that she could have,” added Astrachan, who chairs The Daily Record’s independent Editorial Advisory Board. “Of all parties who should know better, it would be an attorney and the attorney’s law firm.”

1st Mariner claims in its lawsuit that RLG and Broderick prepared and mailed the “false and misleading” advertisement “with a malicious intent to injure 1st Mariner’s business and goodwill, and to induce the targeted recipient of the advertisement to call RLG about mortgage reduction services offered by RLG.”

Gauvey’s order that RLG and Kandel & Associates pay a total of $23,221 in attorney’s fees followed an earlier defeat for RLG.

On May 17, 2012, U.S. District Judge James K. Bredar issued a temporary restraining order barring RLG from sending out any more of the letters for 14 days.

RLG has “failed to present a scintilla of evidence supporting the statements [it] made to [1st Mariner’s] customers suggesting [the bank] is in settlement negotiations with federal and state government entities as to its lending practices and, significantly, [the bank] states unequivocally that this is untrue,” Bredar stated in the order. “Such an evidently false contention, if widely circulated, is likely to undermine confidence in the bank, which in turn could cause its depositors to make precipitous withdrawals, and otherwise drive away customers and alarm [others].”

The restraining order was extended indefinitely on May 30, 2012, by U.S. District Judge Marvin J. Garbis.

Peter T. Kandel, chief attorney at Kandel & Associates, did not return a telephone message Monday seeking comment on Gauvey’s award of attorney’s fees.

RLG’s controversial letters contained the heading “Litigation Notification” and only mentioned the law firm’s name in small print at the bottom, according to court papers. The letter told customers to call a toll-free number to “opt-in” as a potential litigant if the lawsuit was filed. The letter also said the lawsuit would allege “improper lender actions,” and, by joining the lawsuit, the customer could be entitled to reduced mortgage rates, monthly payments or monetary damages.

Astrachan, 1st Mariner’s attorney, called RLG’s tactics “a buggy without springs. You would think that their butts would be getting sore.”

But Hagen, RLG’s counsel, said his client had a good-faith belief of wrongdoing by 1st Mariner.

“There was certainly no intent to defame,” he added.