Friday, February 22, 2008
Judge to California lawyers: Don't come backTriangle Business Journal - by Chris Baysden
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"In short, he lacked any credentials to act as a fiduciary for a company in multimillion dollar litigation," Tennille wrote in his order. "The (law) firm should have been aware of his holdings and inexperience."
Stock no longer held
Egelhof and his representatives at Robbins Umeda & Fink failed to communicate with each other about the case to such an extent that one of the plaintiff's lawyers who appeared before the court "knew absolutely nothing about his client," wrote Tennille.
After being asked by the judge to determine their client's Red Hat holdings, Robbins Umeda & Fink representatives eventually found out that Egelhof had sold his shares of Red Hat stock for $756.98 on Dec. 31, 2005.
Shareholder derivative actions and class-action lawsuits often are settled because they are expensive to defend. But Raleigh-based Red Hat, which was founded in 1993 and employs about 2,000 people, decided to take a stand against what it considered inappropriate legal conduct.
"When it does occur, we don't shy away from taking it on," says Red Hat General Counsel Michael Cunningham.
Neither Cunningham nor Millen would disclose how much it cost to fend off the lawsuit. Local business lawyer Larry Robbins, who is not involved in the case, estimates that such an action could cost defendants in the range of $250,000 to $500,000.
While Millen and Cunningham hope that the case will help discourage shareholder suits, UNC business law professor Tom Hazen views it simply as the court's reaction to the performance of the lawyers involved.
"I would imagine that it must have been pretty bad for him (Tennille) to react this way," Hazen says. "It certainly is a serious slap in the face to their firm."
In addition to the sanctions on Robbins Umeda & Fink, Tennille specifically prohibited three of the firm's lawyers from appearing pro hac vice in North Carolina for five years. Managing Partner Brian Robbins said, " ... we plan on appealing that decision."
Charlotte attorney Lane Williamson, who acted as local counsel for Egelhof, did not return messages seeking comment. Williamson was not sanctioned in the judge's order.
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