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Law Firms

Co-founder of defunct firm LeClairRyan may be able to avoid tax liability after 4th Circuit decision on his exit

By Debra Cassens Weiss

February 12, 2025, 10:44 am CST

The co-founder and former CEO of the defunct law firm LeClairRyan may be able to avoid tax liability in connection with the firm’s collapse because of a ruling Friday by a federal appeals court.

The 4th U.S. Circuit Court of Appeals at Richmond, Virginia, ruled for former partner Gary LeClair in a Feb. 7 opinion, Law360 reports.

The Legal Profession Blog published highlights.

The 4th Circuit ruled that LeClairRyan’s operating agreement didn’t bar LeClair from withdrawing as a partner after a vote to dissolve in July 2019. Bankruptcy and federal courts had reached the opposite conclusion, which made LeClair liable for some tax obligations because he was considered a partner on the day that the firm filed for bankruptcy in September 2019.

The firm had included LeClair on a list of equity holders filed with the bankruptcy court. LeClair wanted to amend the list to remove his name.

The 4th Circuit remanded for a determination.

“We leave it to the bankruptcy court on remand to determine whether any equitable considerations warrant denial of the motion to amend despite LeClair’s correct interpretation of the operating agreement,” the appeals court said.

See also:

Too big too soon: How LeClairRyan went under

LeClairRyan bankruptcy trustee targets firm co-founder, compares firm to movie ‘Weekend at Bernie’s’

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3. Who won election to top North Carolina court?…

Election Law

Who won election to top North Carolina court? Case belongs in state court, for now, 4th Circuit says

By Debra Cassens Weiss

February 5, 2025, 3:03 pm CST

A federal court shouldn’t decide lawsuits over a contested election for a seat on the North Carolina Supreme Court, at least not yet, the 4th U.S. Circuit Court of Appeals at Richmond, Virginia, ruled Tuesday.

The 4th Circuit ruled in consolidated appeals stemming from the race between the Democratic incumbent, Justice Allison Riggs, and her Republican challenger, North Carolina Court of Appeals Judge Jefferson Griffin.

Law360, the Associated Press, the New York Times and the News & Observer have coverage, while How Appealing linked to the per curiam, unpublished Feb. 4 opinion.

Riggs leads by 734 votes, but Griffin is questioning the counting of about 66,000 ballots, according to the AP. Griffin wants to throw out ballots in which voters did not prove identity with a driver’s license or partial Social Security number when they registered to vote. He is also seeking to toss overseas ballots, including those cast by voters who didn’t produce a photo ID with their absentee ballots.

Riggs and the North Carolina State Board of Elections wanted two cases filed by Griffin transferred to federal court.

“While Riggs and the State Board of Elections argued that his case implicated national election laws,” the News & Observer reports, “Griffin argued that it should be left to the jurisdiction of North Carolina courts—where Republican judges predominate.”

The New York Times reports that the case has “unsettled election experts and government watchdogs across the country, who say that overturning the election would undermine democracy and provide a blueprint for doing it again in the future.”

Judges on the 4th Circuit panel were Judge Paul V. Niemeyer, an appointee of former President George H.W. Bush; Judge Marvin Quattlebaum Jr., an appointee of President Donald Trump; and Judge Toby J. Heytens, an appointee of former President Joe Biden.

One case filed by Griffin asked the North Carolina Supreme Court to stop the elections board from counting challenged ballots. Another asked the superior court in Wake County, North Carolina, to review the elections board’s rulings against him.

The 4th Circuit ruled that Chief U.S. District Judge Richard E. Myers II was correct when he refused to assert federal jurisdiction. But Myers, a judge in the Eastern District of North Carolina, should have based his decision on the Pullman doctrine, the 4th Circuit said. That doctrine can be applied when there are unclear issues of state law that once resolved could moot federal constitutional issues.

Under the doctrine, the federal court retains jurisdiction of the federal constitutional claims, while state court issues are addressed in state court.

The 4th Circuit provided an example of how the federal case could become moot. If the elections board prevailed on state law issues, the resolution of federal claims may not be necessary, the appeals court said.

Another section of the opinion addressed Griffin’s writ of prohibition filed with the North Carolina Supreme Court, which dismissed the application Jan. 22. That sent the case back to state court in Wake County.

Because the appeal had asked the 4th Circuit to retrieve the case from the North Carolina Supreme Court, the issue is moot, the 4th Circuit said.

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3. 4th Circuit upholds $1M sanction for law…

Trials & Litigation

4th Circuit upholds $1M sanction for law firm that tried to ‘sabotage’ federal court’s authority

By Debra Cassens Weiss

October 29, 2024, 3:50 pm CDT

A federal judge had inherent power to impose a $1.05 million sanction against a Maryland law firm for asking state courts to order an end to U.S. district court litigation, a federal appeals court ruled last week.

The 4th U.S. Circuit Court of Appeals at Richmond, Virginia, affirmed the sanction against Napoli Law, which was accused of breaching a contract to share attorney fees promised in a referral deal. Napoli Law had filed lawsuits in two New York state courts that sought an order for the plaintiff, the Keyes Law Firm, to dismiss the federal case.

“District courts are not powerless to act in the face of contumacious conduct so expressly designed to undercut, and even sabotage, their adjudicative authority,” the 4th Circuit said in an Oct. 24 opinion by Judge J. Harvie Wilkinson III, an appointee of former President Ronald Reagan.

Napoli Law had filed the state court suits after the district court in Maryland rejected its motion to dismiss the fee case.

“In every practical sense,” Wilkinson said, “Napoli asked a state court in New York to overrule a federal district court in Maryland. 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.”

The 4th Circuit rejected Napoli Law’s argument that federal courts only have power to sanction conduct outside the courtroom when it is in direct defiance of a court order.

“To ask a district court to foresee and expressly prohibit through court order every conceivable abuse of process is to ask it to chase its tail,” Wilkinson wrote. “Litigation is complicated enough as it is. District courts should not have to wage a sprawling, three-front war to defend their rightful role.”

Law360 and the Maryland Daily Record have coverage of the decision.

The sanction against Napoli Law followed a December 2019 verdict of more than $861,000 for the Keyes Law Firm. It also followed a previous sanction of nearly $317,000 against Napoli Law for defiance of discovery orders.

The second sanction was for the state court suits and “other bad-faith misconduct,” the appeals court said. “The full list of Napoli’s sanctioned misconduct is long and troubling. It included repeated defiance of court orders, frivolous motions, and last-minute document dumps, to name just a few examples.”

Lawyer Paul J. Napoli formed Napoli Law after the breakup of Napoli Bern Ripka Shkolnik, according to Law360. The suit by the Keyes Law Firm had claimed that the prior firm violated fee-sharing agreements for referrals of asbestos cases. The Keyes Law Firm’s suit named 17 defendants alleged to be alter egos of the original firm and lawyer Napoli, according to Law360.

Marc Bern, a former Napoli Bern name partner, settled the case and was dropped from the Keyes Law Firm suit.

In a statement to Law360, lawyer Napoli said Napoli Law and Napoli Bern are distinct entities. The appeals court disregarded the distinction and overlooked the fact that many of the underlying cases have concluded through settlement or dismissal, he said.

“Keyes consistently held the misconception that there were still tens of millions in fees outstanding, despite having already received millions, a view the jury ultimately sided with us on,” Napoli said. “In the end, it became evident that we had prevailed in the underlying case. The firm is evaluating further briefing to remedy these misconceptions.”

Louis Malick of the Keyes Law Firm told the Maryland Daily Record that the firm is pleased with the 4th Circuit’s decision.

“It sends a strong message to certain members of the profession that the sort of tactics employed in this case will not be tolerated and that district judges have ample authority to sanction misconduct,” Malick told the Maryland Daily Record in an email.

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3. 4th Circuit upholds ordinance requiring gun…

First Amendment

4th Circuit upholds ordinance requiring gun sellers to distribute suicide prevention information

By Debra Cassens Weiss

January 24, 2024, 2:02 pm CST

A federal appeals court has upheld a county ordinance requiring gun dealers to distribute literature on suicide prevention and conflict resolution to buyers of guns and ammunition.

The 4th U.S. Circuit Court of Appeals at Richmond, Virginia, ruled Tuesday that the Anne Arundel County, Maryland, ordinance does not violate the First Amendment rights of gun dealers.

Bloomberg Law has coverage.

The ordinance was passed in 2022 after the county created a task force to address how to reduce gun violence. The task force, appointed after the 2018 mass shooting at the Capital Gazette newspaper in Annapolis, Maryland, found that suicide deaths had increased, and guns were the most often means used.

In response, the county adopted the ordinance requiring the health department to prepare informational literature for gun dealers. The department used a pamphlet created by a collaboration of the American Foundation for Suicide Prevention, a national nonprofit organization, and developed a flyer on county conflict-resolution resources, including a suicide prevention toolkit.

The plaintiffs in the case were four Anne Arundel County gun dealers and Maryland Shall Issue Inc. They claimed that the literature conveyed the message that guns cause suicide and was intended to discourage gun sales.

A federal district judge rejected the challenge, and the 4th Circuit affirmed in a Jan. 23 opinion.

The appeals court analyzed the issue using the standard governing compelled commercial speech established in the 1985 U.S. Supreme Court decision in Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio.

The 4th Circuit said the compelled speech is constitutional under Zauderer because it is commercial, it is factual and uncontroversial, it is reasonably related to the county’s interest in preventing suicide, and it is not unduly burdensome.

“We conclude that the pamphlet is simply, and no more, a public health and safety advisory that does not discourage the purchase or ownership of guns,” the appeals court said in an opinion by Judge Paul V. Niemeyer, an appointee of former President Ronald Reagan.

“And we are confident that gun purchasers in Anne Arundel County will recognize it as such. While such an advisory surely does not discourage gun ownership or undermine Second Amendment rights, it does encourage generous responses to a serious public health issue, and gun dealers might well find it admirable to join the effort,” the 4th Circuit said.

The case is Maryland Shall Issue Inc. v. Anne Arundel County, Maryland.