The BLT: The Blog of Legal Times

Muslim Nonprofit and Former Intern Accused of Stealing Documents Fight Over Filings

A Washington federal judge has chastised both parties in a lawsuit filed by a Muslim advocacy nonprofit group against a former intern accused of stealing thousands of internal documents as part of an “undercover operation.” The judge took both sides to task for failing to adhere to her instructions in the latest phase of the case.

The Council on American-Islamic Relations Action Network, which is based in Washington, is suing author and self-described counterterrorism researcher Paul Gaubatz and his son, Chris Gaubatz, over the alleged theft of more than 12,000 internal documents.

The group alleges Chris Gaubatz applied for an internship with the organization falsely posing as a Muslim college student. He interned with the group from April to August 2008.

That Chris Gaubatz obtained the internal documents and gave them to his father is undisputed – in a book about the nonprofit written by Paul Gaubatz and co-author Paul Sperry, the entire affair is described as a “daring undercover operation” and cites many of the documents in question – but the two sides dispute whether they were taken unlawfully and also whether the publication of the documents constitutes protected speech.

Since filing the original complaint (PDF) against Paul and Chris Gaubatz, the nonprofit has made two separate motions to file amended versions to include additional defendants and claims as more information has become available. The Gaubatzes are challenging both motions to file amended complaints, arguing the nonprofit has failed to show they would offer anything substantially novel in new pleadings.

The defendants have also filed a motion to dismiss (PDF), arguing that the damages being sought – for the publication of the nonprofit’s internal documents – are protected under the First Amendment.

U.S. District Court Judge Colleen Kollar-Kotelly issued an order on April 13 requesting both sides to meet and file a joint status report on whether any legal issues had been resolved throughout the course of filings, and also whether the motion to dismiss could be denied without prejudice pending a ruling of the motions to amend.

In a minute order issued today, Kollar-Kotelly said that in granting leave for both sides to sort through whether certain aspects of three pending motions might be moot in light of newer filings, she believes they took it “as an opportunity to raise a host of tangential and irrelevant matters that in no way clarify the relationship between the three aforementioned motions.”

In light of the fact that none of the issues could be narrowed, Kollar-Kotelly set a schedule to fully brief the pending motions to amend.

During his time with the nonprofit, according to the complaint, Gaubatz allegedly stole more than 12,000 e-mails, spreadsheets and other internal documents from the organization and delivered them to Paul Gaubatz. Chris Gaubatz is also accused of secretly recording conversations and meetings.

The elder Gaubatz published a book on the nonprofit in 2009, called “Muslim Mafia: Inside the Secret Underworld that’s Conspiring to Islamize America.” In the book, Gaubatz describes Chris Gaubatz’s time at CAIR as a counterintelligence operation in which the younger Gaubatz gathered documents and other information on the group. The book cites numerous internal documents the group alleges were unlawfully stolen, and even describes Chris Gaubatz’s internal monologue as he prepared to take on his false identify.

The nonprofit sued both Chris and Paul Gaubatz in October 2009 and is being represented by in-house counsel Nadhira Al-Khalili. The defendants are being represented by Bernard Grimm of Washington’s Cozen O’Connor, California attorney Daniel Horowitz and Martin Garbus of New York’s Eaton & Van Winkle.

House Ethics Office Investigates Five Matters

In its first report of the new Congress, the office charged with investigating ethics complaints against members of the U.S. House says it had five ongoing cases at the end of March.

The Office of Congressional Ethics does not name the congressmen who are the subjects of ongoing investigations, but it is required to issue a quarterly summary of its activities. The latest summary (PDF), released today, says the office’s board authorized six preliminary reviews during the first three months of this year. One review ended, and the board authorized secondary reviews in the other five matters.

The office’s board includes several former members of the House who make decisions on whether to move forward with cases. The office is separate from the House Ethics Committee, which is made up of sitting congressmen.

Last year, there was speculation that the new Republican majority in the House might curtail the office’s power or even abolish it, because Republicans opposed the founding of the ethics office. That didn’t happen.

Judge Wants Info on Bank Selection Process in Class Action Settlement

Updated 2:19 p.m.

The plaintiffs' lawyers overseeing the $750 million settlement in a discrimination suit brought by Native American farmers and ranchers proposed using five banks in which to deposit and invest settlement funds until the money is disbursed to class members.

Four banks—Bank of America Corporation, Wells Fargo & Company, Citigroup, Inc. and PNC Financial Services—would each receive about $150 million from the compensation fund payment to invest, the plaintiffs’ lawyers in Keepseagle v. Vilsack said in a court filing (PDF) April 22 in U.S. District Court for the District of Columbia.

In addition, a fifth bank, Bank2 of Oklahoma, would receive about $18 million to hold. The plaintiffs’ team, led by Joseph Sellers of Washington’s Cohen Milstein Sellers & Toll, said Bank2 is owned by the Chickasaw Nation and is the largest mortgage lender to Native Americans. Sellers said the plaintiffs' team sought out a Native American-owned bank to reinforce the settlement's connection with the Indian community. The United States Department of Agriculture helped research the identification of a bank.

U.S. District Judge Emmet Sullivan said in an order today that he wants the plaintiffs’ lawyers to discuss the bank selection process at a hearing Tuesday. The lawyers are meeting with Sullivan to go over a dispute about attorneys’ fees and costs. The judge asked the lawyers to come prepared to discuss, among other things, “the credentials” of the selected banks.

Sellers said this afternoon the proposal from the plainiffs' team, which includes Anurag Varma of Patton Boggs, struck a balance between protecting settlement funds and providing some return on the investment. The plaintiffs' lawyers conducted extensive interviews with banks to determine soundness. Sellers said the lawyers conducted a formal request for proposal process to selected national U.S. banks.

The five designated banks would hold and invest settlement money until the presiding judge has approved disbursement to the class. Sellers said in court papers that the plaintiffs’ team will work with the five banks to “adopt prudent investment policies” to minimize the risk of investment loss while trying to maximize investment return. The class lawyers said the settlement money is being divided among five banks in the interest of protecting the money.

Keepseagle’s lawyers said they anticipate the settlement funds will be invested in a range of interest bearing accounts, including money market accounts and certificates of deposit. The attorneys propose using segregated trust/escrow accounts to “reduce the risk that the invested funds will be affected by a possible bank failure.”

Justice Department lawyers said in a recent hearing in the case that the government will not take a position on selecting banks in which to deposit settlement funds. The settlement agreement said the government cannot be held liable for the protection of the deposited funds, “regardless of bank failure, fraudulent transfers, or any other fraud or misuse of funds.”

A sixth bank, Eagle Bancorp Inc., which is based in Bethesda, Md., would coordinate the disbursement of settlement money to class members. Class members would receive checks from Eagle, the plaintiffs’ lawyers said.

The Eagle account, the lawyers said, would be fully insured by the Federal Deposit Insurance Corporation. The attorneys said there’s no risk of institution failure when all of the settlement money is transferred to Eagle.

Clement Leaves King & Spalding to Continue Same-Sex Marriage Litigation

Former U.S. solicitor general Paul Clement is resigning from King & Spalding in protest after the law firm’s request today to withdraw from lawsuits about the Defense of Marriage Act.

Clement says he’ll continue working on the same-sex marriage litigation on behalf of U.S. House Republicans from Bancroft, a small Washington litigation firm. And in a two-page letter to King & Spalding’s chairman, Robert Hays Jr., Clement pointedly disagreed with King & Spalding’s handling of the matter.

The letter says a law firm should not abandon a representation “because the client’s legal position is extremely unpopular in certain quarters.”

“Defending unpopular positions is what lawyers do,” Clement writes. “The adversary system of justice depends on it, especially in cases where the passions run high. Efforts to delegitimize any representation for one side of a legal controversy are a profound threat to the rule of law.”

The letter also takes issue with the idea that King & Spalding did not thoroughly vet the contract that Clement signed with the House General Counsel’s Office this month, an idea that Hays mentioned in a statement today. “I would have never undertaken this matter unless I believed I had the full backing of the firm,” Clement writes, adding that, “If there were problems with the firm’s vetting process, we should fix the vetting process, not drop the representation.”

Clement rejoined King & Spalding in 2008 in a much-watched move reportedly worth $5 million a year. He had been head of the firm’s appellate practice until he became deputy solicitor general in 2001. He became solicitor general in 2005.

In his resignation letter, Clement writes that he has “immense fondness” for his colleagues and for King & Spalding, but that “my loyalty to the client and respect for the profession must come first.” He ends with a quote from former U.S. attorney general Griffin Bell, a longtime King & Spalding partner, warning that lawyers have a duty to finish a representation after it begins.

Brendan Buck, a spokesman for House Speaker John Boehner (R-Ohio), said in an e-mailed statement that Clement “has demonstrated legal integrity.” Buck added, “This move will ensure the constitutionality of this law is appropriately determined by the courts, rather than by the president unilaterally.”

At Bancroft, Clement will be a partner and he’ll link up with another veteran of the Justice Department from George W. Bush’s presidency: Viet Dinh, a former assistant attorney general. H. Christopher Bartolomucci, an associate White House counsel under Bush, is also a partner.

In a news release from Bancroft, Clement said his new firm “offers its clients premier talent, without all the baggage of a mega firm. We are shaking up the D.C. legal establishment.”

Dinh, in the same news release, said Clement “is a perfect fit with Bancroft, where we are building the next great law firm.”

Click here (PDF) for a copy of Clement’s letter.

Updated at 12:17 p.m. National Law Journal photo by Diego M. Radzinschi.

King & Spalding Asks to Withdraw from Marriage Litigation

After a week of criticism from gay-rights groups, King & Spalding reversed itself today and asked to withdraw as counsel in charge of defending the federal Defense of Marriage Act.

In a statement, firm chairman Robert Hays Jr. said the process for vetting its involvement in the litigation was “inadequate.” Hays took responsibility for “any mistakes” and apologized.

(Related: former U.S. solicitor general Paul Clement, who has been leading the litigation, is resigning in protest and will carry on with the lawsuits.)

Organizations that advocate for gays and lesbians, most prominently the Human Rights Campaign based in Washington, have harshly criticized the firm’s involvement with the litigation and promised to target the firm’s clients and recruits. A news conference had been scheduled for Tuesday morning in Atlanta, where the law firm is based.

King & Spalding’s involvement in the litigation became public one week ago, and Hays’ statement says the firm’s attempt to withdraw began soon after. “Last week we worked diligently through the process required for withdrawal,” the statement says.

“In reviewing this assignment further, I determined that the process used for vetting this engagement was inadequate,” the statement continues. “Ultimately I am responsible for any mistakes that occurred and apologize for the challenges this may have created.”

The office of House Speaker John Boehner (R-Ohio), who hired King & Spalding, condemned the announcement. “The speaker is disappointed in the firm’s decision and its careless disregard for its responsibilities to the House in this constitutional matter,” spokesman Brendan Buck said in an e-mailed statement.

But in filings in federal court in Manhattan, King & Spalding asks the court to give the House additional time to make arrangements. Withdrawal requires the approval of the court, according to the filings.

Rep. Nancy Pelsoi (D-Calif.), who has opposed the House’s involvement in the marriage lawsuits, took heart in Hays’ letter, said Pelosi spokesman Drew Hammill. “Leader Pelosi shares Mr. Hays’ apparent concerns with the lack of transparency and accountability in the way this contract was signed,” Hammill said in an e-mailed statement. “She also vigorously opposes using half a million taxpayer dollars or any taxpayer resources to defend discrimination, at a time when Republicans in Congress are cutting critical initiatives like education and infrastructure.”

The new court filings are signed by Richard Cirillo, a partner in King & Spalding’s New York office and, according to his firm profile, the chairman of the firm’s ethics committee. A hearing is scheduled for May 25 in U.S. District Court for the Southern District of New York, according to the filings.

Hays did not elaborate on any vetting mistakes. A spokesman said the firm would have no comment beyond Hays’ statement.

Updated at 12:26 p.m. Photo by Zachary D. Porter/Daily Report.

This Week in the National Law Journal

NLJ 250: The nation's largest law firms dropped about 2,900 attorneys in 2010, according to the annual NLJ 250. The multiyear declines in Big Law attorneys are the largest in the 34 years the National Law Journal has published the survey.

DOMA Battle: David Ingram explores King & Spalding's decision to defend the federal Defense of Marriage Act on behalf of House Republicans.

Wone Case: As a civil wrongful death suit continues in the death of Washington lawyer Robert Wone, the three men acquitted of covering up the murder are keeping quiet, citing their right against self-incrimination, reports Mike Scarcella.

Bratz Verdict: Mattel Inc. lost the latest round of litigation against MGA Entertainment Inc. over ownership of the rights to the highly profitable Bratz dolls. Amanda Bronstad has more on the case here.

BP Claims: David Bario reports on a series of new claims filed in New Orleans federal court relating to the 2010 oil spill in the Gulf of Mexico.

The Morning Wrap

The Guantánamo Papers: Several news organizations have obtained copies of previously undisclosed analysts' reports from the Guantánamo Bay military prison. Click here for The New York Times' take and here for The Washington Post's.

Drug Marketing: USA Today previews a Supreme Court argument over a Vermont law designed to block the release of patient data to pharmaceutical marketers.

Post-Don't Ask: Columbia University plans to recognize the Navy's officer-training program this year, reversing a policy that began during the Vietnam War and continued during the Don't Ask, Don't Tell era, The Wall Street Journal reports.

Fight-Fixing Probe: The Enterprise of Brockton, Mass., reports that the Justice Department in 1954 requested an investigation into an "alleged fix" of a bout featuring heavyweight champion Rocky Marciano. (Also, Marciano received death threats.)

Helicopter Shooting: An 18-year-old man was arrested on suspicion of attempted murder after investigators say he shot at a Los Angeles police helicopter, the Los Angeles Times reports.

$8.7 Million Settlement Reached in Iraq Contractor Whistleblower Suit

Updated at 4:34 p.m. with additional reporting.

The U.S. Department of Justice announced this afternoon that it has settled a whistleblower lawsuit against two companies under contract with the U.S. Department of State.

DynCorp International LLC and its subcontractor, The Sandi Group (TSG), were sued by two former TSG employees in a qui tam lawsuit under the federal False Claims Act.

In the settlement, DynCorp will pay $7.7 million and TSG will pay $1.01 million, according to the DOJ release. The two former TSG employees will also receive a share up to $481,710.

A copy of the lawsuit filed against the two companies was not immediately available this afternoon, but according to the DOJ release, DynCorp was accused of inflating claims made to the government for construction costs, while TSG was accused of seeking reimbursement for danger pay that it had never actually paid out to U.S. employees working in Iraq.

“The hard work of stabilizing Iraq is challenging enough without contractors and subcontractors inflating the cost of rebuilding by making false claims at taxpayers’ expense,” Tony West, Assistant Attorney General for the Civil Division, said in the DOJ release. “This case demonstrates that the Department of Justice will pursue these cases that undermine the integrity of our public contracting process.”

Stuart Bowen Jr., the Special Inspector General for Iraq Reconstruction said in a statement that “false claims filed by contractors have been a problem in Iraq.”

“While SIGIR continues to pursue a number of allegations in this regard, I am pleased to see that today one of those cases has come to just resolution,” he said.

DynCorp's attorney, Douglas Baruch of Fried, Frank, Harris, Shriver & Jacobson, could not immediately be reached for comment. DynCorp spokeswoman Ashley Burke said in a statement this afternoon that the company denies any wrongdoing.

"DynCorp International (DI) entered into a settlement agreement with the Department of Justice that resolves cost issues related to contractor personnel camps delivered by DI to the State Department in Iraq in 2004 - 2006," Burke said. "While the company believes that its actions were appropriate and allowable under the contract, we are committed to resolving this issue to the satisfaction of the U.S. government."

A TSG representative and TSG's attorney, David Barger of Greenberg Traurig, could not immediately be reached this afternoon.

Federal Judiciary Divided Over Changing Criminal Discovery Rule

Federal judges are divided over the necessity to change the rules of criminal procedure to put a greater emphasis and burden on prosecutors to turn over favorable information to defense lawyers, a Federal Judicial Center report concluded.

The center, the research arm of the judiciary, surveyed all U.S. Attorney’s Offices, thousands of defense lawyers and federal and magistrate judges to assess the merits of a proposed amendment to Rule 16, which governs discovery in criminal cases. A copy of the survey results is here. (Click here for an earlier report on the survey’s findings.)

The FJC said 43% of about 1,500 judges completed the online survey, which was conducted last year. Eighty-five of the 93 U.S. Attorney’s Offices participated in the review. More than 5,000 private criminal defense lawyers and federal public defenders provided their assessment.

The judiciary was evenly split on the need for amending the rule. But judges in districts with local rules or standing orders that require broader disclosure of information than what’s required in Rule 16 indicated greater support for a rule change than other judges in the judiciary. The Justice Department opposed a rule change. More than 90% of the defense lawyers who responded favored a change.

The two most frequent disclosure violations among prosecutors, judges reported, were the failure to provide favorable information on time and the scope of the disclosure to the defense.

Judges also reported they rarely hold an attorney in contempt and infrequently report a prosecutor’s conduct to the DOJ’s Office of Professional Responsibility, bar counsel or other disciplinary body.

The survey also said that more than 60% of judges said they did not have a case in the past five years in which a prosecutor or defense lawyer failed to comply with disclosure obligations.

In 2009, Judge Emmet Sullivan of U.S. District Court for the District of Columbia wrote to the Judicial Conference criminal rules committee asking the group of lawyers, judges and law professors to reassess, for a second time in recent years, an amendment to the rule.

Sullivan was the trial judge who oversaw the Justice Department’s botched prosecution of former Alaska Senator Ted Stevens. Sullivan called the Stevens case one of the most shocking examples of prosecutorial misconduct he’d ever seen during his time on the bench.

DOJ officials tout what they call a "comprehensive" approach to discovery reform in arguing against a rule change.

The department early last year issued new discovery guidance to all federal prosecutors. The memos, issued by then-Deputy Attorney General David Ogden, encouraged “broad and early” discovery. Also, the department announced its intent to provide more training for prosecutors.

PETA Seeking Court Order for Inclusion in Merck Shareholder Meeting

Updated at 5:11 p.m.

People for the Ethical Treatment of Animals is seeking a court order to force Merck & Co. Inc. to include a resolution from the animal rights group in materials for the pharmaceutical company’s annual shareholder meeting.

PETA holds 101 shares of Merck, according to a complaint (PDF) seeking injunctive relief filed yesterday in U.S. District Court for the District of Columbia. The group is accusing the company of wrongfully denying its request to include a resolution in the proxy materials that calls on Merck to disclose use of animal testing in in-house and contracted research.

Leveraging stock ownership to pursue advocacy goals, known as shareholder activism or advocacy, is nothing new for PETA, which owns shares in 35 corporations, according to in-house attorney Susan Hall.

However, while companies often resist PETA’s attempts to use its shareholder status, she said, this lawsuit marks the first time PETA is taking a corporation to court over the denial of a request to include a resolution in shareholder proxy materials.

Merck’s annual shareholder meeting is scheduled for May 24. PETA is asking the court to force Merck to include its resolution in the proxy materials for the meeting, or else compel Merck to hold a special meeting to present PETA’s resolution to other shareholders.

According to PETA’s complaint, Merck contested PETA’s request on the grounds that they had failed to prove shareholder status. Merck merged with Schering-Plough Corp. on Nov. 3, 2009, and, according to the complaint, had told PETA that they needed to prove ownership in Schering-Plough to be eligible.

Hall said that under U.S. Securities and Exchange Commission rules, PETA needs to prove ownership of stock for one year prior to filing its request for inclusion in proxy materials in order to be eligible. Since the merger took place on Nov. 3, 2009 and PETA submitted its resolution on Nov. 17, 2010, Hall said Merck is in the wrong in requiring PETA to also prove ownership of Schering-Plough shares.

According to the complaint, PETA also maintains that it meets the eligibility threshold of holding at least $2,000 or 1 percent of Merck.

PETA had originally submitted its proposal on Oct. 28, but claims in their complaint that they formally withdrew it and refiled on Nov. 17 in order to comply with Merck’s other objection that PETA was making multiple proposals when they were limited to making one.

Merck did not have counsel listed as of Friday, and a company representative was not immediately available for comment.

Updated to correct the value of PETA shares in Merck.