Controversies
- Lawrence B. Lockwood v. Sheppard, Mullin, Richter & Hampton et al.
In June 2007, Sheppard Mullin and former Sheppard Mullin partner Jonathan Hangartner were named in a lawsuit filed in the Los Angeles County Superior Court by inventor Lawrence Lockwood. The lawsuit alleged that Sheppard Mullin and Hangartner, who represented defendants in a number of patent suits filed by Lockwood, made false representations in requesting re-examination of the patents from the U.S. Patent and Trademark Office. Lockwood claimed that the firm "fudged the date" of one of the alleged publications and "misrepresented what the other publications actually disclosed." Sheppard Mullin filed a demurrer and a special motion to strike the lawsuit under section 425.16 of the California Code of Civil Procedure. The trial court granted Sheppard Mullin's motion to strike. Lockwood appealed, and in April 2009 the California Court of Appeal vacated the judgment of the trial court, holding that "Lockwood's complaint arises under the patent laws of the United States and therefore is subject to the exclusive jurisdiction of the federal courts."
In July 2009, Lockwood filed his lawsuit anew against Sheppard Mullin, this time in the federal district court for the Central District of California, naming former Sheppard Mullin attorneys Jonathan Hangartner (now a sole practitioner) and Steve P. Hassid (subsequently an associate at Greenberg Traurig's Los Angeles office) individually. The complaint brought causes of action against Sheppard Mullin, Hangartner, and Hassid for malicious prosecution, interference with prospective economic advantage, and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Sheppard Mullin filed a Rule 12(b)(6) motion to dismiss and a special motion to strike the lawsuit under section 425.16 of the California Code of Civil Procedure. In November 2009, the district court granted Sheppard Mullin's motion to dismiss. In November 2010, Lockwood's appeal to the U.S. Court of Appeals for the Federal Circuit was denied without comment. Mr.Lockwood and his company, PanIP, LLC, requested review of the judgment of the Federal Circuit and the U.S. Supreme Court denied certiorari in October 2011.
- Pan Am Railways, Inc. v. Sheppard, Mullin, Richter & Hampton et al.
In March 2007, Pan Am sued Sheppard Mullin and former Sheppard Mullin attorney John R. Fornaciari (now a sole practitioner), in Superior Court in the District of Columbia, alleging that Sheppard Mullin, which represented two of the airline's subsidiaries in the past, breached a fiduciary duty by agreeing to represent Pan Am's general counsel, John Nadolny, without the company's knowledge. According to the complaint, Nadolny had forged a $320,000 bond meant to secure a settlement Pan Am had reached with the Air Line Pilots Association. When the bond company's inspectors made inquiries, Nadolny turned to attorneys at Sheppard Mullin, including John Fornaciari, then a partner and white-collar defense attorney at the firm, for advice on how to handle the insurance company's investigation. Nadolny had worked with Fornaciari in the past on Pan Am-related litigation in New England and in Florida. Sheppard Mullin agreed to take Nadolny on as a client, but for several months allegedly failed to inform Pan Am that it had done so, nor did it alert Pan Am to the problem with the pending bond. Pan Am alleges that this clandestine relationship resulted in damage to the company's reputation and the instigation of a Transportation Department proceeding that has remained stalled for two years.
- United States Fire Ins. Co. v. Sheppard, Mullin, Richter & Hampton
U.S. Fire filed a lawsuit against Sheppard Mullin to enjoin it from representing Kelly-Moore Paint Company, whose interests were allegedly adverse to those of U.S. Fire. In 2001, Sheppard Mullin had defended U.S. Fire against claims by the Kelly-Moore Paint Company that the insurer failed to defend and indemnify it in connection with certain asbestos litigation. U.S. Fire now contends that confidential information obtained by the law firm during that representation could be used adversely to the insurer in connection with a pending suit—a declaratory action by Plant Insulation Company concerning potential benefits owed to Plant by its insurers, including U.S. Fire. U.S. Fire noted that it had never given a conflict waiver, and that 260 boxes of documents, which the insurer said included information about its settlement and litigation strategies and liability analysis, was turned over to successor counsel when Sheppard Mullin was substituted out of the Kelly-Moore litigation in 2006.
In March 2009, the California Court of Appeal affirmed the denial of Sheppard Mullin's special motion to strike the lawsuit under section 425.16 of the California Code of Civil Procedure, allowing the case to proceed.
U.S. Fire sued to prevent Sheppard Mullin from representing asbestos creditors of Plant Insulation Company, not Kelly-Moore Paint Company. When Plant Insulation filed a chapter 11 proceeding in 2009, the U.S. Bankruptcy Court for the Northern District of California authorized the Official Creditors' Committee to employ Sheppard Mullin over the objections of U.S. Fire.
- Vinewood Capital, LLC v. Sheppard, Mullin, Richter & Hampton
Vinewood Capital filed a lawsuit in the 191st Judicial District Court in Dallas County, TX on November 25, 2009, alleging breach of fiduciary duty and fraud against Sheppard Mullin, Sheppard Mullin attorneys James J. McGuire and Tim McCarthy (both of whom subsequently moved to Mishcon de Reya), as well as Cox Smith Matthews Incorporated. Vinewood had engaged Sheppard Mullin to provide legal advice about its various business plans and proposed transactions. However, when an investor in Vinewood, Dar Al-Maal Al-Islami Trust ("DMI") allegedly breached its contract with Vinewood, Sheppard Mullin attorneys McGuire and McCarthy appeared as counsel for DMI and allegedly took positions against Vinewood. Vinewood alleged that Sheppard Mullin shared its confidential and proprietary information with DMI and others.
Sheppard Mullin removed the case to federal court in the Dallas Division of the Northern District of Texas on December 28, 2009. On April 2, 2010, Judge Sam A. Lindsay transferred the case to the Fort Worth division of the Northern District.
The court ordered the case dismissed with prejudice and awarded sanctions in favor of Sheppard Mullin against the plaintiff and its counsel.
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