North Carolina Lawyers Weekly
The North Carolina Court of Appeals has affirmed a trial judge’s order imposing nearly $270,000 in Rule 11 sanctions on a multi-state corporate defense firm, the lawyer in charge of the firm’s Winston-Salem office, and their client.
The court’s unanimous decision came after the client in question, Kenneth Moch, issued an apology and retraction letter and entered into a settlement agreement, leaving his former attorney, Jeffrey Patton of Spilman, Thomas & Battle, to forge ahead with an appeal.
Patton and his firm were challenging a ruling last year from an Orange County trial judge, who held that they assisted Moch in filing a frivolous complaint against Pappas Capital, a life science venture capital firm.
But Court of Appeals Judge Lucy Inman wrote in a July 3 unpublished opinion that a “review of the record reflects evidence supporting the trial court’s determination that Plaintiff’s lawsuit, when considered in its entirety, was not maintained for a proper purpose.”
The complaint was an apparent response to a lawsuit Pappas brought against Moch in Durham County over an alleged defamatory email campaign that Moch waged against Pappas’ firm after it took a substantial investment stake in Chimerix, a pharmaceutical company. The suit also named the firm’s managing partner, Art Pappas, and partner Ford Worthy.
Moch had served as CEO of Chimerix until 2014, when he resigned after the company “came under intense national media scrutiny” for refusing to give a drug it was developing to a boy who needed help battling a potentially fatal virus infection, according to court documents. During the controversy, two members of Chimerix’s board met with Moch and told him he could resign or be fired the next day.
Later, Moch allegedly sent anonymous emails to Pappas’ investors, including the North Carolina State Treasurer’s Office, accusing the Pappas firm and its CEO of misappropriating $2 million. He also accused Pappas of “domestic violence/hitting women.”
Pappas’ attorneys at Smith Anderson in Raleigh confronted Moch, telling him that they believed he was behind the emails and demanded that he retract and apologize for the defamatory statements he’d made and pay more than $10 million in damages.
After settlement negotiations failed, Pappas named Moch as a party in its suit, which was originally filed against a John Doe. Within hours of the amendment, Moch filed suit in Orange County for unfair and deceptive trade practices and abuse of process. Patton, who signed the complaint, declined an earlier interview request and did not respond to messages seeking comment in the wake of the appellate decision.
Worthy revealed in an interview that Moch, who reached a confidential settlement with the Pappas defendants and withdrew his appeal of the sanctions order, had issued a retraction letter, which he provided to Lawyers Weekly.
“The statements I made in the emails were false and it was wrong for me to send them,” the letter states. “I regret sending the emails and I apologize to Mr. Pappas, Mr. Worthy and their families, Pappas Ventures and its employees and investors, and I wish them the best in the future.”
Moch’s suit was dismissed about three months after it was filed. He’d challenged the dismissal, but lost at the Court of Appeals. Patton, meanwhile, had asserted in an affidavit that the suit was not frivolous, arguing that “several associates and partners” at his firm researched the strength of Moch’s case against Pappas. But he did not identify those other lawyers or provide details about their level of expertise or the amount of research that was done, according to the trial judge’s findings in the sanctions order.
“Mr. Patton’s affidavit is seven pages in length and contains about four and one half pages of selected quotes and one-liners from various cases and statutes,” the order stated. It added that Patton had “failed to demonstrate to the court whether he undertook a reasonable inquiry into the law, and the facts show otherwise.”
Reflecting on the case in the wake of the recent appellate decision, Worthy said that “when lawyers and law firms use the judicial system for improper purposes it undermines the public’s respect for the system.”
He added, “I think the entire legal profession suffers when you see that,”
The 16-page decision is Moch v. A. M. Pappas & Associates, LLC (Lawyers Weekly No. 012-095-18). An opinion digest is available at nclawyersweekly.com.
Follow Phillip Bantz on Twitter @NCLWBantz
