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Federal Bankruptcy Court Orders N.J. Counsel to Pay $59K in E-Discovery Sanction Fees

E-Discovery / Photo: Shutterstock.com

(Photo: Shutterstock.com)

In the long-running bankruptcy proceedings of the Newark Watershed Conservation and Development Corp., a judge has levied a nearly $60,000 fees-and-costs sanction against the agency's onetime counsel.

U.S. Bankruptcy Judge Vincent Papalia of the District of New Jersey on Monday issued the order, which partially compensates the defunct Newark Watershed for work done in connection with a discovery dispute over past emails to and from attorneys at New Jersey law firm Trenk, DiPasquale, Della Fera & Sodono.

The award is against the Trenk firm, which dissolved last year as its attorneys were acquired by McManimon Scotland & Baumann, and former Trenk DiPasquale lawyers Elnardo Webster II and Jody Luciani, now of Inglesino, Webster, Wyciskala & Taylor in Parsippany.

The watershed is pursuing legal malpractice claims against the two lawyers and the Trenk firm. Those defendants have denied breaching any duty to the client and are seeking to dismiss the claims.

According to court documents, the discovery dispute leading to Papalia's Monday order began in 2017, when the watershed filed a motion to compel forensic inspection and analysis of electronic devices used by Webster, Luciani and the Trenk firm.

The watershed's counsel in the malpractice matter, Bruce Vargo and James Scarpone of Scarpone & Vargo in Newark, said in the motion that discovery had turned up far fewer emails than expected. "The dearth of emails in the Trenk Defendants' productions stands in stark contrast to the time records attached to the Trenk firm's 2007-2010 bills, which contain many hundreds of references to emails for which no corresponding document has been produced," they wrote. "The NWCDC is entitled to know whether the missing emails still exist and, if not, what happened to them."

According to court documents, the Trenk firm in 2017 explained that archived files for Webster and Luciani were deleted after the two left for Genova Burns in 2012 and thus couldn't be produced. But a subsequent deposition of the Trenk firm's outside information-technology professional, Michael Skomba, revealed that backup drives of the emails had been created, and those drives ultimately were located and produced, and the court in 2018 ordered a forensic analysis of the drives, the documents noted.

Papalia last Dec. 13 ordered the payment of reasonable fees and expenses incurred by the watershed's counsel in connection with the motion to compel.

Vargo said in a court filing last Feb. 14 that the discovery dispute required about 201 hours of work, with fees and costs totaling $71,703.

The defendants, represented by William O'Connor Jr. of McElroy, Deutsch, Mulvaney & Carpenter's Newark office, filed an objection last March 5, contending that Scarpone & Vargo's "billing entries are often not specific enough to determine what work was actually performed, and occasionally appears as block billing." They said, "It is apparent that the time entries are, at best, an educated guess as to time expended," called the time spent on the motion to compel "egregious," and argued that the "rate for the drafting and filing of this motion should be halved at the very least."

A March 12 reply by Vargo called the work "certainly … reasonable in light of the complexity of the motion at hand."

"As the Court itself acknowledged during the numerous hearings conducted prior to the formal motion, an order permitting a forensic analysis of a party's technology is rare," Vargo wrote. "Even rarer when that defendant is a law firm given … the host of complex questions raised relating to attorney-client communications and work product involving Trenk's other clients," as well as other privacy concerns, the agency said.

Papalia on Monday ultimately ordered fees and expenses of $59,545, deducting sums incurred in connection with efforts to seal documents, and duplicative or nonattorney billing.

Papalia stated in the order that he "does not address the allocation of responsibility for the Fee Award among or between the Attorney Defendants, their counsel or their insurers, as those issues were not before the Court."

Scarpone, reached by phone, said he is "mostly pleased" with Papalia's ruling.

"Pleased in the sense that it eases the pain, but we're not pleased about the fact that it took two years to get document discovery," Scarpone said. "This never should've been an issue. … There's no great satisfaction in this."

Asked how the emails turned up in discovery might affect the malpractice claims, Scarpone said, "the case is about what they failed to do, more so than it's about what they actually did," adding that he's not expecting a "smoking gun" piece of evidence revealing a negligent act.

O'Connor, counsel to the defendants, didn't respond to requests for comment. Richard Trenk, who was managing partner and founder of Trenk DiPasquale, couldn't be reached. He is now with McManimon Scotland. Webster and Luciani also couldn't be reached.

The Newark Watershed once operated systems providing water to Newark. It dissolved in 2013 amid reports of corruption. The agency’s former executive director, Linda Watkins-Brashear, pleaded guilty to a wire fraud scheme and filing false tax returns, and was sentenced to eight and a half years in prison in 2017.

The agency, while in bankruptcy, filed a complaint for malpractice and breach of fiduciary duty against Trenk DiPasquale, Webster and Luciani in June 2016, in connection with their representation of the agency from 2006 to 2012. Webster and Luciani continued to represent the agency after they left Trenk DiPasquale to join Newark firm Genova Burns in 2012. The malpractice complaint originally included claims against Genova Burns, too, but in 2016 the firm paid $1 million to settle the claims against Webster and Luciani during their time with Genova Burns in 2012 and 2013.