Judge slams law firm Bose over 'misrepresentations' in Red Spot case

June 15, 2009

Bose McKinney & Evans' defense of an Evansville company in a high-stakes environmental-contamination lawsuit has degenerated into a fiasco, with a federal judge sanctioning both the client and law firm and ordering each to pay half the plaintiff's legal bills.

In a stinging 65-page order June 5, Indianapolis Judge Larry McKinney found Red Spot Paint & Varnish Co. failed to come clean about its use of toxic chemicals and that Bose "compounded the problem by, like a chameleon, becoming indistinguishable from its client."

McKinney wrote that Red Spot "had made a mockery of the discovery process and has subjected the truth to ridicule." Further, he wrote, "BME ... failed in its responsibility to be candid with the court by making statements in court filings that it knew were misrepresentations at best and false at worst."

To punish the parties, he took the draconian step of declaring the plaintiff, 1100 West LLC, a neighbor of Red Spot's that had blamed the firm for contaminating its site, victorious without going through a trial. The ruling puts Red Spot on the hook for millions of dollars in cleanup costs. The legal tab Red Spot and Bose must split in the 6-year-old case also runs into the millions.

Bose McKinney Managing Partner Kendall Crook noted in a written statement that its two principal litigators who handled the case are no longer with the firm—one was fired, and the other agreed to resign, court records say.

"We have taken this matter extremely seriously and took prompt action to address the issues described in the court order," Crook said in the statement.

Bose stepped down from representing Red Spot early this year. In legal filings since, the parties have lobbed broadsides at each other.

"The full extent of Red Spot's contamination and concealment is still being uncovered," attorneys for Bose wrote in a recent filing. "Despite being represented by 'new' counsel ... Red Spot continues to obfuscate the truth. ... This demonstrates the root cause of the problem is Red Spot itself and not the lawyers."

For its part, Red Spot wrote that Bose, which had collected nearly $3 million in legal fees, had thrown its former client "under the bus" in an effort to distract the court from its own misconduct.

"The executives at Red Spot—who had little or no legal experience—placed their trust and faith in the legal experts at BME to guide them through an unfamiliar and potentially treacherous legal landscape," the firm's new legal team said in a filing.

"Red Spot made good-faith efforts to fulfill the duties to the court and the legal process. However, largely because of a lack of guidance, mistakes were made."

Court records suggest the case was wending its way toward trial in fairly typical fashion until 1100 West—frustrated that Red Spot wouldn't verify the authenticity of some records—filed a Freedom of Information Act request with the U.S. Environmental Protection Agency.

The response received last fall turned up numerous documents Red Spot had not produced during discovery and that were out of sync with the company's previous positions. Those included records of prior environmental violations, photos of leaking solvent waste drums, and an EPA memo stating that Red Spot had consistently failed to demonstrate a good-faith effort toward compliance.

1100 West also learned from the EPA that Bose had received the same records one year earlier, though it had not anteed up the information. At an emergency hearing requested by 1100 West, Bose acknowledged a paralegal made a Freedom of Information Act request in June 2007 that was filled a few months later.

At the hearing, Bose partner Richard VanRheenen said the materials "were actually ... forgotten documents"—an oversight he blamed on being out of the office a lot because of health issues.

He said that he and fellow Bose attorney Amy Cueller had not gone through them until 1100 West filed its emergency motion. Similarly, Cueller told the court the materials "had fallen into a black hole."

Even so, the version of the EPA materials Bose ultimately filed with the court didn't include some of the incriminating material 1100 West had flagged. VanRheenen initially claimed Bose didn't receive the extra documents but later acknowledged it had. 1100 West, meanwhile, charged Bose had "sanitized" the file by pulling out the most damaging documents.

Since the controversy over the EPA file erupted, attorneys have turned up additional documents that should have been provided to 1100 West during discovery, some of which contradict statements Red Spot executives made in depositions.

Court records say Bose asked VanRheenen and Cueller to quit in late December. VanRheenen, a partner, did so, while Cueller, a contract attorney, refused and was fired. Cueller could not be reached by IBJ. Wayne Turner, an attorney for VanRheenen, said: "Richard has learned a lot from this experience, hopefully in ways that will make him a better lawyer. I know he looks at it that way."

The next step in the case will be to determine damages Red Spot must pay for cleanup costs. When Red Spot's owners sold the business to a Japanese company last year, they put $14 million in escrow to cover potential costs of the lawsuit.•

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