OrtSe_Oral Arguments_20111027

NOTE: Poor audio quality - intermittent audio with echo. Incomprehensible parts marked with timestamp. Male: Begin with Young Again Products versus Acord. Joe Alfred Izen, Jr.: Good morning Your Honor. I'm Joe Alfred Izen, Jr. I represent the appellants in this case. This case started out as a trademark violation case alleging damages. It became an injunction, which was a mutual injunction of the sentence, which ordered the parties not to disparage each other. It then transformed into litigation over motions for contempt about that particular injunction, which when you look at record, I think you'll find that injunction became a final judgment during the course of this case. Then it resulted in litigation over the contempt motions and that resulted in ultimately a Rule 11 sanction of $25,000, which resulted in, Mr. Acord, one of the appellants, being incarcerated for 97 days for failure to pay a Rule 11 sanction in the amount of $25,000. The record will indicate that that -Male: Is the sanction paid yet? Joe Alfred Izen, Jr.: The sanction was paid ultimately, as a result of Mr. Acords relative liquidating part of a retirement plan in paying the sanction. So the sanction is no longer the issue as far as being paid in this case. The issue is its legality. The underlying basis of that sanction was that Mr. Acord was frivolous in filing a motion claiming that Young Again Products had violated this (00:01:46) injunction, conjunctive order not to disparage. There is a letter in the record that Mr. Mason(ph), an executive with Young Again Products wrote to a gentleman by the name of Goobie(ph), which was definitely disparaging. I think if the Court looks at it, they'll make the determination that it was disparaging. And so, how can you be liable for a Rule 11 sanction when you filed in force an injunction as a nondisparagement clause in it whenever there has been disparagement or even that there is an issue about whether the letter is a good faith issue about why the letter is disparaging. So we move into that and that's contempt, and then we roll along the pretrial hearing. And at the pretrial hearing, Marcella Ortega, who is the mother of John Acord, she is abandoned by her attorney in the middle of the pretrial. Now, we have sighted in our reply brief on one of our papers a motion for new trial, which has attached evidence which indicates to me, looking at those records, that Mr. Laubscher(ph), the attorney for Marcella Ortega had told her she didnt have to appear at the pretrial before he abandoned her. They have the problem of pleadings that have been filed before the pretrial by Mr. Laubscher, which presumably have been given, if were to believe him to, his client, Marcella Ortega, and those pleadings he is responding to motion for default judgment of Freeman

Transcribed by Tech-Synergy

Page 1 of 18

OrtSe_Oral Arguments_20111027

attorneys who represent Young Again Products. He says nothings wrong. He says that Marcella Ortega has made no violations. And he can test default until he gets in the middle of the hearing, and then he abandons the interest of (00:03:31) in the middle of the hearing. Now this raises issues that this Court has dealt with before. I think this Court in the Fourth Circuit has a case, which says that an attorney cannot abandon his client in the middle of proceedings like that. That is simply a synopsis of the general ethics rule, a part of the general ethics rule that none of us are allowed to abandon the interest of our clients. When the going gets tough or it looks like were being under attack, or that we have our own problems, sanction wise or others, we have to withdraw if at all, upon an order signed by the Court of Appeals at such time when it doesnt work for prejudice to the interest of our client. Now on this record, its not just an issue of default judgment or theyre warned sufficiently, this has looked like this complied with our standards in our Circuits for upholding default judgment on something like a pretrial efficiency, which normally requires a warning that very severe sanctions will be put against the party default. It also normally requires an -Male: The District Court here showed a great deal of patience in seeing to give you a chance after chance after chance. The default judgment did not just rest on any one incident. 00:05:00 It rested upon over a pattern of refusal who cooperate with political process and even the most elemental way. Joe Alfred Izen, Jr.: Your Honor, I have to contest that statement. Unless the statements of attorneys about the other party is proved that you can rely on in affirming a case, that statement that you just made is simply wrong. And I specifically point to the fact that we sided in our briefs numerous orders that the District Court that did not impose any sanctions that were about discovery, they had to do with entered agreed orders. There's nothing in those orders that supports this. I'm afraid the Court is being misled by statements of counsel, which transformed their statements into orders that were supposedly made on the record. We laboriously address this in our reply brief. Simply, statements of attorneys are not evidence. Any attorney can get in there, make statements about opposing counsel, about opposing parties and if the Court relies on those statements, the Court hasnt shown great patience because those statements are not evidence. And thats my response on that and Ill move on to the next point. You have a situation here where --

Transcribed by Tech-Synergy

Page 2 of 18

OrtSe_Oral Arguments_20111027

Female:

Can we just go back to that for a second? There is in the record, I think you would agree, a fair number of comment by the District Judge saying, I'm losing my patience. I think there is something wrong. This doesnt smell right to me. I also think youre right. There is no step with one instant in position of sanction or clear warning that youre going to have a default judgment, would you say that those two things are fair characterization --

Joe Alfred Izen, Jr.: I would say that thats a fair characterization at the worst as you can look at our case on appeal. Female: Okay. Other points that seems to me that you have to deal with is that you -- as I take it, you're now representing both mother and son, is that correct?

Joe Alfred Izen, Jr.: Thats correct and the mother is here in the courtroom. Female: And they are in two different situations, it seems to me, would you not agree with that?

Joe Alfred Izen, Jr.: I would and I would like to make this comment. One of the carried along issues here is may a pro se person adopt the pleadings of another party? Both on appeal (00:07:30) and if you say that they can't, there was never any warning in this record that this pro se person could not adopt the pleading. And the Court knew that this gentleman was unrepresented for a long period of time because he allowed Mr. Laubscher to withdraw. Now with that statement, I want to go back to abandonment in the middle of this trial. Is this court going to rule an attorney, who is challenged with sanctionable conduct and abandoned a client in the middle of the trial? Male: Excuse me for a second. I dont think that the District Court's final order representing -- I mean, it was opposed purely on the basis of Acords adoption of the pleading, Ortegas pleading. I understand that the order was based on the District Court's impression that both of the defendants here has essentially hire(ph) themselves in saboteurs of a legal process and if there was a pattern of conduct here that the District Court found that its consented junction was violated and there was a refusal to pay sanctions in the case of Acord and completely snubbed the pretrial scheduling orders, miss scheduling conferences, didnt comply with discovery orders or file motions for continuances and delay that were frivolous just to run the process into the ground. That, if it just been one thing, I wouldnt have been as concerned about it but it was the accumulation of behavior. Joe Alfred Izen, Jr.: Your Honor, there is no accumulation of behavior. I challenge the Court to look at the District Court's rulings, what the District Court signed. They can find whatever they want to find without any evidence. He reversed (00:09:42) all the time.

Transcribed by Tech-Synergy

Page 3 of 18

OrtSe_Oral Arguments_20111027

Male: Isnt the District Court in the best position to determine whether its own scheduling conferences and discovery orders and the rest have been violated? Joe Alfred Izen, Jr.: Not without evidence, which is based simply on statements of attorneys, which are not upheld by the record. 00:09:59 We spent long time, weeks, going through these allegations and whats being done here is were being victimized by the statements of attorneys of what they wish the record would show. Female Could I clarify one thing? My understanding of the record is that Mr. Laubscher, if I'm pronouncing that correctly, requested and was granted permission to withdraw in his representation on Ms. Ortega based on what he describe as her failure to respond to his request for direction about the litigation. Is it your statement that he did not receive permission to report the withdraw?

Joe Alfred Izen, Jr.: No, I'm not saying that at all. I'm saying that the Court, your Court, the District Court cannot allow attorneys to cut and run when their own sanctionable conduct is at issue and simply by statements of counsel, not under cross-examination, not carefully examined by the court, self-serving that, Oh, my pleadings are wrong that I filed before this default was entered. When I responded to the pretrial, I said that they werent in default, they didnt do anything wrong. I told my client to stay home where she wouldnt hear what I was going to say and now, I want out of this case Your Honor. And they strip him out of the case with the motion to withdraw. No judge has the power to do that. Male: But it's up to a District Judge to sort all these out and the question is to whether there was abandonment as you call it or the attorney moved to withdraw because of the fact that there was -- I assume no payment of the bill but also, just no cooperation at all. If the attorney felt that it -- he or she just could not in conscience perceive because the client was on demanding the attorney at every turn. Its apparently the reason -Joe Alfred Izen, Jr.: Well, its a bad reason because the clients not there to defend themselves. Can I do that? Can I cut and run in a case? Can I withdraw when the clients not there, not tell the client not be there? Male: Youre characterizing it in a way that I dont believe that the trial court accept it. Joe Alfred Izen, Jr.: Well, they have to be ruled by evidence. They dont rule by whim. Can you accept an attorneys uncontested but uncross-

Transcribed by Tech-Synergy

Page 4 of 18

OrtSe_Oral Arguments_20111027

examined, self-serving statements describing his own sanctionable conduct? I say to you, no, you cant do that, and its not ethical practice in this Circuit or any Circuit. Male: Yes, if an attorney is perfectly capable of explaining to a District Court, why it is that the attorney-client relationship has found running around. I mean, theres nothing impermissible about that and there is nothing impermissible about attorneys telling the District Court and informing the District Court as to the fact that the case simply cant move forward because no one shows up for scheduling conferences or status conferences and no one complies with discovery orders. The District Court's got to rely on statements from attorneys with respect to those sorts of matter. Joe Alfred Izen, Jr.: No, Your honor, I have to disagree with you. There is a responsibility when you swear an oath to uphold the Constitution, to give each party due process, you cannot allow an attorney who tells his client to stay home who is acting in conflict of interest, to make self-serving statements that are uncontested in the benefit of the opposing party and impose a judgment on that absent client. I disagree with you strongly and your Circuit has already ruled on this issue. There is ruling on this issue that conflict of interest such as this requires bringing forth the client into the presence of the Court and furthermore, youre still stating all these statements that come from attorneys. The set of attorneys over here, the defendants attorney self-serving for himself, are you going to decide cases based on statements of attorney's alone when you've said that statements of attorneys are no evidence? And I mean the whole Court has said that. You cant. You cant do that. Thats the thrust of our argument. Now we have other arguments but keep this in mind, all these defaults that youre saying, Oh, the case couldnt go forward. It couldnt do this. It couldnt do that." Ms. Ortega was (00:14:26) all that time and all of a sudden, it comes up at the pretrial when the attorney did not file his papers timely, that they said. Now the attorney needs somebody to blame or else he's going to have $4 million malpractice sued on him. No, you dont really want to go that way with this Court. I suggest to you that you should reconsider what youre stating in your take on this. Know the District Judge has the power. He is not that broad(ph) and know they have to have evidence to rely on and if they dont have the evidence to rely on, were going to be all in trouble. 00:15:00 And if all we take are statements from people that appear before us in a professional capacity (00:15:04) serving, were going to be in trouble. And this Court has ruled also that you cannot just

Transcribed by Tech-Synergy

Page 5 of 18

OrtSe_Oral Arguments_20111027

accept, as a District Judge, the partys findings, the fact and conclusions alone, put your rubber stamp on them because it'll be too much work. You've got to go grunge it out like appellant attorneys do here with references to the record, to support what youre concluding. Please dont sweep these horrible, ethical violations under the rug. This case should be reversed for no other reason. It's for Ms. Ortega at the ethical violations. As far as Mr. Acord, whose pro se, he should have the deference of a pro se person, he should at least get a warning that your mother has got this expensive attorney but you cant adopt the pleadings. Male: All right, thank you sir. Joe Alfred Izen, Jr.: Excuse me? Male: Thank you. Your red light was on. Joe Alfred Izen, Jr.: Im sorry. Male: Youve got some time for rebuttal. Joe Alfred Izen, Jr.: Yes sir. Male: Mr. Freeman? Mark Freeman: Good morning. My name is Mark Freeman. I represent Young Again Products. I'm here with Thomas Freeman. I think that this case were revisiting issues that at least impart decided by this Court in Mutual Federal, Mobile Oil, (00:16:22) case, the (00:16:23) case, but this case is different. This case doesnt just involve 13 months of subterfuge or game playing, or commendable restraint by the judge during the discovery process. This case involves an issuance and the entry of a permanent injunction by the District Court and then a --- which was agreed to by the party. Yeah, it was agreed to but in the record, there was originally a hearing -Thats why (00:16:53) I understand but --- people agree (00:16:58), right? That is correct. It was an agreed to judgment only -- just prior to the argument. Basically, it was a concession. Its an agreement. I dont know who conceded to who because thats not before -- what we have is an agreement, okay, go for it.

Female: Mark Freeman: Female: Mark Freeman: Female: Mark Freeman: Female:

Transcribed by Tech-Synergy

Page 6 of 18

OrtSe_Oral Arguments_20111027

Mark Freeman:

Certainly, there was an agreement but in appellant's papers, they suggest that there was a fee sharing of some sort as far as the sanction was concerned, as far as our first motion to enforce the permanent injunction. The first motion to enforce the permanent injunction resulted in $1,800 of attorneys fees and cost that were Young Again Products. The order itself talks about the fact that Young Again Products was to be paid by cashiers check from the appellants $1,800. Those werent shared fees on both sides. Did this Court ever gave either your appellants a warning (00:18:01) entered. They didnt comply with the court order. I think the District Court did. Can you tell me where that is in the JA please? I think that the District Court, on November 17, 2008 -- and to be fair, he didnt say, I will default you. So there wasnt (00:18:22) objection. Well, it may be a matter of semantics as far as what a warning is. Thats pretty a default judgment. It looks like (00:18:31) is a pretty serious remedy and it has a meaning all of its own. I'm unhappy with you. My patience is running thin. I think youre playing fast and loose. None of those things are litigant. I am going to issue a default judgment unless you comply with this order. What I'm asking you is if there is something in this record that does that. I think its clear that its in the record -Okay, I need the reference please. I dont have the actual -Would it be -- I'm sorry. I'm sorry. But I can tell you -- I dont have the actual site of the record but I can tell you that on November 17, 2008, certainly the record is nine volumes. But on November 17, 2008, Judge Titus actually said, at the end of the summary, judgment hearing, "I take, please read the rules, our rules, pretrial as to what is required on pretrial. I take them very seriously. I dont want any playing around. This is a significant endeavor to me." That -Thats --

Female Mark Freeman: Female Mark Freeman: Female: Mark Freeman: Female:

Mark Freeman: Female: Mark Freeman: Female: Mark Freeman:

Female:

Transcribed by Tech-Synergy

Page 7 of 18

OrtSe_Oral Arguments_20111027

Mark Freeman:

Well that, to me, that certainly is a warning because what would -- the question about --

Male: What page is that again? Female: Mark Freeman: 00:20:00 What is the expectation of a litigant? What is the expectation of counsel or anyone else when a federal judge or any other judge says, You better read the rules, I take them very seriously, I dont want any game play. Female: Okay. In short, your position I think is in response to Judge -(00:20:20) which I also had. There is no explicit warning. There is no specific statement by the Court that default is imminent. What you would say I gather is that without using those precise words, the District Court made it as clear as it possibly could that its frustration was reaching a point at which default could be expected, that a reasonable participant would have taken his statements to convey the fact the default was imminent. Is that a clear characterization? I think it is but it goes even further because the Court specifically directed the parties to the rule and the rule specifically says that the parties could be defaulted if they dont follow the procedures. But the rules also have other sanction that can be granted and thats where I think your (00:21:25) is because if I tell you I want you to read the rules and to know the rules, you better come back here and follow the rules. And the rules have 14 sanctions, the 14th one, which is you would default judgment and the first one is you have to pay court cost a $100. How is that warning that you are going to have the default judgment imposed upon? I think in the context of pretrial and the decisions I was unable to find the issue relating to warning and anything but discovery cases in the research that we did. We are now at a pretrial and the pretrial order, which I look at differently because we all know that once we -Have you ever been granted a default judgment in another case with this sanction? I'm sorry. Have you ever been granted a default judgment in another case with this sanction? He doesnt know the page, but its there I remember that. Yeah. And that to me -- what is a warning?

Mark Freeman:

Female:

Mark Freeman:

Female: Mark Freeman: Female:

Transcribed by Tech-Synergy

Page 8 of 18

OrtSe_Oral Arguments_20111027

Mark Freeman: Female: Mark Freeman:

I havent had the circumstance. I havent had this Court-I havent either -But I have had the circumstance where someone does not preserve an issue in a pretrial. For example, John Acord didnt preserve any issues with -Youre entirely right. That person might be required to go to trial to pay failed to preserve the issue of pretrial but that is a different sanction. But if you dont file a pretrial at all, you have no evidence, you have no witnesses, you have no documents, you have nothing essentially, whats an alternative sanction that might be available in that circumstance? You could be available. You could still cross-examine. You, the defendant, would cross-examine the plaintiffs witnesses. That would not be something that would be foreclosed from. You would be foreclosed from relying on anything that should have been in you pretrial order but was not. But lets leave the gentleman behind for a moment and go to his mother. If I understand, the counsel did in fact make contributions to pretrial order, is that right? Actually, interestingly it was one hour before the filing of the pretrial order. I think it was a Monday. Something was faxed over to our office, which was then included. Have you ever had anybody file their permissions to the pretrial order late before? Actually -Never? Every case I've ever had in Montgomery County, people file (00:23:59) The rules, I would -I'm not asking you what the rules are. I'm asking you what the practice is. I would presume you are correct. People do file things late. No one filed the motion to extend the time and essentially, what was filed and what Judge Titus said was, Well, what I have before me is essentially worthless. And if you actually look at the pretrial, it was essentially worthless because all of the exhibits including the liability expert(ph) reports, including the damages reports of Young Again Products were incorporated in what was insufficiently sent to my office an hour late.

Female:

Mark Freeman:

Female:

Mark Freeman:

Female: Mark Freeman: Female: Mark Freeman: Female: Mark Freeman:

Transcribed by Tech-Synergy

Page 9 of 18

OrtSe_Oral Arguments_20111027

Female:

They may not be able to prevail. I dont understand why that (00:24:47) default judgment because theyve done a bad job at the pretrial order. The point is at the pretrial conference, there are -- I guess what -- what are we going to do is to say, is to have the Fourth Circuit, so you dont need to follow the rules.

Mark Freeman:

00:25:03 Female: Mark Freeman: No. You dont need to comply with Rule 106, which is a local rule. We dont need to --

Male: How long did the pretrial process last in this case? Mark Freeman: Judge Titus set the case in -- or pretrial three months went by before the actual pretrial hearing. It was three months in which neither John Acord nor Marcella Ortega -(00:25:26) Actually, the way that it works on the local rule, I had to submit my submission to the other side, which I did timely, then the other -Which was when, it wasnt if its three months out. No, thats when -It was like a week out? Well actually, I think it was 30 days out, and I could be wrong, it might be two weeks out, but our office specifically wrote two different letters to John Ortega and Marcella Ortega saying, Please comply with the judges orders. Please participate in this process.

Female: Mark Freeman:

Female: Mark Freeman: Female: Mark Freeman:

Male: As I read this record and I've looked at a lot of this record, (00:26:08) here almost seem to me to be unprecedented in severity. The courts in Texas and Utah have the very same difficulties here. And there are even admissions that the judicial process is being abused and theres an email in which Acord says, under his filing numerous motions to quash discovery respect based in other actions that will hopefully (00:26:51). But the trial court just couldnt get anything done. I mean it wasnt anything that was going forward, that was a consent injunction -- true. But the consent injunction was supposed to be in a situation where the Young Again nutrition was going to notify its distributors that they should stop infringing and instead of -- distribute is being notified to that affect, an

Transcribed by Tech-Synergy

Page 10 of 18

OrtSe_Oral Arguments_20111027

inflammatory notice was sent out, which almost encouraged to continue the infringement. So, other consent injunctions had to be issued and they too were violated but in addition, all of the things that we rely upon to make the judicial process go smoothly and to enable other litigants to be able to draw upon judicial resources without one set of litigants consuming the Courts time completely. And I think the difficulty here is the pattern and the Courts patience. The Court didnt just fly off the handle here. There are specific examples of not only failures to comply with discovery, failures to show up the scheduling conferences, refusals to pay sanctions. It almost reached to the point of a kind of an open defiance of the Courts order. I think thats what were dealing with. Mark Freeman: And I think that thats exactly what Judge Titus said. He said, When I have litigants come in here and thumb their nose at my admonitions and when I tell you to read these rules based on the entire history of the case, I can reach no other conclusion that you are not prepared and have no interest any further in defending this case. Could I ask a specific question about this notice? Whether or not the defendant was unnoticed that default was likely to be forthcoming, it seems to me that there are a couple of facts that I read is working in your favor. The District Court did not impose default sua sponte. It was responding to two motions that you filed. And the District Court granted the motion for sanctions before the imposition of default judgment and also included the trial schedule within the same order. Am I recalling that correctly? Thats correct. So sort of combining the scheduling order with the order imposing sanctions for among other violations causing unnecessary delay would certainly suggest that failure to follow between pretrial schedule could resolve in additional sanction.

Female:

Mark Freeman: Female:

00:30:16 Mark Freeman: And I think that thats what this Court and all -- and the Supreme Court of the United States makes clear that the ultimate sanction of default must be available to the District Court in appropriate cases. Not really to penalize those whose conduct may be deemed to warn such a sanction but to deter those who might be tempted to have such conduct in the absence of attorney.

Male: But I think what the question is -- getting at is -- wasnt a graduated process followed here. The District Court just did not jump --

Transcribed by Tech-Synergy

Page 11 of 18

OrtSe_Oral Arguments_20111027

Mark Freeman:

I think thats right. In the first motion --

Male: It was a graduated fact. Mark Freeman: There is no doubt that that is true. There was an imposition of sanctions on 4/16/2004 relating to the violation of the consent injunction, no doubt. And it wasnt consent injunction but the point is, you still have to follow it because theyre continuing to trade on our trademarks. Judge Titus specifically -(00:31:22) miss the question here. I think Judge Duncan can sort of put forth for you your best argument with respect to the default judgment for Mr. Acord. Yeah. And maybe theres no explicit warning, maybe there are all this other conduct, maybe its not. Maybe you (00:31:42) entry of the default judgment against his mother because we dont have sanction issue against her. We dont have any of this (00:31:52) warning against her. Well, actually, we do. We do? We do. Where is that? At JA Volume 1 Page 416. Yes. There is an imposition of plaintiffs costs and attorneys fees associated with the violation of the permanent injunction. And that wasnt agreed to permanent injunction but they paid our attorneys fees and basically -And how long was that before? I'm sorry? When did that take place? That was on all the way back to April 16th of 2004. So is the -- what? A thousand dollars in attorneys fees -- put her on notice that theres going to be a default judgment -It was $1,800. I think the question was whether or not there had been prior acts of violations or notices by the Court --

Female:

Mark Freeman: Female:

Mark Freeman: Female: Mark Freeman: Female: Mark Freeman: Female: Mark Freeman:

Female: Mark Freeman: Female: Mark Freeman: Female: Mark Freeman:

Transcribed by Tech-Synergy

Page 12 of 18

OrtSe_Oral Arguments_20111027

Female:

Perhaps I'm misreading the record. I thought the first situation was different. I thought there were more warning, sanctions, et cetera imposed upon the son and the mother. (00:32:50) representation (00:32:51) officer reported that incorrect? As far as the default, I thought that the question -- I'm sorry Your Honor. I thought that the question was over a pattern and practice over years that Judge Wilkinson was talking about, there had been certainly (00:33:07) by the Court. Its different in the amount of warning one could get from earlier sanctions or harsh language, that my children used to say, Dont speak to me harshly mama, that the mother received rather than the son. I think that the warning, Your Honor, was what Judge Titus had said at the end of the summary judgment, which Ive just gone through as far as Mrs. Ortega is concerned. Thats the only one. Well, and I think that you also have -You know, this really isnt -- I mean, the answer is yes or no, was there a difference between the amount of warning either in sanctions or in language in the District Judge given to the mother as opposed to the son? From the District Court Judge, no. It was the same one. It was the same? Yes. He gave exactly the same. He imposed exactly the same amount of sanctions on both. He said exactly the same thing for both. Well, I mean, you said both -- I'm sorry if Im misunderstanding your question. He certainly was in Court. I think Ms. Ortega was there. Certainly, her lawyer was there when he made the statements. I can say that as far as -I understand your representation. Mr. Laubscher himself --

Mark Freeman:

Female:

Mark Freeman:

Female: Mark Freeman: Female:

Mark Freeman: Female: Mark Freeman: Female:

Mark Freeman:

Female: Mark Freeman:

Male: A quick question, and your view is that -- of course the Court was proceeding pro se and -Mark Freeman: Voluntarily.

Transcribed by Tech-Synergy

Page 13 of 18

OrtSe_Oral Arguments_20111027

Male: -- (00:34:29) proceeding the counsel but your view is that when you look at these, there was no differentiation and thats your representation. Mark Freeman: Male: As -Female: To anything. No differentiation as to --

Male: What have we been talking about? Mark Freeman: Female: The differentiation as to the warning that the judge gave -Its the displeasure with the defendant.

Male: When the Court was expressing its displeasure with the litigants? Mark Freeman: 00:35:00 Male: When the Court was expressing its displeasure with the litigants, the various expressions of displeasure and concern and warning did not separate them out. It was the displeasure with respect to (00:35:19). Mark Freeman: Thats correct. And certainly, his comments when he defaulted them indicated Mr. Acord, he finds his excuses entirely and willfully inadequate and one wishes to participate at trial before this Court and we have a participatory process and when one thumbs his nose at the process, the only conclusion I can reach is that you simply dont wish to defend the case as it relates to Ms. Ortega, that was essentially the same thing. This case has been here way too long. Okay, I just want to be sure that were not shift passing in a knot(ph). I'm not asking you, and Judge Wilkinson isnt asking you whether the District Court treated the two of them differently, as far as giving the ultimate sanction of the default judgment, what I'm asking, what I think Judge Wilkinson was asking you is whether they were treated differently up until that (00:36:16). I want you to think carefully about your answer to that because your whole point in response to the question from my colleague was, Well, the gentleman was put on notice because he was along the way sanction. (00:36:32) sanction, that way, refuse to pay sanction. I dont remember for example, her refusals to pay sanction. Now, I will be back looking at the record (00:36:42) look at the record but youre telling me theyre treated exactly the same. She did not refuse to pay sanction. The sanctions that were issued were paid. I'm sorry, my time is -Yes.

Female:

Mark Freeman:

Transcribed by Tech-Synergy

Page 14 of 18

OrtSe_Oral Arguments_20111027

Male: I was also interested in the -Female: Mark Freeman: In every other respect, they were treated the same according to you. I do apologize. asking. I'm not quite sure I'm getting what youre

Male: Let me just say something to you sir. Mark Freeman: Yes.

Male: And take this to heart. Mark Freeman: Yes.

Male: The Courts questions are not meant to be (00:37:17). They are an attempt on the part of the Court to gain information. Thats all were doing. Mark Freeman: I understand.

Male: Now, its a very serious case, were trying to get information and you dont seem to be picking up on any of the questions here. Now, the questions actually, some of them go to the strengths of your case. Mark Freeman: Yes, youre right.

Male: Do you understand that? Mark Freeman: I do.

Male: But you dont seem to be picking up. It seems to me that you could be giving a good bit more straightforward answers in assisting the Court with its attempts to get information. Instead, youre hemming, youre hawing and youre pushing back. You dont seem in particular command of your material and I dont understand it because the Courts questions arent meant to be antagonist. Were just trying to get information and some of them actually underscored the frustration and difficulty that the District Court was experiencing with these litigants and with this case. Female: Mark Freeman: Female: Mark Freeman: I think I've let you down. I apologize. And I apologize. My questions have not been clear. I certainly apologize.

Transcribed by Tech-Synergy

Page 15 of 18

OrtSe_Oral Arguments_20111027

Female:

But maybe you should try to answer that last question about disparity between the two (00:38:50). You stand by your question that they were treated the same -- stand by your answer. By the District Court? Not with the final sanction. I know that. I can read that in the record prior to that. There was a distinction between John Acord and Marcella Ortega as it related to what they were doing in the process but they were certainly treated the same as it relates, as we sit out in our brief, and I apologize, I'm not trying to be combated at all. I just dont want to misrepresent anything in the record, so I was trying to be clear. Certainly, there was a pattern in practice and a difficulty involving both of these defendants over the course of five years. Mr. Acord didnt pay a sanction fine. Ms. Ortega didnt have a sanction fine. She was not preceding pro se. So in that respect, theyre different. But with respect to the District Courts expressions of frustration, with respect to what might be characterized as dilatory tactics. The District Court as you recall the record did not make a distinction between the two? As you recall the record.

Mark Freeman: Female: Mark Freeman:

Female:

00:40:11 Mark Freeman: Female: I dont think so. Thank you.

Male: Do you have some rebuttal (00:40:22) Joe Alfred Izen, Jr.: You cant rely on the statements of attorneys to describe the record like (00:40:32) that go down and (00:40:33) it out in the field, youve got to take the record and go through it, and read it and provide the courts with the citations. If you do, youll find agreements where they paid somebodys attorneys fees. They paid the other side too, I believe. I believe thats in the record. Now I believe that these agreements cannot be a course of obstreperous conduct. A courts denial of sanctions with a very specific warning might be but theres no specific warning in this particular case about any default. Female: Maybe you can address the question (00:41:04) was a difference in the Courts reaction prior to the grant of default between Ms. Ortega and Mr. Acord.

Transcribed by Tech-Synergy

Page 16 of 18

OrtSe_Oral Arguments_20111027

Joe Alfred Izen, Jr.: I have a different view on it but its similar to what I infer as being expressed. I dont think theres any different treatment on Ms. Ortega until she gets to the default section where the attorney is allowed to bailout when her own son got rid of his attorney a year and a half ago. We dont cut and run in the trial practice on 90-year-old women and we dont blame 90year-old women for our ethical duty to go at a pretrial three months later. If hes not cooperating three months before the pretrial, if hes not getting any cooperation, does he get to wait until the pretrial? Is that a Fourth Circuit practice? He gets to go in there and at the ultimate moment, when hes arguing an important default, resulting in a $4 million judgment, he gets to run up the flag and surrender and say, Gee! This is all my 90year-old clients fault. I want to depart from this case. And the judge says, Youre fine attorney. Mr. Laubscher, certainly depart from the case. And turn around and slam a 90-year-old lady with default? I have not been treated so kindly in my past. When attorney practices 30 years, he runs counter with the court sometimes when we make arguments like this and I can tell you, thats not a good practice and thats not ethical in any Circuit. So know, she was just lumped in there with her son and you reach outside the record to other proceedings when the record in this case is not good enough to sustain that judgment. Thats what I just heard this panel doing and that should not be permissible. This case should be judged on its own merits, especially when Ms. Ortegas got an attorney because he stands between the Court and the client and hes supposed to make sure ethical practice goes on and hes supposed to keep his client in line. And if there was a bunch of trouble on Ms. Ortega, there shouldve been motions filed long before that pretrial hearing. We all know that. And can you enforce against Mr. Acord 97 days in jail where he rotted for a Rule 11 sanction? Theres nobody who seems concerned about that. He sits in jail there and all he did was file a motion for contempt because they send a disparaging letter. And guess what? If you look at their briefs, I think youre going to find Check me out. That they said that that injunction that they violated was illegal because it violated the First Amendment. So they ought to be able to disparage and now the party shouldnt. What these attorneys have done is carefully gone through their own statements that were made along the line in the record and try to juxtapose them into the facts when this judge simply says, For the reasons expressed by these attorneys in their own sworn statements, I'm going to find all these parties deserve this $4 million sanction and judgment. Thats the case that you have if you stick to the record here.

Transcribed by Tech-Synergy

Page 17 of 18

OrtSe_Oral Arguments_20111027

This case has (00:44:05) and this will be my final comment by (00:44:08) versus Commissioner, the Fourth Circuit 1990. Long ago, this initial sanction is usually inappropriate when it unjustly penalizes a blameless client for the attorneys behavior. There is no evidence in this record that the taxpayers were responsible for their attorneys noncompliance. There is no evidence on Ms. Ortega. Youve got comments of counsel. If youre sitting there as a District Judge, youd say, These comments are interesting, but I remember this Court of Appeal cases and we have to go by them, and they say that attorneys comments are not evidence. So lets go, get up on the stand, prove it up like they used to tell me in Texas. Get up their on the stand, prove up your case so somebody can be penalized under oath if its not proved. Thank you sir. Male: Appreciate it. Would you like to come -- (Audio abruptly ends) 00:45:00

Transcribed by Tech-Synergy

Page 18 of 18