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Keywords

plaintiffdefendantattorneyappealharassmentcorporationclass actiongood faithbad faith
plaintiffdefendantattorneyappealharassmentgood faithbad faithappellant

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Nemeroff v. Abelson, 620 F.2d 339, 29 Fed.R.Serv.2d 243, Fed. Sec. L. Rep. P 97,317, 6 Media L. Rep. 1075

Facts

Robert B. Nemeroff, a shareholder of Technicare Corporation, filed a class action against several defendants, alleging securities fraud based on claims that the publishing defendants leaked non-public information to investor defendants. The case was dismissed with prejudice after a stipulation, which reserved the defendants' right to seek costs and fees. The district court found that the action was commenced in bad faith, leading to the award of attorneys' fees to some defendants, but the Court of Appeals later found this conclusion to be erroneous.

This is an appeal from a judgment entered in the Southern District of New York, Robert L. Carter, District Judge, 469 F.Supp. 630, assessing $50,000 in attorneys' fees and expenses against plaintiff-appellant Robert B. Nemeroff and his law firm, Hale and Dorr, on the ground that they commenced an action under the federal securities laws in bad faith. The district court awarded the fees to Alan Abelson, Robert Bleiberg, and Dow Jones & Company, three of the defendants in the action.

Issue

Did the plaintiff commence the action in bad faith, thereby entitling the defendants to attorneys' fees?

Did the plaintiff commence the action in bad faith, thereby entitling the defendants to attorneys' fees?

Rule

A claim is considered to be commenced in bad faith if it is entirely without color and made for reasons of harassment or delay. The standard for determining bad faith requires clear evidence of such motives.

A claim is considered to be commenced in bad faith if it is entirely without color and made for reasons of harassment or delay. The standard for determining bad faith requires clear evidence of such motives.

Analysis

The Court of Appeals reviewed the evidence and determined that the claims made by Nemeroff were not entirely without merit at the time the action was commenced. The court found that a reasonable attorney could have concluded that there were sufficient grounds to file the action based on the information available at the time, thus undermining the district court's finding of bad faith.

The Court of Appeals reviewed the evidence and determined that the claims made by Nemeroff were not entirely without merit at the time the action was commenced. The court found that a reasonable attorney could have concluded that there were sufficient grounds to file the action based on the information available at the time, thus undermining the district court's finding of bad faith.

Conclusion

The Court of Appeals reversed the district court's award of attorneys' fees against Nemeroff and his law firm, concluding that the action was commenced in good faith. However, the court affirmed the award of costs to the defendants.

The Court of Appeals reversed the district court's award of attorneys' fees against Nemeroff and his law firm, concluding that the action was commenced in good faith. However, the court affirmed the award of costs to the defendants.

Who won?

The defendants were the prevailing parties in the sense that they were awarded costs, but the court reversed the award of attorneys' fees against the plaintiff.

The court held that the action had been commenced in bad faith against the publishing defendants and awarded them $50,000 in attorneys' fees and expenses to be taxed against Nemeroff and Hale and Dorr.

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