Judge Recommends Lawsuit against Reed Smith and Clark Hill to Be Dropped

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Summary: A federal magistrate judge is recommending the dismissal of a lawsuit filed with complaints against each party due to a lack of evidence supporting criminal intent.

A federal magistrate judge is recommending the lawsuit against Reed Smith LLP and Clark Hill PLC to be dropped. The lawsuit by LabMD Inc. claims that Tiversa Inc. and the major law firms of filing baseless lawsuits to avoid criminal prosecution, according to Big Law Business.

  

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The recommendation on May 17 would bring an end to the high-stakes fight between LabMD and Tiversa, a cybersecurity firm. LabMD has accused Tiversa of hacking their computers to steal a file that contained cancer patient information. They then went on to claim that Tiversa reported them to federal regulators when they refused to pay for “remediation” services.

LabMD has since gone on to file a lawsuit against Bryan Cave Leighton Paisner LLP and former U.S. Attorney Mary Beth Buchanan for preventing a whistleblower from telling the truth of what Tiversa did. The whistleblower claimed that Tiversa hacked their system with “FBI surveillance software,” which they obtained from Buchanan. They claim Reed Smith and Clark Hill helped Tiversa cover up their actions by filing baseless defamation lawsuits against LabMD, draining them of all their resources, and by hiring investigators to intimidate the whistleblower into silence.

Despite the claims, U.S. District Court Magistrate Judge Maureen P. Kelly found that LabMD had no proof of malicious prosecution or abuse of process claims by the law firms.

The fight began in 2013 when the Federal Trade Commission filed a complaint stating that LabMD had a spreadsheet of patient information on a peer-to-peer file-sharing network. LabMD countered back that Tiversa had stolen the document from them, using it against them to pressure LabMD to buy “remediation” services from them. LabMD founder Michael J. Daugherty covered these claims in the book “The Devil Inside the Beltway.” In the book, Daugherty claimed the law firms helped Tiversa retaliate against them.

The former Tiversa employee cited as being the whistleblower is Richard E. Wallace. The complaint states that the law firms sued, harassed, and intimated him to keep him quiet. In a 102-page amended complaint, LabMD explains that Wallace testified before the FTC that Tiversa hacked the company. LabMD claimed Tiversa founder Robert J. Boback “cornered Wallace in an elevator” before his testimony before the FTC, pulling a gun on Wallace, threatening harm if he didn’t lie to the FTC.

Tiversa has dropped their claims but Boback is still pursuing his lawsuits. Kelly does not believe that them dropping their claims suggested an “imminent defeat.”

Kelly noted that LabMD did not show an essential element of abuse of process or that they were harmed by the defendants’ alleged abuse of the legal system. She wrote, “Plaintiffs’ conclusory allegation that they ‘were harmed’ as the result of Defendants’ conduct in a pending state court case in which discovery has not been completed is obviously insufficient.”

Do you think LabMD will let their claims go? Share your thoughts with us in the comments below.

May 30, 2018 update: Richard Wallace has reached out to us with the following statement:

Statement from Rick Wallace

I have read the irresponsible and reckless allegations in the complaint filed by Mike Daugherty against Bryan Cave Leighton Paisner LLP and Mary Beth Buchanan. None of the allegations contained in the complaint are true.

It saddens me that Mike Daugherty would file such a baseless complaint against my counsel in the FTC Action.

The false allegations contained in the lawsuit are upsetting because Bryan Cave Leighton Paisner LLP and Ms. Buchanan’s legal representation on my behalf was always outstanding. Mr. Daugherty continues to harass my wife, Amy, and me by way of repeated telephone calls, emails, and text messages. When Amy and I blocked Mr. Daugherty’s phone number from contacting us, he proceeded to message us on Facebook. Amy and I do not want to have any contact with Mr. Daugherty.

To learn more about other law firms sued for misconduct, read these articles:

• Law Firm Stradley Ronon Stevens & Young Sued by Sovereign Bank
• Blank Rome Settles Lawsuit for Real Estate Scheme
• O’Quinn Law Firm Sued by 31 Former Clients

Photo: defense.gov