LAS VEGAS – In the wake of an interim arbitration award that could cost him more than $600,000, First Amendment attorney Marc J. Randazza has filed for Chapter 11 bankruptcy protection, citing $10 million to $50 million in estimated business debt against estimated assets of $1 million to $10 million. Court documents indicate Randazza filed as an individual and believes he owes between one and 49 creditors.
Randazza filed the petition Aug. 28 in Clark County, Nev., six calendar days before a court hearing that could have finalized the interim award. The bankruptcy filing forestalled further court action on the arbitration.
Handed down in June by arbitrator and retired U.S. Magistrate Judge Stephen E. Haberfeld, the interim award resulted from employment claims Randazza brought against Excelsior Media Corp., Liberty Media Holdings LLC and Jason Gibson, chief executive officer for the two related companies. (The arbitrator dismissed Gibson from the proceedings.) Randazza served as the companies’ in-house, salaried legal counsel from June 2009 through August 2012.
In his decision, Haberfield concluded Randazza had breached his fiduciary duties to Excelsior/Liberty when he became “…involved in and successfully concluded negotiations for a bribe in the amount of $75,000, to be paid to Mr. Randazza by the other side in connection with resolution of high-importance litigation.”
Haberfeld also concluded Randazza’s tactics during arbitration hearings undermined his credibility in all claims. According to arbitration documents, Randazza claimed he, a straight man, was sexually harassed by Gibson and others at Excelsior/Liberty, which are the corporate parents of gay adult studio Corbin Fisher.
In denying Randazza’s “hostile working environment” claims, Haberfeld noted “Mr. Randazza was not embarrassed to be seen or filmed in full undress at a poolside business social event at Mr. Gideon’s [Gibson’s] home.”
Interestingly, the sexual harassment allegations appeared to have had the same intention Randazza used in pursuing alleged copyright infringers on Excelsior/Liberty’s behalf: settlement to avoid potential public embarrassment by the revelation of sexual orientation and/or pornography-watching.
“…[S]ince the outset of the arbitration, Mr. Randazza made highly-charged, sexually-based ‘core allegations’ and has claimed strong reactions to them in support of his statutory and contractual claims, which were in the main disproved or not proved,” Haberfeld wrote in his interim arbitration award. “That failure of proof undermined and impaired Mr. Randazza’s credibility concerning all of his testimony and his claims and related contentions.
“The evidence established at hearing was that Mr. Randazza intended that his allegations would induce Mr. Gideon to authorize a settlement financially favorable to Mr. Randazza, based on Mr. Randazza’s belief at the time — and ultimately proven incorrect — that Mr. Gideon would so settle, rather than have to litigate true or false allegations relating to his own sexuality, sexual activity and the pornographic nature of E/L’s business.”
Other findings Haberfeld mentioned in the interim award were ethical misconduct, “forwarding illegally ‘hacked’ computer data to counsel for another company without authorization and in contravention of a settlement agreement,” representing Excelsior/Liberty competitors while in Excelsior/Liberty’s employ, failing to disclose actual or potential conflicts of interest, destroying evidence of his conduct, deleting legal files and other relevant data, and neglecting to return Excelsior/Liberty funds maintained in a legal trust account.
Randazza’s central claims in the arbitration, which he initiated, revolved around wages, bonuses and other compensation he felt Excelsior/Liberty owed him at the time his employment ended. According to Haberfeld, “Randazza was properly compensated for all services.” In addition, Haberfeld determined Randazza was not entitled to any severance payments because he voluntarily left the company. Even had any obligations existed, Haberfeld determined, “E/L has been legally excused from any obligation to make further contractual payment by reason of Mr. Randazza’s material breaches of contract…” and under the “equitable doctrine of unclean hands, which is applicable to Mr. Randazza’s contract claims.”
In the end, Haberfeld found in favor of Excelsior/Liberty on all counterclaims, awarding the companies more than $300,000 in damages, $197,00 in overpayment of salary and bonuses related to violation of fiduciary duties, and more than $30,000 in funds formerly held in legal trust on Excelsior/Liberty’s behalf.
A Randazza representative attempted to deflect media scrutiny of the interim arbitration in mid-July, six weeks after Haberfeld signed the document.
“Marc is hoping to handle this in court rather than in the media, so this will hopefully be a ‘one and done’…on the story until it actually reaches its conclusion,” Randazza’s press agent, Stewart Tongue, wrote in an email that called the situation “nonsense.” “The opposition are trying to drag him through the mud…”
The press release attached to the email disputed claims distributed four days earlier by Excelsior/Liberty. The statement also noted “Randazza has voluntarily submitted the full facts of the complaint and the interim findings to the bar oversight agencies of Massachusetts, California, Florida and Nevada. Each of these jurisdictions previously reviewed the matter and opted not to pursue it. We trust that each state where Mr. Randazza is licensed also understands the crucial differences between an ‘interim finding’ and a final, enforceable, judgment.”
According to Tongue, Randazza is licensed in five states.
“Mr. Randazza has now started the process of challenging the interim findings, and while matters of this sort do tend to become ‘ugly’ along the way toward their final resolution, we are confident that the final result of these proceedings [will] show that he acted properly throughout this ordeal…,” the statement noted. “Undue external pressure or potential public distortions that may be promoted by opposing parties are against the interests of justice. We will take all necessary action to make sure years of our hard work for a lengthy list of prestigious clients will not be tarnished by a single soured client.”