In re Litigation (Oct. 30, 2025)

Case details
Full caption
In re: Telexfree Securities Litigation
Country
United States
Jurisdiction
Massachusetts (MA)
Court
Massachusetts Supreme Judicial Court
Decided
Oct. 30, 2025
Majority
Nathaniel M. Gorton Senior (J.) (unanimous Court)
In re: Telexfree Securities Litigation, Slip Copy (2026) © 2026 Thomson Reuters. No claim to original U.S. Government Works.12026 WL 412550Only the Westlaw citation is currently available.United States District Court, D. Massachusetts.In re: Telexfree Securities LitigationMDL Action No. 4:14-md-2566-NMG|Filed 02/13/2026Editor's Note: This decision contains discussion of citationreferences that are incorrect or do not actually exist. Theseinvalid citations appeared in the original court opinion andhave been preserved as written since they are part of theofficial record. Any links to these invalid citations have beenremoved.MEMORANDUM & ORDERNathaniel M. Gorton Senior United States District Judge*1 Before the Court is the Motion of defendantsVantage Payments, LLC, and Dustin Sparman (collectively,“defendants”) for Attorneys’ Fees and Costs (Docket No.2296). Defendants seek attorneys’ fees from plaintiff Rita DosSantos (“plaintiff” or “Dos Santos”) as well as from her pastand present counsel. Because the Court finds that defendantshave not shown the prerequisite misconduct on the part ofplaintiff, the motion will be denied.I. BackgroundPlaintiff's claims against the Sparman defendants are partof the TelexFree Securities multi-district litigation (“theTelexFree MDL”). That MDL arises from a hybrid Ponzi-pyramid scheme operated by TelexFree, LLC, TelexFree, Inc.and TelexFree Financial, Inc. (collectively, “TelexFree”). TheCourt explained plaintiff's involvement in the TelexFree MDLin its Order dated October 30, 2025:Dos Santos originally brought her claims in the Districtof Arizona (“the Arizona Action”). See Dos Santos v.Telexelectric LLLP, No. 4:15-md-13614-NMG. Whenher case was transferred into the TelexFree MDL, DosSantos became, and remained, a lead plaintiff in everyconsolidated complaint filed in the MDL. In July, 2023,Dos Santos moved voluntarily to dismiss herself as anamed plaintiff in the consolidated class action complaint,after which plaintiff Anthony Cellucci became the leadplaintiff of the putative class.[ ] Despite Dos Santos beingdismissed as a named plaintiff in the class action, theArizona Action remain[ed] pending ....Dos Santos’ individual claims allege[d] that defendantsaided and abetted the TelexFree Ponzi scheme byfacilitating credit card transactions that sustained thescheme and caused injury when the scheme collapsed.She [brought] statutory claims under M.G.L. c. 93,§§ 12 and 69, c. 93A, §§ 2 and 11, and c. 110a,§ 410b, as well as common-law claims for unjustenrichment, civil conspiracy professional negligence,negligent misrepresentation, fraud and tortious aiding andabetting.Docket No. 2292.The Sparman defendants moved for summary judgment withrespect to Dos Santos’ claims in June, 2025, and Dos Santosfiled no opposition. The Court allowed the motion in October,2025.II. Motion for Attorneys’ FeesA. Legal StandardDefendants bring this motion under Fed.R.Civ.P 54(d), whichoutlines the procedure by which parties may request costs andattorneys’ fees incurred in connection with their cases. Rule54(d)(1) creates a presumption of awarding costs in favor ofthe prevailing party, and Rule 54(d)(2) requires that a claimfor attorneys’ fees be made by motion. Under the “AmericanRule,” attorneys’ fees are not recoverable unless authorizedby statute or contract, but courts possess inherent equitablepower to award fees against a party that has acted in bad faith,vexatiously, wantonly or for oppressive reasons. Mullane v.Chambers, 333 F.3d 322, 337-38 (1st Cir. 2003). A court mayaward such fees only insofar as they were incurred as a resultof the misconduct. Goodyear Tire & Rubber Co. v. Haeger,581 U.S. 101, 103-04 (2017).*2 Defendants also cite the Private Securities LitigationReform Act (PSLRA) as a basis for awarding fees pursuantto Fed.R.Civ.P. 11(b). The PSLRA requires that, at theconclusion of an action brought under one of its provisions,the court conduct an independent review under Rule 11(b). 15U.S.C. § 78u-4(c)(1). Rule 11(b) provides that, in presentinga pleading or other paper to the court, an attorney certifies that1) it is not being presented for any improper purpose, 2) the
In re: Telexfree Securities Litigation, Slip Copy (2026) © 2026 Thomson Reuters. No claim to original U.S. Government Works.2claims are warranted by a nonfrivolous legal argument and 3)the factual contentions have evidentiary support. A motion forsanctions under Rule 11 must be served upon the offendingparty at least 21 days prior to its filing in court. Fed.R.Civ.P11(c)(2).B. Applicationi. CostsAs the prevailing parties, defendants are entitled to reasonablecosts associated with defending this action. Fed.R.Civ.P.54(d)(1). Defendants are directed therefore to submit to theCourt a bill of costs pursuant to 28 U.S.C. § 1920. Plaintiffmay then file a Motion to Review Costs Taxed within 10 daysof that submission. Caruso v. Delta Air Lines, Inc., 616 F.Supp. 3d 132, 135 n.1 (D. Mass. 2022). The motion, withrespect to costs, is therefore held in abeyance.i. Attorneys’ FeesDefendants claim that plaintiffs should pay their attorneys’fees in this case based upon purported Rule 11 violations. Asan initial matter, defendants assert that, because this motionis filed pursuant to Fed.R.Civ.P 53(d)(2) and the PSLRA,they were not required to follow the service requirementsof Rule 11. The Court is skeptical of that proposition but,nevertheless, will consider the arguments as presented.At its core, defendants’ motion contends that an awardof attorneys’ fees is appropriate because plaintiff's counsel(both past and present) submitted pleadings and profferedarguments which they knew to be false. Namely, defendantsargue that (1) plaintiff's PSLRA certification (Docket No.48) and associated briefing was submitted for the improperpurpose of securing Attorney Bonsignore's status as leadcounsel and (2) any evidence supporting Dos Santos’ claimsis so obviously absent from the record that her attorneys musthave known that her claims were frivolous.The record is not, however, as deficient as defendants suggest.First, defendants point to the Court's entry of summaryjudgment against plaintiff (Docket No. 2292) as supportfor the argument that her claims were baseless from theoutset. A ruling of summary judgment does not, however,automatically render the losing claims so frivolous as toentitle the prevailing party to attorneys’ fees. See Nelson v.Univ. of Maine Sys., 944 F. Supp. 44, 51 (D. Me. 1996). Here,the Court entered summary judgment against plaintiff basedlargely upon her failure to oppose the motion and withoutthe benefit of an adversarial presentation. Judgment in thatcontext does not establish that any opposition to the motionis frivolous ab initio.Defendants’ contention that plaintiff's PSLRA certificationwas filed for an improper purpose is similarly suspect. In thatcertification, Dos Santos claims that she invested $350,000in the TelexFree scheme and ultimately became a “net loser.”Defendants assert that an internal TelexFree recordkeepingsystem does not support that allegation. As plaintiff argues,however, not all transactions within the TelexFree schemewere logged in the same way, and some of plaintiff's depositsmay have been recorded elsewhere. The record is insufficientto establish that the certification and associated briefings werefiled in violation of Rule 11. The motion, with respect toattorneys’ fees, will therefore be denied.III. Material Misrepresentations in Plaintiff's Pleadings*3 While the Court declines to award attorneys’ fees todefendants based upon the theories presented herein, it isnevertheless disconcerted by plaintiff's pleadings associatedwith this motion. It appears that most of the citations profferedby plaintiff are erroneous. Those errors include: 1) misquotingcases that otherwise relate to plaintiff's position (e.g., citationsto Jensen v. Phillips Screw Co., 546 F.3d 59 (1st Cir. 2008)and CQ Int'l Co. v. Rochem Int'l, Inc., 659 F.3d 53 (1st Cir.2011)), 2) misquoting cases that exist but are inapposite to theissues at hand (e.g., citations to Rivera v. Centro Medico deTurabo, 575 F.3d 10 (1st Cir. 2009) and Gagliardi v. Sullivan,513 F.3d 301 (1st Cir. 2008)) and 3) citations to cases that donot exist at all (e.g., a citation to Raymond v. U.S., 207 F.3d1020 (9th Cir. 2000)). This is only a small sample of sucherrors presented in plaintiff's pleadings.Furthermore, this is not the first time that AttorneyPassatempo has misrepresented the law to this Court, andsuch misrepresentations bear the clear hallmark of artificialintelligence hallucinations.1 Wadsworth v. Walmart Inc.,348 F.R.D. 489, 493 (D. Wyo. 2025) (“A hallucinationoccurs when an AI database generates fake sources ofinformation.”). Plaintiff's counsel should be prepared toaddress these misrepresentations at the status conferencescheduled for February 19, 2026, and to show cause why theCourt should not impose sanctions and/or refer the matter tothe Massachusetts Board of Bar Overseers.
In re: Telexfree Securities Litigation, Slip Copy (2026) © 2026 Thomson Reuters. No claim to original U.S. Government Works.3ORDERFor the forgoing reasons, the Motion for Attorneys’ Fees andCosts (Docket No. 2296) is, with respect to costs, held inabeyance, but with respect to attorneys’ fees, DENIED.So ordered.All CitationsSlip Copy, 2026 WL 412550Footnotes1See Docket Nos. 2305 and 2306, in which plaintiff was suspected of supplying, and later attempting to correct,nonexistent caselaw in its pleadings.End of Document© 2026 Thomson Reuters. No claim to original U.S. Government Works.
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