Irrational Behavior Dooms ADA Lawsuit


In Holt v. Houston Methodist Sugar Land Hospital, No. H-19-5464 (S.D. Texas Houston Division), December 31, 2020, the court dismissed an Americans With Disabilities Act discrimination case because the pro se plaintiff had developed a pattern of refusing to comply with discovery and court orders.

The explanation:

“Plaintiff has repeatedly failed to comply with Orders issued by the Magistrate Judge, including orders to appear for conferences. When ordered on October 3, 2019, not to file additional documents until the Court ruled on Defendant’s 2019 Motion to Dismiss, Plaintiff filed four additional documents on October 9, 2019. Plaintiff failed to appear as ordered for conferences on May 8, 2020, and on July 27, 2020.

Plaintiff also refused to participate in discovery. She failed to respond to written discovery and failed to appear for her deposition on June 24, 2020. Her only explanation for her refusal to comply with her discovery obligations was that she believed the Court had ruled in her favor on the ADA claims and that depositions occur at the beginning of a case. Even after the Magistrate Judge ordered her to comply [Doc. # 125], Plaintiff again refused to respond to written discovery and failed without explanation to appear for her deposition on September 24, 2020.

Between the February 28, 2020, Memorandum and Order ruling on Defendant’s 2019 Motion to Dismiss and December 29, 2020, when Plaintiff filed her “Motion to Deny Defendant Motion to Dismiss,” Plaintiff intentionally refused to participate in the prosecution of this lawsuit. Plaintiff’s refusal persisted notwithstanding at least four orders [Docs. # 119, # 123, # 125, and # 128] for her to participate in discovery, respond to an issue raised by Defendant, or appear for a conference. Plaintiff’s refusal to comply with court orders and participate in discovery persisted notwithstanding at least two orders [Docs. # 125 and # 128] warning her that failure to participate in discovery could result in dismissal of this lawsuit.

In her “Motion to Deny Defendant Motion to Dismiss,” Plaintiff notes that in the Magistrate Judge’s Order [Doc. # 100] entered October 3, 2019, Plaintiff was precluded from calling or appearing at Defendant’s place of business, at defense counsel’s office, or at the Court unless there was a hearing scheduled. This in no way explains or excuses Plaintiff’s failure to comply with Court orders, including the Order [Doc. # 125] requiring Plaintiff to appear for her deposition, or to respond to Defendant’s written discovery requests. Moreover, Plaintiff’s explanation for refusing to appear for her June 24, 2020 deposition was not that she believed her appearance at counsel’s office was precluded by the Magistrate Judge’s October 3, 2019 Order. Instead, Plaintiff stated that she would not appear for her deposition because oral depositions occur at the beginning of a case and she would “not be starting this case over.”

Plaintiff also cites the statement in the October 3, 2019 Order that discovery deadlines were vacated and a new scheduling conference would be held after the Court ruled on the 2019 Motion to Dismiss. It is clear, however, that the referenced scheduling conference occurred on May 8, 2020, but Plaintiff chose not to attend.

Plaintiff relies also on the statement in the October 3, 2019 Order that neither party could file anything in the case until the Court ruled on the 2019 Motion to Dismiss. The Court ruled on the 2019 Motion to Dismiss in its Memorandum and Order [Doc. # 112] issued February 28, 2020. After that date, there was no prohibition on Plaintiff filing additional matters. Yet after that date, until December 29, 2020, Plaintiff willfully refused to file anything, to participate in discovery, or to appear at conferences held by the Magistrate Judge.

In this case, there is a clear record of Plaintiff intentionally and steadfastly refusing to participate in discovery, to appear for conferences with the Magistrate Judge, and to prosecute her lawsuit in any way for a 10-month period. This intentional delay was caused by Plaintiff’s own conduct. As a result, the Court finds without reservation that sanctions are warranted.

The Court finds that there is no lesser sanction that would induce Plaintiff to comply with Court orders and with her discovery obligations. Plaintiff is pro se and filed this lawsuit in February 2019 challenging the termination of her employment in 2017. There is nothing in the record to suggest that Plaintiff has funds to pay a monetary sanction. Court orders and repeated warnings that failure to comply could result in dismissal of this lawsuit have not persuaded Plaintiff to fulfill her discovery obligations.

Although the Court recognizes that dismissal is a severe sanction, Plaintiff’s conduct in this case has been intentional and persistent. The case was filed almost two years ago. Yet, because of Plaintiff’s refusal to prosecute her lawsuit and comply with Court orders and discovery obligations, basic discovery has not begun. Indeed, to date Plaintiff has not responded to Defendant’s written discovery requests or appeared for her deposition. Dismissal of this case, after repeated warnings, is warranted.”

Comment: courts will tolerate a great many faults by pro se litigants, but, eventually, everyone has to comply with the rules.

11th Circuit Holds That District Courts Have Jurisdiction Over Sanctions Motion Even If They Do not Have Subject Matter Jurisdiction


The title of this post is a bit complex. I apologize for that. But the topic is important. Sometimes, a party brings a case to federal court and the court later determines that it lacks subject matter jurisdiction. The case is then dismissed for lack of jurisdiction. What happens, however, when there is a sanctions motion pursuant to 28 U.S.C. §1927? Joining other circuits that have considered the issue, the 11th Circuit held that the district courts do indeed have jurisdiction to decide sanctions motions. This is important as it gives the court the power to discipline conduct and award sanctions even if there was no jurisdiction over the entire case. Obviously, I think the opinion is correct and well-reasoned.

The reasoning:

In the world of jurisdiction, there’s an important distinction between the underlying case or controversy and certain “collateral” matters. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). The former includes the merits of the dispute as well as many procedural questions. The latter includes a limited set of issues “collateral to the merits” of the case. Willy v. Coastal Corp., 503 U.S. 131, 137, 112 S.Ct. 1076, 117 L.Ed.2d 280 (1992). Think things like “the imposition of costs, attorney’s fees, and contempt sanctions.” Cooter & Gell, 496 U.S. at 396, 110 S.Ct. 2447.

Although we call these issues “collateral,” that doesn’t make them any less important. Many involve the power to enforce compliance with the rules and standards that keep the judiciary running smoothly. See Willy, 503 U.S. at 137, 139, 112 S.Ct. 1076. Without them, “abuses of the judicial system” would go unchecked, “burdening courts and individuals alike with needless expense and delay.” Cooter & Gell, 496 U.S. at 397-98, 110 S.Ct. 2447. And that’s not just a matter of procedure. Because justice delayed is justice denied, these powers ensure that justice is done.

The distinction between the underlying case and collateral issues is important when it comes to jurisdiction because it affects a court’s power to decide an issue. Once a court loses jurisdiction over a case, it may no longer decide issues arising out of that case. See, e.g., Capron v. Van Noorden, 6 U.S. (2 Cranch) 126, 127, 2 L.Ed. 229 (1804). But it can still decide certain “collateral” issues related to the case. See Cooter & Gell, 496 U.S. at 395, 110 S.Ct. 2447.

Here, all agree that the district court lacked subject-matter jurisdiction over the case. So the question for us is whether Irish’s motion for sanctions under the district court’s inherent powers or § 1927 was a part of the underlying case (which would mean that the court lacked the power to rule on the motion) or a “collateral” issue (which would mean that it had the power to do so).

Fortunately, we don’t approach this question on a blank slate. The Supreme Court has told us that sanctions under Federal Rule of Civil Procedure 11 are a “collateral” issue and thus a court may decide a Rule 11 sanctions motion even if it lacks jurisdiction over the underlying case. See Willy, 503 U.S. at 137-39, 112 S.Ct. 1076. The decision reasoned that exercising jurisdiction in this context was both constitutionally permissible and practically important.

On the first point, the Court explained that ruling on a Rule 11 motion “implicates no constitutional concern because it does not signify a district court’s assessment of the . . . legal merits” of the case. Id. at 138, 112 S.Ct. 1076 (cleaned up). Instead, it concerns “a collateral issue: whether the attorney has abused the judicial process.” Id. (cleaned up). And because a district court does not have to decide the merits to rule on a Rule 11 motion, it does not improperly consider the “`case or controversy’ over which it lacks jurisdiction.” Id.

On the second point, the Court reasoned that exercising jurisdiction over a Rule 11 motion is practically important because “[t]he interest in having rules of 1310*1310procedure obeyed” outlives the merits of a case. Id. at 139, 112 S.Ct. 1076. This makes sense. The need to deter those who might violate the rules does not rise or fall with any particular case. It is an ever-present need of all courts. Simply put, district courts need the power to rule on these issues to ensure “the maintenance of orderly procedure.” Id. at 137, 112 S.Ct. 1076.

Both these points apply equally to sanctions under a court’s inherent powers or § 1927. These sanctions, like Rule 11 sanctions, do not require a court to rule on the merits of the underlying case. Our analysis in the next Part makes this clear. And the purpose of the sanctions outlasts the end of the case. Otherwise, parties who abuse the judicial procedures could get off scot-free anytime it turned out that the district court lacked subject-matter jurisdiction.

For good reason, then, all of our sister circuits to have faced this question have recognized jurisdiction in this context. See, e.g., Ratliff v. Stewart, 508 F.3d 225, 231 n.7 (5th Cir. 2007)Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 645 (6th Cir. 2006)In re Jaritz Indus., 151 F.3d 93, 96-97 (3d Cir. 1998)see also Fidrych v. Marriott Int’l, Inc., 952 F.3d 124, 137-38 (4th Cir. 2020)Zerger & Mauer LLP v. City of Greenwood, 751 F.3d 928, 931 (8th Cir. 2014).

Today, we join them and hold that a district court may address a sanctions motion based on its inherent powers or § 1927 even if it lacks jurisdiction over the underlying case.

Hyde v. Irish, 962 F.3d 1306 (11th Cir. 2020).

Comment: the court affirmed the denial of the sanctions motion.

Major League Baseball Wins Sanctions Against Supplement Maker


In DNA Sports Performance Lab, Inc. v. Major League Baseball, No. C20-00546 (N.D. California October 27, 2020), the district court awarded Rule 11 sanctions against DNA Sports for filing what it described as a “baseless” complaint against Major League Baseball. DNA markets certain supplements which have been banned by Major League Baseball and its players’ union. The district court found that the complaint was baseless and awarded Rule 11 sanctions. This plaintiff in the case, in my opinion, has pursued this type of litigation against Major League Baseball and its union. long after it was clear that the litigation was without merit and without basis in fact.

This is the description of the prior history of lawsuit between DNA Sports and Major League Baseball

“As detailed in the league’s motion for sanctions, DNA Sports and its attorneys have pursued the league, well before the instant suit, for the past nine years (Dkt. No. 42 at 4-5). Our tale begins with an October 2012 shakedown letter. Following two league investigations into DNA Sports’ former business venture, DNA Sports sent the letter accusing the league of character defamation, alleged $30,000,000 in damages, and threatened to sue unless the league promptly paid $6,000,000. DNA Sports, though, conceded that its products contained a banned substance under the Joint Drug Prevention and Treatment Program (Dkt. 42-2, Exh. A at 3).

In 2013, the league launched another investigation into the illegal sale of performance-enhancing drugs to players. Investigators targeted “anti-aging” clinics in Florida, including DNA Sports (Dkt. No. 19 at 5; Compl. ¶¶ 19-20).

In February 2014, DNA Sports sued the league in Florida state court, challenging the league’s investigation as unfair and discriminatory. But plaintiff missed several case management conferences and failed to perfect service until October, resulting in a November 2014 dismissal for failure to prosecute. Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, etc., et al., No. 3D14-2967, 2015 WL 1930327 (Fla. 3d Dist. Ct. App. Apr. 27, 2015).

In July 2016, following the league’s rejection of another letter, this time demanding $40,000,000, DNA Sports sued the Office of the Commissioner of Baseball and several league employees in the Southern District of New York challenging the same league investigation, alleging tortious interference with prospective economic advantage (Dkt. 42-2, Exh. D). After a pre-motion conference to discuss the league’s intent to file motions for dismissal under Rule 12(b)(1) and for sanctions, DNA Sports voluntarily dismissed that action in November 2016. Nix and DNA Sports Performance Lab, Inc. v. Office of Comm’r of Baseball, No. 16-CV-5604 (S.D.N.Y. July 14, 2016).

In late November 2016, less than a month after the dismissal, DNA Sports sued the league, the commissioner, and several league employees in New York state court for hacking DNA Sports’ social media accounts, tortious interference with economic advantage, and defamation of Nix — all in the course of the league investigation. Defendants removed to federal district court based on the hacking claim. Rather than move to remand or amend its complaint to satisfy federal pleading standards, DNA Sports voluntarily dismissed its federal hacking claim and proceeded with the state suit. The New York state court then dismissed the complaint in June 2018 as res judicata under FRCP 41’s two-dismissal rule, barred by statute of limitations issues, and for failure to state a claim. In December 2018, the state court denied DNA Sports’ motion to reargue the dismissal as frivolous and imposed attorney’s fees against DNA Sports and its counsel — fees which remained outstanding as of briefing here. Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, et al., No. 159953/2016, 2018 WL 2739433 (N.Y. Sup. Ct. June 7, 2018).

In April 2018, while litigating the third action, Neiman Nix — acting pro se — sued Kobre & Kim LLP and three attorneys (the league’s counsel), several MLB coaches and general managers, and over a dozen MLB clubs in Florida state court, alleging RICO, trade secret, and computer abuse violations. In December 2018, Mr. Nix voluntarily dismissed claims against the majority of the baseball clubs as well as Kobre & Kim and its lawyers. The action currently remains pending, however, against two remaining clubs and league personnel. Nix v. Luhnow, et al., No. 2018CA003920 (15th Fla. Cir. Ct., Palm Beach Cnty.).

In January 2019, DNA Sports sued the Office of the Commissioner of Baseball, current and former MLB commissioners, and several MLB employees in Florida state court for unlawful hacking and computer abuse violations in the course of the 2013 MLB investigation. After DNA Sports amended its complaint in response to a motion to dismiss, the court dismissed the claims against the commissioners but allowed DNA Sports to proceed with the remaining claims. Though that case pertained to the leagues’ alleged hacking of DNA Sports’ social media accounts during the 2013 investigation, DNA Sports sought discovery on the league’s stance and communications regarding IGF-1. Neiman Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, et al., No. 2019CA002611 (11th Fla. Cir. Ct., Miami-Dade Cnty.).

In March 2018, DNA Sports also sued ESPN, the Associated Press, and USA Today in the Southern District of Florida in March 2018, alleging that each had defamed plaintiffs by publishing or republishing a statement from the league that DNA Sports’ July 2016 tortious interference lawsuit “admit[ed] Nix and his company used bioidentical insulin-like growth factor (IGF-1), which is derived from elk antlers and is on baseball’s list of banned substances.” Nix and DNA Sports Performance Lab, Inc. v. ESPN, Inc., et al., No. 1:18-CV-22208-UU, 2018 WL 8802885, at *1-2 (S.D. Fla. Aug. 30, 2018). Plaintiff called the statement defamatory because it did not differentiate between natural and synthetic IGF-1, giving readers the impression that DNA Sports had engaged in illegal or legal-but-banned drug sales. The Southern District of Florida, however, held that the statement at issue was substantially correct and the omission did not render the report untrue, thus it was not defamatory. The district court dismissed the complaint with prejudice in August 2018. The Eleventh Circuit affirmed, ruling that league regulations banned all forms of IGF-1 — whether synthetic or natural. Nix and DNA Sports Performance Lab, Inc. v. ESPN, Inc., et al., 772 Fed. Appx. 807, 814 (11th Cir. 2019).

The instant action descends from the March 2018 suit. After the Eleventh Circuit’s decision, DNA Sports began to investigate the presence of natural IGF-1 in animal-derived protein products. Specifically, DNA Sports “consulted with several experts” about whether whey-protein products endorsed by the league would contain natural IGF-1 (allegedly, they would) (Reich Decl., Dkt. No. 31-1 at ¶¶ 9-10). DNA Sports did not test these products for IGF-1 but instead relied on what it and its experts deemed “common sense” (id. at ¶ 11; Opp. Br., Dkt. No. 46 at ¶ 6).

In June 2019, DNA Sports’ current attorney, Lance Reich, contacted the league’s general counsel inquiring about “the unfair competition and conduct by [the league] in maligning [DNA Sports] in public for selling products containing natural IGF-1” while the league and the union endorsed and profited “from the sale of other nutritional products that contain[ed] natural IGF-1.” As DNA Sports admits, Reich demanded that the league “cease its sponsorship and partnerships with all companies and entities that sell natural protein products that contain natural IGF-1,” and “publicly announce that all nutritional supplement products that contain natural IGF-1 are banned performance-enhancing substances,” or face a new suit (Reich Decl., Dkt. 31-1 at ¶ 12 & Exh. A). The league refused.”

The reasoning:

This order finds DNA Sports’ complaint baseless. That, along with finding Reich failed to conduct an adequate investigation, supports Rule 11 sanctions. And, such baselessness in addition to bad faith supports inherent authority sanction of DNA Sports itself.

First, this order finds DNA Sports’ complaint baseless. A prior order found glaring holes in the allegations against the union (Dkt. No. 53). Exhausted of defamation and other tort claims, plaintiffs sought relief under inapplicable statutes. To allege Lanham Act violations, plaintiffs must show that defendants made a false statement of fact in a commercial advertisement about its own or another’s product, that the statement actually and materially deceived its audience, and that plaintiff has been or is likely to be injured as a result of the false statement in the form of diverted sales or loss of goodwill. Southland Sod Farms v. Stover Seed Co. Eyeglasses, 108 F.3d 1134, 1139 (9th Cir. 1997). False advertising claims brought under state law require showing that defendants participated in or had control over the untrue or misleading advertisements. In re First Alliance Mortg. Co., 471 F.3d 977, 995-96 (9th Cir. 2006). Yet, DNA Sports admit that their products contain naturally-occurring IGF-1. They concede that the league and the union have banned IGF-1 in its natural and synthetic forms under their Joint Drug Prevention and Treatment Program. And they acknowledge that NSF International, an independent product-testing organization, certifies products as “safe for sport” after testing for banned substances enumerated in the drug program (Compl. at ¶¶ 8, 18, 29). So, DNA Sports brought false advertising and unfair competition claims, contesting the “certified for sport” declaration on several products that allegedly contained IGF-1, without ensuring they sued the right defendants (i.e., that defendants made, caused, or induced the allegedly false statement), showing requisite harm (i.e., that plaintiffs suffered injuries like diverted sales or loss of goodwill), or requesting appropriate relief (i.e., courts cannot enjoin action that has already ceased on its own accord) (Dkt. No. 53). Such baselessness supports an inference of improper motive. See Townsend, 929 F.2d at 1365.

The league’s prior motion for sanctions would have been granted for similar reasons. The majority of DNA Sports’ complaint rehashed prior suits against the league and relied on conclusory statements to baselessly allege Lanham Act, false advertising, and unfair competition claims. The complaint recapitulated the misdeeds of the league’s investigations that inspired DNA Sports’ February 2015, July 2016, November 2016, and January 2019 suits which were all settled by prior rulings (Compl. at ¶¶ 15, 19-20). It then invoked the press release that was the subject of the March 2018 suit to maintain that though it is true DNA Sports’ supplements contain banned IGF-1, the league publicly maligned plaintiffs and “essentially bann[ed] [them] from ever working again in any” league-related capacity (Id. at ¶ 24). This after admitting that DNA Sports never sold its supplements to league players on account of a non-competition agreement (Id. at ¶ 18). Finally, DNA Sports alleges that league players and coaches consume products with IGF-1 and have never been disciplined and several league-endorsed products that compete with DNA Sports contain IGF-1. All this lending itself to false advertising and unfair competition.

Recall that these claims require, among others, both a false statement and harm, such as lost goodwill or diverted sales. See Southland, 108 F.3d at 1139First Alliance, 471 F.3d at 995-96. Yet DNA Sports’ complaint failed to show how the targeted products (the league-licensed Gatorade “Recover” whey protein bars, Cytosport Muscle Milk protein shakes, and Eyepromise nutritional supplements) compete with DNA Sports’ own products, which cost hundreds of dollars more and contain a banned substance. Further, plaintiffs failed to show how the use of the logo or the press release — the alleged commercial speech here — diverted sales from DNA Sports to these specific products and how this speech was false. Without these elements, their allegations against the league are baseless.

Second, given the obvious pitfalls in DNA Sports’ complaint, this order finds Attorney Reich failed to reasonably investigate these claims. To assess whether an attorney has conducted an adequate pre-filing investigation, courts must consider factual questions regarding the nature of the inquiry and must determine whether the legal issues raised were warranted. Cooter & Gell, 496 U.S. at 399. DNA Sports and Attorney Reich alleged that they “consulted with several experts” about whether whey-protein products endorsed by the league would contain natural IGF-1 (allegedly, they would) (Reich Decl. at ¶¶ 9-10). DNA Sports did not test these products for IGF-1 but instead relied on what it and its experts deemed “common sense” to determine that all these certified for sport products contained IGF-1 (id.at ¶ 11; Opp. Br. at ¶ 6). Beyond this, a cursory investigation into Lanham Act, false advertising, and unfair competition claims would have revealed the commercial speaker, material-deception, and injury elements which could have saved DNA Sports’ complaint or at least, saved the league and the union the trouble of motion practice. Attorney Reich failed in this regard.

Third, this order finds DNA Sports filed its complaint to harass the league and the union. DNA Sports’ history of litigation demonstrates both that this suit is brought in bad faith to vex and that dismissal alone will not dissuade DNA Sports from trying again. Though this is only the first suit against the union, it is the sixth suit arising out of the same original circumstances against the league. As detailed in the prior order, prior dismissals and sanctions have not tempered DNA Sports’ vendetta against the league. It has repeatedly dismissed its cases against the league and companies, either voluntarily or in response to court orders. Yet, true to its reliable pattern, after dismissal, DNA Sports has simply developed a different theory in a different court based on the same facts and continued its pursuit of the league. In 2018, after several these dismissals, a New York state court imposed monetary sanctions on DNA Sports and its previous counsel for frivolous and harassing conduct against the league. Nix and DNA Sports Performance Lab, Inc. v. Major League Baseball, et al., No. 159953/2016, 2018 WL 2739433 (N.Y. Sup. Ct. June 7, 2018). As DNA Sports’ litigation history demonstrates, however, these sanctions have not fazed DNA Sports. Rather, it has continued to sue the league, affiliated entities, and now the union, this despite outstanding monetary sanctions for troublesome lawyering. Considering this prior misconduct, dismissal alone will not deter DNA Sports from filing further baseless and harassing suits.

Indeed DNA Sports and Attorney Reich refuse to dismiss outstanding cases against the league, proving that DNA Sports does not intend to change its course of conduct. After the August 1 order, the league offered to withdraw its motion for sanctions “if Plaintiffs [would] dismiss with prejudice all outstanding litigation against the MLB defendants and agree to bring no further litigation against the MLB defendants” (Dkt. No. 60 at 14). Although plaintiffs dismissed the instant action with prejudice, DNA Sports still has outstanding litigation against some of the league’s clubs and commissioner. These remain intact despite the league’s offer to withdraw their sanctions motion entirely.

Given DNA Sports’ persistence, it may be that no amount of sanctions will deter it from continuing its crusade. The requested amount of fees, however, will at least compensate the union and the league for the harm done here. As this is the sixth case against the league (at least), a full award is appropriate. Though this is the first suit against the union, a full award is justified because it is part of an entrenched campaign of harassment.”

Comment: as a lawyer you have a duty to investigate allegations before you sign your name to a pleading. Please take the time to give every allegation a thorough review to determine if you have evidence to prove that it is true. If your first complaint alleging a novel theory flops, don’t keep refiling the litigation in other courts. That will only lead to discipline. If you are being pressured to make allegations you don’t believe are supported by solid evidence, walk away from the representation. You have a duty to the court system to make well-founded and factually based allegations.

Ed Clinton, Jr.

Dispute over $750 spawns Section 1927 Motion


Stelzer v. Endeavor Business Media, Inc., No. 18-cv-979 (W.D. Wisconsin 8/31/2020) was a copyright case filed for the wrongful use of a photograph. Stelzer, a professional photographer, took a picture and filed for copyright protection. Endeavor allegedly used that photograph without attribution and Stelzer sued. Endeavor offered to pay $750 and Stelzer accepted. Stelzer’s counsel then had a change of heart and tried to raise her demand and back out of the settlement. The district court enforced the settlement agreement and then denied to award section 1927 sanctions against plaintiff’s counsel. The explanation:

Endeavor asks the court to impose sanctions against Liebowitz under 28 U.S.C. § 1927. That section authorizes the court to sanction any attorney who unreasonably and vexatiously multiplies the proceedings in a case. Endeavor contends that Liebowitz’s attempt to back out of the settlement warrants a § 1927 sanction, and it asks the court to shift the cost of enforcing the settlement to Liebowitz.

Liebowitz is a notorious copyright litigator who has been sanctioned many times. The Southern District of Illinois recently sanctioned him for backing out of a settlement agreement, precisely the conduct at issue in this case. Ward v. Consequence Holdings, Inc., No. 3:18-CV-1734-NJR, 2020 WL 2219070 (S.D. Ill. May 7, 2020). Endeavor submitted the court’s opinion in that case as a purported notice of supplemental authority, Dkt. 21, which Liebowitz asks the court to strike, Dkt. 22. The court will deny the motion to strike; whether Liebowitz has been sanctioned for similar misconduct is a fair consideration. Liebowitz was also sanctioned by Southern District of New York, which required Liebowitz to provide notice of that sanction to every court in which he had a pending case. Dkt. 24. That court’s sanction order includes a list of 40 additional sanction orders against Liebowitz. And in this case, Magistrate Judge Crocker found that plaintiff—really Liebowitz—had not complied with plaintiff’s discovery obligations, so Judge Crocker shifted fees and warned against future non-compliance. Dkt. 11.

Nevertheless, the court declines to impose sanctions. Both sides bear responsibility for the unprofessional conduct of this case. Endeavor failed to inform the court that plaintiff had actually provided discovery responses before the hearing on the motion to compel, resulting in the withdrawal of the order on that motion. Dkt. 13. And Liebowitz’s attempt to back out of the settlement agreement was prompted, in part, by Endeavor’s three-month lack of diligence in responding to Liebowitz’s revisions to the settlement agreement. Endeavor hectored Liebowitz about his one-month delay; Endeavor’s three-month delay in responding to a few modest changes is inexcusable. Judge Crocker put it aptly: “The most charitable interpretation of what’s going on in this lawsuit is that neither side is doing its job.” Dkt. 13. There is blame enough for both sides; it’s fair that they bear their own expenses.

One last word of warning to Liebowitz. Liebowitz is admitted to practice in this court, and he has other cases pending. This court’s Local Rule 1.E. provides for automatic reciprocal discipline:

E. Reciprocal Discipline

1. When another jurisdiction enters an order of discipline against an attorney admitted to practice in this court, the same discipline is automatically effective in this court without further action by the court.

2. The attorney may apply to the chief judge for modification or vacation of the discipline in this court.

The judge in the Southern District of New York has referred Liebowitz for potential discipline. Accordingly, the court will order Liebowitz to inform the court within 10 days if his practice privileges are restricted, suspended, or revoked by any other jurisdiction.

Comment: Once the case was settled, it was bad manners, but not a violation of Section 1927, to renege and seek more money.

Lawyer Narrowly Escapes Section 1927 Sanctions in Slip and Fall Case


Saenz v. Kohl’s Department Stores, Inc., No. 20-1517 (6th Cir. 11/2/2020) was a rather routine appeal from a grant of summary judgment. The plaintiff was injured when she slipped and fell on water on the floor of a Kohl’s store. The district court granted summary judgment because Kohl’s had no notice of the alleged hazard. The Sixth Circuit affirmed the grant of summary judgment and denied Kohl’s motion for Section 1927 sanctions. The court was “concerned” by the conduct of the lawyer for the plaintiff but did not impose sanctions. The issue raised in the sanctions motion was whether or not the lawyer had misrepresented the record on appeal. The Sixth Circuit concluded that he had done so, but the error was not sufficiently egregious to warrant sanctions. The court also noted that once the error was pointed out to the lawyer he had a duty to withdraw that argument from the appeal and did not do so.

The merits now behind us, we deny the motion by Kohl’s to strike Saenz’s brief as moot. See, e.g., Greenlee v. Sandy’s Towing & Recovery, Inc., No. 17-3080, 2018 WL 3655961, at *3 (6th Cir. Feb. 21, 2018). One matter, however, remains. Kohl’s has moved for sanctions, arguing that this appeal is frivolous because “Saenz’s entire appeal is premised on an interrogatory answer” that “is not part of the District Court’s record.”

As an initial matter, because Kohl’s “offers no evidence” that Saenz herself “harbored an improper motive” in bringing this appeal, “such as the intent to harass or cause delay,” we decline to impose sanctions against her under Federal Rule of Appellate Procedure 38 or 28 U.S.C. § 1912. Williams v. Shelby Cnty. Sch. Sys., 815 F. App’x 842, 845 (6th Cir. 2020).

As to her counsel, Brian Kutinsky, we find his conduct concerning. That said, we decline in the exercise of our discretion to impose sanctions against him personally. An attorney who “multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927. Sanctions are appropriate under § 1927 “when an attorney has engaged in some sort of conduct that, from an objective standpoint, `falls short of the obligations owed by a member of the bar to the court and which, as a result, causes additional expense to the opposing party.'” Holmes v. City of Massillon, 78 F.3d 1041, 1049 (6th Cir. 1996) (quoting In re Ruben, 825 F.2d 977, 984 (6th Cir. 1987)); see also Mys v. Mich. Dep’t of State Police, 736 F. App’x 116, 117-18 (6th Cir. 2018).

Having represented Saenz from the filing of her complaint through this appeal, Kutinsky was (or should have been) “intimately familiar with the facts and procedural history” of this case. Mys, 736 F. App’x at 118. Indeed, during Beleski’s deposition, counsel for Kohl’s explicitly pointed out the discrepancy in the two versions of Interrogatory 9 and informed him that only the new version had been signed by a Kohl’s representative. Kutinsky then read that signed version— the one with no reference to “wet floor” signs—into the record. Yet despite this exchange, he quoted the unsigned, draft version in Saenz’s brief to the district court. He then perpetuated that error on appeal.

Given that the unsigned draft was nowhere else to be found in the record, appellate counsel for Kohl’s (who did not represent Kohl’s in the trial court) initially charged Saenz with fabricating evidence. Her attorney, for his part, now says that he “mistakenly believed that he was quoting from the signed answers to interrogatories.” And having learned of the events that transpired outside the record, Kohl’s has withdrawn its charge of falsification. Still, Kohl’s stresses that even after it brought this mistake to counsel’s attention a second time on appeal, he doubled down, insisting that we should now expand the record and reverse based on an unsigned interrogatory that the district court had no authority to consider. See Baugham, 211 F. App’x at 441 n.5; Fed. R. Civ. P. 33(b)(5).

We have previously sanctioned attorneys “for misrepresentations that were not accompanied by any `overt signs of bad faith’ but nonetheless amounted to a `misleadingly selective[] reading of the record.'” Mys, 736 F. App’x at 118 (alteration in original) (quoting Kempter v. Mich. Bell Tel. Co., 534 F. App’x 487, 493 (6th Cir. 2013)). What Saenz’s attorney has done here is arguably worse. His argument is based almost entirely on “evidence” that was not part of the record at all.

It is likewise inexcusable that Kutinsky now blames Kohl’s for failing to correct his error in the district court. It was his duty to exercise reasonable diligence before making a representation of fact. See Model Rules of Pro. Conduct r. 1.3 (Am. Bar Ass’n 2019). And it was his duty not to press his argument on appeal any further “unless there [was] a basis in . . . fact for doing so.” Model Rules of Pro. Conduct r. 3.1. But when this mistake was brought to his attention again on appeal, he nevertheless asked us to ignore the invalidity of the unsigned interrogatory, while trying to blame Kohl’s for being too slow to point out his own blunder. Understandably, neither Kohl’s nor the district court addressed this mistake below. It was mentioned once in passing in the facts section of Saenz’s brief, and the argument section never referenced the supposed floor signs. Kohl’s had no reason then to say anything. The floor signs became Saenz’s central argument only on appeal.

Nonetheless, although these actions might have been “unprofessional and serious enough to meet the standard for imposing sanctions,” we choose to “exercise our discretion not to sanction” counsel. Williams, 815 F. App’x at 846. No doubt, it was careless to quote the unsigned Interrogatory 9 and then appeal based on that error. But we appreciate that these are trying times; a Michigan stay-at-home order due to COVID-19 was in effect at the time Saenz filed this appeal, which may have limited her attorney’s access to the record. In these circumstances, we choose to give him the benefit of the doubt.

Even so, once the error was pointed out on appeal, Kutinsky “should have diligently withdrawn” his argument, rather than doubling down. Ridder v. City of Springfield, 109 F.3d 288, 299 (6th Cir. 1997). Such obstinance makes the case for sanctions close. But in his motion to expand, counsel did advance a legal argument that we could consider the unsigned interrogatory, insisting that because he quoted it within his brief to the district court, it became part of the “record on appeal.” See Fed. R. App. P. 10(a). This is of course incorrect: for even accepting counsel’s premise, his argument conflates the “record on appeal” with evidence in that record which may be considered for summary judgment purposes. See Byrne v. CSX Transp., Inc., 541 F. App’x 672, 675-76 (6th Cir. 2013). Yet absent bad faith, we decline to impose sanctions against this trial attorney whose legal argument on appellate procedure—though flawed—might conceivably be characterized as that of a reasonably zealous advocate. Cf. Mys, 736 F. App’x at 117-18 (“Section 1927’s purpose is to `deter dilatory litigation practices and to punish aggressive tactics that far exceed zealous advocacy.'”) (quoting Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006)). In our view, sanctions should generally be reserved only for “truly egregious cases of misconduct.” Williams, 815 F. App’x at 846 (quoting Ridder, 109 F.3d at 299).

Rule 37 Sanctions Granted For Failure to Complete Initial Disclosures


Rule 26(a) now requires most litigants to make certain disclosures of the types of documents they have that are relevant to the lawsuit and the names and addresses of witnesses. The purpose of the initial disclosures is to reduce the squabbling among lawyers over basic interrogatories and document requests. The idea is to speed up the litigation and avoid the inevitable discovery disputes that arise.

In Hill v. Alpine Sheriff Department, 18cv2470 (S.D. California) the plaintiff did not make the disclosures and then, when he was sanctioned, moved to remove the Magistrate judge. The District Court was unimpressed with his arguments:

Here, the motion to remove, which this Court deems an objection to Magistrate Judge Dembin’s Sanctions Order, is untimely. Fed.R.Civ.P. Rule 72(A). While it appears Plaintiff may have been incarcerated when the objections to the Sanctions Order were due, he waited almost one year from the issuance of the Sanctions Order to file objections.

Nevertheless, even if his objections had been timely, Plaintiff has failed to show that the Sanctions Order was “clearly erroneous” or “contrary to law.” 28 U.S.C. § 636(b)(1)(A). Magistrate Judge Dembin ordered Plaintiff to serve initial disclosures on several occasions. [Doc. Nos. 12, 21.] Plaintiff’s argument at the time was that he did not understand why he had to serve initial disclosures, as everything was contained in his complaint. [Doc. No. 30 at 1.] However, Magistrate Judge Dembin explained to Plaintiff why he could not merely rely on the allegations and exhibits to his complaint. [Doc. No. 32 at 4-5.] Nevertheless, Plaintiff failed to serve his initial disclosures.

Now, in this motion to remove, Plaintiff continues to argue that he should not have to comply with the initial disclosure rules because all the evidence is in his complaint. [Doc. No. 54 at 1; Doc. No. 62 at 1.] As Magistrate Judge Dembin previously explained to Plaintiff, reliance on exhibits submitted with his complaint is insufficient. Fed.R.Civ.P. Rule 26(a)(1); Davis v. Molina, No. 1:14-cv-01554 LJO DLB PC, 2016 W.L. 1587022, *2 (E.D. Cal., August 19, 2016) (finding a plaintiff was not substantially justified in failing to provide initial disclosures to defendants and instead referring defendants to his initial pleadings and their attachments). Moreover, the fact that Plaintiff is pro se does not negate his obligation to comply with the rules and with Court orders. Ghazali v. Moran, 46 F.3d 52, 54 (9th Cir. 1995)(“Although we construe pleadings liberally in their favor, pro se litigants are bound by the rules of procedure.”) As a result, Plaintiff has failed to show that the Magistrate Judge’s order was “clearly erroneous” or “contrary to law.”

This case is unpublished, but it offers a reminder to follow the rules, produce the disclosures and spend time on the merits of the litigation. Also, of course, do not attack the judge who disagreed with you.

Ed Clinton, Jr.

Rule 37 Applies in Bankruptcy Court


In Markus v. Rozhkov, 615 B.R. 679 (S.D. NY. 2020) the United States District Court (on an appeal from the bankruptcy court) upheld a sanction award against one of the attorneys in a contested bankruptcy matter. The court held that Rule 37 sanctions do indeed apply in Bankruptcy court.

The discussion as to whether Rule 37 applies in contested bankruptcy matters:

Worms argues that the Sanctions Order is invalid because it was predicated on Rule 37, which, under his interpretation, does not ever apply to Chapter 15 proceedings. The FR responds that Rule 37 sanctions are available in Chapter 15 proceedings. Although the contours of Worms’s argument are less than pellucid, the Court will attempt to map out his reasoning in some detail. Importantly, this section addresses the arguments about whether Rule 37 can apply in Chapter 15 cases as a general matter; it does not discuss, as later sections of this opinion will, whether sanctions under Rule 37 were 699*699 specifically appropriate in the context of this Chapter 15 proceeding.

Worms’s argument is essentially two-fold. First, he asserts that he cannot have been held liable under Rule 37 because Bankruptcy Rule 7037 states that Rule 37 “applies in adversary proceedings” and the Chapter 15 proceedings were not “adversary proceedings” at the time the Bankruptcy Court imposed Rule 37 liability. That logic holds, as far as it goes, but it does not go very far. Bankruptcy Rule 7037 does not state that the only time Rule 37 applies to bankruptcy is in adversary proceedings. And Bankruptcy Rule 9014 forecloses such a reading. Bankruptcy Rule 9014, titled “Contested Matters,” states under subsection (c) that, “[e]xcept as otherwise provided in this rule, and unless the court directs otherwise, [Bankruptcy Rule 7037] shall apply.” Accordingly, by the plain terms of Bankruptcy Rule 9014, Bankruptcy Rule 7037 (and thereby, Rule 37) does not only apply to adversary proceedings. Indeed, Worms acknowledges that Bankruptcy Rule 9014(c) makes Rule 37 applicable to some contested matters.

But, Worms argues, that universe of contested matters cannot include any contested matters arising in Chapter 15 proceedings because Bankruptcy Rule 9014(b) provides that a motion under Bankruptcy Rule 9014 “shall be served in the manner provided for service of a summons and complaint by Rule 7004,” and Chapter 15 notices are not served in that manner. It is undisputed that Chapter 15 proceedings are not initiated “in the manner provided for service of a summons and complaint by [Bankruptcy] Rule 7004.”[9] If Bankruptcy Rule 9014 made itself applicable only when Bankruptcy Rule 7004 service is required, then Worms might have a winning argument. But it does not.

Bankruptcy Rule 9014(a)-(b) provides: “In a contested matter not otherwise governed by these rules, relief shall be requested by motion … [and the] motion shall be served in the manner provided for service of a summons and complaint by Rule 7004.” See also 10 Collier on Bankruptcy P. 9014.02 (16th ed. 2019) (“As acknowledged (`not otherwise governed by these rules’) by the rule, however, there are instances in which a contested matter is initiated by some other means.”). Chapter 15 proceedings are “otherwise governed by these rules”—specifically, Chapter 15 proceedings are governed by Bankruptcy Rule 2002(q) (which provides a substitute for Rule 7004 service).

Therefore, Worms is incorrect that Bankruptcy Rule 9014 is applicable only where Bankruptcy Rule 7004 service is required. Bankruptcy Rule 9014 (and, accordingly, Bankruptcy Rule 7037) may apply to contested matters “otherwise governed by these rules.” In sum, Bankruptcy Rule 9014 makes Rule 37 (via Bankruptcy Rule 7037) applicable to contested matters in Chapter 15 proceedings.

Bankruptcy Rule 9020 is the final blow that topples Worms’s house of cards. Under that rule, “Bankruptcy Rule 9014 governs a motion for an order of contempt made by … a party in interest.” By operation of the transitive principle, Rule 37 therefore applies to Chapter 15 contested matters when a party in interest moves for an order of contempt. That is precisely the situation here.

As outlined above, Worms’s argument that Federal Rule of Civil Procedure 37 does not ever apply to Chapter 15 proceedings cannot survive the plain text of the interlocking Bankruptcy Rules. That could be the end of the analysis. It is worth 700*700 noting, however, that precedent and pragmatism are also against him.

On the former, courts frequently recognize that Chapter 15 proceedings can involve contested matters covered by Bankruptcy Rule 9014. See In re Worldwide Educ. Servs., Inc., 494 B.R. 494, 499 n.1 (Bankr. C.D. Cal. 2013) (“Since a petition for recognition is not defined as an adversary proceeding under Rule 7001, it … should be treated as [a] contested matte[r] under Rule 9014.”); In re Basis Yield Alpha Fund (Master), 381 B.R. 37, 43 n.14 (Bankr. S.D.N.Y. 2008) (applying Bankruptcy Rule 9014 to Chapter 15 proceeding); In re Japan Airlines Corp., 425 B.R. 732, 732 n.2 (Bankr. S.D.N.Y. 2010) (same); In re Toft, 453 B.R. 186, 199 (Bankr. S.D.N.Y. 2011) (same); In re Compania Mexicana de Aviacion, S.A. de C.V., 2010 WL 10063842, at *1 n.1 (Bankr. S.D.N.Y. Nov. 8, 2010) (same).

And on the latter, Worms’s position would lead to the absurd result that bankruptcy courts handling Chapter 15 contested matters would lack Rule 37 recourse to enforce their orders. Rule 37 is intended to address discovery misconduct. That can occur as easily in contested matters under Chapter 15 as anywhere else. It would be wholly illogical for the rulemakers to have deprived bankruptcy courts of the Rule 37 toolkit in Chapter 15 contested matters. As demonstrated above, a plain reading of the rules demonstrate that the rulemakers had no such illogical intent.

Rule 37 is available in contested matters arising within Chapter 15 cases.[

For other reasons, the court reversed the sanctions decision and remanded the case to the bankruptcy court. That discussion is too complicated for this blog.

The opinion is thoughtful and important. Every practitioner who is involved in a bankruptcy matter should be aware that Rule 37 does indeed apply.

What is “Reptile Theory?”


Before my last post was written I had never heard of “reptile theory.” I found an excellent opinion (sadly unpublished) from 2017 that explains the theory in greater detail.

Defendant Costco Wholesale Corporation seeks to stop plaintiff’s counsel from making various statements to the jury during the upcoming trial. Uncoiling Costco’s motion, it appears to ask that I order Aidini’s counsel not to: (1) make any venomous remarks that might incite the jurors’ “primal” instincts to protect their offspring (what Costco calls the “reptile theory” of advocacy),[1] (2) suggest that Costco is slinking from its responsibility by defending this case, and (3) comment on the witnesses’ credibility.

Aldini v. Costco Wholesale, Inc., 2:15-cv-505 (D. Nevada 2017)(Andrew Gordon, J.)

Once shed of its skin, Costco’s motion is little more than a request that I monitor Aidini’s counsel to ensure they stay within the strictures of the federal evidentiary and procedural rules. Of course, counsel must have an evidentiary or legal basis for any statements to the jury. And if some specific statements square with the evidence but also pose a risk of unfairly undermining the jury’s reason, I will balance those scales when the time comes.[2] But I will not issue a blanket pretrial ruling based on nothing more than Costco’s suspicion that there are snakes lurking in the grass.

As to Costco’s request that Aidini’s counsel be barred from suggesting that the company is slithering from its responsibilities by defending this case, I cannot say at this point that this would be improper argument. Of course, argument is reserved for closings, not to be made during opening statements. And Costco is free to point out in its closing that it is entitled to defend itself like any other party.

Costco next requests that I prohibit Aidini’s counsel from suggesting that Costco’s witnesses speak with forked tongues or otherwise questioning their credibility. Again, there is no basis to issue such a ban at this time. Aidini’s counsel agree they will make comments about credibility only if founded in the evidence—and they are allowed to do that.

Similarly, Costco’s arguments about the reptilian theory fail. Federal courts have hissed at motions based on this theory that seek a broad prospective order untethered to any specific statements the other side will make.[3] As Aidini points out, it may be permissible for him to argue that, under Nevada’s law of negligence, the jury should consider what a reasonable person in the community would do in Costco’s place.[4] But Aidini’s counsel is prohibited from making statements that would place the jury in Aidini’s skin, or would otherwise violate the Golden Rule or any other applicable restriction on counsel’s arguments.[5]

IT IS THEREFORE ORDERED that Costco’s motion in limine (ECF No. 48) is DENIED.

Comment: this opinion should be published. Protective Order Granted To Prevent “Reptile Theory” Questions

Protective Order Granted To Prevent “Reptile Theory” Questions


Before I read this case, Estate of McNamara v. Navar, No. 2-19-cv-109 (N.D. Ind. April 22, 2020) I had never heard of “reptile theory” questioning. Here the defendant in a trucking accident requested that the court issue a protective order to prevent such questioning in a fact deposition. The trial court issued the protective order:

The defendants claim that in past trucking-related-injury litigation cases with plaintiff’s counsel the deposition examination of defendant drivers has included “Reptile Theory” questioning. According to the defendants’ briefing, “Reptile Theory” as a litigation theory relies on two basic principles: (1) “[t]he Reptile is about community (and thus her own) safety[,]” and (2) “the courtroom is a safety arena.” See (DE 23, p. 4); David Ball & Don Keenan, REPTILE: THE 2009 MANUAL OF THE PLAINTIFF’S REVOLUTION, at 27 (1st ed. 2009). Reptiletrained attorneys thus look for ways to attempt to communicate to juries that “safety” is “the purpose of the civil justice system,” and that “fair compensation can diminish . . . danger within the community.” REPTILE: THE 2009 MANUAL OF THE PLAINTIFF’S REVOLUTION, at 29, 30. The defining purpose behind Reptile tactics, therefore, is to “give jurors [a] personal reason to want to see causation and dollar amount come out justly, because a defense verdict will further imperil them. Only a verdict your way can make them safer.” REPTILE: THE 2009 MANUAL OF THE PLAINTIFF’S REVOLUTION, at 39.

The defendants anticipate that plaintiff’s counsel will include significant questioning, including hypotheticals, regarding Navar’s knowledge of and the purpose underlying various purported “safety rules” for tractor-trailer operation. The defendants have argued that “Reptile Theory” questioning will create confusion around the defendants’ applicable duty of care by attempting to replace it with safety rules. Therefore, the defendants request that the court issue a protective order prohibiting plaintiff’s counsel from engaging in such questioning because it lacks any tangible connection to the scope of permissible discovery.

The plaintiff has indicated that “questions regarding safety . . . are certainly permissible questions during a discovery deposition,” and “questions along this line of safety could reasonably yield discoverable information.” (DE 24, p. 4). However, these conclusory assertions do not indicate what admissible evidence the plaintiff seeks to discover through this line of questioning. The plaintiff has not explained how questioning Navar about the purpose for alleged safety rules is relevant to the parties’ claims and/or defenses. Additionally, the plaintiff chose not to address the specifics included in the defendants’ motion, like how “Reptile Theory” questions or questions that plaintiff’s counsel previously asked in a trucking-related-injury deposition, e.g., “[i]f a commercial motor vehicle driver like yourself violated those rules [the Federal Motor Carrier Safety Regulations], that could endanger the public, correct,” will produce discoverable information.

Navar has not been designated as an expert by the defense. His testimony, as a lay witness, is limited to one that is rationally based on his perception, helpful to clearly understanding his testimony or to determining a fact in issue, and not based on scientific, technical, or other specialized knowledge. Federal Rule of Evidence 701. Accordingly, asking Navar about alleged “safety rules,” including generalized hypotheticals, would fall outside the scope of permissible discovery. The purpose of a deposition is to discover the facts. Hypothetical questions are designed to obtain opinions and are beyond the scope of the deposition of a lay witness.

The court granted the motion for a protective order pursuant to Rule 26(c)(1).

Plaintiff Receives Stern Warning But Sanctions Are Denied


The case of Cody v. Charter Communications, LLC, No. 17-cv-7118-KMK (S.D. NY July 6, 2020) presents a common occurrence where a plaintiff brings a lawsuit (here a Title VII lawsuit against her former employer) but fails to disclose the lawsuit to her bankruptcy trustee or to the district court. (I have seen this happen several times in my career. Most people don’t understand that a lawsuit is an asset of a bankruptcy. These concepts, which are clear to lawyers, are not clear to the average person.)

Here, defendants sought sanctions pursuant to 28 U.S.C. Section 1927 and the dismissal of the action. The court allowed the plaintiff to substitute the bankruptcy trustee as plaintiff and denied the requests for sanctions with a stern warning to the plaintiff. The court was reluctant to dismiss the action because that would have harmed the bankruptcy creditors of the plaintiff.

The reasoning:

Defendant contends that Plaintiff and her counsel have effectively lied under oath because of her misrepresentations in her Bankruptcy Action, because her statements in her deposition and in her Affidavit contradict each other, and because Plaintiff and her counsel demonstrate a continued failure to correct the misrepresentations by failing to amend her Bankruptcy Petition and/or address the tension between her Affidavit and her deposition testimony. (See Def.’s Mem. in Supp. of Mot. for Sanctions 9-16.) Defendant seeks dismissal of this Action and payment of attorneys’ fees in the first instance, but otherwise, wishes the Court to preclude Plaintiff from personally recovering from this Action. (See id. at 16-17.)

Notably, the Second Circuit has clarified that Federal Rule of Civil Procedure 11 sanctions “may be imposed on both counsel and client, while § 1927 applies only to counsel. . . . Rule 11 requires only a showing of objective unreasonableness on the part of the attorney or client signing the papers, but § 1927 requires more: subjective bad faith by counsel.” United States v. Int’l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., AFL-CIO, 948 F.2d 1338, 1346 (2d Cir. 1991). Other than referring to Federal Rule 11 in one footnote in its briefing, Defendant does not appear to actually move under this Rule or proffer any arguments pursuant to it. (See Def.’s Mem. in Supp. of Mot. for Sanctions 12 n.4; Not. of Mot for Sanctions.) Accordingly, the Court must look for “a clear demonstration of bad faith in order to justify sanctions,” Int’l Bhd. of Teamsters, 948 F.2d at 1347 (citation omitted), and even if sanctions are required, they should be imposed to deter counsel’s purported misconduct, not necessarily the client’s, see id.

To begin, as discussed above, the Court sees no reason to dismiss this entire Action, even as a sanction for purported misconduct by Plaintiff’s counsel. Dismissal of the Action hurts Plaintiff’s creditors more than anyone else. It is true that in August 2019, Plaintiff testified at her deposition that she was under the impression that she would personally recover any damages obtained from this Action, (Chapman Aff. in Supp. of Mot. for Judgment on the Pleadings Ex. 1 (“Pl.’s Dep. Tr.”) 303 (Dkt. No. 62-1)), that she reviewed all her bankruptcy paperwork with her bankruptcy counsel and ensured that everything was true and accurate, (see id. at 26), and that she signed her Bankruptcy Petition after doing so, (id. at 317-18). It is also true that, in the course of the instant Motion practice, Plaintiff, through her counsel, has submitted an Affidavit, dated January 4, 2020, stating that her bankruptcy counsel had advised her that she did not need to review a “bunch of” “minor” “legal stuff” in her Bankruptcy Petition, and that, as a result, she “inadvertently overlooked the question regarding `pending law[]suits’.” (Pl.’s Aff. in Opp’n to Mot. for Judgment on the Pleadings ¶ 4.) Plaintiff further affirms that, at her appearance in bankruptcy court in June 2019, she was informed by her bankruptcy counsel that she only needed to disclose the existence of this Action if she was “asked the question,” which Plaintiff claims Trustee never did. (Id. ¶¶ 5-7.) Plaintiff claims that her omission of this Action from her Bankruptcy Petition was inadvertent and she simply relied on “inaccurate information” from her bankruptcy counsel because she did not “have a lot of experience in or understand the legal system,” or, at least, not enough to realize that she should have voluntarily provided this information at her appearance in bankruptcy court. (Id. ¶ 10.)

Obvious tension exists between Plaintiff’s sworn testimony that she carefully reviewed every aspect of her Bankruptcy Petition for accuracy before filing it, (see Pl.’s Dep. Tr. 26, 317-18), and that Plaintiff simply cursorily reviewed her paperwork at the advice of her bankruptcy counsel, (see Pl.’s Aff. in Opp’n to Mot. for Judgment on the Pleadings ¶ 4). But inconsistency does not necessarily prove that Plaintiff’s counsel has submitted an Affidavit that he “kn[ows] to be false.” (Def.’s Mem. in Supp. of Mot. for Sanctions 12.) Nor does it constitute an “action[]. . . so completely without merit as to require the conclusion that [it] must have been undertaken for some improper purpose such as delay.” In re Khan, 488 B.R. 515, 529 (Bankr. E.D.N.Y. 2013) (citations and quotation marks omitted), aff’d sub nom. Dahiya v. Kramer, 2014 WL 1278131 (E.D.N.Y. Mar. 27, 2014), aff’d sub nom. In re Khan, 593 F. App’x 83 (2d Cir. 2015). It is, of course, possible that Plaintiff gave the answer she thought she was obligated to give in a deposition and, following motion practice on the instant issues, it became necessary for Plaintiff and her counsel to reveal to the Court that Plaintiff actually did not review her bankruptcy materials as diligently as she should have. Although this may constitute a serious error that Plaintiff’s counsel should avoid in the future, the Court is not convinced that Defendant has presented a “clear showing” that Plaintiff’s counsel acted in bad faith or “completely without merit.” Id. at 529 (citations and quotation marks omitted). Defendant’s cited cases are largely inapplicable because they refer to different sanctioning mechanisms and standards and/or describe far more egregiously deceitful or dilatory behavior. See, e.g., Cine Forty-Second St. Theatre Corp. v. Allied Artists Pictures Corp., 602 F.2d 1062, 1067-68 (2d Cir. 1979) (imposing sanctions under Federal Rule 37 where the plaintiff’s counsel simply refused to engage in discovery requests and had “frozen [the] litigation in the discovery phase for nearly four years”); Joint Stock Co. Channel One Russ. Worldwide v. Infomir LLC, No. 16-CV-1318, 2017 WL 3671036, at *2, *31-32 (S.D.N.Y. July 18, 2017) (concluding that Rule 11 sanctions were warranted where counsel argued that his client did not have “sufficient contact with the United States or the State of New York” to come within the jurisdiction of the court but, inter alia, failed to reveal that the client’s website listed a New York address as an “authorized dealer” and that his own attorney’s fees were paid by check from a New York representative of his client), adopted by 2017 WL 4712639 (S.D.N.Y. Sept. 28, 2017); Jimenez v. City of New York, 166 F. Supp. 3d 426, 431 (S.D.N.Y. 2016) (upholding decision to sanction the plaintiff’s counsel under Federal Rule 56(h) where counsel had “attempted to suppress[]various medical records,” and had submitted an affidavit that was “more than just objectively unreasonable, [but also] absolutely fanciful”), aff’d in relevant part by 666 F. App’x 39 (2d Cir. 2016). Therefore, the Court sees no need to further sanction Plaintiff’s counsel under § 1927 at this point in the litigation.

The Court warns Plaintiff that when she provides statements under penalty of perjury, whether through testimony, forms, affidavits, or any other judicial filing, she will be held liable for those words. Even though laypeople may feel intimidated by legal proceedings, they must still diligently review the accuracy of all their judicial submissions. But, to the extent Defendant seeks sanctions beyond barring Plaintiff from prosecuting and benefiting from this Action, the Court denies Defendant’s Motion for Sanctions without prejudice. Defendant may of course seek to file a motion for sanctions again if any misconduct continues. However, given that Trustee is now prosecuting this Action and Plaintiff has been warned about the importance of being fully transparent and forthcoming in all her legal proceedings, the Court anticipates that this will not be the case.

Should you have a question about federal procedure or your rights, do not hesitate to contact us. We can often be of help.

http://www.clintonlaw.net