Seventh Circuit Awards Sanctions For Frivolous and Vexatious Conduct

In the 2010 Seventh Circuit case Carr v. Tillery, 591 F.3d 909 (7th Cir. 2010) defendant attorneys filed a motion for sanctions against the plaintiff alleging the plaintiff was harassing them with repetitive litigation and borderline frivolous suits. The Seventh Circuit reversed the District Court’s dismissal of the motion and awarded the defendants sanctions.

Carr arose from various disputes between former law partners over the division of legal fees from cases their law firm handled before it disbanded. The plaintiff filed eight other suits in state courts against the defendants and at least four liens regarding cases handled by the firm before disbanding. The disputes were supposedly resolved and dismissed by a “Memorandum of Understanding” between the plaintiff and the defendants. However, in 2004, before the suits were dismissed pursuant to the Memorandum, the plaintiff amended a previous counterclaim alleging he had been fraudulently induced to sign the Memorandum. In 2006, the Illinois Circuit Court court rejected the amended counterclaim and dismissed all the pending suits with prejudice. The Illinois Appellate Court affirmed the Circuit Court’s decision.

The complaint before the federal court in the present case repeated the charges in the 2004 counterclaim. As a result, the Seventh Circuit affirmed the District Court’s dismissal of the current charges based on Illinois’s “one refilling” rule and the theory of “claim splitting.” Furthermore, although the current complaint characterized the alleged wrongful acts under the RICO Act, the Seventh Circuit affirmed the dismissal deciding the complaint was barred by res judicata and did not actually arise under the RICO Act because it was a basic breach of contract claim.

Section 1927 of the Judicial Code authorizes the court to grant “excess costs, expenses, and attorney’s fees” resulting from unreasonable and vexatious litigation.

However, this section has been held to be inapplicable to “misconduct that occurs before the case appears on the federal docket.” Nonetheless, the court noted that it “has inherent power, which is to say common law power, to punish by an award of reasonable attorney’s fees or other monetary sanction, or to prevent for the future by an injunction, misconduct by lawyers appearing before it.” Therefore, although much of the alleged misconduct occurred before the suit reached the federal court’s docket, the court decided the defendants would not be left remediless.

The court reasoned that, although the suit could not necessarily be characterized as utterly frivolous, the plaintiff’s actions indicate he had a motive to harass. It pointed out that the plaintiff had a “vitriolic tone” in his complaint, failed discuss important cases in the course of litigation, made a false statement in his opening brief, improperly raised new issues in his reply brief, and failed to even attempt to rebut the defendant’s motion for sanctions. Furthermore, the court reasoned that the plaintiff’s attempt to re-characterize a simple breach of contract claim as a claim under the RICO Act “was an abuse of the patience of the courts.”

The court concluded that “the plaintiff [was] out of control and his lawyers [were] neglecting their duties as officers of the state and federal courts by failing to rein him in,” and directed the lower court to assess a proper monetary sanction. The court also noted that the lower court should consider enjoining the plaintiff from filing any more claims against the defendants outside of potential future claims related to the money he is entitled to under the Memorandum.

Edward X. Clinton, Jr.

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