This case was a challenge, apparently a very weak challenge, to an arbitration award. The court rejected all of the challenges to the award and confirmed the award. However, it declined to award sanctions to the Defendant, even though the court concluded that the Plaintiff’s legal contentions were not well-founded. It wrote:

After reviewing the record as a whole, the Court concludes that while some of Petitioners’ contentions are potentially misleading, if viewed in context, they suggest positions that are not wholly frivolous or deceptive. The Court recognizes, however, that this is an exceedingly low bar by which to gauge attorney work product. Accordingly, although the Court in an exercise of its discretion DENIES Respondent’s motion for sanctions in this instance, the Court pauses to stress that, to the extent there are further proceedings in this matter, similar conduct shall not be tolerated.

Edward X. Clinton, Jr.

Source: Ray v. CHAFETZ, Dist. Court, Dist. of Columbia 2017 – Google Scholar

This is a decision of the Eastern District of New York, which awards the lawyers for the defendants’ sanctions in the amount of $20,000 against plaintiff’s former counsel. The plaintiff was removed from his father’s apartment and involuntarily committed to Coney Island Hospital. Plaintiff then made claims against a number of Jewish charitable organizations, claims that were determined to be frivolous.

The defendants claimed $38,740.50 in legal fees. The court reduced that amount to $20,000. It explained:

The court concludes that an award of the full amount of attorneys’ fees and costs is not the proper measure of sanctions in this instance. To be sure, Borzouye’s misconduct was extreme. As Judge Joan M. Azrack found, 101 of the evidence indicates that Borzouye did not have a good-faith basis for the various allegations and claims . . . that he asserted against the Self Help defendants.” (R&R (Dkt. 103) at 31.) This court also struck one of Borzouye’s submissions—a “cross-motion for sanctions”—in part because it almost entirely plagiarized the Self Help Defendants’ motion for sanctions. (Sept. 27, 2013, Order (Dkt. 86).) This misconduct infected every aspect of the case until Borzouye’s removal, and the Self Help Defendants incurred substantial attorneys’ fees as a direct result of his actions. Despite this reprehensible behavior, the court’s discretion is bound by the guidance that its sanctions must be limited to the amount necessary to prevent repetition of the offense. The Self Help Defendants have not made a showing that sanctions consisting of the full amount of attorneys’ fees and costs is necessary to deter future misconduct by Borzouye or other, similar parties, and the court concludes that awarding all fees and costs incurred would inappropriately stray beyond deterrence into simple fee shifting. In view of the findings and principles above, the court concludes that a sanction of $20,000 adequately reflects the seriousness of Borzouye’s misconduct and will deter similar flagrant misconduct by him and others in the future. [footnotes removed].

Source: Friedman v. SELF HELF COMMUNITY SERVICES, INC., Dist. Court, ED New York 2017 – Google Scholar

The legal doctrine of res judicata bars a litigant from challenging a final judgment in a prior lawsuit between the same parties (or their privies). Here, in a foreclosure matter, the plaintiff filed the same or similar lawsuit against Wells Fargo four separate times. The problem, of course, is that two of the prior cases were dismissed with prejudice. The court’s reasoning is set forth below:

After providing Nguyen the Rule 11 “safe harbor” period, Wells Fargo filed the Sanctions Motion [Doc. # 9]. Wells Fargo argues that Nguyen violated Rule 11 by filing the Fourth Lawsuit, in which she assisted Khan to assert claims Nguyen knew previously had been dismissed with prejudice in the First and Third Lawsuits. Nguyen responds that she did not violate “the Federal Rules of Civil Procedure” because: Khan’s complaint filed in the First Lawsuit was not groundless; Khan’s attorney in the First Lawsuit did not explain the significance of a non-suit with prejudice to Khan; Khan was unaware that her attorney had filed a non-suit with prejudice; and counsel for Wells Fargo bullied Khan’s attorneys, including Nguyen.^[10]

Nguyen’s arguments are meritless. In filing the Fourth Lawsuit, Nguyen ignored two prior dismissals with prejudice of the very claims asserted in this case. The doctrine of res judicata precludes multiple lawsuits on the same causes of action. See United States v. Davenport, 484 F.3d 321, 325-26 (5th Cir. 2007). Under the doctrine, “a final judgment on the merits bars further claims by parties or their privies based on the same cause of action.” Id. at 326 (quoting Montana v. United States, 440 U.S. 147, 153 (1979)). The Fifth Circuit determines whether two suits involve the same claim or cause of action by applying the transactional test of the Restatement (Second) of Judgments, § 24, which turns on “whether the two cases under consideration are based on `the same nucleus of operative facts.” Id. at 326 (quoting In re Southmark Corp., 163 F.3d 925, 934 (5th Cir. 1999)). Independent of any argument Nguyen may assert regarding the effect of the non-suit with prejudice of the First Lawsuit, it is undisputed that Nguyen was counsel in the Third Lawsuit, which was dismissed with prejudice on April 2, 2015, just months before Nguyen filed the Fourth Lawsuit, and which created a final judgment with respect to the claims presented in the Fourth Lawsuit. Moreover, the Petition in the Third Lawsuit alleged that the First Lawsuit had also been dismissed with prejudice. Nguyen, who filed both the Third and Fourth Lawsuits, knew or should have known the basic legal tenets of res judicata. Nevertheless, she ignored the dismissal of the Third Lawsuit.

Nguyen also has delayed resolution of the issues regarding foreclosure on the deed of trust on the Property by repeatedly filing bankruptcies on behalf of Khan without completing the reorganization or discharge process. Together with her disregard of res judicata, this course of conduct suggests an egregious pattern of harassment and purposeful unwarranted delay. See Hall v. Chase Home Fin., LLC, No. A-10-CA-206-SS, 2010 WL 2732404, at *1 (W.D. Tex. July 8, 2010) (imposing sanctions on plaintiff under Federal Rule of Civil Procedure 11 because filing of the case, which was barred by res judicata, “is clearly intended to harass the opposing parties and delay the inevitable foreclosure of property in question.”) There simply was no excuse for Nguyen’s pursuit of Khan’s duplicative and barred causes of action. Nguyen’s conduct violated Federal Rule of Civil Procedure 11 and merits the sanctions sought by Wells Fargo.

Much of the recent sanctions jurisprudence comes from the foreclosure area, an area where the litigants are often desperate and often hire non-mainstream lawyers to defend cases for which there is no defense. The result is often Rule 11 sanctions for asserting frivolous legal positions.

Edward X. Clinton, Jr.

Source: Khan v. WELLS FARGO BANK, NA, Dist. Court, SD Texas 2017 – Google Scholar

https://scholar.google.com/scholar_case?case=3389474079075332974&hl=en&lr=lang_en&as_sdt=400006&as_vis=1&oi=scholaralrt

This case is captioned Crooked Creek Properties, Inc. v. Ensley, pending in the Middle District of Alabama. Crooked Creek filed the case to contest to reclaim a Section 8 Housing Complex. The problem for the was that it had been filed and rejected at least four times previously.

The court first held that res judicata barred the claims of Crooked Creek. Then it awarded sanctions to the defendants, in the form of an injunction prohibiting further litigation. The court’s opinion is entertaining:

Small children usually learn fairly early on that if one parent says “no” to a request, it is best not to go behind his or her back and ask the other parent for the same thing. What the first says, goes. Res judicata is based on the same principle.^[3]“The elements of res judicata, or claim preclusion, are (1) a prior judgment on the merits, (2) rendered by a court of competent jurisdiction, (3) with substantial identity of the parties, and (4) with the same cause of action presented in both suits.” Dairyland Ins. Co. v. Jackson, 566 So. 2d 723, 725 (Ala. 1990). “If these essential elements are met, any issue that was or could have been adjudicated in the prior action is barred from further litigation.” Hughes v. Allenstein, 514 So. 2d 858, 860 (Ala. 1987) (emphasis original).

Unfortunately for Defendants, this court, and everyone else involved, Crooked Creek never learned that tried and true lesson of upbringing. Like a spoiled child, Crooked Creek has not only asked both parents (state and federal) for relief; it has asked repeatedly. However, at every turn, up and down the state and federal systems—including twice by this court—judges, like exasperated parents, have responded resoundingly, “No!” Additionally, those courts and this one have explained the effect of res judicata on this case. Undeterred, Crooked Creek responds that res judicata does not apply. Well, Crooked Creek, to quote the late philosopher Yogi Berra, “It’s like déjà vu all over again.”

….

By now, Crooked Creek should recognize these findings as common themes: that the Autauga County suit resulted in a final judgment on the merits; that the Autauga County circuit court is a court of competent jurisdiction; that Crooked Creek, Richard Ensley, and Anita Liles are the same litigants from the Autauga County suit for res judicata purposes; and that this case presents the same cause of action as the Autauga County suit for res judicata purposes. At the end of the day, if Crooked Creek feels like it is re-living a nightmare, join the club. Crooked Creek has no case as it relates to this property, now or in the future. Its claim was resolved by the Autauga County circuit court, and affirmed on appeal. Defendants’ motion to dismiss is due to be granted.

The court then took time to explain the rationale for the sanctions, again in entertaining fashion:

Crooked Creek’s claims are patently frivolous. A claim is objectively frivolous if it lacks a reasonable factual or legal basis. See In re Mroz, 65 F.3d 1567, 1573 (11th Cir. 1995). This court has gone above and beyond to explain to Crooked Creek that there is no legal basis for its claims, all to no avail. Three times, this court has explained alternative bases for denying redress to Crooked Creek from the Autauga County suit, including twice on the basis of res judicata. See Crooked Creek III, 2015 WL 12940177; Crooked Creek II, 2010 WL 3629818; Crooked Creek I, 2009 WL 3644835.

Additionally, John Norris, plaintiff’s initial attorney in Crooked Creek III, should have been aware that Crooked Creek’s claims are frivolous. Whether an attorney should have been aware of his or her client’s frivolous claim(s) depends upon whether he or she would have been made aware of their frivolity upon a reasonable inquiry. See Worldwide Primates, 87 F.3d at 1254 (“In other words, we must inquire whether she would have been aware that it was frivolous if she had conducted a reasonable inquiry.”). In this case, a reasonable inquiry into the factual and legal grounds for Crooked Creek’s Complaint would have revealed the frivolous nature of Crooked Creek’s claims. A cursory review of Crooked Creek’s legal history—or even a simple Google search—would have alerted the most inauspicious lawyer about Crooked Creek’s storied history of vexatious filing related to the ownership of Danya Park Apartments.

Moreover, this court took great pains to warn Crooked Creek—and future lawyers—about the potential for sanctions if Crooked Creek brought this suit again. In Crooked Creek’s last failed attempt, this court remarked, “Plaintiff is forewarned that serious consideration will be given as to whether Rule 11 or other sanctions are appropriate if a future lawsuit is filed in this court on the same factual predicate as the two prior lawsuits.” Crooked Creek III, 2015 WL 12940177, at *2 n.3. Accordingly, John Norris should have been aware that Crooked Creek’s claims are frivolous, and therefore, sanctions are appropriate for purposes of this case.

The court then enjoined Crooked Creek from filing further litigation.

Edward X. Clinton, Jr.

http://www.clintonlaw.net