Month: July 2017

Lawyer’s Claim Dismissed For Lack of Diversity of Citizenship

An Illinois attorney filed suit against a former client and asked the court for guidance as to who should receive sanctions awarded against him and in favor of Jeanine Stevens and John Cushing. Why he filed the case in Wisconsin is a mystery since the lawyer and the defendants he sued are all citizens of Illinois.

Result: case dismissed for lack of subject matter jurisdiction; there being no diversity of citizenship between the parties.

I’m surprised that a veteran and experienced lawyer did not take the time to consider and evaluate the diversity of citizenship before filing a case.

The case is David Alan Novoselsky v. Christine Zvunca, 17-cv-427, pending in the United States District Court for the Eastern District of Wisconsin. The decision is by Judge Stadtmueller.

Edward X. Clinton, Jr.


Federal District Court Affirms Bankruptcy Sanctions For Using Inadmissible Evidence In Brief

This is an appeal from a trial in the bankruptcy court. Under bankruptcy rules, the losing party can appeal the decision to the federal district court. Here, the debtor failed to disclose an expert before trial in the bankruptcy court. The expert’s opinion was excluded. The debtor, however, in post-trial briefs, included references to the evidence that had been barred. The court sanctioned the lawyers under its inherent power, finding that they acted in bad faith and had violated a court order excluding the evidence. On appeal, the district court agreed and affirmed the sanction award.

It appears from the opinion that the Bankruptcy court considered the inclusion of excluded evidence in a post-trial submission to be sneaky and underhanded.

Source: IN RE BLACK, Dist. Court, ED Louisiana 2017 – Google Scholar

Homeowners’ Association Required to Pay Bank’s Legal Fees

This is a Rule 37 sanctions case for the failure by a Homeowners’ Association, Daisy Trust, to produce documents in response to JP Morgan’s discovery requests. The case is a simple one: the Homeowners’ Association moved to foreclose a single family residence. JP Morgan, which made a loan on the property, served discovery requests. The discovery requests were directed to issues of jurisdiction, and sought to determine the citizenship of the Trust.

The court granted the motion to compel and imposed sanctions by requiring the Daisy Trust to pay the bank’s legal fees. The court reasoned that the discovery requests were proper and that there was not a legitimate basis for refusing to respond.  The court’s explanation is provided in pertinent part:

“Daisy Trust must pay Chase’s reasonable attorney’s fees and expenses. Daisy Trust refused to provide adequate information contrary to Judge Jones’ order. In response to an interrogatory, Daisy Trust merely responded that it was a “trust” and that its trustee is Resources Group, LLC. (ECF No. 93 at 5). However, without information on the type of trust, the identity of the trustee is not enough to determine citizenship. Second, despite Chase’s attempt to meet to discuss the inadequate responses, Daisy Trust was unwilling to provide the necessary information even after they were directed to the court order requiring them to respond to jurisdictional discovery. This is impermissible. The discovery rules are designed to be self-executing to avoid unnecessary court involvement and the needless accrual of costs and expenses. See Goodman v. Staples, 644 F.3d 817, 827 (9th Cir. 2011) (stating that Rule 37 “gives teeth” to the rules’ discovery requirements). Here, Daisy Trust disregarded discovery requests served pursuant to the Court’s order to obtain information concerning Daisy Trust’s citizenship to proceed with this matter.”

Source: DAISY TRUST v. JP Morgan Chase Bank, NA, Dist. Court, D. Nevada 2017 – Google Scholar

Edward X. Clinton, Jr.

Sanctions Motion Denied Where Party Withdrew Claim Within 21 Days Of Receiving Sanctions Motion

Rule 11 contains a safe harbor, which allows a party to withdraw a claim within 21 days of receiving a sanctions motion. In this case, the plaintiff moved to voluntarily dismiss a design patent infringement claim within 21 days of receiving the sanctions motion. Rule 11 did not permit sanctions. The Defendants then sought sanctions under the court’s inherent authority, which the court denied. Sanctions under the court’s inherent authority are exceedingly rare and occur where the court believes that the party committed some egregious misconduct.

In sum, this is a classic example of the Rule 11 safe harbor in action.

Source: CAFFEINATE LABS, INC. v. VANTE INC., Dist. Court, D. Massachusetts 2017 – Google Scholar