Month: April 2018

Sanctions Denied Where Lawyer Takes Affirmative Steps To Amend a Nonviable Claim

This is a case originally filed by a prisoner against prison medical staff for deliberate indifference. The lawyer for the prisoner plaintiff filed a complaint and an amended complaint. After he received the Defendants’ motion to dismiss, he sought leave to file a Second Amended Complaint that would correct the flaws in the first two complaints. The district court allowed the amendment and denied a Rule 11 motion for sanctions. The explanation is revealing:

Defendants fault Lashuay for filing two complaints—the original complaint and the first amended complaint—which contained claims Lashuay now admits were not viable. See Mot. Am. Compl. at 3 (“Upon reviewing Corizon Defendants’ Motion, Plaintiff determined that his gross negligence claims were not viable and further that he should have included a municipal liability claim against Defendant Corizon Health.”). But the grounds for Defendants’ opposition to those claims became apparent only after Defendants filed their motion to dismiss. In other words, Lashuay did not seek to advance manifestly nonmeritorious claims even after Defendants had indicated why they were nonviable. To the contrary, upon receiving notice of the defects in his first amended complaint, Lashuay immediately attempted to file a second amended complaint which corrected those shortcomings.

These kinds of amendments are not only anticipated but encouraged by the Federal Rules. Federal Rule of Civil Procedure 15(a)(1)(B) authorizes a party to amend its pleading once as a matter of course in response to a motion to dismiss by the defendant (assuming the complaint has not already been amended). This Rule contemplates the common scenario where a plaintiff realizes defects in his claims only after a motion to dismiss is filed. The mere fact that a plaintiff attempted to advance nonmeritorious claims does not warrant Rule 11 sanctions (or denial of leave to amend).

Perhaps Defendants believe that Lashuay should have known that the claims advanced in its original and first amended complaints were nonmeritorious. But there is no evidence that the claims were advanced in bad faith, and the Court declines to sanction Lashuay for simply advancing nonmeritorious claims in the absence of additional evidence of culpability.

The quoted text demonstrates that the lawyer (a) reviewed the motion to dismiss and (b) sought to correct the problems with the Complaint as quickly as he could. He also was candid with the Court.

via LASHUAY v. DELILNE, Dist. Court, ED Michigan 2018 – Google Scholar

Fifth Circuit Dismisses Appeal of Sanctions Order

This is a case that was removed from the state court to the federal court. The plaintiff filed a motion to remand the case and the court, sua sponte, ordered defense counsel to show cause as to why he should not be sanctioned. The magistrate was concerned that some of the representations made by counsel were not true.  Ultimately the trial court allowed the Defendant to amend its notice of removal. The court also sanctioned defense counsel under Rule 11. The magistrate then sanctioned the attorney for one of the defendants:

On January 18, 2017, the magistrate judge held a hearing on the order to show cause. Following this hearing and an in camera inspection of documents in connection with the drafting of the initial notice of removal, including U&E’s efforts to obtain jurisdictional facts related to the LLC members, the magistrate judge issued a long, detailed order. See Nogess v. Poydras Ctr., LLC, No. CV 16-15227, 2017 WL 396307 (E.D. La. Jan. 30, 2017). The court granted Velocity’s motion to amend the notice of removal. Id. at *11. The court found that U&E failed to conduct a reasonable inquiry prior to filing the initial notice of removal and its failure merited Rule 11 sanctions. Id. at *12-14. The court also found that Ungarino misrepresented material facts at the December 21 hearing and that Ungarino’s ex parte communications with the district judge’s chambers were improper. Id. at *15-17. Accordingly, the court concluded that Ungarino’s conduct violated one or more of the Louisiana Rules of Professional Conduct and referred the matter to the Eastern District of Louisiana’s Lawyers’ Disciplinary Enforcement Committee for further investigation, proceedings, and discipline, if warranted. Id. at *17.

The District Court denied the appeal and the lawyer moved to certify an interlocutory appeal. The district court entered a final judgment on the sanctions award under Rule 54(b).

The Court of appeals dismissed the appeal because the requirements of Rule 54(b) were not met. Rule 54(b) allows the court to enter a partial judgment on some, but not all, of the claims for relief. Because the sanctions motion was not a “claim for relief” the district court could not enter a Rule 54(b) judgment. The appeal was dismissed.  The court also rejected an appeal under the collateral order doctrine.

The result here is significant because the lawyer who was the subject of the sanctions motion and award must wait until the end of the entire case to appeal the sanctions award. That could mean several years of waiting for the end of the case with a sanctions award hanging in the balance.

via NOGESS v. POYDRAS CENTER, LLC, Court of Appeals, 5th Circuit 2018 – Google Scholar

Court Sanctions Attorney For Filing Frivolous FDCPA Claim

A lawyer filed a claim under the Fair Debt Collection Practices Act, 15 U.S.C. Section 1692 (FDCPA) alleging that a debt collection letter from a law firm was misleading. The problem with this allegation is that the law firm defendant faithfully used the “safe harbor” language approved by the Second Circuit. The Defendant moved for judgment on the pleadings and the court granted the motion.  The court declined to sanction the plaintiff. However, the court awarded Rule 11 sanctions, on its own motion, against the plaintiff’s attorney.

The court reasoned that any competent lawyer practicing in the area of debt collection would know that the case,  Avila v.Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016), provided a safe harbor for the debt collector. If the debt collector followed the language of Avila, he or she could not be held to have violated the FDCPA, at least in the Second Circuit. The court concluded that the lawyer for the plaintiff, Igor Litvak, should not have brought the claim or should have dropped it once he became aware of the safe harbor. The court explained:

Here, Timoshenko’s claim is patently frivolous in light of the Avila safe harbor, for all of the reasons discussed above. Moreover, the evidence suggests that Litvak, her attorney, knew this to be the case. As described in Defendant’s brief (and undisputed by Litvak), Defendant’s counsel spoke with Litvak on August 9, 2017 and advised him that the Collection Letter did not violate the FDCPA because the language at issue conforms to the safe-harbor language endorsed by the Second Circuit in Avila. See ECF No. 8-1 at 12. Any competent attorney would know Avilaforecloses Timoshenko’s claim, and once made aware of that case (assuming, generously, that he did not already know about it), Litvak should have advised his client to voluntarily dismiss this action. Instead, he responded with the same frivolous argument that the Court dispensed with above, pointing to Carlin and Balke and vowing to press on. But the patina of legality afforded by reference to plainly inapposite case law does little to cloak what looks to the Court suspiciously like a shakedown. Defendant likely could have settled this case for significantly less than the legal expenses it has incurred in filing its answer and motion, and no doubt Litvak knew as much when he decided to defend an indefensible position.

In view of the above, the Court will issue an order requiring Litvak to show cause why he should not be sanctioned for violating Rule 11(b)(2).[2] Litvak is advised that the Court will also be considering whether to order him to pay Defendant’s attorneys’ fees and costs pursuant to 28 U.S.C. § 1927. Defendant is welcome (though not required) to weigh in on the § 1927 issue, but no legal expenses incurred in briefing the issue will be included in any eventual award.

via TIMOSHENKO v. MULLOOLY, JEFFREY, ROONEY & FLYNN, LLP, Dist. Court, ED New York 2018 – Google Scholar