Category: Rule 38

Rule 38 Sanctions Awarded For Frivolous Tax Appeal


The 11th Circuit awarded Rule 38 sanctions against a pro se litigant who argued, against a mountain of legal authority, that his wages were not taxable income. Swanson v. Commissioner of Internal Revenue, No. 21-11576 (11th Circuit October 5, 2021).

Federal Rule of Appellate Procedure 38 allows a court of appeals, after a separately filed motion and reasonable opportunity to respond, to award damages and single or double costs to an appellee if the court determines that the appeal is frivolous. Fed. R. App. P. 38. Although we generally prefer that the government establish its costs and attorney’s fees by affidavit, we have previously granted the government’s motion for lump sum sanctions in the interest of judicial economy. See, e.g., King v. United States, 789 F.2d 883, 884-85 (11th Cir. 1986); see also Stubbs, 797 F.2d at 938-39. We explained that “this procedure is [in the appellant’s] interest since he would be liable for the additional costs and attorney’s fees incurred during any proceedings on remand.” King, 789 F.2d at 884-85.

Additionally, we have previously warned appellants seeking to argue that their wages are not taxable income “that they may be expected to have sanctions imposed against them if they continue to raise these sorts of frivolous contentions.” Hyslep v. United States, 765 F.2d 1083, 1084-85 (11th Cir. 1985). In fact, in the unpublished opinion in Swanson’s previous appeal, we concluded that Rule 38 sanctions were appropriate because (1) Swanson’s arguments were frivolous, and (2) he had been warned about their frivolity through our precedent and the district court’s express statement that his position was frivolous. Swanson, 799 F. App’x at 671-72. Accordingly, we granted the government’s motion and awarded a lump sum of $8,000 in sanctions. Id. at 672. Further, we have previously granted the government’s motion for lump sum sanctions of $8,000 in another frivolous tax appeal. See Herriman v. Comm’r of Internal Revenue Serv., 521 F. App’x 912, 914 (11th Cir. 2013) (unpublished).

As discussed above, Swanson’s arguments in this appeal have already been held to be frivolous. As to whether his pursuit of this appeal warrants sanctions, Swanson was previously sanctioned for raising similar frivolous arguments. See Swanson, 799 F. App’x at 671-72. Similarly, the Tax Court expressly warned him that his position was frivolous when denying his motion for summary judgment. In light of these warnings, particularly his previous appeal, Rule 38 sanctions are appropriate.

Thus, we GRANT the government’s motion for sanctions and award $8,000 in sanctions. Accordingly, we DENY all pending motions and petitions as moot.

Sanctions Awarded For Cut and Paste Brief


A litigant lost on summary judgment in the District Court. His lawyers appealed but they did not do a proper appellate brief. Instead, they just re-filed the brief they had filed in the district court with little edition. The result: Rule 38 damages awarded to the opposing party by the Third Circuit.

“Conboy and Gilsenan’s opening brief begins with a proper introductory 157*157sentence arguing that the District Court should not have granted summary judgment. Opening Br. at 1. But it quickly goes awry in the next paragraph: “The district court has subject-matter jurisdiction over this case….” Id. One could readily assume that the sentence included a typographical error, using “has” instead of “had.” But just two sentences later, the brief declares: “Venue is appropriately laid in the District Court of New Jersey….” Id. This second use of the present tense, denoting the wrong trial court, presages what comes after, which belies the notion of an honest mistake.

In the first sentence of his legal argument, counsel describes the summary judgment standard. Id. at 6. Two pages later, he argues that “summary judgment should be denied….” Id. at 8. In the next section of his argument, counsel again writes as if the case remains in the District Court, claiming “there is no reason to grant summary judgment based on jurisdictional reasons for either party.” Id. at 13. Apart from these unusual (and inappropriate) references to the case pending in the District Court, counsel’s fifteen pages of “argument” do not mention how the District Court erred. This left us with the suspicion that something was amiss with counsel’s brief.

Unfortunately, our suspicions were confirmed. Counsel for Conboy and Gilsenan simply took the summary judgment section of his District Court brief and copied and pasted it into his appellate brief, with minor changes such as swapping “Defendant” for “Appellee.” Compare Appendix A hereto, with Appendix B. This is not proper appellate advocacy.

Unsurprisingly, the lack of appellate argument reflects the correctness of the District Court’s summary judgment. The Court properly granted judgment on the UTPCPL and FDCPA claims because those statutes apply to consumer debts, not commercial ones like the debt at issue. In re Smith, 866 F.2d 576, 583 (3d Cir. 1989) (73 PA. CONS. STAT. § 201-9.2, the UTPCPL section on private actions, applies “only [to] those persons who purchase or lease goods or services primarily for consumer use rather than for commercial use”); Staub v. Harris, 626 F.2d 275, 278 (3d Cir. 1980) (the FDCPA “was intended to apply only to debts contracted by consumers for personal, family or household purposes” (citation and internal quotation marks omitted)). Conboy and Gilsenan did not identify evidence supporting their claims against Seda Cog, their unjust enrichment claim against CBE, or their FCRA claim against the SBA. Nor did they point to evidence of any contract with CBE. In addition, the unconditional loan guarantees preempted the contract claim against the SBA, and the defamation claim against the SBA failed because of sovereign immunity. See Brumfield v. Sanders, 232 F.3d 376, 382 (3d Cir. 2000) (“[D]efamation suits against the United States are prohibited.”). Finally, although we have not explicitly addressed whether the United States has waived sovereign immunity as to unjust enrichment claims, we need not resolve that issue here because Conboy and Gilsenan cited no record evidence creating a factual dispute material to their unjust enrichment claim against the SBA. See Kabakjian v. United States, 267 F.3d 208, 213 (3d Cir. 2001) (“We may affirm a judgment on any ground apparent from the record.”).

158*158 Regrettably, counsel’s response to CBE’s motion for damages under Rule 38 of the Federal Rules of Appellate Procedure is yet another copy-and-paste job. Counsel copied Conboy and Gilsenan’s previous opposition to sanctions in the District Court under Civil Rules 11 and 37—with only insignificant alterations and additions. Compare Appendix C hereto, with Appendix A at 10-12. Contrary to counsel’s assertion, the Rule 38 motion did not duplicate the sanctions motions, and we will grant it even though the District Court’s denial of sanctions was well within its discretion.

Rule 38 authorizes compensatory damages—not sanctions or punishment —to reimburse appellees who must defend judgments against frivolous appeals, “and to preserve the appellate court calendar for cases worthy of consideration.” Kerchner v. Obama, 612 F.3d 204, 209 (3d Cir. 2010) (quoting Huck v. Dawson,106 F.3d 45, 52 (3d Cir. 1997)); Beam, 383 F.3d at 108. We “employ[] an objective standard to determine whether or not an appeal is frivolous” on the merits, without considering appellants’ “good or bad faith.” Kerchner, 612 F.3d at 209 (quoting Hilmon Co. (V.I.) v. Hyatt Int’l, 899 F.2d 250, 253 (3d Cir. 1990)). “Here, despite many cues from … the District Court that [their] cause was wholly meritless,” see Beam, 383 F.3d at 109, Conboy and Gilsenan’s counsel filed a copy-and-paste appeal without bothering to explain what the District Court did wrong. It is hard to imagine a clearer case for Rule 38 damages.

We may impose these damages on clients, but here we will place responsibility for payment on the lawyer. See id. “[A]ttorneys have an affirmative obligation to research the law and to determine if a claim on appeal is utterly without merit and may be deemed frivolous.” Hilmon, 899 F.2d at 254. “[B]ecause it would be unfair to charge a damage award against [parties who have] relied upon [their] counsel’s expertise in deciding whether to appeal, we have routinely imposed Rule 38 damages upon counsel when a frivolous appeal stems from counsel’s professional error.” Beam, 383 F.3d at 109. In this case, Conboy and Gilsenan’s attorney is to blame for recycling meritless arguments without engaging the District Court’s analysis.

* * *

It’s not easy to become a lawyer. The practice of law is challenging, and even the best lawyers make mistakes from time to time. So we err on the side of leniency toward the bar in close cases. But the copy-and-paste jobs before us reflect a dereliction of duty, not an honest mistake. We will therefore affirm the District Court’s summary judgment and grant CBE’s motion for Rule 38 sanctions after counsel for CBE files an appropriate fee petition and counsel for Appellants has a chance to respond.”

Conboy v. United States Small Business Administration, 992 F.3d 153 (3rd Cir. 2021).

Ninth Circuit Awards Fees Under Appellate Rule 38 and Section 1927


Rule 38 allows a court to award sanctions for a frivolous appeal. In this case, the Ninth Circuit ordered the plaintiff and his attorney to pay the legal fees the defendants incurred in defending what it found to be a frivolous appeal. The court held that Rule 38 allows the court to award “just damages” for a frivolous appeal. Rule 38 does not allow a court to award the fees incurred in preparing the motion for sanctions or in preparing the attorney affidavits required to obtain sanctions.

The explanation:

The award of fees and costs under Rule 38 thus must be limited to appellees’ direct fees and costs for defending against the frivolous appeal, and may not include the fees and costs incurred regarding the imposition of sanctions. See Cooter & Gell, 496 U.S. at 406-07; Sunbelt, 608 F.3d at 466-67 & n.4; Lyddon, 996 F.2d at 214; Lockary, 974 F.2d at 1178; see also Haeger, 813 F.3d at 1242, 1254(affirming award of attorneys’ fees and costs incurred after a misleading discovery response as a sanction under court’s inherent power to compensate party for losses sustained as a result of misconduct).

However, the Ninth Circuit also awarded fees against the attorney under 28 USC Section 1927, under which the court may sanction an attorney who vexatiously multiplies the proceedings. Under 1927 the Ninth Circuit awarded the legal fees for preparing the sanctions motions and attorney bills that it could not award under Rule 38.

In sum, this case is unusual because it awarded fees and sanctions under Rule 38 and 28 USC § 1927. The ruling allowed the defendants to recover almost all of their costs in defending the appeal and in seeking sanctions and proving up attorney fees.

Source: BLIXSETH v. YELLOWSTONE MOUNTAIN CLUB, LLC, Court of Appeals, 9th Circuit 2017 – Google Scholar