Category: Section 1927 Sanctions

An Unusual Decision – Misstatements In A Rule 37 Sanctions Motion Not Subject to Sanctions


The case is Lee v. Horton, 2-17-cv-2766 (Western District of Tennessee December 4, 2018). What makes this opinion unusual and worth reading is that the court concluded that certain misstatements in a motion for sanctions were not themselves subject to sanctions. Lee was injured in an accident. She sued Horton, a truck driver, and Kroger. Lee filed a motion to sanctions under Rule 37 in which she alleged that Kroger had destroyed the electronic logs of the Kroger truck. Lee’s motion for Rule 37 sanctions was denied. Lee’s counsel apparently clarified the factual allegations in a court hearing and admitted that some of them were, in fact, inaccurate.

The defendants then filed their own Rule 11 motion alleging that Lee had made numerous false statements in the Motion for Rule 37 sanctions. That motion was denied by the Magistrate Judge. The Defendants then appealed to the District Judge who adopted the Magistrate’s findings. No sanctions were issued.

The District Court agreed that Rule 11 did not apply:

The Magistrate Judge found that Lee’s statements were made in a Rule 37(e) motion for spoliation sanctions and were therefore outside the scope of Rule 11. See Fed. R. Civ. Pro. 11(d). (Supplemental Report and Recommendation, ECF No. 104 at 1382-84.) Rule 11 “does not apply to . . . motions under Rules 26 through 37.” Fed. R. Civ. Pro. 11(d). Defendants have not objected to this finding, and the Court therefore reviews it for clear error. Fed. R. Civ. P. 72(b) advisory committee notes.

Defendants have argued that “Plaintiff’s original Motion for Sanctions is nothing more than a defamatory narrative seeking a summary judgment as to compensatory and punitive damages.” (ECF No. 49-1 at 573.) The Court does not agree. Lee’s Motion explicitly seeks relief for alleged spoliation. (P.’s Mot. Sanctions, ECF No. 34 at 282 (“Lee prays for the following: (a) Sanctions against Kroger and Horton, jointly and severally, for intentional destruction of material evidence.”).) While Lee also asked for “summary judgment” as a sanction, (P.’s Mot. Sanctions, ECF No. 34 at 282) Rule 37(e)(2)(c) establishes default judgment as a possible penalty for intentional spoliation. The Court concurs with the Magistrate Judge’s finding that Lee’s statements were contained in a motion for sanctions brought pursuant to Rule 37(e), rather than Rule 56. The Court finds that Lee’s Motion for Sanctions is therefore outside the scope of Rule 11. Fed. R. Civ. Pro. 11(d).

In their Reply in support of their Motion, Defendants have also argued that “the crux of Defendants’ Motion for Sanctions is targeting Plaintiff’s counsel’s misrepresentations and conduct unrelated to any underlying discovery dispute.” (ECF No. 49-1 at 573-74.) The Court notes that Defendants’ original Motion for Sanctions, by its plain text, does seek sanctions for conduct related to an underlying discovery dispute. “Plaintiff’s Motion for Sanctions makes numerous factual contentions that have zero evidentiary support.” (Id. at 495.) “Plaintiff’s Motion for Sanctions makes numerous legal contentions in direct contrast to the authority provided.” (Id. at 497.) “Plaintiff’s Motion for Sanctions is presented to harass, cause unnecessary delay, and to needlessly increase the cost of litigation.” (Id. at 498.) Almost all of the specific statements cited by Defendants as inaccuracies were made in the Motion for Sanctions. (See generally Id., see also P.’s Mot Sanctions ECF No. 34.) The Court concurs with the Magistrate Judge that Defendants’ Motion for Sanctions is outside the scope of Rule 11(b). (Supplemental Report and Recommendation, ECF No. 104 at 1384.)

Even if the Rule 11(d) exception for discovery-related “motions” does not include the factual and legal contentions contained within those motions, the Magistrate Judge concluded that Lee’s representations during an August 21, 2018 hearing clarified any previous inaccuracies. (Supp. Report and Recommendation, ECF No. 104 at 1384-85.) Defendants have not objected to the Magistrate Judge’s conclusion regarding the hearing. The Magistrate Judge determined that additional deterrence was unnecessary when viewing Lee’s conduct as a whole. (Supp. Report and Recommendation, ECF No. 104 at 1384-85.) The Court has broad powers to impose sanctions, so long as they are “limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” Fed. R. Civ. Pro. 11(c)(4). The Court finds that it was not clearly erroneous for the Magistrate Judge to conclude based on subsequent clarifications that Lee’s conduct does not warrant sanctions.

28 U.S.C. 1927 did not apply either.

The Magistrate Judge previously found that Lee’s allegation that Defendants falsified trip sheets lacked evidentiary support. (ECF No. 61 at 694; Def.’s Obj. Report and Recommendation, ECF No. 93 at 1070.) Defendants specifically object that advancing a contention for which there is no evidence should be sanctionable under 28 U.S.C. § 1927. (Def.’s Obj. Report and Recommendation, ECF No. 93 at 1070.) The Court notes that Lee’s allegation of falsification does not appear in her Motion for Sanctions or her Reply. (See ECF Nos. 34, 37.) Neither the Magistrate Judge nor Defendants provide a specific citation for where this allegation was made in any filing. (See ECF No. 61 at 694; Def.’s Obj. Report and Recommendation, ECF No. 93 at 1070.) The record instead suggests that this argument was made in oral argument before the Magistrate Judge on August 21, 2018. (See ECF No. 46.) To be clear, a lawyer should not make statements in Court that lack evidentiary support. On a review of the record, however, the Court considers this argument to be a last-ditch effort that was dismissed out of hand rather than a multiplication of proceedings. While certainly indicative of a lack of care or knowledge, the Court does not find that this rises to a sanctionable level under 28 U.S.C. § 1927, given its limited impact.

The Court next considers whether the legal arguments contained within Lee’s Motion for Sanctions are sanctionable under 28 U.S.C. § 1927. Having reviewed the cases and federal regulations at issue, the Court finds that, while Lee’s arguments were incorrect, such misreadings are attributable to incompetence or negligence. The Court also notes that Defendants’ claim that such misrepresentations are “continuous” appears to be incorrect. Defendants only cite one motion in support of this argument, (Defs.’ Mot. Sanctions, ECF No. 40 at 497-98) and do not object to the Magistrate Judge’s finding that Lee’s counsel made significant clarifications at a subsequent hearing. (Supplemental Report and Recommendation, ECF No. 104 at 1385.) Court concurs with the Magistrate Judge that Lee’s legal arguments were wrong, but not frivolous. (See generally id. (finding under Rule 11 that “Lee’s counsel’s misinterpretation of . . . various legal arguments, while ultimately rejected by the court, do not amount to conduct that would be sanctionable.”) Given that the Defendants have not objected to the Magistrate Judge’s finding that the legal arguments in question were not sanctionable under Rule 11, and the fact that Lee’s counsel clarified Lee’s position at a subsequent motion hearing, the Court finds that these legal arguments are also not sanctionable under 28 U.S.C. §1927.

Conclusion: Lee’s lawyer was lucky here because he made misstatements on the record in an effort to obtain Rule 37 sanctions. Those statements were not accurate and, in my opinion, Lee’s lawyer was fortunate to escape some form of sanctions for this behavior. Apparently, his decision to admit he was wrong at oral argument before the Magistrate Judge saved him from sanctions.

Ed Clinton, Jr.

The Clinton Law Firm

Defamation Claim Dismissed – But Plaintiff’s Lawyers Escape Sanctions


This is a fairly typical situation in litigation. The plaintiff, Redmonds Enterprise, Inc. sued CSX Transportation, Inc. for defamation and other related tort claims. The case grew out of a vandalism incident at a CSX rail yard. Redmonds alleged that a CSX employee sent an email that defamed Redmonds by blaming Redmonds for the vandalism.  During discovery, it became apparent that the author of the email, Rick Omer, was not a CSX employee and there was apparently no evidence that he existed at all.  Furthermore, there was no evidence that anyone at CSX sent a defamatory email to anyone about Redmonds. The court granted summary judgment in favor of CSX and dismissed the case.

CSX moved for sanctions pursuant to Rule 11 and Section 1927. The district judge denied the sanctions motion. This is the key paragraph of the opinion:

While it is a close question, it is not clear that sanctions are warranted under either Rule 11 or § 1927, although the dilatory conduct of Redmonds’ non-local counsel, Mr. Jenkins, was irresponsible, to say the least. CSX argues that sanctions should be imposed because Redmonds refused to dismiss the case after the Orner email was not uncovered during discovery. But, there is no evidence to suggest Redmonds did not have a colorable basis for filing its complaint initially. Redmonds had experienced a decline in business, and had been told this decline was attributable to a defamatory email from a CSX employee. Refusal to dismiss the complaint after discovery is not a basis for Rule 11 sanctions. See Brubaker, 943 F.2d at 1381Simpson, 900 F.2d at 36-37. After conducting discovery, Redmonds moved to amend its complaint to reflect new evidence uncovered during discovery. Although untimely and ultimately unsuccessful, filing this motion was not entirely baseless, nor an unreasonable multiplication of this proceeding under § 1927. The conduct of Redmonds’ counsel was not as “unreasonable[] and vexatious[]” as the attorney in Salvin, who continued proceedings after his own client’s deposition revealed that there was no basis to her claims, and indeed supported his opposition to the motion for summary judgment with an affidavit in which his client contradicted her own deposition testimony. See Salvin v. American Nat. Ins. Co.,281 Fed.Appx. 222, 225-26 (4th Cir. 2016).[5] The delay in seeking leave to amend after it became clear the Orner email could not be found was irresponsible and, as explained above, was sufficient reason to deny the motion to amend. But the court cannot say it amounted to the bad faith that is required to support sanctions under § 1927. The motion for sanctions will be denied.

This is a very typical situation in a plaintiff’s case. The plaintiff believes he or she was wronged but the lawyer is unable to prove the allegations. The lawyer had a good faith basis for filing the case but the case was ultimately dismissed for a lack of proof.

Redmonds Enterprise, Inc. v. CSX Transportation D. Maryland

1927 Sanctions awarded for false allegations


The case is Phillips v. FirstBank Puerto Rico, 13-105. The plaintiff alleged that her signature was forged on a mortgage note in 2003 and that the forgery was concealed from her. She also alleged that the mortgage was refinanced in 2009. She claimed that she learned of the forged 2003 signature only in 2009.

The court concluded that the statute of limitations had run on the claims. Worse still, the plaintiff testified at her deposition that her signature was genuine. The court awarded Section 1927 sanctions to the Defendant in the amount of $10,000. The explanation:

Throughout this litigation, Plaintiff’s Counsel has sidestepped dispositive issues and backtracked on verifiable factual matters in an effort to prolong the Court’s review of time-barred claims. In the original Complaint, Annette alleged that her signature was forged on the mortgage refinancing documents. (Compl. ¶¶ 9-10 (“[Annette] had no knowledge of the refinancing although her name and signature appeared on the application documents. . . . [T]he name and signature were not hers and must have been forged.”).) Despite her own and Counsel’s earlier protestations (see, e.g., Compl. ¶¶ 7-12; Tr. 31:5-6, ECF Nos. 70, 102-1 (“May 2, 2017 Tr.”) (“[T]he mortgage 2003, that is the document that is fraudulent.”)), in her deposition, Annette clarified that her authentic signature did appear on the documents. (Annette R.J. Phillips Dep. 62:22-66:8.)[4]

Based on Annette’s own sworn admissions, it has become clear to the Court that Annette’s signatures were authentic and, thus, the basis for the Complaint, and the arguments presented to the Court on May 2, 2017 in an attempt to overcome judgment on the pleadings, were untruthful. The efforts of Plaintiff and Plaintiff’s Counsel to conceal critical facts from the Court sufficiently establish bad faith. Notably, the 2003 refinancing documents which the Court reviewed and relied on at summary judgment, though presented for the Court’s review by Defendants (seeDef.’s Exs. H-K, ECF Nos. 73-8-73-11), appeared in Plaintiffs’ initial Rule 26 disclosures filed in July 2014 (see, e.g., ECF No. 31 at 2-3). As far as the Court can discern, for years Plaintiff has possessed documents which she knew reflected her authentic signature and confirmed her presence at the 2003 mortgage closing. Yet Plaintiff’s Counsel represented to the Court that the signatures were forged (May 2, 2017 Tr. 31:5-6); or that Annette was ill and medicated and could not remember appearing at the closing or signing the documents;[5] or that Annette was duped into signing these documents; or that “her mother used a pretext to get her to the bank and she ended up signing a refinancing of the mortgage” (Pl.’s Opp’n to Def.’s Mot. Fees and Costs at 1). This revolving-door defense and after-the-fact reframing of Plaintiff’s Complaint is a disingenuous and vexatious cover for the fact that Plaintiff’s original contentions were false and made in bad faith.

This is an ugly tale of a lawyer who should have known better and told the truth immediately when he learned that the 2003 signature was genuine. The lawyer was only found out when the client refused to support the false allegations in the complaint. The link is to an article about a lawyer who fixed a mistake as quickly as he could.

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

Ed Clinton, Jr.

 

Court Awards 9,000,000 for filing and refusing to drop hundreds of frivolous lawsuits


This is a decision awarding in excess of $9,000,000 in sanctions against two law firms that filed 1250 frivolous “Engle Progeny” product liability actions. Engle Progeny cases are injury lawsuits against tobacco companies. The sanctions were awarded pursuant to Rule 11 and 28 U.S.C. Section 1927.

The first award was of Rule 11 sanctions for 588 complaints filed for litigants who were deceased. The explanation:

The complaints filed in the 588 Actions were objectively frivolous. As the Eleventh Circuit observed, “any lawyer worth his salt knows [that] a dead person cannot maintain a personal injury claim.” In re Engle Cases, 767 F.3d at 1086-87. The complaints listing the 588 Pre-Deceased Plaintiffs alleged only a personal injury action— using the present or future tense in referring to the “Smoking Plaintiffs,” and asserting that they “have and will suffer” as a result of their disease. (E.g., Edwin Moody et al. v. R.J. Reynolds Tobacco Co., Case No. 3:08-cv-155-J-32HTS, Doc. 2, Complaint at ¶ 1.10). Nowhere did the complaints suggest that the smoker had died, and nowhere did they assert an alternative wrongful death or survival action. To the contrary, the concluding allegation in each complaint stated that each plaintiff’s injuries “are permanent and continuing and as such will be suffered into the future.” (E.g., id. at ¶ 11.1). These allegations were demonstrably false.

The complaints in the 588 Actions were also frivolous because Counsel lacked authorization to file or maintain them. “Perhaps the most basic factual contentions implicit in a complaint are that the plaintiff consents to the filing of suit and prays for the relief requested.” In re Deep Vein Thrombosis, No. MDL-04-1606 VRW, 2008 WL 2568269, at *1 (N.D. Cal. Jun. 24, 2008). The dead plaintiffs obviously could not have authorized Counsel to bring lawsuits on their behalf. Nor did Counsel have authorization from the Pre-Deceased Plaintiffs’ estates or their survivors because Counsel pled the complaints as personal injury actions on behalf of the Pre-Deceased Plaintiffs themselves. Therefore, “the most basic factual contention implicit” in the 588 personal injury complaints, i.e., that the plaintiff authorized and prayed for the relief requested, was untrue.

The court also awarded Section 1927 Sanctions for claims from nonsmokers and plaintiffs who did not live in Florida.

In the cases discussed below, the Court determines that Counsel multiplied the proceedings unreasonably and vexatiously by maintaining frivolous complaints in bad faith. Between 2011 and 2013, the Court learned that Counsel had filed dozens of Frivolous Actions (in addition to the 588 Actions). Counsel brought these Frivolous Actions without authorization or on behalf of non-smokers, people who never lived in Florida, and plaintiffs with previously adjudicated claims. The fatal defects in these actions surfaced not through voluntary disclosures from Counsel, but through alerts from Defendants, the hard work of the Temporary Special Master, and from the returned Court Questionnaires. Before the Court Questionnaire process, Counsel vigorously opposed any suggestion that someone should interview or question the plaintiffs. Counsel’s intransigence forced the Court to order Wilner to mail the Court Questionnaires to 2,661 plaintiffs and to have the Temporary Special Master review the results. The questionnaire process was time-consuming but necessary. It accomplished what Counsel would not: the identification of hundreds of frivolous cases, and the segregation of viable from non-viable claims.

In some of these cases, Counsel knew or must have known that a fundamental defect existed. As to others, Counsel acted with reckless indifference. Counsel insisted on maintaining cases without having bothered to obtain the plaintiff’s authorization, without having any basis for asserting that the plaintiff was even a smoker, and without knowing whether the alleged smoker ever lived in Florida (as required by Engle III). Moreover, Counsel’s resistance to the questionnaires and false assurances appeared calculated to prevent the discovery of such frivolous cases. At the very least, counsel’s behavior “grossly deviate[d] from reasonable conduct.” Amlong, 500 F.3d at 1240.

Counsel’s actions demonstrated a pattern of obfuscation and deception, which frustrated the Court’s efforts to rid the Engle Docket of frivolous cases and to promptly and fairly resolve the cases that had merit. Counsel’s maintenance of frivolous suits forced the Court to expend valuable resources—in terms of time, money, and manpower—to cope with the swollen Engle Docket. It also delayed the resolution of meritorious claims. As a result, sanctions are appropriate for the “excess costs” and “expenses . . . incurred because of [counsel’s] conduct.” 28 U.S.C. § 1927.

The court awarded a total of $9,164,404.12 against the two law firms that maintained the frivolous lawsuits.

Source: IN RE ENGLE CASES, Dist. Court, MD Florida 2017 – Google Scholar

Losing Your Case Is Not Enough To Be Sanctioned Under Section 1927


This case illustrates an obvious principle – winning is not enough to obtain Section 1927 sanctions. Even getting a complaint dismissed is not enough to get Section 1927 sanctions.

The plaintiff brought a consumer fraud claim and lost. As the court put it, that was not enough to merit sanctions:

Here, the Court disagrees with defendant’s assessment that plaintiffs’ conduct in this litigation amounted to bad faith or that plaintiffs pursued vexatious and frivolous claims. The Court in this instance disagreed with plaintiffs on whether plaintiffs stated viable claims under the ICFA and the MMP. Simply bringing a losing case does not warrant a fee award to the prevailing defendant. Despite the unsuccessfulness of plaintiffs’ lawsuit, the Court cannot find that it was brought in bad faith or that plaintiffs pursued vexatious or frivolous claims. Thus, the Court finds that an award of attorney’s fees is not warranted under the circumstances of this case.

Source: Haywood v. MASSAGE ENVY FRANCHISING, LLC, Dist. Court, SD Illinois 2017 – Google Scholar

 

Plaintiff Fails To Recognize Complaint Is Time-Barred – Section 1927 Sanctions Awarded


Source: Carter v. HICKORY HEALTHCARE INC., Dist. Court, ND Ohio 2017 – Google Scholar

The plaintiff filed a case under the Americans With Disabilities Act, 42 USC Section 12101. The case was time-barred because the complaint was filed more than 90 days after the right to sue letter was received. The court awarded Section 1927 sanctions because Plaintiff’s counsel persisted long after it was clear that the case was time-barred.

This is a second decision of the court that explains the rationale for the sanctions.

Defendant Denies Involvement In Death of Joan Romain – But Sanctions Are Denied


This lawsuit relates to a suspicious death in Michigan – the death of Joan Matouk Romain. Did she commit suicide or was she murdered? There are two versions of the events.

Ms. Romain’s estate sued a number of individuals who were allegedly involved in her wrongful death, including Timothy Matouk. Matouk moved for sanctions on the ground that his cell phone records and work records show that he was elsewhere when Ms. Romain disappeared. He argued that the plaintiffs had sufficient information that should have led them to remove him from the case because he had no involvement in the wrongful death.

The District Court denied the motion because a witness in the lawsuit has testified that he saw Matouk near the crime scene. Therefore, sanctions under Rule 11 and Section 1927 were denied. The court found an issue of fact and explained it in this fashion:

Matouk and two other individuals may have testified that Matouk was working on a multi-jurisdiction task force in Warren the evening Romain disappeared. Nevertheless, Matouk has not pointed this Court to specific testimony representing that he was elsewhere when Hawk claims to have seen him in Grosse Pointe Farms or accounting for his whereabouts at any specific time. In any event, whether to believe Hawk versus another individual who may testify that Matouk was elsewhere raises a credibly question for a jury. It is not a question for this Court to resolve here and the fact that a question exists suggests that there is no basis for sanctions.

Source: ESTATE OF ROMAIN v. City of Grosse Pointe Farms, Dist. Court, ED Michigan 2017 – Google Scholar