New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
Commercial Litigation and Arbitration
« Back to Complex Lit Blog

§ 1927 Sanctions Imposed on Plaintiff’s Counsel Who Refused to Dismiss Case after Client’s Deposition Demonstrated Lack of Merit

Download PDF

After the plaintiff’s deposition revealed that her claim was meritless, defense counsel wrote a letter requesting that the action be withdrawn. Plaintiff’s counsel declined. Litigation proceeded through summary judgment, for which the plaintiff unsuccessfully advanced a new theory of liability supported by an affidavit in which the plaintiff contradicted her deposition testimony. The Fourth Circuit affirmed monetary sanctions against counsel under 28 U.S.C. § 1927 for unreasonably and vexatiously multiplying the proceedings in Salvin v. Am. Nat’l Ins. Co., 2008 U.S. App. LEXIS 12385 (4th Cir. June 10, 2008):

The district court found that Hennessy [counsel] had actual notice that [his client] Salvin's remaining breach of contract claim was rendered meritless by the admissions made in Salvin's deposition testimony. The court noted that the content of the summary judgment opposition submitted by Hennessy confirmed his "awareness that the plaintiff's deposition had indicated that her lawsuit was meritless"; rather than arguing the sole theory approved by the court's partial dismissal order, the opposition advanced a new breach of contract theory based on facts not pled in the complaint.... The district court's finding that Hennessy knew Salvin's claim lacked merit ... is sufficient to support a determination that Hennessy acted in bad faith under either an objective or a subjective standard.

...By refusing to voluntarily dismiss the case once its lack of merit became evident, Hennessy protracted the litigation. [Defendant] ANICO was forced to continue with its discovery obligations, file a summary judgment motion, and respond to Hennessy's opposition to that motion. And, as the district court noted, "[t]he brief in response to [ANICO's] motion for summary judgment is emblematic of the unreasonableness and vexatiousness employed by Mr. Hennessy" because it failed to address the altered records theory at issue, raised new theories based on factual allegations not pled in the complaint, and was based on a new affidavit by Salvin in which she contradicted her earlier deposition testimony....

Finally, we consider Hennessy's contention, raised at oral argument, that upholding the fee award in this case would have a chilling effect on the efforts of plaintiffs' attorneys to zealously pursue their clients' cases. We appreciate the concern expressed by Hennessy, but we respectfully disagree with him. We recognize that Hennessy was put in a tough position because he filed the case based on his client's version of events at the time, only to have the client give a different story — one that defeated the case — when faced with questions, under oath, from opposing counsel. But Hennessy's proper course of action was clear: rather than protract the litigation, he should have voluntarily dismissed the case when ANICO's counsel requested that he do so. As we have said, "litigants and their counsel are not free . . . to disregard evidence that comes to light in discovery and to continue to press their case without any reasonable belief" that the case has merit. Blue v. U.S. Dept. of the Army, 914 F.2d 525, 537 (4th Cir. 1990). Indeed, there is nothing novel in recognizing that an attorney can face sanctions "for pursuing a case after it becomes clear that the case is without merit." Id. Nothing in these principles or in our application of § 1927 in this case will prevent any plaintiff's attorney from zealously pursuing a meritorious case.

Share this article:

Facebook
Twitter
LinkedIn
Email

Recent Posts

Court’s Inherent Power to Police the Conduct of Litigants and Attorneys Extends to Persons Engaged in the Unauthorized Practice of Law Before Them

(1) Inherent Power Sanctions — Duty to Correct or Withdraw — Strategic Silence As Bad Faith — Failure to Advise Court of Absence of Diversity Jurisdiction for 15 Months for Strategic Reasons, Only “Pull[ing] Out The Diversity-Destroying Card” After Losing = “A Textbook Example of Bad Faith” — (2) Under Goodyear, The Court’s Fundamental Job Is to Decide Whether Fees Would Have Been Incurred Absent the Sanctioned Conduct — (3) Appellate Review: While Sanctions Orders Are Reviewed for Abuse of Discretion, A Finding of Bad Faith Is Reviewed for Clear Error — (4) When There Are Two Permissible Views of The Evidence, The Factfinder’s Choice Between Them Cannot Be Clearly Erroneous — (5) “A District Court Is Not Required To Consider Irrelevant Evidence” — (Good Quotes)

Criminal Spoliation Can Be A Due Process Violation — Defendant Must Show That (1) The Evidence Had Exculpatory Value Before It Was Destroyed, (2) Defendant Is Unable to Obtain Comparable Evidence by Reasonable Means, and (3) Bad Faith Failure to Preserve

1) Rule 11 Sanctions: “No First Amendment Exception to a Rule 11 Violation” — “[T]he First Amendment Covers Novel, Nonfrivolous Arguments, But Many Frivolous Arguments Are Also Novel” (Good Quotes) — Frivolous To Continue To Make Rejected Novel Arguments; (2) FRAP 38 Sanctions: District Court In Best Position to Set Sanctions, Attorney’s Fees and Costs

3 Prerequisites for Inherent Power and § 1927 Sanctions in Second Circuit: (1) Bad Faith, (2) Conduct That Is Entirely Without Color [Thus, An Ill-Motivated Colorable Position Appears to Be Protected in the Second Circuit], and (3) Improper Purpose— “To Gain A Strategic Advantage” Is An Improper Purpose — Due Process Satisfied by Opponent’s Motion and Multiple Court Conferences, After Which Target Was Allowed to Submit Additional Letters

Inherent Power Sanctions — Untimeliness as Laches — Laches Properly Applied to Deny Sanctions Motion — Note Waived Defenses to Laches

Rule 37(c)(1) Sanctions: Substantial Justification or Harmless Error (Ninth Circuit Factors) — Erie: When State Supreme Court Has Not Squarely Addressed an Issue, Circuit Must Predict How It Would Rule, Using Intermediate Appellate Decisions, Decisions from Other Jurisdictions, Statutes, Treatises And Restatements for Guidance

(1) Appellate Review of Inherent Power Sanctions (7th Circuit): Factual Findings Reviewed for Clear Error, Choice of Sanction for Abuse of Discretion — 4-Element Test for Reversal; (2) Sanctions and Class Actions: Monetary Sanctions Properly Imposed on Defendants for Improper Communications with Class Members (Represented Parties) — “[I]f The Class And The Class Opponent Are Involved In An Ongoing Business Relationship, Communications From The Class Opponent To The Class May Be Coercive” (Good Quote); (3) Monetary Sanctions under Goodyear v. Haeger: If Same Fact-Gathering Would Have Been Conducted Absent The Misconduct, No But-For Causation — But Only “Rough Justice” Required, “Not Accountant-Like Precision” (Good Quote) — Once Misconduct Is Clear, Time Spent Ferreting It Out Compensable under Goodyear; (4) Goodyear Did Not Overrule Long-Standing Rule That Courts May Impose Modest Civil Monetary Sanctions to Curb Litigation Abuse; (5) Appellate Jurisdiction Lacking Where Sanctioned Attorney Fails to File Notice of Appeal and Lawyer’s Intent to Appeal Not Apparent from Client’s Notice; (5) Rule 11 Improper Purpose — Party May Have Many Purposes for Pursuing Claim — As Long As Claim Is Supported by Good Faith Belief in the Merits, “A Parallel Reason Does Not Violate Rule 11” — To Deny A Motion for Sanctions, The District Court Need Not Address Every Argument: “Arguments Clearly Without Merit Can, And For The Sake Of Judicial Economy Should, Be Passed Over In Silence” (Good Quote); Non-Monetary Sanction on Counsel: Complete Twice The Required Amount Of Professional Responsibility Hours For Her Next Continuing Legal Education Cycle Imposed By The State Bar

(1) Spoliation: Sanctions Are Warranted Only If the Movant Establishes That A Reasonable Trier of Fact Could Find That The Destroyed Evidence Would Support A Claim Or Defense — § 1927 Sanctions: “Courts Often Refuse to Award Sanctions When Both Parties Contributed to the Waste of Judicial Resources” (Good Quote)

No Sanctions Imposed on Counsel Who Submitted A.I.-Generated Phony Cases Without Checking Them in Good Faith on The Mistaken Assumption They Had Been Provided by Highly Respected Co-Counsel Rather Than His Criminally-Convicted, Disbarred Client — No Sanctions on Client Who Had No Access to LEXIS or Westlaw to Check the Phony Cases and Submitted Them in Good Faith: “It Would Have Been Downright Irrational For Him To Provide Fake Cases For [His Lawyer] To Include In The Motion Knowing They Were Fake —

Archives
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

New York Office

© 2024 Joseph Hage Aaronson LLC  
Disclaimer | Attorney Advertising Notice | Legal Notice