Commercial Litigation and Arbitration

Sanctions — Withdrawing Four Successive Putative Class Plaintiffs and Then Dismissing Action Sanctionable under 28 U.S.C. § 1927

Plaintiffs’ counsel in Jensen v. Phillips Screw Co., 2008 U.S. App. LEXIS 23076 (1st Cir. Oct. 29, 2008), proposed and withdrew four successive putative lead plaintiffs, at which point they dismissed the class action. The defense sought sanctions under 28 U.S.C. § 1927 for unreasonable and vexatious multiplication of the litigation.

1. Crossing the Line — Good Quote. “There is a line between zealous representation and abuse of the processes of litigation. Lawyers who overstep it do so at their peril.”

2. Objective Standard Applied to § 1927 in First Circuit. “In this circuit, courts use a mainly objective standard for the purpose of determining when a lawyer's actions are unreasonable or vexatious. See Cruz v. Savage, 896 F.2d 626, 632 (1st Cir. 1990) (explaining that ‘[b]ehavior is vexatious when it is harassing or annoying, regardless of whether it is intended to be so’ (emphasis supplied)). This focus on objective measurement comports with the majority view across the circuits. See, e.g., Amlong & Amlong, P.A. v. Denny's, Inc., 500 F.3d 1230, 1241 (11th Cir. 2007); Salkil v. Mt. Sterling Police Dep't, 458 F.3d 520, 532 (6th Cir. 2006); Jolly Group, Ltd. v. Medline Indus., Inc., 435 F.3d 717, 720 (7th Cir. 2006); Julien v. Zeringue, 864 F.2d 1572, 1575 (Fed. Cir. 1989).”

3. Negligence Inadequate; Bad Faith Unnecessary. “Garden-variety carelessness or even incompetence, without more, will not suffice to ground the imposition of sanctions under section 1927. Rather, an attorney's actions must evince a studied disregard of the need for an orderly judicial process ... or add up to a reckless breach of the lawyer's obligations as an officer of the court..... Bad faith is not an essential element, but a finding of bad faith is usually a telltale indicium of sanctionable conduct.”

4. Abuse of Discretion — Good Quote. “This standard is not appellant-friendly, and ‘a sanctioned litigant bears a weighty burden in attempting to show that an abuse occurred.’”

5. No Right to Oral Argument. “... [Appellant] contends that the district court made an error that tainted every aspect of its order when it declined to hear oral argument before imposing sanctions. That contention is groundless. *** <See EEOC v. S.S. Clerks Union, Local 1066, 48 F.3d 594, 609 (1st Cir. 1995) (holding that dispositive motions may be ‘heard’ on the papers because due process does not require ‘any particular kind of hearing.’)....”

6. Initial Complaint Not Sanctionable under § 1927. “Commencing a proceeding is not the same as multiplying a proceeding. In our view..., Congress's use of the verb ‘multipl[y]’ in the text of the statute clearly contemplates that, to be sanctionable thereunder, conduct must have an effect on an already initiated proceeding. Consequently, we join an unbroken band of cases across the courts of appeals holding that a lawyer cannot violate section 1927 in the course of commencing an action. See, e.g., Steinert v. Winn Group, Inc., 440 F.3d 1214, 1224 (10th Cir. 2006); MEMC Elec. Mat'ls, Inc. v. Mitsubishi Mat'ls Silicone Corp., 420 F.3d 1369, 1382 (Fed. Cir. 2005); DeBauche v. Trani, 191 F.3d 499, 511 (4th Cir. 1999); Zul v. E. Pa. Psych. Inst., 103 F.3d 294, 297 (3d Cir. 1996); In re Keegan Mgmt. Co., 78 F.3d 431, 435 (9th Cir. 1996)."

7. Reliance on Nonexistent Concession = Abuse of Discretion. “In an affidavit submitted prior to the sanctions determination, [appellant] swore that a pre-suit inspection of [the] deck [of one of the putative plaintiffs, Cox] showed corrosion of fasteners made by Phillips. Notwithstanding this affidavit, the district court declared that [appellant] had conceded that it moved to name Cox as a plaintiff without any such inspection having taken place. The record contains no proof of such a concession. Where, as here, a court relies explicitly on a non-fact to make a factual determination, that reliance constitutes an abuse of discretion.

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