Commercial Litigation and Arbitration

Ability to Pay and Safe Harbor Irrelevant to § 1927 Sanctions — Facial Unconstitutionality of § 1927 Waived when Not Asserted in Challenge to Sanctionability of Conduct — Circuit Panel Bound by Prior Panel Precedent

From Roth v. Spruell, 2010 U.S. App. LEXIS 15112 (10th Cir. July 22, 2010):

[On a prior appeal in this case abbreviated Roth II], we considered whether defendants had followed the procedures outlined in Rule 11. Because defendants had not done so, we concluded that the district court had abused its discretion in granting defendants' motions for sanctions under Rule 11. But because the district court had also awarded defendants fees under § 1927, we concluded that "the proper course is to reverse and remand to the district court to determine the proper amount of fees and costs to be assessed under § 1927 (i.e., 'the excess costs . . . and attorneys' fees reasonably incurred because of' his unreasonable and vexatious conduct)." ***

A. Constitutionality of § 1927

Although the only determination at issue before the district court on remand was the amount of fees and costs to be awarded, Mr. Mulhern now argues that he should not be sanctioned under § 1927 because the statute is unconstitutional on its face and as applied. But this court already determined in Roth II that the district court did not abuse its discretion in concluding that Mr. Mulhern's conduct was sanctionable under § 1927. *** We remanded solely for a determination of the amount of fees that could be attributed to that conduct. *** Mr. Mulhern's facial challenge to § 1927 represents a challenge to the district court's decision that Mr. Mulhern's conduct was sanctionable under § 1927. That issue was fully and finally litigated in Roth II and the Supreme Court denied Mr. Mulhern's petition for certiorari from our decision, see Roth v. Green, 522 U.S. 814 (2007). Accordingly, Mr. Mulhern may not bring a facial challenge to § 1927 at this stage in the proceedings when we are solely reviewing the district court's determination of the amount of the sanctions, not whether sanctions were proper under § 1927. As for Mr. Mulhern's as-applied-challenge, because it can be read to encompass the district court's determination of the amount of fees on remand, we will consider it. Mr. Mulhern's main complaint appears to be that the district court's application of § 1927 violated his due process rights. But in Braley v. Campbell, 832 F.2d 1504, 1514 (10th Cir. 1987) (en banc), we explained that "[t]he basic requirements of due process with respect to the assessment of costs, expenses, or attorney's fees are notice that such sanctions are being considered by the court and a subsequent opportunity to respond." Those basic requirements of due process were met in this case — Mr. Mulhern was on notice that sanctions were being considered, and he had the opportunity to respond and to participate in a hearing on the issue.

Mr. Mulhern also complains that the district court should have considered his ability to pay and the other factors outlined in White v. General Motors Corp., 908 F.2d 675, 684-85 (10th Cir. 1990), when the district court was determining the amount of sanctions under § 1927. But White was a Rule 11 sanctions case. This court has recently "reject[ed]" a similar attempt by another attorney "to import several precedents concerning Rule 11 . . . into the context of 28 U.S.C. § 1927." Hamilton v. Boise Cascade Express, 519 F.3d 1197, 1205 (10th Cir. 2008). In Hamilton, this court specifically rejected the same argument advanced here by Mr. Mulhern, stating: "[W]e also reject Appellant's contention that the court's sanction award improperly failed to comply with our directive in White that a district court consider such factors as the minimum amount that will serve as a deterrent and the attorney's ability to pay." Id. at 1206. Mr. Mulhern acknowledges the existence of Hamilton, but asserts that it was erroneously decided and should be reversed. But this panel is bound by prior precedent unless there is an intervening en banc decision of this court or a superseding contrary decision by the Supreme Court. See In re Smith, 10 F.3d 723, 724 (10th Cir. 1993) (per curiam). Mr. Mulhern has failed to demonstrate that the district court's application of § 1927 was unconstitutional.

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