Commercial Litigation and Arbitration

§ 1927 Sanctions Imposed on Counsel for 868-Entry Deposition Errata Sheet — Case Law Split on Propriety of Substantive Deposition Errata — § 1927 Award May Include Costs Incurred on Sanctions Motion (Circuit Split) — Good Quotes

From Norelus v. Denny’s, Inc., 2010 U.S. App. LEXIS 26286 (11th Cir. Dec. 28, 2010) (Note: This is a 2-1 decision with the 1 being a concurrence in part and Judge Tflojat dissenting):

No one's memory is perfect. People forget things or get confused, and anyone can make an innocent misstatement or two. Or maybe even three or four. But not 868 of them. In this case, the plaintiff's attorneys, William and Karen Amlong, filed a sixty-three page errata sheet containing 868 attempted changes to their client's deposition testimony, which was the sole source of evidentiary support for their client's claims. The district court exercised its authority under 28 U.S.C. § 1927 to sanction the Amlongs. ***

In May 1994, Floride Norelus, an illegal immigrant from Haiti, and two of her brothers met with Debra Valladares, a Miami attorney specializing in family law and personal injury litigation. Norelus' native tongue is Haitian French Creole and she has some difficulty with English, so her brothers translated for her. At the meeting, Norelus told Valladares that she had suffered a nearly year-long ordeal of sexual abuse, including rape, inflicted by Asif Jawaid and Raheel Hameed. Those two men, who were roommates, managed separate Denny's restaurants where Norelus worked as a bus person, prep cook, and dishwasher. At the meeting one of Norelus' brothers told Valladares that Jawaid had admitted sexually abusing Norelus. ***

Norelus alleged in her complaint that the managers retaliated against her at work after she complained to restaurant authorities about the sexual harassment. But she testified in her deposition that she had not complained until after she resigned from her job, which means that no retaliation could have occurred at work. Norelus also alleged in her complaint that after the managers raped her with a hairbrush, she sought medical attention. But at her deposition Norelus testified that she had not sought medical attention, and in response to other discovery requests of the defendants she was unable to name any health care provider or facility she had visited.

During the time period in which Norelus' deposition was being taken, the Amlongs arranged for her to undergo a polygraph examination. According to Karen Amlong, they arranged for the polygraph in order to probe the truthfulness of Norelus' claims of abuse. Norelus underwent a second polygraph examination after the last day of her deposition. To conduct the examinations, the Amlongs hired George Slattery, a well respected polygraph examiner who had done work for various law enforcement agencies. Slattery was of the opinion that both examinations showed that, while she was lying about some things, Norelus was telling the truth about her core allegations of sexual abuse.

The Amlongs also decided to have a clinical psychologist assess Norelus' mental state. They selected Dr. Astrid Schutt-Aine, a psychologist who spoke Haitian French Creole, to perform the evaluation. She was of the opinion that Norelus' symptoms were consistent with those exhibited by people suffering from Post-Traumatic Stress Disorder. The record contains no evidence, however, that Dr. Schutt-Aine formed any opinion about the source or nature of any trauma Norelus had suffered.

At this point, the Amlongs decided to continue pursuing the lawsuit. As part of their preparation for trial, they instructed one of their associates to review Norelus' deposition testimony with her. Norelus' brother, whom the Amlongs had listed as a potential fact witness in support of her allegations, served as an interpreter. During this process, the associate read aloud to Norelus the questions asked by defense counsel during the deposition. The brother interpreted those questions for Norelus and then interpreted her answers for the associate.

The Amlongs' associate then prepared an errata sheet. The finished product errata "sheet" was actually sixty-three sheets that made 868 changes to Norelus' deposition testimony. The reason given for more than 500 of the 868 changes to Norelus' deposition testimony was merely that Norelus "[d]id not understand what was being asked." The reasons given for most of the other changes in Norelus' testimony were classified into three broad categories: "poor translation by interpreter," "clarification of response," and "refreshed recollection." At the end of the lengthy errata sheet Norelus signed a sworn statement certifying that she had read the transcript of her deposition and that it "is a true and accurate recording of the proceedings had at the time and place designated with the exceptions, if any, on the ERRATA sheet." Veda Russo, the office manager for the court reporting service that had transcribed Norelus' deposition, notarized Norelus signature and the date that she signed it, which was June 14, 1996. By creating "exceptions" to the deposition transcript being "a true and correct recording" of the Norelus' answers to the deposition questions, the errata document was intended to be, and was, made a part of the deposition. Norelus did not sign the deposition, except by means of the errata document and subject to the massive number of exceptions contained in that document. ***

The Amlongs' submission of the novella-length errata sheet making a slew of material changes in their client's deposition testimony was improper. [Note the Circuit split reflected in the following string cite.] See Hambleton Bros. Lumber Co. v. Balkin Enters., Inc., 397 F.3d 1217, 1225 (9th Cir. 2005) (upholding a district court's judgment to strike an errata sheet listing twenty-seven changes, noting that "Rule 30(e) is to be used for corrective, and not contradictory, changes"); Garcia v. Pueblo Country Club, 299 F.3d 1233, 1242 n.5 (10th Cir. 2002) ("We do not condone counsel's allowing for material changes to deposition testimony and certainly do not approve of the use of such altered testimony that is controverted by the original testimony."); Thorn v. Sundstrand Aerospace Corp., 207 F.3d 383, 388-89 (7th Cir. 2000) (explaining that an errata sheet effecting "a change of substance which actually contradicts the transcript is impermissible unless it can plausibly be represented as the correction of an error in transcription, such as dropping a 'not'"); Greenway v. Int'l Paper Co., 144 F.R.D. 322, 325 (W.D. La. 1992) ("[Rule 30(e)] cannot be interpreted to allow one to alter what was said under oath. If that were the case, one could merely answer the questions with no thought at all then return home and plan artful responses. Depositions differ from interrogatories in that regard. A deposition is not a take home examination."); but see Podell v. Citicorp Diners Club, Inc., 112 F.3d 98, 103 (2d Cir. 1997) ("[T]he language of [Rule 30(e)] places no limitations on the type of changes that may be made, nor does [Rule 30(e)] require a judge to examine the sufficiency, reasonableness, or legitimacy of the reasons for the changes--even if those reasons are unconvincing." (quotation marks and alterations omitted)); Reilly v. TXU Corp., 230 F.R.D. 486, 487-490 (N.D. Tex. 2005) (reviewing the various approaches for interpreting the allowable scope of Rule 30(e) changes and ultimately adopting a broad interpretation "consistent with the plain language" of Rule 30(e), allowing any changes, "in form or substance" under Rule 30(e)); cf. EBC, Inc. v. Clark Bldg. Systems, Inc., 618 F.3d 253, 268 (3d Cir. 2010) ("We therefore hold that when reviewing a motion for summary judgment, a district court does not abuse its discretion under Rule 30(e) when it refuses to consider proposed substantive changes that materially contradict prior deposition testimony, if the party proffering the changes fails to provide sufficient justification. At the same time, we emphasize that courts may, in their discretion, choose to allow contradictory changes (and implement the remedial measures discussed above) as the circumstances may warrant."). One circuit has gone so far as to call the creation of an errata sheet making substantive changes a "foolish tactic." Thorn, 207 F.3d at 388-89. In the present case, the magistrate judge who conducted the evidentiary hearings of the defendants' motion for sanctions found that the procedures used to prepare the errata sheet, "i.e., translating through plaintiff's brother and possible explanations of questions by plaintiff's counsel" were also improper.

As the magistrate judge found and no one (with the possible exception of the dissenting judge on this panel) seriously contests, the improper submission of the massive errata document rendered the eight days spent on Norelus' deposition a waste of time and money to say nothing of the time the attorneys were forced to spend on the issues created by the document itself. The Amlongs' decision to press on with Norelus' claims after the creation of the errata document wasted more time and money. Together, the submission of the errata document and the continued pursuit of Norelus' claims afterwards unquestionably prolonged and multiplied the proceedings. The question is whether under the circumstances of this case the district court abused its discretion in finding that it was done "unreasonably and vexatiously." 28 U.S.C. § 1927; see Amlong I, 500 F.3d at 1242.

An attorney multiplies court proceedings "unreasonably and vexatiously," thereby justifying sanctions under 28 U.S.C. § 1927, "only when the attorney's conduct is so egregious that it is 'tantamount to bad faith.'" Amlong I, 500 F.3d at 1239 (quoting Avirgan v. Hull, 932 F.2d 1572, 1582 (11th Cir. 1991)). The standard is an objective one turning "not on the attorney's subjective intent, but on the attorney's objective conduct." Id. In Amlong I, we said that "objectively reckless conduct is enough to warrant sanctions even if the attorney does not act knowingly and malevolently." Id. at 1241. We compare the conduct at issue with how a reasonable attorney would have acted under the circumstances. The Amlongs' conduct was at least objectively reckless.

he Amlongs' attempt to alter their client's deposition testimony in 868 ways was of a piece with their conduct throughout the litigation. As the magistrate judge found, they had nothing to base Norelus' claims on other than her "own changing testimony . . . which was totally or nearly totally discredited by plaintiff's numerous lapses of memory, outright lies, and outlandish comments made during her deposition." 3 As the litigation unfolded, all of the witnesses who should have seen or heard something if the claims had any basis in fact not only failed to support her incredible story but actually gave deposition testimony contradicting it.

Still, like Ahab hunting the whale, the Amlongs relentlessly pursued the claims. All the while they blinded themselves to as much of the contradictory evidence as they could. They deliberately did not obtain the deposition testimony of any of Norelus' co-workers who would have seen or heard something had anything improper occurred. They did not concern themselves with that testimony, according to Karen Amlong, because they assumed all of the witnesses, except for their client, were either lying or simply could not remember witnessing the gross sexual harassment inflicted on her.

When the truth was thrust in the Amlongs' faces, they stubbornly ignored it and kept on litigating. They knew that the State Attorney's Office had refused to file criminal charges because it had found "inconsistencies and conflicts" in Norelus' allegations. 5 They knew, given the nature of her allegations, that if Norelus' story about the extreme and extensive crimes against her were true, there would have been a lot of corroborating evidence from others who were present at the two small restaurants during those eleven months, but there was none. They knew that the testimony of every witness who should have supported Norelus' story, if it were true, either failed to do so or in many cases actually contradicted it. They knew that the more experienced associate they had sent to monitor the depositions of other employees came back with misgivings about the validity of their case. They knew that their client had responded to a deposition question about whether she had lied with her own question: "Of course, what's wrong with that?" And they knew, or should have known, that submitting an errata document that made 868 changes in their client's deposition testimony would effectively destroy any credibility she might otherwise have had. They knew all of this in light of their significant experience as Title VII lawyers. ***

At the sanctions hearing, Karen Amlong defended the decision to continue to press Norelus' claims even after her disastrous deposition performance. She testified that her belief in the truth of Norelus' allegations was bolstered by, and consistent with, the results of two polygraph examinations and a clinical psychologist's conclusions following an examination of Norelus. According to the Amlongs, those examinations, which they arranged, demonstrate that their continued pursuit of Norelus' claims was without the recklessness that justifies sanctions under § 1927.

We disagree. It can be debated whether the polygraph examinations indicate that the Amlongs believed they were litigating the case in good faith. ***It is true that to some extent the Amlongs' subjective state of mind is relevant to whether sanctions should be imposed because conduct is more likely to be "unreasonable and vexatious" if it is done with a malicious purpose. See Amlong I, 500 F.3d at 1241 n.1 ("[A] determination of whether an attorney's conduct was objectively reckless, or tantamount to bad faith, may be aided by an examination of the attorney's state of mind."). However, we have held that "for purposes of § 1927, bad faith turns not on the attorney's subjective intent, but on the attorney's objective conduct." [Note: There is a Circuit split on the need for bad faith for § 1927 sanctions.] Id. at 1239; see also Braley v. Campbell, 832 F.2d 1504, 1512 (10th Cir. 1987) (en banc) ("Subjective good faith ought not to be an infinitely expansive safe harbor to protect an attorney who brings an action that a competent attorney could not under any conceivable justification reasonably believe not frivolous.").

Even if the polygraph results did allay the Amlongs' own well-founded fears about whether their client was telling the truth, those results could not have justified the belief, if they had one, that their client's case had a snowball's chance of making it to a favorable judgment. Opinions based on polygraph examinations are seldom, if ever, admissible into evidence. See United States v. Henderson, 409 F.3d 1293, 1301-04 (11th Cir. 2005) (upholding a district court's decision to exclude polygraph results under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L. Ed. 2d 469 (1993)). We have never held that it is an abuse of discretion to exclude the opinion of a polygraph examiner. Id. at 1303. To no one's great surprise, the district court ruled in this case that any evidence relating to the polygraph examinations would not be admissible at trial. No reasonable attorney would base a case on the unreasonable expectation that a polygraph examiner's opinion about whether someone was telling the truth would be admitted into evidence. That is especially true where there are many witnesses who, if the client's story were true, would have seen or heard something, and all of them testified under oath that they saw and heard nothing.

Besides, even if the district court had allowed evidence about the polygraph examinations, "the only thing the polygraph examination 'proves' is that the examinee believes her own story." Amlong I, 500 F.3d at 1269 n.30 (Hill, J., dissenting); see also Julie A. Seaman, Black Boxes, 58 Emory L.J. 427, 475 (2008) ("A witness might believe that she is testifying truthfully but be mistaken or perhaps delusional; it is sometimes assumed that even a foolproof lie detector would not detect such untruths." (footnotes omitted)). The same can be said for the psychologist's opinion that Norelus' symptoms were consistent with those exhibited by people suffering from Post-Traumatic Stress Disorder. At most that opinion is evidence that Norelus believed she had been subjected to some kind of trauma by someone at some time. It does not prove that any of Norelus' allegations in this case are true. See Amlong I, 500 F.3d at 1269 n.30 (Hill, J., dissenting). ***

Following the polygraph and psychologist examinations, the Amlongs compiled and then submitted the errata document making 868 changes to Norelus' deposition testimony. As we have already mentioned, the reason given for more than 500 of the 868 changes to Norelus' deposition testimony was merely that Norelus "[d]id not understand what was being asked." The remaining changes were classified mainly in three other broad categories: "poor translation by interpreter," "clarification of response," and "refreshed recollection." But Norelus, or her counsel, could have prevented any problems caused by her lack of understanding about what was being asked or by poor translation. They chose her interpreter. And at the beginning of her deposition, she was asked to listen to the question in English and then wait for the interpreter to ask it in Haitian Creole, her native language. Norelus agreed to do that. She was also instructed: "If at any time you don't understand my question, would you please advise me of that . . . [a]nd I'll try and rephrase it." Norelus agreed to do that. The record casts serious doubt on Norelus' alleged misunderstanding of the questions. ***

Some of the changes made by the errata document were pure additions. Events and facts Norelus could not remember during her deposition were described by her in vivid detail in the lengthy errata document where they were often characterized as "refreshed recollections" without any indication as to who or what had refreshed her memory. ***

We turn now to the parties' contentions about who should bear the costs, expenses, and attorney's fees incurred while pursuing a sanctions award under 28 U.S.C. § 1927. Sanctions imposed under § 1927 "must bear a financial nexus to the excess proceedings [and] may not exceed the 'costs, expenses, and attorneys' fees reasonably incurred because of [the sanctionable] conduct.'" ***

This is the first time we have addressed whether a district court may include costs arising from the sanctions proceedings themselves in an award of § 1927 sanctions. Other circuits have tackled this issue in the closely related context of rules-based sanctions. Many of those courts have held that it is within the discretion of a district court to include within a sanctions award costs incurred in obtaining that award. See In re Tutu Wells Litig., 120 F.3d 368, 387 n.21, 387-88, 37 V.I. 398 (3rd Cir. 1997) (affirming district court's decision to base sanctions award in part on the costs arising from sanctions proceedings and expressly stating that the "analysis . . . does not make a distinction between inherent powers sanctions and statute-based or rule-based sanctions"), overruled on other grounds by Comuso v. Nat'l R.R. Passenger Corp., 267 F.3d 331, 338 (3rd Cir. 2001); Silva v. Witschen, 19 F.3d 725, 733 n.15 (1st Cir. 1994) (rejecting "claim that attorney fees reasonably incurred in the sanctions phase may not be made the subject of a Rule 11 sanction"); Brandt v. Schal Assoc., Inc.., 960 F.2d 640, 649-51 (7th Cir. 1992) (endorsing inclusion in sanctions award of expenses incurred by opposing party in establishing Rule 11 violation); In re Stauffer Seeds, Inc., 817 F.2d 47, 50 (8th Cir. 1987) (instructing that Rule 37 sanctions award should include expenses reasonably incurred in seeking discovery sanctions). ***

The plain language of 28 U.S.C. § 1927 establishes that, in making a sanctions award to a party, a court may include the "costs, expenses, and attorneys' fees" that the party victimized by the sanctionable conduct incurred in obtaining the award. Id. After all, those costs are, in the statute's terms, "incurred because of such conduct." Id. If there were no sanctionable conduct there would have been no proceeding to impose sanctions. Because the costs arising from the sanctions proceedings were "occasioned by the objectionable conduct," McMahan, 256 F.3d at 1128 (citing Peterson, 124 F.3d at 1396), a district court may include costs arising from the sanctions proceedings in the sanctions award.

Because the statutory language is unambiguous, we could end our analysis there. *** But this is another of those occasions in which we give in to the temptation to go beyond a statute's plain language and point out that there is another reason for reaching the same conclusion. *** The additional reason supporting our conclusion is the fact that a categorical rule excluding from a sanctions award the costs incurred in obtaining it would undercut the purposes of providing for sanctions. *** The time, effort, and money a party must spend to get another party sanctioned realistically is part of the harm caused by that other party's wrongful conduct. ***A rule automatically excluding that type of harm from the calculation of sanctions awards would not allow courts to fully compensate the harmed party for the wrongful conduct it had suffered. ***

A categorical rule excluding the costs of having sanctions imposed from the award would also undermine the goal of deterrence, because it would discourage a party aggrieved by wrongful conduct from pursuing sanctions. ***

Against what the statute itself says, and the obvious reasons behind what it says, the Amlongs present us with a holding from the Fourth Circuit and some dicta from the Tenth Circuit to support their position that the costs the moving party incurs in obtaining a sanctions award should not be included in that award. The Fourth Circuit decision is Blue v. U.S. Dept. of Army, 914 F.2d 525 (4th Cir. 1990), a Title VII lawsuit in which the district court had imposed sanctions on the plaintiffs and their counsel by "invok[ing] a number of different yet overlapping legal theories to justify its imposition of sanctions, including Federal Rules of Civil Procedure 11 and 16, the 'bad faith' exception to the American Rule, and 28 U.S.C. § 1927." Id. at 530. The district court had "ordered not only that defendant be awarded payment for court costs and attorneys' fees, but also that the court itself be reimbursed for the expenses it incurred and the time it spent presiding over the litigation." Id. The Fourth Circuit held in Blue that "counsel cannot simply rely on a client's patently incredible testimony when any reasonable investigation of the factual bases for the client's claims or examination of materials obtained in discovery would reveal the paucity and implausibility of the evidence." [Note: This holding of Blue was the subject of a Circuit split and, insofar as it pertained to Rule 11, it was reversed by the 1993 amendment to Rule 11.] Id. at 543. Because the senior partner in charge of the plaintiffs' case had not done that, the Blue court concluded that "the conduct of this litigation was sanctionable." *** Although it set aside the sanctions imposed against the junior associate, who was working on her first case for the firm and had entered the litigation late, the court affirmed the decision to sanction the senior partner who had been in the charge of the case when it began. *** The Blue decision provides strong support for the imposition of sanctions on the Amlongs. Their conduct was even worse than that of the senior partner in Blue when the submission of the massive errata document is considered along with the paucity and implausibility of the evidence supporting Norelus' case.

The part of the Blue opinion that the Amlongs rely on deals with the court's decision to "set aside the sanctions arising out of the prosecution of the sanctions hearing with respect to counsel" because there was "no sanctionable conduct in the attorneys' opposition to the sanctions motions." Id. at 549. The Fourth Circuit gave as its reason for doing so that "[l]itigants should be able to defend themselves from the imposition of sanctions without incurring additional sanctions." Id. at 548. Of course, one could say with equal force that parties who have been victimized by vexatious litigation should be able to have themselves made whole through a sanctions award, which is possible only if they can recover the additional costs of obtaining that award from the guilty party. ***

The Tenth Circuit opinion containing language that the Amlongs rely on is Glass v. Pfeffer, 849 F.2d 1261 (10th Cir. 1988), but that language is only dicta. The actual decision in the Glass case upheld the inclusion in a sanctions award of attorney's fees incurred in obtaining that award, because the sanctioned lawyers had "engage[d] in scorched earth tactics to challenge such a fee award." *** The court speculated in dicta that "a party . . . should not always be entitled to additional attorney's fees for defending, at a due process hearing, an earlier fee award."

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