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

Filing 9 Separate Suits on Behalf of 9 Tenants Against Landlord Sanctionable under Rule 11(b)(1) and Inherent Power, But Not § 1927 — Motion to Disqualify Based on Opposing Counsel’s Alleged Breach of Duty to His Own Client Violates § 1927

Download PDF

From DeDios v. International Realty & RC Investments, 2011 U.S. App. LEXIS 7421 (9th Cir. Apr. 11, 2011):

The district court did not abuse its discretion in sanctioning De Dios's counsel $500 for "vexatious litigation strategy" in filing nine separate but identical actions [on behalf of nine separate tenants in an apartment building against the managing agent] for alleged violations of the [Fair Debt Collection Practices] Act instead of a single action naming all nine tenants as plaintiffs. In its order to show cause on sanctions, the district court wrote:

[T]here appears to be no legitimate reason for the filing of nine individual actions rather than a single action naming nine Plaintiffs. By filing the case as they did, Plaintiffs' counsel unnecessarily multiplied the costs of litigation and the burden on the Court.

We agree. To begin, counsel failed to file a notice of related case in violation of the local rules. As referenced in the court's detailed findings, counsel attempted to justify her actions by professing that conflicts in the clients' respective settlement positions prevented her from filing one suit. This argument is singularly unpersuasive. The district court pointedly noted that "merely filing separate lawsuits does not alleviate the ethical issues related to collective representation." The district court also documented its concern that some of the clients undertook the litigation to punish International Realty rather than to resolve claims under the Act.

Although De Dios is correct that sanctions under 28 U.S.C. § 1927 do not apply to complaints or initial pleadings, see Moore v. Keegan Mgmt. Co. (In re Keegan Mgmt. Co., Sec. Litig.), 78 F.3d 431, 435 (9th Cir. 1996), the district court had ample grounds on this record to impose the sanctions under Rule 11 and its inherent authority to curb abusive litigation practices. See Fed. R. Civ. P. 11(b)(1) (allowing sanctions for filings that "harass, cause unnecessary delay, or needlessly increase the cost of litigation"); Gomez v. Vernon, 255 F.3d 1118, 1133-34 (9th Cir. 2001) (imposing inherent power sanctions for counsel's abusive tactics that resulted in unnecessary litigation).

The district court's additional sanctions award under 28 U.S.C. § 1927 — $12,000 in attorneys' fees to counsel for International Realty — arose from De Dios's motion to disqualify defense counsel because of an alleged conflict of interest in representing his client. According to De Dios, the conflict purportedly arose in earlier litigation because defense counsel, then representing Norton, the property owner, suggested that either International Realty or the receiver, not Norton, was the proper party defendant. The district court quickly dispatched this claim, finding that by virtue of a conflict waiver and an indemnity agreement there was no actual conflict. The district court further found that the motion was procedurally defective — De Dios filed it without complying with local meet and confer rules, see C.D. Cal. Local Rule 7-3 — and finally that De Dios lacked standing to seek disqualification for defense counsel's alleged breach of duties to his client, see Kasza v. Browner, 133 F.3d 1159, 1171 (9th Cir. 1998). It is not surprising that De Dios's counsel does not challenge the court's rulings, as its findings are well grounded and legally correct. Instead, De Dios pleads that the motion was not so vexatious as to warrant sanctions and that she was unaware of the indemnification agreement. Given that there was no legal basis for the motion, these after-the-fact justifications do not save the day. The district court did not abuse its discretion in awarding sanctions under 28 U.S.C. § 1927.

Share this article:

Facebook
Twitter
LinkedIn
Email

Recent Posts

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 —

(1) Electronic Spoliation — Rule 37(e)(2) Dismissal Sanction — Temporal Proximity of Spoliation to Production Due Date = Circumstantial Evidence of Intent; (2) While Discovery Sanctions Are Reviewed For Abuse Of Discretion, Findings Of Fact Related To Discovery Sanctions Are Reviewed For Clear Error; (3) Dismissal under Rule 37(e)(2) Plus Attorney’s Fees under Inherent Power Appropriately Combined [But see 2015 Advisory Committee Note: “New Rule 37(e) … authorizes and specifies measures a court may employ if information that should have been preserved is lost, and specifies the findings necessary to justify these measures. forecloses reliance on inherent authority or state law to determine when certain measures should be used.”]; (4) Compensatory Sanctions under Goodyear v. Haeger Appropriately Include Fees and Costs Resulting from Attempts to Settle Spoliation Motion

(1) FRAP 38 Sanctions Inapt for Appeal That Is Weak — “Borderline Frivolous” — Test Is Whether Appellant Should Have Known the Appeal Had Absolutely No Chance of Success — (2) Lay Opinion Testimony under Rule 701: Nub of Helpfulness Requirement Is to Exclude Testimony When the Witness Is No Better Suited Than the Jury to Assess the Issue; (3) Appeals: No Appeal from Denial of Motion for Judgment As a Matter of Law Unless Appellant Made That Motion Before Case Was Submitted to Jury

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