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Filing Second Action to Avoid Seeking Leave of Court to Amend Is Subject to § 1927 Sanction in First Action (Despite General Rule that Filing a Complaint Doesn’t Violate § 1927 Because It Isn’t Multiplicative)

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From Thurmond v. Wayne County, 2011 U.S. App. LEXIS 11817 (6th Cir. June 10,2011):

On March 8, 2007, Thurmond filed a complaint in the Wayne County Circuit Court, which Wayne County removed to the U.S. District Court for the Eastern District of Michigan. After almost one year and a litany of discovery motions from both parties, Thurmond filed a motion for default judgment against all defendants, claiming deliberate withholding of evidence and various abuses of the discovery process. The parties continued in their discovery battle and, meanwhile, Troopers Bunk and Crawford filed a motion to dismiss and a motion for summary judgment, respectively, and Wayne County along with Wayne County Deputy Sheriffs Linda Rodgers, Matthew Mears, and Linda Jones also filed a motion for summary judgment. Thurmond did not respond to the merits of these motions, but instead recounted his allegations of discovery abuses and argued that further discovery was necessary before granting summary judgment. The district court held oral argument on these motions, at which time it considered Thurmond's objections to a magistrate judge's order that purported to deny Thurmond's motion for default judgment. The district court granted Bunk's motion to dismiss, Crawford's motion for summary judgment, and the motion for summary judgment by Wayne County, Mears, Jones, and Rodgers, and denied Thurmond's motion for default judgment. Thurmond filed a motion for reconsideration of the district court's grant of Bunk's motion to dismiss, which the district court also denied.

During this time, approximately two weeks before discovery was set to close, Thurmond informed Wayne County of his intent to file a third amended complaint, or, alternatively, a new action. Wayne County objected to the proposed amendment and asked Thurmond to seek leave of the court before filing the third amended complaint. Thurmond did not do so, and instead filed a new action, creating the second of the cases consolidated for appeal here.

As a result, Wayne County filed a motion for sanctions under Rule 11 and also a motion to dismiss the new action. Thurmond did not respond to either motion, despite the district court's order to do so. At the district court's hearing on the outstanding motions pending in the first suit, Thurmond voluntarily dismissed the second suit, whereupon the district court ordered Thurmond's counsel, Martin, to pay Wayne County's attorney fees, but specifically declined to impose further sanctions under Rule 11. ***

After Thurmond's counsel, Martin, orally stipulated to dismiss the second lawsuit at the district court's hearing, the district court sanctioned Martin for his "contumacious conduct," which the district court stated to include: (1) Martin unreasonably refusing to dismiss this "unviable action;" and (2) Martin's "initial failure to respond to [defendants'] motions . . . in disregard of the Court's direct orders." (Order Dismissing Case, Case 08, Dist. Ct. Docket No. 12, at 4.) However, the district court failed to identify or otherwise reference the legal basis for its imposition of sanctions. Although 28 U.S.C. § 1927 may support the imposition of sanctions in this case, the district court failed to make any reference to any legal authority under which it imposed sanctions. This omission is problematic. If, for instance, the district court awarded attorney fees against Martin under 42 U.S.C. § 1988(b), this would be error because such fees may only be charged against a party, not the party's attorney. See Smith v. Detroit Fed'n. of Teachers, 829 F.2d 1370, 1374 n.1 (6th Cir. 1987) (citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 761 & n.9 (1980)). Nor is a proper legal basis found in Wayne County's request for fees. Indeed, the legal authority relied upon by Wayne County in its motion concerns awards under 42 U.S.C. § 1988(b), which, as explained above, would be error if applied here. While the district court summarized Martin's conduct that it found "contumacious," it did not mention--even in passing--any potential basis for the imposition of fees. Without more, the district court has deprived us of the opportunity to meaningfully review its order.

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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)

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(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

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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.

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