Inherent Power Sanctions — Voluntary Dismissal in Face of Summary Judgment Motion = Evidence of Awareness of Frivolousness/Subjective Bad Faith — Client’s Verification of Complaint No Defense to Attorney’s Filing Baseless Claim

Dubuc v. Green Oak Township, 2012 U.S. App. LEXIS 11334 (6th Cir. June 4, 2012):

Dennis Dubuc has a long history of instigating lawsuits against his township. As chronicled in an opinion from the Michigan Supreme Court, Dubuc filed "at least ten lawsuits" between 1985 and 2000, when the opinion was written. Dubuc v. Green Oak Twp., 609 N.W.2d 829, 829-30 (Mich. 2000) (Corrigan, J., concurring). Since that time, Dubuc has appeared as an appellant before the Sixth Circuit six times. Most of these suits and appeals have dealt with land use.

In the instant lawsuit, Dubuc sued the township for violation of his procedural due-process rights, arguing that the township unconstitutionally deprived him of the opportunity to continue a "nonconforming, legal use" of the property. Dubuc alleged that manufacturing, retail sales, and commercial indoor and outdoor storage had been permitted on the property for over 40 years. Dubuc alleged that in March 2008 the Township wrongfully limited the legal nonconforming use to "commercial indoor storage." ***

On December 17, 2008, Dubuc filed an amended complaint, adding Michael Rosati as a defendant. Michael Rosati represented the Township in Dubuc's suit. Dubuc sued Rosati in his individual capacity under § 1983, alleging that after Dubuc filed his complaint against the Township, Dubuc was "subjected to acts of retaliation" that were based on Rosati's legal advice. Specifically, he alleged that after he filed the lawsuit his requests for building permits were rejected by the Township. Dubuc claimed that he was told that "no further permits could be issued for the subject property pursuant to the advice of Township Attorney Michael Rosati," and that "if he had any questions as to why permits could not be issued that [he] should call Michael Rosati." Dubuc alleged that Rosati "was delegated the authority to control the application process," and that "Rosati's legal advice was unconstitutional and it violated Plaintiffs' federally secured rights." The court granted Dubuc leave to amend his complaint, but stated that "should actual vexatiousness or similar bad faith . . . be later provably revealed, a corresponding motion for sanctions may well be appropriate."***

The court denied the motion. It noted that there was a possibility that Dubuc could prove that Rosati had acted under color of state law, even though Rosati was a private attorney, if his actions could be described as "'properly attributable' to the state." Further, the court noted, it had instructed Dubuc that it might sanction him if adding Rosati proved to be vexatious or in bad faith.

On February 17, 2009, Rosati was terminated as the Township's attorney, and another attorney was substituted.

On May 22, 2009, Rosati filed a motion for summary judgment. He argued that Dubuc had no evidence that he "ever advised anyone to stop issuing or to delay any permits for the subject property." He also argued that he was entitled to qualified immunity for acts he took as counsel to the township. He argued that the township had issued permits for Dubuc's land on September 5, 2008 and September 9, 2008. He argued that the permits that Dubuc claimed were not issued actually had never been fully applied for—"[t]he Affidavits offered . . . do not establish that Plaintiffs' contractors completed the necessary applications to receive an approval or denial." These permits were indeed issued once the applications were completed — as "recently as January 14, 2009." Rosati argued that there were no outstanding permit requests by Dubuc. He argued that the only evidence Dubuc had that implicated Rosati was "a piece of paper that allegedly had defendant Rosati's telephone number on it, which Mr. Dubuc purportedly received from a township employee after inquiring about the status of a permit . . . which he cannot produce."

Dubuc did not respond to Rosati's motion for summary judgment. Instead, on June 2, 2009, the parties stipulated that the action against Rosati was dismissed with prejudice and with no costs to either party. On June 26, the court dismissed Dubuc's suit as to the remaining defendants.

On July 13, 2009, the Township, Kruszewski, and Hunt filed a motion for sanctions and attorney's fees. The motion did not include mention of Rosati. However, in its response to Dubuc's reply to the motion, the Township stated that Dubuc's decision to add Rosati as a defendant cost the Township additional attorney's fees because it had to retain a new attorney after Rosati withdrew.

On March 11, 2010, the court ordered Dubuc to show cause why he should not be sanctioned under the inherent authority of the court and 28 U.S.C. § 1927. By way of explanation, the court stated that Dubuc's "pursuit of Rosati, in the midst of his representation of Defendants . . . appear[ed] to reduce to a spurious allegation that an attorney should be liable for the legal advice provided to the client." Because the claim forced defendants to change defense counsel, adding to their legal expenses, but then was quickly dismissed, the court stated that it had "the appearance of a pure strategic gambit." The court requested that Dubuc discuss "whether [he was] possessed of any information establishing that Rosati's conduct was fairly attributable to the Township, i.e., Rosati acting as the Township, as opposed to acting merely as the Township's attorney and in that capacity providing advice."

Footnote 2. The court could not sanction under Rule 11 because defendants failed to comply with the "safe-harbor provision," and it determined that 42 U.S.C. § 1988 — for attorney's fees — was not an appropriate vehicle for sanctions. We need not reach these issues on appeal.

Dubuc responded by arguing that the court's sua sponte order "over nine months after this case had been dismissed" was "unusual and unfair." He provided four pieces of information to support his belief that Rosati retaliated against him: (1) Dubuc's own testimony that the Township told him that "'the Township lawyers said no permits are going to be issued'"; (2) that Rosati was "identified on a written sheet of paper as 'the attorney' to speak to about obtaining a permit"; (3) that the Township put a "moratorium" on issuing permits to Dubuc after he filed this lawsuit; and (4) other contractors "were told" that their applications for permits to work on Dubuc's property could not be granted because of the lawsuit. Dubuc argued that these pieces of evidence gave him the "firm understanding that Michael Rosati was the attorney, or one of the attorneys, who stated 'no permits are going to be issued,' and that the people at the Township who are legally responsible for processing permit applications had placed their decision-making authority in Mr. Rosati's hands." Dubuc also stated that he had decided to dismiss the case against Rosati not because it was meritless, but because the Township had begun granting permits to him again and his damages against Rosati would therefore be "mitigated."

On August 16, 2009, the court sanctioned Dubuc $15,000 under its inherent authority. The court determined that Dubuc had no factual basis to believe that the township had delegated its permit-granting authority to Rosati, nor that Rosati was using any such authority to retaliate against Dubuc. The court determined that Dubuc made the claim in bad faith, either to draw out the litigation or to inconvenience the Township by causing Rosati to withdraw as their counsel. The court determined that any delay in the sanction order would not have caused unfair surprise, prejudice, or piecemeal appeals, particularly because it had warned Dubuc that sanctions were possible. In re Ruben, 825 F.2d 977, 981-82 (6th Cir. 1987).

The court also sanctioned, under 28 U.S.C. § 1927, Dubuc's attorney, Eric Christensen, for $5,000. The court determined that Christensen abused the judicial process and needlessly multiplied the proceedings by filing Dubuc's suit against Rosati.***

The court ... did not abuse its discretion when it determined that Dubuc sued Rosati in bad faith. Both Dubuc, an attorney, and his lawyer either knew or should have known that there was no basis for holding Rosati, a private attorney, liable under § 1983. They, in fact, indicated, by opting to dismiss the claim rather than respond to Rosati's summary-judgment motion, that they knew the claim was frivolous. Further, Dubuc caused both harassment and delay because he caused the Township to be divested of its primary counsel and forced it to find new counsel. It is not speculative to infer that his motives were to bring about the result that was achieved. It was thus not an abuse of discretion to find that Dubuc filed the complaint for the bad-faith purpose of causing harassment and delay. ***

On appeal, Christensen's primary argument is that the district court abused its discretion when it sanctioned him because he insisted that Dubuc sign a "verified" complaint against Rosati. He argues that meant that he "relied upon the verified facts provided by the Dubucs and [the district judge] acknowledged that the complaint, as alleged, set forth a valid claim." He also argues that the district court abused its discretion because it did not detail how or when he would have been aware that Dubuc's claim against Rosati was frivolous.***

This circuit has construed the statute to provide for sanctions when an attorney "knew or should have known that a claim pursued was frivolous, or that his litigation tactics will needlessly obstruct the litigation of non-frivolous claims." Jones v. Continental Corp., 789 F.2d 1225, 1232 (6th Cir. 1985); see also Parrott v. Corley, 266 F. App'x 412, 414 (6th Cir. 2008) (following Jones). Sanctions under § 1927 are also appropriate where there has been "'some conduct on the part of the subject attorney that trial judges . . . could agree falls short of the obligations owed by a member of the bar to the court and which, as a result, causes additional expense to the opposing party.'" Parrott, 266 F. App'x at 414 (quoting In re Ruben, 825 F.2d 977, 984 (6th Cir. 1987)). Section 1927 sanctions may be imposed without a finding that the lawyer subjectively knew that his conduct was inappropriate. Ridder v. City of Springfield, 109 F.3d 288, 298 (6th Cir. 1997). However, the conduct must exceed "simple inadvertence or negligence that frustrates the trial judge." Ibid. (internal quotation marks removed).

The district court did not abuse its discretion when it sanctioned Christensen under § 1927. As the court noted, there was no factual basis for Dubuc to believe that Rosati was liable under § 1983, making his claim meritless. Due to this fact, it does not appear important whether Dubuc filed a "verified" complaint or not. The issue is not Christensen's subjective perception of whether or not Dubuc was being truthful in his belief that Rosati retaliated against them while acting under color of state law. The issue is whether there was any basis in fact for the claim. There was not. Because there was no basis for the claim, the action of suing Rosati, the lead attorney for the Township, multiplied the proceedings vexatiously and unreasonably —it forced Rosati to withdraw as the Township attorney and the Township to substitute an attorney. Substituting a new attorney also added to the Township's expenses.

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