Commercial Litigation and Arbitration

Rule 11 Sanctions for Filing Claims Barred by Statute of Limitations (An Affirmative Defense) and § 1927 Sanctions for Filing Duplicative Lawsuits

Erwin v. Russ, 2012 U.S. App. LEXIS 11101 (5th Cir. June 1, 2012):

Erwin, along with twenty-three other plaintiffs (collectively the "Plaintiffs") sued Bryan F. Russ, Jr. and fifty-three other defendants (collectively the "Defendants") for their roles in an alleged grand conspiracy involving a Texas state judge and Russ' law firm ("The Firm") that, according to the complaint, taints all litigation associated with Russ' law firm or filed in Robertson County Court. The district court granted each defendant's motion to dismiss, denied the Plaintiffs' motion to amend, and awarded sanctions and attorney's fees against the Plaintiffs. We AFFIRM the ruling of the district court. ***

3. Sanctions

The district court awarded $25,000 in sanctions and attorney's fees based on 42 U.S.C. § 1988(b), 28 U.S.C. § 1927, and Rule 11. 1 Plaintiffs claim that the sanctions and fees could not have been proper under § 1988, which permits winning parties under § 1983 to collect attorney's fees, because § 1983 only purports to provide attorney's fees to successful plaintiffs. They argue the sanctions and fees imposed on attorneys under § 1927 may only be imposed with prior notice to the attorney. Finally, they contend, citing to out-of-circuit authority, that the court may not grant Rule 11 sanctions sua sponte.

The Supreme Court has permitted attorney's fees to defendants in § 1983 cases for frivolous claims. Fox v. Vice, 131 S. Ct. 2205, 2213 (2011). This court has permitted sanctions against an attorney under § 1927 for "the persistent prosecution of a meritless claim" so long as " the entire financial burden of an action's defense" was not shifted. Browning v. Kramer, 931 F.2d 340, 345 (5th Cir. 1991) (citations omitted). Given the filing of this lawsuit in two jurisdictions, the expansion of the suit to parties well outside the alleged main conspiracy, and the district court's finding that "no responsible attorney would have included the baseless claims raised in these lawsuits," the district court did not abuse its discretion.

Finally, Rule 11 permits sanctions when attorneys unreasonably pursue frivolous or groundless suits. The district court identified the sanctionable conduct:

[A]ll Plaintiffs' RICO claims were frivolous because they failed to identify a RICO enterprise and they failed to identify specific actions which constitute a pattern of racketeering activity. All Plaintiffs' § 1983 and state conspiracy claims were frivolous . . . . the majority of the claims asserted by Plaintiffs are barred by limitations. . . . adding in a variety of unrelated plaintiffs with unrelated claims, such as child custody disputes and false arrest charges, clearly shows that Plaintiffs' attorney multiplied the proceedings 'unreasonabl[y] and vexatiously' to the extent that costs and attorneys' fees were incurred by the Defendants.

By finding that every claim should be dismissed, identifying the multitude of superfluous defendants, and pointing to the filing of this suit in multiple district courts, the district court justified its imposition of sanctions. The Plaintiffs and their attorney opened themselves up to the possibility that they would be forced to pay attorney's fees and sanctions by filing frivolous claims against parties only tangentially related to the alleged conspiracy. The district court did not abuse its discretion in awarding $25,000 in fees and sanctions.

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