Commercial Litigation and Arbitration

§ 1927 Sanctions Are Discretionary Even If Vexatiousness Found — Bad Faith Finding Subject to Clear-Error Standard of Review

Olson v. Reynolds, 2012 U.S. App. LEXIS 13167 (7th Cir. June 27, 2012):

We turn next to the denial of sanctions under section 1927. Under this provision, a court may in its discretion impose sanctions only upon a finding of bad faith-meaning extreme negligence, "serious and studied disregard for the orderly process of justice," pursuit of claims without plausible factual or legal bases, or conduct that a reasonably careful attorney would know to be unsound. See Jolly Group, Ltd. v. Medline Indus., Inc., 435 F.3d 717, 720 (7th Cir. 2006) (collecting cases). The statute is couched in permissive terms, however; a court need not grant sanctions even for conduct that a district court finds to be vexatious. See Corley v. Rosewood Care Ctr., Inc. of Peoria, 388 F.3d 990, 1014 (7th Cir. 2004) (refusing to reverse a discretionary denial of § 1927 sanction even though district court found conduct vexatious); Ross v. City of Waukegan, 5 F.3d 1084, 1089 n.6 (7th Cir. 1993). And the finding about bad faith itself is subject to the clear-error standard of review. See Finance Inv. Co. (Bermuda) Ltd. v. Geberit AG, 165 F.3d 526, 530 (7th Cir. 1998).

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