Commercial Litigation and Arbitration

Counsel’s Improper Influence over Deposition Errata Sheets — Effecting Substantive Changes to Conform Deposition to Complaint — in Order to Push Meritless Case to Trial Warrants § 1927 Sanctions

Gonzalez v. Fresenius Med. Care N. Am., 2012 U.S. App. LEXIS 15704 (5th Cir. July 30, 2012):

Relator's counsel also appeals the district court's award of sanctions under § 1927 in connection with Relator's retaliation suit. ***

Section 1927 sanctions are not to be awarded lightly. They require "evidence of bad faith, improper motive, or reckless disregard of the duty owed to the court." Edwards v. Gen. Motors Corp., 153 F.3d 242, 246 (5th Cir. 1998).***

Relator's inconsistent statements with respect to whether she had refused requests to help cover up the fraud were central to the attorney fee proceedings. Relator initially alleged that she had been directed to participate in the defendants' alleged Medicare fraud. The complaint specifically referenced a July 3, 2007, letter to Ramirez in which Relator said that she would not lie to the Medicare authorities, would not help cover up the fact that medical assistants were performing some of the work, and would not be coming back to work under those conditions.

Relator's story then changed during discovery. When asked in deposition testimony if she had ever been asked to lie to Medicare auditors or ever felt like it was a job requirement that she assist in fraud, Relator replied in the negative. After the deposition, Relator's counsel submitted an errata sheet containing 101 corrections to Relator's testimony, some of which again changed Relator's answers to match her original complaint allegations that her supervisors wanted her to lie to Medicare authorities.

The defendants then moved to strike the errata sheet from the record and to re-depose Relator. They also requested sanctions under § 1927. The magistrate judge denied in part and granted in part the defendants' motion, determining that the errors were presumably made in good faith, that sanctions were unnecessary, and that the errata sheet need not be stricken from the record. The magistrate judge also ordered that Relator be re-deposed at no cost to the defendants. During her second deposition, Relator maintained that her July 3 letter accurately reflected the situation at Fresenius.

At trial, Relator's story changed yet again. She testified that she had never been asked to lie, and that her answers in the first deposition had been accurate. She testified that her attorney had "literally word[ed]" some of the errata sheet changes and had also helped her write the July 3 letter referenced in her complaint. The district court inferred bad faith on the part of counsel, concluding that counsel had helped Relator push a meritless claim to trial. On this basis, the district court awarded sanctions.

Counsel argues on appeal that Relator was entitled to submit an errata sheet and make substantive changes to her deposition under Federal Rule of Civil Procedure 30(e). We do not necessarily disagree, but the only question for our purposes is whether the district court abused its discretion in concluding that Relator's counsel unreasonably and vexatiously multiplied proceedings. We find no abuse of discretion. The district court assumed good faith in the initial filing of the complaint but noted that counsel should at least have developed questions about the merits of Relator's claim when she disclaimed a critical allegation from her complaint in the first deposition. Additionally, Relator's testimony at trial supported the district court's conclusion that counsel exerted improper influence over the drafting of the errata sheet. Although clients do sometimes make substantive missteps in deposition testimony which may be corrected with an errata sheet, attorneys may not use an errata sheet to push a case to trial where the client no longer adheres to the allegations supporting the claim. See Norelus v. Denny's, Inc., 628 F.3d 1270, 1281-82 (11th Cir. 2010). The evidence in the record before us supports the district court's conclusion that Relator's counsel did just that.

We are likewise unpersuaded by counsel's argument that the defendants' failure to file a motion for summary judgment at the close of discovery somehow precludes the award of sanctions. The district court denied the defendants' motion to strike the errata sheet from the record, and the defendants did not have any way of knowing that Relator would again change her testimony at trial. Similarly, we reject counsel's broader contention that if a case has enough merit to proceed to trial it cannot possibly be so meritless as to warrant sanctions. This argument turns § 1927, designed to prevent the vexatious multiplication of proceedings, on its head. No multiplication of proceedings would be more vexatious than one which gave a frivolous claim the appearance of trial-worthy merit.

Lastly, we reject counsel's assertion that the district court did not afford due process before awarding sanctions. We have held that where counsel "does not contend that any factual dispute exists with respect to his actions for which § 1927 sanctions were imposed" and "those actions appear in the record and briefs before the district court," a hearing may not be helpful. See Travelers Ins. Co. v. St. Jude Hosp. of Kenner, La., Inc., 38 F.3d 1414, 1418 (5th Cir. 1994). Furthermore, the judge who awarded sanctions was the same judge who presided over Relator's FCA and retaliation cases and had become familiar with all facets of the litigation. See id. ("[B]y having presided over the underlying action, as well as related actions, the district court was most familiar with . . . the parties, and the litigation."); United States v. Nesglo, Inc., 744 F.2d 887, 891 (1st Cir. 1984) ("Another factor that militates towards finding that a hearing was unnecessary is the degree of familiarity the court had with the parties and the litigation."). Relator's counsel received notice that the district court was considering sanctions in the form of opposing counsel's motion, and Relator's counsel responded to the motion. No hearing was necessary.

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