Commercial Litigation and Arbitration

Imposition of Vexatious Litigant Sanctions in Prior Case, and Earlier Judge’s Warning That Future Harassing Litigation Would Be Sanctioned, Does Not Excuse Lack of Notice Before Imposing Sanctions for New Conduct in New Case — Due Process Denied

Truong v. Nguyen, 2012 U.S. App. LEXIS 23827 (2d Cir. Nov. 20, 2012) (note: citation subject to change when headnotes added by LEXIS):

Here, the district court did not provide adequate notice to Truong prior to imposing either leave-to-file or financial sanctions, as it did not inform him, in the present proceeding, that it was considering imposing sanctions prior to imposing them. Although the district court found that Truong was on notice because another judge in the Southern District of New York had previously imposed leave-to-file sanctions, see Vishipco Line v. Charles Schwab & Co., No. 02 Civ. 7823 (SHS), 2003 WL 1345229, at *9-10 (S.D.N.Y. Mar. 19, 2003), and had previously warned Truong that "any further harassing or vexatious litigation by him [would] be subject to sanction," Vitranschart, Inc. v. Levy, No. 00 Civ. 3618 (SHS), 2000 WL 1239081, at *11 (S.D.N.Y. Aug. 31, 2000), neither prior order notified Truong of the need to "prepare a defense" against the imposition of sanctions based on his "specific conduct" in the present proceeding, see Schlaifer Nance & Co., 194 F.3d at 334. Moreover, the district court did not notify Truong of the relevant authority under which it was considering imposing sanctions. [Here, inherent power] Id.

We also conclude that the district court's leave-to-file injunction-which bars Truong from filing any lawsuit on any claim in any court against any party without first obtaining, in writing, the express permission of the court in which he wishes to proceed-is too broad. See Bd. of Managers of 2900 Ocean Ave. Condo. v. Bronkovic, 83 F.3d 44, 45 (2d Cir. 1996) (per curiam) ("[Filing] injunctions must be appropriately narrow."); see also In re Martin-Trigona, 737 F.2d 1254, 1262-63 (2d Cir. 1984).

Finally, "[i]mposition of [financial] sanctions under a court's inherent powers requires a specific finding that [a party] acted in bad faith." Wolters Kluwer Fin. Servs., Inc. v. Scivantage, 564 F.3d 110, 114 (2d Cir. 2009). "Moreover, inherent-power sanctions are appropriate only if there is clear evidence that the conduct at issue is (1) entirely without color and (2) motivated by improper purposes." Id. "A finding of bad faith, and a finding that conduct is without color or for an improper purpose, must be supported by a high degree of specificity in the factual findings." Id. Additionally, "when a court awards defendants attorney's fees, it must take into account the financial circumstances of the plaintiff." Sassower v. Field, 973 F.2d 75, 81 (2d Cir. 1992). Here, the district court did not make a specific finding of bad faith. Moreover, although the district court explained that Truong had a history of contempt for court orders, it neither explicitly found that Truong had brought the current suit for any improper purpose nor identified the "clear evidence" of such a purpose. Furthermore, the district court did not consider, as it should have, Truong's financial circumstances when imposing attorney's fees. See id.

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