Commercial Litigation and Arbitration

Sanctions —Failure to File Reply Brief as Evidence of Frivolousness — “Close Call” Ruling by District Court as Notice of Frivolousness of Appeal — § 1927 and FRAP 38

Scherer v. JP Morgan Chase & Co., 2012 U.S. App. LEXIS 25516 (6th Cir. Dec. 11, 2012):

Under 28 U.S.C. § 1927, we have discretion to impose "costs, expenses, and attorney fees" personally on an attorney "who . . . multiplies the proceedings in any case unreasonably and vexatiously." Waeschle v. Dragovic, 687 F.3d 292, 296 (6th Cir. 2012); 28 U.S.C. § 1927. "This standard is met 'when an attorney knows or reasonably should know that a claim pursued is frivolous.'" Tareco Prop., Inc. v. Morriss, 321 F.3d 545, 550 (6th Cir. 2003) (quoting Jones v. Cont'l Corp., 789 F.2d 1225, 1230 (6th Cir. 1986)); see also Garner v. Cuyahoga Cnty. Juvenile Ct., 554 F.3d 624, 644 (6th Cir. 2009) (advising that sanctions are appropriate "where the attorney . . . knowingly disregards the risk that his actions will needlessly multiply proceedings.") (internal quotations omitted). 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); see also Gibson v. Solideal USA, Inc., 2012 WL 2818944, at *6 (6th Cir. 2012) ("A court may sanction an attorney under § 1927, even in the absence of bad faith"). However, the conduct must exceed "simple inadvertence or negligence that frustrates the trial judge." Ridder, 109 F.3d at 298.

Similarly, under the Federal Rules of Appellate Procedure Rule 38, we can impose sanctions if we determine that an appeal is frivolous after a separately filed motion or notice from the court and a reasonable opportunity to respond. Fed. R. App. P. 38; see also Roadway Express, Inc. v. Piper, 447 U.S. 752, 767 (1980) (explaining that notice and opportunity to respond must precede the imposition of sanctions). We have noted that "Rule 38 should doubtless be more often enforced than ignored in the face of a frivolous appeal." WSM, Inc. v. Tenn. Sales Co., 709 F.2d 1084, 1088 (6th Cir. 1983). Sanctions under Fed. R. App. P. 38 are "appropriate when an appeal is 'wholly without merit' and when the appellant's 'arguments essentially had no reasonable expectation of altering the district court's judgment based on law or fact.'" B&H Med., L.L.C. v. ABP Admin., Inc., 526 F.3d 257, 270 (6th Cir. 2008) (quoting Wilton Corp. v. Ashland Castings Corp., 188 F.3d 670, 677 (6th Cir. 1999)).

Here, even though the district court elected not to impose sanctions, it stated that the decision was a "very close call." The district court also admonished counsel for not being more familiar with preclusion law and advised him to be more careful in evaluating potential cases. This should have given counsel a clear warning that the issues raised below would likely lack any merit on appeal.

Thus, at the very least, Scherer's counsel seems to have "knowingly disregard[ed] the risk" that in pursuing an appeal his actions would "needlessly multiply proceedings." Garner, 554 F.3d at 644. Counsel's failure to file a reply brief is further evidence that he had reason to know the issue on appeal was a non-starter. See Leeds v. City of Muldraugh, Meade Cnty., Ky., 174 F. App'x 251, 256 (6th Cir. 2006) (acknowledging that failure to file reply brief may be additional evidence that sanctions are appropriate). It is also noteworthy that on appeal counsel abandoned all but a single argument raised below and that the best support he could muster for that argument was an Ohio Supreme Court case that briefly discussed the concept of estoppel, but that clearly did not alter the course of the estoppel doctrine in Ohio. After the district court's rebuke, counsel should have seen the writing on the wall.

Accordingly, we order Scherer's counsel to show cause as to why, pursuant to 28 U.S.C. § 1927 or Fed. R. App. P. 38, he should not be sanctioned for filing this appeal.

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