Commercial Litigation and Arbitration

Sanctions — Neither Prior Sanction Nor Explicit Observation of Frivolousness Affords Sufficient Due Process to Sustain Sua Sponte Rule 11 Sanction — Due Process Challenge Review Is Plenary, Not Abuse-of-Discretion

O.R. v. Hutner, 2013 U.S. App. LEXIS 2760 (3d Cir. Feb. 8, 2013):

Appellant O.R. ("O.R.") and his attorney, Rotimi A. Owoh ("Mr. Owoh"), (collectively "Appellants"), appeal the October 13, 2011 and January 27, 2012 Orders of the District Court, denying various post-judgment motions and imposing a monetary sanction against Mr. Owoh under Federal Rule of Civil Procedure 11. ***

In 2004, O.R., then a minor, was found in possession of a knife at school and was disciplined. He subsequently initiated several state court actions against Appellees, challenging his suspension and seeking the production of school records. In March 2010, O.R. filed a complaint in federal district court, alleging that Appellees' conduct violated his constitutional right of access to the courts. The District Court dismissed O.R.'s complaint and denied several motions to amend and motions seeking reconsideration. The District Court also, upon Appellees' motion, sanctioned Mr. Owoh under Federal Rule of Civil Procedure 11, ordering him to pay Appellees' counsel attorney's fees in the amount of $4,500. We summarily affirmed the District Court's judgment on July 27, 2011, and additionally ordered that the costs of the appeal be taxed against Appellant.

Despite our affirming the imposition of the sanction, on August 18, 2011, Mr. Owoh filed a Rule 60 motion to set aside the judgment, arguing that the amount of the sanction was obtained through inaccurate information or fraud. Specifically, Mr. Owoh contested the accuracy of the billing invoices which Appellees' counsel filed in support of Appellees' sanctions motion. Mr. Owoh's motion also sought additional discovery related to the payment of Appellees' counsel's legal bills.

The District Court denied this motion in an Order dated October 13, 2011. Mr. Owoh then filed a motion for reconsideration and for a stay of the judgment, which the District Court denied on December 8, 2011. On December 20, 2011, Mr. Owoh filed yet another motion for a stay of the judgment and for the court to conduct a factual finding as to the amount of attorney's fees actually paid by Appellees' insurance carrier. Mr. Owoh argued that Open Public Records Act ("OPRA") proceedings pending in state court would allow him to show that the amounts that Appellees' insurance carrier claimed to have paid Appellees' attorneys were inaccurate.

In an Order dated January 27, 2012, the District Court denied Mr. Owoh's motion, holding that the information sought by Mr. Owoh in the OPRA proceedings would have been immaterial to the Court's imposition of monetary sanctions against him. The District Court explained, as it had in several previous Orders, that it imposed the sanction against Mr. Owoh to deter further frivolous litigation conduct, not to reward or compensate Defendants' counsel. Noting Mr. Owoh's continued frivolous filings with the Court, the District Court imposed an additional sanction against Mr. Owoh. The District Court explained that "[e]ven in the face of the initial sanctions order, Mr. Owoh's actions have expanded these legal proceedings beyond their proper scope, wasting Defendants' time as well as valuable judicial resources that could have been devoted to legitimate cases pending with the Court," and determined that an additional sanction of $4,500, payable to the Court, would be appropriate to deter future misconduct. (App. 35.)***

We generally review a district court's decision to impose sanctions for abuse of discretion. See Adams v. Ford Motor Co., 653 F.3d 299, 304, 55 V.I. 1310 (3d Cir. 2011). However, "[w]hen the procedure the court uses to impose sanctions raises due process issues of fair notice and the right to be heard, the standard of review is plenary." Id. (citing Martin v. Brown, 63 F.3d 1252, 1262 (3d Cir. 1995)). Because the District Court did not comply with the notice requirements of Rule 11 in imposing the additional sanction on Mr. Owoh in its January 27, 2012 Order, we must vacate the additional monetary sanction.

Rule 11 specifies that the district court must provide "notice and a reasonable opportunity to respond" before imposing sanctions on an attorney. Fed. R. Civ. P. 11(c)(1); see also Martin, 63 F.3d at 1262 ("The Due Process Clause of the Fifth Amendment requires a federal court to provide notice and an opportunity to be heard before sanctions are imposed on a litigant or attorney."). We have held that "the party sought to be sanctioned is entitled to particularized notice including, at a minimum, 1) the fact that Rule 11 sanctions are under consideration, 2) the reasons why sanctions are under consideration, and 3) the form of sanctions under consideration." Simmerman v. Corino, 27 F.3d 58, 64 (3d Cir. 1994). The notice must apprise the party of the "particular factors that he must address if he is to avoid sanctions." Anjelino v. N.Y. Times Co., 200 F.3d 73, 100 (3d Cir. 1999).

The District Court imposed the sanction on Mr. Owoh on its own initiative, not in response to any motion filed by Defendants. Rule 11(c)(3) specifies that a district court may, "[o]n its own," order an attorney "to show cause why conduct specifically described in the order has not violated Rule 11(b)." Fed. R. Civ. P. 11(c)(3) (emphasis added). However, the District Court did not issue an order to show cause addressed to Mr. Owoh before imposing the additional sanction. The Court expressed frustration with Mr. Owoh in its December 8, 2011 Order denying his motion for reconsideration. (App. 22 ("The Court would be remiss in not noting the frivolous nature of the present filing. . . . At every stage of this review Mr. Owoh has ignored the legal standard for relief and has flaunted procedural rules.").) Although this Order may be viewed as providing Mr. Owoh with some notice of the sanctionable conduct, the Order did not state that Rule 11 sanctions were under consideration, nor did it state the type of sanctions being considered. Moreover, the Order was not formatted as an order to show cause, as is specifically required by Rule 11(c)(3). Cf. In re Taylor, 655 F.3d 274, 286 (3d Cir. 2011) (holding that order gave sufficient notice where it identified the sanctionable filings and "was clearly in substance an order to show cause, even if it was not specifically captioned as such").

As a result, Mr. Owoh did not have an opportunity to respond before the additional sanction was imposed. See Simmerman, 27 F.3d at 64 (noting that in some cases, "the opportunity for counsel to fully brief the issue will suffice," but explaining that "[a]t bottom, however, there must be . . . some opportunity to respond"); Eash v. Riggins Trucking Inc., 757 F.2d 557, 571 (3d Cir. 1985) (en banc) (explaining that notice and opportunity to respond are "procedural safeguards" that "ensure that the attorney has an adequate opportunity to explain the conduct deemed deficient").

We recognize that dealing with a litigant who, even in the face of repeated rebukes, continues to make frivolous filings, can seem like a Sisyphean task. In this regard, the District Court exercised the patience of Job. However, while we appreciate the District Court's frustration over Mr. Owoh's frivolous filings and dilatory tactics, the procedural dictates at issue require us to vacate the January 27, 2012 sanction award and remand to the District Court.

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