Rule 11 — Sua Sponte vs. Sanctions Sought by Motion — Different Standards in Second Circuit — Good Quotes

Muhammad v. Wal-Mart Stores East, LP, 2013 U.S. App. LEXIS 20589 (Aug. 19, 2013):

Christina Agola is an attorney practicing primarily employment law in the Western District of New York. She has a long disciplinary history in the courts of this Circuit. See, e.g., In re Agola, 484 F. App'x 594 (2d Cir. 2012) (summary order) (failing to comply with scheduling orders); Rankin v. City of Niagara Falls, No. 09-cv-974-A, 2013 U.S. Dist. LEXIS 52421, 2013 WL 1501682 (W.D.N.Y. Apr. 11, 2013) (misrepresenting facts to the court); Johnson v. The Univ. of Rochester Med. Ctr., 715 F. Supp. 2d 427 (W.D.N.Y. 2010) (same); Geiger v. Town of Greece, No. 07-cv-6066(CJS), 2008 U.S. Dist. LEXIS 21190, 2008 WL 728471 (W.D.N.Y. Mar. 18, 2008)  (pursuing a frivolous claim); Colombo v. E. Irondequoit Cent. Sch., No. 07-cv-6270(CJS), 2010 U.S. Dist. LEXIS 141961, 2010 WL 6004378, at *10 n.8 (W.D.N.Y. Dec. 17, 2010) (collecting more cases).

1.   Agola was temporarily suspended by the Supreme Court Appellate Division for the Fourth Department on September 10, 2013 during an investigation into disciplinary matters involving Ms. Agola currently pending before that court. On September 16, this Court followed with a reciprocal order of suspension pending the outcome of matters at the Appellate Division.

Acting pro se, plaintiff Abidan Muhammad initiated the present employment discrimination action in the United States District Court for the Western District of New York. Shortly thereafter, Agola began representing Muhammad. At summary judgment, Agola represented to the court that Muhammad had clearly pled a gender discrimination claim which he had not. Sua sponte, the court ordered Agola to show cause why she should not be sanctioned under Federal Rule of Civil Procedure 11. Agola insisted that the liberal pleading standard afforded pro se complaints meant that Muhammad's complaint should be read to include a gender discrimination claim. The court rejected this argument as frivolous, reprimanded Agola, and imposed a $7,500 sanction. Agola appeals the imposition of sanctions. Because the district court misapplied the relevant legal standard, we vacate the sanction order and reverse.***

We review orders imposing Rule 11 sanctions for abuse of discretion. Kiobel v. Millson, 592 F.3d 78, 81 (2d Cir. 2010). "This deferential standard is applicable to the review of Rule 11 sanctions because . . . the district court is familiar with the issues and litigants and is thus better situated than the court of appeals to marshal the pertinent facts and apply a fact-dependent legal standard." Storey v. Cello Holdings, 347 F.3d 370, 387 (2d Cir. 2003) (internal citations and quotations omitted). Nonetheless, when, as here, the court issues sanctions sua sponte without offering the offender the opportunity to withdraw the offending submission, our "review is more exacting than under the ordinary abuse-of-discretion standard," ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 579 F.3d 143, 150 (2d Cir. 2009), because in such cases the court simultaneously acts "as accuser, fact finder, and sentencing judge." Mackler Prods., Inc. v. Cohen, 146 F.3d 126, 128 (2d Cir. 1998).

Under Rule 11, a court may sanction an attorney for, among other things, misrepresenting facts or making frivolous legal arguments. Storey, 347 F.3d at 388. Rule 11 contemplates that "ordinarily" opposing counsel will initiate  sanctions proceedings. Advisory Committee notes to the 1993 amendments. In those situations opposing counsel must serve a notice of the sanctions claim on the accused attorney 21 days before moving for sanctions to give an opportunity to correct the asserted misconduct. Fed. R. Civ. P. 11(c)(2). Rule 11 also gives the court the power to initiate sanctions proceedings sua sponte. Fed. R. Civ. P. 11(c)(3). In these rarer cases, however, the 21-day safe harbor does not apply and the court may impose sanctions without providing opportunity to withdraw the misstatement.

For sanctions issued pursuant to a motion by opposing counsel, courts have long held that an attorney could be sanctioned for conduct that was objectively unreasonable. In In re Pennie & Edmonds LLP, we considered, for the first time, the appropriate standard for sua sponte sanctions. 323 F.3d 86, 90 (2d Cir. 2003). In Pennie, we determined that the power of the court under Rule 11 to issue sanctions sua sponte without affording the offender the opportunity to withdraw the challenged document in the manner provided in the "safe harbor" provision of Rule 11(c)(1)(A), is akin to the court's inherent power of contempt. We reasoned  that, like contempt, sua sponte sanctions in those circumstances should issue only upon a finding of subjective bad faith. Id. at 91.

3.     In Pennie we addressed only the "narrow issue" of an attorney permitting a client to submit a false affidavit. Pennie, 323 F.3d at 87. The nature of attorney misconduct does not change the contempt-like nature of sua sponte sanctions. Moreover, the district courts of this Circuit have already applied Pennie beyond the affidavit context. Centauri Shipping Ltd. v. W. Bulk Carriers KS, 528 F. Supp.2d 197, 200 n.3 (S.D.N.Y. 2007) (collecting cases).

The only question for this court is whether the record before the district court could sustain a finding that Agola was in bad faith in asserting that Muhammad's pro se complaint included a claim of gender discrimination. Applying the heightened review standard accorded to the imposition of sanctions in such circumstances, we find that it could not. ATSI, 579 F.3d at 150.

Our review of the record indicates that the district court did not apply the correct legal standard. Int'l Bhd. of Boilermakers v. Local Lodge D129, 910 F.2d 1056, 1059 (2d Cir. 1990). Here, the district court said it was applying the Pennie  bad faith standard; its analysis, however, indicates that it was applying an objective reasonableness test. The court couched its conclusion in terms of what "any competent attorney" would have done and extensively discussed Agola's admittedly incompetent practice in other areas. This is not enough to demonstrate subjective bad faith.

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