Commercial Litigation and Arbitration

Sanctions — Sixth Circuit Standards for Sanctions under § 1927 (Something Less Than Bad faith But More Than Negligence) and Inherent Power (Bad Faith — Three-Pronged Test)

Jordan v. City of Detroit, 2014 U.S. App. LEXIS 23468 (6th Cir. Dec. 11, 2014):

Under 28 U.S.C. § 1927, an attorney who "multiplies the proceedings in any case unreasonably and vexatiously" may be sanctioned by the court. Such sanctions are appropriate when counsel "objectively falls short of the obligations owed by a member of the bar to the court and . . . , as a result, causes additional expense to the opposing party." Red Carpet Studios, 465 F.3d at 646 (citation omitted). Section 1927 sanctions "require a showing of something less than subjective bad faith, but something more than negligence or incompetence." Id. "Thus, an attorney is sanctionable when he intentionally abuses the judicial process or knowingly disregards the risk that his actions will needlessly multiply proceedings." Id.

The imposition of inherent-power sanctions requires a finding of bad faith or conduct tantamount to bad faith. Metz v. Unizan Bank, 655 F.3d 485, 489 (6th Cir. 2011). A district court must find "(1) that the claims advanced were meritless, (2) that counsel knew or should have known this, and (3) that the motive for filing the suit was for an improper purpose such as harassment." Id. (citation omitted). The simple fact that an action is without merit is not tantamount to bad faith; rather, [*7]  "the court must find something more than that a party knowingly pursued a meritless claim or action at any stage of the proceedings," such as by filing the suit for purposes of harassment or delay, or for other improper reasons. Id. (citation omitted).

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