Commercial Litigation and Arbitration

Not All Inherent Power Sanctions Require Bad Faith (8th Cir.) — Sanctions Denied under Rule 11, 1927 & Inherent Power Where Some Claims Survived 12(c) and Summary Judgment Motions

Duranseau v. Portfolio Recovery Assocs., LLC, 644 F. App'x 702 (8th Cir. 2016):

Harvey Duranseau sued Portfolio Recovery Associates, LLC (PRA), alleging violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 et seq., and Minnesota law. The parties filed cross-motions for summary judgment on, among others, Duranseau's claim under 15 U.S.C. § 1692g of the FDCPA. PRA also moved for sanctions against Duranseau and his counsel. The district court1 denied the motions, and Duranseau's remaining claims proceeded to trial. After presenting his case-in-chief, Duranseau moved for judgment as a matter of law on his claim under 15 U.S.C. § 1692d(5) but not on the § 1692g claim. The court denied the motion. The jury returned a verdict for PRA on all of Duranseau's claims. In this consolidated appeal, Duranseau appeals the district court's denial of [**2]  summary judgment on his § 1692g claim, and PRA appeals the district court's denial of its motion for sanctions. We affirm.


1   The Honorable Patrick J. Schiltz, United States District Judge for the District of Minnesota.


I. Background

Duranseau filed suit against PRA, asserting that it had violated the FDCPA and Minnesota law. Duranseau alleged that during a phone call at 9:23 a.m. on December 28, 2012, PRA "called [him] a 'N****r' and told [him] to 'Suck our d***s.'" (Bold omitted.) He also alleged that PRA called him from October 2012 to February 2013 to collect a debt from "Thomas [Duranseau]." PRA answered the complaint and counterclaimed under 15 U.S.C. § 1692k(a)(3) of the FDCPA, alleging that Duranseau brought his suit in bad faith and for the purpose of harassment.


B. Sanctions

On October 20, 2014, PRA moved for sanctions against Duranseau and his counsel under Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, and the court's inherent authority. In its brief in support of the motion, PRA argued that Duranseau and his counsel violated Rule 11 by filing and continuing to litigate [**7]  a frivolous lawsuit lacking any evidentiary basis. According to PRA:

   Plaintiff certified that the "factual contentions have evidentiary support" or after further investigation or discovery "will likely have evidentiary support." Fed. R. Civ. P. 11(b)(3). Yet, as evidenced by the call recordings, Call History, Account Notes, and Call Logs, Plaintiff's allegations are demonstrably false. (See, e.g., Privette Decl. ¶ 37g (regarding content of December 28, 2012 call.)


Had Plaintiff's counsel conducted a reasonable investigation before--or even during the litigation once presented with evidence produced by PRA contradicting his claims--Plaintiff's counsel would have discovered that it was Plaintiff, not PRA, who made inappropriate and harassing comments. (See Privette Decl. ¶¶ 36-37; see supra at 14-20 for a discussion on Plaintiff's allegations regarding the December 28, 2012 call.) As demonstrated by the recordings, Plaintiff's counsel had no factual basis, nor could he have any factual basis, supporting the allegations he has brought against PRA. Plaintiff's counsel's blind reliance on his client's allegations does not shield him from liability.

PRA also argued that the district court should sanction Duranseau and his counsel [**8]  under § 1927 for unreasonably and vexatiously multiplying the proceedings. PRA argued:

   Plaintiff's counsel has pressed forward with this suit even though PRA has demonstrated time and again that Plaintiff's claims are meritless. (See[,] e.g., supra at 2-12) (explaining that (1) Plaintiff continued this action even after PRA produced all recordings showing that PRA never used obscene or profane language; (2) Plaintiff refused to dismiss his claims after PRA produced the Privette Declaration along with all of PRA's Account Notes, automated Call History, and Call Logs; (3) Plaintiff raised new telephone numbers twice after PRA provided all evidence showing that Plaintiff's claims were meritless; and (4)  [*706]  Plaintiff brought multiple frivolous motions including a motion to compel discovery that Magistrate Judge Brisbois emphasized was not relevant to Plaintiff's remaining claims). Even after PRA gave Plaintiff another opportunity to withdraw his claims against PRA, in the form of a Safe Harbor letter, Plaintiff again refused. (Robbins Decl., ¶ 2.)

Finally, PRA asked the court to exercise its inherent authority to sanction Duranseau and counsel.

The district court denied with prejudice PRA's motion for sanctions [**9]  against Duranseau's counsel and denied without prejudice PRA's motion for sanctions against Duranseau personally, advising that the motion "may be renewed after trial."

After trial, PRA moved for attorneys' fees and costs in the amount of $261,945.00 based upon Federal Rule of Civil Procedure 54, 15 U.S.C. § 1692k, 28 U.S.C. § 1927, and the inherent powers of the court. *** PRA sought "costs, fees, and expenses incurred after PRA's Motion for Summary Judgment and Sanctions dated October 20, 2014," arguing that Duranseau's "pattern of vexatious behavior" continued after that date.

On June 30, 2015, the district court denied PRA's motion for costs and attorneys' fees, concluding that it could not "find that Duranseau's entire lawsuit was brought in bad faith. To the contrary, several of Duranseau's claims survived motions for judgment on the pleadings and for summary judgment, and the surviving claims were supported by the testimony of multiple witnesses (in addition to Duranseau)." The court also expressed its belief that "even [**10]  after the jury's verdict, . . . Duranseau's § 1692k claim presents close and difficult legal issues." Because the court was unable to find that Duranseau's entire lawsuit was brought in bad faith and for the purpose of harassment, it denied PRA's motion for an award of attorneys' fees under § 1692k(a)(3).

The court also addressed Duranseau's and PRA's assertions "that the other's conduct warrants sanctions of fees and costs under various other authorities--namely 28 U.S.C. § 1927, Fed. R. Civ. P. 11, and the inherent power of the Court." The court found that the "purported misconduct" that each party cited did not warrant sanctions. The court explained, "To be sure, this lawsuit has been extremely hard fought, and both sides could have acted to make this litigation more efficient and civil. But, in the Court's opinion, neither side has committed sanctionable misconduct."

On appeal, PRA argues that the district court erred in denying its October 20, 2014 motion for sanctions. We review for an abuse of discretion a district court's denial of sanctions pursuant to Rule 11, 28 U.S.C. § 1927, and the court's inherent authority. See, e.g., Clark v. United Parcel Serv., Inc., 460 F.3d 1004, 1008 (8th Cir. 2006) ("We review the district court's determinations concerning Rule 11 under the abuse-of-discretion standard." (citation omitted)); Gibson v. Solideal USA, Inc., 489 F. App'x 24, 28 (6th Cir. 2012) ("A [**11]  district court's denial of a motion for sanctions and attorney's fees--whether made pursuant to Rule 11, Rule 54 (for costs), 28 U.S.C. § 1927, or the court's inherent powers--is reviewed for an abuse of discretion." (citations omitted)).

Rule 11 provides that "the court may impose an appropriate sanction on any attorney, law firm, or party that violated the  [*707]  rule or is responsible for the violation." Fed. R. Civ. P. 11(c)(1).

   Rule 11 sanctions may be warranted when a pleading is "presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation," Fed. R. Civ. P. 11(b)(1), contains allegations or factual contentions that lack evidentiary support, Fed. R. Civ. P. 11(b)(3), or contains denials of factual contentions that are not warranted on the evidence. Fed. R. Civ. P. 11(b)(4).

Clark, 460 F.3d at 1008.

Additionally, a court may hold counsel liable for fees and costs for "so multipl[ying] the proceedings . . . unreasonably and vexatiously." 28 U.S.C. § 1927. "[T]he statute permits sanctions when an attorney's conduct, viewed objectively, manifests either intentional or reckless disregard of the attorney's duties to the court." Clark, 460 F.3d at 1011 (quotations and citations omitted).

Finally, a district court has the inherent authority "to fashion an appropriate sanction for conduct which abuses the judicial process." Chambers v. NASCO, Inc., 501 U.S. 32, 44-45, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1991)."Our interpretation [**12]  of Supreme Court authority concerning a court's inherent power to sanction counsels that a finding of bad faith is not always necessary to the court's exercise of its inherent power to impose sanctions." Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 745 (8th Cir. 2004) (citations omitted).

We hold that the district court did not abuse its discretion in denying PRA's October 20, 2014 motion for sanctions. While not at issue in this appeal, the district court's June 30, 2015 order is informative as to the district court's reasons for its prior denial of the motion for sanctions under all of the aforementioned standards. As the court noted in that order, "several of Duranseau's claims survived motions for judgment on the pleadings and for summary judgment." Moreover, the district court noted that "both sides could have acted to make this litigation more efficient and civil" but concluded that neither side's conduct rose to the level of "sanctionable misconduct." "We give deference to [the] district court's decision [whether] to impose sanctions because it is in the best position to 'evaluate the circumstances surrounding an alleged violation and render an informed judgment.'" Mendez-Aponte v. Bonilla, 645 F.3d 60, 68 (1st Cir. 2011) (quoting McLane, Graf, Raulerson & Middleton, P.A. v. Rechberger, 280 F.3d 26, 44 (1st Cir. 2002)); see also Blue v. U.S. Dep't of Army, 914 F.2d 525, 538 (4th Cir. 1990) (stating that "[a] district court's decision to impose [**13]  sanctions is entitled to substantial deference" because a district court "is in the best position to review the factual circumstances and render an informed judgment as [it] is intimately involved with the case, the litigants, and the attorneys on a daily basis" (alteration in original) (quotation and citations omitted)).

III. Conclusion

Accordingly, we affirm the judgment of the district court.

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