What Is Conduct Unbecoming a Member of the Bar within FRAP 46(b)(1)(B)? — Standards — Factors Relevant to Deciding Whether Sanctions Apt — Range of Sanctions (Discipline) Available — The Vice of Misrepresentation to the Court

Greene v. Exec. Coach & Carriage, 2015 U.S. App. LEXIS 23218 (9th Cir. July 22, 2015):

JUDGES: Before: Peter L. Shaw, Appellate Commissioner.

OPINION

ORDER

On February 12, 2015, the court identified a false statement in the answering brief of Defendant-Appellee Executive Coach & Carriage: "[Defendant] asserted that, in its July 9, 2010 motion and the attached declaration in the district court, it 'stated that Jacob Transportation Services, LLC was the correct entity' for Greene to have named as a defendant in this action." The court ordered Defendant's counsel, Mario P. Lovato, Esq., to show cause within 21 days why he should not be subject to discipline under Ninth Circuit Rule 46-2. The court referred counsel's response to the order to show cause to the Appellate Commissioner [*2]  to "conduct whatever proceedings he deems appropriate" and to enter "an order imposing whatever discipline he deems appropriate." Lovato filed a response to the order to show cause on March 5, 2015, and requested a hearing if his response did not "resolve the Court's concerns."

To determine whether the alleged misrepresentation is serious enough to warrant discipline, it is necessary to review the somewhat complicated procedural history of the case, especially as it relates to ongoing confusion about the identity of the Defendant.

I

Background

Greene's appeal challenged the district court's disposition of both his state-law minimum wage claims and his federal claims under the Fair Labor Standards Act (FLSA). Over the course of three years, Greene's various claims were resolved by rulings on a series of motions. The state claims were decided as a matter of law, but the FLSA claims turned on whether Greene had named the proper legal entity as the defendant in his complaint. Greene's complaint had named "Executive Coach & Carriage," which was the dba of Bentley Transportation Services, LLC. In reality, Greene's employer was the closely allied entity, Jacob Transportation Services, LLC, whose [*3]  dba was "Executive Las Vegas."

On July 9, 2010, after the state claims had been dismissed, Defendant filed a "Motion to Dismiss/Motion for Summary Judgment" (the "July 9, 2010 motion"), which alleged that Greene had named the wrong party as his employer. Defendant observed that "from the outset," it had "pointed out that Robert Greene has not named the correct defendant," but the earlier admonitions appear to have been directed at the fact that Plaintiff Greene had named a dba rather than a legal entity. Defendant's July 9, 2010 motion made it clear that Greene's complaint was doubly wrong in suing "Executive Coach & Carriage":

   In addition to Plaintiff's failure to name a legal entity, plaintiff Robert Greene never worked for Bentley Transportation, LLC or any company that did business as Executive Coach and Carriage. Plaintiff cannot proceed against Bentley Transportation or a company that does business as Executive Coach and Carriage.

Defendant's motion was supported by a brief declaration by Carol Jimmerson, who stated that she was the CEO of Bentley and that she also managed the operations of Jacob Transportation. Jimmerson stated that Greene had never been an employee of Bentley [*4]  or any company doing business as Executive Coach and Carriage.

In his July 26, 2010 opposition, Plaintiff Greene argued that Bentley had not timely raised the proper party issue and its counsel had previously appeared as counsel for "Executive Coach and Carriage." Plaintiff could not be held accountable for any confusion created by Defendant itself, and any technical pleading defects could be cured by amendment. Greene's declaration in support of the opposition attached various orientation materials Greene had received as an employee that referenced "Executive."

Defendant's August 11, 2010 reply reiterated that the designation of "Executive Coach and Carriage" as defendant was doubly wrong. It went on to point out that Greene was employed by Jacob Transportation Services, LLC dba "Executive Las Vegas," as was clear from the very documents that Greene had attached to his declaration. Defendant went on to argue that no amendment could cure the complaint because Greene had in the meantime opted into another suit against his true employer, Jacob Transportation, that raised only FLSA claims, and that was pending before the same judge.1 See Schemkes v. Presidential Limousine, et al, No. 09-cv-0100 [*5]  (D. Nev.). Citing Adams v. California Dep't of Health Servs., 487 F.3d 684, 688 (9th Cir. 2007), Defendant argued that Greene could not simultaneously maintain both FLSA actions against Jacob.

1   The December 2, 2009 "consent to sue" form that Greene executed in the Schemkes litigation reflects his understanding that he was suing an entity called "Executive Las Vegas," not Jacob. The caption of the form would have informed him, however, that "Executive Las Vegas" was the dba of Jacob Transportation.

On March 4, 2011, the district court denied Defendant's motion without prejudice. The court acknowledged that there appeared to be some connection between Bentley and Jacob and their respective dba's, and it noted that at least one of the documents in Greene's orientation materials referenced "Executive Coach and Carriage,' and that Bentley had not established that Greene had never worked for Bentley as well as Jacob. "In order to simplify the confusion that the parties have created in the present case," the district court consolidated Greene's case with that portion of the Schemkes litigation involving Jacob.

In his April 15, 2011 interim status report, Greene acknowledged that he was suing the wrong party, a situation that would be corrected by discovery and motion practice. Discovery in the Greene case was scheduled to close June 15, 2011, but Greene moved on May 25, 2011 to modify the scheduling order. The motion noted Bentley's lack of cooperation in discovery and its refusal to stipulate to an amendment of the pleadings so as to name Jacob. Greene proposed [*6]  a new schedule that extended the discovery cut-off until August 31, 2011. The proposed schedule also set a June 15, 2011 deadline for any motion to amend or supplement the pleadings under Federal Rule of Civil Procedure (FRCP) 15.

The magistrate judge to whom the case had been referred granted the motion to modify the scheduling on June 21, 2011, six days after the deadline for motions to amend. The same day, Greene filed a motion for leave to amend in order to substitute Jacob for Bentley. The motion stated that Greene had learned the true identify of his employer as a result of supplemental disclosures that had been made a few weeks earlier. The magistrate judge denied the motion on August 31, 2011 after applying the more stringent standard of FRCP 16(b) rather than FRCP 15 and concluding that Greene had not shown "good cause" for the untimely amendment. The magistrate judge explained that Greene had not been diligent about acting on information that he and his counsel knew or should have known sooner about the identity of his employer, and he noted that Greene had opted into the Schemkes case against Jacob on December 2, 2009. The magistrate judge concluded that the motion for leave to amend was reckless and frivolous and awarded sanctions [*7]  under 28 U.S.C. § 1927.2

2   The finding that the motion to amend was frivolous was also based on Greene's request that the state claims previously dismissed against Bentley be reinstated against Jacob, and Greene's failure to offer evidentiary support for other proposed amendments.

The district court denied Greene's motion for reconsideration of the magistrate judge's order, and the district court subsequently granted Bentley's motion to dismiss the case because it named the wrong party and because Greene was already suing the proper party in the Schemkes litigation.

On appeal, Greene argued that the district court had erred in dismissing the state-law wage claims and in denying Greene's motion to amend his FLSA claims so as to name the correct entity. Greene pointed to Bentley's failure to disclose the true relationships among entities that were obviously related, and argued that any objections based on the true identity of Greene's employer should have been raised at the outset of the litigation. The answering brief explained why dismissal of the state-law claims was appropriate, and argued that the motion to amend the FLSA claims was properly denied because Greene had not been diligent in seeking the amendment, which was in any event futile because he was already suing Jacob in the Schemkes litigation. The answering brief's controversial claim that the July 9, 2010 motion disclosed the true identity of Greene's employee was therefore part of the argument [*8]  that Greene had waited too long to amend his complaint.

The Ninth Circuit reversed the judgment of the district court and remanded. The court relied on an intervening Nevada Supreme Court decision to reverse the judgment on the state law claims, and it concluded that the district court had abused its discretion in refusing Greene's request to amend his complaint.

II

Discussion

"A member of the court's bar is subject to suspension or disbarment by the court if the member . . . is guilty of conduct unbecoming a member of the court's bar." Fed. R. App. P. 46(b)(1)(B); see Gadda v. Ashcroft, 377 F.3d 934, 947 (9th Cir. 2004) (court also has inherent authority to suspend or disbar attorneys who perform incompetently in immigration proceedings). Furthermore, the court "may discipline an attorney who practices before it for conduct unbecoming a member of the bar or for failure to comply with any court rule." Fed. R. App. P. 46(c).

"Conduct unbecoming a member of the court's bar" means "conduct contrary to professional standards that shows an unfitness to discharge continuing obligations to clients or the courts, or conduct inimical to the administration of justice." In re Snyder, 472 U.S. 634, 645 (1985); Gadda, 377 F.3d at 946. In addition to caselaw and applicable court rules, the court may consider codes of professional conduct in determining whether [*9]  an attorney's conduct falls below the standards of the profession. See In re Snyder, 472 U.S. at 645, 646 n.7 (referring to state rules of professional conduct, and the American Bar Association's Model Rules of Professional Conduct and Model Code of Professional Responsibility); United States v. Swanson, 943 F.2d 1070, 1076 (9th Cir. 1991).

In assessing the appropriateness of a particular sanction, the court may consider the American Bar Association's Standards for Imposing Lawyer Sanctions, which were promulgated to aid enforcement of the ABA's Model Rules of Professional Conduct. See Swanson, 943 F.2d at 1076; see also ABA Joint Comm. on Prof'l Standards, Standards for Imposing Lawyer Sanctions (1984, rev. 1992), available at http://www.abanet.org/cpr/regulation/standards_sanctions.pdf ("Standards"). Under the Standards, a court should generally consider: (a) the duty violated; (b) the lawyer's mental state; (c) the actual or potential injury caused by the lawyer's misconduct; and (d) the existence of aggravating or mitigating factors. See Standards § 3.0. The Standards also set out various forms of suggested discipline based on the type of misconduct involved. See id. §§ 4.0-8.4.

The ABA Standards provide a range of discipline for misrepresentations to a court, and the degree of discipline depends, in large measure, on the lawyer's mental state, the materiality of the misrepresentation, [*10]  and the damage it caused:

   6.11. Disbarment is generally appropriate when a lawyer, with the intent to deceive the court, makes a false statement, submits a false document, or improperly withholds material information, and causes serious or potentially serious injury to a party, or causes a significant or potentially significant adverse effect on the legal proceeding.

   6.12. Suspension is generally appropriate when a lawyer knows that false statements or documents are being submitted to the court or that material information is improperly being withheld, and takes no remedial action, and causes injury or potential injury to a party to the legal proceeding, or causes an adverse or potentially adverse effect on the legal proceeding.

   6.13. Reprimand is generally appropriate when a lawyer is negligent either in determining whether statements or documents are false or in taking remedial action when material information is being withheld and causes injury or potential injury to a party to the legal proceeding, or causes an adverse or potentially adverse effect on the legal proceeding.

   6.14. Admonition is generally appropriate when a lawyer engages in an isolated instance of neglect in determining [*11]  whether submitted statements or documents are false or in failing to disclose material information upon learning of its falsity, and causes little or no actual or potential injury to a party, or causes little or no adverse or potentially adverse effect on the legal proceeding.

Standards, §§ 6.11-6.14.

Despite this framework, this court has held that it "need not find squarely intentional conduct to impose serious discipline pursuant to Rule 46(c) for misrepresentations made to the court." In re Girardi, 611 F.3d 1027, 1037-38 (9th Cir. 2010) (order) (citing DCD Programs, Ltd. v. Leighton, 846 F.2d 526, 528 (9th Cir. 1988) (order)). The Girardi court also explained why misrepresentation cannot be taken lightly:

   The vice of misrepresentation is not that it is likely to succeed but that it imposes an extra burden on the court. The burden of ascertaining the true state of the record would be intolerable if misrepresentation was common. The court relies on the lawyers before it to state clearly, candidly, and accurately the record as it in fact exists.

Id. at 1037 (quoting In re Boucher, 837 F.2d 869, 871 (9th Cir. 1988) (order)). If the true "vice" of misrepresentation is the burden it places on the court, even a single misrepresentation disrupts the court's ability to rely on the professionalism of those who appear before it.

In his March 5, 2015 response to the court's order to show [*12]  cause, Lovato appears to concede that the statement in his answering brief was not accurate because there was no identification of Jacob Transportation as the proper party in the July 9, 2010 motion itself. But Lovato points out that the explicit identification of Jacob as the proper party occurs several times in the August 11, 2010 reply brief in support of the July 9, 2010 motion. Lovato also notes that the inaccurate statement in the appellate brief occurs in the "Statement of the Case" section, which by its nature is designed to summarize the proceedings. Lovato explains that the larger point he was trying to convey was that the briefing on the July 9, 2010 motion as a whole made it clear that the proper defendant was Jacob Transportation, almost a year before Greene sought to amend his complaint. Lovato maintains that he "did not knowingly state anything false."

The record generally supports Lovato's characterization of events in the district court. Some confusion arises because, both in the district court and on appeal to the Ninth Circuit, the question whether Defendant disclosed that "Executive Coach and Carriage" was the wrong party is related to, but distinct from, the question [*13]  whether Defendant disclosed that Jacob in fact was the proper party. The July 9, 2010 motion made it clear that Greene had filed his suit against the wrong party, and the August 11, 2010 reply brief supporting the motion went further and identified the proper defendant, an identification essential to the further argument that no amendment was possible because Greene was already suing Jacob in the Schemkes litigation.

The inaccurate statement in Defendant's appellate brief does not appear to have been a knowing misrepresentation designed to affect the outcome of the appeal, nor does it appear to have affected the prosecution of the appeal beyond adding to the confusion already present in the record. The inaccurate statement that occurs in the "Statement of the Case" section is not repeated in the body of the brief. When the appellate brief, which is primarily concerned with the state-law issues, addresses the "wrong party" issue, it argues that the July 9, 2010 date is important because the motion to dismiss put Greene on notice that he was suing the wrong party.

It is also noteworthy that Greene's reply brief in this court does not challenge or even cite the inaccurate statement at issue [*14]  here. Instead, Greene's reply brief challenges Defendant's more general claim that Greene knew his employer was Jacob, a claim that was based on Greene's participation in the Schemkes litigation as much as any disclosure made in the context of the July 9, 2010 motion. Greene appears to agree that the briefing initiated by the July 9, 2010 motion was a turning point in the litigation insofar as it informed Greene that he was allegedly suing the wrong party. The parties differ primarily on the course of conduct that preceded and followed what Greene calls the "Gotcha!" strategy of the July 9, 2010 motion, not the significance of the motion itself. On appeal, Greene argues that Defendant "sandbagged" him by waiting to argue the "wrong party" issue until after the state claims had been dismissed, and then "stonewalled" his efforts to conduct discovery on the issue. Because Greene took the position that he did not know for certain who his employer was until June 2011, and that Defendant "stonewalled" him in the interim, the fact that the explicit identification of Jacob as the proper defendant occurred in the August 11, 2010 reply brief rather than the July 9, 2010 motion itself had no [*15]  apparent effect on Greene's appeal strategy.

It is also relevant that the inaccurate statement in Defendant's appellate brief did not have an obvious bearing on this court's resolution of the issues raised on appeal. The court ruled that the district court had abused its discretion in denying Greene's motion for leave to amend because it held him to a schedule with which it was impossible to comply. The decision did not address whether Greene had been diligent in seeking such leave, the only legal question potentially affected by the inaccurate statement.

Because there is no evidence that the inaccurate statement at issue here is anything other than "an isolated instance of neglect" that "cause[d] little or no actual or potential injury to a party [and] little or no adverse or potentially adverse effect on the legal proceeding," Lovato's conduct is subject, at most, to an admonition. See Standards § 6.14.

Although the court concludes that Lovato should not be subject to discipline under Ninth Circuit Rule 46-2, the court's concern over the inaccurate statement is understandable. Defendant's strategy in litigating the case in the district court involved considerable gamesmanship about the true identity of Greene's employer. [*16] 3 At various points in both the district court and this court, Greene has alleged that Defendant's conduct was not only deceptive, but in violation of FRCP 7.1 (regarding corporate disclosures) and FRCP 12(h) (regarding waiver of defenses). No court has directly addressed these issues, but the appellate panel asked Lovato at oral argument whether Defendant had an obligation to raise the "wrong party" issue earlier than it did. Lovato replied that there was no such obligation if Defendant took the position that all claims failed as a matter of law.

3   Lovato is at times disingenuous about this gamesmanship. At oral argument, Lovato stated that the Carole Jimmerson declaration attached to the July 9, 2010 motion states "very clearly at the beginning" that she manages Jacob as well as Bentley. But there is no sentence in the declaration that connects Greene to Jacob, and as a result the reference to Jacob seems like a non sequitur. In his response to the order to show cause, Lovato cites the Jimmerson declaration as one instance among many where the identity of Jacob Transportation Services, LLC was "affirmatively disclosed" and he suggests that the inaccurate statement in question is not really inaccurate because it referenced both the July 7, 2010 motion "and the attached declaration."

Lovato's response may be correct as a matter of law, but his conduct in the district court remains troubling. Nevada Rule of Professional Conduct 3.4 recognizes that an attorney owes a duty of "Fairness to Opposing Party and Counsel." Lovato's decision to litigate the state-law issues to a favorable conclusion while reserving the "wrong party" issue was arguably less than fair to his opponent, especially if that strategy involved a decision to ignore any disclosure obligation. This court is not in a position to examine the ethical dimension of Lovato's conduct in the district court, but it advises Lovato to do so.

The court's February 12, 2015 order [*17]  to show cause is discharged.

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