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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
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Inherent Power & § 1927 Sanctions: Prelitigation Conduct May Be Considered on Issue of Bad Faith — Bad Faith of Predecessor Counsel, Client Not Imputed to Successor Counsel — Due Process: Notice Given in Summary Judgment Decision, Sanctions Motion

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Redding v. Prosight Specialty Mgmt. Co., 2017 U.S. App. LEXIS 10303 (9th Cir. June 9, 2017):

*   This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.

1. A fine is generally civil if it is [*3]  meant "to compensate the complainant for losses sustained." Int'l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 834 (1994) (quoting United States v. Mine Workers, 330 U.S. 258, 303-04 (1947)). Here, the district court sanctioned Appellants Lin Deola, Brian Miller, and Richard Layne in the form of attorneys' fees and costs to compensate Appellees ("NYM") for their losses, so the civil sanction standard applies.

2. The district court provided Appellants notice and an opportunity to be heard before imposing sanctions under the district court's inherent authority and 28 U.S.C. § 1927 for "bad faith" and "reckless" conduct. See Lasar v. Ford Motor Co., 399 F.3d 1101, 1109-10 (9th Cir. 2005); T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 638 (9th Cir. 1987). Appellants received notice from the district court's summary judgment order and NYM's motion for fees and costs [under the inherent power and § 1927]. The district court also provided Appellants an opportunity to be heard, permitting briefing on the motion for attorneys' fees and costs and the submission of affidavits. See Pac. Harbor Capital, Inc. v. Carnival Air Lines, Inc., 210 F.3d 1112, 1118 (9th Cir. 2000).

3. The district court did not err by considering prelitigation conduct when imposing sanctions because we permit district courts to look at the "'totality of the circumstances' including conduct 'prelitigation and during trial,' when making bad faith determinations." Rodriguez v. United States, 542 F.3d 704, 712 (9th Cir. 2008) (quoting Cazares v. Barber, 959 F.2d 753, 755 (9th Cir. 1992)).

4. The record amply supports the district court's finding that Plaintiff Billie Redding's motion to disqualify NYM's lead counsel was frivolous [*4]  and also supports the sanction amount of $73,934.82 in attorneys' fees and costs. The record also justifies the district court's finding that Deola and Miller violated Fed. R. Civ. P. 37(b)(2)(C) when they failed to comply with the district court's February 3, 2014 order; the sanction of $33,932.72 in attorneys' fees and costs is supported by the evidence.

5. There is insufficient evidence in the record to show Layne acted in "bad faith" or was "reckless" in the litigation of Redding's claim against NYM. We therefore reverse the district court's imposition of sanctions against Layne.

6. There is sufficient evidence in the record to support the district court's finding that Deola and Miller acted in "bad faith" or were "reckless" in the litigation of Redding's claim against NYM. In addition to Deola's prelitigation conduct, the record shows: Deola made reckless comments to the district court; Deola and Miller acted with incivility in front of the district judge, during discovery, and in response to opposing counsel; and Deola and Miller continued to litigate Redding's case after discovery showed NYM did not violate Montana law. But, because the district court awarded sanctions of $515,119.90 in attorneys' fees [*5]  and costs based on Deola's, Miller's, and Layne's conduct, we remand to the district court to give it an opportunity to reassess the appropriate amount of sanctions.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Costs of appeal shall be taxed against Appellants Lin Deola and Brian Miller.

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Criminal Spoliation Can Be A Due Process Violation — Defendant Must Show That (1) The Evidence Had Exculpatory Value Before It Was Destroyed, (2) Defendant Is Unable to Obtain Comparable Evidence by Reasonable Means, and (3) Bad Faith Failure to Preserve

1) Rule 11 Sanctions: “No First Amendment Exception to a Rule 11 Violation” — “[T]he First Amendment Covers Novel, Nonfrivolous Arguments, But Many Frivolous Arguments Are Also Novel” (Good Quotes) — Frivolous To Continue To Make Rejected Novel Arguments; (2) FRAP 38 Sanctions: District Court In Best Position to Set Sanctions, Attorney’s Fees and Costs

3 Prerequisites for Inherent Power and § 1927 Sanctions in Second Circuit: (1) Bad Faith, (2) Conduct That Is Entirely Without Color [Thus, An Ill-Motivated Colorable Position Appears to Be Protected in the Second Circuit], and (3) Improper Purpose— “To Gain A Strategic Advantage” Is An Improper Purpose — Due Process Satisfied by Opponent’s Motion and Multiple Court Conferences, After Which Target Was Allowed to Submit Additional Letters

Inherent Power Sanctions — Untimeliness as Laches — Laches Properly Applied to Deny Sanctions Motion — Note Waived Defenses to Laches

Rule 37(c)(1) Sanctions: Substantial Justification or Harmless Error (Ninth Circuit Factors) — Erie: When State Supreme Court Has Not Squarely Addressed an Issue, Circuit Must Predict How It Would Rule, Using Intermediate Appellate Decisions, Decisions from Other Jurisdictions, Statutes, Treatises And Restatements for Guidance

(1) Appellate Review of Inherent Power Sanctions (7th Circuit): Factual Findings Reviewed for Clear Error, Choice of Sanction for Abuse of Discretion — 4-Element Test for Reversal; (2) Sanctions and Class Actions: Monetary Sanctions Properly Imposed on Defendants for Improper Communications with Class Members (Represented Parties) — “[I]f The Class And The Class Opponent Are Involved In An Ongoing Business Relationship, Communications From The Class Opponent To The Class May Be Coercive” (Good Quote); (3) Monetary Sanctions under Goodyear v. Haeger: If Same Fact-Gathering Would Have Been Conducted Absent The Misconduct, No But-For Causation — But Only “Rough Justice” Required, “Not Accountant-Like Precision” (Good Quote) — Once Misconduct Is Clear, Time Spent Ferreting It Out Compensable under Goodyear; (4) Goodyear Did Not Overrule Long-Standing Rule That Courts May Impose Modest Civil Monetary Sanctions to Curb Litigation Abuse; (5) Appellate Jurisdiction Lacking Where Sanctioned Attorney Fails to File Notice of Appeal and Lawyer’s Intent to Appeal Not Apparent from Client’s Notice; (5) Rule 11 Improper Purpose — Party May Have Many Purposes for Pursuing Claim — As Long As Claim Is Supported by Good Faith Belief in the Merits, “A Parallel Reason Does Not Violate Rule 11” — To Deny A Motion for Sanctions, The District Court Need Not Address Every Argument: “Arguments Clearly Without Merit Can, And For The Sake Of Judicial Economy Should, Be Passed Over In Silence” (Good Quote); Non-Monetary Sanction on Counsel: Complete Twice The Required Amount Of Professional Responsibility Hours For Her Next Continuing Legal Education Cycle Imposed By The State Bar

(1) Spoliation: Sanctions Are Warranted Only If the Movant Establishes That A Reasonable Trier of Fact Could Find That The Destroyed Evidence Would Support A Claim Or Defense — § 1927 Sanctions: “Courts Often Refuse to Award Sanctions When Both Parties Contributed to the Waste of Judicial Resources” (Good Quote)

No Sanctions Imposed on Counsel Who Submitted A.I.-Generated Phony Cases Without Checking Them in Good Faith on The Mistaken Assumption They Had Been Provided by Highly Respected Co-Counsel Rather Than His Criminally-Convicted, Disbarred Client — No Sanctions on Client Who Had No Access to LEXIS or Westlaw to Check the Phony Cases and Submitted Them in Good Faith: “It Would Have Been Downright Irrational For Him To Provide Fake Cases For [His Lawyer] To Include In The Motion Knowing They Were Fake —

(1) Electronic Spoliation — Rule 37(e)(2) Dismissal Sanction — Temporal Proximity of Spoliation to Production Due Date = Circumstantial Evidence of Intent; (2) While Discovery Sanctions Are Reviewed For Abuse Of Discretion, Findings Of Fact Related To Discovery Sanctions Are Reviewed For Clear Error; (3) Dismissal under Rule 37(e)(2) Plus Attorney’s Fees under Inherent Power Appropriately Combined [But see 2015 Advisory Committee Note: “New Rule 37(e) … authorizes and specifies measures a court may employ if information that should have been preserved is lost, and specifies the findings necessary to justify these measures. forecloses reliance on inherent authority or state law to determine when certain measures should be used.”]; (4) Compensatory Sanctions under Goodyear v. Haeger Appropriately Include Fees and Costs Resulting from Attempts to Settle Spoliation Motion

(1) FRAP 38 Sanctions Inapt for Appeal That Is Weak — “Borderline Frivolous” — Test Is Whether Appellant Should Have Known the Appeal Had Absolutely No Chance of Success — (2) Lay Opinion Testimony under Rule 701: Nub of Helpfulness Requirement Is to Exclude Testimony When the Witness Is No Better Suited Than the Jury to Assess the Issue; (3) Appeals: No Appeal from Denial of Motion for Judgment As a Matter of Law Unless Appellant Made That Motion Before Case Was Submitted to Jury

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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