Sanctions — Settlement & Mootness - Joseph Hage Aaronson

Commercial Litigation and Arbitration

Commercial Litigation and Arbitration

Sanctions — Settlement & Mootness

Fleming & Assoc’s v. Newby & Tittle, 2008 U.S. App. LEXIS 11764 (5th Cir. May 30, 2008) presented the following factual scenario:

September 14, 2006 — District Court issues order sanctioning plaintiffs’ counsel “for changing the [plaintiffs’] expert witness report” and orders reimbursement of certain defendants’ attorneys' fees.

September 28, 2006 — Plaintiffs’ counsel moves for reconsideration.

December 13, 2006 — Case settles; defendants forgo all rights to any attorneys' fees; plaintiffs’ counsel moves (unopposed) that the claims be dismissed with each party to bear its own “costs, expenses, and attorneys' fees.”

February 8, 2007 — Court denies reconsideration of sanctions order, even though defendants have withdrawn their objections to reconsideration.

March 6, 2007 — Magistrate Judge holds hearing and orders plaintiffs’ counsel to pay $15,214.45 in attorneys' fees, even though defendants’ counsel states that they have agreed not to collect sanctions after the settlement.

What is moot? Anything? Yes, but not everything. “[A] district court always has jurisdiction to impose sanctions designed to enforce its own rules, even after that court no longer has jurisdiction over the substance of a case” under Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395 (1990), and Willy v. Coastal Corp., 503 U.S. 131, 139 (1992).

The Fifth Circuit distinguished between (1) the District Court’s finding that plaintiffs’ counsel engaged in sanctionable behavior; and (2) its compensatory award. Held, the latter was rendered moot by the parties’ settlement, but not the former. The Fifth Circuit also indicated that if the sanction had been punitive in nature, rather than compensatory, the result may have been different.

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