Commercial Litigation and Arbitration

Sanctions — Due Process

The sanctions motion served by the defendants in Nisus Corp. v. Perma-Chink Sys., 2007 U.S. Dist. LEXIS 58363 (E.D. Tenn. Aug. 9, 2007) — more precisely, the second sanctions motion — sought sanctions pursuant to the court’s inherent power against the plaintiff and against ‛[plaintiff’s] counsel,“ but it did not ‛specifically identify which of plaintiff's many attorneys it is seeking to sanction under the Court's inherent authority.“ It also sought sanctions under 28 U.S.C. § 1927, but the motion stated merely requested sanctions against the plaintiff or [sic] one of its law firms, but did not ‛specifically identify the individuals nor the conduct it seeks to be sanctioned.“ District Judge Thomas A. Varlan concluded that due process rights of the lawyers against whom sanctions were sought had not been satisfied:

After thoroughly reviewing the relevant pleadings, the Court cannot say that defendant's Renewed Second Motion for Sanctions affords the Attorneys the type of particularized notice to which they were entitled by due process. ... [The motion] does not sufficiently set forth the sanctioning authority being considered, the conduct alleged to be sanctionable, nor which of the numerous attorneys involved in the representation of plaintiff that defendant seeks to be sanctioned. ... Despite defendant's argument to the contrary, ... "[s}imply describing the conduct is not sufficient."

It is difficult to disagree with the conclusion that a motion which evidently sought § 1927 sanctions against a client was deeply flawed (only lawyers are subject to sanction under that statute). The case highlights the specificity required by due process in sanctions motion practice.

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