Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-56099/USCOURTS-ca9-13-56099-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

KAASS LAW,

Appellant,

v.

WELLS FARGO BANK, N.A., a

National Association,

Appellee.

No. 13-56099

D.C. No.

2:12-cv-08356-

RGK-JC

OPINION

Appeal from the United States District Court

for the Central District of California

R. Gary Klausner, District Judge, Presiding

Argued and Submitted

April 6, 2015—Pasadena, California

Filed August 27, 2015

Before: Andrew J. Kleinfeld, M. Margaret McKeown,

and Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.

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2 KAASS LAW V. WELLS FARGO BANK

SUMMARY*

Sanctions 

Reversing the district court’s decision to grant Well

Fargo’s motion for sanctions against Kaass Law pursuant to

28 U.S.C. § 1927, and vacating the order imposing sanctions,

the panel held that § 1927 does not permit the imposition of

sanctions against a law firm.

COUNSEL

Vahag Matevosian (argued), Armen Kiramijyan, Kaass Law,

Glendale, California, for Appellant.

Kerry W. Franich (argued), Severson & Werson, Irvine,

California; Jan T. Chilton, Severson & Werson, San

Francisco, California, for Appellee.

OPINION

M. SMITH, Circuit Judge:

In this appeal, Appellant Kaass Law challenges the

district court’s decision to grant Appellee Wells Fargo’s

motion for sanctions against it pursuant to 28 U.S.C. § 1927.

We hold that 28 U.S.C. § 1927 does not permit the imposition

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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KAASS LAW V. WELLS FARGO BANK 3

of sanctions against a law firm, and we reverse the decision

of the district court, and vacate its order imposing sanctions.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Complaint and Motion to Dismiss

On September 27, 2012, Armen Kiramijyan, an attorney

with Kaass Law, filed a complaint on behalf of Plaintiff

Izabell Manukyan against 10 different defendants, including

Wells Fargo Bank. The complaint made various allegations

relating to certain adverse information the defendants had

reported to credit agencies, who then reflected the adverse

information on Plaintiff’s credit report. On October 29, 2012,

Wells Fargo moved to dismiss Plaintiff’s complaint pursuant

to Federal Rule of Civil Procedure 12(b)(6). Instead of

responding to Wells Fargo’s motion to dismiss, or any of the

motions to dismiss filed by the other defendants, on October

30, 2012, Mr. Kiramijyan filed a motion to amend the initial

complaint, and attached a proposed first amended complaint. 

On November 11, 2012, Wells Fargo filed a notice of

non-opposition to its motion to dismiss Plaintiff’s complaint.

On December 11, 2012, the district court granted Wells

Fargo’s motion to dismiss, and denied Plaintiff’s motion to

amend. The district court held that “Plaintiff’s Complaint, as

a whole, is procedurally deficient because it does not

differentiate between Defendants and makes no mention of

any specific acts made against an individual Defendant. 

Thus, on its face, the Complaint fails to comply with Rule 8

and fails to put Defendants on notice of their supposedly

improper conduct.” The district court also held that

Plaintiff’s proposed amended complaint “does not rectify the

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4 KAASS LAW V. WELLS FARGO BANK

Complaint’s failure to comply with Rule 8, rendering

amendment futile.”

II. Prior Proceedings in the Action for Sanctions

On March 21, 2013, the district court’s judgment

dismissing Wells Fargo from the action was filed. Thereafter,

Wells Fargo filed a motion to recover $11,236.50 in

attorneys’ fees and costs from Kaass Law and the named

Plaintiff, pursuant to 28 U.S.C. § 1927. Wells Fargo

contended that Kaass Law’s “litigation conduct undoubtedly

‘multipl[ied] the proceedings in any case unreasonably and

vexatiously’ thereby constituting bad faith.” Specifically,

Wells Fargo argued that Kaass Law had acted in bad faith by:

1) filing a complaint and amended complaint that failed to

differentiate Wells Fargo from the other defendants, and

failed to provide factual allegations identifying the inaccurate

information; 2) failing to communicate its intent to file a

motion for leave to amend, and then filing a motion for leave

to amend the day after Wells Fargo filed a motion to dismiss;

3) failing to oppose Wells Fargo’s motion to dismiss; 4) and

engaging in a pattern and practice of filing similar “canned”

and “boilerplate” complaints, in the same manner as Kaass

Law’s “predecessor,” attorneyArshak Bartoumian, had done.

The district court granted the motion in part, and denied

it in part. While the district court declined to award fees

against the Plaintiff, it ruled that “Kaass Law acted in bad

faith by knowingly raising frivolous arguments against Wells

Fargo and other defendants,” and granted the motion against

Kaass Law. The district court noted that “Wells Fargo

provides sufficient evidence that Kaass Law acted in bad

faith,” including “its failure to plead specific allegations or

differentiate between defendants in the Complaint; its failure

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KAASS LAW V. WELLS FARGO BANK 5

to oppose defendants’ motions to dismiss; and its failure to

meet and confer or communicate with opposing counsel.” 

Additionally, the district court concluded that in attempting

to file a first amended complaint, Kaass Law had “failed to

correct the glaring pleading and legal errors identified by

defendants, therebyrecklessly and knowinglymultiplying the

proceedings in this action.”

The district court reduced the hours claimed by Wells

Fargo’s attorneys, Scott J. Hyman and David Berkeley, from

14.4 hours to 10 hours for Mr. Hyman, and from 22.5 hours

to 18 hours for Mr. Berkeley, but then awarded Wells Fargo

a total of $8,480 in attorneys’ fees.

This timely appeal followed.

STANDARD OF REVIEW AND JURISDICTION

We have jurisdiction over this appeal pursuant to

28 U.S.C. § 1291. “We review all aspects of an award of

§ 1927 sanctions for an abuse of discretion.” GRiD Sys. Corp.

v. John Fluke Mfg. Co., 41 F.3d 1318, 1319 (9th Cir. 1994)

(per curiam); United States v. Associated Convalescent

Enters., Inc., 766 F.2d 1342, 1345 (9th Cir. 1985). The

construction or interpretation of 28 U.S.C. § 1927 is a

question of law, and is reviewed de novo. See Miranda v.

Anchondo, 684 F.3d 844, 849 (9th Cir. 2011).

DISCUSSION

Kaass Law makes two principal arguments on appeal. It

first contends that the district court abused its discretion by

imposing sanctions pursuant to 28 U.S.C. § 1927 because

sanctions under that statute can only be made against an

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6 KAASS LAW V. WELLS FARGO BANK

individual attorney, and not against a law firm. This argument

was raised for the first time on appeal. Second, Kaass Law

argues that 28 U.S.C. § 1927 only permits an award of

sanctions for conduct that multiplies the proceedings, not for

the filing of initial pleadings or the ordinary costs of

litigation. Kaass Law contends that its second argument

undermines the district court’s finding of bad faith.

We agree with Kaass Law’s first argument, and therefore

do not reach the second one. We hold that the district court

abused its discretion when it imposed sanctions against a law

firm pursuant to 28 U.S.C. § 1927.

I. Argument Raised for the First Time on Appeal

Initially, we must determine whether we can consider

Kaass Law’s argument concerning the permissibility of

awarding sanctions against a law firm pursuant to 28 U.S.C.

§ 1927 because the issue was raised by Kaass Law for the

first time on appeal.

“Ordinarily, an appellate court will not hear an issue

raised for the first time on appeal.” Cornhusker Cas. Ins. Co.

v. Kachman, 553 F.3d 1187, 1191 (9th Cir. 2008) (internal

quotation omitted). “There are, however, four exceptions to

this rule, where: (1) there are exceptional circumstances why

the issue was not raised in the trial court; (2) new issues have

become relevant while the appeal was pending because of [a]

change in the law; (3) the issue presented is purely one of law

and the opposing party will suffer no prejudice as a result of

the failure to raise the issue in the trial court; or (4) plain error

has occurred and injustice might otherwise result.” United

States v. Echavarria-Escobar, 270 F.3d 1265, 1267–68 (9th

Cir. 2001).

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KAASS LAW V. WELLS FARGO BANK 7

Kaass Law contends that because it “is not an attorney,

nor is it a person admitted to conduct cases in courts, the

district court erred in imposing sanctions against it pursuant

to Section 1927.” Because this argument falls under the third

exception noted in Echavarria-Escobar, we can consider it on

appeal, and we need not consider the other exceptions. 

Whether a law firm may be sanctioned under 28 U.S.C.

§ 1927 is “purely” an issue of law. Moreover, Wells Fargo

will not suffer prejudice if we address it for the first time on

appeal. There is nothing in the record to suggest that Wells

Fargo would “have presented new evidence or made new

arguments” if the issue had been raised below. United States

v. Rubalcaba, 811 F.2d 491, 493 (9th Cir. 1987).

II. Sanctions Pursuant to 28 U.S.C. § 1927

The statutory language of 28 U.S.C. § 1927 authorizes

sanctions against “[a]ny attorney or other person admitted to

conduct cases in any court of the United States or any

Territory.” While we have held that 28 U.S.C. § 1927 does

not permit the awarding of sanctions against an individual

employed by attorneys or against a client, we have not

previously addressed whether a law firm may be considered

an “attorney or other person admitted to conduct cases.”

Based on our review of the plain language of the statute, and

our consideration of the persuasive reasoning of some of our

sister circuits, infra, we hold that 28 U.S.C. § 1927 does not

permit the award of sanctions against a law firm.

In Federal Trade Commission v. Alaska Land Leasing,

Inc., we overturned sanctions awarded by a district court

pursuant to 28 U.S.C. § 1927 against a financial consultant

employed by attorneys representing two of the parties to the

suit. 799 F.2d 507, 508–10 (9th Cir. 1986). In vacating the

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8 KAASS LAW V. WELLS FARGO BANK

sanctions, we held that “[s]ection 1927 does not authorize

recovery from a party or an employee, but ‘only from an

attorney or otherwise admitted representative of a party.’” Id.

at 510 (quoting 1507 Corp. v. Henderson, 447 F.2d 540, 542

(7th Cir. 1971) (emphasis in original)). In Sneller v. City of

Bainbridge Island, we also overturned an award of sanctions

pursuant to § 1927 because “[t]he sanction here was imposed

jointly on counsel and the client, but § 1927 authorizes

sanctions only upon counsel.” 606 F.3d 636, 640 (9th Cir.

2010).

In Claiborne v. Wisdom, the Seventh Circuit considered

“whether a law firm is subject to sanctions under § 1927,”

and held that “[i]ndividual lawyers, not firms, are admitted to

practice before both the state courts and the federal courts. . . .

It is too much of a stretch to say that a law firm could also be

characterized as such a person.” 414 F.3d 715, 722–23 (7th

Cir. 2005). The Seventh Circuit further reasoned:

Our conclusion has the virtue of being

consistent with the rationale the Supreme

Court used in Pavelic & Le Flore v. Marvel

Entertainment Group, 493 U.S. 120, 110 S.Ct.

456, 107 L.Ed 2d 438 (1989), when it

considered the question whether sanctions

were possible against a law firm under an

earlier version of FED. R. CIV. P. 11. (The

rule was amended as of December 1, 1993, to

ensure that law firms could be subject to

sanctions under its authority.) In Pavelic &Le

Flore, however, the Court had to construe

language that permitted sanctions only against

“the person who signed” the offending

document. . . . The Supreme Court [found]

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KAASS LAW V. WELLS FARGO BANK 9

that in context the phrase “the person who

signed” could only mean the individual

signer, not his partnership, either in addition

to him or in the alternative. The language of

§ 1927 raises exactly the same problem as the

earlier version of Rule 11.

Id. at 723.

We find this reasoning persuasive. Indeed, as the Seventh

Circuit observes, Federal Rule of Civil Procedure 11 now

explicitly allows sanctions “on any attorney, law firm, or

party that violated the rule or is responsible for the violation,”

(emphasis added) whereas 28 U.S.C. § 1927 does not. Such

a rationale is further supported by the principle of statutory

construction, “expressio unius,” and we hold that the

“specificity and precision” of § 1927, allowing for sanctions

only against “attorneys” or “other person admitted to conduct

cases” was designed to exclude sanctions against a law firm.

See Longview Fibre Co. v. Rasmussen, 980 F.2d 1307,

1312–13 (9th Cir. 1992).

The Sixth Circuit also found that “[e]ven if [a] firm[ ] can

admittedly be personified in a literary sense through briefs,

there is no reason to consider a law firm a ‘person’ under

[§ 1927],” and confirmed that “28 U.S.C. § 1927 does not

authorize the imposition of sanctions on law firms.” BDT

Prods., Inc v. Lexmark Int’l, Inc., 602 F.3d 742, 750–51 (6th

Cir. 2011).

We are not persuaded by the reasoning of those of our

sister circuits that have upheld sanctions against law firms

pursuant to 28 U.S.C. § 1927, to the extent that they express

or imply a contrary view. The Eleventh Circuit seemingly

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10 KAASS LAW V. WELLS FARGO BANK

conflated the sanctioning powers in two different rules when

it upheld sanctions against lead counsel and his law firm

pursuant “to the bad-faith exception, 28 U.S.C. § 1927, and

Federal Rule of Civil Procedure 11.” Avirgan v. Hull,

932 F.2d 1572, 1582 (11th Cir. 1991). The Third Circuit

sanctioned a law firm pursuant to 28 U.S.C. § 1927 before

Fed. R. Civ. P. 11 was amended to explicitly include law

firms, and did not address the limiting statutory language of

28 U.S.C. § 1927. Baker Indus., Inc. v. Cerberus Ltd.,

764 F.2d 204, 209 (3d. Cir. 1985).

The Second Circuit permitted a district court to impose

sanctions against a law firm, but seemed to buttress its

reasoning on the inherent powers of the district court, not on

the express language of 28 U.S.C. § 1927:

We disagree with [the law firm]’s assertion

that the District Court was without authority

under 28 U.S.C. § 1927 to award sanctions

against the “firm as a whole” for the “actions

of various lawyers.” As an initial matter, the

District Court imposed sanctions pursuant to

both its inherent powers and § 1927. There is

no serious dispute that a court may sanction a

law firm pursuant to its inherent power. We

see no reason that a different rule should

apply to § 1927 sanctions, and, in any event,

we have previously upheld the award of

§ 1927 sanctions against a law firm. . . . In

sum, nothing in the language of 28 U.S.C.

§ 1927, in our case law regarding that statute

or a district court’s inherent powers, or in

counsel’s actions in this case leads us to think

that the District Court was without authority

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KAASS LAW V. WELLS FARGO BANK 11

to impose sanctions on [the law firm] as a

whole.

Enmon v. Prospect Capital Corp., 675 F.3d 138, 147–48 (2d

Cir. 2012).

We believe the Second Circuit misconstrues the language

of 28 U.S.C. § 1927, which limits sanctions to attorneys and

other persons admitted to conduct cases, and does not

expressly provide the district court authority to sanction a law

firm. The Second Circuit’s conclusory statements that

“nothing in the language” of the statute forecloses the

imposition of sanctions against a law firm and that “sister

circuits” have reached the same result is particularly

unpersuasive because the court apparently ignored the

plaintiffs’ citations to Pavelic, Claiborne, and BDT Products. 

See Brief for Appellant at 49, Enmon, No. 10-2811-cv (2d

Cir. Nov. 12, 2010), 2010 WL 4715535. We believe that if

Congress had intended to permit federal courts to impose

sanctions against law firms pursuant to 28 U.S.C. § 1927, it

would have included an express authorization to do so in the

statute.

Wells Fargo urges us to affirm because “the district

court’s sanctions award against Kaass is supported under” its

“inherent authority.” But Wells Fargo did not request that the

district court impose sanctions under its inherent authority,

and the court only cited 28 U.S.C. § 1927 in its order

imposing sanctions. “We have previously held that ‘the

conduct in question must in fact be sanctionable under the

authority relied upon.’” GRiD Sys. Corp., 41 F.3d at 1320

(quoting Matter of Yagman, 796 F.2d 1165, 1183 (9th Cir.

1986)) (emphasis in original). “The court here relied on

§ 1927; as §1927 cannot support the sanctions, the sanctions

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12 KAASS LAW V. WELLS FARGO BANK

cannot stand.” Id.; see also Alaska Land Leasing, Inc.,

799 F.2d at 510 (“Since the district court based its imposition

of sanctions exclusively on its authority under § 1927, we

have no basis to review the propriety of sanctions under

alternative theories.”). In light of our conclusion that 28

U.S.C. § 1927 does not support the imposition of sanctions

against Kaass Law, we need not address its argument that its

conduct did not merit sanctions under any authority.

The district court abused its discretion by sanctioning

Kaass Law, a law firm, pursuant to 28 U.S.C. § 1927.

CONCLUSION

We reverse the decision of the district court, and vacate

the order imposing sanctions against Appellant Kaass Law.

Each party shall bear its own costs on appeal.

REVERSED.

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