# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 4- 15 60

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Dav id M. Meyer an d Nan cy R. Meyer Trus t UTA Date d Oct ob er 1 3, 2 00 6

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

U.S. Ban k Nat io na l As so ci at io n

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll ee

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of Ne br as ka - Lin co ln

__ __ __ __ __ __

Su bm it te d: Feb ru ary 12 , 20 15
Fil ed : J ul y

6, 2 01 5

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Befo re RI LEY, Chi ef J ud ge , LOKE N and SMITH, Ci rcu it Ju dg es

.

__ __ __ __ __ __

LOKEN, Ci rcu it Ju dg e.

In Ju ne 20 03

, Dav id an d Nan cy M e ye r s i g n e d a rev ol vi ng cred it no te an d

rev ol vi ng cred it ag reem en t an d la te r si gn e d a s e rie s of te rm no te s an d te rm lo an

ag reem en ts to ob ta in lo an s fro m U.S. Ban k to fin a n c e th ei r swi ne pr od uc ti on
bu si ne ss

. In Octo be r 20 06

, th e Meyers tra ns ferr ed al l th ei r bu si ne ss as se ts to a

rev oc ab le tru st

, The Dav id M. Meyer an d Nan cy R. Meyer Trus t (th e Trus t), na m in g

th em se lv es as Gran to rs an d Trus te es

. The rev ol vi ng cred it lo an wen t in to de fau lt onJu ly 1, 20 08

. U.S. Ban k ag ree d n o t t o ex erci se it s de fau lt rig ht s. The le nd in g

rel at io ns hi p co nt in ue d un ti l th e Meyers wit hh el d pr oc eed s fro m th e sa le of co ll at eral
(h og s) ; U.S. Ban k co m

m en ced a rep le vi n act io n; an d th e Meyers fil ed fo r Ch ap te r 11

ba nk ru pt cy

pro te ct io n i n Au gu st 20 10

.

In Sep te m

be r 20 11

, th e Meyers, in di vi du al ly, su ed U.S. Ban k in th e Dis tri ct of

Neb ras ka

, al le gi n g b r e a c h of co nt ract

, frau d, vi ol at io ns of th e Neb ras ka Uni fo rm Decep ti ve Trad e Prac ti ces Act, an d un jus t en ric hm en t. The di st ric t co ur t gr a n t ed

su m m ary jud gm en t di sm is si ng al l cl ai m s, an d we affi rm ed

. Meyer v. U.S. Ban k Nat’l

Ass ’n, 71 5 F.3 d 70 3 (8 th Ci r. 20 13 ) (Me y er I). The Trus t th en co m m en ced th is act io n

in st at e co ur t, al le gi ng th at U.S. Ban k to rti ou sl y in te r fere d wit h th e Trus t’s

co nt ract ua l re la ti on s wi th a feed su pp li er. U.S. Ban k re m ov ed th e act io n, pro m pt ly

fil ed a m ot io n fo r su m

m ary jud gm en t, an d la te r so ug h t R ul e 11 sa nc ti on s. The

di st ric t co ur t gr an te d su m m ary jud gm en t an d im

po se d a $5 ,00 0 sa nc ti on ag ai ns t th e 1

Trus t an d it s at to rn ey s. The Trus t ap pe al ed

. U.S. Ban k m ov ed fo r ad di ti on al

sa nc ti on s un de r Ru le 38 of th e Fed e r a l R u le s of App el la te Pro ced ur e, arg ui ng th e

ap pe al is fri vo lo us

. W e affi rm th e di st ric t co ur t’s ru li ng s. We con cl ud e th e ap pe al

was no t fr iv ol ou s bu t was friv ol ou sl y arg ue d. We den y

an award of a tt or ne y s’ fees

bu t g ran t d ou bl e co st s as a Ru le 38 san ct io n.

I. Th e Meri ts

In Meyer I, th e Meyers’ cl ai m s cen te red o n t h e i r al le ga ti on th at U.S. Ban k

fo rg ed th ei r si gn at ur es on a do cu m en t ack no wled gi ng a ch an ge in th e lo an ag reem en t

te rm s, whic h m ad e th em ap pe ar les s cr ed it wor th y , fo rci ng th e lo an in to de fau lt

. To

ob ta in cred it ex te ns io ns , th e Meyers were th en co erce d i n t o si gn in g fo rb eara nc e

ag reem en ts rel eas in g U.S. Ban k fro m li ab il it y fo r th e fo rg ery. Ult im at el y , U.S. Ban k

The Hon or ab le Lau rie Sm it h Cam p, Ch ie f Ju dg e, Uni te d St at es Dis tri ct Co ur t 1

fo r th e Dis tri ct of Ne br as ka

.

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-refu se d to ex te nd th e m at ur it y da te ag ai n, fo rci ng th e Meyers in to ba nk ru pt cy

. The ir

da m ag e cl ai m s in cl ud ed “ a lo ss of pe rfo rm an ce by th e Meyer he rd as a res ul t of feed

de pr iv at io n us ed by U.S. Ban k in fu rth er le ve rag e ag ai ns t th e Meyers to co m pl y wit h

al l de m an ds m ad e by U.S. Ban k.” W e affi rm ed th e g r a n t of su m m ary jud gm en t

di sm is si ng th es e cl ai m s be cau se , wh en th e Meyers fai le d to pa y th e am ou nt du e on

th ei r lo an whe n it m at ur ed

, U.S. Ban k “wa s u n d er no ob li ga ti on to ex te nd th e

m at ur it y da te y e t a g a i n

. W ha te ve r th e accu racy of [U.S. Ban k’s cred it wor th in es s
cal cu la ti on ], th e Meyers ha d fai le d to co m pl y w i th th e rev ol vi ng cred it ag reem en t,

an d t he Ban k was en ti tl ed to en fo rce i ts rig ht s.” 7 15 F.3d at 7 05

.

In th is act io n, th e Tr u s t al le ge d th at it is “ th e in de pe nd en t en ti ty so le ly

res po ns ib le fo r ru nn in g” th e Meyers’ swi ne bu si ne ss

. W he n th e lo an m at u r ed by

reas on of th e fo rg ed de bt -ack no wled gm en t, U

. S. Ba nk use d “ feed de pr iv at io n ta ct ic s”

-- refus in g to wire m on ey to th e Trus t’s feed su pp li er -- to fo rce th e Meyers to si gn

fo rb eara nc e ag reem en ts

, co nd u ct th at to rti ou sl y in te rfer ed wit h th e Trus t’s

rel at io ns hi p wit h th e feed su pp li er. U.S. Ban k m ov ed fo r su m m ary jud gm en t, arg ui ng

th e Trus t’s cl ai m s were ba rred by jud ic ia l es to pp el an d res ju d i c a t a an d su bm it ti ng

ex te nsi ve doc um en ta ti on fro m Meyer I an d th e Meyers’ ba nk ru pt cy pr oc eed in gs

. The

di st ric t co ur t gr an t e d s u mm ary jud gm en t, co nc lu di ng th at th e de te rm in at io ns in
Meyer I “ th at th e Meyers de fau lt ed on th ei r rev ol vi ng cred it ag reem en t wit h th e

Ban k; th e Ban k was un de r no ob li ga ti on to fo rb ear; an d th e Ban k was free to en fo rce

it s ri g h t s

. . . a re re s ju di ca ta ” in th is act io n. Co ns eq ue nt ly, th e co m pl ai nt “ fai ls to

st at e a cl ai m [o f to rti ou s in te rfer en ce] up on whi ch rel ie f c a n b e gr an te d, be cau se it

de sc rib es no ‘ un

jus ti fie d i nt en ti on al act of i nt erfe ren ce’ on th e p art of t he Ban k.” 2

Und er Nebras ka la w, th e el em en ts of a cla im for to rti ou s in te rfer en ce with a 2

bu si ne ss rel at io ns hi p or ex pe ct an cy in cl ud e pr oo f of “ an un jus ti fie d in te nt io na l act of in te rfer en ce on th e pa rt of th e in te rfer er.” St ei nh au s e n v

. H o meS erv s. of Neb

., In c., 85 7 N.W.2d 8 16 , 83 1 (Ne b. 2 01 5)

.

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-On ap pe al

, th e Tru s t do es no t ch al le ng e th e di st ric t co ur t’s de ci si on on th e

m eri ts

. Rat he r, se iz in g on th e co ur t’s st at em en t th at th e co m pl ai nt fai le d to st at e a
cl ai m up on whi ch rel ie f can be gr an te d, th e Trus t arg ue s th e co ur t erre d pr oc ed ur al ly
by go in g b ey on d t he Trus t’s wel l-p le ad ed cla im of to rti ou s in te rfer en ce in gr an ti ng

U.S. Ban k a Ru le 12 (b )(6 ) di sm is sa l. Tho ug h th e pr oc ed ur al pr in ci pl e is so un d, th e

co nt e n t i o n i n th is cas e is no t m erel y wit ho ut m eri t, it is fri vo lo us

. U.S. Ban k

ex pl ic it ly m ov ed fo r su m

m ary jud gm en t an d su bm it te d su pp or ti ng do cu m en ts tha t th e

co ur t co ns i de red wit ho ut ob jecti on

. The di st ric t co ur t’s Mem or an du m an d Ord er

st at ed th at it was gr an ti n g s u m m ary jud gm en t an d id en ti fie d th e do cu m en ts fro m Meyer I an d th e Meyers’ ba nk ru pt cy pr oc ee d i n gs on whi ch th e co ur t was rel y in g.

W he n t he Trus t m ov ed for reco ns id erat io n, ar gu in g t he co ur t had fai le d to co ns tru e

th e co m pl ai nt li be ral ly an d acce pt al l al le ga ti on s as tru e, th e di st ric t co ur t de ni ed th e

m ot io n i n a se co nd Mem or an du m an d Ord er, ex pl ai ni ng th at it s “ gr an t o f su m m ary jud gm en t in fav or of th e Ban k was go ve rn ed by Fed

. R. Ci v. P. 56 be cau se th e Co ur t

co ns id ered m at te rs ou ts id e th e pl ead in gs , a nd al l p art ie s were gi ve n an op po rtu ni ty

to pr es en t m at eri al p e r t i n e n t t o th e m ot io n.” The re was no pr oc ed ur al erro r. The

co ur t’s g ran t o f su m

m ary jud gm en t i s af

fir m ed

.

II . The Rul e 1 1 S an cti on

The di st ric t co ur t gr an te d U.S. Ban k’s m ot io n fo r sa nc ti on s, co nc lu di ng th e

Trus t’s to rti ou s in te rfer en ce cl ai m vi ol at ed Ru le 11 (b )(2 ) an d (3 ) of th e Fed eral

Ru le s of Ci vi l Pr o c e du re. The cl ai m was fri vo lo us an d ve xa ti ou s be cau se , whi le

b r o u g h t i n t he na m e of th e Trus t, un de r Neb ras ka la w “ a tru st is no t a le ga l

pe rs on al it y ” an d th e tru st ees -- he re, th e Meyers, th e un su cces sf ul pl ai nt iff

s in Meyer

I -- were “ th e pr op er pe rs on [s ] to su e or be su ed on be ha lf of su ch tru st .” Bac k Acres

Pu re Trus t v. Fah nl an de r, 44 3 N.W .2d 60 4, 60 5 (Neb . 1 98 9)

. The co ur t im po se d a $5 ,00 0 s an ct io n a ga in st th e Tru st an d i ts att or ne y s, joi nt ly and sev eral ly.

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-O n a p p e a l

, th e Trus t arg ue s th at it s cl ai m was no t fri vo lo us

. Bec au se tru st s

ha ve be en al lo wed to ap pe ar as se pa rat e en ti ti es in ot he r Neb ras ka an d Eig ht h Ci rcu it

cas es , th e cl ai m was ba se d up on a reas on ab le ex te ns io n of exi st in g law and was no t

“ so ba s e l e s s as to warra nt Ru le 11 sa nc ti on s.” Exe c. Air Tax i Co rp

. v. Ci ty of

Bi sm arck

, 51 8 F.3 d 56 2, 57 1 ( 8t h Ci r. 20 08 ). In ad di ti on , th e Trus t as se rts

, U.S.

Ban k w a i v e d a ny ob

jecti on to th e cl ai m be in g br ou gh t in th e na m e of th e Trus t by

rem ov in g th e act io n and se ek in g a di sp os it io n on th e m eri ts

. U.S. Ban k rep li es th at

a sa nc ti on was pr op erl y im po se d be cau se th e two act io ns aro se ou t of th e sa m e

nu cl eu s of op erat iv e fact s, th e Meyers pu rs ue d th e cl ai m s in di vi du al ly in Meyer I, th e Meyers as tru st ees an d gra nt or s of th e rev oc ab le Trus t con tro ll ed th e Trus t’s abi li ty

to as se rt it s cl ai m in ei th er act io n, an d th eref or e th e Trus t a nd it s at to rn ey s “ ha d to

kn ow” th at th is act io n was ba rred by Mey er I.

“ W e rev ie w th e di st ric t co ur t’s im po si ti on of sa nctio ns fo r ab us e of di sc ret io n,”
gi vi ng “ su bs ta nt ia l de fere nc e to th e di st ric t co ur t’s de te r mi n a t i on as to whe th er

s a n c t i on s are warra nt ed be cau se of it s fam il ia rit y wit h th e cas e an d co un se l

in vo lv ed .” W il lh it e v. Co ll in s, 45 9 F.3 d 86 6, 86 9 (8 th Ci r. 20 06 ); se e Co ot er & Gell

v. Hart m arx Co rp ., 49 6 U.S. 38 4, 40 5 (1 99 0)

. W e ha ve re p e a t ed ly ap pr ov ed

sa nc ti on s in cas es whe re pl ai nt iff s at te m pt ed to ev ad e th e cl ear pr ecl us iv e effe ct of

e a r l i e r ju d gm en ts

. See W il lh it e, 45 9 F.3 d at 86 9; Pro f’l Mg m t. Ass oc s., In c. v

. KPMG LL P

, 34 5 F.3 d 10 30

, 10 32 -3 3 (8 th Ci r. 20 03 ); Lan ds cap e Pro ps ., In c. v.

W hi se nh un t, 12 7 F.3 d 67 8, 68 2- 84 (8 th Ci r. 19 97 ); Kin g v. Hoo ve r Gro up , In c., 95 8

F.2 d 21 9, 22 3 (8 th Ci r. 19 92 ). In th is cas e, th e Meyers rep ack ag ed th ei r pr io r

un su cces sf

ul la wsu it un de r a di ffer en t cau se of act io n, us in g th ei r rev oc ab le Trus t as

p l a i n t i f f an d fil in g th e act io n in st at e co ur t. The co nt en ti on th at th e Trus t was t h e

own er an d op erat or of th e Meyers’ swi ne pr od uc ti on bu si n e s s w a s co nt rad ic te d by

fil in gs in Meyer I an d in th e Meyers’ ba nk ru pt cy pr oc eed in g. Oth er ev id en ce in th e

reco rd co nf

irmed th at th ey op erat ed th e bu si ne ss an d de al t pe rs on al ly wit h it s le nd er

an d ve nd or s. The ci rcu m st an ces , th ou gh un us ua l, are no t un li ke th os e in Kou nt ze ex
rel

. Hit ch co ck Fo un d. v. Gain es , 53 6 F.3 d 81 3, 81 9 (8 th Ci r. 20 08 ), whe re we

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-affi rm ed th e im po si ti on of sa nc ti on s whe n a so n as se rte d vi rtu al ly id en ti cal cl ai m s as

th os e un su cces sf

ul ly as se rte d by hi s fat he r, a co -tr us te e. W e co nc lu de th at th e di st ric t

co u r t d id no t ab us e it s di sc ret io n in im po si ng a m on et ary sa nc ti on th at was
si gn ifi can tl y le ss th an th e at to rn ey s’ fe es an d ex pe ns es in cu rred by U.S. Ban k in

de fen di ng th e su it . See Fed . R. Civ . P. 11 (c)( 4)

.

In it s Rep ly Bri ef, th e Trus t arg ue d fo r th e fir st ti m e th at th e di st ric t co ur t was
wit ho ut po wer to im

po se a Ru le 11 sa nc ti on fo r th e fil in g of a fri vo lo us co m pl ai nt in

st at e co ur t. Co ns is te nt wit h th ei r pa tt ern of m is rep res en ti ng fact s an d l a w t o t h i s

co ur t, th e Trus t’s at to rn ey s fai le d to di sc lo se th at al l th e cas es th ey ci te d in su pp or t

of th is co nt en ti on pr ed at ed a 19 93 am en dm en t to Ru le 11 (b ) cl ari fy in g th at sa nc ti on s

m ay be im

po se d fo r “ la te r ad vo c a t i n g ” a s t at e co ur t co m pl ai nt aft er th e cas e is

rem ov ed

. See Bu st er v. Grei se n, 10 4 F.3 d 11 86

, 11 90 n.4 (9 th Ci r. 19 97 ). By sa vi ng

th is arg um en t un ti l th ei r Rep ly Bri ef, co un se l ga ve U.S. Ban k no op po rtu ni ty to he lp

th e co ur t by po in ti ng ou t th e c r u ci al Ru le 11 am en dm en t. Bec au se co un se l’s

de cep ti on is rel ev an t to th e qu es ti on whe th er to im po se a Ru le 38 sa nc ti on , we reject

th e u nt im el y

co nt en ti on as m eri tl es s, ra th er t ha n d ecl in in g t o c on si de r it

.

IV. Appel la te Sa ncti on s

On ap pe al

, U.S. Ban k m ov ed fo r im po si ti on of sa nc ti on s, se ek in g an award of

it s f u l l at to rn ey s’ fees on ap pe al an d do ub le co st s. U.S. Ban k arg ue d th at th e

“ pu rp or te d is su es as se rte d by [th e Trus t] are ba se d up on ou tri gh t m is st at em en ts of th e
di st ric t co ur t’s o rd ers .” The Tru st ’s att or ne y s re sp on de d, arg ui ng th e ap pe al rai se d

“ se r i o u s an d su bs ta nt ia l is su es an d qu es ti on s ab ou t whe th er th e Dis tri ct Co ur t ha d

erre d in d e te rm in in g th e in va li di ty of [th e Trus t’s] st at e co ur t cl ai m of to rti ou s

in te rfer en ce.” Ru le 38 of th e Fed eral Ru le s of App el la te Pro ced ur e pr ov id es th at a

co ur t of ap pe al s m ay “ award jus t da m ag es an d si ng le or do ub le co st s to th e ap pe ll ee”

if i t d et erm in es an ap pe al is fri vo lo us

.

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-Th e M o ti on fo r San ct io ns is fla wed fo r an ob vi ou s reas on no t ad dr es se d b y

ei th e r pa rty -- th e Trus t’s ap pe al of th e di st ric t co ur t’s sa nc ti on s or de r, th ou gh

un su cces sf

ul

, was no t fri vo lo us

. Dis cret io na ry or de rs im po si ng sa nc ti on s on a pa rty

or it s at to rn ey s are of

te n ap pe al ed an d are gi ve n care fu l r e v i e w by th is co ur t. Fo r

ex am pl e, in Kou nt ze, we ob se rv ed th at “ Ru le 11 m ot io ns fo r sa nc ti on s in vo lv e fact

in te ns iv e, cl os e cal ls .” 53 6 F .3d at 8 19 (qu ot at io n om it te d)

. Kou nt ze was th e on ly

cas e U.S. Ba n k c i te d in it s ap pe al br ie f in whi ch we up he ld a rel it ig at io n sa nc ti on

im po se d up on a di ffer en t pa rty. In th e di st ric t co ur t, U.S. Ban k fil ed a mo t i o n f o r

sa nc ti on s, whi ch th e co ur t gr an te d. By as ki ng th e di st ric t c o u r t t o im po se a
di sc ret io na ry rem ed y be y on d di sm is sa l of th e Trus t’s cl ai m , U.S. Ban k en su red it

wou ld ne ed to in cu r at to rn ey s’ fees de fen di ng an ap pe al . The m ot io n fo r a Ru le 38

award of f

ees is de ni ed

.

On th e ot he r ha nd

, U.S. Ban k’s Mo ti on fo r San ct io ns accu rat el y de sc rib ed th e

Trus t’s ap pe ll at e at ta ck on th e di st ric t co ur t’s gr an t of su m m ary jud gm en t di sm is si ng

th e cl ai m of to rti ou s in te rfer en ce. As we ha ve no te d, th e Trus t di d no t arg ue th e

m eri ts on ap pe al

. In st ead

, it arg ue d th e di st ric t cou rt pro ced ur al ly erre d in gr an ti ng

a Ru le 12 (b )(6 ) di sm is sa l. U.S. Ban k co rrec tl y res po nd ed th at th e di st ric t co ur t st at ed

cl earl y in it s in it ia l or de r th at it was gr an ti ng su mmar y ju dg men t

, an d th en reaf fir m ed

in it s de ni al of reco ns id erat io n th at th e “ Co ur t’s gr an t of su m m ary jud gm en t in fav or

of th e Ban k was go ve rn ed by Fed

. R. Ci v. P. 56 .” Non et he le ss , in it s Rep ly Bri ef an d

at or al arg um en t, th e Trus t pe rs is te d in fri vo lo us ly m is rep res en ti ng th e di st ric t co ur t’s

ru li ng s. In ad di ti on , a ne w co nt en ti on in th e Trus t’s Rep ly Bri ef f l a g r a n tl y

m is rep res en te d go ve rn in g la w. Thu s, th ou gh no t “ fri vo lo us a s f i le d,” th e Trus t’s

ap pe al fal ls wit hi n th e di st res si ng cat eg or y of “ fri vo lo us as arg ue d.” “ Fri vo lo us ne ss 3

is de te rm in ed

. . . no t in th e ab st ract bu t in rel at io n to th e arg um en ts act ua ll y m ad e by

“ An ap pe al is

. . . ‘friv ol ou s as arg ue d’ whe n an ap pe ll an t ha s no t de al t fai rly 3

wit h th e co ur t

, h as si gn ifi can tl y m is rep res en te d th e la w or fact s, or ha s ab us ed th e jud ic ia l p ro ces s b y

rep eat ed ly lit ig at in g t he same iss ue in th e sa m e co ur t.” Abb s v. Pri nc ip i, 2 37 F.3d 13 42 , 13 45 (Fed . Cir . 20 01 ) (q uo ta ti on om it te d)

.

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-th e ap pe ll an t.” And ers on v. St eers , Su ll iv an , McNa m ar & Ro ge rs , 99 8 F.2 d 49 5, 49 6

(7 th Cir . 19 93 ).

Ru le 38 sa nc ti on s m ay be im po se d for app eal s th at are “ fri vo lo us as arg ue d.”

The di ffi cu lt qu es ti on is whe th er t o i m po se a sa nc ti on in th is cas e. U.S. B an k do es

no t de se rv e ev en a pa rti al gr an t of it s at to rn ey s’ fees on ap pe al ; most of it s br ie f

un ne ces sa ril y rear gu ed th e m eri ts of th e di st ric t co ur t’s ru li ng whe n th e Trus t rai se d

on ly a fri vo lo us pr oc ed ur al is su e on ap pe al

. Howev er, an ap pe al th at is fri vo lo us as

arg ue d “ im

po se s co st s no t on ly up on th e pa rty fo rced to de fen d it

, bu t al so up on th e

pu bl ic who se ta xe s su pp or ti ng th is co ur t a n d it s st aff are was te d on fri vo lo us

ap pe al s.” Abb s, 23 7 F.3 d at 13 46 (q uo ta ti on om it te d)

. In th es e ci r c u ms t a n c es , we

co nc lu de th at an award of do ub le co st s on ap pe al is an ap pr op ria te Ru le 38 sa nc ti on

.

The jud gm en t of th e di st ric t co ur t is a ffi rm ed

, wit h do ub le co st s award ed to

ap pe ll ee U.S. Ban k.

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