United States Court of Appeals

For the First Circuit

No. 12-1302

HARRIET J. BALERNA,

Plaintiff,

v.

CARMEL A. GILBERTI; MELVIN L. LEWIS, individually and as

Executor of the Estate of Helen Lewis; EDWARD F. LEWIS,

individually and as Executor of the Estate of Helen Lewis,

Defendants, Appellees.

JOSEPH J. COPPOLA,

Interested Party, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge]

Before

Howard, Circuit Judge,

Souter, Associate Justice, *

and Stahl, Circuit Judge.

Robert J. Muldoon, Jr., with whom Matthew C. Moschella,

Hon. David H. Souter, Associate Justice (Ret.) of the Supreme *

Court of the United States, sitting by designation.
Jessica G. Kelly and Sherin and Lodgen LLP were on brief, for

appellant.

Michael J. Markoff for appellees.

February 27, 2013
HOWARD, Circuit Judge. Joseph Coppola, an attorney,

appeals a decision of the United States District Court for the

District of Massachusetts admonishing him for unprofessional

conduct. Finding no abuse of discretion, we affirm.

I. Background

This appeal arises from Coppola's behavior during a case

in which he made accusations against opposing counsel. To explain

the reasons for the district court's admonishment, we briefly

review the background of the case. The estate of Helen Lewis held

the senior mortgage on a parcel of real property, and Harriet

Balerna (whom Coppola would eventually represent) held the junior

mortgage. When the mortgagor defaulted, Helen Lewis's husband and

executor Melvin Lewis hired an attorney, Carmel Gilberti, to

foreclose on the property. In each of two foreclosure auctions,

Ruth Drowne placed the highest bid but could not obtain financing,

forfeiting $30,000 in deposits she made. The property was

eventually sold to Edward Lewis, Melvin's son and another executor

of Helen Lewis's estate, who had placed the second highest bid at

the second auction. Ruth Drowne then filed suit in Massachusetts

state court to set aside the foreclosure sale and retrieve the

deposits that she had forfeited. Gilberti successfully defended

the suit. After Gilberti received attorneys' fees for defending

the suit, the remaining proceeds of the foreclosure sale were equal

only to a fraction of Balerna's junior mortgage.

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Because the proceeds were so meager, Coppola filed suit

on Balerna's behalf in the United States District Court for the

District of Massachusetts against Gilberti, Melvin Lewis, and

Edward Lewis on four counts:

1. Accounting for the proceeds of the foreclosure sale.

2. Declaratory judgment regarding the parties' rights to

those proceeds.

3. Conversion of the proceeds, including unjustified

payment of Gilberti's attorney's fees in the Drowne case.

4. Breach of fiduciary duty, again including the payment

of Gilberti's attorney's fees.

The defendants filed a motion to dismiss, which the court

denied in a minute order. After months of discovery, the case

proceeded to a bench trial, at which Coppola questioned Gilberti

extensively. Three of Coppola's areas of inquiry are relevant on

appeal:

Conversion

The complaint filed by Coppola on behalf of Balerna

accused Gilberti of wrongfully converting the foreclosure proceeds

by using some of them to defend the Drowne suit, in which Gilberti

was sued individually. Despite the caption of that case, however,

Drowne had sued Gilberti only in her capacity as the estate's

attorney. The mortgage agreement, moreover, clearly allowed the

mortgagee to participate in legal proceedings affecting the

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mortgaged property, which undoubtedly included the Drowne suit. 

Balerna v. Gilberti, 281 F.R.D. 63, 67 (D. Mass. 2012). At the

beginning of the trial, the court warned Coppola that he risked

being assessed costs if he could not substantiate the conversion

allegation. Coppola offered no evidence that the decision to

defend the Drowne suit was unjustified; in fact, the costs and fees

associated with that suit were less than the $30,000 in forfeited

deposits that Drowne was attempting to recover. The court later

concluded that Coppola had accused Gilberti of serious misconduct

without any evidence.

Usury

In a motion to disqualify Gilberti, as well as in his

opposition to the defendants' motion to dismiss, Coppola invoked

the Massachusetts criminal usury statute, which prohibits a lender

from taking "directly or indirectly, interest and expenses the

aggregate of which exceeds an amount greater than twenty per centum

per annum upon the sum loaned." Mass. Gen. Laws ch. 271, § 49(a). 

Based on this statute, Coppola argued that Gilberti's fees were

excessive because they exceeded twenty percent of the foreclosure

proceeds. On the first day of trial, the court told Coppola that

this was a losing argument: "I'll tell you right now, the usury

argument is a total nonstarter. I'll look at it, but I have had it

argued to me before. It's never worked. It's not going to work

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this time either." Nevertheless, Coppola questioned Gilberti in a

way that insinuated that she had committed criminal usury:

Q[:] Are you aware that [payments made on the

loan were] greater -- principal and interest

greater than 20 percent per year?

. . . .

MR. COPPOLA: The cause of action is that the

payments were excessive, your Honor. It is --

as a matter of law, it is illegal to charge

more than 20 percent per year.

After much discussion with Coppola, the court cut off this line of

questioning: "[The usury statute] doesn't have anything to do with

this witness. Maybe by analogy you can argue it in your proposed

findings, but this is not a claim that you advanced against

[Gilberti] or against anyone."

False Statements

Based on discrepancies between the Lewis estate's records

and information that Gilberti provided during discovery, Coppola

accused Gilberti at trial of providing false information: "The

fact is, we asked for an accounting of those proceeds. We were

provided false information. We were provided false information

under oath. We were provided false information as to the answers

to interrogatories." Coppola pressed this attack in his

questioning of Gilberti:

Q[:] You did file an accounting. Yes, you

did. But you made false statements, did you

not?

. . . .

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THE COURT: Very strong words, Mr. Coppola. 

You better be very careful.

THE WITNESS: I am really tired of your

accusations, Joe. I'm going to tell you that

right now.

THE COURT: Let's –

THE WITNESS: I'm a good attorney. I've done

nothing wrong.

(Whereupon, the witness breaks down.)

After the trial, the court entered judgment for the

defendants and issued an order to show cause why Coppola should not

be disciplined for the conduct described above. After receiving

briefing, the court held that "sanctions are warranted" because of

"the heedless and unnecessary damage inflicted on Attorney

Gilberti's reputation." Balerna, 281 F.R.D. at 70. The court

admonished Coppola under Federal Rule of Civil Procedure 11(b) for

his conduct, but it did not impose any sanction beyond the

admonishment itself. Coppola appealed.

II. Analysis

We review for abuse of discretion a decision of the

district court imposing sanctions under Rule 11. Cooter & Gell v.

Hartmarx Corp., 496 U.S. 384, 405 (1990), superseded in part on

other grounds by Fed. R. Civ. P. 11(c). As the standard implies,

we give deference to the court's decision. Méndez-Aponte v.

Bonilla, 645 F.3d 60, 68 (1st Cir. 2011). Here, the district court

did not abuse its discretion in admonishing Coppola for the

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accusations he made concerning conversion, usury, and false

statements.

Conversion

Coppola's claim that Gilberti converted funds was never

supported by any evidence; the mortgage agreement clearly permitted

Gilberti to spend foreclosure proceeds to defend the Drowne suit,

and "any reasonable attorney would have understood that although

Gilberti had been named in her individual capacity in the [Drowne]

action, her presence as a defendant was related solely to her

capacity as the attorney for the Lewis Estate." Balerna, 281

F.R.D. at 67. These facts should have been obvious to Coppola

before trial. Nevertheless, Coppola allowed this claim to proceed

to judgment while impugning Gilberti's integrity. Coppola claims

that sanctions were not warranted because he relied in good faith

on In re Hilson, 863 N.E.2d 483 (Mass. 2007), a case in which an

attorney was disciplined for sending funds to his client when those

funds were supposed to be held in escrow for another party. See

Protective Life Ins. Co. v. Dignity Viatical Settlement Partners,

L.P., 171 F.3d 52, 58 (1st Cir. 1999) ("But though that claim

lacked merit, it was not so plainly unmeritorious as to warrant the

imposition of sanctions."). Coppola could not reasonably have

relied on this case because, unlike the attorney in Hilson,

Gilberti had an explicit contractual right to spend the foreclosure

proceeds as she did. See Hilson, 863 N.E.2d at 491.

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Usury

Coppola's allegation that Gilberti violated the criminal

usury statute was frivolous. Coppola claims that he reasonably

relied on two cases, Begelfer v. Najarian, 409 N.E.2d 167 (Mass.

1980), and Focus Investment Associates, Inc. v. American Title

Insurance Co., 992 F.2d 1231 (1st Cir. 1993). In Begelfer, the

Supreme Judicial Court of Massachusetts ordered the recomputation

of attorneys' fees payable under a contract that violated the usury

statute for reasons unrelated to attorneys' fees. 409 N.E.2d at

175 n.16. Begelfer has no application here because the usury

statute applies to lenders making loans, not to attorneys such as

Gilberti, charging fees. As the court pointed out to Coppola, if

his interpretation of the usury statute were correct, any attorney

charging a one-third contingency fee in a foreclosure matter would

be guilty of criminal usury. Focus Investment Associates involved

a "consulting fee" associated with a loan, which may have been a

pretext for the lender to collect an unlawful amount of interest. 

992 F.3d at 1240. Here, there is no question that the payments to

Gilberti were legitimate expenses of litigation that benefitted the

Lewis estate. Therefore, Coppola could not reasonably have relied

on these cases.

False Statements

At trial, Coppola questioned Gilberti about her alleged

false statements so aggressively that she broke down on the stand.

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Coppola claims that three allegedly false statements justified this

questioning. First, Gilberti filed an affidavit in the Drowne suit

stating that she had received funds to purchase the foreclosed

property from Edward Lewis. In fact, her firm had received about

half of the funds, while the estate received the rest. Second, in

responding to a request for admission, Gilberti stated that her

firm held the foreclosure sale proceeds in escrow. This was not

correct. At trial, another attorney for the Lewises explained that

he interpreted this request to ask whether Gilberti could account

for the proceeds, and that if there was a mistake in the answer, he

was responsible. The court appeared to accept this explanation. 

Third, Gilberti's original accounting credited the estate with a

$10,000 payment that was never made. Gilberti corrected the

accounting after Coppola pointed it out to her.

In the end, the court apparently decided that Gilberti's

statements did not amount to misconduct. Although the court's

decision to impose sanctions on Coppola based on these accusations

is a closer question than it is for the accusations of conversion

and usury, it did not constitute an abuse of discretion; Coppola

turned what seemed to be innocent misunderstandings into claims of

perjury.

Finally, Coppola makes a blanket challenge to his

admonishment under Federal Rule of Civil Procedure 11(b): While

the court cited Coppola's conduct at trial as the reason for his

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admonishment, Rule 11(b) allows sanctions only for misconduct in

presenting "a pleading, written motion, or other paper--whether by

signing, filing, submitting, or later advocating it." The rule

cannot be used to punish conduct at trial. Lamboy-Ortiz v.

Ortiz-Vélez, 630 F.3d 228, 245 (1st Cir. 2010). With respect to

Coppola's claims of conversion and criminal usury, his argument

misses the mark because he did raise these claims in submissions to

the court, and he continued to advocate them during the trial even

after clear warnings by the judge. But Coppola appears not to have

alleged in "a pleading, written motion, or other paper" that

Gilberti made false statements. Although the court was not

entitled to impose sanctions for this conduct under Rule 11(b), it

would not have been an abuse of discretion for the court to invoke

its inherent power to discipline Coppola. See Chambers v. NASCO,

Inc., 501 U.S. 32, 44-45 (1991) ("A primary aspect of [a federal

court's discretion to exercise its inherent powers] is the ability

to fashion an appropriate sanction for conduct which abuses the

judicial process."). Once the court concluded that the unremitting

accusations of falsehoods were groundless, it was entitled to

sanction counsel for pressing them. Therefore, no prejudice to

Coppola resulted from the district court's reliance on Rule 11(b).

III. Conclusion

We affirm the district court's decision.

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