In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 04-4277

KEVIN A. DAL POZZO,

Plaintiff-Appellee,

v.

BASIC MACHINERY COMPANY, INCORPORATED

and FANUC ROBOTICS AMERICA, INCORPORATED,

DefendantsThird-Party Plaintiffs-Appellees,

v.

RICHARDS BRICK COMPANY,

Third-Party Defendant-Appellant,

and

APPEAL OF:

GREGORY C. VACALA, Attorney.

____________

Appeal from the United States District Court

for the Southern District of Illinois.

No. 03 C 138—G. Patrick Murphy, Chief Judge.

____________

ARGUED NOVEMBER 8, 2005—DECIDED SEPTEMBER 6, 2006

____________

Before CUDAHY, KANNE, and SYKES, Circuit Judges.
2 No. 04-4277

SYKES, Circuit Judge. This appeal challenges an award

of costs and attorneys’ fees imposed against Attorney

Gregory Vacala as a sanction for his postsettlement obstructionism that necessitated an otherwise unnecessary motion

to enforce the parties’ settlement agreement. We agree with

the district court that Vacala’s conduct was sanctionable.

Moreover, his appeal is frivolous. We order Vacala to pay

reasonable attorneys’ fees and double costs as a sanction

pursuant to Rule 38 of the Federal Rules of Appellate

Procedure.

I. Background

Plaintiff Kevin Dal Pozzo was injured on the job when

something went wrong with an automated brick conveyor

system he was working on at his place of employment,

Richards Brick Company. Dal Pozzo sought workers’

compensation from Richards Brick and sued Basic Machinery Co., Inc., which built the conveyor system, and Fanuc

Robotics America, Inc., which provided the parts that

malfunctioned. Basic and Fanuc filed a third-party complaint for contribution against Richards Brick.

Richards Brick was represented in this action by two

attorneys: Vacala, whose firm is in Chicago, and Attorney

Farrah Anderson, whose firm is in Carbondale, Illinois.

Vacala took the position that Richards Brick was an insured

under the policies of Basic and Fanuc, and sent a letter

purporting to tender its defense to the insurance companies

for Basic and Fanuc. Basic’s insurer declined the tender;

Fanuc’s insurer never responded.

Eventually the parties reached an oral settlement and

notified the district court that the case was settled. Chief

Judge G. Patrick Murphy entered an order dismissing the

action with prejudice, but preserving the right to reopen if

the settlement was not consummated. The first draft of the

parties’ settlement agreement stated in relevant part:
No. 04-4277 3

DAL POZZO, BASIC, FANUC . . . and RICHARDS

desire to compromise, settle and conclude all the

various disputes, controversies, claims and causes of

action of any kind which DAL POZZO or any person,

firm, corporation or other entity have, may have or claim

to have, directly or indirectly, against BASIC, FANUC,

. . . RICHARDS, and/or their insurers, or which in any

way relate to or derive from, directly or indirectly, the

claims of DAL POZZO against all others, including, but

not limited to, those matters set forth in or in any way

related to the various pleadings filed in the DAL

POZZO litigation, and any and all other potential

causes of action, claims and/or controversies which DAL

POZZO has, may have or could have against BASIC,

FANUC, . . . and/or RICHARDS for injuries which DAL

POZZO allegedly sustained at any time, or for damages

which DAL POZZO may have sustained at any time.

(Emphasis added).

Attorney Anderson represented Richards Brick throughout the settlement negotiations and approved the draft

language. In the meantime, and contrary to the foregoing

terms of the draft settlement agreement, Vacala continued

to press Fanuc’s insurer about his tender of Richards

Brick’s defense. Basic and Fanuc then inserted the names

of their insurance companies into the written settlement

agreement (among other immaterial modifications to the

agreement).

When Vacala got wind of this modification, he refused

to sign the settlement agreement on behalf of Richards

Brick. He maintained that the new draft required Richards

Brick to release its claims against the insurers, while the

first draft did not. The reason for this position is a mystery—the language of the first draft, quoted above, plainly

referred to Basic’s and Fanuc’s insurers, and the new draft

simply inserted their names. Vacala asserted that Richards

Brick had agreed to settle only liability issues, not any
4 No. 04-4277

1 Although Fanuc did not include a request for costs and fees in

its motion to enforce the settlement (as Dal Pozzo and Basic had),

Fanuc’s lawyer stated at the beginning of the motion hearing that

the parties were seeking costs and fees as a sanction for Vacala’s

conduct in blocking consummation of the settlement. The district

judge apparently construed the lawyer’s statement as an oral

motion for costs and fees. This was appropriate under the

circumstances; Attorney Anderson, Richards Brick’s counsel, was

in court and had proper notice and opportunity to respond, which

is all that is required. Larsen v. City of Beloit, 130 F.3d 1278, 1286

(7th Cir. 1997).

insurance coverage claims it had against the defendants’

insurers. The attorneys for Basic and Fanuc believed

Vacala’s claims for coverage under their clients’ policies

were utterly meritless; they pointed out that Vacala had

copies of all the policies involved and none even remotely

gave Richards Brick the status of an insured. Indeed,

Richards Brick did not even have contractual relationships

with either Basic or Fanuc. Basic subcontracted with

Harrop Industries, Richards Brick’s general contractor (not

a party to this appeal), and Fanuc contracted with Basic to

provide parts.

Frustrated by the delay, Dal Pozzo’s counsel e-mailed

Vacala warning him that if he persisted in blocking completion of the settlement, a motion to enforce the agreement

would become necessary and costs and fees associated with

the motion would be sought. Vacala continued to obstruct

consummation of the settlement, and Dal Pozzo, Basic, and

Fanuc all filed motions to enforce the settlement agreement. Dal Pozzo and Basic also sought an award of costs

and fees.1

 Chief Judge Murphy held a hearing on the

motions, which Vacala did not attend; he sent Anderson

instead. Each of the lawyers was sworn in and testified to

the events surrounding the settlement. The lawyers for

Basic and Fanuc also explained that Richards Brick could
No. 04-4277 5

not possibly be covered by their clients’ insurance policies

in this case. Anderson, for Richards Brick, did not dispute

that contention, nor did she dispute that she had approved

the language of the draft settlement agreement. There was

no disagreement among the attorneys that the reason the

settlement had not been concluded was that Vacala insisted

on pursuing baseless coverage claims against Basic’s and

Fanuc’s insurers.

Chief Judge Murphy ordered the settlement enforced.

Clearly displeased that Vacala had not even bothered to

appear at a hearing occasioned by his dilatory behavior, the

chief judge also granted Basic’s and Fanuc’s motions for

costs and fees associated with the motion and hearing—about $2000 each. The judge held it was “clear” that

“this case was resolved” and Vacala had “not articulated

any possible way that there would be any possible coverage

issues that would entitle him to any type of indemnity.” The

judge observed that “we’ve . . . got a rule around here. If you

start the fight you have to come to the fight.” Vacala was

the “prime mover” behind the stalled settlement, the judge

noted, yet he failed to show up at the hearing to defend his

position. The sanctions were imposed against Vacala, not

Richards Brick.

Vacala moved to alter or amend the judgment pursuant

to Rule 59 of the Federal Rules of Civil Procedure. He

argued that the other parties had changed the terms of

the settlement and that Rule 11 of the Federal Rules of

Civil Procedure did not justify the sanctions against him.

Chief Judge Murphy held another hearing, this time by

telephone. He reiterated that the parties—including

Richards Brick, through Attorney Anderson—had agreed to

settle all claims and it was Vacala who later sought to

change the terms of the settlement. The chief judge also

stuck to his decision that sanctions were justified because

Vacala’s behavior had unnecessarily prolonged the litigation. Vacala had forced opposing counsel to travel to East
6 No. 04-4277

St. Louis from Chicago for a hearing Vacala did not even

attend, a hearing occasioned by an indefensible (and

undefended) reading of the initial settlement. Vacala had

his chance to explain why his position on insurance coverage was meritorious and he failed to do so.

II. Analysis

Vacala’s opening brief on appeal challenged both the

sanctions imposed against him and the district court’s

enforcement of the settlement agreement. In his reply brief,

however, he swore off the second issue no fewer than three

times. Then, at oral argument, he purported to reassert his

challenge to the enforcement of the settlement agreement.

(We can see why opposing counsel and the district court

became frustrated with Vacala’s litigation conduct.) Vacala

has conceded the settlement issue; we will not address it.

Vacala contends the district court improperly sanctioned him under Rule 11. Some of the particulars of his

argument are frivolous (for instance, his contention that

Chief Judge Murphy did not explain the sanctionable

conduct), but as a general matter, it is true that Rule 11

procedures were not followed here. That is because Vacala

was not sanctioned under Rule 11.

Rule 11, of course, covers a particular type of attorney

misconduct associated with the signing of pleadings,

written motions, and other papers filed with the court, none

of which were the vehicle of Vacala’s misbehavior. FED. R.

CIV. P. 11; see also Christian v. Mattell, 286 F.3d 1118, 1131

(9th Cir. 2002); Milltex Indus. Corp. v. Jacquard Lace Co.,

55 F.3d 34, 37 n.5 (2d Cir. 1995). No one ever mentioned

Rule 11 until Vacala, in his Rule 59 motion to alter or

amend the judgment, said he assumed the sanctions were

imposed under Rule 11.

It is unfortunate that none of the parties specified the

statute or rule under which they were pursuing sanctions,
No. 04-4277 7

and also that the district court neglected to cite the specific

basis for the award of attorneys’ fees in this case. Chief

Judge Murphy commented, during the hearing on Vacala’s

Rule 59 motion, that the sanctions were the result of a

motion under Rule 11. We think he simply misspoke. He

was responding to Vacala’s argument that the sanctions

were improperly imposed sua sponte rather than pursuant

to motion. The parties had in fact moved for their costs and

fees, and the chief judge mistakenly characterized these as

Rule 11 motions. That detail was incorrect, but the gist of

the chief judge’s observation was not: Vacala had ample

notice that his opponents were seeking sanctions and he

was given an opportunity to respond, which is all that was

required in this situation. See, e.g., Jolly Group, Ltd. v.

Medline Indus., Inc., 435 F.3d 717, 720 (7th Cir. 2006);

Johnson v. Cherry, 422 F.3d 540, 549 (7th Cir. 2005);

Larsen v. City of Beloit, 130 F.3d 1278, 1286 (7th Cir. 1997);

Kapco Mfg. Co. v. C&O Enters., Inc., 886 F.2d 1485, 1494-95

(7th Cir. 1989). At any rate, the chief judge did not mention

Rule 11 until Vacala sent the discussion down that wrong

path after he was sanctioned, during the Rule 59 motion.

The chief judge’s slip does not change the nature of the

sanctions imposed.

It would have been better had the parties and the district

court explained the legal basis for the sanctions from the

beginning. An advocate’s job is to make it easy for the court

to rule in his client’s favor; at a minimum, this means

stating the legal grounds for a motion. When applying for

sanctions for litigation misconduct, a party should identify

the authority being invoked for the award; the district court

should explain the authority under which the sanctions are

imposed. District courts will make clearer records if the

attorneys do their jobs as advocates.

Despite this oversight by the court and counsel, the

district court’s power to impose the sanctions in this case is
8 No. 04-4277

not in doubt. Two sources of authority fit this situation:

either 28 U.S.C. § 1927 or the inherent power of the court.

Since the inherent power of the court “is a residual authority, to be exercised sparingly” and only when other rules do

not provide sufficient basis for sanctions, Zapata Hermanos

Sucesores, S.A. v. Hearthside Baking Co., 313 F.3d 385, 390-

91 (7th Cir. 2002), we will presume these sanctions to have

been the product of § 1927. Either way, we review an award

of sanctions for an abuse of discretion, Chambers v.

NASCO, Inc., 501 U.S. 32, 55 (1991); Kapco Mfg., 886 F.2d

at 1491, and we see none here.

Section 1927 provides that “[a]ny attorney . . . who so

multiplies the proceedings in any case unreasonably

and vexatiously may be required by the court to satisfy

personally the excess costs, expenses, and attorneys’ fees

reasonably incurred because of such conduct.” Some of our

cases say either subjective or objective bad faith is a

prerequisite for awarding sanctions pursuant to § 1927, see,

e.g., Moriarty v. Svec, 429 F.3d 710, 722 (7th Cir. 2005),

while others seem to suggest otherwise, see, e.g., Hill v.

Norfolk & W. Ry. Co., 814 F.2d 1192, 1202 (7th Cir. 1987);

Westinghouse Elec. Corp. v. NLRB, 809 F.2d 419, 425 (7th

Cir. 1987). We read the cases as drawing a distinction

between subjective and objective bad faith. Subjective bad

faith, the more difficult type of bad faith to prove, is not

always necessary. Hill, 814 F.2d at 1202; Westinghouse, 809

F.2d at 425. Subjective bad faith must be shown only if the

conduct under consideration had an objectively colorable

basis. In re TCI Ltd., 769 F.2d 441, 445 (7th Cir. 1985). The

standard for objective bad faith does not require a finding

of malice or ill will; reckless indifference to the law will

qualify. Id. “If a lawyer pursues a path that a reasonably

careful attorney would have known, after appropriate

inquiry, to be unsound, the conduct is objectively unreasonable and vexatious.” Riddle & Assocs. P.C. v. Kelly, 414 F.3d
No. 04-4277 9

832, 835 (7th Cir. 2005) (quoting Kapco Mfg., 886 F.2d at

1491); see also In re TCI, 769 F.2d at 445.

Vacala’s conduct unquestionably satisfies the standard for

objective bad faith. He had nothing to do with the settlement negotiations, which were handled by his cocounsel,

Attorney Anderson. The draft settlement agreement,

approved by Anderson, eliminated any claims Richards

Brick thought it had against the insurers for Basic and

Fanuc. The parties agreed to:

conclude all the various disputes, controversies, claims

and causes of action of any kind which DAL POZZO or

any person, firm, corporation or other entity have, may

have or claim to have, directly or indirectly, against

BASIC, FANUC, . . . RICHARDS, and/or their insurers,

or which in any way relate to or derive from, directly or

indirectly, the claims of DAL POZZO against all others,

. . . . (Emphasis added.)

This language is comprehensive. Richards Brick and every

other party to the litigation released all disputes, claims,

and causes of action by any firm or corporation against

Basic or Fanuc and their insurers. When given an opportunity to tell the court why he thought this settlement

language did not abandon Richards Brick’s insurance

coverage “claims,” Vacala skipped the hearing. Any reasonably careful attorney would know not to pursue

this obviously unsound path. The district court’s conclusion

that Vacala’s conduct was sanctionable was not an abuse of

discretion.

By the time Vacala tried to defend his position at the

hearing on his Rule 59 motion, it was too late. Motions to

alter or amend judgments are no place to start giving

evidence that could have been presented earlier. Frietsch v.

Refco, Inc., 56 F.3d 825, 828 (7th Cir. 1995); see also

Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10th

Cir. 2000); Vasapolli v. Rostoff, 39 F.3d 27, 36 (1st Cir.
10 No. 04-4277

1994) (“Unlike the Emperor Nero, litigants cannot fiddle as

Rome burns.”). Litigation must sometime come to an end,

and the limit on Rule 59 motions advances that goal.

Beyond that basic point, Vacala had no reason whatsoever

to challenge his sanctions on Rule 11 grounds; it is inapplicable to these circumstances.

Vacala’s appeal is likewise frivolous. Vacala has raised

only procedural shortcomings under Rule 11; he has not

argued that his behavior was defensible. The Rule 11

argument, we have pointed out, has no objective legal basis.

Besides his baseless appeal of the sanctions, Vacala wasted

the time of opposing counsel and this court by purporting to

appeal the enforcement of the settlement, only to abandon

the issue emphatically in his reply brief. The appeal of

sanctions alone is frivolous, but the pursuit and abandonment of an appeal on the settlement issue is problematic

too. Vacala’s opponents would not have pressed their

position if they had known this appeal concerned only a

meager $4000 in sanctions; they told us so at oral argument

and filed motions for frivolous appeal sanctions under Rule

38. Vacala’s opposing counsel spent time on this appeal

because the settlement—not the sanctions—was valuable to

their clients. Vacala continues to needlessly and frivolously

multiply the proceedings in this case. Accordingly, pursuant

to Rule 38, we direct Vacala to pay his opponents’ reasonable fees and double costs on this appeal. See Hill, 814 F.2d

at 1202 (Rule 38 may be invoked where counsel makes

“objectively groundless legal arguments for which a monetary sanction is proper in order to protect this court’s ability

to serve litigants with meritorious cases and in order to

make lawyers give thoughtful consideration to whether

there are grounds for an appeal before filing an appeal.”).

AFFIRMED WITH SANCTIONS.
No. 04-4277 11

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—9-6-06