Source: https://law.justia.com/cases/federal/appellate-courts/F3/115/378/568339/
Timestamp: 2020-02-24 00:14:52
Document Index: 381522491

Matched Legal Cases: ['§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455']

Union Planters Bank, Formerly Known As Sunburst Bank,plaintiff-appellee, v. L & J Development Company, Inc., Defendant,john W. Jemison and Lynn Jemison (95-5624), Defendants-appellants,laurence D. Conn, Intervening Defendant,william M. Gotten (95-5623), Attorney-appellant, 115 F.3d 378 (6th Cir. 1997) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Sixth Circuit › 1997 › Union Planters Bank, Formerly Known As Sunburst Bank,plaintiff-appellee, v. L & J Development Compan...
Union Planters Bank, Formerly Known As Sunburst Bank,plaintiff-appellee, v. L & J Development Company, Inc., Defendant,john W. Jemison and Lynn Jemison (95-5624), Defendants-appellants,laurence D. Conn, Intervening Defendant,william M. Gotten (95-5623), Attorney-appellant, 115 F.3d 378 (6th Cir. 1997)
U.S. Court of Appeals for the Sixth Circuit - 115 F.3d 378 (6th Cir. 1997) Argued (95-5624) March 21, 1997. Submitted (95-5623) March 21, 1997. Decided May 30, 1997. Rehearing Denied July 11, 1997
The next day, March 29, 1995, Judge Turner transferred the garnishment claim remaining in case number 93-3075 to another judge " [b]ecause Sunburst Bank has been acquired by Union Planters National Bank, a banking institution with whom the presiding judge currently has substantial economic relations and because the plaintiffs in this case have requested the court to recuse itself on the remaining untried issue." J.A. at 279-80. Judge Turner noted that " [t]he parties specifically declined to request recusal on [the sanctions] issue." J.A. at 280 n.1. The Jemisons and Gotten, L & J's attorney, now appeal the sanctions order.1
28 U.S.C. § 455(b). Disqualification arising under § 455(b) cannot be waived by the parties, 28 U.S.C. § 455(e), and the judge is under a statutory duty to "inform himself about his personal and fiduciary financial interests, and make a reasonable effort to inform himself about the personal financial interests of his spouse and minor children." 28 U.S.C. § 455(c). "Financial interest" is defined in the statute as "ownership of a legal or equitable interest, however small, or a relationship as director, adviser, or other active participant in the affairs of a party." 28 U.S.C. § 455(d) (4). We review a judge's decision regarding § 455 recusal for abuse of discretion. Barclays/American Business Credit, Inc. v. Adams (In re Adams), 31 F.3d 389, 396 (6th Cir. 1994), cert. denied, 513 U.S. 1111, 115 S. Ct. 903, 130 L. Ed. 2d 786 (1995).
Careful consideration of the record before us reveals that, even after the merger, Judge Turner did not possess a direct financial interest in a party to the proceeding within the meaning of § 455(b) (4), (d) (4). The evidentiary showing regarding ownership interest is simply too speculative and contingent to support a finding that the judge or his wife owned any stock in Union Planters at the relevant time period. Furthermore, we are unable to detect "any other interest" of the judge, aside from his wife's potential stock ownership, that could have been "substantially affected" by the outcome of the sanctions motion. Thus, we have no competent basis to conclude that Judge Turner possessed the requisite financial or other interest necessary to invoke automatic disqualification under § 455(b) (4).2
Pursuant to § 455(a), a judge must recuse himself or herself "where a reasonable person with knowledge of all the facts would conclude that the judge's impartiality might reasonably be questioned." United States v. Dandy, 998 F.2d 1344, 1349 (6th Cir. 1993) (quotation omitted), cert. denied, 510 U.S. 1163, 114 S. Ct. 1188, 127 L. Ed. 2d 538 (1994). This statute is designed "to promote confidence in the judiciary by avoiding even the appearance of impropriety whenever possible." Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 865, 108 S. Ct. 2194, 2205, 100 L. Ed. 2d 855 (1988). Accordingly, " [w]here the question is close, the judge must recuse himself." Dandy, 998 F.2d at 1349. Notwithstanding the statute's broad reach, disqualification under § 455(a) may be waived following full disclosure. 28 U.S.C. § 455(e).
Putting aside for the moment the aspects of the sanctions order that appear disconcerting from an objective viewpoint, the record is clear that Judge Turner discussed his connection to Union Planters on the record with the parties soon after the public announcement of Union Planters's planned acquisition of Sunburst, months before the merger took effect. Following the trial, the judge again discussed the question of his recusal in open court with the parties. There, Judge Turner offered the Jemisons an opportunity to object to his continued handling of the case. A review of the transcript, however, reveals that the Jemisons expressly indicated that they did not expect Judge Turner to withdraw from hearing the sanctions motion; rather, they suggested only that he recuse himself from trying the remaining garnishment claim. Specifically, in response to a direct question from the judge, the Jemisons' attorney replied that his clients would prefer for the judge to recuse himself from the remaining triable issue in the Texas case, J.A. at 344, but as to the motion for sanctions, stated " [a]s I understand the thrust of the Motion of Sanctions which [sic] is essentially dealing with matters that have been heard by the Court. I'm not suggesting that the Court should recuse itself from the motion." J.A. at 345.
Turning to the merits of the sanctions order, the Jemisons and Gotten, L & J's attorney, challenge several aspects of the district court's application of Rule 11. In this circuit, the test for the imposition of Rule 11 sanctions remains, after the 1993 amendments, "whether the individual's conduct was reasonable under the circumstances." Lemaster v. United States, 891 F.2d 115, 118 (6th Cir. 1989) (quotation omitted); see Ridder v. Springfield, 109 F.3d 288, 293 (6th Cir. 1997); Fed. R. Civ. P. 11(b) (requiring "inquiry reasonable under the circumstances"). On appeal, " [w]e review all aspects of a court's Rule 11 determination for abuse of discretion." Ridder, 109 F.3d at 293.
Rule 11 explicitly allows for the imposition of sanctions upon a party responsible for the rule's violation, provided that a represented party is not sanctioned for a violation of subsection (b) (2) involving unwarranted legal contentions. See Fed. R. Civ. P. 11(c), (c) (2) (A). Here, the sanctions order speaks to the Jemisons' "improper purpose" in " 'string [ing] along' Sunburst with delaying tactics," and their advancement of claims lacking legitimate evidentiary support that unnecessarily multiplied the proceedings. J.A. at li-liii (Sanctions Order at 7-9). A cursory review of the order thus shows that the Jemisons were sanctioned for improper motivations and unfounded factual, not legal, contentions. Because the Jemisons were sanctioned for misrepresenting key facts during both deposition and trial testimony, and knowingly bringing and pursuing claims devoid of evidentiary support, we refuse to hold that the district court abused its discretion by sanctioning the represented parties.
Furthermore, the district court's imposition of sanctions without a full evidentiary hearing did not violate due process. The Jemisons were notified well in advance that Sunburst would be seeking sanctions against them individually and against their attorneys,3 and they filed a written response to Sunburst's request for sanctions. Significantly, Judge Turner presided over the pretrial and trial proceedings and thus was intimately familiar with the basic facts of the litigation, including the Jemisons' financial position and the relative behavior of the Jemisons and their attorneys. See Silverman v. Mutual Trust Life Ins. Co. (In re Big Rapids Mall Assoc.), 98 F.3d 926, 929 (6th Cir. 1996) (recognizing that an evidentiary hearing is "not necessarily required where the court has full knowledge of the facts and is familiar with the conduct of the attorneys."); INVST Fin. Group, Inc. v. Chem-Nuclear Sys., Inc., 815 F.2d 391, 405 (6th Cir.) (explaining that "no hearing is required where an attorney is sanctioned for filing frivolous motions ungrounded in law or fact, and where the judge imposing sanctions has participated in the proceedings."), cert. denied sub nom. Garratt v. INVST Fin. Group, Inc., 484 U.S. 927, 108 S. Ct. 291, 98 L. Ed. 2d 251 (1987). Having been afforded ample notice and a meaningful opportunity to be heard on the sanctions issue, the Jemisons and their attorneys received appropriate due process.
When it is the client who acts improperly by providing false testimony, a question arises whether sanctions should properly be assessed against the attorney. See In re Big Rapids, 98 F.3d at 932 (holding that without specific findings of wrongdoing, sanctioning the attorneys in that case amounted to vicarious liability for the perceived unreliability of their clients' testimony). However, attorneys are obligated under Rule 11 "to conduct an appropriate investigation into the facts that is reasonable under the circumstances." Fed. R. Civ. P. 11, Advisory Committee Notes (1993 Amendments). Here, Judge Turner concluded that, as to the alteration issue, Mr. Jemison's "direct statements and Wetter's lack of memory, although borderline, provide an objectively reasonable basis for Jemison's attorneys to have proceeded as they did." J.A. at lvii-lviii (Order at 13-14). Yet, as to the Jemisons' claims of a superseding guaranty and their entitlement to affirmative damages from Sunburst, the attorneys had not conducted an appropriate inquiry reasonably necessary to assure that such claims were supported by the evidence and not interposed for improper purposes. J.A. at lviii (Order at 14). A simple inquiry into whether the Jemisons had executed a superseding guaranty, or a demand that the Jemisons produce the purported document, would have revealed to the attorneys involved that the existence of this superseding guaranty was, if not entirely illusory, at the very least, questionable. Cf. Mann v. G & G Mfg., Inc., 900 F.2d 953, 959-60 (6th Cir.) (holding that counsel should have known that client's claim was not well-grounded in fact when reasonable pre-filing inquiry would have revealed deficiencies in the client's theory of causation), cert. denied sub nom. Sloan v. G & G Mfg., Inc., 498 U.S. 959, 111 S. Ct. 387, 112 L. Ed. 2d 398 (1990). Accordingly, we agree that sanctions were appropriately awarded against Gotten, L & J's attorney, for failing to investigate and verify, within reason, a major factual premise behind the asserted legal claims of his client.
The Jemisons also claim that the denial of Sunburst's motion for summary judgment serves to insulate them from all Rule 11 reproach. Before Rule 11 was amended in 1993, it was clear in this circuit that "mere survival of a summary judgment motion ... does not insulate the party from sanctions if it is later determined that all factual claims were groundless." Lemaster, 891 F.2d at 121. While it is true that the drafters of the 1993 amendments contemplated that a party having evidence sufficient to defeat a motion for summary judgment "would have sufficient 'evidentiary support' for purposes of [Rule 11(b) (3) ]," Fed. R. Civ. P. 11, Advisory Committee Notes (1993 Amendments), we are not persuaded that the drafters intended the anomaly of insulating from the rule's reach a dishonest litigant who presented false testimony sufficient to overcome summary judgment. Rather, the presentation of false testimony strongly suggests that sanctions are needed to deter the litigant from displaying similarly abusive tactics in the future. Consistent with the purposes behind Rule 11, we hold that litigants cannot avoid sanction under the rule simply by defeating summary judgment on the basis of false evidence. In this case the Jemisons were not rendered sanction-proof because their false testimony sufficed to defeat summary judgment. The district court found that Mr. Jemison's deposition testimony regarding the superseding guaranty was "quite simply, false," J.A. at li (Sanctions Order at 7), a finding that has not been shown to be erroneous. Had Mr. Jemison testified truthfully, in all likelihood, Sunburst would have been granted summary judgment, and both Sunburst and the court would have been spared the need to undergo a full trial.
Even though Rule 11 now "de-emphasizes monetary sanctions and discourages direct payouts to the opposing party," Ridder, 109 F.3d at 294, the rule explicitly allows for expenses "incurred as a direct result of the violation" to be paid directly to the other party "if imposed on motion and warranted for effective deterrence." Fed. R. Civ. P. 11(c) (2). The drafters note that a direct payout to the injured party is particularly appropriate for Rule 11(b) (1) violations involving improper motivations of the type found here. See Fed. R. Civ. P. 11, Advisory Committee Notes (1993 Amendments). Judge Turner also recognized that the Jemisons' wealth was "largely protected from any efforts by Sunburst to execute or garnish," and that this supported the order to pay the sanctions directly to the injured party. See J.A. at liii (Sanctions Order at 9). Moreover, the Jemisons never challenged their ability to pay nor opposed Sunburst's affidavits detailing the bank's expenses incurred in contesting the Jemisons' claims. Thus, we agree that the present case called for a direct payout to the injured party in an amount that we believe was based upon the evidentiary showing, necessary for deterrence, and well within the court's discretion.
Because the evidence fails to demonstrate an existent financial or other interest under § 455(b) (4), a challenge based upon § 455(b) (1), actual personal bias or prejudice, similarly falls short of the proof in the present case. Cf. Liteky v. United States, 510 U.S. 540, 552-53, 553 n. 2, 114 S. Ct. 1147, 1155-56, 127 L. Ed. 2d 474 (1994) (distinguishing between subjective bias or prejudice proscribed by § 455(b) (1) and the objective appearance of bias or prejudice proscribed by § 455(a))
By serving the sanctions motion on the Jemisons in August and then waiting until November to file it with the court, Sunburst fully complied with Rule 11's "safe harbor" procedural prerequisite. See Fed. R. Civ. P. 11(c) (1) (A); Ridder v. Springfield, 109 F.3d 288, 294-95 (6th Cir. 1997)