Source: https://casetext.com/case/martin-v-brown
Timestamp: 2020-04-06 04:37:33
Document Index: 505278789

Matched Legal Cases: ['§ 1927', '§ 1292', '§ 78', '§ 1341', '§ 1291', '§ 1291', '§ 1291', '§ 1292', '§ 1291', '§ 3911', '§ 1927', '§ 1920', '§ 1927']

Martin v. Brown, 63 F.3d 1252 | Casetext Search + Citator
We have followed the rule that a "finding of separateness [in this regard] is dependent on the facts" in any…
Sanctions Although a trial court has considerable discretion in imposing sanctions, it is settled law that an…
Full title:LEON M. MARTIN v. HAROLD ED BROWN, AN INDIVIDUAL; KYLE ENERGY, INC., A…
63 F.3d 1252 (3d Cir. 1995)
holding that attorney sanctions must be “imposed solely because of [the attorney's] own improper conduct”
Summary of this case from In re Plaza-Martinez
Rebecca E. Bender (argued), Rebecca E. Bender Associates, P.A., Minneapolis, MN, for appellant.
Appellant, Rebecca E. Bender ("Bender"), an attorney who represented the defendants, Harold E. Brown, Kyle Energy, Inc. and Kyle Energy and Kyle Energy Corporation, in this action, appeals orders of the United States District Court for the Western District of Pennsylvania sanctioning her for refusing to comply with a discovery order and for refiling two motions the court reserved for trial after denying them without prejudice. The discovery sanctions required Bender and Brown to pay $500 each plus the costs plaintiff Leon M. Martin ("Martin") incurred in connection with the discovery request. Bender's and Brown's liability for these costs was joint and several. The sanction for refiling the two motions required Bender individually to pay an additional $500. In an accompanying memorandum, the district court stated that it was imposing these sanctions under Rule 11, Rule 37, 28 U.S.C.A. § 1927 (West 1994) and the court's inherent power.
Bender represented all three defendants. For the sake of simplicity, however, we will refer solely to Brown.
The orders Bender appeals are dated April 20 and April 25, 1994. They impose the same sanctions. The April 20 order, however, did not include the docket numbers of ten in limine motions. See Martin v. Brown, 758 F. Supp. 313, 317 n. 1 (W.D.Pa. 1994).
In November 1992, Brown retained Bender as defense counsel in an ongoing case in which Martin claimed Brown violated federal securities laws, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and engaged in state common law fraud and breach of contract by selling or offering to sell interests in numerous gas well properties.
The district court dismissed the RICO count on October 23, 1990, before Bender's association with the case.
In March 1993, Bender filed ten in limine motions. They were unrelated to the discovery dispute. She also filed a motion to dismiss the federal security claim arguing that the interests in gas wells Martin claimed Brown fraudulently offered for sale were not securities as defined by federal law. Alternatively, Bender moved to certify this issue for immediate appeal believing an interlocutory determination could expeditiously dispose of Martin's only remaining federal claim. See 28 U.S.C.A. § 1292(b) (West 1993). This was the third time Brown had raised the lack-of-a-security question. One of the ten in limine motions Bender had filed was yet a fourth attempt to relitigate the security issue. In another of Bender's ten in limine motions, she also raised for the second time the statute of limitations as a defense.
The issue was first decided in October 1990 and then again in December 1992, both times without prejudice.
The issue was also first decided in October 1990.
Also on April 30, 1993, the district court denied Bender's motion to dismiss on the security issue and refused to certify it for interlocutory appeal. Concurrently, it also rejected Bender's in limine motion concerning the security issue, reasoning that it was "in part a disguised motion to relitigate the `securities' issue," App. at 588, and once more denied the statute of limitations issue as repetitive, but again without prejudice to Brown's right to raise it at trial. The court warned, however: "Counsel is instructed not to make any further attempts to relitigate this issue prior to trial on the merits." App. at 589.
After the April 30, 1993 order, counsel on each side seemed to have made an effort to resolve the outstanding discovery issues. Sometime around July 1993, Martin's original counsel, Thomas E. Rodgers ("Rodgers"), was hospitalized. Thereafter Martin was represented by a lawyer named David H. Cullis ("Cullis"). Bender contends that Cullis's unfamiliarity with her discussions with Rodgers revived the inspection problem.
Bender argues that a number of problems in this case resulted from the entry of new counsel. The record, however, suggests that Cullis may have had some previous relationship to the case or to prior counsel. The record shows the following: Rodgers's letterhead indicates that he was a sole practitioner. Cullis practiced in a firm named Rodgers and Cullis, P.C. Rodgers and Cullis, P.C.'s letterhead lists two partners: Patricia A. Rodgers and Cullis. Rodgers and Rodgers Cullis, P.C. have the same address, phone and facsimile number listed on their respective letterheads. Furthermore, Cullis responded to correspondence sent to Rodgers before his illness forced him out of the case.
Bender did not appear personally at the April 15 hearing. She had yet to refile her in limine motions with the clerk of the district court, but Brown's local counsel was present and tried to argue their merits. The district court questioned him pointedly about Bender's persistent refiling of motions denied without prejudice pending trial, as well as her refusal to permit inspection of all the real estate included in the court's December 30, 1992 order. It ordered Bender, on or before April 20, 1994, to file with the clerk the motions that she previously mailed to the judge with her March 16, 1994 letter before it would consider them. On April 20, 1994, Bender again filed all ten in limine motions. On that day the district court entered its initial April 20, 1994 order imposing sanctions on Bender and Brown and, on April 25, revised the April 20 order by adding the docket numbers of the in limine motions.
Bender claims that she only filed these ten in limine motions because the district court ordered her to do so. Thus, she contends that any sanctions imposed upon her are unfair. We need not decide this issue because of our resolution of this case on procedural grounds. We note, however, that when the district court directed Bender to file with the clerk the ten in limine motions she had enclosed in her March 16, 1994 letter to the judge, it only ordered Bender to comply with its rules of procedure.
Bender appeals from those portions of both orders sanctioning her for "willful and flagrant" disregard of the court's orders by "resurrecting and advocating defendants' motions in limine regarding `lack of a security' and the `statute of limitations defense'"; App. at 654-55, and "for refusal to permit meaningful inspection of real property in compliance with [the] court's orders . . . ." Id. at 652-53. For her persistence in raising questions the district court had decided, or indicated it wished to defer to trial, the court ordered Bender to pay $500 personally. For prohibiting Martin from inspecting certain properties, the court ordered Bender and Brown each to pay $500 and, jointly and severally, any costs Martin had incurred in attempting to arrange an inspection.
The district court had subject matter jurisdiction over the underlying dispute between Martin and Brown under 15 U.S.C.A. § 78a et seq. (West Supp. 1995) and 28 U.S.C.A. §§ 1341 and 1343 (West 1993). Bender contends that the district court's orders of April 20 and 25, 1994 are "final decisions" over which we have appellate jurisdiction under 28 U.S.C.A. § 1291 (West 1993). Although no appellee is present to refute her contention, we have a threshold obligation to consider our appellate jurisdiction. See, e.g., Hoots v. Commonwealth of Pa., 639 F.2d 972, 978 (3d Cir. 1981).
Appeals of attorney sanctions often present this procedural problem because there is no appellee. See Snow Machines, Inc. v. Hedco, Inc., 838 F.2d 718, 725 (3d Cir. 1988). Thus, "[w]e must play not only our accustomed and proper role of neutral adjudicator, but also (albeit temporarily) the role of adversary to the appellant in order to test the assertions made on appeal." Id. at 726. In limited situations, we have appointed amici to achieve the benefits of the adversarial system. See Eash v. Riggins Trucking, Inc., 757 F.2d 557, 559 n. 1 (3d Cir. 1985). We believe that action is unnecessary in this case.
Our appellate jurisdiction is generally limited to the review of final decisions of the district courts. United States v. Bertoli, 994 F.2d 1002, 1010 (3d Cir. 1993); see also 28 U.S.C.A. § 1291. Section 1291 states: "The courts of appeals . . . shall have jurisdiction of appeals from all final decisions of the district courts of the United States . . . except where a direct review may be had in the Supreme Court." 28 U.S.C.A. § 1291. "A final decision is one which disposes of the whole subject, gives all the relief that was contemplated, provides with reasonable completeness, for giving effect to the judgment and leaves nothing to be done in the cause save to superintend, ministerially, the execution of the decree." Isidor Paiewonsky Associates, Inc. v. Sharp Properties, Inc., 998 F.2d 145, 150 (3d Cir. 1993) (internal brackets, quotation, emphasis and citations omitted).
Although section 1292 authorizes appeals of certain specified non-final orders, none are applicable here 28 U.S.C.A. § 1292 (West 1993 Supp. 1994).
App. at 664. In Borelli v. City of Reading, 532 F.2d 950, 951 (3d Cir. 1976) (per curiam), we held that "[g]enerally, an order which dismisses a complaint without prejudice is neither final nor appealable because the deficiency may be corrected by the plaintiff without affecting the cause of action." In that case, and in subsequent cases, we recognized that exceptions exist, e.g., when the party "cannot amend or declares his intention to stand on his complaint." Id. at 952. The dispositive inquiry is whether the district court's order finally resolved the case. See, e.g., Presbytery of N.J. of Orthodox Presbyterian Church v. Florio, 40 F.3d 1454, 1461 n. 6 (3d Cir. 1994); Newark Branch, N.A.A.C.P. v. Harrison, N.J., 907 F.2d 1408, 1416-17 (3d Cir. 1990).
In Trent v. Dial Medical of Florida, Inc., 33 F.3d 217 (3d Cir. 1994), we addressed the effect on our appellate jurisdiction of a district court's stay and dismissal pursuant to Colorado River abstention. We stated that "[e]ven dismissals without prejudice have been held to be final and appealable if they end the suit so far as the District Court was concerned, although . . . such dismissals may not constitute final orders until the party seeking relief renounces any intention to reinstate litigation." Id. at 220 (internal quotation, citation and brackets omitted). In reliance on Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), we held that the inquiry was whether the purpose and effect of the stay order was to surrender jurisdiction of the federal suit to a state court. Id. at 221 (quoting Moses H. Cone, 460 U.S. at 10 n. 11, 103 S.Ct. at 933 n. 11).
See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).
The collateral order doctrine, as first annunciated in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), relaxes the strict standard of finality by permitting us to entertain appeals from certain orders that would not otherwise be appealable final decisions. See Johnson v. Jones, ___ U.S. ___, ___, 115 S.Ct. 2151, 2155, 132 L.Ed.2d 238 (1995) ("[I]n [ Cohen], this Court held that certain so-called collateral orders amount to `final decisions,' immediately appealable under . . . 28 U.S.C. § 1291, even though the district court may have entered those orders before (perhaps long before) the case has ended."); Bertoli, 994 F.2d at 1010 ("The flexibility given by Cohen . . . permits appeal of some district court orders that do not terminate the entire case, or even a discrete part of it."). The collateral order doctrine recognizes that the benefits achieved by the final decision rule can sometimes be outweighed by other concerns. Johnson, ___ U.S. at ___, 115 S.Ct. at 2154 ("sometimes interlocutory appellate review has important countervailing benefits"). The case law on the collateral order doctrine is extensive and its requirements clear. It permits appellate review of orders that: (1) finally resolve a disputed question; (2) raise an important issue distinct from the merits of the case; and (3) are effectively unreviewable on appeal from a final judgment. See, e.g., Digital Equipment Corp. v. Desktop Direct, Inc., ___ U.S. ___, ___-___, 114 S.Ct. 1992, 1995-96, 128 L.Ed.2d 842 (1994); Praxis Properties, Inc. v. Colonial Sav. Bank, S.L.A., 947 F.2d 49, 54 (3d Cir. 1991). In Praxis Properties, we described these three requirements as: (1) the "conclusiveness" prong; (2) the "importance/separateness" prong; and (3) the "unreviewability" prong. Praxis Properties, 947 F.2d at 54-58. Failure to meet any one prong precludes a finding of appellate jurisdiction. Bertoli, 994 F.2d at 1012.
"The requirement that the district court's order `conclusively determine' the question means that appellate review is likely needed to avoid that harm." Johnson, ___ U.S. at ___, 115 S.Ct. at 2155. An order "is conclusive when no further consideration is contemplated by the district court." Bertoli, 994 F.2d at 1011 (citations omitted). The conclusiveness prong excludes from review "`any decision which is tentative, informal or incomplete.'" Swint v. Chambers County Com'n, ___ U.S. ___, ___, 115 S.Ct. 1203, 1208, 131 L.Ed.2d 60 (1995) (quoting Cohen, 337 U.S. at 546, 69 S.Ct. at 1225, and citing Coopers Lybrand v. Livesay, 437 U.S. 463, 469, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351 (1978)).
In Eavenson, Auchmuty Greenwald v. Holtzman, 775 F.2d 535, 537 (3d Cir. 1985), we addressed the applicability of the collateral order doctrine to appeals of attorney sanctions. We concluded that there could be "no dispute" that the conclusiveness prong was satisfied because "[t]he sanctions order challenged . . . finally and conclusively determines the sanctions issue." Eavenson, 775 F.2d at 538. Similarly, in Eastern Maico Distributors, Inc. v. Maico-Fahrzeugfabrik, 658 F.2d 944 (3d Cir. 1981), although we ultimately found the Rule 37 sanctions there involved were not immediately appealable, we noted that the sanction order conclusively determined the disputed question of sanctions and thus satisfied the first element. Eastern Maico, 658 F.2d at 947; see also Lawrence R. Kemm, Note, Interlocutory Appeals of Attorney Sanctions: In Search of a Standard, 25 Ind.L.Rev. 919, 923 (1991) ("[T]here has been little discussion or disagreement that a sanction order represents a `conclusive determination.'") (collecting cases).
Generally, an order is not final until it is reduced to a determinate amount. Napier v. Thirty or More Unidentified Federal Agents, Employees or Officers, 855 F.2d 1080, 1089 (3d Cir. 1988); see also Apex Fountain Sales, Inc. v. Kleinfeld, 27 F.3d 931, 934-35 (3d Cir. 1994); United States v. Sleight, 808 F.2d 1012, 1015 (3d Cir. 1987); Becton Dickinson Co. v. District 65, United Auto., Aerospace and Agric. Implement Workers of Am., AFL-CIO, 799 F.2d 57, 61-62 (3d Cir. 1986). The need for quantification arises from "concerns with duplicative expenditure of judicial time and resources." Sleight, 808 F.2d at 1015. It is not without exceptions, however. See, e.g., In re Seidman, 37 F.3d 911 (3d Cir. 1994). One exception applies to orders in which the amount, when determined, is insignificant in the overall context of the dispute and itself unlikely to be the subject of a later appeal. Thus, we recently stated in Apex:
[W]e have continued to recognize that an order is final even if it does not reduce the damages to a sum certain if "the order sufficiently disposes of the factual and legal issues and [if] any unresolved issues are sufficiently `ministerial' that there would be no likelihood of further appeal."
In this case, the sole discovery expense Martin incurred was the cost of retaining a single real estate appraiser to inspect the property. The determination of this amount is likely to be straightforward and mechanical, and it is also unlikely to result in a later appeal. Furthermore, Bender insists her concern is not the money, but her professional reputation. In Simmerman v. Corino, 27 F.3d 58, 64 (3d Cir. 1994), we recognized that the impact of attorney sanctions goes beyond the dollar amount and acts "as a symbolic statement about the quality and integrity of an attorney's work — a statement which may have tangible effect upon the attorney's career." In the overall context of this case, the dollar amounts of the sanctions imposed and the potential liability for the unquantified sanction are insignificant in comparison to their stigmatic effect. Furthermore, there is nothing in the record to explain Martin's delay in filing the statement and it now appears highly unlikely that it will ever be filed. Though the record leaves much to be desired, the district court's order limited Martin to recovery of whatever amount is due from, or paid by Martin to Welsch for the time Welsch lost on a day on which he showed up to inspect Brown's real estate and was not able to do so. See App. at 249-255. Because the only thing missing is an invoice from the appraiser covering this limited lost time, we believe quantification is essentially a ministerial or "mathematical" calculation that can be based on Welsch's bill for this time. Thus, this case is distinguishable from those in which we have refused to entertain appeals from unquantified orders holding attorneys liable for reasonable attorney's fees over the course of a particular dispute. See In re Jeannette Corp., 832 F.2d 43, 45 (3d Cir. 1987). We conclude that the district court's orders conclusively determine the sanctions question.
Turning to whether the matter is separate from the merits of the action, it has been said that this prong "means that review now is less likely to force the appellate court to consider approximately the same (or a very similar) matter more than once, and also seems less likely to delay trial court proceedings (for, if the matter is truly collateral, those proceedings might continue while the appeal is pending)." Johnson, ___ U.S. at ___, 115 S.Ct. at 2155. This requirement of separateness "derives from the principle that there should not be piecemeal review of steps toward final judgment in which they will merge." Praxis Properties, 947 F.2d at 56-57 (internal quotation marks omitted). Attorney sanctions, especially discovery sanctions, are, however, often too intertwined with the merits of the underlying litigation to permit immediate review under the collateral order doctrine. See Eavenson, 775 F.2d at 538 n. 6; Eastern Maico, 658 F.2d at 947.
Here, as in Eavenson, there is little danger that our review will cause delay. Brown is in bankruptcy, Martin's case against him has been dismissed and Bender does not represent Brown in the bankruptcy. To the best of our knowledge, the underlying litigation continues in the bankruptcy court. Thus, Bender's sanction is "collateral to and separate from the merits not only because the principal case cannot be affected by the outcome of the sanction appeal, but also because the sanction appeal cannot be affected by the outcome of the principal case." Lawrence R. Kemm, supra, 25 Ind.L.Rev. at 924. Thus, we conclude that the sanctions imposed against Bender are separate from the underlying merits within the meaning of Cohen.
Our finding of separateness is dependent on the facts presently before us. As in Eavenson, "[w]e do not now adopt a rule that would allow immediate appellate review of any sanction order imposed upon counsel, whether counsel has withdrawn from the case or not." Eavenson, 775 F.2d at 539 (emphasis in original).
This prong, however, contains two subparts. The claim on appeal must be one that is "too important to be denied review." Cohen, 337 U.S. at 546, 69 S.Ct. at 1226. Therefore, we must also consider whether the issue Bender poses is important. This question is sometimes merged in discussion with the third prong of the Cohen doctrine because the adequacy of subsequent review affects the importance of the question. See Digital Equipment, ___ U.S. at ___, 114 S.Ct. at 2001 (applying the importance requirement as part of the third prong, but noting that other cases have properly applied it to the second prong, citing Coopers Lybrand, 437 U.S. at 468, 98 S.Ct. at 2457; Lauro Lines S.R.L. v. Chasser, 490 U.S. 495, 498, 109 S.Ct. 1976, 1978, 104 L.Ed.2d 548 (1989)). Whether importance is reviewed as part of the second or the third prong, however, it "simply cannot be answered without a judgment about the value of the interests that would be lost through rigorous application of a final judgment requirement." Id. As noted above, the imposition of attorney sanctions may impose significant burdens on the reputation and career opportunities of the sanctioned attorney. We believe such potential harm, absent compliance with the constitutional protections of due process, coupled with the lack of later opportunity for effective appellate review, is sufficient to meet the importance requirement of the collateral order doctrine. See Digital Equipment, ___ U.S. at ___, 114 S.Ct. at 2002 ("Where statutory and constitutional rights are concerned, irretrievable loss can hardly be trivial . . . .") (internal quotations and brackets omitted).
On the unreviewability prong of the Cohen requirements, we consider whether the district court's orders will be "effectively unreviewable" if we do not review them now. Bertoli, 994 F.2d at 1012. To meet this requirement, "an order must be such that review postponed will, in effect, be review denied." Id. (internal quotation marks and ellipses omitted). For purposes of the collateral order doctrine, unreviewability "means that failure to review immediately may well cause significant harm." Johnson, ___ U.S. at ___, 115 S.Ct. at 2155 (citing 15A C. Wright, A. Miller, E. Cooper, Federal Practice and Procedure § 3911, pp. 334-35 (1992)).
Because appellant is no longer connected with the merits of the case, he has an immediate interest in challenging the sanction which is not shared by the parties to the suit or by counsel to a party.
We review orders imposing sanctions for abuse of discretion. See, Chambers v. NASCO, Inc., 501 U.S. 32, 55, 111 S.Ct. 2123, 2138, 115 L.Ed.2d 27 (1991); Arab African Int'l Bank v. Epstein, 10 F.3d 168, 171 (3d Cir. 1993). When the procedure the district court uses in imposing sanctions raises due process issues of fair notice and the right to be heard, however, our review is plenary. See Fabulous Assoc., Inc. v. Pennsylvania Public Utility Commission, 896 F.2d 780, 783 (3d Cir. 1990) (constitutional issues subject to plenary review); Snow Machines, Inc. v. Hedco, Inc., 838 F.2d 718, 725 (3d Cir. 1988); see also Gillette Foods, Inc. v. Bayernwald-Fruchteverwertung, GmbH, 977 F.2d 809, 812 (3d Cir. 1992) (applying plenary review to legal issues that arise in a sanctions context).
V. Discussion A.
Bender contends that the district court denied her notice and an opportunity to be heard when it sanctioned her for failure to comply with discovery. The Due Process Clause of the Fifth Amendment requires a federal court to provide notice and an opportunity to be heard before sanctions are imposed on a litigant or attorney. Eash v. Riggins Trucking, Inc., 757 F.2d 557, 570-71 (3d Cir. 1985) (in banc); Landon v. Hunt, 938 F.2d 450, 454 (3d Cir. 1991) (per curiam).
Because we conclude that the district court failed to afford Bender procedural due process, we believe it is unnecessary and inappropriate for us to decide on this record her contention that she engaged in no sanctionable misconduct. We believe the district court must first address these matters on remand, after Bender is afforded the procedural safeguards required by the Due Process Clause.
No precise all encompassing rule captures the requirements of procedural due process. The process that is due varies with the nature of particular disputes, and evaluation of its requirements should balance fairly the competing interests of the sanctioned person against the judicial system's need for efficient judicial administration. See Corino, 27 F.3d at 64 ("The precise form of procedural protection required will, of course, vary with the circumstances of the case."); Eash, 757 F.2d at 570 ("The form which those procedural protections must take is determined by an evaluation of all the circumstances and an accommodation of competing interests."). Nevertheless, the fundamental requirements of due process — notice and an opportunity to respond — must be afforded before any sanction is imposed. See Eash, 757 F.2d at 570 (citation omitted); Jones v. Pittsburgh National Corp., 899 F.2d 1350, 1357 (3d Cir. 1990) (citing Eash, 757 F.2d at 570-71). With regard to sanctions, particularized notice of the grounds for the sanction under consideration is generally required. See, e.g., Corino, 27 F.3d at 64; Jones, 899 F.2d at 1357.
Recently, we upheld the imposition of sanctions under the bankruptcy court's inherent sanction power without requiring this type of "particularized notice." Fellheimer, Eichen Braverman, P.C. v. Charter Technologies, Inc., 57 F.3d 1215 (3d Cir. 1995). In that case, however, the sanctioned attorney was plainly on notice that he was facing sanctions for conduct involving subjective bad faith.
Bender's argument that the district court wholly failed to provide her notice is somewhat overstated. In its memorandum, the district court stated that the sanctions it imposed on Bender for failure to afford discovery were imposed under Rule 37. Martin's motion requesting Rule 37 sanctions for noncompliance with the court's discovery order obviously referred to Rule 37. It was served on Bender and she filed a response. The district court also provided her sufficient opportunity to be heard. It held a hearing before deciding the issues Martin's Rule 37 motion raised. Bender's election to rely on local counsel to state her position because of her own prior commitment is immaterial. Although Martin's motion only requested dismissal or preclusion of evidence, Bender had fair notice and an adequate opportunity to respond to Martin's request for Rule 37 sanctions before their imposition. See Corino, 27 F.3d at 64.
1. Plaintiff's Revised Motion for Sanctions Pursuant to Rule 37 (Document No. 434) is GRANTED IN PART AND DENIED IN PART, as follows: . . . c) plaintiff's request to sanction defendants and/or their counsel for refusal to permit meaningful inspection of real property in compliance with this court's orders of December 30, 1992 and January 25, 1993, is GRANTED, and defendant Harold E. Brown and attorney Rebecca E. Bender are DIRECTED TO PAY to the Clerk of [the] Court the sum of $500.00 EACH for their willful refusal to comply with the court's orders; [and they are both jointly and severally liable for the resulting costs to the plaintiff].
Bender's argument, however, that the district court's order imposing the sanctions was overly broad, is more troubling. Rule 37 cannot justify the $500 sanction the district court imposed on Bender for her refusal to allow discovery. Absent contempt, the only monetary sanctions Rule 37 authorizes are "reasonable expenses" resulting from the failure to comply with discovery. Fed.R.Civ.P. 37 (1995); cf. Newton v. A.C. S., Inc., 918 F.2d 1121, 1126 (3d Cir. 1990). The district court failed to explain the basis for the sanction amount. Although the imposition of the related discovery costs are allowable under Rule 37, imposition of the unauthorized fine leaves the court's justification for these sanctions ambiguous and thus requires us to look elsewhere in the court's opinion to determine the grounds for both these discovery sanctions and the refiling sanction. The only other reference to the grounds for sanctions is made in the district court's introduction. There, the district court states without elaboration that it imposed sanctions under Rule 11, Rule 37, 28 U.S.C.A. § 1927 and its inherent powers.
Although Rule 37 authorizes both punitive and compensatory damages, it requires the amount of any monetary damages to be specifically related to expenses incurred by the violations. See Roadway Express, Inc. v. Piper, 447 U.S. 752, 763-64, 100 S.Ct. 2455, 2462-63, 65 L.Ed.2d 488 (1980); Hamilton v. Ford Motor Co., 636 F.2d 745, 747 (D.C.Cir. 1980) ("The principal purpose of Rule 37(b) is punitive, not compensatory."). But see Media Duplication Services, Ltd. v. HDG Software, 928 F.2d 1228, 1241-1242 (1st Cir. 1991). The sanctions in Newton v. A.C. S., Inc., 918 F.2d 1121 (3d Cir. 1990), and Media Duplication were imposed under Rule 16(f), not Rule 37(b)(2). The latter is directed to a party or its agents. Rule 16(f) refers expressly to "a party or [its] attorney."
Though we will not decide any of the other issues Bender raises, we think it may be appropriate to comment briefly on some issues that are likely to come up on the remand. Rule 11 authorizes imposition of sanctions upon the signer of any pleading, motion or other paper that was presented for an improper purpose, e.g., "to harass or to cause unnecessary delay or needless increase in the cost of litigation." See Landon, 938 F.2d at 452. Rule 11 sanctions are based on "`an objective standard of reasonableness under the circumstances.'" Id. at 453 n. 3 (quoting Mary Ann Pensiero, Inc. v. Lingle, 847 F.2d 90, 94 (3d Cir. 1988)). Bad faith is not required. Id.; Jones, 899 F.2d at 1358. Rule 11(c)(1) provides that sanctions can be initiated either by motion or on the court's initiative. When acting on its own initiative, however, the district court should first enter an order describing the specific conduct that it believes will warrant sanctions and direct the person it seeks to sanction to show cause why particular sanctions should not be imposed. See Rule 11(c)(1)(B); see also Rule 11(c)(3) ("When imposing sanctions, the court shall describe the conduct determined to constitute a violation of this rule and explain the basis for the sanction imposed."). If the district court wishes to sanction Bender under Rule 11, it should issue and serve on her an order to show cause and, after considering any response she may file, explain its rationale and describe the specific conduct that supports the particular Rule 11 sanction imposed.
Rule 11 also has specific notice requirements echoing the Due Process Clause of the Fifth Amendment. See Corino, 27 F.3d at 64 ("The party sought to be sanctioned is entitled to particularized notice including, at a minimum, 1) the fact that Rule 11 sanctions are under consideration, 2) the reasons why sanctions are under consideration, and 3) the form of sanctions under consideration.").
Likewise, if the court desires to base any sanction on section 1927, it should refer to that statute in the order to show cause and relate specific conduct to its violation. We note, however, that section 1927, unlike Rule 11, requires bad faith. Gaiardo v. Ethyl Corp., 835 F.2d 479, 484 (3d Cir. 1987). In addition, section 1927, like Rule 37, authorizes only the imposition of costs and expenses that result from the particular misconduct the court sanctions. Eash, 757 F.2d at 560. Section 1927 also limits these costs and expenses to those that could be taxed to a losing party under 28 U.S.C.A. § 1920 (West 1994). Id.
28 U.S.C.A. § 1927.
Usually, the inherent power that a district crt retains to sanction attorneys also requires bad faith. Gillette Foods, 977 F.2d at 813 ("[A] court may assess attorney's fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.") (internal quotations omitted); Landon, 938 F.2d at 454 ("[A] prerequisite for the exercise of the district court's inherent power to sanction is a finding of bad faith conduct."); but see Republic of Philippines v. Westinghouse Electric Corp., 43 F.3d 65, 74 n. 11 (3d Cir. 1994) (sanctions imposed under the court's inherent authority do not always require a showing of bad faith). We have previously suggested care in the use of inherent powers to impose sanctions. See Fellheimer, Eichen, Braverman, 57 F.3d at 1224 ("`Because of their very potency,'. . . the federal courts must be careful to exercise their inherent powers `with restraint and discretion.'") (quoting Chambers, 501 U.S. at 44, 111 S.Ct. at 2132); Republic of Philippines, 43 F.3d at 74. Generally, a court's inherent power should be reserved for those cases in which the conduct of a party or an attorney is egregious and no other basis for sanctions exists. See Gillette Foods, 977 F.2d at 813.
Bender correctly points out that the district court never used the term bad faith in its order and suggests that there is no evidence that could support a finding of bad faith. The district court on remand will be in a position to determine, in the first instance, whether Bender acted in bad faith.
[63] STAPLETON, Circuit Judge, dissenting:
[P]laintiff's request to sanction defendants and/or their counsel for refusal to permit meaningful inspection of real property in compliance with this court's orders of December 30, 1992 and January 25, 1993, is GRANTED, and defendant Harold E. Brown and attorney Rebecca E. Bender are DIRECTED TO PAY to the Clerk of Court the sum of $500.00 EACH for their willful refusal to comply with the court's orders; additionally defendant Brown and attorney Bender, jointly and severally, are DIRECTED TO PAY to the Clerk of Court the reasonable travel expenses and standard hourly fees incurred by plaintiffs for the services of Mr. John Welsch, MAI, to the extent he was unable to inspect defendants' properties, within 14 days of the filing by plaintiffs of a verified statement itemizing said expenses and fees. . . .
The court acknowledges that "the amount of this sanction remains unquantified" and that, generally, "an order is not final until it is reduced to a determinate amount" (Maj. op. at 1259). It relies, however, on a venerable exception to the general rule known as the Forgay-Conrad doctrine, see Forgay v. Conrad, 47 U.S. (6 How.) 201, 12 L.Ed. 404 (1848), which is applicable to cases in which the order appealed from leaves nothing to do but a "ministerial act." The court cites Apex Fountain Sales, Inc. v. Kleinfeld, 27 F.3d 931 (3d Cir. 1994) as authority for its conclusion that this is such a case.
In the Forgay case itself, the order appealed from directed the immediate transfer of physical property to the plaintiff, as well as an accounting. The losing party was thus regarded as facing immediate irreparable injury and this fact has been regarded by numerous courts as essential to the result reached. See 9 James W. Moore et al., Moore's Federal Practice ¶ 110.11, at 89-97 (2d ed. 1995).
"Permitting piecemeal appeals would undermine the independence of the district judge, as well as the special role that individual plays in our judicial system. In addition, the [finality] rule is in accordance with the sensible policy of avoiding the obstruction to just claims that would come from permitting the harassment and cost of a succession of separate appeals from the various rulings to which a litigation may give rise, from its initiation to entry of judgment." Van Cauwenberghe v. Biard, 486 U.S. 517, 521-22 n. 3, 108 S.Ct. 1945, 1949 n. 3, 100 L.Ed.2d 517 (1988) (quotations omitted); see Catlin v. United States, 324 U.S. 229, 233-34, 65 S.Ct. 631, 633-34, 89 L.Ed. 911 (1945) ("The foundation of this policy is not in merely technical conceptions of `finality.' It is one against piecemeal litigation.").
Most important for present purposes, we noted in Apex that this understanding of the importance of finality is "reflected in our cases holding that a district court order awarding `reasonable' attorneys fees is not appealable until the fees are quantified in order to prevent two appeals — one on whether attorneys fees should be awarded and a second on the amount of the award." Id. In my view, a determination of "reasonable travel expenses" and reasonable fees for the expert services of a professional "to the extent he was unable to inspect defendants' properties" holds no less potential for disagreement and a second appeal than does the typical determination of the amount of reasonable litigation expense and reasonable counsel fees following an unquantified award of such expenses and fees. Accordingly, I do not see how we can hear this appeal without hereafter also hearing appeals from unquantified counsel fee awards.
While the district court's order refers to "standard hourly fees" rather than "reasonable fees," the former is obviously intended as an indicia of the latter and does not suggest to me that the potential for disagreement is less than that inherent in a lodestar determination.
My concern about the court's ruling on jurisdiction is based only in part on the considerations we stressed in Apex. Piecemeal appellate review is an inefficiency the federal judiciary can ill afford. But today's ruling gives rise to a distinct, equally grave, concern. An order is either final or it is not final and if it is final, there is but a limited period in which courts of appeals have jurisdiction to review it. This makes it crucial that a party and its counsel be able to know with certainty when an order is final. In the absence of such certainty, counsel must either flood us with protective appeals or run the risk that appeal rights will be unintentionally foregone. When the ministerial exception is extended beyond the realm of mathematic calculations, uncertainty will necessarily be generated in an area where certainty is essential to the efficient operation of the appellate justice system.
See 9 Moore et al., supra note 1, ¶ 110.11, at 98-99.
I would insist that the amount of the sanctions assessed against Ms. Bender be established before she is permitted to seek appellate review of those sanctions. I see nothing to be lost by so requiring and a great deal to be gained.
The court considers it significant that Martin has apparently not yet applied to have the sanction quantified and may not do so hereafter. Ms. Bender, however, is free to apply to the court for an order requiring quantification or the deletion of the portion of the order relating to Martin's expenses.
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