Opinion ID: 794648
Heading Depth: 2
Heading Rank: 1

Heading: The Gautreau Proceeding

Text: 3 In 1998 and with Ball as their counsel, the Gautreaus had filed a complaint against A.O. Smith alleging RICO and state-law fraud claims in connection with their purchase in 1977 of a used Harvestore silo. In August 2000, Judge Tucker L. Melancon of the Louisiana district court granted summary judgment for A.O. Smith and dismissed the action with prejudice. Judge Melancon found that plaintiffs' claims were clearly time-barred under the one-year period prescribed for the state-law claims and the four-year statute of limitations for the RICO claims. 4 A.O. Smith sought sanctions against Ball for his role in bringing the suit. Thereafter, Judge Melancon held a two-day evidentiary hearing to determine whether sanctions were warranted under Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, or the court's inherent power to sanction. The judge heard testimony from Ball's client Timothy Gautreau and received into evidence questionnaires filled out by the Gautreaus which together demonstrated that Ball knew the Gautreaus were aware of problems with the silos by the early 1980s. At the conclusion of the evidentiary hearing, Judge Melancon determined that [t]here was not a colorable claim when the lawsuit was filed and that the plaintiffs' claims were so obviously [barred] that under the circumstances it was unreasonable to bring the suit in the first place. 5 Accordingly, Judge Melancon found that Ball violated both Rule 11 and § 1927. The judge acknowledged that § 1927 is to be sparingly applied, and it's only in those cases when the entire course of the proceedings were unwarranted and should never have been commenced. He expressly cited the Fifth Circuit's opinion in FDIC v. Calhoun, which requires a showing of improper purpose before § 1927 sanctions may be imposed. See FDIC v. Calhoun, 34 F.3d 1291, 1300 (5th Cir.1994). Judge Melancon ordered Ball to pay the entire cost of A.O. Smith's defense, which came to $168,397.21. The Fifth Circuit affirmed this sanction. Gautreau v. A.O. Smith Corp., 34 Fed.Appx. 962 (5th Cir. Mar. 27, 2002).