Opinion ID: 73263
Heading Depth: 1
Heading Rank: 5

Heading: the amount of fees

Text: 70 Donaldson, 819 F.2d at 1560. 71 Id. 20 Dandar argues that, in awarding the amount of fees, the district court failed to consider their ability to pay the award.72 In response to the petitions for attorney's fees, Dandar submitted an affidavit addressing his financial ability to pay fees. Dandar's affidavit explained that he was in practice with his younger brother, and had paid an experienced civil rights attorney “out of [his] own pocket” to assist with the research and litigation.73 He said that he was “personally unable to pay any additional sanctions in this matter,” as his “personal financial situation would render [him] unable to pay a judgment even in the amount of $10,000-$15,000 without having to resort to borrowing the money,” and he had “no collateral that [he] solely own[ed] which [he] could use to secure a loan.”74 He explained that his liability insurance carrier had denied coverage based on a policy exclusion. He argued that the intent of Rule 11 had been met by the consequences he had suffered as a result of the district court’s published opinion granting sanctions, and his personal expenditure of $18,531.54 in costs. He stated that the judgment had been “the greatest embarrassment to [him] personally and professionally” and that he had also been affected physically.75 In requesting a stay of the judgment pending appeal, Dandar stated that a judgment “most assuredly will result in bankruptcy action by the Plaintiff and [Dandar], which is not the intended result of Rule 11.”76 72 Although Baker also raises this issue, it will not be addressed as the fees imposed against him are reversed. 73 R4-116 at 1-2, ¶¶ 2-3. 74 Id. at 3-4, ¶¶ 10-11, 14. 75 Id. at 3, ¶ 12. 76 No. 94-3291 1SR1-149 at 2, ¶ 1; Nos. 95-2983 and 95-3055 R1-149 at 2, ¶ 1. 21 The district court’s order awarding the requested fees makes no mention of Dandar’s affidavit as to his financial status. Although Dandar moved to stay entry of judgment pending appeal, arguing that the district court had failed to conduct a hearing or provide an opportunity for the submission of financial information to assist the court in the determination of ability to pay, the district court denied the motion. The district court found that a hearing was not required, and that a stay without a bond was precluded by the “fact that a party may be unable to pay a judgment, as in the present case. . . .”77 Although it appears that the district court recognized that Baker and Dandar lacked the ability to pay, it made no specific findings as to this issue, and it was not considered in the determination of the amount of sanctions. The law in this circuit is clear that ability to pay should be considered in the award of attorney’s fees under § 1988.78 This court has never required the district court's consideration of the losing party's financial status in the determination of a Rule 11 sanctions award. It has, however, held that sanctioning a represented party should only be done with sensitivity to the facts of the facts of the case and to the party’s financial situation.79 After a court has decided to impose Rule 11 sanctions, the court should explain why 77 No. 94-3291 1SR1-153 at 5-7; Nos. 95-2983 and 95-3055 R1-153 at 5-7. 78 Nesmith, 833 F.2d at 1491 (“the amount of attorney’s fees was properly modified by the district court in consideration of plaintiff’s ability to pay. See Durrett, 678 F.2d 911, 917 (11th Cir. 1982).” In Durrett, this court stated that “(a)lthough the losing party’s ability to pay is not among the Johnson factors, we do not believe that Johnson and Jones bar consideration of the plaintiff’s limited ability to pay as one factor in calculating an attorney’s award to a prevailing Title VII defendant. Id. at 916. 79 Milam, 855 F.2d at 742-743 (as appellate review of Rule 11 sanction orders become more common, the issue of whether a particular sanction is appropriate will develop parts and sub-parts, including whether the particular sanction imposed was excessive.). 22 the amount of sanctions that it awards will deter unreasonable conduct by the parties. In determining the amount of sanctions to impose, a district court may take into account compensation of other parties and punishment of the offender, but deterrence remains the touchstone of the Rule 11 inquiry.80 The conduct and resources of the party to be sanctioned are relevant to the determination of the amount of sanctions to be imposed.81 The district court should also inquire as to the extent to which the nonviolating party’s expenses could have been avoided, or mitigated, and reduce or increase the award accordingly.82 Other circuits require consideration of ability to pay before imposing a monetary sanctions award. The Third Circuit directs the district courts to consider the “particularly relevant equitable factor” of ability to pay as a mitigating factor in the calculation of a monetary sanction.83 The Fifth Circuit, affirming the imposition of Rule 11 sanctions against a pro se litigant, reduced the awarded amount as excessive based on the plaintiff’s annual earnings.84 The Sixth Circuit considered the 80 Fox, 937 F.2d. at 1571; Advisory Committee Note to Rule 11. 81 Thomas, 836 F.2d at 880. 82 Id. at 878. 83 Doering v. Union County Board of Chosen Freeholders, 857 F.2d 191, 195-196 (3rd Cir. 1988) (affirming the imposition of sanctions, but vacating the amount of monetary sanctions imposed and remanded for further evidence. The court noted that the plaintiff’s attorney was a sole practitioner who had requested mitigation of sanctions in the district court and stated at oral argument that he had limited financial resources, but that the record was devoid of any evidence relevant to such an inquiry). Id. at 196. Also see Napier v. Thirty or More Unidentified Federal Agents, Employees or Officers, 855 F.2d 1080, 1094 n. 12 (3rd Cir. 1988)(“Ability to pay is an appropriate consideration” when determining the level of a sanction). 84 Coats v. Pierre, 890 F.2d 728, 734 (5th Cir. 1989), cert. denied, 498 U.S. 821, 111 S.Ct. 70, 112 L.Ed.2d 44 (1990) (finding the award of $20,000 excessive, where the plaintiff earned between $22,200-28,657 per year, and remanding with directions to reduce the award to $1,800). 23 imposition of $15,671.14 in sanctions against the plaintiff and the plaintiff’s attorney despite the defendants’ submission of a request for $109,305.90 in attorney’s fees and $5,671.14 in costs.85 Affirming the district court’s award, the Sixth Circuit held that a party’s financial status is relevant to a sanctions procedure “in order to protect a party from punitive awards in favor of the deterrent purposes of Rule 11.86 The Sixth Circuit based its analysis on an earlier decision in which it had held that “a district court is required to make an inquiry into an attorney’s ability to pay sanctions in order to prevent Rule 11 from being used ‘as a vehicle to drive an attorney out of practice.’”87 In Jackson, it noted that it is not an abuse of discretion for a district court to award “a fraction of the actual and reasonable fees requested” sufficient to deter future violations.88 The Seventh Circuit has held that the sanctioned party’s or attorney’s assets are an equitable consideration relevant to the fashioning of an award.89 The Ninth Circuit views ability to pay as a “factor relevant in determining reasonableness” 85 Runfola & Associates, Inc. v. Spectrum Reporting II, Inc., 88 F.3d 368, 375 (6th Cir. 1996). 86 Id. 87 Jackson v. Law Firm of O’Hara, Rubera, Osborne and Taylor, 875 F.2d 1224, 1230 th (6 Cir. 1989). 88 Id. 89 Brown v. Federation of State Medical Boards of the United States, 830 F.2d 1429, th 1439 (7 Cir. 1987) (“Although equitable consideration are not relevant to the initial decision to impose sanctions . . . they may be an ingredient in the discretionary aspect of Rule 11-fashioning an award.”); also see Munson v. Friske, 754 F.2d 683, 697 (7th Cir. 1985) (Fee awards are equitable matters permitting the court “to consider the relative wealth of the parties.”) 24 in the assessment of a sanctions award.90 The Tenth Circuit requires ability to pay as one of four factors a district court should consider in imposing Rule 11 sanctions reasoning that, because Rule 11 sanctions are analogous to punitive damages, the financial condition of the offender is an appropriate consideration.91 The Fourth Circuit adopted the Tenth Circuit’s criteria, holding that “a monetary sanction imposed without any consideration to pay would constitute an abuse of discretion. A court should refrain from imposing a monetary award so great that it will bankrupt the offending parties or force them from the future practice of law.”92 We adopt the rulings of our sister circuits and therefore hold that a district court must consider financial ability in the award of sanctions. Because the district court failed to do so in this case, the award of the amount of sanctions is vacated, and the matter is remanded for further proceedings. On remand, the district court should permit supplementation of the record with financial affidavits sufficient to permit consideration of financial ability. 90 Matter of Yagman, 796 F.2d 1165, 1185 (9th Cir.), amended on other grounds on reh’g denial, 803 F.2d 1085 (1986), mandamus granted on other grounds sub. nom Brown v. Baden, 815 F.2d 575, cert. denied, 484 U.S. 963, 108 S.Ct. 450, 98 L.Ed.2d 390 (1987). 91 White v. General Motors Corp., Inc., 908 F.2d 675, 684-685 (10th Cir. 1990), cert. denied, 498 U.S. 1069, 111 S.Ct. 788, 112 L.Ed.2d 850 (1991)(the other factors include (1) the reasonable of the opposing attorney’s fees; (2) the minimum to deter; and (3) factors relevant to the severity of the Rule 11 violation). In White, the plaintiffs submitted financial affidavits stating that they would be forced to file bankruptcy is the court imposed the requested fees. Id. Although the Tenth Circuit sympathized that these statements were “general and unhelpful,” it remanded to permit the plaintiffs to supplement the record, holding that if the plaintiffs remained uncooperative the court could ignore ability to pay in levying sanctions. Id. 92 In re Kunstler, 914 F.2d 505, 524 (4th Cir. 1990), cert. denied sub. nom Kunstler v. Britt, 499 U.S. 969, 111 S.Ct. 1607, 113 L.Ed.2d 669 (1991). 25