Opinion ID: 667161
Heading Depth: 1
Heading Rank: 2

Heading: The FDIC's Claims Against Conner and the 28 U.S.C. Sec.

Text: 1927 Sanction Levied Against Sartain
23 In late January of 1992, the district court learned that William C. Conner had died. Because the district court had not received evidence that Conner had been served with a summons and complaint, the district court inquired into the status of the FDIC's claims against him. The court ordered the FDIC to file proof of proper service on Conner or face dismissal of its claims against him. The FDIC thus filed an Affidavit of Service of Summons and Complaint. This affidavit explained that on November 15, 1991, the FDIC received a copy of a Notice and Acknowledgement of Service by Mail signed by Conner. The affidavit further explained that the FDIC also received on November 15, 1991, an unfiled copy of what appeared to be Conner's answer. However, Conner, who was proceeding pro se, never filed an answer in the district court. On January 31, 1992, the district court ordered the FDIC to inform the court whether it wished to proceed with its claims against Conner by substituting his representatives. If so, the court ordered the FDIC to substitute the proper party by complying with the requirements of Federal Rule of Civil Procedure 25(a). Thus, on February 21, 1992, the FDIC filed a Rule 25 motion, requesting the court to substitute the Estate of William C. Conner in place of the deceased Defendant William C. Conner. 24 After considering the response of Hillard, Robinson, Ryan, Stevens, and Whipp, the district court denied the motion to substitute and dismissed the FDIC's claims against Conner. The district court gave several reasons for its action: The court first noted that the FDIC's motion to substitute was signed by a law firm instead of an individual attorney in violation of a standing order of the district court. Second, the court faulted the FDIC for failing to serve the motion to substitute on the representatives or successors of Conner. Third, the court noticed that neither the FDIC's Affidavit of Service of Summons and Complaint nor the Notice and Acknowledgement of Service by Mail signed by Conner had been served on the other defendants. The court also observed that the Notice and Acknowledgement of Service by Mail had not been timely filed with the district court as required by Local Rule 3.1(g) and the version of Federal Rule of Civil Procedure 4(g) in effect at that time. 7 Furthermore, the court found that the FDIC incorrectly requested the substitution of the Estate of William C. Conner as a defendant. An estate is not a legal entity and cannot be sued as such. Henson v. Estate of Crow, 734 S.W.2d 648, 649 (Tex.1987). Finally, the district court held that since Conner had not answered or otherwise appeared in the case for ninety days after being served, and since the FDIC had not filed a motion for default judgment within that period of time, the FDIC's claims against Conner were susceptible of being dismissed pursuant to Local Rule 3.1(h). 8 The district court thus denied the FDIC's motion to substitute and dismissed the FDIC's claims against Conner. The FDIC filed a motion for new trial, but this motion was summarily denied by the district court. 25 In their May 14, 1992 motion for sanctions, defendants Hillard, Robinson, Ryan, Stevens, and Whipp requested that they be reimbursed for the expenses they incurred in their opposition to the FDIC's motion to substitute. At the July 17, 1992 sanctions hearing, the district court invoked 28 U.S.C. Sec. 1927 and ordered Sartain to pay the defendants who opposed the FDIC's motion to substitute parties $1,590.00 to compensate them for the attorney's fees they incurred in their opposition to the motion. The district court justified this sanction on the FDIC's multiplication of these proceedings unreasonably due to the failure of the plaintiff to comply with my order signed January 31, 1992.
26 Sartain contests the propriety of the $1590.00 sanction for his failure to comply with the district court's January 31 order. As noted above, this order required the FDIC to inform the court whether it wished to pursue its claims against Conner, and, if so, to comply with the requirements of Federal Rule of Civil Procedure 25(a). The district court sanctioned Sartain under 28 U.S.C. Sec. 1927. Under this statute, district courts have the authority to order an attorney who so multiplies the proceedings in any case unreasonably and vexatiously to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct. We review sanctions made under this statute for abuse of discretion. Thomas v. Capital Security Services, Inc., 836 F.2d 866, 872 (5th Cir.1988) (en banc); Topalian, 3 F.3d at 936 n. 5. 27 Before a sanction under Sec. 1927 is appropriate, the offending attorney's multiplication of the proceedings must be both unreasonable and vexatious. We have characterized awards under this statute as penal in nature. Browning v. Kramer, 931 F.2d 340, 344 (5th Cir.1991). Other courts have written that Sec. 1927 should be employed only in instances evidencing a 'serious and standard disregard for the orderly process of justice.'  Dreiling v. Peugeot Motors of America, Inc., 768 F.2d 1159, 1165 (10th Cir.1985) (quoting Kiefel v. Las Vegas Hacienda, Inc., 404 F.2d 1163, 1167 (7th Cir.1968), cert. denied, 395 U.S. 908, 89 S.Ct. 1750, 23 L.Ed.2d 221 (1969)); see also United States v. Ross, 535 F.2d 346, 349 (6th Cir.1976) (Sec. 1927 liability should flow only from an intentional departure from proper conduct, or, at a minimum, from a reckless disregard of the duty owed by counsel to the court.). Such a strict construction of Sec. 1927 is necessary so that the legitimate zeal of an attorney in representing her client is not dampened. Browning, 931 F.2d at 344. 28 In this case, the FDIC's response to the district court's January 31 order was careless and even negligent. However, we cannot ignore the fact that the district court made no finding that Sartain's actions were vexatious. This deficiency leads us to repeat what we said in Browning: [A]n award pursuant to 28 U.S.C. Sec. 1927 'require[s] more detailed findings to determine whether the requirements of the statute have been met, and which, if any, excess costs, expenses, or attorney's fees were incurred because of [the attorney's] vexatious multiplication of the proceedings.'  Browning, 931 F.2d at 345 (citation omitted) (emphasis supplied). We must therefore vacate the Sec. 1927 sanction against Sartain. On remand, the district court may, if the facts warrant it, identify the conduct in which Sartain engaged that displayed the degree of recklessness, bad faith, or improper motive required for a finding that [Sartain] has multiplied the proceedings 'unreasonably and vexatiously.'  Manax v. McNamara, 842 F.2d 808, 814 (5th Cir.1988); see also Hogue v. Royse City, 939 F.2d 1249, 1256 (5th Cir.1991) (application of Sec. 1927 requires evidence of recklessness, bad faith, or improper motive).