Opinion ID: 744488
Heading Depth: 4
Heading Rank: 1

Heading: Can Sanctions be Based on the Costs of Sanctioning Proceedings?

Text: 74 Goldman Antonetti argues that the district court impermissibly awarded sanctions based on the costs and expenses arising from the sanctions proceedings themselves. In the firm's submission, such an award constitutes improper fee shifting. We disagree. It is beyond dispute that attorney's fees are, in certain circumstances, properly awarded as a sanction. We are unaware of precedent in this circuit that categorically excludes from such an award attorney's fees arising from the sanctions proceedings themselves (though, as we discuss below, there is precedent in other circuits that bears on this issue). 22 Nor do we believe such a categorical exclusion is wise. The time, effort, and resources expended in bringing sanctionable conduct to light would have been unnecessary had the sanctionable conduct never occurred. These costs are as much a harm to a party in the litigation as is the delay in the litigation or the substantive prejudice caused by the conduct. If we exclude from a possible award the costs of sanctions proceedings, we would undermine the compensatory goal of a sanctions award. 75 Further, if a party is aware ex ante that the costs he incurs in exposing sanctionable conduct will never be recouped, that party may decide to forgo a sanctions proceeding altogether. See Burbank, supra at 40-41. In doing so, however, that party might allow otherwise sanctionable conduct to go unaddressed. In such cases, the deterrent goal of a sanction award has been lost; parties who know that the likelihood of facing a sanction proceeding are low may engage in sanctionable conduct more often. Therefore, we believe a district court, in the exercise of its discretion, may award attorney's fees arising from sanctions proceedings. 76 We are aware of precedent in other circuits that has disallowed such awards in the Rule 11 context. See, e.g., Zimmerman v. Bishop Estate, 25 F.3d 784, 790 (9th Cir. 1994); Pan-Pacific and Low Ball Cable Television Co. v. Pacific Union Co., 987 F.2d 594, 597 (9th Cir.1993); Lockary v. Kayfetz, 974 F.2d 1166, 1177-78 (9th Cir.1992); Brubaker v. City of Richmond, 943 F.2d 1363, 1387 (4th Cir.1991); Blue v. United States Dept. of the Army, 914 F.2d 525, 548-49 (4th Cir.1990). 23 However, better reasoned precedent in still other circuits supports our view that the costs associated with the sanctions proceedings themselves can be recoverable. See, e.g., Kirk Capital Corp. v. Bailey, 16 F.3d 1485, 1491 (8th Cir.1994); Silva v. Witschen, 19 F.3d 725, 733 n. 15 (1st Cir.1994); Brandt v. Schal Assocs., Inc., 960 F.2d 640, 649-51 (7th Cir.1992); In re Stauffer Seeds, Inc., 817 F.2d 47, 50 (8th Cir.1987) (Rule 37). 77 In addition, in 1993, Rule 11 was amended to add language that would allow sanctions for the costs associated with presenting or opposing a motion for Rule 11 sanctions. See Joseph, supra, § 16(B)(17), at 278. The language in Rule 11 now states that the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Fed.R.Civ.P. 11(c)(1)(A). That amendment seems to have effectively overruled cases that held that it is an abuse of discretion to award sanctions based on the costs of sanctions proceedings. 24 78