Court Opinion

ID: 2657400
Source: CourtListenerOpinion
Date Created: 2014-03-20 16:47:12.335186+00
Date Added: 2024-06-11T12:18:13.954705
License: Public Domain

NOT PRECEDENTIAL

                 UNITED STATES COURT OF APPEALS
                      FOR THE THIRD CIRCUIT
                           _____________

                                No. 13-3450
                               _____________

     DONALD E. HAVILAND, JR.; THE HAVILAND LAW FIRM, LLC;
                   HAVILAND HUGHES, LLC.,
                                       Appellants

                                    v.

                SHANIN SPECTER; THOMAS R. KLINE;
              KLINE & SPECTER, A Professional Corporation
                          _____________

              On Appeal from the United States District Court
                        for the District of New Jersey
                      District Court No. 3-12-cv-05580
              District Judge: The Honorable Freda L. Wolfson

                          Argued March 5, 2014

         Before: AMBRO, SMITH, and HARDIMAN, Circuit Judges

                         (Filed: March 20, 2014)

Mark L. Rhoades [ARGUED]
Mitts Milavec
1835 Market Street
12th Floor
Philadelphia, PA 19103
       Counsel for Appellant

Charles L. Becker [ARGUED]
Kline & Specter
1525 Locust Street
                                     1
19th Floor
Philadelphia, PA 19102

Marshall D. Bilder
Sterns & Weinroth
50 West State Street
P.O. Box 1298
Suite 1400
Trenton, NJ 08607

David C. Kistler
Stephen M. Orlofsky
Blank Rome
301 Carnegie Center
Third Floor
Princeton, NJ 08540
      Counsel for Appellee

                             _____________________

                                    OPINION
                             _____________________

SMITH, Circuit Judge.

      Neil Sedaka’s observation that “Breaking Up Is Hard to Do” rings true

whether the separation relates to lovers or lawyers. This case concerns the latter.

      Appellant Donald Haviland is a lawyer formerly employed by Kline &

Specter, P.C. During his tenure at Kline & Specter, Haviland presided over the

firm’s Class Action Department and maintained an active complex litigation

practice. In August 2006, Haviland informed Kline & Specter of his intention to

leave and start his own firm. The break-up began with a tone of cordiality, with the

parties agreeing that Haviland’s new firm would assume control of certain matters
                                          2
previously managed by Haviland. It turned contentious, however, when Kline &

Specter discovered that, on his way out, Haviland had secretly solicited class

representatives to elect him to replace Kline & Specter as class counsel in one of

that firm’s class action cases.

      After the fallout, Haviland and Kline & Specter both filed Writs of

Summons in the Philadelphia Court of Common Pleas seeking contractual

damages under Haviland’s employment contract. Those writs, however, were

stayed in May 2008, when the court granted Kline & Specter’s previously filed

petition to send the matter to arbitration.

      In September 2012, while the Writs of Summons were still stayed in

Pennsylvania state court, Haviland, the Haviland Law Firm, LLC, and Haviland

Hughes, LLC (collectively, “Plaintiffs”), commenced this action in the United

States District Court for the District of New Jersey against Shanin Specter, Thomas

R. Kline, and Kline & Specter (collectively, “Defendants”). Plaintiffs primarily

asserted claims under Pennsylvania state law. However, to trigger federal question

jurisdiction under 28 U.S.C. § 1331, Plaintiffs also alleged that Defendants

violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18

U.S.C § 1961 et seq., by paying bonuses to firm employees and requiring a portion

be contributed to candidates for political office, all as part of a scheme to

circumvent campaign finance laws.

                                              3
      In November 2012, Defendants moved to dismiss the complaint, arguing

that the RICO claim was barred by the four-year statute of limitations. In

particular, Defendants contended that Haviland knew he was making political

contributions at the time he made them, and because Haviland left the firm in

September 2006, his claim was time barred no later than September 2010.

      Defendants also moved for sanctions under both 28 U.S.C. § 1927 and the

Court’s inherent powers as described in Chambers v. NASCO, Inc., 501 U.S. 32

(1991). Defendants argued that Haviland knew his claim was time-barred when he

filed it, but, acting in bad faith, chose to file the suit anyway for the sole purpose of

embarrassing Kline & Specter and besmirching the firm’s reputation.

      On November 30, 2012, Haviland filed an amended complaint reasserting

his previous claims and adding a state law claim for fraud. The amendment,

however, failed to remedy the statute of limitations deficiency. Accordingly,

Defendants once again moved to dismiss and for sanctions. Plaintiffs filed a

responsive brief on all issues. Then, on April 4, 2013, after Defendants’ motion to

dismiss had been pending for more than three months, Plaintiffs voluntarily

dismissed their case under Federal Rule of Civil Procedure 41. They later

explained that they dismissed their federal case because the arbitration had

concluded and the stay in the Philadelphia Court of Common Pleas had been lifted,

thereby opening that forum for further litigation.

                                           4
      On April 5, 2013, Defendants wrote a letter to Judge Wolfson reminding her

that, although the motion to dismiss was rendered moot by the voluntary dismissal,

the motion for sanctions remained pending. The court scheduled the matter for a

hearing, which was held on July 24, 2013. At the hearing, Defendants abandoned

their request for sanctions under § 1927 and stated that they were seeking sanctions

only under the Court’s inherent authority and to be imposed solely against Mr.

Haviland. Judge Wolfson then engaged in a discussion with Haviland’s counsel

regarding the basis for a federal RICO claim and why Plaintiffs continued to

pursue it in the face of a fatal statute-of-limitations defense. Unpersuaded by

counsel’s responses, Judge Wolfson decided to impose “limited sanctions” in the

amount of $2,500 against Mr. Haviland. She expressed frustration that “my court,

our court was used by the plaintiff in this case and used improperly to forum

shop.” However, she also explained that Defendants should have proceeded under

Rule 11, and because they did not, she was reluctant to impose a greater penalty.

       In an amended order, Judge Wolfson found that “Plaintiffs acted in bad

faith, vexatiously, wantonly, and for oppressive reasons by filing a time-barred

RICO claim in order to fabricate jurisdiction in this Court, and by opposing

Defendants’ Motion to Dismiss the RICO claim after learning that the RICO claim

was indeed time-barred.” Further, she found that “Donald E. Haviland, Jr. was

responsible for these actions,” and thus ordered the $2,500 sanction to be paid by

                                         5
Mr. Haviland. Plaintiffs timely appealed.1

       “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.” Martin v. Brown, 63 F.3d 1252, 1262 (3d Cir. 1995). The

procedural protections required by the Fifth Amendment, however, are not

cemented; they vary depending on the circumstances of the case. Simmerman v.

Corino, 27 F.3d 58, 64 (3d Cir. 1994) (“The precise form of procedural protection

required will, of course, vary with the circumstances of the case.”); Eash v. Riggins

Trucking Inc., 757 F.2d 557, 570 (3d Cir. 1985) (“The form which those

procedural protections must take is determined by an evaluation of all the

circumstances and an accommodation of competing interests.”).

       Plaintiffs complain that they were not provided adequate notice that the

Court was considering imposing sanctions pursuant to its inherent authority. We

disagree. Defendants twice moved the District Court to impose sanctions against

Plaintiffs, both times invoking the Court’s inherent authority. Both motions were

served on Plaintiffs, and Plaintiffs filed a response to the second. After Plaintiffs

voluntarily dismissed the action, Defendants submitted a letter to Judge Wolfson,

1
        The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction
pursuant to 28 U.S.C. § 1291. “We review orders imposing sanctions for abuse of discretion.”
Martin v. Brown, 63 F.3d 1252, 1262 (3d Cir. 1995) (citing Chambers v. NASCO, Inc., 501 U.S.
32, 55 (1991)). “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.” Id.
(citations omitted).
                                               6
which was also served on Plaintiffs, reminding her that the second motion for

sanctions was still ripe for consideration. Finally, the District Court’s notice

scheduling the hearing stated that the Court would hear argument “on the

previously filed Motion for Sanctions.” On this record, we conclude that Haviland

was amply notified of the possibility of being sanctioned under the Court’s

inherent authority.

      The District Court also provided Plaintiffs a sufficient opportunity to be

heard. The District Court held an oral hearing—with Haviland and his counsel

present—before imposing sanctions. Despite Plaintiffs’ argument to the contrary,

there was no need for the District Court to hold an additional evidentiary hearing

because the order imposing sanctions was not predicated on facts that needed to be

established through an evidentiary showing. See Rogal v. Am. Broad. Co., Inc., 74
F.3d 40, 45 (3d Cir. 1996) (explaining that evidentiary hearings are often

unnecessary and the decision to require one “depends heavily on the specific

nature” of the sanctionable conduct). Tellingly, Plaintiffs fail to explain why an

evidentiary hearing was necessary and what evidence would have been presented.

Compare Adams v. Ford Motor Co., 653 F.3d 299, 309 (3d Cir. 2011) (discussing

the evidence which could have been submitted at an evidentiary hearing had one

been provided). Our review of the record reveals that Judge Wolfson had ample

basis to conclude that Haviland acted in bad faith based on the pleadings, briefs,

                                        7
the various exhibits submitted in support of the motion for sanctions, and

statements from counsel at the hearing. This procedure was more than adequate to

satisfy the demands of the Fifth Amendment’s Due Process Clause.

       We find no merit to Plaintiffs’ contention that the Court was deprived of

jurisdiction to rule on the sanctions motion after Plaintiffs voluntarily dismissed

their complaint. The Supreme Court has explicitly held that voluntary Rule

41(a)(1) dismissal does not deprive a district court of jurisdiction over a Rule 11

motion. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395 (1990) (“The

district court’s jurisdiction, invoked by the filing of the underlying complaint,

supports consideration of both the merits of the action and the motion for Rule 11

sanctions arising from that filing.”). Although Cooter addressed sanctions under

Rule 11, we cannot see any principled reason why the Court’s decision would not

apply equally to sanctions imposed pursuant to a district court’s inherent

authority.2

2
         We also reject Plaintiffs’ argument that the District Court inappropriately imposed
sanctions against the two plaintiff law firms. Plaintiffs point to a sentence in the Court’s
amended order that states: “Plaintiffs acted in bad faith, vexatiously, wantonly, and for
oppressive reasons . . . .” App. 7 (emphasis added). They argue that this statement, which refers
to Plaintiffs collectively, suggests that all plaintiffs were culpable for the sanctionable conduct.
Read as a whole, however, the District Court’s order is abundantly clear that Mr. Haviland was
the culpable actor and the party against whom sanctions were being imposed. See App. 6
(“Defendants clarified . . . that they [are] seeking only sanctions against Donald E. Haviland, Jr.
in his individual capacity”); App. 7 (“the Court having further found on the record that Donald E.
Haviland, Jr. was responsible for these actions”); App. 7 (“Defendants’ motion for Sanctions is
granted in the amount of $2,500 to be paid to Defendants by Donald E. Haviland, Jr.”). We fail
to see any reversible error.

                                                 8
For these reasons, we will affirm.

                                     9