Court Opinion

ID: 49785
Source: CourtListenerOpinion
Date Created: 2010-04-26 00:36:29+00
Date Added: 2024-06-11T17:18:42.915856
License: Public Domain

CORRECTED                                               [DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT            FILED
                                              U.S. COURT OF APPEALS
                     ________________________
                                                        ELEVENTH CIRCUIT
                                                           JULY 20, 2006
                            No. 05-13760                 THOMAS K. KAHN
                        Non-Argument Calendar                 CLERK
                      ________________________

                 D. C. Docket No. 04-80343-CV-DTKH

CARLINE SMITH,

                                                      Plaintiff-Appellee,

SCOTT BEHREN,
WALDMAN FELUREN HILDERBRANDT & TRIGOBOFF, P.A.
LAW OFFICES OF SCOTT BEHREN, P.A.

Interested
                                                      Parties-Appellees,

                                 versus

GRAND BANK & TRUST OF FLORIDA,

                                                      Defendant-Appellant.

                      ________________________

               Appeal from the United States District Court
                   for the Southern District of Florida
                     _________________________

                             (July 20, 2006)
Before CARNES, PRYOR and KRAVITCH, Circuit Judges.

PER CURIAM:

      Grand Bank & Trust of Florida (“Grand Bank”) appeals the district court’s

denial of sanctions under 28 U.S.C. § 1927 against attorney Scott Behren and the

law firm Waldman, Feluren, Hildbrandt & Trigoboff (“Waldman”). After a

thorough review of the record, and for the reasons that follow, we affirm.

                                  I. Background

      Carline Smith was employed by Grand Bank as a loan teller for several years

before she was diagnosed with breast cancer. She applied for and received leave

time under the Family Medical Leave Act (“FMLA”), 29 U.S.C. § 2601, from

September through November 2003. After she completed her treatment, Smith’s

doctor released her to return to work part-time, but when she came to work, she

discovered that her position had been filled. Grand Bank offered her another

position as a lock box teller, which would accommodate part-time work, until she

could return to full-time status. The lock box position provided the same salary

and benefits. Although Smith refused the position, and despite Smith’s inability to

work full-time, Grand Bank paid her for two weeks of work. Grand Bank then

made several attempts to make other employment arrangements for Smith, to no

avail. Instead, Smith presented Grand Bank with a doctor’s note stating that she

                                          2
could not return to work. Nevertheless, Grand Bank extended Smith’s leave and

insurance coverage. Smith was not released for full-time work until after her leave

had expired. Once she was cleared for work, however, Smith did not contact

Grand Bank. After multiple attempts to reach Smith, Grand Bank ultimately

discharged her from employment in January 2004. Smith then hired Behren for

representation, and Behren threatened Grand Bank with a lawsuit for FMLA

violations. Grand Bank disputed that there was any FMLA violation, but offered

Smith a settlement in the amount of $2,500. Smith and Behren rejected the offer.

On April 2, 2004, using Waldman’s letterhead, Behren filed a complaint against

Grand Bank on Smith’s behalf.

      Grand Bank moved for summary judgment, asserting that Smith received all

she was entitled to under the FMLA. Smith did not respond to the motion, but

sought to extend the time in which to conduct discovery. Nevertheless, Smith did

not engage in discovery and did not respond to Grand Bank’s discovery requests.

      Grand Bank conducted Smith’s deposition, in which Smith admitted that the

lock box teller job provided the same benefits and salary, that she had refused the

job, and that she was not able to return to full-time work. After this deposition,

Grand Bank notified Behren that it would seek sanctions unless the frivolous

complaint was dismissed. Behren did not dismiss the complaint, and Grand Bank

                                          3
filed an amended summary judgment motion including Smith’s deposition. In late

July 2004, Behren was terminated from his employment with Waldman.

       Behren and Smith moved to dismiss the complaint without prejudice. Grand

Bank opposed the motion and moved for sanctions against Behren, Waldman, and

Smith under § 1927 and the court’s inherent powers.1 Grand Bank alleged that

Behren had failed to conduct sufficient inquiry before filing suit, refused Grand

Bank’s settlement offer despite the frivolity of the claim, and refused to dismiss the

complaint after learning that the complaint had no basis in law or fact. Grand Bank

asserted that it had incurred more than $50,000 in costs associated with defending

the suit.

       Behren responded that he had acted with good faith belief that there was a

colorable legal issue, that Smith had not relayed full information before they filed

the complaint, and that he had not conducted additional discovery after Smith’s

deposition to minimize expenses.

       Waldman responded that it was not involved in Smith’s representation,

Behren had been an independent contractor, and Behren had agreed to file a

substitution of counsel removing Waldman as Smith’s counsel of record, which

       1
          On appeal, Grand Bank does not challenge the denial of sanctions against Smith.
Therefore, it has abandoned the issue, and we do not address it. Rowe v. Schreiber, 139 F.3d 1381,
1382 n.1 (11th Cir. 1998).

                                                4
Grand Bank was aware of and had not objected to. The parties then moved to

dismiss the complaint with prejudice, but permit the court to address the sanctions

motion.

      At the hearing on sanctions before a magistrate judge, Grand Bank argued

that sanctions were appropriate because § 1927 required the attorney’s conduct be

unreasonable and vexatious, and the conduct must multiply the proceedings, both

of which were present. Grand Bank claimed that Behren acted in bad faith by

knowingly and recklessly filing the complaint without all the facts, failing to

research the law, ignoring Grand Bank’s warning that the facts did not support a

claim, and delaying the case by seeking continuances and discovery. It further

asserted that Waldman was liable for sanctions because (1) the firm (a) represented

Smith at the time the complaint was filed, (b) paid the filing fee, and (c) sought a

lien against Smith for fees; (2) there was no evidence that Behren acted as an

independent contractor; and (3) the stipulation to substitute counsel had never been

filed with the court.

      Behren argued that he did not engage in vexatious conduct that multiplied

the litigation, and he explained that the standard was something greater than

frivolity or negligence. He then argued that the complaint was dismissed during

the safe harbor period for Fed. R. Civ. P. (“Rule”) 11, and, therefore, sanctions

                                           5
should not be imposed. He noted that he did not conduct additional discovery after

the deposition in order to avoid increasing the costs of the litigation. Waldman

argued that § 1927 did not provide for sanctions against the firm, and, in any event,

there was no evidence of bad faith.

      The magistrate judge recommended granting sanctions against Behren and

Waldman, jointly and severally. First, the magistrate judge found that Behren and

Waldman engaged in bad faith by filing a complaint without good cause and in the

absence of any factual or legal basis for the FMLA claim, and refusing to dismiss

after the facts came to light. The magistrate judge further found that Behren’s and

Waldman’s conduct multiplied the litigation. The court noted that there was no

evidence that Behren was an independent contractor or that the stipulation to

substitute counsel had been filed with the court, and, therefore, the firm was liable.

      Waldman and Behren objected to the report and recommendation. The

district court conducted a de novo review and rejected the magistrate judge’s

recommendation, noting that sanctions were permissible but not required, and

finding that the conduct did not rise to the level of willful abuse and bad faith.

      After Grand Bank filed its notice of appeal, Waldman sought fees and costs

under Rule 68. The court stayed the Rule 68 motion pending the outcome of the

appeal.

                                           6
                                   II. The Appeal

      We review the district court’s imposition of sanctions under 28 U.S.C.

§ 1927 for an abuse of discretion. Schwartz v. Millon Air, Inc., 341 F.3d 1220,

1225 (11th Cir. 2003). “An abuse of discretion occurs if the judge fails to apply

the proper legal standard or to follow proper procedures in making the

determination, or bases an award upon findings of fact that are clearly erroneous.”

Cordoba v. Dillard’s, Inc., 419 F.3d 1169, 1180 (11th Cir. 2005).

      Under § 1927: “Any attorney or other person admitted to conduct cases in

any court of the United States or any Territory thereof who so multiplies the

proceedings in any case unreasonably and vexatiously may be required by the

court to satisfy personally the excess costs, expenses, and attorneys’ fees

reasonably incurred because of such conduct.” 28 U.S.C. § 1927 (emphasis

added). The statute was designed to sanction attorneys who “willfully abuse the

judicial process by conduct tantamount to bad faith.” Schwartz, 341 F.3d at 1225

(citing Malautea v. Suzuki Motor Co., Ltd., 987 F.2d 1536, 1544 (11th Cir. 1993)

and Avirgan v. Hull, 932 F.2d 1572, 1582 (11th Cir. 1991)).

      As this court has explained, “this section is not a ‘catch-all’ provision for

sanctioning objectionable conduct by counsel.” Id. Rather, for sanctions to be

appropriate (1) counsel must have engaged in unreasonable and vexatious conduct;

                                           7
(2) this conduct must have multiplied the proceedings; and (3) the amount of the

sanction cannot exceed the costs resulting from the conduct. Id.; McMahan v.

Toto, 256 F.3d 1120, 1128 (11th Cir. 2001), amended on reh’g, 311 F.3d 1077

(11th Cir. 2002). Moreover, “bad faith is the touchstone,” and mere negligence is

not sufficient to justify sanctions. Schwartz, 341 F.3d at 1255. A determination of

bad faith is warranted where an attorney knowingly or recklessly pursues a

frivolous claim. Id. at 1225-26. Whether this bad faith is subjective or objective

has not been decided in this circuit. Cordoba, 419 F.3d at 1178 (finding the

distinction unimportant for purposes of that case). Sanctions are not warranted,

however, simply because counsel’s performance did not rise to the highest

standards of the profession. Peterson v. BMI Refractories, 124 F.3d 1386, 1396

(11th Cir. 1997).

       A. Sanctions against Behren 2

       Grand Bank argues that sanctions were warranted against Behren because he

willfully abused the judicial process and acted in bad faith when he pursued a

claim that he knew had no basis in law or fact. It notes that the magistrate judge

made factual findings that were not clearly erroneous and which were entitled to

       2
         Notably, the parties continue to confuse sanctions under Rule 11 and those under § 1927.
Behren continually argues that there is no bad faith when the complaint is dismissed during the safe
harbor period applicable to Rule 11. Section 1927, however, does not include a safe harbor period.

                                                 8
deference. Grand Bank asserts that imposing sanctions in this case would have met

the goals of § 1927 to deter frivolous litigation and force the offending party to

bear the costs of its conduct, thus limiting the court’s discretion to deny sanctions.

Grand Bank notes that the district court did not explain why it believed sanctions

were not warranted.3

       Section 1927 requires bad faith, which is more than negligence or lack of

merit. This court has held that an attorney who “knowingly or recklessly pursues a

frivolous claim” acts in bad faith. Schwartz, 341 F.3d at 1225. Although it is

unclear whether this bad faith must be subjective or objective, we need not decide

that question here. For the reasons discussed below, we conclude that whether

Behren acted in bad faith is a close call, and, as a result, we cannot say that the

court abused its discretion.

       Arguably, Behren should have known that the claims were frivolous.4

Behren knew Smith had been offered another position with comparable benefits,

that Smith was unable to return to full-time work, and that Grand Bank was

prepared to return Smith to her previous position when she was able to return to

       3
         Importantly, the court is not required to make specific findings of bad faith in awarding
sanctions under § 1927. Cordoba, 419 F.3d at 1178 n.6.
       4
           This court, addressing fees under the Americans with Disabilities Act, has explained that
the frivolity inquiry involves whether the plaintiff could “introduce any evidence to support their
claims;” “whether the plaintiff established a prima facie case;” and “whether the defendant offered
to settle.” Cordoba, 419 F.3d at 1176.

                                                 9
full-time status. Given these facts, Grand Bank did all it was required to do under

the FMLA, see 29 C.F.R. § 825.204, and had Behren investigated the law or the

facts, he should have been aware that the complaint had no merit. His failure to do

either investigation before filing suit could constitute reckless behavior sufficient

to rise to the level of bad faith. Cf. Schwartz, 341 F.3d at 1223-24.

      Behren contends that Smith was not completely forthcoming with all of the

facts, and that she changed her story after their initial meeting. Subjectively, then,

if Smith was not truthful, Behren had no knowledge of the facts that would have

confirmed the complaint had no merit. Moreover, the fact that Grand Bank

informed Behren that the case had no merit did not dictate that Behren dismiss the

case. It should, however, have encouraged him to research the law more

completely and investigate the facts more thoroughly. Nevertheless, the fact that

we may reach the opposite conclusion does not mean the court abused its

discretion in determining that Behren’s conduct did not amount to bad faith.

      According to Grand Bank, however, Behren’s bad faith extended beyond

filing the complaint when he sought extensions of time for discovery, refused to

dismiss even after it became clear that the claim had no merit, and was unprepared

                                           10
at the hearing on the motion for sanctions.5 These events, however, took place

over only a few months, and § 1927 does not require the voluntary dismissal once

a plaintiff decides not to pursue the claims. Jackson Marine Corp. v. Thomas

Jordan, Inc., 794 F.2d 989, 992 (5th Cir. 1986).

       Even if Behren’s conduct was in bad faith, sanctions are not warranted

unless the conduct also multiplied the litigation. Thus, there must be some causal

connection between the conduct and the continuation of proceedings that otherwise

would not have occurred. Peterson, 124 F.3d at 1396-97. There was no such

connection in the instant case, which lasted only a few months and involved

minimal discovery.

       Moreover, a review of the record indicates that Grand Bank’s conduct

contributed to the rising litigation fees. Grand Bank asserts that it suffered $50,000

in fees and costs, which seems extraordinarily high for a case of this duration.

       Finally, even if Behren acted in bad faith, and this conduct multiplied the

proceedings, the district court may nevertheless exercise its discretion to award

sanctions.6 Additionally, there is no case law supporting Grand Bank’s claim that

       5
          Behren asserts that his conduct before the magistrate judge cannot serve as a basis for
sanctions because Grand Bank did not raise this issue before the district court, but that his conduct
did not multiply the litigation at that point because the underlying case had been closed.
       6
         Notably, the cases Grand Bank cites for this proposition that the court was required to
impose sanction are cases addressing sanctions under Rule 11 or 42 U.S.C. § 1988. See Head v.
Medford, 62 F.3d 351, 355 (11th Cir. 1995). See also Quintana v. Jenne, 414 F.3d 1306, 1309 (11th

                                                 11
the court was required to make special findings or that the award was justified

unless special circumstances are shown. In fact, the case law stands for the

opposite conclusion. Schwartz, 341 F.3d at 1225. Accordingly, the district court

did not abuse its discretion by denying sanctions.

       B. Sanctions against Waldman

       Grand Bank correctly argues that § 1927 allows for sanctions against a law

firm. See Malautea v. Suzuki Motor Co., Ltd., 987 F.2d 1536, 1544 (11th Cir.

1993); Avirgan v. Hull, 932 F.2d 1572, 1582 (11th Cir. 1991). Although Waldman

argues that Grand Bank misunderstands the law, it appears that the confusion lies

with Waldman. Avirgan addresses sanctions under both Rule 11 and § 1927;

however, the language of the decision tracks language applicable to § 1927 -

unreasonable and vexatious conduct. Thus, the court in Avirgan considered the

standard under § 1927. Additionally, Malautea, which addresses sanctions under

§ 1927, cites Avirgan, and, therefore, this court has implicitly determined that

§ 1927 applies to law firms. We are not bound by other circuits that have reached

the opposite conclusion.

       Thus, the issue here becomes whether Waldman’s involvement constitutes

vexatious conduct that multiplied the proceedings. Waldman contends that its

Cir. 2005) (discussing sanctions awarded for frivolous claim under Rule 11 and 42 U.S.C. § 1988,
but where sanctions were denied under § 1927).

                                              12
limited involvement with Behren after the case began does not justify sanctions.

Grand Bank contends that Waldman essentially ratified Behren’s conduct by

failing to control Behren’s actions, and participating in the suit.

      Here, the facts do not show that the firm acted to harass Grand Bank or to

multiply the proceedings. Waldman signed the pleadings, paid the filing fee for

the complaint, and notarized Smith’s affidavits. According to the record, however,

Behren was the only attorney from the firm involved in Smith’s case. Behren was

terminated from the firm during the litigation, which, as noted, lasted only a short

period of time and involved minimal discovery. Thus, the conduct falls short of

the bad faith requirement necessary for sanctions under § 1927. See Schwartz, 341

F.3d at 1255.

                                    III. Conclusion

      As a final aside, we note the unnecessarily contentious nature of this

litigation, and we do not condone the parties’ behavior in this case. In fact, it

appears that the parties’ extreme adversarial conduct has contributed to the legal

fees incurred. Nevertheless, in light of the record, we cannot conclude that the

court abused its discretion in denying sanctions. Therefore, we AFFIRM.

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