Court Opinion

ID: 3000958
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:11:07.842254+00
Date Added: 2024-06-11T11:45:43.488595
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 06-1878
MICHAEL WADE,
                                             Plaintiff-Appellant,
                                v.

SOO LINE RAILROAD CORPORATION and
CANADIAN PACIFIC RAILWAY COMPANY,
                                          Defendants-Appellees.
GEORGE T. BRUGESS,
                                                         Appellant.
                         ____________
           Appeal from the United States District Court
      for the Northern District of Illinois, Eastern Division.
             No. 03 C 3922—James B. Zagel, Judge.
                         ____________
    ARGUED MAY 23, 2007—DECIDED AUGUST 29, 2007
                    ____________

 Before EASTERBROOK, Chief Judge, and BAUER and
MANION, Circuit Judges.
  EASTERBROOK, Chief Judge. Michael Wade alleged that
he was permanently injured while operating a handbrake
on the Soo Line Railroad. (The Soo Line is a subsidiary of
the Canadian Pacific Railway. It is not clear from the
record which company is Wade’s employer; because
nothing turns on the issue, we refer to both collectively
as the Soo Line.) Wade brought this action under the
Federal Employees Liability Act, 45 U.S.C. §§ 51–60,
2                                               No. 06-1878

seeking damages for medical expenses, lost wages, and
pain and suffering. The district court never reached the
merits of Wade’s claims, however; it dismissed the suit,
with prejudice, as a sanction for misconduct by Wade’s
lawyer, George Brugess. It also ordered Brugess to pay
more than $110,000 to reimburse Soo Line’s fees and costs.
  Wade was treated for his injuries by Michael R. Treister
and Chang Sun Kim, two orthopedic specialists at Treister
Orthopedic Services (TOS). Wade listed Dr. Treister as a
treating physician in an answer to Soo Line’s interrogato-
ries. That made him a potential fact witness, and Soo Line
accordingly subpoenaed TOS, seeking its “entire file
pertaining to Michael Wade”. TOS produced what pur-
ported to be its entire file, but at Dr. Kim’s deposition Soo
Line’s attorney Daniel Mohan noticed that Kim’s copy of
the file was thicker than the one that had been produced
in discovery. Mohan examined Kim’s file, saw several
documents that had not been produced, and requested a
copy of the complete file. The attorneys took a 20-minute
break. An aide from Kim’s office took the file for copying
and, when the file was returned, some of the previously
missing documents were included in the copy—but two
had disappeared from Kim’s file and were not in the
copy made for Mohan. The record does not show who
removed these documents from the file, but we do know
that Brugess was at the deposition and that Wade’s
counsel had the opportunity to control the events.
  Soo Line promptly subpoenaed Dr. Kim and all staff
members who had been on duty during the deposition,
seeking the missing documents. On January 4, 2005, six
days after the deposition, TOS faxed the missing docu-
ments to Brugess—but not to Soo Line, the party that had
subpoenaed them. Brugess sat on them. When a week had
passed with no answer to its subpoena, Soo Line filed a
motion to compel production (miscaptioned as a motion for
a “protective order”). The district court granted this mo-
No. 06-1878                                               3

tion on January 10 and sent the order to TOS and to
Brugess on January 13. Brugess did not turn over the
documents until January 25, well after the deadline.
  Five documents were at issue: three that TOS had not
revealed until Dr. Kim’s deposition, and two that TOS
and Brugess withheld even after Soo Line learned of
their existence. These were highly probative records
that should have been produced much earlier. The district
court called them “smoking guns”. One was an intake
form on which Wade checked “no” in answer to the ques-
tions “Was the condition being treated the result of an
accident or injury?” and “Do you feel that another party
is responsible for this accident or injury?” Two more of
the documents related to an undisclosed physical exam-
ination that Dr. Treister performed at the request of
Wade’s law firm, Hoey & Farina; in one Dr. Treister
stated, “I do not on physical examination see any evidence
of objective pathology requiring treatment at this time.”
  The two documents removed from the file during
Dr. Kim’s deposition were particularly damaging. One
was a “collections system detail report” detailing billing
activity on Wade’s file. It included an entry, signed by
Dr. Treister, reading:
   Atty Brugess called, states he is aware that we are
   just making penny for a dollar billed thru United
   Health which we have a contract with, he make a
   proposal to bill him for the balance showing that
   we did review of record for such $ amt. then he
   will include that in the settlement or pay us up
   front for that charge. Asked him for the risk that
   we might encounter (fraud) in the future. He
   states it happened so many times, & that is the
   only way we will get our bills paid in full. He will
   provide proper documentation like he will request
   for record review then we charge him & he will
   pay.
4                                               No. 06-1878

Brugess’s proposal was problematic in part because,
according to a contract with United Healthcare that TOS
produced in discovery, TOS had agreed to accept a re-
duced rate and not to collect further amounts from anyone
else. The document also included a statement that “Patient
was referred to TOS by Atty Downes office”, which contra-
dicted Wade’s statement that he had been referred by a
friend.
  The other particularly damaging document was a note
from Dr. Treister to an employee at TOS. It began:
    George Brugess from Hoey & Farina sent me a
    disability form to fill out on Michael Wade.
    This is a real problem. Can you call him and read
    him this unofficial note???? I don’t think I will
    have time until late in the week.
    I have gone through the chart really carefully.
Then, after summarizing Wade’s treatment history at TOS,
the note concluded (second ellipses in original):
    Problem here—how do I indicate disability when
    basically examination is normal and there is no
    atrophy or any other really objective findings?
    ...
    So I just don’t think there is anything that I can
    write down which would be helpful rather than
    harmful. Does George Brugess have any ideas?
    I think it is best that I just file the chart and he
    try to resolve the case. . . I probably cannot get
    back to him until later in the week, but wanted
    you to report my thoughts. This note can be
    staple[d] unofficially to the outside of the chart. It
    is NOT a report and NOT a progress note.
   Once Soo Line finally received copies of these documents,
it moved for sanctions pursuant to Fed. R. Civ. P. 37(c)(1).
No. 06-1878                                               5

Soo Line argued, first, that Brugess and his firm made
improper payments to TOS to influence its diagnosis of
Wade, and, second, that Wade had tried to conceal these
damaging documents and, even after being caught, tried to
conceal them again and, when their absence was detected
once more, tarried in turning them over. The district
court concluded that the money was payment for an
independent medical examination rather than a kickback,
and while “not per se improper”, was “certainly an unsa-
vory ‘sweetening of the deal.’ ” The court ruled that,
although the payments did not themselves merit sanctions,
failure to turn over highly relevant documents justified
not only dismissal with prejudice but also an order re-
quiring Brugess to pay Soo Line’s fees and costs. In the
district court’s view, the dismissal would not hurt Wade,
because “[g]iven the documents uncovered by Mohan, the
grant of summary judgment for Soo Line is almost a
foregone conclusion.”
  The main argument on appeal is that $110,000 is too
much. Soo Line sought sanctions on account of Wade’s
failure to disclose damaging documents as well as the
payments to TOS, but it prevailed on the first argument
only. Brugess argues that the district court had to “appor-
tion” any sanction between the successful and unsuccessful
grounds. Hensley v. Eckerhart, 461 U.S. 424 (1983), holds
that attorneys’ fees awarded pursuant to 42 U.S.C. §1988
must be apportioned: if a plaintiff brings two distinct
claims in one lawsuit but prevails on only one, the court
must award only the fees incurred in prosecuting the
successful claim. Divane v. Krull Electric Co., 319 F.3d 307
(7th Cir. 2003), applies this principle to attorneys’ fees
awarded as sanctions under Fed. R. Civ. P. 11. A plaintiff
who brings distinct claims, one of which is sanctionable,
can be ordered to pay attorneys’ fees incurred in defending
the frivolous claim—but not those incurred in defending
non-sanctionable claims. Sanctions in the form of attor-
6                                               No. 06-1878

neys’ fees are analogous to damages in a tort case, so the
party that misbehaved pays for the injury caused by the
misconduct. When a factually independent part of the
case is entirely legitimate, there is no justification for
extending the sanction to cover that part. See also
Maynard v. Nygren, 332 F.3d 462, 471 (7th Cir. 2003)
(applying the causation principle to attorneys’ fees
awarded under Rule 37(c)).
  It’s one thing to distinguish between factually unrelated
claims brought in a single suit because the federal rules
permit joinder of unrelated claims, and quite another to
apply this principle to related accusations of misconduct
concerning one claim. Soo Line advanced two theories in
support of one goal: dismissal of the litigation. It achieved
this goal. Brugess asserts that the multiple grounds on
which Soo Line sought sanctions are different “claims” as
Hensley and Divane use that term, but that’s not so. A
separate “claim” is an argument for additional relief for
a distinct wrong.
  Soo Line thought that Hoey & Farina was making under-
the-table payments to Dr. Treister and TOS; the evidence
for this accusation came from the documents TOS and
Brugess avoided turning over. The harm caused by
Brugess’s failure to turn over documents is not readily
distinguishable from the harm that would have been
caused by side payments to TOS: both would delay resolu-
tion of the lawsuit and cause Soo Line to incur unneces-
sary fees. That the district court saw only one kind of
misconduct in the withheld documents does not excuse
Wade or Brugess from paying for the harm caused by the
misconduct.
  This assumes that the entire $110,000 is attributable to
the misconduct. That amount was Soo Line’s entire cost
of defending the case until the entry of the sanctions order,
and Wade and Brugess assert that it cannot represent the
No. 06-1878                                                7

actual harm. Indeed, the district court had found that
the harm was limited to expenses incurred after the date
when the documents should have been handed over. The
district court entered three orders concerning the amount
of sanctions. The first granted the motion for sanctions,
leaving the amount open until Soo Line submitted a
statement of its fees and costs. Soo Line did so, and in
the second order the court held that Soo Line was entitled
to fees and expenses incurred only after January 4, 2005.
The district court gave Wade’s counsel time to file objec-
tions to specific items in Soo Line’s requests. Brugess
squandered this opportunity, arguing yet again that
sanctions were inappropriate but not addressing any of
Soo Line’s line items. The district court then ordered
Brugess to pay all $110,000—a sum that included expenses
from before January 4 (when TOS gave him copies) and
indeed before they should have been furnished in response
to the original discovery request for the medical file.
(January 4 was already long past time for disclosure.)
  The district court had ruled that Soo Line was not
entitled to expenses incurred before January 4, which may
explain why Brugess did not object to earlier entries in Soo
Line’s itemization, though it is hard to fathom why he
would have failed to remind the judge that Soo Line had
not followed the court’s instructions. For its part, Soo Line
did not resubmit a list of expenses limited to those in-
curred after January 4—but then, no one asked it to.
Brugess did object to the way some of the expenses had
been calculated, and the district court ruled on those
objections, but the court never mentioned its 180-degree
turn on pre-January 4 expenses. Maybe there is a good
explanation: perhaps the court decided that the suit
itself was frivolous or vexatious. See Kapco Manufactur-
ing Co. v. C&O Enterprises, Inc., 886 F.2d 1485 (7th Cir.
1989). But the court had rejected these possibilities in the
second order, and nothing obvious had happened in the
8                                              No. 06-1878

meantime that might explain the change. An equally
plausible explanation is that the judge simply lost track
of the need to calculate a subset of the fees. Since we
have no way of knowing whether the district court in-
tended to award Soo Line fees for the entire case, and if so
what its justification was, this part of the sanctions order
must be revisited on remand.
   As for the dismissal of the suit: the district court ob-
served that “the dismissed claim appears to have had
little merit or chance of success.” Wade takes this to mean
that the district court reached the merits and concluded
that he could not show an injury; he responds that,
although the withheld documents may show that he is not
entitled to damages for permanent injuries, they do not
foreclose the possibility that he might recover for loss
during the year in which he now says that he was tempo-
rarily disabled. Yet the district court did not reach the
merits; it dismissed the case as a sanction for misconduct.
The quoted statement was little more than an aside. If
Wade has a claim, his remedy now is a malpractice suit
against Brugess and his law firm.
  The district court recognized that dismissal should not
be used lightly. The punishment should fit the crime, so
fees and fines—which can be scaled as appropriate—often
are the best sanctions. Maynard, supra; Ball v. Chicago,
2 F.3d 752 (7th Cir. 1993); cf. Greviskes v. Universities
Research Association, Inc., 417 F.3d 752 (7th Cir. 2005).
  Maynard held that dismissal is an appropriate sanction
for a violation of Rule 37 only when there is “clear and
convincing evidence of willfulness, bad faith or fault”, 332
F.3d at 468. We doubt that “clear and convincing” evidence
is required; the Supreme Court held in Grogan v. Garner,
498 U.S. 279 (1991), that heightened burdens of proof do
not apply in civil cases unless a statute says so or the
Constitution requires an elevated burden. See also Herman
No. 06-1878                                               9

& MacLean v. Huddleston, 459 U.S. 375 (1983). Soo Line
has not, however, asked us to revisit Maynard (which did
not discuss the Supreme Court’s decisions) and use the
preponderance-of-the-evidence standard, perhaps because
the evidence of bad faith is manifest. As the district court
put it: “If the faxed documents were not enough to get
[Brugess’s] attention, the point should have been brought
home when he received a copy of Defendant Soo Line’s
motion for a protective order in which Mohan accurately
described [the missing documents].”
  Wade didn’t assert a privilege or even say that the
documents had been withheld by mistake. The district
court could and did conclude that Brugess (or someone
else on the plaintiff ’s legal team) deliberately concealed
documents known to favor the adversary; that’s sufficient
evidence of bad faith. Attorneys’ actions are imputed to
their clients, even when those actions cause substantial
harm. A litigant bears the risk of errors made by his
chosen agent. E.g., Pioneer Investment Services Co. v.
Brunswick Associates L.P., 507 U.S. 380, 396–97 (1993);
Johnson v. McBride, 381 F.3d 587 (7th Cir. 2004); United
States v. 7108 West Grand Avenue, 15 F.3d 632 (7th Cir.
1994). Sanctions for misconduct are within the discretion
of district judges, National Hockey League v. Metropolitan
Hockey Club, 427 U.S. 639 (1976); In re Golant, 239 F.3d
931 (7th Cir. 2001), and dismissing this case was not
an abuse of discretion.
  Finally we come to Brugess’s argument that he should
not have to pay any of Soo Line’s fees because he, as an
attorney rather than a party, is not liable under Fed. R.
Civ. P. 37(c). That rule permits fee shifting when a party
fails to make disclosures required by various parts of Fed.
R. Civ. P. 26. Insurance Benefit Administrators, Inc. v.
Martin, 871 F.2d 1354, 1360 (7th Cir. 1989), held that
because Rule 37(c) “by its express terms applies only to
10                                               No. 06-1878

parties, and not to attorneys, [ ] it may not be the basis
for sanctions against an attorney.” Accord, Maynard,
332 F.3d at 470. Brugess did not make this argument
in the district court, however; had he done so, the judge
could have given a different justification for holding him
personally liable. Several alternative bases are plausible:
the district court might have used its inherent authority to
sanction attorneys, see Chambers v. NASCO, Inc., 501 U.S.
32, 49 (1991); Dotson v. Bravo, 321 F.3d 663, 667–69 (7th
Cir. 2003), or relied on 28 U.S.C. §1927 (unreasonable and
vexatious multiplication of proceedings) or Fed. R. Civ. P.
26(g)(3) (false certification of compliance with the discov-
ery rules). Because he never raised the issue, Brugess has
forfeited the benefit of appellate review on the issue; at
oral argument he also expressly withdrew the argument.
So we need not consider the application of Rule 37(c).
  A corollary of Brugess’s argument, however, is that Wade
must pay the fees personally. That argument puts
Brugess’s interests (and, indirectly, his law firm’s) in
conflict with his client’s, which puts Brugess and his firm
on the wrong side of their professional obligations. Local
Rule 83.51.7(b) of the Northern District of Illinois provides:
     A lawyer shall not represent a client if the repre-
     sentation of that client may be materially limited
     by the lawyer’s responsibilities to another client or
     to a third person, or by the lawyer’s own interests,
     unless:
         (1) the lawyer reasonably believes the repre-
         sentation will not be adversely affected; and
         (2) the client consents after disclosure.
Accord, Illinois Rule of Professional Conduct 1.7(b). (All of
Wade’s attorneys are members of the Illinois Bar.)
  It is not possible to believe that Brugess’s and his firm’s
representation of Wade “will not be adversely affected” by
No. 06-1878                                              11

their own conflicting interests when Brugess and his firm
are making arguments that go directly against their
client’s interests. This issue is zero-sum: if Brugess
prevails, the monetary sanction is shifted to Wade. And
Brugess conceded at argument that Wade did not con-
sent to the making of an argument that, if accepted, would
have saddled him with a $110,000 judgment. His lawyers
just ignored the conflict and argued in their own interests.
   Maybe Wade could have shifted the expense to Brugess
in turn. A lawyer whose misconduct results in sanctions
against his client has committed malpractice; if Wade
did end up liable on account of Brugess’s misconduct, he
would have a claim against Brugess for (at least) the
amount of the sanctions. (Why make the argument in the
first place, then? Does it affect whether Hoey & Farina’s
malpractice insurer pays?) The possibility that Wade could
shift the cost of the sanctions back onto Brugess, however,
does not mean that Wade has nothing at risk from his
lawyers’ argument. If Brugess had agreed to indemnify
Wade for any sanctions assessed against him (and Brugess
were sure to be solvent), then there would be no conflict,
but that doesn’t seem to have happened. We learned after
argument that Wade and Hoey & Farina had negotiated
toward a settlement of Wade’s possible malpractice claim,
but apparently no settlement was reached. For all we know
Brugess intends to fight any attempt to collect the mone-
tary sanction from him.
  When we asked Brugess at oral argument about the
conflict of interest, he noted that Wade had additional
representation after the district court’s decision. Wade’s
supplemental lawyer, Robert A. Montgomery, apparently
engaged to negotiate toward settlement of Wade’s potential
malpractice claim, told us by an affidavit filed after
argument that Wade had consented to the filing of a joint
brief with Brugess. Yet the only lawyers listed on Wade’s
two briefs are Steven P. Garmisa, George T. Brugess,
12                                              No. 06-1878

Richard A. Haydu, and Frank E. Van Bree, all of Hoey &
Farina. Circuit Rule 26.1 requires all attorneys represent-
ing a private party to file a disclosure statement giving,
among other things, the names of all firms that repre-
sented that party in the trial court or are expected to do
so in the court of appeals. While four attorneys from Hoey
& Farina filed statements under the Rule, none of them
listed any other firm. And while the Rule requires that
“[e]very attorney for a non-governmental party or amicus
curiae . . . must file a statement under this rule”, Cir. R.
26.1(a), Montgomery did not file a disclosure statement.
Fortunately his role, at last revealed, has not caused a
belated recusal.
  Montgomery’s affidavit stated that he had read the final
brief—complete with an argument that would leave Wade
personally responsible for any financial sanction—and “did
not feel that corrections, deletions, or additions needed
to be made.” His affidavit does not say that he consented
on Wade’s behalf to this conflict of interest (or had author-
ity to do so), that he discussed the brief ’s contents with
Wade, or that he thought the brief ’s arguments to be in
Wade’s best interests. Montgomery’s failure to look after
his client’s welfare, however, does not excuse Brugess’s
and his partners’ violation of their duty to place their
client’s well-being above their own. His negligence doesn’t
justify their misconduct.
  The Northern District of Illinois has specific rules for the
practice of law. This court has not enacted similarly
detailed regulations, but Fed. R. App. P. 46 permits us to
discipline an attorney for violation of any court rule or for
any other conduct unbecoming a member of the bar. E.g.,
In re Bagdade, 334 F.3d 568 (7th Cir. 2003); cf. United
States v. Johnson, 327 F.3d 554, 559–61 (7th Cir. 2003)
(discussing a court’s authority to control admission to
its bar and discipline attorneys who appear before it).
This authority to regulate membership in the court’s bar
No. 06-1878                                             13

protects litigants from careless or unethical acts by their
attorneys. See In re Cook, 49 F.3d 263 (7th Cir. 1995).
Arguments designed to protect the attorney at the expense
of the client are precisely the sort of acts that invite
discipline. An attempt to defraud the court (and the
defendant) by withholding vital documents has been
compounded by an effort to make the client bear the
consequences.
  The judgment of the district court is affirmed except for
the amount of fees and costs awarded to Soo Line; that
portion of the judgment is vacated and remanded for
recalculation. Wade’s attorneys, Steven P. Garmisa,
George T. Brugess, Richard A. Haydu, Frank E. Van Bree,
and Robert A. Montgomery, are ordered to show cause
by September 19, 2007 why they should not be disciplined
by this court pursuant to Fed. R. App. P. 46(b)–(c) for
conduct unbecoming members of the bar. We will forward
a copy of this opinion to the Northern District of Illinois
and the Attorney Registration and Disciplinary Commis-
sion of Illinois for such consideration as they deem appro-
priate.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit

                  USCA-02-C-0072—8-29-07