Court Opinion

ID: 9493028
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:55:55.583493+00
Date Added: 2024-06-11T17:55:36.403855
License: Public Domain

KLEINFELD, Circuit Judge, concurring and dissenting:
The district judge was properly and understandably frustrated that Carnival held onto the engines they had not paid for and continued to fly the planes in violation of the court’s order. But I do not think the record justifies the harsh sanctions imposed on Carnival’s lawyers. Their client did wrong, but all they did was defend their client, hopelessly because of their client’s misconduct, but not so abusively as to justify the sanctions imposed on them. Lawyers from time to time get saddled with a client whose litigation conduct embarrasses them. Their ethical duty to advocate the client’s cause occasionally interferes with their ability to perceive that they ought to be embarrassed, and rightfully prevents them from being too prissy about resigning from the case as soon as the client threatens to embarrass them. The lawyers cannot be held responsible for what they cannot control. “[A]ny sanctions imposed against [the lawyer] should *1121be based solely on his ‘own improper conduct without considering the conduct of the parties or any other attorney.’ ”1
I concur in footnote 8, vacating the judge’s order that Mr. Mermelstein had to stay within the city limits and keep the U.S. Marshal informed of his whereabouts over the weekend, so that he could be put in jail if his client did not return the engines. This is like a bail order for a person who has been indicted but released under strict conditions. No matter how defiant Carnival was, Mr. Mermelstein had the right to go home to Florida, visit a friend in,Seattle, or do whatever else he liked over the weekend, without telling the U.S. Marshal where he was. A judge may not hold a lawyer’s body as security for his client’s compliance with an order. For the rest, I respectfully dissent.
Once the lawyer tells his client about the court order and tells his client that the client ought to comply, the lawyer has performed his duty, and cannot be sanctioned if the client does not comply. If a lawyer does not know that the court has ordered his client' to do something, he cannot be sanctioned for failing to tell his client. For Mr. Mermelstein, especially, I can see no basis for any sanction at all, yet his reputation is permanently besmirched. For Mr. Herman, the sanctions are not justified by the record.
Herman was sanctioned for “bad faith” in asserting that he understood the court order to go into effect Monday. The judge did not make a finding that Herman told his client that it could or should violate the court order. Rather, he expressly stated in his order denying reconsideration of sanctions that “the transcript of the contempt hearing ... fails to establish that former defense counsel actually advised defendant to continue using the engines.” Herman was on the phone, not physically present at the hearing. There was extensive discussion of how much the bond would have to be on the order. The judge said that he would specify a surety bond of $250,000 and, according to the transcript, “Upon submission of that to the court the TRO is in [ejffect.” The plaintiffs lawyer, Mr. Fortino, said he had a $2 million surety bond. He then asked for permission to file the $2 million bond and “replace it on Monday” with a $250,000 bond. The judge closed the hearing by saying “I will expect that [the] TRO is now in effect.” He followed that remark by saying “And the bond will be replaced Monday morning,” and would need to be submitted to a different judge for approval and signature at that time.
This record does not furnish a basis for the district court’s “bad faith” finding. Mr. Herman tried to explain at the sanctions hearing that he thought the TRO would not be signed until the bond was placed on Monday. But the judge repeatedly cut him off and would not let him finish what he was saying. Mr. Herman, who was participating by telephone, thought the plaintiffs lawyer had a $2 million bond with him, the court had ordered $250,000, and the court would sign the TRO when the $250,000 bond was submitted Monday. There is every reason to believe that Mr. Herman had an honest misunderstanding, and no substantial basis in the record for the proposition that he was lying.
The majority suggests that Mr. Herman ought to have clarified what the judge meant about when the bond would be effective, immediately or on Monday. Perhaps so. But a lawyer has little reason to ask a judge what he meant when he thinks he understood the judge, the judge has repeatedly told him to be silent, and the lawyer thinks the judge has already given him as favorable an answer as he is likely to get. As for clarifying it with local counsel, we do not know the content of the privileged communications between local and out of town counsel. Even assuming that it would have been prudent to ask the judge whether the bond was in effect as of *1122the time of the hearing or would go into effect when a judge approved and signed the bond on Monday, failure to exercise all the prudence desirable is not sanctionable as misconduct under the inherent powers of the court.2 At worst failure to clarify was a mistake rather than defiance of a court order and bad faith. Such a mistake cannot under controlling law support a sanction.3
Mr. Herman says in his affidavit that they had a poor telephone connection and he had trouble hearing what the judge said, and he thought Mr. Fortino and the judge were saying “place” the bond Monday instead of “replace” the bond Monday. His statement is corroborated because the transcript in the record is expressly labeled “draft,” suggesting that the court reporter had trouble understanding all of what was said. Most importantly, the judge’s own syntax was ambiguous as to when the order went into effect. He said “I will expect that the TRO is now in [ejffect.” 4 If he wanted to issue an order that was in effect, he could have said “The TRO is now in effect” without the qualification “I will expect that.” The judge’s syntax, and his reference to having another judge sign approval of the bond on Monday, opened the door to good faith misunderstanding, and the record does not furnish any substantial reason to doubt that the misunderstanding was in bad faith.
Despite the ambiguity, Mr. Herman did not tell his client that it could violate the order. Herman says in his affidavit that he told his client that “it probably would not technically be a violation of the temporary restraining order to fly the aircraft during the weekend” (emphasis added) because the order would technically go into effect when the bond was placed Monday, “but there were certain risks inherent in doing so.”5 That hedged restrained opinion is simply not the same as telling a client to go ahead and violate a court order. Lawyers often properly tell their client in their judgment, the client would not technically be in violation of the law in pursuing a desired course of action, but that there are legal risks in doing so, because often the facts and the law do not allow for greater certainty. In a dramatic courtroom confrontation, the judge asked Carnival’s representative if the lawyers told him they could fly the planes, but Carnival’s man said the chief executive officer, not the lawyers, told him that. The chief executive officer filed an affidavit saying that “at no time” did anyone from Mr. Herman’s firm advise Carnival to continue flying, and that it was a business decision based on logistical problems "with complying with the court order. As men*1123tioned above, the judge expressly stated in his order denying reconsideration of sanctions that “the transcript of the contempt hearing ... fails to establish that former defense counsel actually advised defendant to continue using the engines.”
Thus what we have is no finding that Herman told his client to disobey the court’s order, and an unsupported finding that Herman spoke in bad faith about what he understood. What mattered is whether Mr. Herman told his client that it could continue to use the planes or engines in violation of the order. The judge had to concede that there was no basis for finding that he did. At worst he misunderstood the word “replace” as “place” and gave his client hedged advice that flying until Monday, when Mr. Herman thought the order would go into effect, would be risky but might not be contempt of court because the bond had not yet been placed. That is not bad faith.
For Mr. Mermelstein, I can see no basis whatsoever for the harsh sanctions imposed on him. He was placed under what amounted to conditions of bail, publicly humiliated, and disbarred from the District of Oregon, at least before this judge, because in response to the judge’s request for “an update on what the status of things are,” Mr. Mermelstein said Carnival had been “thwarted” from complying with the court’s order by practical concerns that made compliance “impossible,” so Carnival needed more time to comply.
Mr. Mermelstein explained that some parts were on planes that another creditor had an interest in, and that creditor’s seizure of planes had prevented or would prevent Carnival from returning the parts pursuant to the court’s order. The judge asked Carnival’s management representative what the planes were being used for, learned that they were in revenue service, and the judge said “this has just been a ridiculous violation of my-you two gentlemen are very close to having me call the marshals and put you away, both of you.” The judge asked the management representative whether he knew about the court’s order, and he said he had. Mr. Mermelstein interjected that “Carnival was in an untenable position. They could not return the aircraft.”
Then the judge asked the management representative what his lawyers advised, “because this is whether this man [Mr. Mermelstein] goes to jail or not.” The management representative said that his understanding was that they were not in violation of the court order, but this understanding came from the chief executive officer (who swore that it was a business decision, and had not been the advice of counsel), and did not attribute any such advice to counsel. Then the judge called on local counsel, saying “this man [Mr. Mermelstein] is disqualified and he will never be admitted to this court.” The judge then said he was “tempted” to put Mr. Mermelstein and the management representative in custody “until all of the performance required by this has been completed,” but then partially relented, introduced Mr. Mermelstein to the deputy United States Marshal and told him to stay within the City of Portland and tell the Marshal where he was going to be. He then, in open court, said “Mr. Mermel-stein, now you should really spend a little time examining how you got in the frame of mind that you are in. If a client means that much to you, that you will go to the extremes you have gone to, then you should reassess how you evaluate clients and how you evaluate your life. You are an embarrassment to the profession today.”
“Evaluate your life”? “Custody”? “Extremes”? Keep the marshal advised of his whereabouts like a person indicted for a felony and released on bah under especially close supervision? All this was for being asked to give a status report, and disappointing the judge with a report that his client had found compliance “impossible.” Had Mr. Mermelstein had a sharper feeling for his own interest, and less concern for his client, he would doubtless have kept his mouth shut and let his client take the full brunt of the court’s wrath. The *1124wrath appears to have been deserved, because the client had not complied with the court’s order. But like a good lawyer, Mr. Mermelstein spoke up for his client without protecting himself. And for this, his career is permanently scarred with a harsh sanction reflecting on his integrity. No sanction was justified.
It is important to note that the judge did not even suggest that Mr. Mermelstein had anything to do with whether his client returned the planes or engines in a timely way. Mr. Mermelstein was. an associate,6 and Mr. Herman was the partner who communicated with the client. The court’s stated reason for sanctioning Mr. Mermel-stein was that the “bad faith arguments former defense counsel raised during the hearing” were “clearly frivolous.” As a matter of law, using the word “impossible,” in conjunction with an explanation of what he meant by “impossible” (a high degree of commercial impracticality) could not furnish a proper basis for a sanction. A lawyer has a duty to represent his client “zealously” and is permitted and obligated to make such arguments for his client as are arguable.7
Mr. Mermelstein’s argument may have been unpersuasive or meritless, but it was not frivolous. As Mr. Mermelstein explained it, when one of the three planes containing parts belonging to Pacific Harbor landed in Fort Lauderdale, it was seized by another creditor before Pacific Harbor’s parts could be removed. Mr. Mermelstein argued that Carnival could not comply with the order requiring Pacific Harbor’s parts to be returned to Fort Lauderdale if other creditors seized the other two planes, as it did the first. The judge took issue with this argument because Pacific Harbor did not attempt to bring the planes to Fort Lauderdale and instead assumed that the other creditor would seize the second and third planes as it did the first. Until the planes were actually seized, the judge suggested that compliance with the order was not yet impossible. The judge was technically correct, but it was not frivolous for Mr. Mer-melstein to argue that Carnival correctly assumed that the second and third planes would be seized just as the first had. Instead of surrendering the planes to this almost certain seizure, Carnival negotiated with both Pacific Harbor and its other creditor to permit Pacific Harbor’s parts to be removed from the planes of the other creditors. While perhaps misguided, because a party generally must obey a court order despite impracticality, the argument was not frivolous.
Under its inherent powers, a court is justified in imposing sanctions for “the attorney’s willful abuse of the judicial process, bad faith conduct during litigation, or filing frivolous papers.”8 “A finding of bad faith is warranted where an attorney ‘knowingly or recklessly raises a frivolous argument....’”9 The order stated, regarding Mr. Mermelstein, that “my sanction order was primarily premised upon the bad faith arguments former defense counsel raised during the hearing.” A trial judge needs the power and discretion to use sanctions to punish and deter frivolous arguments that take up considerable time for the court and cause significant expense to adversaries.10 But this argument was *1125neither frivolous nor responsible for any cost or delay to anyone.11 It was a permissible attempt to cushion the client against the full brunt of the judge’s expected anger when he learned that the client had still not complied with the court order. Mr. Mermelstein was performing the function we need lawyers to perform-making sure the courts do not overlook facts or law in favor of their clients. Courts need lawyers to do this and should not deter the advocacy they need. A dose of pro se litigation quickly reminds any judge of how much courts need lawyers to help us avoid error. Lawyers should not be afraid to offer excuses for their clients, or pressured to throw their clients to the wolves. I have read the transcript many times, and all I can get out of it is that the judge was so angry at the client’s noncompliance with his order that he punished the lawyer who told him about it and who tried to offer an excuse for it. That is an abuse of discretion.

. Primus Automotive Financial Services, Inc. v. Batarse, 115 F.3d 644 (9th Cir.1997)(quoting Martin v. Brown, 63 F.3d 1252, (3d Cir.1995)).

. See Weissman v. Quail Lodge, Inc., 179 F.3d 1194, 1198 (9th Cir.1999) (stating that sanctions under the court’s inherent power are justified for "the attorney’s wilful abuse of the judicial process, bad faith conduct during litigation, or filing frivolous papers”).

. See In re Keegan Management Co., 78 F.3d 431, 436 (9th Cir.1996) (stating that a finding of bad faith requires knowing or reckless conduct by an attorney); see also Mark Industries Ltd. v. Sea Captains’s Choice, Inc., 50 F.3d 730, 732 (9th Cir.1995) (stating that a clearly erroneous assessment of the evidence is an abuse of discretion).

. The majority points out that the Judge corrected the draft transcript a few days later, replacing "expect” with "direct.” This cuts both ways. If the court reporter honestly heard and transcribed it wrong, Herman should not be sanctioned for making the same mistake as the court reporter. It is also possible that the court reporter got it right and the judge misspoke, as we all do sometimes.

.The majority explains that if Herman believed that the bond was not in effect until Monday, there would have been no risk to Carnival in flying the planes over the weekend. They reason that because Herman acknowledged some risk he must have known that the TRO was currently in effect. But this is not a fair reading of the situation. An action that is "perfectly legal” may still be "risky,” particularly when the custody of an item worth hundreds of thousands or even millions of dollars is in question. It is entirely consistent with the record that Mr. Herman thought the order would go into effect when the bond in the proper amount was approved Monday, but that he might be mistaken or the court might regard it as already in effect.

. While Mr. Mermelstein was no "neophyte” it is still important to note that he was not the lead attorney on the case and was merely an associate at Mr. Herman’s law firm.

. See Or.Code of Prof. Resp., DR 7 — 101 (A)(1), Representing a Client Zealously ("A lawyer shall not intentionally: Fail to seek the lawful objectives of the lawyer’s client through reasonably available means permitted by the law and these disciplinary rules....”); DR 7-102(A)(2), Representing a Client Within the Bounds of the Law ("In the lawyer’s representation of a client ... a lawyer shall not: ... Knowingly advance a claim or defense that is unwarranted under the law.... ”).

. Weissman, 179 F.3d at 1198.

. Primus Automotive Financial Services, Inc. v. Batarse, 115 F.3d 644 (9th Cir.1997) (quoting In re Keegan Management, 78 F.3d at 436).

. See id. at 648.

. The majority cites United States v. Associated Convalescent Enters., Inc., 766 F.2d 1342 (9th Cir.1985) and Wages v. Internal Revenue Service, 915 F.2d 1230 (9th Cir.1990), in support of 28 U.S.C. § 1927 sanctions, but they are not on point. In Associated Convalescent we held that sanctions were not appropriate. See 766 F.2d at 1347. In Wages, we affirmed sanctions because the sanctioned person repeatedly filed new papers in bad faith after the court had ruled and made it clear that the ruling would stay the same, as contrasted with Mr. Mermelstein's simple oral response to the judge’s request for a status report. See 915 F.2d at 1233. The statute says that section 1927 sanctions are for one who "multiplies” the proceedings. 28 U.S.C. § 1927. The judge scheduled the hearing at which Mr. Mermelstein spoke regardless of any assurances of compliance with the TRO and what Mr. Mermelstein said was immediately rejected with no hearings or papers, so proceedings were not multiplied.