Court Opinion

ID: 3025912
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:34:38.847028+00
Date Added: 2024-06-11T09:52:55.574210
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 00-1240
                                   ___________

Kenneth Ray Lee, et al.,                *
                                        *
       Plaintiffs,                      *
                                        *
Thomas J. Lyons & Associates,           *
                                        * Appeal from the United States
       Appellant,                       * District Court for the
                                        * District of Minnesota.
       v.                               *
                                        *
First Lenders Insurance Services, Inc., *
                                        *
       Defendant - Appellee.            *
                                   ___________

                             Submitted: October 18, 2000

                                 Filed: January 9, 2001
                                  ___________

Before McMILLIAN, BOWMAN, and LOKEN, Circuit Judges.
                          ___________

LOKEN, Circuit Judge.

       Nine automobile purchasers filed this suit as a putative class action against
numerous defendants in July 1994. The complaint alleged violations of the Minnesota
Retail Installment Sales Act, the Minnesota usury laws, the federal Truth in Lending
Act, and RICO; breaches of warranty; common law fraud; and illegal insurance sales.
In August 1996, the district court granted summary judgment in favor of three
defendants. Those defendants then moved for sanctions under 28 U.S.C. § 1927. The
district court awarded $15,000 to each defendant against plaintiffs’ counsel, Thomas
J. Lyons & Associates (“Lyons”). Lyons appealed, and we remanded because the
district court’s rulings did not provide “an adequate basis for reviewing the
determination that sanctions were warranted.” Lee v. L.B. Sales, Inc., 177 F.3d 714,
719 (8th Cir. 1999). On remand, two defendants settled the sanctions issue. The
district court1 again imposed a $15,000 sanction in favor of the third defendant, First
Lenders Insurance Services, Inc. (“First Lenders”), explaining the basis for its award
under § 1927. Lyons again appeals. We affirm.

       The suit was initially filed by attorneys Thomas J. Lyons, Richard G. Nadler, and
Steven T. Appelget. In January 1995, Lyons “parted company” with Nadler but did not
withdraw as counsel for plaintiffs. In July 1995, Nadler filed a memorandum in support
of plaintiffs’ pending motion for class certification. In mid-September, Lyons and his
new firm replaced Appelget and Nadler’s law firm as counsel of record for the
plaintiffs. Later that month, Lyons withdrew plaintiffs’ motion to certify the class,
advising the district court that he needed more time to file a third amended complaint,
complete additional discovery, and reformulate the class certification motion with the
help of new “national class counsel.” The court extended the deadline for filing and
arguing the class certification motion to March 1, 1996. Despite this extension, Lyons
on behalf of plaintiffs never filed a third amended complaint and never moved to certify
a class, effectively abandoning plaintiffs’ class action allegations.

      1
        The HONORABLE JAMES M. ROSENBAUM, United States District Judge
for the District of Minnesota, who adopted the Report and Recommendation of the
HONORABLE FRANKLIN L. NOEL, Chief United States Magistrate Judge for the
District of Minnesota.
                                          -2-
      After the district court granted summary judgment in its favor, First Lenders
moved for an award of $83,284.64 in costs and attorneys’ fees under § 1927, which
provides that “[a]ny attorney . . . 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.” The magistrate judge concluded that sanctions were warranted but that First
Lenders had failed to specify with sufficient detail the excess costs resulting from
Lyons’s unreasonable and vexatious conduct. Accordingly, the magistrate judge
ordered Lyons to pay First Lenders $15,000. The district court summarily affirmed.
On remand from this court, the magistrate judge held a status conference, took the
matter under advisement, and issued an order recommending that the court again
impose a $15,000 sanction. The district court adopted that recommendation.

       Sanctions are proper under § 1927 “when attorney conduct, viewed objectively,
manifests either intentional or reckless disregard of the attorney’s duties to the court.”
Lee, 177 F.3d at 718 (quotation and citation omitted). We review the district court’s
factual findings for clear error and its decision to award sanctions for an abuse of
discretion. We give substantial deference to the district court’s ultimate determination
because of that court’s “intimate familiarity with the case, parties, and counsel.”
O’Connell v. Champion Int’l Corp., 812 F.2d 393, 395 (8th Cir. 1987).

       On remand, the district court articulated three bases for imposing sanctions under
§ 1927, but we need discuss only one, the court’s finding that Lyons, by the “filing of
a class action complaint, and permitting the action to proceed with discovery and
motion practice for over a year and a half, before abandoning the class claims without
explanation, unreasonably and vexatiously multiplied the proceedings.” On appeal,
Lyons first argues that, because the district court found that class action claims were
asserted without an adequate pre-filing investigation, this conduct may only be
sanctioned under Rule 11 of the Federal Rules of Civil Procedure, rather than § 1927.
We disagree. The court expressly found that baseless class action claims dominated

                                           -3-
discovery and motion practice for an extended period before Lyons abandoned the class
allegations without explanation. As a result of this conduct, First Lenders and other
defendants were forced to incur additional costs to defend the case as a class action.
In these circumstances, there was clearly “a causal connection between the
objectionable conduct of counsel and multiplication of the proceedings.” Peterson v.
BMI Refractories, 124 F.3d 1386, 1396 (11th Cir. 1997). The district court properly
found that this conduct “multiplie[d] the proceedings . . . vexatiously and
unreasonably” within the meaning of § 1927.

        Lyons next argues that the district court’s ultimate finding was clearly erroneous
because Lyons did not represent plaintiffs between January and September 1995, when
the unreasonable and vexatious class certification motion and supporting memorandum
were filed by Nadler and Appelget. As the district court noted, however, Lyons never
formally withdrew as counsel of record for plaintiffs. Moreover, after Lyons replaced
Nadler and Appelget as counsel of record, he withdrew the pending motion for class
certification and requested an extension of time to file a third amended complaint and
a renewed motion for class certification. The district court granted a four-month
extension of the class certification deadline, but Lyons then abandoned these efforts
without explanation. The district court’s finding that Lyons was responsible for
conduct warranting a § 1927 sanction is not clearly erroneous.

       Lyons further argues that the district court erred in imposing a $15,000 sanction
because First Lenders failed to establish a “financial nexus” between the amount it
claimed in costs and attorneys’ fees, and any excess costs and fees incurred as a result
of Lyons’s unreasonable and vexatious conduct. The district court criticized First
Lenders for failing to submit detailed evidence of the excess costs and fees incurred,
but the court found sufficient evidence that First Lenders had incurred at least $15,000
in additional costs and fees. We agree that a sanctioning court must make an effort to
isolate the additional costs and fees incurred by reason of conduct that violated § 1927.
But the task is inherently difficult, and precision is not required. See Fox Valley

                                           -4-
Constr. Workers Fringe Benefit Funds v. Pride of the Fox Masonry & Expert
Restorations, 140 F.3d 661, 667 (7th Cir. 1998). Here, the district court discounted the
First Lenders fee request some 82% to an amount that was clearly a conservative
estimate of the excess costs and fees incurred on account of the unreasonable and
vexatious class action claims and discovery activities. Thus, the $15,000 sanction was
not an abuse of the court’s discretion.

       Lyons’s remaining arguments concern the other reasons given by the district
court for imposing a § 1927 sanction, reasons we need not consider because Lyons’s
conduct in multiplying these proceedings with unreasonable and vexatious class action
claims fully justifies the $15,000 sanction imposed. The district court’s amended
sanction order dated November 15, 1999, is affirmed.

      A true copy.

             Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                          -5-