Court Opinion

ID: 194484
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:18:09+00
Date Added: 2024-06-11T09:42:56.369414
License: Public Domain

January 11, 1993
                United States Court of Appeals
                    For the First Circuit
                                         

No. 92-1843

         GERARDO MARIANI & GEORGINA LOUREIRO, ET AL,

                   Plaintiffs, Appellants,

                              v.

              DOCTORS ASSOCIATES, INC., ET AL.,

                    Defendants, Appellees.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

               FOR THE DISTRICT OF PUERTO RICO

        [Hon. Jose Antonio Fuste, U.S. District Judge]
                                                     

                                         

                            Before

                     Stahl, Circuit Judge,
                                         
               Campbell, Senior Circuit Judge,
                                             
               Skinner,* Senior District Judge.
                                              

                                         

Harry  E. Woods  with whom  Ricardo  Skerrett  Yordan and  Woods &
                                                                  
Woods were on brief for appellants.
 

Edward Wood Dunham with whom Christopher  L. Levesque and Wiggin &
                                                                  
Dana  and  Jay A.  Garcia-Gregory with  whom  Ricardo F.  Casellas and
                                                              
Fiddler, Gonzalez & Rodriguez were on brief for appellees.
                         
                                         

                                         

*Of the District of Massachusetts, sitting by designation.

          STAHL, Circuit Judge.   In this appeal,  plaintiffs
                              

challenge   the  district  court's   imposition  of  Rule  11

sanctions  for  their  submission  of  a  motion  in  a  case

dismissed by  the district court two years  earlier.  Finding

error solely in the  district court's imposition of sanctions

upon the attorneys' law firm rather than upon the responsible

attorneys, we affirm,  except that we impose the sanctions on

the attorneys themselves.

                              I.
                                

               BACKGROUND AND PRIOR PROCEEDINGS
                                               

          Plaintiffs are twenty-five dissatisfied Puerto Rico

franchisees  of the  sandwich shop  chain known  as "Subway."

Defendants consist  of Doctor's  Associates, Inc.,  owner and

franchisor of the "Subway" chain, and several of its officers

and directors.   On  September 14, 1988,  plaintiffs, through

the  law  firm of  Woods  &  Woods,  commenced  suit  against

defendants in  United States District Court  for the District

of Puerto Rico alleging  breach of contract, fraud and  other

claims arising out of their franchise agreements.  

          All of plaintiffs' individual  franchise agreements

contain  clauses  requiring  that any  claim  or  controversy

arising out of the  contract or an alleged breach  thereof be

settled by  arbitration in  Bridgeport, Connecticut.   On the

basis  of  that  arbitration  provision,  defendants  filed a

motion  to  dismiss.     Responding,  plaintiffs   interposed

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"Plaintiffs' Motion in  Opposition of  Defendants' Motion  to

Dismiss" ("the first  motion") dated February 7, 1989  with a

supporting  memorandum of  law signed  by attorney  Victor M.

Rodriguez Baez  of Woods & Woods.   On May 17, 1989, agreeing

with  defendants'  argument  that  the  arbitration provision

controlled, the district court  granted defendants' motion to

dismiss. 

          Twenty-two months later, on March  26, 1991, having

sought  neither reconsideration  nor an  appeal, and  with no

intervening change in the relevant law, plaintiffs  submitted

a motion  to the district court  entitled "Plaintiffs' Second

Request   for  Change   of  Venue   and  First   Request  for

Consolidation  of  Arbitration   Proceedings"  ("the   second

motion").  The  memorandum of  law in support  of the  second

motion  consisted  entirely of  argumentation from  the first

motion  except for (1)  occasional minor  grammatical changes

(e.g., changing "the contract  was" to "the contracts were"),
     

and  (2)  an appended  argument  requesting consolidation  of

plaintiffs' claims for arbitration  proceedings.  The  second

motion was  signed by  attorneys Harry E.  Woods and  Gerardo

Mariani of Woods & Woods. 

          In  response,  defendants filed  a  motion opposing

plaintiffs'  second  motion  and  seeking  Rule 11  sanctions

against  plaintiffs' attorneys.    The district  court denied

plaintiffs'  second  motion, and  imposed  Rule 11  sanctions

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directing that Woods  & Woods pay  part of defendants'  costs

for defending the second motion.1  

          Plaintiffs  now   appeal,  arguing  that   (1)  the

sanctions should  not have  been imposed, (2)  the sanctioned

amount was excessive,  and (3) sanctions may  be imposed only

against   individual  attorneys,   not  against   law  firms.

Although  we find  merit  in plaintiffs'  final argument,  we

affirm the district court in all other respects.

                             II.
                                

                          DISCUSSION
                                    

          Fed.  R. Civ. P. 112 requires that an attorney make

                    

1.  Defendants  submitted  a  verified time  sheet  detailing
128.5  hours  of legal  work with  fees  of over  $14,000 for
defense of  the sanctioned motion.  Based  on this submittal,
the district court imposed sanctions of $7,500.  

2.  Fed. R. Civ. P. 11 states in relevant part:

     Every pleading, motion, and  other paper of a party
     represented by  an attorney  shall be signed  by at
     least one  attorney  of record  in  the  attorney's
     individual  name .  .  . .    The signature  of  an
     attorney or party constitutes a certificate by  the
     signer  that  the  signer has  read  the  pleading,
     motion  or other  paper; that  to the  best of  the
     signer's knowledge, information, and  belief formed
     after  reasonable inquiry  it is  well  grounded in
     fact and  is warranted  by existing law  or a  good
     faith  argument for the extension, modification, or
     reversal  of  existing  law,  and that  it  is  not
     interposed  for any  improper purpose,  such as  to
     harass  or to  cause unnecessary delay  or needless
     increase in the  cost of  litigation. . .  .  If  a
     pleading,  motion, or  other  paper  is  signed  in
     violation of  this rule, the court,  upon motion or
     upon  its own  initiative,  shall  impose upon  the
     person who signed it, a represented party, or both,
     an appropriate sanction, which may include an order

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                              4

reasonable inquiry to assure  that all pleadings, motions and

papers filed  with  the court  are  factually  well-grounded,

legally tenable and not  interposed for any improper purpose.

Cooter  & Gell v. Hartmarx  Corp., 496 U.S.  384, 393 (1990).
                                 

Counsel is held  to standards of due  diligence and objective

reasonableness.   Maine  Audubon Soc'y  v. Purslow,  907 F.2d
                                                  

265, 268 (1st  Cir. 1990).  See also  Lancellotti v. Fay, 909
                                                        

F.2d 15, 20 (1st  Cir. 1990); Cruz v.  Savage, 896 F.2d  626,
                                             

631  (1st Cir. 1990); Kale  v. Combined Ins.  Co. of America,
                                                            

861 F.2d 746, 756-57 (1st Cir. 1988).    

          District  courts have broad  discretion in imposing

and fashioning Rule 11 sanctions.  Cooter & Gell, 496 U.S. at
                                                

400  ("[I]n  directing  the   district  court  to  impose  an

`appropriate'  sanction, Rule  11 itself  indicates that  the

district court is  empowered to  exercise its  discretion.");

Lancellotti, 909 F.2d at 20 ("[W]e believe the district court
           

should determine,  in the first  instance, whether reasonable

inquiry was made, and  if not, the consequences which  should

ensue."); Anderson v. Beatrice  Foods Co., 900 F.2d  388, 394
                                         

(1st Cir.)  ("[D]ecisions as  to whether sanctions  should be

imposed, and if so, what form they should take, often require

intensive  inquiry  into  the  circumstances  surrounding  an

                    

     to  pay to the other party or parties the amount of
     the  reasonable expenses  incurred  because of  the
     filing  of the  pleading,  motion, or  other paper,
     including a reasonable attorney's fee. 

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                              5

alleged violation.  The trial judge, steeped in the facts and

sensitive  to  the  interplay  amongst  the protagonists,  is

ideally equipped to review  those ramifications and render an

informed judgment."),  cert. denied,  111 S. Ct.  233 (1990).
                                   

We therefore review all aspects  of the district court's Rule

11  determination  under  an abuse  of  discretion  standard.

Cooter & Gell,  496 U.S. at  400-01; Navarro-Ayala v.  Nunez,
                                                            

968 F.2d 1421, 1425 (1st Cir. 1992).  See also Maine Audubon,
                                                            

907  F.2d at 268 (explaining  that a party  appealing Rule 11

sanctions  "bears a  heavy burden  of demonstrating  that the

trial  judge  was clearly  not  justified  in entering  [the]

order") (quoting Anderson, 900 F.2d at 393).  
                         

A.  The Propriety of the Sanctions
                                  

          Plaintiffs  argue  that  the  district  court  used

improper criteria in deciding to impose sanctions, that their

motion did  not  warrant  Rule 11  sanctions,  and  that  the

sanctions  order   should  be  overturned  as   an  abuse  of

discretion.  We disagree.  

          The district court  found that plaintiffs'  counsel

failed to  make an  objectively reasonable inquiry  to assure

that the second motion was  legally tenable.  Several factors

support  this  finding:    the  district  court  had  already

dismissed the case  in favor of arbitration  nearly two years

prior  to the  second  motion; the  second  motion failed  to

suggest any basis for the court's jurisdiction to rule on the

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                              6

motion in view of the dismissal;  the second motion consisted

of  virtually verbatim argumentation  from the  first motion;
                      

and  plaintiffs  had failed  to  appeal  or move  for  timely

reconsideration of the order dismissing the first motion.3

          We find,  therefore, that the record amply supports

the district court's imposition of Rule 11 sanctions based on

the  plaintiffs' filing  of its  second motion,  and  we find

plaintiffs' "abuse of discretion" claim without merit.4

                    

3.  Plaintiffs   also  argue   that   the  district   court's
scrupulous  attention to  the second  motion and  its careful
consideration  of  the sanction  is  evidence  of the  second
motion's  merit.   Our review  of the  record shows  that the
district court did no  more or less than properly  detail all
the reasons why  the second motion was sanctioned.  Moreover,
we  are  very  reluctant  to   fashion  a  rule  which  would
discourage  district courts from  thoroughly discussing their
reasons for  imposing  sanctions, and  we reject  plaintiffs'
suggestion that we adopt such an approach.

4.  Plaintiffs  offer two  additional  arguments  to  support
their  appeal of the sanctions.   First, they  argue that the
district   court  improperly  sanctioned   them  for  conduct
occurring throughout the proceeding, rather than imposing its
Rule  11 sanctions  with regard  to one  particular pleading,
motion or  paper.   The  district  court order  imposing  the
sanctions  belies this  argument:  "What  concerns us  in the
long  history of  this  case,  which  has  been  filled  with
numerous delaying  tactics by the plaintiffs,  is this latest
                                                             
attempt  to  delay   arbitration."     Mariani  v.   Doctor's
                                                             
Associates,  Inc., No. 88-1630, slip op. at 2 (D.P.R. Feb. 2,
                 
1992)  (emphasis  supplied).    Thus,  we  find  unpersuasive
plaintiffs'  assertion that  the  district  court  improperly
sanctioned conduct occurring throughout the proceeding.
     Second, plaintiffs argue that  in deciding to impose the
sanctions, the district court improperly ignored pressures on
the law firm of Woods & Woods which contributed to the filing
of the second motion.  Specifically, they argue that attorney
Mariani  was  in  the  process  of being  considered  for  an
appointment as  a federal administrative law  judge, and that
attorney  Woods  had been  diagnosed  as  having a  cancerous
lesion.    Though  they  had  ample  opportunity  to  do  so,

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B.  The Amount of the Sanctions
                               

          Plaintiffs' next  argument  is that  the  sanctions

were excessive.  Rule 11 specifically states that appropriate

sanctions "may include  an order  to pay the  other party  or

parties  the  amount  of  the  reasonable  expenses  incurred

because of the filing of the pleading, motion or other paper,

including  a  reasonable  attorney's  fee."    Moreover,  the

district court has  wide discretion in fashioning  sanctions.

See, e.g., Cooter &  Gell, 496 U.S. at 400;  Lancellotti, 909
                                                        

F.2d  at 20; Anderson, 900 F.2d at 394; Unanue-Casal 898 F.2d
                                                    

at 843; Kale, 861 F.2d at 756-58.  
            

          In its order imposing  the sanctions, the  district

court  noted that  the total of  128.5 hours  that defendants

spent responding to plaintiffs' second motion seemed "a great

deal of  work to  oppose  one motion."   It  also noted  that

because  the  case had  "lain dormant  for  two years,  it is

understandable that  costs  were high."    As a  result,  the

district court  awarded defendants  roughly half of  the fees

incurred  in  defending the  motion.    Reviewing the  record

carefully, we find that  the sanction of $7,500 was  not only

                    

plaintiffs  never argued  to  the district  court that  these
factors contributed  to the filing of  the sanctioned papers.
We  have  repeatedly  warned   that  we  will  not  entertain
arguments made for the first time on appeal.  Federal Deposit
                                                             
Ins.  Co. v. World University, Inc., No. 92-1389, slip op. at
                                   
5  (1st Cir.  Oct. 22, 1992).   We  do not  therefore address
plaintiffs'  arguments  about  the  health  and  professional
status of attorneys Mariani and Woods.

                             -8-
                              8

within  the  district   court's  discretion   but  was   also

reasonable.5

C. Imposition of the Sanctions on the Individual Attorneys
                                                          

          Lastly, plaintiffs  argue,  and defendants  do  not

dispute, that  the district court improperly  imposed Rule 11

sanctions upon  the  law firm  of  Woods &  Woods.   Rule  11

sanctions may  be imposed only upon  individual attorneys who

have  signed sanctioned papers.   Pavelic & Leflore v. Marvel
                                                             

Entertainment Group, 110 S. Ct. 456, 458-59 (1989).  They may
                   

not be imposed upon a law firm.  Id.    
                                    

          Elsewhere, we  have avoided remanding Rule 11 cases

by discerning the responsible  parties and ordering that they

pay the sanctions.   Ballard's Serv. Ctr., Inc.   v. Transue,
                                                            

865  F.2d 447, 450 (1st Cir.  1989) (requiring that attorney,

                    

5.  Relying  on Dubisky  v. Owens,  849 F.2d  1034  (7th Cir.
                                 
1988), plaintiffs  also argue  that because their  own motion
was  so facially  meritless, defendants  should have  been on
notice to mitigate expenditures.   According to plaintiffs, a
phone  call or  some informal  contact from  defendants would
have been  the appropriate  response to their  second motion.
Dubisky, however,  is inapposite.  The  plaintiffs in Dubisky
                                                             
were  mistaken  as  to defendant's  citizenship,  and wrongly
believed  that  they  could  invoke  diversity  jurisdiction.
Plaintiffs were  sanctioned under  Rule 11.   On appeal,  the
Seventh Circuit held that  the defendant, before embarking on
a  costly  defense,  had  a  duty  to   mitigate  damages  by
contacting the plaintiff to  inform him of the jurisdictional
defect.    Id. at  1038-39.   As  a result,  it  reversed the
              
sanction awarded  by the district  court.   Id.  In  the case
                                               
before us, however, there was no mistake of  fact on the part
of plaintiffs that could  be readily corrected by defendants.
Thus,  we find no need to reverse the sanction on the grounds
that defendants had a duty to mitigate expenditures.

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                              9

rather than party,  pay Rule 11  sanctions); Muthig v.  Brant
                                                             

Point  Nantucket, Inc.,  838 F.2d  600,  607 (1st  Cir. 1988)
                      

("[T]he district  court did not  specify whether  [sanctioned

party] or their counsel should pay the counsel fees assessed.

Our reading of the record  indicates that the sanction should

be  imposed upon counsel.").  Cf.  Navarro-Ayala, 968 F.2d at
                                                

1428 (explaining that "this may properly be classified as one

of  the rare cases in which an  appellate court ought to take

the bull  by the  horns and,  rather  than remanding,  simply

select  an appropriate  [Rule 11]  sanction").   We therefore

modify  the  district court's  order  and  impose the  $7,500

sanctions  jointly  and  severally upon  attorneys  Woods and

Mariani. 

                             III.
                                 

                          CONCLUSION
                                    

     For the foregoing reasons, the district court's order is

affirmed as modified.  

     Affirmed as modified.  Costs to appellees.
                                               

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