March 26, 2018 Articles

Young Lawyers: The Danger of Raising Baseless Arguments to Evade Arbitration

By Charles E. Harris II

In Hunt v. Moore Brothers, Inc., 861 F.3d 655 (7th. Cir. 2017), the Seventh Circuit affirmed a $7,500 sanction that Chief Judge Michael J. Reagan of the Southern District of Illinois imposed against an attorney for filing baseless motions in her effort to avoid arbitration. The district court relied on section 1927 of the Judiciary Code, which states that an attorney "who so multiplies [a] 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. Either objective or substantive bad faith can support a section 1927 sanction. Hunt, 861 F.3d at 657–58.

As background, James Hunt, a Nebraska truck driver, entered into two independent contractor agreements to drive trucks for Moore Brothers, a small Nebraska company. After a dispute arose between the parties, the attorney filed a scathing lawsuit in the district court that included claims against Moore Brothers under section 1581 of the Criminal Code, 18 U.S.C. § 1581, for allegedly holding Hunt in peonage and for violating the RICO laws, 18 U.S.C. § 1962. But the agreements contained an arbitration clause requiring the parties to submit any disputes that "arise under this Agreement . . . to final and binding arbitration." Id. at 657–58. Accordingly, Moore Brothers filed a motion to stay the litigation and to compel arbitration under sections 3 and 4 of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 3, 4.

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