Ordered to show cause why he should not be sanctioned to reimburse opposing counsel for her time incurred in preparation for argument and several hours waiting for the case to be called, counsel compounded his problems. First, he misfiled his response as a motion. Then, as an excuse, he claimed he “mistakenly remembered the sequence of events incorrectly.” He explained that after talking to a colleague about the case over the weekend, he decided that his client would be better served by the court deciding the case on the briefs (she might have been) and thought he “could still rest on the appeal previously submitted.”
Pointing out that “‘I forgot’ is not an acceptable excuse,” the Second Circuit ordered counsel to pay “an amount appropriate to compensate for the wasted attorney time” by the appellee’s counsel, a high price to pay for not taking the subway to the Second Circuit courthouse in Manhattan.
It turns out relying on the briefs did not help his client either: her appeal was denied. See Cotto v. City of New York, 803 F. App’x 500 (2d Cir. 2020).
Young v. SEC, 956 F.3d 650 (D.C. Cir. 2020)
Besides showing up, it helps to be at the right court.
This case arose out of the infamous Stanford Ponzi scheme. Petitioner Young was the chief compliance officer for an investment company controlled by Stanford. After the Ponzi scheme collapsed and Stanford was sentenced to prison, the Securities and Exchange Commission (SEC) brought an administrative action against Young and two other corporate officers. The administrative law judge (ALJ) ordered Young to be barred from working in the securities industry and to disgorge about $600,000. Young (now proceeding pro se) appealed the decision to the full commission, which affirmed the ALJ’s order. Young then had 60 days to file an appeal with the U.S. Court of Appeals for the D.C. Circuit.
On “the last day to file, he filed a petition for review, but filed it with the wrong court.” Id. at 653 (emphasis added). Instead of the D.C. Circuit, he filed in the D.C. Court of Appeals, which hears appeals from the local D.C. courts. The next day the clerk informed him of his error, and Young refiled his petition with the correct court—but “one day too late.” Id.
As the appeal involved the hot issue of ALJ appointments, the D.C. Circuit appointed an amicus to represent Young. Amicus counsel argued that Young’s error was not jurisdictional and a mistake that even experienced lawyers make. Amicus counsel contended that, given the petition was only one day late, equitable tolling should apply, allowing the court to reach the merits. Id. at 655.
The court was neither impressed nor forgiving. Pointing out that equitable tolling requires an “extraordinary circumstance,” the court stated that “[f]iling a petition for review in a state court that clearly lacks jurisdiction over the petition does not toll the deadline for filing in our Court.” Id. at 652.
Amicus counsel also asked the court to consider Young’s pro se status. The court rejected that line of argument as well, stating, “[I]gnorance of the law is not an appropriate basis for equitable tolling.” Id.
The court dismissed Young’s petition as untimely, leaving him no recourse to appeal the almost $600,000 in penalties. While the court’s response may seem hard-hearted, the court correctly noted that equitable tolling is rarely granted, and even then in circumstances “external to the party’s own conduct”—and Young did not present the most sympathetic petitioner, offering the court an opportunity to make an example.
For practitioners, the lesson is clear: ensure you are at the correct court (and try to allow some extra time in case of a mix-up).
H.A.L. NY Holdings, LLC v. Guinan, 958 F.3d 627 (7th Cir. 2020)
This is another case arising in the securities area—and, again, the appellant did not fare well.
H.A.L. was a securities trading company that had an account with a Chicago brokerage. When H.A.L. could not meet certain margin calls, the brokerage liquidated the account, leaving a negative balance of more than $75,000. The brokerage sued in federal court to recover. H.A.L. made an offer of judgment, which was accepted, and the district court entered judgment in November.
As the decision noted, “[o]ne might expect that to be the end of the story.” Id. at 630. But H.A.L. never paid the judgment. Instead, four months later, it sued the brokerage’s CEO in the U.S. District Court for the Southern District of New York for $25 million. The CEO had the case transferred to the district court in Illinois, which dismissed the action on the basis of res judicata. H.A.L. appealed and the defendant CEO moved for sanctions. Id. at 631.
The Seventh Circuit’s opinion pointed out that “H.A.L. admits its solitary argument to the district court was wrong and offers in its place an entirely new argument on appeal. Both are meritless.” Id. at 630. The decision noted that in the district court, “H.A.L. never breathed a whisper of Illinois law,” insisting that “state law was irrelevant.” Id. at 633. However, on appeal, H.A.L. “shifted to an entirely new theory, based entirely on Illinois law.” Id. Further, H.A.L. did not claim that Illinois law supported its position, but rather that the state law should be clarified by certification to the Illinois Supreme Court. Id.
The Seventh Circuit pointedly stated that H.A.L.’s “entirely new theory was of course waived, and its lawyer should have known that before pursuing this theory on appeal. . . . Clearer cases of waiver ‘in the truest sense’ are hard to find.” Id. Moreover, H.A.L.’s new theory on appeal was “foreclosed as a matter of controlling circuit law applying Illinois . . . law.” Id. at 634.
Turning to sanctions, the court held that the appeal was frivolous as “H.A.L. has conceded that its sole argument to the district court was wrong, which effectively concedes that its appeal cannot succeed.” Id. at 636. H.A.L.’s brief did not even address the authority that the district court relied on; and “[f]ailing to engage with a district court’s central reasons and authority is usually a reliable sign of a doomed appeal.” Id. Considering H.A.L.’s overall conduct, the court questioned whether it ever intended to pay the offered judgment. Rather, the court was “convinced that H.A.L. has pursued this appeal as part of an effort to keep the doomed case on life-support as long as possible as a bargaining chip. . . .” Id. at 637. Concluding that H.A.L.’s actions and arguments “smack of gamesmanship and delay,” the court granted the defendant’s motion for sanctions, finding that such conduct was “well worth deterring.” Id.
Sun Coast Res., Inc. v. Conrad, 958 F.3d 396 (5th Cir. 2020)
This opinion begins by observing that “[t]here is a time for punishment and a time for grace.” Id. at 397. The successful appellee believed it was the former and sought sanctions for a frivolous appeal. Fortunately for the appellant’s counsel, the court believed grace was in order, despite terming the appellee’s sentiment “understandable.” Id.
The appellant employer lost an arbitration that it “should have anticipated in light of the plain language of its arbitration agreement. . . .” Id. The employer unsuccessfully challenged the arbitration in the district court and “then pursued a meritless appeal” on a theory it forfeited “not once but twice” by failing to raise it before either the arbitrator or the district court. Id. On appeal, the employer claimed that it had not forfeited the issue based on a Third Circuit case, without disclosing there were two Third Circuit decisions with the same name—and it compounded the error by citing the wrong one of the two. When the court announced that oral argument was unnecessary, the employer filed a motion—which the court described as “remarkable”—insisting on oral argument, claiming, without argument, that the Court of Appeals “would be guilty of ‘cafeteria justice’” if the motion was denied and overlooking that submission is the norm “in the overwhelming majority of appeals.” Id. at 397–98. The Seventh Circuit denied both the motion and appeal.
Based on this record, things looked bleak for the employer. However, the employer was saved because the court decided that the employer’s actions were the result of “incompetence, not malice,” and sanctions should be reserved for cases involving malice. Id.
The court expressed uncertainty about the employer’s motives on appeal. Did it earnestly but mistakenly believe it had a valid claim? Or did it act in bad faith, attempting to use its economic power to bully an adversary with fewer resources. “Or perhaps its decisions were driven by counsel.” Id. Recognizing that it could only speculate, the court expressed sympathy for the appellee but concluded that “this is a time for grace, not punishment.” Id.
Quincy Biosci. v. Ellishbooks, 961 F.3d 938 (7th Cir. 2020)
Many people, especially many attorneys, should realize that appellate advocacy is a true specialty—not an area for the novice. This case was a hard lesson on that point for one attorney—and especially for the client.
The plaintiff, a producer of dietary supplements, brought an action against a company for unauthorized sale of one of its trademarked products on Amazon. Some of this product had been stolen from retailers. The defendant’s problems began when it failed to answer the complaint and the district court entered a default. The defendant sought to lift the default, claiming it was never properly served. The district court refused, observing that the defendant “had ‘deliberately . . . sought to avoid service.’” Id. at 940. At a hearing on damages, the defendant’s new attorney argued against a damages award but did not counter the plaintiff’s evidence supporting almost a half-million dollars in sales—which the district court subsequently awarded, plus costs. Then the defendant’s counsel failed to appear at the subsequent hearing where the district court granted a permanent injunction.
On appeal, the court held that the defendant’s “arguments ‘had been waived and, in any event, are meritless’ and ‘require limited discussion.’” Id. The plaintiff then moved for sanctions for a frivolous appeal. Id. At this point, another new counsel appeared for the defendant. This lawyer sought to avoid sanctions by arguing that former counsel had “been admitted to practice in the District of Columbia for a substantial period of time, but the nature of his principal intellectual property and patent prosecution practice has caused him never to have previously prosecuted or defended any appeal in any United States Court of Appeals. . . .” Id. at 941.
This court did not feel it was a time for grace, noting that all of the defendant’s “appellate arguments had virtually no likelihood of success” and that the effect of default and waiver of arguments reflected “[w]ell-settled principles” that were controlling. Id. Further, counsel failed to file a complete jurisdictional statement or respond when ordered to do so, requiring issuance of one show-cause order. Id. Then counsel filed a “confusing” motion to dismiss, suggesting that the case was moot. The court ordered counsel to file a clarification, but he failed to respond. Id. Counsel also failed to file a timely brief, requiring another show-cause order. Id. When finally filed, the brief had “several significant discrepancies” and “was a mere five pages long,” consisting “of meritless contentions.” Id. Counsel did not file a reply brief and then unsuccessfully sought to delay oral argument, a request denied by the court. Id. at 941–42.
The Seventh Circuit concluded that “[t]hese shortcomings cannot be attributed entirely to counsel’s lack of experience in litigating federal appeals”—rather, they suggested the defendant was trying to drag out the appeal. Id. Considering all of the circumstances, the court granted the motion for sanctions. While the client may have sought to delay the case, the attorney’s mistakes were so basic and obvious that it cost the client more in the end.
Tom Donlon is counsel with the firm of Robinson + Cole LLP, in Stamford, Connecticut. A former cochair of the Appellate Practice Committee, Donlon continues to serve as a vice chair while also serving as cochair of the Section of Litigation’s Amicus Curiae Brief Committee.