April 08, 2014 Top Story

Court Abused Discretion by Not Considering Sanctions Request

Even absent a formal motion, courts must address claims of vexatious conduct

Oran F. Whiting

District courts should exercise their discretion to impose 28 U.S.C. § 1927 sanctions or at least consider them even if not formally requested by separate motion, according to the U.S. Court of Appeals for the Sixth Circuit. In Meathe v. Ret, the Sixth Circuit expounded on a district court’s obligation to consider sanctions under Section 1927, but only briefly addressed the “vexatious” conduct required for the imposition of such sanctions, choosing instead to remand the case.

Sanctions Request in Response to a Motion to Amend      

In Meathe, the plaintiffs filed a shareholder suit alleging breach of contract and breach of fiduciary duty, which the defendants promptly sought to dismiss via summary judgment. The plaintiffs immediately moved for leave to amend their complaint. The amended complaint, according to the U.S. District Court for the Eastern District of Michigan, made no substantive additions to the pleading. As part of their response to the plaintiffs’ motion to amend, the defendants requested sanctions under 28 U.S.C. § 1927, arguing that the plaintiffs unreasonably sought to obstruct and delay the litigation. The defendants did not file a separate sanctions motion. 

28 U.S.C. § 1927 Sanctions

Section 1927 states, in relevant part, that “[a]ny attorney . . . who so multiples 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.” As the language of the statute indicates, Section 1927 sanctions are only available against lawyers—not litigants. According to the Sixth Circuit, “[t]he proper inquiry is not whether an attorney acted in bad faith; rather, a court should consider whether an attorney knows or reasonably should know that a claim pursued is frivolous.”        

Sixth Circuit Affirms Dismissal but Remands on Sanctions Issue

The district court dismissed the case by denying the plaintiffs’ motion to amend and granting the defendants’ motion for summary judgment, but the court failed to address or even mention the defendants’ request for sanctions. The Sixth Circuit affirmed what it referred to as the district court’s “well-reasoned opinion” dismissing the case, but on the defendants’ cross-appeal, remanded the case for consideration of the defendants’ request for sanctions under 28 U.S.C. § 1927.

Due to the district court’s “espoused skepticism of the meritoriousness and propriety of the case,” the Sixth Circuit found that the court “should have exercised its discretion and at least briefly considered the defendants’ request for sanctions.” The Sixth Circuit noted that the issue of sanctions was squarely before the court (albeit without a motion), and was “close enough to warrant at least some discussion.”

“The appellate court’s problem with the district court’s action is that it failed to address the issue at all after expressing skepticism over the behavior,” according to Eileen M. Letts, Chicago, IL, cochair of the ABA Section of Litigation’s Ethics and Professionalism Committee. “The court should have delved into the behavior not only for the decision but to provide lawyers with some guidance concerning sanctionable behavior,” says Letts.

Vexatious Conduct

The interpretation of the word “vexatious” in the statute varies among the different judicial circuits. For example, “the Seventh Circuit adheres to a more objective/subjective standard,” according to Letts. The Seventh Circuit requires a great deal for a lawyer to be sanctioned under Section 1927, including repeatedly filing baseless claims; repeatedly making frivolous arguments; needlessly delaying litigation procedures or court proceedings; recklessly disregarding case law, statutes, rules, or court orders; and/or continuing a course of conduct after repeated warnings by the court.

“This case can serve as a jumping off point for a discussion about the implementation of Section 1927 sanctions,” opines Barry E. Cohen, Washington, DC, chair of the Multi-Jurisdictional Practice Subcommittee of the Section of Litigation’s Ethics and Professionalism Committee. “Some situations are easy—the lawyer who pleads an important fact allegation without any reasonable belief that it is true or any reason to believe that discovery will support it. Or the assertion of a legal theory that has been rejected by the highest court in the jurisdiction and where the lawyer can offer no reasonable argument for changing the law,” says Cohen. “The other end of the spectrum is also easy to identify,” explains Cohen, “but the middle is hard to describe.”

“To avoid chilling zealous advocacy, courts will usually decide close questions against the imposition of sanctions. In these sanctions proceedings, which are often highly fact-specific, there usually is no bright line dividing the middle area between clearly sanctionable and clearly proper,” according to Cohen.

“As a young attorney, I would make sure that I move for sanctions with clean hands,” remarks Kathryn Heidrichs, Chicago, IL, editor of the Section’s Ethics and Professionalism Committee’s newsletter. “This decision will not have a significant impact on the practice of law, but it could be the beginning of the establishment of a protocol in close cases where courts must be clear on what is permissible behavior,” Letts believes.

Oran F. Whiting is an associate editor for Litigation News.

Keywords: sanctions, vexatious conduct, summary judgment, motion to amend

Copyright © 2014, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).