Ignoring court orders or trying to pass the buck to a different attorney is not a winning strategy on appeal. This discipline case started as a simple appeal of a judgment of foreclosure and sale. After filing a notice of appeal, the attorney sought an emergency stay, which the U.S. Court of Appeals for the Second Circuit denied. Then some other, unidentified attorney filed for bankruptcy, but no one informed the court of appeals. When the court learned of the bankruptcy, it stayed the appeal and issued an order requiring the appellate parties to inform the court whether the property had been sold and, further, whether any party was responsible for informing the court about the automatic stay in bankruptcy; whether any notice was given to the court; and, if not, whether any party should be sanctioned for the omission. The order also warned that “presentation of frivolous arguments in response to this order is itself sanctionable.”
The appellee’s counsel responded that one of the appellants had filed for bankruptcy, the bankruptcy had stayed the foreclosure sale, and the bankruptcy required the present appeal to be stayed. The appellant’s counsel, however, began his slow path to sanctions by responding, “The Bankruptcy was not filed by my office but by a separate Bankruptcy Attorney. The Court’s request for information has been forwarded to that attorney.”
Unhappy with the appellant’s attorney’s attempt to “unilaterally assign the responsibility of responding to this Court’s order to the Bankruptcy attorney,” the court issued another order requiring the attorney to advise the court of the status of the automatic stay at monthly intervals (immediately if the stay was lifted) and to show cause why the attorney should not be sanctioned for “failing to properly respond to the Court’s [first] order.”
The attorney did not file any of the required reports—even though the court issued four written requests and a voicemail over the next year—nor did he respond to the show-cause order. Somehow, the court let the matter slide. Sixteen months after the show-cause order, in response to another telephone request from a court employee, the attorney said that he would file a status report—but never did. Finally, in response to a further written request, the attorney sent a letter saying simply, “I am not the Bankruptcy Attorney. Thank you.”
Ultimately, the court of appeals sua sponte lifted the stay, having determined that the bankruptcy court had permitted the appeal to proceed. The court then requested a briefing schedule and ordered the attorney to show cause why he should not be sanctioned. In response, the attorney filed a motion to withdraw the appeal, including a statement that the sanctions’ show-cause provision should be “withdrawn as moot.” He concurrently filed what the court described as “a defective motion,” claiming that he should not be sanctioned as he was never retained as appellate counsel, only to file the notice of appeal, and that his former clients, who were “apparently unhappy with the result [at trial,] have declined to communicate with me despite numerous requests.”
The court, after more than a year and a half, had enough. It rejected the attorney’s attempt to limit his representation to filing the notice of appeal, saying that “[o]nce an attorney enters an appearance in the Court,” the attorney must continue to prosecute the appeal unless the court allows withdrawal or replacement.
In awarding sanctions, the court noted that the attorney’s “responses (and lack of responses in several instances) to this Court’s orders and other directives were inappropriate.” Further, “the docket reflects that much time and effort was expended by Court personnel in trying to persuade [him] to comply with his obligations—time and effort that could have gone to the processing of other cases, which were effectively delayed as a result.” Moreover, “despite this Court’s multiple expressions of concern about [his] conduct throughout the appeal and its multiple references to the possibility of sanctions, [the attorney] neither altered his behavior nor acknowledged that any of it was inappropriate.”
The court also highlighted the attorney’s prior disciplinary record, pointing out that he was publicly censured by the New York Appellate Division only two years earlier for multiple instances of misconduct, which had followed four prior admonishments. Id. at *3 (citing In re DeMaio, 200 A.D. 3d 140 (N.Y. App. Div. 1st Dep’t 2021)).
In this case, the attorney escaped with only a public reprimand because, although previously a member of the Second Circuit bar, his admission had lapsed, so he could not receive the suspension that his conduct “likely would have warranted.” New York will get another crack at him, however, because the Second Circuit is forwarding this decision to the disciplinary committee of the New York Appellate Division.
One of the most frustrating things for an attorney is doing work and not getting paid. Some efforts at collecting unpaid fees, however, are simply not worth it—as the attorney in this case demonstrates.
The lawyer originally represented defendants sued by a company. He stopped representing them after they failed to pay his fees. Eventually, the lawsuit settled and the plaintiff company obtained a judgment against the defendants. A few years later, the lawyer bought the unpaid judgment and “filed a torrent of actions” seeking to collect the judgment against his former clients. The defendants moved successfully to disqualify the attorney, and the judge issued an order barring him from acting as counsel to collect on the judgment that he had bought.
The attorney defied the order and brought additional actions before other judges in the same district, seeking enforcement of the judgment. Eventually, all of the actions were dismissed as a sanction for violation of the initial disqualification order. On a prior appeal of those dismissals, the U.S. Court of Appeals for the Seventh Circuit affirmed because the attorney had never appealed the original disqualification order, so was not free to disobey it.
The present case arose out of a separate lawsuit that the attorney brought against his former clients to set aside the alleged fraudulent transfer of some stock. As the decision points out, the details do not matter because the “attorney is again attempting to collect on the [] judgment, in clear defiance of [the disqualification] Order.” The Seventh Circuit affirmed the dismissal of the fraudulent transfer lawsuit, saying that it “could not have been clearer” in the prior appeal that any effort to collect on the judgment was barred.
The opinion continues: “That does it for the merits. But we are not done.” The court ruled that the appeal was frivolous because the issue was decided in the prior appeal. “We have held repeatedly that appellants risk Rule 38 sanctions when they litigate in the face of controlling adverse authority that they pretend does not exist.” As for the appropriateness of sanctions, the court pointed out that the attorney “has wrangled [his former clients] into Court time and time again with duplicative claims. While an award of Rule 38 sanctions in [the former client’s] favor probably will not fully compensate the family for the time and money [the attorney’s] efforts have cost them, it is a start.” Further, the court observed, “sanctions are necessary to deter the attorney from wasting further judicial resources.” As he “has been remarkably persistent in harassing his clients with vexatious litigation[,] [w]e hope that forcing [him] to reach into his own pocket to compensate defendants will finally make clear to him that his continued defiance of the [disqualification] Order will not be tolerated.”
In closing, the court mentioned that at oral argument it was revealed the attorney had filed yet another action seeking to collect on the judgment. The attorney told the court he would withdraw that action if he lost the appeal. The court stated, “We expect [counsel] to keep his word,” but, if not, “he can expect the imposition of additional sanctions.”
An initial untimely appeal in this matter led to a subsequent frivolous appeal and sanctions. The plaintiff brought suit when he was kicked out of the Louisiana State University medical residency program at Lafayette Hospital. After the university and the hospital were granted summary judgment, the plaintiff appealed—but not timely. So, the U.S. Court of Appeals for the Fifth Circuit dismissed that prior appeal.
Fifteen months later, the plaintiff moved under Federal Rule of Civil Procedure 60(b) to vacate the judgment. The district court denied the motion and awarded attorney fees to the university and the hospital.
The Fifth Circuit affirmed those attorney fees here, finding that the delay in moving for relief under Rule 60(b) exceeded either the one-year time limit under Rule 60(b)(2) and (3) or the “reasonable time” limit of Rule 60(b)(6), as the underlying issue had been identified in plaintiff’s “untimely blue brief in his first appeal.” The court also ruled that the district court’s award of attorney fees was not an abuse of discretion.
The Fifth Circuit then turned to the university and hospital’s request for attorney fees for a frivolous appeal. It noted that the plaintiff “repeatedly refused to heed the district court’s warnings about ‘unreasonable attempts at continuing this litigation’ with an untimely and also meritless Rule 60(b) motion. And here again [plaintiff] has filed another frivolous appeal.” The court of appeals remanded to the district court to determine the appropriate fees and costs as a sanction for this frivolous appeal.
The decision does not distinguish who will have to pay the sanctions between the plaintiff-appellant and his counsel. However, given the failure to timely file the first appeal, the delay past the statutory deadline for the Rule 60(b) motion, and the finding that the second appeal was frivolous, the appellate counsel should be nervous—and perhaps in touch with their insurance carrier.
Determining federal jurisdiction over a business entity may be difficult at times, but it is certainly harder when the entity affirmatively misleads the plaintiff—and the court.
This case arose out of a dispute between a Texas food distributor and a group purchasing organization. The Texas plaintiff brought its claims in federal court against what it believed was a Massachusetts corporation. The defendant answered using the Massachusetts corporate name. Unknown to the plaintiff, however, prior to the lawsuit, the defendant had converted itself into a limited liability company (LLC), with both Delaware and Texas members.
Subsequently, the defendant commenced a third-party action against another LLC that had Delaware, Georgia, and North Carolina members. Although the defendant brought the claim in the corporation’s name, it changed the caption to its LLC name (without leave of court).
Four months later, the defendant first asserted that the plaintiff had named the wrong entity—in a footnote to a motion for continuance. The defendant assured the court that a stipulation to correct the record would be filed, but it never was. Almost a year later, the defendant finally corrected the name on its pleading but “still failed to plead the LLC’s complete citizenship and make proper jurisdictional allegations.” The defendant even resisted jurisdictional discovery that might have uncovered the truth.
The third-party defendant finally filed a motion to dismiss for lack of jurisdiction, which led the court to order each party to file a document establishing citizenship. The defendant then conceded lack of diversity with the third party but continued to (falsely) claim diversity with the original plaintiff. In response to further court orders, the defendant then claimed anonymity of some members, but offered information on their residences. As one of these was in Texas, the original basis of jurisdiction was called into question.
Before a show-cause hearing, the original plaintiff and defendant settled, leaving only the third-party complaint. At the hearing, the defendant’s litigation and in-house counsel “disclaimed any intentional deception and asserted that their representation was merely inept.” Rejecting this claim, the district court dismissed the third-party action as a sanction, “[c]haracterizing [the defendant’s] overall conduct as a ‘cover up’” and finding that the attorneys “violated various federal and local rules, the most important being their duty of candor.” Denying the defendant’s subsequent motion to alter the judgment, the district court found that no lesser sanction would be appropriate because dismissal “without prejudice would allow [the defendant] to flout court orders and move on to the next venue without penalty.”
In sustaining the dismissal sanction, the Fifth Circuit noted that although the diversity criteria as to LL’s had been established for years, the defendant “unacceptably hid the ball with respect to elementary jurisdictional facts during the entire course of this litigation, including on appeal.” Id. at 697 (emphasis added). In a footnote, the decision points out that the defendant, “has yet to reveal its citizenship for diversity purposes, as it again amended its representations regarding citizenship while on appeal to this court.”
While “modern business entities may organize in complex ways unknown in the past,” id. at 697, that does not justify them or their lawyers being untruthful about the form adopted. The defendant’s continued pattern of deception over a number of years, including before the court of appeals, is astonishing.
