Opinion
CIVIL ACTION NO. 02-CV-9097
March 16, 2004
MEMORANDUM ORDER
On December 17, 2002, Plaintiffs Arrow Drilling, Co., Inc. ("Arrow Drilling") and Palm Valley Health Care, Inc. ("Palm Valley") filed this lawsuit against Defendants Daniel Carpenter, Benistar 419 Plan Services, Inc., Benistar 419 Admin Services, Inc., and Benistar Employer Services Trust Corporation (collectively, "Defendants"). On December 30, 2002, Palm Valley's President, Idalia Canales, sent a letter to Defendants stating Palm Valley's "desire and intention to withdraw from [this] lawsuit." Defendants' Memorandum of Law in Response to Palm Valley's Motion for Voluntary Dismissal and in Support of Their Motion for Attorneys' Fees ("Defs' Mem."). Ex. A.
On July 23, 2003, Ms. Canales reaffirmed the statements made in her December 2002 letter. Defs' Mem., Ex. C. Ms. Canales also stated in an affidavit that: (1) "Palm Valley . . . never intended to start a lawsuit against the defendants in this case, and that it wanted no part of the case;" (2) since December 30, 2002, "[she] presumed that Palm Valley has been withdrawn as a party from this lawsuit and that no legal action has been pursued against the defendants in this case;" and (3) "[s]ubsequent to December 30, 2002, Palm Valley has not been contacted by any attorney for the plaintiffs in this action regarding Palm Valley's desire and intention not to be part of this lawsuit." Id., Ex. D. Plaintiffs contend that the Defendants drafted the December 2002 "form" letter and Ms. Canales' affidavit. Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion for Attorneys' Fees ("Pls.' Mem.") at 6-7; Transcript of November 19, 2003 Hearing ("Tr.") at 32.
On June 18, 2003, Defendants' counsel, Aaron C. F. Finkbiner, III, Esquire, informed Plaintiffs' counsel of Palm Valley's stated desire not to be part of this lawsuit. Defs.' Mem., Ex. E. Specifically, Mr. Finkbiner stated: "[O]ne of the putative plaintiffs, Palm Valley Health Care, Inc., has communicated that it never intended to start this action." Id. He also advised Plaintiffs' counsel that any attempt to effectuate service of a complaint on behalf of Palm Valley would be met with a Rule 11 motion. Id. Plaintiffs' counsel nevertheless continued to pursue this lawsuit on behalf of Palm Valley.
On November 19, 2003, the Court heard oral argument on Defendants' Motion for Attorneys' Fees. During oral argument, Plaintiffs' counsel, Virginia Miller, explained that she sought Palm Valley's dismissal as soon as Ms. Canales contacted her directly and stated Palm Valley's desire to withdraw from this lawsuit. Tr. at 31. Ms. Miller further explained that she would not, however, "withdraw [Ms. Canales] just on the defendant's (sic) motion or any of their oral representations to her that [Ms. Canales] no longer wanted to be involved. . . . [e]specially when the [December 2002] letter . . . had been drafted by the defendants." Id.
Accordingly, on August 12, 2003, Defendants served on Plaintiffs' counsel a Rule 11 motion, attaching Ms. Canales' letters and affidavit. After receiving the Rule 11 motion, Plaintiffs' counsel moved to dismiss Palm Valley without prejudice. In response, Defendants filed the instant Motion (Dkt. No. 26) seeking attorneys' fees pursuant to 28 U.S.C. § 1927 and under the Court's inherent power, arguing that the knowing pursuit of litigation on behalf of Palm Valley constituted bad faith and vexation litigation. 28 U.S.C. § 1927 provides that:
By Memorandum and Order of September 23, 2003, the Court dismissed this case and denied Palm Valley's Motion for Voluntary Dismissal Without Prejudice as moot.
Both parties have filed a notice of appeal in this case. During the pendency of an appeal, a district court is not divested of jurisdiction to determine an application for attorneys' fees. See, e.g., Sheet Metal Workers Int'l Assoc. Local 19 v. Herre Bros., Inc., 198 F.3d 391, 394 (3d Cir. 1999).
Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies 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.28 U.S.C. § 1927. To justify the imposition of attorneys' fees and costs under Section 1927, counsel's conduct must be "of an egregious nature, stamped by bad faith that is violative of recognized standards in the conduct of litigation." In re Orthopedic Bone Screw Prods. Liab. Litig., 193 F.3d 781, 795 (3d Cir. 1999) (citations omitted). Specifically, the court must find that counsel: "(1) multiplied proceedings; (2) unreasonably and vexatiously; (3) thereby increasing the cost of the proceedings; (4) with bad faith or with intentional misconduct." LaSalle Nat'l Bank v. First Connecticut Holding Group, LLC, XXIII, 287 F.3d 279, 288 (3d Cir. 2002); see also In re Prudential Ins. Co. of Am. Sales Practice Litig. Agent, 278 F.3d 175, 190 (3d Cir. 2002) (finding numerous attempts to multiply litigation in bad faith sanctionable under 28 U.S.C. § 1927). An award of fees under the court's inherent powers requires a similar finding. Chambers v. NASCO, 501 U.S. 32, 45-46, 111 S.Ct. 2123, 2133, 115 L.Ed.2d 27 (1991) ("[A] court may assess fees under inherent powers when a party has acted `in bad faith, vexatiously, wantonly, or for oppressive reasons.') (quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975)).
Although the conduct of Plaintiffs' counsel has been far from commendable, it did not "multiply" the proceedings as is required to support an award of sanctions under Section 1927. Palm Valley's presence in this lawsuit did not increase the time Defendants spent preparing their Motion to Dismiss or complicate the resolution of that Motion. Even if Palm Valley had been withdrawn from the lawsuit in early 2003, Defendants would have filed the same motion to dismiss against Arrow Drilling supported by the same arguments that they filed on July 30, 2003.
As the Court noted during oral argument, Defendants' counsel has also contributed to the vitriolic tone of this litigation. Tr. 24.
ACCORDINGLY, day of March, 2004, upon consideration of Defendants' Motion for Attorneys' Fees (Dkt. No. 26), and Plaintiffs' response thereto, consistent with the accompanying memorandum, it is hereby ORDERED that said Motion is DENIED.