Summary
recognizing that a district court "cannot award attorneys' fees to a party who has not filed a Rule 11 notice"
Summary of this case from Tommy Hilfiger Licensing, Inc. v. Bradlees, Inc.Opinion
99 Civ. 12308 (JSM)
October 18, 2001
Alfred Ferrer, III, Eaton Van Winkle, New York, N Y 10016, Attorney for Plaintiff.
William R. Mait, Mait, Wang Simmons, New York, N.Y. 10007-2909, Attorney for Defendant.
ORDER AND OPINION
Dante should have reserved a special place in hell for lawyers who file unwarranted orders to show cause on the eve of a holiday. Since such a divine sanction is not immediately available, the Court must consider whether 28 U.S.C. § 1927 can provide an adequate remedy for the party required to respond to such an order to show cause.
Defendant has moved pursuant to 28 U.S.C. § 1927 for sanctions against plaintiff's counsel. Although the court gave plaintiff's counsel several extensions of the time to respond to the motion, responsive papers have not been submitted.
This matter first came before the Court as a result of an order to show cause, presented on December 23, 1999, in which plaintiff sought an order requiring the defendant to pay $4,522,008.46 allegedly due and owing on a surety bond that had been issued to secure a judgment in the amount of $320,148.29 entered in the New York State Supreme Court.
Two major problems with plaintiff's application were immediately obvious. First, the bond was by its terms clearly limited to the amount of $374,145.50 and there was no basis for holding the surety to any higher amount. Indeed, a different counsel for plaintiff, in an earlier proceeding in a different court, had acknowledged that the surety bond did not guarantee more than the face amount. Second, even if a non-frivolous argument could be made in support of a claim for a higher amount, there was no basis for an injunction when all that was sought was money damages. Not surprisingly, none of the authorities cited by plaintiff's counsel supported his application for such extraordinary relief.
The bond was originally in the amount of $320,148.29, but was later amended to the higher amount to account for accumulated interest.
On the return date of the order to show cause the court noted:
This to me is perhaps the most outrageous case I have had in a long time. One, it is filed without precedent for an order to show cause. It is to me sleazy tactics. It is where there is a bond filed for a specific amount, lawyers for your client represented to a court in Ohio what the amount was secured to be and you come in here and make a claim on an expedited basis where there is no basis for expedition and make what I think is a fraudulent claim.
Since plaintiff's claims were wholly without merits and the order to show cause was frivolous, some sanction is appropriate and the only question is the amount. If defendant had served plaintiff with a Rule 11 notice at any time during the course of this case and plaintiff had refused to withdraw the complaint, it would have been appropriate to award plaintiff the costs it incurred after the notice was served. However, no Rule 11 notice was served. While the Court can impose Rule 11 sanctions on its own motion, it cannot award attorneys' fees to a party who has not filed a Rule 11 notice. Nuwesra v. Merrill Lynch Fenner Finch, 174 F.3d 87, 94 (2d Cir. 1999).
Apparently recognizing that its failure to serve a Rule 11 notice would preclude the court from awarding it attorneys' fees under that Rule, defendant has not sought them under Rule 11 but rather asks for such relief under 28 U.S.C. § 1927. Section 1927 provides for sanctions against a lawyer who "so multiplies the proceedings in any case unreasonably and vexatiously . . . ." In the Second Circuit, "[b]ad faith is the touchstone of an award under this statute." United States v. Int'l Bhd. Of Teamsters, 948 F.2d 1338, 1345 (2d Cir. 1991). "`[A]n award under § 1927 is proper when the attorney's actions are so completely without merit as to require the conclusion that they must have been undertaken for some improper purpose . . . .'" Id. at 1345 (quotingOliveri v. Thompson, 803 F.2d 1265, 1273 (2d Cir. 1986)
The conduct of plaintiff's counsel in this case clearly supports the award of sanctions under 28 U.S.C. § 1027. However, given the policy considerations that gave rise to the adoption of Rule 11's safe harbor provision, it seems inappropriate to use 28 U.S.C. § 1927 to do what the Court cannot do under Rule 11. See Galonsky v. Williams, No. 96 Civ. 6207, 1997 WL 759445, at *7 (S.D.N.Y. Dec. 10, 1997).
Those policy concerns are not implicated, however, when considering the question of sanctions for filing an unwarranted order to show cause. Since the order to show cause was filed on December 23rd and was originally returnable on December 28th, defendant could not have given plaintiff's counsel 21 days to withdraw his application. Moreover, there is no reason to believe that some shorter notice period would have been effective or could have spared the defendant the necessity of preparing responsive papers. Thus, it is entirely appropriate to require plaintiff's counsel to reimburse plaintiff for the $9,017.00 in attorneys' fees and cost it incurred in responding to the order to show cause.
It is therefore the judgment of the Court that plaintiff's counsel, Alfred Ferrer III, shall pay to the defendant $9,017.00 as a sanction for violating 28 U.S.C. § 1927.