Hernandez v. Emery Worldwide

Full title: ANGELITA Z. HERNANDEZ, Plaintiff, v. EMERY WORLDWIDE, et al., Defendants

Court: United States District Court, W.D. Texas, San Antonio Division

Date published: Dec 24, 2000

CIVIL NO. SA-97-CA-1085-FB (W.D. Tex. Dec. 24, 2000)

Opinion

CIVIL NO. SA-97-CA-1085-FB.

December 24, 2000.

MEMORANDUM AND RECOMMENDATION

John W. Primomo, United States Magistrate Judge.

Before the Court is a motion for sanctions under Rule 11 and 28 U.S.C. § 1927 filed by Consolidated Freightways Corporation of Delaware (CFCD). Docket no. 43. CFCD, which has been granted summary judgment, seeks sanctions because it was sued in this employment discrimination case even though it never was plaintiff's employer. CFCD and plaintiff's employer, Emery Worldwide, were sister subsidiaries of Consolidated Freightways, Inc. (CFI). CFCD contends that plaintiff's counsel continued to pursue a groundless claim against it even though CFCD notified counsel that CFCD was not a proper defendant. Plaintiff maintains that its claim against CFCD was reasonable because CFCD was "affiliated" with plaintiff's employer. Upon consideration, the undersigned finds plaintiff's position untenable. The undersigned will recommend that the motion for sanctions be granted, and that sanctions be imposed against plaintiff's counsel in the amount of $5,314.23.

Background

In this case, plaintiff Angelita Hernandez asserts claims of employment discrimination based on incidents that occurred during her employment with Emery Worldwide. On August 25, 1997, plaintiff filed suit pro se against her former employer, Emery Worldwide, as well as Consolidated Freightways Corporation and CF Transportation, Inc. Docket no. 1. Although CFCD was not named as a defendant, it was served with process as a defendant in plaintiff's lawsuit. On January 8, 1998, Wayne Bolio, Assistant General Counsel for Consolidated Freightways Corporation, sent a letter to plaintiff explaining the nature of the relationship between Emery and other companies owned by Consolidated Freightways, Inc. Mot. Sanctions , Exh. 2. The letter advised plaintiff that she sued the wrong party by including Consolidated Freightways because it took no action against her that would form the basis of the suit. Id . The letter also advised plaintiff that she failed to file a charge of discrimination against it, which is a condition precedent to her employment discrimination claims. A copy of the letter was sent to Lorenzo Tijerina because his name and address were on the envelope in which the summons and complaint were contained.

On May 20, 1998, the Court allowed Lorenzo Tijerina to appear pro hac vice on behalf of plaintiff. On June 1, 1998, Mr. Tijerina filed the amended complaint (docket no. 15) on behalf of plaintiff. The amended complaint asserts employment discrimination claims against Emery, Consolidated Freightways Corporation, and CNF Transportation, Inc. On June 3, 1998, CFCD filed a motion for summary judgment. Docket no. 16. Plaintiff never filed a response to the motion for summary judgment. In a Memorandum and Recommendation dated August 12, 1998, the undersigned found that: 1) CFCD was not named in the charge of discrimination, 2) the charge of discrimination failed to alleged any specific conduct that would have implicated CFCD, 3) the EEOC would have neither notified CFCD of the pending charge nor conducted an investigation of CFCD, 4) CFCD and Emery had at one time the same parent company, but they were never a single integrated enterprise, and 5) CFCD did not play a role in the final decisions regarding employment matters related to the plaintiff. Docket no. 26. Thus, the undersigned concluded that CFCD cannot be considered plaintiff's employer for purposes of her employment discrimination claims. Id . Plaintiff never filed any objections to the Memorandum and Recommendation. On September 2, 1998, the District Court accepted the findings and conclusions in the Memorandum and Recommendation and granted the motion for summary judgment. Docket no. 32. Subsequently, plaintiff's counsel sent a letter dated October 20, 1998, to counsel for CFCD and Emery that contained plaintiff's offer to settle for $137,656, plus attorney's fees. Mot.Sanctions , Exh. 7.

Rule 11 and 28 U.S.C. § 1927

Under Rule 11 of the Federal Rules of Civil Procedure, the Court has the power to sanction an attorney and/or a party in certain circumstances. Under Rule 11, every document filed with the Court must be signed by either the party or the party's attorney if the party is represented by counsel. Fed.R.Civ.P. 11(a) (1998). The signature on the document is considered a certification that the claims asserted are well-grounded in fact and in law, and that it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. Fed.R.Civ.P. 11(b) The determination of whether a filing was made for an improper purpose is based on an objective standard. Pacific Dunlop Holdings, Inc. v. Barosh , 22 F.3d 113, 118 (7th Cir. 1994). Rule 11 requires a reasonable inquiry before a party or attorney signs a filing. FDIC v. Calhoun , 34 F.3d 1291, 1299 (5th Cir. 1994). However, Rule 11 only requires compliance at the time that the paper is signed as opposed to a continuing duty that would require the withdrawal of pleadings upon a change of circumstances. Edwards v. General Motors Corp ., 153 F.3d 242, 245 (5th Cir. 1998).

In contrast to Rule 11, 28 U.S.C. § 1927 allows a court to sanction an attorney, as opposed to a party, that unnecessarily multiplies proceedings. Section 1927 provides as follows:

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 (West 1994). "Punishment under this statute is sparingly applied, and except when the entire course of proceedings were unwarranted and should neither have been commenced or persisted in, an award under 28 U.S.C. § 1927 may not shift the entire financial burden of an action's defense." Calhoun , 34 F.3d at 1297 (quotation and citation omitted). In order to impose sanctions under § 1927, the Court must make detailed findings that the proceedings were both unreasonable and vexatious. Calhoun , 34 F.3d at 1297. The Court may not reason that the suit was vexatious just because the claims are found to be unreasonable. Id . at 1300. Instead, a finding that the multiplication of the proceedings was vexatious must be based on evidence of recklessness, bad faith, or improper motive. Travelers Ins. Co. v. St. Jude Hosp. Of Kenner, La ., 38 F.3d 1414, 1416-1417 (5th Cir. 1994).

Discussion

The claims asserted against CFCD were analyzed at length in the August 12, 1998 Memorandum and Recommendation, which recommended that summary judgment should be granted against such claims. Docket no. 26. The bases for the recommendation were essentially that plaintiff never filed a charge of discrimination with the EEOC against CFCD, and plaintiff was not employed by CFCD. Since the District Court accepted the findings and conclusions in the August 12 Memorandum and Recommendation, the undersigned finds that maintaining the employment discrimination claims against CFCD was unreasonable.

Although maintaining the claims against CFCD was unreasonable, the Court does not believe that the claims were instituted against CFCD for an improper purpose. Plaintiff filed suit pro se, yet it is apparent that she received some assistance from someone with at least limited experience in drafting complaints for filing in federal courts. According to plaintiff, the legal assistance was provided by someone that works as a legal assistant. The letter from CFCD's general counsel states that it would seek sanctions if it was not soon dismissed from the case. Thus, although the letter expressed concern from being named in the lawsuit, the greater concern was remaining in the lawsuit. Plaintiff responded to the letter from CFCD by employing counsel to represent her. The Court finds that plaintiff acted reasonably by securing counsel to represent her in this case. Therefore, even though counsel did not appear on her behalf until four months after she received the letter from CFCD, the Court finds that there is no appropriate basis for imposing Rule 11 sanctions against plaintiff.

The actions of Mr. Tijerina are viewed differently because he acted as plaintiff's counsel. While he cannot be held responsible for the filing of the claims against CFCD, he is responsible for the prosecution of such claims after his appearance in this case. Over four months prior to Mr. Tijerina's appearance in this case, he was advised that the claims against CFCD lacked legal basis. The January 8 letter that Mr. Tijerina received from CFCD's assistant general counsel set forth reasons why the claims against it lacked merit, and those reasons became the bases for the granting of summary judgment on such claims. Despite having been warned of the lack of merit, Mr. Tijerina reasserted the claims of CFCD in the amended complaint that he filed on plaintiff's behalf on June 1, 1998. Docket no. 15. Having determined that the pursuit of the claims against CFCD was unreasonable, the Court must determine if they were maintained by Mr. Tijerina for an improper purpose.

It is significant that, over four months before filing the amended complaint, Mr. Tijerina had notice of serious defects in claims asserted against CFCD. Although the January 8 letter advised Mr. Tijerina of the defects, he made no inquiry with the author of the letter, CFCD's assistant general counsel, to ascertain the factual basis for the asserted defects. However, Mr. Tijerina was ostensibly aware of such facts because the response to the motion indicates that he reviewed a copy of CFI's 1993 annual report to stockholders, which clearly shows that CFCD and Emery were sister subsidiaries of CFI. Mr. Tijerina continued to prosecute the claims against CFCD despite having no evidence that CFCD and Emery had any relationship which would permit liability to be imposed upon CFCD for the actions of Emery. Even now, Mr. Tijerina maintains, without a legal basis, that the claims are appropriate against CFCD.

Additionally, Mr. Tijerina cannot adequately explain why the claims were prosecuted against CFCD when CFCD was never named in a charge of discrimination. Mr. Tijerina contends that the EEOC failed to bring CFCD into the administrative proceeding, and that no one can be held liable for the investigative or audit methods of the EEOC. The August 12 Memorandum and Recommendation found that the EEOC would have neither notified CFCD of the charge of discrimination nor conducted an investigation of CFCD because the charge of discrimination failed to allege any specific conduct that would have implicated CFCD. Thus, Mr. Tijerina's arguments are completely without merit. More important than the failure of the arguments advanced by Mr. Tijerina is the fact that a simple investigation into the facts and law of the case would have confirmed the deficiencies brought to Mr. Tijerina's attention in the January 8 letter. By proceeding forward with such untenable claims with notice of basic and insurmountable defects in the claims against CFCD, the Court finds that Mr. Tijerina was acting recklessly. That alone supports a finding that Mr. Tijerina multiplied the proceedings in a vexatious manner.

Other actions of Mr. Tijerina are also relevant. Mr. Tijerina never filed a response to CFCD's motion for summary judgment. Mr. Tijerina also did not file objections to the findings of fact and conclusions of law made in the August 12 Memorandum and Recommendation. Yet, after the District Court granted summary judgment on the claims against CFCD, Mr. Tijerina sent a letter to counsel for CFCD and Emery indicating that plaintiff would settle for $137,656, plus attorney's fees. Mr. Tijerina's pursuit of such claims, even after they had been dismissed, suggests that he pursued the claims against CFCD in bad faith and for the improper motive of merely extracting a settlement. Therefore, the undersigned concludes that Mr. Tijerina vexatiously multiplied these proceedings and should be required to personally satisfy the excess costs and expenses that CFCD incurred as a result of his conduct. See Callahan v. Schoppe , 864 F.2d 44 (5th Cir. 1989) (affirming imposition of sanctions for suing the wrong party).

The response to the motion for sanctions does not challenge the propriety of the amount of sanctions sought. Despite the failure to challenge the amount sought, the undersigned will analyze CFCD's request closely. The undersigned finds that CFCD's request for sanctions is well-supported by detailed information concerning the fees and expenses incurred by CFCD. Upon review of the documentation, the undersigned finds that all the fees and expenses described were reasonably incurred by CFCD in defense of the claims asserted against it in this case. The Court must determine, however, the amount of fees and expenses that were reasonably incurred by CFCD as a result of Mr. Tijerina's conduct.

As this case was not instituted by Mr. Tijerina, it would not be fair to impose sanctions that correspond to all the fees and expenses that CFCD incurred. The trigger for Mr. Tijerina's liability was not his appearance on behalf of plaintiff. Instead, it was his action in pursuing the claims against CFCD. The best evidence of the start of that activity is the filing of the amended complaint, which occurred on June 1, 1998. Therefore, expenses and fees incurred before that date cannot serve as a basis for an award of sanctions.

CFCD's documentation shows a total of $13,772.50 for attorney's fees and paralegal costs incurred as a result of this case. Subtracting the amounts incurred prior to the filing of the amended complaint, the total is reduced to $5080. CFCD's documentation also shows a total of $472.59 for out-of-pocket expenses. Subtracting the amounts incurred prior to the filing of the amended complaint, the total is reduced to $234.73. Therefore, the total of those two figures, $5,314.73, is the amount of fees and expenses that were reasonably incurred by CFCD as a result of Mr. Tijerina's conduct.

CONCLUSION

Having found that Mr. Tijerina unreasonably and vexatiously multiplied these proceedings, the undersigned concludes that the imposition of sanctions under Rule 11 and 28 U.S.C. § 1927 is appropriate. The Court, therefore, should impose sanctions against Mr. Tijerina in the amount of $5,314.73, which is the amount of fees and expenses that were reasonably incurred by CFCD as a result of Mr. Tijerina's conduct.

RECOMMENDATION

It is the recommendation of the Magistrate Judge that the motion for sanctions be GRANTED, and that sanctions be imposed against plaintiff's counsel in the amount of $5,314.73.

Instructions for Service and Notice of Right to Appeal/Object

The United States District Clerk shall serve a copy of this Memorandum and Recommendation on all parties either (1) by certified mail, return receipt requested, or (2) by facsimile if authorization to do so is on file with the Clerk. Pursuant to Title 28 U.S.C. § 636(b)(1) and Rule 72(b), Fed.R.Civ.P., any party who desires to object to this report must serve and file written objections to the Memorandum and Recommendation within 10 days after being served with a copy unless this time period is modified by the district court. A party filing objections must specifically identify those findings, conclusions or recommendations to which objections are being made and the basis for such objections; the district court need not consider frivolous, conclusive or general objections. Such party shall file the objections with the clerk of the court, and serve the objections on all other parties and the magistrate judge . A party's failure to file written objections to the proposed findings, conclusions and recommendations contained in this report shall bar the party from a denovo determination by the district court. See Thomas v. Arn , 474 U.S. 140, 150, 106 S.Ct. 466, 472, 88 L.Ed.2d 435 (1985). Additionally, any failure to file written objections to the proposed findings, conclusions and recommendation contained in this Memorandum and Recommendation within 10 days after being served with a copy shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the district court. Douglass v. United Services Automobile Association , 79 F.3d 1415, 1428 (5th Cir. 1996).