Opinion
Civil No. 3:00-0736
February 27, 2003
MEMORANDUM and ORDER
Pending before the court is the matter of potential sanctions against petitioner's counsel, Robert Catz. On August 29, 2002, the court ordered that Mr. Catz show cause as to why he should not be sanctioned for violating Rule 11(b), Fed.R.Civ.P., at a hearing scheduled for October 4, 2002. (Docket No. 210) The show cause hearing was postponed on several occasions and was most recently set for March 27, 2003. (Docket No. 253) On February 14, 2003, Mr. Catz filed a "Notice to the Court Regarding Show Cause Hearing," stating that he respectfully declines the "show cause opportunity to be heard." (Docket No. 254) On the basis of this filing, the court has cancelled the show cause hearing scheduled for March 27, 2003. (Docket No. 258)
The show cause hearing was set on the court's own initiative pursuant to Rule 11(c)(1)(B), based on misrepresentations made to the court, as fully set out and explained in the Order setting the show cause hearing (Docket No. 210) and in the Memorandum and Order granting in part the respondents' Motion to Set Aside Award of Attorney's Fees (Docket No. 209), both of which are incorporated herein by reference as if set forth verbatim. In the Order setting the show cause hearing, the court put Mr. Catz on notice that it was considering one or more of the following sanctions against him:
(1) Referral of this matter to the United States Attorney for prosecution under 18 U.S.C. § 1623;
(2) Barring Mr. Catz from further appearances in the United States District Court for the Middle District of Tennessee;
(3) Ordering Mr. Catz to pay a penalty into the court; and
(4) Some other monetary or non-monetary sanction commensurate to this conduct.
(Docket No. 210 at 3) The court construes Mr. Catz's declining to be heard at the show cause hearing to constitute an admission that he has violated Rule 11(b) by misrepresenting to the court that the time Mr. Catz spent in certain meetings held in Mexico on July 14-16, 2000 were reasonably expended on this ICARA litigation and, therefore, compensable in this litigation. Since no defense has been made, the court will consider what sanction is appropriate for this violation.
Some two months after the court gave notice to Mr. Catz of the potential for the court to award sanctions on its own initiative, the respondents filed a motion requesting that the sanction include an award of their attorney's fees for their efforts in bringing Mr. Catz's misrepresentations to the court's attention. (Docket No. 230) This motion was made under Rule 11(c)(2), Fed.R.Civ.P. John B. Herbison, another counsel for the petitioner, responded in opposition to this request (Docket No. 244), and the respondents filed a reply. (Docket No. 247) In their initial motion, the respondents relied upon the language in Rule 11(c)(2) that, among the sanctions that can be imposed for Rule 11 violations, is payment of the opposing party's attorney's fees. The petitioner's opposition is based upon the assertion that the respondents may not seek attorney's fees as a sanction for a Rule 11 violation because they have failed to comply with the "safe harbor" provisions set out in subsection (c)(1)(A) of Rule 11. The respondents reply that the safe harbor provision does not apply in this instance and, even if it did, the court should exercise its "inherent power" under a recent Sixth Circuit case to award them their fees as requested.
The respondents are correct that the "safe harbor" provisions do not apply to the situation at hand because they filed no separate motion requesting Rule 11 sanctions, as required by Rule 11(c)(1)(A). In their Rule 60(b)(2) Motion to Set Aside Award of Attorney's Fees, the respondents had requested, among other things, that the court find Mr. Catz in violation of Rule 11 and enter a show cause order under Rule 11(c)(1)(B). (Docket No. 203 at 4) That subsection provides as follows:
On Court's Initiative. On its own initiative, the court may enter an order describing the specific conduct that appears to violate subdivision (b) and directing an attorney, law firm, or party to show cause why it has not violated subdivision (b) with respect thereto.
Rule 11(c)(1)(B), Fed.R.Civ.P. It is that section under which the show cause hearing was set, not Rule 11(c)(1)(A). Therefore, the safe harbor provisions have no applicability.
The sanctions that may be awarded for a violation of Rule 11 are set out in Rule 11(c)(2), which reads in part as follows:
Subject to the limitations in subparagraphs (A) and (B), the sanction may consist of, or include, directives of a non-monetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys "fees" and other expenses incurred as a direct result of the violation. (emphasis added)
This language seems to clearly provide that attorney's fees may only be imposed when a party successfully moves for sanctions under Rule 11(c)(1)(A), and not when sanctions are imposed on the court's initiative under Rule 11(c)(1)(B). The Advisory Committee Notes to Rule 11 support this interpretation:
The power of the court to act on its own initiative is retained, but with the condition that this be done through a show cause order. This procedure provides the person with notice and an opportunity to respond. The revision provides that a monetary sanction imposed after a court-initiated show cause order be limited to a penalty payable to the court and that it be imposed only if the show cause order is issued before any voluntary dismissal or an agreement of the parties to settle the claims made by or against a litigant.
Advisory Committee Notes to 1993 Amendments, Rule 11, Fed.R.Civ.P. (emphasis added) Therefore, this court may not award attorney's fees to the respondents as a sanction pursuant to the court's own show cause proceeding.
The respondents' reliance upon the court's inherent power to award them attorney's fees, as discussed in First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501 (6th Cir. 2002), is likewise unpersuasive. Although broadly construing the court's inherent power, the court in First Bank stated that inherent power sanctions may only be imposed when the court has found bad faith. Id at 517. This court did not find bad faith, but, instead, that Mr. Catz had made misrepresentations. In the law, that is an important distinction.
Two other limitations set out in First Bank likewise foreclose this court's potential use of its inherent powers to award attorney's fees to the respondents. The court stated that the "district court's failure to use a clearly applicable and effective sanction rule [instead of its inherent power] could constitute an abuse of discretion;" and "generally, a court's inherent power should be reserved for those cases in which the conduct of a party or an attorney is egregious and no other basis for sanctions exists." Id. at 516 (internal citations omitted) Here, another basis does exist — Rule 11 — which likewise constitutes "a clearly applicable and effective sanction rule." Moreover, the court cautioned that the district court "should usually inform the parties . . . that the district court is considering using its inherent authority to sanction particular conduct." Id. at 516. This court has not so informed the parties or Mr. Catz. This court has put Mr. Catz on notice that the sanctions which might be imposed upon him are only those available under Rule 11. Therefore, the First Bank case does not provide an alternative means by which the court might award the respondents their attorney's fees.
Sanctions imposed under Rule 11 are "limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated." Rule 11(c)(2), Fed.R.Civ.P. Because of the court's ruling on the respondents' motion, Mr. Catz and his co-counsel have already refunded to the respondents $3,097.50 of the attorney's fees that the respondents paid to the petitioner as the prevailing party in this ICARA action. (Docket Nos. 209, 220) The court finds that an appropriate sanction for Mr. Catz's Rule 11(b) violation (making misrepresentations to the court) is a penalty in the amount of $3,000 to be paid into the court.
It is therefore ORDERED that, within twenty days of the entry of this order. Mr. Catz shall pay into the court $3,000 as sanctions pursuant to Rule 11(c)(2), Fed.R.Civ.P.
It is so ORDERED.