CJC Holdings, Inc. v. Wright & Lato, Inc.

142 F.R.D. 648, 1992 U.S. Dist. LEXIS 8963, 1992 WL 140822
CourtDistrict Court, W.D. Texas
DecidedJune 9, 1992
DocketCiv. No. A-90-CA-533
StatusPublished
Cited by2 cases

This text of 142 F.R.D. 648 (CJC Holdings, Inc. v. Wright & Lato, Inc.) is published on Counsel Stack Legal Research, covering District Court, W.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CJC Holdings, Inc. v. Wright & Lato, Inc., 142 F.R.D. 648, 1992 U.S. Dist. LEXIS 8963, 1992 WL 140822 (W.D. Tex. 1992).

Opinion

ORDER

NOWLIN, District Judge.

Before the Court are: Plaintiff CJC Holdings’ Motion for Attorney’s Fees, filed on April 20, 1992; Defendant Wright & Lato’s oral motion for Rule 11 sanctions; and, Defendant Wright & Lato’s Petition for Attorneys’ Fees, filed June 8,1992. On May 18, 1992, this Court held a hearing to consider the Plaintiff’s motion. On May 12, 1992, this Court ordered that the attorneys be prepared to discuss at the hearing whether Rule 11 sanctions would be appropriate for the filing of the Plaintiff’s motion.

I. Background

On December 9, 1991, this Court entered a default judgment in favor of Plaintiff CJC Holdings, Inc., d/b/a Artcarved (“Art-carved”), and against Defendant Wright & Lato, Inc. In addition to the specific in-junctive relief, this Court also awarded Plaintiff Artcarved $115,661.75 (plus post-judgment interest), the full amount of attorney’s fees requested by Artcarved for its total services and expenses incurred in maintaining the action.

Upon motion of Plaintiff Artcarved, this Court entered an order permitting registration in a foreign jurisdiction the portion of this Court’s default judgment awarding attorney’s fees to Artcarved. Apparently upon the fear of Artcarved’s registering and executing that portion of this Court’s judgment in a federal district court in New Jersey, Wright & Lato unsuccessfully sought to collaterally attack, in a federal district court in New Jersey, the judgment of this Court. Subsequently, Wright & Lato filed a supersedeas bond in this Court to prevent execution of the judgment pending resolution of the appeal to the Fifth Circuit.

Based primarily, if not exclusively, upon Wright & Lato’s unsuccessful collateral attack in the federal district court in New Jersey, Artcarved has moved in this Court for an award of sanctions to compensate Artcarved for its costs in defending the collateral action. The federal court in New Jersey dismissed that action without prejudice and without assessing costs or fees to any party. See Plaintiffs Motion For Attorneys Fees, filed April 20, 1992, Exhibit [651]*651B at 2.1 At first glance, this Court presumed that such a motion should be filed in the forum where the allegedly improper conduct occurred. The law confirms such a presumption.

II. Sanctions Under 28 U.S.C. § 1927 and the Inherent Power

Although also resting on this Court’s inherent power, the plaintiff’s motion for sanctions is primarily based upon the statutory provision of 28 U.S.C. § 1927, which provides:

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 (emphasis added). In its motion, Plaintiff Artcarved cited one case to support its argument for sanctions based upon § 1927. See Plaintiffs Brief in Support of Motion for Attorney’s Fees, filed April 20, 1992, at 5 (citing Shields v. Shetler, 120 F.R.D. 123, 127 (D.Colo.1988)). In that case the district court did indeed impose sanctions upon an attorney and the client’s attorney for motions and pleadings filed before that court. See generally, Shields.

In Shields, the district court presented three requirements that must be met before liability may be imposed under § 1927:

(1) a multiplication of proceedings by an attorney or other person;

(2) by conduct that can be characterized as unreasonable and vexatious; and,

(3) a resulting increase in the cost of proceedings.

See Shields, 120 F.R.D. at 127. The district court in Shields did not however need to concern itself with the plain language, “in any case,” of Section 1927. This language and precedent limit the application of Section 1927 to conduct in the case before the court and not in a case before another court.

Section 1927 does not permit a court to impose sanctions against a party. See Browning v. Kramer, 931 F.2d 340, 344 (5th Cir.1991). Section 1927 permits sanctions for the excess costs, expenses, and attorney’s fees reasonably incurred because of an attorney’s unreasonable and vexatious multiplication of the proceedings. See id. (emphasis in original). Explaining 28 U.S.C. § 1927, the Fifth Circuit has stated:

Before an award is made under § 1927, the attorney to be sanctioned must be allowed to respond not only as to the finding that her [or his] actions taken on behalf of her client have become unreasonable and vexatious, but also as to the amount of her opponent’s fees and costs which are attributable to any action that multiplied the proceedings.

Id. at 346.

The Fifth Circuit has strictly construed § 1927 to not dampen the proper zeal of an attorney representing a client. See Matter of Case, 937 F.2d 1014, 1023 (5th Cir.1991). The Fifth Circuit has expressly stated that:

The language of § 1927 limits the court’s sanction power to attorney’s actions which multiply the proceedings in the case before the court. Section 1927 does not reach conduct that cannot be construed as part of the proceedings before the court issuing § 1927 sanctions.

Id. (emphasis added).2 The Fifth Circuit has held that § 1927 sanctions could not be awarded based upon conduct that occurred “in a separate state court proceeding no matter how vexatious or multiplicious that conduct may be.” See id. (emphasis added). Recognizing that the proceedings [652]*652in the state court were “completely collateral to the proceedings in” the federal court, the Fifth Circuit stated that the conduct of the parties in the collateral action did not affect the exercise of the judicial authority of the federal court or limit the authority of the federal court to control the behavior of the parties and attorneys in the litigation before that court. Id. at 1023-1024. The Fifth Circuit specifically concluded that the federal court did have the power to award sanctions for bad faith conduct in the federal court proceeding, but the circuit court then stated that the inherent power of the federal court “does not reach conduct which does not occur in proceeding in the [federal] court.” Id. at 1023. The Matter of Case decision directly addresses the situation before this Court.3

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142 F.R.D. 648, 1992 U.S. Dist. LEXIS 8963, 1992 WL 140822, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cjc-holdings-inc-v-wright-lato-inc-txwd-1992.