Mariani v. Doctors Assoc.et al

• Court: Court of Appeals for the First Circuit
• Decided: January 11, 1993
• Docket: 92-1843
• Status: Published

Opinion

USCA1 Opinion

January 11, 1993
                            United States Court of Appeals
                            United States Court of Appeals
                                For the First Circuit
                                For the First Circuit
                                 ____________________

        No. 92-1843

                     GERARDO MARIANI & GEORGINA LOUREIRO, ET AL,

                               Plaintiffs, Appellants,

                                          v.

                          DOCTORS ASSOCIATES, INC., ET AL.,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

[Hon. Jose Antonio Fuste, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                 Stahl, Circuit Judge,
                                        _____________
                           Campbell, Senior Circuit Judge,
                                     ____________________
                           Skinner,* Senior District Judge.
                                     _____________________

                                 ____________________

            Harry  E. Woods  with whom  Ricardo  Skerrett  Yordan and  Woods &
            _______________             _________________________      _______
        Woods were on brief for appellants.
        _____

            Edward Wood Dunham with whom Christopher  L. Levesque and Wiggin &
            __________________           ________________________     ________
        Dana  and  Jay A.  Garcia-Gregory with  whom  Ricardo F.  Casellas and
        ____       ______________________             ____________________
        Fiddler, Gonzalez & Rodriguez were on brief for appellees.
        _____________________________
                                 ____________________

____________________

        *Of the District of Massachusetts, sitting by designation.

STAHL, Circuit Judge.   In this appeal,  plaintiffs
                             _____________

            challenge   the  district  court's   imposition  of  Rule  11

            sanctions  for  their  submission  of  a  motion  in  a  case

            dismissed by  the district court two years  earlier.  Finding

            error solely in the  district court's imposition of sanctions

            upon the attorneys' law firm rather than upon the responsible

            attorneys, we affirm,  except that we impose the sanctions on

            the attorneys themselves.

                                          I.
                                          I.
                                          __

                           BACKGROUND AND PRIOR PROCEEDINGS
                           BACKGROUND AND PRIOR PROCEEDINGS
                           ________________________________

                      Plaintiffs are twenty-five dissatisfied Puerto Rico

            franchisees  of the  sandwich shop  chain known  as "Subway."

            Defendants consist  of Doctor's  Associates, Inc.,  owner and

            franchisor of the "Subway" chain, and several of its officers

            and directors.   On  September 14, 1988,  plaintiffs, through

            the  law  firm of  Woods  &  Woods,  commenced  suit  against

            defendants in  United States District Court  for the District

            of Puerto Rico alleging  breach of contract, fraud and  other

            claims arising out of their franchise agreements.  

                      All of plaintiffs' individual  franchise agreements

            contain  clauses  requiring  that any  claim  or  controversy

            arising out of the  contract or an alleged breach  thereof be

            settled by  arbitration in  Bridgeport, Connecticut.   On the

            basis  of  that  arbitration  provision,  defendants  filed a

            motion  to  dismiss.     Responding,  plaintiffs   interposed

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"Plaintiffs' Motion in  Opposition of  Defendants' Motion  to

            Dismiss" ("the first  motion") dated February 7, 1989  with a

            supporting  memorandum of  law signed  by attorney  Victor M.

            Rodriguez Baez  of Woods & Woods.   On May 17, 1989, agreeing

            with  defendants'  argument  that  the  arbitration provision

            controlled, the district court  granted defendants' motion to

            dismiss. 

                      Twenty-two months later, on March  26, 1991, having

            sought  neither reconsideration  nor an  appeal, and  with no

            intervening change in the relevant law, plaintiffs  submitted

            a motion  to the district court  entitled "Plaintiffs' Second

            Request   for  Change   of  Venue   and  First   Request  for

            Consolidation  of  Arbitration   Proceedings"  ("the   second

            motion").  The  memorandum of  law in support  of the  second

            motion  consisted  entirely of  argumentation from  the first

            motion  except for (1)  occasional minor  grammatical changes

            (e.g., changing "the contract  was" to "the contracts were"),
             ____

            and  (2)  an appended  argument  requesting consolidation  of

            plaintiffs' claims for arbitration  proceedings.  The  second

            motion was  signed by  attorneys Harry E.  Woods and  Gerardo

            Mariani of Woods & Woods. 

                      In  response,  defendants filed  a  motion opposing

            plaintiffs'  second  motion  and  seeking  Rule 11  sanctions

            against  plaintiffs' attorneys.    The district  court denied

            plaintiffs'  second  motion, and  imposed  Rule 11  sanctions

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directing that Woods  & Woods pay  part of defendants'  costs

            for defending the second motion.1  

                      Plaintiffs  now   appeal,  arguing  that   (1)  the

            sanctions should  not have  been imposed, (2)  the sanctioned

            amount was excessive,  and (3) sanctions may  be imposed only

            against   individual  attorneys,   not  against   law  firms.

            Although  we find  merit  in plaintiffs'  final argument,  we

            affirm the district court in all other respects.

                                         II.
                                         II.
                                         ___

                                      DISCUSSION
                                      DISCUSSION
                                      __________

                      Fed.  R. Civ. P. 112 requires that an attorney make

____________________

            1.  Defendants  submitted  a  verified time  sheet  detailing
            128.5  hours  of legal  work with  fees  of over  $14,000 for
            defense of  the sanctioned motion.  Based  on this submittal,
            the district court imposed sanctions of $7,500.  

            2.  Fed. R. Civ. P. 11 states in relevant part:

                 Every pleading, motion, and  other paper of a party
                 represented by  an attorney  shall be signed  by at
                 least one  attorney  of record  in  the  attorney's
                 individual  name .  .  . .    The signature  of  an
                 attorney or party constitutes a certificate by  the
                 signer  that  the  signer has  read  the  pleading,
                 motion  or other  paper; that  to the  best of  the
                 signer's knowledge, information, and  belief formed
                 after  reasonable inquiry  it is  well  grounded in
                 fact and  is warranted  by existing law  or a  good
                 faith  argument for the extension, modification, or
                 reversal  of  existing  law,  and that  it  is  not
                 interposed  for any  improper purpose,  such as  to
                 harass  or to  cause unnecessary delay  or needless
                 increase in the  cost of  litigation. . .  .  If  a
                 pleading,  motion, or  other  paper  is  signed  in
                 violation of  this rule, the court,  upon motion or
                 upon  its own  initiative,  shall  impose upon  the
                 person who signed it, a represented party, or both,
                 an appropriate sanction, which may include an order

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                                          4

reasonable inquiry to assure  that all pleadings, motions and

            papers filed  with  the court  are  factually  well-grounded,

            legally tenable and not  interposed for any improper purpose.

            Cooter  & Gell v. Hartmarx  Corp., 496 U.S.  384, 393 (1990).
            ______________    _______________

            Counsel is held  to standards of due  diligence and objective

            reasonableness.   Maine  Audubon Soc'y  v. Purslow,  907 F.2d
                              ____________________     _______

            265, 268 (1st  Cir. 1990).  See also  Lancellotti v. Fay, 909
                                        ___ ____  ___________    ___

            F.2d 15, 20 (1st  Cir. 1990); Cruz v.  Savage, 896 F.2d  626,
                                          ____     ______

            631  (1st Cir. 1990); Kale  v. Combined Ins.  Co. of America,
                                  ____     _____________________________

            861 F.2d 746, 756-57 (1st Cir. 1988).    

                      District  courts have broad  discretion in imposing

            and fashioning Rule 11 sanctions.  Cooter & Gell, 496 U.S. at
                                               _____________

            400  ("[I]n  directing  the   district  court  to  impose  an

            `appropriate'  sanction, Rule  11 itself  indicates that  the

            district court is  empowered to  exercise its  discretion.");

            Lancellotti, 909 F.2d at 20 ("[W]e believe the district court
            ___________

            should determine,  in the first  instance, whether reasonable

            inquiry was made, and  if not, the consequences which  should

            ensue."); Anderson v. Beatrice  Foods Co., 900 F.2d  388, 394
                      ________    ___________________

            (1st Cir.)  ("[D]ecisions as  to whether sanctions  should be

            imposed, and if so, what form they should take, often require

            intensive  inquiry  into  the  circumstances  surrounding  an

____________________

                 to  pay to the other party or parties the amount of
                 the  reasonable expenses  incurred  because of  the
                 filing  of the  pleading,  motion, or  other paper,
                 including a reasonable attorney's fee. 

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                                          5

alleged violation.  The trial judge, steeped in the facts and

            sensitive  to  the  interplay  amongst  the protagonists,  is

            ideally equipped to review  those ramifications and render an

            informed judgment."),  cert. denied,  111 S. Ct.  233 (1990).
                                   _____ ______

            We therefore review all aspects  of the district court's Rule

            11  determination  under  an abuse  of  discretion  standard.

            Cooter & Gell,  496 U.S. at  400-01; Navarro-Ayala v.  Nunez,
            _____________                        _____________     _____

            968 F.2d 1421, 1425 (1st Cir. 1992).  See also Maine Audubon,
                                                  ___ ____ _____________

            907  F.2d at 268 (explaining  that a party  appealing Rule 11

            sanctions  "bears a  heavy burden  of demonstrating  that the

            trial  judge  was clearly  not  justified  in entering  [the]

            order") (quoting Anderson, 900 F.2d at 393).  
                             ________

            A.  The Propriety of the Sanctions
            A.  The Propriety of the Sanctions
            __________________________________

                      Plaintiffs  argue  that  the  district  court  used

            improper criteria in deciding to impose sanctions, that their

            motion did  not  warrant  Rule 11  sanctions,  and  that  the

            sanctions  order   should  be  overturned  as   an  abuse  of

            discretion.  We disagree.  

                      The district court  found that plaintiffs'  counsel

            failed to  make an  objectively reasonable inquiry  to assure

            that the second motion was  legally tenable.  Several factors

            support  this  finding:    the  district  court  had  already

            dismissed the case  in favor of arbitration  nearly two years

            prior  to the  second  motion; the  second  motion failed  to

            suggest any basis for the court's jurisdiction to rule on the

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                                          6

motion in view of the dismissal;  the second motion consisted

            of  virtually verbatim argumentation  from the  first motion;
                          ________

            and  plaintiffs  had failed  to  appeal  or move  for  timely

            reconsideration of the order dismissing the first motion.3

                      We find,  therefore, that the record amply supports

            the district court's imposition of Rule 11 sanctions based on

            the  plaintiffs' filing  of its  second motion,  and  we find

            plaintiffs' "abuse of discretion" claim without merit.4

____________________

            3.  Plaintiffs   also  argue   that   the  district   court's
            scrupulous  attention to  the second  motion and  its careful
            consideration  of  the sanction  is  evidence  of the  second
            motion's  merit.   Our review  of the  record shows  that the
            district court did no  more or less than properly  detail all
            the reasons why  the second motion was sanctioned.  Moreover,
            we  are  very  reluctant  to   fashion  a  rule  which  would
            discourage  district courts from  thoroughly discussing their
            reasons for  imposing  sanctions, and  we reject  plaintiffs'
            suggestion that we adopt such an approach.

            4.  Plaintiffs  offer two  additional  arguments  to  support
            their  appeal of the sanctions.   First, they  argue that the
            district   court  improperly  sanctioned   them  for  conduct
            occurring throughout the proceeding, rather than imposing its
            Rule  11 sanctions  with regard  to one  particular pleading,
            motion or  paper.   The  district  court order  imposing  the
            sanctions  belies this  argument:  "What  concerns us  in the
            long  history of  this  case,  which  has  been  filled  with
            numerous delaying  tactics by the plaintiffs,  is this latest
                                                              ___________
            attempt  to  delay   arbitration."     Mariani  v.   Doctor's
            ________________________________       _______       ________
            Associates,  Inc., No. 88-1630, slip op. at 2 (D.P.R. Feb. 2,
            _________________
            1992)  (emphasis  supplied).    Thus,  we  find  unpersuasive
            plaintiffs'  assertion that  the  district  court  improperly
            sanctioned conduct occurring throughout the proceeding.
                 Second, plaintiffs argue that  in deciding to impose the
            sanctions, the district court improperly ignored pressures on
            the law firm of Woods & Woods which contributed to the filing
            of the second motion.  Specifically, they argue that attorney
            Mariani  was  in  the  process  of being  considered  for  an
            appointment as  a federal administrative law  judge, and that
            attorney  Woods  had been  diagnosed  as  having a  cancerous
            lesion.    Though  they  had  ample  opportunity  to  do  so,

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B.  The Amount of the Sanctions
            B.  The Amount of the Sanctions
            _______________________________

                      Plaintiffs' next  argument  is that  the  sanctions

            were excessive.  Rule 11 specifically states that appropriate

            sanctions "may include  an order  to pay the  other party  or

            parties  the  amount  of  the  reasonable  expenses  incurred

            because of the filing of the pleading, motion or other paper,

            including  a  reasonable  attorney's  fee."    Moreover,  the

            district court has  wide discretion in fashioning  sanctions.

            See, e.g., Cooter &  Gell, 496 U.S. at 400;  Lancellotti, 909
            ___  ____  ______________                    ___________

            F.2d  at 20; Anderson, 900 F.2d at 394; Unanue-Casal 898 F.2d
                         ________                   ____________

            at 843; Kale, 861 F.2d at 756-58.  
                    ____

                      In its order imposing  the sanctions, the  district

            court  noted that  the total of  128.5 hours  that defendants

            spent responding to plaintiffs' second motion seemed "a great

            deal of  work to  oppose  one motion."   It  also noted  that

            because  the  case had  "lain dormant  for  two years,  it is

            understandable that  costs  were high."    As a  result,  the

            district court  awarded defendants  roughly half of  the fees

            incurred  in  defending the  motion.    Reviewing the  record

            carefully, we find that  the sanction of $7,500 was  not only

____________________

            plaintiffs  never argued  to  the district  court that  these
            factors contributed  to the filing of  the sanctioned papers.
            We  have  repeatedly  warned   that  we  will  not  entertain
            arguments made for the first time on appeal.  Federal Deposit
                                                          _______________
            Ins.  Co. v. World University, Inc., No. 92-1389, slip op. at
            _________    ______________________
            5  (1st Cir.  Oct. 22, 1992).   We  do not  therefore address
            plaintiffs'  arguments  about  the  health  and  professional
            status of attorneys Mariani and Woods.

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                                          8

within  the  district   court's  discretion   but  was   also

            reasonable.5

C. Imposition of the Sanctions on the Individual Attorneys
            C. Imposition of the Sanctions on the Individual Attorneys
            __________________________________________________________

                      Lastly, plaintiffs  argue,  and defendants  do  not

            dispute, that  the district court improperly  imposed Rule 11

            sanctions upon  the  law firm  of  Woods &  Woods.   Rule  11

            sanctions may  be imposed only upon  individual attorneys who

            have  signed sanctioned papers.   Pavelic & Leflore v. Marvel
                                              _________________    ______

            Entertainment Group, 110 S. Ct. 456, 458-59 (1989).  They may
            ___________________

            not be imposed upon a law firm.  Id.    
                                             ___

                      Elsewhere, we  have avoided remanding Rule 11 cases

            by discerning the responsible  parties and ordering that they

            pay the sanctions.   Ballard's Serv. Ctr., Inc.   v. Transue,
                                 ___________________________     _______

            865  F.2d 447, 450 (1st Cir.  1989) (requiring that attorney,

____________________

            5.  Relying  on Dubisky  v. Owens,  849 F.2d  1034  (7th Cir.
                            _______     _____
            1988), plaintiffs  also argue  that because their  own motion
            was  so facially  meritless, defendants  should have  been on
            notice to mitigate expenditures.   According to plaintiffs, a
            phone  call or  some informal  contact from  defendants would
            have been  the appropriate  response to their  second motion.
            Dubisky, however,  is inapposite.  The  plaintiffs in Dubisky
            _______                                               _______
            were  mistaken  as  to defendant's  citizenship,  and wrongly
            believed  that  they  could  invoke  diversity  jurisdiction.
            Plaintiffs were  sanctioned under  Rule 11.   On appeal,  the
            Seventh Circuit held that  the defendant, before embarking on
            a  costly  defense,  had  a  duty  to   mitigate  damages  by
            contacting the plaintiff to  inform him of the jurisdictional
            defect.    Id. at  1038-39.   As  a result,  it  reversed the
                       ___
            sanction awarded  by the district  court.   Id.  In  the case
                                                        ___
            before us, however, there was no mistake of  fact on the part
            of plaintiffs that could  be readily corrected by defendants.
            Thus,  we find no need to reverse the sanction on the grounds
            that defendants had a duty to mitigate expenditures.

                                         -9-
                                          9

rather than party,  pay Rule 11  sanctions); Muthig v.  Brant
                                                         ______     _____

            Point  Nantucket, Inc.,  838 F.2d  600,  607 (1st  Cir. 1988)
            ______________________

            ("[T]he district  court did not  specify whether  [sanctioned

            party] or their counsel should pay the counsel fees assessed.

            Our reading of the record  indicates that the sanction should

            be  imposed upon counsel.").  Cf.  Navarro-Ayala, 968 F.2d at
                                          ___  _____________

            1428 (explaining that "this may properly be classified as one

            of  the rare cases in which an  appellate court ought to take

            the bull  by the  horns and,  rather  than remanding,  simply

            select  an appropriate  [Rule 11]  sanction").   We therefore

            modify  the  district court's  order  and  impose the  $7,500

            sanctions  jointly  and  severally upon  attorneys  Woods and

            Mariani. 

                                         III.
                                         III.
                                         ____

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                 For the foregoing reasons, the district court's order is

            affirmed as modified.  

                 Affirmed as modified.  Costs to appellees.
                 ________ __ _________  _____ __ __________

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