Trustee of the Bankruptcy Estate v. Dowson Holding Co.

859 F. Supp. 2d 722, 2012 U.S. Dist. LEXIS 18192, 2012 WL 511490
CourtDistrict Court, Virgin Islands
DecidedFebruary 14, 2012
DocketCivil No. 2008-10
StatusPublished
Cited by1 cases

This text of 859 F. Supp. 2d 722 (Trustee of the Bankruptcy Estate v. Dowson Holding Co.) is published on Counsel Stack Legal Research, covering District Court, Virgin Islands primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Trustee of the Bankruptcy Estate v. Dowson Holding Co., 859 F. Supp. 2d 722, 2012 U.S. Dist. LEXIS 18192, 2012 WL 511490 (vid 2012).

Opinion

MEMORANDUM OPINION AND ORDER1

-RUTH MILLER, United States Magistrate Judge.

Before the Court is defendant Dowson Holding Company, Inc.’s Amended Motion for Sanctions (Dismissal with Prejudice) (ECF 133).2 In its Order dated December 22, 2011, the District Court denied as moot so much of the motion as sought the sanction of dismissal pursuant to the Court’s inherent power, because the parties had settled the underlying claims (ECF 152). This Memorandum and Order will address that portion of the motion that seeks costs and attorney’s fees pursuant to 28 U.S.C. § 1927.

I. FACTUAL AND PROCEDURAL HISTORY

On January 19, 2006, Monique Faulkner (“Faulkner”) and Blair Shannon (“Shan[724]*724non”) were guests at a hotel on St. Thomas, U.S. Virgin Islands owned and/or operated by defendants. On that date, Shannon was shot and killed by a person attempting to rob Shannon and Faulkner in their hotel room. On January 18, 2008, Faulkner filed this action alleging that she suffered emotional distress as a result of witnessing Shannon’s death. She stated claims of negligence based on defendants’ alleged duties as an innkeeper, and sought punitive damages for gross negligence. After the subject incident, but before filing the complaint herein, on August 22, 2006, Faulkner filed for bankruptcy in the United States Bankruptcy Court for the Southern District of Ohio.

After discovery and motion practice in this case, on January 28, 2010, the Bankruptcy Court overseeing Faulkner’s bankruptcy entered an Order approving a settlement reached by defendants and the trustee of Faulkner’s bankruptcy estate. Notwithstanding the settlement, on March 5, 2010, Dowson filed the instant motion for sanctions. Thereafter, on April 12, 2010, this Court entered an Order (ECF 139) acknowledging the settlement and denying all pending motions without prejudice, subject to the submission of a stipulation to dismiss pursuant to the settlement. Defendant Dowson sought reconsideration of that Order so that the Court could consider the pending motion for sanctions. On March 22, 2011, the Court vacated the April 12, 2010 Order insofar as it denied the current sanctions motion, thus clearing the way for consideration of the instant motion.

In support of the request for Section 1927 sanctions, Dowson alleges generally that“Plaintiffs3 and their lawyers ... have repeatedly violated numerous ethical rules, have committed fraud on the Courts, and have vexatiously, and in bad faith, multiplied the instant proceedings.” (ECF 133, at pp. 1-2) Dowson then specifically points to the following conduct as illustrative of these allegations:

Hart knowingly hired Dennis Sheraw, a private investigator, gaining improper access to Dowson’s privileged and confidential materials for his own pecuniary gain; Hart did not represent any clients until a year later; Hart repeatedly called Lester Shannon, the personal representative of his brother’s estate, who did not authorize this lawsuit; and, it was over a year before Christine Hamilton, represented by Thomas Hart, petitioned the Superior Court in St. Croix to be appointed as the “personal representative.”

(ECF 133, at p. 2 (footnote omitted)) Dow-son also notes that it moved to disqualify plaintiffs’ attorneys because of their involvement with the investigator Sheraw, but that motion was denied.4

Further, Dowson contends that after it filed for summary judgment on a legal issue in the case (the foreseeability of the shooting of Shannon), “plaintiffs” sought, and were granted, “numerous continuances based on Rule 56(f)5 on the grounds that [725]*725they needed to conduct additional discovery in order to respond.” (ECF 133, at pp. 7-8) Then, Dowson contends, such discovery was scheduled, and/or cut short or abruptly cancelled, for a variety of unsatisfactory reasons.

Finally, Dowson claims that counsel “have engaged in a course of intimidation of [Dowson’s] representatives and non-parties, including but not limited to Lester Shannon, and made numerous unrestrained personal attacks in depositions and pleadings filed with the Court.” (ECF 133, at p. 11)

After a review of the law applicable to Section 1927, each of these alleged bases for imposing Section 1927 sanctions will be discussed in turn.

II. LEGAL AUTHORITY

28 U.S.C. § 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. The statute is aimed at addressing acts by attorneys that unreasonably extend court proceedings. Zuk v. Eastern Pa. Psychiatric Inst., 103 F.3d 294, 297 (3d Cir.1996) (“Although a trial court has broad discretion in managing litigation before it, the principal purpose of imposing sanctions under 28 U.S.C. § 1927 is the deterrence of intentional and unnecessary delay in the proceedings.”). The statute does not apply to acts that occurred prior to the filing of a lawsuit, such as a “failure to make a reasonable inquiry into the facts and law before filing,” nor does it authorize imposing sanctions on a client. Zuk, 103 F.3d at 297.

Moreover, Section 1927 sanctions require a finding of willful bad faith, not merely a showing of objectively unreasonable conduct. Baker v. Cerberus, Ltd., 764 F.2d 204, 208-09 (3d Cir.1985) (“conduct must be of an egregious nature, stamped by bad faith that is violative of recognized standards in the conduct of litigation”). See also Grider v. Keystone Health Plan Central, Inc., 580 F.3d 119, 142 (3d Cir.2009) (“sanctions may not be imposed under § 1927 absent a finding that counsel’s conduct resulted from bad faith, rather than misunderstanding, bad judgment, or well-intentioned zeal;” quoting LaSalle National Bank v. First Connecticut Holding Group, L.L.C. XXIII, 287 F.3d 279 (3d Cir.2002)).

Sanctions under Section 1927 are appropriate for attorneys who engage in “serious and studied disregard for the orderly process of justice;” Ford v. Temple Hosp., 790 F.2d 342, 347 (3d Cir.1986); and not simply those who bring weak cases:

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Lerner Master Fund, LLC v. Paige (In re Paige)
564 B.R. 806 (M.D. Pennsylvania, 2016)

Cite This Page — Counsel Stack

Bluebook (online)
859 F. Supp. 2d 722, 2012 U.S. Dist. LEXIS 18192, 2012 WL 511490, Counsel Stack Legal Research, https://law.counselstack.com/opinion/trustee-of-the-bankruptcy-estate-v-dowson-holding-co-vid-2012.