Walter v. Fiorenzo

840 F.2d 427, 1988 WL 12134
CourtCourt of Appeals for the Seventh Circuit
DecidedFebruary 8, 1988
DocketNo. 87-1386
StatusPublished
Cited by115 cases

This text of 840 F.2d 427 (Walter v. Fiorenzo) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Walter v. Fiorenzo, 840 F.2d 427, 1988 WL 12134 (7th Cir. 1988).

Opinion

KANNE, Circuit Judge.

Nearly four years after instituting this action plaintiffs-appellants’ counsel, Esler, Stephens & Buckley, Esler & Schneider, and Jacobs, Burns, Sugarman & Orlove (collectively “plaintiffs’ counsel” or “counsel”) were unable to articulate a factual basis for plaintiffs’ claim against defendant-appellee, Oscar Fiorenzo (“Fiorenzo”). During that four-year period, three other defendants, in virtually the same position as Fiorenzo, obtained summary judgments in their favor. The last defendant had requested, but was denied sanctions. Ultimately, Fiorenzo followed suit and sought summary judgment alleging he was not involved with the sale of the securities in question. Plaintiffs’ counsel — after a delay for additional discovery — did not file any affidavits opposing Fiorenzo’s summary judgment motion. The district court granted Fiorenzo’s motion for summary judgment and awarded attorneys’ fees to Fiorenzo for the cost of the entire case, chargeable to plaintiffs’ counsel. Counsel then sought reconsideration of both the motion for summary judgment and the award of fees. In support of the motion to reconsider, plaintiffs’ counsel introduced an affidavit purporting to tie Fiorenzo to the fraudulent security sales. Although not obligated to do so, the district court vacated summary judgment and reconsidered plaintiffs' complaint in light of the newly filed affidavit. The court did not, however, vacate its previous order imposing attorneys’ fees. Upon reconsideration, the court ruled that the facts in the affidavit did not support plaintiffs’ claims that Fior-enzo participated or was a substantial factor in the sale of the securities. However, rather than reinstating its order granting summary judgment in favor of Fiorenzo, the court dismissed the complaint without prejudice for failure to plead securities fraud with particularity. With respect to its previous award of fees, the court indicated that the disruption caused by the belated affidavit would, in any event, result in assessments against plaintiffs’ counsel. However, the court gave counsel the opportunity to avoid all other sanctions previously imposed by either alleging sufficient facts to sustain a claim against Fiorenzo under the theories contained in the complaint or by explaining under what other theory Fiorenzo might have been held liable given the facts in the complaint. Plaintiffs’ counsel neither refiled against Fiorenzo nor proffered any theory under which Fiorenzo could have been sued in the first place. Accordingly, the court’s order, imposing sanctions against plaintiffs’ counsel for the costs of the entire suit, remained in effect. This appeal followed.

We affirm the imposition of sanctions against counsel under 28 U.S.C. § 1927 not only for needlessly multiplying these proceedings but for counsels’ repeated inability to articulate a viable claim against Fior-enzo after nearly four years of discovery and after the dismissal of three other similarly situated defendants.

I.

On October 19,1982, William Walter and thirty-nine other plaintiffs filed a five-count complaint against Black Diamond, Inc., Midas Truck Body, Inc., Midas International [429]*429Corporation, and several other corporate and individual defendants, including Oscar Fiorenzo. Plaintiffs claimed that the defendants violated federal and Oregon state securities regulations and that all defendants, including Fiorenzo, participated in the sale of “trailer investment contracts” using “the means and the instrumentalities of interstate commerce in connection with the offer and the sale of these unregistered securities to the plaintiffs_” The unregistered investment contracts were allegedly sold by REL Leasing, Inc. (“REL”) and Richard Leader (“Leader”),1 but the individual defendants purportedly participated in the sale of the trailer investments by disseminating false or misleading information. The complaint did not specify how or what information each individual defendant disseminated in connection with the sale of the “investment contracts”. Importantly, the allegedly fraudulent sales of trailer investment contracts began in or before 1981.

On September 7, 1983, two defendants, Leonard Smith and Lennard Carlson, filed motions for summary judgment and supporting affidavits, arguing that they could not possibly have participated in the pre-1982 sale of REL investment contracts since they did not become directors of REL Leasing, Inc., until early 1982.

In response to a court order directing them to conduct the necessary discovery to answer Smith’s and Carlson’s motions for summary judgment, plaintiffs filed a number of document production requests and took the depositions of both Smith and Carlson. Two days before their responses to defendants’ motions were due, plaintiffs filed a request for an extension of time. The district court granted the request and gave plaintiffs until March 15, 1984 to respond. When no response was filed on that date, defendants Carlson and Smith renewed their motions for summary judgment. On June 6, 1984, the court granted their unopposed motions after plaintiffs admitted they had insufficient facts upon which to base claims against Smith and Carlson.

On February 27, 1985, another defendant, Joseph A. Roberto, also filed a motion for summary judgment and requested that sanctions be imposed against plaintiffs for naming him in the complaint. Like Carlson and Smith, Roberto filed an affidavit explaining that he became an employee of REL in March, 1982, but was never associated with REL as a director, shareholder, or controlling person and therefore could not have participated in the sale of trailer investment contracts beginning in or before 1981. Roberto claimed he made these facts known to plaintiffs’ counsel as early as March, 1983, but that counsel nevertheless refused to dismiss him from this action. Roberto further alleged that because counsel knew, before instituting plaintiffs’ suit (or at a minimum, shortly thereafter), that Roberto could not have been involved in the sale of unregistered securities, counsels’ failure to dismiss him was vexatious and violated Fed.R.Civ.P. 11. On February 27, 1985, the district court granted Roberto’s uncontested motion for summary judgment but did not impose sanctions.

Less than one month later, on March 6, 1985, Fiorenzo filed his motion for summary judgment and request for attorneys’ fees. Like the other individual defendants, Fiorenzo filed an affidavit stating he was not a director of REL Leasing. The affidavit also stated that Fiorenzo neither participated in the business of REL Leasing nor in the sale of trailer investment contracts. Fiorenzo's only connection with REL arose in January, 1982, when he became a 3 percent shareholder of REL. Like the others, Fiorenzo argued he could not have participated in the sale of investment securities by REL beginning in or before 1981. Fiorenzo also requested that plaintiffs be sanctioned as a “pre-filing inquiry into the facts or any post-filing discovery would have revealed that Mr. Fiorenzo should not have been sued.”

Plaintiffs were given until March 20, 1985, to respond to Fiorenzo’s motion. On that day, one of the attorneys for plaintiff, Kim T. Buckley, filed an affidavit stating that further discovery would be necessary [430]*430to file an adequate response to Fiorenzo’s motion.

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Cite This Page — Counsel Stack

Bluebook (online)
840 F.2d 427, 1988 WL 12134, Counsel Stack Legal Research, https://law.counselstack.com/opinion/walter-v-fiorenzo-ca7-1988.