Taylor v. Autozone, Inc.

Filing 306

ORDER that plaintiffs' counsel shall pay $5,985.00 as a sanction to the clerk of this court no later than ten days after the entry of this order. Signed by Judge Frederick J Martone on 9/13/12. (TLJ)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Michael L. Taylor; Dilawar Khan; Volena)
Glover-Hale; Manuel Montoya, on behalf)
of themselves and other persons similarly)
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situated,
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Plaintiffs,
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vs.
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AutoZone Inc., a Tennessee corporation;)
AutoZone Inc., a Nevada corporation;)
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AutoZoners LLC,
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Defendants.
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CV 10-08125-PCT-FJM
ORDER

The court has before it plaintiffs' response to our order to show cause (doc. 302),
defendants' opposition (doc. 304), and plaintiffs' reply (doc. 305).
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After judgment was entered in favor of defendants in this Fair Labor Standards Act

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collective action, the Clerk taxed costs against plaintiffs in the amount of $66,599.02 (doc.

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291). Plaintiffs moved to have the costs set aside. Attached to the motion were declarations

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from each of the four named plaintiffs describing each plaintiff's limited financial means.

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Plaintiffs stated that if a large judgment of costs was enforced against them, each "would be

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forced to seek bankruptcy protection," and each stated that a judgment would have a chilling

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effect on future litigation "because the risk of losing would be financially disastrous." (docs.

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284, 285, 286, 287). Defendants argued in opposition that whether plaintiffs themselves

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were responsible for paying the costs was a legally relevant factor. Before deciding the

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motion, we ordered plaintiffs, who had not provided this information, to confirm who was

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ultimately responsible for paying the costs. We then learned that it was plaintiffs' counsel,

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not plaintiffs, who would foot the bill.

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In our order denying plaintiffs' motion to set aside costs, we expressed "great concern.

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. . that plaintiffs' arguments and original declarations, which strongly implied that plaintiffs

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would be responsible for payment of costs, were misleading to the Court" (doc. 300 at 4).

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Accordingly, we ordered plaintiffs' counsel to show cause why sanctions should not be levied

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against them.

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II

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Plaintiffs' counsel apologizes for the misleading impression created by what they

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characterize as "poor drafting." Pls.' Resp. to Order to Show Cause ("OSC") at 2. They

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argue that sanctions are unwarranted because they proffered a good faith legal argument for

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setting aside the award of costs. Specifically, they argued that who ultimately paid an award

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of costs was legally irrelevant under their interpretation of Ninth Circuit precedent. Thus,

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plaintiffs "did not focus" on who was ultimately responsible for payment. Id.

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Our concern, however, stems not from plaintiffs' legal theory, but from the misleading

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factual impression that the named plaintiffs would personally be responsible for paying costs.

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Plaintiffs focused their argument on two factors the Ninth Circuit considers when

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determining whether to set aside a cost award: financial resources and the chilling effect on

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future litigation. They accompanied these arguments with declarations from the named

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plaintiffs predicting that they would have to file personal bankruptcy should this judgment

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of costs be taxed. Importantly, the declarations did not state that these plaintiffs would not

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have to shoulder the burden of the cost judgment. To the contrary, they created the

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impression that the judgment would be personally levied against the four named plaintiffs.

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For example, Volena Glover-Hale submitted a declaration stating:

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I have limited financial means. I have a modest income and little or no
savings. There is no way I could pay a judgment of several thousand dollars.
If defendants obtained and enforced a large judgment against me, I would be
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forced to seek bankruptcy protection.

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If big companies like AutoZone could punish workers who bring legitimate
claims. . . by sticking them with tens of thousands of dollars in costs, it would
have a chilling effect. Regular people like me would never try to enforce their
rights because the risk of losing would be financially disastrous.

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Glover-Hale Decl. ¶¶ 3-4 (emphasis added) (doc. 284). Combined with the plaintiffs' legal
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argument emphasizing financial resources and the chilling effect, these factual submissions
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created an almost inescapable impression that plaintiffs would be directly responsible for
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costs.
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Plaintiffs argue that they believed discussing who was responsible for costs was
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unnecessary because of their "openly expressed" legal position that this factor was irrelevant,
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and that this legal position explains why plaintiffs did not affirmatively state to the Court that
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counsel would cover the costs. Pls.' Resp. to OSC at 6-7. Defendants, however, directly
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argued in opposing the motion to set aside costs that in their view, whether the costs
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ultimately came out of plaintiffs' pockets was a relevant consideration. They argued that
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[d]espite their ability to do so, Plaintiffs failed to submit the fee agreement to
show who is ultimately responsible for the payment of costs. Nor have
Plaintiffs made a simple statement regarding the nature of the fee agreement.
Without such a showing, the Court and AutoZone are left to assume that
Plaintiffs' counsel may share some, if not all, responsibility to pay the
$66,599.02 in costs.

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Resp. to Mot. to Set Aside Costs at 4 (doc. 293). Although plaintiffs continued to argue that

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whether counsel might pay costs was legally irrelevant in reply, they failed to notify this

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Court that counsel would pay the cost judgment. Worse, plaintiffs made additional

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statements in their reply brief implying that they would be personally responsible for costs,

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despite their knowledge that this was false. For example, plaintiffs opened their reply by

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arguing that

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AutoZone's response to the motion asks this Court to avoid the actual issue of
whether or not to burden four average individuals in today's precarious
economy with $66,599.02 in costs and instead to focus on a purely theoretical
division of the costs across the 1400 opt-in class members or on the collateral
argument that the Plaintiffs' lawyers may pay the costs.

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Reply to Mot. to Set Aside Costs at 2 (emphasis added) (doc. 294). And under a heading

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titled "The Cost Judgment Won't be Entered Against the Opt-ins or Counsel, id. at 3

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(emphasis added), plaintiffs argued that "AutoZone’s suggestion that the Court spread the

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costs over the 1400 Opt-ins or assume that Plaintiffs' counsel will be paying them is sleight

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of hand." Id. (emphasis added). But when we ordered plaintiffs to affirmatively state who

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was responsible for costs, we learned that "burden[ing] four average individuals in today's

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precarious economy with $66,599.02 in costs," and forcing them into bankruptcy, was not

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an "actual issue."

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representations on poor drafting. Contrary to their argument, it appears that plaintiffs'

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counsel were the ones engaging in sleight of hand.

See id. at 2.

Plaintiffs' counsel cannot blame these repeated

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Plaintiffs' counsel could have been honest with this Court that they were responsible

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for paying the costs. Indeed, doing so would not have undermined their legal argument that

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who ultimately paid was legally irrelevant. But plaintiffs' counsel chose instead to submit

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declarations that they admit gave the misleading impression that plaintiffs were responsible

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for paying costs. Even after defendants argued that courts have denied motions to set aside

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costs in part because counsel was responsible for payment, plaintiffs' counsel still did not

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acknowledge that they were covering the costs. Instead, they continued to make affirmative

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statements suggesting that plaintiffs would be personally responsible for costs. Plaintiffs'

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counsel explain that they simply assumed that, despite their arguments, we would guess that

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counsel would foot the bill based on the prevalence of this kind of fee arrangement in class

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action cases. But it is not this Court's job to assume facts. It is counsel's job, and indeed

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their duty as officers of the court, to ensure that the facts they place before us are accurate

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and not misleading. This plaintiffs' counsel did not do.

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Rule 11(b)(3), Fed. R. Civ. P. requires that factual contentions submitted to the court

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"have evidentiary support." Moreover, filings should not be presented for "any improper

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purpose." Id. 11(b)(1). Here, plaintiffs' counsel repeatedly made statements and submitted

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declarations strongly implying that plaintiffs would be responsible for payment of costs.

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These statements were not supported by the fee agreements, and counsel obfuscated the true

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facts, even after these were challenged by defendants. Accordingly, we find that sanctions

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under Rule 11, Fed. R. Civ. P. are appropriate.1

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Court-initiated monetary sanctions must be paid as a penalty into court. Barber v.

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Miller, 146 F.3d 707, 711 (9th Cir. 1998). Defendants submitted documentation showing

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that they incurred $5,985.00 in fees when opposing plaintiffs' motion to set aside costs. We

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conclude that this is an appropriate penalty.

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Accordingly, IT IS ORDERED that plaintiffs' counsel shall pay $5,985.00 as a
sanction to the clerk of this court no later than ten days after the entry of this order.
DATED this 13th day of September, 2012.

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The filings also raise questions regarding plaintiffs' counsel's adherence to the
Arizona Rules of Professional Conduct. Under ER 3.3(a)(1) of the Arizona Rules of
Professional Conduct, a lawyer has a duty of candor to the tribunal. He cannot knowingly
"make a false statement of fact or law to a tribunal," or fail to correct a false statement of
material fact previously made to the tribunal.
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