Tony M. Graham v. VCA Antech, Inc. et al

Filing 128

MINUTES OF Motion Hearing held before Judge Christina A. Snyder: The Court RESERVES JUDGMENT on defendants' motion for sanctions against plaintiffs' counsel 125 until the resolution of this action. Court Reporter: Laura Elias. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV14-8614-CAS(JCx)

Title

TONY M. GRAHAM v. VCA ANTECH, INC., ET AL.

Present: The Honorable

Date

‘O’
March 21, 2016

CHRISTINA A. SNYDER, U.S. DISTRICT JUDGE

CONNIE LEE
Deputy Clerk

LAURA ELIAS
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Richard Toon, Jr.
Robert Methvin, Jr.

John Karaczynski

Proceedings:

I.

DEFENDANTS’ MOTION FOR SANCTIONS AGAINST
PLAINTIFFS’ COUNSEL PURSUANT TO 28 U.S.C. § 1927
AND THE COURT’S INHERENT AUTHORITY (Dkt. 125, filed
February 18, 2016)

INTRODUCTION

On August 14, 2015, plaintiffs Tony M. Graham and Elizabeth P. Brockwell
(collectively, “plaintiffs”) filed the operative third amended complaint (“TAC”) in this
putative class action against defendants VCA, Inc. and VCA Animal Hospitals, Inc.
(collectively, “defendants” or “VCA”). Dkt. 82 (TAC). In brief, plaintiffs allege that
defendants, who own and operate over six hundred veterinary facilities in forty-one
states, “engaged in a scheme of charging bogus fees to illegally upcharge” their
customers. TAC at ¶¶ 7, 15. Specifically, plaintiffs allege that defendants routinely
imposed improper “Biohazard Waste Management” fees in a “guise that is designed . . .
to imply that the surcharges are government mandated or required.” Id. at ¶ 17.1
On February 18, 2016, defendants filed a motion for sanctions against plaintiffs’
attorneys pursuant to 28 U.S.C. § 1927 and the Court’s inherent power.2 Dkt. 125
1

On February 12, 2016, plaintiffs filed a motion for class certification. Dkt. 115.
The motion for class certification is currently pending before the Court and is set for
hearing on August 8, 2016.
2

Defendants do not seek sanctions pursuant to Federal Rule of Civil Procedure

11(c).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

CV14-8614-CAS(JCx)

March 21, 2016

Title

TONY M. GRAHAM v. VCA ANTECH, INC., ET AL.

(“Motion”). On February 29, 2016, plaintiffs filed an opposition. Dkt. 126 (“Opp’n”).
On March 7, 2016, defendants filed a reply. Dkt. 127 (“Reply”). On March 21, 2016, the
Court held oral argument on defendants’ motion. Having carefully considered the
parties’ arguments, the Court finds and concludes as follows.
II.

LEGAL STANDARD
A.

Sanctions Pursuant to 28 U.S.C. § 1927 (“Section 1927”)

28 U.S.C. § 1927 provides that any “attorney . . . 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. “[D]amages under section 1927 are
appropriate where there is no obvious violation of the technical rules, but where, within
the rules, the proceeding is conducted in bad faith for the purposes of delay or increasing
costs.” Matter of Yagman, 796 F.2d 1165, 1187 (9th Cir. 1986). The statute “applies
only to unnecessary filings and tactics once a lawsuit has begun.” In re Keegan Mgmt.
Co., Sec. Litig., 78 F.3d 431, 435 (9th Cir. 1996).
Before they can be imposed, Section 1927 sanctions “must be supported by a
finding of subjective bad faith.” Id. at 436 (quoting New Alaska Development Corp. v.
Guetschow, 869 F.2d 1298, 1306 (9th Cir. 1989)). Subjective “[b]ad faith is present
when an attorney knowingly or recklessly raises a frivolous argument, or argues a
meritorious claim for the purpose of harassing an opponent.” Id. (quoting Estate of Blas
v. Winkler, 792 F.2d 858, 860 (9th Cir. 1986)). Put differently, “[f]or sanctions to apply
[under Section 1927], if a filing is submitted recklessly, it must be frivolous, while if it is
not frivolous, it must be intended to harass.” Id. “Tactics undertaken with the intent to
increase expenses, or delay, may also support a finding of bad faith.” New Alaska, 869
F.2d at 1306 (internal citations omitted). Indeed, “[e]ven if an attorney’s arguments are
meritorious, his conduct may be sanctionable if in bad faith.” Id. (citation omitted).
The decision to sanction a party under Section 1927 rests in the sound discretion of
the district court. Wages v. I.R.S., 915 F.2d 1230, 1235 (9th Cir. 1990) (noting district
court’s award of sanctions pursuant to Section 1927 is reviewed for abuse of discretion);
see also MGIC Indemnity Corp. v. Moore, 952 F.2d 1120, 1121 (9th Cir. 1991) (holding
district court abused its discretion by awarding Section 1927 sanctions); Trulis v. Barton,
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

CV14-8614-CAS(JCx)

March 21, 2016

Title

TONY M. GRAHAM v. VCA ANTECH, INC., ET AL.

107 F.3d 685, 694 (9th Cir. 1996) (holding district court abused its discretion by not
awarding Section 1927 sanctions where attorney’s conduct––i.e., his “intentional
disregard” of his clients’ “express instructions” to be dismissed from the suit and his
“continued insistence that he represented persons who he was not authorized to
represent”––were “reckless as a matter of law”). Moreover, Section 1927 sanctions must
be tailored to the particular challenged conduct. See, e.g., United States v. Blodgett, 709
F.2d 608, 610-11 (9th Cir. 1983) (“Section 1927 only authorizes the taxing of excess
costs arising from an attorney’s unreasonable and vexatious conduct; it does not authorize
imposition of sanctions in excess of costs reasonably incurred because of such conduct.”).
B.

Sanctions Pursuant to the Court’s Inherent Power

The district courts have “the inherent authority to impose sanctions for bad faith,
which includes a broad range of willful improper conduct.” Fink v. Gomez, 239 F.3d
989, 992 (9th Cir. 2001). Sanctions pursuant to the Court’s inherent authority “are
available for a variety of types of willful actions, including recklessness when combined
with an additional factor such as frivolousness, harassment, or an improper purpose.” Id.
at 994. However, these sanctions are only available “if the court specifically finds bad
faith or conduct tantamount to bad faith.” Id.
“For purposes of imposing sanctions under the inherent power of the court, a
finding of bad faith does not require that the legal and factual basis for the action prove
totally frivolous; where a litigant is substantially motivated by vindictiveness, obduracy,
or mala fides, the assertion of a colorable claim will not bar the assessment of attorney’s
fees.” Id. at 992 (internal quotation marks and citations omitted). A court may assess
attorneys’ fees pursuant to its inherent power when a party has “ ‘acted in bad faith,
vexatiously, wantonly, or for oppressive reasons.’ ” Chambers v. NASCO, Inc., 501 U.S.
32, 45-46 (1991) (quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240,
258-59 (1975)). “Because of their very potency, inherent powers must be exercised with
restraint and discretion.” Id. at 44.
III.

DISCUSSION

The gravamen of defendants’ motion for sanctions is that plaintiffs acted recklessly
or in bad faith by serving a burdensome Joint Stipulation for a Motion to Compel that
raised seventy-eight issues, only to “abandon” seventy-four of those issues a week later,
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

CV14-8614-CAS(JCx)

March 21, 2016

Title

TONY M. GRAHAM v. VCA ANTECH, INC., ET AL.

“at the eleventh hour,” after defendants “had invested substantial time and attorneys’ fees
in preparing Contentions for all seventy-eight issues.” Motion at 1. Defendants
accordingly seek sanctions in the amount of $91,213 to cover attorneys’ fees “incur[red]
unnecessarily” because of plaintiffs’ service of the expansive initial Joint Stipulation, as
well as $31,004 in attorneys’ fees incurred in connection with preparing the instant
motion for sanctions. Id.
Defendants state that on January 4, 2016, they were served with a Local Rule 37-2
Joint Stipulation identifying issues on which plaintiffs sought to compel discovery.
Defendants aver that they took this Joint Stipulation “very seriously” because the
document production and data compilation that plaintiffs were seeking to compel “would
have had a significant adverse impact on VCA’s business.” Id. at 4. Accordingly,
defendants state that they undertook a “time-consuming and expensive project of research
and writing” to prepare a client declaration and many Contentions for their portion of the
Joint Stipulation. Id. at 5. On January 12, 2016––the deadline for VCA to send its
seventy-eight Contentions to plaintiffs––one of plaintiffs’ attorneys informed defendants
that he would be sharing a revised draft of the Joint Stipulation shortly. Dkt. 136, Ex. 35.
Plaintiffs shared the revised draft roughly twelve hours later. Id., at Ex. 37. The revised
draft eliminated ten special interrogatories, forty-six document production requests, and
eighteen additional issues, thereby leaving only four of the original seventy-eight items.
Defendants accordingly contend that plaintiffs were at minimum reckless in
serving a lengthy and contentious Joint Stipulation and then abandoning nearly all of
their requests “even though there had not been any changed circumstances on the major
issues between January 4, 2016, when they served their Joint Stipulation, and January 13,
2016, when they abandoned 74 of their 78 issues.”3 Motion at 10-11. Specifically,

3

Defendants argue that sanctions are especially warranted here because plaintiffs
also served a lengthy Joint Stipulation for a Motion to Compel in September 2015, only
to “unilaterally . . . abandon” it upon receiving in response defendants’ one hundred and
seventy-seven pages of Contentions. Motion at 1-2, 9 (citing Adriana Intl. Corp. v.
Lewis & Co., 913 F.2d 1406, 1411 (9th Cir. 1990) (“In evaluating the propriety of
sanctions, we look at all incidents of a party’s misconduct. A court may consider prior
misconduct when weighing a subsequent sanction motion.”) (internal citations omitted)).
Defendants contend that they were billed approximately 35.4 hours by their attorneys for
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

CV14-8614-CAS(JCx)

March 21, 2016

Title

TONY M. GRAHAM v. VCA ANTECH, INC., ET AL.

defendants first argue that forcing them to prepare Contentions for these ultimatelyabandoned issues constitutes bad faith conduct under the relevant Ninth Circuit standard
for 28 U.S.C. § 1927. Motion at 11 (citing Estate of Blas, 792 F.2d at 860 (“Bad faith is
present when an attorney knowingly or recklessly raises a frivolous argument or argues a
meritorious claim for the purpose of harassing an opponent.”) (citations omitted)).
Second, defendants argue that plaintiffs’ conduct also satisfies an alternative standard
justifying sanctions under Section 1927––i.e., knowledge of a federal rule coupled with
its reckless disregard. Id. (citing B.K.B. v. Maui Police Dep’t, 276 F.3d 1091, 1107 (9th
Cir. 2002) (“[W]e conclude that the district court’s finding of recklessness plus
knowledge was sufficient to justify the imposition of § 1927 sanctions.”)). Finally,
defendants argue that even if the Court finds sanctions under Section 1927 to be
unwarranted, the Court should award sanctions pursuant to its inherent authority. Id. at
12-14.
In their opposition, plaintiffs argue that sanctions are unwarranted for at least the
following reasons: first, because much of VCA’s own conduct throughout the course of
this litigation was improper and required plaintiffs “continually [to] address the numerous
deficiencies in VCA’s discovery responses”; and second, because plaintiffs were justified
in reducing the number of issues in the Joint Stipulation on account of (a) “the parties
continued [efforts] to narrow the issues” between January 4 and January 13, and (b)
defendants’ production (between January 4 and January 13) of information “it had been
withholding for months.” See Opp’n at 1, 11-12. In short, plaintiffs contend that their
decision to “outline[] all of VCA’s discovery deficiencies in the initial draft of the Joint
Stipulation is not evidence of frivolousness, bad faith, harassment or any improper
purpose.” Id. at 13.
In their reply, defendants reject plaintiffs’ arguments as either off-topic or wholly
without merit. According to defendants, only two of the seventy-eight issues in the initial

research and preparation of those Contentions, and that plaintiffs “dropped their
September 2015 motion in its entirety without explanation and without offering to
reimburse VCA for the attorneys’ fees that it had incurred needlessly.” Id. at 2. In
response, plaintiffs argue––and defendants contest this assertion in their reply––that the
parties mutually agreed to “set aside” the September 2015 Joint Stipulation and to resolve
the discovery disputes contained therein without the Court’s intervention. Opp’n at 4.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

CV14-8614-CAS(JCx)

March 21, 2016

Title

TONY M. GRAHAM v. VCA ANTECH, INC., ET AL.

Joint Stipulation were arguably “narrowed” between January 4 and January 13. Reply at
2-3. Furthermore, “at most” five of the issues were impacted by defendants’ additional
document production and interrogatory responses in the week between plaintiffs’ service
and revision of the document. Id. at 3. Thus, defendants insist that sanctions are
appropriate because “withdrawal of the vast majority of [the seventy-eight] items cannot
be explained by either of [p]laintiffs’ two principal arguments”––i.e., plaintiffs’
narrowing of issues or defendants’ document production between January 4 and January
13.
The Court agrees that plaintiffs failed carefully and concisely to designate issues in
their initial Joint Stipulation. Furthermore, the Court finds that plaintiffs’ evidence of
document production and issue “narrowing” do not adequately account for the drastic
changes between plaintiffs’ initial and revised Joint Stipulations. While certainly
plaintiffs’ expansive designation of issues was likely “overkill,” the Court is nonetheless
mindful that plaintiffs’ initial draft was a hurried effort to place defendants on notice of
all potential discovery-related disputes for which plaintiffs may ultimately seek judicial
relief. This draft was narrowed within eight days of its submission, during which time
defendants do not appear to have argued that the draft needed to be paired down.
Accordingly, at this juncture, it is difficult to justify over $91,000 in attorneys’ fees spent
within a single week in these circumstances.4
Therefore, having carefully considered the parties’ arguments and evidence
submitted in support thereof, the Court RESERVES JUDGMENT on the instant motion
until the resolution of this action. In the interim, the parties are admonished to abide by
the Local Rules and are further reminded that the Federal Rules of Civil Procedure are to
be “construed, administered, and employed by . . . the parties to secure the just, speedy,
and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1.

4

As stated supra, defendants are also seeking $31,004 in attorneys’ fees incurred
in connection with preparing the instant motion for sanctions.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV14-8614-CAS(JCx)

Title

TONY M. GRAHAM v. VCA ANTECH, INC., ET AL.

IV.

Date

‘O’
March 21, 2016

CONCLUSION

In accordance with the foregoing, the Court RESERVES JUDGMENT on
defendants’ motion for sanctions.
IT IS SO ORDERED.
00
Initials of Preparer

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CL

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