Exe et al v. Fleetwood RV, Inc.

Filing 246

OPINION AND ORDER: DENYING 179 MOTION for Sanctions in the Form of Dismissal with prejudice by Defendant Fleetwood RV Inc. Signed by Judge Theresa L Springmann on 1/26/2016. (lhc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
RICHARD D. EXE and
DONA EXE,

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Plaintiffs,
v.
FLEETWOOD RV, INC.,
Defendant.

CAUSE NO.: 1:11-CV-70-TLS

OPINION AND ORDER
This matter is before the Court on a Motion for the Entry of Attorney’s Fees as Sanctions
[ECF No. 179] filed by the Defendant on February 22, 2015. For the reasons stated in this
Opinion and Order, the Motion is denied.

BACKGROUND
On October 20, 2010, the Plaintiffs filed a complaint alleging that the Defendant
breached a warranty in violation of the Magnuson-Moss Warrranty Act, 15 U.S.C. § 2301, in
connection with the sale of a motor home. Following a transfer from the Eastern District of
Wisconsin, this matter was assigned to Judge Joseph S. Van Bokkelen on February 24, 2011, and
then re-assigned to this Court on June 12, 2014.1 The case eventually proceeded to a jury trial
from April 21–24, 2015. The jury rendered a verdict in favor of the Defendant.
The Defendant’s Motion for Sanctions [ECF No. 179]—the only motion remaining in

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Prior to its re-assignment, the parties engaged in lengthy discovery and contentious motions
practice, including the Plaintiffs’ Motion for Sanctions Based on Spoliation of Evidence [ECF No. 73],
which was filed on July 25, 2012, and denied on September 30, 2013 [ECF No. 153].

this case—presents issues stemming from a failed pre-trial mediation that occurred on August
10, 2011. At the conclusion of mediation, Attorney Paul Petticrew (the mediator) imposed a
$500 mediation fee for each party. Pursuant to Rule 2.6 of the Indiana Rules of Alternative
Dispute Resolution (ADR), the mediation fee was due 30 days after the close of mediation. On
July 24, 2014, the Court conducted a telephone status/scheduling conference, at which the Court
was informed by Attorney Bruce S. Terlep (counsel for the Defendant) that the Plaintiffs had not
paid the mediation fee.
Over six months later, on February 16, 2015, the Defendant filed a Motion to Compel
and for Sanctions [ECF No. 176]—purportedly at the request of Attorney Petticrew—because
the Plaintiffs continued to withhold payment of the mediation fee. Attached to the Motion is an
invoice for the mediation fee, dated August 10, 2011; and a letter from Attorney Petticrew to
Attorney Terlep, dated February 11, 2015. In the Motion, the Defendant asked the Court to enter
an order compelling the Plaintiffs and/or their counsel, Attorney Lawrence A. Towers, to pay the
mediation fee; and to enter “any other sanction” the Court deems appropriate. (Mot. to Compel
3.)
On February 18, 2015, the Plaintiffs filed a Response [ECF No. 178], wherein they
affirmed their opposition to paying the $500 fee because of Attorney Petticrew’s “clear bias in
favor of [the Defendant].” (Pl.’s Resp. 4.) The Response included specific references and
descriptions of the parties’ statements and conduct during the course of mediation, including
statements allegedly made by the mediator. Attached to the Response is an Affidavit from
Attorney Towers, and a letter from Attorney Towers to the mediator, dated April 16, 2013.
Similar to the Response, the letter contains specific information related to the parties’ statements

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and conduct during the mediation, along with accusations made by Attorney Towers as to the
mediator’s partiality toward the Defendant.
On February 22, 2015, the Defendant filed a Motion to Dismiss the Plaintiffs’ Case, With
Prejudice, and for the Entry of Attorney’s Fees as Sanctions [ECF No. 179], arguing that
sanctions in the form of dismissal and/or attorney’s fees is appropriate because the Plaintiffs,
through their Response [ECF No. 178], disclosed confidential information related to the
mediation. The Defendant also argued that the Plaintiffs, through their Response, “besmirch[ed]
the integrity of opposing counsel . . . [and the mediator].” (Def.’s Mot. 14.) The Plaintiffs filed a
Response [ECF No. 180] on March 1, 2015; and the Defendant filed Replies [ECF Nos. 181,
189] on March 3, 2015, and March 11, 2015. The Court withheld ruling on the Defendant’s
Motion for Sanctions pending the resolution of a jury trial.
Following trial, the Plaintiffs filed a Notice [ECF No. 233] on May 5, 2015, indicating
that they had satisfied the Defendant’s bill of costs by submitting a check in the amount of
$14,363.62. The Plaintiffs also indicated that they submitted to the mediator a check in the
amount of $650 in full satisfaction of the mediation fee, as represented by the mediator.
However, on May 11, 2015, the Defendant filed a Motion for a Hearing [ECF No. 234] on the
Defendant’s Motion for Sanctions [ECF No. 179]. In lieu of an in-person hearing, the Court
conducted a telephone conference with the parties on July 23, 2015. After receiving arguments
from each party, the Court ordered the Defendant to file a fee application within 30 days, and the
Plaintiffs to respond to the fee application within 15 days of its filing.
On August 21, 2015, the Defendant filed a Supplemental Memorandum in Support of its
Motion for Sanctions [ECF No. 243], along with fee application in the form of detailed time

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entries and a sworn affidavit from Attorney Terlep. The Defendant also attached an e-mail from
Attorney Towers to Attorney Terlep, dated May 3, 2015. Through these submissions, the
Defendant requests attorney’s fees in the amount of $66,481.00, which consists of all attorney’s
fees accrued by the Defendant in this matter from February 16, 2015 (the date the Defendant
filed the Motion to Compel and for Sanctions [ECF No. 176]), to August 21, 2015.2 On August
28, 2015, the Plaintiffs filed a Response [ECF No. 244]; and on August 31, 2015, the Defendant
filed a Reply [ECF No. 245]. The Defendant’s Motions for Sanctions [ECF Nos. 176,
179]—which have been consolidated into a single motion [ECF No. 179]—are now fully briefed
and ripe for ruling.

ANALYSIS
Pursuant to Federal Rules of Civil Procedure 16(f)(1)(C) and 37(b)(2), a court may
impose sanctions where a party has failed to obey a scheduling or pretrial order. Moreover, a
court may exercise its “inherent power to fashion an appropriate sanction for conduct which
abuses the judicial process.” Salmeron v. Enter. Recovery Sys., Inc., 579 F.3d 787, 793 (7th Cir.
2009) (internal quotation marks and citation omitted); see also Chambers v. NASCO, Inc., 501
U.S. 32, 45–46 (1991) (“[A] court may assess attorney’s fees [under its inherent powers] when a
party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons” or has exhibited
“willful disobedience of a court order.”) (internal quotation marks and citation omitted).
Ultimately, the imposition of sanctions, as well as the nature of such sanctions, is a matter

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The Defendant originally requested $67,801.00, but this request was subsequently lowered due
to a clerical error.

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committed to the court’s discretion. G. Heileman Brewing Co. v. Joseph Oat Corp., 871 F.2d
648, 655 (7th Cir. 1989); see also Jones v. Winnepesaukee Realty, 990 F.2d 1, 5 (1st Cir. 1993)
(“[A] district court is necessarily vested with considerable discretion in deciding whether to
impose sanctions . . . and, if so, in determining what form the sanctions should take.”).
The Defendant argues that sanctions in the form of attorney’s fees are appropriate
primarily because the Plaintiffs, through their Response to the Defendant’s Motion to Compel
and for Sanctions, disclosed confidential information related to the parties’ mediation.
Specifically, the Defendant asserts that the Plaintiffs violated Indiana ADR Rule 2.11, which,
pursuant to N.D. Ind. L.R. 16-6(c), applies to all ADR processes unless otherwise ordered by the
court. Rule 2.11 provides in relevant part:
Confidentiality . . . Mediation shall be regarded as settlement negotiations as
governed by Ind. Evidence Rule 408 . . . Mediation sessions shall be closed to all
persons other than the parties of record, their legal representatives, and other
invited persons. Mediators shall not be subject to process requiring the disclosure
of any matter discussed during the mediation, but rather, such matter shall be
considered confidential and privileged in nature. The confidentiality requirement
may not be waived by the parties, and an objection to the obtaining of testimony or
physical evidence from mediation may be made by any party or by the mediators.
Indiana ADR Rule 2.11; see also Marchal v. Craig, 681 N.E.2d 1160, 1163 (Ind. Ct. App. 1997)
(noting that “[a]ll matters discussed in mediation are strictly confidential and privileged.”)
(citation omitted).
According to the Defendant, because ADR Rule 2.11 applied to the parties’ court-ordered
mediation, and the Plaintiffs committed a violation by disclosing confidential information related
to the mediation, the Plaintiffs have, in essence, violated a pretrial order. Therefore, the
Defendant argues that the Court, in addition to its inherent authority, is authorized to impose
sanctions under Federal Rules of Civil Procedure 16(f)(1)(C) and 37(b)(2). See also Indiana
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ADR Rule 2.10 (“Upon motion by either party and hearing, the court may impose sanctions
against any attorney, or party representative who fails to comply with these mediation rules,
limited to assessment of mediation costs and/or attorney fees relevant to the process.”).3
For support, the Defendant points to Salmeron, 579 F.3d 787, and Hand v. Walnut Valley
Sailing Club, 475 Fed. App’x. 277 (10th Cir. 2012) (unpublished)—each of which involve a
district court’s order of sanctions in the form of dismissal. In Salmeron, sanctions were imposed
after the district court found that an attorney acted willfully when he violated an oral agreement
and leaked a confidential document obtained through discovery to three separate sources (i.e., his
client, another lawyer, and a newspaper reporter). Id. at 794.4 The court noted that, prior to the
leak, the attorney engaged in a “‘virtually unbroken pattern of dilatory and irresponsible
conduct,’” which included his failure to meet filing deadlines and appear at status conferences.
Id. at 789 (quoting U.S. ex rel. Salmeron v. Enter. Recovery Sys., No. 05 C 4453, 2008 WL
3876135, at *1 (N.D. Ill. Aug. 18, 2008)). The court’s order of sanctions was also preceded by a
“final warning” to the attorney that future misconduct would not be tolerated. Id.

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The Defendant also cites the Court’s authority to impose sanctions under 28 U.S.C. § 1927,
which states that “[a]ny 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.” In other words, “‘[i]f a lawyer pursues a path that a
reasonably careful attorney would have known, after appropriate inquiry, to be unsound, the conduct is
objectively unreasonable and vexatious.’” Kapco Mfg. Co. v. C & O Enterps., Inc., 886 F.2d 1485, 1491
(7th Cir. 1989) (quoting In re TCI, 769 F.2d 441, 445 (7th Cir. 1985)); see also Bender v. Freed, 436 F.3d
747, 751 (7th Cir. 2006) (“To be liable under section 1927, counsel must have engaged in serious and
studied disregard for the orderly process of justice.”) (internal quotation marks and citation omitted).
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Following the leak, the confidential document was posted on Wikileaks.org, “a multi-national
media organization and associated library” that “specializes in the analysis and publication of large
datasets of censored or otherwise restricted official materials involving war, spying and corruption.”
https://wikileaks.org/What-is-Wikileaks.html (last visited Jan. 26, 2016).

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Similarly, in Hand, sanctions were imposed after the district court found that the plaintiff
intentionally disclosed “extensive and prejudicial details” related to the parties’ mediation
(including the mediator’s statements and the defendant’s settlement offer) to nearly 50
individuals—several of whom were potential witnesses at trial. 475 Fed. App’x. at 279. The
district court stated that sanctions were justified because the plaintiff—who testified in a
deposition that he “absolutely” disclosed the confidential information because he believed the
recipients “had a right to know,” id. at 278—“demonstrated complete disrespect for the
confidential mediation process.” Id. at 279 (quoting Hand v. Walnut Valley Sailing Club, No.
10–1296–SAC, 2011 WL3102491, at *4 (D. Kan. July 20, 2011)); see also Hand, 2011 WL
3102491 at *1 (noting that the plaintiff “essentially provid[ed] his blow-by blow description of
everything that happened during the mediation”).
Contrary to the Defendant’s assertion, this case is readily distinguishable from Salmeron
and Hand, which both involved confidential disclosures that were flagrant, extensive,
intentionally directed at third-parties outside of the litigation, and clearly intended to prejudice
the opposing party. In contrast, this case involves confidential disclosures—by way of an
electronic filing to this Court—that were relatively limited in both content and motives. See
Attorney Towers’s Aff. 1–2, ECF No. 244-1 (testifying that the only purpose for the disclosures
was to defend against the Defendants’ Motion to Compel and for Sanctions [ECF No. 176]).
While such disclosures (and the mediation-related tactics of Plaintiffs’ counsel) may accurately
be described as amateurish or indecorous, they do not, in the Court’s view, reach the level of
being sanctionable. See In re Young, 253 F.3d 926, 927 (7th Cir. 2001) (“Although settlement
negotiations are of course confidential for most purposes, their contents may be revealed insofar

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as necessary for the decision of an issue of alleged misconduct in them.”) (citing Pueblo of San
Ildefonso v. Ridlon, 90 F.3d 423, 424 n.1 (10th Cir. 1996) (finding no violation of the rule of
confidentiality when an attorney disclosed certain information regarding the content of
settlement negotiations because “the disclosure was necessary in order to respond to [the court’s]
order to show cause.”)); Estate of Sims ex rel. Sims v. Cnty. of Bureau, 506 F.3d 509 (7th Cir.
2007) (declining to impose monetary sanctions for plaintiffs’ counsel’s alleged disclosure of
discussions that occurred in the course of settlement proceedings); but cf. May v. Gale Tschuor
Co., No. 2:08 CV 172, 2009 WL 3763161, at *2-3 (N.D. Ind. Nov. 6, 2009) (imposing monetary
sanctions because plaintiff’s counsel failed to appear at a court-ordered mediation and had a
history of failing to meet deadlines); In Re Hein, 341 B.R. 903, 906 (N.D. Ind. 2006) (finding
that a party’s failure to attend a pre-trial conference that could have resolved the issue created
unnecessary costs and was subject to sanction).
Moreover, the Court notes that since the filing of the Defendant’s pre-trial Motion to
Dismiss the Plaintiffs’ Case, With Prejudice, and for the Entry of Attorney’s Fees as Sanctions
[ECF No. 179]—which was preceded by nearly five years of protracted and contentious
litigation—the Defendant has not only prevailed at a jury trial, but has recovered costs from the
Plaintiffs in the amount of $14,363.62. In conjunction with their timely payment of costs, the
Plaintiffs have also submitted to the mediator a check in the amount of $650 in full satisfaction
of the mediation fee. Given these actions, coupled with the extensive public record made in this
case regarding the conduct of Plaintiffs’ counsel, the Court views the Defendant’s requested
relief as not only excessive given the circumstances of this case, but also as having been
rendered essentially moot.

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In sum, the Court sees no wisdom in exercising its discretionary authority to impose
sanctions in this matter.

CONCLUSION
For the foregoing reasons, the Court DENIES the Defendant’s Motion for the Entry of
Attorney’s Fees as Sanctions [ECF No. 179].
SO ORDERED on January 26, 2016.
s/ Theresa L. Springmann
THERESA L. SPRINGMANN
UNITED STATES DISTRICT COURT

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