Smith v. Bradley Pizza, Inc. et al

Filing 107

ORDER denying 74 Motion for Sanctions(Written Opinion) Signed by Magistrate Judge Katherine M. Menendez on 6/4/2018. (BJP)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Scott Smith,

Case No. 0:17-cv-2032-WMW-KMM
Plaintiff,

v.

ORDER

Bradley Pizza, Inc.,
Pamela M. Dahl,
Defendants.

The Plaintiff, Scott Smith, brought a motion in this case to recover expenses
and attorney’s fees incurred in serving Defendant Pamela Dahl. [Smith Mot., ECF
No. 52.] The Court denied Mr. Smith’s motion on January 24, 2018, and denied
without prejudice Ms. Dahl’s own request that she be awarded her own expenses and
fees incurred in responding to Mr. Smith’s motion.1 [Order (Jan. 24, 2018), ECF
No. 72.] The Court determined that before considering the propriety of imposing
sanctions on Mr. Smith and his counsel, Padraigin Browne, Ms. Dahl should file a
formal motion. [Id. at 6–7.] On January 26, 2018, Ms. Dahl filed a formal motion
seeking sanctions against Mr. Smith and Ms. Browne. [Dahl Sanctions Mot., ECF
No. 74.] In her sanctions motion, Ms. Dahl asks the Court to award her the expenses
and attorney’s fees she incurred in responding to Mr. Smith’s motion for recovery of
service expenses and attorney’s fees. [Dahl Mem., ECF No. 77.]
A.

Section 1927 Sanctions

Ms. Dahl first argues that sanctions should be imposed against Mr. Smith,
Ms. Browne, and Browne Law LLC pursuant to 28 U.S.C. § 1927. Ms. Dahl contends

On May 15, 2018, the District Court affirmed the Court’s Order denying
Mr. Smith’s motion for recovery of service expenses and attorney’s fees.

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that the filing of Mr. Smith’s motion to recover service expenses unreasonably and
vexatiously multiplied the proceedings.

Legal Standards
Section 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. The statute authorizes a court to “require counsel to satisfy
personally attorneys’ fees reasonably incurred by an opposing party when counsel’s
conduct multiplies the proceedings in any case unreasonably and vexatiously.” Clark v.
United Parcel Serv., Inc., 460 F.3d 1004, 1011 (8th Cir. 2006) (internal quotations
omitted). “[T]he statute permits sanctions when an attorney’s conduct, viewed
objectively, manifests either intentional or reckless disregard of the attorney’s duties to
the court.” Id. (internal quotations omitted).
As explained by another district court within our Circuit, “‘[b]ehavior is
‘vexatious’ when it is harassing or annoying, regardless of whether it is intended to be
so. Thus, if an attorney’s conduct in multiplying proceedings is unreasonable and
harassing or annoying, sanctions may be imposed under section 1927.’” Sherman v.
Sunsong Am., Inc., No. 804-cv-300, 2007 WL 1310057, at *1 (D. Neb. Mar. 27, 2007)
(quoting Cruz v. Savage, 896 F.2d 626, 632 (1st Cir. 1990)). Relying on precedent from
the Federal Circuit, another court within the District of Minnesota recently explained
that “28 U.S.C. § 1927 implicates a higher level of culpability than Rule 11 sanctions.”
M-I Drilling Fluids UK Ltd. v. Dynamic Air Inc., No. 14-CV-4857 (JRT/HB), 2017 WL
8947185, at *16 (D. Minn. Feb. 3, 2017), report and recommendation adopted, No. 14-cv4857 (JRT/HB), 2017 WL 1193992 (D. Minn. Mar. 30, 2017) (citing Raylon, LLC v.
Complus Data Innovations, Inc., 700 F.3d 1361, 1371 n.6 (Fed. Cir. 2012)).
The Eighth Circuit has cautioned that § 1927 should be construed narrowly to
avoid deterring zealous advocacy by an attorney on behalf of her clients. Lee v. L.B.
Sales, Inc., 177 F.3d 714, 718 (8th Cir. 1999). As such, conduct is not sanctionable
merely because a party raises an issue and does not prevail. Sanctions are not
appropriate where the issues raised “are subject to reasonable dispute.” Misischia v. St.
John’s Mercy Health Sys., 457 F.3d 800, 806 (8th Cir. 2006).
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If a district court imposes sanctions under § 1927, it must make findings and
explain its reasoning. Tenku v. Normandy Bank, 348 F.3d 737, 743 (8th Cir. 2003). “The
decision as to whether to award attorneys’ fees and costs under Section 1927 is within
this Court’s discretion.” Bernstein v. Extendicare Health Servs., Inc., 653 F. Supp. 2d 949,
954 (D. Minn. 2009) (quoting Gundacker v. Unisys Corp., 151 F.3d 842, 849 (8th Cir.
1998)).

Analysis
The Court concludes that it is not appropriate to sanction Ms. Browne under
§ 1927 for pursuing Mr. Smith’s unsuccessful motion to recover service expenses and
attorney’s fees. Most importantly, the Court reaches this conclusion because Ms. Dahl
cites no case where a court has imposed sanctions against an attorney pursuant to
§ 1927 based on the filing of a single unsuccessful and unnecessary motion. Courts
imposing sanctions under this statute are generally faced with much more prolonged
and egregious conduct than Ms. Browne engaged in here. See Books Are Fun, Ltd. v.
Rosebrough, 239 F.R.D. 532, 548–49 (S.D. Iowa 2007) (discussing Eighth Circuit cases
involving egregious conduct where § 1927 sanctions were upheld). Indeed, a recent
case from the District of Minnesota (cited by Ms. Dahl in her brief) suggests that
sanctions should not be awarded under the circumstances presented by this case.
Jahnke v. R.J. Ryan Const., Inc., No. CIV. 13-962 JRT/SER, 2014 WL 4639831, at *10
(D. Minn. Sept. 16, 2014) (“[T]he Court concludes that ECS’ conduct, as described by
RJ Ryan, resulted in the filing of a single motion by RJ Ryan—hardly the type of
vexatious multiplication of proceedings that § 1927 was designed to address.”). In the
absence of more persuasive authority, the Court cannot conclude that § 1927
sanctions are appropriate here, especially because § 1927 must be construed strictly so
that advocates are not deterred from providing their clients with zealous advocacy.
The Court is also not persuaded by Ms. Dahl’s suggestion that Mr. Smith’s
motion for service expenses was retaliatory. Ms. Dahl’s counsel points to a dismissal
and fee motion in another case involving the same attorneys that are representing the
parties here—Davis v. Morris-Walker, Ltd., No. 17-cv-1270 (DSD/FLN), Doc. No. 63
(D. Minn. Dec. 7, 2017). [Dahl Mem. at 5.] Other than the fact that Mr. Smith’s
motion for service expenses was filed later in the same month that the order was
issued in Davis, Ms. Dahl has made no showing to support the assertion that the
motion in this case “appeared retaliatory for, a recent dismissal and fee motion [that]
defendants’ counsel obtained in a related case.” [Dahl Mem. at 5.]
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The Court’s finding that Ms. Dahl has failed to show the motion for service
expenses was filed for an improper purpose is not to say that the Court in any way
condones Ms. Browne’s conduct in this instance. As this Court previously found, and
the District Court has affirmed, Ms. Browne filed the motion to recover service
expenses without demonstrating compliance with Rule 4(d)(1), without having
provided Ms. Dahl’s counsel with proof of the expenses incurred, and without
completing the meet-and-confer process so that the Court’s intervention was
necessary. [Order (Jan. 24, 2018); Order (May 14, 2018), ECF No. 103.] Even if
Ms. Browne is correct in her assertion that noncompliance with Rule 4(d)(1)’s
technical requirements could be the subject of reasonable disagreement [see Pl. Mem.
at 5–12, ECF No. 84], the rush to file the motion to recover service expense before
finishing the meet-and-confer process arguably went beyond the boundaries of
reasonable zealous advocacy. The tenuous legal footing for the motion, the fact that
the motion sought to recover a very modest sum, and the hasty filing of the motion all
permit an inference that the motivation behind the motion was to make the litigation
more expensive for Ms. Dahl in the hopes of extracting a settlement. The Court is not
convinced that is the only inference that can be drawn from the record, but future
submissions under comparable circumstances may alter that calculation. Cf. Steinlage v.
Mayo Clinic Rochester, 235 F.R.D. 668, 673 (D. Minn. 2006) (“The court may infer bad
faith when counsel’s actions are ‘so completely without merit as to require the
conclusion that they must have been undertaken for some improper purpose such as
delay.’”) (quoting United States v. Int'l Bhd. of Teamsters, 948 F.2d 1338, 1345 (2nd Cir.
1991)).
B.

Inherent Power

Ms. Dahl also argues that the Court should impose sanctions on Mr. Smith,
Ms. Browne, and Browne Law LLC using its inherent powers. Ms. Dahl argues that
such sanctions are appropriate because the filing of Mr. Smith’s motion to recover
service expenses abused the judicial process. For similar reasons to those set forth
above, the Court disagrees.
Federal courts have the inherent power to assess attorney’s fees against a party
or attorney as a sanction. Gas Aggregation Servs., Inc. v. Howard Avista Energy, LLC, 458
F.3d 733, 739 (8th Cir. 2006). “[A]n award of attorneys’ fees is permissible under a
court’s inherent powers as long as the person being sanctioned has demonstrated bad
faith.” Willhite v. Collins, 459 F.3d 866, 870 (8th Cir. 2006).
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Ms. Dahl cites Dillon v. Nissan Motor Co., 986 F.2d 263, 267 (8th Cir. 1993), and
Harlan v. Lewis, 982 F.2d 1255, 1260 (8th Cir. 1993), for the proposition that a finding
of bad faith is not required to impose sanctions under the court’s inherent authority.
[Dahl Mem. at 3.] However, Ms. Dahl’s reliance on these cases misplaced. In Harlan,
the court explains that a finding of bad faith is not required for every sanction a
district court may impose. But Harlan did nothing to disturb existing caselaw
indicating that a finding of bad faith is necessary when the court assesses attorney’s
fees against a party or its counsel.2 982 F.2d at 1259–60 (discussing Chambers v.
NASCO, Inc., 501 U.S. 32 (1991), and Roadway Express, Inc. v. Piper, 447 U.S. 752
(1979)). Similarly, in Dillon the Eighth Circuit recognized that assessing attorney’s fees
as a sanction requires a finding of bad faith, but the court noted that the case before it
did not involve an assessment of attorney’s fees. 986 F.2d at 266.
Here, Ms. Dahl’s motion for sanctions specifically asks the Court to assess
attorney’s fees against Mr. Smith and Ms. Browne under the Court’s inherent power
for conduct that allegedly abuses the judicial process. Because such an award requires
a finding of bad faith, and the record here does not support such a finding, the Court
will not assess attorney’s fees against Mr. Smith or his counsel using its inherent
power.
ORDER
For the reasons stated above, IT IS HEREBY ORDERED THAT
Ms. Dahl’s Motion for Sanctions [ECF No. 74] is DENIED.

s/Katherine Menendez
Katherine Menendez
United States Magistrate Judge

Date: June 4, 2018

In Harlan the district court imposed a $2,500 sanction to discipline counsel for
violating a Model Rule of Professional Conduct, but there was no indication that the
court was assessing attorney’s fees. 982 F.2d at 1258 (explaining that the court
sanctioned defense counsel for conduct violating Model Rule 3.4(f) and characterizing
it as a modest sanction designed to warn counsel against future similar conduct).

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