Montgomery et al v. eTreppid Technologies et al

Filing 1150

ORDERED that the Objections of Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP to Order Re: Motion for Sanctions (# 1035 ) with supporting declaration (# 1036 ) are SUSTAINED without prejudice to any further proceedings consistent wi th this Order with respect to Flynn's motion for sanctions. IT IS FURTHER ORDERED that the Objections of Dennis Montgomery to Order Re: Motion for Sanctions ( # 1037 ) are hereby OVERRULED. IT IS FURTHER ORDERED that Teri Pham's Objection t o Magistrate Judge's Order ( # 1040 ) are hereby SUSTAINED without prejudice to any further proceedings consistent with this Order with respect to Flynn's motion for sanctions. IT IS FURTHER ORDERED that the Objections of Non-Party Deborah A. Klar to Findings of Magistrate Judge in Stayed Order Re: Motion for Sanctions (# 1042 ) are hereby SUSTAINED without prejudice to any further proceedings consistent with this Order with respect to Flynn's motion for sanctions. Signed by Judge Philip M. Pro on 4/5/2010. (Copies have been distributed pursuant to the NEF - DRM)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 P re se n tly before the Court is the Objections of Liner Grode Stein Yankelevitz S u n s h in e Regenstreif & Taylor LLP to Order Re: Motion for Sanctions (Doc. #1035) with s u p p o rtin g declaration (Doc. #1036), filed on May 11, 2009. Interested Party Michael F lyn n filed a Response (Doc. #1102) on June 25, 2009. A ls o before the Court is the Objections of Dennis Montgomery to Order Re: M o tio n for Sanctions (Doc. #1037) with supporting declaration (Doc. #1038), filed on May 1 1 , 2009. Interested Party Michael Flynn filed a Response (Doc. #1099) on June 25, 2009. A ls o before the Court is Teri Pham's Objection to Magistrate Judge's Order (D o c . #1040), filed on May 11, 2009. A supporting letter (Doc. #1050) was filed on May 1 5 , 2009, and an errata (Doc. #1051) was filed on May 19, 2009. Non-Party Deborah Klar f ile d a Joinder (Doc. #1057) on May 27, 2009. Interested Party Michael Flynn filed a UNITED STATES DISTRICT COURT D IS T R IC T OF NEVADA *** ) D E N N IS MONTGOMERY and the ) M O N T G O M E R Y FAMILY TRUST, ) ) P la in tif f s , ) ) v. ) ) E T R E P P ID TECHNOLOGIES, LLC; ) W A R R E N TREPP; and the UNITED ) S T A T E S DEPARTMENT OF DEFENSE, ) ) Defendants. ) ) ) AND ALL RELATED MATTERS. ) )

3 :0 6 -C V -0 0 0 5 6 -P M P -V P C B A S E FILE 3 :0 6 -C V -0 0 1 4 5 -P M P -V P C ORDER

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R e sp o n s e (Doc. #1098) on June 25, 2009. Teri Pham filed a Notice of Relevant New Case L a w (Doc. #1127) on October 9, 2009. A ls o before the Court is the Objections of Non-Party Deborah A. Klar to F in d in g s of Magistrate Judge in Stayed Order Re: Motion for Sanctions (Doc. #1042) with s u p p o rtin g declaration (Doc. #1043), filed on May 11, 2009. Interested Party Michael F lyn n filed a Response (Doc. #1100) on June 25, 2009. Deborah Klar filed a Notice of R e le v a n t Case Law (Doc. #1128) on October 19, 2009. I . BACKGROUND T h is case arises out of a dispute between Dennis Montgomery ("Montgomery") a n d Warren Trepp ("Trepp") over the ownership of certain computer software codes. During the course of the underlying actions, Montgomery terminated the representation of h is counsel, refused to pay his former counsel's attorneys' fees, and sought the return of his c lie n t file. Montgomery obtained new counsel who represented him both in the underlying a c tio n and in various efforts to obtain his client file from his former counsel. Montgomery's former counsel ultimately filed a motion for sanctions in this Court against M o n tg o m e ry and his new counsel for, among other things, their conduct in seeking to o b ta in the client file in various other forums. The Magistrate Judge in this action, the H o n o ra b le Valerie P. Cooke, held an evidentiary hearing and subsequently awarded s a n c tio n s against Montgomery, his new counsel, and new counsels' law firm. The s a n c tio n e d parties object to the sanctions award. T h e underlying lawsuits commenced when Trepp filed suit in Nevada state court o n January 19, 2006. (Status Report (Doc. #16 in 3:06-CV-00145-PMP-VPC).) On J a n u a ry 31, 2006, Montgomery filed suit against Trepp in this Court. (Compl. (Doc. #1).)1

Citations are to the base file docket in this case, 3:06-CV-00056-PMP-VPC, unless otherwise indicated. 2

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In the state court action, Montgomery asserted a third party claim against the United States D e p a rtm e n t of Defense. (Notice of Removal (Doc. #1 in 3:06-CV-00145-PMP-VPC), Ex. 1 .) The Department of Defense removed the state court action to this Court. (Notice of R e m o v a l (Doc. #1 in 3:06-CV-00145-PMP-VPC).) The Court subsequently consolidated th e s e two actions. (Mins. of Proceedings (Doc. #123).) P rio r to removal to this Court, the state court held a preliminary injunction h e a rin g . (Snyder Decl. (Doc. #33 in 3:06-CV-00145-PMP-VPC), Trans. of Proceedings.) At that hearing, Montgomery was represented by local counsel Ronald Logar ("Logar") and E ric Pulver ("Pulver"), as well as Michael Flynn ("Flynn"), who was appearing pro hac v ic e . (Id.; Verified Pet. for Permission to Practice Pro Hac Vice (Doc. #9 in 3:06-CV0 0 1 4 5 -P M P -V P C ).) Flynn's pro hac vice petition identified a Massachusetts bar number f o r Flynn, and listed his address in California. (Verified Pet. for Permission to Practice Pro H a c Vice (Doc. #9 in 3:06-CV-00145-PMP-VPC).) At the hearing, which Montgomery a tte n d e d in person, Logar introduced Flynn to the state court as "a member of the M a s s a c h u s e tts Bar," indicated that Flynn had applied for pro hac vice status, and stated that th e Massachusetts bar had sent a certificate of good standing to the Nevada State Bar. (Id. a t 5-6.) Logar requested the court permit Flynn to appear at the hearing, and the state court p e rm itte d it. (Id.) Around this same time period, the Federal Bureau of Investigation sought and o b ta in e d search warrants to search Montgomery's house and several storage units. (Application & Aff. for Search Warrant (Doc. #1, #4, #6, #8, #10, #12 in 3:06-CV-00263P M P -V P C ).) Montgomery subsequently filed a motion to unseal the search warrant a f f id a v its and for the return of his property. (Mot. to (1) Unseal Search Warrant Affs.; (2) F o r the Return of Property; and (3) For the Segregation and Sealing of All Attorney-Client & Trade Secret Materials Seized (Doc. #21 in 3:06-CV-00263-PMP-VPC).) /// 3

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In the search warrant proceedings, the United States moved in February 2007 to s trik e pleadings filed by Flynn and to preclude Flynn's pro hac vice admission in the case. (Gov't's Mot. to Strike (Doc. #110 in 3:06-CV-00263-PMP-VPC).) The Government c o n te n d e d that Flynn was admitted proc hac vice only in the related civil suits, not in the s e a rc h warrant proceedings. (Id. at 2.) The Government further contended that Flynn s h o u ld not be admitted because his pro hac vice petitions in the consolidated civil actions c o n ta in e d what the Government asserted were misleading statements. (Id.) Specifically, th e Government argued that although the application stated Flynn was licensed only in M a s s a c h u s e tts, Flynn actually maintained a residence and phone number in California, and p ra c tic e d in California. (Id. at 2-4.) The Government included as an exhibit a February 7, 2 0 0 7 letter which Flynn wrote on Montgomery's behalf to certain high ranking government o f f ic ia ls . (Id., Ex. 1.) On the letterheard beneath Flynn's name it states "admitted only in M a s s a c h u s e tts." (Id.) Flynn, Logar, and Pulver opposed the motion on Montgomery's behalf. (Montgomery's Opp'n to the Gov't's Mot. to Strike (Doc. #113 in 3:06-CV-00263-PMPV P C ).) In support of the opposition, Flynn filed a declaration in which he averred that he is a member of the Massachusetts bar, he maintains residences in both Massachusetts and C a lif o rn ia , and he maintains an office address in Boston, Massachusetts. (Flynn Decl. (D o c . #114 in 3:06-CV-00263-PMP-VPC) at 1-3.) Flynn also included two letters he sent in February 2007 on Montgomery's behalf to various government officials which stated b e n e a th his name that he was admitted only in Massachusetts. (Id., Exs. 1-2.) Montgomery also filed a declaration in support of the opposition, which hereafter w ill be referred to as the February 2007 Declaration. (Montgomery Decl. (Doc. #115 in 3 :0 6 -C V -0 0 2 6 3 -P M P -V P C ).) Montgomery averred, among other things, that he had read th e motion to disqualify Flynn, that he had read letters Flynn had sent on Montgomery's b e h a lf to government officials, that the Government's attempt to remove Flynn "would 4

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g ra v e ly damage" his constitutional protections, and that Flynn was Montgomery's counsel o f choice due to Flynn's "experience, integrity, and litigation expertise." (Id. at ¶¶ 4, 131 4 .)2 Montgomery attached as an exhibit to his declaration a March 1, 2006 letter Flynn s e n t to various government officials on Montgomery's behalf. (Id., Ex. 1.) The letterhead s ta te s beneath Flynn's name, "only admitted in Massachusetts." (Id.) T h is Court denied the motion to strike Flynn's filings in the search warrant p ro c e e d in g s . (Order (Doc. #122 in 3:06-CV-00263-PMP-VPC).) The Court also ordered th e entire search warrant proceedings, which up to this point had been sealed, to be u n s e a le d subject to objections by the United States regarding the states secret privilege and o b je c tio n s by the parties to the civil action regarding trade secrets or other privileges. (Id.) The Court set forth a procedure by which the United States would complete review and re d a c tio n of the privileged material in the search warrant proceedings, after which the p a rtie s to the civil cases would have access to the redacted materials. (Order (Doc. #147 in 3 :0 6 -C V 0 0 0 5 6 -P M P -V P C ).) The parties then would have a certain period of time within w h ic h to review the materials and assert any objections to the unsealing of any unredacted m a te ria ls. (Id.) Montgomery filed an objection to the Government's decision not to redact certain in f o rm a tio n which Montgomery contended was protected by the states secret privilege. (Montgomery's Opp'n to the Gov't's Designations of State Secrets & Classified In f o rm a tio n in the Search Warrant Case File (Doc. #168).) At a hearing on the parties' v a rio u s objections, Flynn proposed submitting a declaration signed by Montgomery under o a th which stated, among other things, that an attached exhibit was a true and correct copy o f an email. (Mins. of Proceedings (Doc. #188).) The Court permitted the Trepp parties

The February 2007 Declaration contains two paragraphs numbered "13" and "14." The Court refers to paragraphs 13 and 14 contained on page 8 of the Declaration. 5

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a n d the Government to review the declaration and file any objections thereto. (Mins. of P ro c e e d in g s (Doc. #188).) The Government determined that Montgomery's declaration c o n ta in e d material subject to the states secrets privilege and the related protective order e n te re d in the case, and provided redactions thereto. (United States' Notice of Filing (Doc. # 1 9 7 ).) The Trepp parties also filed an objection, claiming that the email which M o n tg o m e ry averred was a "true and accurate copy" of the original was fabricated. (Defs. e T re p p id Tech., LLC & Warren Trepp's Notice of Obj. to the Public Filing of a Fabricated D o c u m e n t by Dennis Montgomery (Doc. #198).) On July 9, 2007, Flynn and out-of-state co-counsel Carla DiMare 3 ("DiMare") m o v e d to withdraw as Montgomery's attorneys. (Ex Parte Mot. to Withdraw as Counsel for M o n tg o m e ry (Doc. #204).) Flynn and DiMare gave as grounds for their withdrawal that M o n tg o m e ry breached an obligation for payment of fees and engaged in conduct that made c o n tin u e d representation unreasonably difficult. (Id.) In response to Flynn's motion to withdraw, the United States requested Flynn's w ith d ra w a l be subject to various conditions related to the protection of states secrets p riv ile g e d materials that may be contained in Flynn's client files. (United States' Response to Ex Parte Mot. to Withdraw as Counsel for Montgomery (Doc. #209).) Montgomery, th ro u g h Logar and Pulver, indicated he did not oppose Flynn's motion to withdraw, and he a lre a d y had retained the law firm of Liner Yankelevitz Sunshine & Regenstrief LLP ("Liner F irm " ) to substitute into the case. (Pls.' Reply to Michael J. Flynn's & Carla A. DiMare's M o t. to Withdraw & the United States' Response Thereto (Doc. #213).) Montgomery o p p o se d the Government's efforts to place as conditions upon Flynn's withdrawal a g o v e rn m e n ta l review of the client file because such a review would intrude on attorneyc lie n t privileged materials. (Id.) Montgomery also made reference to Nevada and

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DiMare was admitted pro hac vice in this Court on February 6, 2007. (Order (Doc. #113).) 6

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C a lif o rn ia professional rules of conduct which he contended would require Flynn to turn o v e r the client file to Montgomery. (Id.) Montgomery supported this filing with a d e c la ra tio n from Deborah Klar ("Klar"), a partner of the Liner Firm. (Id., Klar Decl.) Klar a v e rre d that the Liner Firm was ready, willing, and able to substitute into the case upon re c e ip t of the client file from Flynn. (Id.) Klar requested the Court reject the Government's re q u e s te d conditions on Flynn's withdrawal and "require Mr. Flynn and Ms. DiMare to turn o v e r all client files in their possession." (Id.) O n July 31, the Court set an August 17 date for hearing Flynn's motion to w ith d ra w . (Min. Order (Doc. #223).) On August 1, Montgomery filed a notice with the C o u rt indicating that Flynn and DiMare had been terminated as counsel of record. (Notice o f Termination of Counsel (Doc. #227).) On August 3, Klar and another partner of the Liner Firm, Teri Pham ("Pham"), f ile d a Complaint in Los Angeles Superior Court on Montgomery's behalf against Flynn (th e "LA Action"). (Request for Judicial Notice (Doc. #262), Ex. 1.) The Complaint a lle g e d that Flynn led Montgomery to believe that Flynn was licensed to practice law in C a lif o rn ia , and that "[t]hroughout the course of his representation, Flynn held himself out to [ M o n tg o m e ry] as a California lawyer." (Id.) The Complaint further alleged that Flynn re f u s e d to return the client file and that Flynn has "threatened to disclose, and has disclosed c o n f id e n tia l and privileged attorney-client communications to others." (Id.) The Complaint s o u g h t as relief a preliminary injunction requiring Flynn to return the client file and e n jo in in g Flynn from disclosing privileged communications to any third party. (Id.) On August 6, Flynn removed the LA Action to the United States District Court f o r the Central District of California and sought transfer to this Court. (Request for Judicial N o tic e (Doc. #275), Ex. 2.) Two days later, Flynn lodged a number of exhibits regarding h is representation of Montgomery which he contended demonstrated he consistently re p re se n te d himself as an attorney licensed only in Massachusetts. (Tr. (Doc. #873) at 7

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2 1 7 ) .) O n August 14, the Liner Firm entered an appearance in the action on M o n tg o m e ry's behalf, subject to the approval of a pro hac vice application. (Notice of A s so c . of Counsel (Doc. #236).) That same date, Liner Firm partners Klar and Pham filed p e titio n s for pro hac vice admission, and the Court granted the petitions. (Verified Pets. (D o c . #233, #234); Orders (Doc. #237, #239).) A ls o on that same date, Flynn filed a declaration in this Court referencing the LA A c tio n and attaching as an exhibit Flynn's motion to dismiss that action against him. (Flynn Decl. (Doc. #240).) In the motion to dismiss in the LA Action, Flynn identified v a rio u s statements in the LA Action Complaint which he contended were false, specifically w ith respect to Montgomery's knowledge about Flynn's status as admitted to practice only in Massachusetts. (Id., Ex. 1.) On August 17, Flynn and DiMare filed in this action notices of liens and/or re ta in in g liens for unpaid fees and costs. (Notices (Doc. #243, #245.) Flynn asserted over $ 6 0 0 ,0 0 0 in unpaid fees. (Id.) T h a t same date, the Court held a hearing on Flynn's motion to withdraw as M o n tg o m e ry's counsel in this action. (Mins. of Proceedings (Doc. #247).) At the hearing, th e undersigned indicated the Court was aware of the LA Action, but indicated the Court d id not have "the details of that and don't know to the extent to which I have to." (Tr. of H rg . (Doc. #267) at 4-5.) Klar advised the Court that Montgomery had a pending suit in C a lif o rn ia regarding turnover of the client file. (Id. at 12.) Klar stated that Montgomery u n d e rs to o d Flynn was California counsel, and that under both California and Massachusetts la w , there is no authority for a retaining lien. (Id.) As to the scope of documents which K la r was seeking, Klar indicated Montgomery gave Flynn original documents which had n o t been returned. (Id. at 19.) However, Klar had access to local counsel's file, which c o n s is te d of pleadings and exhibits filed with the Court. (Id. at 19-20.) Additionally, Flynn 8

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in d ic a te d that much of the representation was performed via emails between Flynn and M o n tg o m e ry, many of which were copied to Logar and Pulver. (Id. at 20-21.) Flynn e s tim a te d that he had maybe one or two original documents of Montgomery's. (Id. at 22.) When the Court questioned Klar about the emails, Klar responded that she did have access to Montgomery's emails. (Id. at 23-24.) At the hearing, the Court questioned Flynn regarding the fee and file dispute and w h e th e r the Court should-m o re appropriately simply leave that issue to the court in California th a t's addressing the lawsuit between counsel, including, I would im a g in e , fees and with some secure knowledge that while it may not c o n s titu te a bond, it's a forum, in which your fee interests and M o n tg o m e ry's position on the matter can be vindicated. Why do we n e e d to tie this litigation up with regard to a fee dispute, if that fee d is p u te is encompassed in the relationship of attorney/client as e n c o m p a s s e d in the California litigation? (Id . at 25.) Flynn responded by noting, among other things, that the LA Action did not in v o lv e a fee dispute. (Id. at 27.) Rather, the action only sought injunctive relief for return o f the file and to enjoin Flynn from disclosing privileged materials. (Id. at 27-28.) The C o u rt took the matter under submission. (Mins. of Proceedings (Doc. #247).) O n August 21, Flynn filed a motion for attorneys' fees and costs in this Court, s e e k in g the outstanding fees and costs owed to Flynn and DiMare for their work in the u n d e rlyin g action. (Mot. for Attorney Fees & Costs (Doc. #248).) On August 31, M o n tg o m e ry filed an objection to Flynn's notice of lien, asserting the parties' attorneyc lie n t relationship was governed by California law which does not permit retaining liens, th e amount of fees requested was unreasonable, an action already was pending in the Los A n g e le s Superior Court regarding the attorney-client relationship between the parties, Flynn w a s licensed to practice only in Massachusetts which does not allow retaining liens, and e v e n under Nevada law Flynn was not entitled to a retaining lien because he voluntarily w ith d re w . (Notice of Obj. to Notice of Lien (Doc. #254).) 9

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O n August 22, the United States District Court for the Central District of C a lif o rn ia denied Montgomery's motion to transfer the case to this Court, and ordered the a c tio n remanded to the Los Angeles Superior Court. (Request for Judicial Notice (Doc. # 2 6 2 ), Ex. 3.) The court remanded for lack of diversity jurisdiction, finding Flynn failed to e s ta b lis h more than $75,000 was at stake with respect to the requested injunctive relief. (Id.) On September 4, the undersigned issued an order granting Flynn's motion to w ith d ra w . (Order (Doc. #256).) In the Order, the Court noted that the Government sought to condition Flynn's withdrawal on four conditions in relation to protection of state secrets p riv ile g e d material potentially residing in Flynn's files. (Id.) The Court also noted the d is p u te between Flynn and Montgomery's new counsel over the turnover of the client file. (Id.) The Court granted the motion to withdraw subject to two of the Government's re q u e s te d conditions, but denied the Government's other two requested conditions. (Id.) As for the client file dispute, the Court stated: to the extent the Montgomery Plaintiffs seek to condition the w ith d ra w a l of Flynn and DiMare on Flynn and DiMare surrendering th e ir complete "client file" to new counsel of record for Plaintiffs (D o c . #213), said precondition is rejected by the Court. In this regard, th e record before the Court does not support a finding that Flynn and D iM a re have withdrawn "voluntary" [sic] as counsel for Montgomery P la in tif f s , In the Matter of Kaufman, 93 Nev. 452, 567 P.3d 957 (1 9 7 7 ), nor does it appear on the record before the Court that Flynn a n d DiMare should be compelled to surrender their files to new c o u n s e l of record. Figliuzzi v. Fed. Dist. Court, 111 Nev. 338, 890 P .2 d 798 (1995).

O n September 7, Montgomery filed an application for arbitration of the fee d is p u te with the San Diego County Bar Association. (Request for Judicial Notice (Doc. # 2 6 2 ), Ex. 2.) The application is signed by Montgomery and indicates he will be re p re se n te d by Klar and Pham of the Liner Firm. (Id.) In the statement of facts section, M o n tg o m e ry asserted that Flynn held himself out as a California attorney throughout the 10

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re p re se n ta tio n . (Id.) On September 10, Klar and Pham filed on Montgomery's behalf an opposition to F lyn n 's motion for attorneys' fees in this action. (The Montgomery Parties' Opp'n to M ic h a e l J. Flynn's Mot. for Attorneys Fees & Costs (Doc. #261).) In support, Klar and P h a m attached a declaration by Montgomery, hereinafter referred to as the September 2007 D e c la ra tio n . (Id., Montgomery Decl.) In the September 2007 Declaration, Montgomery m a d e the following statements: · "Mr. Flynn led me to believe at that time and throughout the course of his re p re se n ta tio n that he was a California attorney, and I believed that I was engaging a C a lif o rn ia lawyer to represent me. Specifically, he told me he had a law firm, Flynn & S tillm a n , in California, and I met with him at his offices in Cardiff, California." (Id. at ¶ 3.) · "[a]ll of the papers he filed with the Court listed a California address." (Id. at ¶ 6.) · "At no time did Mr. Flynn ever inform me that he was not and is not licensed to p ra c tic e in the State of California, or that he is licensed to practice only in Massachusetts. I o n ly learned of this after I retained new counsel." (Id. at ¶ 7.) O n September 12, Klar and Pham, on Montgomery's behalf, filed an ex parte a p p lic a tio n for writ of possession in the LA Action. (Request for Judicial Notice (Doc. # 5 9 7 , Ex. 2.) Montgomery requested that court to "enter an immediate routine turnover o rd e r and Writ of Possession." (Id. at 2.) On September 13, the Los Angeles Superior C o u rt heard Montgomery's ex parte application for writ of possession in chambers. (Exs. to F lyn n Decl. (Doc. #548), Ex. 3.) Montgomery withdrew the ex parte application and s u b s e q u e n tly noticed the motion for hearing, which was set for October 18. (Id., Request f o r Judicial Notice (Doc. #597), Ex. 4, Ex. 7 at 3.) On September 18, Klar and Pham filed on Montgomery's behalf an emergency re q u e s t for clarification of this Court's September 4 Order. (Emergency Ex Parte 11

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A p p lic a tio n for Clarification of Order (Doc. #274).) Montgomery referenced the LA A c tio n and stated that Flynn was asserting the position in the LA Action that this Court a lre a d y had adjudicated the issue of the disposition of Montgomery's client file. (Id.) Montgomery argued the Court had made no such ruling and the parties had not briefed the is su e , including which state law would apply to the dispute. (Id.) Montgomery requested th e opportunity to brief the issue in the event the Court intended to adjudicate the issue. (Id.) O n that same date, in the LA Action, Pham submitted a memorandum of points a n d authorities in support of Montgomery's Application for Writ of Possession. (Request f o r Judicial Notice (Doc. #275), Ex. 4.) Pham filed a declaration similar to the September 2 0 0 7 Declaration in support. (Id., Montgomery Decl.) On September 25, Montgomery filed a request for an investigation of Flynn with th e Massachusetts State Bar. (Request for Judicial Notice (Doc. #597), Ex. 13.) In the re q u e s t for investigation, Montgomery stated that "[a]t all times during the representation, F lyn n led the Montgomery Parties to believe that he was authorized to practice law in C a lif o rn ia ." (Id.) On October 4, the undersigned denied Montgomery's motion for clarification of th e September 4 Order. (Order (Doc. #291).) The Court stated that the prior order was " c le a r and unambiguous, dealing solely with the matter then before the Court as to whether to condition Flynn's withdrawal as an attorney in this matter on the return of Montgomery's c lie n t file." (Id.) The Court further noted that Montgomery "has not moved in this Court f o r return of his client files under Nevada or any other applicable law. The Court's denial o f Montgomery's Motion for Clarification therefore is without prejudice to file a fully b rie f e d motion for return of the file, including any argument that law other than Nevada's a p p lie s to such an inquiry." (Id.) /// 12

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O n October 12, the Magistrate Judge entered an order regarding Flynn's motion f o r attorneys' fees. (Order (Doc. #296).) In that Order, the Magistrate Judge referenced the L A Action and, in a footnote, stated that "in the face of the District Court's September 4, 2 0 0 7 order that Flynn and DiMare would not be compelled to surrender their files to new c o u n s e l of record . . ., Montgomery has continued to pursue another forum to adjudicate the f e e dispute, namely California. In his California Superior Court action, Montgomery seeks re lie f that is contrary to the District Court's order." (Id. at 3 n.3.) In a separate footnote, th e Magistrate Judge acknowledged that Montgomery's new counsel had indicated M o n tg o m e ry had or would file complaints with the California and/or Massachusetts State B a rs . (Id. at 5 n.5.) The Magistrate Judge stated, "[t]he court takes no position on the p ro p rie ty of such potential complaints. By this order, this court only takes jurisdiction over th e attorney's fees and client file dispute." (Id.) T h e Magistrate Judge granted Flynn's motion for attorneys' fees to the extent that th e Court would determine the amount of fees due, but the Court would not order M o n tg o m e ry to pay the fees at that juncture. (Id.) As to the retaining lien issue, the M a g is tra te Judge noted that Montgomery never had filed a motion with this Court for return o f his files, and the Court therefore could not order Flynn to return the files absent a motion b y the client and presentation of adequate security or bond for the payment of the fees. (Id.) In conclusion, the Magistrate Judge stated that she had jurisdiction to adjudicate th e amount of attorneys' fees due to Flynn and set forth a procedure by which she would m a k e that determination. (Id.) With respect to the retaining lien, the Magistrate Judge s ta te d "the court concludes that should Montgomery desire the client files currently in F lyn n 's possession, Montgomery must file a motion requesting the return of the files and p o s t adequate security or bond." (Id.) The Magistrate Judge further ordered that M o n tg o m e ry's counsel "shall deliver, either via facsimile or hand delivery, a copy of this o rd e r to the chambers of the presiding judge" in the LA Action prior to the scheduled 13

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O c to b e r 18 hearing in that action. (Id.) Pham and Klar thereafter attended the October 18 hearing in the LA Action. (Tr. (D o c . #323).) As directed by the Magistrate Judge, Pham and Klar provided the Magistrate J u d g e 's October 12 order to the presiding judge in the LA Action. (Notice of Lodging U S D C Nevada Order of Oct. 12, 2007).) At the hearing, Pham stated the Los Angeles S u p e rio r Court was "the only court with jurisdiction to decide whether or not the files s h o u ld get turned over because the files are located here in California," and "[o]nly this c o u rt could order the files to get turned over because the files are located here in C a lif o rn ia ." (Tr. (Doc. #323) at 5-6.) Pham also stated that the only issue before the M a g is tra te Judge in this action was the attorneys' fee dispute, "it's not with respect to p o s s e s s io n of the files." (Id. at 9.) Later in the hearing, after DiMare referenced footnote 5 o f the Magistrate Judge's October 12 order, Pham stated that she was "not contentesting th a t [the Nevada District Court] has jurisdiction, we're simply saying we believe this court a ls o has jurisdiction, it is concurrent jurisdiction." (Id. at 12-13.) Klar also attended the hearing and suggested government counsel's appearance at th e hearing was to get "another bite at the apple and to try to circumvent [this Court's] o rd e r." (Id. at 8.) Klar stated government counsel was at the hearing "to muddy the waters a n d to somewhat intimidate Your Honor to refrain in giving us the relief that we believe M r. Montgomery and Mrs. Montgomery and the Montgomery Trust is entitled to." (Id.) The Los Angeles Superior Court denied Montgomery's motion for writ of possession, f in d in g that Montgomery had not met his burden of establishing he was entitled to p o s s e s s io n of the client file. (Id. at 13.) O n October 31, the Massachusetts State Bar closed Montgomery's bar complaint. (Exs. to Flynn Decl. (Doc. #548), Ex. 5.) In its letter, the Bar stated that Montgomery "did n o t mention in [his] complaint that the United States District Court, District of Nevada, e n te re d detailed and comprehensive orders with respect to the transmission of the file. 14

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A tto rn e y Flynn was admitted pro hac vice in the Nevada Court and as such, in connection w ith that proceeding, is subject to the standards of professional conduct as adopted by the N e v a d a Supreme Court." (Id. at 1.) The Bar also noted that the client file may contain state s e c re ts , and that this Court had maintained jurisdiction over such issues. (Id.) O n November 9, the Magistrate Judge held a hearing to discuss with the parties th e fact that although the Court previously had ordered the unredacted materials in the s e a rc h warrant proceedings be unsealed, Montgomery's February 2007 Declaration in a d v e rte n tly never was unsealed. (Order (Doc. #270); Mins. of Proceedings (Doc. #331).) The Magistrate Judge ordered the declaration be unsealed. (Id.) On November 1, the Los Angeles Superior Court dismissed the LA Action. (Exs. to Flynn Decl. (Doc. #548), Ex. 1.) In dismissing the action, the presiding judge stated: C a lif o rn ia is only involved in this matter due to an unsubstantiated a lle g a tio n by the plaintiff that defendant misrepresented to him that d e f e n d a n t was licensed to practice in California. This case is before a C a lif o rn ia court for the transparent purpose of having this court c o u n te rm a n d the orders of the Nevada District Court. California has n o interest in doing so. (Id . at 3.) Approximately two weeks later, the San Diego Bar Association dismissed w ith o u t prejudice the request for arbitration of the fee dispute. (Exs. to Flynn Decl. (Doc. # 5 4 8 ), Ex. 4.) The Bar Association stated that based on the orders of this Court and the Los A n g e le s Superior Court, "it is clear that the US District for Nevada has taken control of the e n tire case filed by . . . Montgomery including the issue of attorney fees and costs." (Id.) On March 24, 2008, the Magistrate Judge entered an order granting Flynn's m o tio n for attorneys' fees and costs in the amount of $557,522.18. (Order (Doc. #502).) On April 24, Flynn moved for sanctions pursuant to 28 U.S.C. § 1927 and/or the Court's in h e re n t power against the Montgomery parties and "their counsel of record, Deborah Klar a n d her firm, Liner Yankelevitz Sunshine & Regenstreif, LLP." (Mot. for Sanctions (Doc. # 5 4 5 ) at 1.) Among other things, Flynn argued that Montgomery and his counsel 15

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v e x a tio u s ly multiplied the proceedings by attempting to circumvent this Court's Orders re g a rd in g the client files by filing actions or complaints in three different forums and using th e September 2007 Declaration, which Flynn asserted was perjured. (Id. at 2.) Flynn also c o n te n d e d that Montgomery and his counsel misrepresented this Court's orders at the O c to b e r 18 hearing before the Los Angeles Superior Court. (Id. at 3.) Flynn requested over $ 2 0 0 ,0 0 0 in attorney's fees for the period of August 1, 2007 through December 5, 2007, a n d he requested "the revocation of Ms. Klar's pro hac vice admission in these cases." (Id. a t 24.) Montgomery opposed the motion, and included declarations from Pham and Klar. (Opp'n to Mot. for Sanctions Filed by Attorney Michael J. Flynn (Doc. #601); Pham Decl. (D o c . #599); Klar Decl. (Doc. #600).) The Magistrate Judge set an evidentiary hearing related to the motion for s a n c tio n s and indicated the evidentiary hearing would address only the September 2007 D e c la ra tio n and the Montgomery parties' litigation against Flynn in the LA Action, the San D ie g o fee arbitration, and the Massachusetts Bar complaint. (Order (Doc. #770).) The o rd e r required Montgomery to "appear in person and to testify concerning these matters." (Id.) The order also stated that Flynn, Klar, and Pham "shall attend the hearing in person a n d shall be prepared to address the court concerning these matters." (Id.) The Magistrate J u d g e held a sealed evidentiary hearing on August 21, at which Montgomery and Pham te s tif ie d under oath. (Mins. of Proceedings (Doc. #826).) Klar was present but did not te s tif y. (Id.) M o n tg o m e ry and Trepp subsequently settled the underlying lawsuit. (Mins. of P ro c e e d in g s (Doc. #856).) After Montgomery defaulted on a payment required under the s e ttle m e n t agreement, judgments by confession were entered against the Montgomery p a rtie s and other parties in the litigation. (Judgment (Doc. #897, #898).) The Court also e n te re d judgment on the award of attorneys' fees to Flynn. (Judgment (Doc. #902).) Subsequent efforts at settling the Flynn fee dispute were unsuccessful. (Mins of 16

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P ro c e e d in g s (Doc. #933).) On February 19, 2009, the Court entered an order dismissing all c la im s and counterclaims in the underlying action. (Order (Doc. #962).) However, the C o u rt retained jurisdiction over, among other things, Flynn's motion for sanctions. (Id.) O n March 31, 2009, the Magistrate Judge entered a 54-page order granting F lyn n 's motion for sanctions under 28 U.S.C. § 1927 and the Court's inherent power. (Order (Doc. #985).) The Magistrate Judge sanctioned Montgomery for perjuring himself in the September 2007 Declaration regarding his knowledge about Flynn's admission status, a n d that he signed the declaration "in bad faith, vexatiously, wantonly, and for oppressive re a s o n s ." (Id. at 49.) The Magistrate Judge also sanctioned Klar and Pham, finding that K la r and Pham "acted in bad faith or conduct tantamount to bad faith with the intention to u n d e rm in e this court's orders for the improper purpose of obtaining a more favorable forum f o r resolution of the fee dispute and the turnover of the client files." (Id. at 37.) The M a g is tra te Judge also sanctioned the Liner Firm, concluding that it allowed Klar to operate " u n c h e c k e d and unquestioned," and the Firm "acquiesced to or willingly carried out Ms. K la r's litigation strategy." (Id. at 48.) Based on her findings, the Magistrate Judge awarded Flynn and DiMare a tto rn e ys ' fees in the amount of $201,990 and costs in the amount of $2,421. (Id. at 51-52.) The Magistrate Judge apportioned the sanctions as follows: Klar 50%, Montgomery 30%, P h a m 10%, and the Liner Firm 10%, and imposed joint and several liability among the s a n c tio n e d parties. (Id. at 52.) The Magistrate Judge also imposed non-monetary sanctions on Klar, Pham, and M o n tg o m e ry. The Magistrate Judge ordered that the Clerk of Court send a copy of the s a n c tio n s order to the Nevada and California State Bars; that Klar and Pham be prohibited f ro m applying for pro hac vice admission to this Court for five years, after which time they m a y apply but must attach a copy of the sanctions order along with a declaration identifying a ll the legal ethics courses they have completed in the interim; that the Court would publish 17

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th e sanctions order as a form of public reprimand; and that Klar and Pham must perform 2 0 0 and 100 hours of pro bono legal services, respectively. (Id. at 52-53.) As to M o n tg o m e ry, the Magistrate Judge ordered that a copy of the sanctions order be sent to the U n ite d States Attorney's Office. (Id. at 53.) T h e Magistrate Judge indicated that pursuant to Local Rule IB 3-1(a), any party c o u ld object to the sanctions order. (Id. at 54.) The Magistrate Judge therefore stayed the s a n c tio n order's effect until after the undersigned issued a final order with respect to any o b je c tio n s . (Id.) The Liner Firm, Klar, Pham, and Montgomery subsequently filed o b je c tio n s to the sanctions order. P rio r to this Court resolving the objections to the sanctions order, Dennis and B re n d a Montgomery filed a Notice of Filing of Voluntary Petition Under Chapter 7 of the B a n k ru p tc y Code and of Automatic Stay (Doc. #1104). Flynn moved in the bankruptcy p ro c e e d in g s for relief from the automatic stay for this Court to rule upon the objections to th e Magistrate Judge's sanctions order. (Status Report Re: Montgomery Bankruptcy (Doc. # 1 1 4 3 ).) On January 8, 2010, the United States Bankruptcy Court for the Central District of C a lif o rn ia granted Flynn's motion, effective as of December 31, 2009. (Id., Ex. A.) The s ta y having been lifted, the Court now will address the various objections to the sanctions o rd e r. I I . LEGAL STANDARD M a g istra te judges statutorily are authorized to resolve "pretrial matter[s]" subject to review by district judges under a clearly erroneous or contrary to law standard. 28 U.S.C. § 636(b)(1)(A). Excluded from this grant of authority are dispositive motions, such as m o tio n s "for injunctive relief, for judgment on the pleadings, for summary judgment, to d is m is s or quash an indictment or information . . ., to suppress evidence in a criminal case, to dismiss or to permit maintenance of a class action, to dismiss for failure to state a claim u p o n which relief can be granted, . . . to involuntarily dismiss an action," and analogous 18

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m o tio n s . Id.; United States v. Rivera-Guerrero, 377 F.3d 1064, 1067-68 (9th Cir. 2004). Dispositive motions may be submitted to a magistrate judge for a report and re c o m m e n d a tio n , which the district court then reviews de novo. 28 U.S.C. § 636(b)(1)(B). Thus, nondispositive pretrial matters are governed by § 636(b)(1)(A) and are s u b je c t to the clearly erroneous or contrary to law standard of review, while dispositive m a tte rs are governed by § 636(b)(1)(B) and are subject to de novo review. Gomez v. U n ite d States, 490 U.S. 858, 873-74 (1989); see also Fed. R. Civ. P. 72(a). Which standard o f review applies is determined by whether the motion's effect properly is characterized as " d is p o s itiv e or non-dispositive of a claim or defense of a party." Rivera-Guerrero, 377 F.3d a t 1068 (quotation omitted). T h e United States Court of Appeals for the Ninth Circuit has not addressed s p e c if ic a lly whether a magistrate judge's order sanctioning a party or counsel under 28 U .S .C . § 1927 or the Court's inherent power is dispositive or non-dispositive. However, the N in th Circuit has determined that sanctions under Federal Rules of Civil Procedure 11 and 3 7 are non-dispositive and thus fall under § 636(b)(1)(A). See Grimes v. City & County of S a n Francisco, 951 F.2d 236, 240 (9th Cir. 1991) (Rule 37); Maisonville v. F2 Am., Inc., 9 0 2 F.2d 746, 747-48 (9th Cir. 1990) (Rule 11). The Ninth Circuit has analogized sanctions u n d e r § 1927 and its inherent power to Rule 11 or Rule 37 sanctions. See Stanley v. W o o d f o rd , 449 F.3d 1060, 1064 (9th Cir. 2006) (stating "the policies undergirding Rule 3 7 (a ) sanctions are not relevantly different from those justifying sanctions under § 1927 or a c o u rt's inherent powers"); Grimes, 951 F.2d at 240 (indicating there is "no material d is tin c tio n s between Rule 11 sanctions and Rule 37 [discovery] sanctions" (quotation o m itte d )); Adriana Int'l Corp. v. Thoeren, 913 F.2d 1406, 1412 n.4 (9th Cir. 1990) (" A lth o u g h this case involves only a Rule 37 default, we have held that dismissal sanctions u n d e r Rule 37 and a court's inherent powers are similar."). Sanctions under § 1927 or the /// 19

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Court's inherent power therefore are non-dispositive,4 and subject to the clearly erroneous o r contrary to law standard of review.5 " A finding is clearly erroneous when although there is evidence to support it, the re v ie w in g body on the entire evidence is left with the definite and firm conviction that a m ista k e has been committed." United States v. Ressam, 593 F.3d 1095, 1118 (9th Cir. 2 0 1 0 ) (quotation omitted). This Court may not substitute its judgment for that of the M a g is tra te Judge. Grimes, 951 F.2d at 241. I I I . DISCUSSION T h e Court has inherent power to sanction counsel or a party who acts "in bad f a ith , vexatiously, wantonly, or for oppressive reasons." Leon v. IDX Sys. Corp., 464 F.3d 9 5 1 , 961 (9th Cir. 2006) (quotation omitted). A court must exercise its inherent powers " `w ith restraint and discretion,'" and must make a specific finding of bad faith before s a n c tio n in g under its inherent powers. Yagman v. Republic Ins., 987 F.2d 622, 628 (9th C ir. 1993) (quoting Chambers v. Nasco, 501 U.S. 32, 44 (1991)); Fink v. Gomez, 239 F.3d 9 8 9 , 992-93 (9th Cir. 2001). Bad faith "includes a broad range of willful improper c o n d u c t," including "delaying or disrupting the litigation or . . . hampering enforcement of a c o u rt order." Fink, 239 F.3d at 992 (quotation omitted); Leon, 464 F.3d at 961. "Sanctions a re available for a variety of types of willful actions, including recklessness when combined

To the extent a sanction imposed is case dispositive, such as striking an answer or entering a default, then the sanctions order would be dispositive, and would be subject to de novo review. Other circuits have disagreed or are undecided as to the appropriate standard of review for a magistrate judge's award of sanctions. See Kiobel v. Millson, 592 F.3d 78, 86 (2d Cir. 2010) (declining to decide the issue, but in three separate concurring opinions expressing the view that the de novo standard applied, the clearly erroneous or contrary to law standard applied, or that Congress or the Supreme Court ought to make the standard clear); Retired Chicago Police Ass'n v. City of Chicago, 76 F.3d 856, 869 (7th Cir. 1996) (holding "a sanctions request is a dispositive matter capable of being referred to a magistrate judge only under § 636(b)(1)(B) or § 636(b)(3), where the district judge must review the magistrate judge's report and recommendations de novo"); Bennett v. Gen. Caster Serv. of N. Gordon Co., Inc., 976 F.2d 995, 998 (6th Cir. 1992) (same). 20
5

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w ith an additional factor such as frivolousness, harassment, or an improper purpose." Fink, 2 3 9 F.3d at 994. Indeed, the Court may exercise its inherent power to sanction a party or a tto rn e y who acts for an improper purpose even if the sanctioned act "consists of making a tru th f u l statement or a non-frivolous argument or objection." Gomez v. Vernon, 255 F.3d 1 1 1 8 , 1134 (9th Cir. 2001) (quotation omitted). Whether to impose sanctions under the C o u rt's inherent power lies within the Court's discretion. Id. In addition to inherent powers, the Court may sanction an attorney under 28 U .S .C . § 1927 for unreasonably and vexatiously prolonging the proceedings. To impose s a n c tio n s under § 1927, the Court must make a finding that counsel acted with subjective b a d faith. B.K.B. v. Maui Police Dep't, 276 F.3d 1091, 1107 (9th Cir. 2002); Pacific Harbor Capital, Inc. v. Carnival Air Lines, Inc., 210 F.3d 1112, 1118 (9th Cir. 2 0 0 0 ). The standard is met when "an attorney knowingly or recklessly raises a frivolous a rg u m e n t, or argues a meritorious claim for the purpose of harassing an opponent." B.K.B., 2 7 6 F.3d at 1107 (quotation and emphasis omitted). Whether to impose sanctions under § 1927 lies within the Court's discretion. In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 4 3 5 (9th Cir. 1996). A . Liner Firm T h e Liner Firm contends the Magistrate Judge sanctioned it only under § 1927, a n d § 1927 provides for sanctions only against an attorney, not a law firm. Flynn responds th a t the Magistrate Judge intended to sanction the Liner Firm under both the Court's in h e re n t power and § 1927, and indicated in the order that the Firm acted in bad faith. Flynn also argues sanctions may be awarded against a law firm under § 1927. Although the sanctions order generally referenced both § 1927 and the Court's in h e re n t powers, the sanctions order imposed sanctions against the Liner Firm only pursuant to § 1927. (Order (Doc. #982) at 48 (stating "sanctions against the Liner Firm are w a rra n te d pursuant to 28 U.S.C. § 1927").) The sanctions order referenced both the Court's 21

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inherent power and § 1927 when grouping the sanctioned parties together. For example, page one of the order states that the "court concludes that the conduct of the Liner firm and its attorneys, Ms. Klar and Ms. Pham, was willfully reckless, intended to harass, done for an improper purpose, and was suffused with bad faith." (Id. at 1.) On page 51, the order stated: "[b]ased on the foregoing, the court finds that pursuant to its inherent powers and 28 U.S.C. § 1927, the following sanctions shall issue."6 (Id. at 51.) The order then itemized the sanctions against all of the sanctioned parties, including the Liner Firm. (Id. at 51-53.) However, in the order's discussion specifically related to the Liner Firm, the order cited only § 1927 and did not make an explicit finding of bad faith on the Firm's part. To the extent the Magistrate Judge intended to sanction the Liner Firm under the Court's inherent power, the sanctions order does not make that intention clear. Section 1927 provides: A n y attorney or other person admitted to conduct cases in any court of th e United States or any Territory thereof who so multiplies the p ro c e e d in g s in any case unreasonably and vexatiously may be required b y the court to satisfy personally the excess costs, expenses, and a tto rn e ys ' fees reasonably incurred because of such conduct. S o m e Circuit Courts of Appeal have permitted § 1927 sanctions against a law firm, but h a v e done so without analyzing whether such sanctions are permissible under the statutory la n g u a g e . See Jensen v. Phillips Screw Co., 546 F.3d 59, 61-69 (1st Cir. 2008); LaPrade v. K id d e r Peabody & Co., Inc., 146 F.3d 899, 904-07 (D.C. Cir. 1998); Avirgan v. Hull, 932 F .2 d 1572, 1582 (11th Cir. 1991); Baker Indus., Inc. v. Cerberus Ltd., 764 F.2d 204, 208-09 (3 d Cir. 1985). In contrast, the Sixth and Seventh Circuits have indicated that § 1927 s a n c tio n s are not awardable against a law firm based on the statute's plain language. See R e n tz v. Dynasty Apparel Indus., Inc., 556 F.3d 389, 396 n.6 (6th Cir. 2009); Claiborne v.

This sentence could not mean the Magistrate Judge intended to sanction all of the parties under both sources of authority, as Montgomery is a party and thus is not sanctionable under § 1927. F.T.C. v. Alaska Land Leasing, Inc., 799 F.2d 507, 510 (9th Cir. 1986) (stating § 1927 "does not authorize recovery from a party"). 22

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W is d o m , 414 F.3d 715, 722-23 (7th Cir. 2005). The United States Court of Appeals for the N in th Circuit has not decided whether a law firm, as opposed to an individual attorney, may b e sanctioned under § 1927, although it has indicated § 1927 sanctions were not permissible a g a in s t a non-profit organization that varyingly described itself as a representative of the p la in tif f s , an employer of the plaintiffs' lawyers, and as the entity directing the litigation. Lockary v. Kayfetz, 974 F.2d 1166, 1168-70 (9th Cir. 1992) (stating the district court re c o g n iz e d it did not have the power to sanction the non-profit entity under § 1927). When construing a statute, the Court begins with the statute's plain language. Moreno-Morante v. Gonzales, 490 F.3d 1172, 1175 (9th Cir. 2007). If the language is u n a m b ig u o u s , the Court's inquiry is complete. Alvarado v. Cajun Operating Co., 588 F.3d 1 2 6 1 , 1268 (9th Cir. 2009.) Section 1927 by its plain terms applies only to an "attorney or other person a d m itte d to conduct cases in any court of the United States." A law firm is not an attorney. Nor is it a person admitted to conduct cases in federal courts. "Individual lawyers, not f irm s , are admitted to practice before both the state courts and the federal courts." Claiborne, 414 F.3d at 723. Further, the statute requires the sanctioned person to "satisfy p e rs o n a lly" the costs and expenses incurred as a result of the sanctionable conduct. T h e conclusion that § 1927 does not apply to law firms is supported by the U n ite d States Supreme Court's analysis of whether a prior version of Federal Rule of Civil P ro c e d u re 11 applied to law firms. In Pavelic & LeFlore v. Marvel Entertainment Group, th e Supreme Court held that Rule 11's plain language permitted the imposition of sanctions o n "the person who signed" the paper at issue. 493 U.S. 120, 123 (1989). Because the Rule re q u ire d an attorney or unrepresented party to sign the paper in his or her "individual n a m e ," the Supreme Court concluded that the signature requirement, and the consequences a tta c h e d thereto, ran to the individual attorney and not to his or her law firm. Id. at 123-24. Following this decision, Rule 11 was amended to allow sanctions against law firms. See 23

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F e d . R. Civ. P. 11(c)(1) ("If, after notice and a reasonable opportunity to respond, the court d e te rm in e s that Rule 11(b) has been violated, the court may impose an appropriate sanction o n any attorney, law firm, or party that violated the rule or is responsible for the v io la tio n ." ); see also Fed. R. Bankr. P. 9011(c) (listing law firms among persons or entities th a t may be sanctioned). T h e Court therefore concludes § 1927 sanctions may not be imposed against a la w firm. The Magistrate Judge's order imposing such sanctions thus is contrary to law. In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d at 435 ("For a sanction to be validly imposed, the c o n d u c t in question must be sanctionable under the authority relied on." (quotation o m itte d )). The Liner Firm's objection to the sanctions order is affirmed, and the sanctions o rd e r as to the Liner Firm is reversed without prejudice to any further proceedings c o n s is te n t with this Order with respect to Flynn's motion for sanctions.7 B . Montgomery Montgomery argues the sanctions against him are based on perceived differences in his two declarations, but there is insufficient evidence to support a finding that the S e p te m b e r 2007 Declaration was made in bad faith. Montgomery argues his two d e c la ra tio n s do not contradict each other because the February Declaration does not m e n tio n anything about where Flynn was licensed. Even if the declarations are in c o n s is te n t, Montgomery contends the evidence adduced at the evidentiary hearing d e m o n s tra te d Montgomery did not understand what it meant to be licensed or admitted in a c e rta in jurisdiction and the significance of that in relation to practicing law in a particular s ta te . Montgomery further argues his September 2007 Declaration does not amount to p e rju ry because the record does not disclose what Montgomery meant by referring to Flynn

Because the Court affirms the Liner Firm's objections on this basis, the Court need not address the Liner Firm's other objections. 24

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a s a "California lawyer" and in any event, the statements were not material. Montgomery a ls o argues he cannot be sanctioned for conduct occurring outside the proceedings in this C o u rt, the Magistrate Judge failed to assess the reasonableness of Flynn's fees, and she s h o u ld not have made liability joint and several. Finally, Montgomery requests that in the e v e n t any further proceedings are necessary, the Court assign a different Magistrate Judge. F lyn n responds that there is clear and convincing evidence that the September 2 0 0 7 Declaration is perjured, as evidenced by the exhibits on file which show Montgomery k n e w Flynn was licensed only in Massachusetts based on various documents in the record. Flynn further argues that because Montgomery did not raise below his inability to pay, that a rg u m e n t is waived. As to joint and several liability, Flynn contends it is appropriate b e c a u s e Montgomery, Klar, and Pham were jointly engaged in the misconduct at issue. Finally, Flynn argues the request for a new judge is unsupported, as the Magistrate Judge h a s been unbiased in this action, ruling against Flynn on several occasions, and Flynn c o n te n d s she could have sanctioned the objecting parties even more than she did. Flynn re q u e s ts the Court modify the sanctions award to include fees expended in having to re s p o n d to the various objections to the Sanctions. 1 . The September 2007 Declaration U n d e r the federal perjury statute, a person commits perjury when he "willfully s u b s c rib e s as true any material matter which he does not believe to be true" in a declaration s ig n e d under penalty of perjury. 18 U.S.C.A. § 1621. A declarant's statement under oath or a f f irm a tio n violates this statute if he makes a false statement concerning a material matter " w ith the willful intent to provide false testimony, rather than as a result of confusion, m ista k e , or faulty memory." United States v. Dunnigan, 507 U.S. 87, 94 (1993). The Magistrate Judge's finding that Montgomery perjured himself is not clearly e rro n e o u s or contrary to law. Montgomery filed the September 2007 Declaration under p e n a lty of perjury. Montgomery's statements in the September 2007 Declaration regarding 25

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F lyn n 's representations to Montgomery about Flynn's status as a California attorney were m a te ria l because Montgomery was attempting to convince this Court, and other forums, that th e file and fee disputes should be heard somewhere other than in this District. The S e p te m b e r 2007 Declaration was filed in support of Montgomery's opposition to Flynn's m o tio n for attorneys' fees. In that motion, Montgomery argued that California, not Nevada, w a s the proper forum to resolve the fee dispute and cited the September 2007 Declaration in s u p p o rt. (The Montgomery Parties' Opp'n to Michael J. Flynn's Mot. for Attorneys Fees & C o s ts (Doc. #261) at 2-5.) The Magistrate Judge held an evidentiary hearing in this matter at which M o n tg o m e ry testified. In the sanctions order, she made an adverse credibility finding a g a in s t Montgomery regarding his understanding of the words "admitted" or "licensed." (Order (Doc. #985).) The Magistrate Judge concluded Montgomery knew or should have k n o w what that meant because he attended the preliminary injunction hearing in state court a t which Flynn's admission and ability to practice in front of the Nevada state court was d is c u s se d in front of Montgomery. (Id. at 18.) Even if Montgomery was not aware then, he c e rta in ly was by February 2007, when the United States attempted to disqualify Flynn based o n the fact that Flynn was licensed only in Massachusetts, but allegedly was practicing in C a lif o rn ia . (Id. at 19.) T h e s e findings are not clearly erroneous or contrary to law. The Magistrate J u d g e presided over the evidentiary hearing and thus had an opportunity to observe M o n tg o m e ry's demeanor while testifying. She thus uniquely was situated to evaluate M o n tg o m e ry's credibility. Moreover, the adverse credibility finding has ample support in th e record. Montgomery attended the preliminary injunction hearing and was present while lo c a l counsel introduced Flynn to the state court as a member of the Massachusetts Bar, in d ic a te d that Flynn had applied for pro hac vice status, and stated that the Massachusetts B a r had sent a certificate of good standing to the Nevada State Bar. 26

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F u rth e r, Montgomery was aware of and participated in opposing the G o v e rn m e n t's efforts to disqualify Flynn on the very basis that Flynn's pro hac vice a p p lic a tio n contained misstatements because Flynn was licensed only in Massachusetts, but w a s residing and practicing in California. In his February 2007 Declaration, Montgomery a v e rre d that he had read both the motion to disqualify Flynn, and letters which Flynn had s e n t to high ranking officials on Montgomery's behalf. The Government's motion stated th a t Flynn was licensed only in Massachusetts. One of the referenced letters was attached a s an exhibit to Montgomery's own declaration. On the letterhead it states beneath Flynn's n a m e "only admitted in Massachusetts." At the sealed evidentiary hearing on the motion for sanctions, Montgomery te s tif ie d that he "probably" read Flynn's declaration in February 2008 in which Flynn stated th a t he was licensed only in Massachusetts. (Sealed Tr. (Doc. #873) at 26.) Montgomery s u b s e q u e n tly stated that he did not know whether he read it at the time. (Id. at 26-27.) When questioned about reading the Government's motion to disqualify in which the G o v e rn m e n t raised the issue that Flynn had only a Massachusetts license and not a C a lif o rn ia license, Montgomery stated "What's that mean to me? That didn't mean to me th a t you couldn't practice in California." (Id. at 29.) Montgomery further testified that he d id not know what the term "licensed" meant, and he "assumed" Flynn could practice in C a lif o rn ia , even though Flynn did not represent Montgomery in any California courts at any tim e during the representation. (Id. at 40.) When questioned regarding whether, in their f irs t meeting, Flynn advised Montgomery that Flynn was licensed in Massachusetts, M o n tg o m e ry responded "[w]hether [Flynn] said [he was] licensed in Massachusetts, didn't m e a n to me that [Flynn wasn't] in California." (Id. at 42.) W h e n asked whether it was his position that he never saw Flynn's letterhead that s ta te d "admitted only in Massachusetts," Montgomery stated, "[n]o. That is not my te s tim o n y." (Id. at 49-50.) When asked directly whether he had ever seen any letters 27

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s ta tin g "admitted only in Massachusetts," Montgomery answered, "Yes." (Id. at 50.) Montgomery's counsel offered to stipulate that Montgomery had received letters with the le tte rh e a d on it. (Id. at 87, 101-02.) Montgomery also stated that he "must have seen" F lyn n 's Massachusetts bar number next to Flynn's name on numerous pleadings on file in th is Court. (Id. at 129.) The course of the proceedings, Montgomery's February 2007 Declaration, and h is testimony at the evidentiary hearing support the Magistrate Judge's adverse credibility f in d in g against Montgomery regarding his professed lack of knowledge as to the meaning o f "admitted" or "licensed." Montgomery is not an unsophisticated individual, and even if h e had no understanding regarding what these terms meant prior to this litigation, the e v id e n c e shows he knew what it meant by the time he filed the February 2007 Declaration in support of his opposition to the Government's motion to disqualify. The Magistrate J u d g e 's conclusion that Montgomery therefore perjured himself in the September 2007 D e c la ra tio n when he averred that Flynn led him to believe throughout the course of re p re se n ta tio n that Flynn was a California attorney, that at no time did Flynn ever inform M o n tg o m e ry that Flynn was licensed to practice only in Massachusetts, and that M o n tg o m e ry learned of Flynn's status only this after he retained new counsel is neither c le a rly erroneous nor contrary to law. Perjury is sufficient grounds for a bad faith finding to s u p p o rt a sanction under the Court's inherent power. Whitney Bros. Co. v. Sprafkin, 60 F .3 d 8, 14 (1st Cir. 1995). 2. Joint and Several Liability A court may hold sanctioned parties jointly and severally liable. Hyde & Drath v. B a k e r, 24 F.3d 1162, 1172 (9th Cir. 1994). Pursuant to general tort law, joint and several lia b ility is appropriate when the independent tortious conduct of each of two or more p e rs o n s is a legal cause of a single and indivisible harm to the injured party. Restatement (T h ird ) of Torts § A18 (2000). That the Court may apportion fault "does not render an 28

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in d iv is ib le injury `divisible' for purposes of the joint and several liability rule." Rudelson v . U.S., 602 F.2d 1326, 1332 n.2 (9th Cir. 1979) (quotation omitted). Joint and several lia b ility as between a client and his or her attorney may be appropriate where the client w illf u lly participates in the sanctionable conduct. See Avirgan v. Hull, 125 F.R.D. 189, 1 9 0 -9 1 (S.D. Fla. 1989). T h e Magistrate Judge's decision to make the award joint and several is not c le a rly erroneous or contrary to law. Although Montgomery's Declaration was not filed in th is Court until September 2007, the "facts" therein were the foundation for the efforts to p u rs u e the fee and file disputes in three other forums. The Complaint in the LA Action, the p e titio n for arbitration of the fee, and the Massachusetts Bar complaint all referenced M o n tg o m e ry's assertion that Flynn held himself out to Montgomery as a California lawyer th ro u g h o u t Flynn's representation of Montgomery. The harm to Flynn was indivisible, e v e n if the Magistrate Judge found the relative fault as between Montgomery and his a tto rn e ys was capable of being apportioned. 3 . Power to Sanction for Conduct Outside Court Proceedings C o n tra ry to Montgomery's position, the Court has inherent power to sanction a p a rty's misconduct occurring outside the Court's proceedings so long as the sanctionable c o n d u c t has a "nexus with the conduct of the litigation before the court." United States v. W u n s c h , 84 F.3d 1110, 1115-16 (9th Cir. 1996) (holding that court had inherent power to s a n c tio n attorney who had appeared in case and sent sexist letter to opposing counsel f o llo w in g his disqualification from the case but concluding no sanction was authorized u n d e r cited local rules); see also Chambers v. NASCO, Inc., 501 U.S. 32, 57 (1991) (" C h a m b e rs challenges the District Court's imposition of sanctions for conduct before other trib u n a ls , including the FCC, the Court of Appeals, and this Court, asserting that a court m a y sanction only conduct occurring in its presence. Our cases are to the contrary, h o w e v e r." ). For example, the Court may invoke its inherent power to san