Huang v. Lin et al
MEMORANDUM AND ORDER: While the Court embraces Judge Kuo's findings, it finds that under the circumstances presented here, a sanction in the form of attorneys' fees is not authorized. It therefore sustains defendants' objections and vacates the Sanctions Order. (See Order for Details). Ordered by Judge Raymond J. Dearie on 11/23/2016. (Rodriguez, Lori)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
MEMORANDUM & ORDER
- against 14 CV 7204 (RJD) (PK)
SHAO YU LIN, WALIND HOME DESIGN
INC. and WALAND TRADING CORP.,
DEARIE, District Judge:
Plaintiff brings, inter alia, wage and hour claims against her former employers under the
Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-19, and state law. On April 8, 2016,
Magistrate Judge Kuo imposed sanctions against defendants and defense counsel in the form of
attorneys' fees (the "Sanctions Order"). Defendants object to the Sanctions Order and ask this
Court to set it aside. While this Court wholeheartedly embraces Judge Kuo's findings regarding
this matter, the Court finds that under the circumstances presented, a sanction in the form of
attorneys' fees is not authorized. The Court reluctantly sustains defendants' objections and
vacates the Sanctions Order.
Plaintiff brought this action on December 10, 2014, against her former employers,
defendants Shao Yu Lin, Walind Home Design Inc., and Waland Trading Corp. During
discovery, a dispute arose over documents defendants produced with their initial disclosures that
purported to be weekly pay statements covering plaintifr s employment from December 2013 to
August 2014. Plaintiff questioned the authenticity of these pay statements and served defendants
with a request for electronically stored information ("metadata") related to the documents,
intending to use the metadata to prove that the pay statements had been created after the fact for
the purpose of defeating plaintiffs wage claims. Defendants objected to the request, arguing that
production of the metadata was unnecessary. After several more requests for the metadata and
meetings regarding the same, plaintiff filed a motion to compel production of the requested
information. Defendants filed a cross-motion for a protective order.
On January 7, 2016, Magistrate Judge Kuo heard oral argument and granted plaintiffs
motion to compel production of the metadata; specifically, metadata showing when the pay
statements were created and modified. Judge Kuo initially set a deadline of February 18, 2016,
to produce the metadata, but later granted defendants' request to extend the deadline to March
On the deadline for production of the metadata, defendants' former counsel, Daniel
Millman, 1 provided a letter to plaintiffs counsel stating that defendants were unable to retrieve
the metadata. Mr. Millman further stated, however, that the metadata was likely irrelevant
because counsel had learned, "much to [his] dismay," that the pay statements had, in fact, been
created after the commencement of this lawsuit.
On March 21, 2016, plaintiff filed a motion for sanctions, arguing that defendants had
committed a fraud upon the court. In their opposition, defendants again admitted that the
paystubs had been created after the fact. Mr. Millman argued, however, that he had simply made
an honest mistake in thinking the pay statements had been created contemporaneously, only to
later learn this was not the case.
On September 5, 2016, Mr. Millman, on behalf of the Law Offices of Brian Shengjin Yang,
filed a motion to withdraw as counsel for defendants, citing, inter alia, a complete
breakdown of the attorney-client relationship. Judge Kuo granted the motion on September
20, 2016, and gave any new attorneys which defendants may hire until November 21, 2016,
to file notices of appearance.
Judge Kuo heard argument on the motion on April 8, 2016. During the hearing, Judge
Kuo found that defendants and defense counsel had acted improperly, in that (1) defendants
created the pay statements after the fact and handled them over to counsel without explanation,
and (2) the first time defense counsel asked his client about the authenticity of the documents
was after the Court denied defendants' motion for a productive order. Judge Kuo stated that
defense counsel clearly should have inquired as to the authenticity of the documents sooner-if
not when he originally received them, then certainly once plaintiff had specifically questioned
the authenticity of the documents. Judge Kuo did not go so far as to find that this behavior rose
to the level of fraud upon the court-accepting counsel's representation that he 'made an honest
mistake and making no finding regarding the intention of defendants-but she did find that this
behavior resulted in counsel for plaintiff having to expend unnecessary time and resources. As
such, Judge Kuo sanctioned defendants and defense counsel in the form of attorneys' fees
associated with litigating this issue. Defendants now object to the imposition of those sanctions.
Defendants argue that the Sanctions Order is not authorized under any recognized
exception-including the Court's inherent powers, 28 U.S.C. § 1927, Federal Rule of Civil
Procedure ("FRCP") 11, or FRCP 37-to the general rule that each party bears its own attorneys'
fees. Defs.' Objs. & Resp. Magistrate's Order Imposing Sanctions ("Defs.' Mem.") at 7-13,
ECF No. 34. Defendants further argue that the Sanctions Order was issued in violation of
defendants' due process rights. Id. at 13-14. Plaintiff does not attempt to defend the Sanctions
Order under 28 U.S.C. § 1927, FRCP 11, or FRCP 37-and this Court agrees that none of those
provisions is applicable here-but he does argue that (a) the court has the inherent power to
sanction defendants and (b) Judge Kuo did not violate defendants' due process rights. Pl.'s
Mem. Law Opp'n Defs.' Obj. Magistrate Judge Kuo's Apr. 8, 2016 Order Sanctions ("Pl.'s
Mem.") at 6-14, ECF No. 36.
Generally, a sanction in the form of attorney's fees is permitted under the court's inherent
power only where the court finds that the sanctioned party acted in bad faith. See Wilson v.
Citigroup. N.A., 702 F.3d 720, 724 (2d Cir. 2012) ("Our case law is clear that a district court
may not impose attorney's fees as a sanction [under the court's inherent power] without first
making an explicit finding that the sanctioned party, whether a party or a party's counsel, acted
in bad faith in engaging in the sanctionable conduct."). The Second Circuit has "declined to
uphold awards under the bad-faith exception absent ... clear evidence that the challenged
actions are entirely without color and [are taken] for reasons of harassment or delay or for other
improper purposes." Id. (second alteration in original) (quoting Oliveri v. Thompson, 803 F.2d
1265, 1272 (2d Cir. 1986)). 2
Judge Kuo found that defendants' and defense counsel's conduct was improper. Judge
Kuo stopped short, however, of finding that their conduct rose to the level of fraud upon the
court, accepting counsel's representation that he made an honest mistake and making no finding
regarding the intention of defendants. During oral argument, Mr. Millman and the Court had the
Mr. Millman: [J]ust so we could be clear, your Honor, the Court
has made no finding of willfulness, of intent to deceive or fraud on
the part of counsel.
An award of sanctions under 28 U .S.C. § 1927 similarly requires a finding of bad faith. See
United States v. Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am ..
AFL-CIO, 948 F.2d 1338, 1345 (2d Cir. 1991) ("Bad faith is the touchstone of an award
under [28 U.S.C. § 1927]."); Mahoney v. Yamaha Motor Com. U.S.A., 290 F.R.D. 363, 367
(E.D.N.Y. 2013) ("[T]o impose sanctions under§ 1927, the court must make a finding of
'conduct constituting or akin to bad faith."' (quoting In re 60 E. 80th St. Equities, Inc., 218
F.3d 109, 115 (2d Cir. 2000))).
The Court: I am not finding that which is why I am not finding that
there's fraud on the Court, all right? I mean, I am accepting that,
Mr. Millman, your representation that it was in error, but there was
no intention. And I am not making any finding at this point, as far
as what your client was intending to do ...
Tr. Oral Arg. at 15, ECF No. 33. Thus, it is apparent that Judge Kuo made no finding that
defendants' or defense counsel's actions were taken "for reasons of harassment or delay or for
other improper purposes."
It is true, as plaintiff argues, see Pl.'s Mem. at 12-13, that the Second Circuit has carved
out a limited exception to the bad faith requirement. In United States v. Seltzer, 227 F.3d 36 (2d
Cir. 2000), the Court stated the following:
Our opinion today therefore is intended to clarify the
circumstances under which a district court has the power to
sanction pursuant to its inherent authority without a finding of bad
faith. When a district court invokes its inherent power to impose
attorney's fees or to punish behavior by an attorney in the actions
that led to the lawsuit or conduct of the litigation, which actions
are taken on behalf of a client, the district court must make an
explicit finding of bad faith. But, when the district court invokes
its inherent power to sanction misconduct by an attorney that
involves that attorney's violation of a court order or other
misconduct that is not undertaken for the client's benefit, the
district court need not find bad faith before imposing a sanction
under its inherent power.
Id. at 41-42 (internal quotation marks and citations omitted). This exception, however, does not
apply here, as there is no evidence that defense counsel violated a court order or engaged in other
misconduct that was not undertaken for the client's benefit.
This Court agrees with Judge Kuo's analysis of this matter. Indeed, this Court is troubled
by defense counsel's conduct. Nevertheless, given that there has been no finding of bad faithand this Court agrees that the record does not support such a finding-sanctions in the form of
attorney's fees are not authorized under the Court's inherent power. See Mahoney, 290 F.R.D. at
369-70 ("This Court finds no clear evidence that [counsel] acted in bad faith in filing the
complaint or proceeding with the litigation .... There is little dispute that [counsel] should have
reasonably determined that his client's claim was meritless based on the information he was
given .... [Nevertheless], this Court finds that [counsel] did not file his complaint, while
seemingly meritless, for 'purpose of delay or harassment.'"). The Court, therefore, sustains
defendants' objections and vacates the Sanctions Order. 3
While the Court embraces Judge Kuo's findings, it finds that under the circumstances
presented here, a sanction in the form of attorneys' fees is not authorized. It therefore sustains
defendants' objections and vacates the Sanctions Order.
Dated: Brooklyn, New York
Given the Court's ruling, it need not address defendants' due process argument.
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