DILLON v. BMO HARRIS BANK, N.A. et al

Filing 285

MEMORANDUM OPINION AND ORDER signed by JUDGE CATHERINE C. EAGLES on 02/10/2017. The Court will impose a total sanction of $150,000 in attorney's fees and expenses. Mr. Six, Mr. Kaplan, Stueve Siegel Hanson LLP, and Darren Kaplan Law Firm, P.C. are responsible for paying this entire amount and Mr. Moore is responsible for paying up to $100,000 of this sanction as set out herein.(Taylor, Abby)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
JAMES DILLON,
Plaintiff,
v.
BMO HARRIS BANK, N.A., et al.,
Defendants.

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1:13-CV-897

MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
This is a civil RICO lawsuit arising out of online loans the plaintiff, James Dillon,
received at predatory interest rates. The Court previously found that three of Mr. Dillon’s
lawyers and their law firms multiplied the proceedings and violated their duty of candor
by hiding a document that was potentially dispositive of a dispute over whether there was
an agreement to arbitrate and by implying to the Court that the document did not exist.
The Court granted a motion for sanctions filed by a defendant, Generations Community
Federal Credit Union, and held the matter open for determination of a monetary sanction.
The sanctioned attorneys filed a motion for reconsideration, which the Court held open as
to the issue of law firm liability and otherwise denied.
Having reviewed the supplemental briefing and evidence, the Court will require
two attorneys, Steve Six and Darren T. Kaplan, and their firms, Stueve Siegel Hanson
LLP and Darren Kaplan Law Firm, P.C., to jointly pay $150,000 to Generations as a
sanction. The Court finds that the third attorney, J. Austin Moore, will be jointly

responsible for $100,000 of this sanction. The Court further concludes that the law firms
fully participated in this case and in the violation of the duty of candor to the Court, and
so the Court will deny the motion for reconsideration.
I.

BACKGROUND
As explained in detail in the Court’s previous order granting the motion for

sanctions, Mr. Six, Mr. Moore, Mr. Kaplan, and their law firms acted unreasonably, in
bad faith, and vexatiously, thereby multiplying the proceedings and violating their duty of
candor to the Court. See generally Doc. 264, available at Dillon v. BMO Harris Bank,
N.A., No. 13-CV-897, 2016 WL 5679190 (M.D.N.C. Sept. 30, 2016). They objected to
the Court’s consideration of an arbitration agreement proffered by Generations while
hiding, for two years, the existence of an identical copy in the possession of their client;
they misled the Court about the existence of their client’s copy; and they caused an
unnecessary appeal. See Doc. 264 at 62. The Court concluded that sanctions were
appropriate under 28 U.S.C. § 1927 and in the Court’s inherent authority. See id. at 38,
49-50.
The Court further determined that Generations’ attorney’s fees from a renewed
motion to dismiss and the first appeal were “excess” costs recoverable under § 1927 and
were appropriate as a sanction for violating the duty of candor. Id. at 49-50, 56-59. The
Court directed the sanctioned attorneys and Generations to confer about the amount of
reasonable fees and to provide supplemental briefing. Id. at 57-58. The Court held open
the issue of whether a monetary sanction in addition to the attorney’s fees would be
appropriate. Id. at 58-59.
2

The sanctioned attorneys and Generations agreed on a reasonable amount for the
attorney’s fees and expenses incurred by Generations in connection with the renewed
motion to dismiss and the first appeal. Doc. 268 at ¶ 1. They disagreed as to whether
Generations should also recover fees and expenses incurred in prosecuting the motion for
sanctions and, if so, the amount of those fees. Id. at ¶ 2. The sanctioned attorneys and
Generations have now briefed this issue. Docs. 270, 271, 272.
II.

AMOUNT OF SANCTION
A. Attorney’s Fees and Expenses Associated with the Renewed Motion to
Dismiss and First Appeal
Sanctioned counsel and Generations agree that $70,147.70 is a reasonable amount

for the attorney’s fees and expenses associated with the renewed motion to dismiss and
the first appeal. Doc. 268 at ¶ 1. The Court has reviewed the evidence, and it finds that
this is a reasonable amount. The Court will order the sanctioned attorneys to pay
$70,147.70 to Generations for those proceedings.
B. Attorney’s Fees and Expenses Associated with Prosecuting the
Sanctions Motion
As of late October 2016, Generations had incurred an additional $118,417.33 in
attorney’s fees and expenses while prosecuting the motion for sanctions. See Doc. 270-1
at ¶ 8; Doc. 270-2 at ¶ 8. Generations asks that the Court require the sanctioned attorneys
to pay this amount as well. Doc. 270 at 5. The sanctioned attorneys object, contending
that the Court’s initial order did not require the payment of these fees and that the Fourth
Circuit prohibits requiring sanctioned attorneys from paying fees incurred in litigating a

3

sanctions motion. See Doc. 271 at 2-3. In the alternative, they ask the Court to review
Generations’ attorneys’ bills in camera. Id. at 4.
1. Overview of Relevant Authorities
Section 1927 authorizes recovery of attorney’s fees and expenses “reasonably
incurred because of” the vexatious conduct. 28 U.S.C. § 1927. Generations made a
reasonable decision to file a sanctions motion, given the egregious conduct of sanctioned
counsel in hiding the existence of Mr. Dillon’s copy of the disputed contract. The plain
language of the statute appears to cover fees and costs from litigating a sanctions motion,
and many courts have so held. Norelus v. Denny’s, Inc., 628 F.3d 1270, 1298, 1302 (11th
Cir. 2010) (holding that the plain language of § 1927 supports including “costs arising
from the sanctions proceedings in the sanctions award,” and affirming such an award);
Truck Treads, Inc. v. Armstrong Rubber Co., 868 F.2d 1472, 1474-75 (5th Cir. 1989)
(upholding award under Rule 11 and § 1927 that included fees “incident to the sanctions
motion itself”); see In re Royal Manor Mgmt., Inc., 525 B.R. 338, 365-66 (B.A.P. 6th Cir.
2015) (affirming sanctions imposed under § 1927 and the bankruptcy court’s inherent
authority and noting that such sanctions awards may include fees incurred in obtaining
the sanctions award), aff’d, 652 F. App’x 330 (6th Cir. 2016), cert. denied sub nom.
Grossman v. Wehrle, 2017 WL 276189 (U.S. Jan. 23, 2017); In re Tutu Wells
Contamination Litig., 120 F.3d 368, 387-88, 390 (3d Cir. 1997) (upholding sanctions in
court’s inherent authority, including attorney’s fees incurred in prosecuting sanctions
motion), overruled on other grounds, Comuso v. Nat’l R.R. Passenger Corp., 267 F.3d
331, 339 (3d Cir. 2001); Amlong & Amlong, P.A. v. Denny’s, Inc., 500 F.3d 1230, 12734

74 (11th Cir. 2006) (dissent of Hill, J.) (collecting cases for the proposition that fees
incurred in sanctions motions are recoverable).
In Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991), a case involving inherent
authority, the Supreme Court upheld a sanctions award that included attorney’s fees
incurred in filing a sanctions motion. The original award by the district court included
“attorney’s fees and expenses paid . . . for services rendered in connection with the
sanctions portion of this suit,” NASCO, Inc. v. Calcasieu Television & Radio, Inc., 124
F.R.D. 120, 143 (W.D. La. 1989), aff’d, 894 F.2d 696 (5th Cir. 1990), and the Supreme
Court did not indicate any misgivings about requiring the sanctioned lawyers to pay those
fees. See Chambers, 501 U.S. at 50-51. Indeed, the Court emphasized that making the
prevailing party whole was one of the purposes of a sanction in the Court’s inherent
authority. Id. at 46 (citing Hutto v. Finney, 437 U.S. 678, 689 n.14 (1978)) (holding that
sanctions serve the “dual purpose” of vindicating judicial authority and making the
prevailing party whole).
In a case predating Chambers, the Fourth Circuit expressed a more cautious
approach to including attorney’s fees related to the sanctions motion itself. That case,
Blue v. U.S. Dep’t of Army, held that courts ordinarily should not award attorney’s fees
for the costs of prosecuting motions for sanctions, even if those motions are successful.
See 914 F.2d 525, 548-49 (4th Cir. 1990). However, Blue does not absolutely prohibit
awarding attorney’s fees incurred in prosecuting sanctions motions, and it upheld such
sanctions in part. Id.

5

In Blue, the defendants sought sanctions under Rule 11, Rule 16, § 1927, and “the
bad faith exception to the American Rule.” Id. at 533. The district court granted the
motion and awarded attorney’s fees incurred as a result of the misconduct, including fees
incurred in prosecuting the sanctions motion. Id. at 532-33, 548. The Fourth Circuit
agreed the conduct was sanctionable and affirmed certain sanctions against the plaintiffs
and their senior lawyer. Id. at 544-45, 546-48. The court set aside sanctions imposed on
a junior associate and made other revisions to the district court’s order. Id. at 545-46,
548-50.
As is most relevant here, the Fourth Circuit set aside the district court’s award of
sanctions against plaintiff’s counsel for the fees the defendants incurred in the sanctions
proceeding itself, but it upheld such sanctions against the individual plaintiffs. Id. at 549.
The court noted that counsel’s sanctionable conduct occurred only in discovery and at
trial, where plaintiff’s counsel neither investigated the facts underlying their clients’
claims nor adequately examined discovery materials. Id. at 548-49. No sanctionable
conduct by the attorneys occurred during sanctions hearings. Id. On the other hand, the
individual plaintiffs “engaged in numerous instances of untruthfulness during the course
of their testimony at the sanctions hearing,” and thus sanctions against them were
appropriate. Id. at 549. In conclusion, the Court stated that while “[l]itigants should be
able to defend themselves from the imposition of sanctions without incurring additional

6

sanctions,” a categorical rule against such sanctions was not appropriate because it
“would . . . license the wholesale abuse of [sanctions] hearings.” Id. at 548-49.1
After Blue, an amendment to Rule 11 explicitly allows for attorney’s fees incurred
in filing a successful sanctions motion. Fed. R. Civ. P. 11 advisory committee’s note to
1993 amendment (“[T]he court may award to the person who prevails on a motion under
Rule 11 . . . reasonable expenses, including attorney’s fees, incurred in presenting or
opposing the motion.”). As discussed supra pp. 4-5, other circuits have included the
attorney’s fees incurred in filing a § 1927 motion in sanctions awards and the Supreme
Court has implicitly approved such attorney’s fees in an inherent authority case. No
party has identified a post-Blue case where the Fourth Circuit applied or discussed Blue
to decide whether § 1927 or the Court’s inherent authority authorize a court to include
attorney’s fees incurred in prosecuting a sanctions motion.2 Nonetheless, the Fourth
Circuit has not overruled or limited Blue’s restrained approach and Blue is consistent
with the general principle that courts should be cautious when imposing sanctions. See,
e.g., Chambers, 501 U.S. at 44; Roadway Express, Inc. v. Piper, 447 U.S. 752, 764
(1980).

1

In deciding the case, the Fourth Circuit did not distinguish between the various sources of
sanctioning power. Blue, 914 F.2d at 534.
2

In Brubaker v. City of Richmond, 943 F.2d 1363, 1387 (4th Cir. 1991), a Rule 11 case, the
Fourth Circuit rejected an award of sanctions for the costs of the sanctions motion itself. The
Brubaker opinion relied in part on Blue, see id., but noted that neither § 1927 nor inherent
authority sanctions were involved, id. at 1382 n.25, which distinguishes it from the situation
here.
7

2. Amount of Fees Incurred by Generations
The Court has reviewed the evidence provided by Generations of its fees and,
while it is a large amount, the amount is reasonable. In addition to the initial briefing on
the motion for sanctions, Generations incurred attorney’s fees as a result of numerous
complications in the sanctions litigation caused by Mr. Dillon’s counsel. Sanctioned
counsel asked the Court to consider certain materials in camera, Doc. 245 at ¶ 8,
submitted three expert declarations of law professors to one of their later briefs, Docs.
244-1 to -3, and repeatedly raised new issues and purported facts in their defense. See,
e.g., Doc. 246 at 4 (making a factual assertion based on “correspondence with [Mr.]
Dillon at the start of the case,” but not attaching or adequately describing that
correspondence until the Court ordered it to do so; see Text Order 07/13/2016), and at 6
(asserting, for the first time, in a supplemental brief, that the process by which Mr. Dillon
obtained his copy of the loan “certainly involved multiple transfers between multiple
Western Sky affiliates over a period of months”). The Court also required supplemental
briefing. Doc. 239.
Mr. Dillon’s attorneys raised numerous arguments in opposition to the motion for
sanctions. See Doc. 264 at 31-34, 39-48. Several of these arguments were exaggerated
or unsupported, but Generations nonetheless had to evaluate, investigate, and answer
each of them. See generally Docs. 213, 255. While there was some duplicated effort
associated with local counsel’s review and work, the duplication was minimal and local
counsel’s work was particularly appropriate in connection with a sanctions motion. The
hourly rates were reasonable. Doc. 270-3 at ¶¶ 13-14; Doc. 270-4 at ¶¶ 16-20.
8

Considering all the relevant factors, see Berry v. Schulman, 807 F.3d 600, 617 (4th Cir.
2015) (citing Johnson v. Ga. Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.
1974)), Generations’ fees and expenses were reasonable.
Sanctioned counsel ask the Court to review unredacted copies of the invoices of
Generations’ lawyers in camera to be sure the amount is reasonable. Doc. 271 at 4. Two
of Generations’ attorneys, Eric Pullen and Jonathan Reich, attached the invoices that their
firms had submitted to Generations. Doc. 270-1 at pp. 6-51; Doc. 270-2 at pp. 6-67.
While these bills were redacted to exclude time spent on matters unrelated to the
sanctions motion, Doc. 270-1 at p. 3; Doc. 270-2 at p. 3, the bills include substantial
detail as to the tasks undertaken in connection with the sanctions motion and related
matters like the sanctioned counsel’s motion to seal. See, e.g., Doc. 270-1 at p. 41
(describing revisions to briefs, research on specific topics, and communications with
client and co-counsel). Sanctioned counsel have not explained why the Court needs to
review time entries for tasks not associated with the sanctions motion and for which
Generations does not seek attorney’s fees. In camera review is unnecessary.
3. Counsel’s Conduct During the Sanctions Proceeding Warrants
Additional Sanctions
In this case, sanctioned counsel’s underlying conduct involved deceit and
intentional efforts to mislead the Court. In opposing the sanctions motion, sanctioned
counsel continued their efforts to mislead; the Court described some of this conduct in its
previous order. See generally Doc. 264. The Court need not repeat its findings in full,
but will restate some of these acts:

9

 Counsel responded to the motion for sanctions by requesting their own
fees in defending against Generations’ motion for sanctions. Doc. 202
at 18-20. The basis for this request was “so lacking in merit that it lends
further support to the Court’s conclusion that [Mr. Dillon’s counsel] are
acting in bad faith.” Doc. 264 at 61-62.
 Counsel offered post hoc explanations for their conduct that were not
credible, id. at 39-42, and the Court explicitly did not believe Mr. Six
and Mr. Kaplan when they professed their innocence during the
sanctions proceedings. Id. at 44-45.
 In opposing the sanctions motion, counsel provided “numerous,
inconsistent explanations and exaggerations of the record.” Id. at 31-34.
In particular, counsel denied knowledge of facts in a way that was
inconsistent with their questioning of Mr. Dillon at his 2015 deposition,
and they did not clarify this issue at the sanctions hearing, despite a
direct prompt from the Court. See id. at 32. Counsel also stated that
certain events were “impossible,” without relevant or timely factual
support. See, e.g., id. at 41 & n.24.
 In sworn testimony, Mr. Kaplan asserted a version of the facts that was
inconsistent with the record and with the contentions of his co-counsel.
See id. at 52 & n.31. The Court found this attempt to rewrite history
“inaccurate,” “offensive,” and “further indicative of his bad faith.” Id.
at 52, 55.
 Counsel made factual representations to one of their retained experts
that they never made to the Court, and then they offered this expert’s
declaration as evidence that sanctions were not appropriate. Id. at 46;
see Doc. 244-3 at ¶ 6 n.1.
 Some of counsel’s arguments were “shocking” in their willingness to
defend “cynical gamesmanship and deliberate obfuscation.” Doc. 264
at 43.
Sanctioned counsel thus defended the sanctions motion in a vexatious way that increased
Generations’ attorney’s fees.

10

If the Court awards none of these fees, Generations will have spent more litigating
sanctions than it spent on the original excess proceedings that were the basis for
sanctions. This result would likely dissuade litigants from bringing improper conduct to
the attention of the courts. Norelus, 628 F.3d at 1299 (“An economically rational party
would not relish the prospects of an award that is smaller than the costs of obtaining it.”);
In re Tutu Wells, 120 F.3d at 388 (stating that, after such an outcome, litigants “might
allow otherwise sanctionable conduct to go unaddressed”). The problem is worse if the
victimized litigants believe the misbehaving lawyers are likely to defend the sanctions
motion in an unfair or vexatious manner.
Equitable considerations also favor an additional financial sanction. The
sanctioned attorneys have made no argument that their behavior was negligent rather than
deliberate. Though sanctioned counsel did not dispute the basic fact underlying the
sanctions motion—that sanctioned counsel knew Mr. Dillon had a copy of the arbitration
agreement and did not tell Generations or the Court about it for two years—they have not
accepted any real responsibility for their actions and their consequences. See Doc. 202 at
4 (calling Generations’ argument “nonsensical” and absurd); Doc. 246 at 14 (asserting
that “Plaintiff’s Counsel did absolutely nothing improper or unethical”); Doc. 246-1 at ¶
29 (testimony by Mr. Kaplan that he does not understand how anyone could see his
purpose as malevolent); Doc. 258 at 2 (stating that counsel “did not intend or engage in
any impropriety, much less the egregious conduct required . . . for sanctions”); see also
Doc. 263 at 7 (observation, by the Court, that there was a near-total lack of “any
recognition or acknowledgement . . . that the conduct at issue here might have been less
11

than perfect”); Doc. 279 at 25 (“Sanctioned counsel deeply regret the confusion
concerning Plaintiff’s original objection . . .” (emphasis added)). This is not a case where
the sanctioned attorneys engaged in a moderate and reasonable defense of their actions.
Moreover, there is nothing to indicate that sanctioned counsel are unable to pay a
substantial sanction. See generally Docs. 246-1 to -3.3
Finally, a significant financial sanction is appropriate to emphasize the seriousness
of the misconduct and to deter future misconduct. See Doc. 264 at 58-59; Norelus, 628
F.3d at 1298-99. The attorney’s fees Generations incurred as a result of the renewed
motion and first appeal are relatively small in context, and, as the Court has explained,
the misconduct was outrageous, aspects of the defense were shocking, and sanctioned
counsel show no understanding of why their actions were inappropriate. Sanctioned
counsel have emphasized their nationwide experience in large class actions, e.g., Doc.
246-1 at ¶¶ 6, 8, and sanctioned counsel and their firms have appeared in courts across
the country on behalf of putative class members.4 Given the brazen nature of their
original misconduct, their willingness to engage in cynical gamesmanship and deliberate

3

Sanctioned counsel have waived any argument that they are unable to pay. See Robeson
Def. Comm. v. Britt (In re Kunstler), 914 F.2d 505, 524 (4th Cir. 1990) (treating inability to pay
as “reasonably akin to an affirmative defense” to Rule 11 sanctions (quoting White v. Gen.
Motors Corp., Inc., 908 F.2d 675, 685 (10th Cir. 1990))); accord Salvin v. Am. Nat’l Ins. Co.,
281 F. App’x 222, 226 (4th Cir. 2008) (unpublished) (per curiam) (citing Kunstler with approval
in § 1927 context).
E.g., Parm v. Nat’l Bank of Cal., N.A., 835 F.3d 1331 (11th Cir. 2016) (listing all three
sanctioned counsel as counsel of record); Moss v. First Premier Bank, 835 F.3d 260 (2d Cir.
2016) (same); Anderson v. Spirit Aerosystems Holdings, Inc., 827 F.3d 1229 (10th Cir. 2016)
(listing Mr. Six); Baker v. Microsoft Corp., 797 F.3d 607 (9th Cir. 2015) (listing Mr. Kaplan);
Hapka v. CareCentrix, Inc., No. 16-2372, 2016 WL 7336407 (D. Kan. Dec. 19, 2016) (listing
Mr. Moore).
4

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obfuscation, and the risk of harm to vulnerable putative class members in cases across the
country from such inappropriate litigation tactics, a small financial sanction will not be an
adequate deterrent.
The sanctioned attorneys contend that the Court’s initial order did not require the
payment of these fees. Doc. 271 at 4. While this is so, the Court’s order did explicitly
contemplate an additional financial sanction, should it be appropriate, Doc. 264 at 58-59,
and sanctioned counsel have not shown any unfair prejudice from the Court’s
consideration of Generations’ fees incurred in filing the sanctions motion.
Sanctioned counsel also contend that the Fourth Circuit in Blue prohibited
requiring sanctioned attorneys from paying attorney’s fees incurred in connection with
the sanctions litigation, absent sanctionable conduct occurring during the sanctions
proceedings. See Doc. 271 at 2-3. As discussed supra pp. 5-6, the holding in Blue is not
so broad as they contend. Other circuits also disagree with sanctioned counsel’s
interpretation. E.g., Norelus, 628 F.3d at 1300-01 (discussing Blue); In re Tutu Wells,
120 F.3d at 388 (mentioning Blue). In any event, the conduct of sanctioned counsel
during the sanctions proceedings demonstrates continuing bad faith. See discussion
supra pp. 9-11.
Generations expended significant time and resources to bring the conduct of
sanctioned counsel to the attention of the Court, to evaluate that conduct in the context of
an ever-growing litigation history and ever-expanding post hoc explanations by
sanctioned counsel, and to provide the Court with legal analysis and relevant case law.
During the sanctions proceedings, sanctioned counsel demonstrated continuing bad faith,
13

and, to this day, sanctioned counsel do not appear to appreciate the seriousness of their
misconduct. An additional sanction is appropriate to emphasize the duty of counsel to be
candid with the Court, to deter sanctioned counsel from future misconduct, and to make
Generations whole. In its inherent authority, the Court finds it appropriate to impose an
additional financial sanction beyond the attorney’s fees incurred in connection with the
multiplied proceedings.
4. Amount of the Additional Sanction
Generations incurred attorney’s fees and costs of $118,417.33 in prosecuting the
sanctions motion, on top of the fees incurred during the underlying proceedings.
Generations asks the Court to require sanctioned counsel to pay this entire amount. Doc.
270 at 1-2. Were it not for the Fourth Circuit’s decision in Blue, the Court would do so in
its discretion, in view of the factors discussed supra.
Blue, however, tells trial courts that attorneys facing sanctions motions are entitled
to defend those motions “without incurring additional sanctions.” 914 F.2d at 548.
Generations would have no doubt incurred some fees had sanctioned counsel undertaken
a measured defense free of additional bad-faith complications and protestations. To be
fair, some of sanctioned counsel’s arguments in opposition to the sanctions motion were
made in good faith. For instance, sanctioned counsel sought to explain their
understanding of the law on sanctions and to put their conduct in a favorable context.
See, e.g., Doc. 202 at 10-18. Blue sought to allow this type of defense. Because the
Court must follow the Fourth Circuit’s admonition in Blue that attorneys should be
allowed to present a fair defense to a sanctions motion without fear of additional
14

sanctions, the Court will not award all of Generations’ attorney’s fees incurred in
prosecuting the sanctions motion.
Determining the amount of excess costs and fees under § 1927 sanctions is
“inherently difficult, and precision is not required.” Lee v. First Lenders Ins. Servs., Inc.,
236 F.3d 443, 446 (8th Cir. 2001); see also Blue, 914 F.2d at 547 (stating that a
“reasonable sanction” may mean sanctions “more or less than the actual costs and fees”
created by the offending conduct). Generations incurred about $25,000 in attorney’s fees
on the sanctions motion before filing it on January 12, 2016.5 For the fees incurred
thereafter, it would be a tedious, time-consuming, and ultimately impossible exercise to
comb through Generations’ timesheets and attempt to separate the fees incurred as a
result of bad faith arguments from fees incurred to respond to more reasonable arguments
in defense of the sanctions motion.
In the Court’s discretion, weighing all the evidence in light of its extensive
experience in the case, the Court finds that an additional sanction of $79,852.30 is
appropriate. Combined with the $70,147.70 agreed to by both parties for attorney’s fees
and expenses from the renewed motion to dismiss and first appeal, Doc. 268 at ¶ 1, this
will bring the total sanction to $150,000. This amount goes a long way towards making
Generations whole while not punishing sanctioned counsel for asserting matters of
legitimate consideration relevant to the sanctions motion. It is sufficiently large that it

5

The parties did not supply this approximation; the Court reached it by looking at the dates,
times, and descriptions of the entries on Generations’ counsels’ timesheets. See Docs. 270-1,
270-2.
15

emphasizes both the significant nature of the misconduct and the importance of being
candid with the Court. As discussed supra pp. 11-13, a smaller amount would be
insufficient to punish sanctioned counsel or to make Generations whole.
5. Who Should Pay the Additional Sanctions
i.

Individual Attorneys

Of the three sanctioned attorneys, Mr. Kaplan and Mr. Six are more culpable
because of their level of experience and because of their prominent roles in the vexatious
conduct.6 Mr. Kaplan has practiced law for twenty-five years and has litigated against
banks and other financial institutions on behalf of borrowers and depositors for twelve of
those years. Doc. 246-1 at ¶¶ 3, 8. Mr. Six has practiced law for twenty-three years and
has served as a Kansas district court judge and as the attorney general of Kansas. Doc.
246-2 at ¶¶ 3, 6. These were the lawyers driving the bus during the course of the
proceedings related to the arbitration motions, and they have been driving the bus on the
sanctions motions. The Court will require Mr. Six and Mr. Kaplan to pay the entire
sanctions award.
Mr. Moore, an associate at the firm where Mr. Six is a partner, Doc. 246-2 at ¶ 2
& Doc. 246-3 at ¶ 2, has made no effort to distinguish his culpability from that of Mr. Six
and Mr. Kaplan. Nonetheless, a review of Mr. Dillon’s deposition shows that Mr. Moore
was following Mr. Kaplan’s lead. See Doc. 180-1 at 36, 134:7-137:24. Mr. Moore’s
declarations do not otherwise describe his credentials or his experience in the practice of

6

The Court reviewed in detail the specific conduct of each attorney in its earlier order. See
Doc. 264 at 50-55.
16

law, nor has he indicated an inability to pay. See Docs. 203, 246-3. In Blue, the Fourth
Circuit set aside the sanction on an attorney who, among other things, was an associate
following the directions of a senior partner. 914 F.2d at 546. Because Mr. Moore was an
associate following, in part, the lead of the other more experienced counsel, the Court
will assess a total sanction of only $100,000 against Mr. Moore.
ii.

Firms

The Court has also sanctioned the law firms with which Mr. Six, Mr. Moore, and
Mr. Kaplan practice. Doc. 264 at 62. These law firms have asked the Court to reconsider
their liability for sanctions and contend that the Court’s findings of fact as to the firms are
inadequate. See Doc. 279 at 24-25.7
As noted in the Court’s initial order, the Stueve firm had primary responsibility for
the factual investigation—or lack thereof—that led to the suppression of the Dillon copy.
Doc. 264 at 54. The record reflects that the names of the law firms were on the relevant

7

The motion for sanctions was directed towards the law firms as well as counsel, yet the law
firms made no separate arguments and did not contest their liability for the misconduct of their
partners and associate until after the Court sanctioned them. See Official Comm. of Unsecured
Creditors of Color Tile, Inc. v. Coopers & Lybrand, LLP, 322 F.3d 147, 167 (2d Cir. 2003)
(noting, in Rule 54(b) context, that “where litigants have once battled for the court’s decision,
they should neither be required, nor without good reason permitted, to battle for it again.”
(internal citation omitted)); Akeva L.L.C. v. Adidas Am., Inc., 385 F. Supp. 2d 559, 565
(M.D.N.C. 2005) (“Public policy favors an end to litigation and recognizes that efficient
operation requires the avoidance of re-arguing questions that have already been decided.”);
Potter v. Potter, 199 F.R.D. 550, 553 (D. Md. 2001) (Grimm, M.J., mem. & order) (“It is hard to
imagine a less efficient means to expedite the resolution of cases than to allow the parties
unlimited opportunities to seek the same relief simply by conjuring up a new reason to ask for
it.”); cf. Bey v. Shapiro Brown & Alt, LLP, 997 F. Supp. 2d 310, 320-21 (D. Md. 2014)
(discussing Rule 59(e)), aff’d, 584 F. App’x 135 (4th Cir. 2014) (unpublished) (per curiam). In
any event, “[t]here is no serious dispute that a court may sanction a law firm pursuant to its
inherent power.” Enmon v. Prospect Capital Corp., 675 F.3d 138, 147 (2d Cir. 2012).
17

pleadings and that each sanctioned lawyer appeared before the Court in the name of and
on behalf of their firms. E.g., Doc. 113 at 3; Doc. 143 at 1-2; see Doc. 264 at 54-55.
Sanctioned lawyers used firm letterhead and firm email addresses to communicate with
other lawyers in the case. E.g., Doc. 203-2; Doc. 213-1 at 2-3. A third, unsanctioned
lawyer from the Stueve firm also signed pleadings. See Doc. 17 at 21; Doc. 113 at 3.
Mr. Kaplan changed law firms around August 2015, but no other attorneys from the
earlier firm appeared in court or signed any documents, and his current firm bears only
his name, reflecting that he and his firm are one and the same when it comes to court
appearances. See Doc. 264 at 50 n.30. There is no evidence to suggest that any of these
three lawyers were acting outside the scope of their authority as agents of their law firms,
and the misconduct occurred over the course of an extended period of time.
Moreover, the law firms ratified the conduct of Mr. Six, Mr. Moore, and Mr.
Kaplan in their defense of the sanctions motion, where they repeatedly expressed to the
Court the position that the sanctioned lawyers had done nothing wrong. See supra p. 11
(listing sanctioned counsel’s repeated insistence of their innocence); see also Doc. 263 at
20 (representing to the Court that the law firms “conducted full internal reviews” in
response to the sanctions motion). Neither firm has presented any evidence to reduce its
relative culpability as compared to that of the sanctioned lawyers.
The Court again concludes that it should sanction Stueve Siegel Hanson LLP and
Darren Kaplan Law Firm, P.C. for the violation of the duty of candor, based on the
misconduct of their partners acting within their authority on behalf of the firms and based

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on the participation in and ratification of the misconduct by the firms. The law firms are
each responsible for the entire sanctions amount.
III.

CONCLUSION
As a result of the bad faith and vexatious conduct of sanctioned counsel in

multiplying the proceedings and violating their duty of candor to the Court, Generations
incurred attorney’s fees and expenses in the amount of $70,147.70 in connection with a
renewed motion to dismiss and the first appeal and $118,417.33 in connection with
sanction proceedings. The Court finds that a significant sanction is necessary to make
Generations whole and to emphasize the importance of counsel’s duty of candor to the
Court and the negative consequences to the Court, the opposing party, and the system of
justice when one violates that duty.
The Court will impose a total sanction of $150,000 in attorney’s fees and
expenses. Mr. Six, Mr. Kaplan, Stueve Siegel Hanson LLP, and Darren Kaplan Law
Firm, P.C. are responsible for paying this entire amount and Mr. Moore is responsible for
paying up to $100,000 of this sanction.
It is ORDERED that:
1. The motion to reconsider directed towards sanctions against Stueve Siegel
Hanson LLP and Darren Kaplan Law Firm, P.C., Doc. 278, is GRANTED in
part, to the limited extent that the Court supplements its findings of fact and
conclusions of law as stated in this opinion. Otherwise, the Court affirms and
adopts its original decision as to the sanction against the law firms and the
motion is DENIED. Stueve Siegel Hanson LLP is liable for the misconduct of
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Mr. Six and Mr. Moore, Darren Kaplan Law Firm, P.C. is liable for the
misconduct of Mr. Kaplan, and sanctions against those firms are appropriate
for the reasons stated in the Court’s original order and in this order.
2. Steve Six, J. Austin Moore, Darren T. Kaplan, Stueve Siegel Hanson LLP, and
Darren Kaplan Law Firm, P.C. are SANCTIONED for acting vexatiously, in
bad faith, and in violation of their duty of candor to the Court and as a sanction
shall reimburse some of Generations’ attorney’s fees caused by the
misconduct.
3. The total financial sanction is $150,000. Mr. Six, Mr. Kaplan, Stueve Siegel
Hanson LLP, and Darren Kaplan Law Firm, P.C. are jointly and severally
responsible for this entire amount, and Mr. Moore is jointly and severally
responsible for part of this sanction in the amount of $100,000.
4. Mr. Six, Mr. Kaplan, Mr. Moore, Stueve Siegel Hanson LLP, and Darren
Kaplan Law Firm, P.C. SHALL PAY the sanction to Generations no later than
March 17, 2017, and each shall file a certificate of compliance with the Court
no later than that same date.
This the 10th day of February 2017.

__________________________________
UNITED STATES DISTRICT JUDGE

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