Williamson et al v. Recovery Limited Partnership et al

Filing 906

ORDER denying 893 Motion to Dismiss Sanctions Motion. Signed by Judge Algenon L. Marbley on 1/14/2014. (cw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
MICHAEL WILLIAMSON, et al.,
Plaintiffs,
v.
RECOVERY LIMITED
PARTNERSHIP, et al.,
Defendants.

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Case No. 2:06-cv-00292
JUDGE ALGENON L. MARBLEY

Magistrate Judge Kemp

OPINION & ORDER
This matter is before the Court on Attorney Richard Robol’s “Motion to Dismiss the
‘Sanctions Motion’ filed against him.” (Doc. 893). On October 16, 2013, Plaintiff Dispatch
Printing Company (“DPC” or “Dispatch”) filed a Motion for Sanctions (Doc. 871) against
Defendants Thompson, Kirk, and Ford, as well as against Attorney Robol, former counsel for
Defendants Recovery Limited Partnership (“RLP”) and Columbus Exploration, LLC (“CX”). As
part of its Plenary Order (Doc. 887), the Court severed the Motion as against Defendant
Thompson, holding that portion in abeyance until such time as Thompson appears before the
Court. The Court also permitted Attorney Robol to file a motion challenging whether he was
properly the target of a sanctions motion (Id. at 4), which he has now done. DPC responded in
opposition on December 11 (Doc. 895) and Robol replied on December 18 (Doc. 901).
For the reasons stated herein, Attorney Robol’s Motion is hereby DENIED.
I. BACKGROUND
DPC’s Motion for Sanctions alleges that Attorney Robol made “fraudulent
misrepresentations” to the Court regarding Defendants’ possession of original inventories of the
gold treasure at issue here; and that Defendants Thompson, Kirk, and Ford, as former directors

and/or managers of RLP and CX, exhibited “purposeful failure” to take action to prevent or
correct Robol’s misstatements. (Doc. 871 at 2). DPC seeks sanctions in the amount of the entire
cost of these proceedings – that is, $1,717,388 – or for an award of the cost of the receivership
proceedings1 that were necessary to uncover the fraud, $325,613.00. (Id.).
DPC contends that the Court’s July 20, 2006 Order (Doc. 84) was intended to resolve
DPC’s claim for an accounting, but instead resulted in futility and “sandbagging,” the result of
which was that Defendants were twice held in contempt for violation of the Order (see Doc. 145
& 480). Under the Order, the Court ordered Defendants to make available “all documents
identified in the July 11, 2006 list by the Accountant,” (Doc. 84 at 4), which, the Court later
noted, included “an inventory of the gold recovered and sold by the Defendants” (Doc. 145 at 4).
According to DPC, Defendants turned over one such inventory, but when pressed by the Court,
stated, through Attorney Robol, that the produced document was the “one and only inventory
that [RLP] had.” (Doc. 871 at 7) (citing 12/8/08 Hrg. Tr. At 60). DPC asserts that Robol made
such a representation to this Court on seven occasions and to the Court of Appeals twice. (Id.).
DPC insists, however, that once the Receiver had taken over the assets and records of RLP and
CX, he found the missing inventory documents with only a cursory search of Robol’s office,
implying that Robol lied when he told this Court, and the Court of Appeals, that the items could
not be found. (Id. at 7-8).
Furthermore, on November 20, 2013, DPC filed a Supplemental Motion for Sanctions,
alleging that additional investigation by the Receiver “has now revealed another category of
documents that Judge Sargus ordered Defendants to produce, but Mr. Robol said they did not

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On February 27, 2013, CX gave notice of an involuntary bankruptcy petition, filed by creditors, pursuant to
Chapter 11 of the U.S. Bankruptcy Code. (Doc. 865). On May 23, 2013, the Franklin County Court of Common
Pleas appointed Ira Kane as Receiver for CX and RLP. (Case No. 05-CV-4220).

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have.” (Doc. 888 at 3). The Court entered an agreed Order that this Supplemental Motion would
be briefed and argued on the same schedule as the original Motion. (Doc. 892).
II. LAW AND ANALYSIS
Attorney Robol does not dispute that the documents in question “should long ago have
been produced.” (Doc. 893 at 4). Instead, he argues that the violations, if any, were committed
by his former clients, RLP and CX, now under the control of the Receiver, and thus they, and/or
the Receiver are the proper targets for this Motion. Robol himself was not the object of the
Court’s orders, and indeed never a party to this case. Robol notes that going forward with the
evidentiary hearing without RLP, CX, and/or the Receiver could also create thorny issues of
attorney-client privilege and derivative liability.
Specifically, Robol raises the following objections to the Motion for Sanctions:
1) The “Order of Satisfaction” is dispositive, because, in that order, the Court found
that Defendants had complied with all of the Court’s production orders, the
violations of which are the source of this Motion for Sanctions;
2) Robol has never been a party to this case, and so he is not amenable to sanctions
under the Court’s inherent powers;
3) Robol was never the object of the Court’s orders to produce documents, the
violations of which are the source of this Motion for Sanctions;
4) Robol did not plausibly defraud the Court or otherwise proceed in bad faith;
5) Robol’s liability, if any, is derivative of his former clients’ liability, and therefore
those companies, and/or the Receiver, are necessary parties for this Motion.
(Doc. 893 at 2).
In response to Robol’s argument regarding the Order of Satisfaction, DPC filed a Motion
to Vacate the Order of Satisfaction on December 20, 2013 (Doc. 902), on the grounds that it was
obtained via fraud, and therefore invalid. DPC hastened to add that the Court does not need to
vacate the Order for Satisfaction, since, if the Court finds sanctionable fraud after the February
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18, 2014, evidentiary hearing, it can vacate the Order of Satisfaction at that time. (Id. at 2). But
vacating the Order now, DPC argues, would “put[] an end to Mr. Robol’s attempt to hide behind
an order that was obtained by material misrepresentations to the Court.” (Id. at 3).
A. The Order for Satisfaction and Plausibility Argument
With regard to Robol’s arguments relating to the Order for Satisfaction, and the
“plausibility” of the Motion for Sanctions, the Court finds that these objections necessarily
implicate issues of fact, which are more properly considered after the Court has had the benefit
of evidence and testimony. The Court will consider these arguments at the evidentiary hearing
on February 18, 2014.
B. Robol’s status as non-party and not the object of the Court’s Orders
Attorney Robol is not, nor has he ever been, a party to this case. Thus, he argues that
pursuing sanctions under the Court’s “inherent authority” prejudices his ability to defend
himself. Rather, he suggests that Fed. R. Civ. P. 11, 26, and 37 provide the proper mechanisms,
if any, for seeking sanctions from opposing counsel in this case.
Robol asserts that, because the Federal Rules already contemplate, and provide a
mechanism for, seeking sanctions for discovery violations, sanctions under the Court’s inherent
powers would not “fill a gap in the Civil Rules,” but rather would serve only to “ease the burden
of satisfying existing Civil Rules – to punish practices exempted by a Rule or that fall short of
meeting a Rule's standard for sanctionable conduct.” United States v. Aleo, 681 F.3d 290, 307
(6th Cir. 2012) (Sutton, J., concurring). Instead, “[a]ny effort to sanction [a] lawyer would have
to rise or fall based on the relevant rules and statutes already in place.” Id. at 308. In sum, in a
civil case, “a court’s use of inherent power to sanction . . . [can] not be reconciled with the
sanctioning regime already in place under the Federal Rules of Civil Procedure.” Id. at 307.

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Robol urges the Court to address any sanctions against him under the framework of Fed.
R. Civ. P. 26(g), which covers discovery disclosures, and 37, which addresses disobedience of a
discovery order. (Doc. 893 at 16). Both of those Rules allow for the moving party to recover
only “the reasonable expenses, including attorney’s fees, caused by the violation.” Robol
concludes that, since DPC does not, and cannot, show that it incurred any additional costs or
expenses because of Robol’s representations, the Motion for Sanctions should be dismissed as to
him. (Id. at 17).
In addition, Robol adds that the Consent order, which underlies DPC’s Motion for
Sanctions, addresses its mandates to “Defendants,” not their counsel. (See Doc. 84). In general,
sanctions for “violation of a definite and specific court order” require a showing by clear and
convincing evidence that the order was violated, regardless of the source of the court’s authority.
Grace v. Center for Auto Safety, 72 F.3d 1236, 1243 (6th Cir. 1996). When a person has not
violated any order, sanctions are not justified. Burley v. Gagacki, 729 F.3d 610, 618 (6th Cir.
2013) (“[B]ecause plaintiffs never moved to compel disclosure or discovery, the federal
defendants did not violate any court order that would justify any sanction under Rule 37.”).
Robol thus argues that, because he did not violate any order (and could not violate any
court order, as none was addressed at him), it would be improper for the Court to impose
sanctions against him.
DPC responds that it does not matter that Robol is “not a party” to this case, because “the
sanctions motion is about the obligation of a trial attorney – an officer of the court – to deal
honestly with the court.” (Doc. 895 at 9) (emphasis in original). And, “[s]ince attorneys are
officers of the court, their conduct, if dishonest, would constitute fraud on the court.” H.K.
Porter Co., Inc. v. Goodyear Tire & Rubber Co., 536 F.2d 1115, 1119 (6th Cir. 1976).

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Accordingly, DPC argues that, when an attorney perpetrates fraud upon the court, it is
well within the court’s powers to sanction the attorney. In support, DPC cites several Sixth
Circuit cases sanctioning attorneys for fraudulent conduct under the court’s inherent powers. In
Red Carpet Studios Div. of Source Advantage, Ltd. V. Sater, 465 F.3d 642 (6th Cir. 2006), the
Court of Appeals affirmed the award of sanctions against attorney Joel Joseph under 28 U.S.C. §
1927, and pursuant it its inherent authority, for his conduct in mailing harassing cease-and-desist
letters, moving for injunction with no support and no preparation for the hearing, and failing to
cooperate in scheduling a deposition for one of his clients. 465 F.3d at 644. The court held that,
even though the case had already settled, the district court retained jurisdiction over collateral
issues like sanctions, and that “federal courts have the inherent power to assess attorney's fees
against counsel who willfully abuse judicial processes or who otherwise act in bad faith.” Id. at
645-46 (citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 766-67 (1980)).
Moreover, in Metz v. Unizan Bank, 655 F.3d 485 (6th Cir. 2011), the Court of Appeals
found that the District Court’s use of its inherent authority to sanction an attorney was not
improper, even when Fed. R. Civ. P. 11 was available. In that case, defendant Fifth Third Bank
sought sanctions against attorney Daniel Morris because, after Fifth Third had been dismissed
with prejudice, Morris filed a complaint that reasserted identical claims against the bank. 655
F.3d at 487. When Morris failed to respond to Fifth Third’s request for sanctions, the district
court sanctioned him under its inherent powers. Id. The Court of Appeals affirmed. The court
reasoned that “although a court ordinarily should rely on the Rules rather than the inherent
power, . . . the district court [can] resort to its inherent authority to sanction bad-faith conduct,
even if the court has not expressly considered whether such conduct could be sanctioned under
all potentially applicable rules or statutes,” 655 F.3d at 491 (internal quotations and citations

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omitted). The court relied, however, on the fact that Morris never responded to the motion for
sanctions, thus “le[aving] the district court with few options” other than to employ its inherent
powers. Id. at 490. In addition, the court noted that Rule 11 was not directly on point, since that
rule does not cover “disregard of court orders” or “inaction that needlessly delays the entire
proceedings,” such as failure to respond and failure to attend a pretrial conference. Id. at 491.
Finally, in First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501 (6th
Cir. 2002), the Court of Appeals affirmed the imposition of sanctions against a party under the
district court’s inherent powers, despite the fact that Rule 11 was available. The court explained
that “[e]ven if there were available sanctions under statutes or various rules in the Federal Rules
of Civil Procedure, the Supreme Court in Chambers emphasized that the inherent authority of the
Court is an independent basis for sanctioning bad faith conduct in litigation.” 307 F.3d at 511.
Although Supreme Court precedent states that a district court should consider whether the
conduct could be sanctioned under the Rules before it relies upon its inherent authority to
sanction bad-faith conduct, it may do so even if the Rules arguably are applicable. Id. at 512.
The Sixth Circuit’s reasoning in Red Carpet, Metz, and First Bank makes clear that
district courts can sanction attorneys for their misconduct, even if they are not parties to the
litigation. The ability of courts to deploy their inherent power to sanction in situations where no
Rule or statute is directly on point is beyond question. Thus, in Metz, the Court of Appeals
reasoned that Rule 11 did not apply to all of the conduct at issue, and therefore the exercise of
the court’s inherent authority was appropriate. 655 F.3d at 491. Moreover, even it situations
where a Rule or statute might arguably apply, the district court may still use its inherent authority
to sanction. As the Court of Appeals explained in Red Carpet, where an attorney’s actions were
an “unreasonable and vexatious multiplication of litigation” as well as a “willful[] abuse [of]

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judicial processes [and/or] in bad faith,” 465 F.3d at 646, sanctions could be “justified under §
1927, the court's inherent authority, or both.” Id. at 647. The inherent authority of the Court is
“an independent basis for sanctioning bad faith conduct in litigation,” First Bank, 307 F.3d at
511, and it is not the case that “a federal court [is] forbidden to sanction bad-faith conduct by
means of the inherent power simply because that conduct could also be sanctioned under [a]
statute or the Rules,” Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991). This is particularly true
when wrongful conduct covered by the Rules is “intertwined with bad-faith conduct beyond the
reach of the Rules that only the inherent power could address.” Aleo, 681 F.3d at 310 (Sutton, J.,
concurring) (internal quotation omitted). In such cases, a district court is not required to
“separate out the conduct forbidden by the Rules from conduct sanctionable only through the
inherent power,” and can instead rely on its inherent authority. Id.
The Court need not decide now whether to sanction Attorney Robol under the Federal
Rules of Civil Procedure, its inherent authority, or not at all. It is sufficient at this preliminary
stage for the Court to find that Robol’s Motion to Dismiss will not be granted on this ground.
C. Robol’s liability vis-à-vis his former clients
Finally, Robol argues that any liability he faces is “derivative of, and secondary to, his
former clients’ liability.” (Doc. 893 at 17). He suggests that if DPC had filed a claim against his
former clients (now, the Receiver), Robol could have asserted cross-claims against them. (Id.).
Or, DPC could have brought its motion for sanctions against the Receiver only, and the Receiver
in turn could have sought remuneration, if proper, in a malpractice lawsuit against Robol. (Id. at
18). Robol accuses DPC of choosing the target of its Motion for Sanctions with an eye toward
cutting off Robol’s strategic options, while also protecting the Receiver, with whom Robol
alleges DPC now has an amicable relationship. (Id. at 17 n.6). In addition, Robol argues that

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DPC’s choice of targets for this Motion was calculated to ensure that Robol could not offer
evidence of assurances made to him by his former clients, since, as non-parties, such statements
might now be inadmissible hearsay. (Id.).
DPC responds by noting that Robol’s reliance on his client’s representations is no excuse:
“trial counsel themselves have an affirmative obligation to ensure that what their clients tell them
is accurate.” Brown v. Tellermate Holdings, Ltd., No. 2:11-CV-1122, 2013 WL 1363738, at *6
(S.D. Ohio Apr. 3, 2013) (Kemp, M.J.). And DPC adds that, even if his clients told him a lie,
because Robol knew it was a falsehood, he is equally guilty of fraud upon the Court. See
General Medicine P.C. v. Horizon/CMS Health Care Corp., 475 F. App’x 65, 72 (6th Cir. 2012)
(fraud requires, at minimum, a “reckless disregard for the truth,” which includes “situations
where the actor has knowledge, or reason to know, of the facts, but does not realize or appreciate
the high degree of risk involved, although a reasonable man in his position would do so.”).
Nor, according to DPC, is Robol’s liability “derivative” of his client’s. (Doc. 895 at 2223). Because Robol was the one who “turned a blind eye” to his client’s actions, even when he
knew the truth, he is the one who perpetrated the fraud on the Court. (Id. at 23). Moreover, even
if his liability were derivative, DPC argues that Robol’s clients and/or the Receiver still would
not be necessary parties. (Id.). DPC asserts that it is “well-settled” that “joint tortfeasors are not
indispensable parties.” Dennis v. Wachovia Securities LLC, 429 F. Supp. 2d 281, 290 (D. Mass.
2006) (quotation omitted).
Whether or not Robol fulfilled his obligations to deal with the Court in good faith, and
whether he reasonably relied on his former clients’ representations, are matters that go to the
substantive merit of the Motion for Sanctions, and not to be answered here. Regardless, Robol
fails to direct the Court to any authority supporting his contention that either RLP and CX, or the

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Receiver, are necessary parties that must be included in the Motion for Sanctions in order to
proceed. Rather, it is axiomatic that joint tortfeasors, including those in an agency relationship,
are not indispensable parties. See Lynch v. Johns-Manville Sales Corp., 710 F.2d 1194, 1198
(6th Cir. 1983) (“It is beyond peradventure that joint tortfeasors are not indispensable parties in
the federal forum.”). In addition, it is clear that DPC’s Motion for Sanctions alleges misconduct
by Attorney Robol himself, not just by his former clients. (See Motion for Sanctions, Doc. 871,
at 13-19, 23-24; DPC’s Response, Doc. 895, at 17).
Accordingly, Robol’s Motion to Dismiss is DENIED.
III. CONCLUSION
Attorney Robol has demonstrated no good reason that the Motion for Sanctions should
not go forward against him. Accordingly, his Motion to Dismiss (Doc. 893) is hereby DENIED.
IT IS SO ORDERED.

s/ Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
DATED: January 14, 2014

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