Allied World Assurance v. Bank of Utah

Filing 32

MEMORANDUM DECISION AND ORDER: 1) Bank of Utah as Trustee's 22 29 two motions requesting an in-person hearing and objecting to the Writ are GRANTED. 2) The Writ 20 is QUASHED. 3) On or before September 8, 2022, Al lied and Bank of Utah as Trustee shall each submit a brief consisting of no more than ten pages on the issue of whether Allied's counsel should be sanctioned under Section 1927. 4) Once the court considers the parties' forthcoming briefs, it will determine whether to impose Section 1927 sanctions against Allied's counsel. Signed by Magistrate Judge Jared C. Bennett on 8/30/22. (dla)

Case 2:17-cv-01188-RJS-JCB Document 32 Filed 08/30/22 PageID.406 Page 1 of 7

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH
ALLIED WORLD ASSURANCE
COMPANY, LTD.,

MEMORANDUM DECISION
AND ORDER

Petitioner,
v.

Case No. 2:17-cv-01188-RJS-JCB

BANK OF UTAH, in its capacity as Owner
Trustee of the MSN53519 and MSN5320
Trusts,
Respondent.

Chief District Judge Robert J. Shelby
Magistrate Judge Jared C. Bennett

Chief District Judge Robert J. Shelby referred this case to Magistrate Judge Jared C.
Bennett under 28 U.S.C. § 636(b)(1)(A). 1 Respondent Bank of Utah, in its capacity as Owner
Trustee of the MSN53519 and MSN5320 Trusts (“Bank of Utah as Trustee”), filed two motions
requesting an in-person hearing and objecting to a writ of execution the Clerk of Court issued on
March 7, 2022 (“Writ”). 2 The court held oral argument on the motions on August 25, 2022. 3 For
the reasons stated on the record, the court: (I) granted Bank of Utah as Trustee’s motions and
quashed the Writ; and (II) stated that the court is considering imposing sanctions against
Petitioner Allied World Assurance Company, Ltd. (“Allied”) under 28 U.S.C. § 1927. This

1

ECF No. 24.

2

ECF Nos. 22, 29.

3

ECF No. 31.

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Memorandum Decision and Order memorializes the court’s rulings, which the court addresses in
turn below.
I.

Bank of Utah as Trustee’s Motions and the Writ
This action is based upon an arbitration award of attorney fees and costs entered in favor

of Allied and against Bank of Utah as Trustee. On November 9, 2017, Allied initiated this action
by filing a motion to enforce the arbitration award against Bank of Utah. 4 Subsequently, Bank of
Utah moved to dismiss this action to the extent it sought judgment against Bank of Utah in its
individual capacity rather than against Bank of Utah as Trustee. 5 Chief Judge Shelby denied
Bank of Utah’s motion on April 26, 2018, stating: “Nothing in the Motion to Enforce supports
the inference that Allied is seeking judgment against Bank of Utah in its individual capacity.
Thus, the court will construe the Motion to Enforce as directed against Bank of Utah in its
capacity as a trustee.” 6
On May 25, 2018, Chief Judge Shelby granted Allied’s motion to enforce and directed it
to submit a proposed judgment. 7 Despite Chief Judge Shelby’s prior ruling, Allied submitted a
proposed judgment that did not specifically indicate that the judgment was against only Bank of
Utah as Trustee. 8 Instead, the proposed judgment indicated that it was against “Bank of Utah.” 9
4

ECF No. 2.

5

ECF No. 4.

6

ECF No. 11 at 2.

7

ECF No. 13.

8

ECF No. 14.

9

Id. at 3.
2

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Bank of Utah as Trustee filed a response to Allied’s proposed judgment, arguing that the
proposed judgment was misleading because it could suggest that the judgment was against Bank
of Utah in its individual capacity. 10 Bank of Utah as Trustee submitted its own proposed
judgment indicating that the judgment was against only Bank of Utah as Trustee. 11
Undeterred by Chief Judge Shelby’s prior ruling, Allied filed a reply in which it argued
that the court had never determined that the judgment “may only be satisfied by trust assets” or
that Bank of Utah’s non-trust assets “are not subject to enforcement” of the judgment. 12 Allied
further requested that the court “rule that Allied . . . is not constrained to enforce the [judgment]
only against assets of . . . Bank of Utah held or traceable to the subject trusts” and argued that
Allied “should be permitted to enforce the [j]udgment against available non-trust assets of Bank
of Utah.” 13
Chief Judge Shelby entered a judgment on June 22, 2018. 14 That judgment specifically
stated that it was “entered in this matter in favor of [Allied] against . . . Bank of Utah in its
capacity as Owner Trustee of the MSN53519 and MSN5320 Trusts.” 15
On March 7, 2022, over three years after the judgment was entered, Allied applied for the
Writ against “Bank of Utah” and represented to the court that Allied was permitted to execute on
10

ECF No. 15.

11

Id.

12

ECF No. 16 at 2 of 6.

13

Id. at 5 of 6.

14

ECF No. 18.

15

Id. at 3.
3

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any assets “held by Bank of Utah as the judgment debtor.” 16 The Clerk of Court issued the Writ
the same day, which commanded “Bank of Utah” to turn over $417,880.35. 17
On August 11, 2022, after Allied served Bank of Utah as Trustee’s counsel with the
Writ, 18 Bank of Utah as Trustee filed a motion requesting an in-person hearing and objecting to
the Writ. 19 Apparently in response to Bank of Utah as Trustee’s argument that the Writ was not
properly served, Allied subsequently served Bank of Utah as Trustee with the Writ on August 17,
2022, 20 which prompted Bank of Utah as Trustee’s second motion requesting an in-person
hearing and objecting to the Writ. 21
As indicated above, the court held a hearing on Bank of Utah as Trustee’s motions on
August 25, 2022. 22 Given Chief Judge Shelby’s prior ruling that he had construed Allied’s
motion to enforce as being directed against only Bank of Utah as Trustee, and his entry of
judgment against only Bank of Utah as Trustee, the court questioned Allied’s counsel extensively
during the hearing about the legal authority upon which he was relying that would permit Allied
to collect on any non-trust assets held by Bank of Utah. Despite being given numerous
opportunities to present that authority, Allied’s counsel could not identify any plausible legal
16

ECF No. 19 at 2.

17

ECF No. 20.

18

ECF No. 25.

19

ECF No. 22.

20

ECF No. 26.

21

ECF No. 29.

22

ECF No. 31.
4

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basis for collecting the judgment against Bank of Utah in its individual capacity. In fact, when
the court directly questioned Allied’s counsel about any such authority, he repeatedly stated that
he did not have it, despite being provided with prior notice of the hearing, which the court was
required to hold to determine whether the Writ could be enforced. 23 Consequently, the court
granted Bank of Utah as Trustee’s motions and quashed the Writ.
II.

28 U.S.C. § 1927 Sanctions
After resolving Bank of Utah as Trustee’s motions and quashing the Writ, the court

indicated that it is considering imposing sanctions against Allied’s counsel under § 1927 based
upon their efforts to advocate a position that Chief Judge Shelby had rejected on several
occasions—namely, that Allied is entitled to collect its judgment against Bank of Utah in its
individual capacity rather than only against Bank of Utah as Trustee. The court voiced its
concern that Allied’s counsel’s use of that rejected position to obtain the Writ was misleading to
the court, unreasonably multiplying these proceedings, and forcing Bank of Utah as Trustee to
unnecessarily expend resources to defend against that position. 24 The court also stated its

23

Fed. R. Civ. P. 69(a)(1) (“A money judgment is enforced by a writ of execution, unless the
court directs otherwise. The procedure on execution—and in proceedings supplementary to and
in aid of judgment or execution—must accord with the procedure of the state where the court is
located, but a federal statute governs to the extent it applies.”); Utah R. Civ. P. 64E(d)(1)-(2)
(providing that “[t]he defendant may reply to the writ and request a hearing” within 14 days of
service of the writ and that “[t]he court shall set the matter for an evidentiary hearing” to
determine whether “the writ was wrongfully obtained” or seeks property “exempt from seizure,”
or “the writ was properly issued and the property is not exempt”).
24

28 U.S.C. § 1927 (“Any attorney or other person admitted to conduct cases in any court of the
United States or any Territory thereof who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to satisfy personally the excess costs,
expenses, and attorneys’ fees reasonably incurred because of such conduct.”); Braley v.
Campbell, 832 F.2d 1504, 1511-13 (10th Cir. 1987) (providing that a court may impose
sanctions under § 1927 against counsel who, among other things: (1) engages in “conduct that,
5

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concern that, after using that position to obtain the Writ, Allied’s counsel could not identify a
valid legal basis to support the position, despite having prior notice that the hearing was being
held to determine the validity of the Writ.
At the same time, the court acknowledged that sanctions under § 1927 are limited to
compensating Bank of Utah as Trustee and cannot be used to punish or deter Allied’s counsel. 25
Thus, the court indicated that if any sanctions are imposed against Allied’s counsel under § 1927,
they will be limited to the fees and expenses Bank of Utah as Trustee incurred in filing its two
motions and the fees for one attorney’s time at the hearing on the motions.
The court also acknowledged that it is required to provide Allied’s counsel with notice
and an opportunity to be heard before imposing sanctions under § 1927. 26 Accordingly, the court
ordered the parties to submit simultaneous briefs of no more than ten pages on the issue of
§ 1927 sanctions against Allied’s counsel on or before September 8, 2022. The court indicated

viewed objectively, manifests either intentional or reckless disregard of the attorney’s duties to
the court”; (2) acts “recklessly or with indifference to the law”; (3) engages in conduct that is
either “cavalier” or “bent on misleading the court”; (4) “act[s] in the teeth of what [one] knows
to be the law”; or (5) “repeat[s] arguments previously rejected by the court” (quotations and
citations omitted)).
25

28 U.S.C. § 1927 (requiring the offending attorney to “satisfy personally the excess costs,
expenses, and attorneys’ fees reasonably incurred because of” the offending attorney’s conduct);
Hamilton v. Boise Cascade Express, 519 F.3d 1197, 1205 (10th Cir. 2008) (“[T]he text of § 1927
. . . indicates a purpose to compensate victims of abusive litigation practices, not to deter and
punish offenders.”).
26

Dominion Video Satellite, Inc. v. Echostar Satellite L.L.C., 430 F.3d 1269, 1279 (10th Cir.
2005) (considering a sanctions award under § 1927 and providing that “‘[t]he basic requirements
of due process with respect to the assessment of costs, expenses, or attorney’s fees are notice that
such sanctions are being considered by the court and a subsequent opportunity to respond.’”
(quoting Braley, 832 F.2d at 1514)).
6

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that, once it considers the parties’ forthcoming briefs, it will determine whether to impose § 1927
sanctions against Allied’s counsel.
ORDER
In summary, the court HEREBY ORDERS:
1.

Bank of Utah as Trustee’s two motions requesting an in-person hearing and
objecting to the Writ 27 are GRANTED.

2.

The Writ 28 is QUASHED.

3.

On or before September 8, 2022, Allied and Bank of Utah as Trustee shall each
submit a brief consisting of no more than ten pages on the issue of whether
Allied’s counsel should be sanctioned under § 1927.

4.

Once the court considers the parties’ forthcoming briefs, it will determine whether
to impose § 1927 sanctions against Allied’s counsel.

IT IS SO ORDERED.
DATED this 30th day of August 2022.
BY THE COURT:

JARED C. BENNETT
United States Magistrate Judge

27

ECF Nos. 22, 29.

28

ECF No. 20.
7