Stradtman v. Republic Services, Inc. et al
Filing
205
MEMORANDUM OPINION re: 179 MOTION for Attorney Fees and Costs by Ronald Krall, Republic Services of Virginia, LLC, Republic Services, Inc. (See Memorandum Opinion For Details). Signed by District Judge James C. Cacheris on 8/5/15. (nhall)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
STEPHEN M. STRADTMAN,
Plaintiff,
v.
REPUBLIC SERVICES, INC.,
et al.,
Defendants.
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M E M O R A N D U M
1:14cv1289 (JCC/JFA)
O P I N I O N
This matter is before the Court on Defendants Republic
Services, Inc., Republic Services of Virginia, LLC, and Ronald
Krall’s (collectively “Defendants”) Motion for Attorney Fees and
Costs.
[Dkt. 179.]
For the following reasons, the Court will
deny the motion.
I. Background
The facts of this case are well-known to the Court.
(See 6/11/15 Mem. Op. [Dkt. 174] at 1-10.)
As relevant here,
Stephen Stradtman (“Stradtman” or “Plaintiff”) filed a threecount complaint against Defendants in the Circuit Court of
Fairfax County, Virginia.
2.)
(Am. Notice of Removal [Dkt. 8] at
Stradtman alleged: (1) tortious interference with
contractual relations and business expectancies against all
Defendants (Compl. [Dkt. 8-3] ¶¶ 121-40); (2) common law
1
conspiracy against all Defendants (id. ¶¶ 141-49); and (3)
negligent retention of employees (Ronald Krall) against the two
Republic Defendants (id. ¶¶ 150-70).
Defendants removed the
case to this Court and subsequently moved to dismiss the
Complaint.
4].)
(Am. Notice of Removal; Defs.’ Mot. to Dismiss [Dkt.
The Court granted the Defendants’ motion in part,
dismissing the conspiracy and negligent retention claims.
(11/25/14 Mem. Op. [Dkt. 14] at 16.)
Mindful that dismissal
under Federal Rule of Civil Procedure 12(b)(6) is disfavored,
the Court denied the motion as to the tortious interference
claim so as to develop a record for the Court to consider the
claim on its merits. (Id. at 13.)
Stradtman alleged Defendants tortiously interfered
with contractual rights regarding his former employment as the
Chief Executive Officer (“CEO”) of Otto Industries North
America, Inc. (“Otto”), a trash and recycling cart manufacturer.
(Compl. ¶¶ 121-40.)
According to Stradtman, Defendants diverted
their business away from Otto in an attempt to force his
resignation.
(Id. ¶¶ 127-28.)
This pressure to resign,
Stradtman claimed, was in retaliation for a discrimination
lawsuit that Stradtman’s wife had filed against Defendants.
(Id.)
Stradtman believed he had no choice but to resign because
of Defendants’ improper methods and interference with his
employment at Otto.
(Id. ¶ 133.)
2
After the close of a contentious discovery period,
Defendants moved for summary judgment.
J. [Dkt. 142].)
(Defs.’ Mot. for Summ.
The Court granted the motion from the bench and
memorialized its reasoning in a written Memorandum Opinion.
(6/11/15 Mem. Op. [Dkt. 174].)
failed for three reasons.
The Court held Stradtman’s claim
First, Stradtman failed to prove that
Defendants induced a third party, Otto, to terminate his
employment contract.
(Id. at 12.)
Second, Stradtman’s
voluntary resignation broke the causal chain between any
supposed interference by Defendants and the termination of his
employment with Otto.
(Id.)
Third, Stradtman was not
constructively discharged or forced to resign.
(Id.)
Defendants now move for attorneys’ fees and costs
pursuant to 28 U.S.C. § 1927, Federal Rule of Civil Procedure
54, and the Court’s inherent authority.
(See generally Defs.’
Mot. for Attorney Fees and Costs [Dkt. 179].)
Defendants
believe they are entitled to fees and costs because Stradtman
and his counsel “brought and continued to litigate this case
long after they must have known that there was no good faith
basis to do so.”
(Defs.’ Mem. in Supp. [Dkt. 180] at 1.)
Stradtman and his counsel oppose the motion, arguing there was
no bad faith in prosecuting this case.
Opp. [Dkt. 198].)
(See generally Pl.’s
Having been fully briefed and argued, this
motion is ripe for disposition.
3
II. Legal Standard
A. 28 U.S.C. § 1927
Section 1927 of Title 28 of the U.S. Code states:
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.
Section 1927 is concerned with remedying abuse of
court process.
If an attorney needlessly multiplies a
proceeding, then he may be liable for the costs of such
extraneous litigation.
See Roadway Express, Inc. v. Piper, 447
U.S. 752, 756 n.3 (1980) (noting that § 1927 provides only for
excess costs incurred as a result of multiplication, not the
entire cost of the litigation).
The statute “‘does not
distinguish between winners and losers, or between plaintiffs
and defendants.
The statute is indifferent to the equities of a
dispute and to the values advanced by the substantive law.’”
DeBauche v. Trani, 191 F.3d 499, 511 (4th Cir. 1999) (citing
Roadway Express, 447 U.S. at 762).
Thus, an attorney who files
a meritless claim may not be sanctioned under § 1927 if he does
not “multiply the proceedings.”
DeBauche, 191 F.3d at 511.
Likewise, an attorney who wins a substantial verdict on a
meritorious claim may still face sanctions if he does engage in
4
such conduct.
Id.
Bad faith on the part of the attorney is a
precondition for fees and costs under § 1927. 1
McKenzie v.
Norfolk S. Ry. Co., 497 F. App’x 305, 312 (4th Cir. 2012);
E.E.O.C. v. Great Steaks, Inc., 667 F.3d 510, 522 (4th Cir.
2012).
Awarding sanctions under § 1927 lies within the sound
discretion of the district court.
Collins v. Dollar Tree
Stores, No. 2:09cv486, 2010 WL 9499078, at *4 (E.D. Va. May 28,
2010).
B. Court’s Inherent Authority
In addition to the authority granted under 28 U.S.C. §
1927, this court also possesses “the inherent authority in
appropriate cases to assess attorneys' fees and impose other
sanctions against a litigant or a member of the bar who has
‘acted in bad faith, vexatiously, wantonly, and for oppressive
reasons.’”
Williams v. Family Dollar Servs., Inc., 327 F. Supp.
2d 582, 585 (E.D. Va. 2004) (quoting Chambers v. NASCO, Inc.,
501 U.S. 32, 45-46 (1991)). “The bad faith exception for the
award of attorneys' fees is not restricted to cases where the
1
Defendants cite Sanford v. Virginia, 689 F. Supp. 2d 802 (E.D.
Va. 2010) as standing for the proposition that the Fourth
Circuit had suggested, but not decided, that bad faith is
required for sanctions under § 1927.
(Defs.’ Mem. in Supp. at
11.) However, in McKenzie the Fourth Circuit rejected Sanford’s
interpretation of its case law. McKenzie, 497 F. App’x at 312
(“Sanford asserts, however, that our decisions merely state this
proposition [that bad faith is required under § 1927] in dicta
because a finding of bad faith was not necessary to reach our
conclusions in those cases. We disagree.”).
5
action is filed in bad faith.
[B]ad faith may be found, not
only in the actions that led to the lawsuit, but also in the
conduct of the litigation.”
Roadway Express, Inc., 447 U.S. at
766 (citation and internal quotation marks omitted).
This Court
also has the power to invoke its inherent authority to sanction
an attorney's conduct “even if procedural rules exist which
sanction the same conduct.”
Chambers, 501 U.S. at 49.
Under both § 1927 and the court’s inherent power, the
burden of demonstrating an entitlement to attorneys’ fees rests
on the moving party.
Morris v. Wachovia Secs., Inc., 448 F.3d
268, 284 (4th Cir. 2006).
III. Analysis
A. Fees and Costs Under 28 U.S.C. § 1927
Before deciding the merits of this action, the Court
must determine, without the benefit of briefing from either
party, whether § 1927’s bad faith requirement is the “more
stringent” subjective standard or a less stringent objective
standard.
In Salvin v. American National Insurance Co., this
Court canvassed the relevant case law and found that several
circuits have ruled that the objective standard of bad faith
should be used to determine an award of attorneys’ fees and
costs under § 1927.
No. 2:06cv264, 2007 WL 1097891, at *3-4
(E.D. Va. Apr. 11, 2007) (collecting cases).
Although the
Fourth Circuit had not addressed the distinction between the
6
objective and subjective standard, the Salvin court concluded
that the Fourth Circuit had “indicated” that § 1927 only
requires an objective showing of bad faith.
Id. at *3 (citing
Fahrenz v. Meadow Farm P’ship, 850 F.2d 207, 211 n.1 (4th Cir.
1988) for the proposition that Fed. R. Civ. P. 11 required an
objective bad faith showing, upholding Rule 11 sanctions, and
stating sanctions would be also be appropriate under § 1927).
Therefore, the Salvin court applied the objective standard of
bad faith in awarding attorneys’ fees under § 1927.
2007 WL 1097891, at *4, *10.
Salvin,
On appeal, the attorney argued §
1927 required a subjective showing of bad faith.
Salvin v. Am.
Nat’l Ins. Co., 281 F. App’x 222, 225 (4th Cir. 2008).
The
Fourth Circuit declined to decide which standard is required
under § 1927 because the factual findings supported that the
attorney acted in bad faith, even assuming the more stringent
subjective standard applied.
Id.
Two years later, this Court was again faced with the
question of what standard – objective or subjective – governs
the bad faith inquiry under § 1927.
at *3-4.
Collins, 2010 WL 9499078,
Based on its reasoning in Salvin, this Court applied
the objective standard.
Id.
The Fourth Circuit has not issued
any definitive pronouncement regarding the appropriate standard
in a post-Salvin case.
In light of the case law and this
Court’s sound reasoning in Salvin, the Court will apply an
7
objective standard in determining whether § 1927 sanctions are
warranted here.
Objective bad faith does not require malice or ill
will; “reckless indifference to the law will qualify.
If a
lawyer pursues a path that a reasonably careful attorney would
have known, after appropriate inquiry, to be unsound, the
conduct is objectively unreasonable and vexatious.”
Collins,
2010 WL 9499078, at *3 (citing Dal Pozzo v. Basic Machinery Co.,
463 609, 614 (7th Cir. 2006)).
Defendants claim that
Stradtman’s counsel was “well aware” of the facts as set forth
in the Court’s Memorandum Opinion granting summary judgment.
(Defs.’ Mem. in Supp. at 13.)
Specifically, Defendants argue
that Stradtman and his counsel “long knew” that (1) Defendants
did not induce Otto to terminate his employment contract or
force Stradtman’s resignation; (2) that Stradtman voluntarily
resigned; (3) that Stradtman’s working conditions at Otto were
not intolerable; (4) that Stradtman’s voluntary actions were
part of a scheme to obtain money from Otto and manufacture a
claim against Defendants; and (5) there was no factual support
for many of the allegations of retaliation made against
Defendants in Stradtman’s complaint.
2.)
(Defs.’ Mem. in Supp. at
The Court addresses each of these contentions in turn.
8
1. Whether Defendants Induced Otto to Force Stradtman
Out and Stradtman’s Voluntary Resignation
Turning to the first two issues raised by Defendants,
namely, whether Defendants induced Otto to terminate Stradtman’s
employment and Stradtman’s voluntary resignation, Stradtman has
never denied that he resigned from Otto.
at 7.)
(Pl.’s Mem. in Supp.
His position in this litigation has been that his
resignation cannot be fairly characterized as truly voluntary
because of the wrongful conduct of Defendants, which was
directed at Stradtman and Otto, his employer.
(Id.)
Stradtman’s theory of the case was as follows: Republic diverted
business from Otto in an effort to coerce Stradtman to convince
his wife to drop her lawsuit against Republic; as a result of
Republic’s conduct, Stradtman concluded his position with Otto
was untenable and that considering the circumstances, he had no
choice but to resign; and the facts would support a showing of
constructive discharge and that Republic would be found liable
for tortious interference with Stradtman’s contract with Otto.
(Id. at 2.)
For Stradtman’s theory to succeed, he had two
difficult hurdles to surmount: persuading the Court that
constructive discharge is viable in Virginia, and then
convincing the Court that constructive discharge can satisfy the
elements of tortious interference with contract.
Though
Stradtman ultimately could not convince this Court that the law
9
was otherwise, that does not mean that Stradtman’s arguments
advocating for the change in the law were in bad faith, i.e.,
made for the purpose of running up Defendants’ costs.
As one district court has noted, the Supreme Court of
Virginia has not yet ruled on constructive discharge as it
relates to a claim for wrongful termination by an at-will
employee.
Faulkner v. Dillon, -- F. Supp. 3d --, No.
1:14CV00081, 2015 WL 1291411, at *3 (W.D. Va. Mar. 23, 2015).
The federal district courts in Virginia are split over whether
constructive discharge is recognized under Virginia law.
Id.
(comparing Gordon v. ArmorGroup N. Am., Inc., No. 1:10cv002
(JCC), 2010 WL 3418219, at *4 (E.D. Va. Aug. 27, 2010)
(rejecting constructive discharge), and Gastyne v. Entrust,
Inc., No. 1:10cv271 (JCC), 2010 WL 3418235, at *11 (E.D. Va.
Aug. 24, 2010) (same), with Wynne v. Birach, No. 1:09cv15, 2009
WL 3672119, at *4 (E.D. Va. Nov. 3, 2009) (recognizing
constructive discharge), and Johnson v. Paramont Mfg., LLC, No.
1:05CV00079, 2006 WL 2711830, at *6 (W.D. Va. Sept. 21, 2006)
(same)).
Virginia trial courts have also reached different
conclusions on the issue, with many courts choosing to recognize
a constructive discharge claim under Virginia law.
2015 WL 1291411, at *4 (collecting cases).
Faulkner,
The Fourth Circuit
has declined to recognize a constructive discharge exception to
the employment-at-will doctrine, concerned that federal courts
10
would extend state law beyond any point recognized by Virginia
law.
Id. (citing Hairston v. Multi-Channel TV Cable Co., No.
95-2363, 1996 WL 119916 (4th Cir. Mar. 19, 1996)); see also
Grier v. Titan Corp., Nos. 97–1167, 97–1168, 1997 WL 467510, at
*1 n.1 (4th Cir. Aug. 15, 1997) (citing Hairston as stating
Virginia law does not provide a cause of action for constructive
discharge).
In light of such disagreement in the case law, it
would not be unreasonable for Stradtman and his counsel to
believe that constructive discharge for an at-will employee may
be a viable legal theory in Virginia.
Even assuming constructive discharge is a viable legal
theory in Virginia, Stradtman also had to persuade the Court
that constructive discharge is sufficient to show intentional
interference with his contract with Otto.
Stradtman’s argument
on this point rested on two cases: Taylor v. CNA Corp. and
Wilson v. Modjadidi.
Among other claims, the plaintiff in
Taylor, who had voluntarily resigned, brought a claim for
tortious interference with business expectancy.
182, 204 (E.D. Va. 2010).
782 F. Supp. 2d
This Court dismissed the claim.
Id.
“It is axiomatic that a plaintiff cannot sustain a claim of
tortious interference with business expectancy when he willingly
surrendered his right to those expectancies.”
this Court qualified that language.
Id.
However,
“Of course, if conditions
at CNA had become so intolerable that Taylor [was] effectively
11
left no practical choice other than quitting, then it would be
unfair to characterize his decision as willingly made.”
Id.
Because the plaintiff had alleged the same facts in his
constructive discharge count, which the Court had already
dismissed, the plaintiff in Taylor could not establish tortious
interference based on a constructive discharge theory on the
facts of his case.
Id.
In Wilson, the plaintiff had an at-will employment
contract with a family dentistry practice.
No. CL06-4670, 2008
WL 5539824, at *1 (Va. Cir. Ct. Jan. 23, 2008).
She alleged
that one of the dentists subjected to her to such severe and
pervasive harassment that she had no choice but to quit.
Id.
She then sued the dentist for tortious interference with her
employment contract with the dentistry group.
Id.
The Norfolk
County Circuit Court found the plaintiff had alleged sufficient
information about the defendant’s intention to force her to
resign and made specific threats evidencing those intentions.
Id. at *3.
“Because such threats are a type of conduct that
will support a cause of action for tortious interference,” the
court overruled the demurrer.
Id.
In ruling on summary judgment, this Court assumed,
without deciding, that an at-will employee can maintain a
tortious interference claim on a constructive discharge theory.
(6/11/15 Mem. Op. at 19 n.9 (noting that the Supreme Court of
12
Virginia has not resolved this issue).)
Nonetheless, this Court
distinguished Wilson and Taylor on their facts.
Unlike the
plaintiff in Wilson, “[t]here is no evidence in the record that
Defendants specifically threatened Otto to force Stradtman’s
resignation, that they openly bragged about causing Stradtman to
lose his employment, or that they had anything remotely to do
with Stradtman’s separation.”
(6/11/15 Mem. Op. at 19.)
Therefore, Stradtman could not establish a causal chain between
any of Defendants’ actions and his ultimate resignation
sufficient to introduce any genuine issue of fact on whether
Defendants tortiously interfered with his Otto contract.
And
with respect to Taylor, this Court found that Stradtman’s
working conditions were not so intolerable that he could not
continue working at Otto, and thus his decision to leave Otto
was willingly made.
(6/11/15 Mem. Op. at 21.)
Both of these determinations are fact-specific
determinations that could only be made after a complete record
before the Court.
While the legal support underlying
Stradtman’s theory may have been thin, the Court is wary to
penalize an attorney for undertaking an effort to advance the
law, especially absent a concrete showing that such arguments
were made with the intent to harass the opposing party.
See
Overnite Transp. Co. v. Chicago Indus. Tire Co., 697 F.2d 789,
794 (7th Cir. 1983) (stating plaintiff’s actions did not
13
“multiply” proceedings where issue presented was one of first
impression); see also McMahan v. Adept Process Servs., Inc., 279
F.R.D. 356, 361-62 (E.D. Va. 2011) (“While the existing
precedent did not support such counsel's position ‘on all
fours,’ there is no existing precedent which is contrary to
Plaintiffs' position based upon the particular facts of this
case. Perhaps the lack of such precedent suggests the lack of a
logical factual basis for counsel's position, but a lack of
logic is a highly questionable basis for the imposition of
sanctions.”).
In addition to attacking Stradtman’s legal theory as
made in bad faith, Defendants also argue that Stradtman’s
counsel misconstrued the facts in this litigation.
Defendants
cite to several emails in support, including one email sent from
Stradtman to his counsel before the complaint was filed in which
he told her that the Otto board wanted him to stay.
Reply [Dkt. 202] at 3; Defs.’ Reply, Ex. A.)
(Defs.’
Though a close
call, the Court finds that these emails are not evidence of bad
faith.
Stradtman believed that he had a fiduciary duty to
resign once he learned of potential problems with Republic.
(Pl.’s Opp’n at 10-11.)
Such arguments do not depend on whether
the Otto board wanted him to stay, because the Court, and not
the Otto board, ultimately determines whether such a duty
existed.
It was not bad faith for Stradtman’s counsel to argue
14
that if he remained as CEO, he would be in breach of his
fiduciary duties to Otto, even if the board of directors
interpreted Stradtman’s fiduciary duties differently.
Therefore, the emails do not show that Stradtman’s counsel
multiplied the litigation in bad faith, and thus do not support
an award of fees and costs under § 1927.
2.
Whether Stradtman’s Working Conditions Were
Intolerable
Defendants also allege that Stradtman and his counsel
knew from the beginning of this suit that Stradtman’s working
conditions could not be classified as intolerable such that they
would support a claim for constructive discharge.
in Supp. at 5-6.)
(Defs.’ Mem.
In ruling on the motion to dismiss, the Court
found that Stradtman’s complaint alleged that Stradtman was left
with no other options but to resign.
(11/25/14 Mem. Op. at 10.)
The claim was allowed to proceed in part so the Court could
consider a fully developed record at summary judgment as to
Stradtman’s working conditions.
(Id. at 12-13.)
When the
record was fully developed, it was clear to the Court that the
working conditions at Otto were anything but intolerable; in
fact, in the Court’s view, Stradtman’s work environment at Otto
might even be desirable.
(See 6/11/15 Mem. Op. at 21.)
In essence, Defendants argue that because Stradtman
was unable to defeat summary judgment on this point, then there
15
was never any good faith basis to bring the lawsuit in the first
place.
Losing a summary judgment motion because of lack of
factual support does not show that Stradtman’s counsel pursued a
path that a reasonable attorney would have known to be unsound.
In fact, if the Court were to accept that alone as evidence of
bad faith, every party who has had their motion for summary
judgment granted would have a basis for fees and costs against
the losing party for multiplying the proceedings, a result that
runs counter to the statute’s purpose of preventing wasteful
litigation and the American Rule that each party generally bears
its own expenses.
See Bakker v. Grutman, 942 F.3d 236, 237 (4th
Cir. 1991) (noting that § 1927 provides an exception to the
American Rule).
Put another way, just because a party cannot
overcome a motion for summary judgment does not mean that the
case is flawed from the outset.
Nor does it mean that, as the
record develops and it becomes clear to a neutral observer that
one side has a stronger likelihood of success, an attorney
should cease trying to marshal the facts and the law to
zealously advocate on behalf of his client.
Though the facts
here were not in Stradtman’s favor, the Court is mindful that
its job in assessing whether costs and fees under § 1927 are
appropriate is not whether the litigation was ultimately
successful or whether the complaint was frivolous, but whether
counsel’s actions were so far beyond the pale as to constitute
16
nothing more than driving up Defendants’ litigation costs.
Though the merits of the case were not strong to begin with and
look even weaker in hindsight, the Court cannot say that there
has been a showing that Stradtman’s counsel continued to
litigate this case merely as a way to run up costs.
Great
Steaks, 667 F.3d at 522-23 (“[Defendant’s] first contention
concerning the weaknesses of the [plaintiff’s] case does not
fall within the purview of § 1927, which ‘focuses on the conduct
of the litigation and not on its merits.’”) (citing DeBauche,
191 F.3d at 511).
Therefore, this ground also does not support
an award of fees and costs under § 1927.
3. Stradtman’s Voluntary Actions Were Part of a Scheme
to Obtain Money from Otto and Manufacture a Claim
Against Defendants
Defendants argue that Stradtman fabricated his claim
from the beginning and that his counsel was complicit in that
scheme.
(Defs.’ Mem. in Supp. at 6.)
Defendants offer the
following in support: Stradtman sought and was hired for another
CEO position, unbeknownst to Otto; Stradtman negotiated a
$270,000 payment from Otto just four days after accepting the
new position; and Stradtman sent an email to his counsel in
which he states he would “need to try to force [his]
termination.”
(Defs.’ Mem. in Supp. at 6-7.)
Defendants also
cite to additional emails they received during discovery.
One
is an email from Stradtman to his wife in which he referred to
17
his attempt to “trap” Republic’s procurement manager into making
a damaging statement.
(Defs.’ Mem. in Supp. at 8-9.)
The
second is a series of emails from Stradtman to his counsel in
March 2012.
Stradtman writes: “This is the email I would like
to send to Ron Krall to accomplish a few objectives which I
think could be effective.
the issue at hand.
I am trying to link his behavior to
I am certainly open to your comments.”
(Defs.’ Mem. in Supp. at 8.)
Stradtman’s counsel provided
comments on the draft email and authorized him to send it.
(Id.)
Though on summary judgment the Court found that these
facts were fatal to Stradtman’s claim, the Court does not
believe they rise to the level of demonstrating that Stradtman’s
counsel acted in bad faith in continuing to litigate the case.
As stated before, Stradtman’s position throughout this entire
litigation was that he was constructively discharged from his
job at Otto.
Looking for a new job while still employed at a
job where Stradtman believed the working conditions were
intolerable does not run afoul of this position.
“Forcing” his
termination is also consistent with this litigation position, as
Stradtman’s claim would have been on stronger legal footing had
Otto terminated him.
While accepting a $270,000 payment from
Otto after accepting another job reflects poorly on Stradtman,
there is no allegation that Stradtman’s counsel encouraged
18
Stradtman to seek such a payment.
Similarly, the “trap” email
reflects Stradtman’s unfortunate word choice.
might, attorneys cannot control their clients.
Try as they
Though on one
view the “trap” email paints Stradtman in an unflattering light,
the email also could be read as an over-zealous client who
strongly believes he has been harmed and is trying to build a
case to right what he perceives is a serious wrong.
Therefore,
Stradtman’s use of the word “trap” does not exhibit objective
bad faith on the part of Stradtman’s counsel. 2
Finally, the email from Stradtman to his counsel
discussing a draft email to Krall could be read as Stradtman
laying the groundwork for his eventual lawsuit.
It could also
be viewed as a misguided attempt to create a paper trail of
events as they were happening.
As the text of the email notes,
Stradtman’s wife’s lawsuit was on-going at the time, and
Stradtman’s counsel in this action was representing Stradtman’s
wife in her lawsuit against Republic.
It does not strain
credulity to believe that counsel would want to review an email
drafted by her client’s husband to the opposing party in the
midst of ongoing litigation.
Therefore, like the “trap” email,
2
Defendants note that Stradtman’s counsel knew this email
existed and sought to prevent its production, though it is
unclear at what point in time Stradtman’s counsel was made aware
of this email. (See Defs.’ Mem. in Supp. at 8 n.10.)
19
this email and knowledge of it does not rise to the level of
objective bad faith.
Put simply, while one view of these facts and emails
cast Stradtman’s motivations for bringing this lawsuit into
serious doubt, it does not follow that such motivations are
attributable to Stradtman’s counsel.
Though the Court found
these facts determinative in ruling on summary judgment, these
facts standing alone do not show that a reasonable attorney
acting as Stradtman’s counsel would not have continued to
litigate this case.
Therefore, this ground does not provide a
basis for fees and costs.
4.
Whether There Was Factual Support for Allegations of
Retaliation in Stradtman’s Complaint
Defendants argue that discovery proved there was never
a basis for many of the other allegations about Republic’s
conduct made by Stradtman in the complaint.
Supp. at 9.)
(Defs.’ Mem. in
Defendants do not articulate how these statements
are actionable under § 1927; the Court assumes that Defendants’
theory is that the statements in the complaint multiplied the
litigation in some way, most likely because Defendants had to
investigate whether the statements were true. 3
3
Defendants’ arguments seem like Rule 11 sanctions dressed in §
1927’s clothing, as Defendants are attacking specific
allegations in the complaint as having no basis in fact.
Federal Rule of Civil Procedure 11 governs pleadings, motions,
and other papers signed by attorneys and presented to the court.
20
“Section 1927 focuses on the conduct of the litigation
and not on its merits.”
DeBauche, 191 F.3d at 511.
In
DeBauche, the Fourth Circuit held that as a matter of law, the
filing of a single complaint cannot be held to have multiplied
the proceedings unreasonably and vexatiously and therefore §
1927 could not be employed to impose sanctions.
logic applies here.
Id.
Similar
Though Defendants argue that the
allegations were “critical” to the case, Defendants were able to
discern whether those allegations had merit during Stradtman’s
deposition.
To be sure, Defendants would have deposed Stradtman
regardless of whether those allegations were contained in the
complaint.
See Bakker, 942 F.3d at 242 (“Section 1927 was
intended to sanction conduct Rule 11 does not reach, i.e.,
protracting or multiply the litigation to run up the opposing
party’s costs, remedied by awarding excess attorneys’ fees and
costs.”) (emphasis in original).
Therefore, these “critical
By filing a pleading, motion, or other paper with the court, the
attorney certifies to the best of his information and belief,
formed after an inquiry reasonable under the circumstances,
“that the factual contentions have evidentiary support or, if
specifically so identified, will likely have evidentiary support
after a reasonable opportunity for further investigation or
discovery.” Fed. R. Civ. P. 11(b)(3). In any event, Defendants
would not be successful even if the Court were to construe this
ground as a motion for Rule 11 sanctions. Defendants have put
forward no evidence to show that Stradtman’s counsel did not
undertake a reasonable pre-filing investigation nor have they
put forward any evidence that would tend to show objectively
that Stradtman’s counsel did not believe the statements could be
verified during discovery.
21
allegations” could not be said to have unnecessarily multiplied
the litigation and as such do not form a basis for fees and
costs under § 1927. 4
B. Court’s Inherent Power
A court’s inherent power allows district courts to
sanction attorneys who inhibit courts' ability “to manage their
own affairs.”
Royal Ins. V. Lynnhaven Marine Boatel, Inc., 216
F. Supp. 2d 562, 567 (E.D. Va. 2002).
The power allows a court
to sanction an attorney's actions taken in bad faith, wantonly,
oppressively, or vexatiously.
Id.
The power “ought to be
exercised with great caution,” in circumstances such as those
involving “the very temple of justice [being] defiled.”
(citations omitted).
Id.
litigation misconduct.
The inherent power covers every type of
Sanford v. Commonwealth of Va., 689 F.
Supp. 2d 802, 814 (E.D. Va. 2010), abrogated on other grounds by
McKenzie v. Norfolk S. Ry. Co., 497 F. App’x 305 (4th Cir.
2012).
Though the scope of the court’s inherent power covers
more than just rule or statute-based misconduct, the level of
misconduct required “is almost always something more egregious
than that required for other types of sanctions.”
Id.
Like
attorneys’ fees and costs under § 1927, a showing of bad faith
4
Indeed, Defendants own record citations reveal that questions
about these allegations comprised at most five pages of more
than three hundred pages of deposition testimony in just one of
Stradtman’s two depositions. (See Defs.’ Mem. in Supp. at 910.)
22
is required, though like § 1927 it is unclear whether a
subjective or objective bad faith standard applies.
See Blair
v. Shenandoah Women’s Center, Inc., 757 F.2d 1435, 1438 (4th
Cir. 1985) (stating that there were sufficient facts to support
a finding of subjective bad faith by plaintiff’s attorney in
prosecuting the case).
Regardless of the bad faith standard required under
the court’s inherent power, Defendants have failed to meet their
burden that they are entitled to attorneys’ fees and costs under
§ 1927.
It follows that Defendants have failed to make a
showing that this Court’s inherent powers are necessary to
rectify a litigation abuse.
Therefore, the Court declines to
order sanctions under its inherent power.
IV. Conclusion
For the foregoing reasons, the Court will deny the
motion.
An appropriate order will issue.
August 5, 2015
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
23
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