HENRY R. WILHOLT, JR., District Judge.
This matter is before the Court upon Defendants Zimmer Holdings, Inc. and Zimmer, Inc.'s Motion for Award of Attorney's Fees and Expert Expenses [Docket No. 30]. Defendants seek $47,147.50 in fees and expenses incurred in their defense of this case, from January 7, 2014 until July 31, 2014. For the reasons set forth below, the Court finds that motion is without merit and will be
This is a products liability claim involving artificial hip components which were manufactured by the Defendants, Zimmer Holdings, Inc. and Zimmer, Inc., and implanted into Plaintiff Wilson Johnson. Plaintiff is represented by Michael Todd Hogan of Hogan, Derifield and Perdue, located in Louisa, Kentucky. Defendants are represented by John T Schlafer of Faegre, Baker, Daniels LLP, located in Indianapolis, Illinois. Carta De La Barra Helstrom and Douglas Langdon of Frost, Brown & Todd's Louisville, Kentucky office serve as Defendants' local council in this matter.
In their motion, Defendants state that their request for fees "is based upon Plaintiff's Counsel's near-total failure to prosecute this case, his failure to dismiss the case upon determining that it was without merit, and his unfounded opposition to Zimmer's Motion For Summary Judgment, which contained no competent evidence and failed to designate a single item of material fact as disputed." [Docket No. 30-1 at p. 1]. In support of their argument, Defendants provided the following chronology of what transpired in this case during the relevant period:
On August 15, 2014, Defendants filed this Motion for Award of Attorney's Fees and Expert Expenses [Docket No. 30]. On August 29, 2014, Plaintiff filed a Motion for Extension of Time in which to respond to the motion. [Docket No. 31]. The motion was sustained by Order entered on August 29, 2014 and Plaintiff was directed to file his response no later than October 20, 2014. [Docket No. 32]. On October 20, 2014, Plaintiff responded to the motion for fees. [Docket No. 33]. On October 31, 2014, Defendants filed their Reply. [Docket No. 34].
On the same day, the undersigned entered an Order directing Defendants to file time and task records for the work by Defendants' attorneys and experts, as well as copies of all invoices submitted to Defendants for services rendered from the beginning of this case as well as a record of remittances in response to those invoices. [Docket No. 35].
Defendants timely filed certain records, under seal, along with a Motion for Leave to Seal. [Docket Nos. 36 and 37]. Plaintiff filed a Response on November 19, 2014 [Docket No. 38].
The motion is fully briefed and stands submitted to the Court for decision.
Defendants' motion is made pursuant to 28 U.S.C. § 1927, which provides:
28 U.S.C. § 1927 (emphasis added).
Section 1927 is penal in nature, enacted to deter unnecessary litigation by requiring attorneys to
This statute operates separate and apart from Fed.R.Civ.Proc. 11. The United States Court of Appeals for the Sixth Circuit has determined a distinction between sanctions sought pursuant to Rule 11, requiring a showing of bad faith, and the lower "unreasonable and vexatious multiplication" standard applying to assessments under § 1927. Reynolds v. Humko Products, 756 F.2d 469, 473 (6th Cir.1985).
28 U.S.C. § 1927 authorizes a Court to assess fees against an attorney personally for "unreasonable and vexatious" multiplication of litigation despite the absence of any conscious impropriety. "An attorney's ethical obligation of zealous advocacy on behalf of his or her client does not amount to carte blanche to burden the Federal Courts by pursuing claims that are frivolous through the use of multiplicative litigation tactics that are harassing, dilatory, or otherwise `unreasonable and vexatious'." Id. Accordingly, at least when an attorney knows or reasonably should know that a claim pursued is frivolous, or that his or her litigation tactics will needlessly obstruct the litigation of nonfrivolous claims, a trial court does not err by assessing fees attributable to such actions against the attorney. Jones v. Continental Corp., 789 F.2d 1225, 1229 (6th Cir. 1986).
In examining the facts pursuant to the statute, the Court is mindful that, in contrast to law defined and refined by caselaw, short of a legislative amendment, statutes are not ever changing, continually evolving or subject to relentless re-interpretation. "[I]n interpreting a statute a court should always turn to one cardinal canon before all others .... [C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there." Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992).
The statute at issue applies to those who "
Defendants' argument in support of their application for almost $50,000 in fees and costs is that Plaintiff's case became, in their view, "unwinnable" on January 7, 2014, at the latest. They state:
[Docket No. 30-1, p. 8].
As Defendants have identified the time period in which Plaintiff's counsel's allegedly sanctionable conduct occurred, it is necessary to examine what, in fact, he did to needlessly multiply the proceedings from January 7, 2014 forward.
Based upon the record before the Court, Plaintiff's counsel did nothing in furtherance of this case during the month of January, 2014. On February 13, 2014, a member of Mr. Hogan's staff signed the return receipt for the Defendants' Requests for Admission. He then received an email dated April 8, 2014 from Mr. Schlafer, demanding he relinquish his case. On April 9, 2014, Mr. Hogan sent a reply email, stating, "[w]e will be asking you to sign an Agreed Order modifying the discovery deadlines. If you are unable to do so then we will ask the court. It is my intention to get this case back on track." [Docket No. 30-9]. Following that, there appears to be no activity on behalf of Plaintiff until Mr. Hogan filed his response to Defendants' Motion for Summary Judgment on May 22, 2014. These minimal actions can hardly be described as
By contrast, what did Defendants' counsel do from January until July? The time and task records submitted to the Court establish that Mr. Schlafer, his underlings and experts expended
Moreover, Defendants argue that this case became "unwinnable" as of January 7, 2013 "
The Sixth's Circuit opinion in Gibson v. Solideal USA, Inc., 489 Fed.Appx. 24 (6th Cir.2012) is instructive in this case. From 2005 until June 2009, Shawn Gibson was employed by Solideal, as a service technician. His job involved physically strenuous labor. Id. at 27-28. In February 2009, Gibson sustained a work-related shoulder injury requiring surgery. Gibson's physician restricted him to "light-duty" status, and Solideal allowed him to continue as an employee at the same salary, but limited to light physical duties and without the commissions he received as a service technician. At the time, Solideal paid for Gibson's medical benefits, covering his medical bills. Id. Solideal had recently undergone a reduction in force, leaving Gibson as the only service technician at its Louisville, Kentucky branch.
Consequently, Gibson's inability to perform the functions of a service technician required Solideal to retain outside technicians to cover his responsibilities. Although Gibson was scheduled for surgery while still on light duty, the surgery was delayed due to complications with his other medical conditions. Id. On June 30, 2009,
In July 2009, Gibson filed a Complaint against Solideal alleging employment discrimination and retaliatory discharge Kentucky state court. Id. His verified complaint was submitted on his behalf by Robert Catlett, an attorney employed by Appellee Sales, Tillman, Walbaum, Catlett & Satterley, PLLC. Id. Specifically, the Complaint alleged that Gibson's termination constituted intentional discrimination "on the basis of the work-related accident which he suffered and his efforts to pursue a lawful [workers' compensation] claim ...." Solideal timely removed the action to the United States District Court for the Western District of Kentucky.
On November 24, 2009, Gibson filed a formal workers' compensation claim, seeking full or partial permanent disability compensation. Id. That claim settled in August 2010. The federal litigation remained pending. In connection with the federal litigation, Catlett conducted no discovery on Gibson's behalf during the agreed-upon discovery period. Id. On August 31, 2010, upon the expiration of discovery, Solideal moved for summary judgment. It argued that Gibson's claim should be dismissed because, at the time of Gibson's termination, he had not filed a lawful workers' compensation claim and the record contained no evidence of his intent to do so. Solideal alternatively asserted that it had articulated a non-discriminatory basis for Gibson's discharge: his inability to perform the essential functions of his job. Gibson filed an untimely response to Solideal's motion for summary judgment. Gibson argued in part that summary judgment was inappropriate because Kentucky case law permits a plaintiff to proceed under KRS § 342.197 even if he has not filed a formal workers' compensation claim, so long as he intends to do so. Id.
In a January 7, 2011 Memorandum Opinion, Chief Judge Heyburn court granted Solideal's motion for summary judgment. Id. On February 7, 2011, Solideal filed a "Motion for Attorney's Fees and Expenses." Solideal first asserted that Gibson and Catlett should be sanctioned pursuant to Federal Rule of Civil Procedure 11 for prosecuting a claim with no factual or legal predicate. Id. at 28. It claimed that, because Gibson conceded that his termination was due to his injury rather than any protected activity, he "is and always was incapable of establishing a cognizable KRS 342.197 claim." Solideal next asserted that Attorney Catlett should be sanctioned pursuant to 28 U.S.C. § 1927, because the attorney unreasonably and vexatiously multiplied the litigation. Solideal noted that Catlett did not pursue any discovery and did not withdraw Gibson's claim once it became clear that it was without support. Finally, Solideal asserted that Appellees should be sanctioned pursuant to the district court's inherent powers. It maintained that Gibson's lawsuit lacked colorable evidentiary support from the beginning: because Solideal believed that the action was clearly meritless, it asserted that the plaintiff's continued litigation was "tantamount to bad faith." Id. at 28.
In overruling the motion, Judge Heyburn wrote:
Id. at 28.
Although it denied Solideal's motion and discussed Rule 11, the district court did not explicitly address 28 U.S.C. § 1927.
Solideal appealed. In affirming Judge Heyburn's decision, Judge Mattice
Id. at 28 (emphasis added).
Judge Mattice further noted:
Id. at 32 (emphasis added).
Judge Mattice also took note of Solideal's complicity:
Id. at 32.
As in Gibson, in this case Plaintiff's counsel failed to conduct any discovery or file substantial briefs. Defendants seeks sanctions for what can be described as an exceedingly "lax attitude toward litigation" and a "languid litigation strategy." However, as in Gibson, Defendants did not come to the Court when the case became in their terms "unwinnable", thereby failing to mitigate their damages, so to speak. Instead, they continued to labor,
Defendants take the position that Plaintiff's counsel was fairly warned that they would ask for more than judgment in their favor. On April 8, 2014, Mr. Schlafer sent Mr. Hogan an email, which read:
[Docket No. 30-8](emphasis added).
Mr. Hogan served responses to the outstanding Interrogatories three days later, On April 11, 2014. Yet, as Defendants pointed out in the instant motion as well as in their Motion for Summary Judgment,
Instead, Defendants counsel retreated behind closed doors and spent 17.3 hours in March, 38 hours in April and 1.8 hours in May drafting a Motion for Summary Judgment, before finally pulling the trigger by filing it on May 1, 2014. It appears that 3.5 hours were spent in May analyzing Plaintiff's response and drafting a Reply. Given that Plaintiff's case was so clearly without merit, according to Defendants, it boggles the mind that
With regard to the infamous email, it is noteworthy that the records reveal that although it was transmitted on April 8, 2014, it was drafted on March 13, 2014 by Mr. Schlafer who expended no fewer than 0.8 hours doing so, for which he billed $260.
The delay between drafting the email, sending the email and filing the dispositive motion begs the question; why did Defendants tarry? A cynic might suggest that Defendants counsel were paving the way for the instant motion. Although they claim Mr. Hogan was duly warned, it is doubtful he was fairly alerted to the trap in which he would be ultimately find himself ensnared.
Section 1927 pertains only to fees and costs where were "
Date Name Hours $Value Description 3/5/14 J.T. Schlafer 1.40 455.00 Draft motion for summary judgment 3/5/14 V.A. Yoke 0.50 112.50 Begin to prepare motion for summary judgment 3/18/14 V.A. Yoke 5.10 1,147.50 Continue to prepare motion for summary judgment 3/19/14 V.A. Yoke 5.50 1,237.50 Continue to prepare motion for summary judgment 3/20/14 V.A. Yoke 0.60 135.00 Continue to prepare motion for summary judgment 3/21/14 V.A. Yoke 1.90 427.50 Continue to draft summary judgment brief 3/21/14 J.T. Schlafer 0.80 260.00 Draft motion for summary judgment with V. Yoke 3/31/14 V.A. Yoke 1.50 337.50 Continue to prepare motion for summary judgmentTOTAL 17.30 4,112.50
Although the argument for summary judgment was simple, to-wit, that Plaintiff did not conduct discovery and thus has no evidence to support his cause of action, Zimmer's counsel toiled further on the motion in April:
Date Name Hours $Value Description 4/4/14 V.A. Yoke 2.90 652.50 Prepare draft summary judgment brief 4/7/14 V.A. Yoke 0.10 22.50 Finish draft of summary judgment motion 4/7/14 V.A. Yoke 1.90 427.50 Finish draft of summary judgment brief 4/9/14 J.T. Schlafer 6.50 2,112.50 Draft motion for summary judgment and memorandum in support thereof 4/10/14 V.A. Yoke 0.60 135.00 Begin to revise motion for summary judgment 4/10/14 J.T. Schlafer 0.80 260.00 Draft motion for summary judgment with V. Yoke 4/10/14 J.T. Schlafer 2.50 812.50 Draft expert declaration of D. Miller in support of motion for summary judgment 4/16/14 V.A. Yoke 1.30 292.50 Revise motion for summary judgment 4/17/14 V.A. Yoke 3.90 877.50 Revise summary judgment motion 4/18/14 J.T. Schlafer 1.40 455.00 Draft motion for summary judgment 4/21/14 J.T. Schlafer 0.80 260.00 Draft motion for summary judgment 4/28/14 J.T. Schlafer 4.50 1,462.50 Draft motion for summary judgment 4/29/14 J.T. Schlafer 3.30 1,072.50 Draft motion for summary judgment 4/30/14 J.T. Schlafer 7.50 2,437.50 Draft, including cite check all documents and coordinate preparation of exhibits, motion for summary judgment, declaration of J. Schlafer, memorandum in support of motion, and proposed orderTOTAL 38.00 11,280.00
Id. at p. 32.
Defense counsel undertook another 5.30 hours of labor on the motion in the month of May, for a grand total of 57.1 hours.
The Court is mindful that this was not the only time expended by Defendants' counsel in its vigorous defense of this case. The Court has highlighted the time spent on the dispositive motion. This does not include the hours upon hours "studying" and "analyzing" various documents, "conferring with" one another and otherwise "working on" this matter. Upon review Defendants' counsel's time records, one could easily conclude they were defending against a claim of complex conspiracy or fraud — not the "unwinnable" design defect claim unsupported by any discovery or expert testimony. To read the records is to be like Alice, peering through a looking glass...
The instant motion is surely the product of countless hours as well. The 17-page memorandum includes a discussion of several cases which Defendants maintain support their cause. However, a review of the caselaw cited by Defendants reveals that Section 1927 is not a golden goose. Section 1927 sanctions, when awarded by courts in this Circuit, are based upon extreme dilatory conduct and the fees awarded are pocket change compared to exorbitant amount sought by Defendants.
One such case relied upon by the Defendants is Bailey v. Papa John's USA, Inc., 236 Fed.Appx. 200 (6th Cir.2007). Gerard Bailey filed a Complaint against his former employer, Papa John's, alleging discrimination.
Based on the lack of evidence supporting the Fair Labor Standards Act claim at the conclusion of Bailey's deposition, defendant's counsel wrote letters on two different occasions to plaintiff's counsel asking him to withdraw the Fair Labor Standards Act claim. Id. Plaintiff's counsel failed to respond to either letter and did not withdraw the claim. He explained at oral argument that he was experiencing family difficulties during that time. Id.
Defendant filed its motion for summary judgment four months later, on February 2, 2004. Plaintiff received several extensions in filing his response to the summary judgment motion and ultimately filed it in September 2004. Id.
On November 14, 2004, the district court granted summary judgment to defendant Papa John's on both counts. Bailey appealed only the Title VII claim to our Court and specifically waived his right to appeal his Fair Labor Standards Act claim. The Sixth Circuit affirmed the district court's judgment for defendant. Id.
During the pendency of the appeal on the merits, defendant filed a motion in the district court for attorney fees totaling about $95,000 and for litigation expenses and costs in the amount of $3,334.50. Defendant sought attorney fees pursuant to Section 1927 as well as Rule 11 for both the Title VII claim and the Fair Labor Standard Act claim. Id.
The district court awarded defendant the full amount of costs but only $5,000 in fees — less than 5% of the amount requested by defendant. Id. In affirming the district court's award, Justice Merritt, writing for the Sixth Circuit, observed:
Id. at 205.
With regard to the actual amount awarded, Justice Merritt reiterated the reasoning set forth by the district court.
Id.
Justice Merritt then concluded:
Id.
In Bailey, both the district court and the Sixth Circuit that Plaintiff's counsel should
Another case cited by Defendants in support of their motion is Runfola & Associates v. Spectrum Reporting, II, Inc., 88 F.3d 368 (6th Cir.1996). The case originated as an antitrust action between rival court reporting business. In 1988, two of Plaintiff Runfola's most widely utilized reporters, Barbara Rogers and Nicholas Marrone, left Runfola and formed their own court reporting firm, Spectrum Reporting, Inc. Id. at 370. In the period following the defection of Rogers and Marrone, Runfola lost both clients and staff to Spectrum. The losses led Runfola to file a lawsuit against Spectrum, several individuals and another Columbus-based court reporting firm, PRI, in the United District Court for the Southern District of Ohio, alleging violations of the Sherman Antitrust Act, 15 U.S.C. § 1, and unfair business practices in violation of state law. Id. at 371. In overruling defendants' motion to dismiss, the district court noted that plaintiffs' allegations were phrased in somewhat vague and conclusory terms and warned that Plaintiff would need to discover facts sufficient to maintain its civil action. Id. at 370. A few months later, the district court sustained a subsequent dispositive motion on all but one of the counts — alleging a breach of a covenant not to compete.
In spite of the district court's admonition that plaintiff should produce evidence, between September 1991 and late January 1993, Runfola pursued no discovery. On January 19, 1993, plaintiff served defendant with thirteen notices of deposition. However, these depositions, for reasons upon which the parties do not agree, did not go forward. On February 17, 1993, this case was transferred to another district judge, and a discovery deadline of August 1, 1993 was ordered. On March 1, 1993, defendants filed motions for summary judgment, to which plaintiff did not timely reply, arguing that there was no evidence of an antitrust violation. After several procedural skirmishes, plaintiff finally filed a response to defendants' motions for summary judgment on September 9, 1993, over six months from the date that defendants had filed their motions. In opposing summary judgment, plaintiff offered only one exhibit, a fifteen page affidavit of Thomas Runfola. Plaintiff had completed none of the depositions that it had noticed. Id. at 372.
On November 1, 1993, the district court granted Spectrum's motion for summary judgment. In granting summary judgment, the court found that plaintiff had produced no evidence of harm to competition by defendants. The court also granted defendant's motion to strike Runfola's affidavit, stating that the affidavit. Id.
A month later, defendant filed a motion for sanctions. Following a hearing on the motions, the district court imposed sanctions against plaintiff Runfola and its counsel and directed defendants to file itemized statements of their attorneys' fees and costs. Having considered the defendants' submission of $109,305.90 in attorney fees and $5,671.14 in costs, the district court imposed a joint liability of $15,671.14 in sanctions against Runfola and its counsel, Kelm. A lump sum of $10,000 was also divided three ways among the defendants. Id. Defendants appealed.
The sanction were affirmed. In a per curiam opinion, the Sixth Circuit panel observed;
Id. at 373 (emphasis added).
The Court further noted:
Id. (emphasis added).
Although Runfola involved sanction imposed pursuant to Rule 11, it is highly instructive here. First, as in Bailey, the Court awarded significantly less in fees than was sought. Second, in Runfola, the litigation was protracted, to over
The third case cited by Defendants, In re Olympia Brewing Company Securities Litigation, 613 F.Supp. 1286 (N.D.Ill.1985) hails from the Northern Division of Illinois. Its lack of precedential value notwithstanding, it, too, underscores the weakness of Defendants' position. The action was filed alleging violations of the Securities Act and Securities Exchange Act and including allegations of short-selling market manipulation. The case was ultimately dismissed and the defendants sought fees and costs pursuant to Section 1927 as well as Rule 11. Defendants argued that plaintiff had failed to conduct any discovery. Plaintiff countered, pointing out that defendants did nothing to extricate themselves from the litigation or to seek dismissal earlier. Id. at 1304. The court concluded that as the litigation proceeded, needlessly, for almost four years, sanctions were warranted. Id. at 1305. As to the amount of fees, the court stated that the reasonableness of fees requested by defendant would be considered in calculating the award and ordered that the defendants file an itemized fee petition. Id. Defendants have not enlightened us as to the dollar amount ultimately awarded.
Finally, Defendants rely upon Chief Judge Carl Rubin of the Southern District of Ohio's opinion in Fifth Third Bank v. Boswell, 125 F.R.D. 460 (S.D.Ohio 1989). Judge Rubin describes the litigation as "complex" involving promissory notes and mortgages and one that was resolved in several stages. Id. at 461. Ultimately, defendant's sought sanctions against plaintiff for failing to conduct discovery. Judge Rubin found that "plaintiff's cause of action became harassing, dilatory and otherwise unreasonable and vexatious upon the passage of ten months after the filing of defendant's answer and counterclaim." Id. at 463. He then determined that a reasonable amount of time for the preparation and filing of defendant's dispositive motion was
Following the filing of Defendants' application for costs a and fees, the undersigned entered an Order directing Defendants
Defendants filed 43 pages of time and task records, however their submission was devoid of any proof of actual payment of the fees generated by Zimmer. Those documents do not exist. In an affidavit, Mr. Schlafer informed the Court, for the first time, of what he calls an "alternate fee arrangement" between his law firm and Zimmer. [Docket No. 37, ¶ 4]. Mr. Schlafer describes the arrangement:
Id. at ¶ 6.
He further explains that over the course of this litigation, Zimmer has been invoiced a total of $61,383.00. $47,147.50 was billed for attorney's fees from January 7, 2014 to July 31, 2014. Id. at ¶ 9. However, Mr. Schlafer states that per the "alternate fee arrangement", Zimmer has only paid $32,510.00, only 75% of the amount invoiced. Which raises the question: Why are Defendants seeking $47,147.50, roughly $15,000.00
More troubling than the apparent windfall sought by Defendants is the fact that the "alternate fee arrangement" and the discrepancy in the amounts at issue only came to light pursuant to the Court's order for further documentation. Had the undersigned not required Defendants to provide their counsel's time records, as well as proof of what was invoiced and what was paid, we would still be in the dark.
In order to trigger sanctions under Section 1927, the lawyer's conduct must multiply the proceedings both "unreasonably and vexatiously." That is, a federal district court may only impose sanctions pursuant to Section 1927 "if [:] (1) the actions of the attorney multiply the proceedings and (2) the attorney's actions are [both] vexatious and unreasonable." The power granted to the federal district courts to utilize this sanction is one that must be strictly construed. It is also one which should be utilized only in situations evidencing a serious disregard for the orderly process of justice.
In this case, it is abundantly clear that Plaintiff's counsel did not run afoul Section 1927. If any character is this unfortunate tale can be said to have acted with a lack of civility and in an unreasonable manner, it would be the Defendants and their counsel.
The Court is mindful that an award of sanctions pursuant to Section 1927 is purely discretionary. In the undersigned's opinion, sustaining Defendants' motion would be an abuse of discretion.
Accordingly,
