4.3 28 U.s.c. § 1927 Sanctions

• Library: Attorney Fees and Sanctions - Virginia and Federal Courts (Virginia CLE) (2016 Ed.)

4.3 28 U.S.C. § 1927 SANCTIONS

4.301 In General. 28 U.S.C. § 1927 reads

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who

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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 "does not distinguish between winners and losers, or between plaintiffs and defendants." ¹⁰⁷

Moreover, section 1927 is indifferent to the equities of a dispute and to the values advanced by the substantive law. ¹⁰⁸ Instead, the statute is "concerned only with limiting the abuse of the court processes." ¹⁰⁹ For this reason, a court considering the propriety of a section 1927 award must focus "on the conduct of the litigation and not on the merits." ¹¹⁰ As such, it "imposes a continuing obligation in the conduct of litigation." ¹¹¹

"Section 1927 was intended to sanction conduct Rule 11 does not reach; i.e., protracting or multiplying the litigation to run up the opposing party's costs, remedied by awarding excess attorneys' fees and costs." ¹¹² Whether to award sanctions under section 1927 lies within the sound discretion of the district court. ¹¹³ Where "each of the actions about which [a party] complains have more appropriately tailored sanctions that could have been sought at an earlier stage in the litigation," for example, alleged discovery misconduct readily addressed under Rule 37 or failure to prosecute or to comply with court rules or orders addressed under Rule 41(b)'s involuntary dismissal sanction. This fact may weigh against an award of sanctions under section 1927 when sought following a stipulated dismissal with prejudice. ¹¹⁴

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4.302 Application to Pro Se Litigants Uncertain. In Abbott v. Suntrust, ¹¹⁵ Judge Payne held that section 1927 did not apply to pro se litigants after noting that there was a split of authority on the issue. ¹¹⁶ The court stated "[t]he Supreme Court has not ruled on the issue, nor has the Fourth Circuit Court of Appeals, nor has any court in the Eastern District of Virginia. However, two district courts within the Fourth Circuit have addressed the issue, and have reached opposite conclusions." ¹¹⁷ There are, in fact, very few cases assessing the issue. ¹¹⁸ The weight of the decisional law, such as it is, appears to favor the inapplicability of the statute to pro se litigants, with the Fifth and Second Circuits supporting this view; only the Ninth Circuit Court of Appeals appears to firmly hold the contrary position. ¹¹⁹

4.303 Standard and Considerations for Imposing Sanctions Under 28 U.S.C. § 1927.

A. Bad Faith Required. Most decisions by the Fourth Circuit and the district courts in Virginia have stated that sanctions under section 1927 require a finding of "counsel's bad faith as a precondition to the imposition of fees," ¹²⁰ "[and] thus, § 1927 authorizes sanctions only when counsel's bad faith conduct multiplies the proceedings, resulting in excess

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costs for the opposing party." ¹²¹ However, whether bad faith is a precondition to issuing sanctions under section 1927 is not universally accepted in the various circuits and was not universally accepted in the Fourth Circuit until recently. ¹²² In McKenzie v. Norfolk Southern Railway Co., the Fourth Circuit definitively held that "[b]ad faith on the part of the attorney is a precondition to imposing fees under § 1927." ¹²³

In Stradtman v. Republic Services, Inc., ¹²⁴ the district court considered whether section 1927's bad faith requirement is the "more stringent" subjective standard or a less stringent objective standard: "The Fourth Circuit has not issued any definitive pronouncement regarding the appropriate standard in a post-Salvin¹²⁵ case. In light of the case law and this Court's sound reasoning in Salvin, the Court will apply an objective standard in determining whether § 1927 sanctions are warranted here." ¹²⁶ "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.'" ¹²⁷

"Mere negligence does not rise to the level of bad faith and will not support the imposition of sanctions under § 1927." ¹²⁸ Where the court found that the alleged misconduct, five "frivolous" discovery motions and five "unnecessary

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and irrelevant" depositions, did not meet the "something less than bad faith" standard imposed by the Lanham Act, it held that "it necessarily follows that it does not meet the higher bad faith requirement of § 1927." ¹²⁹

B. Multiplying the Proceedings Unreasonably and Vexatiously.

• In DeBauche v. Trani, ¹³⁰ the Fourth Circuit found that, "[a]s a matter of law . . . the filing of a single complaint cannot be held to have multiplied the proceedings unreasonably and vexatiously."

• Unreasonably: "Litigants and their counsel are not free . . . to disregard evidence that comes to light in discovery and to continue to press their case without any reasonable belief that the case has merit." ¹³¹

• Vexatious: "It is clear that, for conduct to be vexatious, more than mere negligence is required. 'Vexatious' is defined in various sources as 'without reasonable or probable cause or excuse, harassing; annoying' (Black's Law Dictionary (8th ed. 2004)); as 'causing or likely to cause vexation; distressing, afflictive' (Webster's New International Dictionary (Unabridged) 2548 (3d ed. 2002))." ¹³²

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C. Must Cause Additional Costs. Multiplication of the proceedings needs to lead to additional costs to other party and in situations where had a party been properly represented from the beginning the same work would have been required, no sanctionable multiplication of proceedings can be found. ¹³³

The unambiguous text of section 1927 aims only at attorneys who multiply proceedings. ¹³⁴ Courts have held that there is a causal element relating to fees—an award must only be for the excess costs, expenses and attorney fees reasonably incurred because of the improper conduct. ¹³⁵ A court's "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 nothing more than driving up Defendants' litigation costs." ¹³⁶

D. Ability to Pay. Ability to pay must be considered if a monetary sanction is to be imposed a court. ¹³⁷ In Moore v. Southtrust Corp., ¹³⁸ a monetary sanction was not warranted where the plaintiff had limited ability to pay and any money paid by the plaintiff would be better spent compensating the defendant for its attorney fees and costs in defending the case.

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However, an "inability to pay . . . should be treated as reasonably akin to an affirmative defense, with the burden upon the parties being sanctioned to come forward with evidence of their financial status." ¹³⁹

In Salvin v. American National Insurance Co., ¹⁴⁰ although a court's discussion regarding the ability to pay may be brief, and given that counsel did not raise his inability to pay below or assert an inability to pay on appeal, there was no abuse of discretion in determining whether counsel would be able to pay the amount in question.

4.304 Situations Where Sanctions Warranted.

• The district court properly awarded sanctions under section 1927 where after the plaintiff's deposition revealed that she had no evidence to support her claims against her employer and the defendant asked plaintiff's counsel to voluntarily dismiss the case, when counsel refused and remaining discovery obligations had to be complied with until the defendant's motion for summary judgment was granted, plaintiff's counsel multiplied the proceedings unreasonably and vexatiously by continuing to litigate after awareness that the claims lacked mer-it. ¹⁴¹

• While the Fourth

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