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Attorney Sanctions Payable to Clerk of Court Comport With Supreme Court Decisions — Chicago Business Dispute Lawyers

A plaintiff’s attorney in New York recently challenged a federal court’s authority to order him to pay a $10,000 fine as a sanction for misconduct under the Federal Rules of Civil Procedure in a copyright infringement case. Southern District of New York Judge Denise Cote imposed the monetary sanction on attorney Richard L. pursuant to Rule 11 of the Federal Rules and the court’s inherent authority to manage its own affairs (Paul Steeger v. JMS Cleaning Services, LLC).

The alleged conduct for which Richard was sanctioned included failure to serve notice to the defense of a pretrial hearing as required by court order, which the judge accused Richard of having done on three other occasions in the southern district, and also failing to respond to the defendant’s settlement offer.

Shortly after the defendant complained of Richard’s conduct to the court, the parties reached a voluntary settlement in the case. As a result of the complaint, the judge issued Richard an order to show cause why he should not be sanctioned.

At issue in Richard’s motion for consideration was what the court is allowed to do under its inherent power and under Rule 11, which requires that no monetary sanction or order may be imposed against a party or its counsel after the litigants have reached a voluntary settlement.

Judge Cote noted, however, that she received the defendant’s complaints about Richard’s misconduct and issued the order prior to the case’s formal dismissal or settlement. Instead, Richard had notified the court only that the parties had reached a settlement “in principle.” The case was not dismissed pursuant to the settlement until four weeks later.

The judge accused Richard of a pattern of omissions and misrepresentations in the case and failing to adhere to standards expected of officers of the court.

Additionally, Richard argued that the U.S. Supreme Court’s holding in Goodyear Tire & Rubber Co. v. Haeger (137 S. Ct. 1178 (2017)), requires that any monetary sanctions imposed pursuant to a court’s inherent power be compensatory rather than punitive. Therefore, he claimed, the sanctions must be paid to the defendant based on the costs incurred as a result of the misconduct by plaintiff’s counsel. In Goodyear, the Court held that sanctions in the form of attorneys’ fees granted under a court’s inherent power must be limited to the fees incurred as a result of the offending behavior. But, Judge Cote noted, the Court held that attorneys’ fees are but one permissible sanction available when a court exercises its inherent powers, not the sole sanction.

“The nature of the $10,000 sanction imposed here is not an award of attorneys’ fees to compensate the defendant,” the judge wrote. “Instead, as the [order] makes clear, the sanction is to be paid to the Clerk of Court. The sanction was imposed under the court’s inherent power to manage its own affairs, and specifically to sanction misconduct by an attorney that involves that attorney’s violation of a court order or other misconduct that is not undertaken for the client’s benefit (quoting United States v. Seltzer, 227 F.3d 36 (2d Cir. 2000)).

“Such sanctions may be appropriate when a lawyer, through negligence or recklessness, fails to perform his or her responsibility as an officer of the court.”

The judge vacated her prior opinion to the extent that it based the $10,000 sanction on Rule 11. Instead, pursuant to the court’s inherent powers, she reduced the fine to $2,000 and ordered Richard to attend a professional ethics course.

In a recent case before the Northern District of Illinois, Twyman v. S&M Auto Brokers, a federal judge sanctioned a defense attorney under the court’s inherent powers for “unprofessional, contemptuous, and antagonistic behavior directed at opposing counsel” including filing what the judge called baseless or unnecessary motions which prolonged the litigation and its costs. Under Seventh Circuit precedent, Judge Virginia Kendall wrote, such sanctions are appropriate where the Federal Rules and statutes are insufficient to address actions by counsel that undermine the integrity of the court.

Further characterizing the attorney’s conduct as “vitriolic”, “acerbic”, and “unhinged”, the judge ordered the attorney to pay a $50,000 fine to the clerk of the court and attend an ethics course and an anger management program.Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. DiTommaso Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex class action, copyright, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes.  Our Arlington Hts. and Elmhurst business dispute lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0000 or our toll-free number (877) 990-4990.  You can also contact us online here.