174 F.3d 87 (2nd Cir. 1999), 98-7649, Nuwesra v. Merrill Lynch, Fenner & Smith, Inc.
| Citation | 174 F.3d 87 |
| Party Name | Lee NUWESRA, Esq., Appellant, Ernesto Forbes, Plaintiff, v. MERRILL LYNCH, FENNER & SMITH, INC., Yolanda D'Apuzzo and Anthony Dibiase, Defendants-Appellees. |
| Case Date | April 22, 1999 |
| Court | United States Courts of Appeals, U.S. Court of Appeals — Second Circuit |
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Argued March 4, 1999.
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Lee Nuwesra, New York, NY, pro se.
Nicholas H. De Baun, Brown & Wood LLP, New York, NY (Roger J. Hawke, of counsel, on the brief), for defendants-appellees.
Davis & Eisenberg, New York, NY (Herbert Eisenberg and Paula A. Brantner, of counsel, on the brief), for amicus curiae National Employment Lawyers Association.
Before: JACOBS and SOTOMAYOR, Circuit Judges, and SAND, [*] District Judge.
PER CURIAM:
Attorney Lee Nuwesra ("appellant") appeals from an order of the United States District Court for the Southern District of New York (Motley, J.) sanctioning him under Fed.R.Civ.P. 11(c)(1)(B). Appellant represented plaintiff Ernesto Forbes ("plaintiff") in his unsuccessful lawsuit alleging that defendants Merrill Lynch, Fenner & Smith, Inc. ("Merrill Lynch"), Yolanda D'Apuzzo ("D'Apuzzo") and Anthony DiBiase ("DiBiase") (collectively, "defendants") fired him on account of his HIV status in violation of federal and state law. Following a bench trial, the district court dismissed all of plaintiff's claims and ordered appellant to pay attorneys' fees of $25,000 to defendants pursuant to Fed.R.Civ.P. 11(c)(1)(B). We hold that the district court improperly imposed sanctions without giving appellant adequate notice and a reasonable opportunity to respond, and had no authority under Rule 11(c)(1)(B) to award attorneys' fees sua sponte. We therefore vacate the district court's sanctions order and remand for further proceedings.
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BACKGROUND
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Plaintiff's Termination
Plaintiff alleged that in late summer or early fall of 1992, while he was working as a processing clerk in Merrill Lynch's messenger service center, he learned through an anonymous test that he was infected with the Human Immunodeficiency Virus ("HIV"). Plaintiff claimed that in October 1992, he informed his immediate supervisor, D'Apuzzo, of his medical condition, and as a result, "her attitude toward [him] soured and [his] work environment gradually became intolerable." In particular, D'Apuzzo allegedly reassigned many of plaintiff's duties to other employees, excluded plaintiff from meetings in or entry to her office, sprayed disinfectant in her office and on telephones used by plaintiff, asked the cleaning staff to use disinfectant when cleaning plaintiff's work area, made derogatory statements about gay people and people with AIDS in plaintiff's presence, commented to plaintiff that he looked thin, "repeatedly screamed at [plaintiff] in front of vendors and other employees and instigated fights and arguments," falsely accused plaintiff of improperly borrowing money from a vendor, and asked plaintiff's co-workers whether plaintiff was gay and whether he had made sexual advances toward them.
In January 1993, plaintiff claimed he informed D'Apuzzo's supervisor, DiBiase, that he was having difficulty working with D'Apuzzo. DiBiase allegedly acknowledged that he was aware of plaintiff's medical status and promised to intervene, but never did. On April 20, 1993, D'Apuzzo issued a ninety-day probation notice indicating that plaintiff was "unable or unwilling to work" with her. Plaintiff maintained that he later spoke to Merrill Lynch's Director of Human Resources, Nick DiGirolamo, about "the intolerable conditions he was enduring at his job" and requested a transfer to another department. On September 13, 1993, DiBiase instead called plaintiff into his office and told him he was fired for "insubordination."
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Administrative Proceedings
In February 1994, plaintiff filed dual complaints with the New York City Commission on Human Rights ("NYCCHR") and the Equal Employment Opportunity Commission ("EEOC") alleging that defendants had discriminated against him by denying him equal terms and conditions of employment and by terminating his employment on the basis of his disability, in violation of the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12101 et seq., and § 8-107.1(a) of the Administrative Code of the City of New York. In July 1994, plaintiff approached the Gay Men's Health Crisis ("GMHC") seeking legal representation. The GMHC was of the view that plaintiff "presented a credible claim of HIV discrimination" and agreed to represent him in the administrative proceedings.
On February 23, 1995, the NYCCHR issued a "Determination and Order After Investigation" dismissing plaintiff's complaint on the ground that "there [was] no probable cause to believe that respondents ha[d] engaged in the unlawful discriminatory practice complained of." Specifically, the NYCCHR found that
[t]he investigation did not support complainant's allegations. The investigation revealed that complainant committed several acts of misconduct and performed his job responsibilities poorly. It was because of his performance problems that complainant was disciplined and eventually terminated....
Plaintiff timely sought review of this determination, and on June 29, 1995, the NYCCHR reaffirmed its original decision dismissing plaintiff's complaint.
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District Court Proceedings
In July 1995, the GMHC arranged for the law firm of Brenner, Chambers, Gant & Getachew to serve as pro bono counsel for plaintiff. The Brenner firm requested a right to sue letter from the EEOC, but
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dissolved before filing a federal suit. In July 1996, the GMHC referred plaintiff's case to appellant, who agreed to represent plaintiff on a contingency fee basis. Appellant subsequently filed a complaint on plaintiff's behalf in federal district court alleging that defendants had violated the ADA and state law by terminating plaintiff's employment on the basis of his disability. After the parties conducted discovery, the district court held a three-day bench trial in October 1997. At the close of plaintiff's evidence, which included his own testimony, the court found that "leaving aside completely the issue of credibility," plaintiff had established a prima facie case of discrimination. Defendants then attempted to establish a legitimate nondiscriminatory reason for firing plaintiff by presenting witnesses, including D'Apuzzo, DiBiase and DiGirolamo, who testified that plaintiff was fired for insubordination. These witnesses also testified that they were not aware of plaintiff's medical condition until after he filed his administrative complaints. In his summation, defense counsel argued that the first record of plaintiff's medical condition was an HIV test conducted in June 1993, two months after plaintiff had been placed on probation.
At the close of the bench trial, the court dismissed plaintiff's remaining claims, 1 finding that "[t]here ha[d] been a total failure of proof on the part of plaintiff as to his claimed disability or claimed perceived disability and defendants' knowledge of same." The court further stated:
If there is going to be a claim for counsel fees by the prevailing party, the defendants, they must submit in the next thirty days an affidavit setting forth the time spent in terms of hours supported by records. As I understand it those can be computer records.
I think that counsel fees should be awarded in this case because it is the [c]ourt's view that there was no substance to this case to begin with, and the statute allows for the recovery of counsel fees.
We also have in this court a rule prohibiting the filing of a complaint where there is no real basis for the complaint. That appears to have been the case here. There has been no application for a Rule 11 sanction, but I think that the awarding of counsel fees can serve as a deter[r]ent to bringing this kind of claim, that is, a claim for which there is no real proof, and no investigation apparently made of the facts prior to filing this complaint.
Merrill Lynch subsequently submitted an affidavit of services detailing its legal fees and expenses incurred in connection with the lawsuit, which totaled $234,045.66. No motion or memorandum of law accompanied the affidavit. One week later, the court issued an order scheduling "a hearing on the award of attorney's fees" and inviting appellant to respond to Merrill Lynch's affidavit. The order further stated that "[t]he court will be awarding attorney's fees based on one or more of the following provisions: 42 U.S.C. § 12205; 28 U.S.C. § 1927; Rule 11(c)(1)(B) F.R.C.P.; and the inherent power of the district court to award attorney's fees." Appellant filed responsive papers, and Merrill Lynch filed a reply. The court held a sanctions hearing on January 23, 1998.
On April 6, 1998, the district court issued an order sanctioning appellant under Rule 11(c)(1)(B) and ordering him to pay attorneys' fees of $25,000 to defendants. The order stated that appellant
is not being sanctioned merely or even primarily for the complaint he filed but rather for taking the case all the way to
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trial; he is being sanctioned for his ongoing failure to make reasonable inquiries in the papers he filed before the court, from the complaint onward. His pre-trial memorandum, submitted after the close of discovery, reiterated many of the problematic assertions in the case and contained some important omissions.
Forbes v. Merrill Lynch, Fenner & Smith, Inc., 179 F.R.D. 107, 111 n. 6 (S.D.N.Y.1998). The court specifically declined to sanction a colleague of appellant's who signed the complaint, argued in opposition to defendants' motion to dismiss and responded to discovery requests, but did not represent plaintiff at trial. See id. The court also declined to award attorneys' fees under either 28 U.S.C. § 1927 or the court's inherent powers, based on its finding that "there has been an insufficient showing of...
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