Wade v. Soo Line R.R. Corp.

• Decision Date: 29 August 2007
• Docket Number: No. 06-1878.,06-1878.
• Parties: Michael WADE, Plaintiff-Appellant, v. SOO LINE RAILROAD CORPORATION and Canadian Pacific Railway Company, Defendants-Appellees. George T. Brugess, Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

500 F.3d 559

Michael WADE, Plaintiff-Appellant, v. SOO LINE RAILROAD CORPORATION and Canadian Pacific Railway Company, Defendants-Appellees.

George T. Brugess, Appellant.

No. 06-1878.

United States Court of Appeals, Seventh Circuit.

Argued May 23, 2007.

Decided August 29, 2007.

Steven P. Garmisa, Hoey & Farina, Chicago, IL, for Plaintiff-Appellant.

Mark E. Shure (argued), Keating & Shure, Daniel J. Mohan, Daley & Mohan, George T. Brugess, Hoey & Farina, Chicago, IL, for Defendants-Appellees.

George T. Brugess (argued), Hoey & Farina, Chicago, IL, pro se.

Steven P. Garmisa, Hoey & Farina, Chicago, IL, for Appellant.

Before EASTERBROOK, Chief Judge, and BAUER and MANION, Circuit Judges.

EASTERBROOK, Chief Judge.

Michael Wade alleged that he was permanently injured while operating a handbrake on the Soo Line Railroad. (The Soo Line is a subsidiary of the Canadian Pacific Railway. It is not clear from the record which company is Wade's employer; because nothing turns on the issue, we refer to both collectively as the Soo Line.) Wade brought this action under the Federal Employees Liability Act, 45 U.S.C. §§ 51-60, seeking damages for medical expenses, lost wages, and pain and suffering. The district court never reached the merits of Wade's claims, however; it dismissed the suit, with prejudice, as a sanction for misconduct by Wade's lawyer, George Brugess. It also ordered Brugess to pay more than $110,000 to reimburse Soo Line's fees and costs.

Wade was treated for his injuries by Michael R. Treister and Chang Sun Kim, two orthopedic specialists at Treister Orthopedic Services (TOS). Wade listed Dr. Treister as a treating physician in an answer to Soo Line's interrogatories. That made him a potential fact witness, and Soo Line accordingly subpoenaed TOS, seeking its "entire file pertaining to Michael Wade". TOS produced what purported to be its entire file, but at Dr. Kim's deposition Soo Line's attorney Daniel Mohan noticed that Kim's copy of the file was thicker than the one that had been produced in discovery. Mohan examined Kim's file, saw several documents that had not been produced, and requested a copy of the complete file. The attorneys took a 20-minute break. An aide from Kim's office took the file for copying and, when the file was returned, some of the previously missing documents were included in the copy—but two had disappeared from Kim's file and were not in the copy made for Mohan. The record does not show who removed these documents from the file, but we do know that Brugess was at the deposition and that Wade's counsel had the opportunity to control the events.

Soo Line promptly subpoenaed Dr. Kim and all staff members who had been on duty during the deposition, seeking the missing documents. On January 4, 2005, six days after the deposition, TOS faxed the missing documents to Brugess—but not to Soo Line, the party that had subpoenaed them. Brugess sat on them. When a week had passed with no answer to its subpoena, Soo Line filed a motion to compel production (miscaptioned as a motion for a "protective order"). The district court granted this motion on January 10 and sent the order to TOS and to Brugess on January 13. Brugess did not turn over the documents until January 25, well after the deadline.

Five documents were at issue: three that TOS had not revealed until Dr. Kim's deposition, and two that TOS and Brugess withheld even after Soo Line learned of their existence. These were highly probative records that should have been produced much earlier. The district court called them "smoking guns". One was an intake form on which Wade checked "no" in answer to the questions "Was the condition being treated the result of an accident or injury?" and "Do you feel that another party is responsible for this accident or injury?" Two more of the documents related to an undisclosed physical examination that Dr. Treister performed at the request of Wade's law firm, Hoey & Farina; in one Dr. Treister stated, "I do not on physical examination see any evidence of objective pathology requiring treatment at this time."

The two documents removed from the file during Dr. Kim's deposition were particularly damaging. One was a "collections system detail report" detailing billing activity on Wade's file. It included an entry, signed by Dr. Treister, reading:

Atty Brugess called, states he is aware that we are just making penny for a dollar billed thru United Health which we have a contract with, he make a proposal to bill him for the balance showing that we did review of record for such $ amt. then he will include that in the settlement or pay us up front for that charge. Asked him for the risk that we might encounter (fraud) in the future. He states it happened so many times, & that is the only way we will get our bills paid in full. He will provide proper documentation like he will request for record review then we charge him & he will pay.

Brugess's proposal was problematic in part because, according to a contract with United Healthcare that TOS produced in discovery, TOS had agreed to accept a reduced rate and not to collect further amounts from anyone else. The document also included a statement that "Patient was referred to TOS by Atty Downes office", which contradicted Wade's statement that he had been referred by a friend.

The other particularly damaging document was a note from Dr. Treister to an employee at TOS. It began:

George Brugess from Hoey & Farina sent me a disability form to fill out on Michael Wade.

This is a real problem. Can you call him and read him this unofficial note? ? ? ? I don't think I will have time until late in the week.

I have gone through the chart really carefully.

Then, after summarizing Wade's treatment history at TOS, the note concluded (second ellipses in original):

Problem here—how do I indicate disability when basically examination is normal and there is no atrophy or any other really objective findings?

. . .

So I just don't think there is anything that I can write down which would be helpful rather than harmful. Does George Brugess have any ideas? I think it is best that I just file the chart and he try to resolve the case . . . I probably cannot get back to him until later in the week, but wanted you to report my thoughts. This note can be staple[d] unofficially to the outside of the chart. It is NOT a report and NOT a progress note.

Once Soo Line finally received copies of these documents, it moved for sanctions pursuant to Fed.R.Civ.P. 37(c)(1). Soo Line argued, first, that Brugess and his firm made improper payments to TOS to influence its diagnosis of Wade, and, second, that Wade had tried to conceal these damaging documents and, even after being caught, tried to conceal them again and, when their absence was detected once more, tarried in turning them over. The district court concluded that the money was payment for an independent medical examination rather than a kickback, and while "not per se improper", was "certainly an unsavory `sweetening of the deal.'" The court ruled that, although the payments did not themselves merit sanctions, failure to turn over highly relevant documents justified not only dismissal with prejudice but also an order requiring Brugess to pay Soo Line's fees and costs. In the district court's view, the dismissal would not hurt Wade, because "[g]iven the documents uncovered by Mohan, the grant of summary judgment for Soo Line is almost a foregone conclusion."

The main argument on appeal is that $110,000 is too much. Soo Line sought sanctions on account of Wade's failure to disclose damaging documents as well as the payments to TOS, but it prevailed on the first argument only. Brugess argues that the district court had to "apportion" any sanction between the successful and unsuccessful grounds. Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), holds that attorneys' fees awarded pursuant to 42 U.S.C. § 1988 must be apportioned: if a plaintiff brings two distinct claims in one lawsuit but prevails on only one, the court must award only the fees incurred in prosecuting the successful claim. Divane v. Krull Electric Co., 319 F.3d 307 (7th Cir. 2003), applies this principle to attorneys' fees awarded as sanctions under Fed. R.Civ.P. 11. A plaintiff who brings distinct claims, one of which is sanctionable, can be ordered to pay attorneys' fees incurred in defending the frivolous claim— but not those incurred in defending non-sanctionable claims. Sanctions in the form of attorneys' fees are analogous to damages in a tort case, so the party that misbehaved pays for the injury caused by the misconduct. When a factually independent part of the case is entirely legitimate, there is no justification for extending the sanction to cover that part. See also Maynard v. Nygren, 332 F.3d 462, 471 (7th Cir.2003) (applying the causation principle to attorneys' fees awarded under Rule 37(c)).

It's one thing to distinguish between factually unrelated claims brought in a single suit because the federal rules permit joinder of unrelated claims, and quite another to apply this principle to related accusations of misconduct concerning one claim. Soo Line advanced two theories in support of one goal: dismissal of the litigation. It achieved this goal. Brugess asserts that the multiple grounds on which Soo Line sought sanctions are different "claims" as Hensley and Divane use that term, but that's not so. A separate "claim" is an argument for additional relief for a distinct wrong.

Soo Line thought that Hoey & Farina was making under-the-table payments to Dr. Treister and TOS; the evidence for this accusation came from the documents TOS and Brugess avoided turning over. The harm caused by Brugess's failure to turn over documents is not readily distinguishable from the harm that would have been caused by side payments to TOS: both would delay resolution of the lawsuit and cause Soo Line to incur unnecessary fees. T...