Jensen v. Phillips Screw Co.

• Decision Date: 29 October 2008
• Docket Number: No. 07-2766.,07-2766.
• Citation: 546 F.3d 59
• Parties: Thomas R. JENSEN, Plaintiff, Stewart, Estes & Donnell, P.L.C., Appellant, v. PHILLIPS SCREW COMPANY et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

546 F.3d 59

Thomas R. JENSEN, Plaintiff, Stewart, Estes & Donnell, P.L.C., Appellant, v. PHILLIPS SCREW COMPANY et al., Defendants, Appellees.

No. 07-2766.

United States Court of Appeals, First Circuit.

Heard July 31, 2008.

Decided October 29, 2008.

William C. Saturley, with whom Frank W. Beckstein III and Nelson, Kinder, Mosseau & Saturley were on brief, for appellant.

Kevin T. Peters, with whom Christopher Weld, Jr., Raymond P. Ausrotas, and Todd & Weld LLP were on brief, for appellees.

Before BOUDIN, SELYA, and DYK,^* Circuit Judges.

SELYA, Circuit Judge.

There is a line between zealous representation and abuse of the processes of litigation. Lawyers who overstep it do so at their peril. In the case before us, the district court found that a law firm had crossed the line by unreasonably and vexatiously multiplying the proceedings in a class action. See 28 U.S.C. § 1927. Accordingly, the court imposed sanctions.

The law firm appeals from the sanctions order. It argues, first, that the record fails to disclose any sanctionable conduct and that, in all events, the district court made mistakes both in finding the facts and in gauging their import. As a fallback, the firm maintains that, even if its principal argument does not carry the day, the district court nonetheless abused its discretion in refusing to reconsider the sanctions order on a supplemented record. The defendants, who moved for the imposition of sanctions in the first place, offer rejoinders to each and every aspect of this asseverational array.

On the record at hand, we well understand the district court's frustration with the law firm's apparent carelessness. Still, we do not think that it can be said, as a matter of law, that sanctions either are or are not appropriate. In attempting to proceed past that point, we find ourselves largely stymied by gaps in the record. Consequently, we decide only one of the further questions presented, vacate the sanctions order, and remand for a new round of proceedings consistent with this opinion.

I. THE UNDERLYING LITIGATION

The genesis of this case seemed ordinary enough; it began with the filing of a class-action complaint by the law firm of Stewart, Estes & Donnell, P.L.C. ("SE & D") on behalf of Thomas R. Jensen and (unnamed) others similarly situated. The complaint designated two related corporations, Phillips Screw Company and Phillips Fastener Products, Inc. (collectively, "Phillips") as defendants and alleged that screws manufactured and marketed by them for use with pressure-treated wood suffered from an undisclosed propensity for premature failure in certain relatively commonplace circumstances.

As matters turned out, Jensen had previously contacted Phillips about his claims and had received at least partial satisfaction for them (the record is opaque as to whether SE & D knew or should have known as much before filing suit). Given this circumstance, Phillips raised an affirmative defense of accord and satisfaction in its answer to the complaint. Along the same line, it argued at an early scheduling conference with the district court that Jensen's vulnerability to this defense rendered him an inappropriate class representative.

The district court agreed; it gave SE & D six weeks (i.e., until January 30, 2007) to amend the complaint to add a new named plaintiff. The court subsequently granted SE & D's request for a short extension of that deadline.

Within the allotted time, the law firm moved to file an amended complaint adding a second plaintiff, Larry Vanlandingham. SE & D implied that Vanlandingham would make a superior class representative because he not only had encountered problems when he used Phillips screws in the construction of a deck but also (unlike Jensen) had eschewed a private settlement.

As a Scottish poet once warned, even the most carefully contrived plans may sometimes implode.² Six weeks after moving to add Vanlandingham as its new champion and before the district court ruled on that motion, SE & D abruptly retreated. This time, it moved to forgo Vanlandingham's entry into the lists because, in the law firm's words, "circumstances have arisen ... which may compromise the ability of [Vanlandingham] to act on behalf of the class." Phillips opposed this motion and sought dismissal of the action. It explained in an attached affidavit the nature of the "circumstances" to which SE & D had alluded. The affiant, Gary M. Sable, a Phillips executive, recounted that Vanlandingham's wife, Gayle, had told him (Sable) that she and her husband did not wish to sue but, rather, preferred to reach a private accommodation with the company. According to Sable, Gayle Vanlandingham expressed surprise that her husband's name had been put forward in the class action, noting that neither she nor he had engaged counsel. Neither of them, she added, harbored any desire to become involved in litigation. Sable went on to quote Gayle Vanlandingham as saying that when she and her husband expressed their concerns to SE & D, they were told that Phillips would not honor a warranty claim in the absence of legal action.

At that juncture SE & D did not directly dispute Phillips's allegations. In a responsive pleading, it argued instead that the Sable affidavit constituted hearsay and attributed any change of heart on the part of the Vanlandinghams to Phillips's influence.

In this exchange of pleadings, SE & D gave top billing to the new candidate whom it had recruited to fill the named plaintiff position: Emmett Cox. SE & D asserted that Cox would be an appropriate class representative because an inspection of his deck had "indicated substantial premature corrosion of fasteners manufactured by [Phillips]." Although expressing some skepticism about SE & D's methods, the district court allowed the motion—a ruling that had the effect of shelving Vanlandingham and inserting Cox as a named plaintiff and putative class representative.

Over the next several months, it became apparent that, notwithstanding SE & D's prior assurances, Cox had used a brand of screws not manufactured by Phillips in constructing his deck. When that conclusion became irresistible, SE & D moved to drop Cox as a plaintiff and to amend the complaint yet again. This proposed amendment sought to substitute Timothy Scott Damm in Cox's place and stead.

Once burned is twice shy. This time the district court gave SE & D two weeks (i.e., until September 13, 2007) within which to file a detailed written statement describing Damm's qualifications as a class-action plaintiff and putative class representative. SE & D never proffered such a statement. At the end of the two-week grace period, it withdrew its motion to amend and terminated the class action in the federal court.

II. SANCTIONS

Throwing in the sponge on the class action did not end the matter. Invoking 28 U.S.C. § 1927, Phillips moved for an award of sanctions in the form of attorneys' fees and expenses. In support of its motion, Phillips argued that SE & D had never undertaken a reasonably thorough investigation into the bona fides of any of its four proposed class representatives but had simply plunged ahead with devil-may-care abandon.

SE & D demurred. The law firm posited that sanctions under section 1927 were inappropriate vis-à-vis the initial filing of a complaint; that two of the putative class representatives, Vanlandingham and Damm, were withdrawn before any excess costs accrued; and that if any shortcomings characterized its performance—and it conceded none—those shortcomings were not of the magnitude required for the imposition of sanctions. In framing its opposition, SE & D for the first time directly contradicted Phillips's account of Vanlandingham's appearance on the scene.³ As to Cox, SE & D pointed to his reputed statement that he had purchased Phillips screws to justify its initial assertion that he was an appropriate plaintiff.

Although SE & D had requested oral argument, the district court rejected that request. Then, eschewing an evidentiary hearing, it filed a written decision. See Jensen v. Phillips Screw Co., Civ. No. 05-12117, 2007 WL 3104625 (D.Mass. Sept. 26, 2007) ("D.Ct.Op."). In that rescript, the court agreed with SE & D that section 1927 does not authorize sanctions for the filing of an initial complaint, even if that complaint is groundless. Id. at *2-3. It determined, however, that SE & D had engaged in sanctionable conduct vis-à-vis each of the other three erstwhile plaintiffs. Id. at *3-4. To consummate this determination, the court directed Phillips to file an itemized account of counsel fees and expenses incident to those phases of the litigation. Id. at *5.

SE & D moved for reconsideration, accompanying its motion with copious if belated evidentiary submissions. Among other things, it proffered affidavits from two SE & D attorneys, Robert C. Bigelow and M. Reid Estes, Jr., explaining SE & D's general professionalism and the particular procedures followed by the firm in recruiting Vanlandingham and Cox; an affidavit from Vanlandingham vouchsafing that he had given SE & D permission to name him as a plaintiff; and an affidavit from Cox asserting that he repeatedly, though mistakenly, had told SE & D that he had used Phillips screws to build his deck. Phillips opposed the motion for reconsideration as too late and too little. The district court summarily denied the motion.

In due course, Phillips filed its account. The district court, as a sanction, awarded attorneys' fees and expenses totaling $8,775. This timely appeal followed. In it, SE & D challenges the appropriateness of sanctions and certain procedural aspects of the district court proceedings. SE & D does not challenge the amount of the award.

III. ANALYSIS

We subdivide our analysis into seven short segments. Our starting point is a synopsis of the legal and evidentiary principles attendant to appellate review of sanctions orders imposed under 28 U.S.C. § 1927. We then...