556 F.3d 389 (6th Cir. 2009), 07-4123, Rentz v. Dynasty Apparel Industries, Inc.
|Citation:||556 F.3d 389|
|Party Name:||Richard J. RENTZ, Plaintiff-Appellee, v. DYNASTY APPAREL INDUSTRIES, INC. et al., Defendants, Paul R. Leonard, Attorney-Appellee, B. Randall Roach, Attorney-Appellee, Paul Warfield; Jemesco, Inc., Defendants-Appellants.|
|Case Date:||February 11, 2009|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Argued: Dec. 5, 2008.
Kevin Robert McDermott, Schottenstein, Zox & Dunn Co., LPA, Columbus, Ohio, for Appellants.
B. Randall Roach, Martin, McCarty, Richman & Wright, Fairborn, Ohio, for Appellees.
Kevin Robert McDermott, Daniel M. Anderson, Schottenstein, Zox & Dunn Co., LPA, Columbus, Ohio, for Appellants.
B. Randall Roach, Martin, McCarty, Richman & Wright, Fairborn, Ohio, Christopher Jon Cornyn, Springboro, Ohio, for Appellees. Paul R. Leonard, Centerville, Ohio, pro se.
Before: MERRITT and MOORE, Circuit Judges.[*]
KAREN NELSON MOORE, Circuit Judge.
Paul Warfield and his company, Jemesco, Inc., (collectively, " the Warfield Defendants" ) appeal the district court's decision awarding them monetary sanctions against
Paul R. Leonard and B. Randall Roach, counsel for Richard J. Rentz, the plaintiff in the underlying litigation. In 1999, the district court determined that Leonard and Roach had violated Rule 11 of the Federal Rules of Civil Procedure and 28 U.S.C. § 1927 by litigating several of Rentz's claims set forth in an amended complaint that lacked any basis in fact. In 2007, the district court reduced the amount of potential attorney fees from that which was originally requested by Warfield as sanctions, approximately $70,000, to a total of $29,294.87 from Leonard, and $3,747.37 from Roach, based on calculations of the amount of attorney fees actually caused by the sanctionable conduct. The district court then further reduced the amount of sanctions and ultimately awarded to the Warfield Defendants only $2,500 from Leonard and $250 from Roach. The district court did not sanction Rentz or the relevant law firms.
On appeal, the Warfield Defendants argue that the district court abused its discretion by (1) failing to sanction one of the law firms, (2) failing to sanction Rentz, and (3) arbitrarily reducing the sanctions against Leonard and Roach to an amount far below the court's own calculation of attorney fees reasonably incurred to litigate Rentz's frivolous claims. For the reasons explained below, we AFFIRM the district court's decision with respect to the first two issues. Because, however, the district court abused its discretion in further reducing the awards to de minimis amounts, we VACATE that portion of the district court's order specifying the amount of sanctions and REMAND with instructions to the district court to issue an order forthwith imposing sanctions of $29,294.87 against Leonard and $3,747.37 against Roach, to be paid to the Warfield Defendants.
I. BACKGROUND 1
The sanctions at issue in this case arise out of litigation that occurred between 1996 and 1999 involving Rentz, the Warfield Defendants, and Warfield's co-defendants, Armando and Ignacio Mendez (the " Mendez brothers" ). The Mendez brothers own and operate a silk-screening and apparel-manufacturing business based in Florida, Dynasty Apparel Industries, Inc. (" Dynasty" ). Rentz, a Dayton businessman, first met Armando Mendez while sitting next to him at a World Series game in Cincinnati on October 18, 1990. Mendez told Rentz that he and his brother ran a sports-apparel-manufacturing business and sought to obtain a license from the National Football League (" NFL" ) to produce NFL apparel. Mendez said that he had a standing order from K-Mart for $10 million if he was able to procure an NFL license. After Rentz told Mendez that he knew someone who might be able to help obtain the license, the two men agreed that if Rentz introduced Mendez to someone who helped him obtain an NFL license, Mendez would pay Rentz a commission of one percent of Dynasty's gross sales of NFL-licensed goods. Although Rentz and Mendez shook hands on the deal and exchanged telephone numbers, they did not reduce the agreement to writing. Joint Appendix (" J.A." ) at 427-28 (D. Ct. Dec. 2/5/99 at 2-3).
Rentz soon contacted Paul Warfield, a former NFL football player who leased office space from Rentz in Dayton. Rentz suggested that Warfield might use his connections to the NFL to help the Mendez brothers obtain a license. Although Rentz prepared a " Letter of Understanding" obligating
Warfield to pay Rentz one percent of gross sales of merchandise sold under an NFL license, Warfield never signed an agreement with Rentz. In late October 1990, Rentz arranged a meeting in Dayton between the Mendez brothers and Warfield. After the Mendez brothers showed Warfield samples of their work, Warfield agreed to seek an NFL license on their behalf. Although Rentz mentioned his one-percent commission at the meeting, there was no specific discussion of who would pay Rentz. Following the Dayton meeting, Rentz periodically spoke by phone with both Warfield and the Mendez brothers. During one call with Armando Mendez, Rentz repeatedly mentioned the promised one-percent commission, but Mendez suggested that Warfield pay the commission. In November 1990, Warfield met the Mendez brothers in Miami, Florida, and toured Dynasty's production facility. At that meeting, Warfield told Armando Mendez that Rentz was not Warfield's partner and told the Mendez brothers that they would have to pay any commission to Rentz.
In 1991, Warfield and his wife formed the corporation Jemesco, which then entered an agreement with the Mendez brothers' corporation Dynasty to create a joint venture called the Jemesco-Mendez Group. The Jemesco-Mendez Group obtained two NFL licenses in 1991. In February 1991, Armando Mendez told Rentz that the Mendez brothers had obtained an NFL license through a contact other than Warfield, and Rentz assumed that Warfield's efforts had failed. However, several years later, in July 1995, Rentz learned in a newspaper article that Warfield had been in the Florida sports-apparel business since 1990. Rentz concluded that Warfield had obtained an NFL license for the Mendez brothers and that Rentz had been deprived of his one-percent commission.
After Rentz threatened litigation, Warfield filed a declaratory-judgment action against Rentz on May 24, 1996, in the United States District Court for the Southern District of Florida. Rentz then filed a separate action in the United States District Court for the Southern District of Ohio on June 7, 1996, naming as defendants the Mendez brothers, Dynasty (also known as Mendez Screen Printing, Inc.), and the Warfield Defendants. The two actions were subsequently consolidated in the Ohio district court on July 17, 1996.
On March 31, 1997, the district court dismissed several portions of Rentz's complaint but gave him leave to file an amended complaint. Rentz filed an amended complaint on June 5, 1997, alleging various fraud, breach-of-contract, promissory-estoppel, and unjust-enrichment claims against the Mendez brothers, Dynasty, and the Warfield Defendants, and tortious interference with a business relationship against Warfield. On March 30, 1998, the district court dismissed the fraud claims and all of the claims insofar as they were directed against the Mendez brothers individually. The claims remaining in the case, therefore, were the contract, promissory-estoppel, and unjust-enrichment claims against Dynasty and the Warfield Defendants, and the claim of tortious interference with a business relationship against the Warfield Defendants.
Both Dynasty and the Warfield Defendants subsequently moved for summary judgment on the remaining claims. The Warfield Defendants also filed a motion for sanctions against Rentz, his counsel, and their law firms, pursuant to Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and OHIO REV.CODE § 2323.51. J.A. at 147-58 (Mot. for Sanctions).2 On February 5, 1999, the district
court granted summary judgment to the Warfield Defendants, but denied summary judgment to Dynasty. J.A. at 426-71 (Dist. Ct. Dec. 2/5/99 at 1-46).3
The district court also found Rentz's counsel subject to sanctions under both Rule 11 and 28 U.S.C. § 1927, but it denied the motion for sanctions under OHIO REV.CODE § 2323.51 as " moot." J.A. at 472-80 (Dist. Ct. Dec. 2/5/99 at 47-55). Specifically, the court found that Rentz's November 1996 deposition testimony revealed that there was no evidentiary basis for the allegations and legal claims that Rentz continued to make against the Warfield Defendants in his amended complaint, filed on June 5, 1997, and in his opposition to the defendants' motions for summary judgment, filed on August 26, 1998.
The district court explained that throughout his deposition Rentz had repeatedly denied the existence of any agreement requiring the Warfield Defendants to compensate him. The court noted the following statements by Rentz at his deposition: (1) " I did not care where [the one-percent commission] came from, but I dealt with the Mendez brothers. That is who I made the deal with." J.A. at 707 (Rentz Dep. Tr. at 44); (2) " I was not partners with Mr. Warfield. Mine would be coming from the Mendez brothers." J.A. at 708 (Rentz Dep. Tr. at 45); (3) " I didn't feel my deal was with Paul Warfield." J.A. at 710 (Rentz Dep. Tr. at 49). The district court also cited the following testimony in which Rentz, after repeated questioning, acknowledged that neither Jemesco nor Warfield personally ever agreed to pay Rentz's one-percent commission:
Q: Did Jemesco ever obligate itself to pay you a dime?
Q: Did Mr. Warfield ever obligate...
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