592 F.3d 78 (2nd Cir. 2010), 07-3903-cv, Kiobel v. Millson

Docket Nº:07-3903-cv.
Citation:592 F.3d 78
Opinion Judge:JOS
Party Name:Esther KIOBEL, individually and on behalf of her late husband, Dr. Barinem Kiobel, Bishop Augustine Nume John-Miller, Charles Baridorn Wiwa, Israel Pyakene Nwidor, Kendricks Dorle Kwikpo, Anthony B. Witah-Kote, Victor B. Wifa, Dumle J. Kunenu, Benson Magnus Ikari, Legbara Tony Idigma, Pius Nwinee, Kpobari Tusima, Plaintiffs-Appellees, v. Rory O. MI
Attorney:Peter Nordberg (Stephen A. Whinston, Carey R. D'Avino, Keino R. Robinson, on the brief), Berger & Montague, P.C., Philadelphia, PA., for Plaintiff-Appellees. Rowan D. Wilson (Douglas J. Dixon, Noah J. Phillips, on the brief), Cravath, Swaine & Moore LLP, New York, NY, for Appellants.
Judge Panel:Before: JACOBS, Chief Judge, LEVAL, and CABRANES, Circuit Judges. JOS
Case Date:January 08, 2010
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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592 F.3d 78 (2nd Cir. 2010)

Esther KIOBEL, individually and on behalf of her late husband, Dr. Barinem Kiobel, Bishop Augustine Nume John-Miller, Charles Baridorn Wiwa, Israel Pyakene Nwidor, Kendricks Dorle Kwikpo, Anthony B. Witah-Kote, Victor B. Wifa, Dumle J. Kunenu, Benson Magnus Ikari, Legbara Tony Idigma, Pius Nwinee, Kpobari Tusima, Plaintiffs-Appellees,

v.

Rory O. MILLSON, Thomas G. Rafferty, Michael T. Reynolds, Appellants,

Royal Dutch Petroleum Company, Shell Transport & Trading Company PLC, Shell Petroleum Development Company of Nigeria, Ltd., Defendants. [*]

No. 07-3903-cv.

United States Court of Appeals, Second Circuit.

January 8, 2010

Argued: Jan. 12, 2009.

Page 79

Peter Nordberg (Stephen A. Whinston, Carey R. D'Avino, Keino R. Robinson, on the brief), Berger & Montague, P.C., Philadelphia, PA., for Plaintiff-Appellees.

Rowan D. Wilson (Douglas J. Dixon, Noah J. Phillips, on the brief), Cravath, Swaine & Moore LLP, New York, NY, for Appellants.

Before: JACOBS, Chief Judge, LEVAL, and CABRANES, Circuit Judges.

JOSÉA. CABRANES, Circuit Judge:

In this appeal we consider a challenge to the imposition of sanctions under Rule 11 of the Federal Rules of Civil Procedure. Appellants are defense counsel in an action brought pursuant to the Alien Tort Statute (" ATS" ), 28 U.S.C. § 1350, for alleged violations of customary international law in Nigeria. They seek review of an order of the United States District Court for the Southern District of New York (Kimba M. Wood, Chief Judge ), affirming the order of a magistrate judge, that sanctioned them for making factual representations that allegedly lacked evidentiary support. Appellants challenge the order of the District Court on two grounds. First, they contend that a magistrate judge is not authorized to issue an order imposing Rule 11 sanctions, and the District Judge should have therefore construed the Magistrate Judge's " Opinion and Order" as a report and recommendation under 28 U.S.C. § 636(b)(1)(B) subject to de novo review. Second, they argue that the imposition of Rule 11 sanctions based on the statements identified by plaintiffs cannot be sustained as a matter of law in light of the record evidence that supported those statements.

The panel is evenly divided on the first ground raised in this appeal, with one member of the panel concluding that magistrate judges have authority to impose Rule 11 sanctions, another judge concluding that they do not, and the third declining to endorse either view in light of the statute's ambiguity. See post. Fortunately, we need not decide whether the District

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Judge applied the correct standard of review to the Magistrate Judge's determination that Rule 11 sanctions were warranted in this case, because we agree with appellants' second basis for challenging the order of the District Court. As explained in greater detail below, the record evidence does not provide an adequate basis to impose Rule 11 sanctions on appellants. Therefore, we rely solely on the second ground advanced by appellants to resolve this appeal.

BACKGROUND

This appeal arises from a putative class action brought under the ATS. The complaint charged three affiliated corporate entities with violations of international law for their involvement in oil exploration and development in Nigeria. See Kiobel v. Royal Dutch Petroleum Co., 456 F.Supp.2d 457 (S.D.N.Y.2006). Plaintiffs moved for class certification pursuant to Rule 23(c) of the Federal Rules of Civil Procedure, and the District Court referred that motion to a magistrate judge for a report and recommendation under § 636(b)(1)(B). See Kiobel v. Royal Dutch Petroleum Co., No. 02 Civ. 7618, 2004 WL 5719589, 2004 U.S. Dist. LEXIS 28812 (S.D.N.Y. Mar. 31, 2004). On March 31, 2004, Magistrate Judge Henry B. Pitman recommended that the District Court deny plaintiffs' motion for class certification. Id. at *14, 2004 U.S. Dist. LEXIS 28812, at *43.

Plaintiffs objected to the Magistrate Judge's report and recommendation, and defendants filed an opposition to those objections. In that opposition, defense counsel stated, inter alia: (1) " Now we have learned that seven of the identified witnesses [in support of plaintiffs' claims] are being paid for their testimony; " (2) " [T]here can be no doubt that the witnesses are giving testimony that [plaintiffs'] counsel knows to be false; " 1 and (3) " [W]e know that between February 29, 2004 and April 2, 2004, Berger & Montague [plaintiffs' counsel] wired $15,195 to the Benin Republic for the benefit of the witnesses." J.A. 344. On the basis of these statements, plaintiffs charged defense counsel-who are the appellants in this matter-with violating Rule 11(b)(3) of the Federal Rules of Civil Procedure, alleging that defense counsel's statements had no evidentiary support. Pursuant to Rule 11, plaintiffs filed a motion for the imposition of sanctions against defense counsel. Opposing that motion, defense counsel argued that their statements were supported by record evidence.

In an Opinion and Order dated September 29, 2006, the Magistrate Judge denied plaintiffs' motion with respect to the first statement,2 having found some support for it in the record, see Kiobel v. Royal Dutch Petroleum Co., No. 02 Civ. 7618, 2006 WL 2850252, *4, 2006 U.S. Dist. LEXIS 71421, at *13 (S.D.N.Y. Sept. 29, 2006), but granted the motion with respect to the second 3 and third 4 statements, see id. at **9-10, 11-12, 2006 U.S. Dist. LEXIS 71421, at *29, *32-34. With respect to the second statement, the Magistrate Judge imposed

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a $5,000 sanction on each attorney who signed the opposition filing, see id. at *12, 2006 U.S. Dist. LEXIS 71421, at *36, but he declined to impose monetary sanctions for making the third statement because " [a]lthough defendants' counsel overstated the amount of money sent to benefit the [plaintiffs'] [w]itnesses, the amount of the overstatement was small (approximately $3,000) and did not materially change the nature of the statement," id. at *11, 2006 U.S. Dist. LEXIS 71421, at *34. The Magistrate Judge also awarded plaintiffs one-third of their attorneys' fees arising from their partially successful Rule 11 motion. See id. at **12-13, 2006 U.S. Dist. LEXIS 71421, at *37.

Counsel for defendants appealed the Magistrate Judge's September 29, 2006 Order to the District Court. Applying a deferential " clearly erroneous or contrary to law" standard of review under 28 U.S.C. § 636(b)(1)(A), the District Court affirmed the imposition of sanctions in an unpublished order dated August 10, 2007. See Sp.App. 35, 37. This appeal followed.

DISCUSSION

We review an order imposing Rule 11 sanctions for abuse of discretion. See, e.g., Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 387 (2d Cir.2003). An " abuse of discretion" occurs when a district court " base[s] its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence, or render[s] a decision that cannot be located within the range of permissible decisions." Sims v. Blot, 534 F.3d 117, 132 (2d Cir.2008) (citations and internal quotation marks omitted). Here, the District Court's decision to impose sanctions based on the statements challenged by plaintiffs has no support in law or logic-and therefore constitutes an " abuse of discretion." A statement of fact can give rise to the imposition of sanctions only when the " particular allegation is utterly lacking in support." Storey, 347 F.3d at 388 (internal quotation marks omitted). As described in greater detail below, neither of the statements that the Magistrate Judge and the District Judge held sanctionable meets this standard as a matter of law, and they therefore cannot give rise to the imposition of sanctions pursuant to Rule 11.

1. " [T]here can be no doubt that the witnesses are giving testimony that counsel knows to be false." 5

The Magistrate Judge held that there was no support whatsoever for defense counsel's allegation that the Benin witnesses gave testimony that plaintiffs' counsel knew to be false. See Kiobel, 2006 WL 2850252, at **9-10, 2006 U.S. Dist. LEXIS 71421, at *29. In defense of this statement, defense counsel argue that based on circumstantial evidence-including the size of the payments to the witnesses and the rush to depose them just before the end of discovery-it was reasonable to infer that plaintiffs' counsel knew that testimony so elicited was likely to be false. More concretely, defense counsel point to moments during depositions when they directly told plaintiffs' counsel that certain witnesses were testifying falsely. J.A. 529, 539. For instance, one witness, Ejiogu, testified that he had not returned to Nigeria since he fled in September 2003, but another witness, John-Miller, testified that Ejiogu subsequently returned to Nigeria to meet with plaintiffs' counsel. Id. at 529-30, 621, 648.

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The Benin witnesses also denied knowing one another even though plaintiffs' counsel was housing them together in a " compound" in Benin. Id. at 530. While there might have been reasons-perhaps even good ones-for these contradictions and inconsistencies, those contradictions were as apparent to plaintiffs' counsel as they were to defense counsel. It was reasonable in the circumstances for defendants' counsel to conclude not only that some of the testimony of the witnesses was false, but also that plaintiffs' counsel were aware of the falsity.

Defense counsel also point to fourteen statements of the Benin witnesses that they contend were so obviously false that plaintiffs' counsel must have known of their falsity. The strongest of these statements came from a witness who testified that " Shell had a $260 billion contract" in Nigeria, notwithstanding...

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