Hedrick v. Comptroller of Currency, Washington D.C.
| Citation | 68 F.3d 477 |
| Decision Date | 12 October 1995 |
| Docket Number | No. 94-3713,94-3713 |
| Parties | NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit. Donald E. HEDRICK, Plaintiff, v. COMPTROLLER OF the CURRENCY, Washington D.C. Defendant-Appellee; Appeal of Richards. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Before COFFEY, MANION and KANNE, Circuit Judges.
Dean E. Richards, an attorney who represented Donald E. Hedrick in his suit against the Office of the Comptroller of the Currency ("OCC"), appeals from the district court's award of attorneys' fees as sanctions under Federal Rule of Civil Procedure 11. We affirm.
Hedrick, Chairman of the Board of Rushville National Bank of Rushville, Indiana, ("Rushville"), owned 88% of Hoosier Bancorp of Indiana, Inc. ("Hoosier Bancorp"), which is a holding company with 89% of Rushville's stock. Hoosier Bancorp had pledged its Rushville stock as part of the collateral for a promissory note, which over time had come into the possession of Liberty National Bank and Trust of Louisville, Tennessee ("Liberty National"). Hedrick sued the OCC on the grounds that it had prohibited him from selling his shares in Hoosier Bancorp.
On November 12, 1992, in Washington, D.C., just before Hedrick attended a meeting between the OCC and Rushville's Board of Directors, he was pulled aside by OCC staff for a private meeting. During this private meeting, OCC staff served him with an order suspending him from participating in Rushville's affairs and a "Notice of Intention to Prohibit Further Participation," which notified him of administrative proceedings to prohibit him from participating in any bank or other institution governed by 12 U.S.C. Sec. 1818 (1988 & Supp.1989). According to Hedrick, Jane Rasmussen, a Senior Attorney for the enforcement division of the OCC, told him that attempting to sell his stock in Hoosier Bancorp would violate the suspension order. Liberty National interpreted Hedrick's suspension as grounds for declaring the promissory note in default. It notified Hoosier Bancorp on November 20, 1992, that it intended to sell the pledged Rushville stock at or after the end of the month.
On November 23, 1992, Hedrick filed a suit to seek a partial stay of the OCC's suspension order, and two days later he filed an amended complaint. See Hedrick v. Office of the Comptroller of the Currency, No. IP92-1635 C (S.D.Ind. Nov. 23, 1992) (complaint). In a letter dated December 4, 1992, Fred Finke informed Richards that the OCC approved "the transfer or attempted transfer by Mr. Donald E. Hedrick of all or part of the voting rights of his shares of Rushville National Bank and/or Hoosier Bancorp." He added that Hedrick must provide twenty days advance notice "of any transfer of all or part of such shares."
On December 9, 1992, Hedrick filed the suit for a declaratory judgment that underlies the sanctions dispute in this appeal. He sought a declaratory judgment holding that the OCC acted beyond its authority under 12 U.S.C. Sec. 1818 by restricting his ability to sell his stock. In the alternative, if Sec. 1818 authorized such actions, he sought a declaratory judgment holding that statute was unconstitutional because it deprived him of his Fifth Amendment rights to due process and to protection against the taking of his property without just compensation.
Prior to the eventual dismissal of the underlying suit, counsel for the parties submitted various affidavits in relation to the OCC's motion to dismiss or for summary judgment. On February 11, 1993, the OCC submitted this motion, in which it stated that "the OCC has never prohibited plaintiff from selling or otherwise divesting himself of his interest in [Hoosier Bancorp], subject to OCC approval...." The OCC argued that the court lacked jurisdiction, 1 that Hedrick's claims lacked merit, and that the suit was moot because after Rasmussen's alleged statements at the meeting, the OCC had repeatedly informed Hedrick through his counsel that he could sell his stock. In addition to other materials, Robin Rosenbaum, the OCC's trial counsel from the Department of Justice, submitted in support of this motion the first of two affidavits by her. Richards later filed Hedrick's response to the OCC's motion to dismiss or for summary judgment, which included Richards' own affidavit. In this affidavit, he stated that Rasmussen had flatly indicated at the November 12 meeting that Hedrick could not sell his stock. On April 14, 1993, two of the OCC's counsel, Rasmussen and Gerald Sexton, withdrew their appearances before the district court. At the same time, the OCC filed a reply to Hedrick's response, and it supported the reply with affidavits from Rasmussen and Sexton and with Rosenbaum's second affidavit. Rasmussen stated in her affidavit that she did not tell Hedrick that he could not sell his stock, but only that he could not sell, transfer or exercise voting rights in that stock.
In these affidavits, counsel for both sides described their interaction during the pendency of Hedrick's suit. In his affidavit, Richards stated that on December 11, 1992, he discussed the problem of being able to sell only voting rights with Rasmussen. On December 18, 1992, Rushville was declared insolvent, and a receiver was appointed. According to Richards' affidavit, this act rendered the stock worthless. After the bank was closed, assets were sold off. On December 23, 1992, after talking to Richards, Rosenbaum sent him confirmation that "Mr. Hedrick may transfer, sell, or otherwise dispose of his interest in Hoosier Bancorp, as well as transfer his voting rights" in compliance with Finke's letter. In his affidavit, Richards stated that during his conversation with Rosenbaum, he complained that the stock was now worthless, Hedrick's ability to sell or transfer it meant little or nothing. According to Rosenbaum's second affidavit, she never discussed the alleged worthlessness of the stock until February 4, 1993. Rosenbaum stated in her first affidavit that she talked with Richards again on January 5, 1993, to see if he would dismiss his suits for declaratory judgment and for a partial stay of the suspension order. According to that affidavit, Richards told her that he believed that her December 23 letter was not binding on the OCC. Therefore, on January 5, Rasmussen sent him a letter confirming the OCC's position. In his affidavit, Richards denied that he believed the letter was not binding, but rather alleged that he wanted a confirmation letter for the purposes of the suit.
On May 21, 1993, after receiving these various affidavits, the district court dismissed the case as moot. The court held that the motion for summary judgment constituted a judicial admission that Hedrick could sell his stock. In addition, it noted that the correspondence between the attorneys on December 4, 1992 and thereafter was therefore immaterial. On May 25 and 27, 1993, respectively, the clerk of court docketed the district court's orders dismissing the case as moot and providing a separate order of judgment in compliance with Fed.R.Civ.P. 58.
During the course of this case, the OCC cited three documents in which Richards allegedly violated Rule 11. The first one was Hedrick's motion to disqualify opposing counsel or to strike their affidavits. The motion invoked the "advocate-witness" rule, Indiana Rule of Professional Conduct 3.7, which the district court incorporated into its local rules. See R. Disciplinary Enforcement IV.B, in R. U.S.Dist.Ct.S.D.Ind. Ironically, the plaintiff's course of action for which the OCC sought sanctions paralleled the OCC's own behavior. Richards did not file an affidavit until after the OCC had used an affidavit of counsel to support its dispositive motion, and he did not file the motion to disqualify opposing counsel or to strike their affidavits until after the OCC had filed a motion seeking the same relief against him. The OCC distinguishes its own conduct on the grounds that Rasmussen and Sexton withdrew at the time that they filed affidavits and that Rosenbaum's affidavits did not contain material facts.
The OCC also sought sanctions against Richards for filing Hedrick's response to the OCC's motion to disqualify, which Richards submitted with Hedrick's motion to disqualify. In the response, Richards stated on Hedrick's behalf that counsel's affidavit was only filed to controvert the OCC's affidavits (although we note that only Rosenbaum had filed an affidavit at that time), and that Hedrick had no intent of calling Richards as a witness at trial. Further, Richards contended that Rule 3.7 did not apply because his counter-affidavit "does not constitute testimony at 'trial' as set out in Rule 3.7."
The third document for which the OCC requested sanctions was Hedrick's "Motion for Order Compelling Discovery and for Sanctions for Failure to Appear at Deposition [FRCP 37(A)(d) (sic) ]." On April 19 and 20, 1993, Richards served on Rosenbaum by fax and mail six sets of documents for depositions scheduled from April 26, 1993 to April 28, 1993. Each set included a "Notice to Take Deposition," a "Motion to Produce Documents at Deposition," and a subpoena requesting the person's presence and the production documents. The subpoenas named Fred Finke, Deputy Comptroller for Special Supervision at the OCC, Ronald Schneck, Director of Special Supervision at the OCC, Michelle Collins, a bank examiner for the OCC, Rasmussen, Sexton, and Rosenbaum. Rosenbaum informed Richards in advance of the meetings that the individuals would not attend because the subpoenas were facially defective for a variety of reasons. On May 24, 1993, three days after the date of the court order and judgment dismissing the case (but one day and three days before the order and the judgment respectively were entered...
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