Bay State Towing Co. v. Barge American 21 (O.N. 517472), s. 89-1042

• Decision Date: 08 January 1990
• Docket Number: Nos. 89-1042,89-1155 and 89-1335,s. 89-1042
• Citation: 899 F.2d 129
• Parties: BAY STATE TOWING COMPANY, Plaintiff, Appellee, v. BARGE AMERICAN 21 (O.N. 517472), et al., Defendants, Appellants. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 129

899 F.2d 129

16 Fed.R.Serv.3d 582

BAY STATE TOWING COMPANY, Plaintiff, Appellee, v. BARGE AMERICAN 21 (O.N. 517472), et al., Defendants, Appellants.

Nos. 89-1042, 89-1155 and 89-1335.

United States Court of Appeals First Circuit.

Heard Jan. 8, 1990.

Decided March 30, 1990.

John J. Tabacco, Jr., with whom Jared Stamell and Stamell, Tabacco & Schager New York City, were on brief, for defendants, appellants.

Timothy R. McHugh, with whom Hoch & McHugh, Boston, Mass., was on brief, for plaintiff, appellee.

Before BREYER and CYR, Circuit Judges, and BOWNES, Senior Circuit Judge.

BREYER, Circuit Judge.

Bay State Towing Company, which owns a tugboat, sued New England Marine Services, which owns barges, claiming that New England owed it about $113,000 for tugboat towing for March, April, and May 1986 ($81,000 after deducting a fuel setoff of about $32,000). After a trial, the district court found that New England had no substantial defense; it awarded Bay State the $81,000 plus interest of about $19,000 (running from July 1, 1986, to the time of judgment); and it imposed a sanction against New England, amounting to $20,000 in attorneys' fees, for having filed an improper "opposition" to Bay State's summary judgment motion.

The district court noted that Rule 11 of the Federal Rules of Civil Procedure says:

The signature of an attorney or party [on a filed paper] constitutes a certificate by the signer that the signer has read the ... paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact ... and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

Fed.R.Civ.P. 11 (emphasis added). It pointed out that the "opposition," which Jared Stamell, New England's counsel, signed, said there were four "issues of material fact," namely:

A. Whether plaintiff's bills to defendants correctly set forth the reasonable charges for towage services actually provided to defendants....

B. Whether plaintiff has given defendants credit for the about $250,000 paid to plaintiff....

C. Whether plaintiff has given defendants credit for the about $45,000 in fuel sales defendants made to plaintiff....

D. Whether plaintiff padded bills submitted to defendants in May 1986 just before starting the lawsuit.

It also pointed out that Jared Stamell's wife, Susan Frank, who is a principal officer of New England, filed an attached affidavit in which she said that she believed

the amounts claimed for standby time, weather delays, and to move a barge from one location to another are unreasonable.

It concluded that Stamell and Frank either did not believe any of this, or would not have believed it if they had made "reasonable inquiry." The court added that Stamell and Frank had filed the "opposition" to "cause unreasonable delay."

Rule 11 also says that:

If a ... paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.

Accordingly, the district court imposed a sanction consisting of a $20,000 attorney's fee.

New England appeals this sanction. We have reviewed the record. In our view, that record adequately supports the district court's determination.

I Liability

In its initial June 1986 complaint, Bay State said that New England owed it $113,000 for barge towing services. New England answered, denying the liability, and added that Bay State owed it $45,000 for fuel. Bay State then filed its summary judgment motion, admitting that it owed New England $32,000 for fuel, while adding that New England indisputably owed it the remaining (approximately) $81,000. (Bay State also asked for $10,500 interest.) New England's response, which we quoted above, asserted 1) billing (i.e., bookkeeping) inaccuracies; 2) failure properly to credit $250,000 in payments; 3) $45,000 owed for fuel; and 4) bill padding. We have read the record to determine whether the appellants complied with Rule 11's requirement that they have a belief "formed after reasonable inquiry" that these factual claims are true. In our view, the district court acted well within its legal powers in deciding that they did not.

That the appellants did not, or should not (after reasonable inquiry) have believed the first three of the "response's" claims is demonstrated by the fact that the record, which includes pleadings, a trial transcript, a Rule 11 hearing transcript, and numerous affidavits and other documents, contains nothing to suggest why, or how, a person could have believed any such thing. The evidence shows that Bay State owed New England $32,000 for fuel, not $45,000, and there is nothing to the contrary. There is nothing to suggest that the $250,000 in payments had anything to do with the matter. There is no evidence of bookkeeper confusion or inaccuracy of invoices. Indeed, we have examined the specific invoice amounts that Bay State listed in its complaint; we have compared them with the bookkeeping invoice figures that New England conceded were accurate (i.e., represented the invoice amounts) at trial; the figures are the same. There is no evidence of the bookkeeper confusion that appellants assert in their brief. The Rule 11 hearing offered the appellants an opportunity to present any additional factual information that might have led them to form a reasonable belief that the first three statements in their "response" were accurate. We can find no such additional information. The best support we can find for New England is that Mr. Stamell, at the end of the trial, asked the parties to stipulate that his wife, Susan Frank, would testify that "her books and records show reductions which were agreed to by Bay State ... in the amount of $7,981," were she present (she was having a baby at the time). But the record indicates that the $81,000 already reflected all the reductions Bay State agreed to, and nothing in the record suggests that the $7,981 reflects an additional reduction, or that anyone ever thought it did. That is to say, New England nowhere clearly contended (or produced evidence supporting the contention) that Bay State had promised to reduce the $81,000 further.

The fourth factual assertion in the "response"--bill padding--is more difficult. Although New England seemed simply to abandon its first three claims, it made clear throughout the pretrial proceedings that it would make a factual defense showing that the bookkeeper's invoices did not reflect the services that New England provided, that is to say, that its bills were "padded." In addition to asserting this claim (backed by Susan Frank's affidavit) in New England's summary judgment "opposition," Mr. Stamell, seventeen months later, wrote a letter to the district court, in which he said that the "figure on defendant's books [i.e., the amount owed] is about $65,000 [not $81,000], and we will show at trial that a substantial reduction to this figure is required because plaintiff padded the bills." He reiterated this statement in letters to Bay State's attorneys. He did not tell Bay State, however, just which invoices New England thought were "padded," or just why New England thought this, until the trial was under way.

The record shows that New England had no reasonable factual basis for asserting this "bill padding" claim. The trial, in July 1988, consisted mostly of testimony by Bay State's tug captain, his partner, and the bookkeeper, to the effect that they had provided the services invoiced and that the invoices were accurate. After their testimony, New England, apparently for the first time, told Bay State just which amounts it would dispute--amounts that reflected "standby" time during a fog, or while waiting for a pilot, or where it would have been cheaper to have had the tug return to its home and come back later to pick up the barge. New England's evidence consisted of testimony by an expert witness, Richard DiNapoli, who worked for Standard Marine Services, a company affiliated with, and owned by, the mother of Peter Frank, New England's President (and Susan Frank's brother). DiNapoli said that he had read Bay State's invoices, that he had examined the tugboat's logs, that he knew the industry, and that he failed to find in Bay State's materials corroboration that the day in question had really been foggy, that the pilot really had been delayed, etc. Plaintiff's counsel asked for a ten minute recess. He then brought in New England's own logs from its own towed barges for the relevant dates (logs that he had received only a few weeks before because New England had obtained a court "protective" order that required Bay State's lawyers to go to New Jersey to inspect the barge's logs). The barge logs contained all the necessary corroboration. The barge logs showed, for example, that the day in question really had been foggy just as Bay State had said, that the pilot really had been late, and so forth. DiNapoli, after about fifteen minutes of such cross-examination, agreed that there was no argument, that Bay State was right. He added that he would not have given a contrary opinion if anyone had ever shown him New England's own barge logs, but no one ever did.

This trial record suggests that, at best, the Franks (and Mr. Stamell, who helped them draw up their affidavits) failed to make "reasonable inquiry" before claiming that the bills were "padded." Common sense bolsters that conclusion. After all, there are perfectly obvious ways for a barge company manager, in mid-1986, to determine whether or not the weather really was foggy on a particular day in May, or whether the...