Kotsilieris v. Chalmers

Decision Date10 July 1992
Docket NumberNo. 91-1973,91-1973
Citation966 F.2d 1181
PartiesParis KOTSILIERIS, Plaintiff, v. Hymen P. CHALMERS, Andy Nanos and Electronics, Missiles & Communications, Incorporated, Defendants-Appellees. Appeal of Ronald P. KANE and Michael A. Kraft.
CourtU.S. Court of Appeals — Seventh Circuit

Daniel F. Webb, Chicago, Ill., Joseph M. Fitzsimmons, Melville B. Bowen, Kevin F. Bowen, Fitzsimmons & Bowen, Oakbrook, Ill., for plaintiff.

Ronald L. Marmer, Howard R. Barron, Howard S. Suskin (argued), Jenner & Block, Chicago, Ill., for defendants-appellees.

Ronald P. Kane (argued), Siegan, Barbakoff & Gomberg, Chicago, Ill., for appellants.

Before WOOD, Jr., * COFFEY, Circuit Judges, and CURRAN, ** District Judge.

HARLINGTON WOOD, JR., Circuit Judge.

This case not only tests the limits of the district court's discretion, but it tests this court's discretion as well. Today, we must decide whether a district court abused its discretion under 28 U.S.C. § 1927 when awarding attorneys' fees against counsel who inadvertently waited until the eve of trial before making a jury demand. In deciding this issue we must address two questions: did counsel act vexatiously, and was $5,546.25 an excessive award?

I.

Ronald P. Kane and Michael A. Kraft, the appellants in this case, served as counsel for the plaintiff, Paris Kotsilieris, in a suit against Hymen P. Chalmers, Andy Nanos and Electronics, Missiles & Communications, Incorporated ("Chalmers"). Kane and Kraft constituted the third set of counsel for Kotsilieris. Kane and Kraft entered the case about three years after the filing of the initial complaint. About one and one-half years after beginning their representation, defense counsel informed Kane and Kraft that no jury request had been made. Kane and Kraft, who had wrongly assumed that such a request had been made, filed a belated jury demand. Kane and Kraft's request was made close to the eve of trial, four and one-half years after the initiation of Kotsilieris's suit. Recognizing the importance of protecting the plaintiff's interest in receiving a trial by jury, the district court granted this belated motion. Although granting this motion, the district court found Kane and Kraft's failure to make a jury demand before the eve of trial inexcusable. The district court characterized this failure as an act of extreme negligence. Based on this finding, the district court awarded Chalmers $5,546.25 in attorneys' fees under 28 U.S.C. § 1927.

Kane and Kraft challenge the district court's order of attorneys' fees on two grounds. First, Kane and Kraft argue that although they acted negligently in failing to make a jury request, this negligent conduct does not rise to the level of vexatious conduct required for section 1927 sanctions. Second, Kane and Kraft argue that the award of $5,546.25 in attorneys' fees was excessive.

While the facts of this case, in our view, push the bounds of district court discretion, we will defer to the good judgment of Judge Williams and hold that the district court did not abuse its discretion in finding that Kane and Kraft's conduct warranted an award of attorneys' fees. Nonetheless, to balance this close call, we find that the district court did abuse its discretion in awarding such a large sum in relationship to the sanctioned conduct. The district court limited the award to the fees defendants incurred in responding to Kotsilieris's belated jury request--$5,546.25 is an excessive fee for a response to such a motion.

II.
A. Jurisdiction.

The district court order for sanctions is not a final order under 28 U.S.C. § 1291. Kraft and Kane argue that this court has jurisdiction over this interlocutory appeal under the collateral order doctrine. We agree.

Three criteria must be satisfied before an interlocutory order can be reviewed on appeal as a collateral order: " 'the order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment.' " Knorr Brake Corp. v. Harbil, Inc., 738 F.2d 223, 226 (7th Cir.1984) (citation omitted).

In Knorr this court held that an order granting attorneys' fees under 28 U.S.C. § 1927 against counsel who no longer has connection with the case meets these criteria. Kane and Kraft, who no longer represent Kotsilieris, suffered section 1927 sanctions. Therefore, we have appellate jurisdiction to review the district court's order of attorneys' fees under the collateral order doctrine. Id. at 226.

B. Was Award Justified?

The decision to award sanctions is solely within the discretion of the district court subject to the abuse of discretion standard. Kapco v. Mfg. Co. v. C & O Enter., Inc., 886 F.2d 1485, 1491 (7th Cir.1989).

Under section 1927 an attorney "who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." 28 U.S.C. § 1927 (emphasis added). The meaning of "vexatiously" is at the heart of this dispute.

Chalmers argues that objectively unreasonable behavior constitutes vexatious conduct under section 1927. 1 Such a reading seems to equate vexatious with unreasonable conduct. However, the statute explicitly requires that counsel act unreasonably and vexatiously before sanctions are warranted. We can, therefore, assume that Congress intended vexatiously to mean something other than unreasonably. In fact, our decisions have indicated just that. That is, our past decisions have interpreted vexatious to mean either subjective or objective bad faith. See, for example, Ordower v. Feldman, 826 F.2d 1569, 1574 (7th Cir.1987) (indicating that intentional ill will or reckless conduct constitutes vexatious conduct); In re TCI Ltd., 769 F.2d 441, 445 (7th Cir.1985) (bad faith can be demonstrated by subjective evidence of malice, objective evidence of reckless conduct, or indifference to the law).

Chalmers, however, cites a few of this court's statements out of context in order to argue that ordinary negligence meets section 1927's vexatious requirement. One case on which Chalmers relies in arguing that vexatious conduct is the same as objectively unreasonable conduct is Walter v. Fiorenzo, 840 F.2d 427, 433 (7th Cir.1988). However, when reading the entire sentence on which Chalmers relies for this proposition, rather than reading only that portion of the sentence which Chalmers quoted, it becomes clear that ordinary negligence was not the standard set forth in that case. To the contrary, in Fiorenzo this court stated, "A court may impose sanctions under 28 U.S.C. § 1927, against an attorney where that attorney has acted in an objectively unreasonable manner by engaging in a 'serious and studied disregard for the orderly process of justice'...." Fiorenzo, 840 F.2d at 433 (citations omitted) (emphasis added). This statement certainly does not stand for the proposition that any unreasonable conduct is sanctionable under section 1927.

Chalmers also relies on TCI in arguing that objectively unreasonable conduct satisfies section 1927's vexatious requirement. However, we must be careful to place that case in context. In TCI this court was grappling with the question of whether bad faith meant something other than subjective ill will. TCI, 769 F.2d at 445. Therefore, any reference to objective reasonableness in that case was made in order to emphasize that bad faith can be demonstrated by objective as well as subjective evidence--which we explained meant that recklessness or indifference to the law constitutes bad faith. Id.; see also Ordower, 826 F.2d at 1574 (interpreting TCI to mean that reckless conduct as well as intentional conduct is sufficient for section 1927 sanctions). Stating that bad faith has an objective component is far from saying that ordinary negligence constitutes bad faith.

Chalmers also relies on Hill v. Norfolk Western Railway Co., 814 F.2d 1192, 1202 (7th Cir.1987), for the proposition that ordinary negligence constitutes vexatious conduct. However, our discussion in Norfolk, like the discussion in TCI, focuses on whether or not intentional misconduct is a prerequisite for imposing sanctions under section 1927. As such, that case was not necessarily dealing with the question of whether ordinary negligence is sufficient for section 1927 sanctions. And, in any event, Norfolk was decided on Rule 38 grounds, not section 1927 grounds.

As the Supreme Court indicated in Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 700, 54 L.Ed.2d 648 (1978), it is difficult to apply abstract words to concrete cases. If our language has been less than clear it is because of this difficulty and not because we intended to extend the meaning of vexatious to encompass ordinary negligence. Indeed, when we look to the facts in our prior decisions, we find no cases where we have upheld sanctions upon a showing of a simple mistake or ordinary negligence. Rather, cases in which this court has upheld section 1927 sanctions have involved situations in which counsel acted recklessly, counsel raised baseless claims despite notice of the frivolous nature of these claims, or counsel otherwise showed indifference to statutes rules, or court orders. See, for example, Fred A. Smith Lumber Co. v. Edidin, 845 F.2d 750, 752-54 (7th Cir.1988) (took ostrich-like tactic of pretending potentially dispositive authority did not exist; persisted in putting forth claims despite fact that statute of limitations clearly barred claims; and acted in bad faith in filing a fraud claim in hopes that future discovery would lead to sufficient facts to support such a claim); Fiorenzo, 840 F.2d at 435 (counsel sanctioned because after four years of discovery and after dismissal of three other defendants it should have been obvious to counsel that claim was baseless...

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