Balerna v. Gilberti
| Decision Date | 07 February 2012 |
| Docket Number | CIVIL ACTION NO. 09-10075-RGS |
| Parties | HARRIET J. BALERNA v. CARMEL A. GILBERTI and MELVIN L. LEWIS and EDWARD F. LEWIS, both individually and as Executors of the Estate of Helen Lewis |
| Court | U.S. District Court — District of Massachusetts |
IMPOSITION OF SANCTIONS UNDER
FED. R. CIV. P. 11 AND THE
DISPOSITION OF SURPLUS FUNDS
STEARNS, D.J.
This case involves unfounded accusations of criminality and unethical conduct leveled by a lawyer against his opposing counsel during the trial of an otherwise mundane dispute over an accounting of the proceeds of a foreclosure sale. The haggling over the issue is chronicled in the court's November 24, 2010 decision, which followed a three-day non-jury trial. See Balerna v. Gilberti, 2010 WL 4878286 (D. Mass. Nov. 24, 2010). The dispute moved to federal court in 2009, when Attorney Joseph J. Coppola filed a complaint against Melvin and Edward Lewis (father and son),the Executors of the Estate of Helen Lewis (the wife of Melvin and mother of Edward), and Attorney Carmel A. Gilberti, the lawyer for the Lewis Estate.
Attorney Gilberti was hired in 2004 by the Executors to collect a $26,500 first mortgage granted on April 20, 2001, by Alfred Balerna (Harriet Balerna's late husband), to Helen Lewis on a residence at 110 Wild Harbor Road in North Falmouth, Massachusetts (Property).1 Helen Lewis died in June of 2004. Melvin Lewis, through his son Edward , granted a power of attorney to Gilberti in November of 2004. A month later, Gilberti filed a foreclosure action against the Property in the Barnstable Superior Court, which Alfred Balerna did not defend. On March 2, 2005, a default judgment entered against Alfred Balerna. Two failed foreclosure auctions followed, resulting in the forfeiture of deposits totaling $30,000 by Ruth Drowne, a former owner of the Property. After Drowne's second default, the Property was sold for $145,000 to Edward Lewis (who was the next highest bidder).
On October 12, 2005, the day that Lewis took title (by way of a foreclosure deed) to the Property, Ruth Drowne filed an action in the Barnstable Superior Court toset aside the sale and return the forfeited deposits.2 Gilberti defended the Lewis Estate in the matter (which was eventually dismissed) in which she was also named as a defendant. On January 16, 2009, Coppola filed this diversity action in the federal district court. The Complaint named the Lewises in their individual capacities as well as in their capacities as Executors of the Lewis Estate, and demanded an accounting of the foreclosure sale proceeds. Somewhat unusually, Coppola also named Gilberti personally as a defendant, accusing her "upon information and belief" of fraudulently converting the sale proceeds "to pay legal fees and expenses which did not arise from the Foreclosure Action or the foreclosure sale." Compl. ¶ 32. In addition to conversion, the Complaint alleged a breach of fiduciary duty on Gilberti's part and asserted that she had violated the Massachusetts Rules of Professional Conduct in her handling of the foreclosure proceeds. See id. ¶¶ 39, 52-55. The only instance of an alleged conversion cited in the Complaint was the reimbursement by the Lewis Estate of Gilberti's fees in defending the Barnstable action.3 See id. ¶¶ 33, 50.
The accounting of the sale submitted by Gilberti in the federal action (adjusted by a $10,300 credit for an overlooked real estate tax refund payment identified by Coppola), showed as follows: gross proceeds of $176,815 (including interest) and gross expenses of $133,249. The expenses included the pay-off of the Lewis mortgage with interest ($55,027), the costs of the two sales, including auction fees, a services-rendered payment to Edward Lewis, taxes, and title adjustment fees. Gilberti was also paid her costs and legal fees, a total of $47,000, which included $17,000, that she billed for the Barnstable matter.
After discovery, the court dismissed the claims of a number of third-party defendants laying claim to the surplus. See Balerna v. Gilberti, 266 F.R.D. 42 (D. Mass. 2010). A non-jury trial was then held on the Balerna Complaint beginning on July 6, 2010. On November 24, 2010, the court issued its findings and rulings confirming the final accounting, including the expenses incurred in the Barnstable action, which the court found to fall within the "Mortgagee's Right to Cure and Expenses" clause of the mortgage.4 Balerna, 2010 WL 4878286, at *3. Then, afterciting at length from the transcript of the trial, the court ordered Attorney Coppola to show cause why he should not be sanctioned pursuant to Fed. R. Civ. P. 11(b), "for making baseless accusations against Attorney Gilberti regarding her conduct in representing the [Lewis] Estate." Id., at *8. The Order to Show Cause specified three areas of potentially sanctionable conduct against Coppola: (1) the accusation that Gilberti had converted money from the proceeds of the sale for her personal defense in the Barnstable action: (2) the accusation that she had engaged in criminal usury in violation of Massachusetts state law by charging a fee in excess of 20 percent of the value of the Lewis mortgage; and (3) that she had filed false declarations with the court (most notably, in her accounting of the foreclosure funds). Id., at *5-8.
Immediately following the entry of the Order to Show Cause, Coppola movedfor an extension of the return date to obtain the transcript of the trial. The motion was granted. On April 26, 2011, the official transcript of the first two days of the trial was docketed by the court reporter and Coppola was given until May 17, 2011, to respond. On April 27, 2011, appearances on behalf of Coppola were entered by attorneys David Dineen and Robert Muldoon, Jr., who promptly moved for a further extension while the transcript of Day 3 of the trial was completed. The motion was allowed. The final portion of the transcript was filed on May 13, 2011, and Coppola responded to the Order to Show Cause on May 17, 2011. Gilberti filed a response of her own on June 6, 2011, followed by a reply from Coppola (now represented by Attorney Matthew Moschella) on June 16, 2011.
Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990) (emphasis added). The range of sanctions available to the court is broad. In additionto monetary penalties, the "most prominent are reprimands, orders to undergo continuing education . . . , and referral to disciplinary authorities." 5A Wright & Miller, Federal Practice and Procedure § 1336.3 at 695-696 & nn. 60, 61, 62 (3d ed. 2004). Tailoring of the penalty to fit the offense is a key consideration - guided by the admonition that the sanction imposed should be the least severe of the available alternatives necessary to serve the purposes of Rule 11. Akin v. Q-L Invs., Inc., 959 F.2d 521, 535 (5th Cir. 1992); Wright & Miller, § 1336.3 at 688 & n.41.
A claim is frivolous under Rule 11 when it is "either not well-grounded in fact or unwarranted by existing law." Cruz v. Savage, 896 F.2d 626, 632 (1st Cir. 1990). "[I]n making Rule 11 determinations, judges should not employ the wisdom of hindsight, but should consider the reasonableness of the attorney's conduct at the time the attorney acted." Id. at 633. "However, a litigant's obligations with respect to the contents [of his filings] are not measured solely as of the time they are filed with or submitted to the court, but include reaffirming to the court and advocating positions contained in those pleadings and motions after learning that they cease to have any merit." Fed. R. Civ. P. 11 advisory committee's note.
Turning to the substance of the cited instances of possible misconduct, I will address each of Coppola's explanations in turn.
In its opinion of November 24, 2010, the court highlighted the following.
In the Complaint filed on behalf of Balerna, Coppola accused Gilberti, "upon information and belief," of using proceeds from the foreclosure sale "to pay legal fees and expenses which did not arise from the Foreclosure Action or the foreclosure sale." Compl. ¶ 32. The Complaint specifically referenced the Estate's payment to Gilberti of her fee for representing the Estate's interests in the Barnstable action. See id. ¶ 33. At trial, the court was presented with no evidence to suggest that the expenditure was inappropriate. Gilberti testified convincingly that had she not intervened in the Barnstable action, the $30,000 in forfeited deposits might well have been restored to the Drownes. This explanation was made known to Coppola early in the litigation, see Dkt. 17 ¶ 9, and the allegation of impropriety should have been withdrawn. (The court warned Coppola at the beginning of the trial that he risked being assessed costs if he could not corroborate the accusation).
Balerna, 2010 WL 4878286, at *5 (footnote omitted).
Coppola's explanation of his reasoning in drafting paragraph 32 of the Complaint is founded on his purported belief that by charging the Lewis Estate with the costs of defending the Barnstable action, Gilberti committed the tort of conversion. Coppola contends that he reasonably believed that the charge was improper in part because "the Mortgage document itself did not allow the Estate to use sale proceeds for an action unrelated to the foreclosure sale or foreclosure action," and in...
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