Chaney v. Grigg (In re Grigg)

• Decision Date: 19 June 2017
• Docket Number: Bankruptcy No. 11–71206–JAD,Adversary No. 12–07008–JAD
• Citation: 568 B.R. 498
• Parties: IN RE: Ronald W. GRIGG, Debtor. Blaine John Chaney, Plaintiff, v. Ronald W. Grigg, Defendant. Ronald W. Grigg, Counter–Claimant, v. Blaine John Chaney, Counter–Defendant.
• Court: U.S. Bankruptcy Court — Western District of Pennsylvania

568 B.R. 498

IN RE: Ronald W. GRIGG, Debtor.

Blaine John Chaney, Plaintiff,

v.Ronald W. Grigg, Defendant.

Ronald W. Grigg, Counter–Claimant,

v.Blaine John Chaney, Counter–Defendant.

Bankruptcy No. 11–71206–JAD

Adversary No. 12–07008–JAD

United States Bankruptcy Court, W.D. Pennsylvania.

Signed June 19, 2017

As Corrected July 7, 2017

Matthew T. Yanni, The Yanni Law Firm, P.L.L.C., Martinsburg, WV, Joseph A. Yanny, Yanny & Smith, A.P.L.C., Los Angeles, CA, for Plaintiff.

Ronald P. Carnevali, Jr., Spence, Custer, Saylor, Wolfe & Rose L.L.C., Johnstown, PA, Robert O. Lampl, Pittsburgh, PA, William C. Price, Clark Hill P.L.C., Pittsburgh, PA, for Defendant.

Frank J. Guadagnino, McGuireWoods, L.L.P., Pittsburgh, PA, Kevin J. Petak, Spence Custer Saylor Wolfe & Rose, L.L.C., Johnstown, PA, James R. Walsh, Esq., Spence Custer Saylor Wolfe & Rose, L.L.C., Johnstown, PA, for Interested Party.

MEMORANDUM OPINION

JEFFERY A. DELLER, Chief United States Bankruptcy Judge

The matter before the Court is Chaney's Motion for Sanctions filed by Plaintiff/Counter-Defendant/Movant, Blaine John Chaney ("Movant" or "Chaney"). By this motion, Movant seeks to have the Court impose sanctions on responding parties, Ronald W. Grigg ("Grigg"), Ronald Carnevali, Jr., Esq. ("Attorney Carnevali"), and the law firm of Spence, Custer, Saylor, Wolfe & Rose, LLC ("Spence Custer," and together with Grigg and Attorney Carnevali, the "Respondents"), pursuant to 28 U.S.C. § 1927. As a unit of the United States District Court for the Western District of Pennsylvania (the "District Court"), and by virtue of 28 U.S.C. § 157 and the standing order of reference by the District Court,¹ this Court has the authority to impose sanctions under 28 U.S.C. § 1927. In re Schaefer Salt Recovery, Inc. , 542 F.3d 90, 105 (3d Cir. 2008).

The genesis of this dispute arises out of a California state court judgment rendered against Grigg and in favor of Chaney. In this Adversary Proceeding, this Court found that Grigg's liability relating to the same is non-dischargeable.

Prior to the Court's ruling as to non-dischargeability, the Respondents aggressively attacked the California state court judgment through many collateral proceedings brought before this Court. It is these collateral proceedings that form the basis of Chaney's Motion for Sanctions (the "Motion for Sanctions" or "Motion"). As Chaney averred in his Motion:

This Motion for Sanctions arises out of proceedings, the very inception of which were based on vexatious overpleadings, and meritless claims, legal theories and arguments proffered by Grigg's attorneys....

From the very beginning of the litigation before this Court, Grigg, through his attorneys, sought relief from a nondischargeable debt owed to Chaney as the result of a California state court judgment, which he had already appealed within the California state court system. Despite this, Grigg filed papers in this Court that simply rehashed the same arguments in an attempt to seek relief through multiple Motions for Relief and then reconsiderations of those Motions for Relief. This Court noted that "Grigg attempt[ed] to create disputes of material facts by rearguing arguments previously made concerning the validity of the underlying judgments and orders rendered by the California state courts" in its October 23, 2013 Memorandum Opinion on Chaney's Motion for Summary Judgment....

See Motion for Sanctions 2, ECF No. 341.

The Respondents have opposed Chaney's Motion for Sanctions on numerous grounds, including timeliness. Specifically, the Respondents contend that Chaney unreasonably delayed in prosecuting the instant motion by waiting to file the sanctions motion until more than fifteen months after the Third Circuit Court of Appeals affirmed this Court's decision in the underlying litigation and nearly a full year after the Adversary Proceeding was closed by this Court. For the reasons set forth more fully below, the Court agrees that Chaney's Motion for Sanctions was not filed within a reasonable period of time and, for this reason, must be denied.

I.

A bedrock principle of litigation in this country is that each party is responsible for payment of its own attorneys' fees, win or lose. Baker Botts L.L.P. v. ASARCO LLC , ––– U.S. ––––, 135 S.Ct. 2158, 2164, 192 L.Ed. 2d 208 (2015) (citing Hardt v. Reliance Standard Life Ins. Co. , 560 U.S. 242, 252–253, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010) ). This general standard, fittingly known as the "American Rule," is not absolute because the Supreme Court of the United States has recognized deviations from the "American Rule" where attorney fee shifting is explicitly provided for under statute, law, or by contract. Baker Botts L.L.P. v. ASARCO LLC , 135 S.Ct. at 2164 (citation omitted). The Movant herein seeks such an exception.

In this regard, Movant requests that this Court order the payment of Movant's attorneys' fees incurred in connection with certain alleged vexatious conduct by the Respondents as a sanction pursuant to 28 U.S.C. § 1927. This statute states as follows:

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof 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.A. § 1927.

As required by the terms of the statute, to award sanctions under § 1927, a court must find that the offending person has "(1) multiplied proceedings; (2) in an unreasonable and vexatious manner; (3) thereby increasing the cost of the proceedings; and (4) doing so in bad faith or by intentional misconduct." In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions , 278 F.3d 175, 188 (3d Cir. 2002) (citing Williams v. Giant Eagle Mar kets, Inc. , 883 F.2d 1184, 1191 (3d Cir. 1989)).

The purpose of § 1927 sanctions is to "deter an attorney from intentionally and unnecessarily delaying judicial proceedings [.]" LaSalle Nat. Bank v. First Conn. Holding Grp., L.L.C. , 287 F.3d 279, 288 (3d Cir. 2002). However, courts must take care " 'so as not to stifle the enthusiasm or chill the creativity that is the very lifeblood of the law.' " Id. at 289 (quoting Mone v. Comm'r of Internal Revenue , 774 F.2d 570, 574 (2d Cir. 1985) ). Thus, although § 1927 confers upon a court the power to impose sanctions for vexatious and willful conduct, § 1927 should be construed narrowly and the powers thereunder exercised " 'only in instances of a serious and studied disregard for the orderly process of justice.' " Id. at 288–289 (quoting Ford v. Temple Hosp. , 790 F.2d 342, 347 (3d Cir. 1986) (citation omitted)); see also Williams v. Giant Eagle Markets, Inc. , 883 F.2d at 1191 (quoting Overnite Transp. Co. v. Chicago Industrial Tire Co. , 697 F.2d 789, 795 (7th Cir. 1983) ). Accordingly, "before a court can order the imposition of attorneys' fees under § 1927, it must find willful bad faith on the part of the offending attorney." Williams v. Giant Eagle Markets, Inc. , 883 F.2d at 1191 (citing Baker Industries, Inc. v. Cerberus, Ltd. , 764 F.2d 204, 208–209 (3d Cir. 1985) ); see also In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions , 278 F.3d at 188 (quoting Zuk v. Eastern Pa. Psychiatric Inst. , 103 F.3d 294, 297 (3d Cir. 1996) ).

It has been held that:

"Indications of this bad faith are findings that the claims advanced were meritless, that counsel knew or should have known this, and that the motive for filing the suit was for an improper purpose such as harassment." Smith v. Detroit Fed'n of Teachers Local 231, Am. Fed. of Teachers, AFL–CIO , 829 F.2d 1370, 1375 (6th Cir.1987). Inasmuch as § 1927 addresses the impact conduct has on the proceedings, sanctions that are imposed under § 1927 must only impose costs and expenses that result from the particular misconduct. Martin v. Brown , 63 F.3d 1252, 1264 (3d Cir.1995). Moreover, these costs and expenses are limited to those that could be taxed under 28 U.S.C. § 1920. Id .

In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions , 278 F.3d at 188. Bad faith can be found to exist based upon a person's overall conduct throughout the course of litigation and no one single act by the offending party is required to rise to the level of bad faith in itself. Id. at 189–191.

II.

The facts and procedural history of this Adversary Proceeding, as well the underlying dispute, are extensive. This Court has previously set forth a review of the history in its opinions and orders dated October 19, 2012, denying Defendant/Counter-Claimant Ronald W. Grigg's Motion for Relief Under Cal. Code Civ. Proc. § 1008, Fed. R. Bankr. P. 9024/FRCP 60(b), and Cal. Code of Civ. Proc. § 484.100 and Related Sections , and October 23, 2013, resolving cross-motions for summary judgment. See Mem. Order, Oct. 19, 2012, ECF No. 132 and Mem. Op., Oct. 23, 2013, ECF No. 281. However, as the procedural history of a case is of significant importance in evaluating whether sanctions are warranted under § 1927 for a party's alleged unreasonable and vexatious multiplication of proceedings, the Court will revisit the relevant procedural history of this matter herein.

The dispute forming the basis of the within Adversary Proceeding arises from Grigg's representation of Chaney relative to Chaney's marital dissolution proceedings commenced in the state of California more than a decade ago. In connection with those proceedings, Chaney entered into two fee agreements with Grigg-one hourly and the other on a contingency basis-each dated August 31, 2005. See Def./Counter-Claimant, Ronald W. Grigg's Answer, Affirmative Defenses and Countercl. (hereafter, "Answer to Compl.") Ex. D, H, ECF No. 73. Chaney and his former spouse executed a Marital Settlement Agreement regarding their marital assets in January 2006. See Def./Counter-Claimant Ronald W. Grigg's Statement Admitting and Denying the Alleged Undisputed Facts...