Chaves v. M/V Medina Star, 94-60388

Citation47 F.3d 153
Decision Date10 March 1995
Docket NumberNo. 94-60388,94-60388
PartiesLuis Cuna CHAVES, Oscar D. Barbosa, Nikolay Shmakov, Konstantin Anchev, Victor Formenkov, Danail Ivanov, Vyacheslav Shutikov, Oscar L. Goinhex, Frederick D. Brooks, Clive D. Bennet, Dene E. Zepeda and Captain Leonard O'Keefe, Plaintiffs, v. The M/V MEDINA STAR, formerly the M/V Odessa Star in rem, and Casblan Maritime, Gema Shipping & Trading and Captain Jose Otero in personam, Defendants, Jimmie M. Spears, Attorney, Appellant. Summary Calendar.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Frank Svetlik, Houston, TX, for appellant.

Jimmy M. Spears, pro se.

Appeal from the United States District Court for the Southern District of Texas.

Before JOHNSON, WIENER, and STEWART, Circuit Judges.

JOHNSON, Circuit Judge:

Under the authority of the inherent power of the court, the magistrate judge imposed sanctions on attorney for allegedly bad faith conduct in litigation. Attorney appeals and we REVERSE.

I. FACTS AND PROCEDURAL HISTORY

On February 8, 1994, attorney Jimmie M. Spears brought suit on behalf of several crew members of the M/V MEDINA STAR seeking the recovery of earned but unpaid wages. As Spears chose to pursue the plaintiffs' claims in rem, he contemporaneously requested the issuance of a warrant for the arrest of the vessel. The magistrate judge to whom the case was assigned granted this request, issued a warrant and the U.S. Marshal arrested the vessel in Freeport, Texas. 1

Two days later, the magistrate judge held a hearing to determine the amount of security to be posted to effect the release of the vessel. At that hearing, the initial group of intervenors appeared asserting claims actionable against the M/V MEDINA STAR in rem. Additionally, the captain of the M/V MEDINA STAR, a named-defendant, personally appeared and requested that the hearing be continued to permit him time to employ counsel. Accordingly, the magistrate judge granted the intervention and rescheduled the hearing for setting the amount of the bond for February 18, 1994.

On February 18, a second group of intervenors appeared asserting claims actionable in rem against the M/V MEDINA STAR. The magistrate judge granted the intervention. 2 Further, the magistrate judge set the amount of the bond at $440,000. This amount was calculated to secure payment of all claims pending before the magistrate judge. 3

Shortly thereafter, the original plaintiffs, represented by Spears, reached a settlement of their claims. Accordingly, and without seeking court approval, Spears, on February 23, 1994, submitted a document to the Marshal purporting to authorize the release of the vessel. 4

This action distressed the magistrate judge who feared that, while he still had claimants against the vessel pending, his in rem jurisdiction over the vessel could sail with the tide. 5 Believing that Spears had no authority to unilaterally release the vessel when he knew there were other claimants before the court, the magistrate judge ordered Spears to appear and show cause why he should not be held in contempt or otherwise sanctioned for his role in the release of the M/V MEDINA STAR from custodia legis. In defense of his action, Spears argued that because only his clients, the original plaintiffs, had the vessel arrested, he, as their attorney, had the authority to release their seizure of the vessel.

The magistrate judge rejected Spears' argument, though. Further, the magistrate judge found that Spears had acted in bad faith in acting to jeopardize the jurisdiction of the court. Accordingly, relying on the inherent power of the court, the magistrate judge imposed sanctions upon Spears in the amount of $2,500 payable within ten days. Spears objected to the Opinion and Order issued by the magistrate judge and requested review by the district court. The district court upheld the action of the magistrate judge, however. Spears now appeals to this Court.

II. DISCUSSION
A. Jurisdiction

Before we address the merits of this case, we must satisfy ourselves that we have jurisdiction. In Click v. Abilene National Bank, 822 F.2d 544 (5th Cir.1987), we held that an order awarding Rule 11 sanctions against an attorney was not final and appealable under 28 U.S.C. Sec. 1291. 6 Moreover, the Click Court held that the order was not an appealable collateral order under the doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). 7 The prerequisites of an appealable Cohen order are that: 1) it must conclusively determine the disputed question, 2) it must resolve an important or serious and unsettled question, 3) which is completely separable from and collateral to the merits of the parties' litigation, and 4) if not appealed as a collateral matter, the district court's determination must be practically unreviewable. Rives v. Franklin Life Insurance Co., 792 F.2d 1324, 1327 (5th Cir.1986); Click, 822 F.2d at 545. The Click Court found that the final criterion was not met because Rule 11 sanctions against an attorney can be and routinely are appealed when merged into the district court's final judgment. Id.

This decision was reaffirmed in Schaffer v. Iron Cloud, Inc., 865 F.2d 690 (5th Cir.1989). In Schaffer, as in the instant case, the sanction order against the attorney was immediately payable. Even so, in the absence of any showing that the sanction impeded the plaintiff's access to the courts, this Court saw no reason to diverge from Click's holding that such an order was not an appealable collateral order under Cohen. Id. at 691.

However, this Court did diverge from the Click rule in Markwell v. County of Bexar, 878 F.2d 899 (5th Cir.1989). In that case, the district court imposed monetary sanctions against an attorney who had withdrawn from representation of any party at the time of the appeal. In addressing whether this fact distinguished this case from the holding of Click, the Markwell Court looked to our sister circuit's opinion in Eavenson, Auchmuty & Greenwald v. Holtzman, 775 F.2d 535 (3d Cir.1985). That court held that a sanctions order imposed against an attorney that had withdrawn from the litigation was an appealable collateral order because the attorney had an immediate interest in challenging the sanction, which interest was not shared by the parties to the suit or by counsel to a party, and that the sanctions order would be effectively unreviewable from a final judgment in the litigation. Id. at 538-39. Relying on this reasoning, the Markwell Court determined that an exception to the Click rule was warranted where an order assesses sanctions against an attorney who has withdrawn from representation at the time of the appeal and where immediate appeal of the order would not impede the progress of the underlying litigation. Markwell, 878 F.2d at 901.

We believe that the facts of the instant case fall within the exception set out in Markwell. While attorney Spears has not withdrawn from representation of his clients, his clients have settled and have been voluntarily dismissed from the underlying action. Spears has no further interest in the merits of the litigation. However, he clearly has an interest in challenging the sanction against him and this interest is not shared by any other party or attorney in the underlying litigation. Further, as Spears is no longer connected with the merits of the case, it is unclear that he would be able to obtain review of the sanctions order after final judgment. Finally, we are unable to discern any impediment to the progress of the underlying litigation that would be caused by our consideration of this appeal. Accordingly, we conclude that we have jurisdiction over Spears' appeal under the collateral order doctrine.

B. Sanctions Under the Court's Inherent Power

We review the imposition of sanctions for an abuse of discretion. Resolution Trust Corp. v. Bright, 6 F.3d 336, 340 (5th Cir.1993). A court abuses its discretion when its ruling is based on an erroneous view of the law or on a clearly erroneous assessment of the evidence. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 2461, 110 L.Ed.2d 359 (1990).

As authority for the instant order, the magistrate judge relied entirely on the inherent power of the court to impose sanctions against attorneys for bad faith conduct in litigation. See Chambers v. NASCO, Inc., 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). While this power undoubtedly exists, the threshold for the use of inherent power sanctions is high. Reed v. Iowa Marine and Repair Corp., 16 F.3d 82 (5th Cir.1994). Indeed, the Supreme Court has cautioned that "[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion." Chambers, 501 U.S. at 44, 111 S.Ct. at 2132; see also Natural Gas Pipeline Co. v. Energy Gathering, Inc., 2 F.3d 1397, 1406-07 (5th Cir.1993) (inherent powers must be exercised with restraint and discretion and only sparingly so). In this case, we find the mandated restraint lacking.

In order to impose sanctions against an attorney under its inherent power, a court must make a specific finding that the attorney acted in "bad faith." Bright, 6 F.3d at 340; In re Thalheim, 853 F.2d 383, 389 (5th Cir.1988). In this case, the magistrate judge found that Spears acted in bad faith when, without any authorization from the court, Spears purported to authorize the U.S. Marshal to release the vessel.

As the magistrate judge interpreted the sparse law on the subject, Spears could not, when he knew that there were other claimants before the court pressing claims against the vessel who had not rearrested the vessel, release the vessel without an order from the court. 8 Spears, by contrast, contended that since he was the only attorney who, for the benefit of his clients, caused the vessel to be seized, he had the authority to release the vessel.

We need not resolve this question to decide this case. We merely...

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