Gurman v. Metro Hous. & Redevelopment Auth., Case No. 11–CV–0228 (PJS/JJG).

• Decision Date: 07 August 2012
• Docket Number: Case No. 11–CV–0228 (PJS/JJG).
• Citation: 884 F.Supp.2d 895
• Parties: Mikhail GURMAN; Ester Kruglyak; Valeriy Babushkin; Svetlana Babushkina; Svetlana Barskiy; Rada Shevtsov, f/k/a Rada Babushkina; and Vicro Home Care, Inc., a Minnesota Corporation, Plaintiffs, v. METRO HOUSING AND REDEVELOPMENT AUTHORITY; Metropolitan Council; Carver County Community Development Agency; Landrum and Dobbins, LLC; Mary G. Dobbins, officially and individually; Tamara M. Peters, f/k/a Tamara M. Witt, officially and individually; Therese A. Smith, officially and individually; Beth A. Reetz, officially and individually; Kathleen M. Shea, officially and individually; Allison Streich, officially and individually; and Defendants X, Y, and Z, Defendants.
• Court: U.S. District Court — District of Minnesota

884 F.Supp.2d 895

Mikhail GURMAN; Ester Kruglyak; Valeriy Babushkin; Svetlana Babushkina; Svetlana Barskiy; Rada Shevtsov, f/k/a Rada Babushkina; and Vicro Home Care, Inc., a Minnesota Corporation, Plaintiffs,

v.METRO HOUSING AND REDEVELOPMENT AUTHORITY; Metropolitan Council; Carver County Community Development Agency; Landrum and Dobbins, LLC; Mary G. Dobbins, officially and individually; Tamara M. Peters, f/k/a Tamara M. Witt, officially and individually; Therese A. Smith, officially and individually; Beth A. Reetz, officially and individually; Kathleen M. Shea, officially and individually; Allison Streich, officially and individually; and Defendants X, Y, and Z, Defendants.

Case No. 11–CV–0228 (PJS/JJG).

United States District Court,

D. Minnesota.

Aug. 7, 2012.

Richard A. Saliterman, Brian P. Lundgren, and Brett M. Larson, Saliterman & Siefferman, PC, for plaintiffs.

Andrew D. Parker, Anthony G. Edwards, and Tammy L. Pust, Parker Rosen LLC, for defendants Metro Housing and Redevelopment Authority, Metropolitan Council, Tamara Peters, Therese Smith, Beth Reetz, and Kathleen Shea.

Jessica A. Megorden and James R. Andreen, Erstad & Riemer, PA, for defendants Carver County Community Development Agency and Allison Streich.

John M. LeFevre, Jr. and Peter G. Mikhail, Kennedy & Graven, Chartered, for defendants Mary G. Dobbins and Landrum and Dobbins, LLC.

MEMORANDUM OPINION AND ORDER

PATRICK J. SCHILTZ, District Judge.

Seven plaintiffs—Mikhail Gurman and Ester Kruglyak (“the Gurmans”) and their daughter, Svetlana Barskiy; Valeriy Babushkin and Svetlana Babushkina (“the Babushkins”) and their daughter Rada Shevtsov; and Vicro Home Care, Inc. (“Vicro”), a health-care corporation owned by Barskiy and Shevtsov—brought this lawsuit against certain government agencies and employees who are responsible for administering the Section 8 housing program in the Twin Cities area. Plaintiffs' lawsuit was directed at ten defendants, divided into three groups:

The first group consisted of Metro Housing and Redevelopment Authority (“Metro HRA”), the Metropolitan Council, and four Metro HRA employees—Kathleen Shea, Tamara Peters, Beth Reetz, and Therese Smith (collectively “the Metro HRA Defendants”).

The second group consisted of Carver County Community Development Agency and one of its employees, Allison Streich (collectively “the CCCDA Defendants”).

The final group consisted of Metro HRA's outside counsel, Mary Dobbins, and her law firm, Landrum and Dobbins, LLC (collectively “the Dobbins Defendants”).

This lawsuit arose out of a relatively straightforward dispute over Section 8 benefits, no different from hundreds of Section 8 disputes that are resolved by federal and state courts and administrative-law judges every year. Plaintiffs had several viable claims. In particular, the Gurmans and the Babushkins had viable due-process claims arising out of the reduction of their respective housing vouchers in 2009. Plaintiffs may each have had a viable defamation claim against one or two of the defendants (although those defendants likely had formidable defenses to those claims). And finally, the Babushkins conceivably had a viable claim arising out of the suspension of their housing voucher altogether in November 2010. Rather than litigating this handful of viable claims, however, plaintiffs' law firm—Saliterman & Siefferman, PC (“S & S”)—brought not one, not two, but three kitchen-sink complaints, in which it asserted literally hundreds of claims against defendants, almost all of which were frivolous. Even worse, the last of these kitchen-sink complaints was filed by S & S after the firm had been clearly and emphatically warned by this Court to refrain from bringing frivolous claims.¹

Soon after plaintiffs filed their second amended complaint, the Metro HRA Defendants and the CCCDA Defendants moved to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. See ECF Nos. 39 and 41. Meanwhile, the Dobbins Defendants, who had been dropped from the second amended complaint, moved for sanctions under Fed.R.Civ.P. 11 and 28 U.S.C. § 1927. See ECF No. 45. The Court held a hearing on these motions on December 8, 2011. After nearly three and a half hours in the courtroom, the Court had covered barely half of the counts in plaintiffs' second amended complaint. The Court continued the hearingand ordered the parties to contact Magistrate Judge Jeanne J. Graham for an early settlement conference. See ECF No. 70. The Court also issued an order compelling S & S and S & S attorneys Richard Saliterman, Brian Lundgren, and Brett Larson to show cause why they should not be sanctioned under Fed.R.Civ.P. 11 or 28 U.S.C. § 1927 for unreasonably and vexatiously multiplying these proceedings by filing the second amended complaint. See ECF No. 75.

On January 23, 2012, after two full days of mediation before Judge Graham, the parties agreed to settle this lawsuit. Over the next two months, the parties reduced their agreement to writing and, on April 13, 2012, the Court dismissed the lawsuit with prejudice and on the merits. See ECF No. 101. Here before the Court are three pending matters: (1) S & S's response to the Court's show-cause order, see ECF No. 75; (2) the Dobbins Defendants' motion for sanctions, see ECF No. 45; and (3) plaintiffs' motion for attorney's fees under 42 U.S.C. § 1988, see ECF No. 91.²

The factual background was previously set forth in the Court's January 13 show-cause order and will not be repeated here. The Court addresses each of the pending matters in turn.

A. Sanctions Pursuant to the Court's Show–Cause Order

Under Rule 11(b)(2), an attorney must certify, after conducting a reasonable inquiry, that “the claims, defenses, and other legal contentions [asserted in the complaint] are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law....” To determine whether an attorney has violated this provision, a court “must determine whether a reasonable and competent attorney would believe in the merit of an argument.” Coonts v. Potts, 316 F.3d 745, 753 (8th Cir.2003) (internal quotations omitted). The attorney must further certify that the factual contentions in the complaint “have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation....” Fed.R.Civ.P. 11(b)(3). Finally, the attorney must certify that the complaint is “not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation....” Fed.R.Civ.P. 11(b)(1). An attorney who violates these provisions may be sanctioned. SeeFed.R.Civ.P. 11(c)(1).

An attorney may also be ordered to pay the opposing party's attorney's fees under 28 U.S.C. § 1927 for “multipl[ying] the proceedings in any case unreasonably and vexatiously....” An award of fees under this section is warranted “when an attorney's conduct, viewed objectively, manifests either intentional or reckless disregard of the attorney's duties to the court.” Clark v. United Parcel Serv., Inc., 460 F.3d 1004, 1011 (8th Cir.2006) (internal quotations omitted).

Although S & S does not raise this argument in its response to the show-cause order, the Court notes that an attorney cannot be sanctioned under § 1927 for simply commencing a frivolous lawsuit. See, e.g., Jensen v. Phillips Screw Co., 546 F.3d 59, 65 (1st Cir.2008) (“[W]e join an unbroken band of cases across the courts of appeals holding that a lawyer cannot violate section 1927 in the course of commencing an action.”); In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 435 (9th Cir.1996) (“The filing of a complaint may be sanctioned pursuant to Rule 11 or a court's inherent power, but it may not be sanctioned pursuant to § 1927.”). Here, though, S & S's vexatious conduct went beyond filing the initial frivolous complaint. In its June 30 order, the Court made clear that plaintiffs' first amended complaint almost surely violated Rule 11. See842 F.Supp.2d at 1153 (“It is inconceivable that all 17 of these claims satisfy Rule 11(b)(2) as asserted by every plaintiff against every defendant, and some of these claims almost certainly do not satisfy Rule 11(b)(2) as asserted by any plaintiff against any defendant.” (emphasis in original)). Rather than proceeding to sanction S & S immediately, the Court gave S & S and plaintiffs a final chance to meet their obligations under Rule 11. S & S was explicitly warned that, if it filed a second amended complaint, S & S must: (1) “make clear which specific plaintiffs and which specific defendants are the subject of which specific allegations,” id. at 1154; (2) ensure that the factual allegations in the complaint “have evidentiary support,” as required by Rule 11(b)(3); and (3) ensure that the legal claims asserted in the complaint are “warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law,” as required by Rule 11(b)(2).

Any reasonable and competent attorney would have responded to the Court's June 30 order by carefully going through the first amended complaint line-by-line and re-pleading only those claims that would pass muster under Rule 11. Instead of doing that, however, S & S chose to re-plead many of the same frivolous claims, thereby unreasonably and vexatiously multiplying the proceedings. To cite several examples:

First, S & S asserted malicious-prosecution and abuse-of-process claims on behalf of Barskiy, Shevtsov, and Vicro, even though it is undisputed that they were not prosecuted or subjected to legal process of any kind. See ECF No. 75 at 7–8 (citing Second Am. Compl. ¶¶ 102, 115 and ECF No. 59 at 35). In its response to the show-cause order, S & S makes a number of arguments regarding these claims that are meritless or irrelevant (or both).

S & S first contends that the claims for...