Jolly Group, Ltd. v. Medline Industries

• Decision Date: 24 January 2006
• Docket Number: No. 05-2021.,No. 05-2115.,05-2021.,05-2115.
• Citation: 435 F.3d 717
• Parties: THE JOLLY GROUP, LTD., Plaintiff, and Michael J. Rovell, Respondent-Appellant, Cross-Appellee, v. MEDLINE INDUSTRIES, INC., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

435 F.3d 717

THE JOLLY GROUP, LTD., Plaintiff, and Michael J. Rovell, Respondent-Appellant, Cross-Appellee, v.MEDLINE INDUSTRIES, INC., Defendant-Appellee, Cross-Appellant.

No. 05-2021.

No. 05-2115.

United States Court of Appeals, Seventh Circuit.

Argued October 26, 2005.

Decided January 24, 2006.

Michael J. Rovell, Rovell & Associates, Chicago, IL, for Plaintiff.

Dan J. Hofmeister(argued), Jr., Neal, Gerber & Eisenberg, Chicago, IL, for Defendant-Appellee.

Michael J. Rovell(argued), Rovell & Associates, Chicago, IL, pro se.

Before FLAUM, Chief Judge, and EVANS and WILLIAMS, Circuit Judges.

TERENCE T. EVANS, Circuit Judge.

In this appeal, attorney Michael J. Rovell challenges a rather modest ($450 plus 4 hours of attorneys fees) sanction order issued against him stemming from his representation of The Jolly Group, Ltd. in a breach of contract action against Medline Industries, Inc.For reasons we will explain, we find that the district court did not abuse its discretion in imposing the sanctions, but we also deny Medline's cross-appeal asking us to significantly enlarge the scope of the penalty: Medline seeks a more robust sanction order—in excess of $30,000 (as of May 2004) with the meter still running.

Jolly sued Medline in 2003.Medline moved to dismiss the complaint as failing to allege the existence of a valid written contract and because the statute of frauds barred enforcement of a purported oral contract.Instead of responding to the motion, Jolly filed an amended complaint.Medline's counsel sent Rovell a letter pointing out factual inconsistencies between the two complaints and threatening a Rule 11 motion.Medline then moved to dismiss the amended complaint, and Jolly filed its response.

The district court(Judge Suzanne B. Conlon) dismissed the amended complaint with prejudice on April 30, 2004.Two weeks later, Medline moved for sanctions under Federal Rule of Civil Procedure 11and28 U.S.C. § 1927, which authorizes sanctions against an attorney who "multiplies the proceedings in any case unreasonably and vexatiously."Instead of responding to the sanctions motion, Jolly moved the next day, May 14, 2004, for reconsideration of the dismissal and for leave to file a second amended complaint.

On June 4, 2004, the district judge denied everything except the § 1927 sanctions, finding that Rovell had in bad faith asserted four different purported contracts as well as contradictory versions of events.Rovell moved to vacate the order, saying he had not been given an opportunity to respond to Medline's motion before sanctions were ordered.Medline, meanwhile, continued to press for even larger sanctions.Judge Conlon held a hearing and agreed that Rovell should have been given an opportunity to respond to Medline's sanctions motion.She vacated the sanctions portion of her June 4 order and referred the matter to Magistrate Judge Geraldine Soat Brown for further proceedings.

After briefing and oral argument, Magistrate Judge Brown recommended that the Rule 11sanctions motion be denied but that § 1927 sanctions were justified.In her careful § 1927 analysis, the magistrate judge divided Rovell's conduct into two time periods: before and after the district judge's decision to dismiss the suit.Noting that "[T]he line between strong advocacy and vexatious conduct is not always bright," the judge declined to find improper motives behind Jolly's original complaint and amended complaint.On the other hand, she found Rovell's May 14, 2004, motions, after the case had been dismissed with prejudice, "clearly vexatious and unreasonable."She rejected Rovell's argument that he had sought reconsideration in order to perfect the appellate record and went on to criticize what she considered his "sloppiness" in assembling pleadings, "disingenuous explanations," and "negligent[,] ... reckless, and indifferent conduct" that demonstrated bad faith and justified sanctions under § 1927.She recommended that Medline be awarded excess costs based on 4 hours of attorney time and that Rovell be assessed $450 payable to the court for wasting its time and resources.District JudgeConlon adopted the recommendations.Rovell now appeals.

We review a district court's imposition of attorney sanctions for an abuse of discretion.U.S. Bank Nat'l Ass'n, N.D. v. Sullivan-Moore,406 F.3d 465, 469(7th Cir.2005).We have explained that a court has discretion to impose § 1927 sanctions when an attorney has acted in an "objectively unreasonable manner" by engaging in "serious and studied disregard for the orderly process of justice,"Pacific Dunlop Holdings, Inc. v. Barosh,22 F.3d 113, 119(7th Cir.1994); pursued a claim that is "without a plausible legal or factual basis and lacking in justification,"id.; or "pursue[d] a path that a reasonably careful attorney would have known, after appropriate inquiry, to be unsound,"Kapco Mfg. Co. v. C & O Enters., Inc.,886 F.2d 1485, 1491(7th Cir.1989).We have also interpreted § 1927"to impose a continuing duty upon attorneys to dismiss claims that are no longer viable."Dahnke v. Teamsters Local 695,906 F.2d 1192, 1201 n. 6(7th Cir.1990).

Rovell protests that he should not have been punished for filing the May 14, 2004, motions because Medline's sanctions motion had preceded those filings and had sought sanctions on a different basis.Of course, a district court acting under § 1927 is not bound by the parties' motions and...