Kazazian v. Emergency Serv. Physicians, P.C.

• Decision Date: 27 March 2014
• Docket Number: Civil Action No. 13-cv-00669-PAB-KMT
• Parties: NINA H. KAZAZIAN, Plaintiff, v. EMERGENCY SERVICE PHYSICIANS, P.C., et al. Defendants.
• Court: U.S. District Court — District of Colorado

NINA H. KAZAZIAN, Plaintiff, v. EMERGENCY SERVICE PHYSICIANS, P.C., et al. Defendants.

Civil Action No. 13-cv-00669-PAB-KMT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

DATED March 27, 2014

Judge Philip A. Brimmer

ORDER

This matter is before the Court on Defendants Kennedy Childs, P.C. and Daniel McCune, Esq.'s Motion for Attorneys' Fees Pursuant to Colo. Rev. Stat. § 13-17-102 and 28 U.S.C. § 1927 [Docket No. 71] filed by defendants Kennedy Childs, P.C. and Daniel McCune, Esq. (collectively "Kennedy Childs") and Defendants Laura E. Shapiro and Law Offices of Laura E. Shapiro P.C.'s Motion for Attorney Fees Pursuant to § 13-17-102, C.R.S. and 28 U.S.C. § 1927 [Docket No. 72] filed by defendants Laura E. Shapiro and the Law Offices of Laura E. Shapiro P.C. (collectively the "Shapiro defendants").¹

I. BACKGROUND

On July 29, 2011, a divorce decree was entered in a divorce proceeding between plaintiff Nina Kazazian and her then-husband, defendant Michael Stackpool,M.D. Docket No. 31 at 8, ¶ 34. The Shapiro defendants represented Dr. Stackpool in the divorce proceeding and continue to represent Dr. Stackpool in post-decree proceedings and appeals. Docket No. 72 at 2. On December 17, 2012, plaintiff filed suit against the Shapiro defendants in the District Court for the County of Eagle, Colorado (the "state court suit") and brought various tort claims for abuse of process, misappropriation of confidential information, tortious interference with business opportunities, defamation, civil theft, obstruction of justice, and harassment and stalking.² Docket No. 72-1 at 1. Plaintiff is a licensed attorney with more than 20 years of experience who represented herself in the state court suit.³ See Docket No. 77-3 at 1-2, ¶¶ 2-3. The Shapiro defendants retained defendant Kennedy Childs to represent them in the state court suit. Docket No. 72 at 2. The Shapiro defendants admit that they provided Kennedy Childs with information from the divorce proceeding for the purpose of preparing a defense to the state court suit. Id. The Shapiro defendants claim that plaintiff demanded that they withdraw from representing Dr. Stackpool and threatened Kennedy Childs with a lawsuit. Docket No. 72 at 2. On January 8, 2013, plaintiff voluntarily dismissed the state court suit without prejudice. Docket No. 72-2.

On March 13, 2013, plaintiff filed the instant case against ten named defendants.Docket No. 1 at 1. On April 29, 2013, plaintiff filed an amended complaint, adding Dr. Stackpool and Kennedy Childs (and Mr. McCune) as defendants. Docket No. 31. Plaintiff's amended complaint alleged that Dr. Stackpool, his company, and related parties had violated the Employee Retirement Income Security Act of 1974 ("ERISA) by diverting and misappropriating funds from plan benefits and by breaching fiduciary duties to the plan and beneficiaries, and by refusing to provide plaintiff with COBRA health insurance coverage. Id. at 11-15. Plaintiff brought the following state law claims against various defendants: Count III - Fraud; Count V - Breach of Fiduciary Duty; Count VIII - Failure to Supervise/Aiding and Abetting Fiduciary Breach; Count X -Abuse of Process; Count XI - Misappropriation of Confidential Information and Violations of Right to Privacy; Count XIII - Defamation; Count XIV - Civil Theft; Count XV - Breach of Fiduciary Duty (Stackpool) - Count XVI - Breach of Fiduciary Duty (Shapiro); Count XVII - Aiding and Abetting Breaches of Fiduciary Duty (Shapiro, Hulet, Jeffrey, Esp, ADP, Johnson, Rooks, McCune, and Childs). Id. at 15-29. On May 19, 2013, plaintiff deleted her defamation claim, Docket No. 60 at 1. On May 20, 2013, plaintiff deleted Counts XI, XII, XIV, XVI, and XVII. Docket No. 63. On May 22, 2013, the day that defendants were due to respond to the amended complaint, plaintiff voluntarily dismissed the case without prejudice. Docket No. 67.

Defendants filed motions seeking attorneys' fees, arguing that plaintiff's claims were frivolous and brought in bad faith. See generally Docket No. 71; Docket No. 72.⁴

II. ANALYSIS

"'Our basic point of reference' when considering the award of attorney's fees is the bedrock principle known as the 'American Rule': Each litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252-53 (2010) (internal quotation marks omitted). Defendants seek attorneys' fees pursuant to two statutes: 28 U.S.C. § 1927 and Colo. Rev. Stat § 13-17-102.⁵

A. 28 U.S.C. § 1927

Defendants argue that they are entitled to an award of fees based upon 28 U.S.C. § 1927, which provides:

Any attorney . . . 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.

Id. "An attorney's actions are considered vexatious and unreasonable under § 1927 if the attorney acted in bad faith," Dreiling v. Peugeot Motors of America, Inc., 768 F.2d 1159, 1165 (10th Cir. 1985), or if the attorney's conduct constitutes a "reckless disregard of the duty owed by counsel to the court." Braley v. Campbell, 832 F.2d 1504, 1511-12 (10th Cir. 1987). Sanctions under § 1927 are also appropriate when "an attorney is cavalier or bent on misleading the court; intentionally acts without a plausible basis; [or] when the entire course of proceedings was unwarranted." Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1342 (10th Cir. 1998) (internal quotations and citationsomitted). However, the complaint "that gives birth to the proceedings" is excluded from § 1927 because "it is not possible to multiply proceedings until after those proceedings have begun." Steinert v. Winn Grp., Inc., 440 F.3d 1214, 1225 (10th Cir. 2006).

Defendants' citation of Steinert does not support their argument that plaintiff's amended complaint was an unnecessary multiplication of proceedings. Docket No. 80 at 6-7. In Steinert, the plaintiff brought a 42 U.S.C. § 1983 claim and two § 1985 claims. 440 F.3d at 1225. With respect to the plaintiff's § 1983 claim, the court held that, where the plaintiff acquiesced in the defendant's attempt to dismiss the claim, "we cannot say that [plaintiff] multiplied the proceedings after pleading this claim in the complaint." Id. However, the plaintiff opposed the dismissal of his § 1985 claims and moved to amend/add parties, both of which required defendant to respond. Id. Unlike Steinert, here plaintiff amended her complaint under Fed. R. Civ. P. 15 as a matter of course and dismissed the case before defendants filed a motion to dismiss or were otherwise required to respond to plaintiff's claims.

Defendants argue that plaintiff multiplied the proceedings by sending unnecessary emails, attempting to schedule individual Rule 26(f) conferences with each defense counsel, and filing a motion for an emergency protective order [Docket No. 56]. Docket No. 72 at 12. Defendants do not provide any authority indicating that unnecessary emails and difficulty scheduling a Rule 26(f) conference rises to the level of sanctionable conduct under § 1927. Although plaintiff's motion for an emergency protective order sought sanctions against defendants, it appears to be the only significant motion plaintiff filed necessitating a response from defendants. Defendantsare critical of plaintiff's strategic decision to file such a motion, but this, by itself, is insufficient to compel the conclusion that sanctions are warranted. The Court finds that defendants have failed to show that plaintiff unreasonably multiplied the proceedings or otherwise acted in bad faith so as to justify an award of sanctions pursuant to 28 U.S.C. § 1927.

B. Colo. Rev. Stat. § 13-17-102

Plaintiff argues that Fed. R. Civ. P. 11(c)(2) preempts Colo. Rev. Stat. § 13-17-102 because Rule 11 requires that a party seeking sanctions serve its motion on the opposing party 21 days before filing. Docket No. 78 at 8. Defendants do not dispute that they failed to serve a copy of their motions for attorneys' fees on plaintiff 21 days before filing them, thereby providing plaintiff a safe harbor during which time she could have dismissed her case without fear of sanctions under Rule 11. Rather, defendants state that they are not seeking sanctions pursuant to Rule 11 and, because the purpose of Rule 11 is different from the purpose of § 13-17-102, Rule 11 should not act to preempt the state remedy. Docket No. 80 at 5.

"[T]he 'first analytical step' in an Erie case 'is to determine whether [a state] statute collides with any federal procedural rule.'" Scottsdale Ins. Co. v. Tolliver, 636 F.3d 1273, 1276 (10th Cir. 2011) (quoting Trierweiler v. Croxton & Trench Holding Corp., 90 F.3d 1523, 1539 (10th Cir. 1996)). A court must determine whether the scope of the Federal Rule "is sufficiently broad to cause a direct collision with the state law or, implicitly, to control the issue before the court." Id. at 1277. "In such a case, . . . we must apply the Federal Rule." Id.; McCoy v. West, 965 F. Supp 34, 35-36 (D. Colo.1997) ("When a matter is covered by a Federal Rule, a federal court need not perform a full Erie analysis to determine whether the matter is substantive or procedural.").⁶

Both Rule 11 and § 13-17-102 allow sanctions against a party who has brought frivolous or groundless claims. McCoy, 965 F. Supp at 36. "[T]he central purpose of Rule 11 is to deter baseless filings in district court . . . [and] any interpretation must give effect to the Rule's central goal of deterrence." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990). Colorado courts characterize § 13-17-102 as a sanction, rather than a substantive right. See City of Aurora ex rel. Utility Enterprise v. Colo. State Engineer, 105 P.3d 595, 618 (Colo. 2005) ("An award of attorney fees [under § 13-17-102] is an important sanction against an attorney or party who improperly instigates or...