Schwartz v. Millon Air, Inc., No. 02-10875.

Citation341 F.3d 1220
Decision Date12 August 2003
Docket NumberNo. 02-10875.
PartiesNewton B. SCHWARTZ, Sr., Benton Musslewhite, Sr., Plaintiffs-Appellants, Geovanny Arauz Joza, individually and as Administrator and/or Personal Representative of the Estate of Sicyaenn Gregoria Burgos Mendoza, et al., Plaintiffs, v. MILLON AIR, INC., Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

Newton B. Schwartz, Sr., Benton Musslewhite, Sr., Houston, TX, pro se.

Lisa M. Berlow-Lehner, J. Thompson Thornton, Thornton, Davis & Murray, Miami, FL, for Defendant-Appellee.

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

Before EDMONDSON, Chief Judge, DUBINA, Circuit Judge, and HODGES*, District Judge.

EDMONDSON, Chief Judge:

Appellants, Newton Schwartz, Sr. and Benton Musslewhite ("Appellants") appeal the district court's order imposing sanctions under 28 U.S.C. § 1927 and Fla. Stat. § 57.105. We reverse the district court's award of sanctions.


On 22 October 1996, a cargo plane owned and operated by Millon Air, a Florida corporation, crashed shortly after takeoff from Manta, Ecuador. In addition to killing the crew of the airplane, the crash killed, on the ground, approximately 30 residents of Ecuador living in the neighborhood of the crash site; and the crash injured many others. Following the plane crash, many Ecuadorian plaintiffs filed suit in state and federal courts in the United States for bodily injury, wrongful death, and property damage against Millon Air and against other defendants whom Plaintiffs claimed were responsible for the crash.1

In April 1997, Appellants filed cases in the Southern District of Florida on behalf of Cecilia Guzman Cedeno, whose mother, Rita Patria Cedeno Vera, had died shortly after the crash, and on behalf of Luis Alberto Veliz Cevallos, a burn victim. Appellants received these cases (along with approximately 217 other claims resulting from the plane crash) from Richard Briones, a lawyer licensed to practice law in Ecuador.2 Because Briones was located in Ecuador, Appellants relied upon Briones, as the referring attorney, to conduct the factual investigation into the claims. The files Appellants received from Briones included photographs and copies of their clients' medical records which were, for the most part, in Spanish.

Although Schwartz neither reads nor speaks Spanish, he — as well as a staffer who was fluent in Spanish — conducted a review of the files. In reviewing the photographs included in the files, Schwartz was struck by what appeared to be a remarkable recovery by Cevallos. Schwartz inquired of Briones whether the photographs were in fact of Cevallos. Briones assured Schwartz that the photographs were of Cevallos. Schwartz made no further investigation.

In December 1997, Musslewhite and Briones met in Ecuador with Rodrigo Jijon, one of Millon Air's Ecuadorian attorneys, and with other Millon Air representatives to discuss settlement possibilities for the approximately 219 claims Musslewhite and Briones represented from the accident. Jijon indicated to Musslewhite that some of the cases might have been totally lacking merit in that some of the claimants might not have been positioned close enough to the crash to have been injured and that some who were in the vicinity may not have been injured as claimed. Jijon, however, did not indicate which cases he believed included false claims. The parties do not dispute that Appellants asked Jijon to work with the Appellants' investigator, Raphael Jaque, to identify which claims Jijon believed to be meritless; Jijon did not do so.

All of the cases — 33 cases — filed in the Southern District of Florida relating to the Millon Air accident were consolidated, and later Millon Air moved to dismiss under the doctrine of forum non conveniens. The district court granted the motion, and Cedeno and Cevallos appealed.

In 1999, while the appeal was pending, Millon Air discovered that Cedeno and Cevallos's claims were fraudulent. Millon Air then moved in district court to dismiss the claims. Millon Air also sought attorneys' fees and costs, pursuant to 28 U.S.C. § 1927 and Fla. Stat. § 57.105. Millon Air asserted that it originally did not investigate the claims because it had moved to dismiss for forum non conveniens. Millon Air stated that, when it investigated the claims to prepare for mediation, it discovered that the dates in the medical records of Cedeno and Cevallos had been altered to make it appear as though they had been victims of the plane crash. Cedeno actually had been admitted to the hospital two days before the crash, and Cevallos had received his burns more than a year before the crash.

Millon Air also filed a motion in this Court seeking to stay the appeal pending certification of the district court's inclination to grant Millon Air's motion to dismiss. We granted Millon Air's motion to stay the appeal.

Before the district court, Appellants responded to Millon Air's motion to dismiss and motion for sanctions.3 Appellants did not oppose the motion to dismiss. Appellants noted that they did not question the authenticity of the evidence submitted by Millon Air. Appellants stated that they did not "countenance any fraud," and asserted that they had made reasonable inquiries into the claims before filing suit and had reasonably relied upon the investigation conducted by Briones, the Ecuadorian lawyer who had referred the case.

After the district court certified that it was inclined to grant the motion to dismiss, we remanded for consideration of Millon Air's motion to dismiss and the motion for attorneys' fees. We also granted Appellants' motion to withdraw as counsel.

On remand, the district court dismissed the case based on the newly discovered evidence of fraud. The district court imposed sanctions under 28 U.S.C. § 1927, determining that Plaintiffs' counsel failed to conduct a proper investigation before filing the complaints and missed later suggestions of meritlessness, and concluding that sanctions were warranted. The district court pointed out that Appellants had never spoken to their clients and that nothing indicated that counsel had conducted a pre-complaint investigation. The district court concluded that counsel's "complete reliance" on the investigators and referring attorney was unreasonable and a breach of the duty to investigate. The district court said that, although Schwartz had been troubled by the photographs of Cevallos's burns and Musslewhite had indications from opposing counsel that some of the claims might be based on faulty information, neither counsel acted on this information. The district court also determined that Millon Air was entitled to attorneys' fees and costs under Fla. Stat. § 57.105, which provides for attorneys' fees when the losing party presents a claim that the attorney knew or should have known was not supported by the material facts necessary to establish the claim.

Appellants filed a pro se motion for a new trial pursuant to Fed.R.Civ.P. 59 and 60 and requested an evidentiary hearing. In support of their motions, Appellants submitted the affidavits of Musslewhite and Robert Roberts, an attorney who assisted in putting Briones in contact with Musslewhite. The district court denied the motion to reconsider the previous order imposing sanctions. After an evidentiary hearing, the district court awarded Defendants $63,245.51 in attorneys' fees and costs.


28 U.S.C. § 1927

On appeal, Appellants argue that the district court erred by imposing sanctions upon them pursuant to 28 U.S.C. § 1927. Appellants assert that they reasonably relied upon information from Briones and others who investigated the case and that nothing evidences that they engaged in vexatious or unreasonable litigation.4

We review the district court's imposition of sanctions under 28 U.S.C. § 1927 for an abuse of discretion. Peterson v. BMI Refractories, 124 F.3d 1386, 1390 (11th Cir.1997).

Section 1927 provides: "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. § 1927 (emphasis added).

The plain statutory language of section 1927 makes clear that this section is not a "catch-all" provision for sanctioning objectionable conduct by counsel. Peterson, 124 F.3d at 1396. To justify an award of sanctions pursuant to section 1927, an attorney must engage in unreasonable and vexatious conduct; this conduct must multiply the proceedings; and the amount of the sanction cannot exceed the costs occasioned by the objectionable conduct. McMahan v. Toto, 256 F.3d 1120, 1128 (11th Cir.2001), amended on reh'g, 311 F.3d 1077 (11th Cir.2002), cert. denied sub nom. Nemesis Veritas, L.P. v. Toto, ___ U.S. ___, 123 S.Ct. 2273, 156 L.Ed.2d 129 (2003). For sanctions under section 1927 to be appropriate, something more than a lack of merit is required. Id. at 1129. The statute was designed to sanction attorneys who "willfully abuse the judicial process by conduct tantamount to bad faith." Malautea v. Suzuki Motor Co., Ltd., 987 F.2d 1536, 1544 (11th Cir.1993) (quoting Avirgan v. Hull, 932 F.2d 1572, 1582 (11th Cir.1991)).

"Bad faith" is the touchstone. Section 1927 is not about mere negligence. See Shepherd v. Wellman, 313 F.3d 963, 969 (6th Cir.2002); Zuk v. E. Pa. Psychiatric Inst. of the Med. Coll. of Pa., 103 F.3d 294, 297-98 (3d Cir.1996); Baulch v. Johns, 70 F.3d 813, 817 (5th Cir.1995). A determination of bad faith is warranted where an attorney knowingly or recklessly pursues a frivolous claim or engages in litigation tactics that needlessly obstruct the litigation of non-frivolous claims. Cf. Thomas v. Tenneco Packaging Co., Inc., 293 F.3d 1306, 1320 (11th Cir.200...

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