Topalian v. Ehrman

• Decision Date: 12 October 1993
• Docket Number: No. 91-2818,91-2818
• Citation: 3 F.3d 931
• Parties: Michael K. TOPALIAN, et al., Plaintiffs, Roy Jacobs, Jr., Richard H. Manuel, and Bobby W. McDonald, Plaintiffs-Appellants, and Armando Lopez, Appellant, v. John N. EHRMAN, etc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 931

3 F.3d 931

26 Fed.R.Serv.3d 1136

Michael K. TOPALIAN, et al., Plaintiffs Roy Jacobs, Jr., Richard H. Manuel, and Bobby W. McDonald Plaintiffs-Appellants and Armando Lopez, Appellant, v. John N. EHRMAN, etc., et al., Defendants-Appellees.

No. 91-2818.

United States Court of Appeals Fifth Circuit.

Oct. 12, 1993.

Rehearing Denied Nov. 9, 1993.

Armando Lopez, Houston, TX, for Jacobs, Manuel & McDonald.

Michael A. Maness, Houston, TX, for Armando Lopez, Roy Jacobs, Richard H. Manuel.

Frank Pinedo, James Pinedo, Pinedo, Cezeaux & Sweeney, Houston, TX, for John Ehrman & Ehrman Inv.

Stephen W. Schueler, Charles M. Silverman, Winstead, Sechrest & Minick, Houston, TX, for Rio Bravo Oil Co., Inc. & Bert Gamble.

Kevin F. Risley, Butler & Binion, Houston, TX, for Rockwood Ins. Co.

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

Before WIENER, BARKSDALE, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Appellants Armando Lopez, Roy Jacobs, Jr., Richard H. Manuel, and Bobby W. McDonald appeal the Final Judgment of the United States District Court for the Southern District of Texas, Houston Division, imposing sanctions in the amount of $1,000 each on Jacobs, Manuel, and McDonald (hereinafter together, "Plaintiffs"), and in excess of $300,000 on their attorney, Lopez. We affirm the sanctions against Plaintiffs; and vacate the trial court's sanctions order and remand the case for more specific factual findings as to the sanctionable conduct of Lopez, according to the rule we announced in Thomas v. Capital Security Services, 836 F.2d 866, 876-77 (5th Cir.1988) (en banc).

I. FACTS AND PROCEDURAL HISTORY

Plaintiffs and 12 other investors originally brought this suit against 23 defendants, including Appellees. The district court rendered summary judgment against all plaintiffs on all causes of action. ¹ While the summary judgment motion was on appeal, the district court--after inviting and receiving motions for sanctions from defendants--entered a sanctions order awarding attorney's fees against the Plaintiffs and against their counsel, Lopez. ²

The district court awarded sanctions against Plaintiffs under Rule 11 because it held that they were more responsible for the content of the pleadings than were the other investors in that they were officers and directors of one of the defendant companies, and therefore had prior personal knowledge of the verity of the facts alleged in their complaint.

The district court awarded sanctions against Lopez under Fed.R.Civ.P. 11 and 28 U.S.C. Sec. 1927. In its order sanctioning Lopez, the district court stated its findings that Lopez submitted to the court as a true and correct copy a document that had been materially and deliberately altered; that he responded late or not at all to motions filed by the defendants; that he filed several motions for an improper purpose or merely to delay the proceedings; that he submitted pleadings in violation of Rule 11; and that he disobeyed a court order to reimburse a party to the suit for expenses incurred in travelling from New York to Texas for a deposition.

The lower court further sanctioned Lopez for violations of the discovery rules, Fed.R.Civ.P. 26(g), 34(b), and 37. The trial judge found that Lopez violated these rules by filing a motion for sanctions against the defendants for their failure to produce documents that the court had previously ordered did not need to be produced; by responding late or not at all to motions for discovery; by being uncooperative in the discovery process; by continually rescheduling or cancelling depositions at the last minute; by failing to produce witnesses for depositions after those depositions had lasted past a certain time period; by being uncooperative and argumentative at depositions; by appearing in court late on at least one occasion; and by offering frivolous and time-consuming arguments for his lack of diligence in pursuing the litigation.

After setting out these findings in its order, the district court entered a final judgment imposing the sanctions. This appeal followed.

II. ANALYSIS

The district courts wield their various sanction powers at their broad discretion. See, e.g., Thomas, 836 F.2d at 876-877 (sanctions under Rule 11); Burull v. First Nat'l Bank, 831 F.2d 788, 790 (8th Cir.1987), cert. denied, 485 U.S. 961, 108 S.Ct. 1225, 99 L.Ed.2d 425 (1988) (sanctions under 28 U.S.C. Sec. 1927); Bell v. Bell, No. 86-4321 (5th Cir.Sept. 17, 1986) (sanctions under Rule 26(g)); Roadway Express, Inc. v. Piper, 447 U.S. 752, 763, 100 S.Ct. 2455, 2462, 65 L.Ed.2d 488 (1980) (sanctions under Rule 37).

We in turn may reverse a district court's award of sanctions only if we find that the court abused its discretion in imposing them. Thomas, 836 F.2d at 872; Trevino v. Holly Sugar Corp., 811 F.2d 896, 907-908 (5th Cir.1987) (sanctions under 28 U.S.C. Sec. 1927); Bell, No. 86-4321 at 6-7 (sanctions under Rules 11, 26(g), and 37); Batson v. Neal Spelce Assoc., 765 F.2d 511, 512 (5th Cir.1985) (sanctions under Rule 37). Although the district court imposed these sanctions under various rules, we review all of the awards by the same standard: the question we address is not whether this Court, in its own judgment and as an original matter, would have imposed any of these sanctions. Rather, we only ask whether the district court abused its discretion in doing so. National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976).

1. Rule 11 Sanctions Against Plaintiffs

As their first point of error, Appellants argue that "a represented litigant is not sanctionable under Rule 11, wholly apart from the signing requirement, simply because his lawyer has signed and filed a purportedly sanctionable court paper or lawsuit." However, in Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120, 124, 110 S.Ct. 456, 459, 107 L.Ed.2d 438 (1989), the United States Supreme Court noted that Rule 11 is to be interpreted literally. We therefore reject Appellants' position as inconsistent with the clear language of Rule 11 on this point: "If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction...." Fed.R.Civ.P. 11 (emphasis added). This language is reinforced in the Advisory Committee Note to Rule 11: "If the duty imposed by the rule is violated, the court should have the discretion to impose sanctions on either the attorney, the party the signing attorney represents, or both.... Even though it is the attorney whose signature violates the rule, it may be appropriate under the circumstances of the case to impose a sanction on the client." citing Browning Debenture Holders' Committee v. DASA Corp., 560 F.2d 1078 (2d Cir.1977). ³ Rule 11 clearly allows district courts the discretion in appropriate cases to impose sanctions against non-signing represented parties for violations of the rule by their attorneys. See, e.g., Jennings v. Joshua Independent School District, 948 F.2d 194 (5th Cir.1991). Appellants' first point of error is overruled; and we affirm the judgment of the trial court in so far as sanctions against Jacobs, Manuel, and McDonald are concerned.

2. Effect of Sanctions Ruling in Prior Appeal

In their third point of error, Appellants remind us of our earlier opinion affirming the summary judgment entered against them. There, we denied Appellees' motion for sanctions against Appellants for bringing a frivolous appeal pursuant to Fed.R.App.P. 38, saying "although plaintiffs [Appellants in both appeals] have not met the evidentiary burden required to survive defendant's motion for summary judgment, we cannot summarily dismiss the issues they have brought before us as 'frivolous.' " Topalian, 954 F.2d at 1140. Appellants argue that we cannot affirm the trial judge's findings because we are bound to our earlier decision that their appeal was not frivolous.

Appellants' argument on this point must fail, however, because it confuses our discretionary sanctioning power under Rule 38 with the standard by which we review sanctions imposed by a district court. In declining to impose sanctions under Rule 38 in the first appeal, we did not review any findings by the trial court as to whether the claim was frivolous. Rather, we evaluated the appeal of that claim de novo, exercising our own discretion. See Fed.R.App.P. 38 advisory committee note. And in our discretion, we determined that the appeal was not frivolous, and therefore we declined to impose sanctions on Appellants. But, in reviewing sanctions imposed under the district court's various sanctioning powers, we will not suppose to substitute our judgment for that of the trial court, when it comes to enforcement of acceptable standards of litigation conduct. Thomas, 836 F.2d at 873, citing Eastway Construction Corp. v. City of New York, 637 F.Supp. 558, 566 (E.D.N.Y.1986). It is inconsistent with the purposes of a district court's power to sanction, as well as the principles of appellate review, to hold here that our earlier decision on appeal now binds our review of the district court's exercise of discretion in awarding sanctions in the first instance. Therefore, our earlier denial of Rule 38 sanctions notwithstanding, we hold that we are free to affirm the sanctions order if we find that the district court did not abuse its discretion in awarding these sanctions.

3. Specific Findings to Support Sanctions

Even though we have overruled two of Appellants' contentions, we find ourselves in agreement with Appellants' second point of error; and accordingly we must vacate the trial court's award of sanctions against Lopez; and remand the case for further factual findings to support that award. We reach this conclusion because the district court's findings provide an insufficient basis for reviewing the...