Sanctions: Counsel Still Caused “Excess” Fees within § 1927 Despite 42 U.S.C. § 1988 Award against Client for Same Fees — Default in Responding to Motion Suffices as a Substitute for Required Finding of Bad Faith (1 Judge Dissenting)

Young Apartments, Inc. v. Town of Jupiter, 2013 U.S. App. LEXIS 383 (11th Cir. Jan. 7, 2013):

Appellants William Tedards and Michael Weeks, two attorneys who represented their client, Plaintiff Young Apartments, in this civil lawsuit, appeal the district court's imposition of sanctions on them in the form of attorneys' fees under 28 U.S.C. § 1927 in favor of Defendants Andrew Lukasik and Robert Lecky. After review of the briefs and the record in this case, and with the benefit of oral argument, we find no abuse of discretion in the district court's imposition of § 1927 sanctions and affirm.

This is the third appeal before this Court in this case. Plaintiff Young Apartments does not contest or appeal the district court's $139,397 award of attorneys' fees against Young Apartments in favor of the Defendants under 42 U.S.C. § 1988 and 28 U.S.C. § 1927. [Editorial Note: This is noteworthy because clients may not be sanctioned under § 1927, although given the award under § 1988, any battle over this would have been Pyrrhic. ] Rather, this appeal concerns only the attorneys' fees award of $82,341 against counsel for Young Apartments under § 1927.

The full $139,397 represents all attorneys' fees incurred by Defendants Lukasik and Lecky in the entire case. The $82,341, awarded against Young Apartments' counsel, represents only that portion of the $139,397 award that was incurred by the Defendants after the first appeal in this case.

Specifically, the $82,341 award consists of: (1) $50,984 in attorneys' fees incurred in the discovery and summary judgment process that followed the first appeal; and (2) $31,357 in attorneys' fees incurred in the second appeal, which affirmed the entry of summary judgment in favor of the Defendants. ***

II. THE ATTORNEYS' FEES LITIGATION

A. Lukasik and Lecky's Motion Filed April 29, 2011 Following this Court's decision in Young II, Defendants Lukasik and Lecky filed an April 29, 2011 renewed motion for attorneys' fees in the district court, through which they sought to recover their attorneys' fees and costs from Young Apartments and its counsel. The Defendants first argued that they were entitled, as prevailing parties under 42 U.S.C. § 1988, to recover from Young Apartments all of the attorneys' fees they incurred in defending against Young Apartments' suit from inception and throughout the entire case because there was never any evidence to support any of Plaintiff's allegations and the lawsuit was frivolous.

Further, as to Plaintiff's counsel, Defendants Lukasik and Lecky's April 29 motion expressly sought to recover attorneys' fees under 28 U.S.C. § 1927 "jointly and severally" from "Young Apartments and [its] counsel" of record, but limited to only those fees incurred after the Young I decision. As noted above, the Young I decision had held that Defendants Lukasik and Lecky were sued individually, not in their official capacity. Defendants Lukasik and Lecky's motion pointed out that after the Young I decision and after the case was back in the district court, counsel for Young Apartments prosecuted selective enforcement claims against Defendants Lukasik and Lecky knowing no evidence supported those claims.

As a result of Plaintiff Young Apartments' "counsel's unwillingness to abandon [a] clearly baseless claim," Defendants Lukasik and Lecky's April 29 motion argued that they incurred nearly $83,000 in attorneys' fees in (1) defending themselves against Young Apartments' baseless claims in the district court after the Young I remand, (2) filing a motion for summary judgment, which the district court granted in the Defendants' favor, and (3) successfully defending the district court's summary judgment ruling on appeal in Young II. In their April 29 motion, Defendants Lukasik and Lecky estimated that, of the approximately $83,000 spent after the remand in Young I, $55,000 was spent on attorneys' fees for their defense in the district court after Young I, and $28,000 was spent on appellate attorneys' fees for their defense before this Court in the Young II proceedings. ***

B. District Court's Order, Dated June 7, 2011, Granting Defendants Lukasik and Lecky's § 1927 Motion by Default

Neither Plaintiff Young Apartments nor its counsel of record filed a response to Defendants Lukasik and Lecky's April 29 motion for attorneys' fees against both Young Apartments and its counsel under § 1927.

On June 7, 2011, the district court entered an order entitled "Order Granting by Default Renewed Verified Motion for Trial and Appellate Attorneys' Fees and Costs." The district court, after indicating that it "ha[d] carefully considered the motion, applicable law, and pertinent portions of the record," granted Lukasik and Lecky's motion by default, pursuant to Southern District of Florida Local Rule 7.1(c). The district court's order quoted the text of Rule 7.1(c), which states that "[e]ach party opposing a motion shall serve an opposing memorandum of law no later than fourteen (14) days after service of the motion. Failure to do so may be deemed sufficient cause for granting the motion by default." S.D. Fla. L.R. 7.1(c).

At the time the district court entered its June 7 default order, Young Apartments and its counsel had not responded to Defendants Lukasik and Lecky's § 1927 motion for over 38 days.

The district court's order also permitted Defendants Lukasik and Lecky, within 30 days, to file affidavits or other corroborating documentation in support of the reasonableness of the amount of fees and costs requested.

C. Affidavit and Billing Records Filed July 8, 2011

On July 8, 2011, in support of their fees motion, Defendants Lukasik and Lecky filed (1) an affidavit from their attorney, and (2) time and billing records, which demonstrated that their attorneys had expended a total of 1068.5 hours on Lukasik and Lecky's defense. Of the 1068.5 total hours, 376.3 were expended in Lukasik and Lecky's defense in the district court after the Young I remand, and 234.7 were expended defending the district court's summary judgment ruling before this Court in the Young II proceedings--a total of 611 hours. Lukasik and Lecky requested that the district court find that hourly rates of $110 to $130 per hour for associates, and up to $180 per hour for partners, were reasonable in light of the experience of the attorneys and the work performed in the litigation.

Defendants Lukasik and Lecky asked that the district court award them (1) $139,397 in attorneys' fees from Young Apartments, under § 1988, for fees incurred in the entire litigation; and (2) $82,341 in attorneys' fees jointly and severally recoverable from Young Apartments and its counsel under § 1927, for fees after the Young I remand.

D. Tedards's Response Filed August 5, 2011, on Behalf of Tedards and Weeks, Challenging Defendants' Entitlement to Fees

On August 5, 2011, William Tedards, one of Young Apartments' counsel, filed a response to Defendants' July 8 documents (showing Defendants' attorneys' hours expended and billing rates). In the district court, Tedards's response admitted that he had no authorization from his client--Young Apartments--to contest the § 1988 award of $139,397 against Young Apartments.

Rather, Tedards's August 5 response argued that the district court should deny what Tedards termed the "overlapping" § 1927 fee request against counsel for Young Apartments. In other words, because the full amount of $139,397 was recoverable under § 1988 against Young Apartments, Tedards contended that no sum was recoverable under § 1927 against counsel for Young Apartments.

Importantly for this third appeal, Counsel Tedards's August 5 response also addressed the substance of whether Defendants Lukasik and Lecky were entitled to attorneys' fees against Young Apartments' counsel under § 1927. Counsel Tedards's August 5 response, filed in the district court, contended that he did not tell this Court in Young I that he had been prevented from introducing certain evidence, or that he intended to renew a claim, post-remand in Young I, that relied on previously excluded evidence. Counsel Tedards's August 5 response conceded that Defendants Lukasik and Lecky may have been misled during the post-Young I remand summary judgment proceedings and may have devoted unnecessary effort to certain issues. Counsel Tedards admitted that he could have emphasized more clearly the precise nature of Young Apartments' claim after remand and in the second summary judgment phase, that he had offered to settle the § 1927 attorneys' fees issue with Defendants, and that his offer had been rejected***.

Counsel Tedards's August 5 response also included a proposed order to the district court concerning the § 1927 award, in which Counsel Tedards offered to settle the issue of attorneys' fees against counsel for "an amount equal to twenty percent (20%) of the attorney fees expended during the proceedings in [the district court] after remand from the Eleventh Circuit, the dollar amount to be determined and agreed to by the parties." (emphasis added). ***

E. District Court's Order Filed October 12, 2011

On October 12, 2011, the district court entered an order making several findings. For example, the district court found: (1) that "the total hours expended by Defendants' attorneys (1,068.5) was reasonable"; (2) that "Defendants' attorneys claim rates of $110-$130 per hour for associates, and a maximum of $180 per hour for partners"; (3) that "Defendants also submitted the declaration of an attorneys' fees expert"; and (4) that "based on this evidence, the nature of the case, and the Court's knowledge and experience," the Defendants' attorneys' "rates are reasonable." The district court granted the motion for fees in part, awarding Defendants Lukasik and Lecky $139,397 in attorneys' fees (plus interest) under § 1988.

The district court also concluded, however, that because the 611 hours claimed under § 1927 were already included in the total 1068.5 hours claimed under § 1988, the request for an award under § 1927 was "duplicative" and thus denied.

Notably too for this third appeal, the district court also addressed Counsel Tedards's August 5 response, which argued that the Defendants were not entitled to fees under § 1927. In its October 12 order, the district court concluded that: (1) "Plaintiff failed to lodge any objections to the reasonableness of the rates" and "Plaintiff failed to lodge any objections regarding the reasonableness of the hours claimed"; (2) "[r]ather, Plaintiff's opposition improperly challenges Defendants' entitlement to fees" and "the Court has already decided the issue of entitlement"; (3) Plaintiff waived its opportunity to argue the entitlement issue "when it failed to timely respond to the motion for attorneys' fees"; and (4) Plaintiff "has also waived its opportunity to argue the issue of reasonableness by failing to address this issue at all in its response to Defendants' memorandum."

IV. DISCUSSION

A. Legal Principles Concerning 28 U.S.C. § 1927

Section 1927 provides that "[a]ny 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." 28 U.S.C. § 1927. To warrant sanctions pursuant to § 1927, an attorney must (1) "engage in unreasonable and vexatious conduct"; (2) "this conduct must multiply the proceedings"; and (3) "the amount of the sanction cannot exceed the costs occasioned by the objectionable conduct." Peer v. Lewis, 606 F.3d 1306, 1314 (11th Cir. 2010) (internal quotation marks omitted); Amlong, 500 F.3d at 1239.

An attorney multiplies the proceedings unreasonably and vexatiously "only when the attorney's conduct is so egregious that it is 'tantamount to bad faith,'" which turns on the objective conduct of the attorney. Peer, 606 F.3d at 1314 (quoting Amlong, 500 F.3d at 1239). Bad faith is an objective standard that is satisfied when an attorney "knowingly or recklessly pursues a frivolous claim or engages in litigation tactics that needlessly obstruct the litigation of non-frivolous claims." Amlong, 500 F.3d at 1242 (quoting Schwartz v. Million Air, Inc., 341 F.3d 1220, 1225 (11th Cir. 2003)). Similarly, whether an attorney's conduct is "vexatious" "requires an evaluation of the attorney's objective conduct." Id. at 1240. "[T]he attorney's subjective state of mind is frequently an important piece of the calculus, because a given act is more likely to fall outside the bounds of acceptable conduct and therefore be 'unreasonabl[e] and vexatious[ ]' if it is done with a malicious purpose or intent." Id. (alterations in original). An attorney facing § 1927 sanctions must be afforded an opportunity to be heard. Id. at 1242.

B. Analysis

Attorneys Tedards and Weeks ("Counsel") offer four arguments in support of their contention that the district court abused its discretion in awarding attorneys' fees against them under § 1927: (1) there was no multiplication of proceedings as required by § 1927 because there were no "excess" costs incurred by Defendant beyond those Defendants claimed under § 1988; (2) any multiplication of proceedings did not result in Lukasik and Lecky incurring such "excess" costs or fees; (3) the district court failed to make factual findings with respect to either the multiplication of proceedings or any "excess" fees or costs; and (4) Attorney Weeks, as local counsel, only came into the proceedings following this Court's decision in Young I, and he played a limited, non-substantive role.

Counsel's appeal lacks merit for several reasons. First, the district court did not err in granting Defendants Lukasik and Lecky's April 29, 2011 motion for attorneys' fees by default. It is undisputed that Lukasik and Lecky's April 29 motion for attorneys' fees gave Counsel clear notice of their own potential liability under § 1927. That April 29 motion also described the conduct that was vexatious and caused multiplication of the proceedings after Young I. Specifically, the April 29 motion alleged that: (1) Plaintiff's Counsel after remand pursued a baseless selective enforcement claim knowing there was no evidence to support that claim; (2) this caused Lukasik and Lecky to defend the case, participate in discovery, and file a motion for summary judgment in the district court; and (3) then required Lukasik and Lecky to defend the district court's summary judgment ruling in the Young II appeal.

After receiving notice of what conduct was alleged to be vexatious, in bad faith, and multiplicitous, Plaintiff's Counsel did not respond at all to this April 29 motion within the time limits prescribed by the Local Rule governing motions practice in the Southern District of Florida, thereby placing Counsel in default and providing the district court with a sufficient basis for granting the April 29 motion as to the entitlement issue. See S.D. Fla. L.R. 7.1(c) (stating that "[e]ach party opposing a motion shall serve an opposing memorandum of law no later than fourteen (14) days after service of the motion. Failure to do so may be deemed sufficient cause for granting the motion by default.").

And Plaintiff's Counsel, by their default, admitted the factual allegations of vexatious conduct, bad faith, and multiplicity of proceedings contained in the 18-page, April 29 motion for attorneys' fees under § 1927 against Plaintiff and its counsel. Cf. Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009) ("A defendant, by his default, admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established." (internal quotation marks omitted)); Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987) (stating "[t]he liability of [the defendant] is not at issue. Such liability is [sufficiently] pled in the complaint, and is therefore established by the entry of default against him."); Nishimatsu Constr. Co., Ltd. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (stating "[a]ttempts by a defendant to escape the effects of his default should be strictly circumscribed; he should not be given the opportunity to litigate what has already been considered admitted in law." ). By virtue of their default, Plaintiff's Counsel admitted the allegations in the April 29 motion, which were that they pursued a baseless claim knowing no evidence supported it, that this was vexatious conduct that amounted to bad faith, and that as a direct result of their unwillingness to abandon the clearly baseless claim, the Defendants had to defend themselves in the second summary judgment proceedings and the Young II appeal. The April 29 motion clearly alleged that all of the post-remand proceedings amounted to a bad faith pursuit of a baseless claim against Defendants Lukasik and Lecky without any evidence. Since that factual basis of the § 1927 motion was admitted by default, there was no factual dispute for the district court to resolve as to entitlement.

Second, Counsel's briefs on appeal do not address the district court's June 7 default order or the actual — and correct — basis for all of its rulings on Lukasik and Lecky's motion for attorneys' fees: Counsel's default in not responding to Defendants' April 29 motion. Counsel do not contest the district court's finding of default as to Lukasik and Lecky's entitlement to fees under § 1927 against Counsel. Indeed, Counsel's August 5 and October 31 responses ignored the default finding as to entitlement, never offered an excuse or any explanation for not responding to that April 29 motion, which the district court granted on June 7, and continued to make the same arguments about entitlement which were rejected by the district court in its October 2011 and February 2012 orders due to the initial default.

Third, as to the amount of fees, Counsel do not even raise an argument on appeal as to the reasonableness of either (1) the number of hours expended by the attorneys for Lukasik and Lecky, or (2) the hourly rates charged by the attorneys for Lukasik and Lecky. Accordingly, Counsel have abandoned any argument as to the reasonableness of the hours expended or the rates charged. See Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (recognizing as a well-settled principle that "a legal claim or argument that has not been briefed before the court is deemed abandoned and its merits will not be addressed").

In addition, we note that all of Young Apartments' filings were signed by both attorneys of record, and, even accepting Tedards's statement regarding Weeks's limited role, Weeks nevertheless participated in the litigation as counsel of record. We therefore cannot say that the district court abused its discretion by making Weeks jointly and severally liable for the § 1927 award, given that Weeks too defaulted in the district court.

Fourth, we recognize that Plaintiff's Counsel argues that (1) there can be no multiplicity of proceedings under § 1927 unless the attorneys' conduct produced costs beyond what the Defendants already recovered under § 1988, and (2) thus, "excess" costs caused by bad faith conduct means costs beyond what is recovered under § 1988. This "excess costs" argument not only lacks merit but wholly misapprehends § 1927. Section 1988 does not award fees against counsel but only against the non-prevailing party. See 42 U.S.C. § 1988(b). In contrast, § 1927 awards fees against counsel for that counsel's bad faith conduct, such as pursuit of a baseless claim knowing no evidence supported it. See 28 U.S.C. § 1927; Amlong, 500 F.3d at 1242. There is no basis, and Plaintiff's Counsel cite none, to limit the application of § 1927 by a request for fees under § 1988. And there was no need to factually determine what portion of the post-remand fees were recoverable because Defendants' April 29 motion made clear that Defendants alleged that the entire post-remand proceedings, including the second summary judgment proceedings and the second appeal, involved a claim Plaintiff's Counsel knew was baseless and without any evidentiary support. Plaintiff's Counsel defaulted and thus conceded those factual allegations in the April 29 motion.

Footnote 12. The dissent argues that after the default order, the district court still should have had a hearing and made findings on "the propriety of sanctions and the amount." This ignores that Plaintiff's Counsel not only defaulted as to Defendants' allegations of vexatious conduct throughout the entire post-remand phase and entitlement under § 1927, but also lodged no objections to the number of hours or the hourly rates charged. And the district court made findings that the number of hours claimed for the post-remand phase and the rates charged were reasonable. The dissent's analogy to liability and damages fails because (1) the default as to liability here was broad in scope, i.e, an admission that all post-remand proceedings involved the pursuit of a baseless claim without any evidence and in bad faith, and (2) then subsequently there was no objection to the amount of hours expended and the rates charged during those post-remand proceedings.

In light of the foregoing, after our review of the briefs and the record in this case, and with the benefit of oral argument, we conclude that Counsel have not carried their burden of demonstrating an abuse of discretion by the district court, and we affirm the district court's § 1927 award of $82,341 in attorneys' fees in favor of Lukasik and Lecky and against Tedards and Weeks.

AFFIRMED.

***

WHITTEMORE, District Judge, dissenting:

I respectfully disagree with the majority and conclude that the district court abused its discretion when it sanctioned Plaintiff's attorneys under 28 U.S.C. §1927 without finding that they unreasonably and vexatiously multiplied the proceedings and without finding that the amount of the sanction represents the excess fees incurred by Defendants.1 Without findings from the district court, a meaningful review of its decision to impose sanctions cannot be conducted. For this reason, I would reverse and remand to the district court.

Absence of findings

The plain language of § 1927, as well as Circuit precedent, required the district court to make findings before imposing sanctions against Plaintiff's counsel, specifically that they acted in bad faith by unreasonably and vexatiously multiplying the proceedings. Hudson v. International Computer Negotiations, Inc., 499 F.3d 1252, 1262 (11th Cir. 2007) (plain language of § 1927 requires findings of unreasonable and vexatious conduct, multiplication of proceedings, and that the dollar amount of the sanction bears a financial nexus to the excess proceedings); Amlong & Amlong, P.A. v. Denny's. Inc., et al., 500 F.3d at 1251-52 (". . . we have held that before a court can impose sanctions on an attorney under its inherent power, it must make a finding of bad faith . . ."). Although the district court had ample opportunity to do so, it never made any findings to support the §1927 sanction.

The majority notes that Defendants' renewed motion for attorneys' fees "explained how counsel for Young Apartments engaged in 'unreasonable and vexatious conduct,' which 'multiplied the proceedings,' constituted 'bad faith,' and justified an award of attorneys' fees as a sanction under § 1927." The majority concludes that "by their default," Tedards and Weeks "admitted the factual allegations of vexatious conduct and multiplicity of proceedings" in that motion.

I find no support for this conclusion. More importantly, Defendants' explanation of how Tedards and Weeks engaged in "unreasonable and vexatious conduct" which "multiplied the proceedings" is not a substitute for the required judicial findings under § 1927.