(1987). Although the Court recognizes that sanctions must be imposed with caution so as not to chill the filing of meritorious claims, application of the above standard reveals that sanctions are warranted in the instant case.
The Court finds that plaintiff's counsel not only failed to make a reasonable inquiry into both the factual and legal basis of the claims against Klynveld before filing the complaint, but also refused to withdraw the complaint despite clear indications that such action was warranted. As an initial matter, plaintiff's contention that this Court had personal jurisdiction over Klynveld based on some derivative theory of jurisdiction was without basis. As stated above, this case presents no factual support for a finding of jurisdiction based on theories of partnership or agency. Likewise, there is no legal support for Howard's theory of jurisdiction by estoppel.
In addition to the jurisdictional problems, plaintiff's counsel had no reasonable basis for filing the instant action given Howard's clear obligation to arbitrate her claims against the defendants. Although plaintiff's counsel initially contended that there was some doubt as to the validity and/or scope of the arbitration clause in the Agreement, any such doubts were resolved by this Court in the October 1996 Order. There, the Court explicitly held that "the arbitration clause at issue governs any claims related to Howard's employment with [Peat Marwick]." October 1996 Order at 13 (emphasis in original). As such, counsel's argument that Howard's claims against Klynveld -- which all undeniably arise out of her employment with Peat Marwick, and in fact virtually mirror the claims asserted in the February 1996 Action -- are not subject to arbitration is patently frivolous.
Even a cursory review of the law reveals that Howard's claims based on her employment with Peat Marwick are subject to arbitration as per the Agreement, regardless of whether she targets new defendants. See Doctor's Assoc., Inc. v. Stuart, 85 F.3d 975, 984 (2d Cir. 1996) (Federal Arbitration Act "plainly requires that a district court stay litigation where issues presented in the litigation are the subject of an arbitration agreement" and a party may not eschew its duty to arbitrate those issues by "introducing the identical controversy" against nonsignatories to the agreement) (emphasis in original).
Finally, a brief review of the claims set forth in the instant action reveals that numerous causes of action are incurably defective on their face. For example, Howard asserts a claim for wrongful termination in violation of public policy without any allegation that her employment with Peat Marwick was for a fixed term of duration. It is well established under New York law, however, that no cause of action for wrongful termination in violation of public policy exists for employees at will. Ingle v. Glamore Motor Sales, Inc., 73 N.Y.2d at 188-89, 538 N.Y.S.2d at 773-74. Similarly, the complaint purports to assert a Title VII claim against Klynveld despite the fact that Howard neither submitted a charge to the Equal Employment Opportunity Commission against Klynveld nor received a notice of right to sue with respect to Klynveld, as statutorily required. See Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-5(e)(1). Moreover, even if Howard's Equal Employment Opportunity Commission charge and right to sue notice regarding Peat Marwick could apply to Klynveld, the ninety day limitations period in which suit must be brought against Klynveld expired five months before the filing of this action. See 42 U.S.C. § 2000e-5(f)(1).
Howard's counsel offers little in defense of the motion for sanctions against him. First, counsel baldly asserts that Klynveld's motion for sanctions is untimely -- a contention lacking legal and factual support. At a case conference held on September 18, 1996, the Court expressly stated that it would accept a motion for sanctions together with a motion to dismiss the complaint. In addition, Klynveld fully complied with the timing and notice requirements of Rule 11. Klynveld filed its motion for sanctions on December 9, 1996, twenty-one days after giving plaintiff notice of its intent to move for sanctions. See Fed. R. Civ. P. 11(c)(1)(A). Second, Howard argues that she did not file the instant action for the improper purpose of avoiding arbitration, but rather "to assure the payment of any compensation that plaintiff may be awarded." Pl. Mem. of Law, dated Dec. 24, 1996, at 41. This stark concession, that her sole or primary reason for suing Klynveld was to ensure a judgment in the event that she succeeded against Peat Marwick, provides further support for the Court's conclusion that no reasonable inquiry was made before filing the instant action and thus that the imposition of sanctions pursuant to Rule 11 is warranted.
The Court has the discretion to fashion an appropriate sanction for a Rule 11 violation. The critical consideration in exercising this discretion is that the policy underlying Rule 11 is to "sanction" rather than to "reimburse." Wood v. Brosse U.S.A., Inc., 149 F.R.D. 44, 51 (S.D.N.Y. 1993). However, the typical sanction imposed is the payment of the other party's reasonable attorneys' fees which were incurred as a result of the violation. Eastway Construction Corp. v. City of New York, 821 F.2d 121, 123 (2d Cir.), cert. denied, 484 U.S. 918, 98 L. Ed. 2d 226, 108 S. Ct. 269 (1987). Nonetheless, the sanction should not exceed the amount required to achieve the desired result: the minimum that will reimburse the party adversely affected by the improper filing and deter the proscribed conduct. Id.
To justify an award of attorneys' fees and expenses, the party seeking such an award must provide the court with time and expense records, specifying for each attorney who performed work on the matter the date, hours expended and the nature of the work performed. Durant v. Traditional Invs., Ltd., 135 F.R.D. 42, 50 (S.D.N.Y. 1991). Fees and expenses must be both necessary and reasonable. Nemeroff v. Abelson, 94 F.R.D. 136, 146 (S.D.N.Y. 1982), aff'd, 704 F.2d 652 (2d Cir. 1983). Accordingly, Klynveld is directed to submit to the Court detailed billing records reflecting the work expended on the instant motion so that an appropriate sanction award may be established.
V. Sanctions Pursuant to 28 U.S.C. § 1927 and the Court's Inherent Powers
Section 1927 provides that "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." 28 U.S.C. § 1927. An award pursuant to this statute must be supported by a finding of bad faith. Oliveri v. Thompson, 803 F.2d 1265, 1273 (2d Cir. 1986), cert. denied, 480 U.S. 918, 94 L. Ed. 2d 689, 107 S. Ct. 1373 (1987). An action is brought in bad faith when it is "entirely without color and has been asserted wantonly, for purposes of harassment or delay, or for other improper reasons." Browning Debenture Holders' Comm. v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir. 1977).
Likewise, as part of its inherent powers, a court has the authority to impose sanctions for improper conduct. Wood v. Brosse U.S.A., Inc., 149 F.R.D. at 49. According to the Supreme Court, this power is derived from the court's "very nature" and in its need to be able to "manage [its] own affairs as to achieve the orderly and expeditious disposition of cases." Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1962). One aspect of this power is a court's ability to assess costs and attorneys' fees against either the client or his attorney when a party has acted in bad faith, vexatiously, wantonly or for oppressive reasons. Wood v. Brosse U.S.A., Inc., 149 F.R.D. at 49. Because of the "very potency" of a court's inherent powers, the Supreme Court has cautioned that it should be used with "restraint and discretion." Chambers v. NASCO, Inc., 501 U.S. at 44. Accordingly, as with sanctions pursuant to Section 1927, a particularized showing of bad faith must be made. United States v. Int'l Broth. of Teamsters, Chauffers, Warehousemen and Helpers of America, AFL-CIO, 948 F.2d 1338, 1345 (2d Cir. 1991).
Courts have declined to impose sanctions pursuant to Section 1927 or a court's inherent powers absent clear evidence that the challenged actions are entirely without color, and are taken for reasons for harassment, delay or other improper purpose. Oliveri v. Thompson, 803 F.2d at 1272. Moreover, a high degree of specificity in the factual findings underlying such sanctions is required. Id.
On the present record, there is an insufficient showing that Howard's complaint "must have been undertaken for some improper purpose." Id. at 1273. Although the Court finds that plaintiff's counsel failed to make a reasonable legal and/or factual inquiry before bringing the instant action, there has not been a clear and specific showing of bad faith. Accordingly, defendants' motions for sanctions pursuant to Section 1927 and the Court's inherent powers are denied.
For the reasons set forth above, Klynveld's motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) is granted. In addition, Hannon and Madonna's motion to dismiss based on the duplicative nature of this action is granted. Klynveld's motion for sanctions pursuant to Rule 11 is granted. Accordingly, counsel for Klynveld are directed to submit detailed billing records for the purposes of fashioning an appropriate sanction award. Finally, defendants' motions for sanctions pursuant to Section 1927 and the Court's inherent powers are denied.
SHIRLEY WOHL KRAM
UNITED STATES DISTRICT JUDGE
Dated: New York, New York
September 11, 1997