United States District Court, S.D. New York
August 23, 2005.
PACIFIC ELECTRIC WIRE & CABLE CO., LTD., ASIA PACIFIC WIRE & CABLE CORP., LTD., and KINBONG HOLDINGS LIMITED, Plaintiffs,
SET TOP INTERNATIONAL INC., TOM CHING-YUN TUNG, TAI-SHENG LIEN, FU-CHUAN TSAI, FU-NU TSAI, JACK TAKACS a/k/a JOHN P. TAKACS, ROBERT EVERETT WOLIN and JOHN DOES 1 THROUGH 10, Defendants.
The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
OPINION and ORDER
In its previous Opinion and Order, dated March 11, 2005, the
Court denied Plaintiffs' motion for dismissal of the Second
Amended Complaint without prejudice pursuant to Fed.R.Civ.P.
41(a)(2). The Court also granted in part and denied in part
motions by defendants Tung and Takacs to dismiss the claims
against them. Defendant Robert Wolin ("Wolin") opposed
Plaintiffs' Rule 41(a)(2) motion and moved for sanctions against
Plaintiffs and their counsel, Coudert Brothers, LLP ("Coudert").
Prior to issuance of the Court's Order, Plaintiffs stipulated to
a dismissal of the claims against Wolin with prejudice. The Court
noted the dismissal in its Order and reserved decision on Wolin's
sanctions motion. Pac. Elec. Wire & Cable Co. v. Set Top Int'l
Inc., No. 03 Civ. 9623(JFK), 2005 WL 578916 at *1 (S.D.N.Y. Mar.
11, 2005). For the following reasons, the motion is denied.
The Court has already set out a complete statement of facts in
its previous Order. See Pac. Elec., 2005 WL 578916 at *1-4.
Familiarity with these facts is presumed. To recap, Wolin is a
partner in the Dallas office of Kirkpatrick & Lockhart Graham
Nicholson LLP ("Kirkpatrick"), which was counsel to Pacific
Electric Wire & Cable Co., Ltd. ("PEWC") when the following
events occurred. PEWC owned approximately 72.84% of the shares of Asia Pacific Wire & Cable Corp., Ltd. ("APWC")
through its subsidiaries, Kinbong Holdings Limited ("Kinbong")
and Pacific USA Holdings Corp. ("PUSA"). PUSA held 50.44% of the
shares; Kinbong held 22.4%. In September 2001, PUSA pledged its
APWC shares to Swiss Re Financial Corporation ("Swiss Re") in
exchange for a letter of credit. In October 2003, Swiss Re
assigned its rights in the shares to Set Top International Inc.
("Set Top") in exchange for $11.5 million. Around the same time,
Kinbong pledged its APWC shares directly to Set Top in exchange
for $4.1 million to be paid to Swiss Re in partial satisfaction
of a debt owed to Swiss Re by PEWC and PUSA. In summary, Set Top
acquired 72.84% of APWC for a total of $15.6 million, an amount
Plaintiffs claimed was below book value.
Tom Ching-Yun Tung ("Tung"), the purported chairman of PEWC,
consented to the Swiss Re-Set Top assignment agreement (the
"Assignment Agreement").*fn1 Plaintiffs alleged that Tung,
who was also chairman of PUSA and APWC, and a director of
Kinbong, was also a beneficial owner of Set Top, or acted in
concert with Set Top's principal shareholders. In essence,
Plaintiffs claimed that Tung engineered Set Top's inexpensive acquisition of the
PUSA- and Kinbong-pledged APWC shares.
In November 2003, Set Top announced its intention to put up for
"public sale" the PUSA-pledged APWC shares, which had been
assigned by Swiss Re to Set Top. On December 4, 2003, PEWC and
APWC, now with Coudert as counsel, filed a Complaint and moved by
Order to Show Cause for a temporary restraining order ("TRO") and
a preliminary injunction preventing the disposition of any APWC
shares in Set Top's hands.*fn2 As to Wolin, Plaintiffs
asserted fraud, RICO, fiduciary duty, conversion, negligence,
professional malpractice, and tortious interference with contract
claims. On December 8, 2003, the Court issued a TRO ex parte.
At the TRO hearing, the Court queried the Coudert attorneys with
respect to the severity of the allegations against Wolin, a
member of the Bar. Richard De Palma, Esq., responded: "Yes, sir;
they're very serious and they're not included lightly." (Tr.,
Dec. 8, 2003 Hrg. at 19). It later became apparent that at the
TRO hearing, Mr. De Palma and his Coudert colleague, Michael
Hagan, Esq., had in possession two letters between Wolin and Set
Top's counsel. This correspondence showed that Wolin was acting
in PEWC's best interests and diligently pursuing a buy-back agreement. (See Hagan Decl. in Further Supp., Exh. N). Messrs.
De Palma and Hagan failed to disclose the letters to the Court.
At the Order to Show Cause hearing on December 16, 2003, the
Court requested an explanation for the missing letters from
Messrs. De Palma and Hagan. (Tr., Dec. 16, 2003 Hrg. at 41, 44,
51-52). Both attorneys essentially apologized, claiming that the
letters were "a side issue" (Mr. De Palma) that "didn't merit the
court's attention." (Mr. Hagan). (Id. at 43, 53). In its Order
dissolving the TRO, the Court chose not to highlight the
incident. Rather, the Court remarked that "[n]othing in
plaintiff's submission proves any wrongdoing on Wolin's part."
Pac. Elec. Wire & Cable Co. v. Set Top Int'l Inc., 2003 WL
23095564 at *1 n. 5 (S.D.N.Y. Dec. 30, 2003).
On January 27, 2004, Wolin's counsel, Patterson Belknap Webb &
Tyler LLP ("Patterson"), informed Coudert that a Rule 11 motion
would be forthcoming unless Plaintiffs withdrew their Complaint.
(King Decl., Exh. 12). The next day, Coudert responded that
Plaintiffs would withdraw all claims against Wolin without
prejudice except the malpractice claim. (Id., Exh. 13). Wolin
agreed to this proposal, and the parties entered into a
stipulation. No Rule 11 motion was filed. On February 6, 2004,
Plaintiffs filed their First Amended Complaint, which reflected
the terms of the stipulation. On February 24, 2004, Wolin filed
an Answer to the Amended Complaint. Plaintiffs sought damages of $100 million on their surviving
malpractice claim against Wolin. The Second Amended Complaint,
filed on June 24, 2004, repeats the relatively few allegations
against Wolin in the First Amended Complaint. In fact, there are
only three: (i) he failed to advise Plaintiffs of the Assignment
(2d Am. Compl. ¶¶ 85, 87); (ii) he knew that a buy-back agreement
was not executed simultaneously with the Assignment Agreement,
and he failed to ensure that a buy-back agreement was executed,
thereby leaving PEWC's interests unprotected (Id. ¶ 89, 181);
and (iii) he made misrepresentations to Plaintiffs at a November
2003 meeting by denying any connection with the Assignment and
buy-back agreements. (Id. ¶ 90). Plaintiffs chose not to
re-assert an allegation in the original Complaint that Wolin had
joined with Tung and Takacs in laying the groundwork for the
Assignment by introducing Swiss Re to Set Top. (See id. ¶ 63;
Compl. ¶ 65).
While discovery crawled along in 2004, various settlements
shrank the case. On July 2, 2004, PEWC, APWC and Set Top executed
a settlement agreement, which permitted PEWC to purchase the APWC
shares from Set Top for $25 million. (De Palma Decl. in Supp.,
Exh. A, Art. 1). The parties amended other areas of the agreement
on July 15, 2004. (Id., Exh. B). On the same day, Patterson
wrote to the Court on Wolin's behalf and requested an order
compelling Plaintiffs to serve an amended complaint and extending the discovery deadline. (King Decl. Exh. 20). Quite
correctly, Wolin understood that the Set Top settlement
"change[d] the landscape of this litigation significantly" and
materially affected any claim for damages against the remaining
defendants. (Id., Exh. 20 at 2). Wolin's remaining
co-defendants, Tung and Takacs, requested a stay of discovery.
On July 19, 2004, Brian Belowich, Esq. of Coudert sent the
Court a letter in opposition to the defendants' applications.
This letter has been the subject of much ink spillage in this
litigation. Mr. Belowich informed the Court that "a final
settlement ha[d] not yet been reached between Plaintiffs and Set
Top" and that "assuming a final settlement is reached,
Plaintiffs' claims against Tung, Takacs and Wolin will not be
impacted." (King Decl. Exh. 21). Wolin, as did his co-defendants
when they were in the case, claims that this letter is misleading
at best and a "deliberate deception" at worst. (See Wolin Joint
Mem. at 21-22). Coudert defends the letter as "fully accurate and
. . . in no way misleading." (Pl. Mem. in Further Supp. at 9).
The Court ordered a final extension of discovery to October 4,
2004, but denied the other applications.
On July 20, 2004, one day after Mr. Belowich's letter, the
attorneys for Plaintiffs and Set Top executed their stipulation
of discontinuance. (De Palma Decl. in Supp., Exh. C). The Court
so-ordered the stipulation on July 26, 2004. True to their word, Plaintiffs continued to prosecute their claims
against Tung, Takacs and Wolin. On August 19, 2004, Plaintiffs
added fuel to what was already a very hot fire by filing a
grievance against Wolin with the Texas State Bar (King Decl., Exh
31). The basis of Plaintiffs' grievance was that Wolin improperly
withheld PEWC files that Plaintiffs had sought in a Request for
Production of Documents. (King Decl., Exh. 30). This problem
resulted from the power struggle described in Footnote 2,
supra, page 4. Apparently, the new PEWC chairman, Michael Lee,
terminated Wolin's representation and demanded the files. (Pl.
Mem. in Further Supp. at 32). Because of the dispute over control
of PEWC, Tung instructed Wolin not to turn over the files. (Wolin
Joint Mem. at 13). PEWC sought the documents in their First
Request for Production, (King Decl., Exh. 30, Req. #52), and
Wolin objected on the basis of privilege, among other things.
(Id., Exh. 32, Resp. #52). As far as the Court knows, the Texas
proceeding is ongoing.
On September 9, 2004, Wolin's video deposition was taken in
Dallas. (De Palma Decl. in Supp., Exh. F). On September 15, 2004,
pursuant to the settlement, PEWC regained control of the APWC
shares for $25 million. (Id. ¶ 28). On September 22, 2004,
Plaintiffs offered Wolin a full release in exchange for "a
substantial settlement payment" to PEWC. (De Palma Decl. in
Further Supp. ¶ 104). Plaintiffs alternatively offered to release Wolin without prejudice to any claims arising from issues
other than the Set Top transactions. (Id. ¶ 108). The next day,
September 23, 2004, Plaintiffs dispatched facsimiles to counsel
for the remaining defendants, including Wolin, informing them
that Plaintiffs had decided to discontinue the matter without
prejudice and that the remaining depositions in Taiwan were
canceled. (De Palma Decl. in Supp., Exh. I; King Decl., Exh. 28).
This cancellation violated a Court Order, which required consent
of the other parties or of the Court before alteration of the
deposition schedule.*fn3 On September 24, 2004, Wolin
rejected Plaintiffs' settlement offers and a proposed stipulation
of discontinuance. (De Palma Decl. in Supp., Exh. L).*fn4
Plaintiffs thereupon brought their Rule 41(a)(2) motion. Wolin
opposed the motion and cross-moved for sanctions. In a
declaration in response to Wolin's motion, Mr. De Palma of
Coudert stated that Plaintiffs would not object to a
discontinuance as to Wolin with prejudice "applicable only to the
claims made in this case relating to the Set Top transactions."
(De Palma Decl. in Further Supp. ¶ 15). At oral argument, Wolin agreed to a dismissal with prejudice on these terms. (Tr., Jan.
31, 2005 Hrg. at 32-33). On February 1, 2005, the Court issued an
Order, inter alia, dismissing Wolin with prejudice pursuant
to the agreement in open court.
On March 11, 2005, the Court denied plaintiffs' Rule 41(a)(2)
motion and directed the prompt completion of discovery in
preparation for summary judgment motions and trial. On April 8,
2005, Plaintiffs filed their Third Amended Complaint. On May 18,
2005, a stipulation of dismissal pursuant to Fed.R.Civ.P.
41(a)(1) was filed as to Plaintiffs, Tung and Takacs. APWC
dismissed its claims in the Third Amended Complaint with
prejudice; PEWC and Kinbong dismissed their claims without
prejudice but agreed not to commence suit in New York state or
federal court in connection with any claims or transactions in
the Third Amended Complaint. The lawsuit is all but ended, with
the exception of Wolin's instant sanctions motion.
Wolin seeks sanctions pursuant to 28 U.S.C. § 1927 and the
inherent power of the Court.*fn5 He does not rely on Rule
11. Wolin asserts that Plaintiffs and Coudert (a) made
misrepresentations to the Court; (b) initiated the action without
any factual basis and pursued a meritless claim against him; (c)
initiated the action without any intention of bringing it to trial; (d) unreasonably multiplied the proceedings by continuing
the action after the Set Top settlement, canceling depositions
and delaying their Rule 41 motion; and (e) filed a baseless
grievance with the Texas State Bar over a mere discovery dispute.
(Wolin Joint Mem. at 21-25).
I. LEGAL STANDARDS
Title 28 of the United States Code, Section 1927, provides that
an 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. The Court also may impose sanctions pursuant to its
inherent power when attorneys or parties act "in bad faith,
vexatiously, wantonly, or for oppressive reasons." United States
v. Int'l Bhd. of Teamsters, 948 F.2d 1338, 1345 (2d Cir. 1991)
(internal quotation marks omitted). "[T]he only meaningful
difference between an award made under § 1927 and one made
pursuant to the court's inherent power is . . . that awards under
§ 1927 are made only against attorneys or other persons
authorized to practice before the courts while an award made
under the court's inherent power may be made against an attorney,
a party, or both." Oliveri v. Thompson, 803 F.2d 1265, 1273 (2d
Cir. 1986). In this circuit, the Court may impose § 1927 or inherent-power
sanctions only if there is "clear evidence that (1) the offending
party's claims were entirely without color, and (2) the claims
were brought in bad faith that is, motivated by improper
purposes such as harassment or delay." Eisemann v. Greene,
204 F.3d 393, 396 (2d Cir. 2000). "The test is conjunctive and
neither meritlessness alone nor improper purpose alone will
suffice." Sierra Club v. U.S. Army Corps of Eng'rs,
776 F.2d 383, 390 (2d Cir. 1985). While Rule 11 permits sanctions when a
pleading or paper is interposed for an improper purpose or
without sufficient grounding in fact or law, see Eastway
Constr. Corp. v. City of New York, 762 F.2d 243, 254 (2d Cir.
1985), Section 1927 and inherent-power sanctions require clear
evidence of both. See Schlaifer Nance & Co. v. Estate of
Warhol, 194 F.3d 323, 336 (2d Cir. 1999).
A sanctions award is a powerful weapon in the Court's arsenal.
District courts must tread carefully in this area, lest they
"stifle the enthusiasm or chill the creativity that is the very
lifeblood of the law." Motown Prods., Inc. v. Cacomm, Inc.,
849 F.2d 781, 785 (2d Cir. 1985). In particular, § 1927, a "statute
with a punitive thrust," must be "strictly construed," Cresswell
v. Sullivan & Cromwell, 922 F.2d 60, 70 (2d Cir. 1990), and
"inherent powers must be exercised with restraint and
discretion." Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991). II. WOLIN'S ARGUMENTS IN SUPPORT OF SANCTIONS
A. Misrepresentations to the Court
Wolin's first argument is that Coudert made repeated
misrepresentations to the Court during this litigation. The Court
is sympathetic. At the ex parte TRO hearing, Coudert failed
to disclose correspondence between Wolin and Set Top's counsel
tending to show that Wolin had protected PEWC's interests by
pursuing a buy-back agreement with Set Top. In a July 19, 2004
letter to the Court, Mr. Belowich of Coudert stated unequivocally
that "a final settlement has not yet been reached between
Plaintiffs and Set Top," even though the parties had already
signed and amended a settlement agreement. While there is no
question that it is bad faith to egregiously mislead a Court,
particularly with respect to an ex parte TRO, Agee v.
Paramount Communications, Inc., 869 F. Supp. 209, 211 (S.D.N.Y.
1994), the Court finds that the behavior of the Coudert
attorneys, without more, is not enough to justify a sanctions
award that flows from Plaintiffs or Coudert to Wolin.
The Court is in no way excusing Coudert's conduct. At the Order
to Show Cause hearing, the Court made it very clear that the
withheld letters should have been disclosed at the TRO hearing.
(See Tr., Dec. 16, 2003 Hrg. at 52-53). The attorneys
apologized, and the Court did not mention the incident again. The
July 19, 2004 letter from Mr. Belowich, which stated that a "final settlement" had not been reached, also was problematic.
While it is true that a settlement agreement had been signed and
amended, a stipulation of discontinuance had not been filed. The
issue boils down to how one defines the phrase "final
settlement." Though the Court is not inclined to believe that the
letter was "fully accurate" and "in no way misleading," the
letter does not seem to be an egregious misrepresentation.
Suffice it to say that in future communications with this or any
other Court, Mr. Belowich and his colleagues are advised to use
terms with precision and to steer clear of semantic gamesmanship.
B. Plaintiffs' Initiation of the Action Without Adequate
Basis and Pursuit of a Meritless Claim
In their original Complaint, Plaintiffs asserted RICO, fraud,
fiduciary duty and conversion claims against Wolin and several
other defendants. Wolin contends that Plaintiffs and Coudert had
evidence in their possession that squarely refuted these
allegations; for example, the missing letters. Wolin also claims
that Plaintiffs sued him for malpractice without knowing what
advice he gave to Tung. (Wolin Joint Mem. at 22-23). Plaintiffs
protest their good faith and cite a host of reasons supporting
their belief that Wolin breached a duty of good faith to PEWC.
(Pl. Mem. in Further Supp. at 26-30).
Leaving aside the malpractice claim for a moment, the Court
concludes that a sanctions award based on the withdrawn RICO,
fraud, fiduciary duty and conversion claims is not warranted. The parties stipulated less than two months into the
litigation that Plaintiffs would withdraw the claims. This
stipulation meant that Wolin avoided the task of bringing a Rule
11 motion as to all of the claims (which might have been
unsuccessful), and Plaintiffs were able to prosecute the
remaining malpractice claim. Both sides having benefitted from
the bargain, the Court declines to find bad faith on Plaintiffs'
side, particularly when the bargain was struck relatively quickly
without the need for Court-ordered relief.
The sanctions cases cited by Wolin do not help his cause
because they involve plaintiffs who repeatedly asserted frivolous
claims despite warnings from the court that the claims were
groundless. In Lazzarino v. Kenton Associates, Ltd.,
998 F. Supp. 364 (S.D.N.Y. 1998), the district court dismissed the
complaint as lacking in specificity, only to have the Plaintiff
file an amended complaint with almost identical allegations.
Id. at 366. In In re 60 East 80th Street Equities, Inc.,
218 F.3d 109 (2d Cir. 2000), the Court of Appeals affirmed the
district court's sua sponte imposition of § 1927 sanctions on
an attorney for maintaining a frivolous appeal of a bankruptcy
court decision, despite a warning from that court that his claim
was meritless, and for directing "totally unsubstantiated abusive
and slanderous statements" at his opponent and the bankruptcy
court in his brief. Id. at 116-17. Finally, in Tedeschi v.
Smith Barney, Harris Upham & Co., 579 F. Supp. 657 (S.D.N.Y. 1984);
aff'd 757 F.2d 465 (2d Cir. 1985) (per curiam), Judge Weinfeld
sanctioned plaintiffs for launching a suit "intended as an in
terrorem force upon the defendants after neither party had
prevailed in [an] arbitration claim." Id. at 661. Most
egregious was a treble-damages claim of attorney misconduct under
Section 487 of the New York Judiciary Law. Judge Weinfeld, citing
Rule 11, warned the plaintiff that the claim was frivolous, but
the plaintiff declined to withdraw the claim. Id. at 662. All
of these cases are distinguishable from the instant case because
Plaintiffs withdrew their non-malpractice claims as soon as Wolin
threatened to bring a Rule 11 motion, and these claims did not
appear in subsequent versions of the complaint.
The malpractice claim presents a different issue because
Plaintiffs prosecuted this claim to the bitter end. While Wolin
is correct that the allegations in the complaint are scanty for a
$100 million malpractice claim, and the evidence in the record
tends to lean in Wolin's favor, the Court cannot say for certain
that Plaintiffs vexatiously multiplied the Court's proceedings by
pressing forward with a meritless claim. First of all, Wolin
never moved for a dismissal of the malpractice claim in the
Amended Complaint under Fed.R.Civ.P. 12(b)(6) or 12(c), nor
did he file a Rule 11 motion. While the Court is not suggesting
that Wolin conceded anything by answering rather than moving for dismissal, his decision signaled a clear acceptance
that the malpractice claim would be going to discovery. Wolin
then agreed to a withdrawal of the claim with prejudice before
the final, and most critical, set of depositions. One of the
depositions would have been Tung's. In arguing that Plaintiffs
had no intention of going to trial, Wolin notes that Plaintiffs
canceled Tung's deposition even though Wolin's advice to Tung
"was necessarily at the heart of any serious malpractice claim."
(Wolin Joint Mem. at 23). True enough, but without Tung's
testimony, the Court is dealing with an incomplete record. The
Court cannot assume that the testimony of Tung or the other
Taiwan deponents would have shown conclusively that the
malpractice claim was colorless. While the evidence on record was
certainly heading in that direction, the rest is speculation.
Wolin argues that the Plaintiffs were responsible for the final
depositions not taking place. Also true, but Plaintiffs had no
authority to "cancel" depositions unilaterally. Their doing so
violated a clear order, and the Court in its March 11, 2005 Order
took Plaintiffs' counsel to task for this action. Pac. Elec.,
2005 WL 578916 at *5 ("As a general rule, it is good form for
attorneys to contact the Court before disregarding one of its
directives."). In that Order, the Court directed the remaining
depositions to take place within three months. Id. at *16. The
Court notes that at the time Coudert informed Wolin that the depositions were cancelled, Wolin did not seek immediate
relief from the Court, nor did he file a motion to compel
pursuant to Fed.R.Civ.P. 37(a).
Prim v. Peatco Ltd. L.P., No. 90 Civ. 7272(LAP), 1994 WL
570754 (S.D.N.Y. Oct. 17, 1994) (Preska, J.), cited by Wolin,
actually demonstrates that sanctions are not appropriate in the
instant case. In Prim, the district court imposed sanctions
under § 1927 where plaintiff's counsel instituted the action
without adequate factual investigation or basis, reasserted
meritless allegations in an amended complaint and continued the
lawsuit even though discovery failed to support the claims. Id.
at *3-6. Again, the reassertion of baseless allegations is a
distinguishing point. Moreover, discovery had concluded in
Prim, allowing the district court to state unequivocally that
"discovery failed to produce any evidence in support of [the
plaintiffs' claims." Id. at *6. In the case at bar, a critical
phase of discovery was unfinished when the parties settled. The
Court simply is not in the position to make the unequivocal
finding, á la Prim, that discovery failed to produce any
evidence to support Plaintiffs' malpractice claim.
Accordingly, the Court is unable to agree with Wolin that
sanctions are warranted because of Plaintiffs' assertion of the
claims against him in the original complaint and their continued
assertion of the malpractice claim. C. Plaintiffs' Intention to Go to Trial
Wolin's next argument is that Plaintiffs initiated this action
without any intention of bringing it to trial. (Wolin Joint Mem.
at 23-24). If this were the standard for sanctions, many
attorneys would be poorer for it. Because of the Court's denial
of Plaintiffs' Rule 41(a)(2) motion, this case would have gone to
summary judgment motions and trial had the parties not settled.
Nor can it be argued that Plaintiffs did not pursue the case with
diligence. The Court points out that Plaintiffs opposed the
extension of the discovery deadline, granted by the Court, from
August 20, 2004 to October 4, 2004. There is no other evidence in
the record of dilatory tactics on the Plaintiffs' side. If
anything, Plaintiffs were too aggressive in achieving their goals
in this litigation, particularly in their communications with the
Wolin notes that Plaintiffs' Rule 30(b)(6) witnesses were
unprepared to state the basis of the $100 million malpractice
claim; that Plaintiffs' counsel never questioned him during
deposition about his advice to Tung; and that Plaintiffs had not
retained an expert as of three weeks prior to the close of
discovery. (Wolin Joint Mem. at 23). Even if true, these facts do
not conclusively demonstrate a complete unwillingness to go to
trial from the outset. The first two arguments go to the weight
of the evidence in an incomplete record. As for the third, it is true that Plaintiffs had not hired an expert when
the parties appeared for a conference before the Magistrate on
September 13, 2004. It is also true under New York law that in
order to show negligence in a malpractice action, "unless the
ordinary experience of the fact-finder provides sufficient basis
for judging the adequacy of the professional service . . . or the
attorney's conduct falls below any standard of due care . . .
expert testimony will be necessary to establish that the attorney
breached a standard of professional care and skill." Greene v.
Payne, Wood & Littlejohn, 197 A.D.2d 664, 666, 602 N.Y.S.2d 883,
885 (2d Dep't 1993).*fn6 Magistrate Judge Peck gave the
Plaintiffs another week to hire an expert. (Tr., Sep. 13, 2004
Hrg. at 11). If Plaintiffs failed to do so, a summary judgment
grant dismissing the malpractice claim would have been a very
strong possibility. See, e.g., Sitts v. United States,
811 F.2d 736, 742 (2d Cir. 1987). Nevertheless, Wolin has cited no
precedent, and the Court can find none, to support the
proposition that failure to hire an expert in a malpractice case
leads inevitably to § 1927 or inherent-power sanctions where
there has not been a summary judgment order, or some other
disposition on the merits. D. Unnecessary Multiplying of Proceedings
Wolin argues that Plaintiffs unnecessarily multiplied the
proceedings by canceling depositions, delaying their Rule
41(a)(2) motion, and continuing the case against Wolin after the
Set Top settlement in July 2004. (Wolin Joint Mem. at 24). As to
the first point, both sides initiated requests for discovery
extensions during this litigation. The issue of the canceled
Taiwan depositions already have been covered in this Order. As to
the second, Plaintiffs acquired the Set Top shares on September
15, 2004; they made their Rule 41(a)(2) motion on September 23,
2004. This was not undue delay. If Wolin is suggesting that the
motion should have been brought in July 2004, the Court tends to
agree, but failure to bring a Rule 41(a)(2) motion is not a
sanctionable offense. The Court reiterates: Wolin never brought a
Rule 12(b)(6) motion for dismissal, a Rule 12(c) motion for
judgment on the pleadings, or a Rule 11 motion. The Court is not
inclined to hear complaints now that discovery was too expensive
and went on for too long.
E. The Texas Bar Grievance
Finally, Wolin argues that Plaintiffs improperly filed a
grievance with the Texas bar over a mere discovery dispute. As
explained supra on page 8, the dispute came about as the result
of the dispute between the PEWC factions. It appears at present
that the grievance is under consideration with the Texas Bar. There it will remain. It would be unseemly for the Court to find
that the grievance was filed in bad faith, only to have the Texas
State Bar come to the opposite conclusion.
For the foregoing reasons, the Court declines to sanction
Plaintiffs or Coudert under 28 U.S.C. § 1927 or inherent power.
The motion is denied. This case is closed and the Court directs
the Clerk to remove it from the active docket.
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