The opinion of the court was delivered by: Seybert, District Judge:
On November 2, 2010, the Court: (i) denied Defendants' motion to dismiss; (ii) enforced a Settlement Agreement against Defendants; and (iii) ordered Defendants to show cause why they shouldn't be sanctioned under FED. R. CIV. P. 11 ("Rule 11"), 28 U.S.C. 1927 ("Section 1927"), and/or otherwise held in contempt for advancing frivolous legal arguments in connection with the denied motion to dismiss. See 2010 WL 4568980, 2010 U.S. Dist. LEXIS 117091. Both Plaintiffs and Defendants have responded to this Order to Show Cause.
For the reasons discussed below, the Court holds that Defendants' counsel violated Rule 11. Having considered possible remedies, the Court finds that monetary sanctions directed against Defendants' counsel are the most appropriate response. Accordingly, the Court holds Defendants' counsel jointly and severally liable in the amount of $4,900.
The Court presumes familiarity with the underlying facts. In brief, Defendants moved to dismiss on the grounds that the Court lacked continuing jurisdiction to enforce a Stipulation of Settlement ("Settlement Agreement") that the parties entered into on September 20, 2004. Defendants did so even though that Settlement Agreement provided, in part, that:
19. The parties hereby agree that the United States District Court for the Eastern District of New York shall retain jurisdiction over the Litigation for the purpose of enforcing, if necessary, the [Settlement Agreement] and that Such Court shall have exclusive jurisdiction over the Litigation for that purpose.
20. The parties hereby agree that in the event of the failure on the part of either Plaintiffs or Defendants to comply with any of the terms and conditions herein, upon ten business days' written notice to the allegedly non-complying parties . . . during which period the allegedly non-complying parties will have the opportunity to cure any noticed violation or default hereunder to the extent such cure is possible, the parties alleging such default or violation may apply to the United States District Court for the Eastern District of New York to enforce this [Settlement Agreement]. Upon demonstrating to the Court that the allegedly non-complying parties have violated the terms of this [Settlement Agreement], the complaining parties will be entitled to temporary, preliminary and permanent injunctive relief and to recover, in addition to their actual damages and the non-complying parties' profits from such violation, their costs and expenses. The prevailing parties in any such action shall be entitled to their reasonable attorney's fees.*fn1
Defendants contended, before both Magistrate Judge Wall and myself, that these words -- which they agreed to and the Court expressly "so ordered" -- lacked any meaning, because the "so ordered" Stipulation of Dismissal somehow failed to incorporate the Settlement Agreement. Docket No. 47-1 at p. 4; Docket No. 55 at p. 10. In so arguing, Defendants argued that the following words were insufficient to incorporate the Settlement Agreement:
[The parties] having entered into a Stipulation of Settlement and Order that has been 'so ordered' by this Court, and Defendants having timely paid the Settlement Payment pursuant to such Stipulation of Settlement and Order, IT IS HEREBY STIPULATED AND AGREED by and between Plaintiffs and Defendants, by their undersigned counsel, that the [Litigation] be dismissed with prejudice to all parties, with each party to bear its own costs and attorney fees. (emphasis supplied)
Judge Wall rejected this argument,*fn2 and I ordered Defendants to show cause why they shouldn't be sanctioned for making it.
DISCUSSION I. Form of Sanctions
The Court's Order asked Defendants to show cause why
they shouldn't be sanctioned under Rule 11, 28 U.S.C. § 1927, and/or the Court's inherent power to hold parties and attorneys in contempt. After some consideration, the Court finds that Rule 11 is the most appropriate vehicle to address Defendants' conduct. Additionally, the Court finds that sanctions, if appropriate, should be directed only against Defendants' counsel, not Defendants. Below, the Court briefly explains why.
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." Here, however, the Settlement Agreement already entitles Plaintiffs to their costs, expenses, and reasonable attorney's fees. See supra at 3. And, based on that entitlement, the Court has already ordered Defendants "to reimburse Plaintiffs for their costs, expenses and reasonable attorneys' fees in reopening and prosecuting this action." 2010 WL 4568980 at *6; 2010 U.S. Dist. LEXIS 117091 at *17. So, even ...