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Robert E. Wilson, Iii v. Citigroup

December 26, 2012

ROBERT E. WILSON, III,
PLAINTIFF, LANGROCK SPERRY & WOOL, LLP, AND LANKFORD & REED, PLLC, APPELLANTS,
v.
CITIGROUP, N.A., FKA CITIBANK, N.A., INTERNATIONAL EQUITY INVESTMENTS, INC., CITIGROUP VENTURE CAPITAL INTERNATIONAL BRAZIL, LLC, CITIGROUP VENTURE CAPITAL INTERNATIONAL BRAZIL, LP, DEFENDANTS-APPELLEES, DANIEL VALENTE DANTAS, OPPORTUNITY EQUITY PARTNERS, LTD., OPPORTUNITY EQUITY PARTNERS, L.P., OPPORTUNITY INVEST II, INC., OPPORTUNITY HARVEST II, INC., DEFENDANTS.



Per curiam.

11-5085

Langrock Sperry v. Citigroup

(Argued: December 11, 2012

Before KATZMANN, PARKER and WESLEY, Circuit Judges.

Appellants Langrock Sperry & Wool, LLP and Lankford & Reed, PLLC (collectively, "Langrock") appeal from the September 13, 2011 Order of the United States District Court for the Southern District of New York (Batts, J.), requiring Langrock to pay certain fees and costs incurred by Defendants-Appellees Citigroup, N.A., International Equity Investments, Inc., Citigroup Venture Capital International Brazil, LLC, and Citigroup Venture Capital International Brazil, LP (collectively, "Citigroup") in connection with this action, and from the October 19, 2011

Memorandum Endorsement denying Langrock's request for reconsideration and ordering that payment be made "promptly." Specifically, the district court ordered Langrock to pay $24,398.83 in attorneys' fees and costs to Citigroup as a sanction for filing opposition papers to Citigroup's motion to dismiss four days late, despite the fact that Langrock submitted a timely request for an extension of the filing deadline that the court later determined was supported by good cause. We hold that the district court abused its discretion by imposing a sanction of attorneys' fees without explicitly finding that Langrock acted in bad faith, and by sanctioning Langrock without affording the attorneys prior notice and an opportunity to be heard. Accordingly, the orders of the district court are REVERSED.

This case requires us to determine whether a district court abuses its discretion by ordering attorneys to pay their adversaries' legal fees and costs as a sanction for filing opposition papers four days late where the district court does not find that the attorneys acted in bad faith, and does not provide the attorneys notice of the impending sanctions or an opportunity to be heard. We conclude that it does.*fn1

BACKGROUND

On March 21, 2011, plaintiff Robert E. Wilson III filed a complaint in the district court alleging that various defendants wrongfully denied him participation in the distribution of large profits from an investment strategy and portfolio in Brazilian companies. Wilson is a shareholder in defendant Opportunity Equity Partners LTD ("Opportunity") -- an investment company incorporated in the Cayman Islands and principally doing business in Brazil. His complaint also names as defendants an officer of Opportunity, several entities affiliated with Opportunity (collectively, the "Opportunity Defendants"), as well Citigroup N.A. and several of its corporate affiliates (collectively, "Citigroup"). See Complaint, Wilson v. Dantas, No. 11 Civ. 1936 (S.D.N.Y. Mar. 21, 2011). Wilson is represented by attorneys from two law firms, Appellants Langrock Sperry & Wool, LLP and Lankford & Reed PLLC (collectively, "Langrock"). On June 24, 2011, Citigroup moved to dismiss the Complaint. Thereafter, Langrock contacted Citigroup's counsel, Cleary Gottlieb Steen & Hamilton LLP ("Cleary"), in order to seek an extension of the July 11, 2011 deadline to file opposition papers to the motion. Cleary agreed. Accordingly, on July 7, 2011, Langrock filed electronically a "Stipulation and Order" signed by counsel for both parties, which purported to extend Langrock's deadline to file opposition papers until July 28, 2011 and give Cleary a corresponding extension of its deadline to file reply papers. The document did not contain any explanation of the need for the extensions, other than that both parties consented to them. Later that day, the Clerk's Office of the Southern District of New York notified Langrock that its filing had been rejected because the local rules prohibit the filing of stipulations via the electronic case filing system ("ECF"). Accordingly, Langrock e-mailed the document to the Clerk's Office the next day, Friday, July 8, 2011. That same day, the district court denied the Stipulation and Order by simply writing "Denied" on the document and filing it. The next business day, Monday, July 11, 2011 -- i.e., the day Wilson's opposition papers were due -- Terrence Reed, an attorney at one of the Appellants, faxed a letter to the district court reiterating Langrock's request for an extension. Reed also provided the following reasons for the extension request:

I am currently scheduled to commence a trial as lead trial counsel before Judge Koeltl on Monday July 18th wherein I represent the plaintiff Republic of Benin. My pretrial responsibilities include witness and exhibit preparation and related travel to New York for discussions with Benin's UN officials, responding to last minute requests to modify the pretrial order, and an as yet unscheduled pretrial conference. In addition, I am lead trial counsel for plaintiff in Office of Strategic Services v. Sadeghian, No. CA 1:11-cv-0185- CMH (E.D.Va.) wherein I have conducted, or will conduct eight depositions, including four party depositions, since June 30th, participated in a July 8th hearing from which an order issued compelling defendants to produce substantial additional discovery which must be completed by the July 15th discovery deadline except for the production of a supplemental expert report on the 20th based upon the new discovery, and must complete and exchange all trial exhibit and witness designations for a final pretrial conference on the 21st. I have had other professional obligations to other clients since the filing of defendants' brief on June 24th.

Attorney Peter Langrock, plaintiff's co-counsel had a variety of court appearances in State and Federal Court in Vermont as well as depositions in New Hampshire the week of June 27 and from July 6th through July 14th. Mr. Langrock has been attending the Annual Meeting of the National Conference of Commissioners on Uniform State Laws in Colorado, in his capacity as a Commissioner for Vermont. Attorney Erin Heins, of Mr. Langrock's firm, was out of state from June 25 to July 4th.

App'x 22-23.

The district court did not immediately respond to Reed's letter. On July 15, 2011 -- four days after its original filing deadline -- Langrock filed its opposition to Citigroup's motion to dismiss, along with a motion for leave to file the untimely brief. Two months later, on September 13, 2011, the district court issued an Order granting Langrock's motion to file untimely opposition papers. In this Order, the court explained that it had denied the parties' initial request for an extension because the accompanying Stipulation and Order "did not show good cause for the Court to grant an extension." Nevertheless, the court concluded that "the scheduling conflicts described in the letter submitted [by Reed] on the actual [filing] deadline provide good cause for the grant of an extension." However, to cure "any prejudice caused by allowing Plaintiff to file an opposition out of time," the court also required "Counsel for Plaintiff to pay the Citibank Defendants' reasonable fees and costs incurred in preparing their Reply to Plaintiff's Opposition." Finally, the court ordered Citigroup to "file [its] reply, if any, within 14 days of the date of this order" and to "provide the Court and [Langrock] with an accounting of their reasonable fees and costs incurred in preparing the Reply, which [Langrock] will promptly pay."

Citigroup timely filed its reply brief on September 27, 2011, and, on October 7, 2011, submitted an accounting of $24,398.83 in fees and costs incurred in preparing that brief. On October 13, 2011, Langrock submitted a letter to the district court objecting to the type and magnitude of the sanction and requesting reconsideration of the sanctions order. App'x 36 (stating that it is "Plaintiff's position that a $24,398.83 sanction is excessive under the circumstances and is not warranted"). In response, on October 17, 2011, Citigroup submitted a letter demanding prompt payment of ...


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