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Garber v. Office of the Commissioner of Baseball

United States District Court, S.D. New York

February 27, 2017

FERNANDA GARBER, MARC LERNER, DEREK RASMUSSEN, ROBERT SILVER, GARRETT TRAUB, and VINCENT BIRBIGLIA, representing themselves and all others similarly situated, Plaintiffs,
v.
OFFICE OF THE COMMISSIONER OF BASEBALL, et al., Defendants.

          OPINION & ORDER

          VALERIE CAPRONI United States District Judge

         This sanctions proceeding stems from the filing of an objection (the “Hull Objection”) to the proposed class action settlement in this case.[1] Asserting that the Hull Objection was frivolous, Plaintiffs filed motions for sanctions pursuant to Federal Rule of Civil Procedure 11 against the objector, Sean Hull, and his counsel. Although the Rule 11 motions ultimately were withdrawn by stipulation, the Court held a hearing to consider whether to impose sua sponte Rule 11 sanctions upon Christopher Bandas of Bandas Law Firm, an attorney representing Hull. For the reasons discussed below, although the Court has grave concerns about Bandas' conduct in this matter, it will not sua sponte impose sanctions on Bandas.

         BACKGROUND

         On the last day that he was permitted to do so, Hull filed a class-settlement objection that was drafted by Bandas. The Hull Objection was frivolous for a variety of reasons. It asserted that the proposed settlement was not fair, adequate, or reasonable because it did not provide for monetary damages, ignoring Judge Scheindlin's decision to certify the class only for injunctive relief and Plaintiffs' counsel's unsuccessful interim appeal of that decision. Objection of Sean Hull (hereafter, “Hull Obj.”), at 4, Dkt. 538; Opinion and Order, Dkt. 430; Mandate, Dkt. 440; see also April 25, 2016, Transcript (“Fairness Hr'g Tr.”), at 8:3-12, 20:12-18, Dkt. 572. Bandas acknowledged that he had “no idea” whether there was any likelihood that the decision not to certify a damages class would have been reversed had Plaintiffs continued to pursue the case rather than settling. July 14, 2016, Transcript (hereafter, “Tr.”), at 43:7-45:4, Dkt. 596. The Hull Objection also asserted that the proposed attorneys' fees award was “excessive;” Hull's proposed fee award, however, would have resulted in a “very de minimis amount” of cash to be distributed to the class. See Hull Obj. at 69; Tr. at 54:6.[2] It further asserted that Hull was “a class member who has timely filed a claim, ” but, in fact, Hull had not filed a claim, as there was no procedure for filing a claim in this case. Hull Obj. at 2; see also Memorandum in Support of Plaintiffs' Motion for Sanctions Pursuant to Rule 11 of the Federal Rules of Civil Procedure (hereafter, “Rule 11 Br.”), at 2, Dkt. 558.

         It is undisputed that the Hull Objection was drafted by Bandas but was filed by local counsel, David Stein of Samuel and Stein, after Stein's associate conducted a “basic review.” Tr. at 4:3-10, 5:3-7, 8:1-5, 16:8-9; April 21, 2016, Letter (hereafter, “April 21 Letter”), Dkt. 547. After Plaintiffs threatened Rule 11 sanctions for the Hull Objection, Stein requested leave to withdraw his firm's representation of Hull because his firm did not have “sufficient confidence” in the Hull Objection and was not “sufficiently well-informed about the case.” April 21 Letter. Judge Scheindlin granted Stein's request to withdraw. April 21, 2016, Court Endorsement, Dkt. 549. Although Stein asked Bandas to withdraw the Hull Objection, Bandas informed Stein that Hull refused to withdraw the objection. April 21 Letter; Tr. at 5:20-6:1. Stein had no communications with Hull; rather, Stein communicated only with Bandas. April 21 Letter.[3]

         Several days later, Plaintiffs filed a Rule 11 Motion for Sanctions against Hull and Stein, claiming that the Hull Objection was frivolous and that its “only purpose is to interfere with the implementation of the settlement in order to extort a payment to drop the objection.” Rule 11 Br. at 1. Plaintiffs also informed the Court that they intended to request that Hull be required to post a $150, 000 bond if he appealed the order approving the class settlement. April 18, 2016, Letter, Dkt. 542. Judge Scheindlin held a fairness hearing, at which she approved the proposed class settlement and awarded attorneys' fees and costs. Fairness Hr'g Tr. at 45:4-54:17; see also Order Approving Class Settlement and Awarding Attorneys Fees and Costs (hereafter, “Settlement Order”), Dkt. 561. Among other things, Judge Scheindlin noted that although several class members objected to the settlement because it did not provide monetary compensation, “[a]s this class was certified for injunctive relief only, parties were not in a position to negotiate for damages.” Fairness Hr'g Tr. at 49:12-16. Though he had not yet been retained by any interested party, Forrest Turkish appeared telephonically but did not participate at the hearing. See Fairness Hr'g Tr. at 5:17-6:4.

         After the settlement was approved and while discovery and briefing relating to the Rule 11 motion was proceeding, the case was reassigned to the Undersigned. Because Stein no longer represented him, Hull himself submitted a letter “to advise the Court of [his] intent to respond substantively to class counsels' motion for sanctions.” April 25, 2016, Letter (hereafter, “Hull Letter”), at 1, Dkt. 570. Although Hull's letter was labeled as pro se, it stated that it was “prepared with the assistance of Christopher A. Bandas, of Bandas Law Firm, P.C., ” and it was transmitted by Bandas Law Firm. Hull Letter at 1; Reply Memorandum of Law in Support of Plaintiffs' Motions for Rule 11 Sanctions Against Serial Objectors Christopher Bandas, Sean Hull, and David Stein, Ex. 2, Dkt. 575-2. Bandas subsequently retained Turkish to defend the Rule 11 sanctions motion against Hull and to file a Notice of Appeal of the Order approving the settlement. Tr. at 25:19-26:8; Notice of Appeal, Dkt. 574.[4]

         Bandas drafted substantial portions of Hull's brief opposing sanctions, which Turkish reviewed and revised before filing. Tr. at 26:1-2, 28:16-29:5 (Turkish: “Most of [the opposition brief] was not drafted by me.”); see also Turkish Engag. Email at 1 (noting that as a term of Turkish's engagement, Bandas “will be preparing the substantive filings including the Motions.”). Turkish never spoke with Hull; all of Turkish's communications about the case were with Bandas. Tr. at 28:3-6.

         Plaintiffs then filed a Rule 11 Motion for Sanctions against Bandas, to which Bandas refused to respond. Bandas stated that he was “fully aware” of the Rule 11 motion against him, but that he “ignored” it. Tr. at 20:24-22:4. He reasoned that because he had not filed a notice of appearance, he was not before the Court and, therefore, was not sanctionable. Tr. at 20:23- 21:12.[5] Bandas acknowledged, however, that he represented Hull, drafted the Hull Objection as Hull's attorney, and also drafted Hull's opposition brief to the Rule 11 sanctions motion against Hull. Tr. at 18:16-20, 26:1-2, 28:16-29:5.

         During discovery on Plaintiffs' Rule 11 motions, Plaintiffs served Hull with a subpoena directing him to produce documents and appear for a deposition relating to, among other things, the Hull Objection and Hull's communications and agreements with Bandas. Subpoena, Dkt. 576-1. Turkish opposed Plaintiffs' request for documents and Hull's deposition, and the Court scheduled a conference call to resolve the objection. June 3, 2016, Discovery Letter (hereafter, “June 3 Letter”), Dkt. 576; June 6, 2016, Court Endorsement, Dkt. 579. Turkish joined the call late because he erroneously thought that the conference was the following day, and he was entirely unprepared to respond to the arguments that Plaintiffs had presented in a letter filed the day before the call. June 7, 2016, Tr. at 4:1-7, 9:14-10:20, Dkt. 606.[6] This Court ordered Hull to appear for a deposition, which occurred shortly thereafter. June 3 Letter; Order, Dkt. 580; Memorandum of Law on Behalf of Christopher Bandas, Esq. Submitted for the Limited Purpose of Responding to the Question Posed by the Court at the July 14, 2016, Hearing (hereafter, “Bandas Mem.”), at 3, Dkt. 59. Bandas, who was “assisted by” Turkish, “missed the deadline” to assert privilege objections to the subpoena's document requests. Bandas Mem. at 3. Plaintiffs then filed three motions: a letter motion to compel Hull to produce documents responsive to the subpoena, Dkt. 581; a motion for Hull to post an appellate bond, Dkt. 582; and a motion for sanctions against Turkish, Dkt. 583.

         In July 2016-three months after the initial Rule 11 sanctions motions were filed, and while the Rule 11 motions, the motion to compel, and the motion for an appeals bond were pending before this Court, and while the appeal of the Settlement Order was pending in the Second Circuit-Bandas, Turkish, Hull, and Plaintiffs' Class Counsel filed a stipulation that settled the Hull Objection in exchange for the withdrawal of the sanctions motions against Hull and his counsel. Stipulation to Withdraw the Objection of Sean Hull, To Withdraw Notice of Appeal & To Withdraw Plaintiffs' Motions for Sanctions Against Christopher Bandas, Sean Hull, David Stein, and Forrest Turkish (hereafter, “Stipulation”), Dkt. 587.[7] The Court ordered Plaintiffs' Class Counsel and Bandas, Stein, and Turkish to appear for a hearing to discuss why the Court should not sua sponte issue an Order to Show Cause why sanctions should not be imposed upon the attorneys who represented Hull. July 8, 2016, Court Endorsement, Dkt. 589. Following the hearing, Bandas submitted a brief regarding whether this Court has authority to impose sanctions against him. Bandas Mem.

         DISCUSSION

         Rule 11 of the Federal Rules of Civil Procedure governs the imposition of sanctions upon an attorney. An attorney who presents a filing to the court certifies that “to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, ” the filing is not presented for an improper purpose, the legal contentions are nonfrivolous and supported by existing law, and the factual contentions have evidentiary support. Fed.R.Civ.P. 11(b). “If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction.” Fed.R.Civ.P. 11(c)(1). To impose sanctions, sua sponte, the court may order an attorney to show cause why certain conduct has not violated Rule 11(b). Fed.R.Civ.P. 11(c)(3).

         Although the standard for imposition of sanctions initiated by an opposing counsel is a finding that the attorney's conduct was “objectively unreasonable, ” sua sponte sanctions initiated by the court “long after [the accused attorney or party] had an opportunity to correct or withdraw the challenged submission” may be imposed only upon a finding of subjective bad faith. In re Pennie & Edmonds LLP, 323 F.3d 86, 87, 91 (2d Cir. 2003); Muhammad v. Walmart Stores East, L.P., 732 F.3d 104, 108 (2d Cir. 2013). This is because the court's power to issue sua sponte sanctions is “akin to the court's inherent power of contempt.” Muhammad, 732 F.3d at 108 (discussing Pennie).[8] Courts in the Second Circuit have concluded that to find subjective bad faith, an attorney must “have actual knowledge that a pleading or argument that he or she is advancing is frivolous.” Braun ex rel. Advanced Battery Techss., Inc., v. Fu, No. 11-cv-4383(CM)(DF), 2015 WL 4389893, at *15 (S.D.N.Y. July 10, 2015) (emphasis in original); seealso Rivas v. Bowling Green Assoc., No. 13-cv-7812 (PKC), 2014 WL 3694983, at *2 (S.D.N.Y. July 24, 2014) (“Proof of actual knowledge, and not merely what a reasonable attorney should have known, is required.”). Negligence, even gross negligence, does not suffice. See Centauri Shipping Ltd. v. W. Bulk Carriers KS, 528 F.Supp.2d 197, ...


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