Sixth Circuit Affirms §1927 Sanctions on Plaintiff’s Attorney for Maintaining Untimely ADA Lawsuit Where Plaintiff Failed to Notify EEOC of Changed Address

Yesterday, the Sixth Circuit affirmed sanctions against a plaintiff’s attorney under §1927 in the amount of $25,995.32 for pursuing an ADA lawsuit that was not filed until more than nine months after the EEOC mailed his client its right-to-sue letter.  Carter v. Hickory Healthcare, Inc. No. 17-4199 (6th Cir. 9-27-18).  The plaintiff had notified the OCRC of her change of address, but had failed to similarly notify the EEOC. Thus, when the EEOC finally mailed her RTS letter, it was sent to her former address and her attorney did not discover this mistake for months.  The Court rejected a tolling argument based on the EEOC’s failure to mail a copy to her attorney (whose address had not changed). “It thus is not true that “a failure by the EEOC to copy counsel on a right-to-sue letter prevents the ninety-day period from running.”  Ball v. Abbott Advert., Inc., 864 F.2d 419, 421 (6th Cir. 1988).”

According to the Court’s opinion, the plaintiff had filed her Charge of Discrimination six years earlier in 2007 with the Ohio Civil Rights Commission and it was dual filed with the EEOC.  The OCRC ultimately found in 2013 that she had been subject to unlawful discrimination when she was terminated for refusing to monitor client smoking breaks that aggravated her asthma after previously notifying the defendant employer of her medical condition, which it had accommodated until she was assigned a new supervisor.   While the OCRC processed her dual-filed charge, the plaintiff had moved, had notified the OCRC of her change of address, but failed to similarly notify the EEOC.  Although her attorney requested that the EEOC issue her a RTS letter, he apparently similarly failed to notify the EEOC of her new address.  The EEOC mailed the RTS letter to her former address and this was not discovered by her attorney for approximately six months, even though the statute of limitations to file an ADA action is 90 days after the RTS letter has been issued.  The 90 days begins to run on the fifth day after the EEOC mails the RTS.  

[A] judge may impose sanctions under § 1927 when a lawyer objectively “falls short of the obligations owed by a member of the bar to the court.”  Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006) (quotation omitted).  The lawyer need not have “subjective bad faith” but must act with “something more than negligence or incompetence.”  Id.  A court may impose the sanction if an attorney “abuses the judicial process or knowingly disregards the risk” that he will needlessly multiply the proceedings.  Id.  Maintaining a clearly time-barred lawsuit constitutes a classic example of conduct that warrants a sanction.  See, e.g., Davis v. Bowron, 30 F. App’x 373, 376 (6th Cir. 2002).

The Court rejected the argument that the employer defendant failed to mitigate its expenses by waiting to file a summary judgment motion instead of a motion to dismiss soon after the Complaint was filed.  The defendant employer’s attorneys had notified the plaintiff’s attorney in writing that the lawsuit was clearly untimely and so the attorney’s liability began upon the receipt of that letter.   Interestingly, the district court denied the employer’s Motion for Rule 11 sanctions and that decision was not appealed.

The Court similarly rejected the plaintiff’s argument that her notification to the OCRC of her new address should have been sufficient after the OCRC informed her that it would share information with the EEOC because the EEOC rules clearly provide that it must be provided with separate notice. 29 C.F.R. § 1601.7(b).  While her mistake was understandable, it was not excusable.  She could have, for instance, inquired much earlier about why she had not received the RTS notice.

The Court also rejected the attorney’s argument that he thought that equitable tolling would apply to suspend the 90 days due to the mistaken address and the EEOC’s failure to also send him a copy of the RTS letter when it was mailed to his client’s former address.

But these arguments were leaky at best, frivolous at worst.  That a regulation required the Commission to send some types of attorneys a copy of the right-to-sue letter does not justify equitable tolling.  The regulation applies only to public sector claims, not private sector ones like Carter’s.  See 29 C.F.R. §§ 1614.103(b), 1614.605(d).  It thus is not true that “a failure by the EEOC to copy counsel on a right-to-sue letter prevents the ninety-day period from running.”  Ball v. Abbott Advert., Inc., 864 F.2d 419, 421 (6th Cir. 1988).

Much of the opinion discusses the appropriate standard of review of a Magistrate recommendation and appellate jurisdiction.  Neither party raised this on appeal.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney. 

Franklin County Court of Appeals Affirms $19.6K Award Against Employer for Pursuing Frivolous Claim Against Employee

Last week the Franklin County Court of Appeals upheld an award of more than $19,500 in attorney’s fees and costs against an employer under R.C. 2323.51 for continuing with a lawsuit against a former employee after it should have been apparent that the lawsuit lacked merit. Bartelt Dancers, L.L.C. v. Icenhour, 2013-Ohio-5604.   Notably, the trial court did not find that the lawsuit lacked merit when it was filed.  However, after the employee’s attorney pointed out the flaws with the employer’s legal theory and lack of factual basis, the employer was obligation to investigate further instead of just continuing with the lawsuit.  The employer’s misconduct was exacerbated because it never made a settlement demand upon the employee and, at the preliminary injunction hearing, it focused only on the other defendant and never produced any evidence against the employee (who was an employee of the other defendant).   The Court also noted that the award of fees and costs was proper even though the employer dismissed the entire lawsuit soon after losing the preliminary injunction hearing and the employee’s attorney filed the motion for costs and fees.

According to the Court’s opinion, the employee resigned his employment and went to work for a former co-worker about 6 months after she formed a competing dance instruction studio.  About six months after that, the employer initiated legal action, including “claims for breach of contract, unfair competition, breach of fiduciary duty, and misappropriation of trade secrets and confidential information (the student list)” taken by the co-defendant.  The employee’s attorney pointed out, among other things, that the student list had not been confidential.  Although the employer’s attorney agreed that the employee was primarily a witness instead of a party, he did not dismiss the claims against her.   The employer also failed to obtain any witnesses to testify against the employee at the hearing.

 

The trial court in this case imposed sanctions under R.C. 2323.51(B), which allows the trial court to sanction a party, counsel, or both for engaging in frivolous conduct in the course of litigation. The statute defines frivolous conduct to include conduct that "consists of allegations or other factual contentions that have no evidentiary support or, if specifically so identified, are not likely to have evidentiary support after a reasonable opportunity for further investigation or discovery." R.C. 2323.51(A)(2)(a)(iii). "Under this definition of 'frivolous conduct,' the test is whether no reasonable attorney would have brought the action in light of the existing law."

 The employer’s conduct was frivolous because the employer and its attorney knew that it lacked a legal basis to continue the lawsuit against the employee.  By failing to dismiss the lawsuit, the employee

and her attorney had to prepare for and attend a preliminary injunction hearing where Plaintiff presented no evidence of any kind against her. Plaintiff and its counsel, based on the failure to secure or talk to witnesses and the one sided settlement offer to Icenhour, knew that they were not going to proceed against [the employee].

“[T]he frivolousness of appellants' conduct lies not in filing the original complaint, but rather in declining to timely dismiss it after failing to prosecute the action.”

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Provides Guidance for Imposing Attorney Fees on Unsuccessful Plaintiffs Who Bring or Pursue Frivolous Employment Claims.

Today, the Sixth Circuit affirmed in part and remanded in part a federal court sanction which imposed joint and several liability upon the plaintiffs’ attorney and eight unsuccessful plaintiffs who pursued discrimination and wrongful discharge claims against their former supervisors and managers at the Cuyahoga County Juvenile Court. Garner v. Cuyahoga County Juvenile Court, No. 07-3602. The Sixth Circuit agreed with the district court’s analysis of the merit of the plaintiffs’ claims and affirmed the award of $69,345 in Rule 54 costs, but remanded the $660,103 attorney fee award so that the district court could articulate how the fees should be re-allocated in consideration of (i) each plaintiff’s respective ability to pay; (ii) the admission of the plaintiffs’ attorney that she was primarily responsible for prosecution of the frivolous claims; (iii) the potential conflict of interest between the plaintiffs’ and their attorney on this issue; (iv) each plaintiff being responsible for their own claims and not for the prosecution or defense of other plaintiffs’ claims; and (v) the point in time when each plaintiffs’ claim became frivolous and should have been dropped. Most saliently, the Court found it inappropriate to impose joint and several liability for the fee sanction when there were factual differences in the claims and the plaintiffs’ attorney had admitted her primary responsibility for prosecuting the frivolous claims.

According to the Court’s opinion, the discrimination and wrongful discharge claims of fourteen plaintiffs had been consolidated into one lawsuit and all of them were dismissed on summary judgment in a 250-page opinion. Some of the claims were dismissed because the plaintiff failed to present evidence to substantiate each element of the prima facie case (i.e., the “no evidence plaintiffs”) and some were dismissed because the plaintiff could not show that the defendants’ non-discriminatory/retaliatory explanation was pretextual (i.e., the “insufficient evidence plaintiffs”). After the dismissal of the case, the defendants filed a bill of costs under Civil Rule 54 in the amount of $69,345 (for, among other things, deposition transcripts, witness fees, copies). The defendants then moved for reimbursement of their $664,885 in attorneys fees from the plaintiffs on the grounds that the claims were frivolous under 42 U.S.C. § 1988. Defendants also sought sanctions against the plaintiffs’ attorneys under “28 U.S.C. § 1927, [Civil Rule] 11 .. , Ohio Revised Code § 2323.51, and the court’s inherent authority.”

The district court awarded costs to the Defendants and imposed joint and several liability against all of the plaintiffs. In granting the defendants’ fee motion for $660,103 in fees, the district court did not impose any fee sanctions upon the insufficient evidence plaintiffs or under Civil Rule 11, but held that the remaining claims were frivolous, should not have been pursued at all (and certainly not beyond the close of pre-trial discovery) and justified sanctions against eight of the plaintiffs and their attorney on a joint and several liability basis. The Sixth Circuit agreed with the district court’s analysis of the merits of the plaintiffs’ claims, affirmed the award of Rule 54 costs, and affirmed that the plaintiffs’ attorney could be liable for fees under § 1927, but remanded the attorney fee award so that the district court could reconsider and articulate how the fees should be re-allocated.

As an initial matter, the Sixth Circuit “conclude[d] that the district court erred in holding each employee jointly and severally liable with respect each other’s claims, as opposed to individually liable, for attorney fees under 42 U.S.C. § 1988. While “[t]he employees here all shared a disparate-impact claim involving common allegations about the CCJC’s employment practices, . . . this lone claim does not justify imposing the entire fee award jointly and severally among all of the employees in this case. Most of the individual employees’ claims are in fact unrelated. The disparate treatment claims, for example, do not share a common factual nexus. And the retaliation claims similarly involved different allegations unique to each employee. Indeed, the employees’ respective claims were sufficiently distinct that the district court decided to issue individual summary judgment orders against each one.”

The Court also remanded the sanction award so that the district court could better articulate how the fee sanction should be allocated in light of each plaintiff’s ability to pay. While the court agreed that each plaintiff bore the burden of proving an inability to pay their share of the sanction, “[w]e are nevertheless troubled by the district court’s failure to explain why the salary information provided to the court was insufficient to establish the employees’ inability to pay. In particular, the court itself recognized, in the portion of its order addressing costs, that the employees had “modest incomes” averaging about $35,000 per year. We are therefore puzzled as to why this information was not addressed in the portion of the court’s order discussing the calculation of attorney fees . . . The district court’s obligation to “explain its reasoning adequately” exists irrespective of which party bears the burden of persuasion to demonstrate an inability to pay.”

The Court also remanded so that the district court could explain when the sanctions began to accrue. “The parties disagreed during oral argument as to whether the attorney fees improperly included legal work done before the completion of discovery—i.e., the point in time at which the employees should have realized that their claims were frivolous and the lawsuit should have been voluntarily dismissed. Because the record is not clear on this issue, the district court should ensure on remand that the total attorney-fee award excludes fees incurred before the point in time when the individual employees should have known that their claims were frivolous. We presume that, for most of the employees, this point in time occurred at the close of discovery. But the district court should make a clear finding, for each of the individual employees, to determine whether this presumption is correct.”

Finally, the Court also remanded so that the district court could consider re-allocating a greater portion of the fee sanction against the plaintiffs’ attorney. “Our review of the record suggests that the fault for bringing the groundless claims in this case lies principally with Attorney Frost and not with her clients. Indeed, Frost graciously conceded during oral argument that, if there is anyone to blame for the litigation, she should be the one and not her clients. Frost’s concession tempts us to simply instruct the district court to reverse the imposition of any liability against her clients under § 1988.” However, because clients selected the attorney to be their agent, they remain responsible for the actions of their attorney. Moreover, the court did not want the Defendants to lose their ability to recoup their fees in the event that the attorney became insolvent.

In affirming the frivolous nature of the no-evidence plaintiff’s claims as a sufficient basis for imposing sanctions, the Sixth Circuit rejected the plaintiff’s arguments that the CCJC had previously lost a discrimination claim and there was some evidence to support the claims of the insufficient evidence plaintiffs. The court rejected the plaintiffs’ arguments because the no-evidence plaintiffs failed to “establish[] a clear nexus between themselves” and the prima facie evidence of the insufficient evidence plaintiffs and ruling in their favor “would encourage frivolous “me-too” claimants to piggyback on the nonfrivolous claims of legitimate plaintiffs.” The court also refused to permanently bar every “employer who has lost a discrimination claim . . . from recovering attorney fees against subsequent frivolous claimants” because the plaintiffs failed to “present[] relevant evidence deriving from [the] prior successful jury verdict against the CCJC.”

Insomniacs can read the full court opinion at