Sanctions
Case Analysis
Sept.
13, 2006
The
standard for what constitutes multiplying court proceedings “unreasonably
and vexatiously” under 28 U.S.C. 1927 has been stated in
many different ways.
Normally,
a court selects one of those definitions and applies it, as though
there were no question about the proper standard.
Here,
however, the court has recognized that it has not always used
the same language to state the test, and attempts reconciliation.
The effort is a welcome one; the question is whether the court
succeeds in its endeavor.
In
one respect, it does; the court settles that subjective bad faith
need not be shown.
However,
the court fails to reconcile, and perpetuates, disparity in what
constitutes “objective bad faith.” Much of this can
be attributed to the simple fact that “objective bad faith”
is an awkward term. “Bad faith” implies subjective misbehavior;
attaching the word “objective” to it is a poor fit.
Some
of the court’s decisions avoid the phrase altogether. In
Kapco Mfg. Co. v. C&O Enters., Inc., 886 F.2d 1485, 1494 (7th
Cir. 1989), for example, the court wrote, “Whether an attorney
is being sanctioned acted in [subjective] good faith is not material
if his conduct was objectively unreasonable (emphasis added).”
The
court in the case at bar quotes another statement from Kapco:
“If a lawyer pursues a path that a reasonably careful attorney
would have known, after appropriate inquiry, to be unsound, the
conduct is objectively unreasonable and vexatious (quoting Kapco,
at 1491).”
The
problem is that these statements sound like mere negligence. If
a person fails to act with care, and damages result, he is negligent;
if an attorney fails to act with appropriate care, and the result
is that he pursues a baseless legal theory, his conduct is sanctionable
as objectively unreasonable.
Earlier
in its statement of the applicable law, however, the court in
the case at bar writes as follows: “The standard for objective
bad faith does not require a finding of malice or ill will; reckless
indifference to the law will qualify (emphasis added)(citing In
re TCI Ltd., 769 F.2d 441, 445 (7th Cir. 1985).
The
problem is that “reckless indifference to the law” suggests
more is required than the negligence that Kapco suggests will
suffice. Other cases also do; in Claiburne v. Wisdom, 414 F.3d
715, 721 (7th Cir. 2005), a case the court does note cite, the
court stated that “objective bad faith” requires that
the attorney be “extremely negligent.”
Ultimately,
therefore, the court’s attempt at reconciliation is incomplete;
the court lays to rest any notions that “subjective bad faith”
must be shown, but fails to recognize that the definition of “objective
bad faith” is still unclear.
That
is not a problem in the case at bar, in which the conduct easily
meets any standard for being objectively unreasonable; however,
in other cases, this inconsistency in the court’s standard
may become an issue.
-
David Ziemer
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David
Ziemer can be reached by email.
