United States District Court, E.D. Virginia, Alexandria Division
MEMORANDUM OPINION AND ORDER
MATTER is before the Court on Magistrate Judge Michael S.
Nachmanoff s Report and Recommendation (Doc. 97) in which the
Judge Nachmanoff recommends this Court (1) grant
Defendants' Motion for Sanctions Pursuant to 28 U.S.C.
§ 1927 (Doc. 69) and award Defendants reasonable
attorney's fees and costs incurred after September 30,
2015, and (2) deny Respondent Ernest P. Francis' Motion
for Sanctions Under Rule 11 (Doc. 74). Also before the Court
is Mr. Francis' Objection (Doc. 104) to Judge Nachmanoff
s Report and Recommendation. The present motions for
sanctions arise principally as a result of Mr. Francis'
failure communicate with his client Andrew Blowers
("Plaintiff') during the pendency of this
litigation, and in particular, Mr. Francis' failure to
communicate a settlement offer on September 30, 2015 which
would have ended the case. There are two issues before the
Court. The first issue is whether the Court should adopt the
Judge Nachmanoff s Report and Recommendation, under
circumstances where Plaintiffs counsel, Mr. Francis, did not
communicate with his client for six months, during which time
he litigated unilaterally without his client's knowledge
or consent, and withheld a settlement offer from his client
that would have brought the litigation to an early conclusion
because Mr. Francis felt the offer did not include adequate
attorney's fees. The second issue is whether
Defendants' requested attorney's fees and costs
pursuant to the motion for sanctions, as set forth in
Defendants' Statement of Fees and Costs (Doc. 99), are
Court ADOPTS the recommendations contained in Judge
Nachmanoff s Report and Recommendation in its entirety
because the Court finds that Mr. Francis, in pursuing this
litigation unilaterally and failing to convey the terms of
the September 30, 2015 settlement offer to Plaintiff,
"multiplie[d] the[se] proceedings . . . unreasonably and
vexatiously" within the meaning of § 1927, and
accordingly, Defendants are entitled to recover reasonable
attorney's fees and costs from that date. Next, the Court
finds that Defendants' requested award of attorney's
fees and costs totaling $84, 752.00 are reasonable and shall
be paid by Mr. Francis. Because the Court finds
Defendants' motion for sanctions meritorious, the Court
DENIES Respondent's Motion for Sanctions Under Rule 11 in
which he claims Defendants' motion is frivolous.
Nachmanoff skillfully and comprehensively and set forth the
relevant facts in the Report and Recommendation, and the
material facts in this case are not in dispute. The following
is a summary of the facts underlying the present motions.
Defendants Andrew S. Lemer and Gregory B. Walz
("Defendants") are attorneys who represented
American Express Centurion Bank in a debt collection action
against Plaintiff. On October 9, 2014, Defendants filed suit
against Plaintiff in the Fairfax County Circuit Court to
recover a debt of approximately $40, 000 owed on Plaintiffs
credit card. Compl. (Doc. 1) ¶¶ 7, 27-28. When
Plaintiff failed to respond, Defendants moved for default
judgment. Id. at 13. Mr. Francis entered an
appearance on Plaintiffs behalf in the Fairfax Circuit Court
on December 31, 2014, and opposed Defendants' Motion for
Default Judgment at a hearing held on January 9, 2015.
See (Doc. 30-1). Based on Plaintiffs testimony that
he had not seen a summons attached to the complaint with
which he was served, the Circuit Court held that it could not
enter default judgment against him. Mat 41.
9, 2015, Mr. Francis filed the instant suit against
Defendants, allegedly on Plaintiffs behalf, asserting
violations of the Fair Debt Collection Practices Act
("FDCPA"). Compl., 3-7. The claims raised here
relate to the proceedings in Fairfax County and are based, in
part, on Defendants' purported failure to properly serve
Plaintiff with a summons with the Complaint before seeking
default judgment against him. The Complaint alleges that as a
result of Defendants' conduct in the Fairfax County case,
Plaintiff incurred $50, 000 in "actual and statutory
damages." Id. at 8.
September 29, 2015, Plaintiff declared bankruptcy and the
proceedings in Fairfax Circuit Court were stayed.
See Doc. 89-1; Hrg. Audio 11:28:42. The case in this
Court proceeded without interruption, with a settlement
demand propounded by Mr. Francis on September 24, 2015, and a
counteroffer by Defendants on September 30, 2015 (the
"Settlement Offer"). (Doc. 71-1, 8). Mr. Francis
rejected the Settlement Offer, admittedly without informing
his client of its existence. Id. at 9. Mr. Francis
maintains that he was acting under the authority of a
"prior understanding" with Plaintiff that had
established certain parameters for an appropriate settlement
offer. (Doc. 94, ¶ 7). Under these parameters, Mr.
Francis maintains that any offer that did not include
attorney's fees for the Fairfax County litigation was per
se unreasonable, thus affording Mr. Francis the authority to
reject the offer without first needing to refer to Plaintiff.
See Id. ¶¶ 7, 12. This litigation also
contained briefing on a motion for partial summary judgment,
and numerous collateral disputes, among which was Mr.
Francis' consistent and aggressive opposition to the
admission pro hac vice of Defendants' counsel based in
part on his use of a single curse word during a telephone
call directed at a third party. (Docs. 46, 49, 56; Hrg. Audio
11:34:25 ("I'm going to oppose the application, bar
application of somebody who uses profanity in a conversation
with me. Yes, I'm going to do that.")).
January 12, 2016, this case came to an abrupt halt as a
result of Plaintiff s deposition. Plaintiff testified that he
had no contact with Mr. Francis throughout the instant
litigation, had suffered no harm that would justify this
litigation, did not want the relief sought in this
litigation, and had no interest in pursuing this litigation.
See generally Doc. 71-1. The deposition ended with
Plaintiff discharging Mr. Francis and agreeing to settle the
case in exchange for Defendants' promise that they would
not seek fees or costs from him. Id. at
106:01-108:03. Defendants' Motion for Sanctions rests
primarily upon the testimony that Mr. Francis failed to
consult with Plaintiff during the pendency of this case,
which Defendants allege led to unnecessary and vexatious
multiplication of these proceedings. (Doc. 69, at 1).
Plaintiff testified at his deposition that he did not speak
with Mr. Francis at all from the filing of the Complaint in
this matter until the week before Plaintiffs deposition on
January 12, 2016. (Doc. 71-1, 50:00-51:17).
purposes of Defendants' Motion for Sanctions, Plaintiffs
most important testimony concerned Mr. Francis' failure
to convey the Settlement Offer propounded by Defendants on
September 30, 2015. (Doc. 71-1, 101:21-102:24). The
Settlement Offer stated that Defendants were "willing to
pay the total sum of $1, 100.00 plus reasonable fees and
costs incurred in this action, in full settlement of this
matter. Id. When asked whether he would have
accepted this offer had it been conveyed to him, Plaintiff
responded that he would not have, but only because the offer
was too generous. (Doc. 71-1, 102:00-105:10). Shortly after
this testimony at the deposition, Defendants' counsel
made another settlement offer addressed to Mr. Francis in
Plaintiffs presence: if Plaintiff would agree to dismiss the
case with prejudice before the end of the deposition,
Defendants would "not seek fees against [Plaintiff] for
this litigation." Id. at 106:00-107:00.
Plaintiff responded by discharging Mr. Francis and
immediately accepted the offer. Id.
Francis moved to withdraw from his representation of
Plaintiff the day after the deposition, while seeking to
remain in the case solely for purposes of further contesting
Defendants' counsel's application for admission pro
hac vice. See Doc. 56. Defendants consented to Mr.
Francis' withdrawal on the condition that the Court
retain jurisdiction over Mr. Francis in order to permit
Defendants to pursue sanctions under § 1927 against him.
See Doc. 61. The Court granted Mr. Francis'
Motion to Withdraw and retained jurisdiction over him for 180
days. See Doc. 65.
February 5, 2016, Defendants filed the present Motion for
Sanctions pursuant to 28 U.S.C. § 1927. Defendants argue
that Mr. Francis' conduct in this litigation, as
evidenced by the sworn testimony of his own client,
unreasonably and vexatiously multiplied the proceedings
before this Court. Defendants also assert that this has
caused them excessive costs and fees, and also cite Mr.
Francis' numerous threats of bar complaints as further
grounds for their Motion.
response, Mr. Francis not only opposed Defendants'
Motion, but filed his own Motion for Sanctions under Rule 11,
claiming that Defendants' Motion is frivolous. .See Doc.
74. Mr. Francis also moved to suppress Plaintiffs deposition.
See Doc. 78. Magistrate Judge Nachmanoff readily
denied the latter motion as legally unsupported. Hrg. Audio
February 19, 2016, Judge Nachmanoff held a two-hour oral
argument, at which the parties were permitted to argue their
motions at length. At the conclusion of that hearing, Judge
Nachmanoff granted both parties leave to supplement the
record in light of the gravity of this matter. See
Doc. 88. Judge Nachmanoff also raised the possibility that
Mr. Francis could either obtain from Plaintiff a waiver of
attorney-client privilege as to pertinent client
communications, or alternatively could conduct an evidentiary
hearing at which Mr. Francis would have an opportunity to
cross-examine Plaintiff if he believed the record was
incomplete. Hrg. Audio 11:47:56. Mr. Francis declined to
exercise both options, instead submitting a Supplemental
Declaration (Doc. 94).
Francis' Declaration is largely dedicated to explaining
his failure to convey Defendants' settlement offer to
Plaintiff. First, Mr. Francis argues that there was an
existing understanding between him and Plaintiff as to
settlement discussions, specifically that "no settlement
offer from an opposing party would be accepted unless it
provided for payment in full of attorney's fees incurred
in the defense of the Fairfax County Action." (Doc. 94,
¶ 7). Because the Settlement Offer at issue here did not
include fees related to the Fairfax County matter, Mr.
Francis claims that he was not required to convey it to
Plaintiff because it was outside the parameters of Mr.
Francis and Plaintiffs prior "understanding."
See Id. ¶¶ 7, 12. Mr. Francis further
iterates that his "practice is to present settlement
offers to clients when the offer is in the form of an
agreement that [his] client can sign in order to create
contractual liability for the other party." (Doc. 94,
¶ 19). Because the Settlement Offer here came in the
form of an email rather than a contract, Mr. Francis argues
he interpreted it as "simply a preliminary
negotiation." Id. Notably, Mr. Francis concedes
that he did not speak to Plaintiff during the pendency of
this litigation until a week before Plaintiffs deposition.
Id. at ¶¶ 10, 20-22.
March 14, 2016, Judge Nachmanoff issued a Report and
Recommendation recommending that this Court grant
Defendant's Motion for Sanctions pursuant to 28 U.S.C.
§ 1927, and award Defendants reasonable attorney's
fees and costs incurred after September 30, 2015, the date
Mr. Francis neglected to convey the Settlement Offer to
Plaintiff. (Doc. 97, at 1). Judge Nachmanoff reasoned that
failure to convey the Settlement Offer "mark[ed] the
point at which any responsible attorney would have discovered
that this litigation should have ended, " and thus all
Defendants' reasonable attorney's fees beyond that
date were incurred solely because of Mr. Francis'
sanctionable conduct under § 1927. (Doc. 97, at 16).
Judge Nachmanoff further denied Mr. Francis' Motion for
Rule 11 Sanctions. Id. at 30. On March 28, 2016, Mr.
Francis timely filed an Objection (Doc. 104) to Judge
Nachmanoff s Report and Recommendation.
Objection, Mr. Francis advances six arguments. First, Mr.
Francis argues that Judge Nachmanoff impermissibly imposed
liability for attorney's fees without a determination as
to what fees are reasonable, and without giving Mr. Francis
an opportunity to object. (Doc. 104, at 3). Second, Mr.
Francis asserts that settlement discussion cannot be a ground
for sanctions because it implicates privileged
attorney-client information. Id. at 4. Third, Mr.
Francis asserts he did satisfy whatever duty he had to his
client, and that he has no such duty to Defendants or the
Court as Judge Nachmanoff stated. Id. at 7. Fourth,
Mr. Francis alleges that Defendants have failed to show a
causation of excess attorney's fees resulting from Mr.
Francis' conduct. Id. at 10. Fifth, Mr. Francis
argues that Judge Nachmanoff acted improperly in considering
Mr. Francis' opposition to Defendants' Motion for
Summary Judgment for the purposes of sanctions under §
1927. Id. at 12. Sixth, and finally, Mr. Francis
argues that his alleged incivility is not a basis for
sanctions under § 1927. Id. at 13.
April 8, 2016, Defendants filed a Response (Doc. 101) to Mr.
Francis' objections, rebutting each of Mr. Francis'
arguments in turn. Defendants' maintain that the Court
was proper in (1) setting the date by which of fees and costs
would be calculated, (2) considering Mr. Francis' failure
to communicate settlement offers to Plaintiff, (3) concluding
that Mr. Francis did fail to satisfy his obligations to
Plaintiff, Defendants, and the Court, (4) finding that Mr.
Francis' conduct did cause Defendants excess fees and
costs, (5) considering the failure to communicate with
Plaintiff regarding opposition to Defendants' Summary
Judgment Motion, and (6) considering Mr. Francis'
incivility as evidence of bad faith for purposes of §
April 14, Mr. Francis filed a Motion for Extension of Time
(Doc. 102), and on April 16, he filed a Reply (Doc. 103) to
Defendants' Response. In addition to reiterating his
primary arguments in the Objection, Mr. Francis further
suggests Judge Nachmanoff improperly issued a Report and
Recommendation, rather than an order. (Doc. 103, at 2-3). Mr.
Francis argues that Judge Nachmanoff was therefore required
to discern what dollar amount constitutes Defendants'
reasonable attorney's fees and costs in this case, rather
than this Court. Id. Mr. Francis maintains Judge
Nachmanoff s method of setting attorney's fees deprived
him of the opportunity to object to the award of
Defendants' requested fees. Id. at 3-4.
Nachmanoff s Report and Recommendation on Defendants' and
Mr. Francis' motions for sanctions, as well as
consideration of an award of reasonable attorney's fees
and costs, are now properly before this Court.
Standard of Review
Rule of Civil Procedure 72 allows a party to object to the
ruling of a magistrate judge. Courts in this district
customarily treat motions for sanctions as non-dispositive
and appropriately decided by magistrate judges. See
Giganti v. Gen-X Strategies, Inc., 222 F.R.D. 299,
304-05 (E.D. Va. 2004) (Ellis) (reviewing a motion for
sanctions under Rule 72(a) after finding the motion
non-dispositive under 28 U.S.C. § 636(b)); see also
Manship v. Bros., No. 1:11-CV-1003, 2012 WL 527349, at
*2 (E.D. Va. Feb. 16, 2012) ("Although the Fourth
Circuit has not spoken definitively on whether . . .
sanctions matters are dispositive or non-dispositive, the
Court finds that the issue of Rule 11 sanctions in this case
is non-dispositive, as the nature of the sanction imposed is
not dispositive of any claim or defense.");
Guarantee Co. of North America U.S.A. v. Metro
Contracting, Inc., No. 2:13-cv-02266, 2015 WL 402909, at
*6 (D.S.C. Jan. 28, 2015) (finding the discovery sanction at
issue non-dispositive and reviewed under Rule 72(a) because
applying the sanction could not dispose of the case).
to Rule 72(a) a "district judge in the case must
consider timely objections and modify or set aside any part
of the order that is clearly erroneous or is contrary to
law" on non-dispositive matters. Fed.R.Civ.P. 72(a). The
Fourth Circuit has held that the "clearly
erroneous" standard is deferential and that findings of
fact should be affirmed unless review of the entire record
leaves the reviewing court with "the definite and firm
conviction that a mistake has been committed."
Harman v. Levin, 772 F.2d 1150, 1153 (4th Cir. 1985)
(citing United States v. U.S. Gypsum Co., 333 U.S.
364, 395 (1948)); Tafas v. Dudas, 530 F.Supp.2d 786,
792 (E.D. Va. 2008). A decision is considered contrary to law
"when it fails to apply or misapplies relevant statues,
case law, or rules of procedure." Attard Industries,
Inc. v. U.S. Fire Ins. Co., No. 1:10-cv-121, 2010 WL
3069799 at *1 (E.D. Va. Aug. 5, 2010) (citing DeFazio v.
Wallis, 459 F.Supp.2d 159, 163 (E.D.N.Y.2006)). The
Eastern District of Virginia has noted that for questions of
law, "there is no practical difference between review
under Rule 72(a)'s contrary to law standard and [a]
de novo standard" Bruce v. Hartford,
21 F.Supp.3d 590, 594 (E.D. Va. 2014) (quoting Robinson
v. Quicken Loans Inc., No. 3:12-cv-0981, 2013 WL
1704839, at *3 (S.D. W.Va. Apr. 19, 2013)). Therefore, the
Court reviews the factual findings of the magistrate
judge's Report and Recommendation for clear error, and
reviews de novo legal conclusions. Id. at