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Blowers v. Lerner

United States District Court, E.D. Virginia, Alexandria Division

August 31, 2016

ANDREW S. LERNER, ESQ., et al., Defendants.


         THIS 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 reasonable.

         The 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.

         I. BACKGROUND

         Judge 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.

         On July 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.

         On 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.")).

         On 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).

         For 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.

         Mr. 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.

         On 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.

         In 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 10:24:00.

         On 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).

         Mr. 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.

         The Present Proceedings

         On 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.

         In his 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.

         On 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 § 1927.

         On 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.

         Judge 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.


         1. Standard of Review

         Federal 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).

         Pursuant 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 593-94.

         2. ...

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