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Monday, August 03, 2009

Ind. Decisions - ND federal court imposes sanctions

We've seen several cases recently out of SD Indiana where the judge threatened sanctions or sanctioned an entire firm - see this ILB entry from June 10th headed "Judge McKinney imposes major sanctions in a second trial this year."

Now in a 21-page order dated July 31st, out of the ND Hammond Division, in the case of Cheryl Janky v. Speros Batistatos et al, Judge Simon writes:

The issue before the Court is whether attorneys Gregory Reed and Stephanie L. Hammonds (together, “Respondents”) should be sanctioned under Rule 11 for their filing a spurious complaint in this case. The complaint named Cheryl Janky as the plaintiff and was brought against the Lake County Convention & Visitors Bureau (“LCCVB”), its Board of Directors, its CEO Speros Batistatos, and its attorneys Timothy Jordan, Robert Goldstein, and Daniel Kuzman. The complaint was based on claims those Defendants asserted when defending an earlier federal copyright lawsuit, also brought by Janky. The main thrust of this second lawsuit was that the defenses used in the first case were frivolous and groundless. In fact, there was no basis for Janky’s second lawsuit, as it had been established in the initial litigation that the defenses were grounded in fact and credible evidence, and were held by the judge in that case to not be frivolous. After dismissing the complaint before me, I sua sponte ordered Respondents to show cause why they should not be sanctioned for violating Rule 11(b) of the Federal Rules of Civil Procedure. Because they failed to show that the claims included in the second lawsuit were warranted by existing law or by a nonfrivolous argument, or that the suit was brought for a proper purpose, sanctions will be imposed. * * *

In sum, I find that this entire lawsuit was not warranted by existing law or by a nonfrivolous argument. I also find that the case was brought for an improper purpose, both to harass Defendants and to needlessly increase the cost of litigation. I make this latter finding based not just on the blatant frivolity of the claims, but also because of the context in which the suit was brought. Respondents were clearly unhappy with the result of Janky I because the jury award would not cover their attorney fees, and were facing an even worse situation if LCCVB proved successful in their two appeals. The overwhelming thicket of excessive motions in Janky I demonstrates a significant amount of leverage-seeking, and the current suit can only be explained as a further attempt to get Defendants to back down and settle. Indeed, they attempted to do just that after filing this case by moving to enforce a global settlement agreement that was based on nothing more than a few emails between parties proposing some general settlement terms. The attorneys’ history of similar harassing conduct in other jurisdictions, for which they were also disciplined, demonstrates a pattern and proof that they are using their redundant claims as a leverage and harassment tactic, as opposed to just overzealous advocacy or a failure to understand pertinent legal concepts. The bringing of claims in order to “cause expensive delay in the hope of getting paid to go away,” is not a proper purpose under Rule 11. * * *

Enough is enough. It is apparent that neither side can take the hint, and I am half convinced that both parties are treating matters as a joke. But the best medicine will be to just end things. Respondents will be sanctioned for their bringing of the current lawsuit, pursuant to the Court’s Rule 11 powers. It was the filing of the second federal suit that opened pandora’s box and is the action most in need of court response in order to prevent future conduct. Although certainly the more innocent party, the Defendants’ latest Rule 11 motion strikes me as an overreach. Deterrence of abusive litigation practices is the central purpose of imposing Rule 11 sanctions. ... Tacking on additional Rule 11 sanctions to those already ordered will produce only the most marginal of additional deterrent incentive, and for all I know, may just as likely prompt a new cavalcade of filings. I will therefore wade no deeper into this morass. The Respondents’ subsequent motion to strike and both parties’ motions for Rule 11 sanctions are all dismissed.

CONCLUSION

1. Attorney Gregory J. Reed is fined in the sum of $10,000, payable to the Clerk of the Court by 1 month from the date of this order.

2. Attorney Stephanie L. Hammonds is fined in the sum of $5,000, payable to the Clerk of the Court by 1 month from the date of this order.

3. Cheryl Janky is fined in the sum of $1,000, payable to the Clerk of the Court by 1 month from the date of this order.

4. Attorneys Reed and Hammonds are prohibited from filing a complaint in a civil case on behalf of Cheryl Janky in this district without simultaneously posting a bond of $5,000 to cover the high probability of additional sanctions.

5. Respondents’ Motion to Strike [DE 43] is DISMISSED.

6. Defendants’ Motion for Attorney Fees and Costs Pursuant to Rule 11 [DE 46] is DISMISSED. Janky’s Motion for Extension to Respond [DE 48] is DISMISSED as moot.

SO ORDERED.

Posted by Marcia Oddi on August 3, 2009 09:35 AM
Posted to Ind Fed D.Ct. Decisions