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Velocys, Inc., et al v. Catacel Corp

October 18, 2011

VELOCYS, INC., ET AL., PLAINTIFFS,
v.
CATACEL CORP., DEFENDANT.



The opinion of the court was delivered by: Judge John R. Adams

MEMORANDUM OF OPINION AND ORDER [Resolving Doc. 57]

This matter comes before the Court on Plaintiffs' motion for sanctions pursuant to 28 U.S.C. § 1927. The Court has considered the pleadings, parties' memoranda, and applicable law. For the reasons discussed below, the motion is GRANTED as detailed herein.

I. BACKGROUND

This action was filed on April 11, 2010, and Plaintiff Velocys, Inc. sought an immediate hearing on its request for a temporary restraining order ("TRO"). The Court scheduled and held such a hearing on April 15, 2010, with full participation from Defendant Catacel Corp. and its counsel. The pending motion arises from conduct that occurred during that hearing.

Specifically, during the hearing, the Court learned that Catacel had shipped roughly 3/8 of the total catalyst strips that it was required to ship under its contract. Moreover, defense counsel informed the Court in a straightforward manner that nothing could occur in the near future that would necessitate immediate action by the Court. Velocys now takes issue with both those statements and contends that they warrant sanctions.

II. LEGAL STANDARDS

A. Attorney Sanctions under 28 U.S.C. § 1927

Although "a prevailing party may not ordinarily recover attorneys' fees," it may do so when a statute provides for such an award. See Shimman v. Int'l Union of Operating Engineers, Local 18, 744 F.2d 1226, 1229 (6th Cir. 1984) (explaining the "American Rule" regarding attorneys' fees). Section 1927 provides for an award of costs and fees where an attorney has "multiplie[d] the proceedings in any case unreasonably and vexatiously." 28 U.S.C. § 1927. The purpose of § 1927 sanctions are to "deter dilatory litigation practices and to punish aggressive tactics that far exceed zealous advocacy." Red Carpet Studios Div. of Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006).

In Wilson-Simmons v. Lake County Sherriff's Department, 207 F.3d 818, 824 (6th Cir. 2000), the Sixth Circuit set forth the following standard to apply in determining whether sanctions are warranted under § 1927:

Sanctions under § 1927 are warranted when an attorney has engaged in some sort of conduct that, from an objective standpoint, falls short of the obligations owed by a member of the bar to the court and which, as a result, causes additional expense to the opposing party. An attorney's ethical obligation of zealous advocacy on behalf of his or her client does not amount to carte blanche to burden the federal courts by pursuing claims that are frivolous on the merits . . . . Accordingly . . . when an attorney knows or reasonably should know that a claim pursued is frivolous, or that his or her litigation tactics will needlessly obstruct the litigation of non-frivolous claims, a trial court does not err by assessing fees attributable to such actions against the attorney. Bad faith is not required to support a sanction under § 1927.

Id. (emphasis in original) (citations omitted) (internal quotation marks omitted).

More recently, the Sixth Circuit has stated that sanctions are appropriate under § 1927 when an attorney "intentionally abuses the judicial process or knowingly disregards the risk that his actions will needlessly multiply proceedings." Red Carpet Studios, 465 F.3d at 646. In Garner v. Cuyahoga County Juvenile Court, 554 F.3d 624, 645 (6th Cir. 2009), the Sixth Circuit noted that this language "suggests a higher standard than the one described above in Wilson-Simmons." The Sixth Circuit declined to reconcile any "apparent conflict" between the standards because it concluded that the district court's finding that the attorney facing sanctions in Garner "intentionally pursued meritless claims" satisfied either standard. Garner, 554 F.3d at 645; Jones v. Continental Corp., 789 F.2d 1125, 1230 (6th Cir. 1986).

This Court does not read Red Carpet Studios as establishing or applying a higher standard than the one set forth in Wilson-Simmons. A standard providing for sanctions when an attorney "knowingly disregards the risk that his actions will needlessly multiply proceedings," Red Carpet Studios, 465 F.3d at 646, is similar to a standard providing for sanctions when an attorney "reasonably should know that his or her tactics will needlessly obstruct the litigation of non-frivolous claims," Wilson-Simmons, 207 F.3d at 824 (emphasis in original). Both standards invoke recklessness, "a ...


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