Roger Edwards, LLC v. Fiddes & Son Ltd.

United States Court of Appeals
For the First Circuit
No. 05-1679

ROGER EDWARDS, LLC,

Plaintiff, Appellant,

v.

FIDDES & SON LTD.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE

[Hon. David M. Cohen, U.S. Magistrate Judge]

Before
Boudin, Chief Judge,
Selya, Circuit Judge,
Siler,* Senior Circuit Judge.

Thomas F. Hallett and Thomas F. Hallett Law Offices, P.A on
brief for appellant.
Ronald W. Schneider, Jr., David A. Soley and Bernstein, Shur,
Sawyer & Nelson on brief for appellee.
Ronald W. Schneider, Jr., David A. Soley and Bernstein, Shur,
Sawyer & Nelson on Appellee's Motion for Sanctions Pursuant to
F.R.A.P. 38 with Incorporated Memorandum of Law in No. 05-1306.

February 8, 2006

*
Of the Sixth Circuit, sitting by designation.
 BOUDIN, Chief Judge. Appellant Roger Edwards, LLC

("Roger Edwards"), a Maine limited liability company, seeks

reversal of Rule 11 sanctions, Fed. R. Civ. P. 11, imposed on it

and its counsel by the magistrate judge who tried the underlying

case with the consent of the parties. See 28 U.S.C. § 636(c)(1)

(2000). This is the third appeal filed in this case by Roger

Edwards.1 This decision also resolves a motion by appellee Fiddes

& Son, Ltd. ("Fiddes") requesting appellate sanctions under Fed. R.

App. P. 38, on the ground that Roger Edwards' second appeal--No.

05-1306, appealing the denial of Rule 60(b) relief--was frivolous.

Our prior two opinions, cited in the margin, chronicle

the long history of this commercial litigation. See Roger Edwards

I, 387 F.3d at 92-94; Roger Edwards II, 427 F.3d at 131-32. After

unfavorable partial summary judgments followed by an adverse jury

verdict in July 2003, Roger Edwards filed its first appeal from the

original "merits" judgment, which denied its claims against Fiddes

and awarded Fiddes damages on a counterclaim. While that appeal

was pending, Roger Edwards in July 2004 filed a Rule 60(b) motion,

Fed. R. Civ. P. 60(b), for relief from judgment, alleging

fraudulent conduct by Fiddes, including "fraud on the court."

1
See Roger Edwards, LLC v. Fiddes & Sons, Ltd., 387 F.3d 90
(1st Cir. 2004) ("Roger Edwards I") (appealing jury instructions
and grant of partial summary judgment); Roger Edwards, LLC v.
Fiddes & Son Ltd., 427 F.3d 129 (1st Cir. 2005) ("Roger Edwards
II") (appealing denial of Rule 60(b) motion for relief from
judgment).

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 Fiddes not only opposed the motion but filed a motion for

Rule 11 sanctions against Roger Edwards for having filed a

frivolous Rule 60(b) motion. Thereafter, we resolved Roger

Edwards' first appeal by affirming the merits judgment. Roger

Edwards I, 387 F.3d at 97. The magistrate judge then took up Roger

Edwards' pending Rule 60(b) motion, and denied it on January 26,

2005. He initially urged the parties to settle the sanctions

issue, but this effort was unsuccessful.

Thereafter, on February 16, 2005, the magistrate judge

issued an opinion and order granting Fiddes' motion for Rule 11

sanctions. Following a substantial discussion, the magistrate

judge ruled that "the filing of the [Rule 60(b)] motion was, under

the circumstances, frivolous, unreasonable and without foundation,

even though it may not have been made in subjective bad faith."

Roger Edwards and its attorney were ordered to pay Fiddes

"reasonable attorney fees and other expenses incurred" in opposing

the Rule 60(b) motion.

The next day, Roger Edwards filed an appeal to this court

from the denial of its Rule 60(b) motion. Roger Edwards also filed

a Rule 59(e) motion for reconsideration of the sanctions award,

which was thereafter denied by the magistrate judge, who said that

the motion for reconsideration "either rehashes arguments

previously advanced and which I have carefully considered or

advances new arguments not made either at the summary judgment

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stage or in support of its Rule 60(b) motion and which are

therefore procedurally defaulted."

Roger Edwards then initiated a third appeal--the one now

before us, No. 05-1679--to challenge the Rule 11 sanctions.

Fiddes in turn filed a motion for appellate sanctions under Fed. R.

App. P. 38 in connection with Roger Edwards' earlier appeal of the

denial of Rule 60(b) relief, No. 05-1306. On October 31, 2005, we

affirmed the magistrate judge's denial of Rule 60(b) relief, see

Roger Edwards II, 427 F.3d at 137, but deferred a decision on the

motion for Rule 38 sanctions, id. at 132 n.1, so we could consider

it together with the appeal of the Rule 11 sanctions.

Rule 11 "prohibits filings made with 'any improper

purpose,' the offering of 'frivolous' arguments, and the assertion

of factual allegations without 'evidentiary support' or the

'likely' prospect of such support." Young v. City of Providence ex

rel. Napolitano, 404 F.3d 33, 39 (1st Cir. 2005). Anyone

presenting a motion must "certify[] that to the best of the

person's knowledge, information, and belief, formed after an

inquiry reasonable under the circumstances," the paper being filed

does not violate one of Rule 11's prohibitions. Fed. R. Civ. P.

11(b). With respect to a legal contention, an argument is not

frivolous if

the claims, defenses, and other legal
contentions therein are warranted by existing
law or by a nonfrivolous argument for the
extension, modification, or reversal of

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 existing law or the establishment of new law.

Fed. R. Civ. P. 11(b)(2).

To support a finding of frivolousness, some degree of

fault is required, but the fault need not be a wicked or

subjectively reckless state of mind; rather, an individual "must,

at the very least, be culpably careless to commit a violation."

Young, 404 F.3d at 39. We review Rule 11 sanctions for abuse of

discretion, but "both a mistake of law and a clearly erroneous

finding of fact constitute such an abuse." Id. at 38 (citing

Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 402 (1990)).

In the original merits case, Roger Edwards had charged

Fiddes with breaching an alleged exclusive dealing agreement for

the distribution of Fiddes' products; Fiddes had counterclaimed for

unpaid invoices on delivered goods. The magistrate judge found

(based on documents coupled with Roger Edwards' own admissions)

that Roger Edwards had terminated the open-ended contract on

November 19, 2001; he also granted Fiddes summary judgment on its

counterclaim.

These summary dispositions left open for trial the

possibility that Fiddes was liable to Roger Edwards for the period

prior to termination. The jury resolved liability for the pre-

November 19 period by finding no breach by Fiddes before that date.

The magistrate judge entered judgment for Fiddes on the jury

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verdict and awarded $17,286 to Fiddes on the counterclaim. On

appeal, we found no error. Roger Edwards I, 387 F.3d at 97.

Roger Edwards' Rule 60(b) motion was based on a double

proposition: that Fiddes' products had been mislabeled in numerous

respects--this is a shorthand version of the charge, which also

included alleged improper documentation--and that, during the

original merits case, Fiddes and its counsel had made

misrepresentations in discovery and court filings by asserting that

its products were in compliance with U.S. law. As proof of the

former, Roger Edwards offered an expert affidavit; for the latter,

it pointed to three statements in the proceedings.

We agree with the magistrate judge that the Rule 60(b)

motion was hopeless. The background law as to what constitutes

fraud under Rule 60(b), and as to pertinent incidents like time

limits and prejudice, is admittedly no model of perfection; our own

opinion on the appeal of the Rule 60(b) motion makes this clear

while trying to sort out some of the problems. See Roger Edwards

II, 427 F.3d at 132-34. If (against the background of somewhat

fuzzy law) the Rule 60(b) motion might conceivably have succeeded,

we would not uphold the sanction.

The difficulty for Roger Edwards is that the deficiencies

in its motion went well beyond debatable inference and colorable

legal argument. The affidavit offered to prove the mislabeling

purported to identify numerous details in which the product had not

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conformed to a parade of regulations; but the only basis for the

charge of fraud on the part of Fiddes in marketing the allegedly

mislabeled product was the explicit, conclusory inference by the

expert that alleged mistakes must have been dishonest because there

were a lot of technical problems with the labeling.

The further charges of fraud, based on the three

litigation-related statements cited by Roger Edwards, were

pitifully weak; even weaker were any inferences of reliance or

other showings that the alleged fraud "'substantially interfered

with [the litigant's] ability fully and fairly to prepare for, and

proceed at, trial.'" Tiller v. Baghdady, 294 F.3d 277, 280 (1st

Cir. 2002) (quoting Anderson v. Cryovac, Inc., 862 F.2d 910, 926

(1st Cir.1988)). Two of the statements are bland, unspecific

denials, at most debatably "inaccurate," as to which reliance by an

experienced adversary is not credible; the third and more detailed

statement is not even arguably false. See Roger Edwards II, 427

F.3d at 135-37.

More important to the issue of sanctions for the filing

of the Rule 60(b) motion, the outcome of the motion would be no

different even if there had been some basis for arguing that the

product had been mislabeled and that Fiddes had misrepresented to

the contrary in the course of the litigation. Roger Edwards was

unable throughout the Rule 60(b) proceeding and the ensuing appeal

to explain plausibly how such mislabeling would have altered the

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judgment being assailed on either the initial claim or the

counterclaim.

On Roger Edwards' affirmative contract claim (for breach

of exclusive dealing rights), the magistrate judge's finding was

that Roger Edwards had terminated the contract itself in November

2001; for the period prior to that date, the jury found that Fiddes

had not violated whatever exclusive dealing rights it might have

granted. Whether the product was mislabeled or not does not

undermine either ruling in any way that Roger Edwards has been able

to explain.

Similarly, the award on the counterclaim for unpaid

invoices rested on the fact that the goods had been delivered,

their acceptance had not been timely revoked, and the invoices had

not been paid. Roger Edwards said that it revoked acceptance of

the goods in December 2002, but then withdrew this revocation in

March 2003 because of the alleged fraud. But the magistrate judge

found that the time for a revocation-of-acceptance defense in the

case had passed by December 2002, making the purported March 2003

withdrawal of revocation irrelevant to the disposition of the

counterclaim.

Despite a good deal of case law saying that prejudice is

required to reopen a judgment under Rule 60(b), Roger Edwards

argued to the magistrate judge that the supposed misrepresentations

were "fraud on the court" and did not require a showing that Roger

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Edwards' position in court had in fact been prejudiced. The main

case cited for this view, Hazel-Atlas Glass Co. v. Hartford-Empire

Co., 322 U.S. 238 (1944), involved conduct and circumstances

egregiously designed to corrupt the judicial process; the attempt

of Roger Edwards to extend this precedent to cover any material

misstatement whatsoever was hopeless from the outset.

Roger Edwards also invoked the burden-shifting analysis

in Anderson v. Cryovac, Inc., 862 F.2d 910 (1st Cir. 1988), under

which a Rule 60(b)(3) movant who proves "knowing or deliberate"

misconduct benefits from a rebuttable presumption of the required

prejudice. Id. at 926. Yet Roger Edwards proved no such

deliberate misconduct. And even if it had, the presumption would

have been overcome by the evidence discussed above and in our Rule

60(b) opinion showing that the alleged misconduct in fact had no

impact on the litigation.

So what we have are highly dubious charges of fraud

which, in any event, are not effectively connected to any plausible

showing of the necessary prejudice. No reasonable lawyer

considering a Rule 60(b) motion could suppose that such a

combination had any chance of upsetting a final judgment reached

after extensive litigation and a defeat of Roger Edwards' claim in

different respects by both judge and jury. The magistrate judge

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acted within his discretion in deeming the motion "frivolous" and

imposing sanctions.2

In addition to defending the district court's sanctions

award in its favor for time spent opposing the Rule 60(b) motion,

Fiddes has moved for appellate sanctions under Fed. R. App. P. 38,

which gives the court of appeals discretion to sanction frivolous

appeals. "An appeal is frivolous if the result is obvious or the

arguments are 'wholly without merit.'" Cronin v. Town of Amesbury,

81 F.3d 257, 261 (1st Cir. 1996) (quoting Westcott Constr. Corp. v.

Firemen's Fund of N.J., 996 F.2d 14, 17 (1st Cir. 1993)).

Our analysis under Rule 38 is somewhat different than

that under Rule 11. First, we exercise our own independent

judgment in assessing a possible Rule 38 violation, whereas we

defer to the trial judge's judgment when reviewing Rule 11

sanctions. Second, although a frivolous claim made before a trial

court is unlikely to be rescued on appeal, the argument on appeal

might sometimes be different and more promising, although--apart

from errors in process--this would surely be rare.

However, in this case we think that sanctions in this

court are also appropriate. To the extent Roger Edwards' brief on

2
At the time of the original appeal of the Rule 11 sanction,
the magistrate judge had not yet fixed the amount of the attorneys'
fees comprising the sanction. Concerned as to whether the sanction
order being appealed was a final judgment, we deferred a decision
until the figure had been set, which the magistrate judge did in a
later order. Neither side has contested the amount of the award
($4,553.10).

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appeal added to arguments made in the district court (e.g., the

equitable estoppel argument presented on appeal but not in Roger

Edwards' Rule 60(b) brief below), Roger Edwards had no reason to

think that these new arguments were preserved, see Daigle v. Me.

Med. Ctr., Inc., 14 F.3d 684, 687-88 (1st Cir. 1994); to the extent

the arguments were the same, Roger Edwards' insistence on rehashing

its meritless claims yet again represents just the sort of

vexatious behavior that Rule 38 is meant to discourage. See Maher

v. Hyde, 272 F.3d 83, 87 (1st Cir. 2001).

Even so we might hesitate, in the exercise of our own

discretion, to grant a request for sanctions based on a meritless

brief in this court--of which a good many are filed each year--but

for two aggravating factors: that the Rule 60(b) motion and appeal

were themselves a second bite at the apple, and that Roger Edwards'

opening brief on the Rule 60(b) appeal was a kitchen-sink

collection of weak or undeveloped arguments that failed to respond

to the fatal weaknesses identified by the magistrate judge, and so

burdened both opposing counsel and this court.

This present, third appeal--from the magistrate judge's

sanctions order--was also hopeless and it is baffling that Roger

Edwards did not settle the matter, as the magistrate judge urged,

before a formal sanctions order was entered. But for obvious

reasons we would be loath to sanction the appeal of a sanctions

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order save in extraordinary circumstances. Thus, Fiddes ought not

seek new appellate sanctions as to this third appeal.

The district court's award of Rule 11 sanctions is

affirmed. As for sanctions under Fed. R. App. P. 38, we award a

flat sum of $1,500 in attorneys' fees to Fiddes for the defense of

the second appeal (No. 05-1306) and the preparation of its Rule 38

motion, plus double costs. Much of the work done by Fiddes in the

district court Rule 60(b) proceeding could be adapted to the

appeal, and a further round of filings to refine the amount

precisely will lead only to more expense.

It is so ordered.

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