Rabin v. Dow Jones & Co., Inc.

15-3150 Rabin et al. v. Dow Jones & Co., Inc. et al. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 1 At a stated term of the United States Court of Appeals for 2 the Second Circuit, held at the Thurgood Marshall United States 3 Courthouse, 40 Foley Square, in the City of New York, on the 4 25th day of October, two thousand sixteen. 5 6 PRESENT: AMALYA L. KEARSE, 7 DENNIS JACOBS, 8 RAYMOND J. LOHIER, JR., 9 Circuit Judges. 10 11 - - - - - - - - - - - - - - - - - - - -X 12 I. STEPHEN RABIN, 13 Plaintiff-Appellant, 14 15 RAYMOND A. BRAGAR 16 Interested Party-Appellant, 17 18 -v.- 15-3150 19 20 DOW JONES & COMPANY, INC., 21 Defendant-Appellee, 22 23 THE NEW YORK TIMES COMPANY, FORBES INC., 24 Defendants. 25 26 - - - - - - - - - - - - - - - - - - - -X 27 1 1 FOR APPELLANTS: ALEXANDRA A.E. SHAPIRO (Chetan A. 2 Patil, on the brief), Shapiro Arato 3 LLP, New York, NY. 4 5 FOR APPELLEE: HILARY PRESTON (Clifford L. Thau, 6 Joshua S. Johnson, on the brief), 7 Vinson & Elkins LLP, New York, NY. 8 9 Appeal from a judgment of the United States District Court 10 for the Southern District of New York (Rakoff, J.). 11 12 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND 13 DECREED that the judgment of the district court be AFFIRMED. 14 15 Plaintiff I. Stephen Rabin, a lawyer, and Raymond A. Bragar, 16 Rabin’s attorney in this action, appeal from the judgment of 17 the United States District Court for the Southern District of 18 New York (Rakoff, J.) granting a motion for sanctions pursuant 19 to 28 U.S.C. § 1927 and the court’s inherent powers. We assume 20 the parties’ familiarity with the underlying facts, the 21 procedural history, and the issues presented for review. 22 Plaintiff-appellant Rabin and appellant Bragar are, by 23 their own characterization, experienced class-action lawyers, 24 and Bragar represented Rabin in the underlying litigation. 25 Together they filed a putative class action against The New York 26 Times Company, Forbes, Inc., and appellee Dow Jones & Company, 27 Inc., alleging participation in a fraudulent 28 subscription-renewal scheme. It is undisputed that the scheme 29 was orchestrated by a third party (not sued by Rabin), which 30 sent official-looking but unauthorized “renewal” notices to the 31 subscribers of various publications, charging them inflated 32 prices to renew their subscriptions and keeping the excess after 33 passing the actual renewal cost along to the publishers. 34 The defendants moved to dismiss, arguing, among other 35 things, that plaintiff had sued the wrong parties. In response, 36 Bragar and Rabin filed an amended complaint largely reasserting 37 the same claims. After the New York Times and Forbes settled, 38 Dow Jones renewed its motion, and the district court dismissed 39 the amended complaint with prejudice. Dow Jones moved for 40 sanctions against Bragar and Rabin in the amount of its costs 2 1 and fees in defending against the dismissed claims. The 2 district court found their conduct sanctionable only from the 3 time of the filing of the amended complaint, ultimately holding 4 them liable to Dow Jones for $180,000. Bragar and Rabin appeal 5 from that judgment, arguing principally that the district court 6 applied the wrong legal standard for finding the amended 7 complaint not colorable and erred in finding that they pursued 8 their claims in bad faith. 9 “We review all aspects of a District Court’s decision to 10 impose sanctions for abuse of discretion.” Schlaifer Nance & 11 Co. v. Estate of Warhol, 194 F. 3d 323, 333 (2d Cir. 1999). “[W]e 12 bear in mind that when the district court is . . . fact finder 13 and sentencing judge all in one, our review is more exacting 14 than under the ordinary abuse-of-discretion standard,” and we 15 require that “[a] finding of bad faith, and a finding that conduct 16 is without color or for an improper purpose, must be supported 17 by a high degree of specificity in the factual findings.” 18 Wolters Kluwer Fin. Servs., Inc. v. Scivantage, 564 F. 3d 110, 19 113-14 (2d Cir. 2009) (citations and quotation marks omitted). 20 The imposition of sanctions is an abuse of discretion if it is 21 “based on an erroneous view of the law or on a clearly erroneous 22 assessment of the evidence,” or “it cannot be located within 23 the range of permissible decisions.” Id. at 113 (quotation 24 marks omitted). 25 The district court articulated and applied the correct legal 26 standard. To impose sanctions under 28 U.S.C. § 1927 or under 27 its inherent power, a district court must find “clear evidence 28 that the conduct at issue is (1) entirely without color and (2) 29 motivated by improper purposes.” Wolters Kluwer, 564 F. 3d at 30 114; see Oliveri v. Thompson, 803 F.2d 1265, 1273 (2d Cir. 1986) 31 (likening the requirements under 28 U.S.C. § 1927 to the inherent 32 power requirements). As the district court recognized, see 33 S.P.A. 4, “a claim is colorable when it has some legal and factual 34 support,” and it “lacks a colorable basis when it is utterly 35 devoid of a legal or factual basis.” Schlaifer, 194 F. 3d at 36 337 (quotation marks omitted). 37 The district court found that plaintiff pleaded no facts 38 to support the conclusory allegation of defendant’s liability 39 for a third-party’s fraud; and that even if the defendant had 3 1 an affirmative duty to act when it became aware of the fraud 2 (which appellants now aver was a good-faith argument to extend 3 the law), plaintiff’s own amended complaint establishes that 4 defendant did act to warn its customers. The district court 5 therefore concluded that the claims had no objectively 6 reasonable basis and that the first requirement for the 7 imposition of sanctions was satisfied. We find no error in that 8 conclusion. 9 The district court’s finding of bad faith is supported by 10 detailed factual findings. Specifically, the court found that 11 Rabin admitted in his deposition that “at least two” fraud 12 allegations, which were pleaded in the original complaint and 13 left uncorrected in the amended complaint, were 14 “overstatement[s],” S.P.A. 5-6; that Bragar became aware of 15 evidence showing Dow Jones’s efforts to fight the fraud (efforts 16 inconsistent with the complaint’s allegations of complicity) 17 and that he failed to conduct a good-faith investigation into 18 that evidence or to adjust the pleadings; that Bragar and Rabin 19 sought to suppress the truth by withholding relevant evidence, 20 such as the fact that prior to filing the amended complaint, 21 Rabin had received refunds of amounts he pleaded as damages in 22 that complaint; and that, when confronted with evidence of 23 dishonesty in his deposition, Rabin dubiously claimed a bad 24 memory. The district court’s assessment of the evidence is not 25 clearly erroneous and its finding of bad faith is within the 26 bounds of its permissible discretion. 27 Accordingly, and finding no merit in appellants’ other 28 arguments, we hereby AFFIRM the judgment of the district court. 29 FOR THE COURT: 30 CATHERINE O’HAGAN WOLFE, CLERK 4