RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 11a0234p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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CAROL METZ, et al.,
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Plaintiffs,
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No. 09-3999
v.
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Defendants-Appellees, -
UNIZAN BANK, et al.,
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v. -
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Appellant. -
DANIEL G. MORRIS,
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Appeal from the United States District Court
for the Northern District of Ohio at Akron.
No. 05-01510—Donald C. Nugent, District Judge.
Argued: May 31, 2011
Decided and Filed: August 24, 2011
Before: MARTIN, NORRIS, and SILER, Circuit Judges.
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COUNSEL
ARGUED: Paul W. Flowers, PAUL W. FLOWERS CO., L.P.A., Cleveland, Ohio, for
Appellant. Michael E. Mumford, BAKER & HOSTETLER LLP, Cleveland, Ohio, for
Appellees. ON BRIEF: Paul W. Flowers, PAUL W. FLOWERS CO., L.P.A.,
Cleveland, Ohio, for Appellant. Michael E. Mumford, Katie M. McVoy, BAKER &
HOSTETLER LLP, Cleveland, Ohio, for Appellees.
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No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 2
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OPINION
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SILER, Circuit Judge. Defendant Fifth Third Bank, N.A. (“Fifth Third”) sought
sanctions against attorney Daniel G. Morris because, after Fifth Third had been
dismissed with prejudice, Morris filed a complaint that reasserted claims against Fifth
Third that were identical to previously dismissed claims. Morris never responded to
Fifth Third’s request for sanctions, and the district court sanctioned Morris under its
inherent powers. Morris now appeals. For the reasons stated below, we AFFIRM the
district court’s imposition of sanctions.
I.
In 2005, Plaintiffs Carol Metz and others filed a putative class action against 55
banks, including Fifth Third. The claims arose out of a Ponzi scheme orchestrated by
James Carpenter involving bogus promissory notes issued by Lomas de la Barra
Development Corp. (“Lomas”) and Serengeti Diamonds U.S.A., Inc. (“Serengeti”).
Five months later, Morris filed a motion to intervene on behalf of his clients, the
Floyds and the Blairs. Attached to the motion was a complaint that was similar to
Metz’s complaint, except it was also premised on promissory notes issued by
International Real Estate Investment Group, LTD (“International”) and Rawhide Select,
Inc. (“Rawhide”). The district court granted the motion to intervene, but later clarified
that intervention was only permitted with respect to claims involving Lomas and
Serengeti, not with respect to claims involving International and Rawhide. The Blairs
were prohibited from intervening because their claims related only to Rawhide.
The case then proceeded for three years, with Morris actively participating in the
case. After resolving multiple motions to dismiss, the district court dismissed Fifth
Third with prejudice in May 2008. But that did not end the participation of Fifth Third
in this case. In February 2009, Morris filed an intervenors’ complaint on behalf of the
Floyds against Fifth Third and three other banks. The complaint was virtually identical
No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 3
to the complaint attached to their motion to intervene over three years earlier and
included claims premised on Rawhide and International that the court previously
disallowed. Also, a claim was added for aiding and abetting Carpenter’s tortious
conduct.
In March 2009, Fifth Third filed a motion to strike or dismiss the intervenors’
complaint. Fifth Third also requested that the court sanction Morris for reasserting
claims that had already been dismissed. Specifically, it requested that the court use its
inherent powers to sanction Morris in an amount sufficient to pay its fees and expenses
for having to file the motion to strike.
Morris did not respond to Fifth Third’s motion. Instead, in April 2009, he filed
a motion to voluntarily dismiss the claims without prejudice. Fifth Third filed an
opposition, arguing that the claims should be dismissed with prejudice. Fifth Third
again requested that the court sanction Morris for requiring it to defend against the
intervenors’ complaint. It also noted that its previous request for sanctions should be
granted as unopposed.
With a trial date approaching, Fifth Third’s counsel attended a pretrial status
conference. Morris, however, did not attend. Following the conference, the district
court granted the motion to dismiss filed by Morris, but it dismissed the claims with
prejudice.
In May 2009, the district court granted Fifth Third’s unopposed request for
sanctions. Citing Chambers v. NASCO, Inc., 501 U.S. 32, 45-47 (1991), the district
court first noted that it had the inherent power to sanction “where a party litigates in bad
faith, vexatiously, wantonly, or for oppressive reasons.” It next found that Morris was
aware of the prior rulings in this case and “therefore had no legal basis for re-filing
claims against Fifth Third that were in every way identical to claims previously
dismissed in this litigation.” It also noted that Morris had “several opportunities to
voluntarily dismiss Fifth Third,” and by not doing so, “forced the unnecessary
expenditure of time and resources to defend against frivolous and baseless claims.”
No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 4
Morris filed a motion for reconsideration of the sanctions, explaining that he did
not intend to reassert previously dismissed claims against Fifth Third. Instead, he
claimed he was merely responding to Unizan’s assertion that it would not respond to his
discovery requests because, although Morris had attached the intervenors’ complaint to
the Floyds’ motion to intervene in 2005, he never formally filed it after the district court
granted the motion. The district court denied Morris’s motion to reconsider, reasoning
that Morris never responded to the sanctions request nor explained why he did not
respond.
After a hearing on the amount of fees to be awarded, the district court sanctioned
Morris in the amount of $8,702.13. Morris appealed, raising the following challenges:
(1) the record does not support a finding of bad faith; (2) the district court failed to make
a specific finding of bad faith; (3) the district court’s use of its inherent authority
deprived him of the procedural protections of Rule 11; (4) the district court denied him
due process; and (5) the amount of fees awarded was excessive.
II.
We review a district court’s imposition of sanctions under its inherent powers for
abuse of discretion. BDT Prods., Inc. v. Lexmark Int’l, Inc., 602 F.3d 742, 751 (6th Cir.
2010).
A.
A court may assess attorney’s fees under its inherent powers “when a party has
acted in bad faith, vexatiously, wantonly, or for oppressive reasons,” Chambers, 501
U.S. at 45-46 (internal quotation marks omitted), or when the conduct is “tantamount to
bad faith,” Roadway Express, Inc. v. Piper, 447 U.S. 752, 767 (1980). We apply a three-
part test from Big Yank Corp. v. Liberty Mut. Fire Ins. Co., 125 F.3d 308, 313 (6th Cir.
1997), to determine whether the district court’s imposition of sanctions under the bad
faith standard was proper. BDT Prods., 602 F.3d at 752. This test requires the district
court to find “[1] that ‘the claims advanced were meritless, [2] that counsel knew or
No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 5
should have known this, and [3] that the motive for filing the suit was for an improper
purpose such as harassment.’” Id. (quoting Big Yank, 125 F.3d at 313).
“[T]he mere fact that an action is without merit does not amount to bad faith.”
Id. at 753 (internal quotation marks omitted). Rather, “the court must find something
more than that a party knowingly pursued a meritless claim or action at any stage of the
proceedings.” Id. Examples of “something more” include: a finding that the plaintiff
filed the suit “for purposes of harassment or delay, or for other improper reasons,” Big
Yank, 125 F.3d at 314, a finding that the plaintiff filed “a meritless lawsuit and
[withheld] material evidence in support of a claim,” First Bank of Marietta v. Hartford
Underwriters Ins. Co., 307 F.3d 501, 523 n.18 (6th Cir. 2002), or a finding that a party
was “delaying or disrupting the litigation” or “hampering enforcement of a court order,”
Chambers, 501 U.S. at 46. See BDT Prods., 602 F.3d at 753-54.
Here, the claims advanced in the intervenors’ complaint were clearly meritless
against Fifth Third because the district court had previously dismissed identical claims
with prejudice. Morris had been involved in the case for over three years and was aware
of the court’s prior rulings. He therefore knew or should have known filing the
intervenors’ complaint was meritless.
Morris’s actions after filing the complaint, which was filed in disregard of the
court’s previous orders, demonstrate that he filed it with an improper purpose. As the
district court found, “Morris had several opportunities to voluntarily dismiss Fifth Third
after the Intervening Complaint was filed, but he failed to do so.” Even if Morris could
show a proper purpose with respect to Unizan, once he learned that the other banks were
concerned that they were injected back into a case from which they were previously
dismissed, he should have taken immediate action to quell those fears. See BDT Prods.,
602 F.3d at 753 n.6 (“[A]ttorneys have a responsibility to halt litigation whenever they
realize that they are pursuing a meritless suit.”). Instead, he placed the burden on the
banks to file motions to dismiss. After seeing that Fifth Third had filed a motion to
dismiss, he did not file a response stating that he did not oppose it. On the contrary, he
did nothing with respect to that motion and filed a separate motion seeking to voluntarily
No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 6
dismiss the complaint without prejudice. The latter filing further necessitated a response
from Fifth Third. In addition, by keeping Fifth Third in the case, Morris forced Fifth
Third to attend a pretrial conference, which Morris himself failed to attend. The district
court was therefore correct that “Morris’ conduct necessitated Fifth Third’s on-going
participation in a lawsuit from which it had already been dismissed with prejudice” and
“forced the unnecessary expenditure of time and resources to defend against frivolous
and baseless claims.” These findings support a determination that Morris acted with an
improper purpose. See Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465
F.3d 642, 647 (6th Cir. 2006) (upholding sanctions where the attorney’s “actions were
taken, at the very least, in the face of an obvious risk that he was increasing the work on
the other party without advancing the litigation”).
B.
Morris argues that the district court’s imposition of sanctions was improper
because it never made a specific finding of “bad faith” or “conduct tantamount to ‘bad
faith.’”
We have “upheld a district court’s sanctions in exercise of its inherent authority
despite objections that the orders imposing the sanctions lacked specific findings of bad
faith.” First Bank of Marietta, 307 F.3d at 519. Indeed, we may affirm without an
“express finding of willfulness, bad faith or recklessness . . . if ‘the record sets forth
sufficient evidence to support [the district court’s] decision.’” Red Carpet Studios, 465
F.3d at 647 n.2 (quoting Toombs v. Leone, 777 F.2d 465, 471 (9th Cir. 1985)).
Here, while the district court did not make an explicit finding that “Morris acted
in bad faith,” it cited the applicable bad faith standard from Chambers and then
proceeded to set forth Morris’s conduct that met the standard. As explained above, the
record sets forth sufficient evidence to support the district court’s decision. Thus, the
district court’s failure to make a specific finding does not mandate reversal.
No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 7
C.
Morris next argues that Fifth Third improperly invoked the court’s inherent
authority to avoid the procedural safeguards found in Federal Rule of Civil Procedure
11, such as the separate motion requirement and the 21-day safe harbor. Inherent power
sanctions, according to Morris, are not appropriate if Rule 11 applies.
One problem for Morris is that his failure to respond to Fifth Third’s sanctions
requests left the district court with few options. Certainly, parties should be given notice
of the possibility of inherent power sanctions so that they “can present to the district
court those rules or statutes that may be more appropriate.” First Bank of Marietta, 307
F.3d at 516. If Morris believed that Fifth Third should have invoked Rule 11 instead of
the court’s inherent authority, he should have responded to Fifth Third’s requests and
presented this argument to the district court before it awarded sanctions.
In any event, Morris is incorrect that inherent power sanctions are improper if
Rule 11 also applies. The Supreme Court has indicated in multiple cases that “the
inherent power of a court can be invoked even if procedural rules exist which sanction
the same conduct.” Chambers, 501 U.S. at 49. Although a court “ordinarily should rely
on the Rules rather than the inherent power,” id. at 50, we read Chambers “broadly to
permit the district court to resort to its inherent authority to sanction bad-faith conduct,
even if the court has not expressly considered whether such conduct could be sanctioned
under all potentially applicable rules or statutes,” First Bank of Marietta, 307 F.3d at
514.
That inherent power sanctions may be proper, even if Rule 11 applies, does not
mean that Rule 11 is not pertinent to our inquiry. See id. at 516. In both Chambers and
First Bank of Marietta, inherent power sanctions were upheld even though the
misconduct was also sanctionable under Rule 11. But in both of these cases, some of the
misconduct was covered by Rule 11, while other misconduct was not. Chambers, 501
U.S. at 50-51 (filing “false and frivolous pleadings” was sanctionable under Rule 11, but
much of the party’s conduct throughout the litigation “was beyond the reach of the
Rules”); First Bank of Marietta, 307 F.3d at 518 (filing a meritless claim was
No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 8
sanctionable under Rule 11, but “noncompliance with discovery orders, delays in
providing discovery and withholding material evidence” fell outside Rule 11).
Similarly, some of Morris’s misconduct in this case went beyond Rule 11.
Rule 11 does not directly cover the disregard of court orders, and the injection of Fifth
Third back into the case was in disregard of the court’s order dismissing it with prejudice
and in disregard of the court’s order disallowing claims involving Rawhide and
International. In addition, Morris failed to respond to Fifth Third’s motion or attend a
pretrial conference, and Rule 11 does not apply to inaction that needlessly delays the
entire proceedings. Under this court’s broad reading of Chambers, the district court
could sanction Morris under its inherent authority, even though Rule 11 also applied.
See First Bank of Marietta, 307 F.3d at 514.
D.
Morris further argues that his due process rights were violated because he did not
receive fair notice and a hearing.
“In this circuit, there is no requirement that a full evidentiary hearing be held
before imposing sanctions.” Wilson-Simmons v. Lake Cnty. Sheriff’s Dep’t, 207 F.3d
818, 822 (6th Cir. 2000). What is required is that an attorney receive “fair notice and an
opportunity for a hearing on the record.” Roadway Express, 447 U.S. at 767 (emphasis
added).
Morris had fair notice of the possibility of inherent power sanctions from Fifth
Third’s motion. Contrary to Morris’s argument that the request was buried in the back
of Fifth Third’s brief, it was in fact on page one of its motion, page one of its brief, and
the supporting argument was found on pages 17-18 of its brief. A cursory review of the
motion and brief, which at a minimum Morris is expected to do with respect to motions
seeking to dismiss his clients’ claims, would have revealed the request for sanctions.
Moreover, Fifth Third’s response to his motion to dismiss without prejudice should have
further alerted him to the sanctions request.
No. 09-3999 Metz, et al. v. Unizan Bank, et al. Page 9
Morris cannot complain about not having a hearing because he never requested
a hearing before the sanctions were granted, nor did he tender any sort of response to
Fifth Third’s requests. The district court gave Morris ample time to respond or
otherwise make amends, waiting two months before awarding sanctions. It also
conducted an evidentiary hearing on the amount of the reasonable attorneys’ fees.
Hence, Morris’s due process rights were not violated.
E.
Morris’s final argument is that the sanctions were excessive because Fifth Third
could have requested dismissal in a single-paragraph motion. As an initial matter, this
argument ignores that Morris’s conduct forced Fifth Third’s attorneys to file a response
to a motion to dismiss without prejudice and to attend a pretrial conference. Both
required Fifth Third to incur legal fees. Further, Fifth Third’s attorneys are entitled to
diligently represent their client and there is no indication that the attorneys’ fees awarded
were unreasonable. See First Bank of Marietta, 307 F.3d at 526. All three attorneys
who worked on the matter testified at an evidentiary hearing. An itemized summary of
Fifth Third’s attorneys’ fees and costs was submitted to the district court. Morris did not
rebut this evidence. Accordingly, we reject Morris’s argument that the amount awarded
was excessive.
AFFIRMED.