United States Court of Appeals
For the First Circuit
No. 02-2703
TOP ENTERTAINMENT, INC., ANGELO MEDINA, and
STAR ENTERTAINMENT, INC.,
Plaintiffs, Appellees,
v.
WATSSON HEBERT TORREJON,
as Assignee for Maria Ortega,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jaime Pieras, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella, Circuit Judge,
and Lynch, Circuit Judge.
Kevin Little with whom Law Offices of David Efron was on brief
for appellees.
Manuel R. Lopez with whom Wilson Suarez & Lopez was on brief
for appellant.
November 20, 2003
LYNCH, Circuit Judge. Watsson Hebert Torrejon, as
assignee defendant for Maria Ortega, appeals the district court's
denial of sanctions under Puerto Rico R. Civ. P. 44.1(d). For the
reasons that follow, we vacate and remand.
Plaintiffs Top Entertainment, Inc., Angelo Medina (d/b/a
Producciones Angelo Medina), and Star Entertainment, Inc. brought
a contract action in September 1999 against Maria Ortega (d/b/a
Servitel) in federal district court in Puerto Rico. The district
court found that the original complaint was vague and cursory and
ordered plaintiffs, in an Initial Scheduling Order, to detail the
terms of the parties' contractual relationship and how those terms
were breached. Plaintiffs neither complied with this order nor
sought an extension. The court then ordered plaintiffs to show
cause why the case should not be dismissed for noncompliance with
the scheduling order. Plaintiffs filed a lame response in which
they offered a string of implausible excuses and added new factual
allegations that were completely inconsistent with the allegations
in the original complaint. The court found that plaintiffs had
engaged in extreme misconduct in failing to comply with the
scheduling order and dismissed the action with prejudice.
In Top Entm't Inc. v. Ortega, 285 F.3d 115 (1st Cir.
2002), this court addressed plaintiffs' appeal from that dismissal
for failure to comply with the Initial Scheduling Order. This
court noted that plaintiffs had made a complete about-face in the
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district court from the position stated in their complaint when
they belatedly attempted to revise their allegations in response to
the court's order to show cause. 285 F.3d at 117, 118.
Furthermore, plaintiffs' counsel admitted that the allegations in
the original complaint were false. Id. at 120. This court noted
that it was "apparent that the complaint violated Rule 11." Id. at
118. We also noted that plaintiffs' counsel had made
misrepresentations to the district court and had willfully
disobeyed the district court's order. Id. at 119. Accordingly, we
affirmed the dismissal and awarded double costs and attorney's fees
of $2,000 to defendant because plaintiffs' appeal was frivolous.
Id. at 119-20. The opinion issued on April 5, 2002. Mandate
issued on May 17, 2002.
Plaintiffs did not pay the sums ordered by this court.
On September 30, 2002, Watsson Hebert Torrejon, Ortega's assignee,
filed a Motion to Compel Compliance with Mandate of First Circuit
Court of Appeals and for Contempt. That same day, Torrejon filed
a Motion for Sanctions under Rule 44.1(d) of the Puerto Rico Rules
of Civil Procedure. The motion alleged that plaintiffs and their
attorney had acted, in the language of Rule 44.1(d), "obstinately
or frivolously" in bringing a baseless claim, in pursuing a
frivolous appeal, and in refusing to comply with this court's
order. Defendant sought to recover over $150,000 in attorney's
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fees, travel costs, and other litigation expenses. Plaintiffs
filed no opposition to this motion.
On October 23, 2002, the district court ordered
plaintiffs and their counsel to pay the sanctions imposed by this
court by November 21, 2002 or face further sanctions. The district
court denied the motion for contempt and denied defendant's
application for the further fees that resulted from plaintiffs'
failure to comply with this court's order. On November 20,
plaintiffs and their counsel finally complied with this court's
sanctions order.
Also on October 23, 2002, the district court responded to
defendant's Motion for Sanctions with the following order:
Defendants' request for further sanctions is hereby
DENIED as the Court views the sanctions already imposed
on Plaintiffs as adequate.
Torrejon appeals from this denial of his Rule 44.1(d) motion.
I.
The gist of defendant's appeal is that once a
determination has been made that a party or its lawyer has acted
obstinately or frivolously, then under Puerto Rico R. Civ. P.
44.1(d), the district court must impose sanctions in the amount of
the moving party's attorney's fees. Defendant argues that this
court's determination that the original complaint violated Rule 11
and the district court's earlier dismissal of the action must mean
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that plaintiffs acted obstinately and frivolously, thus satisfying
the preconditions of the rule.
Rule 44.1(d) provides:
(d) Attorney's Fees. -- In the event any party or its
lawyer has acted obstinately or frivolously, the court
shall, in its judgment, impose on such person the payment
of a sum for attorney's fees which the court decides
corresponds to such conduct.
Our review of the district court's denial of the Rule 44.1(d)
motion is for abuse of discretion. Newell P.R., Ltd. v. Rubbermaid
Inc., 20 F.3d 15, 24 (1st Cir. 1994). Where a legal error is
committed, there is by definition an abuse of discretion. Goya
Foods, Inc. v. Wallack Mgmt. Co., 290 F.3d 63, 75 (1st Cir. 2002).
The basic parameters that should guide the district court
in applying Rule 44.1(d) are well established. See Correa v.
Cruisers, A Division of KCS Int'l, Inc., 298 F.3d 13, 30-31 (1st
Cir. 2002). The Supreme Court of Puerto Rico has stated: "The
main purpose of awarding attorney's fees in cases of obstinacy is
to impose a penalty upon a losing party that because of his
stubbornness, obstinacy, rashness, and insistent frivolous attitude
has forced the other party to needlessly assume the pains, costs,
efforts, and inconveniences of a litigation." Fernández Mariño v.
San Juan Cement Co., 18 P.R. Offic. Trans. 823, 830 (1987).
This court has explained that under Rule 44.1(d), "[a]
finding of obstinacy requires that the court determine a litigant
to have been unreasonably adamant or stubbornly litigious, beyond
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the acceptable demands of the litigation, thereby wasting time and
causing the court and the other litigants unnecessary expense and
delay." De León López v. Corporación Insular de Seguros, 931 F.2d
116, 126 (1st Cir. 1991). Once the court has determined that a
party has engaged in obstinate conduct, the case law holds that
imposition of attorney's fees is mandatory. Fernández Mariño, 18
P.R. Offic. Trans. at 829; Correa, 298 F.3d at 30; Dopp v.
Pritzker, 38 F.3d 1239, 1252 (1st Cir. 1994); cf. P.R. R. Civ. P.
44.1(d) (stating that the court "shall" impose attorney's fees in
cases of obstinacy). However, the court, in its discretion, may
determine the amount of fees awarded. Correa, 298 F.3d at 30;
Dopp, 38 F.3d at 1252.
The language of Rule 44.1(d) itself does not require an
award of "reasonable" attorney's fees; the rule leaves it to the
judgment of the court to pick a sum that "corresponds to such
conduct." Still, given the purposes of the statute, the
reasonableness of the fees awarded in light of the misconduct that
took place is surely a factor in evaluating whether there was an
abuse of discretion.
There are several possible interpretations of the
district court's order denying Torrejon's Motion for Sanctions.
Plaintiffs maintain that the district court denied sanctions
because their conduct was not obstinate or frivolous. They point
to the fact that defendant's Motion for Sanctions was denied, not
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granted, and to the court's finding that the existing sanctions
were adequate. But if the basis for the district court's order was
that none of plaintiffs' conduct was obstinate or frivolous, that
would be hard to square with plaintiffs' admission that the
original complaint was false and with this court's conclusion that
the filing of that complaint violated Rule 11. Plaintiffs argue
that their late-tendered revision of the complaint was proper;
defendant strenuously asserts that it was not and that, in
addition, plaintiffs consistently failed to comply with discovery
deadlines and other court orders. In any event, there was no
determination by the district court of the adequacy of the belated
filing because the case was dismissed for failure to comply with
the Initial Scheduling Order.
Alternatively, the district court may have implicitly
concluded that the plaintiffs' actions were obstinate or frivolous,
but thought that the sanctions imposed by this court for the
frivolous appeal were adequate to cover any misconduct in the trial
court as well. If so, that would be problematic. The sanctions
imposed by this court were for conduct on appeal, not conduct in
the trial court. See Top Entm't, 285 F.3d at 119 (imposing
sanctions "based on the frivolity of this appeal").
Another alternative is that the district court implicitly
found the plaintiffs' actions in the district court to be obstinate
or frivolous, properly did not consider the sanctions imposed for
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the frivolous appeal, and nevertheless concluded that the sanction
of dismissal imposed by the district court was alone enough. That,
too, would be problematic. The district court's dismissal was
entered under Fed. R. Civ. P. 37(b)(2) and 41(b) and Rule 314(4) of
the Local Rules for the District Court for the District of Puerto
Rico. The dismissal did not purport to be related to Rule 44.1(d).
Rule 44.l(d) embodies a policy judgment by the Puerto Rico
legislature that obstinate and frivolous actions require the
imposition of some attorney's fees as a sanction.
II.
This leaves one more issue. Watsson Hebert Torrejon has
sought attorney's fees against plaintiffs' counsel, David Efron,
for having filed a motion with this court to dismiss the appeal,
inter alia, for lack of standing on the grounds that there was no
valid assignment from Ortega to Torrejon, and for purported
misconduct. We agree that the motion was baseless and frivolous
and that the actions of plaintiffs' counsel deserve sanction. In
the earlier appeal, this court granted the assignee's motion to
substitute parties on his filing of copies of a January 7, 2002
Irrevocable Assignment and of Ortega's January 16, 2002 death
certificate. The district court also permitted substitution. The
issue raised by the motion had been twice decided against
plaintiffs when the motion was filed. This conduct "unreasonably
and vexatiously" multiplied the proceedings in this case and thus
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violated 28 U.S.C. § 1927. We award Torrejon $4,000 to cover
reasonable attorney's fees, costs, and expenses generated by the
baseless motion to dismiss filed by plaintiffs' attorney. The
award is against attorney David Efron.
III.
For these reasons, we vacate the order and remand to the
district court for reconsideration of defendant's Rule 44.1(d)
motion, which is premised on very serious allegations. Costs of
appeal are awarded to Watsson Hebert Torrejon.
In addition, Watsson Hebert Torrejon is awarded
attorney's fees, costs, and expenses under 28 U.S.C. § 1927 against
attorney David Efron in the amount of $4,000.
So ordered.
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