The courts decision that sanctions can only be imposed under 28 U.S.C. 1927 based on an attorneys conduct during litigation is the correct one, for the reasons given by the court. Without proceedings and a case pending, there is nothing for a party to vexatiously multiply.
Nevertheless, it would have been helpful had the court at least addressed the case of Riddle & Associates, P.C., v. Kelly, 414 F.3d 832 (7th Cir. 2005), in which the court allowed costs to be imposed for prelitigation conduct.
In that case, Judith Kelly wrote a bad check. When Riddle & Associates, the law firm retained to collect the debt, sent her a collection notice, Kelly responded by retaining Edelman, Combs & Latturner. Edelman then wrote Riddle, demanding $3,000 in tribute to refrain from filing suit under the Fair Debt Collection Practices Act.
Riddle rejected the demand, and demanded $500, lest it bring suit seeking sanctions.
Edelman did not respond, and Riddle brought suit under the Declaratory Judgment Act. Kelly counterclaimed. Ultimately, the Seventh Circuit held that Edelmans conduct was sanctionable under sec. 1927.
However, the court drew no line between Edelmans prelitigation conduct, and its conduct while proceedings were pending: We find that Edelman is responsible for causing the suit to be filed and for allowing the litigation to continue when it knew that Kelly could not win (emphasis added). Id., at 836.
The court continued, When Edelman demanded $3,000 to release a blatantly frivolous claim, the firm pursued a path that it should have known was improper; therefore, its conduct was objectively unreasonable and vexatious (cite omitted).
While the court does not address the amount of attorney fees in detail, it appears to authorize sanctions that include fees incurred prior to litigation.
The question is whether the decision in the case at bar overrules Riddle & Associates sub silentio (at least as it addresses prelitigation conduct) or if the two can be reconciled.
In the case at bar, the Todryk firms only conduct alleged to be vexatious occurred prior to commencement of litigation; in Riddle & Associates, the conduct may have began before litigation also, but it continued unabated throughout the litigation.
Arguably, Riddle & Associates could be interpreted to allow for sec. 1927 sanctions for prelitigation conduct, but only if the conduct was part of a course of conduct that continued during litigation.
However, while such a construction would be reasonable, and could be administered without difficulty, it would nevertheless conflict with the same statutory language as in the case at bar, where all the allegedly vexatious conduct occurred prior to suit.
Because the court failed to even cite Riddle & Associates, it is unclear if in a future case, on those identical facts, the prevailing party could recover attorney fees and expenses incurred prior to the filing of suit, pursuant to the holding in that case, or whether the case at bar precludes such relief.
– David Ziemer
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David Ziemer can be reached by email.