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Sanctions Case Analysis

By: dmc-admin//September 13, 2006//

Sanctions Case Analysis

By: dmc-admin//September 13, 2006//

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The standard for what constitutes multiplying court proceedings “unreasonably and vexatiously” under 28 U.S.C. 1927 has been stated in many different ways.

Normally, a court selects one of those definitions and applies it, as though there were no question about the proper standard.

Here, however, the court has recognized that it has not always used the same language to state the test, and attempts reconciliation. The effort is a welcome one; the question is whether the court succeeds in its endeavor.

In one respect, it does; the court settles that subjective bad faith need not be shown.

However, the court fails to reconcile, and perpetuates, disparity in what constitutes “objective bad faith.” Much of this can be attributed to the simple fact that “objective bad faith” is an awkward term. “Bad faith” implies subjective misbehavior; attaching the word “objective” to it is a poor fit.

Some of the court’s decisions avoid the phrase altogether. In Kapco Mfg. Co. v. C&O Enters., Inc., 886 F.2d 1485, 1494 (7th Cir. 1989), for example, the court wrote, “Whether an attorney is being sanctioned acted in [subjective] good faith is not material if his conduct was objectively unreasonable (emphasis added).”

The court in the case at bar quotes another statement from Kapco: “If a lawyer pursues a path that a reasonably careful attorney would have known, after appropriate inquiry, to be unsound, the conduct is objectively unreasonable and vexatious (quoting Kapco, at 1491).”

The problem is that these statements sound like mere negligence. If a person fails to act with care, and damages result, he is negligent; if an attorney fails to act with appropriate care, and the result is that he pursues a baseless legal theory, his conduct is sanctionable as objectively unreasonable.

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Objective bad faith suffices for sanctions

Earlier in its statement of the applicable law, however, the court in the case at bar writes as follows: “The standard for objective bad faith does not require a finding of malice or ill will; reckless indifference to the law will qualify (emphasis added)(citing In re TCI Ltd., 769 F.2d 441, 445 (7th Cir. 1985).

The problem is that “reckless indifference to the law” suggests more is required than the negligence that Kapco suggests will suffice. Other cases also do; in Claiburne v. Wisdom, 414 F.3d 715, 721 (7th Cir. 2005), a case the court does note cite, the court stated that “objective bad faith” requires that the attorney be “extremely negligent.”

Ultimately, therefore, the court’s attempt at reconciliation is incomplete; the court lays to rest any notions that “subjective bad faith” must be shown, but fails to recognize that the definition of “objective bad faith” is still unclear.

That is not a problem in the case at bar, in which the conduct easily meets any standard for being objectively unreasonable; however, in other cases, this inconsistency in the court’s standard may become an issue.

– David Ziemer

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David Ziemer can be reached by email.

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