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United States District Court, Northern District of Illinois, E.D

August 28, 1985


The opinion of the court was delivered by: Shadur, District Judge.


This Court's April 25, 1985 memorandum opinion and order (the "Opinion") suggested the possible liability of the lawyers for L.A. Muller ("Muller"), under either or both of Fed.R.Civ.P. ("Rule") 11 and 28 U.S.C. § 1927 ("Section 1927"), for a portion of the attorneys' fees and expenses incurred by Northern Trust Company ("Northern") in this action.*fn1 In response Northern petitioned for its fees and expenses (in part against Muller and in part against the lawyers), and one of Muller's lawyers — Thomas Wilson Waters ("Waters") — replied.

This Court has previously deferred its ruling on the motion because it was aware our Court of Appeals had in the works one or more cases posing the question of the proper interpretation of Rule 11 as amended in 1983. Now the Court of Appeals has spoken in Rodgers v. Lincoln Towing, Inc., 771 F.2d 194, 204-05 (7th Cir. 1985) and just last week in Frazier v. Cast, 771 F.2d 259, 263 (7th Cir. 1985), both times confirming the same reading of Rule 11 earlier suggested by this Court in the Opinion and elsewhere.*fn2 Accordingly the issue is ripe for decision.

Northern's petition has been modest. It distinguishes carefully among its counsel's various services:

    1. Muller but not his lawyers is sought to be
  made responsible for $2,703 attributable to
  preparation of the Complaint.

    2. Miscellaneous expenses of $1,305.75
  (including a skip tracer hired because Muller was
  evading service) are also sought to be attributed
  to Muller and not to his lawyers.

    3. Northern's summary judgment motion, forced
  to be pursued because of the baseless (and
  bootless) arguments advanced by Muller and his
  lawyers and rejected in the Opinion, cost
  Northern $6,633.05. That expense is asked to be
  charged against Muller and his lawyers jointly
  and severally.

Waters responds in several respects. None is persuasive.

First Waters observes accurately that Rule 11 by its terms applies only to him as the signer of the offending documents, not to the firm of Morrissey and Kay. This Court need not decide whether, under the realities of law firm practice, any room exists for reading Rule 11 more expansively than its individualized language, so as to extend liability to the firm as well as to the individual signer.*fn3 If no such room exists, any recovery from Morrissey and Kay must look to the provisions of Section 1927 (which has been applied by the courts to impose liability on all counsel for a litigant).

On that score our Court of Appeals has also recently departed from its prior strict reading of Section 1927, applying to counsel's conduct an objective test rather than one of purely subjective bad faith. As In re TCI, Limited, 769 F.2d 441, 445 (7th Cir. 1985) put it (citations omitted):

  "Bad faith" sounds like a subjective inquiry, and
  this is probably why Judge Hertz looked for
  evidence of "malice" on White's part. Despite its
  sound, however, "bad faith" has an objective
  meaning as well as a subjective one. . . . A

  lawyer has a duty, which the recent amendment to
  Rule 11 emphasizes, to limit litigation to
  contentions "well grounded in fact and . . .
  warranted by existing law or a good faith
  argument for the extension, modification, or
  reversal of existing law." Fed.R.Civ.P. 11. 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. To put
  this a little differently, a lawyer engages in
  bad faith by acting recklessly or with
  indifference to the law, as well as by acting in
  the teeth of what he knows to be the law. Our
  court has long treated reckless and intentional
  conduct as similar, . . . . A lawyer's reckless
  indifference to the law may impose substantial
  costs on the adverse party. Section 1927 permits
  a court to insist that the attorney bear the
  costs of his own lack of care.

Precisely the same principles apply to "acting recklessly or with indifference to" the facts, which are equally implicated in the handling of litigation and which are always a particular focus of a Rule 56 motion. Frazier, announcing a like principle as to Rule 11, was dealing entirely with the factual basis for counsel's argument.

All the circumstances here strongly call Section 1927, as so read, into play. Indeed in many ways Section 1927 fits counsel's conduct better than Rule 11. Northern's Petition at 4 is accurate in stating:

  Prior to Northern's attorneys' initiation of any
  work on summary judgment, this Court suggested to
  Muller's counsel during the several status
  hearings that Muller's arguments were groundless.
  Muller's attorneys nevertheless persisted in
  defending the action on patently frivolous
  grounds. As a result, Northern was forced to go
  to the expense of obtaining summary judgment.

That reflects lawyers' conduct that "so multiplies the proceedings . . . unreasonably and vexatiously" as to be subjected to personal responsibility under Section 1927.

Though Waters asserts reasons for putting Northern to its proof under Rule 56, not one of those items need have taken more than a few minutes' conversation between counsel — each acting in good faith to resolve the issue of Muller's unquestioned liability. Instead Muller's counsel forced Northern to the time-consuming and expensive summary judgment route. Waters' current arguments are cut from the same cloth as those found without merit — or worse — in the Opinion.

Accordingly this Court orders payment of the following amounts in addition to the full face amount of the Collateral Note:

    1. $4,008.75 to be paid by Muller individually;

    2. $6,633.05 to be paid by Muller, Waters and
  Morrissey and Kay or any of them (such liability
  to be joint and several).

Those amounts are ordered to be paid forthwith. Northern may determine whether, for that purpose, it requires any separate judgment or other order in addition to this one.

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