UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
June 13, 2011
BARBARA HUBBARD, PLAINTIFF,
PLAZA BONITA, L.P., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Hon. William V. Gallo U.S. Magistrate Judge
ORDER AFTER ORDER TO SHOW CAUSE HEARINGS
I PROCEDURAL BACKGROUND
On July 22, 2009, Plaintiff Barbara Hubbard (hereafter "Plaintiff" or "Barbara"), filed a Complaint against the Plaza Bonita Shopping Center, and most, if not all, of the tenants at the shopping center.*fn1 The Complaint alleges that all of the named Defendants violated the Americans With Disabilities Act (hereafter "ADA").
After the Complaint was filed, Plaintiff settled her action with numerous named Defendants. On February 25, 2010, the Court conducted a Settlement Disposition Conference with the remaining Defendants. Lynn J. Hubbard III (hereafter "Plaintiff's counsel"), appeared in person at the conference on behalf of Plaintiff. David Peters appeared in person at the conference on behalf of Defendant Flava Enterprises (hereafter "Flava"). Jonathan Block appeared by telephone at the conference on behalf of Hot Topic. Tony Bucchignani appeared by telephone on behalf of Defendant Westfield America. At that time, Defendants Hot Topic and Westfield America, inter alia, had entered into settlement agreements with Plaintiff, but Defendant Flava had not. At the conference, Plaintiff's counsel informed the Court that Plaintiff had passed away on November 13, 2009.*fn2
After the conference, the Court directed Plaintiff's counsel to file a Notice of Death pertaining to Plaintiff, pursuant to Federal Rule of Civil Procedure 25. On March 17, 2010, Plaintiff's counsel filed the Notice of Death of Plaintiff. The Notice states that Plaintiff passed away on November 13, 2009.
On March 29, 2010, Plaintiff's counsel filed a Motion to Substitute Barbara with Barbara's surviving husband, Lynn J. Hubbard, II (hereafter "Lynn").*fn3
On May 12, 2010, Plaintiff's counsel filed an Ex Parte Motion to Dismiss this action as to the remaining Defendant Flava. On June 1, 2010, Defendant Flava filed an Opposition to the Motion to Dismiss and requested that an Order To Show Cause (hereafter "OSC"), hearing be held regarding the potential falsification of Barbara's signature, after her death, on the settlement agreement with Flava.
On June 2, 2010, the District Judge assigned to this case denied Plaintiff's counsel's Motion to Substitute Barbara with Lynn because, by that time, Lynn had also passed away.*fn4
On June 23, 2010, Flava's Motion for an OSC was granted. The Order Granting the Motion for an OSC directed Plaintiff's counsel to address several topics raised by Flava's Motion. Thereafter, Plaintiff's counsel and Flava filed briefs regarding the issues that the Court directed to be addressed.
On June 28, 2010, the District Judge assigned to this case referred the OSC to the undersigned.
On October 12, 2010, the Court held a hearing on the OSC.*fn5
Prior to the hearing, Plaintiff's counsel filed his own declaration, supported by four of his other clients, that stated that the standard operating procedure for (Plaintiff's counsel) and the Disabled Advocacy Group is for clients to sign a document - it's called '(S)ignature
(A)greement' and all it characterizes is basically a special power of attorney that allows the Disabled Advocacy Group to execute any kind of settlement agreement and/or endorse any settlement check or document in connection with the specific lawsuit in question in which the client is being represented... (OSC Hearing Transcript, October 12, 2010 at 12)(emphasis added).*fn6
Pursuant to the Power of Attorney, the Court found that the signature on the Settlement Agreement provided to Mr. Peters on behalf of Flava, was not in fact, the signature of Barbara.(OSC Hearing Transcript, October 12, 2010 at 12).*fn7
At the hearing, the Court requested that counsel file further briefing on several topics discussed at the hearing. Also, the Court continued the OSC hearing to January 27, 2011. Thereafter, counsel filed the requested further briefing.
On January 27, 2011, the Court held a continued OSC hearing. At the hearing, the Court ordered Plaintiff's counsel to file Supplemental Declarations regarding the authentication of Barbara's signature. On February 10, 2011, the Supplemental Declarations were filed with the Court.
On March 24, 2011, the District Judge assigned to this case denied Plaintiff's Ex Parte Motion to Dismiss without prejudice, pending the issuance of this Order.
II ISSUES RAISED AT THE OSC HEARING
Agreement as "Power of Attorney" or "POA."
The Power of Attorney signed by Barbara in connection with this action is attached to the Declaration of Lynn Hubbard III in Response to Order To Show Cause, filed August 3, 2010, Exh. D. The Power of Attorney signed by Barbara in connection with another lawsuit, Hubbard v. Otay Ranch Town Center ,is attached to the Declaration of Lynn Hubbard III in Response to Order To Show Cause, filed August 3, 2010, Exh. E. The Court notes that the signatures on Exhs. D and E appear to be different.
The June 23, 2010 Order directed Plaintiff's counsel to address the following topics:
1. Why he should not be required to present to the Court documents and evidence that Plaintiff signed Exh. A,*fn8 attached to Defendant's Supplemental Opposition to Plaintiff's Ex Parte Motion to Dismiss and Request for Order To Show Cause (Doc. #182);
2. Why he should not be required to provide to the Court additional known and genuine signatures of Plaintiff;
3. Why he should not be required to identify appearances that Plaintiff personally made in this Court and any documents signed in connection with those appearances;
4. Why a hearing should not be held as to whether the signatures of Plaintiff in some or all of the settlement agreements in this matter have been falsified, and if so, what actions are appropriate to achieve accountability and deter those who would engage in this conduct;
5. Why he should not be sanctioned for vexatious and unreasonable multiplication of legal proceedings for:
(a) prolonging the litigation in this matter by demanding settlements involving commitments to make changes to settlement agreements after Plaintiff's death, including provisions in settlement agreements awarding attorneys fees even if the changes were not made;
(b) failing to timely disclose to the Court Plaintiff's death;
6. Why his conduct should not be reported to the State Bar of California;
7. Why he and his law firm (Law Offices of Lynn Hubbard III, Disabled Advocacy Group, APLC) and the attorneys involved in this matter should not be disqualified from further representation of parties in litigation matters in this Court.
A. Plaintiff's Counsel's Factual Response To The OSC On August 3, 2010, in response to the OSC, Plaintiff's counsel described the circumstances under which Barbara signed the settlement agreement with Flava Enterprises:
On November 11, 2009, Plaintiff's counsel met with Barbara, who was hospitalized at the time, and told her that she was too frail to continue prosecuting ADA cases. Barbara agreed and told him to settle her last case for whatever he could and give the proceeds to his father (Barbara's husband, Lynn).
On November 12, 2009, Plaintiff's counsel instructed his assistant, Kaina Schukei, to offer to settle with Defendant Hot Topic. Hot Topic counter-offered and the counter offer was accepted.
On November 13, 2009, Barbara passed away. She did not have a will. Lynn was Barbara's sole beneficiary under California law and could decide what to do with her case. Lynn instructed Barbara's counsel to "finish up" the pending lawsuit.
Over the next six weeks, Plaintiff's counsel finalized, or attempted to finalize, settlements with the remaining Defendants in the case. However, neither David Peters (hereafter "Peters"), nor his client Flava, signed the Settlement Agreement and when pressed to do so, cited Barbara's death*fn9 and his client's unwillingness to make changes to its facility because her lawsuit was moot.
On March 15, 2010, David Chamberlin (then employed by Plaintiff's counsel) sent Peters a letter informing Peters that Lynn intended to substitute himself as Plaintiff under Fed. R. Civ. Pro. 25(a)(1), and was willing to agree to the original settlement. Peters did not respond.
On March 29, 2010, Lynn moved to substitute himself as
Plaintiff. However, on March 31, 2010, Lynn passed away.
Plaintiff's counsel and his staff immediately asked Peters to stipulate to dismiss the lawsuit because there was no Plaintiff left in the case and no other person to substitute for Plaintiff. Most defense attorneys probably would have jumped at the opportunity to get out of the litigation. However, Peters declined the invitation.
Five weeks later, Plaintiff's counsel requested dismissal of this action because the action was moot.
B. Flava's Response to Plaintiff's Counsel's Factual Response
To The OSC
Flava objected to Plaintiff's counsel's recitation of the facts. He asserted that settlement offers which had been made to Flava and Hot Topic had not been accepted prior to Barbara's death. Instead, Flava and Hot Topic filed documents with the Court which show that the offers for settlement were accepted after Barbara's death.
The Certificate of Death filed by Plaintiff's counsel states that Barbara passed away on November 13, 2009 at 12:55 PM. On November 13, 2009 at 1:25 PM, Flava's counsel preliminarily accepted Plaintiff's counsel's offer for settlement. After several changes were made to the settlement agreement, on December 30, 2010, Peters informed Plaintiff's counsel that Flava agreed to sign the settlement agreement without any further changes. Plaintiff's counsel did not respond to Peters.
C. Hot Topic's Position Regarding Settlement Of The Case Hot Topic states, via the Declaration of Donna S. Gin, its attorney:
On November 12, 2009, I received a letter via facsimile from (Plaintiff's counsel's) office offering to settle the case against Hot Topic... I verbally countered Plaintiff's offer... sometime on or after November 16, 2009. verbally by (Plaintiff's counsel's) office on or
Our counter-offer was accepted around December 1, 2009. On that day, I was told by Kaina Schukei, (Plaintiff's counsel's) senior paralegal that she would send over a draft settlement had not discussed any of the terms of the settlement agreement the following day. Until that point, we agreement except for the dollar amount...
On December 7, 2009, Ms. Schukei responded (to me) via e-mail that our changes (to the settlement agreement) were acceptable to Plaintiff's counsel and that she would get me signatures shortly.
When Ms. Schukei told me she would "get signatures," I assumed she meant she would get the signatures of Plaintiff Barbara and her attorney Lynn Hubbard
(III), as those were the only signature lines on the agreement besides Hot Topic's.
On December 8, 2009, I received via facsimile a copy of the settlement agreement which had a signature in the blank for Barbara Hubbard. I believed the signature on the document was indeed that of Barbara Hubbard because I had no reason to believe otherwise. I forwarded this document to my client for signature...
Hot Topic was dismissed from this action on or about January 11, 2010.
Even with all of the foregoing communications, no one from (Plaintiff's counsel's) office ever informed me of the death of Plaintiff Barbara Hubbard, nor did I become aware of the same until long after Hot Topic was dismissed from the action. Had I known about (Barbara's) death at any time during the negotiation of the settlement, I would have immediately halted settlement discussions and notified my client of this development.
(Declaration of Donna S. Gin re: Plaintiff's Ex Parte Motion to Dismiss at 2-3)(emphasis added).
D. October 12, 2010 OSC Hearing
At the OSC hearing, the Court discussed with counsel the topics enumerated in Section II of this Order. The Court was satisfied with Plaintiff's counsel's explanations regarding several of the topics noted.*fn10 However, the authenticity of Barbara's signature on the Power of Attorney, and the survivability of the Power of Attorney after Barbara's death*fn11 continued to be issues that required further briefing. Therefore, the Court ordered counsel to address those issues in further briefing. A continued OSC hearing was held on January 27, 2011.
E. January 27, 2011 OSC Hearing
Prior to the January 27, 2011 hearing, counsel submitted further briefing required by the Court on October 12, 2010. At the hearing, counsel were given the opportunity to argue their respective positions regarding the authenticity of Barbara's signature and the survivability of the Power of Attorney after Barbara's death.
A. Documented Contradictions
Prior to the February 25, 2010 conference, Plaintiff's counsel had not informed any defendant in this case, nor the Court, that Plaintiff had passed away over three months earlier on November 13, 2009. Additionally, Plaintiff's counsel informed the Court of the following:
* that he "heard (his) Mom was gravely ill," leaving the Court with the distinct impression "that Plaintiff's counsel did not personally observe his mother's condition, but was informed by someone else."(OSC Hearing Transcript, October 12, 2010, at 5);
* that Chris Kohler (another of Plaintiff's counsel's clients) or possibly Plaintiff's counsel's father, Lynn, may substitute in as Barbara's successor in interest, leading the Court to believe that no formal decision had yet been made. (OSC Hearing Transcript, October 12, 2010, at 8);
* that "Barbara Hubbard had signed numerous blank settlement agreements (prior to her death)," leading the Court to believe that the signature on the settlement demand and agreement provided to Mr. Peters on behalf of Flava was in fact "the genuine signature of Mrs. Hubbard, Barbara Hubbard." (OSC Hearing Transcript, October 12, 2010, at 12). However, all of the representations were directly contra-
dicted by Plaintiff's counsel's sworn declaration filed on August 3, 2010, in which he stated:
* He personally observed his mother's fragile condition at her hospital bedside at which time she instructed him to settle the case quickly. (Plaintiff's counsel's Declaration at paras. 3-10; OSC Hearing Transcript, October 12, 2010, at 5-6);
* As early as November 17, 2009, but certainly no later than December 8, 2009, Lynn had assumed "unofficial"*fn12 control of this lawsuit upon Barbara's passing and that Lynn was "ratifying" settlement agreements. (Plaintiff's counsel's Declaration at paras. 17-21; OSC Hearing Transcript, October 12, 2010, at 6-10). Nowhere in the Declaration does Plain-tiff's counsel even mention that Mr. Kohler was being considered as Barbara's successor in interest.
* Barbara did not, in fact, sign numerous blank settlement agreements, but rather executed a power of attorney giving Plaintiff's counsel authority to sign a settlement agreement on her behalf, which was standard and customary practice of Plaintiff's counsel's law firm. (Plaintiff's counsel's Declaration at paras. 34-36; OSC Hearing Transcript, October 12, 2010, at 11-12).
B. Authenticity of Barbara's Signature
At the January 27, 2011 hearing, the Court found that on the record presented to it at that time, Plaintiff's counsel had failed to properly authenticate Barbara's signature on the Power of Attorney. (OSC Hearing Transcript, January 27, 2011, at 4-9). Therefore, the Court ordered Plaintiff's counsel to file supplemental declarations of two of Barbara's family members to properly authenticate Barbara's signature. On February 10, 2011, Plaintiff's counsel filed the Supplemental Declarations of Douglas Hubbard and Elora Hubbard, which properly authenticated Barbara's signature.*fn13
C. Survivability of Power of Attorney*fn14
It is an elementary rule of law that the relation of attorney and client is terminated by the death of the client..." Mallory v. Rittenhouse, 99 Cal. App. 96, 104 (1929); see also Lanza v. Bank of America National Trust & Savings Assoc., 229 Cal. App. 2d 720, 724 (1964). "Generally, a power of attorney terminates on the death of the principal. People v. Fenderson, 188 Cal. App. 4th 625, 634 (2010); see also California Probate Code § 4152(a)(4); Rest. 3d Agency §3.06 and 3.07.
In Mallory, the court held that the attorney-client relationship is terminated on the death of the client, "but an exception is made in the case of a special contract of employment, such as a specific contract to conduct a suit to final judgment, or some agreement on a fee for the entire case." Mallory at 104. Mallory was cited approvingly in Lanza, supra. In Mallory, the exception was applied to a "contract to conduct a suit to final judgment," which disposed of the whole case.
Plaintiff's counsel argues that Barbara's oral instructions to him were that he was to immediately settle the case for whatever he could get and give the funds to his father, Lynn. Therefore, Barbara's oral instructions created a "specific contract to bring (this) suit to final judgment," as quickly as possible. For this reason, the attorney-client relationship did not terminate on Barbara's death.
Flava argues that the Mallory exception does not apply because the attorney-client relationship creates an agency relationship, wherein the attorney acts as an agent for the client. To support this position, Flava cites Stoll v. Stoll, 5 Cal. 3d 687, 692 (1936). The Stoll court held that contract liability may survive the death of a contractor, but the contractor's agent's power to act on behalf of the decedent contractor may not survive the decedent's death. Flava's position is supported by Webster Real Estate v. Rickard, 21 Cal. App 3d 612, 616-617 (1972). Webster dealt with a real estate owner-broker contract in which the owner died before the property was sold. The court held that death of the owner of the property terminated the broker's agency and the authority of the broker to represent the owner in seeking a buyer for the property. The court cited the Restatement Second of Agency, which states: "One cannot act on behalf of a non-existent person." Further, an agency is terminated by the death of the principal. Estate of Friedman, 20 Cal. App. 3d 399 (1971); Jay v. Dollarhide, 3 Cal. App. 3d 1001 (1970) superceded by statute on other grounds; California Civil Code §§ 2355(b) and 2356(a).
As a result, Flava concludes that in this case, the agency was created and held for the benefit of Barbara, for her desire that she be able to gain barrier-free access to the stores at Plaza Bonita. The agency was not created for the benefit of Plaintiff's counsel. As a result of Barbara's death, the agency terminated and Plaintiff's counsel did not have the authority to act on Barbara's behalf. Consequently, Plaintiff's counsel had no authority to sign settlement agreements on Barbara's behalf after her death. The Court agrees.
The Mallory exception may apply if the Court views Plain-tiff's counsel's acts in settling Barbara's case, as bringing the suit "to final judgment." However, to bring a case to "final judgment," is obviously different from bringing a case to settlement, where a judgment is not entered. Nevertheless, a fair reading of Mallory might suggest that bringing a case to "final judgment" may be equivalent to ending the case by settlement. However, neither Plaintiff's counsel nor Flava provided the Court with any authority, nor could the Court find any authority, that defines whether bringing a case to "final judgment" is the equivalent of ending a case by settlement. Therefore, the Court does not adopt the view that the two ways of ending a case, as noted above, are equivalent.
Regardless of whether "final judgment" and "settlement" are functional equivalents or whether the attorney-client relationship survived Barbara's death, the Mallory exception does not excuse or justify Plaintiff's counsel's failure to inform opposing counsel that Barbara had died, that the signature on the settlement agreement was not hers, and that Plaintiff's counsel was relying on Mallory for authority to sign the settlement agreement and bring the case to conclusion. In other words, Plaintiff's counsel's conduct lacked the transparency and candor expected of counsel practicing before this Court.
D. The Appropriateness of Signing Barbara's Name To The
Even assuming the agency relationship extended beyond Barbara's death, Flava argues that the Mallory exception does not support Plaintiff's counsel's signing Barbara's name on an agreement without informing Flava's counsel that the signature was not Barbara's signature.
Flava goes further by accusing Plaintiff's counsel of forgery of Barbara's name. It cites to U.S. v. Price, 655 F.2d 958, 960 (9th Cir. 1981), which states that forgery is a:
"false making, with intent to defraud, of a document which is not what it purports to be, as distinct from a document which is genuine but nevertheless contains a term or representation known to be false." "A document signed by a third person using the signature of another is a forgery..." "Forgery contemplates a writing which falsely purports to be the writing of another person than the actual maker..." "Signing one's own name with the intent that the writing be received as written by another person, or impersonating another in the signature of the instrument... or signing in such a way as to make the writing purport to be that of another... are all acts of forgery." (citations omitted)(emphasis added).
Therefore, Flava argues that Plaintiff's counsel's signing Barbara's name on settlement agreements, without informing its counsel that the signature on the document was not, in fact, Barbara's signature, constitutes forgery.
Flava goes even farther by accusing Plaintiff's counsel of committing fraud. Extrinsic fraud is the failure to disclose material information. Estate of Anderson, 149 Cal. App. 3d 336 (1983). The fraud need not be completed to establish it. Intent to defraud is required. People v. Russell, 214 Cal. App. 2d 445 (1963). It is not necessary that no actual harm result from the fraud to merit disciplinary action. Resnik v. Cal. State Bar, 1 Cal. 3d 198 (1969).
Flava alleges that it acted upon the signed settlement documents as having Barbara's genuine signature on them. One of the Defendants (Hot Topic), paid money to settle its action with Barbara, in reliance that Barbara actually signed the settlement agreement. Flava asserts that it incurred significant time and expense in believing the same thing and acting pursuant thereto.
In Hallinan v. State Bar of Cal., 33 Cal. 2d 246 (1948), defense counsel in that case explicitly requested that plaintiff personally sign a release as part of the settlement of the case. However, the plaintiff's attorney instead signed the release under a power of attorney to do so, but did not inform opposing counsel that the signature was that of the attorney, not the plaintiff. The court held that an attorney who puts his client's signature on a release, with the power of attorney to do so, without informing opposing counsel that the signature is not the client's signature, is deceptive and punishable conduct. The punishable conduct was not that the attorney put his client's signature on the release, because he had the authority to do so. Rather, the punishable conduct was the failure to inform defense counsel that the signature on the release was not his client's signature, but his own.*fn15 Hallinan has been followed for the same purpose and reasoning in Aronin v. Cal. State Bar, 52 Cal. 3d 276, 286-287 (1990).
The Court finds that the situation in Hallinan is analogous to the situation presented here. Plaintiff's attorney in Hallinan had a power of attorney from his client to sign documents on the client's behalf. The attorney signed the client's signature on a release and did not inform defendant's counsel that the signature on the release was not the client's signature, despite the defendant's attorney's request that the client sign the release.*fn16 The court held that the attorney's conduct in signing the release on behalf of his client, without informing defense counsel that the signature on the release was not his client's signature, was deceptive and punishable conduct. The Court noted that the attorney's signing of his client's name on the release was not the objectionable conduct. Rather, not informing defense counsel that the signature on the release was not the client's signature was objectionable.
The Court concludes that Plaintiff's counsel (or someone at his direction) placed Barbara's signature on the Settlement Agreements with Flava and Hot Topic under an expired power of attorney to do so, but without informing Flava's or Hot Topic's counsel that he had done so. Plaintiff's counsel's conduct in not informing Flava's and Hot Topic's counsel that the signatures on the settlement agreements were not, in fact, Barbara's signature, wasdeceptive and punishable conduct. "This was an intentional deception and thus constituted moral turpitude." Aronin, 52 Cal 3d at 287.17/*fn17
17/ The Court finds that Plaintiff's counsel may have violated the following statutes and rules: California Business & Professions Code §6106, which states: The commission of any act involving moral turpitude, dishonesty or corruption, whether the act is committed in the course of his relations as an attorney or otherwise, and whether the act is a felony or misdemeanor or not, constitutes a cause for disbarrment or suspension.
If the act constitutes a felony or misdemeanor, conviction thereof in a criminal proceeding is not a condition precedent to disbarrment or suspension from practice therefor.
California Rule of Professional Conduct 3-110, which states in pertinent part:
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer...
California Rule of Professional Conduct 5-220, which states: A member shall not suppress any evidence that the member or the member's client has a legal obligation to reveal or to produce.
American Bar Association Model Rule of Professional Conduct 3.3, which states in pertinent part:
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer;...
(c) The duties stated in paragraphs (a)... continue to the conclusion of the proceeding...
American Bar Association Model Rule of Professional Conduct 4.1, which states in pertinent part: In the course of representing a client a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third person;...
American Bar Association Model Rule of Professional Conduct 7.1, which states: A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.
American Bar Association Model Rule of Professional Conduct 8.4, which states pertinent part: It is professional misconduct for a lawyer to: ...
(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;
(d) engage in conduct that is prejudicial to the administration of justice;...
Southern District of California Local Rule 83.4 which states in
Case 3:09-cv-01581-JLS -WVG Document 218 Filed 06/13/11 Page 19 of 25
There are two sources of authority under which a court can sanction a party for improper conduct: (1) 28 U.S.C. § 1927 and (2) the inherent power of federal courts to levy sanctions in response to abusive litigation practices. Lahiri v. Universal Music and Video Distribution Corp., 606 F.3d 1216, 1219 (9th Cir. 2010); B.K.B. v. Maui Police Dept., 276 F.3d 1091, 1107-1108 (9th Cir. 2002).
1. 28 U.S.C. § 1927 28 U.S.C.A. § 1927 states:
Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.
Imposition of sanctions under 28 U.S.C. § 1927 (hereafter "§ 1927") requires a finding of recklessness or bad faith on the part of the attorney sanctioned. B.K.B., 276 F.3d at 1107; Lahiri, 606 F.3d at 1219.
b. Standards of Professional Conduct. Every member of the bar of this court and any attorney permitted to practice in this court must be familiar with and comply with the standards of professional conduct required of members of the State Bar of California, and decisions of any court applicable professional conduct which are now adopted as standards of professional conduct of this court. This specification will not be interpreted to be exhaustive of the standards of professional conduct. In that connection, the Code of Professional Responsibility of the American Bar Association should be noted. No attorney permitted to practice before this court will engage in any conduct which degrades or impugns the integrity of the court or in any manner interferes with the administration of justice within the Court.
The plain language of § 1927 establishes that, when a court issues a sanctions award, it may include the costs, expenses and attorney's fees that were incurred by the aggrieved party by the sanctionable conduct. Sanctions imposed under § 1927 "must bear a financial nexus to the excess proceedings and may not exceed the "costs, expenses and attorney's fees reasonably incurred because of the sanctionable conduct." Norelus v. Denny's Inc., 628 F.3d 1270, 1297 (11th Cir. 2010). Several courts have held that a sanctions award under § 1927 may include the costs arising from the sanctions proceedings themselves. See In re Tutu Wells Contamination Litigation, 120 F. 3d 368, 387-388 n. 21 (3rd Cir. 1997) overruled on other grounds by Comuso v. Nat. R.R. Passenger Corp., 267 F.3d 331, 331 (3rd Cir. 2001); Brandt v. Schal Assoc., Inc., 960 F.2d 640, 649-651 (7th Cir. 1992); In re Stauffer Seeds, Inc., 817 F. 2d 47, 50 (8th Cir. 1987).
Further, exclusion from a sanctions award the costs incurred in obtaining the award undermines the purposes of providing for sanctions. "The time, effort and money a party must spend to get another party sanctioned... is part of (the) harm caused by the other party's wrongful conduct." Norelus, 628 F.3d at 1298. Moreover, exclusion from a sanctions award undermines the goal of deterring future similar sanctionable conduct because it would discourage the aggrieved party from pursuing sanctions. Id., at 1298-1299.
2. Court's Inherent Powers
Under its "inherent powers," a district court may award sanctions in the form of attorneys' fees against a party or counsel who acts "in bad faith, vexatiously, wantonly, or for oppressive reasons." Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997); Adams v. AllianceOne, Inc., 2011 WL 2066617 at *5 (S.D. Cal. 2011). "This inherent power derives from the lawyer's role as an officer of the court which granted admission." In re Snyder, 472 U.S. 634, 643 (1985). Under this inherent power, and unlike statutory sanctions provisions, the Court may sanction a "broad range of improper litigation tactics." Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1196 (9th Cir. 2003); Adams, supra, at *5.
Before awarding such sanctions, the Court must make an express finding that the sanctioned party's behavior "constituted or was tantamount to bad faith." Roadway Express v. Piper, 447 U.S. 752, 767 (1980), superceded by statute on other grounds as recognized in 749 F.2d 217, 222 n.4 (5th Cir. 1984)); Lahiri, 606 F.3d at 1219; B.K.B., 276 F.3d at 1108. "[A] finding of bad faith 'does not require that the legal and factual basis for the action prove totally frivolous; where a litigant is substantially motivated by vindictiveness, obduracy, or mala fides, the assertion of a colorable claim will not bar the assessment of attorney's fees.'" Id., at 1108 [quoting Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001)]. "(S)anctions are available if the court specifically finds bad faith conduct or conduct tantamount to bad faith. Sanctions are available for a variety of types of willful actions, including recklessness when combined with an additional factor such as improper purpose." Id., at 1108 (quoting Fink, 239 F.3d at 994). Bad faith can consist of "delaying or disrupting the litigation." M.M. v. Lafayette School Dist., 2011 WL 830261 (N.D. Cal. 2011) [quoting Hutto v. Finney, 437 U.S. 678, 689 n.14 (1978).
The focus of the bad faith inquiry is the sanctioned party's abuse of the judicial process. Roadway Express, 447 U.S. at 765-66. The bad faith requirement ensures that the district court's exercise of its broad power is properly restrained, and "preserves a balance between protecting the court's integrity and encouraging meritorious arguments." Id.; Adams, supra at *5.
Moreover, "the amount of an inherent powers sanction is meant to do something very different than provide a substantive remedy to an aggrieved party. An inherent powers sanction is meant to 'vindicate judicial authority.'" Mark Indus. v. Sea Captain's Choice, 50 F.3d 730, 733 (9th Cir. 1995) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 55 (1991). Nonetheless, the amount of monetary sanctions based on attorneys' fees must be "reasonable." Brown v. Baden (In re Yagman), 796 F.2d 1165, 1184-85 (9th Cir. 1986) amended on other grounds by 803 F.2d 1085 (9th Cir. 1986); Adams, supra, at *6.
Here, the Court finds that Plaintiff's counsel's conduct in this litigation, as discussed in this Order, warrants the imposition of sanctions under §1927 and its inherent authority. Specifically, Plaintiff's counsel submitted to counsel for Flava and Hot Topic a proposed settlement agreement that was represented to contain Barbara's genuine signature, when the signature was not, in fact, Barbara's signature. In presenting the settlement agreement to counsel for Flava and Hot Topic, Plaintiff's counsel failed to inform counsel for Flava, Hot Topic and the Court that the signature on the settlement agreement was not that of Barbara, but instead, penned by someone else.
The Court notes that Plaintiff's counsel first represented to it at the February 25, 2010 Settlement Disposition Conference that Barbara had signed numerous blank settlement agreements prior to her death. This representation could have been made for only one purpose: Plaintiff's counsel wanted the Court to believe that Barbara had signed the proposed settlement agreement prior to her death. However, when Flava's counsel informed the Court that the proposed settlement agreement he had received from Plaintiff's counsel was dated after Barbara's death, Plaintiff's counsel was apparently forced to provide another explanation. It stretches credulity to believe that Plaintiff's counsel simply and honestly made several mistakes of fact on February 25, 2010. The circumstantial evidence points to a different conclusion. However, the resolution of the propriety of sanctions does not turn on a resolution of the mens rea behind the February 25, 2010 misrepresentations. Whether Plaintiff's counsel was intentionally deceptive or honestly mistaken on February 25, 2010, one thing is undisputable: Plaintiff's counsel informed no one that Barbara had died while he continued to try to settle this action against Flava and Hot Topic while at the same time leading opposing counsel to believe Barbara was still alive and that she signed the settlement agreement. Plaintiff's counsel's failure to inform all counsel concerned that the signature on the proposed settlement agreements was not, in fact, Barbara's signature, would have never come to light absent Flava's counsel's presentation to the Court of Plaintiff's counsel's conduct.
After Flava's counsel discovered that the signature on the proposed settlement agreement that he received from Plaintiff's counsel did not bear Barbara's genuine signature, he brought this fact to the attention of the Court. Since the Court was presented with Plaintiff's counsel's potentially objectionable conduct at that time, the Court was required to have Plaintiff's counsel explain his conduct with respect to Barbara's signature appearing on documents dated after her death.
The Court finds that Plaintiff's counsel's conduct in this regard, and the settlement agreements he submitted to Flava's and Hot Topic's counsel and the Court, constitute recklessness and were done in bad faith. Had Plaintiff's counsel been candid with counsel and the Court, the briefing requested by the Court by both Plain-tiff's counsel and Flava's counsel, and the hearings held by the Court, would not have been necessary. As a result, the Court concludes that Plaintiff's counsel unreasonably and vexatiously multiplied the proceedings in this case.
Further, the Court concludes that Plaintiff's counsel's conduct, as discussed in this Order, was done for the purpose of leading opposing counsel to believe that the proposed settlement agreements received by them contained Barbara's genuine signature, when in fact, they did not. Plaintiff's counsel's conduct disrupted the proceedings in this litigation and has delayed its conclusion.
Therefore, the Court concludes that any sanctions to be imposed on Plaintiff's counsel will suffice to deter Plaintiff's counsel from repeating the conduct as discussed in this Order.
As a result, on or before June 27, 2011, Flava's counsel shall submit to the Court, for in camera review, his billing statements for all work and expenses incurred that directly resulted from Plaintiff's counsel's submitting to him a proposed settlement agreement in this case which purported to bear Barbara's genuine signature, but was not, in fact, Barbara's genuine signature. After the Court reviews Flava's counsel's billing statements in camera, it will issue appropriate monetary sanctions against Plaintiff's counsel.
D. Report of Conduct to the State Bar of California Since Plaintiff's counsel's conduct, as discussed in this order, may have violated statutes and Rules of Professional Conduct, (see fn. 17), the Court will report Plaintiff's counsel's conduct to the State Bar of California.
E. Disqualification From Further Representation In This
In footnote 17 of this Order, the Court noted that Plain-tiff's counsel's conduct in this litigation may have violated statutes and Rules of Professional Conduct. At this time, the Court declines to determine whether Plaintiff's counsel should be disqualified from further representation in this Court. However, pursuant to Local Rule 83.5, the Court refers Plaintiff's counsel to the Standing Committee on Discipline.