Claims and Bad Faith Law Blog

SANCTIONING BAD FAITH CONDUCT OF ATTORNEYS, PARTIES: INHERENT v. STATUTORY AUTHORITY.

Federal courts, it has been held, have at least two kinds of authority to sanction bad faith conduct of attorneys and parties.

One source of their authority is inherent.  A federal court can sanction a lawyer or a party for acting in bad faith, vexatiously, wantonly or for oppressive reasons.  The standard for imposing inherent sanctions is subjective.  JQ Adams & Sons, Inc. v. Scottsdale Ins. Co., NO. 3:21-cv-492-TJC-PDB, 2022 WL 2643587, at *6 (M.D. Fla. July 8, 2022) (Barksdale, USMJ).

A second source of their authority is under 28 U.S.C.A. § 1927.  The statute authorizes sanctions for unreasonable and vexatious conduct,  which has been held to mean virtually the same thing as bad faith.  The standard is objective.  When the standard is applied to lawyers, the standard measures the conduct of the particular lawyer at bar, against how a reasonable lawyer would have acted.  JQ Adams & Sons, Inc. v. Scottsdale Ins. Co., NO. 3:21-cv-492-TJC-PDB, 2022 WL 2643587, at *6 (M.D. Fla. July 8, 2022) (Barksdale, USMJ).

Whatever the source of sanctions authority, sanctions for bad faith conduct is definitely not good faith.

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NON-RETAINED EXPERT WITNESSES, COLORADO INSURANCE CASE: DISCLOSURE INVALID, NO SANCTIONS.

In Roof Rehab, LLC d/b/a Rhino Roofing, LLC v. Travelers Cas. Ins. Co. of Am., No. 20-cv-01863-RMR-NYW 2021 WL 5579053 (D. Colo. November 30, 2021) (Wang, USMJ), a United States Magistrate Judge wrestled with an unusual motion.  The defendant insurance carrier filed a motion to exclude the testimony of expert witnesses who had not been retained in an insurance case.  The carrier contended that the experts in question had not been disclosed as the Federal Rules of Civil Procedure require non-retained expert witnesses to be disclosed.

          The federal magistrate judge agreed that the non-retained expert witnesses in this case were not disclosed by the plaintiff as the Rules require, but that was not the only thing that the Court had to decide in order to resolve the defendant's motion to disqualify their testimony.  The Court also had to consider the Rules regarding sanctions including prohibiting an expert's testimony.

          The starting point was Federal Rule of Civil Procedure 26:

    Before considering whether Plaintiff's expert disclosures should be stricken and the experts precluded from testifying at trial, the court must first determine whether there was a Rule 26(a) violation. As set forth above, Rule 26(a) requires that expert disclosures of non-retained expert witnesses include (1) the subject matter on which the witness is expected to present evidence and (2) a summary of the facts and opinions to which the witness is expected to testify. Fed. R. Civ. P. 26(a)(2)(C)(i)-(ii).

Roof Rehab, 2021 WL 5579053, at *2.

          The non-retained expert witnesses in question were Ryan Verstreater, Kyle Larson, and Toni Morrow.  For various reasons, the plaintiff's disclosures failed to satisfy Rule 26(a) as to each of them.  For some, the plaintiffs only disclosed that the witness would testify in accordance with documents that had been produced including in one case a report; for another the plaintiffs disclosed the same thing, namely that the witness would testify according to a report, but the plaintiffs had not produced the report.

          For all these reasons, none of the non-retained trio of expert witnesses were sufficiently disclosed under Rule 26(a).  However that did not end the matter.  The Magistrate Judge went on to consider whether sanctions should be imposed under Federal Rule of Civil Procedure 37.  The defendant carrier had requested that the experts' proffered testimony be barred from this litigation.

          The Magistrate Judge ruled that prohibiting the opinion testimony of these proffered experts was too severe a sanction under Rule 37 for the plaintiff's clear noncompliance with Rule 26(a).   Instead, the Magistrate followed the Tenth Circuit's standard In exercising her discretion that when a party seeks to exclude evidence because of alleged misconduct in discovery, the misconduct at issue must be shown to substantially interfere with that party's preparation for trial, in sum and in substance.  The Court found that there was no such substantial interference here.  Roof Rehab, 2021 WL 5579053, at *8.

          "In sum," said the Court, ...

while I find that Plaintiff's affirmative expert disclosures failed to comply with the substantive requirements of Rule 26(a)(2)(C), I find that any prejudice resulting from this failure can be cured by requiring Plaintiff to supplement its disclosures. Accordingly, the Motion to Strike is DENIED insofar as it seeks to strike the expert testimony of Messrs. Verstreater and Larson and Ms. Morrow. In so ruling, the court does not pass on the admissibility of any of Plaintiff's non-retained expert testimony, a determination which is reserved for the presiding judge. In addition, Plaintiff is ORDERED to produce supplemental expert disclosures which comply with Rule 26(a)(2)(C) [i.e., "with specific information reflecting (1) the subject matter upon which the witnesses is expected to present expert testimony; and (2) a descriptive summary of the facts and opinions to which the witness is expected to testify"], no later than December 10, 2021. 

Roof Rehab, 2021 WL 5579053, at *8 (emphasis in original).

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"BAD FAITH" ATTORNEY'S FEES EXPOSURE: LITIGIOUS PLAINTIFFS IN ELECTION CASES?

(Photograph Brennan Linsley / Associated Press)

Recently filed litigation has caused me to wonder about "bad faith" attorney's fees liability.  First, let me describe the lawsuits that have caused the wondering.

In Texas, the same person or group of people reportedly filed the same lawsuit more than once challenging the legality of drive-through voting in Harris County (Houston).  They filed in Texas State Court to begin with, ultimately losing at every level all the way to the Supreme Court of Texas, according to the confusing reporting.  Then they filed in a U.S. District Court in Texas and they lost there.  Then they filed an appeal to the Fifth Circuit Court of Appeals.  My understanding is that they lost again there.

Other people have also filed their own "one-note" lawsuit but in different States, all in Federal Court.  In Georgia, Pennsylvania, and Wisconsin there is a lawsuit filed in a Federal District Court in each state by the losing candidate.   The same losing candidate filed in each.  It is confusing, at least before looking more closely at each of these lawsuits, but apparently two are to stop counting votes and the third is for a re-count.  Presumably the votes have already been counted once before the recount litigation was filed, or else there could not be a "recount" yet, but as I say, the reports are confusing.

I want to temporarily put aside the question of Federal jurisdiction to adjudicate State election matters, and concentrate here on the issue of exposure to "bad faith" attorney's fees in Federal Court.

Having laid out the facts for the moment, here now is the law.  My understanding has long been that there can be exposure under Federal Rule of Civil Procedure 11, under Federal Appellate Rules and under State Court equivalents for parties and their lawyers for bad faith in litigation.

Did the defendants and their lawyers even request attorney's fees in any of these cases for having to go through a "Groundhog Day" kind of litigation?

Parenthetically, if they did not request attorney's fees, did they request some kind of sanctions for this conduct?  I am not asking why the Courts did not assess attorney's fees or sanctions; I wonder if the defendants and their lawyers even asked for them.  Why should the defendants have to bear the full burden of their attorney's fees for repeatedly having to defend the same losing propositions?

I am going to look into this exposure in more detail.  In the interim, let's all of us keep an eye on the lawsuits being filed, and on who files them and who pays for them.

Assessing "bad faith" attorney's fees and sanctions, along with many situations requiring good faith and fair dealing, are discussed in § 2:7 in 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d ed. and 2020 Supps. Thomson Reuters West).  Attorney's fees awarded in a variety of cases are the subject of §§ 13:12 -13:14 in Volume 2, id.

Please read the disclaimer.  ©2020 Dennis J. Wall.  All rights reserved.

IMPOSING ATTORNEY SANCTIONS FOR BAD FAITH.

When an attorney acts in bad faith in a court proceeding, the standard of proof for imposing bad-faith sanctions may not make any difference.  That is what a U.S. Magistrate Judge held In Lanard Toys Ltd. v. Dolgencorp LLC, NO. 3:15-CV-849-J-34PDB, 2019 WL 1003134, at *2 n.3 (M.D. Fla. March 1, 2019) (Barksdale, USMJ).

    In that case, the Court ultimately denied a defendant's request either for dismissal of the case with prejudice or alternatively for sanctions regardless of what standard of proof applies to imposing attorney sanctions for "subjective bad faith."  The defendant's request in that case was bottomed on the Court's "inherent powers."  This did not persuade the Magistrate-Judge.

    The Court held in this case that it denied the defendant's motion for sanctions whether the Court applied a high standard of clear and convincing proof or a lower standard more or less based on the circumstances.  Lanard Toys Ltd. v. Dolgencorp LLC, NO. 3:15-CV-849-J-34PDB, 2019 WL 1003134, at *2 n. 3 (M.D. Fla. March 1, 2019) (Barksdale, USMJ).

These and many other issues of bad faith are discussed in Chapter 2, titled History and Contrasting Good Faith Requirements, in Volume 1 of Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Third Edition, 2020 Supplements in process).

Please read the disclaimer. ©2020 Dennis J. Wall.  All rights reserved.