United States District Court, E.D. Michigan, Southern Division
PATTI JO CAHOO, KRISTEN MENDYK, KHADIJA COLE, HYON PAK, and MICHELLE DAVISON, Plaintiffs,
SAS INSTITUTE INC., FAST ENTERPRISES LLC, CSG GOVERNMENT SOLUTIONS, STEPHEN GESKEY, SHEMIN BLUNDELL, DORIS MITCHELL, DEBRA SINGLETON, JULIE A. McMURTRY, and SHARON MOFFET-MASSEY, Defendants.
OPINION AND ORDER DENYING MOTIONS FOR SANCTIONS BY
DEFENDANTS FAST ENTERPRISES AND SAS INSTITUTE
M. LAWSON, United States District Judge
FAST Enterprises (FAST) and SAS Institute (SAS) each have
filed motions seeking sanctions against the plaintiffs and
their attorneys for filing claims alleged to be frivolous,
and for causing unnecessary briefing on a motion to dismiss.
Both motions have been fully briefed by the parties. Because
the motion papers adequately set forth the relevant facts and
law, and oral argument will not aid in the disposition of the
motions, it is ORDERED that the motions be
decided on the papers submitted. See E.D. Mich. LR
7.1(f)(2). Because neither the plaintiffs nor their attorneys
have engaged in sanctionable conduct, the Court will deny
facts of the case are well known to the parties. The
plaintiffs alleged in their original complaint that they are
part of a class of individuals who suffered loss after the
State of Michigan's Unemployment Insurance Agency (UIA)
implemented an automated system to detect fraudulent
unemployment insurance claims, which malfunctioned. Between
2013 and 2015, the Agency used software developed by FAST and
SAS to “robo-adjudicate” insurance claims without
human oversight, which resulted in several thousand false
fraud determinations. In addition to losing their benefits,
the plaintiffs and other members of the putative class were
assessed heavy penalties and deprived of any recourse. They
now seek damages from the software and consulting companies
involved in the system's implementation, as well as from
the individual state employees responsible for the
system's continued administration.
plaintiffs filed their original complaint on March 2, 2017.
The six-count complaint alleged that entity defendants FAST,
SAS, and CSG Government Solutions violated Michigan negligent
design and products liability laws, the Fourth and Fourteenth
Amendments, the Michigan Constitution's prohibition
against self-incrimination and excessive fines, and the False
Claims Act. On May 23, 2017, the plaintiffs filed their first
motion to amend the complaint, which was dismissed for
failure to seek concurrence in compliance with the local
rules. That same day, FAST and CSG filed motions to dismiss
the complaint under Federal Rule of Civil Procedure 12(b).
30, 2017, the Court permitted the plaintiffs to file an
amended complaint, which added individual employees from the
entities and the UIA as defendants and stated thirteen counts
based on state and federal law. All four sets of defendants
responded with another set of motions to dismiss. In addition
to their Rule 12(b) motions, the FAST and SAS defendants
filed these motions for sanctions based on their apparent
disapproval of opposing counsel's pleading practices.
Since then, the Court has ruled on the defendants'
motions to dismiss and concluded that at least some of the
counts in the amended complaint pass muster, including
constitutional claims against FAST and SAS. See Cahoo v.
SAS Institute, Inc., No. 17-10657, 2018 WL 1141807 (E.D.
Mich. Mar. 2, 2018). With the disposition of those motions in
mind, the Court will address each motion for sanctions in
motion for sanctions stems from representations made to
FAST's counsel by plaintiffs' counsel about that
claims would be included in the plaintiffs' proposed
first amended complaint. Before filing its motion to dismiss,
counsel for FAST sent an email to the plaintiffs'
attorney on May 20, 2017 outlining the flaws he saw in the
complaint and seeking a conference about the motion to
dismiss he was preparing. The plaintiffs' attorney
responded on May 22, 2017 via email and agreed to drop the
counts based on the Michigan Constitution and False Claims
Act. Plaintiffs' counsel asserted at the time that other
issues raised by FAST on the remaining claims either lacked
merit or would be addressed by the proposed amended
complaint. He also suggested postponing a conference until
after the amended complaint was filed. Relying on that
communication, FAST prepared a motion to dismiss that
addressed all anticipated claims, including those based on
self-incrimination and excessive fines which were raised in
the original complaint as substantive due process violations
via 42 U.S.C. § 1983. On May 23, 2017, the plaintiffs
filed their motion for leave to amend and FAST filed its
motion to dismiss. To FAST's consternation, the
plaintiffs' proposed amended complaint did not include
counts based on self-incrimination and excessive fines under
section 1983. FAST subsequently filed the pending motion for
sanctions on July 28, 2017, the same day it filed its second
motion to dismiss the amended complaint.
argues that plaintiffs' counsel deceptively allowed it to
brief those two claims - work that ultimately was unnecessary
- and seeks attorneys' fees under 28 U.S.C. § 1927.
The plaintiffs respond that they reserved the right to make
decisions as to which claims would be pursued and were under
no obligation to inform opposing counsel of changes in their
1927 permits courts “to assess excess costs, expenses,
and attorney fees directly against an attorney ‘who so
multiplies the proceedings in any case unreasonably and
vexatiously.'” Waeschle v. Dragovic, 687
F.3d 292, 296 (6th Cir. 2012) (quoting 28 U.S.C. §
1927). “This standard is satisfied when an attorney
knows or reasonably should know that a claim pursued is
frivolous.” Ibid. (internal marks omitted).
“A court may sanction an attorney under § 1927 for
unreasonably and vexatiously multiplying the proceedings even
in the absence of any ‘conscious
impropriety.'” Hall v. Liberty Life Assur. Co.
of Boston, 595 F.3d 270, 275 (6th Cir. 2010) (quoting
Rentz v. Dynasty Apparel Indus., Inc., 556 F.3d 389,
396 (6th Cir. 2009)). The moving party must show
“something less than subjective bad faith, but
something more than negligence or incompetence.”
Id. at 276 (internal marks and citations omitted).
cites four unpublished cases from this circuit in support of
its position. Those cases, however, do not help FAST overcome
the high bar set for an award of attorney's fees or costs
under section 1927. The circumstances in those cases differ
markedly from those before the Court. See Liberty Legal
Found. v. Nat'l Democratic Party, 575 F. App'x
662, 663 (6th Cir. 2014) (affirming sanctions against
plaintiff's counsel under section 1927 following district
court's grant of defendant's motion to dismiss claims
of misrepresenting Barack Obama's citizenship
qualification to be President of the United States);
Bailey v. Papa John's USA, Inc., 236 F.
App'x 200, 205 (6th Cir. 2007) (affirming sanctions under
Rule 11 and section 1927 where plaintiffs' counsel did
not withdraw baseless claim after discovery); Ruschel v.
Nestle Holdings, Inc., 89 F. App'x 518, 520-22 (6th
Cir. 2004) (affirming award of attorneys' fees as a
condition on leave to amend complaint where plaintiff
launched a series of “unconventional and dilatory
filings designed to terminate his action without
prejudice”); Blumberg v. Ambrose, 2015 WL
1737684, at *4-5 (E.D. Mich. Apr. 16, 2015) (awarding
attorney's fees as a condition on leave to amend where
plaintiff waited 12 months to file motion to amend). It
cannot fairly be said that plaintiffs' counsel's
course of conduct here rises to the level of the offending
attorneys' actions in those cases. As the plaintiffs note
in their response, plaintiffs' counsel were entitled to
revise the proposed amended complaint as they deemed
necessary up until the time of filing.
appears that FAST's main grievance here is that
plaintiffs' counsel did not give any indication in his
May 22, 2017 email that he intended to drop the
self-incrimination and excessive fines claims from the
amended complaint he was preparing, and which he filed the
next day. FAST seeks to penalize plaintiffs' counsel for,
apparently, changing his mind about the viability of those
claims between the time he sent the email on the morning of
May 22, 2017 and when he filed the motion to amend the
complaint on the afternoon of May 23, 2017. (FAST filed its
motion to dismiss about an hour later.) It is difficult to
see how that course of conduct can be characterized as
“vexatious” under any definition of the term. And
it also is not clear how those exchanges might have impacted
FAST's attorney, who was already working on a motion to
dismiss when the plaintiffs' attorney's email
arrived. Moreover, that the plaintiffs ultimately abandoned
arguably non-meritorious claims in their proposed amended
complaint undermines a finding that their attorneys
unreasonably and vexatiously multiplied the proceedings.
purpose [of section 1927] is to deter dilatory litigation
practices and to punish aggressive tactics that far exceed
zealous advocacy.” Red Carpet Studios Div. of
Source Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th
Cir. 2006) (citing Jones v. Continental Corp., 789
F.2d 1225, 1230-31 (6th Cir. 1986)). FAST filed a motion to
dismiss based on claims it anticipated would be stated in the
proposed amended complaint. It is not uncommon for parties to
prepare arguments against claims that are abandoned before
the Court rules on them. Section 1927 contemplates misconduct
that goes beyond the bounds of routine litigation tactics.
All that can be said about ...