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Gibson v. Credit Suisse Securities USA, LLC

United States District Court, D. Idaho

March 14, 2019

L.J. GIBSON, et al., Plaintiffs,
v.
CREDIT SUISSE AG, a Swiss corporation, et al., Defendants,

          ORDER ON REMAND AND MEMORANDUM DECISION AND ORDER RE: MOTION TO (1) DISBURSE FINES FROM REGISTRY OF THE COURT; (2) DISCHARGE SANCTIONS ORDER; AND (3) VACATE SANCTIONS ORDERS (DOCKET NO. 866)

          Ronald E. Bush Chief U.S. Magistrate Judge

         The Court issues the following Order on Remand in response to the Ninth Circuit's April 26, 2018 Memorandum Opinion. See Gibson v. Credit Suisse Group Sec. (USA) LLC, 733 Fed.Appx. 342 (9th Cir. 2018). Also pending is the Motion of Robert Huntley, James Sabalos, Michael J. Flynn, Christopher J. Conant, and Philip H. Stillman (present and former counsel of record for Plaintiffs, collectively referred to as “Movants”) to “(1) Disburse Fines from Registry of the Court; (2) Discharge Sanctions Order; and (3) Vacate Sanctions Orders” (the “Motion”). See Mot. (Dkt. 866). Having carefully considered the record, heard oral argument, and otherwise being fully advised, the Court enters the following Memorandum Decision and Order:

         I. RELEVANT BACKGROUND

         1. On March 29, 2013, the undersigned issued a Memorandum Decision and Order (the “Sanctions Order”), (1) granting Defendant Cushman & Wakefield's Motion for Sanctions, (2) granting Defendant Credit Suisse's Motion for Order to Show Cause, and (3) denying Plaintiffs' Motion for Award of Attorneys' Fees Re: Motions by Defendants. See 3/29/13 MDO (Dkt. 352). The Sanctions Order addressed the circumstances surrounding certain of Plaintiffs' counsel's (Movants) conduct and representations relating to Michael L. Miller's declaration, affidavit, and deposition testimony. See generally id. Ultimately, this Court was “convinced, after considering the written and oral arguments of counsel, that there has been a material failure on the part of Plaintiffs' counsel in their responsibilities to this Court, as officers of this Court, in the circumstances underlying the pending motions.” See id. at pp. 17-18. The Court found that, because Plaintiffs' counsel repeatedly relied upon and made representations on the record regarding a declaration attributed to Mr. Miller but unsigned by him, they had a duty to inform the Court and opposing counsel when an affidavit that Mr. Miller subsequently did sign was materially different. See id. at pp. 18-23. Specifically, the undersigned concluded:

Such a failure is an abuse of the duties owed to the Court and constituted or was tantamount to bad faith. Such a failure delayed and hampered the litigation process by presenting a flawed and arguably false record before the Court, while at the same time asking the court to focus upon the flawed portion of that same record as a basis for deciding critical motions in the case. The Court properly can sanction such failures by Plaintiffs' counsel under its inherent powers.
Plaintiffs' counsel had a duty under Idaho Rule of Professional Conduct 3.3(a)(1) not to knowingly “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.” Plaintiffs' counsel's failure to file the signed statement of Mr. Miller, once it was received and in the context of representations in writing and orally about the facts and circumstances of Mr. Miller's unsworn testimony, constituted the equivalent of an affirmative misrepresentation. The signed “affidavit” was not the same document as the unsigned declaration. The statement of fact that the witness, Mr. Miller, would not sign a statement under oath because of fear of retaliation was no longer true, even if true at the outset, at the moment he did sign the affidavit. Further, Plaintiffs' counsel's failure to remedy such matters is a breach of a lawyer's “duty of candor to the tribunal” which warrants “reasonable remedial measures.” Plaintiffs' counsel's failure to file the signed statement when it came into their possession had the inevitable, and intended, effect of unreasonably multiplying the proceedings in this case pertaining to briefing, argument, consideration and decision upon motions to dismiss, and motions to amend. Whether or not Judge Lodge ultimately changed any of his decision upon objections (or reconsideration of his decision) to the undersigned's Report and Recommendation dated February 17, 2012 does not change this analysis or the finding made here. The failure to file the signed affidavit necessarily meant that the nature of the briefing and the argument, and the court's consideration of the evidence and decision upon the same, was different than it would have been with the addition of such evidence to the record. The Court acknowledges that Plaintiffs' counsel would have been free to argue, and no doubt would have argued, that the signed statement was of no different evidentiary importance than the unsigned affidavit. But, defense counsel would also have the argument that the signed statement was substantively different, that the characterization of a whistleblower witness worried about retaliation was unfounded, and the Court would have had that full panoply of evidence and argument to consider. When the signed statement came to light, a new round of motion practice ensued and even the very fact of the Memorandum Decision and Order is evidence that proceedings have been multiplied and additional resources of the parties and the court have been drawn upon.
The Court finds that the failure of Plaintiffs' counsel to file the signed, sworn affidavit in the circumstances described in this Decision was done recklessly at a minimum, and that such reckless conduct on the part of lawyers to this case, as officers of the court, justifies a finding that the attorneys are personally liable for excessive costs associated with such conduct. There is no question but that Plaintiffs' counsel was aware of the signed, sworn affidavit. Indeed, the record indicates that they were in repeated contact with Mr. Miller requesting him to make the sworn statement, so that it could be submitted to the Court. Yet, after submitting an unsworn declaration, and representing that a sworn statement could not be obtained because of the witness's fear of retaliation, they failed to file the actual sworn affidavit when it came into their possession. Such conduct is reckless at a minimum. Therefore, the Court finds that an award of sanctions against Plaintiffs' counsel is also appropriate under 28 U.S.C. § 1927.

Id. at pp. 21-23 (internal citations omitted).

         2. Having determined that an award of sanctions against Plaintiffs' counsel was justified under (1) the Court's inherent powers, (2) Idaho Rule of Professional Conduct 3.3, and (3) 28 U.S.C. § 1927, the undersigned ordered that Plaintiffs were precluded from using testimonial evidence of Mr. Miller for any purpose unless such evidence was obtained in deposition or courtroom testimony. See id. at pp. 23-24. Relevant here, the Court also imposed monetary sanctions upon certain of Plaintiffs' counsel (Movants) as follows:

Plaintiffs' counsel, jointly and severally, shall pay a sum to each Defendant - Credit Suisse and [Cushman & Wakefield] - to be determined upon consideration of appropriate evidence, to recompense said Defendant for the attorneys' fees and costs necessitated by the motions filed seeking sanctions as a result of the failure to file the sworn affidavit of Mr. Miller. Plaintiffs' counsel is each individually sanctioned in the sum of $6, 000.00. The Court arrives at that sum by considering the very serious nature of the decision not to file the sworn affidavit of Mr. Miller, or to advise opposing counsel of the existence of that sworn affidavit, all as further previously discussed in this Decision. Such failure unnecessarily multiplied the proceedings in this lawsuit, caused an unnecessary and unjustifiable use of the resources of the parties and the Court, constituted a material misrepresentation of the evidentiary record, and violated an attorney's duty of candor to the Court. Any sanction for those serious professional failings must serve both as a sanction for the fact of the improper conduct and as a deterrent to the lawyer, and other lawyers, who might consider taking such actions in the future.

Id. at pp. 24-25.

         3. On April 8, 2013, in anticipation of objecting to the Sanctions Order, Plaintiffs moved to stay the briefing and payment protocols outlined therein. See Mot. to Stay (Dkt. 358). Plaintiffs formally objected to the Sanctions Order on April 12, 2013. See Opp. to Sanctions Order (Dkt. 367). On April 22, 2013, the Court stayed the deadlines referenced within the Sanctions Order, pending resolution of Plaintiffs' objections. See 4/22/13 Order (Dkt. 384).

         4. On April 24, 2013, Plaintiffs moved to reconsider the Sanctions Order. See Mot. to Recon. (Dkt. 392). On August 15, 2013, the undersigned denied Plaintiffs' request for reconsideration. See 8/15/13 Order (Dkt. 408).

         5. On October 17, 2014, U.S. District Judge Edward J. Lodge affirmed the Sanctions Order (and likewise denied Plaintiffs' objections to the same). See 10/17/14 Order (Dkt. 531). In doing so, Judge Lodge agreed that Plaintiffs' counsel's conduct was sanctionable in the above-referenced respects under (1) Idaho Rule of Professional Conduct 3.3, (2) 28 U.S.C. § 1927, and (3) the Court's inherent powers. Id. at pp. 7-23. Additionally, Judge Lodge lifted the stay. See id. at p. 23.

         6. On November 7, 2014, Plaintiffs' counsel appealed the March 29, 2013 Sanctions Order, as well as Judge Lodge's October 17, 2014 Order affirming the Sanctions Order. See Not. of Appeal (Dkt. 540). On December 3, 2014, the U.S. Court of Appeals for the Ninth Circuit dismissed Plaintiffs' appeal for lack of jurisdiction. See Order (Dkt. 553).

         7. On September 8, 2015, the undersigned granted Credit Suisse's and Cushman & Wakefield's motions for costs and attorneys' fees, ordering that “[t]he previously-identified Plaintiffs' counsel, jointly and severally, shall pay $27, 834.50 to Credit Suisse . . . [and] $29, 903.50 to Cushman & Wakefield.” 9/8/15 MDO, p. 18 (Dkt. 674). The sanction represented by the reimbursement of attorneys' fees to Credit Suisse and Cushman & Wakefield thus totaled $57, 738.00. See id.

         8. On October 28, 2015, Plaintiffs moved to reconsider Judge Lodge's October 17, 2014 Order affirming the Sanctions Order. See Mot. to Recon. (Dkt. 706). On February 2, 2016, Judge Lodge denied Plaintiffs' request for reconsideration. See 2/2/16 Order (Dkt. 777).

         9. On July 27, 2016, U.S. District Judge Justin L. Quackenbush[1] granted Defendants' Motions for Summary Judgment. See 7/27/16 MDO (Dkt. 815). On August 2, 2016, the Court issued a Judgement in Defendants' favor, dismissing Plaintiffs' Fifth Amended Complaint and the claims therein with prejudice. See 8/2/16 J. (Dkt. 816).

         10. On August 17, 2016 and August 23, 2016, [2] Plaintiffs' counsel appealed (1) the undersigned's March 29, 2013 Sanctions Order, (2) Judge Lodge's October 17, 2014 Order affirming the Sanctions Order, (3) the undersigned's September 8, 2015 Order granting Defendants' motions for costs and attorneys' fees, and (4) Judge Lodge's February 2, 2016 denial of Plaintiffs' efforts to reconsider his October 17, 2014 Order affirming the Sanctions Order. See Not. of Appeal (Dkt. 819 & 822).[3]

         11. On April 26, 2018, the Ninth Circuit upheld the ruling that Plaintiffs' counsel acted in bad faith and affirmed the Court's award of attorneys' fees. See Mem., pp. 2-7 (Dkt. 859). However, only as to the Court's imposition of sanctions in the amount of $6, 000 per ...


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