Offerpad Incorporated v. Saenz ( 2021 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Offerpad Incorporated, et al., No. CV-20-00668-PHX-DWL 10 Plaintiffs, ORDER 11 v. 12 Alfredo Saenz, et al., 13 Defendants. 14 15 Defense counsel’s conduct during this case has been unacceptable. Moreover, 16 during a show-cause hearing on the issue of sanctions, defense counsel made verifiably 17 false statements while attempting to defend her conduct. The Court thus concludes that a 18 sanction is appropriate—specifically, a six-month suspension of defense counsel’s ability 19 to practice law in the United States District Court for the District of Arizona. This order 20 also resolves Plaintiffs’ unopposed motions for attorneys’ fees and voluntary dismissal. 21 BACKGROUND 22 Defendants have been represented since the outset of this case by Brittany Burback 23 of Sublime Law, PLLC (“defense counsel”). (Doc. 15.) Plaintiffs’ overarching claim, as 24 summarized in the Rule 26(f) report, is that “Defendants have copied from Plaintiffs’ 25 website, using marks and web domains confusingly similar to Plaintiffs’ trademarks in 26 furtherance of Defendants’ directly competing business.” (Doc. 26 at 3.) 27 In June 2021, the parties informed the Court they had reached a settlement. (Doc. 28 44.) The notice explained that “[o]nce the terms of the Settlement Agreements have been 1 satisfied, the Parties will file a Stipulation to Dismiss this matter.” (Id.) Upon receipt of 2 this filing, the Court issued an order explaining that the case would be dismissed without 3 further notice on August 10, 2021 absent further action by the parties. (Doc. 45.) 4 On August 10, 2021 (the dismissal deadline), Plaintiffs filed a request for a 30-day 5 extension because Defendants had not yet satisfied all of the terms of the settlement 6 agreement. (Doc. 46 at 2.) This request was granted. (Doc. 47.) 7 On September 7, 2021 (just before the extended dismissal deadline), Plaintiffs filed 8 a request for a telephonic status conference and a further extension of the deadline. (Doc. 9 48.) In this filing, Plaintiffs’ counsel explained that Defendants had “yet to complete all 10 of the terms of their respective Settlement Agreements” and that she had “reached out to 11 [defense counsel] on multiple occasions in an effort to resolve these outstanding issues, but 12 to no avail.” (Id. at 2.) The filing identified five separate incidents, occurring over a period 13 of months, in which defense counsel failed to respond to emails and phone calls: 14 Specifically, [Plaintiffs’] counsel . . . contacted [defense counsel] by email on or about June 14, 2021, July 7, 2021, and August 10, 2021 and by phone 15 on or about June 17, 2021 and August 10, 2021. [Defense counsel] failed to respond to any of this communication. 16 (Id.) 17 The Court scheduled a telephonic status conference for September 13, 2021 to 18 address these issues. (Docs. 49, 50.) However, defense counsel did not call in for the 19 hearing on time, forcing the Court’s staff to scramble to locate her and remind her to appear. 20 During the resulting hearing, the Court “made it clear to Defendants’ counsel that her 21 conduct during this litigation—including failing to reply to communications from opposing 22 counsel and failing to appear on time for a hearing in federal court—was ‘unacceptable’ 23 and fell short of the standard of ‘basic professionalism.’” (Doc. 52.) Nevertheless, rather 24 than take any action at that time, the Court gave Defendants another two weeks to satisfy 25 the outstanding terms of the settlement agreement and simply “direct[ed] counsel to file a 26 joint statement no later than 5:00 p.m., September 27, 2021, advising the Court whether 27 the parties have fully complied with the settlement agreement.” (Doc. 50.) 28 On September 27, 2021, Plaintiffs’ counsel filed a one-sided (i.e., not joint) 1 memorandum, which explained that Plaintiffs’ counsel sent a follow-up email to defense 2 counsel on September 14, 2021; that defense counsel ignored this email and never 3 responded; that Plaintiff’s counsel sent a second email to defense counsel on September 4 22, 2021; that defense counsel responded to this email by briefly stating that she was 5 “working with [her] clients to address the outstanding items” but didn’t send a substantive 6 follow-up response afterward; that Plaintiff’s counsel sent a third email to defense counsel 7 on September 27, 2021, but again received only an incomplete response; and that Plaintiffs’ 8 counsel sent a draft of the joint memorandum to defense counsel “for review and/or 9 permission to sign” but defense counsel once again didn’t respond. (Doc. 51 at 2-3.) 10 In response to these developments, the Court scheduled a hearing for October 12, 11 2021—at which defense counsel and her clients were required to appear in person—and 12 specifically advised defense counsel to “be prepared to justify her failure to timely respond 13 to opposing counsel’s inquiries related to the most recent joint memorandum, particularly 14 in light of her previous failures to respond to inquiries from opposing counsel (which 15 failures were addressed at length during the September 13, 2021 hearing), and to show 16 cause why sanctions (including, potentially, revocation of admission to practice in the 17 District of Arizona) should not be imposed.” (Doc. 52 at 2.) 18 During the hearing on October 12, 2021, the Court asked defense counsel whether 19 she agreed with Plaintiffs’ counsel’s summary of their communications (or lack thereof) 20 during the two-week period following the September 13, 2021 status conference. In 21 response, defense counsel disputed the accuracy of Plaintiffs’ counsel summary, claimed 22 that she had responded to the September 14, 2021 email “that same day, on the 14th,” and 23 asserted that she didn’t bring a copy of that email with her to the hearing. Following the 24 adage of “trust but verify,” the Court ordered defense counsel to file a copy of the 25 responsive email by that afternoon and stated that it would review defense counsel’s filing 26 before “decid[ing] whether sanctions, including revocation to the admission of practice in 27 the District of Arizona, should be imposed based on the Defense counsel’s course of 28 1 conduct.” (Doc. 54.)1 2 That afternoon, defense counsel filed a copy of her email correspondence with 3 Plaintiffs’ counsel. (Doc. 53.) The correspondence is exactly how Plaintiffs’ counsel 4 described it in the September 27, 2021 memorandum—it reveals that defense counsel 5 ignored the email sent by Plaintiffs’ counsel on September 14, 2021. (Id. at 10.) In her 6 cover memorandum, defense counsel tacitly acknowledged this point, stating that she “was 7 out of the office from September 10, 2021 until September 20, 2021” and “responded once 8 [she] was back in the office.” (Id. at 1.) Nowhere did defense counsel explain why she 9 made false statements when asked about this issue during the hearing or apologize for 10 making those false statements. 11 Following the October 12, 2021 hearing, Plaintiffs filed a pair of motions: (1) a 12 motion for attorneys’ fees and double damages, to be assessed jointly and severally against 13 Defendants and defense counsel (Doc. 59); and (2) a motion to voluntarily dismiss their 14 claims without prejudice (Doc. 63). Defendants (and defense counsel) did not bother to 15 respond to either motion, and the time to respond has now expired. 16 DISCUSSION 17 “Any attorney admitted or otherwise authorized to practice before this Court may 18 be disbarred, disciplined, or have the order of appointment revoked after such hearing as 19 the Court may in each particular instance direct.” LRCiv 83.2(a). Additionally, “[a]fter 20 notice and a reasonable opportunity to be heard, the Court upon its own initiative may 21 impose appropriate sanctions upon [an] attorney . . . who without just cause . . . violates, 22 or fails to conform to . . . any order of the Court.” LRCiv 83.1(f)(1)(A). The Court has 23 1 The Court emphasized that even if defense counsel did respond to the September 14, 2021 email, her general lack of responsiveness was culpable, as she had been chastised 24 during the September 13, 2021 hearing for not responding to inquiries from opposing counsel, and then during the two-week period that followed, she didn’t respond to or, at 25 most, barely responded to inquiries from opposing counsel. And then, knowing there was a court-ordered deadline to file a joint memorandum, she failed to participate in drafting it 26 or signing off on it. Defense counsel responded that she was on vacation during that two- week period and didn’t remember that there was a hearing, and that on the day the 27 memorandum was due, she did not have time to respond to the memorandum drafted by Plaintiffs’ counsel because she was picking up her kids from school. In response to the 28 Court’s assertion that it was “just mind-blowing” that she did not at least file her own statement, defense counsel replied, “I don’t know what to tell you.” 1 wide discretion in choosing an appropriate sanction for such a violation. LRCiv 83.1(f)(2) 2 (“The Court may make such orders as are just under the circumstances . . . .”). 3 The Arizona Rules of Professional Conduct, which “apply to attorneys admitted or 4 otherwise authorized to practice before the United States District Court for the District of 5 Arizona,” LRCiv 83.2(e), prohibit a lawyer from knowingly making a false statement of 6 fact to a tribunal, ER 3.3(a)(1), and require a lawyer to “make reasonable efforts to expedite 7 litigation consistent with the interests of the client,” ER 3.2. Defense counsel’s litigation 8 conduct in this case has violated both of these tenets. Although she is not responsible for 9 her clients’ conduct and can’t control whether they comply with the terms of their 10 settlement agreement with Plaintiffs, it is fair to expect her to comply with such basic 11 obligations as responding to emails and calls from opposing counsel, showing up on time 12 for court hearings, complying with court-imposed filing deadlines, providing accurate 13 information in response to questioning by the Court, and being forthright and honest when 14 confronted with evidence of her past inaccurate statements. During the show-cause 15 hearing, not only did defense counsel fail to “justify her failure to timely respond to 16 opposing counsel’s inquiries related to the most recent joint memorandum, particularly in 17 light of her previous failures to respond to inquiries from opposing counsel (which failures 18 were addressed at length during the September 13, 2021 hearing), and to show cause why 19 sanctions (including, potentially, revocation of admission to practice in the District of 20 Arizona) should not be imposed” (Doc. 52 at 2), she exacerbated the situation by making 21 a false statement. 22 Defense counsel was specifically advised that her conduct—which, as noted, 23 includes both violations of ethical rules and violations of court orders—could result in the 24 revocation of her ability to practice in the District of Arizona and was provided ample 25 opportunity to show cause why the contemplated sanction should not be imposed. Thus, 26 she has been provided with all of the process that is due to her. In re Lehtinen, 564 F.3d 27 1052, 1060 (9th Cir. 2009) (“[W]hen using the inherent sanction power, due process is 28 accorded as long as the sanctionee is provided with sufficient, advance notice of exactly 1 which conduct was alleged to be sanctionable, and [was] furthermore aware that [she] stood 2 accused of having acted in bad faith.”) (internal quotation marks omitted). The Court 3 concludes, in its discretion, that a six-month suspension is appropriate here. See LRCiv 4 83.2(a) (identifying suspension as permissible sanction); In re Oladiran, 2010 WL 5 3775074, *9-10 (D. Ariz. 2010) (“The ABA Standards for Imposing Lawyer Sanctions 6 discuss the discipline appropriate for abuse of the legal process, which includes failure to 7 . . . obey court orders and rules. . . . Suspension is appropriate when a lawyer knows that 8 he is violating a court order or rule and causes interference with a legal proceeding. . . . 9 Suspension generally may extend for a period of years but should not be less than six 10 months. The Court concludes that a relatively brief suspension of six months will be 11 sufficient, but not longer than necessary, to accomplish the deterrent purposes of attorney 12 discipline.”) (citations omitted). 13 Finally, also pending before the Court are the pair of motions that Plaintiffs filed 14 after the October 12, 2021 hearing: (1) Plaintiffs’ motion under A.R.S. § 12-349 for 15 attorneys’ fees and double damages, to be assessed jointly and severally against Defendants 16 and defense counsel (Doc. 59); and (2) Plaintiffs’ motion to voluntarily dismiss their claims 17 without prejudice (Doc. 63). More than 14 days have elapsed since these motions were 18 filed and no response has been filed. 19 Under LRCiv 7.2(i), a party’s failure to respond to a motion “may be deemed a 20 consent to the . . . granting of the motion and the Court may dispose of the motion 21 summarily.” Although it is tempting, especially in light of defense counsel’s litigation 22 conduct in this case, to summarily grant the motion for attorneys’ fees and double damages, 23 the Court declines to do so. This is because the motion is facially deficient—the statute on 24 which Plaintiffs’ request is based, A.R.S. § 12-349, is inapplicable in federal court. See, 25 e.g., In re Larry’s Apartment, L.L.C., 249 F.3d 832, 838-39 (9th Cir. 2001) (reversing fee 26 award imposed under § 12-349, “question[ing] . . . the propriety of using an Arizona 27 sanction statute in federal court,” and concluding that “when fees are based upon 28 misconduct by an attorney or party in the litigation itself, rather than upon a matter of 1 || substantive law, the matter is procedural [under Evie]. ... In other words, the federal courts || must be in control of their own proceedings and of the parties before them, and it is almost || apodictic that federal sanction law is the body of law to be considered in that □□□□□□□□□□ 4|| Pacesetter Consulting LLC vy. Kaprelian, 2021 WL 4820485, *4 (D. Ariz. 2021) (“[T]he 5 || Ninth Circuit has held that § 12-349 cannot serve as the basis for an award of sanctions by || a federal court for litigation conduct occurring in federal court.”); R. Prasad Industries v. 7\| Flat Irons Env. Solutions Corp., 2014 WL 4722487, *12 (D. Ariz. 2014) (“The Court finds 8 || the Ninth Circuit’s analysis of the issue in In re Larry’s Apartment both persuasive and 9|| binding on this District Court. Therefore, the Court finds that A.R.S. § 12-349 is inapplicable here.”); Stilwell v. City of Williams, 2014 WL 1654530 (D. Ariz. 2014) (same). 11 In contrast, Plaintiffs’ motion to voluntarily dismiss their claims without prejudice 12 || is summarily granted. 13 Accordingly, 14 IT IS ORDERED that: 15 (1) Brittany Burback is suspended from the practice of law in the District of 16 Arizona for a period of six months. Defense counsel is further advised of her 17 notification obligations under LRCiv 83.2(d). 18 (2) Plaintiffs’ motion for sanctions (Doc. 59) is denied. 19 (3) Plaintiffs’ motion to dismiss this action without prejudice (Doc. 63) is 20 granted. The Clerk of Court shall enter judgment accordingly and terminate 21 this action. 22 Dated this 1st day of December, 2021. 23 24 25 f _o——— Dominic W. Lanza 26 United States District Judge °° Beth Stephenson 28 -7-