Farmer Ex Rel. Estate of Farmer v. Banco Popular of North America , 791 F.3d 1246 ( 2015 )

FILED
United States Court of Appeals
Tenth Circuit
June 30, 2015
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
GEORGE FARMER, (a/k/a George L.
Farmer), individually and as Executor
of the Estate of George H. Farmer,
Plaintiff-Appellant,
v. No. 14-1423
BANCO POPULAR OF NORTH
AMERICA; JOHN DOES 1-100,
Defendants-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 11-CV-1268-WYD)
George Farmer, Longmont, Colorado, Pro Se.
Sanjay Shivpuri, Chuhak & Tecson, P.C., Chicago Illinois, for Defendant-Appellee
Banco Popular of North America.
Before MORITZ, PORFILIO, and BALDOCK, Circuit Judges. *
BALDOCK, Circuit Judge.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
This matter was previously before the Court on Plaintiff George Farmer’s
appeal from a district court order, in the nature of a mandatory injunction, directing
Farmer to perform under the terms of a settlement agreement he reached with
Defendant Banco Popular a year earlier. We affirmed. Farmer v. Banco Popular,
557 F. App’x 762 (10th Cir. 2014) (unpublished), aff’g 2013 WL 2112428 (D. Colo.
2013). Now here we are again, this time to consider Farmer’s appeal from a district
court order imposing fees and costs on him as a punitive sanction for his extended
delay in executing the settlement. We exercise jurisdiction under 28 U.S.C. § 1291,
and again affirm, while modifying the district court’s reasoning and the amount of
sanctions imposed. See Stan Lee Media, Inc. v. Walt Disney Co., 774 F.3d 1292,
1296 (10th Cir. 2014) (recognizing the authority to “affirm on any grounds supported
by the record.”); Valley Improvement Ass’n, Inc. v. United States Fid. & Guar.
Corp., 129 F.3d 1108, 1126 (10th Cir. 1997) (recognizing the authority to modify a
district court judgment).
I.
Our prior decision recited in detail Farmer’s ongoing conduct that led the
district judge to “warn that he would impose the most severe sanctions and penalties
if the parties did not comply with his order” enforcing the settlement. Farmer, 557
F. App’x at 766. We will not repeat verbatim the tangled and tortuous history of the
case ably set out in Part I there. Instead, we simply adopt that factual recitation and
restate here only the more salient facts bearing on our review.
2
This litigious ordeal began when Farmer, a resident of Colorado and a licensed
attorney who insists on representing himself, sued Banco under federal and state law
to challenge Banco’s by-all-appearances legitimate demand that he pay off the full
amount owed under a $150,000 Home Equity Line of Credit (HELOC) his deceased
father obtained in 2001. 1 On June 15, 2012, the parties informed the district court
they had reached a settlement and “placed the terms of a settlement agreement on the
record.” Id. at 764. Banco was to pay Farmer $30,000 and forgive some principal,
unpaid interest, and attorney’s fees. Farmer’s payment of $137,380.94 in satisfaction
of the HELOC was then due Banco on October 15, 2012. But soon, Farmer “began
to negotiate a number of the . . . terms of the draft agreement.” Id. On July 2, Banco
“sent Farmer the completed settlement agreement, but Farmer sought changes to the
exhibits.” Id. These exhibits included a deed in lieu of foreclosure and a satisfaction
of mortgage. After Farmer received the revised exhibits he still would not sign the
settlement agreement, but “again sought more changes, including the amount, timing,
and structure of the payment.” 2 Id.
1
Following his father’s death in 2002, Farmer continued for an extended
period of time to use the encumbered property located near the New Jersey shore and
write checks against the credit line, purportedly in his capacity as executor of
his father’s estate. As a result of a 2010 investigation into past-due payments, Banco
became aware that Farmer was accessing his deceased father’s credit line. See
Farmer, 557 F. App’x at 763.
2
We are well aware that the district court’s order enforcing the settlement
recited the events of July 2012 in a somewhat different manner, suggesting Plaintiff
may not have been responsible for delaying the settlement prior to July 20, 2012.
(continued...)
3
On August 7, 2012, Banco informed Farmer it would file a motion to enforce
the settlement agreement unless he tendered the executed agreement before a court
hearing the next day. In an email to Banco the next day, “Farmer stated that he was
‘in agreement with the last version of the Settlement Agreement.’” Id. “But Farmer
challenged the request that, because [his father’s] estate had not been closed within
one year, he had to sign the attached real estate documents in his capacity as heir and
executor. The parties’ further discussions proved fruitless, so Banco . . . filed a
motion to enforce.” Id. at 764–65. Responding to Banco’s motion, Farmer told the
court the settlement agreement “‘as drafted is fine’ . . . and in fact he asked the court
to ‘enforce the [s]ettlement [a]greement only (pursuant to the terms that were placed
on the record on June 15, 2012)’ and extend his repayment date.” Id. at 765.
Notwithstanding his prior representations to the court, on August 29, 2012,
Farmer sought to reduce his net payment of $107,380.34 under the terms of the
agreement to $100,000, but pay it by October 1 rather than by October 15. The court
held another hearing on September 10 at which Farmer again told the court the
settlement was fine: “‘[W]e are all in agreement to enforce the settlement,’ and ‘the
only thing that remains is the date that my payment is due.’” Id. (internal brackets
2
(...continued)
See Farmer, 2013 WL 2112428, at *2. Nonetheless, we will follow the facts as
stated in our prior decision. See United States v. Alvarez, 142 F.3d 1243, 1247 (10th
Cir. 1998) (explaining that absent new evidence or new law that would call a prior
panel decision in the same case into question, we normally follow that decision).
4
and ellipses omitted). The parties then agreed that Banco would not pay Farmer
$30,000 as previously agreed, but instead, Farmer would pay Banco $107,380.34 by
November 15, 2012. “Banco Popular sent Farmer an agreement reflecting the new
amount and due date, but instead of signing, Farmer asked for changes and additions.
Banco Popular refused most of those changes and asked Farmer to sign the revised
agreement, which he never did.” Id.Two days before Farmer’s November 15 payment was due, “Farmer sought to
add a liquidated damages provision and a paragraph stating that Banco Popular
would not issue Form 1099 [presumably for forgiveness of a portion of the debt].
He also sought a six-week extension on his due date because Hurricane Sandy . . .
had delayed an expected loan from his cousin.” Id. Farmer then refused Banco’s
offer to extend the payment deadline if he would sign the agreement absent these
newly proposed changes, whereupon Banco filed a motion to enforce the revised
settlement agreement. “Farmer responded that the parties had agreed to a settlement
on September 10.” Id. Farmer also “explained his financing troubles” to the court,
despite sitting on a piece of New Jersey property valued well in excess of the amount
due Banco. Id. Farmer “sought a 45-day extension, the inclusion of a provision that
Banco Popular would not issue Form 1099, and a mutual and immediately effective
release” all contrary to the revised settlement agreement. Id.On December 4, 2012, the magistrate judge who had presided over “numerous
and lengthy settlement negotiations in this case” held an evidentiary hearing on
5
Banco’s second motion to enforce the settlement. Farmer v. Banco Popular, 2013
WL 2112429, at *1 (D. Colo. 2013). The magistrate issued a recommendation that
the district judge enforce the settlement. Id. at *1–2. The recommendation rejected
the notion that Farmer’s obligation to pay was contingent on him obtaining
financing. Anticipating he might be called to testify before the district court, the
magistrate recused from further involvement in the case. 3 In a supplemental
recommendation, the magistrate clarified he was recommending enforcement of the
revised agreement. Dist. Ct. Doc. 152, at 1–2 (filed Feb. 7, 2013). Farmer filed
objections to both the original and supplemental recommendations.
In May 2013, the district judge held an evidentiary hearing on Farmer’s
objections. Farmer yet again informed the court “that a settlement has been
reached,” to which the court responded:
Let me ask you a question. If a settlement has been reached, why do we
need to have this hearing? I mean, you said a settlement has been
reached. If there’s a settlement why haven’t you consummated it—the
settlement? And why—why do I have all of these Motions to Enforce
Settlement in front of me for—and why are we having a hearing today?
3
The magistrate wrote:
Given the fact that Mr. Farmer might continue to object to enforcement
of the settlement agreement, in which case I would be a witness in any
further hearings (having presided over numerous discussions
culminating in the settlement agreement and being firmly convinced
that the parties reached a mutual agreement), I will enter a separate
order recusing myself from this case.
Id. at *2.
6
Dist. Ct. Doc. 181, at 3–4 (filed June 12, 2013) (hereinafter Doc 181). The best
answer Farmer could muster was that Banco had breached the first settlement
agreement by failing to timely perform, notwithstanding the fact Farmer had never
signed the agreement. The district court was unmoved. We too in our prior decision
rejected the argument that Banco had breached the first agreement thereby excusing
Farmer’s failure to perform. Farmer, 557 F. App’x. at 767–68. Once the district
judge had heard enough, he decided to enforce the original June 15, 2012 settlement
agreement, which Farmer on at least two previous occasions had told the court he
approved. The court ordered Banco’s payment of $30,000 due in 30 days, Farmer’s
payment of $137,380.84 due in 60 days, and dismissal documents due in 75 days.
“Banco Popular timely made its $30,000 payment, but Farmer never made his
payment. Instead, he filed a post judgment motion and [his first] appeal.” Id. at 766.
We affirmed the district court’s order enforcing the original settlement
agreement, and concluded with these parting words for Farmer:
Though . . . having agreed to settle the case [in June 2012], Farmer
continues to use the [mortgaged] New Jersey property (with a value far
in excess of the disputed amount) with no payment to [mortgagee]
Banco Popular, which is prevented from foreclosing on the property
[due to the settlement agreement]. Rather than adhering to the terms
of the settlement agreement, Farmer has multiplied the proceedings,
causing the court to expend considerable effort, Banco Popular to incur
attorney’s fees, and delaying the ultimate resolution. . . . . The district
court has all lawful authority to bring this matter to a prompt and just
conclusion.
Id. at 769 (emphasis added).
7
On remand, Defendant Banco, panel decision in hand, renewed its motion
initially made prior to Farmer’s first appeal for a rule to show cause why he should
not be held in contempt for his failure to abide by the district court’s order enforcing
the original settlement. Only then did Farmer tender $137,380.84 to Banco,
rendering the latter’s motion for a rule to show cause moot. At the same time, Banco
also renewed its motion for an award of attorney’s fees and costs pursuant to 28
U.S.C. § 1927 and the district court’s inherent authority. Alleging both Farmer’s
vexatious litigation strategy and his bad faith, Banco sought fees in the amount of
$56,944.38 and costs in the amount of $11,617.77. These figures represented
amounts Banco incurred from July 2, 2012—the date on which, in the words of the
panel decision, “Banco Popular sent Farmer the completed settlement agreement,”
Farmer, 557 F. App’x at 764—until May 14, 2014, the date of the hearing on
Banco’s fee motion.
In a written order, the district court repeated word for word the facts as stated
in our prior decision. The court granted Banco’s motion in part based on those facts
and the following additional findings.
I conclude there is substantial evidence that Farmer, a licensed attorney,
multiplied proceedings unreasonably and vexatiously and engaged in
bad faith. After months of settlement negotiations with Magistrate
Judge Hegarty where the parties finally reached an agreement, Farmer
refused to sign the settlement agreement and instead filed frivolous
pleadings and stalled the litigation in an attempt to gain a more
favorable settlement. Additionally, at the second evidentiary hearing
held on May 14, 2013, . . . I determined that Farmer was engaging in
“mischief” and that his arguments were “nonsensical.” When Farmer
8
failed to respond to my questions regarding when he would have funds
available for the settlement, I concluded that “what that illustrates to me
is that Farmer’s conduct was a sham to avoid a trial on the merits.”
***
Given the Tenth Circuit’s [statement] that I have “all lawful authority
to bring this matter to a prompt and just conclusion,” I find that
Farmer’s bad-faith conduct in refusing to sign the settlement agreement
and unreasonably prolonging this litigation caused both Banco to incur
unnecessary expenses and waste the resources of this court. Thus, I
find that the award of attorney fees under both § 1927 and my inherent
powers is warranted.
Farmer v. Banco Popular, 2014 WL 4627705, at *3–4 (D. Colo. 2014) (emphasis
added) (internal brackets, citations, ellipses, and footnotes omitted). 4 Pursuant to its
findings, the district court awarded Banco fees and costs incurred from July 2, 2012.
Specifically, the court awarded Banco $41,461.76 in attorney’s fees, as well as its
requested costs of $11,617.77. The court reduced Banco’s fee request to exclude
billings of $15,482.62 related to Farmer’s prior appeal. Thereafter, the court entered
final judgment and Farmer again appealed.
4
In its discussion, the district court pointed to, among other things, the
magistrate judge’s testimony at the May 2013 evidentiary hearing, during which the
magistrate questioned Farmer’s statement that he had acted in good faith. The
magistrate testified that Farmer “always wants just a little bit more. Just a little bit
better deal for him, and he thinks that if he stalls, holds on, that he can get a little
better each time. And so whether that’s good faith or bad faith, it’s a question I
have.” Id. at *4. What the magistrate judge’s testimony says to us is that, in the best
case scenario for Farmer, reasonable minds might differ as to whether Farmer acted
in bad faith. Of course, that means the district court’s finding of bad faith cannot be
clearly erroneous. See F.D.I.C. v. Hamilton, 122 F.3d 854, 858 (10th Cir. 1997).
Farmer’s argument that “there was no evidence that [he] acted in bad faith
whatsoever,” Pl’s Op. Br. at 49, is unworthy of extended comment. The record is
replete with instances where, based on Farmer’s conduct, a court might infer bad
faith.
9
II.
Because subject matter jurisdiction is a threshold inquiry, we first address
Farmer’s argument that—notwithstanding the plain language of our prior
decision—the district court lacked jurisdiction over this matter following remand and
therefore lacked the power to (1) order the settlement enforced (again), (2) sanction
him, and (3) enter final judgment reflecting the same. Farmer’s argument is
frivolous. As the panel decision explained, Farmer’s first appeal was interlocutory.
The district court’s order enforcing the settlement was appealable as an injunction
pursuant to 28 U.S.C. § 1292(a)(1). Farmer, 557 F. App’x at 766. In other words,
Farmer’s underlying suit, upon which the district court’s jurisdiction rested, had not
been dismissed. Compare United States v. Hardage, 982 F.2d 1491, 1496 (10th Cir.
1993) (explaining that while the underlying litigation remains pending, a district
court “has the power to summarily enforce a settlement agreement entered into by
the litigants”), with Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 381–82
(1994) (holding that where a case is voluntarily dismissed and the order of dismissal
fails to mandate the parties’ compliance with the settlement agreement, the district
court, absent an independent basis for exercising jurisdiction, lacks jurisdiction to
enforce the agreement).
The panel observed that “the district court clearly retained jurisdiction over
the issue of signing the agreement and potential sanctions.” Farmer, 557 F. App’x
at 766; see also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 396 (1990)
10
(recognizing that the question of whether to impose sanctions is a collateral matter
separate from the merits of an action, and as such may be answered even after the
underlying litigation has been terminated). The panel further observed that “[a] trial
court has the power to summarily enforce a settlement agreement entered into by the
litigants while the litigation is still pending before it.” Farmer, 557 F. App’x at 767
(quoting Shoels v. Klebold, 375 F.3d 1054, 1060 (10th Cir. 2004)). Later, the panel
reiterated:
We have no doubt that the district court has the power to order Farmer
to execute all necessary documents to effectuate the settlement. We
have considered the relief requested by Banco Popular should we
remand the case, but leave those matters to the district court, as it
obviously contemplated when it denied without prejudice Banco
Popular’s motion [made prior to the first appeal] that the court order
Farmer to sign [the settlement agreement] and assess attorney’s fees
against him.
Id. at 768 (internal citations omitted).
On remand, the district court entered final judgment bringing the underlying
litigation to an end, only after it assessed fees and costs against Farmer as a sanction.
Given all that had gone before, the court prudently incorporated that order, as well
as an order that the settlement remain binding and effective, into its judgment. We
conclude the district court properly exercised jurisdiction over Banco’s post-remand
motions, and now turn to Farmer’s argument that the terms of the settlement
agreement prohibited the court from imposing an attorney-fee sanction on him.
11
III.
Farmer points out that the district court ordered the entirety of the June 15,
2012 settlement agreement enforced, and as part of that agreement Banco waived its
right to move for an award of attorney’s fees, let alone receive such award. Farmer
refers us to paragraph six of the agreement.
Forgiveness of Banco Popular’s Attorneys’ Fees. In consideration of
Farmer’s execution of this Agreement, Farmer’s dismissal of his claims
against Banco Popular in the Action subject to terms hereof, and
Farmer’s release of any and all claims, asserted and unasserted, against
Banco Popular as defined below, Banco Popular agrees to forgive the
entire amount of attorneys fees arising out of, and/or relating to, the
HELOC [Home Equity Line of Credit] and the Action.
Dist. Ct. Doc. 169-4, at 23 (filed April 8, 2013). We doubt the parties in settling this
matter contemplated waiver of punitive sanctions in the form of attorney’s fees
arising out of prolonged—and from Banco’s viewpoint unforeseeable—legal
proceedings to enforce their agreement. See Burke v. Guiney, 700 F.2d 767, 772 (1st
Cir. 1983). But what the parties’ contemplated is really beside the point.
“It has long been understood that ‘certain implied powers must necessarily
result to our Courts of justice from the nature of their institution,’ powers ‘which
cannot be dispensed with in a Court, because they are necessary to the exercise
of all others.’” Chambers v. Nasco, Inc., 501 U.S. 32, 43 (1991) (quoting United
States v. Hudson, 7 Cranch 32, 34 (1812)) (emphasis added) (internal brackets
omitted). Among these indefeasible powers is a court’s “ability to fashion an
appropriate sanction for conduct which abuses the judicial process.” Id. at 44–45.
12
In the words of Justice Scalia, “[s]ome elements of [an Article III court’s] inherent
authority are so essential to the judicial Power . . . that they are indefeasible, among
which is a court’s ability to enter orders protecting the integrity of its proceedings.”
Id. at 58 (Scalia, J., dissenting) (internal brackets and quotations omitted)).
Accordingly, the authority of a court to impose attorney-fee sanctions upon a
party for bad-faith misconduct depends not on the terms of any private agreement
between the litigants “but on how the parties conduct themselves during the
litigation. . . . [T]he party, by controlling his . . . conduct in litigation, has the power
to determine whether sanctions will be assessed.” Id. at 53; see also Towerridge,
Inc. v. T.A.O., Inc., 111 F.3d 758, 766 (10th Cir. 1997). Any private agreement
tending to relieve a party of the consequences of abusing the judicial process would
likely violate public policy. See 2 Restatement (Second) of Contracts 4 (1981)
(Introductory Notes to Ch. 8) (indicating that bargains tending to obstruct the
administration of justice contravene public policy and are unenforceable).
The most we can say for paragraph six of the settlement agreement is that it
permissibly proscribes “substantive fee shifting,” no doubt in response to a standard
provision in the debt obligations underlying the HELOC permitting Banco to recover
fees in the event of foreclosure. “Substantive fees are those which are tied to the
outcome of the litigation.” Scottsdale Ins. Co. v. Tolliver, 636 F.3d 1273, 1279
(10th Cir. 2011) (internal quotations omitted). A provision in a settlement agreement
prohibiting the shifting of such fees is a “matter of substantive remedy” and
13
generally enforceable. Chambers, 501 U.S. at 55 (internal quotations omitted).
But paragraph six does not, nor could it, bar “procedural fee shifting” ordered
pursuant to a court’s inherent authority as a sanction for abuse of the judicial
process, or, in other words, for “bad faith conduct in litigation.” Scottsdale Ins., 636
F.3d at 1279 (internal quotations omitted). The shifting of procedural fees “is not
a matter of substantive remedy, but of vindicating judicial authority.” Chambers,
501 U.S. at 55 (internal quotations omitted). “[B]ad faith occurring during the
course of litigation that is abusive of the judicial process undisputably, at the
discretion of the court, warrants sanction through the charging of fees.” Towerridge,
111 F.3d at 768 (emphasis added). We therefore categorically reject Farmer’s
assertion that paragraph six of the settlement agreement limited in any way the
district court’s ability to entertain Banco’s motion for attorney-fee sanctions, and
now turn to his challenge to the amount of fees and costs imposed.
IV.
We review the imposition of an attorney-fee sanction, whether rooted in
statute, rule, or a court’s inherent authority, only for an abuse of discretion. See
Johnson v. Smith (In re Johnson), 575 F.3d 1079, 1084–85 (10th Cir. 2009). A
district court abuses its discretion when it (1) fails to exercise meaningful discretion,
such as acting arbitrarily or not at all, (2) commits an error of law, such as applying
an incorrect legal standard or misapplying the correct legal standard, or (3) relies on
clearly erroneous factual findings. See Chamber of Commerce v. Edmondson, 594
14
F.3d 742, 764 (10th Cir. 2010).
Farmer has represented himself throughout the course of the parties’ settlement
wranglings. The only exception was the post-remand hearing in the district court
that addressed the question of fees as a sanction now before us. 5 Because Farmer
appears both as a party and an attorney in this matter, the district court relied both
on its inherent authority to sanction a party for bad-faith conduct as discussed in
Chambers, and its more limited power to assess fees and costs against an attorney for
unreasonable and vexatious multiplication of proceedings as authorized by 28 U.S.C.
§ 1927. 6 But where a monetary sanction rests in substantial portion on a court’s
5
Farmer says he retained counsel for the district court hearing because he
believed the district judge was upset with him. On appeal, Farmer goes further and
tells us the district judge is not only biased against him but also has a conflict of
interest because he served in the same law firm as Banco’s local counsel twenty
years prior. Farmer asks us in the first instance to vacate the court’s attorney-fee
sanction and order the judge’s recusal. But “expressions of impatience,
dissatisfaction, annoyance, and even anger, that are within the bounds of what
imperfect men and women, even after having been confirmed as federal judges,
sometimes display,” do not in themselves “establish[] bias or partiality.” Liteky v.
United States, 510 U.S. 540, 555–56 (1994). Nor, absent circumstances which do not
appear in this case, does a judge’s prior membership in a firm whose counsel appears
before the court require recusal. See 28 U.S.C. § 455(b)(2). And in any event,
Farmer’s failure to ask the district judge to recuse is the end of the matter. See
Knight v. Mooring Capital Fund, LLC, 749 F.3d 1180, 1191 (10th Cir. 2013) (a
party’s failure to timely move for a trial judge’s qualification in the district court
constitutes waiver); Koch v. Koch Indus., Inc. 203 F.3d 1202, 1239 (10th Cir. 2000)
(same).
6
Section 1927 provides that an attorney admitted to conduct cases in any
United States court “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 attorney’s fees reasonably incurred because of such conduct.”
15
inherent authority to punish a party for bad-faith conduct unreachable by statute or
rule, as it did here, a court need not attribute a portion of the assessment to any
particular statute or rule.
In circumstances such as these in which all of a litigant’s conduct is
deemed sanctionable [after a certain point], requiring a court first to
apply rules and statutes containing sanctioning provisions to discrete
occurrences before invoking the inherent power to address remaining
instances of sanctionable conduct would serve only to foster extensive
and needless satellite litigation . . . .
Chambers, 501 U.S. at 50–51. A district court’s inherent power to sanction reaches
beyond the multiplication of court proceedings and authorizes sanctions for wide-
ranging conduct constituting an abuse of process. See id. at 57. Therefore, we need
not address the particular role § 1927 played in the court’s imposition of sanctions
on Farmer, but instead focus our inquiry (consistent with Chambers) on the district
court’s exercise of its inherent authority to sanction Farmer for the entirety of his
bad-faith delay tactics.
A.
His prior arguments having failed, Farmer asks us in the alternative to remand
this matter and direct the district court to examine all the “pleadings” and identify
which of those unreasonably and vexatiously multiplied the settlement proceedings. 7
Pl’s Br. at 29–30. “[T]he district court should have examined every single filing
7
To the extent Farmer may argue we have not explicitly addressed all of his
voluminous contentions, “we can only respond that not all of them warrant[] explicit
response.” Hamilton v. Boise Cascase Exp., 519 F.3d 1197, 1203 (10th Cir. 2008).
16
[Farmer] made over the years and determined which ones multiplied the
proceedings,” because “[t]his is exactly what the law requires, period.” Pl’s Reply
Br. at 12–13 (internal quotations omitted). Only then, according to Farmer, can the
court properly determine the fees and costs to award. Farmer declares:
[I]n order to properly assess the appropriate quantum of fees and costs
that plaintiff should be responsible to pay, the [district] court has to . . .
analyze the time defendant expended to determine whether plaintiff’s
filing was a “multiplication, unreasonable, vexatious, bad faith, etc.,”
as opposed to merely taking the position: “I do not like plaintiff at all,
and I am going to punitively sanction him and award defendant 100%
of what it seeks, even though I was in the same law firm as defendant’s
local counsel. I can do so because I am the judge and can do anything
I want except award fees and costs for the first appeal because the law
prohibits me from doing so . . . .”
Id. at 12. Farmer says “[a] party should . . . not have to deal with a judge’s ego.”
Pl’s Br. at 44. Needless to say, we are not impressed with either the substance or the
tone of Farmer’s diatribe.
As we just explained—and will do so again for Farmer’s benefit—the Court
in Chambers ruled that when express laws provided by Congress such as § 1927 do
not reach the entirety of a litigant’s bad-faith conduct, a court may rely instead on
its inherent power to impose punitive sanctions. Chambers, 501 U.S. at 57 (“As long
as a party receives an appropriate hearing . . . the party may be sanctioned for abuses
of process occurring beyond the courtroom . . . .”); see also id. at 62–63 (Kennedy,
J., dissenting). As our recitation of the facts in Part I make painfully apparent,
Farmer’s contemptuous conduct extended far beyond frivolous court pleadings or
17
filings reachable by way of § 1927.
After all, Defendant Banco, not Farmer, was the party initiating the filings
because Banco was the party seeking to enforce the settlement agreement which
Farmer obstinately refused to execute. As the district court commented in its
sanction order: “Farmer refused to sign the settlement agreement and instead filed
frivolous pleadings and stalled the litigation in an attempt to gain a more favorable
settlement.” Farmer, 2014 WL 4627705, at *3 (emphasis added). At the hearing
preceding entry of that order, the court expressed a similar view, observing that
Farmer “used every trick up his sleeve to delay the inevitable.” Rec. Supp. Vol. I at
17 (emphasis added). Our record review reveals those tricks included repeatedly
advising the court that a settlement had been reached, while (1) making persistent
and repeated demands for changes to the settlement agreement, (2) refusing to sign
the agreement, (3) seeking extensions of the payment due date, and (4) most
importantly, failing to make timely payment to Banco as required by the terms of the
agreement.
Because the district court relied on its inherent authority to sanction Farmer
for his bad faith, we discern no abuse of discretion in the court’s failure to address
every moment Banco spent and every dollar Banco incurred in seeking to induce
Farmer to live up to his end of a bargain. Given Farmer’s tendencies, such might
“serve only to foster extensive and needless satellite litigation.” Chambers, 501 U.S.
at 51. The district court shifted a portion of Banco’s attorney’s fees to Farmer not
18
as a matter of substantive remedy as, for example, in the case of a compensatory fee
award to a prevailing party, but primarily to vindicate its authority and to punish
Farmer. At the May 2013 hearing, the court informed Farmer “there will be
increasing punitive consequences to you if you don’t make the payment.” Doc 181,
at 63. In this sense, the court’s sanction was akin to a civil fine. See Hutto v.
Finney, 437 U.S. 678. 691–92 (1978) (“We see no reason to distinguish [an] award
[of fees for bad faith] from any other penalty imposed to enforce a prospective
injunction.”). This is a point with which even Farmer might agree. He tells us the
district judge “was hellbent on imposing punitive sanctions” on him. Pl’s Br. at 22;
see also Pl’s Reply Br. at 10 (recognizing the district judge “awarded 100% across
the board as a punitive measure”).
Chambers tells us any argument “that the primary purpose of a fee shift [based
on a litigant’s bad faith is] compensatory utterly fails.” 501 U.S. at 54 n.15 (internal
citation and quotations omitted). To that end, the Court in Chambers rejected the
argument—the same argument Farmer now makes which we too reject—that the
district court “failed to tailor the sanction to the particular wrong.” Id. at 56.
[T]he underlying rationale of “fee shifting” is, of course, punitive. The
award of attorney’s fees for bad faith serves the same purpose as a
remedial fine imposed for civil contempt, because it vindicates the
District Court’s authority over a recalcitrant litigant. That the award
has a compensatory effect does not in any event distinguish it from a
fine for civil contempt, which also compensates a private party for the
consequences of a contemnor’s disobedience.
***
[F]ull attorney’s fees were warranted due to the frequency and severity
of Chambers’ abuses of the judicial system and the resulting need to
19
ensure that such abuses were not repeated. . . . It was within the court’s
discretion to vindicate itself and compensate [plaintiff] by requiring
Chambers to pay for all attorney’s fees.
Id. at 53–54, 56–57 (internal brackets, citations and footnotes omitted). 8
B.
Consistent with Chambers, we view the award of attorney’s fees and costs to
Banco in this case as a punitive sanction in the nature of a fine and review it
accordingly. Where a court sanctions a recalcitrant party for his abuse of process
by an award of fees and costs, sound principles govern our review. See White v.
Gen. Motors Corp., 908 F.2d 675, 683–85 (10th Cir. 1990) (addressing an attorney-
fee sanction imposed pursuant to Fed. R. Civ. P. 11). First, the amount of fees and
costs awarded must be reasonable. Id. at 684. Second, the award must be the
minimum amount reasonably necessary to deter the undesirable behavior. Id. at
684–85. And third, because the principal purpose of punitive sanctions is deterrence,
the offender’s ability to pay must be considered. Id. at 685. Depending on the
circumstances, the court may consider other factors as well, including the extent to
which bad faith, if any, contributed to the abusive conduct. Id.8
We understand the conduct at issue in Chambers was much more egregious
than Farmer’s conduct here. But so too in that case was the award of fees and costs
in an amount exceeding $1,000,000 much greater. See id. at 35–40. Regardless,
none of that permits us to overlook Chambers’ legal analysis, which unquestionably
binds us in this case.
20
In this case, the district court employed the lodestar method to determine the
reasonableness of Banco’s fee request. See Robinson v. City of Edmond, 160 F.3d
1275, 1281 (10th Cir. 1998) (describing the lodestar calculation as a product of the
number of attorney hours reasonably expended and a reasonable hourly rate). That
method is an acceptable approach to determine the reasonableness of a fee request
under the circumstances presented. 9 See White, 908 F.2d at 684. The court chose
a trigger date of July 2, 2012 for imposing fees and sanctions. We discern no abuse
of discretion in the court’s determination to shift fees and costs from this date
forward given the statement of facts contained in our prior panel opinion and adopted
by the district court on remand. See Farmer, 557 F. App’x at 764. The court’s
approval of $250 or thereabouts as a reasonable hourly rate is also acceptable. In
calculating the hours expended, the court understood that it could not impose fees
associated with Farmer’s first appeal: “I do find merit to Farmer’s argument that the
fee request should be reduced to exclude all billing entries related to the appellate
proceedings.” Farmer, 2014 WL 4627705, at *5. Thus, the court reduced Banco’s
fee request by $15,482.62. All this machination resulted in the court imposing
$41,461.76 in fees and $11,617.77 in costs on Farmer.
9
We need not now decide whether alternative means of calculation might be
available to courts shifting fees and costs as a punitive sanction for conduct
undertaken in bad-faith. See, e.g., Hamilton, 519 F.3d at 1206–07.
21
We see no abuse of discretion in the district court’s overall approach that
would warrant remand, but we do recognize the need for some slight adjustments to
the amount of sanctions imposed. In its motion, Banco listed local-counsel fees as
expenses. Although dated July 16, a small portion of those fees, specifically $315,
appear to be for local counsel’s work in June 2012, or prior to the July 2 trigger date.
Another $900 in local-counsel fees appears to have been incurred as part of Farmer’s
first appeal. A $225 filing fee dated June 19, 2013, appears to be an attorney
admission fee in connection with the prior appeal. Lastly, the court awarded other
expenses in the approximate amount of $815 that are dated during the pendency of
the prior appeal. See Morris by Rector v. Peterson, 871 F.2d 948, 951 (10th Cir.
1989) (“Th[e] basic rule is that the determination of the right to sanctions against
counsel for conduct during an appeal is reserved to the appellate court, although it
may allow the trial court to fix the amount of the fees and costs.”). Accordingly, we
reduce the fees imposed on Farmer for his bad-faith conduct in delaying the
settlement by $1,215 ($315 plus $900), or to $40,246.76. We reduce the costs
imposed by $1,040 ($225 plus $815), or to $10,577.77. This results in a monetary
sanction of $50,824.53 which Farmer must pay Banco. Banco, of course, may use
any and all lawful means to ensure timely collection.
Undoubtedly, Farmer will claim, as he did with his payment due under the
settlement agreement, that he does not possess the financial resources to pay this
sanction. But Farmer seems to confuse his willingness to pay with his ability to pay.
22
Farmer is a licensed attorney who lives in Colorado and, to our knowledge, still owns
a home one block from the New Jersey shore. We do not doubt Farmer’s ability to
procure the required funds. Nor do we doubt that the sanction imposed is the
minimum amount reasonably necessary to deter Farmer from further misconduct.
Farmer’s appellate briefs in places exude a disrespect for both the district court and
Banco that is alarming and we have cited some examples. See supra at 16–17; see
also Hollingsworth v. Perry, 133 S. Ct. 2652, 2672 (2013) (Kennedy J., dissenting)
(recognizing that “litigants and counsel who appear before a federal court[] are
subject to duties of candor, decorum, and respect for the tribunal and co-parties
alike”). The district court warned Farmer of his peril yet he remained intransigent.
The tone of Farmer’s most recent appeal provides us no reason to believe anything
has changed in his attitude and outlook, and so a significant sanction is appropriate.
***
For all the foregoing reasons, the final judgment of the district court, as
modified, is affirmed. Sanctions imposed on Farmer in the form of fees and costs
due and payable to Banco now total $50,824.53. Farmer is admonished that further
prolongation of this appeal absent good cause may result in this Court imposing its
own monetary sanctions on him pursuant to Fed. R. App. P. 38. The Clerk of Court
is directed to initiate a formal attorney disciplinary proceeding in this Court
involving Attorney Farmer to consider whether additional discipline is appropriate
in this matter. See 10th Cir. R. 46.6(A) and (C).
23
AFFIRMED AS MODIFIED. THE MANDATE SHALL ISSUE FORTHWITH
WITH EACH SIDE TO BEAR ITS OWN COSTS ON APPEAL.
24