Drain v. Accredited Home Lenders Inc. , 219 F. App'x 791 ( 2007 )

F I L E D
United States Court of Appeals
Tenth Circuit
March 14, 2007
UNITED STATES CO URT O F APPEALS
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
JAM ES DRA IN and RA CH EL
D RA IN ,
Plaintiffs–A ppellants,
v.
ACCREDITED HO M E LENDERS No. 06-2096
INC .; BA SM AJIAN T. DO YLE, (D.C. No. CIV-04-399 M V/KBM )
D irector; WE LLS FA RG O BA NK, (D .N.M .)
M INNESO TA, N.A., as Trustee for
ITLA M ortgage, Loan Securitization
2002-1, LLC ; FA IR BA N K S C APITAL
C ORP., U TA H ,
Defendants – Appellees.
OR DER AND JUDGM ENT *
Before KELLY, A LA RC ÓN, ** and LUCERO, Circuit Judges.
James and Rachel Drain, through their attorney M ike Bello, brought suit
against W ells Fargo Bank, M innesota, N.A. as trustee for ITLA M ortgage Loan
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
**
The Honorable Arthur L. Alarcón, Senior Circuit Judge, United States
Court of Appeals for the Ninth Circuit, sitting by designation.
Securitization 2002-1, LLC (“W ells Fargo”), A ccredited Home Lenders, Inc.,
Fairbanks Capital Corp. (“Fairbanks”), and Basmajian T. Doyle, 1 alleging
violations of several state and federal consumer protection law s. After Bello
engaged in numerous instances of unprofessional conduct, the district court
dismissed Drains’ case under Federal Rule of Civil Procedure 37 and fined Bello
$5,000 under R ule 11. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, w e
A FFIR M .
I
W e see no need to repeat the many instances of Bello’s misconduct, which
the district court ably recounted in its Amended M emorandum Opinion and Order,
entered M arch 2, 2006. Instead, we offer here a broad outline of the proceedings
below. Drains, by and through Bello, 2 filed a complaint in April 2004. Bello
attempted to serve the defendants by sending summonses via certified mail, even
though no defendant had waived personal service. All of the defendants except
Basmajian effectively waived service by responding with motions to dismiss and
motions for a more definite statement, due to the complaint’s “incompleteness and
incoherence.” The court temporarily assigned the case to a magistrate judge and
1
This apparently refers to Thomas D. Basmajian, a former officer of
Fairbanks.
2
For the sake of clarity, we hereinafter attribute the actions Bello took on
behalf of the D rains to B ello. A lthough this differs from the normal practice, w e
deem it appropriate because Drains’ case was dismissed largely due to actions
taken by Bello.
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issued the parties magistrate consent forms to be returned to the court. See
D.N.M . Civ. R. 73. Before the parties returned their consent forms, the
magistrate judge granted defendants’ motions for a more definite statement and
denied their motions to dismiss. No party objected to this order.
Bello filed an amended complaint w ith the same deficiencies as the first.
Defendants again filed motions to clarify or dismiss, noting that numerous
authorities cited in the complaint did not stand for the proposition for which they
were cited. Nevertheless, the magistrate judge denied the motions and ordered
defendants to file answers. After Bello failed to return the magistrate consent
form, the case was assigned to Chief Judge Vazquez, who ordered a second
magistrate judge to conduct hearings and recommend dispositions on various
pending motions pursuant to 28 U.S.C. § 636(b)(1)(B).
Bello then moved for a default judgment against Basmajian, who had never
responded to the complaint. The court clerk refused to enter judgment, noting
that effected service had not been returned. Basmajian entered a limited
appearance and moved for dismissal due to lack of service. Bello filed an
untimely response and a second request for default judgment, which was also
denied. The district court ultimately entered an order dismissing the claims
against Basmajian for lack of service. Bello subsequently filed a “M otion to
Vacate” the dismissal, in w hich essentially every authority is cited for a
proposition for which it does not stand. The magistrate judge recommended that
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the dismissal be affirmed. However, before the court could act on that
recommendation, Bello filed a petition for a w rit of mandamus in this court
seeking vacatur of Basmajian’s dismissal. That petition was denied. In re Drain,
No. 05-2080 (10th Cir. April 5, 2005). The district court later adopted the
magistrate judge’s recommendation.
After the magistrate judge recommended ruling against Bello, he began
filing “objections” arguing that magistrate judge involvement without a party’s
consent was unconstitutional. Finding the argument meritless, the court informed
Bello that referring a matter to a magistrate judge for recommendations does not
require consent of the parties and that the proper method of objecting to an order
is to file a motion under Rule 59 or 60. It also warned him that making frivolous
arguments could subject a party to sanctions. The court chastised Bello as
follows: “If Plaintiff’s counsel had conducted any legal research, or even read
the statute, he would have discovered that his argument was contrary to the plain
language of the statute and Tenth Circuit caselaw.” M oreover, the court
expressed concern that Bello’s “fundamental misunderstanding, or lack of
familiarity with, the Federal Rules of C ivil Procedure and the Court’s local rules,
is jeopardizing the Plaintiff’s case.” It ordered Bello to read the Federal and
Local Rules of Civil Procedure, and to provide a copy of its order to Drains.
Nevertheless, Bello continued to file “objections” or “responses” to virtually
every document issued by the magistrate judge.
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Bello’s conduct became more egregious as the court attempted to fashion a
discovery plan. He failed to respond to numerous discovery requests,
interrogatories, and requests for admission. He similarly disregarded an order
granting defendants’ motions to compel production of this information. Drains
themselves also ignored discovery orders despite the court’s explicit warning that
doing so would lead to sanctions. They failed to appear for their properly noticed
depositions, set on dates provided by Bello. Their initial disclosures were also
deficient, failing to include required medical information. 3 The magistrate judge
granted a motion to compel the disclosures, but rather than complying with the
order or requesting a stay, Bello filed a motion for a protective order, asserting
that the disclosure rule violated Drains’ First A mendment right to privacy.
Although the motion was denied, no medical documents were ever submitted.
Throughout the case, Bello made numerous unfounded accusations against
opposing counsel and court personnel. He consistently characterized opposing
counsels’ often valid arguments as “illegal,” “vexatious,” “frivolous,”
“unethical,” or “bogus.” He also accused opposing counsel of filing frivolous
motions in an effort to overbill clients. At one hearing, when opposing counsel
produced relevant documents, Bello accused the magistrate judge and opposing
counsel of attempting to “ambush [him and his clients] and obtain an unjust and
3
Under Local Rule 26.3(d), plaintiffs are required to submit certain
medical information when they put their physical or mental health at issue.
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predetermined result.” In a motion seeking recusal of Chief Judge Vazquez, he
accused her, without foundation, of personal bias against his clients and of
gaining knowledge of disputed facts from sources outside the proceedings. The
district court eventually took the extreme step of forbidding verbal
communication between Bello and opposing counsel.
Bello also appears to have submitted a number of falsified certificates of
service. Defense counsel raised this issue with the court, requesting sanctions,
and the magistrate judge granted an evidentiary and sanctions hearing. At the
hearing, defense counsel submitted a number of documents in which the postage
date differed from Bello’s certification date by as many as eight days. Bello
denied falsifying the dates, arguing that defense counsel may have switched the
envelopes. Following the hearing, Bello attempted to appeal several pretrial
orders in this court, but that appeal was dismissed for lack of appellate
jurisdiction. Drain v. W ells Fargo Bank, M innesota, N.A., No. 05-2316 (10th Cir.
Oct. 27, 2005).
Ultimately, the magistrate judge recommended that the court dismiss
Drains’ case under Rule 37 and personally fine Bello $5,000 under Rule 11. The
district court entered an order on M arch 1, 2006, adopting most of the magistrate
judge’s recommendations; however, it expressly chose not to rely on Drains’
failure to submit medical information as part of their initial disclosures. The
court entered an order the next day clarifying to whom Bello’s sanctions w ere to
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be paid and another on M arch 28, 2006 clarifying that W ells Fargo’s
counterclaims were dismissed without prejudice. Drains now appeal, still yet
represented by Bello.
II
W e review the imposition of Rule 37 sanctions for abuse of discretion.
Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir. 1992). Because dismissal is
the ultimate sanction, it is appropriate only in cases of willful misconduct. Id.Before dismissing a case under Rule 37, a court must consider: “(1) the degree of
actual prejudice to the defendant; (2) the amount of interference with the judicial
process; . . . (3) the culpability of the litigant; (4) whether the court warned the
party in advance that dismissal of the action would be a likely sanction for
noncompliance; and (5) the efficacy of lesser sanctions.” Id. at 921 (citations and
quotations omitted).
After a thorough review of the record and the briefing, we substantially
agree with the district court’s characterization of Bello and Drains’ malfeasance.
The district court properly considered the Ehrenhaus factors in this case, finding:
(1) Defendants were severely prejudiced as a result of Bello’s wilful obstruction,
such that “nearly two years and over two hundred docket entries later, Defendants
are no closer to understanding the basis for Plaintiffs’ claims than they were when
the claims were filed”; (2) An “inordinate amount of judicial time” was consumed
by Bello’s tactics, and that “it is hard to imagine how a party could be more
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obstructive”; (3) D rains w ere personally advised of the consequences of Bello’s
actions by the court, yet continued to employ Bello as their attorney; (4) Drains
were warned numerous times that sanctions, including dismissal, may be imposed;
and (5) “Given the number and degree of violations Plaintiffs have committed and
the lack of any indication that Plaintiffs intend to change course, a lesser sanction
[did] not appear effective.” W e conclude that the district court did not abuse its
discretion in dismissing Drains’ case.
III
Like Rule 37 sanctions, we review the imposition of Rule 11 sanctions for
abuse of discretion. Dodd Ins. Servs., Inc. v. Royal Ins. Co. of Am., 935 F.2d
1152, 1155 (10th Cir. 1991). Such sanctions are appropriate when an attorney
files documents with the court for an improper purpose, advances frivolous
arguments, or makes unsupported allegations. Fed. R. Civ. P. 11(c).
The district court found that Bello submitted false certifications, attempted
to mislead the court by mis-citing authorities, and intentionally delayed
proceedings by filing frivolous objections. Once again, our review of the record
leads us to the same conclusions. Accordingly, we hold that the district court did
not abuse its discretion in imposing sanctions under Rule 11.
W e further note that Bello’s unprofessional conduct has continued at the
appellate level, where he accuses the district clerk of intentionally falsifying the
case docket, and the magistrate judge of being unduly influenced by “large and
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influential law firms and attorneys to whom the magistrate judges may have
enjoyed or still enjoying [sic] professional association and benefits.” In his brief,
Bello argues that: (1) D.N.M . Civ. R. 26.3(d), which requires certain medical
disclosures, is unconstitutional; (2) M agistrate judges may not hold hearings or
issue recommendations without the parties’ consent; and (3) A corporate officer
may be served by mailing the complaint to his corporate office, or the office of
his attorney. In addition to being fundamentally incorrect, these points are
entirely irrelevant. The questions before us are whether the district court abused
its discretion in dismissing Drains’ case and fining Bello. Finally, we are
disturbed that Bello continues to mis-cite cases even after the district court
pointed out his error. For example, he cites M urphy Bros., Inc. v. M ichetti Pipe
Stringing, Inc., 526 U.S. 344, 347 (1999), for the proposition that “[i]t is well
settled that service of summons and complaints on attorneys for a Defendant is
sufficient.” As the district court noted, M urphy Bros. addresses when the thirty-
day time period for removal begins, not the proper method for service.
IV
AFFIRM ED.
ENTERED FOR THE COURT
Carlos F. Lucero
Circuit Judge
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