Miccosukee Tribe of Indians of Florida v. Cypress ( 2017 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-11223
Non-Argument Calendar
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D.C. Docket No. 1:12-cv-22439-MGC
MICCOSUKEE TRIBE OF INDIANS OF FLORIDA,
Plaintiff,
BERNARDO ROMAN, III,
BERNARDO ROMAN III, P.A.,
Respondents-Appellants,
versus
BILLY CYPRESS, et al.,
Defendants,
DEXTER WAYNE LEHTINEN,
Esquire,
GUY A. LEWIS,
Esquire,
MICHAEL R. TEIN,
Esquire,
LEWIS TEIN PL,
A professional association,
Defendants-Appellees.
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________________________
Appeal from the United States District Court
for the Southern District of Florida
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(April 28, 2017)
Before TJOFLAT, WILLIAM PRYOR and FAY, * Circuit Judges.
PER CURIAM:
Appellees Guy A. Lewis, Michael R. Tein, and their law firm, Lewis Tein
P.L., move to correct our panel opinion, which Appellants Bernardo Roman III,
and Bernardo Roman III, P.A., do not oppose. We grant the motion to correct,
vacate our earlier opinion, and substitute this corrected opinion.
Bernardo Roman III, appeals judgments that disqualified his counsel and
that sanctioned him and his law firm (collectively “Roman”) for filing in bad faith
a civil action on behalf of the Miccosukee Tribe of Indians of Florida against its
general counsel, Dexter Wayne Lehtinen, and Guy A. Lewis, Michael R. Tein, and
their law firm, Lewis Tein P.L. (collectively “Lewis Tein”). Roman argues that the
district court erred by disqualifying his counsel of choice and by sanctioning him.
Roman also argues that the district court erroneously based its sanctions award on
billing records that were submitted under seal. We affirm the judgments to
disqualify counsel and to sanction Roman, but we vacate the sanctions award and
*
This corrected opinion is entered by a quorum. 28 U.S.C. § 46(d).
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remand for the district court to unseal the billing records, to give Roman the
opportunity to respond, and to provide an explanation for the amount awarded to
Lehtinen and Lewis Tein.
The disqualification of counsel requires that we review de novo the
application of the rules of professional conduct and related findings of fact for
clear error. Bayshore Ford Truck Sales, Inc. v. Ford Motor Co., 380 F.3d 1331,
1338 (11th Cir. 2004). We review for an abuse of discretion all aspects of the
imposition of sanctions. Peer v. Lewis, 606 F.3d 1306, 1311 (11th Cir. 2010). A
district court “must afford the sanctioned party due process, both in determining
that the requisite bad faith exists and in assessing fees.” In re Mroz, 65 F.3d 1567,
1575 (11th Cir. 1995).
We reject Roman’s argument for reversal based on the disqualification of his
lead counsel, Angel Cortinas. Roman argues that the district court failed to “clearly
identify a specific Rule of Professional Conduct which is applicable . . . [and
explain how his] attorney violated that rule,” Schlumberger Techs., Inc. v. Wiley,
113 F.3d 1553, 1561 (11th Cir. 1997), but we disagree. The district court stated
that Cortinas was disqualified because he was in “partnership with Mr. Lehtinen”
when Lehtinen allegedly made false statements about his client, the Tribe.
Cortinas’s representation of Roman and the Tribe, the district court stated, violated
the “model rule [which] says that a lawyer in the firm cannot ignore the behavior
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of other lawyers in the firm” who had a conflict of interest that could be imputed to
Cortinas. See Fla. R. Prof’l Conduct 4-1.09, 4-1.10(a).
Even if we assume that the district court erred in disqualifying Cortinas
under Rules 4-1.09 and 4-1.10, any error was harmless. See Fed. R. Civ. P 61
(“Unless justice requires otherwise, no error . . . by the [district] court . . . is [a]
ground . . . for vacating, modifying, or otherwise disturbing a judgment or order.”).
Roman, as the “plaintiff in a civil case[,] [had] no constitutional right to counsel.”
Bass v. Perrin, 170 F.3d 1312, 1320 (11th Cir. 1999), and he opposed requests
from Lewis Tein and Lehtinen to impose sanctions for two years. Roman does not
argue that his or his firm’s substantial rights were affected by proceeding with
Cortinas’s associate, Jonathan Kaskel. See Fed. R. Civ. P. 61. Roman also fails to
identify anything that could have been done differently or more effectively by
Cortinas. See Richardson–Merrell, Inc. v. Koller, 472 U.S. 424, 439 (1985) (“If
respondent were to proceed to trial and there received as effective or better
assistance from substitute counsel than the disqualified attorney could provide, any
subsequent appeal of the disqualification ruling would fail.”). Cortinas and Kaskel
did not enter a notice of appearance until after the first evidentiary hearing on the
motions for sanctions and after we had affirmed the dismissal of the Tribe’s
complaint for lacking the particularity required to state a claim for relief,
Miccosukee Tribe of Indians of Fla. v. Cypress, 814 F.3d 1202 (11th Cir. 2015).
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Roman investigated Lewis Tein and Lehtinen; thrice revised the complaint against
them; and defended against their requests for sanctions. In the light of Roman’s
familiarity with the facts, his legal abilities, and his retention of Kaskel, we cannot
say that disqualifying Cortinas harmed Roman or his firm.
The district court did not abuse its discretion when it determined that Roman
filed the second amended complaint in bad faith. A party exhibits bad faith by
pursuing a claim that it knows is frivolous. Peer, 606 F.3d at 1316. Roman alleged
that Lehtinen countenanced the misappropriation of millions of dollars from Tribe
members while falsely representing that the funds were being held in trust accounts
to satisfy tax liabilities they potentially owed to the federal government and
violated his fiduciary duty to the Tribe by disclosing its financial information to the
Internal Revenue Service. But Lehtinen established the allegations were
objectively frivolous by introducing testimony that the Tribe created two reserve
accounts to satisfy potential federal tax liabilities, by submitting financial records
and minutes from Tribe meetings about the balances in the reserve accounts, and
by presenting a letter recounting that attorney Larry Blum submitted the Tribe’s
financial documents to the Agency. Lewis Tein likewise controverted the
allegations that it had funneled to the Tribe Chairman millions of dollars in
excessive fees charged for fictitious or unnecessary services that Tribe members
paid for using loans obtained from, but not approved by or intended to be repaid to,
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the Tribe. Lewis Tein introduced evidence that a Tribe member approved the
firm’s invoices and was repaying a loan obtained for legal fees; that Roman billed
the Tribe large amounts for his legal services; that Roman had in his custody
records of Tribe members’ loan payments; that an accountant for the Tribe was
fired after telling Roman about existing loan schedules; and that an independent
audit detected no financial irregularities. Roman failed to produce any evidence
that Lewis Tein transferred money to the Chairman or that Lewis Tein overbilled
or falsely charged for its legal services.
The district court did not abuse its discretion when it sanctioned Roman
under Federal Rule of Civil Procedure 11 for frivolously accusing Lehtinen of
wrongdoing. Rule 11 exists “to deter baseless filings in district court.” Peer, 606
F.3d at 1311. The use of Rule 11 is particularly appropriate when a party
knowingly makes allegations that are objectively frivolous and persists in that
“position after it is no longer tenable.” Id. (quoting Rule 11 advisory committee
note (1993)). As the district court stated, Roman conducted an “investigation that
led to results differing” from his suspicions of wrongdoing by Lehtinen and then
“willfully abused the judicial process” by filing the second amended “complaint
that contained false and unsupported allegations” against Lehtinen. Sanctioning
Roman for falsely denunciating Lehtinen was necessary to prevent, the district
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court reasonably determined, a “wayward and emboldened . . . counsel” from
“asserting such baseless allegations in the future.”
The district court also did not abuse its discretion when it exercised its
inherent authority to impose sanctions on Roman for pursuing baseless claims
against Lewis Tein. Lewis Tein sought sanctions under Federal Rule of Civil
Procedure 11, yet it failed to renew its motion after Roman filed the second
amended complaint, which would have given Roman 21 days to withdraw or
correct the pleading. See Fed. R. Civ. P. 11(c)(1)(A). That procedural misstep did
not thwart the ability of the district court to proceed against Roman under its
inherent authority. See Peer, 606 F.3d at 1314–15. If Roman “acted in bad faith,
vexatiously, wantonly, or for oppressive reasons,” the district court had the
inherent authority to impose sanctions. See Chambers v. NASCO, Inc., 501 U.S.
32, 46 (1991). Based on the parties’ numerous filings and the material submitted
during an eight-day evidentiary hearing, the district court found that Roman knew
or should have known that his allegations against Lewis Tein were patently
frivolous when there was no evidence of kickbacks or fraudulent loans and Roman
possessed ample information that flatly contradicted his theories of wrongdoing.
Because Roman filed a complaint against Lewis Tein in bad faith, the district court
acted within its authority to sanction “conduct which [it found] abuse[d] the
judicial process.” See id. at 44–45.
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Roman argues that he was denied due process before being sanctioned under
the inherent authority of the district court, but we disagree. Roman was apprised of
the basis on which sanctions were imposed. Lewis Tein moved to sanction Roman
for filing the first amended complaint without factual support and in bad faith. See
Peer, 606 F.3d at 1314. Lewis Tein reacted similarly to the second amended
complaint by submitting a bench memorandum seeking the imposition of sanctions
based on Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, or the inherent
authority of the court. The filings of Lewis Tein provided Roman notice that his
conduct was sanctionable and why, and he was given ample opportunity to
respond. See Mroz, 65 F.3d at 1575. In addition to Roman’s testimony and
arguments he made during the multi-day evidentiary hearing, he submitted a bench
memorandum and a supplemental memorandum that opposed the district court
using its inherent power to impose sanctions. With all the information in hand, the
district court determined that Roman, despite receiving “continuous notice [of]
sanctions . . . based on the allegations in its [first amended] complaint,” made
“more salacious and astonishing allegations” in the second amended complaint
without “evidence, or [based on] patently frivolous evidence.” The district court
afforded Roman due process in determining whether to sanction him.
The district court violated Roman’s right to due process in determining the
amount of sanctions. The district court ordered Lehtinen and Lewis Tein to submit
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their billing records under seal, which denied Roman notice of and an opportunity
to examine the amount of attorney’s fees and costs sought and to object, if
warranted, to their reasonableness. See Mroz, 65 F.3d at 1575. The order entered
by the district court likewise hampered Roman’s ability to challenge the
calculation of the sanctions because the order merely identified the amounts
awarded and stated that Lehtinen was not entitled to recover the value of his time
attributable to representing himself. The order is devoid of any discussion of how
much time counsel for Lehtinen and Lewis Tein worked on their cases or the
amount the district court applied as a reasonable hourly rate. See Dillard v. City of
Greensboro, 213 F.3d 1347, 1353 (11th Cir. 2000). Without that information, we
cannot meaningfully review the sanctions award. See Norman v. Hous. Auth. of
City of Montgomery, 836 F.2d 1292, 1304 (11th Cir. 1988). Because the district
court determined the sanction awards, which it described as “sizable,” in a manner
that denied Roman due process, we vacate that part of the order that awarded
amounts to Lehtinen and Lewis Tein and remand for the district court to unseal the
billing records, to give Roman an opportunity to respond, and to provide an
explanation for the amount of each award imposed.
We AFFIRM the imposition of sanctions on Roman, but we VACATE that
part of the order that awarded amounts to Lehtinen and Lewis Tein and REMAND
for further proceedings related to the sanctions award.
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