Clark v. Mortenson , 93 F. App'x 643 ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit March 31, 2004
Charles R. Fulbruge III
Clerk
No. 03-20182
TIMOTHY JAY CLARK, ET AL.
Plaintiffs,
VERSUS
JANET MORTENSON, ETC., ET AL.
Defendants,
JANET MORTENSON, PERMANENT RECEIVER OF AUSTIN FOREX
INTERNATIONAL, INC., MICHAEL SHAUNESSY
Defendants-Appellees,
VERSUS
SHELDON BAUM, BRIAN BAUM
Movants-Appellants,
and
DOUGLAS BAUM
Appellant.
Appeal from the United States District Court
For the Southern District of Texas
Before EMILIO M. GARZA, DeMOSS, and CLEMENT, Circuit Judges.
PER CURIAM:*
The Movants-Appellants filed a suit on behalf of Plaintiffs
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
against Defendants-Appellees in federal district court. The suit
was dismissed and Appellants were sanctioned by the court for
filing a frivolous lawsuit and for their egregious conduct in the
district court. Appellants appeal the district court’s sanction
order.
BACKGROUND
Brian Baum, his father Sheldon Baum, and his brother Douglas
Baum (hereinafter referred to as the Baums), filed a lawsuit in the
United States District Court for the Southern District of Texas
purportedly on the behalf of former investors of Austin Forex
International, Inc., International Foreign Exchange Corp., and
AusForex International, L.L.C., (collectively referred to as AFI)
against, inter alia, Janet Mortenson and Michael Shaunessy.
Mortenson is the Permanent Receiver of AFI and was appointed by the
250th District Court of Travis County, Texas in 1998 after AFI was
forced into involuntary bankruptcy due to Russell Erxleben’s, the
former president of AFI, fraud in creating a ponzi scheme.
Erxleben pled guilty to securities fraud and is serving seven years
in a federal correctional facility in Beaumont, Texas. Shaunessy
represents Mortenson in the receivership. Mortenson’s and
Shaunessy’s efforts in the receivership returned approximately 63
cents of each dollar invested to the persons who were defrauded by
Erxleben’s AFI scheme.
Sheldon Baum met Erxleben while they were both serving
2
sentences for fraud in the federal penitentiary in Beaumont. Brian
Baum visited Erxleben several times in the federal penitentiary and
consulted with Erxleben concerning how “to go after” Mortenson and
Shaunessy. Erxleben apparently blames Mortenson for the severity
of his criminal sentence. After being released from federal
prison, Sheldon Baum, with the assistance of his sons Brian and
Douglas, began a course of conduct which ultimately resulted in the
district court sanctioning the Baums, which is the subject of this
appeal.
In the summer of 2002, Brian Baum sent letters to AFI
investors urging them to file a class action lawsuit against
Mortenson. When Mortenson learned of Baum’s solicitation letters,
she alerted the receivership court; State District Judge Paul Davis
(who oversees the receivership) immediately issued a letter
scheduling a September 20, 2002, hearing and inviting any AFI
investor with complaints to appear. No investor appeared to
complain at the September 20 hearing. At the conclusion of the
hearing, Judge Davis entered an order finding that Mortenson had
served the best interests of the receivership estate, that she had
fully complied with all of the court’s orders, and that she had
complied with the court’s instructions concerning payment of her
own fees, receivership expenses, and her attorney Shaunessy’s fees,
and that no accounting was due until the close of the receivership.
None of the Baums appeared at the September 20 hearing before
Judge Davis. Instead, on September 17, 2002, three days before the
3
hearing, Brian Baum and Baum & Baum Associates, P.A., filed a
federal lawsuit in Houston, purportedly on behalf of four AFI
investors (Clark, Howard, Johnson, and Beck). The Baums alleged
that Mortenson, who had been appointed receiver for AFI, breached
her fiduciary duty because she failed to provide a regular,
detailed accounting of receivership funds and that Mortenson and
Shaunessy embezzled funds from the receivership by falsifying legal
expenses and generating legal fees by pursuing wasteful lawsuits.
The Baums alleged that these acts violated their clients’ civil
rights under federal law. They also averred that Mortenson and
Shaunessy were guilty of: (1) conspiracy to violate federal law;
(2) embezzlement of government property; (3) fraud upon the
government; (4) mail fraud; and (5) various RICO violations.1
On October 22, 2000, the court, sua sponte, ordered the
plaintiffs to replead because the plaintiffs: (1) failed to
explain how Mortenson acted outside her authority as receiver; (2)
failed to describe an act of Mortenson that would cause the loss of
her immunity as a receiver; and (3) appeared to use a civil rights
suit to collaterally attack interlocutory state-court decisions.
The court advised the plaintiffs that if the amended complaint was
1
The same day the Baums filed their federal suit, Brian Baum
faxed a copy of the complaint to the Austin American-Statesman,
which printed a story about how Mortenson was accused of
“conspiring with her lawyers to embezzle money from the nearly 32
million collected.” The Baums also mailed a copy of the lawsuit
and newspaper article to about 20 AFI investors. The Baums,
however, did not serve Mortenson or Shaunessy with the lawsuit
until two months later.
4
again baseless in law or fact, they bore the risk of sanctions.
The plaintiffs filed an amended complaint, deleting certain
plaintiffs and defendants and averring, inter alia, that Mortenson:
(1) breached her fiduciary duty by failing to furnish investors
with a detailed accounting; (2) breached her fiduciary duty by
instituting worthless claims for her financial gain and the
financial gain of Shaunessy; and (3) eroded investor confidence by
substituting the law firm that had originally represented her in
her capacity as receiver with a new firm.
Mortenson and Shaunessy (the “appellees”) filed a motion to
dismiss for failure to state a claim. They also moved for
sanctions and a permanent injunction against further proliferation
of litigation. The district court held more than 30 hours of
hearings to address the motions. The district court first
converted the motion to dismiss into a motion for summary judgment
and granted the motion in favor of the appellees, finding that the
complaint failed to state a cause of action upon which relief could
be granted. The court found that the “plaintiffs failed to
articulate a single fact to support their claims in the original
complaint, the amended complaint, or during the protracted
hearings.” The district court also imposed sanctions and issued a
permanent injunction against the Baums enjoining them from filing
any further lawsuits against Mortenson, Shaunessy, and related
parties without advanced permission. The district court made the
following findings:
5
Most of the blame for the filing of the frivolous lawsuit fell
on the Baums. The court found that Sheldon had graduated from
Tulane and attended one semester of law school (Sheldon sometimes
went by the name of Abe Baum, which was the name of his dead father
who had been a lawyer and had practiced in New Jersey). Sheldon
was one of the owners of Creditor Funds Recovery, a proprietorship
that located missing creditors for unclaimed funds in bankruptcy
court. Although Sheldon formally withdrew from Creditor Funds
Recovery on the registration with the county clerk, he continued to
run the business through his sons. Brian Baum is the elder son of
Sheldon. He graduated from law school and passed the Pennsylvania
bar. Brian operated his law practice from the family home located
in Katy, Texas. “His assumed name certificates [were] for Baum &
Baum, and one of them include[d] his non-lawyer brother as
principal.” Douglas Baum is the non-lawyer son of Sheldon and
brother of Brian. Douglas stated that he operated Creditor Funds
Recovery.
The district court found that the Baums recruited four people
to join the suit as plaintiffs by telling them that: (1) there were
funds in the receivership that Mortenson had not disclosed and
(2) they could get other funds by seeking an accounting of assets
that Mortenson had not recovered. The plaintiffs all had accounts
with AFI. The plaintiffs either signed contingent-fee contracts
with Baum & Baum, wrote letters of authorization, or otherwise
indicated their interest in joining the lawsuit. The fee contract
6
granted the authority to seek an accounting and to recover other
assets of the receivership. The district court found that each of
the plaintiffs had continually received notices from Mortenson with
regard to settlements, disbursements, hearings, and other events in
the course of the receivership. None of the plaintiffs knew
anything about errors or omissions by Mortenson and admitted they
had no reason to bring suit. Nor did the plaintiffs know anything
about the Baums -- except for the solicitation letter.2
With regard to the Baums, the district court found that
Sheldon proclaimed himself the instigator of the suit. He
determined whom to name as plaintiffs, what claims to file, whom to
sue, and where to file the suit. He polled attorneys and receivers
for advice with regard to the complaint and conferred with the
plaintiffs. The plaintiffs all believed that Sheldon was an
attorney. Sheldon proclaimed his personal hostility to Mortenson.
The district court found that Sheldon’s “relationship to the truth
[was] pathological.” The district court noted that in response to
“direct questions about simple objective data,” Sheldon said “what
he preferre[d] the facts to be rather than what they demonstrably
[were].” The district court provided the following examples:
1. Sheldon swore that he graduated from Tulane Law
2
The district court ultimately imposed some minor sanctions
on the named plaintiffs because in the district court’s words the
plaintiffs thought they could scare Mortenson into giving them
money by hiring people they did not know to go collect money that
was not due to them. These plaintiffs have not appealed their
sanctions.
7
School. However, Tulane advised the court that
Sheldon had not graduated from their law school,
and Sheldon could produce only a registrar’s letter
reflecting that he had completed 12 hours.
2. Sheldon testified that he did not have a Texas
driver’s license because he no longer drove.
However, he then stated that the license had
expired and that he had “turned it back.” He
explained that earlier, when he testified that he
did not have a license, he meant that he did not
have it with him.
3. Although Sheldon had stated that he no longer
drove, he later explained to the court that he was
present in the courtroom because he had driven his
sons to the hearing.
4. After telling the court that he was retired and
that he only answered telephones for his sons’
business, Sheldon admitted that he was the driving
force behind the litigation. Others testified that
their contact was with Sheldon, not with his sons.
The district court found that Sheldon had extensive experience
with courts, noting that: (1) he was convicted of felony theft of
his brother’s car; (2) he had filed involuntary bankruptcy
petitions against others and had been barred by the courts from
filing similar petitions in the future; and (3) his father and son
were lawyers. The district court found that Sheldon had a history
of acting on “greed, malice, and illness.”
With regard to Brian Baum, the district court noted that he
was an attorney licensed to practice in Pennsylvania and that he
had signed the pleadings in the instant suit. The district court
found that Brian “would not -- could not perhaps -- tell the
truth.” As examples, the court recalled that:
1. Brian had stated that his father was licensed as an
8
attorney by New Jersey. Realizing that the lawyer
he was referring to was his grandfather and not his
father, Brian “just kept talking.”
2. Brian stood mute as Sheldon “told the court his
lies.”
3. After examining the complaint and amended complaint
paragraph by paragraph, Brian admitted that the
claims were fabricated. However, Brian persisted
in his argument that some of the actions of the
receiver were “‘unneeded.’”
4. Brian also disclaimed having prepared pro se
pleadings for several of the plaintiffs. However,
the plaintiffs testified that they received the
pleadings from Brian and were told to sign and mail
them to the court.
5. Besides denying that he had prepared the pleadings,
Brian “violated the proper legal practice when he
prepared pleadings for laymen to file as if they
had prepared them themselves.”
6. Brian told the district court that Creditor Funds
Recovery was defunct and that his father had
discontinued business six or seven years ago. The
court noted, however, that the “assumed name [was]
still active” and that while Sheldon withdrew from
the business, Brian was among the surviving
principals.
7. Brian listed Douglas as a principal of Baum & Baum,
knowing that the firm was not a professional
association.
8. Brian had filed a special appearance, an answer,
and a plea in abatement in a state court defamation
suit filed by Mortenson and Shaunessy against,
inter alia, the plaintiffs and the Baums
notwithstanding that the district court had ordered
the plaintiffs or their agents to not file anything
with a court or administrative agency until after a
hearing scheduled for December 6, 2002. The
district court found that by filing the above
pleadings, as well as a motion to dismiss in the
instant suit, Brian violated an earlier-imposed
preliminary injunction.
9
9. Brian included as a plaintiff Gary Johnson
notwithstanding Johnson’s written statement on the
contingency fee contract that he had no claim
personally and that the claim was to be pursued on
behalf of a family partnership.
10. Brian, in the instant lawsuit, was purportedly
representing investors who had lost money as the
result of the mismanagement of AFI by its
president, Russell Erxleben. However, in other
instances, Brian represented people who helped
Erxleben hide profits and people who were resisting
the receiver. The district court found that Brian
failed to disclose his prior representation to the
present plaintiffs and that he was “conflicted.”
11. Brian had a history of filing lawsuits against
receivers and the receivers’ attorneys.
The district court found that Douglas Baum:
1. Assisted his family in the suit and “argued for
their positions in the face of contrary facts.”
2. Clearly acted for his father and brother.
3. Signed the “assumed name registration [for Baum &
Baum] as an owner, knowing it was not a
professional association” and that he was not a
lawyer.
The district court concluded that the Baums had brought the
suit “to satisfy their illusion of hidden funds or to extort deals
for their other clients.” The court found the lawsuit to be
fraudulent and that “[o]nce instituted, the Baums maintained [the
suit] with singular ineptitude.” The district court noted that
when asked to explain their case, “Brian and Sheldon Baum did not
tell the truth.”
The district court ordered a variety of sanctions against the
Baums including restraining orders, orders to write letters of
10
apology, and an order forbidding Sheldon from practicing law either
formally or informally. The Baums appeal the following actions of
the district court:
1. The district court, finding that Brian had violated
the preliminary injunction, ordered him to serve
ten days in jail. The court found further that
Sheldon had aided and abetted Brian in violating
the preliminary injunction and ordered that he also
serve ten days in jail.
2. Brian and Sheldon were ordered to pay $100,000 to
Mortenson for the legal fees she and Shaunessy
incurred.
3. The district court barred the Baums from filing,
directly or indirectly, any papers in the courts
of Texas or Louisiana, state or federal, or with an
executive agency without the written permission of
a judge.
DISCUSSION
I. Whether the district court abused it discretion in ordering
Brian and Sheldon to be incarcerated ten days for contempt.
While the Baums appeal the district court’s sanction order,
they do not contest any of the district court’s findings with
regard to their deceitful behavior, the frivolity of the complaint,
or the vexatious nature of the litigation. Accordingly, they have
abandoned any challenge to the district court’s factual findings on
appeal. Yohey v. Collins, 985 F.2d 222, 224-25 (5th Cir. 1993).
The appellees aver that the appeal of the incarceration aspect
of the sanction order is moot inasmuch as the Baums have served
their sentences. The Baums argue that the “collateral
consequences” they will experience as a result of the sanction
11
order allow review of this aspect of the sanction order. See
Sinclair v. Blackburn, 599 F.2d 673, 675 (5th Cir. 1979) (holding
that release from custody does not moot a case where the prisoner
continues to suffer collateral consequences as a result of his
conviction).
The Baums fail to specifically state what “collateral
consequences” they will experience. To the extent they argue that
the fact that they were sentenced to jail time could be used to
impeach their testimony in the future and could adversely impact
their careers, as pointed out by the appellees, the order of
incarceration can do no more harm than the Baums’ actions in the
past, i.e., a state theft conviction and sentence, a federal
bankruptcy fraud conviction and sentence (Sheldon Baum), a theft by
check conviction, a deferred adjudication for cocaine, and
marijuana possession (Brian Baum). As the Baums have served their
jail time and they have failed to show that they will suffer any
specific collateral consequences as a result of the incarceration
contempt order, this court finds that the appeal of the
incarceration order is moot. Schlang v. Heard, 691 F.2d 796, 799
& n.6 (5th Cir. 1982) (finding a claim is moot “in the sense that
. . . there is simply no relief this court can give”) (habeas
proceeding).
II. Whether the district court’s sanction order violated the
Baums’ constitutional rights, Federal Rule of Civil
Procedure 11, or 28 U.S.C. § 1927.
12
The federal courts are vested with the inherent power “‘to
manage their own affairs so as to achieve the orderly and
expeditious disposition of cases.’” Gonzalez v. Trinity Marine
Group, Inc., 117 F.3d 894, 898 (5th Cir. 1997) (citation omitted).
The invocation of these inherent powers must be done with
“‘restraint and discretion,’” and should comply with the mandates
of due process. Id. (citation omitted). Sanctions under the
inherent power should be confined to instances of “‘bad faith or
willful abuse of the judicial process.’” Id. (citation omitted).
A court may also impose sanctions under 28 U.S.C. § 1927.
Section 1927 provides that any attorney “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 attorneys’ fees reasonably incurred because of such
conduct.” The statute requires “that there be evidence of bad
faith, improper motive, or reckless disregard of the duty owed to
the court.” Edwards v. General Motors Corp., 153 F.3d 242, 246
(5th Cir. 1998). Lastly, Federal Rule of Civil Procedure 11
directs district courts to impose sanctions against a litigant who
signs frivolous or abusive pleadings.
A district court’s sanction order, whether premised on Rule
11, § 1927, or its inherent powers to impose sanctions is reviewed
for abuse of discretion. Tollett v. City of Kemah, 285 F.3d 357,
363 (5th Cir. 2002). The district court did not state whether the
13
basis for the sanctions was under Rule 11, § 1927, or its inherent
power. A court need not provide specific factual findings in every
sanction order. Topalian v. Ehrman, 3 F.3d 931, 936 (5th Cir.
1993); Thomas v. Capital Sec. Servs., Inc., 836 F.2d 866, 883 (5th
Cir. 1988) (en banc).
The Baums aver that the contempt/sanction order was criminal
in nature and that they were entitled to certain constitutional
protections. A contempt order is characterized as civil or
criminal based on its primary purpose. FDIC v. LeGrand, 43 F.3d
163, 168 (5th Cir. 1995). “[T]he ultimate test for determining the
civil or criminal character of a contempt order is ‘the apparent
purpose of the trial court in issuing the contempt judgment,’ a
punitive purpose or one ‘designed to vindicate the authority of the
court’ establishing the criminal nature of the order, while a
coercive or remedial purpose characterizes a civil contempt.”
Thyssen, Inc. v. S/S Chuen On, 693 F.2d 1171, 1173-74 (5th Cir.
1982) (quoting Smith v. Sullivan, 611 F.2d 1050, 1053 (5th Cir.
1980)). “When a contempt order contains both a punitive and a
coercive dimension, for purposes of appellate review it will be
classified as a criminal contempt order.” LeGrand, 43 F.3d at 168.
The contempt order in the instant case does not expressly
state whether it is a civil or criminal contempt order. However,
the apparent purpose of the order was punitive or “designed to
vindicate the authority of the court” rather than coercive or
remedial. See Thyssen, 693 F.2d at 1173-74. The ten-day jail
14
sentence was punishment for past wrongs, not a sentence intended to
coerce compliance with an ongoing order. Accordingly, at least
part of the order is criminal, therefore for purposes of appellate
review the order will be treated as criminal. See LeGrand, 43 F.3d
at 168.
“While it is clear that a district court has the power to
issue a criminal contempt sanction for the refusal to comply with
a court order, procedures are mandated which protect the
contemnor’s constitutional rights.” Lamar Fin. Corp. v. Adams, 918
F.2d 564, 567 (5th Cir. 1990) (footnote omitted). Rule 42 requires
notice, the appointment of a prosecutor, and an opportunity to be
heard. FED. R. CRIM. P. 42(a)(1)-(3).
The Baums do not contend that they did not receive adequate
notice or that they did not have an opportunity to be heard.
Rather, they contend that they were entitled to the appointment of
an independent prosecutor and that the district court judge
improperly presided over the contempt proceedings.
Notwithstanding Rule 42’s requirement with regard to the
appointment of a prosecutor, Rule 42(b) also provides for summary
criminal contempt penalties when the judge sees or hears in-court
contemptuous behavior. FED. R. CRIM. P. 42(b). Direct contempt
occurs “under the [court’s] own eye within its hearing.” In re
Terry, 128 U.S. 289, 310 (1888). Direct contempt is the
“intentional obstruction of court proceedings that literally
disrupt[s] the progress of the trial and hence the orderly
15
administration of justice.” United States v. Wilson, 421 U.S. 309,
315-16 (1975) (footnote omitted).
Here, the Baums’ contemptuous behavior before the district
court as outlined by the court and which the Baums do not
challenge, included lying to the district court, failing to answer
the district court judge’s direct questions, the unauthorized
practice of law (Sheldon Baum), and admitting that the complaint
was frivolous. See Howell v. Jones, 516 F.2d 53, 55, 58 (5th Cir.
1975) (failing to answer direct questions); United States v.
Johnson, 327 F.3d 554, 559-60 (7th Cir. 2003) (unauthorized
practice of law). Thus, the Baums were not entitled to an
independent prosecutor.
The Baums also aver that because they were not given the
benefit of the 21-day “safe harbor” provision of Rule 11, the
sanction order must be reversed. Rule 11 provides that sanctions
may be imposed only if the offending party has notice and a
“reasonable opportunity to respond.” FED. R. CIV. P. 11(C).
Further, a motion for sanctions “shall not be filed with or
presented to the court unless, within 21 days after service of the
motion (or such other period as the court may prescribe), the
challenged paper, claim, defense, contention, allegation, or denial
is not withdrawn or appropriately corrected.” FED. R. CIV. P.
11(C)(1)(A).
The Baums are wrong. First, the “safe harbor” provision does
16
not apply to sanctions ordered on the court’s initiative. FED. R.
CIV. P. 11(C)(1)(B); Elliot v. Tilton, 64 F.3d 213, 216 (5th Cir.
1995). Thus, to the extent that the sanctions were imposed on the
court’s own initiative and under its inherent power, the Baums were
not entitled to the 21-day “safe harbor” provision. Second, to the
extent that the sanctions were imposed as a result of the
appellees’ motion for sanctions, the appellees were unable to
comply with the requirement that the motion be served 21 days
before filing it with the court because the district court ordered
them to file the motion in six days. Rule 11(c)(1)(A) specifically
provides that the time between service and filing may be prescribed
by the court.
Sheldon and Douglas also argue that because they were not
attorneys (Brian was the signatory attorney on the pleadings) or
parties to the case, they cannot be sanctioned under Rule 11 or
§ 1927. Although it is true that Rule 11 provides for sanctions
against the individual attorney or party or agent of a party who
signs an abusive pleading or motion and § 1927 is limited to
attorney misconduct, a district court may rely on its inherent
powers to sanction the responsible party. Chambers v. NASCO, Inc.,
501 U.S. 32, 42-51 (1991). In Chambers, the Supreme Court
explained that a court may use its inherent power to reach
misconduct that is beyond the scope of Rule 11 and § 1927. Id. at
50. Thus, this argument is also rejected.
Brian also argues that the sanctions against him were improper
17
under § 1927 as he did nothing to prolong or multiply the
proceedings. Again, § 1927 provides for sanctions against an
attorney who “unreasonably and vexatiously” multiplies the
proceedings. Edwards, 153 F.3d at 246. “Underlying the sanctions
provided in . . . § 1927 is the recognition that frivolous . . .
arguments waste scarce judicial resources and increase legal fees
charged to parties.” Baulch v. Johns, 70 F.3d 813, 817 (5th Cir.
1995). However, because § 1927 sanctions are “penal in nature, and
in order not to dampen the legitimate zeal of an attorney in
representing his client, § 1927 is strictly construed.” Travelers
Ins. Co. v. St. Jude Hosp. of Kenner, La., Inc., 38 F.3d 1414, 1416
(5th Cir. 1994) (internal citations omitted).
Brian, as evidence that he did nothing to prolong or multiply
the proceedings and that the sanctions were improper as against
him, points to the fact that within three weeks of filing the
amended complaint, he orally requested that the complaint be
dismissed, that he later admitted that the complaint’s allegations
were unfounded, and that he subsequently filed a motion for
dismissal with prejudice.
Simply because, in Brian’s own view of the proceedings, he
believes he may have acted expeditiously in seeking to have a
frivolous lawsuit dismissed does not excuse his first transgression
-- the filing of a lawsuit known to be frivolous. Had he not filed
the lawsuit, the answers, and motions, numerous hearings would not
have ensued. To hold otherwise would allow attorneys to avoid the
18
consequences of their bad faith conduct by simply dismissing a
frivolous suit before sanctions are entered. Accordingly, to the
extent that the sanction order against Brian was predicated on
§ 1927, the district court did not abuse its discretion.
III. Whether the district court committed any other complained of
errors.
The Baums make several other arguments, many of them in
footnotes, claiming error. Insofar as these arguments can be
understood they are outlined here and rejected by this court.
Brian avers that the district court, in imposing sanctions,
erred in considering conduct that occurred in other courts. Brian
contends that the district court, in referring to the case as “an
example of guerrilla warfare through litigation,” impermissibly
considered other conduct.
Brian misstates the law. The power to punish for contempt is
inherent in all courts and “reaches both conduct before the court
and that beyond the court’s confines.” Chambers, 501 U.S. at 44.
Moreover, a court can consider other litigation in imposing
sanctions under § 1927. In Travelers, this court clarified that
although an attorney may not be sanctioned for conduct that could
not be construed as part of the proceedings before the court
issuing the § 1927 sanctions, the issuing court could consider such
conduct in determining whether the conduct before it was taken in
bad faith or undertaken with an improper motive. Travelers, 38
F.3d at 1417-18. Here, the district court considered Brian’s
19
conduct in the receivership court to determine whether the instant
lawsuit and related conduct were done in bad faith. This was not
improper.
The Baums, in a footnote, argue that the district court’s
failure to state whether it was basing the sanction order on Rule
11, § 1927, and/or its inherent power itself mandates reversal of
the sanction order. Again, a court need not provide specific
factual findings in every sanction order. Topalian, 3 F.3d at 936;
Thomas, 836 F.2d at 883. Findings and conclusions are required
only to the extent necessary to facilitate appellate review.
Thomas, 836 F.2d at 883. Here, the district court’s sanction
order, which was ten pages in length, was sufficiently detailed for
the purpose of appellate review and the fact that the district
court did not state what authority it was basing the sanctions on
does not require reversal.
The Baums also argue in a footnote that if the case is
remanded it should not be remanded to Judge Hughes because of his
comments concerning their conduct. This request, however, is
untimely and Judge Hughes’s comments were from an “intrajudicial
source,” -- the deceitful conduct he witnessed -- and therefore
cannot constitute an alleged bias. Andrade v. Chojnacki, 338 F.3d
448, 455 (5th Cir. 2003). No recusal was or is necessary.
IV. Whether the award of attorneys’ fees was unsupported and
excessive.
The Baums argue that the award of attorneys’ fees in the
20
amount of $100,000 in favor of Mortenson was unsupported and
excessive. The court ordered Brian and Sheldon Baum to pay
Mortenson $100,000 for the legal fees that she and Shaunessy
“incurred in this case.” The court stated that “[t]his [was] a
cost adjustment in this case, and it [did] not represent
compensation for” defaming Mortenson. The Baums argue that the
only evidence of the amount of legal fees were the fees billed by
Mortenson’s attorney, Janiece Longoria, in the amount of $19,727.
The Baums aver further that because Shaunessy was proceeding pro
se, he was not entitled to an award of attorneys’ fees.
Again the Baums are wrong. First, Shaunessy was not
proceeding pro se. He was also represented by Longoria. Second,
there was evidence presented to the court that Mortenson and
Shaunessy incurred legal fees in the amount of $103,550.05.
V. Whether the district court abused its discretion in
permanently enjoining the Baums from filing papers in Texas or
Louisiana.
The Baums aver that the district court erred in permanently
enjoining them from filing papers in Texas or Louisiana courts,
state or federal, or any administrative agency without the prior
permission of a judge. They argue that such a requirement
impermissibly infringes upon their right of access to the courts
and interferes with their ability to make a living.
This court reviews a district court’s grant of an injunction
for an abuse of discretion. Newby v. Enron Corp., 302 F.3d 295,
21
301 (5th Cir. 2002). Federal courts have the power to enjoin
plaintiffs who abuse the court system and harass their opponents.
This includes enjoining future filings to protect its jurisdiction
and control its docket. Farguson v. MBank Houston, N.A., 808 F.2d
358, 360 (5th Cir. 1986). However, an “injunction against future
filings must be tailored to protect the courts and innocent
parties, while preserving the legitimate rights of litigants.” Id.In Farguson, the district court barred Farguson from filing
any further actions against any of the defendants based on any
matter set forth in the complaint. Id. at 359. This court upheld
the injunction finding that it was “specific and limited” in that
it related “only to the same claims against the same defendants.”
Id. at 360. This court noted that the injunction did not prohibit
“[o]ther claims or claims against other parties.” Id. This court
noted that while the injunction punished Farguson for abusive
litigation, the injunction served only to effectuate the court’s
judgment and protect the defendants from further litigation on
claims which were already deemed to be frivolous. Id. However,
the court noted that “a broader injunction, prohibiting any filings
in any federal court without leave of that court” may be
“appropriate if a litigant is engaging in a widespread practice of
harassment against different people.” Id.As a preliminary matter, determining exactly what the Baums
have been enjoined from doing is important. The December 23, 2002,
sanction order of the district court states that the Baums
22
“directly or indirectly, may not file papers in the courts of Texas
or Louisiana, state or federal, or with an executive agency without
written permission of Judge Lynn N. Hughes, or Texas District Judge
Paul Davis, Bankruptcy Judge Stephen Callaway, or Bankruptcy Judge
William Greendyke.” The wording of this sanction seems very broad,
but this particular sanction was placed in the midst of the other
sanctions dealing specifically with the Baums’ conduct in relation
to Mortenson and Shaunessy. Likewise, the judges listed as able to
grant such permission all preside in courts where the Baums had
filed something related to AFI matters. This sanction made
permanent an earlier preliminary injunction that the Baums had
violated. The wording of the district court’s earlier preliminary
injunction, entered on December 9, 2002, states that the Baums or
people associated with Baum & Baum or Creditor Funds Recovery “may
not make claims, including affirmative defenses, in municipal,
state, federal, or bankruptcy courts or before administrative
agencies, executive officers, or legislative officers against Janet
Mortenson personally or as receiver, Janiece Longoria, Michael
Shaunessy, Anne Greenberg, or their associates, partners, agents,
contractors, friends, neighbors, and employees” except with the
express written permission of the same judges as listed in the
sanction order. Accordingly, we read the sanction order in the
context of this entire litigation, and find that the Baums have not
been enjoined from filing any papers in any court or agency, state
or federal, but rather just as to filings against Mortenson and
23
Shaunessy and related individuals and to filings relating to AFI
matters without first obtaining the permission of one of the judges
involved in sorting out the mess the Baums have proliferated within
our courts. This more narrow reading indicates the injunction is
similar to the injunction upheld in Farguson with the exception
that this injunction bars all filings against Mortenson and others,
not just filings relating to AFI matters. It is hard to imagine
what other legitimate claims the Baums could bring against the off
limit individuals and therefore the district court did not abuse
its discretion and the injunction is affirmed.
We note that our statement in Farguson, that “a broader
injunction, prohibiting any filings in any federal court without
leave of that court” may be “appropriate if a litigant is engaging
in a widespread practice of harassment of different people,” could
potentially apply to the Baums. Id. If the Baums persist in a
widespread practice that is deserving of such a broad sanction,
then such an injunction could be appropriate. But here, as of now,
we interpret this injunction as more narrow and appropriate based
on the Baums’ actions in relation to AFI matters.
CONCLUSION
The sanction order is affirmed because the district court did
not abuse its discretion, committed no reversible errors, and under
our interpretation the permanent injunction is sufficiently limited
and appropriate based on the Baums’ conduct.
24
AFFIRMED.
25