Patricia Ayala v. Gabriel Building Supply , 569 F. App'x 241 ( 2014 )

Case: 13-30532 Document: 00512643987 Page: 1 Date Filed: 05/28/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 13-30532 May 28, 2014
c/w No. 13-31246
Lyle W. Cayce
Clerk
PATRICIA HAMAKER AYALA, Individually and as Succession
Representative/Administratix for the Estate of Louis R. Ayala, III,
Plaintiff - Appellant
v.
ENERCO GROUP, INCORPORATED; MR. HEATER, INCORPORATED,
Defendants - Appellees
Appeals from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:12-CV-577
Before KING, SOUTHWICK, and GRAVES, Circuit Judges.
PER CURIAM:*
Patricia Ayala brought suit in Louisiana state court against a
manufacturer, its insurers, and a retail store alleging that defects in a propane
heater caused the death of her husband. The case was removed to federal court
by the manufacturer and insurers who argued the non-diverse retailer, Gabriel
Building Supply, was improperly joined. The district court, finding improper
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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joinder, dismissed Gabriel, and retained jurisdiction over the remaining
defendants. The court later granted summary judgment for the defendants on
Ayala’s products liability claim. The district court also sanctioned Ayala’s
counsel for filing a second, nearly identical action in state court after the
district court denied Ayala’s motion to remand the case. Ayala argues the court
erred in dismissing Gabriel from the suit and denying her motion to remand.
She also appeals the grant of summary judgment for the remaining defendants
on her products liability claim. Ayala’s counsel challenges the imposition of
sanctions. We AFFIRM the district court’s dismissal of Gabriel from the suit
and the court’s grant of summary judgment for the remaining defendants on
Ayala’s products liability claim. The imposition of sanctions is REVERSED.
FACTUAL & PROCEDURAL BACKGROUND
In 2011, Ayala purchased a Mr. Heater portable propane heater from
Gabriel in Ponchatoula, Louisiana. The heater was manufactured by the
defendants, Enerco Group, Inc. and Mr. Heater, Inc. On February 2, 2011,
Ayala’s husband, Louis R. Ayala III, was using the Mr. Heater in the Ayalas’
shed when it exploded, severely burning Louis and causing significant damage
to the shed. Louis was hospitalized for severe burns on his entire back, hips,
shoulders, arms, and the back of his head. He underwent multiple surgeries
but died due to these injuries on August 4, 2011.
Ayala filed suit in Louisiana state court, individually and on behalf of
the estate of her husband, against Gabriel Building Supply, Enerco Group,
Inc., Mr. Heater Corp., and the defendants’ insurers. Enerco and Mr. Heater
filed a notice of removal in the federal district court for the Eastern District of
Louisiana, contending that the retailer Gabriel was improperly joined, and
there would be complete diversity of citizenship once Gabriel was dismissed.
Enerco and Mr. Heater argued that, as the non-manufacturer retailer of the
heater, Gabriel could only be liable for damages in tort if it knew or should
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have known that the product was defective and failed to notify Ayala of the
defect. Ayala had not made such an allegation. Ayala filed an amended
complaint in the district court, adding a claim of liability for “handling and
merchandising,” and simultaneously moved to remand the case. She argued
the complaint did state a claim against Gabriel for its own negligence in
accordance with Louisiana law. On May 3, 2012, the district court dismissed
Ayala’s claims against Gabriel, finding no reasonable basis to predict that a
state court would allow recovery against Gabriel.
After dismissing Gabriel from the suit, the district court also dismissed
Ayala’s claims for negligence, strict liability, and for manufacture of an ultra-
hazardous product. The court held that any recovery could only occur under
the Louisiana Products Liability Act (“LPLA”). Enerco and Mr. Heater filed
motions for partial summary judgment seeking dismissal of Ayala’s remaining
products liability claims under the LPLA. The district court granted the
motions and dismissed Ayala’s claims on April 26, 2013. Ayala timely appealed
the court’s grant of summary judgment for Enerco and Mr. Heater.
In September 2012, after Gabriel was dismissed from the suit in federal
court, Ayala filed a second state court action naming only Gabriel as a
defendant. Gabriel then filed a third party demand against Mr. Heater. After
Gabriel filed the demand, Ayala filed in state court a motion for leave to file an
amended petition in which she asserted claims against Mr. Heater virtually
identical to the claims pending in the ongoing suit in federal court. Mr. Heater
filed a motion in the ongoing federal proceeding to enjoin the second state court
action and requesting sanctions and costs. On November 7, 2012, the district
court granted Mr. Heater’s motion to enjoin the state court proceedings,
reserving the question of sanctions for a later date. At a hearing on December
5, 2012, the court determined that sanctions were appropriate and awarded
costs and attorney’s fees to Mr. Heater. The court then referred the case to the
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magistrate judge for further proceedings on the amount of costs and fees. On
October 29, 2013, the magistrate judge issued a report and recommendation
ordering fees and costs in the amount of $5,045. Before the magistrate judge
issued its final order on the amount of fees and costs, Ayala had already filed
a notice of appeal in April 2013 seeking review of the district court’s final order
granting summary judgment for the defendants as well as the court’s
December 5 order imposing sanctions. After the October 2013 final order on
the amount of sanctions, Ayala filed what she termed an “Amended Notice of
Appeal” stating she was amending her first notice of appeal to include the
court’s October order. The amended notice of appeal from the final order
determining the amount of sanctions was given a separate case number, 13-
31246. We have consolidated the two appeals.
We have these rulings to review: (1) the district court’s determination
that Gabriel was improperly joined and the denial of Ayala’s motion to remand;
(2) the district court’s grant of summary judgment for Enerco and Mr. Heater
on Ayala’s remaining products liability claims; and (3) the imposition of
sanctions against Ayala’s counsel. Ayala has also argued on appeal that the
defendants obstructed the discovery process with improper discovery tactics.
DISCUSSION
I. Improper joinder
We review de novo both the district court’s denial of a motion to remand
to state court and the district court’s improper-joinder determination.
Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 401 (5th Cir. 2013) (improper
joinder); Campbell v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir. 2007) (motion
to remand). Improper joinder is “a narrow exception to the rule of complete
diversity.” McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005). To
establish improper joinder, the party seeking removal must demonstrate
either: “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability
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of the plaintiff to establish a cause of action against the non-diverse party in
state court.” Id. Only the second way is before us. It requires examination of
“whether the defendant has demonstrated . . . that there is no reasonable basis
for the district court to predict that the plaintiff might be able to recover
against an in-state defendant.” Id. “A ‘mere theoretical possibility of recovery
under local law’ will not preclude a finding of improper joinder.” Smallwood v.
Ill. Cent. R.R. Co., 385 F.3d 568, 573 n.9 (5th Cir. 2004) (en banc) (quoting
Badon v. RJR Nabisco, Inc., 236 F.3d 282, 286 n.4 (5th Cir. 2000)). “Ordinarily,
if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper
joinder.” Mumfrey, 719 F.3d at 401. The burden of showing improper joinder
is a heavy one. McDonal, 408 F.3d at 183.
We determine whether there was a right to remove by examining the
plaintiff’s pleading at the time of the petition for removal. See Cavallini v.
State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995). When
considering improper joinder specifically, “[p]ost-removal filings may not be
considered . . . when or to the extent that they present new causes of action or
theories not raised in the controlling petition filed in state court.” Griggs v.
State Farm Lloyds, 181 F.3d 694, 700 (5th Cir. 1999). Accordingly, we look to
Ayala’s ability to recover against Gabriel based on the claims in the original
state-court pleading. Id.
Ayala’s state-court complaint alleged that Gabriel was the retailer of the
Mr. Heater and that the defendants
one and all, were negligent under the applicable Louisiana
statu[t]es and Civil Code articles, in the following non-exclusive
particulars, including the engineering, design, mandates to
component manufacturers, collation of component parts, assembly,
quality control, inspection of components and the finished product,
packaging and shipping, together with other specific instances of
negligence to be disclosed by further discovery herein.
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Post-removal, Ayala amended the final lines of the above paragraph to include
“packaging and shipping, handling and merchandising, together with other
instances of negligence anticipated to be disclosed by further discovery herein.”
(emphasis added). The addition of claims for negligence in the handling and
merchandising of the Mr. Heater, a theory not raised in state court, will not be
considered in our analysis of whether Gabriel was improperly joined. Griggs,
181 F.3d at 700.
In this diversity case, Louisiana substantive law applies. Seacor
Holdings Inc. v. Commonwealth Ins. Co., 635 F.3d 675, 680 (5th Cir. 2011).
Ayala’s claims stem from damages arising out of the malfunction of the
allegedly defective Mr. Heater. In Louisiana, the LPLA “establishes the
exclusive theories of liability for manufacturers for damage caused by their
products.” LA. REV. STAT. ANN. § 9:2800.52. The LPLA does not provide a
cause of action against sellers of products not falling under the LPLA’s
definition of “manufacturer.” See LA. REV. STAT. ANN. § 9:2800.53. Gabriel is
a non-manufacturing seller of the Mr. Heater. Thus, Ayala cannot allege a
viable cause of action against Gabriel under the LPLA.
Because Gabriel is not the manufacturer of the Mr. Heater, “any
responsibility for tort damages it may have would necessarily arise under its
role as a non-manufacturing seller.” Alexander v. Toyota Motor Sales, U.S.A.,
123 So. 3d 712, 714 (La. 2013). Under Louisiana tort law, to establish the
liability of a non-manufacturing seller of a product, “three requirements must
be met: First, the product sold by [Gabriel] must be defective. Second, [Gabriel]
must have had actual or constructive knowledge that the product it sold was
defective. Lastly, [Gabriel] must have failed to declare the defect.” Id. Ayala’s
original complaint contains only the conclusory allegation that Gabriel was
negligent under applicable Louisiana law. Her complaint fails to allege that
Gabriel knew or should have known the product was defective or any other
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factual basis for Gabriel’s negligence under Louisiana law. Looking to the
allegations of Ayala’s state-court complaint and “conduct[ing] a Rule 12(b)(6)-
type analysis” we conclude Ayala’s complaint fails to state a claim under
Louisiana law against Gabriel. Smallwood, 385 F.3d at 573. The court did not
err in concluding Gabriel was improperly joined and denying Ayala’s motion to
remand.
II. Ayala’s products liability claims
After the district court dismissed Gabriel from the suit, Enerco and Mr.
Heater moved for summary judgment on Ayala’s remaining claims. The
district court granted the motions, concluding that no dispute of material fact
existed under the LPLA.
We review de novo a grant of summary judgment, applying the same
standard as the district court. First Am. Title Ins. Co. v. Cont’l Cas. Co., 709
F.3d 1170, 1173 (5th Cir. 2013). Summary judgment is appropriate “if the
movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).
Because Louisiana law applies, we must apply its jurisprudence that,
based on civil law principles, caselaw is not the primary source for
understanding that state’s law. As one of our Louisiana colleagues explained:
It is axiomatic that in Louisiana, courts must begin every legal
analysis by examining primary sources of law: the State’s
Constitution, codes, and statutes. Jurisprudence, even when it
rises to the level of jurisprudence constante, is a secondary law
source in Louisiana.
Prytania Park Hotel, Ltd. v. Gen. Star Indem. Co., 179 F.3d 169, 175 (5th Cir.
1999) (Wiener, J.) (footnote omitted). Accordingly, we seek authority first in
the LPLA, and only secondarily in discussions in judicial decisions.
The district court accurately identified that the LPLA establishes the
exclusive theories of recovery against a manufacturer for damages caused by
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their products. LA. REV. STAT. ANN. § 9:2800.52; see Brown v. R.J. Reynolds
Tobacco Co., 52 F.3d 524, 526 (5th Cir. 1995).
To maintain a successful products liability action under the LPLA,
a plaintiff must establish four elements: (1) that the defendant is
a manufacturer of the product; (2) that the claimant’s damage was
proximately caused by a characteristic of the product; (3) that this
characteristic made the product ‘unreasonably dangerous’; and (4)
that the claimant’s damage arose from a reasonably anticipated
use of the product by the claimant or someone else.
Stahl v. Novartis Pharms. Corp., 283 F.3d 254, 260-61 (5th Cir. 2002)
(summarizing LA. REV. STAT. ANN. § 9:2800.54).
Ayala needed to produce evidence that created a fact issue on the
question of whether this portable propane heater was unreasonably dangerous.
A product may be unreasonably dangerous in four ways: (1) construction or
composition; (2) design; (3) inadequate warning; and (4) nonconformity to an
express warranty. LA. REV. STAT. ANN. § 9:2800.54(B). Ayala contends only
that the heater was unreasonably dangerous due to a defect in construction or
composition. Ayala also raises an issue about res ipsa loquitur.
a. Construction or composition
“A product is unreasonably dangerous in construction or composition if,
at the time the product left its manufacturer’s control, the product deviated in
a material way from the manufacturer’s specifications or performance
standards for the product or from otherwise identical products manufactured
by the same manufacturer.” LA. REV. STAT. ANN. § 9:2800.55. The statute
imposes two requirements on a plaintiff: (1) establish the manufacturer’s
specifications or performance standards for the product, and (2) demonstrate
how the product materially deviated from those standards, rendering it
unreasonably dangerous. Jenkins v. Int’l Paper Co., 945 So. 2d 144, 150 (La.
Ct. App. 2006). The LPLA does not suggest that the existence of a product
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defect may be inferred from the fact that an accident occurred. Weiss v. Mazda
Motor Corp., 54 So. 3d 724, 726 (La. Ct. App. 2010).
Ayala’s summary judgment evidence primarily consisted of deposition
testimony from an expert engineer, A.J. McPhate. Because all non-ferrous
components of the Ayalas’ heater melted in the fire, McPhate examined an
identical Mr. Heater model as the basis for his opinions. McPhate’s opinion
was that the most probable cause of the fire was a propane leak. He then
identified five potential areas for fault in the Mr. Heater which could cause
such a propane leak: (1) a faulty connection on the propane bottle; (2) failure
of the pressure regulator; (3) failure of the safety shutoff valve; (4) a crack in
the fitting between the safety shutoff valve and the pressure regulation body;
and (5) a crack in the fitting between the safety shutoff valve and the mixing
tube. McPhate conceded that while these were all potential areas for a defect
in that model Mr. Heater, there was no evidence to suggest the Ayalas’ heater
itself was defective. He did not perform a structural analysis of the Mr. Heater
or destructive testing of an example unit. His conclusions supporting that
there could be a leak were based solely on the nature of the item itself.
McPhate also admitted that he could not rule out other potential sources of a
propane leak other than a defect in the heater, such as a faulty propane bottle
or a failure by Mr. Ayala to secure the valve properly on the heater.
The district court’s opinion cited a decision where a plaintiff’s expert
testimony was found to be too speculative to create a genuine factual dispute
regarding a defective condition in the product. See Gladney v. Milam, 911 So.
2d 366, 368 (La. Ct. App. 2005). There, the plaintiffs brought a products
liability action against a tire manufacturer, alleging a defect in one of the tires
caused the plaintiff’s vehicle to roll over several times. Id. at 366. In opposition
to summary judgment, the plaintiff submitted the testimony of two experts
that, although unable to examine the damaged tire itself, opined that the most
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probable cause of the tire failure was fatigue of the polyester cords in the
sidewall of the tire resulting from a manufacturing defect. Id. at 371. As here,
though, the experts conceded the tire blow-out could also have been a result of
an alternative design defect or could have been caused by improper
maintenance such as under inflation or overloading. Id. The court concluded
the experts “could only speculate that the tire was defective” and were not
sufficient to create a factual issue regarding a defect in the tire. Id. at 372.
A plaintiff must offer evidence of a defect based on more than mere
conjecture; rather, a plaintiff must offer something in the way of factual
support or circumstantial evidence tending to show the existence of a defect.
See Smith v. Gen. Motors Corp., 722 So. 2d 348, 353 (La. Ct. App. 1998). In
Smith, the plaintiff alleged a defect in his vehicle caused the accident and
offered an expert’s opinion that a defect caused the unwanted acceleration. Id.
at 349, 351-52. Summary judgment for the defendant was not error, the court
concluded, partly because the plaintiff’s expert had no physical evidence of any
alleged defect, and the plaintiff therefore failed to produce factual support
sufficient to establish he would be able to satisfy his evidentiary burden at
trial. Id. at 352-53.
On the other hand, expert opinions based on evidence gathered during
investigation of an accident and inspection of the product at issue that
eliminate other potential causes and are based on sufficient circumstantial
evidence may “allow a reasonable juror to conclude the expert’s opinion on a
material fact more likely than not is true.” See Hanover Am. Ins. Co. v. Trippe
Mfg. Co., 843 So. 2d 571, 575-76 (La. Ct. App. 2003). In Hanover, the parties
disputed whether a fire was caused by an uninterruptible power supply
(“UPS”) device that was unreasonably dangerous in construction or
composition. Id. at 572. The plaintiff provided the testimony of two experts
that the fire originated with the UPS and that defects in the UPS ignited the
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fire. Id. at 575-76. Both experts examined the scene of the fire to assess its
point of origin and inspected the melted wiring in the UPS to eliminate other
electrical devices as the source of origin. Id. at 575. One of the experts also
studied the schematic diagram of the UPS device to identify three potential
faults in the device. Due to the fire damage to the UPS, the expert could not
determine with specificity the fault that caused the fire, but could opine based
on his inspection that a short circuit in the UPS was the fault that caused the
fire. Id. at 576.
McPhate’s testimony here was admittedly based on conjecture about the
Mr. Heater product generally. His hypothetical testimony would require the
court impermissibly to infer the existence of a defect solely from the fact that
an accident occurred. Id.
In addition to McPhate’s expert opinion, Ayala presented her own
affidavit attesting that her husband was familiar with the Mr. Heater propane
heater, having used that model heater before, and was meticulous about
following instructions and caring for his equipment. She also stated in her
affidavit that she had used the previously purchased propane bottle Mr. Ayala
connected to the Mr. Heater, took it in for refills, and was confident that it
functioned properly. She argues her testimony, taken with McPhate’s, makes
it extremely improbable that her husband could have been at fault for the fire,
thus creating a factual dispute as to whether a defect in the heater caused the
fire. Ayala contends the court erred by weighing the credibility of the
witnesses and failing to give credit to her testimony.
The problem with her affidavit is that Ayala was not present on the day
the fire occurred and cannot provide evidence of Mr. Ayala’s actions or the state
of the propane bottle on the day of the fire. She was offering her lay opinion,
extrapolating from her knowledge of her husband’s habits and her use of the
propane bottle, that the fire could not have been due to her husband’s mistake
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or the fault of the propane tank. Louisiana has adopted the standard
evidentiary rule on lay opinion testimony, which states:
If the witness is not testifying as an expert, his testimony in
the form of opinions or inferences is limited to those opinions or
inferences which are:
(1) Rationally based on the perception of the witness; and
(2) Helpful to a clear understanding of his testimony or the
determination of a fact in issue.
LA. CODE EVID. ANN. art. 701. Under Rule 701, “speculative opinion testimony
by lay witnesses — i.e., testimony not based upon the witness’s perception —
is generally considered inadmissible.” Washington v. Dept. of Transp., 8 F.3d
296, 300 (5th Cir. 1993). In particular, a “witness must have personalized
knowledge of the facts underlying the opinion.” Mississippi Chem. Corp. v.
Dresser-Rand Co., 287 F.3d 359, 373 (5th Cir. 2002).
Ayala did not have personalized knowledge of the facts underlying her
opinion that the fire could not have been the fault of her husband or the
propane bottle. She did not perceive the events that day, the actions of her
husband, or the functioning of the propane bottle. Therefore, her opinion
cannot be based on her perception of the events that day. See State v. Taylor,
669 So. 2d 364, 384 (La. 1996) (concluding lay opinion or inference is only
permissible if based on things perceived by witness firsthand). Even if Ayala’s
opinion that her husband was experienced and careful with the use of a Mr.
Heater, or that the propane bottle previously functioned properly, are
themselves based on first-hand observations, it does not follow that she may
properly state her opinion that her husband on the relevant day would have
been careful and the bottle would have performed properly because that
opinion is not based on what she perceived firsthand on that day.
Taken as true, Ayala’s testimony can do nothing more than show that,
based on her observations, her husband was careful in his use of the Mr. Heater
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and the propane bottle itself had functioned properly on prior occasions. Her
testimony as to the cause of the fire, on the other hand, is speculation lacking
any basis in personal perception of the events that day. The testimony,
therefore, is insufficient to create a fact issue as to the defective nature of the
heater. The district court did not err in concluding the summary judgment
evidence was insufficient to create a material fact issue on whether this Mr.
Heater was defective.
b. Res ipsa loquitur
Ayala also argues she may rely on the doctrine of res ipsa loquitur to
establish the Mr. Heater was defective in construction. The doctrine is a rule
of circumstantial evidence “utilized when there has been a highly unusual
act/occurrence; there is no direct evidence to suggest that a defendant’s
negligence brought about said act/occurrence; and yet, the circumstances
surrounding the anomalous event . . . allow the finder of fact to conclude that
the defendant was negligent.” Lawson v. Mitsubishi Motor Sales of Am., Inc.,
938 So. 2d 35, 43-44 (La. 2006). The Louisiana Supreme Court has held that
a products liability plaintiff may use the doctrine to “make the inference that
a product was unreasonably dangerous.” Id. at 49. For res ipsa loquitur to
apply, however, a plaintiff must “sufficiently exclude inference of the plaintiff’s
own responsibility or the responsibility of others besides [the] defendant in
causing the accident.” Id. at 50.
The district court did not err in concluding Ayala could not avail herself
of this doctrine. McPhate opined that a propane leak caused the fire and
identified three potential sources of the leak: a defect in the heater, Mr. Ayala’s
fault in not tightening a valve correctly, or a fault in the propane bottle.
McPhate conceded that he could not exclude any of those potential sources as
the source of the leak that caused the fire. We have already indicated that
Ayala’s opinion about her husband’s general care in using the heater and her
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belief that the propane bottle functioned properly was not probative. “[W]e
cannot say that the only reasonable and fair conclusion is that the fire resulted
from [the] defendant’s negligence.” Aetna Life & Cas. Co. v. AMI-Elec. & Hoist
Service, 637 So. 2d 173, 175 (La. Ct. App. 1994). Because reasonable
hypotheses as to other causes of the propane leak and fire remain, Ayala may
not rely on the doctrine of res ipsa loquitur. Summary judgment dismissing
Ayala’s products liability claim was not error.
III. Sanctions
The district court imposed sanctions on Ayala’s counsel under
28 U.S.C. § 1927. It provides:
Any attorney or other person admitted to conduct cases in any
court of the United States or any Territory thereof 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.
28 U.S.C. § 1927. “An award of attorney’s fees under § 1927 requires evidence
of bad faith, improper motive, or reckless disregard of the duty owed to the
court.” Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848, 871
(5th Cir. 2014). We review a district court’s award of sanctions under Section
1927 for abuse of discretion. Gonzalez v. Fresenius Med. Care N. Am., 689 F.3d
470, 479 (5th Cir. 2012). “A district court abuses its discretion if it awards
sanctions based on an erroneous view of the law or on a clearly erroneous
assessment of the evidence.” Lawyers Title Ins. Corp., 739 F.3d at 856.
The district court imposed sanctions after finding that counsel had
subverted the court’s jurisdiction by filing claims against Mr. Heater in a
second state court action virtually identical to the ones pending before the
district court. At a hearing on the matter, Ayala’s counsel argued that it was
necessary to assert the claims against Mr. Heater in the state court action to
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protect the plaintiff’s rights and not lose claims to prescription. The district
court found those justifications specious at best. It concluded that Ayala’s
rights against Mr. Heater were adequately protected in its court and the
actions evinced a reckless disregard of the duty owed to the court. The court
enjoined the state court proceedings and assessed Ayala’s counsel the costs and
fees incurred by Mr. Heater in bringing the motion to enjoin the state court
proceedings.
The validity of the district court’s decision to enjoin the second state
court action is not before us. We only determine if the court abused its
discretion by imposing sanctions under Section 1927 on the basis that Ayala’s
counsel acted with a reckless disregard for the duty owed to the court. Ayala’s
counsel argues that Gabriel remained a viable defendant after the district
court refused to remand the case and that he was “forced” to re-file in state
court. He further argues that alleging claims against Mr. Heater was
necessary to “avoid possible malpractice charges and running of delays
applicable to third-party actions under Louisiana law.”
Counsel’s decision to make a second filing in state court against the same
defendants who were still in federal court was inconsistent with the federal
district court’s assumption of jurisdiction over the claims against those parties.
We accept that counsel did not advance legally sound arguments for his filing
these nearly identical claims against Mr. Heater in the second state court
action. It is not enough, however, that counsel made legal error. When, as
here, there is no evidence of counsel’s bad faith or improper motive,
recklessness by counsel may be enough to conclude an attorney vexatiously
multiplied the proceedings. Still, “Section 1927 only authorizes shifting fees
that are associated with the persistent prosecution of a meritless claim.”
Procter & Gamble Co. v. Amway Corp., 280 F.3d 519, 525 (5th Cir. 2002)
(quotation marks omitted; emphasis added). “The courts often use repeated
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filings despite warnings from the court, or other proof of excessive
litigiousness, to support imposing sanctions.” Id.; see also, e.g., Cambridge
Toxicology Grp., Inc. v. Exnicios, 495 F.3d 169, 181 (5th Cir. 2007).
We conclude there is no evidence that counsel’s conduct in filing the
second state court action was a result of bad faith, improper motive, or reckless
disregard of the duty owed the court. Counsel for Ayala did not persistently
prosecute a meritless claim despite warnings from the court; rather, the
evidence reflects that counsel at worst errantly believed that unless the second
action was filed, his client would lose certain claims. Lawyers Title Ins. Corp.,
739 F.3d at 871-72. While counsel’s justifications for filing the second state
court action may lack merit, that “is not a sufficient basis for awarding
sanctions.” Id. at 872. “Section 1927 sanctions should be employed only in
instances evidencing a serious and standard disregard for the orderly process
of justice, lest the legitimate zeal of an attorney in representing [a] client [be]
dampened.” Id. (quotation marks omitted) (alteration in original). The district
court abused its discretion in imposing sanctions against Ayala’s counsel.
IV. Discovery
We briefly address Ayala’s argument that the defendants “intentionally
blocked, delayed, and obstructed” the discovery process. Ayala does not
identify any specific ruling by the district court of which she seeks review. The
arguments may best be construed as challenging the court’s confidentiality and
protective order entered on December 7, 2012, after Ayala’s counsel refused to
sign the confidentiality stipulation and protective order proposed by the
defendants. 1 In her brief, Ayala contends the court erroneously imposed the
1 In response to Ayala’s first set of interrogatories, the defendants agreed to provide
all requested information, including confidential and proprietary information, subsequent to
the entry of an appropriate protective order and/or an executed confidentiality agreement.
Counsel for Ayala refused to discuss the terms of a confidentiality agreement and instead
filed a motion to compel. In ruling on the motion to compel, the magistrate judge ordered
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Case: 13-30532 Document: 00512643987 Page: 17 Date Filed: 05/28/2014
No. 13-30532 & 13-31246
non-disclosure order contrary to established discovery policies. Nevertheless,
it does not appear from the record that Ayala objected to the court’s entry of
the protective order or any of the discovery rulings made by the magistrate
judge. Any objections should have been raised with the trial court, rather than
for the first time on appeal. XL Specialty Ins. Co. v. Kiewit Offshore Servs.
Ltd., 513 F.3d 146, 153 (5th Cir. 2008). Moreover, we review a district court’s
discovery rulings for abuse of discretion. Wiwa v. Royal Dutch Petroleum, Co.,
392 F.3d 812, 817 (5th Cir. 2004). We find nothing in the record indicating the
court abused its discretion in entering the protective order.
The judgment of the district court dismissing Ayala’s products liability
claims is AFFIRMED. The imposition of sanctions against Ayala’s counsel is
REVERSED.
Ayala to sign the confidentiality stipulation and protective order proposed by the defendants,
who would then be directed to respond to Ayala’s discovery requests within 48 hours of the
signing. The proposed confidentiality agreement and protective order reserved Ayala’s right
to challenge any of the defendants’ confidentiality designations. When Ayala’s counsel
continued to refuse to sign the confidentiality stipulation and protective order, the magistrate
judge entered the protective order proposed by the defendants as her own order on December
7, 2012. This appears to be the series of events which Ayala’s counsel assigns error on appeal.
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