Schmude, Joan v. Sheahan, Michael ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 04-2306, 04-2322 & 04-2343
JOAN SCHMUDE, Administrator
of the estate of Louis Schmude,
Plaintiff,
v.
MICHAEL F. SHEAHAN, Sheriff
of Cook County, WILLIAM SPATZ,
PATRICIA PULTZ, et al.,
Defendants.
APPEALS OF: EDWARD R. THEOBALD,
ANTHONY PINELLI, and ALAN R. BRUNELL,
Appellants.
____________
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 4580—Charles R. Norgle, Sr., Judge.
____________
ARGUED MAY 2, 2005—DECIDED AUGUST 18, 2005
____________
Before BAUER, EASTERBROOK, and EVANS, Circuit Judges.
BAUER, Circuit Judge. The district court imposed sanc-
tions on appellant attorneys Edward Theobald, Anthony
Pinelli, and Alan Brunell for improperly seeking appoint-
ment as Special State’s Attorneys and fees in state court
after the underlying case had been removed to federal court.
2 Nos. 04-2306, 04-2322 & 04-2343
The attorneys—in conjunction with Cook County, which the
district court ordered to file an appearance— appeal. We
reverse and vacate the sanctions order issued by the district
court. We also deny Cook County’s motion for certification
to the Supreme Court of Illinois.
I. Background
On June 20, 2000, Plaintiff Joan Schmude filed suit in the
Circuit Court of Cook County, Illinois, against Cook County
Sheriff Michael Sheahan, claiming that he was liable under
42 U.S.C. § 1983 and various state law theories for the
death of her husband, Louis Schmude, while he was in the
sheriff’s custody. Two days later, three Sheriff’s depu-
ties—William Spatz, Patricia Pultz, and Lawrence
Koscianski—were indicted and charged with first-degree
murder in connection with Mr. Schmude’s death. Mrs.
Schmude amended her complaint to name the three Sher-
iff’s deputies. On July 28, the Sheriff removed the case to
federal court.
On December 22, 2000, attorneys Theobald and Brunell
filed appearances in federal court. Theobald also filed a
motion with the district court for appointment as Special
State’s Attorney under 55 ILL. COMP. STAT. 5/3-9008 to
represent defendant Spatz in the civil case; Brunell filed a
similar motion with respect to defendant Koscianski.
Several days later, attorney Ficaro filed an appearance and
a motion to be appointed to represent defendant Pultz. The
motions were taken under advisement. On December 29,
the court ordered a stay of all proceedings pending the
outcome of the criminal prosecution. In connection with the
stay, the district court struck the three aforementioned
motions—along with a motion Theobald had made to
remand the case to state court—for case control purposes.
The court allowed for reinstatement of the motions within
28 days of the lifting of the stay order.
Nos. 04-2306, 04-2322 & 04-2343 3
The criminal case concluded on March 12, 2002. Directly
thereafter, attorney Theobald filed another motion with the
district court to remand the civil case to state court. At the
March 22, 2002 hearing on the motion, the district judge
stated that before he lifted the stay and ruled on Theobald’s
motion to remand, he wanted to determine who would
represent the defendants in the case. He explained that he
had concerns about appointing Theobald, Brunell, and
Ficaro as Special State’s Attorneys, since their prior
experience with the State’s Attorneys office could, in his
opinion, create a conflict of interest. The attorneys re-
sponded that they were not presently seeking appointment
as Special State’s Attorneys and urged the court to decide
the remand motion instead. The district judge asked if that
meant they were withdrawing their motions to be appointed
Special State’s Attorneys. The attorneys indicated that if
there were motions for appointment pending, they were
withdrawing them. The district court then vacated the stay.
On April 22, 2002, the district court denied the motion to
remand the case to state court. On April 30, attorneys
Theobald, Brunell, Ficaro, and Pinelli filed petitions in
the Circuit Court of Cook County, seeking appointment
as Special State’s Attorneys in the federal action. The
petition also sought the appointment of Pinelli as additional
counsel for defendant Pultz. The attorneys stated in their
petition that the underlying case had been removed to
federal court, but they did not disclose to the state court
their previous discussion with the district judge about
appointments. On May 3, 2002, the state court granted
their motion. The state court’s order indicated that it
retained “jurisdiction over the appointments for
the purposes of awarding the above Special State’s At-
torneys expenses and attorney’s fees on a regular basis.”
Attorneys Theobald and Brunell periodically sought and
obtained fees in the state court during the year that
followed. They never discussed their appointments with the
4 Nos. 04-2306, 04-2322 & 04-2343
district court, though they did advert to the matter in
passing. For example, at a hearing held on March 26, 2003,
Theobald told the district judge, “I am a Special State’s
Attorney, and so is Mr. Brunell.” Theobald made other
similar statements at hearings held on April 30, 2003, and
May 15, 2003.
It was over a year before the issue of appointments
was fully discussed again in the district court. On May 23,
2003, the court held a hearing on attorney Ficaro’s mo-
tion to withdraw as counsel, during which the judge
asked who would replace him. Attorney Pinelli responded
that he would take over defendant Pultz’s representation
and explained that he had already filed an appearance
as co-counsel. The judge asked Pinelli if he was Pultz’s
private attorney. Pinelli responded, no, he had been ap-
pointed by the state court. The judge was surprised to hear
that and stated that counsel were not permitted to pursue
any proceedings related to appointment as Special State’s
Attorneys in state court:
You are not special attorneys appointed in this case.
Once this case was removed, it was removed, and no
attorney, once removed, could go before any state
judge and file a motion. And any order that would be
entered under those circumstances would be an im-
proper order and unenforceable. Once the case
is removed, just this Court makes the decisions . . . .
If you are here, it is because you are employed by
individuals.
Theobald, speaking on his own behalf and that of the
other attorneys, revealed that the state court had appointed
all of them.1 The judge responded, “[Y]ou can be here as
private attorneys. But you are not Special [State’s] Attor-
1
Attorney Brunell was not present at the hearings that were held
on May 23, 2003, or March 22, 2002. However, he authorized
attorney Theobald to speak on his behalf on both occasions.
Nos. 04-2306, 04-2322 & 04-2343 5
neys as far as this court is concerned.” The judge then asked
Pinelli whether he would be proceeding as Pultz’s private
attorney. Pinelli answered that he needed time to consider
what he had heard, to which the judge responded: “Well,
you are here only as private counsel.” The judge character-
ized his view as an “order.”
Several months passed before the issue of appoint-
ments arose again. In September 2003, the parties reached
a settlement. The district judge shortly thereafter learned
that the attorneys had continued to obtain attorney’s fees
from the state court, despite his warning that such conduct
was improper. On October 2, 2003, the court notified the
attorneys that it planned to proceed on a Rule to Show
Cause as to why it should not impose sanctions. On October
8, the court issued the Rule, stating for its basis counsel’s
disregard of court orders, improper actions in returning to
state court for appointment and fees after removal, and
violation of their duty of candor. The underlying case was
dismissed on October 20, but proceedings concerning the
court’s Rule continued.
The attorneys responded to the Rule by filing motions,
answers, and other pleadings, including a motion to re-
cuse the judge from the case. The district court denied the
attorneys’ motions and found their conduct sanctionable. On
May 4, 2004, the court issued its final judgment imposing
sanctions on the attorneys. Each counsel was ordered to
disgorge all of the fees he had received. Accordingly,
Theobald was ordered to disgorge $301,321.29, Brunell was
ordered to disgorge $51,874, and Pinelli was ordered to
disgorge $28,230. The court also observed that Theobald
had sought in state court to have a Special State’s Attorney
appointed to defend him in the sanctions proceedings, and
enjoined all three counsel from “seeking attorney fees or
receiving remuneration from Cook County for their repre-
sentation of their clients in this case or for defending
against the Rule to Show Cause and resultant proceedings.”
6 Nos. 04-2306, 04-2322 & 04-2343
Finally, each counsel was ordered to pay a $5,000 fine
directly to the court. The attorneys timely appealed the
court’s May 4 order.
II. Discussion
The appellants argue that the district court improperly
invoked its inherent power to impose sanctions. Amicus
curiae appointed to represent the district court maintains
that the court’s sanctions were valid for primarily two
reasons. First, amicus contends that counsel were never
properly appointed Special State’s Attorneys because
removal of the case to federal court had stripped the
state court of jurisdiction. Second, amicus claims that
even if the district court was wrong about the propriety
of the state court’s appointments, its sanctions were
appropriate nonetheless in light of counsel’s conduct.
The Supreme Court has recognized that all courts are
vested with an inherent power “to impose silence, respect,
and decorum, in their presence, and submission to their
lawful mandates.” Chambers v. NASCO, Inc., 501 U.S. 32,
43 (1991); see also Dale v. Bd. of Educ. of Bradley-
Bourbonnais High Sch. Dist. No. 307, 282 F.3d 984, 985-86
(7th Cir. 2002). This inherent power includes the capacity
to sanction counsel for “willful disobedience of a court order”
and “bad faith” conduct. Chambers, 501 U.S. at 45-46(quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421
U.S. 240, 258-59 (1975)). Because these inherent powers are
potent, they must be exercised with caution and restraint.
Chambers, 501 U.S. at 44. We review the issue of whether
a district court properly invoked its inherent powers de
novo. United States v. Johnson, 327 F.3d 554, 559 (7th Cir.
2003). If the court properly invoked its inherent powers, we
review its imposition of sanctions pursuant to those powers
for abuse of discretion. Chambers, 501 U.S. at 55; Cleveland
Hair Clinic, Inc. v. Puig, 200 F.3d 1063, 1066 (7th Cir.
Nos. 04-2306, 04-2322 & 04-2343 7
2000). We review questions of statutory interpretation and
jurisdiction de novo. Olson v. Risk Mgt. Alternatives, Inc.,
366 F.3d 509, 511 (7th Cir. 2004); Midland Coal Co. v.
Office of Workers’ Compensation, 149 F.3d 558, 561 (7th Cir.
1998).
The district court imposed sanctions because it believed
that counsel had circumvented its jurisdiction by petitioning
the state court for appointment. The court’s view was
premised on the notion that removal jurisdiction gave it
exclusive authority to appoint Special State’s Attorneys
under 55 ILL. COMP. STAT. 5/3-9008, the Illinois law autho-
rizing such appointments. That law reads in relevant part:
Whenever the State’s attorney is sick or absent, or
unable to attend, or is interested in any cause or
proceeding, civil or criminal, which it is or may be his
duty to prosecute or defend, the court in which said
cause or proceeding is pending may appoint some
competent attorney to prosecute or defend such cause or
proceeding . . . .
55 ILL. COMP. STAT. 5/3-9008 (emphasis added). The
position taken by the district court does not comport
with the plain language of the statute. The statute em-
powered the district court to appoint Special State’s Attor-
neys in the matter pending before it, but it did not state
that it was the only court that could make such appoint-
ments.
The district court also incorrectly concluded that the issue
of who had authority to appoint Special State’s Attorneys
was dictated by removal jurisdiction. The removal of a case
can empower federal courts to appoint Special State’s
Attorneys, but it cannot strip a state court of its fundamen-
tal authority to do the same. Just as a state or federal court
has no interest in whom a private party selects as counsel,
provided he is a licensed attorney, a federal court has no
8 Nos. 04-2306, 04-2322 & 04-2343
interest in whom the State of Illinois chooses to represent
its interests and how much it pays them. A federal court is
no better situated than a state court to assess an attorney’s
fitness for the job or the legitimacy of his fee submissions.
Put simply, a federal court can play a role in appointment
matters under 55 ILL. COMP. STAT. 5/3-9008, but not to
the exclusion of state courts. Consequently, the district
court was obligated to honor legitimate appointments made
by the state court, regardless of where the case was pending
when the appointment was made.
Our finding that federal courts presiding over a case
share authority with state courts to appoint Special State’s
Attorneys under 55 ILL. COMP. STAT. 5/3-9008 runs counter
to the position advocated by Cook County in its briefs. Cook
County argues that federal courts never have jurisdiction to
appoint Special State’s Attorneys and asks that we certify
to the Supreme Court of Illinois the question of whether a
federal court can ever make such appointments under 55
ILL. COMP. STAT. 5/3-9008. We consider several factors in
deciding whether to certify a question to the state supreme
court, the most important of which is whether we feel
genuinely uncertain about an issue of state law. State Farm
Mut. Auto. Ins. v. Pate, 275 F.3d 666, 671 (7th Cir. 2001).
We are confident that the statute’s permissive language
anticipates circumstances under which both state and
federal courts can appoint Special State’s Attorneys. The
confusion here arose not from the text of the law, which is
clear, but from concerns about jurisdiction and federalism,
which we can resolve. As a result, we decline the invitation
to certify the question.
Our analysis, however, does not end here. Amicus con-
tends that even if the district court was mistaken about the
state court’s authority, its invocation of inherent powers to
sanction the attorneys was proper because counsel willfully
disobeyed a direct order. District courts can sanction
attorneys for not obeying orders. Chambers, 501 U.S. at 43-
Nos. 04-2306, 04-2322 & 04-2343 9
44. Even if an order was issued in error, the collateral bar
doctrine obligates counsel to follow it. Madej v. Briley, 371
F.3d 898, 899-900 (7th Cir. 2004). However, a court’s oral
directive, without more, is not binding on counsel. Bates v.
Johnson, 901 F.2d 1424, 1427-28 (7th Cir. 1990). To be
enforceable, a command must be in the form of “a separate
document, with a self-contained statement of what the court
directs to be done.” Id. at 1428. In the instant matter, the
district judge expressed his views in open court but did not
issue an official, written order barring the attorneys from
seeking appointment and compensation from the state
court. Further, the scope of the court’s written order
denying counsel’s motion to remand did not encompass
the issue of appointments. Since the court’s oral command
was non-binding, it was improper for it to invoke its
inherent power against the attorneys for ignoring it.
Amicus also claims that the district court’s sanctions were
appropriate because the attorneys were dishonest with the
court. Lawyers owe courts a duty of candor. Beam v. IPCO
Corp., 838 F.2d 242, 249 (7th Cir. 1988). Amicus argues that
the attorneys failed to meet this obligation by not being
completely forthcoming about their appointments and
ongoing dealings with the state court over fees, especially
after the district court voiced concerns about appointing
them and warned counsel that seeking appointment and
compensation from the state court was improper. We
sympathize with the district court on this point. At oral
argument, we asked attorney Theobald why he chose not to
disclose to the state court the concerns that the district
judge had raised about appointing him and his colleagues.
Like the court below, we found his responses unpersuasive
and manner somewhat evasive.
Nonetheless, the attorneys were under no duty to
notify the district court of their appointments because
the matter had no bearing on the merits of the federal
litigation and concerned only them and the State of Illinois.
10 Nos. 04-2306, 04-2322 & 04-2343
Amicus cites case law for the proposition that sanctions are
appropriate when an attorney is not candid with the court,
but these decisions can be distinguished on their facts. In
Cleveland Hair Clinic, Inc. v. Puig, an attorney filed a
lawsuit in state court in an attempt to make an end run
around an unfavorable evidentiary ruling by the district
court. The district court sanctioned the attorney for not
giving notice of his state court filing. Puig, 200 F.3d at
1066. We held that the sanctions were not an abuse of
discretion because counsel had a “continuing duty to inform
the Court of any development which may conceivably affect
the outcome of the litigation.” Id. at 1067-68. By contrast,
the attorneys’ dealings with the state court in this case
could not have impacted the outcome of the pending federal
litigation. Nor was this situation like the one in IDS Life
Ins. Co. v. Royal Alliance Assoc., Inc., 266 F.3d 645 (7th Cir.
2001). In IDS Life Ins., we held that it was appropriate to
sanction an attorney who had secretly filed a frivolous
lawsuit in state court which needlessly complicated pending
federal litigation to the detriment of the other party. Id. at
654. In the instant matter, the attorney’s dealings with the
state court neither protracted matters in the district court
nor increased the cost of litigation for any of the parties.
In sum, the district court’s sanctions were inappropriately
based on a misunderstanding of the state court’s authority
to appoint Special State’s Attorneys and handle their fees
and expenses. Finally, while we encourage attorneys to be
forthcoming in their dealings with the court, the district
court abused its discretion by sanctioning the attorneys for
not being candid about matters they had no duty to disclose.
With this result, we see no need to address the attor-
neys’ additional concerns about the procedural propriety
of the court’s order.
Nos. 04-2306, 04-2322 & 04-2343 11
III. Conclusion
For the foregoing reasons, we VACATE the district
court’s order imposing sanctions and REMAND for fur-
ther proceedings in conformity with this opinion. Any
amounts paid by the attorneys pursuant to the district
court’s sanction orders should, of course, be returned to
the attorneys.
Finally, we DENY Cook County’s motion for certification
to the Supreme Court of Illinois.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—8-18-05