Danubis Group, LLC v. Landmark American Insurance Company

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-11750
Non-Argument Calendar
________________________
D.C. Docket No. 6:14-cv-00032-RBD-DAB
DANUBIS GROUP, LLC,
a Florida Limited Liability Company,
Plaintiff - Counter Defendant,
KEVIN CHRISTOPHER AMBLER,
Interested Party - Appellant,
versus
LANDMARK AMERICAN INSURANCE COMPANY,
a foreign corporation,
Defendant - Counter Claimant –
Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(April 17, 2017)
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Before TJOFLAT, WILLIAM PRYOR and JILL PRYOR, Circuit Judges.
PER CURIAM:
Attorney Kevin Ambler appeals the district court’s imposition of sanctions
against him for misconduct related to discovery and his pre-trial investigation of
facts in the complaint. On appeal, Ambler argues that the district court failed to
properly apprise him of the possibility he could be sanctioned, improperly imposed
Rule 11 sanctions based on a complaint filed in state court, and erred in
determining the amount of monetary sanctions to be levied against him. After
careful review, we affirm the district court’s determination that monetary sanctions
against Ambler were appropriate, but we vacate the district court’s determination
of the amount and apportionment of the sanctions and remand with instructions.
I. BACKGROUND
The short version of this case is that Ambler appeals the district court’s
imposition of monetary sanctions for gross dereliction of his duties and for
recklessly becoming an agent of his client’s insurance fraud scheme. The long
version is as follows.
A. Initial Discovery Deficiencies
Danubis Group, LLC—via Ambler, its counsel—filed a breach of contract
action against Landmark American Insurance Company, alleging that Landmark
had underpaid a claim for loss of rent on a commercial property. The complaint
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alleged the following: Danubis had a five year commercial lease agreement with
Richard MacKizer, beginning on November 1, 2009, at a rental rate of $8,500 per
month. MacKizer intended to open a restaurant on the property. However, two
weeks before the lease began, the property was damaged from theft and vandalism,
rendering it unusable as a restaurant. MacKizer subsequently surrendered
possession of the property to Danubis in December 2009. Danubis was unable to
find a new occupant until June 2010, and only at the lower rate of $7,000 per
month.
The complaint further alleged that Landmark took an unjustifiably long time
to reimburse Danubis for lost rent and damage to the property and that it
reimbursed Danubis only partially. Danubis alleged that in filing its claim with
Landmark it provided Landmark with the June 15, 2010 affidavit of Gary Metzger.
The affidavit—which was also attached to the complaint—stated that Metzger,
along with MacKizer, took possession of the property on September 16, 2009, with
a month-to-month lease set to begin on November 1, 2009 at a rate of $8,500 per
month. The affidavit also stated that Metzger and MacKizer placed $100,000 in
escrow with attorney Brian Herzig for the tenancy, and that the tenancy ended in
December 2009 as a result of the theft and vandalism damage. The affidavit was
signed by Metzger and notarized. Ultimately, Danubis’s complaint asked for
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$156,000 in damages for lost rent, plus pre-judgment interest, as well as additional
compensation for Danubis’s equipment loss.
So began a series of missteps by Danubis and Ambler. Landmark removed
the case to the district court, but in doing so only alleged Danubis’s state of
residence, rather than its citizenship. The district court sua sponte ordered
Landmark to file an Amended Notice of Removal properly establishing diversity
jurisdiction by a certain date. Landmark engaged in repeated efforts to obtain the
requisite citizenship information from Danubis—via Ambler—to no avail.
Consequently, Landmark asked the court for an extension of time to file its
amended notice. In doing so, Landmark attached its correspondence with Ambler,
which included an interrogatory on Danubis’s citizenship, requests for admission
concerning the same, an initial letter asking Ambler to expedite responding to the
discovery requests to enable Landmark to comply with the district court’s order,
and a follow-up letter detailing Landmark’s efforts to contact Ambler. The second
letter indicated that Landmark had left Ambler messages and sent him
correspondence concerning Danubis’s citizenship, but had received no response.
The district court granted Landmark’s motion for an extension of time and
ordered Ambler to respond to Landmark’s discovery requests. The court
admonished Ambler for his lack of communication: “The Court takes seriously
Counsel’s responsibility to return calls, correspondence and requests for
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cooperation and will take a dim view of any demonstrated failures in that regard.”
Disc. Order, Doc. 16.1 Notwithstanding the court’s order and warning, Ambler
failed to respond to Landmark’s discovery requests by the court’s deadline.
Landmark filed for a second for extension of time and later supplemented its
motion, noting that Danubis and Ambler had still not responded to Landmark’s
discovery requests. The court then scheduled a status conference.
Ambler appeared at the status conference and apologized for his lack of
responsiveness and violation of the court order, explaining that personal issues
prevented him from responding to Landmark’s discovery requests. The court
ordered Danubis to respond to Landmark’s discovery requests within seven days, a
deadline Danubis met. In total, Ambler’s failure to respond and violation of court
order with regard to jurisdictional discovery resulted in a two month delay in the
case.
With diversity jurisdiction established, the court entered a Case Management
and Scheduling Order setting three deadlines: for providing initial disclosures
pursuant to Federal Rule of Civil Procedure 26, for amending pleadings, and for
the close of discovery. The order warned that the court “will impose sanctions on
any party or attorney . . . who [] fails to comply with this order.” Case
Management Order, Doc. 36 at 12-13. It further noted that the “[s]anctions may
1
Citations to “Doc.” refer to docket entries in the district court record in this case.
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include but are not limited to an award of reasonable attorney’s fees and costs, the
striking of the pleadings, the entry of default, the dismissal of the case, and a
finding of contempt of court.” Id.
Landmark timely served discovery requests on Danubis. On the day
Danubis’s responses were due, Ambler moved for a 30 day extension on Danubis’s
behalf, which the magistrate judge denied. Instead, the magistrate judge
admonished Ambler and ordered Danubis to respond to Landmark’s discovery
requests within 14 days. Ambler and Danubis continued to ignore Landmark’s
requests and the court’s orders. Landmark therefore filed a series of motions to
compel responses to its discovery requests and Danubis’s initial disclosures, which
were now five months late.
In response to Landmark’s motions, the magistrate judge entered an order to
show cause demanding that Ambler and Danubis explain why the action should not
be dismissed for failure to prosecute. In response to a separate motion filed by
Landmark, the magistrate judge warned: “Plaintiff is reminded that failure to
provide discovery and cooperate in the process is not without consequence, and the
Court will not hesitate to impose sanctions (which may include an award of fees
and expenses in addition to dismissal of the case) to the extent Plaintiff’s conduct
hinders the orderly flow of discovery.” Landmark Disc. Extension Order, Doc. 63
at 2.
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Danubis filed no response to any of Landmark’s motions to compel, but did
respond to the show cause order. The response contended that Danubis had timely
served objections to Landmark’s discovery requests, Danubis did not need to serve
initial disclosures because Landmark already had all relevant documentation before
the litigation began, and Ambler was unresponsive because he was involved in
another matter that monopolized his time. Ambler also attached new discovery
responses that were unverified and unsigned by his client.
The magistrate judge determined that although Danubis and Ambler were
“dilatory in prosecuting this action,” they had not abandoned it. Mot. to Compel
Order, Doc. 70 at 2. The magistrate judge concluded however that because
Danubis had acted in bad faith, sanctions were warranted. Specifically, the order
noted that: (1) Danubis/Ambler’s belief that Landmark already possessed all
relevant documents did not obviate the requirement that Danubis serve initial
disclosures, (2) Danubis’s failure to respond to Landmark’s motions to compel
rendered Danubis’s objections to Landmark’s discovery requests waived or
overruled, (3) tendering unsworn discovery responses failed to comply with the
Federal Rules of Civil Procedure, and (4) Ambler failed to take responsibility for
his deficiencies throughout the litigation. The magistrate judge granted each of
Landmark’s motions to compel, setting deadlines for Danubis’s compliance. The
magistrate judge cautioned that “failure to comply with the terms of this Order may
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result in the imposition of sanctions, which may include the striking of pleadings
and dismissal of the claim.” Mot. to Compel Order, Doc. 70 at 5 (emphasis
omitted). The magistrate judge also awarded Landmark costs associated with each
motion to compel under Federal Rule of Civil Procedure 37.
In the same order, the magistrate judge warned Ambler that any future
misconduct would result in further sanctions:
[T]he Court admonishes Plaintiff’s counsel for conduct that is below
the standard of practitioners in this Court. Counsel has a professional
responsibility to his client and this Court to meet deadlines, respond to
opposing counsel, and cooperate with the discovery process. His
failure to do so has resulted in delay, added costs, and the expenditure
of judicial time and effort to direct compliance with those obligations.
Counsel is ethically obligated not to take on more than he can handle.
If counsel is repeatedly too busy to timely respond to discovery, meet
required deadlines, or communicate with opposing counsel, he is too
busy. Counsel is cautioned that further derelictions of duty in this
matter will result in appropriate, and unpleasant, consequences.
Mot. to Compel Order, Doc. 70 at 5 (emphasis omitted).
Notwithstanding the magistrate judge’s clear warning, things only got worse.
Landmark filed a series of motions seeking relief from its affirmative discovery
obligations, pointing out myriad irregularities in Danubis’s discovery responses.
Although Danubis’s company representative, Borivoje Radulovic, appeared for a
deposition, he relied on a series of documents to answer Landmark’s counsel’s
questions—documents that Danubis and Ambler had not produced to Landmark
prior to the deposition. Moreover, an insurance adjuster who worked on Danubis’s
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claim responded to a subpoena by noting that he had no records of his interactions
with Danubis, aside from his firm’s contract with Danubis and a letter signed by
Radulovic indicating that he had taken the adjuster’s file. On the day of the
adjuster’s deposition, Ambler produced the missing file—consisting of
approximately 450 pages—which had been in Radulovic’s possession since before
the inception of the litigation.
Similarly, at MacKizer’s deposition, Ambler used and marked as exhibits
documents that had never been produced to Landmark. In addition, in an
unverified interrogatory response Danubis claimed that it was unable to find any
contact information for Gary Metzger, whose 2010 affidavit was attached to its
complaint. Landmark also claimed that Danubis served discovery responses via a
link to an inaccessible Dropbox account. The magistrate judge noticed a discovery
conference to address these irregularities, directing counsel to appear in person and
warning that the court “will not hesitate to impose sanctions on any party or
counsel found to be hindering the orderly flow of discovery in this case.” Disc.
Hr’g Notice, Doc. 79. In response to Landmark’s motions, Danubis admitted to a
number of the irregularities and denied others, providing various excuses and
explanations.
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B. Landmark’s Motion to Dismiss
The day before the scheduled discovery conference, Landmark filed a
motion to dismiss Danubis’s complaint for “Fabrication of Evidence, Fraud Upon
the Court, Egregious Discovery Practices, and For Violation of the Court’s
Discovery Order.” Landmark’s Mot. to Dismiss, Doc. 83 at 1. The motion
asserted that at his deposition, MacKizer denied that either he or Metzger ever
were tenants at the property in question. It further contended that on the day of
MacKizer’s deposition, Ambler used an errata sheet to make substantive changes
to Radulovic’s earlier deposition testimony and notarized the errata sheet himself.
Moreover, it claimed that although Danubis had previously denied having any
contact information for MacKizer, Danubis produced new documents at
MacKizer’s deposition containing MacKizer’s e-mail address.
Most importantly, the motion explained that Landmark had tracked down
Metzger, who provided Landmark with a new affidavit indicating that his 2010
affidavit was false. The new affidavit stated that Metzger viewed the property,
found it lacking, and declined to enter into a lease agreement with Radulovic or
Danubis. Metzger further claimed he never took possession of the property or
obtained keys to it, and declared that his signature on the 2010 affidavit was a
forgery.
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The magistrate judge ordered an evidentiary hearing on Landmark’s motion,
instructing the parties to locate and subpoena any relevant witnesses including
Metzger, MacKizer, and Radulovic. The magistrate judge informed the parties and
attorneys that he may impose sanctions for misconduct, warning:
Due to the nature of the issues raised in the motion and considering
the possible personal and professional consequences that may result
from a finding that fraud was committed in this case, the potential that
counsel may, themselves, be called upon to testify, and the possibility
of conflicts arising between client and counsel, counsel are advised
to consider the appropriateness of having separate representation
at the hearing and whether their clients may need independent
representation.
To the extent the evidence supports a finding that a party, witness or
counsel has violated the Federal Rules of Civil Procedure or any
Order of this Court, appropriate sanctions will be considered and
imposed, which may include striking of pleadings and/or the
imposition of monetary or other sanctions. All parties and counsel
are further advised that, should the evidence support a finding that
any party, witness or counsel participated in any way in the
perpetration of a fraud in this matter, the Court will consider the full
measure of sanctions available, including, if appropriate, referral to
the United States Attorney or other appropriate authorities for
investigation and/or prosecution.
Evidentiary Hr’g Order, Doc. 88 at 1-2.
C. The Hearing
At the evidentiary hearing, Metzger—who claimed he had not been
contacted by Ambler prior to the filing of the complaint—testified that although he
had looked at the property, he never leased it. He further testified that the affidavit
he provided to Landmark was accurate, and that he did not recall executing the
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2010 affidavit that indicated he had leased the property from Danubis.
Nonetheless, the notary listed on the 2010 affidavit confirmed that her log shows
Metzger appeared and executed that affidavit.
MacKizer confirmed Metzger’s testimony that there was never a lease
agreement for the property between himself, Metzger, and Danubis and that he and
Metzger never took control of the property. Like Metzger, MacKizer had not been
contacted by Ambler prior to the initiation of this lawsuit. A friend of Radulovic’s,
Charles Giannetto, testified that in 2009, as a favor to Radulovic, he called
Herzig—the attorney whose firm was, per the 2010 Metzger affidavit, holding
$100,000 in escrow to secure the lease of the property. On the call, Herzig
purportedly confirmed the existence of the escrow account to Giannetto, despite
the fact that Herzig did not know the identity of the caller. On the contrary,
Landmark submitted an affidavit from an attorney at Herzig’s former firm
indicating that no such escrow account existed and that Metzger was never a client
of the firm.
Radulovic testified that there was an oral lease agreement between Danubis
and Metzger and that Metzger was given keys to the property, which he returned
after the vandalism occurred. Radulovic also testified that Metzger must be
“lying” or “mentally ill” to say that no lease existed. He speculated that Metzger
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was lying out of spite because Radulovic declined to give him a kickback from the
proceeds of his insurance claim on the property.
Ambler provided an affidavit for the court’s consideration. He incorporated
two of his responses to Landmark’s prior discovery motions, as well as his initial
response to Landmark’s motion to dismiss, which attacked Metzger’s credibility.
Ambler also acknowledged that he made a “clerical error” by listing MacKizer in
the complaint, when the purported lease was between Danubis and Metzger.
Nonetheless, Ambler denied knowingly filing any false or misleading evidence.
D. The Ruling
After hearing from these witnesses and several others, the magistrate judge
made factual findings. The magistrate judge found that the 2010 Metzger affidavit
was a sham and that although Metzger and MacKizer had viewed the property,
there was no lease, and no money was ever placed into escrow to secure a lease.
The magistrate judge found that to the extent Radulovic claimed there was an oral
five year lease agreement between Danubis and Metzger, “the uncontradicted
evidence [was] that Metzger was never charged for (and did not pay) ‘rent’ and
never paid a dime for utilities, deposits, insurance or other indicia of tenancy.”
First R. & R., Doc. 119 at 25.
This being the case, the magistrate judge found that in 2009 “Radulovic
colluded with Metzger in an attempt to convert their potential business relationship
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into an existing lease and convince the insurance company that there was a claim
for loss of rent. When Radulovic did not cooperate with a ‘kickback,’ Metzger
recanted.” Id. at 26. In essence, the magistrate judge found that Radulovic teamed
up with Metzger to defraud Landmark into paying out an insurance claim for non-
existent lost rent.
The magistrate judge determined that in pursuing this litigation on Danubis’s
behalf, Ambler became an unwitting agent in Radulovic and Metzger’s scheme.
The magistrate judge assessed various bases for sanctioning Ambler. First, the
magistrate judge concluded that Ambler violated Rule 11 of the Federal Rules of
Civil Procedure by filing a false complaint. Although the magistrate judge found
that Ambler was unaware that he was filing a false complaint, the magistrate judge
found that:
Ambler did not care whether the allegations were true or not. The
record shows that [Ambler] did not perform even the most perfunctory
of investigations prior to filing his Complaint. He did not speak to
Mr. MacKizer or Mr. Metzger, despite making affirmative allegations
about their connection to the Property; he did not review the Public
Adjuster’s file or his own client’s files (as they were first
“discovered” well into the litigation); and, indeed, he did not even
obtain his client’s review of the Complaint before it was filed. It
appears, at best, that Mr. Ambler took a few spotty and self-serving
conclusions of his client as gospel, attached a copy of an Affidavit
drafted by his client and signed by a man Plaintiff contends is a liar,
and threw together a complaint, perhaps with the hope that Defendant
would settle. The Court finds this to be objectively and subjectively
unreasonable.
Id. at 28.
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The magistrate judge further explained that Ambler’s reckless disregard for
the truth extended beyond the pleadings, as Ambler arguably hindered Landmark’s
attempts to locate Metzger and MacKizer by failing to produce documents in his
client’s possession that contained contact information for MacKizer. Id. The
magistrate judge thus concluded that all the procedural requirements for Rule 11
sanctions were met and that imposition of such sanctions was warranted.
Second, the magistrate judge determined that sanctions against Ambler were
appropriate pursuant to Rules 16(f) and 37(b) of the Federal Rules of Civil
Procedure, based on Ambler’s repeated failure to comply with discovery deadlines.
Sanctions on these bases were warranted because Ambler’s failure to comply was
not due to negligence, but rather due to his belief that compliance was unnecessary
because the case involved a “fairly small insurance claim.” Id. at 29. Third,
according to the magistrate judge, Ambler’s behavior throughout the litigation—
including his failure to comply with discovery deadlines, failure to respond to
inquiries from opposing counsel, and failure to respond to Landmark’s motions to
compel—unreasonably and vexatiously multiplied the court’s proceedings,
justifying sanctions under 28 U.S.C. §1927. Fourth, the court explained that it was
within its inherent power to control and discipline attorneys, and that it can do so
even in the face of procedural rules that govern the same conduct.
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Ultimately, the magistrate judge concluded that Danubis’s and Ambler’s
behavior throughout the course of the litigation warranted dismissal of Danubis’s
complaint. The magistrate judge further determined that monetary sanctions
against Danubis and Ambler were appropriate and instructed Landmark to file a
motion identifying the specific costs and fees it sought. The district court adopted
the magistrate judge’s report and recommendation after Ambler and Danubis failed
to timely object.
Soon thereafter, Landmark filed a notice indicating that on August 28, 2014,
amid discovery, Landmark had made an offer of judgment to Danubis pursuant to
Florida Statutes § 768.79, Florida Rule of Civil Procedure 1.442, and Federal Rule
of Civil Procedure 68. The offer of judgment provided that Landmark would pay
Danubis $2,500. Under § 768.79(6)(a), “[i]f a defendant serves an offer which is
not accepted by the plaintiff, and if the judgment obtained by the plaintiff is at least
25 percent less than the amount of the offer, the defendant shall be awarded
reasonable costs, including investigative expenses, and attorney’s fees . . . incurred
from the date the offer was served.” Fla. Stat. § 768.79(6)(a).
Landmark filed a motion seeking $64,037 in attorney’s fees, $9,649.49 in
costs, and $3,208.73 in other expenses that it incurred in preparing its motion to
dismiss and participation in the concomitant evidentiary hearing. Landmark also
sought $72,577.15 in attorney’s fees, $3,083.73 for costs, and $40,575.67 for other
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expenses it incurred during the remainder of the litigation. In response, Ambler
filed an affidavit from a fee expert challenging the reasonableness of the rates
charged and number of hours expended by Landmark’s counsel. The affidavit
opined that $200 per hour was a reasonable rate for partner work on the case, $100
per hour was a reasonable rate for low-level associate work on the case, and $75
was a reasonable rate for paraprofessional work on the case. The latter two figures
were lower than the rates requested by Landmark.
The magistrate judge determined that Landmark was entitled only to costs,
attorneys’ fees, and expenses associated with the motion to dismiss and the
numerous motions to compel Landmark filed earlier in the litigation. The
magistrate judge also decided that Landmark was entitled to reasonable costs and
attorneys’ fees it incurred from August 28, 2014 forward pursuant to
§ 768.79(6)(a), as Danubis obtained a judgment “at least 25% less” than
Landmark’s $2,500 offer and the statute’s other requirements were met. The
magistrate judge explained that the period from August 28, 2014 forward
“encompassed” all the costs and attorneys’ fees associated with the motion to
dismiss and the motions to compel, “so the award should be based on the time
period from August 28, 2014 onward.” Second R. & R., Doc. 168 at 14.
Rejecting the opinions of the parties’ fee experts for various reasons, the
magistrate judge determined based on his own expertise that $200 per hour was a
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reasonable rate for a managing partner at an insurance defense firm in central
Florida and that $125 and $75 represented reasonable rates for a low-level
associate and paraprofessional, respectively. The magistrate judge did not explain
how he arrived at his conclusion that these rates were reasonable. Moreover,
accounting for Landmark’s own missteps, the magistrate judge proceeded to cut
the number of hours of work for which Danubis and Ambler were responsible by
20%, across each individual who worked on the case for Landmark. In total, the
magistrate judge determined that Landmark was entitled to $78,903.20 in
attorney’s fees and $12,778.22 in costs.
In determining how to apportion responsibility for the award between
Danubis and Ambler, the magistrate judge remarked that if the basis of the award
was solely § 768.79(6)(a), then the entire award would be chargeable to Danubis
alone. Nonetheless, citing Radulovic’s active involvement in the initiation and
pursuit of this litigation and Ambler’s repeated inadequacies, the magistrate judge
recommended that Danubis and Ambler be held jointly and severally liable for the
award.
The district court adopted the Second Report and Recommendation over
Ambler’s objection. Ambler timely appealed, arguing that the district court erred
in imposing sanctions on him, calculating the amount of the sanctions, and
apportioning the award between himself and Danubis.
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II. STANDARD OF REVIEW
We review a district court’s sanctions order for abuse of discretion. Amlong
& Amlong, P.A. v. Denny’s, Inc., 500 F.3d 1230, 1237 (11th Cir. 2006). “When
employing an abuse-of-discretion standard, we must affirm unless we find that the
district court has made a clear error of judgment, or has applied the wrong legal
standard.” Id. at 1238 (alteration omitted). “A decision that is contrary to the law
plainly is an abuse of discretion.” Id.
III. DISCUSSION
A. The District Court Afforded Ambler Proper Notice Before Imposing
Sanctions.
Ambler argues that the district court did not afford him proper notice that he
could be sanctioned for an inadequate pre-complaint investigation pursuant to Rule
11 or the court’s inherent power. We disagree.
A court may not impose sanctions on an attorney pursuant to Rule 11 on its
own initiative unless the court has issued an order requiring the attorney to “show
cause why conduct specifically described in the order has not violated Rule 11(b).”
Fed. R. Civ. P. 11(c)(3), (5). “While formal compliance with [Rule 11’s show-
cause order requirement] is the ideal, we apply a flexible standard, so in many
cases substantial compliance may suffice.” Kaplan v. DaimlerChrysler, A.G., 331
F.3d 1251, 1257 (11th Cir. 2003) (internal citations omitted). In Kaplan, we ruled
that the district court improperly imposed Rule 11 sanctions without adequate
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notice. See id. There, the district court issued an oral show cause order
identifying one specific filing as the possible basis for sanctions, but ultimately
imposed Rule 11 sanctions based both on that filing and a series of filings not
identified in the show cause order. Id. at 1253-54.
Here, however, the court sufficiently apprised Ambler of the possibility that
he could be sanctioned for misconduct surrounding the complaint. Ambler argues
that in noticing an evidentiary hearing on Landmark’s motion to dismiss, the
district court specifically limited the possible bases for sanctions to the subject of
Landmark’s motion—which, in Ambler’s view, was the alleged fabrication of the
2010 Metzger affidavit. According to Ambler, because the evidentiary hearing
notice only warned that the parties and counsel might be sanctioned for conduct
associated with fabrication of the 2010 affidavit, the court was not empowered to
sanction him once it determined that the affidavit was genuine. Ambler’s
argument is essentially that the court could not sanction him without further notice
because it uncovered a different fraud—Metzger and Radulovic’s collusion to
defraud Landmark—at the evidentiary hearing, and Ambler was not on notice that
his conduct with regard to that fraud was at issue.
Like Ambler’s behavior throughout this litigation, this argument is wildly
off base. On appeal, Ambler fails to cite the final segment of the magistrate
judge’s evidentiary hearing notice, which warned:
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All parties and counsel are further advised that, should the
evidence support a finding that any party, witness or counsel
participated in any way in the perpetration of a fraud in this matter,
the Court will consider the full measure of sanctions available,
including, if appropriate, referral to the United States Attorney or
other appropriate authorities for investigation and/or prosecution.
Evidentiary Hr’g Order, Doc. 88. The order explicitly placed Ambler on notice
that if he “participated in any way in the perpetration of a fraud in this matter,” he
could be sanctioned. Contrary to Ambler’s assertion, the order was not limited to
the fabrication of the 2010 Metzger affidavit. To the extent Ambler argues that the
magistrate judge improperly imposed sanctions because the subject matter of the
evidentiary hearing order did not encompass the factual findings the district court
ultimately made, we reject his argument as meritless.
Alternatively, Ambler argues that he was never warned that his pre-trial
investigation was a possible basis for sanctions. Indeed, the magistrate judge did
not find that Ambler was a knowing or willful participant in Radulovic’s
fraudulent scheme; the magistrate judge merely found that Ambler’s reckless
failure to conduct due diligence made him an unwitting agent of Radulovic’s
scheme. The problem with Ambler’s argument is that the evidentiary hearing
order’s warning did not limit its terms to knowing or intentional participants in a
fraud. It explicitly cautioned “that any party, witness or counsel [who] participated
in any way in the perpetration of a fraud in this matter” could be sanctioned.
Evidentiary Hr’g Order, Doc. 88 (emphasis added). The magistrate judge
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subsequently found that Ambler participated in Radulovic’s perpetration of a fraud
by way of his “reckless disregard for the truth of” the allegations in the complaint.
First R. & R., Doc. 119 at 28.
Ambler, therefore, was sufficiently on notice that his pre-trial investigation
was a possible basis for sanctions. Consequently, the district court substantially
complied with Rule 11’s notice requirements for court-initiated sanctions. For the
same reasons, Ambler’s argument that the district court failed to properly apprise
him of the basis for sanctions based on the court’s inherent power also lacks merit.
See In re Mroz, 65 F.3d 1567, 1575 (11th Cir. 1995) (“Due process requires that
the attorney (or party) be given fair notice that his conduct may warrant sanctions
and the reasons why.”). 2
B. The District Court Did Not Err in Imposing Rule 11 Sanctions.
Next, Ambler argues that the district court improperly imposed Rule 11
sanctions based on the complaint, which was filed in state court, not federal court.
In so arguing, Ambler cites Worldwide Primates, Inc. v. McGreal, 26 F.3d 1089,
1091 (11th Cir. 1994), where we noted that “Rule 11 does not apply to pleadings
filed before removal.” This much is axiomatic. Two sentences later, however, we
noted a limitation on this rule: “[A]lthough [the plaintiff’s] complaint, which was
2
We also note that the magistrate judge’s repeated warnings that Ambler could be
sanctioned for his various discovery inadequacies more than sufficed to satisfy due process to the
extent the sanctions are based Federal Rules of Civil Procedure 16 and 37.
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filed in state court, cannot be the basis of a Rule 11 violation, any subsequent
federal court filings . . . are sanctionable if they resulted in the continuation of a
baseless lawsuit.” Id. Ambler argues that the district court only cited the
complaint as a basis for sanctions, but this is belied by the text of the First Report
and Recommendation, which also cites to a number of subsequent filings Ambler
made in furtherance of the frivolous complaint, including Ambler’s effort to amend
the complaint, his proposed findings of fact after the evidentiary hearing, and an
affidavit he drafted containing statements that the affiant subsequently recanted at
the evidentiary hearing. Moreover, Ambler made no effort to amend the complaint
once the case was removed to federal court, and in fact he continuously defended
the complaint, as initially filed, until Landmark filed its motion to dismiss for
fraud. The district court did not err in imposing Rule 11 sanctions.
C. The District Court Erred in Determining the Amount of the Sanctions
Award and in Apportioning the Award Between Danubis and Ambler.
We use the lodestar approach to determine the amount of attorney’s fees and
costs to which a party is entitled. Under this approach, “the starting point in any
determination for an objective estimate of the value of a lawyer’s services is to
multiply hours reasonably expended by a reasonable hourly rate.” Norman v.
Hous. Auth. of Montgomery, 836 F.2d 1292, 1299 (11th Cir. 1988). “A reasonable
hourly rate is the prevailing market rate in the relevant legal community for similar
services by lawyers of reasonably comparable skills, experience, and reputation.”
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Id. “Although the district court has wide discretion in exercising its judgment on
the appropriate fee based on its own expertise, that discretion is not without limits.
A conclusory statement that a fee is reasonable in light of the success obtained is
generally insufficient.” Id. at 1304. “The court’s order on attorney’s fees must
allow meaningful review—the district court must articulate the decisions it made,
give principled reasons for those decisions, and show its calculation.” Id.
Ambler argues that the magistrate judge insufficiently explained his
rejection of Ambler’s expert’s determination that Landmark’s counsel spent an
unreasonable amount of time in the prosecution of its motion to dismiss. This
argument is belied by the Second Report and Recommendation, which reflects a
well-reasoned determination of the work hours to be included in the award. The
magistrate judge assessed a variety of factors indicating that Landmark was not
entitled to full payment of its claimed fees, including Landmark’s own missteps in
litigating the case; the fact that some bills reflected a partner performing a low-
level task; and the bills’ inclusion of unnecessary travel time. The magistrate
judge proceeded to make specific findings with regard to the reasonableness
factors outlined in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-
18 (5th Cir. 1974), including the time, labor, and skill required for the suit; the
novelty of the issues; and the experience, reputation, and ability of Landmark’s
counsel, among other factors. In short, the Second Report and Recommendation
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provided ample explanation with regard to court’s determination of the reasonable
number of hours to be included in the award.
Nevertheless, Ambler raises three additional points of error that we find
meritorious. First, the Second Report and Recommendation reflects a lack of
thorough consideration of a reasonable hourly rate for Landmark’s counsel. After
explaining that it would be making the reasonable rate determination based on its
own expertise, the district court simply concluded—without any explanation—that
$200 per hour was a reasonable rate for the partner on the case, $125 was a
reasonable rate for a low-level associate, and $70 per hour was a reasonable rate
for paraprofessional work. However, any assertion on Ambler’s part that the
district court erred in determining that $200 per hour and $70 per hour were
reasonable rates for the partner and paraprofessionals, respectively, is invited error.
Ambler’s own fees expert suggested that the district court adopt rates equal to or
higher than those found to be reasonable by the district court for partner and
paraprofessional work. Consequently, Ambler may not now challenge the court’s
determination of those reasonable rates on appeal. See Pensacola Motor Sales Inc.
v. E. Shore Toyota, LLC, 684 F.3d 1211, 1231 (11th Cir. 2012) (“A party that
invites an error cannot complain when its invitation is accepted.”).
For low-level associate work, however, Ambler’s expert suggested a rate of
$100 per hour, while the magistrate judge found, based on his own expertise but
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without explanation, that a $125 per hour rate was reasonable. On remand, the
district court should determine the reasonable rate for low-level associate work in
this case and “give principled reasons” for its determination. Norman, 836 F.2d at
1304. Those “principled reasons” should reflect the district court’s basis for
believing that the rate it selects is “the prevailing market rate in the relevant legal
community for similar services by lawyers of reasonably comparable skills,
experience, and reputation.” Id. at 1299.3
Second, the district court erred in failing to consider Ambler’s ability to pay
before determining the amount of monetary sanctions levied against him. When
imposing sanctions pursuant to the court’s inherent power, 28 U.S.C. § 1927, or
Rule 11, a district court must consider the sanctionee’s ability to pay the monetary
award. Martin v. Automobili Lamborghini Exclusive, Inc., 307 F.3d 1332, 1337
(11th Cir. 2002). A court “abuse[s] its discretion by imposing joint and several
liability without considering whether each [person or entity being sanctioned]
individually had the ability to pay the sanction.” Id. Here, the Second Report and
Recommendation never discussed and does not reflect that the magistrate judge
considered Ambler’s—as opposed to Danubis’s—ability to pay the sanction award.
This was an abuse of discretion.
3
To the extent Ambler argues that the district court was required make a separate
reasonableness determination specifically mentioning Federal Rule of Civil Procedure 37(a)(5)
before it could impose monetary sanctions based on that rule, we reject Ambler’s argument as
meritless.
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Third, we agree with Ambler that the magistrate judge abused its discretion
by holding Ambler and Danubis jointly and severally liable for all of Landmark’s
reasonable fees that arose after August 28, 2014. The magistrate judge determined
that Landmark was entitled to attorney’s fees and costs for three specific
categories: (1) for time spent in relation to the motion to dismiss and evidentiary
hearing; (2) for time spent in connection with the motions to compel; and (3) for
the time period from August 28, 2014 onward, pursuant to Florida Statutes
§ 768.79. When apportioning the award, the district court properly recognized that
if § 768.79 were the sole basis for the award, it would fall solely on Danubis’s
shoulders because the statute explicitly assigns liability to the plaintiff. See Fla.
Stat. § 768.79(6)(a) (“When such costs and attorney’s fees total more than the
amount of the judgment, the court shall enter judgment for the defendant against
the plaintiff for the amount of the costs and fees, less the amount of the award to
the plaintiff.” (emphasis added)). Yet the district court determined that Ambler
was liable for fees and costs arising after August 28, 2014 that had nothing to do
with either the motion to dismiss or the motions to compel and could only have
been awarded pursuant to § 768.79. Consequently, the district court committed
legal error by assigning Ambler liability for fees and costs that, pursuant to the
relevant statute, should have been assigned solely to Danubis.
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Therefore, on remand, the district court should: (1) determine a reasonable
rate for a low-level associate in this case and provide a legally sound explanation
for its determination; (2) consider what effect, if any, Ambler’s ability to pay has
on the award amount; and (3) apportion to Ambler liability only for costs
associated with the motion to dismiss and the motions to compel.
IV. CONCLUSION
For the foregoing reasons, we hold that the district did not err in imposing
monetary sanctions against Ambler. Nonetheless, we vacate the district court’s
determination of the amount and apportionment of the sanctions and remand for
proceedings consistent with this opinion.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
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