Inst Motivational v. Gosselin

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
10-5-2004
Inst Motivational v. Gosselin
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-4177
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-4177
INSTITUTE FOR MOTIVATIONAL LIVING, INC.;
CREATIVE CORPORATE CONSULTING, LTD.;
CDG DEVELOPMENT GROUP, INC.
v.
DOULOS INSTITUTE FOR STRATEGIC CONSULTING, INC.;
ROBERT J. GOSSELIN, SR.
Robert J. Gosselin, Sr.,
Appellant
On Appeal from the United States District Court
for the District of New Jersey
(District Court No. 01-cv-01290)
District Judge: Honorable William L. Standish
Submitted Under Third Circuit LAR 34.1(a):
October 1, 2004
Before: ROTH and CHERTOFF Circuit Judges, and
IRENAS,* Senior District Judge
(Filed: October 5, 2004)
*
Honorable Joseph E. Irenas, Senior United States District Judge for the District
of New Jersey, sitting by designation.
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OPINION
CHERTOFF, Circuit Judge.
Appellant, Robert J. Gosselin, Sr., and his now-defunct company provided
consulting services to appellee Institute for Motivational Living, Inc. (“Institute”), and its
affiliates, under an agreement which began on January 1, 2000, and terminated on May
24, 2001. The Institute sued Gosselin and his company in District Court to return certain
proprietary materials, and to claim damages for alleged copyright and trademark
infringement, misappropriation of trade secrets, and other torts. The District Court
entered a discovery preservation order, mandating that Gosselin and his company
preserve all documents, software and equipment. The parties then began settlement
negotiations, which culminated in an agreement signed on September 18, 2001, and
which was embodied in a consent order on September 25. In part, that agreement
required the return to the Institute of a certain laptop computer and all the data contained
in it.
Just minutes before the settlement was signed, however, Gosselin deleted some
purportedly personal data from the laptop. This was a direct violation of the discovery
preservation order. For this and other alleged misbehavior by Gosselin, the Institute filed
a motion to enforce the settlement under the consent order and to obtain sanctions,
including civil contempt. This post-settlement litigation spawned multiple disputes about
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whether Gosselin was complying with his settlement obligations and whether the
Institute was harassing Gosselin.
The Magistrate Judge responded to this post-settlement litigation by holding an
evidentiary hearing, at which Gosselin proceeded pro se because his attorney had been
granted permission to withdraw.1 On December 20, 2002, the Magistrate Judge issued a
Report and Recommendation awarding sanctions against Gosselin under 28 U.S.C. §
1927, based on a finding that Gosselin had “multiplied the proceedings in an
unreasonable and vexatious manner” and in “bad faith.” (App. 27). The sum awarded to
the Institute was $2650, which was exactly the amount due from the Institute to Gosselin
under the settlement agreement. The Magistrate also found that Gosselin had knowingly
and in bad faith violated the original discovery preservation order and the September
consent order by deliberately deleting data from the laptop which should have been
preserved under both court orders, but referred the actual adjudication of civil contempt
for the deletion of laptop files to the District Judge.
Neither party objected to the Magistrate’s Report. On September 19, 2003, the
District Judge conducted a hearing on the civil contempt charges, with Gosselin still
representing himself. The District Judge declined to take further evidence on Gosselin’s
deletion of laptop files, explaining that he was relying upon the Magistrate’s findings to
which there had been no objection. The District Judge did take testimony on the costs
1
Gosselin’s company was ordered to find new counsel but did not do so. The
company was later dissolved, leaving Gosselin as sole defendant in the District Court.
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and fees sustained by the Institute in litigating enforcement of the settlement and in
seeking to remediate the file destruction. By order entered on September 22, 2003, the
District Judge adjudicated Gosselin in civil contempt. Specifically, the District Court
ruled that the knowing and intentional deletion of files from the laptop computer before
it was returned to the Institute was a clear violation of the discovery order requiring
preservation of all data, and of the consent decree which required return of all data on the
computer equipment. The sanctions awarded totaled somewhat over $50,000, including
$48,517.59 in attorneys’ fees and roughly $2,000 in costs for efforts to recover deleted
files.
On appeal, Gosselin raises three contentions. First, he asserts that sanctions under
28 U.S.C. § 1927 may only be awarded against attorneys, not against parties appearing
pro se. Second, he argues that money should not have been awarded for civil contempt
because compensation for any violation of the discovery order was released by the
subsequent settlement agreement, and any destruction of files could not have violated the
settlement and consent order because it occurred before the agreement was signed and
the order entered. Third, Gosselin challenges the amount awarded for attorneys’ fees.
We address each of these arguments in turn.
A.
Title 28 U.S.C. § 1927 authorizes sanctions against any “attorney or other person
admitted to conduct cases in any court of the United States. . ..” Gosselin is not an
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attorney; the question is whether, as a pro se appearing in court, he is an “other person
admitted to conduct cases” and therefore sanctionable under the statute.
This is a matter of first impression in our circuit. We have held that a represented
party cannot be punished under § 1927. Williams v. Giant Eagle Markets, Inc., 883 F.2d
1184, 1190 (3d Cir. 1989); see In re Prudential Ins. Co. Sales Practice Litig. Actions, 278
F.3d 174, 187 n. 7 (3d Cir. 2002). But that situation is distinguishable because it is the
attorney who is conducting the case, not the party. Here, we face a circumstance in
which the party himself is conducting the case in court. One could reasonably read the
language of the statute as embracing non-attorneys who conduct cases in court – a
category that includes (if it is not limited to) pro se litigants.
Nevertheless, there is a split among the circuits on this issue. Compare Sassower
v. Field, 973 F. 2d 75, 80 (2d Cir. 1992)(section not applicable to pro se litigants) with
Wages v. Internal Revenue Serv., 915 F.2d 1230, 1235-36 (9th Cir. 1989)(section does
apply to pro se litigants); see also Alexander v. United States, 121 F.3d 312, 316 (7th Cir.
1997)(declining to take sides on this conflict). The Supreme Court has noted in passing
that § 1927 “says nothing about a court’s power to assess fees against a party.” Chambers
v. Nasco, Inc., 501 U.S. 32, 48 (1991). But that statement did not arise in the context of
a specific discussion of pro se litigants.
The argument from the language of the statute seems pretty much in equipoise.
On the one hand, since the only people who may conduct cases in court beside attorneys
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are parties representing themselves, limiting § 1927 to attorneys would seem to read the
reference to “others admitted” right out of the statute.2 On the other hand, parties are not
normally “admitted” in court. An earlier version of the statute, cited in Sassower,
authorized sanctions against any “attorney, proctor or other person admitted. . ..” This
formulation suggests as a matter of context that “other person” was meant to include
various titles that might be applied to lawyers admitted in court – for example, barristers,
advocates, etc. Thus, as the Second Circuit concluded in Sassower, the history of the
provision points to the sanction being limited to those entitled to practice law no matter
how they are professionally denoted. 973 F.2d at 80.
We need not definitively resolve the issue. Even if § 1927 does not apply to pro
se litigants, other sanction provisions do. See Nasco, Inc., supra. The District Court
could readily have sustained the sanction in question under another provision, or under
its inherent authority. Indeed, if § 1927 does not apply to pro se litigants, then the
District Court had inherent authority to impose the identical sanction. Id.; see Alexander,
121 F.3d at 316. While we could remand the sanction award so that the District Court
could re-impose it under its inherent authority, we see no reason to do so. Accordingly,
we will affirm the sanction for vexatious litigation.
2
In some jurisdictions, law students may be provisionally admitted to appear in
court, but we have some difficulty assuming that the statutory category “others” was
designed to embrace this contingency.
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B.
Gosselin argues that the civil contempt fine was improper because the District
Court lacked authority to compensate the Institute for Gosselin’s improper deletion of
files from the laptop computer. Essentially, Gosselin argues that because he deleted the
material on the morning of September 18, 2001, a few minutes before he signed the
settlement agreement (which formed the basis of the consent order), he cannot be deemed
to have violated that agreement. When confronted with the fact that the file deletion
violated the previous discovery preservation order, Gosselin rejoins that the settlement
agreement released the Institute’s claims “whether known or unknown, of any nature
whatsoever. . ..” Thus, Gosselin concludes, the settlement extinguished any right of
compensation the Institute might obtain by way of the contempt sanction.
This argument is clever (perhaps too clever by half). It comes perilously close to
suggesting that Gosselin deliberately sought to mislead the Institute (and the District
Court) by destroying protected information at a moment just before the settlement was
signed, hopefully secure in the knowledge that the settlement would be read to limit any
additional compensation when his spoliation was discovered.
The argument does not carry the day, however. We agree with Gosselin that he
cannot be held liable for violating a settlement agreement and consent order that were
signed and entered after the deletion of the data. Until the order was entered, he was
under no obligation to follow it. But we disagree with the second part of Gosselin’s two-
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step argument, for the release language in the settlement agreement did not extinguish the
District Court’s power to sanction Gosselin’s clear violation of its earlier discovery
order, even if that sanction inured to the benefit of and compensated the Institute.
Gosselin does not dispute that the District Court had jurisdiction to impose civil
contempt sanctions after the settlement. Normally, the termination of litigation after
settlement moots civil contempt proceedings, although not criminal contempt. See
Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 451 (1911)(when main case is
settled, civil contempt becomes moot). In this case, however, the settlement did not
terminate the litigation, because it was incorporated into a consent order under which the
District Court retained jurisdiction to enforce the settlement terms. The District Court’s
civil contempt jurisdiction did not lapse, therefore. Cf. In re E.I. DuPont de Nemours &
Co., 99 F.3d 363, 367-68 (11th Cir. 1996); Travelhost, Inc. v. Blandford, 68 F.3d 958,
961-62 (5th Cir. 1996).
Gosselin argues, nevertheless, that the broad general language of the settlement
release precluded the civil contempt award in this case. We disagree. To be sure, the
agreement contemplated a capacious waiver by the Institute of all claims against, and
liability by, Gosselin, whether known or unknown. But the release itself carved out an
exception for claims relating to enforcement of the agreement itself. Further, the
agreement contemplated the court’s continuing involvement in the implementation of the
settlement by way of the consent order. Implicit in the District Court’s retention of
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jurisdiction – absent any indication to the contrary – was the District Judge’s continuing
authority to insure compliance with judicial orders and to remediate violations of those
orders.
Most important, the language of the release, by its literal terms, does not apply to
any claims arising against Gosselin for his violation of the discovery order minutes
before the agreement was signed on September 18. The release to which the Institute
agreed bars claims, liability, etc. “arising prior to the date of this Agreement, including,
but not limited to the Settling Plaintiffs’ Claims.” (App. 38) “Settling Plaintiffs’
Claims” are defined earlier as the claims in the complaint, and do not include any claims
for contempt or sanctions. So far as the bar date is concerned, liability arising prior to
the date of the Agreement means liability arising before September 18. Indeed,“prior” is
defined as “preceding in time or order.” Black’s Law Dictionary (8th ed. 2004).
Therefore, for a claim to arise “prior to the date of th[e] Agreement,” it would have to
arise on a date “preceding” the date of the Agreement. It follows that liability arising on
or before September 17, 2002, is covered by the release, and liability arising on
September 18, the date of the agreement, or thereafter, is not.
The contempt sanction here arose on September 18. The Magistrate Judge’s
finding of fact – unchallenged in the District Court or before us – states that
[m]inutes prior to meeting with Plaintiffs to sign the settlement agreement
Defendants, unbeknownst to Plaintiffs, secretly deleted computer files in
contravention of the court’s protective order. The record reflects that at 10:19
a.m. on September 18, 2001, the Microsoft Outlook 2000 PST file, containing the
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history of e-mails sent and received by Defendants, was deleted. . .. Plaintiffs
arrived at the offices of Defendants’ counsel at 10:30 a.m. to sign the settlement
agreement. . ..
(App. 19)
If Gosselin thought that by deleting the files in violation of the preservation order
he could thread the gap between discovery sanctions (by relying on the release) and
consent order sanctions (by destroying the evidence before the settlement and order took
effect), he miscalculated. The literal terms of the release continue to expose him to
liability to the Institute for claims arising on the date of the Agreement itself, during
which time the original computer preservation order was still in effect.
Finally, Gosselin argues that the sanction imposed was really criminal contempt
because it was punitive; he claims, therefore, that the District Court was obliged to afford
him the procedural protections that apply in a criminal case. The premise of the
argument is that because the release waived all claims by the Institute, the subsequent
civil contempt sanction could not be treated as remedial or compensatory, and therefore
had to be punitive. The legal basis for this argument is sound. Broadly speaking, a
contempt sanction is civil if it is either coercive or remedial; if it is punitive, the contempt
is criminal. United Mine Workers v. Bagwell, 512 U.S. 821 (1994); Gompers, supra.But the factual basis for the argument is flawed. As we have already found, the release
did not bar the misconduct committed by Gosselin on September 18, so that the District
Court was entitled to impose a sanction that would compensate the Institute for the
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damage done. We will affirm this aspect of the judgment.
C.
That leads us to Gosselin’s final claim on appeal: That the District Court erred in
awarding the Institute the entire amount of attorneys’ fees it incurred seeking to enforce
the settlement agreement.
This claim has some merit. The post-settlement sanctions litigation was
conducted in two parts. The Magistrate Judge adjudicated most of the sanctions motions,
denying Gosselin’s applications, and granting the Institute sanctions under 28 U.S.C. §
1927. All that was left pending for the District Judge was the application for civil
contempt for the deletion of the files. The total which the Magistrate Judge awarded
under § 1927 was a set-off of $2,650. We have already held that this award should be
affirmed on other grounds.
What remained to be adjudicated by the District Judge was only the contempt for
deletion of the files in violation of court orders. At the evidentiary hearing to establish
the cost of damage done, the Institute presented evidence of two types of costs. First,
there was $2,254.45 paid to a computer consultant to try to retrieve the deleted files.
Goselin acknowledges that this amount was plainly recoverable as compensation.
Second, there was $ 48,517.59 in legal fees.
So far as the record discloses, the legal fees reflected the legal fees and costs
expended in connection with the settlement enforcement proceeding from September
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2001, when the Agreement was signed. (App. 165) The only charges deleted from the
bills were some items involving unrelated copyright and trademark advice. (App. 170)
The difficulty is that we have no way of determining what elements of the fees and costs
related specifically to litigation involving the file deletion, and what related to other post-
settlement litigation that was vexatious and that was the subject of the Magistrate Judge’s
§ 1927 award. Unfortunately, the District Court made no specific findings on this point,
but simply awarded the entire amount of fees requested.
As we have indicated, the touchstone of civil contempt is that it be coercive or
compensatory. Where, as here, we are not dealing with a coercive sanction, the contempt
award must relate to the actual loss (including fees and expenses) that flowed from the
contemnor’s violation. See Robin Woods v. Woods, 28 F. 3d 369, 401 (3d Cir. 1994).
To the extent that the District Court awarded attorneys fees and costs that did not relate
to the damage caused by the contempt, but that related to other conduct by Gosselin –
itself already the subject of the § 1927 sanction – the court stepped over the bounds of
remediation into the field of punishment.
We cannot determine from the record what portion of the fees can be fairly
attributed to the improper file deletion. Accordingly, we will reverse the award of
attorneys’ fees to the Institute, and remand that portion of the judgment to the District
Court for a determination of what fees fairly reflect compensation for Gosselin’s
contumacious conduct.
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