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August 27, 2015

Kaass Law v. Wells Fargo Bank, N.A., 799 F.3d 1290 (9th Cir. 2015)

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The Ninth Circuit holds 28 U.S.C. § 1927 authorizes sanctions only against individual attorneys, not law firms.  

Kaass Law attorney Armen Kiramijyan filed a complaint on behalf of Izabell Manukyan against 10 defendants, including Wells Fargo Bank, alleging improper reporting of adverse information to credit agencies. Kiramijyan responded to a motion to dismiss by moving to amend the initial complaint, but filed no opposition to the motion to dismiss.

The district court granted Wells Fargo’s motion to dismiss, and denied Manukyan’s motion to amend. The court ruled the complaint failed to differentiate between Defendants or allege acts by an individual Defendant. The proposed amended complaint did not rectify the deficiencies.

Wells Fargo moved to recover attorneys’ fees and costs from Kaass Law under 28 U.S.C. § 1927. Wells Fargo asserted Kaass Law demonstrated bad faith by filing a complaint that did not differentiate Wells Fargo from the other defendants or make sufficient factual allegations; failing to communicate its intent to move to amend, and then moving for leave to amend the day after Wells Fargo moved to dismiss; failing to oppose Wells Fargo’s motion to dismiss; and engaging in a pattern and practice of filing similar “canned” and “boilerplate” complaints, as Kaass Law’s “predecessor,” attorney had done.

The district court granted the motion against Kaass Law, ruling its failure to plead specific allegations or differentiate between defendants in the Complaint; its failure to oppose defendants’ motion to dismiss; and its failure to meet and confer or communicate with opposing counsel demonstrated bad faith. The proposed amended complaint failed to correct the glaring pleading and legal errors identified by defendants, recklessly and knowingly multiplying the proceedings.

On appeal, Kaass Law argued that § 1927 only permits sanctions against an individual attorney, not against a law firm. The Ninth Circuit agreed the plain language of the statute, and the reasoning of other circuits limits § 1927 sanctions to an attorney or other person admitted to conduct cases in court.

Other cases have held § 1927 sanctions are not recoverable against a party, because the statute authorizes sanctions only against counsel. Only individual lawyers, not firms, are admitted to practice; it is too much of a stretch to say that a law firm could also be characterized as a person.

Under a prior version of Rule 11 the Supreme Court had held it only covered a person who signed a document, not a law partnership. In response, Rule 11 was amended to ensure that law firms could be subject to sanctions under its authority.  Section 1927 has yet to be amended to include law firms within its ambit.

COMMENT: In this instance, the law firm was spared by the language of the statute, not the propriety of its conduct.


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