Friday, May 21, 2010

Eleventh Circuit: Mayoral Race Gets Ugly (For the Lawyers)

In 2006, Daniel Lewis, Christopher (James) Peer, and James Naugle, the incumbent at the time, ran for mayor of Ft. Lauderdale, Florida.  Although Naugle won the race four years ago by a huge margin, the conflict between Lewis and Peer remains; more specifically, between Lewis and Peer's attorneys.  Lewis argues that Peer's attorneys should be sanctioned in relation to a meritless lawsuit filed during the campaign.

Yesterday, the Eleventh Circuit declined to impose sanctions, like the district court before it, but remanded with a strong directive as to one of the attorneys, Richard Rosenbaum: "[T]he district court should keep in mind that attorneys are the filter upon which courts rely to maintain the integrity of, and trust in, our judicial process."  The district court will "contrary to its earlier findings, start[] with our finding that Rosenbaum acted in bad faith."

Two cases, one state and one federal, provide the backdrop for the proposed sanctions.  Lewis, considering Peer to be a possible Ross-Perot spoiler in the three-way mayoral race, challenged Peer's Ft. Lauderdale residency in state court.  Lewis claimed, among other things, that Peer's current address was out of state in North Carolina, citing a major credit reporting agency (TransUnion).  Peer in turn filed a federal claim against Lewis under the Fair Credit Reporting Act, for improperly accessing his credit report.  The problem was that, before Peer filed the federal case, he ordered a copy of his credit report and found out that Lewis had not accessed it.  Peer told Rosenbaum, his attorney, what he had learned.  Also, Lewis' counsel told them that the information came from a Westlaw People Finder report that referred to TransUnion and amended the complaint to omit the TransUnion reference.  But, Peer did not back down from his federal lawsuit.

Lewis requested sanctions against Rosenbaum, who initiated Peer's federal case and then withdrew from representation, as well as two other Peer attorneys, who took over for Rosenbaum.  Regarding the latter two attorneys, Lewis asked for appellate review of Rule 11 sanctions.  On this issue, the Eleventh Circuit simply remanded since the district court had failed to consider Rule 11 sanctions against the two attorneys in the first instance (although it had considered other theories).

Focusing on Rosenbaum, the panel addressed three requested bases for sanctions: Rule 11, 28 U.S.C. § 1927, and the court's inherent power.  Like the district court, it declined to impose sanctions.  Under the first two bases, the panel found that the Rule 11 motion was untimely and that Rosenbaum had not delayed the proceeding as a whole, germane to a § 1927 sanction.

However, the Eleventh Circuit did not agree with the district court on the issue of bad faith, and in turn, whether a court should impose sanctions under its inherent power.  Whereas the district court found no bad faith, the panel found obvious bad faith: Rosenbaum knew Lewis had not accessed the credit report, but filed a case alleging that he had.  Nonetheless, the panel did not impose sanctions and remanded the issue to the district court.  As noted above, though, the Eleventh Circuit left large bread crumbs as to where it expects the matter to go.