Enmon v. Prospect Capital Corp.
675 F.3d 138
| 2d Cir. | 2012Background
- Arnold & Itkin LLP was sanctioned in SDNY for conduct related to resisting arbitration and other litigation steps connected to Enmon's Caprock financing.
- The sanctions arose from a Texas TRO application seeking to enjoin a federal SDNY action, misrepresenting the scope of the dueling TROs.
- Arnold & Itkin filed a Rule 60(b) motion to relitigate arbitration issues, allegedly based on newly discovered or misrepresented evidence.
- Prospect moved for sanctions under the court's inherent powers and §1927, arguing bad faith and frivolous, vexatious litigation.
- The district court awarded partial sanctions and required future pro hac vice sanctions orders to be attached; the Second Circuit affirmed in part and remanded for temporal limits on that attachment.
- The court remanded to consider whether to impose a time limit on the pro hac vice attachment and to exclude attorneys who joined after June 23, 2010.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sanctions were proper under inherent powers or §1927 | Enmon/Caprock contend sanctions were warranted for bad faith, not colorably grounded claims | Arnold & Itkin argue conduct had colorable basis and procedures were proper | Sanctions affirmed under both grounds; proper bad faith and colorable-basis analysis |
| Whether the Texas TRO conduct supported sanctions | Bad faith misrepresentation by omission supported sanction | No intentional misrepresentation; Texas TRO did not impact arbitration scope | Sanctions proper for bad-faith conduct in seeking Texas TRO |
| Whether the Rule 60(b) motion warranted sanctions | Motion contained misrepresentations and was pursued in bad faith | Motion raised legitimate, albeit unsuccessful, challenges | Sanctions affirmed; deliberate misrepresentations supported bad-faith finding |
| Whether voluntary dismissed appeals justify sanctions | Appeals were strategically withdrawn to delay; sanctions appropriate | Voluntary dismissals are common and should be lightly sanctioned | Sanctions upheld for voluntarily withdrawn appeals; affirmed with discussion on caution |
| Whether sanctions should attach to future pro hac vice applications and extent of order | Attachment necessary to deter future misconduct; firm-wide sanctions appropriate | Attorneys joining after the award should not be burdened; limits needed | Affirmed but remanded to consider temporal limits and exclusions for later-joining attorneys |
Key Cases Cited
- Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323 (2d Cir.1999) (standards for imposing sanctions: colorable basis and bad faith)
- Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) (sanctions may be warranted even if conduct does not disrupt litigation)
- Wolters Kluwer Fin. Servs., Inc. v. Scivantage, 564 F.3d 110 (2d Cir.2009) (abuse-of-discretion review for sanctions; focus on rational basis)
- Gallop v. Cheney, 667 F.3d 226 (2d Cir.2012) (notice requirement for sanctioning attorneys; temporal considerations)
- Apex Oil Co. v. Belcher Co., 855 F.2d 1009 (2d Cir.1988) (sanctions authority against firms under §1927)
- Oliveri v. Thompson, 803 F.2d 1265 (2d Cir. *1986) (similar standard for §1927 sanctions)