Kaass Law v. Wells Fargo Bank, N.A.
2015 U.S. App. LEXIS 15127
| 9th Cir. | 2015Background
- Plaintiff Izabell Manukyan, represented by attorney Armen Kiramijyan of Kaass Law, sued multiple defendants including Wells Fargo alleging inaccurate credit reporting; Wells Fargo moved to dismiss under Rule 12(b)(6).
- Kiramijyan filed a motion to amend and a proposed amended complaint one day after Wells Fargo filed its motion to dismiss; Wells Fargo filed a notice of non-opposition to dismissal.
- The district court dismissed Wells Fargo and denied leave to amend, finding the complaint failed to comply with Rule 8 and did not differentiate defendants or plead specific acts.
- Wells Fargo moved for sanctions under 28 U.S.C. § 1927 seeking $11,236.50 in fees, arguing Kaass Law multiplied proceedings in bad faith by filing boilerplate pleadings, failing to oppose motions, and failing to communicate with opposing counsel.
- The district court awarded $8,480 in fees against Kaass Law (but not the plaintiff), finding Kaass Law acted in bad faith and recklessly multiplied the proceedings.
- Kaass Law appealed, arguing (1) § 1927 authorizes sanctions only against individual attorneys, not law firms, and (2) § 1927 does not cover initial pleadings or ordinary litigation costs; the Ninth Circuit considered the first issue dispositive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 28 U.S.C. § 1927 authorizes sanctions against a law firm | Kaass Law: § 1927 applies only to individuals admitted to practice, not to a law firm as an entity | Wells Fargo: District court properly sanctioned the firm under § 1927 (and argued inherent authority on appeal) | Reversed — § 1927 does not permit sanctions against a law firm; sanctions vacated |
| Whether the appellate court should consider the firm's statutory-interpretation argument raised for first time on appeal | Kaass Law: argument is purely legal and appropriate for first-time raise on appeal | Wells Fargo: (did not show prejudice) | Court exercised exception: argument considered because it is purely legal and non-prejudicial |
| Whether sanctions could stand under the district court’s stated authority if § 1927 is inapplicable | Kaass Law: if § 1927 invalid, sanctions unsupported because district court relied solely on § 1927 | Wells Fargo: urged affirmance based on the court’s inherent authority (not raised below) | Court declined to affirm on inherent authority because district court relied exclusively on § 1927 |
| (Unreached) Whether Kaass Law’s conduct merited sanctions under any authority | Kaass Law: argued conduct did not warrant sanctions | Wells Fargo: argued conduct multiplied proceedings and showed bad faith | Not reached — disposition based on statutory interpretation of § 1927 |
Key Cases Cited
- Federal Trade Comm’n v. Alaska Land Leasing, Inc., 799 F.2d 507 (9th Cir. 1986) (vacating § 1927 sanctions against non-attorney employee; § 1927 targets attorneys or admitted representatives)
- GRiD Sys. Corp. v. John Fluke Mfg. Co., 41 F.3d 1318 (9th Cir. 1994) (standard of review for § 1927 sanctions and reliance on proper authority for sanctions)
- Claiborne v. Wisdom, 414 F.3d 715 (7th Cir. 2005) (concluding law firms are not "persons admitted to practice" under § 1927; persuasive reasoning)
- BDT Prods., Inc. v. Lexmark Int’l, Inc., 602 F.3d 742 (6th Cir. 2010) (holding § 1927 does not authorize sanctions on law firms)
- Enmon v. Prospect Capital Corp., 675 F.3d 138 (2d Cir. 2012) (upholding firm sanctions but relying on inherent power and § 1927; discussed and distinguished)
- Pavelic & Le Flore v. Marvel Entm’t Group, 493 U.S. 120 (1989) (interpreting earlier Rule 11 language and concluding individual signers, not firms, were targeted under that version)