Metz v. Unizan Bank
2011 U.S. App. LEXIS 17648
| 6th Cir. | 2011Background
- Metz et al. sued 55 banks including Fifth Third in 2005 over a Ponzi scheme involving Lomas notes and Serengeti notes.
- Morris intervened in 2005 with a complaint similar to Metz’s, adding claims on International and Rawhide.
- District court allowed intervention for Lomas/Serengeti claims but disallowed International/Rawhide claims.
- In May 2008 the district court dismissed Fifth Third with prejudice; Morris continued participation.
- In 2009 Morris refiled an intervenors’ complaint duplicative of prior claims; Fifth Third moved to strike and seek inherent sanctions; Morris did not respond; district court sanctioned Morris and later awarded fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly sanctioned Morris under inherent powers. | Morris knowingly refiled meritless, duplicative claims. | Sanctions warranted for improper purpose and persistence despite prior dismissals. | Yes; sanctions affirmed. |
| Whether explicit finding of bad faith was required. | District court must expressly find bad faith. | Implicit comparatives to bad-faith standard suffice given the record. | Not required; sufficient evidence supported the sanction. |
| Whether inherent power sanctions can apply when Rule 11 also applies. | Rule 11 should govern and constrain sanctions. | Inherent power can sanction conduct overlapping Rule 11; both can apply. | Permissible; Rule 11 does not bar inherent sanctions. |
| Whether Morris received fair notice and a hearing. | Sanctions imposed without proper notice/hearing. | Fair notice given; an evidentiary hearing on fees occurred. | Not violated; due process satisfied. |
| Whether the sanctions amount was excessive. | Fees were inflated and unwarranted. | Fees were supported by itemized evidence and reasonable given conduct. | Sanctions amount upheld. |
Key Cases Cited
- Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (inherent power sanctions appropriate for bad-faith conduct)
- Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980) (bad-faith standard can involve harassment or delay)
- Big Yank Corp. v. Liberty Mut. Fire Ins. Co., 125 F.3d 308 (6th Cir. 1997) (three-part test for bad-faith sanctions)
- First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501 (6th Cir. 2002) (rules-based and inherent sanctions interplay; sufficiency of conduct)
- Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642 (6th Cir. 2006) (sanctions proper where conduct frustrates litigation)
- BDT Prods., Inc. v. Lexmark Int'l, Inc., 602 F.3d 742 (6th Cir. 2010) (application of inherent powers balanced by standards of bad faith)