Ernеst SMITH; Sam Eliowitz; Albert Rosen; Robert Sheldon;
Jan Sklenar; Joseph Soltesz; Cecelia Stoll;
and Harry Weber, Plaintiffs-Appellees,
v.
DETROIT FEDERATION OF TEACHERS, LOCAL 231, AMERICAN
FEDERATION OF TEACHERS, AFL-CIO; Detroit Board of
Education, Defendants-Appellants.
No. 85-1742.
United States Court of Appeals,
Sixth Circuit.
Argued March 13, 1987.
Decided Sept. 29, 1987.
Eileen Nowikowski, Theodore Sachs (argued), Sachs, Nunn, Kates, Kadushin, O'Hare, Heleston & Waldman, P.C., Detroit, Mich., for defendants-appellants.
Michael E. Avakian (argued), Ctr. on Nat. Labor Policy, Inc., North Springfield, Va., Robert W. Morgan, Chirco, Herrington, Runstadler & Thomas, Troy, Mich., for plaintiffs-appellees.
Before LIVELY, Chief Judge, WELLFORD, Circuit Judge, and CELEBREZZE, Senior Circuit Judge.
CELEBREZZE, Senior Circuit Judge.
Defendant-appellant Detroit Federation of Teachers, Local 231, American Federation of Teachers, AFL-CIO ("DFT" or "the Union") appeals that portion of a district court's order which rejected a magistrate's recommendation that DFT be awarded attorney's fees following the plaintiffs-appellees' (collectively "Smith") unsuccessful civil rights suit against the Union. DFT argues on appeal that thе frivolous and harassing nature of Smith's suit and attendant unsuccessful appeal to this court warranted the imposition of attorney's fees against both Smith and plaintiffs' counsel pursuant to the inherent power of the court, 42 U.S.C. Sec. 1988 (1982), 28 U.S.C. Sec. 1927 (1982), and Fed.R.Civ.P. 11. We hold that by failing to object to the magistrate's recommendation that the individual plaintiffs not be held responsible for attorney's fees, DFT waived the right to now contend that Smith be held liable for the payment of attorney's fees to DFT. We also hold that the district court did not abuse its discretion in declining to assess Smith's counsel for DFT's attorney's fees. Accordingly, we affirm.
I.
The facts underlying the instant appeal are not in dispute. Despite a Michigan stаte law prohibiting public employee strikes, DFT instituted a teachers' strike in the Detroit Public School System in September, 1979. As a result of the strike, the start of the school year was delayed by thirteen days, which were made up by extending the end of the school year. Subsequently, on November 12, 1980, eight individuals, all nonunion tenured teachers, filed suit in federal court against the Detroit Board of Education ("Board") and DFT. Although the teachers had lost no wages or benefits as a result of the strike, Smith's complaint alleged that the Board's closing of the schools and subsequent denial of unemployment compensation resulted in a deprivation of their right to employment, and monetary loss by virtue of not being able to perform other employment during the period of the strike, all without due process. To this section 1983 action against the Board, Smith appended a state law tort claim against DFT, alleging that DFT had intentionally caused them to lose their employment until the strike was settled to DFT's satisfaction, resulting in injury to their personal and professional activities.
DFT filed a motion to dismiss or for summary judgment on February 9, 1981, alleging that Smith had failed to state a claim upon which relief could be granted and that the district court lacked jurisdiction to hear Smith's case. Smith then filed a motion with the court for leave to amend the complaint to substitute a section 1983 claim against the Union for the state tort claim. Oral argument was heard before the district court on March 13, 1981. DFT contended that the Michigan Public Employment Relations Act governs public sector labor relations and vests exclusive authority with the Michigan Employment Relations Commission to adjudicate claims arising out of labor disputes, and thereby precluded Smith's pendent state claim against the Union. In addition, DFT argued against permitting Smith to amend the complaint to assert a section 1983 action against DFT, on the ground that DFT, a private organization, was not engaged in any "state action," a necessary element for any section 1983 claim. The district court agreed with DFT in a bench opinion entered following thе hearing. The court formalized its holding in an order denying Smith's motion to amend its complaint because the proposed amendment would be "futile," and granting DFT's motion to dismiss the complaint and for summary judgment. Following the district court's grant of summary judgment to the Board on June 1, 1982, final judgment was entered dismissing Smith's case on June 15, 1982, but assessing no costs. Smith then appealed to this court.
In an unpublished decision, we affirmed the district court in its entirety on August 30, 1983. DFT then moved the panel for double costs of appeal pursuant to Fed.R.App.P. 38, and the award of attorney's fees as the "prevailing party" in a civil rights suit, pursuant to 42 U.S.C. Sec. 1988 (1982). This court referred DFT to the district court as the proper forum in which to apply for attorney's fees, and its request for double costs, based on DFT's assertion that Smith had brought a frivolous appeal, was denied as "unwarranted." Smith v. Detroit Board of Education,
DFT's subsequent motion for attorney's fees in the district court was referred to a magistrate for a report and recommendation. The magistrate recommended that DFT was entitled to attorney's fees under section 1988, under 28 U.S.C. Sec. 1927, under Fed.R.Civ.P. 11, and pursuant to the court's inherent power to assess costs against a party for bad faith litigation. The magistrate also recommended, however, that only Smith's counsel, and not the individual plaintiffs, be assessed for attorney's fees. Finally, the magistrate reduced DFT's total claim of ovеr $30,000 down to $15,740 in attorney's fees and $330 in costs. Upon review of the report, the district court disagreed with the magistrate's recommendation and rejected any award of attorney's fees to DFT, adopting only that portion of the report which assessed costs to Smith. This appeal ensued.
II.
Before addressing the merits, we must delineate the proper scope of this appeal. DFT argues for an attorney's fee assessment against the individual plaintiffs under the court's inherent power, section 1988, and Rule 11, and that Smith's counsel be held liable for the fees pursuant to the court's inherent power, section 1927, and Rule 11. Smith, on the other hand, asserts that the magistrate recommended that only Smith's counsel be held responsible for DFT's attorney's fees, and only pursuant to the court's inherent powers to assess an attorney for bad faith litigation and 28 U.S.C. Sec. 1927. Thus, according to Smith, when DFT failed to object to either the magistrate's delimitation of the parties potentially liable for the fees, or the magistrate's failure to invoke Fed.R.Civ.P. 11 as a basis for an assessment against Smith's counsel, DFT failed to preserve for appeal any objection to these matters.
DFT's motion for attorney's fees was referred to a magistrate pursuant to 28 U.S.C. Sec. 636(b)(1)(B) (1982) for a report and recommendation. By operation of section 636(b)(1), any party that disagrees with the magistrate's recommendation "may serve and file written objections" to the magistrate's report, and thereby obtain de novo review by the district court judge of those portions of the report to which objections are made. 28 U.S.C. Sec. 636(b)(1) (1982). In the interest of judicial economy, this circuit established in United States v. Walters,
Determining whether DFT complied with this supervisory rule, or whether the issue of the individual plaintiffs' responsibility for the fees was otherwise preserved for our review, is made difficult because neither the magistrate's report nor the district court's memorandum are models of clarity. The magistrate first determined that the prevailing defendants were entitled to attorney's fees pursuant to 42 U.S.C. Sec. 1988, the court's inherent powers, and Fed.R.Civ.P. 11, then recommended that the individual plaintiffs not be held liable for the fees, and finally concluded that Smith's counsel should bear responsibility for the fees under the court's inherent powers and 28 U.S.C. Sec. 1927. Although the magistrate only expressly enunciated two bases for assessing the fees against Smith's counsel, it appears to us that he also desired to shift the plaintiffs' responsibility to their attorney and assess Smith's counsel under 42 U.S.C. Sec. 1988 and Fed.R.Civ.P. 11. As for the district court's memorandum, it left unclear whether it was precisely determining that the individual plaintiffs were not being held liable under section 1988, the inherent powers, or Rule 11, or merely expressing a general disagreement with the magistrate over whether DFT was entitled to fees, from any source, under these provisions.
What is clear to us is that the magistrate intended that Smith's counsel only, and not the individual plaintiffs, be held responsible for the payment of DFT's attorney's fees. Despite the fact that this recommendation limited the sources for the recovery of any attorney's fees DFT may have ultimately been awarded, DFT failed to object to this aspect of the magistrate's report, although it did object to the magistrate's halving of the amount of fees requested. Since no objection was taken to the magistrate's recommendation that only counsel be assessed, the question of whether the individual plaintiffs should have been held liable, under any of the alternative ways of doing so, was not properly preserved for appellate review.1 As a result, even if the district court had agreed with the magistrate that DFT was technically entitled to attorney's fees, it would have been free, due to the absence of any objection from DFT, to adopt the magistrate's recommendation that the plaintiffs not be assessed. Consequently, we believe that the question of whether the plaintiffs should bear responsibility for the fees was an issue distinct from the question of whether DFT was entitled to fees from Smith. As we interpret the district court's memorandum, this distinct determination was foreclosed by the district court's finding that DFT was not entitled to fees. In our view, therefore, the fact that the district court addressed the propriety of assessing fees under section 1988, the inherent powers, and Rule 11 does not suffice to preserve for our review the issue of the individual plaintiffs' responsibility. Instead, by failing to object to the magistrate's recommendation that the individual plaintiffs not be held responsible for the fees, DFT acquiesced in that recommendation and waived subsequent review of the matter.2
On the other hand, we disagree with Smith's contention that DFT's failure to object to the magistrate's recommendation that counsel be assessed only under the court's inherent powers and section 1927 similarly precludes DFT's assertion on appeal that attorney's fees should be assessed against counsel under Rule 11. This argument is premised on the notion that the magistrate, in fact, recommended that Smith's counsel be assessed fees under only two aegises. It is clear to us, however, that despite the magistrate's lack of organizational acumen, he desired to charge fees against Smith's counsel under whatever authority was available for this purpose, including Rule 11. Consequently, no objection from DFT was required to preserve this issue, and we find that the issue of whether Smith's attorney should be subjected to paying DFT's attorney's fees under Rule 11 is properly before us. Moreover, although the Rule 11 issue was not addressed by the district court within the precise context of assessing fees against Smith's counsel, the matter has been fully briefed to this court, and will be considered in the interest of judicial economy. Accordingly, we will now prоceed to address only the propriety of an assessment of attorney's fees against Smith's counsel, but under all the avenues available to accomplish this result--the inherent power of the court to assess fees for bad faith litigation, 28 U.S.C. Sec. 1927 (1982), and Fed.R.Civ.P. 11.
III.
"Although the 'American Rule' has been and remains that parties to litigation must bear their own attorney's fees, federal courts recognize several exceptions to this general rule." Jones v. Continental Corp.,
In the instant case, the magistrate found bad faith because the claims against DFT in the complaint and proposed amended complaint were clearly precluded by established judicial precedent, and because the suit by Smith was motivated by anti-union animus. The district court disagreed, finding that the precedents did not so clearly bar Smith's action that the bringing and maintaining of the suit constituted bad faith litigation, and finding no evidence of harassing litigious conduct on the part of Smith's counsel that would warrant the assessment of attorney's fees. Since "[a]n award of attorney's fees ... under the court's 'inherent powers' rests in the sound discretion of the trial court," Jones,
First, we find that the magistrate erred in concluding that thе pendent state tort claim that was asserted against DFT in the original complaint was so clearly precluded by Lamphere Schools v. Lamphere Federation of Teachers,
Next, we find that the magistrate similarly erred in concluding that Smith's attempt to amend the complaint to allege a section 1983 violation by DFT was clearly precluded by Parratt v. Taylor,
Alternatively, the magistrate concluded that it should have been evident to Smith's counsel, at the time he attempted to amend the complaint to assert a section 1983 claim against DFT, or at least while Smith's appeal was pending, that the Union was not a "state actor" for purposes of the federal civil rights statute. The magistrate found that Supreme Court precedents such as Moose Lodge No. 107 v. Irvis,
Although the Supreme Court precedents cited by the magistrate clearly make it very difficult for a private party to be engaged in state action, they do not rule out the possibility that a labor organization, under certain circumstances, could be engaged in state action, even while directing illegal activity. A private party can still become a state actor if it acts in concert with state officials, see Lugar,
Moreover, we believe that the magistrаte placed undue emphasis on the district court's labelling of Smith's proposed amendment of its complaint as "futile," as well as this court's pronouncement on appeal that it was "inconceivable" that the Union would be engaged in state action while conducting an illegal teachers' strike. Labelling a proposed amendment to a complaint as "futile" is a colorful term of art often employed by courts as a recognized justification for refusing to permit such amendments. Although it is obviously indicative of the court's perception of the strength of a plaintiff's claim, it does not follow as a matter of necessity that all claims so denied are frivolous to the degree that justifies the imposition of fees or other sanctions, or that appeals from the denials of the motions to amend are bound to be without merit. We place much more significance in the fact that the district court declined to award costs in its final judgment. As for this court's characterization of the section 1983 claim as "inconceivable," we construe that expression as nothing more than a strong opinion on the merits of the claim in the context of the appeal, again not necessarily implying that the allegation (or the appeal) was frivolous. We find much greater significance than did the magistrate in the fact that the same pаnel that heard the appeal and rendered this strong evaluation against Smith's case declined to assess double costs against Smith, as requested by DFT for Smith's allegedly bringing a frivolous appeal, finding such action "unwarranted." Smith,
Finally, we believe that the magistrate erred in finding that the suit against DFT was motivated by bad faith anti-union animus. The magistrate supported his conclusion primarily by reference to a statement in Smith's appellate brief that "[a]s DFT is fundamentally antagonistic to the system in order to create the controversy that justifies its existence, its exclusive presence and bargaining rights under Michigan law runs counter to every principle of American governmental democracy." We fail to perceive, however, how this type of statement, without more, can establish that Smith's suit against DFT was motivated by an improper purpose justifying an assessment of attorney's fees. In our view, the allegedly anti-union sentiments attributed to Smith's counsel, standing alone, reflect only a zealous advocacy and an attempt to explain the theory underlying Smith's assertion that DFT was engaged in state action for purposes of section 1983. Consequently, in the absence of other evidence, such as dilatory tactics or harassing conduct on the part of Smith's counsel, we find that an insufficient basis existed for the magistrate to conclude that the plaintiffs' attorney instituted or maintained the suit against DFT for an improper purpose.
In light of the foregoing, the district court did not abuse its discretion in refusing to assess DFT's attorney's fees against Smith's counsel under its inherent powers to award fees based on bad faith litigation.
IV.
Another bаsis available to the district court for the imposition of attorney's fees against Smith's counsel was provided by that statute which states:
Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.
28 U.S.C. Sec. 1927 (1982). In United States v. Ross,
In the instant case, requiring Smith's counsel to personally bear the responsibility for DFT's attorney's fees is unwarranted under either the Ross or the Haynie standards. Although Smith's suit against DFT was ultimately found to lack merit, its theory of liability was not so obviously precluded by existing precedent that the attorney should have known that the claim was frivolous. In addition, there is no evidence that Smith's attorney pursued the plaintiffs' suit through the use of multiplicative litigation tactics that were harassing, dilatory, or otherwise "unreasonable and vexatious." Accordingly, we find no abuse of discretion in the district court's refusal to impose sanctions against Smith's attorney pursuant to section 1927.
V.
The third and final basis available to a district court for imposing attorney's fees against a party's counsel is found in Fed.R.Civ.P. 11. Prior to its amendment еffective August 1, 1983, Rule 11 provided that "[t]he signature of an attorney constitutes a certificate by him that he has read the pleading; that to the best of his knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay." Regarding the sanctions which could be imposed against an attorney, the rule only stated that "[f]or a wilful violation of this rule an attorney may be subjected to appropriate disciplinary action." Despite the rule's silence on whether an attorney could be held responsible for opposing counsel's fees, the weight of authority suggests that such monetary sanctions were permitted as an "appropriatе disciplinary action" under the proper circumstances. See Badillo v. Central Steel & Wire Co.,
Rule 11 was amended in 1983 to emphasize the responsibilities of attorneys and stress the need for some prefiling inquiry into both the facts and the law. Albright,
We perceive of no reason to apply amended Rule 11 in the instant case, where all of the pleadings, motions, and papers signed by Smith's attorney which could form a basis for a violation of the rule were filed with either the district court or this court prior to the effective date of the rule's amendment. See Hashemi,
VI.
For the foregoing reasons, the district court's order is AFFIRMED.
Notes
In reaching this conclusion, we reject, for several reasons, DFT's argument that the requirement of making timely objections to a magistrate's report should not apply to it because DFT prevailed in its motion for attorney's fees. First, in a sense, DFT did not prevail at all in its motion for attorney's fees. The motion requested that Smith, not Smith's counsel, be assessed for attorney's fees pursuant to 42 U.S.C. Sec. 1988, which authorizes prevailing civil rights defendants to recover attorney's fees if the court finds that the plaintiff's claim was " 'frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so.' " Hughes v. Rowe,
Moreover, assuming arguendo that the matter of the individual plaintiffs' responsibility for DFT's attorney's fees is before us, we reject the Union's contention that Smith should have been assessed for the fees under 42 U.S.C. Sec. 1988, pursuant to the court's inherent power, or by operation of Fed.R.Civ.P. 11, for the same reasons we find that the district court did not abuse its discretion in declining to assess fees against the plaintiffs' counsel