The opinion of the court was delivered by: Sitarski, M.J.
Presently before the Court is Defendant's Motion For Attorney Fees and Expenses (Doc. No. 93), Plaintiffs' Answer in Opposition (Doc. No. 94), Defendant's Reply (Doc. No. 100), and supplemental briefing by both parties (Doc. Nos. 124, 126, 127).
The facts and procedural history of this case are well known to the parties and to this Court. See e.g., Benson v. Giant Food Stores, LLC, et al., No. 09-3194, 2011 WL 722256 (E.D.Pa. Feb. 28, 2011) (Doc. No. 120). Thus, I will provide only a brief summary of the background relevant to the present motion. Additional relevant facts are incorporated into the discussion section below.
On July 9, 2009, Plaintiffs brought this civil action alleging state law personal injury claims. (Doc. No. 1). Plaintiffs alleged that Carver Benson suffered injuries from ingesting a foreign object in food purchased at a Giant Food Store. (Doc. No. 1, ¶¶ 23-42). Additionally, Plaintiff Annie Benson alleged loss of consortium as a result of her husband's injuries. (Doc. No. 1,¶¶ 42-49). On October 6, 2009, the Honorable Juan R. Sanchez referred the case to me for settlement purposes only, and on November 12, 2009, counsel appeared for a settlement conference, which was ultimately unsuccessful. (Doc. Nos. 4, 9). On April 6, 2010, the parties consented to the exercise of jurisdiction by a United States Magistrate Judge, and the matter was referred to me for trial and disposition. (Doc. No. 30). On April 8, 2010, I granted Plaintiffs' unopposed Motion to Remand for Arbitration. (Doc. Nos. 32, 33). The arbitrators found in favor of Plaintiffs and awarded money damages; Defendant appealed this award, and requested a trial de novo. (Doc. Nos. 37, 38).
The parties proceeded to jury trial on Plaintiffs' claims of negligence and loss of consortium. On the first day of trial, Defendant stipulated to liability, leaving only causation and damages as contested issues. Ultimately, the jury found that Defendant's negligence was the "factual cause" of some harm to Plaintiffs; however, the jury, awarded $0.00 in damages as Carver Benson's injuries. (Doc. No. 80). Likewise, the jury award $0.00 in damages on Annie Benson's loss of consortium claim. (Doc. No. 80). On August 18, 2010, this Court entered judgment, and the matter was marked closed. (Doc. Nos. 81, 82).
Thereafter, on October 13, 2010, Defendant filed a Motion for Attorney Fees and Expenses ("Motion for Fees"). (Doc. No. 93). Plaintiffs filed an Answer in Opposition, and Defendant filed a Reply. (Doc. Nos. 94, 100). On December 10, 2010, the Court denied Defendant's Motion for Fees, concluding that the motion was not timely filed. (Doc. No. 106). On December 17, 2010, Defendant filed a Motion for Reconsideration, which the Court granted on February 28, 2010. (Doc. Nos. 108, 122). Thus, Defendant's Motion for Fees is now before the Court. The Court heard oral argument on March 21, 2011. Supplemental briefs were filed on March 18, 2011, and March 25, 2011. (Doc. Nos. 124, 126, 127).
A. Summary of the Parties' Motions for Attorney Fees and Expenses.
On October 13, 2010, Defendant filed the instant Motion for Attorney Fees and Expenses pursuant to Federal Rule of Civil Procedure 54(d)(2)(B), 28 U.S.C.A. Section 1927, and Local Rule of Civil Procedure 83.6.1. Defendant requests an award of $78,785.00 in fees and $6,360.80 in expenses, incurred beginning with receipt of the Complaint through and including trial and post-trial motions. (Doc. No. 93, Ex. Q) (Doc. Nos. 124, 127). In support of this request, Defendant presented the Court with an unedited, whole bill for attorney fees and expenses. While Defendant conceded that the litigation was not filed in bad faith and that the case originally had some settlement value, counsel did not parse out the fees and expenses relating to the claims that Defendant considered frivolous. Instead, counsel argues that the litigation was multiplied at every stage of the proceedings following the Answer, and that Defendant is entitled to recover all fees and expenses after that point in time. Argument Transcript, 03/21/2011, p. 50-64.
Defendant argues that sanctions are appropriate in this case because Plaintiffs' counsel unreasonably and vexatiously pursued three meritless arguments in support of Mr. Benson's claim for injury and damages.*fn1 Specifically, Defendant alleges that Plaintiffs' counsel unreasonably argued that: (1) "Dr. Jeffrey E. Sootin's hernia operation and treatment of Mr. Benson was related to the ingestion of the screw;" (2) "Mr. Benson suffered internal bleeding and rectal bleeding as a result of the ingestion of the screw;" and (3) "Plaintiffs' financial hardship was a direct result of the ingestion of the screw." (Doc. No. 93, ¶ 2). Defendant alleges that counsel pursued these meritless arguments throughout the litigation even though counsel knew or should have known that each position was unsupported by the facts. Defendant alleges that counsel advanced these arguments in discovery and at arbitration, and failed to properly investigate and/or disclose facts relevant to these issues. Finally, Defendant alleges that counsel pursued the meritless arguments in bad faith and/or by intentional misconduct for "the improper purpose of unjustifiably, grossly inflating Plaintiffs' damages claims." (Doc. No. 93, p. 26). Thus, Defendant contends that counsel's unreasonable and vexatious conduct entitles Defendant to attorney fees and expenses pursuant to 28 U.S.C.A. Section 1927 and Local Rule of Civil Procedure 83.6.1.
In response, Plaintiffs generally argue that statements made during settlement and arbitration are not admissible for purposes of Defendant's motion. (Doc. No. 126, p. 10-14). As discussed more fully below, the written statements at issue are found in Plaintiffs' settlement brochure and pertain to the first and second allegedly meritless arguments (i.e., the physical injuries Mr. Benson claimed to suffer through ingestion of the screw). Plaintiffs presented similar testimony at arbitration in relation to these issues.
In opposing Defendant's motion, Plaintiffs respond specifically to each of the three arguments. Regarding the first, Plaintiffs contend that they made no legal claim in their Complaint or at arbitration that the hernia surgery performed by Dr. Sootin was related to ingestion of the screw. (Doc. No. 126, p. 3-6). Plaintiffs note that Mr. Benson's belief concerning the hernia surgery operation was never presented at trial. As to the second matter, Plaintiffs argue that the testimony at trial supported their position that the passage of the screw excoriated a pre-existing hemorrhoidal condition, causing bleeding. (Doc. No. 94, p. 5) (Doc. No. 126, p. 6-8). As to the third matter, Plaintiffs argue that the evidence supports their position that Plaintiffs' financial hardship was a direct result of the ingestion of the screw. (Doc. No. 126, p. 8-10). Finally, Plaintiffs argue that counsel acted in good faith at all times.
In addition to the attorney fees and costs associated with work performed prior to final judgment, Defendant seeks sanctions concerning the post-trial motions filed by Plaintiffs. Defendant asserts that Plaintiffs' Motion for a New Trial, Plaintiffs' Motion for Reconsideration, and Plaintiffs' request for Rule 11 sanctions against Defendant were improper, and warrant an award of fees and costs. (Doc. No. 93, p. 22, 25) (Doc. No. 100).*fn2 On the other side, Plaintiffs request that sanctions be entered against Defendant. Plaintiffs generally argue that Defendant should be sanctioned for filing the Motion for Attorney Fees because Defendant presented no credible argument in support of this motion, and Plaintiffs' claims at trial were supported by the evidence. (Doc. No. 94, p. 6-8) (Doc. No. 126).
B. Legal Standard Relevant to the Requests for Attorney Fees.
Defendant's request for attorney's fees is governed by 28 U.S.C. Section 1927, which provides:
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.
To violate § 1927, an attorney must be found to have: "(1) multiplied proceedings; (2) in an unreasonable and vexatious manner; (3) thereby increasing the cost of the proceedings; and (4) doing so in bad faith or by intentional misconduct." In re Schaefer Salt Recovery, Inc., 542 F.3d 90, 101 (3d Cir. 2008); LaSalle National Bank v. First Connecticut Holding Group, L.L.C. XXIII, 287 F.3d 279, 288 (3d Cir. 2002) (citing In re Prudential Ins., 278 F.3d 175, 188 (3d Cir. 2002)). A party seeking an award of attorney's fees under §1927 bears a heavy burden. "Courts should exercise [discretion to award §1927 sanctions] only in instances of a serious and studied disregard for the orderly process of justice." Ford v. Temple Hosp., 790 F.2d 342, 347 (3d Cir. 1986) (citations omitted). The Third Circuit has held that "'sanctions may not be imposed under § 1927 absent a finding that counsel's conduct resulted from bad faith, rather than misunderstanding, bad judgment, or well-intentioned zeal.'" Grider v. Keystone Health Plan Central, Inc., 580 F.3d 119, 142 (3d Cir. 2009) (quoting LaSalle, 287 F.3d at 289). The attorney's conduct "must be of an egregious nature, stamped by bad faith that is violative of recognized standards in the conduct of litigation." Baker Industr. Inc. v. Cerberus, Ltd., 764 F.2d 204, 208 (3d Cir. 1985) (citation omitted). "A district court's finding of bad faith or the absence of bad faith in a particular case is a factual determination and may be reversed only if it is clearly erroneous." Ford, 790 F.2d at 347 (citing Baker, 764 F.2d at 210). Further, "once a finding of bad faith has been made, the appropriateness of assessing attorneys' fees against counsel under section 1927 is a matter for the district court's discretion." Id. In exercising its discretion, the court "must balance the equities between the parties and may award attorney's fees whenever overriding considerations indicate the need for such a recovery." Id. In essence, the court is free, upon determining the existence of bad faith, to either grant or deny the imposition of fees and expenses. Additionally, a decision to deny fees may be based on a finding that both parties acted in bad faith, as in Perichak v. International Union of Elec. Radio, 715 F.2d 78, 80 n. 5 (3d Cir. 1983).
Eastern District Local Rule 83.6.1, "Expedition of Court Business," provides:
(b) No attorney shall, with just cause, fail to appear when that attorney's case is before the court on a call, motion, pretrial or trial, or shall present to the court vexatious motions or vexatious opposition to motions or shall fail to prepare for presentation to the court, or shall otherwise so multiply the proceedings in a case as to increase unreasonably and vexatiously the costs thereof.
(c) Any attorney who fails to comply with . . . (b) may be disciplined as the court shall deem just.
Thus, Eastern District Local Rule 83.6.1 provides language identical to that of §1927 in that it focuses on the "vexatious" and "unreasonable" nature of an attorney's behavior. Local Rule 83.6.1 is somewhat broader in scope than Section 1927 "because it takes into consideration the Court's inherent power to sanction . . . Nonetheless, the Third Circuit has explained that sanctions imposed pursuant to the Court's inherent power also require a finding of bad faith in most instances." Cintron Beverage Group, LLC v. Depersia, 2008 WL 1734184, at *2 (E.D.Pa. 2008) (citing In re Prudential Ins. Co., 278 F.3d at 181).
Should this court choose to impose sanctions pursuant to §1927 and Local Rule 83.6.1, the sanction order should "relate each sanction to some aspect of [the] conduct and explain how that conduct comes within the authority" relied on to impose it. Grider, 580 F.3d at 143 (quoting Martin v. Brown, 63 F.3d 1252, 1265 (3d Cir. 1995)). The sanctions available under §1927 are limited to those excess costs and expenses incurred "because of such conduct." 28 U.S.C. §1927. "The burden of proving entitlement to attorney fees is on the party claiming such entitlement." Zambelli Fireworks Mfg. Co., Inc. v. Wood, 2010 WL 4672357, at *7 (W.D.Pa., Nov. 9, 2010) (citations omitted).
C. Whether the Court May Consider Statements Made During Settlement Negotiations of the Underlying Claim.
As an initial matter, the Court must determine whether it may consider certain statements made during the settlement negotiations of the underlying claim. Plaintiffs contend that Federal Rule of Evidence 408 prohibits evidence of settlement discussions for purposes of deciding Defendant's Motion for Fees. (Doc. No. 126, p. 10-14). Plaintiffs specifically argue that the settlement negotiations and the settlement brochure are not admissible.*fn3 Plaintiffs also argue that the statements are simply irrelevant, because any such statements occurred almost a year before trial and prior to discovery being completed. (Doc. No. 94, p. 6).
Defendant contends that the evidence at issue is offered for purposes not prohibited by Federal Rule of Evidence 408. (Doc. No. 124, p. 2). Defendant points to the Advisory Committee Notes on the 2006 amendments, which states that "Rule 408 is inapplicable if offered to show that a party made fraudulent statements in order to settle a litigation." (Doc. No. 124, p. 2-3). Defendant also argues that the statements at issue were found in Plaintiffs' discovery responses and at deposition, not just in the settlement context; therefore, counsel has waived any potential privilege as to statements made in the context of settlement. (Doc. No. 124, p. 5).
Federal Rule of Evidence 408 addresses the admissibility of evidence of prior settlement negotiations. It provides as follows:
(a) Prohibited uses.--Evidence of the following is not admissible on behalf of any party, when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction:
(1) furnishing or offering or promising to furnish--or accepting or offering or promising to accept--a valuable consideration in compromising or attempting to compromise the claim; and
(2) conduct or statements made in compromise negotiations regarding the claim, except when offered in a criminal case and the negotiations related to a claim by a public office or agency in the exercise of regulatory, investigative, or enforcement authority.
(b) Permitted uses.--This rule does not require exclusion if the evidence is offered for purposes not prohibited by subdivision (a). Examples of permissible purposes include proving a witness's bias or prejudice; negating a contention of undue delay; and ...