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Pennsylvania General Energy Co., LLC v. Grant Township

United States District Court, W.D. Pennsylvania

January 5, 2018

PENNSYLVANIA GENERAL ENERGY COMPANY, LLC, Plaintiff
v.
GRANT TOWNSHIP, Defendant.

          OPINION AND ORDER

          Susan Paradise Baxter Magistrate Judge [1]

         Pending before the Court are: (1) the renewed motion for sanctions filed on behalf of Plaintiff Pennsylvania General Energy Company, LLC (“PGE”) (ECF No. 249); (2) Defendant Grant Township's motion to strike PGE's motion for sanctions (ECF No. 253); (3) Little Mahoning Watershed and East Run Hellbenders Society, Inc.'s motion to strike PGE's motion for sanctions as untimely (ECF No. 256); and (4) Grant Township's counter-motion for sanctions (ECF No. 264).

         For the reasons that follow, the Court grants in part PGE's motion for sanctions, and attorneys' fees and costs will be assessed against Attorneys Linzey and Dunne of the Community Environmental Legal Defense Fund (“CELDF”) ONLY, and not, either directly or indirectly, against Defendant Grant Township. In addition, Attorney Linzey will be referred to the Disciplinary Board of the Supreme Court of Pennsylvania for such further proceedings as the Board may deem appropriate. Attorney Schromen-Wawrin's motion to strike, filed on counsel's behalf via proposed intervenors Little Mahoning Watershed and East Run Hellbenders, reluctantly is granted. The remaining motions are denied.

         I. Background and Relevant Procedural History[2]

         PGE is a private corporation in the business of exploration and development of oil and gas. PGE currently owns and operates natural gas wells in Grant Township, Pennsylvania. PGE's exploration and development activities include drilling and operating gas wells and managing brine and other produced fluids from operating wells.

         In 1997, PGE's predecessor in interest put into production a deep gas well in Grant Township on property known as the Yanity Farm. PGE intends to use the Yanity Well to inject produced fluids from its other oil and gas operations. Based on its intention to convert the use of the Yanity Well to an injection well for disposal of produced fluids generated at other PGE oil and gas wells, PGE proceeded to obtain regulatory approval for such use.

         On March 19, 2014, PGE received an initial permit from the United States Environmental Protection Agency to convert the Yanity Well into an injection well, and on September 11, 2014, the EPA issued a final permit in this regard.

         On June 3, 2014, with the assistance and direction of Community Environmental Legal Defense Fund (“CELDF”), Grant Township adopted the Community Bill of Rights Ordinance (the “CBR” or “Ordinance”). The CBR expressly prohibits any corporation from “engag[ing] in the depositing of waste from oil and gas extraction” and invalidates any “permit, license, privilege, charter, or other authority issued by any state or federal entity which would violate [this prohibition] or any rights secured by [the Ordinance], the Pennsylvania Constitution, the United States Constitution, or other laws.”

         PGE filed this action challenging the constitutionality, validity, and enforceability of the CBR. Through this action, PGE seeks relief pursuant to 42 U.S.C. § 1983 against the Township on the grounds that the Ordinance stripped Plaintiff of its federal constitutional rights, and otherwise is in direct conflict with a number of Pennsylvania statutes and therefore is preempted. ECF No. 5.

         Attorney Linzey, on behalf of Grant Township, filed an Answer and Counterclaim invoking 42 U.S.C. § 1983 and § 1988 against PGE, claiming, inter alia, that by bringing this lawsuit challenging the Ordinance, PGE, “acting under color of state law” sought to violate the right of the people of Grant Township to “local community self-government” as secured by the Pennsylvania Constitution, the federal constitutional framework, and the CBR itself. ECF No. 10. Grant Township's counterclaim sought various remedies comprised, in part, of both a declaration that the CBR is a valid exercise of the right to self-government; a declaration that PGE, by virtue of its corporate status, is not a “person” under the law; and an injunction preventing PGE from violating the Ordinance.

         Thereafter, community group East Run Hellbenders Society Inc. (“Hellbenders”), also represented by Attorney Schromen-Wawrin, also of CELDF, filed a motion to intervene in this action as of right or permissively. Attorney Schromen-Wawrin identified the Little Mahoning Watershed (“Ecosystem”) as an additional Proposed Intervenor. ECF No. 37. This Court denied intervention[3], and the Third Circuit affirmed. In affirming, the Circuit acknowledged serious and substantive concerns at the attempted intervention of an ecosystem as a proper party to federal litigation under the plain language of the Federal Rules of Civil Procedure. The Third Circuit further concluded that counsel for Grant Township adequately represented the interests asserted by the community group, at least in part given legal representation by the same environmental law organization. Pennsylvania General Energy Company, LLC v. Grant Township, 658 F. App'x 37, 41 (3d Cir. 2016).

         Cross-motions for judgment on the pleadings were resolved as to certain of the parties' claims, with this Court granting in part PGE's motion and declaring invalid six operative provisions of the challenged Ordinance.[4] Grant Township's motion for relief as to its counterclaim was denied. ECF No. 114. Attorney Linzey, on behalf of Grant Township, followed with a motion for reconsideration, necessitating a response in opposition by PGE. Upon consideration, this Court denied the motion finding, at best, that Attorney Linzey misapprehended the scope of review inherent in a motion for judgment on the pleadings, and merely sought to relitigate the denial of Grant Township's initial motion. ECF No. 172. In the interim, the people of Grant Township voted to repeal the Community Bill of Rights Ordinance and, with the guidance of Attorney Linzey and CELDF, adopted a new Home Rule Charter incorporating many of the provisions previously declared invalid. ECF No. 180-2.

         PGE next sought summary judgment on its remaining federal constitution claims; specifically, that the CBR violates the Supremacy Clause, the Equal Protection Clause, the Petition Clause of the First Amendment, the Contract Clause, and both the substantive and procedural components of the Due Process Clause of the United States Constitution. PGE also sought summary judgment in its favor on Grant Township's counterclaim. Grant Township filed its own motion for summary judgment, again asserting, inter alia, that PGE violated the Township's right to “local community self-government.” This Court issued a judgment order, denying Grant Township's motion in full, and granting PGE's motion in part and denying it in part, with relief granted in PGE's favor as to Grant Township's counterclaim, the Equal Protection Claim, the Petition Clause claim, and the Substantive Due Process challenge. Summary judgment was denied on PGE's Procedural Due Process and Contract Clause challenges due to PGE's failure to submit a copy of an existing Underground Injection Control (“UIC”) permit conveying a property interest to PGE, as well as PGE's omission of copies of any leases with Grant Township landowners to substantiate its contract claims, the absence of which left limited questions of fact to be resolved.

         A trial as to PGE's remaining claims is scheduled for May 2018.

         II. Discussion

         A. PGE's Motion for Sanctions

         PGE's pending motion for sanctions renews and supplements a previously filed motion for sanctions, and seeks to recover over $500, 000 in attorneys' fees and costs incurred as a consequence of “frivolous, unfounded, harassing pleadings and motions in pursuit of … illegitimate ends, thereby increasing litigation costs, abusing process, and wasting judicial resources.” ECF No. 249, p.1.

         PGE argues that CELDF counsel guided Grant Township's promulgation of an unlawful CBR Ordinance and filed numerous motions and pleadings which were conceded to be without legal support, but nevertheless were submitted for judicial consideration, in pursuit of a political agenda to “reorder and restructure” our system of government. ECF No. 250. PGE points to examples of filings asserting Grant Township's “right” to “local, community self-government” rising above well-established concepts of state and federal preemption, as well as arguments propounded by CELDF counsel throughout this litigation rejecting the longstanding legal recognition and protection of corporations as “persons” under the United States Constitution.[5]PGE contends that counsel cannot claim incompetence or lack of awareness of the frivolous nature of the claims asserted by them in this action, given that identical arguments were raised by CELDF and/or Attorney Linzey in prior litigation and uniformly rejected by courts in this Circuit and elsewhere.

         PGE states that as a result of Attorney Linzey's conduct, the litigation of this matter extends to over 250 docket entries, reflecting a strategy to delay resolution of this action in order to interfere with PGE's ability to conduct lawful activities within Grant Township, and to impose unwarranted financial strain on PGE as it litigates this action to preserve its rights. As just one of many examples of frivolous motions, PGE points to the motion to strike the affidavit of PGE's Vice President of Engineering, filed in response to arguments raised by Grant Township in opposition to PGE's motion for summary judgment. ECF No. 250, citing ECF No. 193 and ECF No. 244. Based upon the course of conduct evinced by Defendant's counsel, PGE asserts the propriety of sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and the inherent power of the Court to assess attorney's fees when a party has acted in bad faith, or for oppressive reasons.

         In addition, PGE claims it is entitled to sanctions against Attorney Schromen-Wawrin, pursuant to 28 U.S.C. § 1927, as a result of a “patently frivolous claim” on behalf of the Little Mahoning Watershed, as well as proposed intervention on behalf of the East End Hellbenders, a community group comprised of residents of Grant Township.

         1. Rule 11

         Under Rule 11 of the Federal Rules of Civil Procedure, by signing a pleading, motion or other filing, an attorney certifies, inter alia, that to the best of his or her knowledge, and formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; [and]
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying or reversing existing law or for establishing new law.

Fed. R. Civ. P. 11(b). In the event a party believes a motion or pleading has been interposed for an improper purpose, upon appropriate notice and a 21-day waiting period to permit the withdrawal of the offending paper, claim, defense, contention, or denial, a motion for sanctions may be filed. Fed.R.Civ.P. (11)(c).

         PGE asserts that throughout this litigation, Attorneys Linzey and Dunne, in conjunction with CELDF, have acted unreasonably, pursuing discredited legal theories, misrepresenting facts, and unnecessarily multiplying litigation, and therefore are subject to sanctions to bear the expense incurred by PGE to retain its right to operate its legal business within Grant Township. In opposition to the requested sanctions, Defendant's counsel contend that PGE's motion has been interposed to harass, is untimely, and is filed without required safe harbor notice, and that Grant Township's legal arguments are supported by existing law, are reasonable arguments to extend, modify or reverse existing law, or to establish new law.[6] In addition, counsel assert that sanctions against the Township or its counsel are inappropriate because CELDF and its associated attorneys have not previously been sanctioned, and have candidly disclosed the existence of opposing case law.

         Counsel for Defendant and Proposed Intervenors argue that PGE's motion for sanctions as to Attorney Schromen-Wawrin should be denied as untimely and in violation of Rule 11's safe harbor provisions, requiring service of an intended motion 21 days on the offending party prior to filing.

         Before addressing the merits of a party's Rule 11 motion, the Court must determine whether the party complied with the “safe harbor” provision of Rule 11(c)(2). Under that provision, a party cannot file a motion for sanctions until it first presents the motion to the offending party, and allows 21 days for the other party to withdraw or correct the challenged issue. In re Schaefer Salt Recovery, Inc., 542 F.3d 90, 99 (3d Cir. 2008) (citing Fed.R.Civ.P. 11(c)(2)). Counsel for Grant Township challenge the motion as violating Rule 11's safe harbor provisions because PGE failed to serve a copy of the renewed motion prior to filing, “and seeks to rely on the original notice given in 2015 to comply with the notice rule.”[7] ECF No. 260, p. 4.

         PGE's renewed motion for sanctions primarily addresses the counterclaim and defenses set forth in Grant Township's Answer and repeatedly asserted throughout this litigation. In this respect, the motion is nearly identical to PGE's initial motion for sanctions, which was dismissed by the Court as premature. ECF No. 224. There is scant authority as to whether the refiling of substantially the same motion on nearly identical grounds implicates or requires a second safe harbor period, but examination of the purpose indicates that the goal of a safe harbor period is met under these circumstances. “The purpose of the safe harbor is to give parties the opportunity to correct their errors, ” Schaefer, 542 F.3d at 99, and “encourage the withdrawal of papers that violate the rule without involving the … court.” In re Miller, 730 F.3d 198, 204 (3d Cir. 2013)(internal citation omitted). In this case, PGE's initial motion for sanctions was preceded by sufficient service of a copy of the proposed motion, requesting withdrawal of Grant Township's offending defenses and counterclaim. Under these circumstances, the initial notice provided ample opportunity for Grant Township to abandon those claims not reasonably founded in the law. Despite notice of the offending conduct, counsel for Grant Township continued to assert identical legally implausible arguments throughout this litigation.

         While the grounds asserted in PGE's renewed motion remained the same, the Third Circuit has held that, “[i]f the twenty-one day period is not provided, the [Rule 11] motion must be denied.” Schaefer, 542 F.3d at 99; Metropolitan Life Ins. Co. v. Kalenvitch, 502 F. App'x 123, 125 (3d Cir. 2012). Cases within this Circuit applying the rule are readily distinguishable on the basis that the moving party failed to serve notice of the objectionable content to permit withdrawal of the offending documents prior to seeking judicial intervention. However, the mandate to provide notice with service of a copy of the proposed motion in compliance with Rule 11(c) appears to be without exception. The Court is mindful that in this instance, relief is also sought pursuant to 28 U.S.C. § 1927 and the inherent power of the court, which do not implicate the mandatory nature of Rule 11's safe harbor. Accordingly, to the extent PGE is entitled to sanctions predicated upon the conduct of opposing counsel, the propriety of an award will be reviewed pursuant to the available alternatives.

         2. Section 1927

         PGE's motion for sanctions seeks relief pursuant to 28 U.S.C. § 1927 as to Attorney Schromen-Wawrin with regard to the attempted proposed intervention of East End Hellbenders and the Little Mahoning Watershed, and as to Attorneys Linzey and Dunne for the “frivolous arguments of Grant Township and Counsel.” ECF Nos. 249; ECF No. 250, p. 31-32. Section 1927 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.

28 U.S.C. § 1927. “[T]he principal purpose of imposing sanctions under 28 U.S.C. § 1927 is the deterrence of intentional and unnecessary delay in the proceedings.” Zuk v. Eastern Pennsylvania Psychiatric Institute, 103 F.3d 294, 297 (3d Cir. 1996)(internal quotation marks and citations omitted). The Third Circuit has held that § 1927 requires a finding of bad faith or intentional misconduct on the part of the offending attorney. In re Prudential Ins. Co. America. Sales Practice Litig. Agent Actions, 278 F.3d 175, 188 (2002). “‘Indications of this bad faith are findings that the claims advanced were meritless, that counsel knew or should have known this, and that the motive for filing the suit was for an improper purpose such as harassment.'” Id., quoting Smith v. Detroit Federation of Teachers Local 231, Am. Federation of Teachers, AFL-CIO, 829 F.2d 1370, 1375 (6th Cir. 1987).

         a. ...


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