Affirming $7,500 in sanctions against an attorney who “unreasonably and vexatiously” multiplied proceedings by asserting frivolous arguments, the Seventh Circuit found that the peonage, RICO, and other claims she asserted blew up a simple commercial dispute “beyond all rational proportion,” and explained that by arguing, among other things, that the arbitration agreement was unenforceable because it left to future agreement the selection of the arbitrator, the attorney ignored a long line of Supreme Court cases upholding arbitration clauses exactly like the one here (Hunt v. Moore Brothers, Inc., June 29, 2017, Wood, D.).
Ignored arbitration agreement and filed suit. The attorney represented a truck driver, whose independent contractor agreements with a small Nebraska company included arbitration clauses. The provision stated: “To the extent any disputes arise under this Agreement or its interpretation, we both agree to submit such disputes to final and binding arbitration before any arbitrator mutually agreed upon by both parties.” When her client’s relationship with the company soured, the attorney ignored that language and filed a multi-count complaint in federal court, accusing the company of holding the driver in peonage in violation of a criminal statute, of violating RICO, and of violating federal antitrust laws, among other claims.
Fights motion to compel. In response to the company’s motion to compel arbitration under the Federal Arbitration Act, the attorney asserted that her client had no obligation to comply with the agreements because the company materially breached them. She also argued that the agreement fell outside the FAA under Section 1’s exemption for “contracts of employment of transportation workers.” In addition, she resisted the request for a court-appointed arbitrator because the clause provided for a person “mutually agreed” on by the parties.
The district court rejected her arguments, explaining that if an alleged breach relieved a party from an arbitration agreement, no one would ever arbitrate a contract dispute. Also, the complaint conceded that her client was an “independent truck owner operator,” not an employee. The attorney prevailed only in her procedural argument against a court-appointed arbitrator, because the judge found this step premature and directed the parties to try to do this themselves.
Sanctions imposed. Less than two months later, the attorney filed a motion reporting that the efforts to select an arbitrator failed, which she argued proved the arbitration clause was nothing more than an “agreement to agree,” which is unenforceable under Nebraska law. The court found her argument wholly without merit. It also imposed sanctions under 28 U.S.C. § 1927, ordering her to pay the company about $7,500. The action was later dismissed without prejudice.
Sanctions upheld. The Seventh Circuit affirmed. Though the attorney claimed the court based its order on a finding of objective unreasonableness, without finding subjective bad faith on her part, both were not needed and a finding of objective bad faith was enough for Section 1927 sanctions. Also unavailing was the attorney’s insistence that the arbitration clause was unenforceable under state law—she attacked the lower court’s conclusion that the FAA preempts state law on the subject. The Seventh Circuit found her argument flawed because she disregarded a line of Supreme Court cases upholding the enforceability of arbitration clauses exactly like the one here. Indeed, the Nebraska cases on which she relied to argue that an agreement to agree in the future was not enforceable had nothing to do with arbitration, so were of no use to her.
Under federal law, the fact “that an agreement to arbitrate leaves for later negotiations the selection of the particular arbitrator does not render that agreement so vague as to be unenforceable.” If that were the case, explained the appeals court, the FAA provision allowing a court to appoint an arbitrator if the parties cannot agree on one would be pointless.
“Unreasonably and vexatiously” multiplied proceedings. This was enough to show that the attorney’s effort to avoid arbitration was doomed, and the lower court did not abuse its broad discretion in finding that her continued litigation conduct “unreasonably and vexatiously” multiplied the proceedings. The appeals court pointed out that this was a simple commercial dispute, but “one would never know that from reading [the attorney’s] complaint. She blew it up beyond all rational proportion. One count asserted that there was an unspecified civil right of action to enforce the criminal laws against peonage. There is no support whatsoever for that theory.” The court also found her RICO and antitrust arguments “beyond the pale,” particularly because there was no RICO enterprise and no evidence of racketeering activity or a conspiracy.
Amount reasonable. The appeals court also found the amount of the sanctions was a reasonable measure of the cost imposed by the attorney on her opponent. She argued that it was too high, but offered no support for that position other than a “convoluted argument” that the company should be compensated only for the pages of its brief that she believed the district court adopted.
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