WHOA! . . . NEVADA’S FEDERAL DISTRICT COURT
REINS IN FRIVOLOUS CIVIL RIGHTS ACTIONS
By Charles S. Zumpft, Esq.

Facts About the Case • Federal Fee Shifting Provisions • Conclusions

Due in large part to the passage of various civil rights laws, it comes as little surprise that the number of civil rights lawsuits is growing at an astonishing rate. Few would argue that these statutes should be abolished. Indeed, the necessity of these laws are closely held by many, and rightfully so.

Although most attorneys admire the creative efforts of their peers, lawsuits are often filed which are, simply, frivolous. These actions may be filed for their "nuisance value." Alternatively, they may be filed by inexperienced counsel who act upon a client’s claim which, due to the facts, the law or a combination of both, is not actionable.

Beware! There are several statutes and rules available of which the civil rights bar should be aware. As discussed below, the United States District Court, in the case of Schutts v. Bently Nevada Corporation, 966 F. Supp. 1549 (D. Nev. 1997), applied these statutes and rules. The court awarded Bently Nevada Corporation a portion of its attorney’s fees and litigation expenses as sanctions against both the plaintiff and his attorney for their pursuit of a frivolous claim brought under the Americans with Disabilities Act (ADA).

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FACTS

Bently Nevada Corporation ("Bently") hired Mr. Schutts in 1984 to work as an engineer at its Minden, Nevada, headquarters. Mr. Schutts was a competent and dependable employee. Mr. Schutts had never advised Bently management or acted in any way which would put Bently on notice that he suffered from any disability.

In March of 1994, Mr. Schutts pistol-whipped a local man with a handgun and threatened four other bystanders. Law enforcement officials quickly arrested him. These events were reported the following day in various local newspapers. On the day following his arrest, Mr. Schutts notified his supervisors of the incident, and, for the first time, advised them that he suffered from depression. Bently management concluded that Mr. Schutts had violated various company policies as expressly promulgated in the company’s employee handbook. Bently terminated Mr. Schutts’ employment for committing crimes, engaging in violence and threats of violence, and bringing discredit to Bently and its employees, all of which violated express company policies.

Mr. Schutts was charged with various crimes. He subsequently pleaded guilty to two of the four counts, and a judgment of conviction was entered against him for carrying a concealed weapon and aiming a firearm at another human being.

After his release from incarceration, Mr. Schutts filed a complaint against Bently alleging, inter alia, discrimination under the ADA, 42 U.S.C. § 12101 et seq. Mr. Schutts claimed that his violent behavior was the product of his depression, and that by firing him for his acts of violence, Bently fired him "because of" his mental disability, in violation of the ADA.

Admittedly a gross oversimplification, the ADA only protects otherwise qualified individuals whose disability substantially limits a major life activity. Distilled to its essence, employers may not discriminate against qualified persons with a disability because of their disability.

Bently was convinced that its actions were both lawful and proper. Bently contacted Mr. Schutts’ counsel on multiple occasions to urge him to encourage his client to dismiss the action, not only because of its patent frivolous nature, but because discovery revealed that Mr. Schutts was not a qualified individual with a disability as defined by the act. In the last of those communications, Bently’s counsel advised Schutts’ counsel that should Schutts decline to dismiss the action, Bently would file a motion for summary judgment, and, upon prevailing, seek sanctions.

Schutts declined to dismiss the action, and Bently did file a motion for summary judgment. Bently argued that dismissal was necessary for a variety of reasons, including the fact that employers were absolutely entitled to treat disabled employees the same as non-disabled employees (and were indeed obligated under the law to do so), and that an employer could terminate a disabled employee for misconduct if the employer would have terminated a non-disabled employee for that same conduct. Bently cited abundant case law, from nearly every jurisdiction, including Collings v. Longview Fibre Co., 63 F.3d 828 (9th Cir. 1995), and Newland v. Dalton, 81 F.3d 904 (9th Cir. 1996).

In his opposition to Bently’s Motion for Summary Judgment, Schutts maintained his argument that he had a valid cause of action, and went so far as to file a cross motion for partial summary judgment on the issue of liability.

The district court ruled for Bently, stating:

It is simply not debatable that employers may discharge employees who commit acts of misconduct. An employee who commits an act of misconduct may be fired, whether he or she is disabled within the meaning of the ADA, or an astronaut or Olympic athlete. Federal and state statutes which bar discrimination do not insulate disabled employees from discharge for acts for which a non-disabled employee could certainly be fired. Aggravated battery with a deadly weapon constitutes egregious misconduct for which employees are responsible regardless of any alleged disability.

[Mr. Schutts] admits in his affidavit filed in support of his opposition to summary judgment that he did attack his victim with a gun. [Bently] has provided considerable evidence that it fired Plaintiff because of this act of violence. Plaintiff produces not a shred of evidence which casts any doubt upon Defendant’s proffered explanation why it fired him. Even assuming (1) Plaintiff suffers from a qualifying ADA disability, and assuming even further (2) that Defendant knew of his disability at the time it fired him, Plaintiff’s criminal acts of violence justify Defendant’s terminating his employment without any doubt whatsoever. The ADA and its Nevada counterpart do not protect Plaintiff from the consequences of his violent rage.

966 F. Supp. at 1555 (citations omitted).

By that time, Bently had incurred over $35,000 in attorney’s fees, and over $3,000 in litigation expenses and taxable and nontaxable costs.

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FEDERAL FEE SHIFTING PROVISIONS

The ADA contains its own attorney’s fees provision:

In any action or administrative proceeding commenced pursuant to this chapter, the court or agency, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney’s fee, including litigation expenses, and costs, and the United States shall be liable for the foregoing the same as a private individual.

42 U.S.C. § 12205.

In addition, the United States Code also contains a perhaps-to-little-utilized fee shifting statute at 28 U.S.C. § 1927. Specifically, that section, unlike 42 U.S.C. § 12205, which limits cost shifting to the party, permits the shifting of liability to a party’s attorney:

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 attorney’s fees reasonably incurred because of such conduct.

28 U.S.C. § 1927.

Finally, of course, is everyone’s favorite (or nemesis), Federal Rule of Civil Procedure 11.

Bently argued that both statutes and the rule applied. The essence of Bently’s argument was that Collings had been decided before Schutts filed his complaint. In addition, Newland, which reaffirmed the proposition that an employer is free to terminate disabled employees for criminal misconduct, was filed before Schutts filed his opposition to the motion for summary judgment. Schutts had totally failed to address either of these cases, despite the fact that Bently had relied upon both in its motion. The Honorable Edward C. Reed concluded that Schutts’ case was frivolous when brought and remained frivolous throughout the litigation, and determined that the fee shifting statutes of 42 U.S.C. § 12205 and 28 U.S.C. § 1927, and of F.R.C.P. 11, applied.

42 U.S.C. § 12205

The Court’s eighteen page opinion goes to great lengths discussing the legal application and interpretation of the fee shifting provisions. Space limitations prevent detailed review of the Court’s opinion. In summary, however, the Court found it appropriate to levy sanctions against both Mr. Schutts and his counsel.

In reviewing Bently’s request under 42 U.S.C. § 12205, the court noted that a "defendant in a civil rights action is not entitled to an award of attorney’s fee merely because it prevails on the merits of the case. A prevailing civil rights defendant may be awarded attorney’s fees under section 1988 (and, therefore, under 42 U.S.C. § 12205) only if the plaintiff’s claim was frivolous, unreasonable, vexatious or groundless ab initio, or if the plaintiff continued to litigate after the claim clearly became so." 966 F. Supp. at 1555-56. The court observed that "attorney’s fees may be awarded against a civil rights plaintiff if he or she continues to litigate after it becomes clear that the action lacks factual substance." Id. The court then described why an award of attorney’s fees against Schutts under 42 U.S.C. § 12205 was proper.

First, the court noted that in August of 1995, the Ninth Circuit had issued Collings, supra, holding that employers were entitled to discharge employees for acts of misconduct even where the employee’s misconduct may have been related to a disability. The court further observed that in November of 1995, the Ninth Circuit had issued Newland, supra, reiterating that rule. However, Schutts had filed his complaint on October 2nd, 1995 (six weeks after Collings), and his opposition to Bently’s motion for summary judgment on September 13th, 1996 (ten months after Newland). The court held that under these facts, "controlling federal judicial authority extant prior to the initiation of this action, should have made plain to Plaintiff and his lawyer the futility - - and impropriety - - of filing the complaint, and of opposing Defendant’s meritorious summary judgment motion. ‘Counsel who are admitted to practice in a federal court take on themselves the obligation to know the relevant law.’" 966 F. Supp. at 1557. The Court determined that the original complaint was baseless, meritless and frivolous, that Mr. Schutts continued to litigate despite an obvious absence of legal support for his claim, that he caused Bently to incurred wholly unnecessary attorney’s fees and costs by ignoring clear authority devastating to his claim, and that Mr. Schutts improperly opposed Bently’s summary judgment motion despite his inability to distinguish Collings or Newland. Therefore, Bently was entitled to an award of attorney’s fees under 42 U.S.C. § 12205. 966 F. Supp. at 1557.

28 U.S.C. § 1927

With regard to sanctions under 28 U.S.C. § 1927, the court observed that Schutts’ counsel repeatedly ignored proper requests for discovery, neglected the local "meet and confer" requirements, disregarded "strong hints from defense counsel that Plaintiff’s claim was a certain loser," and "even when cited to controlling authority devastating to his client’s claim . . . filed a wholly worthless opposition to summary judgment." 966 F. Supp. at 1559-60. The court concluded that Mr. Schutts’ counsel exhibited bad faith within the meaning of § 1927, and at least recklessly opposed Bently’s well taken motion for summary judgment. The court ordered, therefore, that Plaintiff’s counsel was liable for Bently’s attorney’s fees "from the moment he was first referred by defense counsel . . . to controlling judicial authority, authority which should have made plain to any minimally competent lawyer the total meritlessness of the complaint." 966 F. Supp. at 1560.

F.R.C.P. 11

Bently initially sought Rule 11 sanctions, but withdrew that request in its reply due to a perceived technical problem with the rule’s enforcement mechanism. The court, however, evidently chose to apply the rule sua sponte. The court noted that "the complaint was neither well grounded in fact, nor warranted by existing law, or any good faith argument for extension or reversal of existing law. After minimally reasonable legal research, [Plaintiff’s counsel] could not have had an objectively reasonable basis for any portion of the complaint. . . . Rule 11 sanctions may therefore be properly imposed." 966 F. Supp. at 1560.

Ultimately, in addition to awarding Bently its taxable costs, the court ordered Mr. Schutts' attorney to reimburse Bently for a portion of its attorney’s fees and litigation expenses, and entered a similar order with regard to Mr. Schutts.

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CONCLUSION

The Schutts opinion is a great resource for both the plaintiff and defense bars. The court discusses in detail the various criteria necessary to state a viable cause of action, and, at the same time, the tests related to a defendant’s recovery of its litigation expenses and attorney’s fees.

The lessons are obvious, but too often unheeded: First, as always, plaintiff’s counsel should be certain of both the facts and the law prior to filing a complaint. In the event either the facts or the law fail to support the claim, both the attorney and the client could be subject to sanctions under one or more of the foregoing fee shifting provisions. In short, research your claim thoroughly before filing your action.

Second, Defense counsel should fully evaluate the plaintiff’s claim, and, if you believe that either the facts or the law fail to support the claim, create a paper record advising plaintiff of the deficiencies, and encouraging him or her to dismiss the claim. Should that fail, proceed "by the book," and follow through on your promise to seek attorney’s fees and litigation expenses. It will be worth the effort.

I would like to thank Joe Laxague, a first year student at the Notre Dame Law School, for his assistance in preparing this article.