Saturday, October 31, 2015

Judge Newman dissents in attorney sanction case, Tesco

From the Tesco case:

The Attorneys argue that there remains an Article III case or controversy because the statements made in the district court’s opinion constitute a sanction against the Attorneys, and the subsequent reputational harm to the Attorneys is a sufficient injury-in-fact to justify our jurisdiction. The Attorneys further claim that the district court erred, as a procedural matter, in issuing a sanctions order under its inherent authority without providing the Attorneys notice and an opportunity to be heard. The Attorneys believed that the result of the hearings held in early 2014 would be, at worst, a trial on NOV’s exceptional case motion, and they claim to have been taken by surprise by the sanctions order. On the merits of the sanctions order, the Attorneys argue that the district court erred in finding bad faith because Ballard relied on Karr’s statements during trial when Ballard made the representations to the court about the brochure, and Karr was equivocal during his deposition testimony about what he told Luman. According to the Attorneys, the deposition evidence of Karr and Orcherton was an insufficient basis upon which to premise an exercise of the court’s inherent authority. They contend, moreover, that this is especially true because the court chose to dismiss the case with prejudice.

Footnote 6 states:

At oral argument, the Attorneys contended that, even though they admit they knew during trial that the statements made to the district court turned out to be incorrect, they had no affirmative duty to correct the misimpression to the court under the Texas Disciplinary Rules of Professional Conduct. Oral Argument at 41:50– 42:15, Tesco Corp. v. Nat’l Oilwell Varco, L.P., No. 151041, available at default.aspx?fl=2015-1041.mp3

IPBiz notes attorneys should pay attention to RPC 3.3(a) about candor to the tribunal.

Of the issues, the CAFC noted:

This appeal presents two questions that must be resolved in order for us to have jurisdiction over the dispute: (1) can the sanctions order that was explicitly issued against Tesco be considered a formal reprimand against the Attorneys so as to provide them with standing to pursue this appeal; and (2) what is the effect of the settlement by all parties on the redressability of the Attorneys’ request for relief?

The attorneys lost. Judge Newman dissented:

These sanctioned attorneys ask for the opportunity to provide privileged records that they say will clear their name, stating that these records were proffered to the district court judge, who declined to receive them. These sanctioned attorneys are surely entitled to an appeal (or remand to the district court, as alternatively requested). Precedent in all of the other circuits would so allow, and fundamentals of due process so require. From my colleagues’ contrary ruling, I respectfully dissent


The majority argues that this dissent “fails to recognize” the “fine factual distinctions” upon which sanctions are based. Maj. Op. at 12 n.7. On this ground, the majority justifies ignoring the vast body of precedent in which sanctioned attorneys have had the right and opportunity to defend their reputations. To the contrary, precedent demands that fine facts be found. My concern is that the district court repeatedly refused to receive the Appellants’ proffered evidence, although that evidence could affect the factual weight and perhaps even change the conclusion. The appellate obligation is to assure an adequate and fair factual foundation to which the law is applied. I dissent for precisely this reason: the incompleteness of the record renders the sanction possibly unfair. All of the precedents that I cite are founded on the position that when the trial judge issues a reprimand, it is incumbent on the appellate tribunal to assure that the processes of law are fully recognized.


The district court invoked its inherent power to punish what it saw as bad faith and willful misconduct. Such power is available “only if clear and convincing evidence supports the court’s finding of bad faith or willful abuse of the judicial process.” In re Moore, 739 F.3d 724, 729–30 (5th Cir. 2014). The issue is not whether the district court has such inherent disciplinary power, but whether these sanctioned attorneys are entitled to appeal and to bring forth privileged documents to defend themselves. My colleagues hold we do not have jurisdiction to consider this issue.


Common to all circuits is the requirement that sanctionable behavior must be established by clear and convincing evidence on the record as a whole. There cannot be clear and convincing evidence without an opportunity to present contrary evidence. Although my colleagues state that the Appellants had adequate opportunity to “recant their statements to the court,” it was not until three years after these attorneys’ conversations, that the witnesses were deposed.


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