A federal district court in Pittsburgh recently ruled that counsel were not permitted to advance the cost of discovery sanctions imposed by the court against their clients. In a case challenging Pittsburgh-based grocery chain Giant Eagle’s mandatory mask policy, Senior Judge Nora Barry Fischer was faced with the question whether two plaintiffs, Vidovich and Zytnick, should pay Giant Eagle’s attorney’s fees and costs related to pursuing the plaintiffs’ Facebook posts about their interactions with the grocery chain. A court-appointed special master had recommended that plaintiffs be sanctioned, but their counsel at Thomson Rhodes and Anderson, contended that members of the firm were ultimately responsible for the delays and sought permission to pay the sanctions on their clients’ behalf. Giant Eagle urged that the sanctions be paid by the plaintiffs personally.
Judge Fischer examined whether the plaintiffs’ fee agreement made any provision for advancing attorney’s fees and costs ordered as discovery sanctions and, not surprisingly, found no specific language providing that counsel were free to advance such fees and costs and secure reimbursement from the clients later. The court also reviewed Rule of Professional Conduct 1.8(e) and the supporting comment concerning the provision of financial assistance to clients in connection with litigation, and found that the rule did not directly address whether court ordered sanctions could be funded by counsel consistent with the rule.
The court found no Pennsylvania cases or ethics opinions directly addressing whether the firm’s proposal was inappropriate, but was “unpersuaded that the appropriate approach to this unsettled ethical issue is for plaintiffs’ counsel to note the lack of controlling authority and to forge ahead to advance such sanctions on behalf of his clients without first utilizing the available resources to obtain an opinion from ethics counsel, the Bar Association or the Disciplinary Board.” The court noted that bar association ethics opinions in Florida and Oklahoma had both said that firms could not ethically advance their clients’ attorney’s fees imposed as a sanction, while an Alaska ethics opinion had concluded that such fees could be considered part of the “expenses” a firm was permitted to advance. The court’s research did not reveal a consensus on the question, and none of the opinions directly “addressed the facts and circumstances at issue here involving court ordered sanctions imposed against certain of the plaintiffs for proven discovery violations.”
The court declined to accept the law firm’s contention that advancing court costs and expenses for a client may be part of a firm’s efforts to maximize access to the courts for those who might not otherwise be able to afford it, as plaintiffs’ had not provided any evidence that Vidovich or Zytnick could not afford to fund the fees.
In a somewhat different context, a U.S. District Judge in Oregon recently imposed a $40,000 sanction on counsel of record and their law firm for failing to mention “long-standing, settled caselaw” that prevented the judge from issuing an injunction that was sought by the law firm in an attempt to prevent a strike by medical technicians and therapists at a health system. The court’s opinion rejected as “meritless” an argument that the attorneys’ actions were not sanctionable because they were merely arguing for an “extension” of existing case law and were unable to identify any case directly on point with the underlying facts. The December 16, 2021 Court Order is here: https://s3.documentcloud.org/documents/21164070/mcshanesanctionslawyerfirmliable.pdf
Takeaways:
- In the event of uncertainty as to whether the law firm or the client is financially responsible for payment of monetary sanctions, further analysis of the background facts and circumstances is likely required. The dearth of court decisions and ethics opinions addressing whether clients or counsel must fund monetary discovery sanctions is in part a function of the fact that Courts seldom focus on the identity of the payor of such sanctions orders. Answering who is the “right” responsible party may require a detailed inquiry into the attorney-client communications concerning the scope and timing of discovery, as well as the diligence exercised in preparing the client’s responses for production.
- Once sanctions are imposed, whether the fees and costs will be funded by the clients or the law firm or both will often be the subject of frank discussion as between the law firm and its client(s). Where the client has caused the delay in a document production, then the payment should come from the client. If the delays were due to oversights or misjudgments by both client and counsel, then the costs may be shared by agreement with the client. If the client and counsel cannot agree on a fair allocation, the question may be raised with the court, addressed via mediation or paid by counsel as an advance against any recovery at the conclusion of the case consistent with Rule 1.8(e). When a dispute develops as between client and counsel concerning the proper party to pay the costs, the client should be encouraged to consult independent counsel for guidance. As in the Giant Eagle case, the party seeking the sanction will typically urge as a tactical matter that the sanction be borne by its opponent, rather than by opposing counsel.
- Lawyers and law firms may want to seek ethics guidance concerning the proper allocation of responsibility for a monetary sanction. Judge Fisher properly explained that there are available avenues to secure ethical guidance through bar association ethics committees or private ethics counsel. The Disciplinary Board in Pennsylvania does not typically provide ethics guidance upon request.
- Law firm’s may want to consider addressing the payment of costs in the form of monetary sanctions in their fee letters at the outset of the representation, particularly in the case for clients with limited financial resources. The court’s ruling suggests that law firms may address in advance in their fee agreements a voluntary commitment to fund or advance monetary sanctions that may be imposed in the course of discovery, subject to reimbursement from any later recovery in the case. Law firms should also consider including language expressing an expectation that the client will reasonably cooperate in the discovery process and assist counsel in responding to discovery requests in a timely manner.
The case is Kimberly Pletcher, et al. v. Giant Eagle Inc., et al., C.A. 2:20-cv-00754 (W.D. PA), and the link to the opinion follows: http://lawyersrepresentinglawyers.com/wp-content/uploads/sites/36/2021/12/Kimberly-Fletcher-v.-Giant-Eagle-Inc.-Order-of-Court-12_15_2021.pdf
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