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In re Prudential Insurance Co. of America Sales Practices Litigation

September 14, 1999

MDL NO. 1061

The opinion of the court was delivered by: William H. Walls, U.S.D.J.

For publication



Walls, District Judge

This matter is before the Court on the objections of Michael P. Malakoff, Esq., to the Report & Recommendation of Magistrate Judge Joel A. Pisano filed July 15, 1999 ("July R&R"). Pursuant to Fed. R. Civ. P. 78 and 72 and Local Rule 72.1(c)(2), this Court considers these objections without oral argument. The Court adopts Magistrate Judge Pisano's report and dismisses Mr. Malakoff's objections.

Factual Background

Michael P. Malakoff, Esq., represents class action representatives in two state court proceedings against Prudential Insurance Company ("Prudential"). These cases were removed to federal court, where they were assigned to Judge Wolin in the District of New Jersey by the Judicial Panel on Multi-District Litigation. In October, 1995, the District Court appointed lead counsel for a nationwide class of plaintiffs. *fn1

According to Judge Wolin, Malakoff commenced "bombard[ing] the Court with paper" soon after the transfers. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450, 479, 479 n.14 (D.N.J. 1997) (listing 24 motions filed by Mr. Malakoff). In April, 1996, Malakoff's motion to remand his cases back to their respective states' courts was denied. Eventually, Malakoff was permitted to continue as counsel for his two cases. *fn2 On October 28, 1996, the parties filed a final Stipulation of Settlement. The district court then issued an order conditionally certifying a national settlement class, directing issuance of class notice, enjoining overlapping litigation and scheduling a fairness hearing.

On December 3, 1996, Mr. Malakoff filed a motion to recuse Judge Wolin. In the motion, he argued that the judge had engaged in unauthorized ex parte communications with lead counsel, the parties, and potential fact witnesses. Two days later, Judge Wolin signed an order to show cause, returnable on December 13, 1996. On December 10, 1996, Mr. Malakoff requested that the court postpone the order to show cause hearing by more than a month. Judge Wolin denied this motion. The same day, lead counsel filed a cross motion ("December 1996 cross motion") requesting that Mr. Malakoff be sanctioned pursuant to 28 U.S.C. § 1927. Judge Wolin denied Mr. Malakoff's recusal motion and stayed the sanctions motion until further order of the court. Mr. Malakoff then filed a petition for mandamus relief which was denied by the Third Circuit without opinion on April 4, 1997.

On March 14, 1997, Mr. Malakoff filed his first motion for sanctions. In his moving papers, Mr. Malakoff argued that lead counsel's December 1996 cross motion for sanctions violated 28 U.S.C. § 1927 because it was "unreasonable" and "frivolous." On April 9, 1997, Mr. Malakoff filed another sanctions motion (his second), this time seeking to impose Rule 11 sanctions on lead counsel. On April 28, 1997, the Third Circuit granted a stay of the sanctions proceedings pending an anticipated appeal of settlement and fee issues. *fn3

On November 16, 1998, lead counsel moved for an interim fee award of $48 million. Four days later, Mr. Malakoff filed papers in opposition to the request. In their reply brief, lead counsel sought Rule 11 sanctions against Mr. Malakoff for factual assertions he made in his opposition papers. In response, Mr. Malakoff served his own Rule 11 motion (his third sanctions motion). On January 4, 1999, lead counsel withdrew its Rule 11 motion, stating that it did not want to delay an ultimate resolution of all of the other outstanding sanctions motions. On January 11, 1999, Mr. Malakoff filed a final sanctions motion (his fourth), this time claiming that lead counsel's reply brief of December 2, 1998, submitted in response to his motion opposing the fee request, violated § 1927. Judge Wolin referred this motion to Magistrate Judge Pisano along with the additional outstanding sanctions motions.

On July 15, 1999, Magistrate Judge Pisano recommended that, pursuant to 28 U.S.C. § 1927, sanctions be imposed against Mr. Malakoff in the sum of $100,000 and that, pursuant to its inherent power, the court require Mr. Malakoff to attach the July R&R and a certification that he has paid the monetary sanction to any application for pro hac vice admission to this district (the "non-monetary penalty"). On August 2, 1998, Mr. Malakoff filed his objections ("Obj.") to the July R&R.

Mr. Malakoff argues, in opposition to Magistrate Judge Pisano's July R&R, that (1) the motion for sanctions was procedurally defective for seeking § 1927 sanctions against a law firm; (2) Mr. Malakoff's motion to recuse had a colorable basis in fact and was not filed in bad faith; and (3) Magistrate Judge Pisano failed to set out any specifically determined violations and resulting damages. He further alleges that the court imposed sanctions not authorized by § 1927 or the inherent power of the court and that these sanctions were imposed without adequate procedural protection.

Standard of Review

Non-dispositive motions decided by a magistrate judge may only be set aside by the District Court if the "order is found to be clearly erroneous or contrary to law." Fed. R. Civ. P. 72(a). Conversely, dispositive motions heard by magistrate judges are subject to de novo review by the district court. Fed. R. Civ. P. 72(b). Pursuant to Fed. R. Civ. P. 72(b), any party may object to a Magistrate Judge's report recommending the disposition of a such a motion within 10 days of receipt of the report. Fed. R. Civ. P. 72(b). The objections must "specifically identify the portions of the proposed filings . . . to which the objection is made and the basis of such objection." Local Rule 72.1(c)(2). Local Rule 72.1(c)(2) adds that the district court "need not normally conduct a new hearing and may consider the record developed before the Magistrate Judge."

The circuits are divided as to whether the imposition of sanctions is considered a dispositive motion. See generally Alpern v. Lieb, 38 F.3d 933, 935 (7th Cir. 1994) ("The power to award sanctions, like the power to award damages, belongs in the hands of the district court judge."); Bennett v. General Caster Serv. of N. Gordon, 976 F.2d 995 (6th Cir. 1992) (same); but see Maisonville v. F2 America, Inc., 902 F.2d 746, 747-48 (9th Cir. 1990) (sanctions requested before disposition on the merits are nondispositive). While these decisions indicate that post-discovery sanctions may be dispositive under Fed. R. Civ. P. 72, see David A. Bell, The Power to Award Sanctions: Does It Belong in the Hands of Magistrate Judges?, 61 Alb. L. Rev. 433, 450-52 (1997), this Court need not resolve this issue.

Here, Magistrate Judge Pisano did not levy sanctions but merely filed a report recommending their imposition. Moreover, all parties have apparently acquiesced to this option. See Lancellotti v. Fay, 909 F.2d 15, 16 (1st Cir. 1990) (subjecting recommended sanctions to de novo review); Plante v. Fleet National Bank, 978 F. Supp. 59, 64 (D.R.I. 1997) (concluding that report and recommendation imposing sanctions should be reviewed de novo). Accordingly, this Court will apply a de novo standard of review to Magistrate Judge Pisano's report.


A. Procedure

Under 28 U.S.C. § 1927,

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.

Plaintiff argues that "the motion for sanctions should have been stricken because it was procedurally defective for seeking § 1927 sanctions against" a law firm because § 1927 "does not apply to law firms." Obj. at 10-11. Section 1927, however, applies to law firms as well as individual attorneys. See Lightning Lube, Inc. v. Witco Corp., 144 F.R.D. 662, 669 (D.N.J. 1992) (citing Brignoli v. Balch Hardy & Scheinman, Inc., 735 F. Supp. 100, 102 (S.D.N.Y. 1990). Additionally, it has been clear since at least March 27, 1997, when lead counsel filed a reply brief in support of their motion for ยง 1927 sanctions, ...

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