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July 21, 2004.

LINO L. ALPHONSO, Plaintiff,

The opinion of the court was delivered by: JEROME SIMANDLE, District Judge


This matter comes before the Court on Defendants' motion for sanctions, attorneys' fees and costs against Plaintiff's counsel, pursuant to 28 U.S.C. § 1927. The principal issue to be decided is whether Defendants have demonstrated that Plaintiff's counsel vexatiously multiplied the proceedings by persisting in prosecuting claims for monetary damages that were not factually supportable. For the reasons discussed herein, Defendants' motion will be granted in part.


  The facts of this case are well-known to the parties. The facts pertinent to the motion now before the Court are given here.

  Plaintiff Lino Alphonso was a sales representative who worked in Pitney Bowes' office in Delran, New Jersey, from January 1997 until June 9, 1999, when he was terminated. He alleged that his termination constituted unlawful retaliation under the New Jersey Law Against Discrimination ("NJLAD" or "LAD"), N.J.S.A. 10:5-1, et seq. He further alleged he had engaged in protected activity by repeating to management some unkind remarks he allegedly had heard co-workers say about an African-American manager who had recently been promoted. After Defendant Norm Sommer terminated him for making inappropriate remarks and unfounded accusations, Plaintiff was unemployed for two months and started a new job (actually, a series of new jobs through 2002) at higher pay.

  Plaintiff's complaint was filed in the Superior Court of New Jersey, Burlington County, on June 8, 2001, and it was properly removed to this court by Defendants based on diversity of citizenship, 28 U.S.C. § 1332, on July 16, 2001, where it was assigned to the Honorable Stanley S. Brotman. The case was reassigned to the undersigned on October 2, 2003, and the jury trial commenced on December 8, 2003.

  On December 22, 2003, after nine days of trial and a short deliberation, the jury returned a defense verdict in favor of Pitney Bowes and against Lino Alphonso. The jury unanimously found that Mr. Alphonso had not engaged in "protected conduct" and, therefore, had no basis for his retaliation claim against Pitney Bowes. While Pitney Bowes, as the prevailing party, could pursue a petition for fees, it has chosen to forego that option and instead moves, under 28 U.S.C. § 1927, against Plaintiff's counsel based upon certain conduct in which they engaged during the prosecution and trial of this case that Defendants allege was so unreasonable and vexatious as to constitute bad faith and warrant sanctions.*fn1

  The applicable statute, 28 U.S.C. § 1927, provides, "[a]n attorney . . . 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." The statute is designed to hold counsel accountable where they intentionally and unnecessarily delay and multiply the proceedings. See Beatrice Foods Co. v. New England Printing & Lithographing Co., 899 F.2d 1171 (1st Cir. 1990).

  Defendants argue that this is exactly what happened in this case. First, Defendants assert that Plaintiff's counsel refused to drop Plaintiff's claim for post-1999 economic damages when the claim was clearly frivolous. Next, Defendants argue that Plaintiff's counsel refused to drop Plaintiff's claim for post-1999 emotional distress damages until after they had elicited from Plaintiff the testimony at trial about continual distress that they wanted the jury to hear and then limited the claim to 1999 to prevent Defendants from countering that testimony with evidence that seriously undermined the credibility of Plaintiff's testimony. Finally, Defendants contend that Plaintiff's counsel made incessant and unprincipled arguments to preclude the taking, and Defendants' use, of the de bene esse deposition of Edward Logan. Each of these actions, Defendants state, caused Pitney Bowes to incur unnecessary expense, and are sanctionable under Section 1927.

  As early as September 13, 2001, Pitney Bowes, through its counsel, warned Mr. Sandler that it would hold him accountable if his objectionable conduct continued. By that date, Mr. Sandler had unreasonably prolonged discussions over the preparation of a Joint Discovery Plan, tried to block Pitney Bowes' routine service of subpoenas on Plaintiff's post-Pitney Bowes employers and refused to provide Pitney Bowes the authorizations to obtain medical records that then Magistrate Judge Kugler told him he must provide. Pitney Bowes' counsel wrote Mr. Sandler and warned:
I do not want this litigation to be fraught with continual and unnecessary battles over matters concerning which there should be no legitimate disagreement. The result will only be inflated litigation costs for which we think your client will ultimately bear the financial burden. But, in the short term, if we have to unnecessarily involve the Court in resolving commonplace issues, we will need to seriously entertain the prospect of sanctions. I state this not as a threat, but as a fact, and with the hope that the sounding of this cautionary note will facilitate the reasonable conduct of this case as we proceed.
(Def. Ex. A, 9/13/01 Levering to Sandler Letter at p. 2).

  Plaintiff's counsel oppose this motion, arguing generally that the positions they advocated were not taken in bad faith and that, if the claims were as lacking in substance as Defendants now claim, defense counsel expended too much time and money in efforts to defend them, as discussed further below.*fn2

  A. Attorney Conduct Concerning Plaintiff's Claim for Lost Earnings

  Defendants assert that Plaintiff's counsel refused to genuinely assess Plaintiff's claim for lost earnings by either learning or appropriately acknowledging that Plaintiff's earnings from other employers exceeded what he would have earned from Pitney Bowes. Plaintiff was required to provide a damages calculation with his initial disclosures. See Fed.R.Civ.P. 26(a)(1)(C). Mr. Sandler did not, and Pitney Bowes pressed for this information. (Def. Ex. B, 8/20/01 Woolf to Sandler Letter). At the initial scheduling conference on August 22, 2001, then Magistrate Judge Kugler asked Mr. Sandler to substantiate his settlement demand of $200,000 plus attorneys' fees. Mr. Sandler could not.

  On September 27, 2001, Pitney Bowes' counsel provided to Mr. Sandler the documents it obtained from SCI, Plaintiff's first post-Pitney Bowes employer. The documents showed that Plaintiff was unemployed for only two months, that he had earned more money at SCI than he earned at Pitney Bowes, and that Plaintiff had abandoned his job at SCI, his first after Pitney Bowes, thereby disqualifying himself from future loss. See Weiss v. Parker Hannifan Corp., 747 F. Supp. 1118, 1132 (D.N.J. 1990). Pitney Bowes' counsel asked Mr. Sandler to limit Plaintiff's claim for lost earnings. (Def. Ex. C, 9/27/01 Levering to Sandler Letter). Mr. Sandler refused and chose instead to press ahead with Plaintiff's unrestricted claim for continued lost earnings.*fn3

  On April 26, 2002, Pitney Bowes' counsel confirmed in writing that it would seek sanctions under Section 1927 against Mr. Sandler at the conclusion of this case:
I've told you before, and I will say it again with even more conviction: when this case ends, we will seek sanctions against you to the fullest extent available. Your conduct in this case has been obstreperous, and now duplicitous. There will be a judgment day.
* * *
Rarely in my 25 years of practice have I written so stern a letter. But your conduct today, and throughout the case, clearly warrants it. I strongly suggest you invest the time to look into 28 U.S.C. § 1927 and other statutes and rules authorizing sanctions.
(Def. Ex. D, 4/26/02 Levering to Sandler Letter).*fn4 Mr. Sandler persisted and retained an expert in an attempt to support Plaintiff's economic damage claim. The expert, Dennis Meyerson, an accountant who had failed his CPA exam (Def. Ex. E, Transcript of April 30, 2002 Deposition of Dennis Meyerson at 71) produced a report augmenting Plaintiff's damages, claiming that Plaintiff would have been promoted had he remained at Pitney Bowes. The post-termination wage loss was calculated at $535,079 based on the assumption that Plaintiff (who earned $36,584 in his last full year of employment in 1998)*fn5 would have become a manager in 2005 at an expected salary of $86,550.

  Pitney Bowes deposed Mr. Meyerson, who knew nothing about Pitney Bowes' criteria for promotion (id. at 87-88), was not aware of any promotion opportunities for which he assumed Plaintiff qualified (id. at 87) and had no information about how or what Pitney Bowes pays its managers (id. at 149). He admitted that he just assumed that Plaintiff would have been promoted in 2005 because Plaintiff told him so. (Id. at 86-88). He also stated that the post-promotion salary he projected of $86,550 was purely hypothetical and not based on Pitney Bowes actual compensation system. (Id. at 148-49). Mr. Meyerson subsequently agreed that, absent a promotion, Plaintiff suffered no lost earnings through at least 2004 — five years after Plaintiff's termination. (Id. at 146-47).

  On May 3, 2002, Defendants' counsel summarized Mr. Meyerson's deposition testimony in a letter to Mr. Sandler. Ms. Levering wrote, inter alia, "It now appears clear that, even under the best of circumstances, Mr. Alphonso only can lay claim to, at best, a $9,388 loss." (Def. Ex. F, 5/3/02 Levering to Sandler Letter). Despite the fact that Mr. Meyerson's deposition testimony undermined the conclusions in his report, Mr. Sandler did not withdraw Mr. Meyerson as a witness or limit Plaintiff's economic damages claim. Indeed, Mr. Sandler ignored Pitney Bowes' counsel's efforts to avoid unnecessary costs and instead pressed on.

  As a result, costs escalated. Faced with Plaintiff's counsel's insistence on calling Mr. Meyerson as an expert, Pitney Bowes engaged a forensic economist, Jerome Staller, Ph.D., and incurred the expense of providing a report that stated that Plaintiff had no viable claim to any economic loss after 1999. Long after Defendants produced this export report, Plaintiff's counsel attempted to add another expert to further buttress their claim.

  On March 10, 2003, the day before the Final Pretrial Conference, and over a year after the close of discovery, Mr. Sandler added Andrew Verzilli, Ph.D., to Plaintiff's witness list on the working draft of the Final Pretrial Oder to testify in "rebuttal" to Dr. Staller. This caused Pitney Bowes to incur additional expense. Dr. Verzilli was never timely identified as an expert; Rule 26 disclosures were never made; and no rebuttal report was ever prepared, timely or otherwise. Yet, oddly enough (given the clear mandates of Rule 16(a) and 26(a)(2) regarding timely disclosure of expert's identities and reports), Mr. Sandler insisted that Dr. Verzilli could testify at trial. Pitney Bowes was forced to file a motion in limine to preclude his testimony, which Magistrate Judge Donio granted. (Def. Ex. G, 11/14/03 Order at p. 2).

  Plaintiff's counsel pursued Plaintiff's claim for economic damages, unrestricted in scope, into trial. Only after Pitney Bowes incurred the expense of preparing to defend against Plaintiff's lost earning claim did Plaintiff's counsel drop the claim for any lost earnings after 1999 and tell Defendants' counsel, on the last day of Plaintiff's presentation of his case in chief, that they were not calling Mr. Meyerson to testify.

  B. Conduct Concerning Plaintiff's Emotional Distress Damages Claim

  Defendants contend that Plaintiff's counsel pursued a hopelessly compromised claim for unrestricted emotional distress damages. First, Defendants accuse Plaintiff's counsel, Mr. Sandler, with knowingly concealing the truth about Plaintiff's consultation with mental health professionals. Defendants sought executed medical authorizations so that counsel could obtain Plaintiff's medical records and investigate for themselves Plaintiff's claim of emotional distress. Although Mr. Sandler insisted that he obtain the records and provide Defendants' counsel copies, Defendants' counsel did not want Mr. Sandler to filter what Defendants could see. Defendants were forced to raise the issue with then-Magistrate Judge Kugler, who instructed Mr. Sandler to provide Defendants with authorizations. Mr. Sandler, however, sent the authorizations to the medical providers and directed them to furnish him, not Defendants, with those records. Only after Defendants involved Judge Kugler again did Mr. Sandler provide the necessary authorizations.

  In response to Pitney Bowes' interrogatories, Mr. Sandler wrote that Plaintiff had seen at least two physicians, as well as his sister-in-law, for psychological treatment after his termination. (See Def. Ex. H at p. 8, #11). Plaintiff's counsel also represented that Plaintiff had newfound problems with sleeplessness and headaches caused by his termination. (Def. Ex. I, Plaintiff's Statement of Material Facts in Opposition to Defendants' Motion for Summary Judgment at pp. 9-10, ¶ 22). The medical records, however, reveal that Plaintiff had headaches dating back to 1993, and that he had never sought any medical attention for sleeplessness.

  On January 14, 2002, Defendants conducted the deposition of Plaintiff's wife, Angelina Guieb-Alphonso. Defendants contend that Mr. Sandler said that, despite what the medical records established, Plaintiff's wife would substantiate Plaintiff's claim that he had serious headaches and sleeplessness caused by his termination. Ms. Guieb-Alphonso's testimony was just the opposite. She confirmed that Plaintiff had headaches and sleeplessness before he separated from Pitney Bowes and that his headaches were not "as bad" after his termination, and that his sleep pattern was no different. Her deposition transcript reflects:
Q: And after he left the employ of Pitney Bowes in June 1999, did [Plaintiff's] headaches continue?
A: They continued — it's not as bad as previous headaches.
Q: So they continued but they weren't as bad as they had been when he was actually working at Pitney Bowes; is that right?
A: Right. Right.
* * *
Q: . . . Now, after his termination of employment from Pitney Bowes, was there any change in his getting up in the middle of the night and his sleep pattern?
A: No.
(See Def. Ex. J, Guieb-Alphonso Tr. at 36, 60). Defendants further argue that Mr. Sandler attempted to change Ms. Guieb-Alphonso's testimony through an errata sheet he wrote. The testimony "it's not as bad as previous", changed to "it's worse than previous" and "right, right" changed to "no." (Def. Ex. K, Guieb-Alphonso Errata Sheet). Although listed among Plaintiff's witnesses, Ms. Guieb-Alphonso was not called to testify at her husband's trial.

  Plaintiff's counsel sought to buttress this claim by engaging an expert and forcing Defendant to do the same. Plaintiff's expert was Andrew F. Jensen, Ph.D. Plaintiff's counsel failed to provide Dr. Jensen any medical records; failed to tell Dr. Jensen of Plaintiff's wife's testimony; failed to provide Dr. Jensen with the medical records showing that Plaintiff did not complain of any stress or anxiety post-termination; failed to provide him Plaintiff's self-assessment in September 2001, just three months after Plaintiff's counsel filed the Complaint claiming continual emotional distress, that he had no psychological or sleep problems; and failed to provide Dr. Jensen with Plaintiff's post-Pitney Bowes employment records that showed that Plaintiff had other stressors that could have caused Plaintiff's supposed distress.

  Plaintiff's problems at his post-Pitney Bowes employers were serious: Plaintiff was counseled, among other things, for lying to his supervisor about whether he actually had made appointments with clients, for leaving "nasty" voicemail messages for his supervisor, for telling a customer to "pretend" she was someone else so that she ...

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