Christopher Conant v. Credit Suisse Group Securities ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 23 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRISTOPHER CONANT; MICHAEL No. 19-35944
JAMES FLYNN, Sr.; PHILIP H.
STILLMAN; ROBERT C. HUNTLEY; D.C. No.
JAMES C. SABALOS, 1:10-cv-00001-EJL-REB
Appellants,
MEMORANDUM*
v.
CREDIT SUISSE GROUP SECURITIES
(USA) LLC, FKA Credit Suisse First Boston
Corp., a Delaware limited liability company;
CREDIT SUISSE FIRST BOSTON CORP.,
a Delaware limited liability corporation;
CREDIT SUISSE AG, a Swiss corporation;
CREDIT SUISSE AG, CAYMAN
ISLANDS BRANCH, an entity of unknown
type; CUSHMAN & WAKEFIELD, INC., a
Delaware corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Idaho
Edward J. Lodge, District Judge, Presiding
Argued and Submitted December 9, 2020
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: BOGGS,** M. SMITH, and BENNETT, Circuit Judges.
Appellants Christopher Conant, Michael James Flynn, Sr., Philip H. Stillman,
Robert C. Huntley, and James C. Sabalos (collectively, Appellants) appeal the orders
of the magistrate judge and district court reaffirming the imposition of a $6,000 fine
per attorney for their conduct during the underlying case. This court has jurisdiction
under 28 U.S.C. § 1291. Because the parties are familiar with the facts, we do not
recount them here, except as necessary to provide context to our ruling. We
VACATE the decision of the district court and REMAND for further proceedings.
In the previous appeal, we vacated the district court’s fines and remanded the
case to the district court because that court “did not express a view regarding what
part of those fines was necessary to compensate the court.” Gibson v. Credit Suisse
Grp. Sec. (USA) LLC, 733 F. App’x 342, 346 (9th Cir. 2018). We held that “[i]f any
portion of the fines is non-compensatory, then that portion would be criminal in
nature and would be subject to the additional due process protection of proof beyond
a reasonable doubt.” Id.On remand, the magistrate judge concluded that the “sanctions were . . .
compensatory in nature and appropriate under the [district c]ourt’s inherent powers.”
To support this conclusion, the magistrate judge cited various excerpts from the
**
The Honorable Danny J. Boggs, United States Circuit Judge for the
U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
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record, such as an order stating that “the imposition of sanctions . . . was . . . to
compensate . . . the [district c]ourt for the unnecessary expenditure of resources
caused as a result of [Appellants’] conduct.” The district court agreed. However,
the magistrate judge also cited various statements pertaining to deterrence and
punishment. For example, in that same order, the court noted that “[t]he character,
purpose, and nature of the imposition of sanctions ordered in this case was both to
punish those individuals who violated their professional duties to the court and to
deter these attorneys as well as other lawyers from such actions in the future[,] but
also to compensate . . . the [district c]ourt . . . .” Even applying an abuse of discretion
standard, see Kaass Law v. Wells Fargo Bank, N.A., 799 F.3d 1290, 1292 (9th Cir.
2015), we vacate the rulings of the magistrate judge and district court, as the
magistrate judge’s own order shows that the $6,000 fines were at least partially non-
compensatory.
Alternatively, the magistrate judge decided that, even if some of the sanctions
were non-compensatory, “only ‘serious’ criminal sanctions warrant procedures
extending beyond notice and an opportunity to be heard.” This ruling also was error.
“[I]f both civil and criminal relief are imposed in the same proceeding, then
the criminal feature of the order is dominant and fixes its character for purposes of
review.” Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 638 n.10 (1988) (internal
quotation marks and citations omitted). “To level that kind of separate penalty [as
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punishment], a court would need to provide procedural guarantees applicable in
criminal cases, such as a ‘beyond a reasonable doubt’ standard of proof.” Goodyear
Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1186 (2017). We noted the same in
the last appeal in this case. See Gibson, 733 F. App’x at 346.
Those individuals on whom criminal sanctions are imposed are “entitled to
the right to be advised of the charges, the right to a disinterested prosecutor, the right
to assistance of counsel, a presumption of innocence, proof beyond a reasonable
doubt,” and other due process protections applicable in the criminal context. F.J.
Hanshaw Enters., Inc. v. Emerald River Dev., Inc., 244 F.3d 1128, 1139 (9th Cir.
2001) (citations omitted). There is no indication that the district court afforded
Appellants these heightened due process protections. The district court gave
Appellants only notice and an opportunity to be heard, and that court “appears to
have applied only a ‘clear and convincing’ standard” of proof. Gibson, 733 F. App’x
at 346.1
1
The magistrate judge cited Lasar v. Ford Motor Co., 399 F.3d 1101, 1112 (9th Cir.
2005), and Hanshaw for the “serious” versus “non-serious” divide in terms of
criminal due process protections. However, both Lasar and Hanshaw stand for the
proposition that “serious” criminal sanctions require a “full-blown trial.” Lasar, 399
F.3d at 1112 (citing Hanshaw, 244 F.3d at 1138. In particular, in Hanshaw we listed
a number of due process protections, but only appended the “serious” label to the
jury trial right. Hanshaw, 244 F.3d at 1139. It is unnecessary to decide whether the
“serious” versus “non-serious” distinction survives the Supreme Court’s ruling in
Goodyear, as the district court here did not afford Appellants the other due process
protections listed in Hanshaw.
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Thus, we vacate the decisions of the magistrate judge and district court. On
remand, Appellants “should be afforded the due process protections appropriate for”
the imposition of criminal sanctions. Id. However, pursuant to its “broad power”
and discretion to impose sanctions, see Primus Auto. Fin. Servs., Inc. v. Batarse, 115
F.3d 644, 649 (9th Cir. 1997), the district court should consider vacating the
sanctions and returning the fines to Appellants. The district court initially imposed
the $6,000 fines in 2013, and subjecting Appellants to the arduous process associated
with the imposition of criminal fines years after the underlying conduct may not
accord with the interests of justice or the initial purpose for those $6,000 fines.2
VACATED and REMANDED.
2
In their supplemental brief, Appellants also argue that “Goodyear mandates
reconsideration of the $57,738 in attorney’s fees that the magistrate [judge] awarded
to the Defendants” in the underlying case. This court already affirmed the
imposition of the attorney’s fees in the previous appeal after the Supreme Court
handed down Goodyear. See Gibson, 733 F. App’x at 344–45. We remanded solely
on the issue of whether the $6,000 fines to be paid to the district court were
compensatory. Id. at 346. Thus, the propriety of the attorney’s fees is not properly
before this court on appeal. See Adamian v. Lombardi, 608 F.2d 1224, 1228 (9th
Cir. 1979) (“[T]he scope of review is narrowed to the limitations of the remand. This
[c]ourt’s prior holding has become the law of the case, binding upon the present
panel.”).
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