Vartec Telecom, Inc. v. Bce, Inc. ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
JEFFREY H. MIMS, Chapter 7 Trustee of )
VARTEC TELECOM, INC., and )
VARTEC TELECOM HOLDING CO., )
)
Plaintiffs, )
)
v. ) Civil Action No. 03-2203 (RJL/JMF)
)
BCE, INC. et al., )
Defendants. )
____________________________________)
MEMORANDUM OPINION
This case has been referred to me for the management of discovery disputes. Presently
before the Court are Rural Telephone Finance Cooperative’s Motion for Reimbursement [#70]
and Defendants’ Motion for Sanctions Against RTFC [#73].
I. Background.
This case arises out of a contract between VarTech Telecom, Inc. (“VarTech”) and
Teleglobe, Inc, a subsidiary of defendant BCE, Inc. Pursuant to that contract, VarTech agreed to
purchase Excel, a subsidiary of Teleglobe. Teleglobe agreed to pay all pre-closing costs and
VarTech agreed to pay all post-closing costs. Teleglobe subsequently declared bankruptcy and
VarTech brought suit against its parent company BCE alleging that BCE misrepresented
Teleglobe’s solvency during the negotiations leading up to the agreement.
During the course of discovery, BCE served a third party subpoena on Rural Telephone
Finance Cooperative (“RTFC”). RTFC opposed the subpoena and BCE filed a motion to
enforce, which was granted without opinion by Judge Leon on May 12, 2008. In RTFC’s
opposition to BCE’s motion to compel, RTFC specifically argues that it should be reimbursed for
its expenses incurred in responding to the subpoena in the event that the motion to compel is
granted. Judge Leon’s Order [#59] grants BCE’s motion to compel, but does not address cost
shifting. RTFC sought reconsideration on May 27, 2008, specifically with regard to the issue of
costs. Judge Leon denied the request for reconsideration by minute order on July 3, 2008.
Neither order mentions the issue of costs.
RTFC argues that Judge Leon, based on his silence, clearly did not consider its request
for reimbursement but instead reserved the issue for later reconsideration. BCE contends that the
opposite is true, that Judge Leon clearly decided in BCE’s favor twice and RTFC should be
sanctioned for bringing a frivolous motion.
II. Analysis.
A. Law of the case.
Pursuant to the law of the case doctrine, I am not permitted to revisit issues that Judge
Leon has already decided. Arizona v. California, 460 U.S. 605, 618 (1983) (a decision upon a
question of law should continue to govern the same issue in subsequent stages of the same case);
LeShawn A. v. Barry, 87 F.3d 1389, 1393 (D.C. Cir. 1996) (the doctrine of the law of the case
means that the same issue presented a second time in the same case in the same court should lead
to the same result). Thus, if Judge Leon has already made a determination that RTFC is entitled
to reimbursement under Federal Rule of Civil Procedure 45, then I will follow his decision and
deny the motion.
RTFC argues that Judge Leon did not rule on its request regarding costs because his
orders do not discuss the issue. RTFC relies on United States v. Columbia Broadcasting Sys.,
Inc., 666 F.2d 364 (9th Cir. 1982), where the 9th Circuit held that the parties had not waived
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their rights to seek reimbursement because they explicitly reserved those rights in their motion to
quash the subpoena. Id. at 368. This is not an appeal, and I am not concerned, at this juncture,
with whether RTFC has adequately preserved its right to seek reimbursement under Rule 45. I
am concerned with whether Judge Leon has already decided not to award costs. Thus, Columbia
Broadcasting is not particularly instructive given that there “a stipulation was entered into by the
studios and networks, in conjunction with the studios’ post-production motion for costs, that
contains no indication that the networks objected to the motion as having been previously
adjudicated,” and “the language of the district court’s minute order suggests that it was the first
and only time the court addressed the reimbursement issue.” Id. I am not willing to accept
RTFC’s proposition that, where a court does not discuss an issue that has been fully briefed in an
order or opinion, one should assume that the Court did not consider the issue.
This is not a case where Judge Leon’s decision to enforce the subpoena rendered the issue
of costs moot. See, e.g., Gaubert v. Gray, 747 F. Supp. 40, 45 (D.D.C. 1990) (“Because this
Court finds defendants’ arguments regarding immunity to be dispositive, the other issues raised
by defendants in their Motion to Dismiss are not addressed in this Opinion.”). In fact, the request
for reconsideration focused entirely on the issue of costs. It is difficult to imagine how Judge
Leon could be said to have denied the motion without considering costs. RTFC would suggest
that Judge Leon denied the request for reconsideration not the request for costs, meaning that the
order should be interpreted to mean that the Judge was declining to reconsider the issue at the
time, without prejudice to reconsidering it later. Notably, however, Judge Leon did not deny the
motion without prejudice; he just denied the motion. Such action does not mean “not now,” it
means “not ever.” As the issue has already been decided by Judge Leon earlier in this litigation, I
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decline to consider the issue of costs.
B. Sanctions.
BCE further argues that RTFC or its counsel should have to pay for the fees and expenses
BCE incurred in defending this motion as a sanction for RTFC’s conduct. Specifically, BCE
argues that the Court should impose sanctions on RTFC’s attorneys under 28 U.S.C. § 19271 or
pursuant to the Court’s inherent authority.
Section 1927 provides “[a]ny 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 attorney’s fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927.
A violation of the statute occurs when a lawyer’s conduct goes beyond mere negligence and
carelessness and is reckless in light of the circumstances. United States v. Wallace, 964 F.2d
1214, 1219 (D.C. Cir. 1992).
In addition, “federal courts, in the exercise of their equitable powers, may award attorneys
fees when the interests of justice so require.” Hall v. Cole, 412 U.S. 1, 4-5 (1973). Thus, the
court has authority to award fees as a sanction for acting “in bad faith, vexatiously, wantonly, or
for oppressive reasons.” Id. at 5. This “bad faith exception” is punitive in nature. F.D.I.C. v.
Bank of N.Y., 479 F. Supp. 2d 1, 21 (D.D.C. 2007). To invoke the bad faith exception to the
general rule that parties bear their own costs, BCE must demonstrate that RTFC operated
primarily for the purpose of harassment. Id. (“A party is not to be penalized for maintaining an
aggressive litigation posture, nor are good faith assertions of colorable claims or defenses to be
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All references to the U.S. Code refer to the versions available on Lexis and Westlaw.
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discouraged. But advocacy simply for the sake of burdening an opponent with unnecessary
expenditures of time and effort clearly warrants recompense for the extra outlays attributable
thereto.”).
The majority of BCE’s allegations with regard to bad faith have to do with RTFC’s
allegedly obstructionist behavior in responding to the subpoena at the outset, by first refusing and
then setting a series of conditions before it would comply. But BCE does not seek sanctions for
discovery misconduct under Federal Rule of Civil Procedure 37; instead they argue that the
instant motion was a baseless attempt to relitigate a question already decided.
While I have indicated that I agree with BCE that Judge Leon has ruled regarding the cost
issue and the rulings are the law of the case, I decline to punish RTFC for seeking costs, despite
Judge Leon’s order. This is not a case where, for example, RTFC is seeking to relitigate an issue
after it was discussed in detail by the court. Compare McLaughlin v. Bradlee, 803 F.2d 1197,
1205 (D.C. Cir. 1986) (“Even after the District Court had issued a final judgment in this case
finding preclusion appropriate, and had warned McLaughlin that the court had seriously
considered applying sanctions, he persisted in filing four insubstantial post-judgment motions.”);
Healey v. Labgold, 231 F. Supp. 2d 64, 68 (D.D.C. 2002) (awarding sanctions against party who
brought lawsuit in D.C. after it had already been dismissed in Virginia for lack of standing). I
cannot describe its seeking a final, definitive ruling on the question of costs as reckless or in bad
faith given that the Order is silent and the amount at issue substantial. In my view, reasonable
lawyers would not describe it as reckless to seek a final definitive statement before instructing
the client to either pay or take an appeal. Accordingly, I decline to award fees as a sanction
against RTFC in this case at this time.
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III. Conclusion.
For the reasons stated herein, RTFC’s Motion [#70] and BCE’s Motion [#73] will both
be denied.
An Order accompanies this Memorandum Opinion.
Date: February 24, 2009 /S/
JOHN M. FACCIOLA
U.S. MAGISTRATE JUDGE
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