Opposition Brief — Buster v. Greisen

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fy ) PIL &éED

OCT 15 1997

No. 97-285

Trerr

In The

Supreme Court of the United States

—>

October Term, 1996

JACK B. BUSTER and A. LEE PETERSEN,

Petitioners,

VS.

RONALD E. GREISEN, HENRY P. HEAD and DAVID L.

RATCHYE,

Respondents.

On Petition for Writof Certiorari to the

United States Court of Appeals for the Ninth Circuit

RESPONDENTS’ BREF IN OPPOSITION

A MICHAEL ZAHARE

Counsel of Record

TIOMAS L. HAUSE "

MATTHEWS & ZAHARE, P.C.

4ttorneys for Respondents

431 West Seventh Avenue

Suite 207

Anchorage, Alaska 99501

(907) 276-1516

72220 ez

(800) 3 APPEAL - (800) 5 APPEAL «800) BRIEF 21 Lo :

ervices, inc.

i

QUESTIONS PRESENTED

1. Whether this Court should consider a case of first

impression in which an appellate court has applied the 1993

Amendments to Federal Rule of Civil Procedure 11 to a case

which was removed.

2. Whether the decision of the Ninth Circuit Court of

Appeals conflicts with the decision of this Court in Willy v.

Coastal Corp., 503 U.S. 131 (1992).

3. Whether the procedure by which the district court

imposed Rule 11 sanctions violated principles of due process

when Petitioners had ample notice and opportunity to be heard.

ul

TABLE OF CONTENTS

Page

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Reasons for Denying the Writ .................... 6

4 I. The Decision Of The Ninth Circuit Court Of

Appeals Is Not In Conflict With Any Reported

re ee eS ee 6

Il. The Opinion Of The Ninth Circuit Court Of

Appeals Is Not In Conflict With Any Decision Of

ps en re eee ee 9

III. The Procedure By Which The District Court

Imposed Rule 11 Sanctions Did Not Violate The

Principles Of Due Process. ...............-. 12

CRUE «0c cc cncscecsceeeedencsaseeennessenee 14

TABLE OF CITATIONS

Cases Cited:

Bisciglia v. Kenosha Unified School Dist. No. 1, 45 F.3d

SEP CHEN GEE HEED c6cccdocecesdseeesseeobuses 7

Contents

Page

Branson v. Knott, 62 F.3d 287 (9th Cir. 1994), cert. denied,

i ns er cy i tS 10

Buster v. Greisen, 104 F.3d 1186 (9th Cir. 1997) . 3, 4,5, 6, 12

Buster v. Thomas, Head & Greisen Employees Trust, No.

94-970 (October Term ee l

Buster v. Thomas, Head & Greisen Employees Trust, No.

96-1013 (October Term RS Sie l

Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990)

Po ePeMURWMEUSESEUS NTL bE Gc Ge aeodeccccc ea’. 10, 11

Foval v. First Nat’l Bank of Commerce, 841 F.2d 126 (5th

ee 8

Gilliard v. Mississippi, 464 U.S. 867 ae 6

Hurd v. Ralphs Grocery Co., 824 F.2d 806 (9th Cir. 1987)

Pe ee MU UMECEe Sawa EG web iw odes ews coc oske a. 8

Kirby v. Allageni Beverage Corp., 811 F.2d 253 (4th Cir.

SEE EELE RICA SSE El Ce oe a 8

McCray v. New York, 461 U.S. 961 ES 6

Pan-Pacific and Low Ball Cable Television Co. v. Pacific

Union Co., 987 F.2d 594 (9th Cir. CE 12

Stiefvater Real Estate, Inc. vy. Hinsdale, 812 F.2d 805 (2d

TUE ShhdNé bua b snub sdooeus cécecss.c... 8

iv

Contents

Page

Thomas, Head & Greisen Employees Trust v. Buster, 24

F.3d 1114 (9th Cir. 1994), cert. denied, 115 S. Ct. 935

4 Re ere rrr ne + Pe ran eS ee 1,2,3

Thomas, Head & Greisen Employees Trust v. Buster, No.

96-35746 (9th Cir. filed Mar. 4, 1996) ........... 3

Thomas, Head & Greisen Employees Trust, Ronald E.

Greisen, and Henry P. Head v. Jack Buster, Terry Parks

& Northern Financial, No. A89-071 Civ. (Alaska filed

ee Se Pere rer ro re ee 2

United States v. Alter, 482 F.2d 1016 (9th Cir. 1973) .. 12

Willy v. Coastal Corp., 503 U.S. 131 (1992) .... i, 5, 9, 10, 11

Worthington v. Wilson, 8 F.3d 1253 (7th Cir. 1993) ... 8

Rules Cited:

Federal Rule of Civil Procedure 11(b) .............. 6

Federal Rule of Civil Procedure 11(b)(1) ........... 13

Federal Rule of Civil Procedure 11(b)(2) ........... 13

Federal Rule of Civil Procedure 11(b)(3) ........... 13

Contents

Federal Rule of Civil Procedure ills | |

Federal Rule of Civil Procedure 41(a)(1) ...........

Other Authority Cited:

Developments in the Law — Lawyers "Responsibilities and

Lawyers’ Responses, 107 Harv. L. Rev., 1547 (1994)

APPENDIX

Appendix A — Findings of Fact and Conclusions of Law

of the United States District Court for the District of

Alaska Filed July 30, 1992 .....................

Appendix B — Minutes of the United States District Court

for the District of Alaska Filed February 21, 1996 ..

Appendix C — Minutes of the United States District Court

for the District of Alaska Filed March 27, 1996

OF PSR SOS 62S. 2:2:8: 62 AS © 666 6:6 6 48 6.45 6.6.06 6 eGo

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———— ae

|

STATEMENT OF THE CASE

This is the third occasion on which Petitioner Jack B. Buster

(hereinafter “Buster”) has asked this Court to hear a case

resulting from his own substantial material misrepresentations

concerning investments made by a trust.’ The investments at

issue were made by a trust, which was organized and operated

pursuant to ERISA, in deed of trust notes secured by real

property. Thomas, Head & Greisen is a small professional

corporation of certified public accountants. Thomas, Head &

Greisen Employees Trust v. Buster, 24 F.3d 1114, 1116 (9th Cir.

1994), cert. denied, 115 S. Ct. 935 (1995). The corporation set

up the Thomas, Head & Greisen Employees Trust, (hereinafter

“the Trust”). The Trust was organized and operated pursuant to

ERISA. Buster, 24 F.3d at 1116. Respondents Ronald E. Greisen,

Henry P. Head, and David L. Ratchye (hereinafter “Trustees”,

were Trustees of the Trust. Jd. However, Respondent David L.

Ratchye ceased being a Trustee for the Trust on June 30, 1984.

Buster developed a business relationship with the Trust whereby

Buster would locate and investigate deed of trust notes for

investment by the Trust. Buster, 24 F.3d at 1116. Buster earned

a commission for the sale of these notes. Jd.

In 1983, Buster joined with Terry Parks (hereinafter

“Parks”) and formed a partnership, Northern Financial. Jd.

Buster introduced Parks to the Trustees and explained their new

partnership. /d. Buster and Parks continued to provide investment

advice and recommendations regarding deed of trust purchases.

Id. The only difference in the relationship was the Trust now

bought its notes from Northern Financial instead of Buster as

an individual. Jd.

1. The prior two cases are Buster v. Thomas, Head & Greisen

Employees Trust, No. 94-970 (October Term 1994) and Buster v. Thomas,

Head & Greisen Employees Trust, No. 96-1013 (October Term 1996).

2

During 1986, the Trust purchased four deed of trust notes,

the sale of which became the subject of the lawsuit entitled,

Thomas, Head & Greisen Employees Trust, Ronald E. Greisen,

and Henry P. Head v. Jack Buster, Terry Parks & Northern

Financial, No. A89-071 Civ. (Alaska filed Feb. 24, 1989).? After

the purchases, the Trust discovered Buster and Parks had made

numerous substantial material misrepresentations when they

recommended the purchase of the notes. These

misrepresentations are detailed in the district court’s findings

of fact and conclusions of law from Case No. A89-071 Civ. (RA.

la.)? Specifically, the district court concluded Buster had

rendered investment advice for a fee pursuant to a mutual verbal

understanding whereby the investment advice rendered by Buster

and Parks would serve as the primary basis for investment

decisions by the Trust. (RA. 10a.) The investment advice was

individualized to the Trust based on the Trust’s particularized

needs. (RA. 10a.) As a result of Buster and Parks substantial

material misrepresentations, the Trust suffered losses in excess

$142,000 with respect to three of the notes. (RA. 13a.) On April

5, 1993 an amended judgment was entered in the amount of

$190,057.64.4

2. On appeal this case became Thomas, Head & Greisen Employees

Trust v. Buster, 24 F.3d 1114 (9th Cir. 1994), cert. denied, 115 S. Ct. 935

(1995).

3. All references to the appendix to Respondents’ Brief in

Opposition will be identified by “RA” and the page number. All other

references are to the appendix to Petitioners’ Petition for Writ of

Certiorari.

4. All pertinent facts have been determined by a previous proceeding

between the parties. Trustees’ statement of the case is based on the facts

contained in the findings of fact and conclusions of law of the previous

proceeding and the facts contained in the Ninth Circuit Court of Appeals’

Opinion in Thomas, Head & Greisen Employees Trust v. Buster, 24 F.3d

(Cont'd)

3

Since the entry of judgment, Buster has committed a long

running series of acts calculated to frustrate the efforts of the

Trustees to collect on the judgment. Buster’s acts resulted in a

fraudulent conveyance action being filed against Buster and the

transferees of his assets. The fraudulent conveyance action ended

with a default judgment in favor of the Trust. The defauit

judgment was upheld on appeal. See Thomas, Head & Greisen

Employees Trust v. Buster, 95 F.3d 1114 (9th Cir. 1996), cert.

denied, 117 S. Ct. 1247 (1997). Buster and the transferees of

his assets were later sanctioned by the district court for

dissipating assets in violation of the terms of the default

judgment. These sanctions are currently the subject of another

appeal to the Ninth Circuit Court Appeals entitled Thomas, Head

& Greisen Employees Trust v. Buster, No. 96-35746 (9th Cir.

filed Mar. 4, 1996).

Finally, Buster filed this-entirely new lawsuit seeking to

pass the blame for his misconduct on to the Trustees of the Trust

to which he was found liable. The instant lawsuit was originally

filed in the Superior Court for the State of Alaska, Case No.

3AN-94-7337 Civ. The Trustees removed this case to federal

court, contending that either ERISA’s complete preemption

doctrine or the district court’s ancillary jurisdiction conferred

federal question jurisdiction over Buster’s complaint. Buster v.

Greisen, 104 F.3d 1186, 1188 (9th Cir. 1997).

Shortly thereafter, counsel for Respondents sent Petersen a

letter in which counsel expressed the view that this new lawsuit

was vexatious and brought in bad faith. Further, counsel for

(Cont'd)

114 (9th Cir. 1994). It is important to note that Petitioners’ statement of

the case is based, in large part, on information obtained from affidavits

filed by Petersen and Buster in this case. To the extent these facts are

inconsistent with the facts as determined by the previous proceeding

between the parties, collateral estoppel prevents reliance on these facts.

4

Respondents cautioned that if Petitioners chose to continue to

pursue the claims, counsel would have no choice but to

recommend to Respondents they pursue both Buster and Petersen

for all recoverable costs and fees associated with defense of the

case. This letter specifically referenced Rule 11.

After denying Buster’s motion to remand, the district court

granted the Trustees’ motion for summary judgment. /d.

Subsequently, the Trustees moved for an award of attorney fees

against Buster and his attorney, Petitioner, A. Lee Petersen

(hereinafter “Petersen’’). In this motion the Trustees set forth

each theory under which they believed they were entitled to an

award of attorney fees. Buster and Petersen were timely served

with Trustees’ motion and filed a 12-page memorandum in

Opposition with an attached 11-page affidavit from Petersen.

Buster v. Greisen, 104 F.3d at 1190.

In considering the motion, the district court determined,

“the only possible explanation for this lawsuit and Petersen’s

conduct is that he brought this patently frivolous case, in bad

faith, solely for purposes of harassment.” (RA. 19a.) The district

court also indicated it believed an award of attorney fees was

the appropriate measure of sanctions. (RA. 19a.) In a subsequent

order, the district court indicated it had the authority to enter

such a sanction not only based on Rule 11, but also under its

inherent authority. (RA. 20a.)

On appeal, the Ninth Circuit Court of Appeals determined

the district court did not have ancillary jurisdiction over the

removed action. Buster, 104 F.3d at 1189. However, the Ninth

Circuit Court of Appeals held the district court acted within its

discretion in imposing Rule 11 sanctions because Buster and

Petersen continued to advocate the frivolous allegations

contained in the complaint after removal. Jd. at 1190. Further,

Buster’s motion for summary judgment provided an independent

5

basis for sanctions. Jd. Finally, the Ninth Circuit Court of

Appeals determined that Petersen’s argument that he was not

awarded due process before imposition of sanctions bordered

on frivolous. Jd. Petersen and Buster had adequate notice and

an opportunity to be heard. Jd.

SUMMARY OF ARGUMENT

None of the compelling reasons which occasionally warrant

granting a petition for writ of certiorari exist in this case. In

upholding the sanctions against Buster and Petersen, the Ninth

Circuit Court of Appeals relied on the 1993 amendments to

Federal Rule of Civil Procedure 11. Application of the 1993

amendments to a case which was removed has not been the

subject of any reported decision of which Respondents are aware.

This is a case of first impression. However, the Ninth Circuit

Court of Appeals’ opinion is consistent with the advisory

committee notes, an opinion of the Seventh Circuit Court of

Appeals, and other learned authorities. Further, the authorities

relied upon by the Petitioners predate the amendments and do

not address the issues presented in this case.

In upholding the sanctions against Buster and Petersen, the

Ninth Circuit Court of Appeals did not render a decision which

is in conflict with a decision of this Court. In fact, the opinion

of this Court as set forth in Willy v. Coastal Corp., 503 U.S. 131

(1992) supports the lower court’s decision.

Finally, the procedure by which the district court imposed

Rule 11 sanctions did not violate principles of due process.

Buster and Petersen had ample notice and opportunity to be

heard.

6

REASONS FOR DENYING THE WRIT

I.

THE DECISION OF THE NINTH CIRCUIT COURT

OF APPEALS IS NOT IN CONFLICT WITH ANY

REPORTED DECISION.

This is a case of first impression.* In upholding the

sanctions, the Ninth Circuit Court of Appeals relied on the 1993

amendments to Federal Rule of Civil Procedure 11. Buster v.

Greisen, 104 F.3d 1186, 1190 (9th Cir. 1997). Prior to the

amendments, Rule 11 required a “snap-shot” approach, under

which the conduct of the signor would be measured at the time

signing only. Developments in the Law — Lawyers’

Responsibilities and Lawyers’ Responses, 107 Harv. L. Rev.,

1547, 1636 (1994). However, signing is no longer the only

sanctionable conduct. Rule 11 now authorizes sanctions when

an issue is presented to the district court. Presentation includes

signing, filing, submitting, or later arguing. Fed. R. Civ. P. 11(b).

In effect, post amendment Rule 11 requires a continuing “duty

of candor” to the court. 107 Harv. L. Rev., at 1636. Application

of this continuing duty to a case which was removed has not

5. This fact, is cause to deny the Petition of Writ of Certiorari. In

the past, this Court has expressed a desire to allow lower courts the

opportunity to fully consider an issue before it is addressed by this Court.

See McCray v. New York, 461 U.S. 961, 963 (1983) (cert. denied where

issues required “further study” in the lower courts “before it is addressed

by this court”); Gilliard v. Mississippi, 464 U.S. 867 (1983); (Marshall,

J. dissenting) (from denial of certiorari addressed to “those of my colleges

who agree with me [on merits of issue] but believe this court should

postpone consideration of the issue until more state supreme courts and

federal circuits have experimented with substantive and procedural

solutions to the problem”).

7

been the subject of any reported decision of which Respondents

are aware.°®

This issue is addressed by the Advisory Committee Notes

to the 1993 Amendments to Federal Rule of Civil Procedure 11.

The advisory committee notes provide:

... [A] litigant’s obligations with respect to

the contents of these papers are not measured

solely as of the time they are filed with or

submitted to the court, but include

reaffirming to the court and advocating

positions contained in those pleadings and

motions after learning that they cease to have

any merit... . [I)f after a notice of removal

is filed, a party urges in federal court the

allegations of a pleading filed in state court

(whether as claims, defenses, or in disputes

regarding removal or remade), it would be

viewed “as presenting” — and hence

certifying to the district court under Rule ||

— those allegations.

This section was quoted favorably by the Seventh Circuit Court

of Appeals in Bisciglia v. Kenosha Unified School Dist. No. 1,

45 F.3d 223, 1227 n.5 (7th Cir. 1995). In Bisciglia, the court

considered arguments similar to those presented in this case.

However, preamendment Rule 11 was applied. Jd. at 226. By

quoting the Advisory Committee Notes in a footnote, the

Bisciglia court implies it may have reached a different decision

had the amendments been in effect. Jd. at 227. The effective

date of the amendments was December 1, 1993.

6. As discussed below, each of the authorities relied upon by

Petitioners involves application of preamendment Rule 11.

8

Buster initiated this case in 1994. There is no question the

1993 amendments apply to this case. In considering the

allegations raised by Buster, the district court determined,

“Petersen has been disingenuous in his published remarks in

this case. The only possible explanation for the lawsuit and

Petersen’s conduct is that he brought this patently frivolous case,

in bad faith, solely for purposes of harassment. . . there is simply

no excuse for his actions in this case.” (A. 22-23.) The allegations

raised in the complaint were reiterated in Buster’s motion to

remand and Buster’s motion for summary judgment. Thus, they

were presented to the district court and Rule 11 sanctions are

appropriate. See Fed. R. Civ. P. 11.

The arguments raised by Buster and Petersen reveal a

complete disregard for the current status of the law. Each of the

authorities relied upon by Petitioners involve application of

preamendment Rule 11.’ Buster and Petersen repeatedly argue

they were sanctioned for filing a complaint and amended

complaint in state court. Petitioners simply do not recognize

the authority to sanction pursuant to Rule 11, is no longer limited

to the signing of a pleading. It is presentation to the court which

is now at issue. In this case, the allegations in the complaint

were repeatedly presented to the district court. For this reason,

the district court had the authority to sanction Buster and

Petersen.® Petitioners cite to no authority to the contrary.

7. Worthingt_.1 v. Wilson, 8 F.3d 1253, 1257-58 (7th Cir. 1993); In

re Summers, 863 F.2d 20, 21-22 (6th Cir. 1988); Foval v. First Nat’l Bank

of Commerce, 841 F.2d 126, 130 (Sth Cir. 1988); See Hurd v. Ralphs

Grocery Co., 824 F.2d 806, 808 (9th Cir. 1987); Stiefvater Real Estate,

Inc. v. Hinsdale, 812 F.2d 805, 809 (2d Cir. 1987); Kirby v. Allageni

Beverage Corp., 811 F.2d 253, 257 (4th Cir. 1987).

8. Petitioners argue the amount of the sanction was inappropriate

because it included expenses incurred as a result of defending against

(Cont'd)

9

Il.

THE OPINION OF THE NINTH CIRCUIT COURT OF

APPEALS IS NOT 1N CONFLICT WITH ANY DECISION

OF THIS COURT.

Petitioners erroneously assert the opinion of the Ninth

Circuit Court of Appeals is in conflict with this Court’s opinion

as set forth in Willy v. Coastal Corp., 503 U.S. 131 (1992). The

opinion of the Ninth Circuit Court of Appeals in this case is

consistent with Willy. In fact, the legal principles set forth in

Willy form the basis of the opinion.

In Willy, this Court concluded Rule 11 sanctions could be

enforced despite the lack of subject matter jurisdiction. Mr. Willy

had sued Coastal Corporation in state court for claims arising

from termination of his employment. Willy, 503 U.S. at 132.

Coastal Corporation removed the case to federal court. The

district court determined it had subject matter jurisdiction. Later,

the district court dismissed the case for failure to state a claim

and imposed Rule 11 sanctions against Willy and his attorney.

On appeal, the Fifth Circuit Court of Appeals concluded the

district court lacked subject matter jurisdiction, but upheld the

Rule 11 sanctions. Jd. In upholding the Rule 11 sanctions this

Court states,

A final determination of lack of subject

matter-jurisdiction of a case in federal court,

of course, precludes further adjudication of

it. But, such a determination does not

(Cont'd)

the motion to remand. However, Petitioners overlook the fact that the

improper arguments raised in the complaint were presented to the district

court in Buster’s motion to remand. The improper allegations form the

basis of Buster’s argument that remand was appropriate.

10

automatically wipe out all proceedings had

in the district court at a time when the district

court operated under the misapprehension

that it had jurisdiction.

Id. at 137. See also Branson v. Knott, 62 F.3d 287, 293 (9th Cir.

1994) (the fact that the district court lacked subject matter

jurisdiction does not preclude it from imposing Rule 11

sanctions), cert. denied, 116 U.S. 565 (1995). This Court further

states,

[i]t is well established that a federal court

may consider collateral issues after an action

is no longer pending . . . [and] imposition of

a Rule 11 sanction is not a judgment on the

merits of an action. Rather it requires a

determination of a collateral issue: whether

the attorney has abused the judicial process,

and, if so, what sanction would be

appropriate.

Id. citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395-

96 (1990).

Petitioners argue that imposition of sanctions in this case

constitutes a decision on the merits thus creating a conflict with

Willy. This is simply not true. Consideration of improper

allegations as the basis for a Rule 11 sanction does not signify a

district court’s assessment of the legal merits of the complaint.

Illustrative of this point is this Court’s opinion in Cooter & Gell

v. Hartmarx Corp., 496 U.S. 384 (1990).

In Cooter, the district court levied Rule 11 sanctions as a

result of “completely baseless” allegations contained in the

complaint. Jd. at 390. However, prior to considering the Rule

1]

11 issue, plaintiff voluntarily dismissed the case pursuant to

Federal Rule of Civil Procedure 41(a)(1). Jd. at 395. Plaintiff

then argued that voluntarily dismissing the action automatically

deprived the court of jurisdiction over the action and rendered

the court powerless to impose Rule 11 sanctions. Jd. Considering

this argument this Court determined,

Because a Rule 11 sanction does not

signify a district court’s assessment of the

legal merits of the complaint, the imposition

of such a sanction after a voluntary dismissal

does not deprive the plaintiff of his right

under Rule 41(a)(1) to dismiss an action

without prejudice. “[D]ismissal ... withoyt

prejudice” is a dismissal that does not

“operat(e] as an adjudication upon the

merits,” Rule 41(a)(1), and thus does not

have a res judicata effect. Even if a district

court indicated that a complaint was not

legally tenable or factually well founded for

Rule 11 purposes, the resulting Rule 11

sanction would nevertheless not preclude the

refiling of a complaint.

Id. at 396.

In this case, the imposition of Rule 11 sanctions was based

on the fact that Petitioners continually presented improper

allegations to the district court. Just as in Cooter, imposition of

sanctions based on those improper allegations does not constitute

a decision on the merits. The decision to impose Rule 11

sanctions was a determination of a collateral issue: whether

Petitioners abused the judicial process. As such, it implicates

no constitutional concerns because “it does not signify a district

court’s assessment of the legal merits of the complaint.” Willy

503 U.S. at 138.

12

Ill.

THE PROCEDURE BY WHICH THE DISTRICT

COURT IMPOSED RULE 11 SANCTIONS DID NOT

VIOLATE THE PRINCIPLES OF DUE PROCESS.

The Petitioners once again claim they were not afforded

due process of law. This argument was made before the Ninth

Circuit Court of Appeals and that court determined, “this

argument itself borders on the frivolous.” Buster v. Greisen, 104

F.3d 1186, 1190 (9th Cir. 1997). Due process only requires notice

and an opportunity to be heard in opposition. /d. citing Pan-

Pacific and Low Ball Cable Television Co. v. Pacific Union Co.,

987 F.2d 594, 597 (9th Cir. 1993); United States v. Alter, 482

F.2d 1016, 1024 (9th Cir. 1973). In this case, the Trustees’ motion

set forth each theory under which they believed they were

entitled to an award of fees.® Contrary to Petitioners’ assertions,

the request for sanctions was not limited to Petitioners’ conduct

of filing the complaint in state court.'° Buster and Petersen were

9. Among the theories set forth by trustees was that,

Rule 11 provides that “by presenting to the court a

pleading .. . an attorney . . . is certifying to the best

of the persons knowledge, information, and belief,

formed after an inquiry reasonable under the

circumstances, 1) it not being presented for any

improper purpose, such as to harass or cause

unnecessary delay or needless increase in the cost

of litigation.”

(See Memorandum in Support of Motion for Attorney Fees, dated

December 6, 1995 at 9.)

10. Page two of Respondents Memorandum in Support of Motion

for Attorney Fees states, in pertinent part,

(Cont'd)

13

timely served with the Trustees’ motion and filed a 12-page

memorandum in opposition with an attached 11-page affidavit

of Petersen. In considering the motion, the district court

determined, “the only possible explanation of this lawsuit and

Petersen’s conduct is that he brought this patently frivolous case,

in bad faith, solely for purposes of harassment.” (RA. 19a.)

Petitioners had notice and an opportunity to be heard. The district

court did not violate the principles of due process."!

(Cont'd)

After this case had been removed to federal court,

Defendants sent A. Lee Petersen, counsel for Jack

B. Buster, a letter. (See letter to Mr. A. Lee Petersen,

dated January 4, 1995 and attached as Exhibit A.)

Counsel for Defendants expressed the view that this

new lawsuit was vexatious and brought in bad faith.

Ex. A. Further, defense counsel cautioned that if

Plaintiff chose to continue to pursue his claims,

defense counsel would have no choice but to

recommend to Defendants that Defendants pursue

both Mr. Buster and his attorney A. Lee Petersen

for all recoverable costs and fees associated with

defense of this case.

(Emphasis added.)

11. In a superficial fashion, Petitioners argue that no sanctions

should be imposed on Buster because Federal Rule of Civil Procedure

11(c)(2)(A) does not permit imposition of sanctions against a party who

is represented by counsel. However, Petitioners overlook the fact that

this section only applies to sanctions awarded pursuant to Rule 11(b)(2).

It does not apply to sanctions awarded pursuant to Rule 11(b)(1) or (3).

14

CONCLUSION

For the reasons discussed above, Respondents respectfully

request that this Court deny the petition for a writ of certiorari.

Respectfully submitted,

A. MICHAEL ZAHARE

Counsel of Record

THOMAS L. HAUSE

MATTHEWS & ZAHARE, P.C.

Attorneys for Respondents

431 West Seventh Avenue

Suite 207

Anchorage, Alaska 99501

(907) 276-1516

la

APPENDIX A — FINDINGS OF FACT AND

CONCLUSIONS OF LAW OF THE UNITED STATES

DISTRICT COURT FOR THE DISTRICT OF ALASKA

FILED JULY 30, 1992

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ALASKA

THOMAS, HEAD AND GREISEN EMPLOYEES TRUST,

RONALD E. GREISEN and HENRY P. HEAD,

Plaintiffs,

VS.

JACK B. BUSTER, TERRY D. PARKS and NORTHERN

FINANCIAL,

Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

A89-071 Civil

The above cause was tried to the court at Anchorage, Alaska

on June 8, 9 and 10, 1992.

The court heard opening statements, the testimony of

witnesses, and final arguments of the parties, following which

the case was submitted for decision.

2a

Appendix A

FINDINGS OF FACT

I. ERISA:

A. Stipulated Facts.

1. Plaintiff Thomas, Head & Greisen Employees Trust

(“Trust”) was an employee trust for Thomas, Head & Greisen,

a professional corporation, organized and operated pursuant to

the Employee Retirement Income Security Act, 29 U.S.C. § 1001

et seq. (“ERISA”).

2. From 1977 to 1983 Jack Buster dealt with Ronald E.

Greisen for the purpose of selling him deed of trust notes.

3. During 1977 to 1990, the Trust was a limited partner,

and Jack Buster was a general partner, in Kavik Mortgage

Investors, a business which invested in deed of trust notes.

4. In 1983, Jack Buster and Terry Parks formed Northern

Financial, a general partnership consisting of defendants Jack

Buster and Terry Parks as equal general partners.

5. Defendants Jack Buster and Terry Parks, in their

Capacity as general partners of Northern Financial, dealt with

the Thomas, Head & Greisen Employees Trust from 1983 until

1987.

6. Atall relevant times during the period when Northern

Financial was dealing with the Trust, plaintiffs Ronald E. Greisen

and Henry P. Head were trustees of the Trust. Ronald E. Greisen

and Henry P. Head are investors knowledgeable in deed of trust

notes.

3a

Appendix A

B. Finding re ERISA Generally.

The Thomas, Head & Greisen Employee Trust is the

successor entity to two separate trusts created for the benefit of

the employees of Thomas, Head & Greisen which were merged

together in 1980.

C. Falkenstein Note.

1. Stipulated Facts. On or about May 1, 1984, Steven

L. Falkenstein executed a promissory note between himself, as

payor, and Lawrence Cornett III, as payee. The original principal

balance on the note was $29,000 and bore interest at the rate of

10 percent per annum. The note was secured by a deed of trust

on a certain parcel of real property located about 25 miles from

Glennallen, and described in the deed of trust as the:

Northeast one-quarter of the Southwest one-

quarter of the Northeast one-quarter of the

Southwest one-quarter (NE1/4 SW1/4

NE1/4 SW1/4) of Section 11, Township |

South, Range | East, Copper River Meridian,

in the Chitina Recording District, Third

Judicial District, State of Alaska.

On or about February 6, 1986, Northern Financial purchased

the note from Lawrence Cornett, III, for the sum of $17,158.53.

On or about March 7, 1986, the Trust purchased the Falkenstein

note for the sum of $21,700. At the time of purchase, payments

were current on the note, and the note had a principal balance

of $27,803.19.

4a

Appendix A

2. Findings re Falkenstein Note.

a. On or about March 7, 1986, in connection with the

sale of the Falkenstein note to the Trust, defendant Terry D.

Parks represented to Ronald E. Greisen that (a) the property

was located near Glennallen, (b) that the payor Steven

Falkenstein grew up in Glennallen, (c) the payor was employed

by ARCO (Supply Division) on the North Slope, (d) the payor

was married, (e) his spouse was employed as a sixth grade school

teacher by the local school district, (f) the payor owned a fishing

boat in Valdez, (g) the payor owned an airplane, (h) the property

appeared to be 10 acres, more or less, (i) the property was

purchased by Mr. Falkenstein for $49,000, (j) Mr. Falkenstein

put $20,000 down when he purchased the property, (k) the

property had been substantially improved in the amount of

$20,000 by virtue of Mr. Falkenstein’s construction of a new

barn, fence and a small addition to the house on the property,

and (1) Mr. Falkenstein had $40,000 equity in the property,

representing his $20,000 down payment and the improvements.

The court finds these representations were material to the Trust’s

decision to purchase the Falkenstein note, and that it relied on

defendant’s representations in doing so. The court further finds

that these representations were either intentional or in reckless

disregard of trust of falsity.

b. In actuality, (a) the payor grew up in Petersburg, (b)

the payor was not then employed by Arco (Supply Division),

(c) the payor was not married but had divorced in 1983, (d) the

payor’s former wife had no teaching certificate and was not

employed outside the home, (e) the payor has never owned a

fishing boat in Valdez, (f) or an airplane, (g) the property was

actually two and one-half acres more or less, (h) the property

was purchased for $29,000, (i) Mr. Falkenstein did not

Sa

= " = _ —. ~— — _

Appendix A

substantially improve the property, (j) Mr. Falkenstein never built

a barn or a fence on the property, and (k) Mr. Falkenstein made

no down payment on the property.

c. The last monthly payment on the Falkenstein note was

February 24, 1987, which brought the interest to current status.

d. The Trust suffered a loss and sustained damages as a

result of defendant Northern Financial’s breach of fiduciary duty,

including interest to June 8, 1992, in the amount of $25,219.21.

e. The court finds that plaintiffs’ efforts to mitigate their

damages were reasonable under the circumstances of the case.

D. Kern Note.

1. Stipulated Facts. On or about June 18, 1985,

Frederick L. Kern executed a promissory note between himself,

as payor, and Billie Poole, Jr. and Bernice Sue Poole, as payees.

The original principal balance on the note was $49,500 and bore

interest at the rate of 12 percent per annum. The note was secured

by a deed of trust on a certain parcel of real property described

in the deed of trust and located in the end of the Rainbow

subdivision in Wasilla. On or about April 24, 1986, Northern

Financial purchased the note from the Pooles for the sum of

$30,100. On or about April 28, 1986, defendants communicated

to Ronald E. Greisen an offer to sell the note to the Trust. On or

about April 29, 1986, the Trust purchased the Kern note for the

sum of $36,250. At the time of the purchase, payments were

current on the note, and the note had a principal balance of

$44,714.07.

6a

Appendix A

2. Findings re Kern Note.

a. On or about April 28, 1986, in connection with the

offer and sale of the Kern note, defendant Parks represented to

Ronald E. Greisen, as trustee of the Trust, that (a) the payor

was a dirt contractor, (b) the payor’s spouse, JoAnn Kern, was

employed as an Alaska State Trooper, (c) that she had been so

employed for six years, (d) that the payor and his wife had only

recently married, and (e) that Terry Parks had inspected the house

and it was completed. The court finds these representations

material to the Trust’s decision to purchase the Kern note, and

that it relied on defendants’ representations in doing so.

b. The court further finds that these misrepresentations

were either intentional or in reckless disregard of truth or falsity.

c. In actuality, the facts were that (a) the payor was a

carpenter who sub-contracted his services, (b) the payor’s

spouse, Patricia Kern, was not then or (c) had she ever been

employed as an Alaska State Trooper, (d) she was an unemployed

housewife with seven children, and (e) Mr. Parks had not

inspected the house.

d. The property securing the Kern note was resold by

the Trust on October 1, 1991. Plaintiffs took reasonable steps to

mitigate their damages prior to the sale by restoring the property

to salable condition and holding it until real estate values

increased.

e. The trust suffered a loss and sustained damages as

a result of defendant Northern Financial’s breach of fiduciary

duty, including interest to June 8, 1992, in the amount of

$50,189.55.

Ta

pod

Appendix A

E. The Bergin Note.

1. Stipulated Facts.

a. On or about June 25, 1982, John L. and Judy M.

Bergin executed a promissory note between themselves, as

payors, and William M. and Ruth M. Schofield, as payees. The

original principal balance on the note was $56,843.38 and bore

interest at the rate of 10 percent per annum. The note was secured

by a deed of trust on a certain parcel of real property described

in the deed of trust and located in the Woodland Park subdivision

in the Spenard area of Anchorage. Northern Financial purchased

the note from the Schofields. On or about April 18, 1986,

defendants communicated to Ronald E. Greisen an offer to sell

the note to the Trust. On or about Apri! 29, 1986, the Trust

purchased the Bergin note for the sum of $35,150. At the time

of purchase, payments were current on the note, and the note

had a principal balance of $50,965.47.

b. In actuality, the property was (a) located in

Woodland Park subdivision next to railroad tracks in the Spenard

area of Anchorage, and (b) the actual assessed value of the

property in 1986 was $143,800.

c. The last payment on the Bergin note was February

25, 1988 which brought the interest to current status.

d. The principal balance at the time of default was

$46,377.65 plus interest at 10 percent from February 25, 1988.

e. On or about April 18, 1988 the Trust retained Jack

Clark to file suit on the promissory note. On or about June 20,

1988 the State of Alaska, Division of Investments, commenced

8a

Appendix A

nonjudicial foreclosure because the $51,027.19 first deed of trust

was delinquent. On or about March 23, 1989 the Trust obtained

a judgment against the Bergins for $52,219.50. On April 3, 1989

John L. and Judy M. Bergin filed a Chapter 7 bankruptcy in the

Western District of Washington. On or about April 19, 1989,

the Trust filed a proof of claim with the bankruptcy court in the

amount of $52,376.87. On or about July 7, 1989 the debtors

were discharged from their pre-petition obligations. The Trust

paid a $22.50 escrow termination fee and expended $773.42 in

attorney’s fees for a total of $795.92.

2. Findings re Bergin Note.

a. On or about April 18, 1986 in connection with the

offer and sale of the Bergin note to the Trust, defendant Buster

represented to Ronald E. Greisen, as trustee of the Trust, that

the real property securing the note was (a) located east of Merrill

Field in the Wonder Park subdivision of Anchorage, and (b) that

the assessed value of the property was $166,000.

b. The court finds these representations were material

to the Trust’s decision to purchase the Bergin note, and that it

relied on defendants’ representations in doing so.

c. Access to the Bergin property was and continues to

be through an alley, and there is no developed access from the

platted street. The court finds defendants’ failure to disclose these

facts material to the Trust’s decision to purchase the Bergin note.

d. The Trust suffered a loss and sustained damages as

a result of defendants Northern Financial’s breach of fiduciary

duty, including interest to June 8, 1992, in the amount of

$67,336.95.

EEE

er

.~ 92

Appendix A

e. Plaintiffs took reasonable steps to mitigate their

damages by pursuing a judgment against the payors on the note.

The court finds it was not unreasonable for plaintiffs to refuse

to assume the first deed of trust, held by the State of Alaska,

since no equity existed in the property for the second deed of

trust.

F. The Smith Note. The Trust suffered no loss and sustained

no damages on the Smith note, and therefore the court enters no

other finding and awards no damages on this note.

G. Findings re Fiduciary Status of Defendants.

1. Defendants rendered investment advice to the Trust

as to the value of the Falkenstein, Kern, Bergin and Smith notes

by virtue of their having presented yield sheets, mortgage

analyses, purchase prices and other information to trustee Ronald

E. Greisen.

2. Defendants made recommendations as to the

advisability of the Trust investing in the Falkenstein, Kern,

Bergin and Smith notes by virtue of defendants’ investigation

into and screening of those notes by applying the investment

criteria previously articulated to them by the trustee Ronald E.

Greisen, and by subsequently presenting those notes to the Trust

with a recommendation to purchase them.

3. Defendants rendered investment advice to the Trust

on a regular basis as evidenced by the Trust’s purchase of 61

notes Over a nine and one-half year period.

4. Defendants rendered investment advice to the Trust

pursuant to a mutual understanding that defendants’ advice

10a

Appendix A

would serve as a primary basis for the investment decisions of

the Trust, and that defendants’ advice would be individualized

investment advice based on the particular needs of the Thomas,

Head & Greisen Employee Trust, concerning such matters as

the Trust’s investment policies or strategies, overall portfolio

composition or diversification of plan assets. Defendants” advice

served as a primary basis for the Trust’s investment decisions.

In the course of Northern Financial’s dealings with the Trust,

the Trust invested approximately 40% of its total assets in

investments recommended by defendants. The advice rendered

by defendants was individualized to the Trust based on its

particularized needs. Mr. Greisen personally met with the

defendants and discussed the need for diversification of plan

assets, both geographically and by asset type, as well as the

overall investment strategy of the Trust. Mr. Greisen articulated

parameters for Trust investments, and defendants were aware

of what types of investments were suitable for the Trust.

Defendants used the Trust’s investment parameters to investigate

and screen such notes before they were recommended to the

Trust.

Defendants understood that the trustees were relying on

them to investigate and screen such notes, and to present only

suitable opportunities to the Trust.

Defendants’ compensation amounted to thousands of dollars

on each of the notes in question; it is unreasonable to assume

that Mr. Greisen and Mr. Head would agree to compensation in

that amount unless they understood that defendants were

providing a substantial service to the Trust in return.

5. Mr. Buster was also a fiduciary to plaintiffs by virtue

of his being a general partner, and they being limited partners,

-- ooo... ae ee ee. ee ee ee ae

week — -die—...... ——

Appendix A

in Kavik Mortgage Investors. The court concludes that any

reasonable person, when dealing with another who serves two

different masters, only one of which is owed a fiduciary duty,

would not proceed before ascertaining which entity he was

purporting to be representing.

6. Defendants received compensation for rendering

investment advice to the Trust. The price of the notes offered to

the Trust were fixed by defendants to yield a 20% return to the

Trust on its invested funds.

7. In late April or early May of 1986, defendant Jack B.

Buster was aware that the Falkenstein, Kern and Smith notes

had been sold to the Trust by Northern Financial. Mr. Buster

considered these notes unsuitable investments for the Trust. In

a conversation with Mr. Greisen, Mr. Buster expressed his

surprise that the Trust had purchased the notes in question.

At that time, Northern Financial had a fiduciary duty to

advise the Trust that the notes in question were not suitable

investments for the Trust, and the reasons for such a conclusion.

II. ALASKA SECURITIES ACT. The court finds the award of

damages to plaintiffs under ERISA to be fully adequate under

the law and evidence in this case, and therefore enters no

Findings or damage award under the Alaska Securities Act.

III. ASSIGNMENT. The Trust has assigned to the plaintiffs

Ronald E. Greisen and Henry P. Head the causes of action which

are the subject of this litigation.

IV. The court finds plaintiffs’ proof insufficient by a

preponderance of the evidence regarding defendants’ financial

profit and therefore awards plaintiffs no damages thereon.

—_— _—

~ 122 —

Appendix A

CONCLUSIONS OF LAW

I. GENERAL.

A. The court has jurisdiction.

B. Defendant Northern Financial and individual defendants

Jack B. Buster and Terry D. Parks are liable for any breach of

fiduciary duty by any of the defendants, by virtue of the general

partnership between Jack B. Buster and Terry D. Parks.

C. The interest acquired by the Trust in purchasing the deed

of trust notes in each of the four transactions at issue was an

interest in real property.

D. Defendant Jack B. Buster owed a fiduciary duty to

Thomas, Head & Greisen Employees Trust by virtue of his being

a general partner in Kavik Mortgage Investors and the Trust

being a limited partner in that venture.

Il. ERISA

A. Defendants were fiduciaries within the meaning of 29

U.S.C. § 1002(21)(a)(2) and 29 C.F.R. § 2510.3-21, by virtue

of having rendered investment advice for a fee pursuant to a

mutual verbal understanding whereby the investment advice

rendered by defendants would serve as a primary basis for

investment decision by the Trust, and that the investment advice

would be individualized to the Trust based on the Trust’s

particularized needs, incident to the four transactions at issue

in this case.

B. Defendants breached the prudent man standard of

ee es a a Ty

AEDST 1 Re SOR rR PMN IBN far

nels Ng aR NS AMBP AI it, mong Y

SRD IF Od "SB SRST MC NCIS

RSEMRRRESaGePSrT tants

Appendix A

ERISA with respect to each of the three transactions in question

by failing to act with the care, skill, prudence and diligence

under the circumstances then prevailing that a prudent man

acting in a like capacity and familiar with such matters would

use in the conduct of an enterprise of a like character and with

like aims.

C. Defendants breached their fiduciary duty to the Trust

under ERISA by making untrue statements of material fact in

connection with the offer and sale of the notes in question to

the plaintiff Trust.

D. Defendants breached their fiduciary duty to the Trust

under ERISA by failing adequately to investigate the information

they passed on to the Trustees regarding (1) the collateral on

the notes and (2) the payors’ ability to make payments on the

notes.

E. Defendants breached their fiduciary duty to the Trust

under ERISA by failing to disclose that access to the Bergin

property was through an alley, that there was no developed access

from the platted street, and the property was located in the

Spendard area of Anchorage.

F. Mr. Buster and Northern Financial breached their

fiduciary duty to the Trust under ERISA by failing to disclose

that the Falkenstein, Kern and Bergin notes were unsuitable

investments for the Trust, which disclosure would have revealed

Mr. Parks’ misrepresentations and allowed the Trust to avoid or

mitigate its loss.

G. That the plaintiffs are entitled to judgment against the

defendants in the total sum of $142,745.71, plus costs, interest

and reasonable attorney fees.

parm — 14g...

Appendix A

Plaintiffs’ counsel may prepare a proposed final judgment

form in conformity herewith for the signature of the court.

DATED at Anchorage, Alaska, this 29th day of July, 1992.

s/ illegible

United States District Judge

Ce: R. BLISS

H. Gazaway

om aa = es | a) ae

APPENDIX B — MINUTES OF THE UNITED STATES

DISTRICT COURT FOR THE DISTRICT OF ALASKA

FILED FEBRUARY 21, 1996

MINUTES OF THE UNITED STATES

DISTRICT COURT

DISTRICT OF ALASKA

Buster v. Greisen, et al.

Case No. A94-0475 CV (JKS)

By: THE HONORABLE JAMES K. SINGLETON

Deputy Clerk: Patty Demeter, Case Management: 271-3235*

PROCEEDINGS: ORDER FROM CHAMBERS

Defendants Ronald E. Greisen, Henry P. Head, and David

L. Ratchye (collectively called “Head”) seek attorney's fees from

Plaintiff Jack B. Buster (“Buster”) and Buster’s attorney, A. Lee

Petersen, after successfully defending a lawsuit brought by

Petersen against them on Buster’s behalf. Docket Nos. 72 & 76.

The motion is opposed. Docket No. 75. The parties have

thoroughly briefed their respective positions and oral argument

would not be helpful. Thus, the matter will be decided on this

record. D. AK. LR 7.1(i), United States v. Cheely, 814 F. Supp.

1430, 1436 n.4 (D. Alaska 1992) (discussing the circumstances

under which oral argument is allowed in this Court under a

predecessor essentially identical rule).

scieadenindasiibiiinats

Jurisdiction in this case is based upon federal questions

related to the federal Employee Retirement Income Security Act

(“ERISA”). See 29 U.S.C. § 1132(e) and § 1451(c) and 28 U.S.C.

§ 1331.' To understand the context in which the motion for

1. Buster has been found to be a fiduciary under an ERISA plan,

(Cont'd)

Saal Os ae A ore SR SET | Seg a PRA ean arr pn ennene tein ay Sry eR

Appendix B

attorney’s fees arose and the basis for this Court’s jurisdiction,

it is necessary to review this case’s procedural history. Buster

was a fiduciary for an ERISA plan operated by Head as trustee

for the employees of a C.P.A. firm, Thomas, Head & Greisen.

Head successfully sued Buster for breach of his fiduciary duties

to the plan in this Court. See Thomas, Head & Greisen

Employees Trust v. Buster, 24 F.3d 1114 (9th Cir. 1994).

Thereafter, Buster brought this action for misrepresentation in

state court against Head arguing that Head had, in effect, made

misrepresentations by omission. Buster argued that Head had

not warned Buster that, in Head’s view, Buster was an ERISA

plan fiduciary who therefore could become liable to the plan

for fraud under a heightened standard of care. Because failure

to disclose opinions about the law would not qualify as

misrepresentations, it is clear that Buster was, in effect, pleading

a claim for civil entrapment, malicious prosecution, or abuse of

process. This analysis is made more clear by review of the

damages claimed which were, in essence, directly related to

Buster’s being sued by Head and losing the prior lawsuit. Head

removed this action to this Court, arguing that it was an action

by a plan fiduciary to determine the scope of his fiduciary

responsibilities and obtain contribution from his co-fiduciaries

for the damages he is obligated to pay the trust. See 29 U.S.C.

§ 1132(e) (giving this Court exclusive jurisdiction over actions

(Cont'd)

Thomas, Head & Greisen, 24 F.3d at 1116-20, and, in this action, seeks

to relitigate his responsibilities to the plan, its trustees, and the other

fiduciaries based on his contention that he was fraudulently led into

becoming a fiduciary to the plan. This is clearly an action contemplated

by ERISA. See 29 U.S.C. § 1451 (permitting an action by a fiduciary

who is adversely affected by the act or omission of any party under the

subtitle, i.e., another fiduciary with respect to a plan for legal or equitable

relief). Buster is suing for an omission to warn him about his fiduciary

responsibilities to the plan. 29 U.S.C. § 1451(a)(1).

ee ee

we wet

eee ee ee ce

PEL TPE BAERS GD Ty

i a ee ESS gh RE

‘

17a

Appendix B

by fiduciaries regarding their duties to plans, participants and

trustees); see also 29 U.S.C. § 1109 (providing for liability for

breach of a fiduciary duty). This Court recognized that the

question was close and that the United States Supreme Court

had specifically denied federal courts removal jurisdiction over

actions for abuse of process brought in state court where the

allegedly abusive process originated in federal court. See

Wheeldin v. Wheeler, 373 U.S. 647, 652 (1963). Nevertheless,

this Court denied Buster’s motion to remand, finding that his

action, if permitted, would be so chilling on the exercise of

federal rights granted by ERISA that an exercise of jurisdiction

by this Court was necessary to protect its judgments and allow

litigants the protection intended by ERISA. See order at Docket

No. 13 which was affirmed on reconsideration at Docket No.

25. This Court found that the assertion of jurisdiction was

necescary “to enable [the] [C]ourt to function successfully, that

is, to manage its proceedings, vindicate its authority, and

effectuate its decrees.” Kokkonen v. Guardian Life Ins. Co. of

Am., 114 S. Ct. 1673, 1676 (1994).

The case was referred to Magistrate Judge John Roberis

who was administering Head’s efforts to collect the judgment

previously awarded against Buster. The parties filed cross-

motions for summary judgment. Magistrate Judge Roberts

reviewed the record, heard oral argument, and recommended

that judgment be entered in favor of Head and against Buster.

In Magistrate Judge Roberts’ reports and recommendations, he

concluded that Buster had not stated a claim against Head for

misrepresentation under Alaska law and that this action was a

disingenuous attempt to circumvent the Ninth Circuit’s decision

in this case and harass Head for successfully suing Buster in

the prior action. Docket Nos. 61 & 65. After a de novo review

of the record and the exercise of its independent judgment, this

18a

Appendix B

Court agreed with Magistrate Judge Roberts and entered an order

granting Head summary judgment. Docket No. 66. This Court

found that Buster’s action was barred by the doctrines of res

judicata and collateral estoppel, because Buster’s theory of civil

entrapment would have been a compulsory counterclaim or an

affirmative defense in the prior action.*, Judgment was therefore

entered in favor of Head and against Buster, and Head was

awarded costs of action Docket No. 67.

This Court has reviewed the motion for attorney’s fees at

Docket No. 72 and finds that the hours worked and the fees

charged are reasonable for comparable actions by men and

women of comparable skill, education, and experience in this

District. This Court therefore is prepared to award the sum

requested: $29,244.00 against Buster. See 29 U.S.C. § 1451(e).

Head also argues that the award should be made as a sanction

against Buster and Petersen for bringing a patently frivolous

action, in bad faith, solely for the purpose of harassing the

Defendants and disrupting their reasonable efforts to collect the

judgment previously awarded against Buster. See 28 U.S.C.

2. Magistrate Judge Roberts’ invocation of res judicata and collateral

estoppel, which was clearly correct on this record, suggests an alternate

basis for jurisdiction; this Court’s power to enjoin state court actions in

which litigants seek to relitigate matters resolved against them in federal

court. See, e.g., Western Sys., Inc. v. Ulloa, 958 F.2d 864 (9th Cir 1992);

Amwest Mortgage Corp. v. Grady, 925 F.2d 1162 (9th Cir. 1991). Alaska

would not require mutuality of estoppel where the party against whom

estoppel is urged had a full and fair opportunity to litigate the issues in

the prior proceeding. Pennington v. Snow, 471 P.2d 370 (Alaska 1970).

Buster thoroughly litigated the issues which doom this action in the

proceeding before Judge von der Heydt and therefore is bound by all

factual determinations made in this case: he was a fiduciary, he breached

his fiduciary duty, he is liable to the plan, and he is not entitled to

contribution from the other fiduciaries.

19a

Appendix B

§ 1927, FED. R. CIV. PROC. 1 1, D. AK. LR 1.3; see also Cox v,

Nasche, 149 F.R.D. 190 (D. Alaska 1993) (discussing an award

of attorney’s fees against an attorney who litigated in bad faith).

Petersen should be jointly and severally liable for the

attorney's fees to be awarded in this action. The motion gave

him notice of the application, and he has made his defense. See

Petersen’s affidavit accompanying Buster’s opposition at Docket

No. 75; see also Docket No. 75 at 11.2 This Court agrees with

Magistrate Judge Roberts that Petersen has been disingenuous

in his published remarks in this case. The only possible

explanation for this lawsuit and Petersen’s conduct is that he

brought this patently frivolous case, in bad faith, solely for

purposes of harassment. Petersen is not a new attorney. He is a

former deputy United States Attorney who has practiced in this

Court for many years. There is simply no excuse for his actions

in this case. See Cox, 149 ER.D. at 197-98. None of the possible

excuses noted in Cox could possibly apply in this case. Petersen

should share in liability for the judgment for fees rendered in

this case. In Cox, this Court discussed in detail why it believes

an award of attorney’s fees is the appropriate measure of

sanctions where an action or motion is brought in bad faith purely

for purposes of harassment and to force an Opponent to suffer

economic waste by incurring unnecessary attorney’s fees,

because the fees incurred are a Proper measure of the damage

suffered.

3. Because the motion notified Petersen that fees were sought

against him as well as his client, he has received the hearing contemplated

by Ulloa, 958 F.2d at 873.

20a

APPENDIX C — MINUTES OF THE UNITED STATES

DISTRICT COURT FOR THE DISTRICT OF ALASKA

FILED MARCH 27, 1996

MINUTES OF THE UNITED STATES DISTRICT

COURT DISTRICT COURT

DISTRICT OF ALASKA

Jack Buster v. Ronald Greisen, et al.

Case No. A94-0475 CV (JKS)

By: THE HONORABLE JAMES K. SINGLETON

Deputy Clerk: Patty Demeter, Case Management: 271-3235*

PROCEEDINGS: ORDER FROM CHAMBERS

Ronald Greisen and others (collectively called “Greisen”)

sued Jack Buster (“Buster”) for fraudulent breach of fiduciary

duties in connection with a pension trust and obtained a judgment

which was affirmed on appeal. See Thomas, Head & Greisen

Employees Trust v. Buster, 24 F.3d 1114 (9th Cir. 1994).

Thereafter, Buster brought this action in state court alleging

misrepresentation against Greisen. Greisen removed this action

to this Court where, after extensive briefing by the parties,

summary judgment was entered in favor of Greisen. Docket No.

66. Thereafter, the Court granted a motion by the defendants

requiring Buster and his attorney, A. Lee Petersen (“Petersen’’),

to pay Defendants’ attorney’s fees incurred in the defense of

this action. This Court expressly concluded that this action had

been brought in bad faith purely for purposes of harassment.

Docket No. 78.' Defendants thereafter sought to collect their

1. In its order, this Court referenced 28 U.S.C § 1927 as authority

for sanctions. This is problematical. This case was frivolous and in bad

faith from its inception. The Ninth Circuit has held that § 1927 cannot be

(Cont'd)

2la

Appendix C

judgment from Petersen and scheduled a judgment debtor

examination for that purpose. See Docket No. 86. On the

recommendation of Magistrate Judge Roberts, this Court

authorized the entry of a restraining order that was directed to

Petersen and the professional corporation through which he

conducts his legal practice. Jd.

Petersen has filed a motion to vacate and/or modify the

judgment debtor proceedings, to vacate and/or modify the

restraining order, and to impose FED. R. CIV. P. |] sanctions.

Docket No. 87. It appears that the motion should be heard on

shortened notice in order to provide the parties with guidance

at the upcoming hearing.

(Cont'd) ;

used to sanction for commencing a frivolous law suit but only for

maintaining one. See In re Keegan Management, Co., No. 94-15713, 94-

16135, 1996 WL 81123 (9th Cir. 1996), see also Zaldivar v. City of Los

Angeles, 780 F.2d 823, 831 (9th Cir. 1986); Matter of Yagman, 796 F.2d

1165, 1187 (9th Cir.) (“Section 1927 does not apply to initial pleadings,

since it addresses only the multiplication of proceedings. It is only possible

to multiply or prolong proceedings after the complaint is filed.”),

amended, 803 F.2d 1085 (9th Cir.1986), cert. denied, 484 U.S. 963 (1987).

While it could be argued that Petersen continued to maintain this lawsuit

even after its frivolousness should have become apparent, it is not clear

that such a finding would Satisfy the case law. It is not necessary to

consider this issue further, however, because FED. R. CIV. P. 11 and this

Court’s inherent authority suffice for sanctions where, as here, the action

is not only frivolous but is brought in bad faith. See Roadway Express,

Inc. v. Piper, 447 U.S. 752 (1980) (court has inherent powers necessary

to conduct business; including the power to Sanction); see also

Cunningham v. County of Los Angeles, 879 F.2d 481, 490 (9th Cir. 1988)

cert. denied, 493 U.S. 1035 (1990); Yagman v. Republic Ins., 987 F.2d

622, 628 (9th Cir. 1993) (quoting United States v. Stoneberger, 805 F.2d

1391, 1393 (9th Cir 1986)); accord Zambrano v. City of Tustin, 885 F.2d

1473, 1478 (9th Cir. 1989).

22a

Appendix C

Petersen argues that attempting to discover information

about his corporation’s assets and liabilities based on a personal

debt involves harassment. It is not clear to what extent Petersen’s

corporation is liable for his bad faith actions in connection with

litigation. See FED. R. CIV. P. 11(c) and AS 10.45.010, et seq.

That issue should be briefed and argued at the judgment debtor

proceeding because it will affect the proceeding’s scope. Because

it appears that Petersen is a sole practitioner, it is at least

debatable that he and his corporation are alter egos for purposes

of FED. R. CIV. P. 11 sanctions. Petersen is certainly the

corporation’s agent. This Court expresses no opinion on how

that debate should be resolved because it is a matter committed,

in the first instance, to Magistrate Judge Roberts.*

Petersen correctly points out that FED. R. CIV. P. 69 adopts

State law regarding the collection of judgments. State law is set

out in Alaska Rule of Civil Procedure 69. Any AK R. CIV. P.

69(c) restraining order should be entered during the pendency

of the proceedings. Petersen argues that this means only until

the judgment debtor examination. Where as here, a Magistrate

Judge will hold the initial hearing but the parties will have the

opportunity to seek review of any adverse decision before this

Court, the restraining order should remain in effect until a few

days after the judgment debtor proceeding is completed to enable

such review. See U.S. DIST. COURT LOCAL MAGISTRATE

2. FED. R. CIV. P. 11 sanctions are only available where a party or

its attorney engages in litigation strategy that is frivolous or in bad faith.

If a strategy is debatable, it is not sanctionable. My conclusion that the

Petersen’s professional corporation may be liable for his bad faith actions

on an agency or alter ego theory should not be taken as expressing an

opinion on those issues. It is certainly possible that all of Petersen’s assets

and the corporations assets are exempt from execution on one or more

theories. That is what the judgment debtor proceedings are intended to

determine.

Ee

23a

Appendix C

RULES 1(15) and 12.3 It would appear that the specific

procedures in AK R. CIV. P. 69 would take precedence over the

more general procedures in FED. R. CIV. P. 65(b). In any event,

the order was issued by Judge Sedwick of this Court at my

request on March 21, 1996 and the tenth day‘ thereafter is

Sunday, March 31, 1996. The hearing in this case is scheduled

for the following day, April 1, 1996, and Judge Roberts can

determine at that time, after hearing from the parties, whether

the stay should remain in effect or be terminated.

IT IS THEREFORE: ORDERED:

The motion for FED. R. CIV. P. | 1 sanctions at Docket No.

87 is DENIED.

The motion to vacate and/or modify the restraining order

and the order for judgment debtor to appear at Docket No. 87 is

GRANTED IN PART AND DENIED IN PART. Specifically,

the request to vacate the judgment debtor examination and the

accompanying restraining order is DENIED. The request to

modify this Court's restraining order, however, is GRANTED.

Therefore, the restraining order at Docket No. 86 is modified to

limit the duration of the order to the time up to and including

3. This Court assumes that Judge Roberts will determine on the

record at the completion of the judgment debtor proceedings whether the

restraining order should remain in effect, be modified, or be vacated. A

person aggrieved by his decision can seek to avoid the time limits in U.S.

DIST. COURT MAGISTRATE LOCAL RULE 12 by seeking a hearing

on shortened time or an abbreviated hearing schedule. See D. AK. LR

7.1(k). Such an application should first be made to Judge Roberts.

Compare FED. R. CIV. P. 62 with FED. R. APP P. 8.

4. See FED. R. CIV. P. 65(b).

24a

Appendix C

April 1, 1996, and such additional time as is necessary to

complete the judgment debtor proceeding scheduled for that day

and to allow the parties their respective rights under U.S.

DISTRICT COURT MAGISTRATE LOCAL RULE 12.

Entered at the direction of the Honorable James K. Singleton,

United States District Court Judge, by Ardel Burritt, secretary

to Judge Singleton.

DATE: March 27, 1996 SECRETARY’S INITIALS: ab

* ALL INQUIRES REGARDING THE SCHEDULING OR

CALENDARING OF THIS CASE SHOULD BE DIRECTED

TO THE ABOVE-INDICATED CASE MANAGER. Any request

for other information or for clarification, modification, or

reconsideration of this Order, or for extension of time must be

made in the form of a motion. See FED. R. CIV. P. 7(b)(1); D.

AK. LR 7.1(1). No one should telephone, fax or write to

chambers regarding pending cases. The judge’s secretary and

law clerks are not permitted to discuss any aspect of this case,

provide any information or communicate with any person

including litigants, lawyers, witnesses and the general public

regarding cases.

SON Ere?