Appendix — Pacific Legal Foundation v. Kayfetz
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FILED |
9 2° l 544 MAR 16 1993
* MBOG OE TE CLERK
eettatietined
In The
Supreme Court of the United States
October Term, 1992
.
PACIFIC LEGAL FOUNDATION,
) : )
Petitioner,
PAUL KAYFETZ; VICTOR AMOROSO; DIANA
LOPEZ FARNSWORTH; DORIS ELAINE
LeMIEUX; JACK BOWEN McCLELLAN;
WILLIAM NIMAN; ORVILLE SCHELL; MARGUERITTE
HARRIS; JUDITH WESTON; and BOLINAS
COMMUNITY PUBLIC UTILITY DISTRICT,
Respondents.
+
Petition For Writ Of Certiorari
To The Ninth Circuit Court Of Appeals
4
PETITION FOR WRIT OF CERTIORARI
APPENDIX
.
JOHN H. FINDLEY *Rex E. Lee
ANTHONY T. Caso GENE C. SCHAERR
Pacific Legal Foundation Kurt H. Jacoss
2700 Gateway Oaks Drive *Counsel of Record
Suite 200 Sipcey & AUSTIN
Sacramento, CA 95833 1722 Eye Street, N.W.
Telephone: (916) 641-8888 Washington, DC 20006
Telephone:
(202) 736-8000
Attorneys for Petitioner
COCKLE LAW BRIEF PRINTING co (800) 225 6964
OR CALL COLLECT (40 342 2831
INDEX
Page
APPENDIX A
Slip Opinion of the United States Court of Appeals
for the Ninth Circuit, September 9, 1992......... A-]
APPENDIX B
Order Adopting Findings of Magistrate Brazil
Nunc Pro Tunc April 2, 1990, January 14, 1991... B-1
APPENDIX C
Report and Recommendations of Special Master Re
Liability Aspects of Defendants’ Motions for Sanc-
tions, January 11, 1990...... : ear ene
APPENDIX D
Order Adopting Recommendation of Magistrate
Filed January 28, 1991, February 11, 1991..... D-]
APPENDIX E
Special Master’s Recommendations Re Character
and Magnitude of Sanctions, January 26, 1991 ... E-1
APPENDIX F
Order Adopting Recommendation of Magistrate
October 22, 1990. October 24, 1990....... esas bee
APPENDIX G
Recommendation of Special Master Re Terminating
Sanctions Proceedings Against Individual! Attor-
neys, October 22, 1990......... Bayh arn oe me? G-l
INDEX — Continued
Page
APPENDIX H
Opinion of the United States Court of Appeals for
the Ninth Circuit, Lockary v. Kayfetz, 917 F.2d 1150
(Sth Cir. 1900). .........50.00000n0neeeeee H-1
APPENDIX |
Order Denying Plaintiffs’ Motion for Abstention
and Granting Defendants’ Motions for Summary
Judgment, November 16, 1987................... 1-1
APPENDIX J
Order Denying Motion to Augment the Record,
Cetoer 20 198! os knees. css esaee eee J-1
APPENDIX K
Order Denying Petition for Rehearing, Decem-
OES BG, TIRE. ow cc iccisves tos ceune eee K-1
APPENDIX L
Motion to Augment the Record, September 23,
BMP) os 6 4b sae ww cine ome oe L-1
APPENDIX M
Draft Recommendation of Special Master Re Lia-
bility of Plaintiffs and Their Counsel for Defen-
dants’ Attorneys’ Fees and Costs, September 8,
Sn arama are et entre tL ee M-1
A-1
APPENDIX A*
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MattrHew Locxary, et al.,
Plaintiff,
)
)
)
)
vs ) No. 91-15384
Pau. Kayretz, et al.; Victor ) D.C. No.
Amoroso; Mary Lowry; DIANA ) ;
CV-82-6191-SW
Lopez FRANSWORTH; Freperick B. )
McCLELLAN, et al.; ) OPINION
)
)
)
)
)
)
)
)
Peter WARSHALL, et al.,
Defendants-Appellees,
V.
PaciFic LEGAL FOUNDATION,
Appellant.
Appeal from the United States District Court
for the Northern District of California
Spencer M. Williams, District Judge, Presiding
Argued and Submitted
May 13, 1992—San Francisco, California
Filed September 9, 1992
* Any typographical and/or incorrect punctuation found in the
following Appendix pages were left intentionally to show accu-
rately how the original documents appeared.
A-2
Before: Alfred T. Goodwin, Betty B. Fletcher and
Thomas G. Nelson, Circuit Judges.
Opinion by Judge Fletcher
SUMMARY
Attorneys and Judges/Attorneys’ Fees/Sanctions/Civil
Litigation and Procedure/Attorneys and Judges
Affirming in part, reversing in part and remanding a
district court judgment imposing sanctions against an
entity directing the underlying litigation and “calling the
shots,” the court of appeals held that, while some of the
conduct complained of was sanctionable and some was
not, the district court properly relied on its inherent
powers to sanction appellant as the responsible entity for
the misconduct that was beyond the scope of Rule 11 and
28 U.S.C. § 1927.
Appellant Pacific Legal Foundation (PLP), itself, from
time to time in similar litigation against the Bolinas Com-
munity Public Utility District has been a party, or held
itself out as representing parties; this action was part of
its ongoing effort to protect private property rights
against “community no-growth policies.” In this litiga-
tion, PLF sometimes held itself out as the representative
of the plaintiffs, sometimes as the employer of the plain-
tiffs’ lawyers, and always as the entity directing the liti-
gation and “calling the shots.” After the district court
issued judgments in the underlying litigation for the
defendants, the defendants sought sanctions against the
plaintiffs, PLF and individual attorneys. A magistrate
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was appointed who, ultimately, recommended the impo-
sition of sanctions on PLF for several instances of miscon-
duct. In his report, the magistrate set forth a calculation
of the amount of the defendants’ attorneys’ fees that PLF
should pay. The district court adopted the magistrate’s
recommendations. PLF argued that the district court
erred in imposing sanctions against it rather than against
the individual attorneys who signed the offending plead
ings and other papers, the sanctions violated its and “its
clients’ ” first amendment rights, they were imposed for
conduct that was not sanctionable, and the district court
erred in calculating the amount of sanctions
[1] The court found no merit in PLF’s argument that
the district court erred in sanctioning it, rather than the
individual attorneys who signed the pleadings or other
papers the court found sanctionable. [2] While the district
court recognized that neither Fed. R. of Civ. P. 11 or
28 US.C. § 1927 gave it the power to sanction PLF,
[3] that court properly concluded that it could rely on its
inherent powers to sanction such of PLF’s misconduct
that was beyond the scope of Rule 11 and § 1927. [4] The
district court properly found that PLF was responsible for
the sanctionable conduct. PLF was not 4 mere passive and
abstract institutional backdrop, but was, rather, the spon-
sor of the litigation, and was actively involved in all
phases of the case. The named plaintiffs gained nothing.
(5] In addition, the court rejected PLF’s first amendment
claim. PLF cited no cases in which the imposition of
sanctions on counsel has been held to violate the right to
litigate controversial issues and vindicate clients’ legal
rights. [6] While the court has rec ognized the reservation
of sanctions for the rare and exceptional! case where the
Se
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action is clearly frivolous because of the potentially chill-
ing effect on innovative lawyering, even in such rare
cases the court will sanction misconduct even where the
responsible party claims noble motives. [7] However,
because the court could not conclude that PLF’s motion
for Pullman abstention was legally frivolous in its incep-
tion, it was difficult to justify sanctions for a strategy
designed to push the district court along to a ruling.
Thus, the court found that the district court erred in
imposing sanctions for this motion. [8] Similarly, the
court reversed the imposition of sanctions on PLF for the
plaintiffs’ procedural due process claim because the liti-
gation of this claim was a legitimate effort to modify
existing law. [9] In addition, the imposition of sanctions
for plaintiffs’ failure to comply with the district court’s
order requiring a more specific pleading was not an
abuse of discretion, [10] nor was it so for sanctioning PLF
for filing the antitrust claims.
[11] The court also held that the method used by the
magistrate in calculating the amount of sanctions met the
requirements established for quantifying sanction
awards, and the district court did not abuse its discretion
in adopting the magistrate’s method of calculation.
[12] However, without proper documentation, the magis-
trate should not have included in his determination an
amount for “second chair counsel” in the sanctions
award. [13] The district court also erred in including the
defendants’ attorneys’ fees for preparing their motion for
sanctions in the sanctions it imposed. [14] However, the
district court properly awarded fees for the defendants’
attorneys’ participation in settlement conferences, and
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discovery proceedings, although there was no finding of
sanctionable conduct in any of these proceedings.
COUNSEL
Anthony T. Caso, Pacific Legal Foundation, Sacramento,
California, for the appellant.
Richard E.V. Harris, Orrick, Herrington & Sutcliffe, San
Francisco, California, for the defendants-appellees.
OPINION
FLETCHER, Circuit Judge:
Pacific Legal Foundation (“PLF”) appeals sanctions
imposed on it by the district court for its conduct while
“representing” Owners of undeveloped land in Bolinas,
California in their suit against the Bolinas Community
Public Utility District. PLF argues that the court erred in
imposing sanctions against it rather than against the indi-
vidual attorneys who signed the offending pleadings and
other papers, that the sanctions violated its and “its cli-
ents’” First Amendment rights, that sanctions were
imposed for conduct that was not sanctionable, and that
the court erred in calculating the amount of sanctions. We
affirm in part, reverse in part and remand.
FACTS
Bolinas is a small community in northern California.
In 1982, as the nominal plaintiffs, owners of undeveloped
ll
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land in Bolinas filed suit against the Bolinas Community
Public Utility District (“BCPUD”), against present and
former BCPUD directors and against private individuals.
The focus of the suit was a moratorium on water hookups
BCPUD originally imposed in 1971 and essentially reen-
acted in 1973 and 1977; the thrust of the plaintiffs’ claims
was that the defendants had prevented them from devel-
oping their land. The plaintiffs alleged regulatory tak-
ings, substantive and procedural due process violations
and equal protection violations and they also made anti-
trust claims. They sought damages of $30 million
($10 million trebled under the Sherman Act), and declara-
tory and injunctive relief. PLF, a nonprofit corporation,
contacted and organized the plaintiffs and paid for the
litigation. PLF, itself, from time to time in similar litiga-
tion has been a party, or has held itself out as represent-
ing parties; this suit was part of its ongoing effort to
protect private property rights against “community no-
growth policies”. In this litigation, PLF sometimes has
held itself out as the representative of the plaintiffs,
sometimes as the employer of the plaintiffs’ lawyers, and
always as the entity directing the litigation and “calling
the shots.”
The case has been lengthy and stormy. In 1984, the
district court granted BCPUD’s motion to dismiss as to
certain claims and defendants. See Lockary v. Kayfetz,
587 F. Supp. 631 (N.D. Cal. 1984) (Lockary I). In 1987, it
granted summary judgment in favor of the defendants on
all remaining claims. The district court’s grant of sum-
mary judgment was affirmed in part and reversed in part
by this court. See Lockary v. Kayfetz, 917 F.2d 1150 (9th Cir.
A-7
1990) (Lockary II). In May 1991, at plaintiffs’ request, their
remaining claims were dismissed with prejudice.
After the district court ruled in their favor on the
summary judgment motion, the defendants sought sanc-
tions against the plaintiffs, PLF and individual attorneys.
The district court, with the agreement of the parties,
appointed a magistrate as special master and referred the
sanctions issued to him. The magistrate initially filed a
draft report, and sought comment from the parties. After
receiving the parties’ responses, the magistrate filed a
final report, which the district court adopted in full in an
April 2, 1990 order.
The magistrate did not recommend that sanctions be
imposed on the plaintiffs themselves. After extensive dis-
cussion of all the plaintiffs’ claims and several specific
motions, he ultimately recommended imposition of sanc-
tions on PLF for seven instances of misconduct.
At the conclusion of his report, the magistrate recom-
mended that the court hold further hearings to determine
whether individual attorneys employed by PLF should be
sanctioned. However, the magistrate later recommended
that such proceedings not go forward. He was concerned
about the due process rights of the attorneys. Although
his findings regarding PLF strongly suggested the attor-
neys were culpable, they had had no opportunity to
respond in their individual behalfs at that stage of the
sanctions proceedings. He also feared that it might
appear that he could not be impartial in subsequent pro-
ceedings. In an order dated October 24, 1990, the district
court adopted the recommendation “that all sanctions
proceedings against individual attorneys be terminated
A-8
immediately and permanently.” The defendants have not
appealed this order.
The magistrate also prepared a second report on the
“character and magnitude” of sanctions, in which he set
forth a calculation of the amount of the defendants’ attor-
neys’ fees that PLF should pay. The district court adopted
this report as well. In an order dated February 7, 1991, it
imposed sanctions on PLF in the amount of $136,434.50.
The order dismissing plaintiffs’ claims stated that the
court’s prior orders as to sanctions would remain in
effect.
STANDARD OF REVIEW
“[A]n appellate court should apply an abuse-of-
discretion standard in reviewing all aspects of a district
court’s Rule 11 determination. A district court would
necessarily abuse its discretion if it based its ruling on an
erroneous view of the law or on a clearly erroneous
assessment of the evidence.” Cooter & Gell v. Hartmarx
Corp., 110 S.Ct. 2447, 2461 (1990).
DISCUSSION
I. Imposition of Sanctions on PLF as an Entity
{1) PLF argues that the district court erred in sanc-
tioning it, rather than the individual attorneys who
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signed the pleadings or other papers the court found
sanctionable. We find no merit in this contention. !
[2] The district court imposed sanctions on PLF, the
entity which had controlled the litigation of the Bolinas
suit and was, in the court’s view, responsible for the
substantial abuse of the court system. The court recog:
nized that neither Federal Rule of Civil Procedure 11 or
28 U.S.C. § 1927 gave it the power to sanction PLF. Rule
11 provides for sanction against the individual attorney
or party or agent of a party who signs an abusive plead-
ing or motion. Fed. R. Civ. P. 11; Pavelic & LeFlore v.
Marvel Entertainment Group, 110 S.Ct. 456, 458 (1989).
Section 1927 is limited to attorney misconduct: it allows
the court to sanction “any attorney ... who... multiplies
the proceedings in any case unreasonably and vex-
atiously.”
[3] The district court concluded, however, that it
could rely on its inherent powers to sanction PLF as the
responsible entity. We agree. In a recent decision that
came down not long after Pavelic, the Supreme Court
explained that a court may use its inherent power to
reach misconduct that is beyond the scope of Rule 11 and
Section 1927:
There is . . . nothing in the other sanctioning
mechanisms or prior cases interpreting them
that warrants a conclusion that a federal court
may not, as a matter of law, resort to its inherent
1 Although we might find that individual counsel were
sanctionable and even that they should have been sanctioned,
that issue is not before us. The fact that individual attorneys
were not sanctioned does not preclude sanctions against PLF.
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power to impose attorney’s fees as a sanction for
bad-faith conduct. This is plainly the case where
the conduct at issue is not covered by one of the
other sanctioning provisions. But neither is a
federal court forbidden to sanction bad-faith
conduct by means of the inherent power simply
because that conduct could also be sanctioned
under the statute or the rules. A court must, of
course, exercise caution in invoking its inherent
power, and it must comply with the mandates of
due process, both in determining that the requi-
site bad faith exists and in assessing fees.
Furthermore, when there is bad-faith conduct in
the course of litigation that could be adequately
sanctioned under the rules, the court ordinarily
should rely on the rules rather than the inherent
power. But if in the informed discretion of the
court, neither the statute nor the rules are up to
the task, the court may safely rely on its inher-
ent power.
Chambers v. Nasco, Inc., 111 S.Ct. 2123, 2135-36 (1991)
(citation omitted). In Chambers, the district court was
confronted by a party to the lawsuit who had acted
fraudulently “outside the confines of the courtroom” to
deprive the court of jurisdiction, had filed false and frivo-
lous pleadings whose true nature could not be known
until after the trial on the merits, and had engaged in
“tactics of delay, oppression, harassment and massive
expense to reduce [the opposing party] to exhausted com-
pliance.” Id. at 2131 (quoting NASCO, Inc. v. Calcasieu
Television & Radio, Inc., 124 F.R.D. 120, 138 (W.D. La.
1989)). This misconduct was largely outside the scope of
Rule 11 and entirely outside Section 1927 because Cham-
bers was a party, not an attorney, and most of his bad acts
took place outside the strict confines of the case and the
a ee
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courtroom. The district court relied on its inherent
powers to sanction these “ ‘acts which degrade the judi-
cial system.’ ” Chambers, 110 S.Ct. at 2131 (quoting Nasco,
124 ER.D. at 139). The Supreme Court found “no abuse of
discretion in resorting to the inherent powers in the cir-
cumstances of this case.” Chambers, 111 S.Ct. at 2136. We
reach the same conclusion here. To use the language of
Chambers, in the “informed discretion” of the district
court, Rule 11 and Section 1927 were not “up to the task”
of sanctioning PLF’s misconduct. The district court thus
properly imposed sanctions pursuant to its inherent
power.
PLF argues that Pavelic limits the court’s inherent
powers, as well as its powers under Rule 11. However,
much as the Pavelic court extolled the virtues of punish-
ing the signer, the Court made quite clear that the founda-
tion of its decision was the “plain meaning” of the
“specific text” of Rule 11. 110 S.Ct. at 458. The Court’s
policy concerns were expressed in the context peculiar to
Rule 11: “the purpose of Rule 11 as a whole is to bring
home to the individual signer his personal, nondelegable
responsibility.” Id. at 460. Chambers, which came after
Pavelic, makes clear that there are situations where exer-
cise of the court’s inherent powers is appropriate and
needed. Thus, Pavelic is not as broad as PLF suggests.?
2 PLE cites dicta from the Fourth Circuit decision in Blue v.
United States Dept. of Army, 914 F.2d 525 (4th Cir. 1990). In Blue,
the Fourth Circuit opined that after Pavelic, it is “doubtful that
[sanctions theories other than Rule 11] will support sanctions
against an entire firm rather than against the individual lawyers
who acted improperly”. 914 F.2d at 549. However, this opinion
is inapposite here: at issue is not the court’s effort to sanction a
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[4] PLF also takes issue with the district court’s
factual finding that it was responsible for the sanction-
able conduct. PLF contends that it merely provided logis-
tical support to the individual attorneys who represented
the plaintiffs, and did not participate as an entity in any
way in this suit. The record belies this assertion. While
the PLF attorneys did not identify themselves as PLF
employees in the signature block of the motions and
pleadings, the heading of each court paper they filed
listed the attorneys’ names, followed by the name and
address of PLF. Moreover, the plaintiffs were represented
by a constantly changing cast of PLF attorneys, including
PLF’s president. PLF funded the litigation in its entirety.
In its analysis of PLF’s involvement, the district court
relied on statements by PLF’s president vaunting the
importance of the Bolinas suit for PLF, and placing the
case in the context of other, similar suits by PLF. The
district court found that PLF was not “a mere passive and
abstract institutional backdrop”, but was, rather, “the
sponsor of this litigation, and was actively involved in all
phases of the case.” We agree.
As our discussion below of the sanctioned conduct
suggests, the course of the litigation makes clear that in
this case the nominal plaintiffs’ interests ran a far distant
second to PLF’s own goals. The claims raised, particularly
the antitrust claims and the “Mesa Ranch” claims, bear
little relationship to the nominal plaintiffs’ economic or
law firm rather than individual attorneys, but the court’s use of
its inherent powers to reach the entity truly responsible for
abuse of the legal system. As PLF has repeatediy asserted, and
we agree, it is not a law firm.
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other concerns. PLF contends that it merely furnished
counsel to the plaintiffs “who could not otherwise afford
to present their claims in court.” Appellants’ Opening Brief
at 4. It acknowledges, however, that as a foundation it
seeks “to participate in precedent setting litigation in the
public interest.” Appellants’ Reply Brief at 3. The course of
this litigation suggests PLF’s goal was to establish a legal
precedent, and that the nominal plaintiffs were merely
pawns or puppets in this effort. Tellingly, once this court
reversed in part the district court’s grant of summary
judgment against PLF’s “clients”, thereby setting in the
appellate court opinion the kind of precedent PLF sought,
the nominal plaintiffs petitioned the district court to dis-
miss the suit with prejudice. While the original complaint
sought substantial monetary and injunctive relief for the
named plaintiffs, alleging great harm to their economic
interests, suddenly, when the road to recovery was
reopened, the case was abandoned. The named plaintiffs
gained nothing.
The record strongly supports the district court’s find-
ing that PLF itself was directly responsible for the sanc-
tioned misconduct. The district court did not abuse its
discretion in sanctioning PLF.
Il. First Amendment Violation
PLF argues that imposition of sanctions on it violated
it and its clients rights to “litigate issues of constitutional
dimension.”
[5] PLF cites no cases in which the imposition of
sanctions on counsel has been held to violate the right to
litigate controversial issues and vindicate clients’ legal
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rights. It relies primarily on National Association for the
Advancement of Colored People v. Alabama, 377 U.S. 288
(1964) and In re Primus, 436 U.S. 412 (1978). In the former,
the Supreme Court held that the state of Alabama could
not use its laws governing the right of an out of state
corporation to do business in the state to prevent the
NAACP from conducting its activities in Alabama. In the
latter, the Court held that South Carolina Supreme Court
Disciplinary Board could not use a rule regulating attor-
ney solicitation to prevent the ACLU from sending a
letter to a prospective litigant. These cases recognize that
public interest advocacy organizations enjoy protected
rights to solicit clients and otherwise promote their legal
activism. However, neither case supports PLF’s position
that abuse of the court system is constitutionally pro-
tected when a public interest law organization is the
perpetrator.
[6] We have recognized that, because of the poten-
tially chilling effect on innovating lawyering, “we reserve
sanctions for the rare and exceptional case where the
action is clearly frivolous, legally unreasonable or with-
out legal foundation, or brought for an improper
purpose.” Operating Engineers Pension Trust v. A-C Co.,
859 F.2d 1336, 1344 (9th Cir. 1988). However, in such rare
cases, we will sanction misconduct even where the
responsible party claims noble motives. We agree with
the eleventh Circuit that “[s]tatus as a public interest law
firm or the nature of a claim does not confer immunity
from attorneys’ fees for bringing and maintaining frivo-
lous lawsuits.” Avirgan v. Hull, 932 F.2d 1572, 1582-83
(11th Cir. 1991), cert. denied, 112 S.Ct. 913 (1992).
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Ill. Sanctionable Conduct
The district court reviewed PLF’s claims and motions
in detail. It ultimately decided to sanction only a few
instances of conduct. PLF argues that sanctions were
improper in each instance.
A. The Abstention Motion
The district court imposed sanctions on PLF for filing
a frivolous motion for Pullman abstention. See Railroad
Comm'n of Texas v. Pullman Co., 312 U.S. 496 (1941) (fed-
eral district court should abstain from exercising jurisdic-
tion when a federal constitutional issue might be mooted
or altered by a state court resolution of a pertinent state
law issue). P
In 1983, defendant County of Marin (not a party to
this appeal) requested the district court to abstain. PLF
opposed that motion; one of its arguments was that the
plaintiffs’ claims “do not turn on any sensitive social
policy recognized by law.”
In 1985, PLF itself moved for the court to abstain. It
contended that the Supreme Court’s then-recent decision -
in Williamson County Regional Planning Commission v.
Hamilton Bank of Johnson City, 473 U.S. 172 (1985) required
the district court to abstain, because under Williamson
County, a Fifth Amendment takings claim was not ripe
until the property owner has exhausted procedures the
state provides for compensation. See 473 U.S. at 195. The
California Supreme Court had previously held that no
state compensation was available for regulatory takings,
Agins v. City of Tiburon, 598 P.2d 25, 29-31 (Cal. 1979), aff'd
RRR
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on other grounds, 447 U.S. 255 (1980), but PLF argued that
it was unclear whether Agins would extend to the kind of
regulatory action present in the plaintiffs’ case. PLF also
argued at this time that the issues in its case “have been
‘repeatedly noted’ to be a sensitive issue of social policy.”
The district court did not rule on the absiention
motion immediately. PLF renewed the motion in 1987. At
that time, it argued in addition that the Supreme Court’s
decision in First English Evangelical Lutheran Church v.
County of Los Angeles, 482 U.S. 304 (1987), which
expressed explicit disapproval of Agins, also supported
abstention because it further muddied state law. In truth,
however, First English did not affect the plaintiffs’ claims
because Williamson County required .ecourse only to com-
pensation procedures available “at the time of taking”.
Williamson County, 473 U.S. at 194. PLF also offered to
dismiss certain claims and defendants to “faciliate” dis-
missal, although it made dismissal contingent on the
grant of abstention. At this time, the court denied the
motion and granted summary judgment in favor of the
defendants.
[7] The appropriateness of sanctions for this motion
is a close question. The substance of the Williamson
County decision and its timing support PLF’s argument
that it moved for abstention in 1985 in response to a
change in the substantive law, although Agins undercuts
this argument. However, the district court may have been
influenced in its decision to sanction by PLF’s conduct in
renewing the motion for abstention in 1987. There, PLF’s
motivations in renewing at that time indeed seem sus-
pect: the motion was renewed in the face of the district
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court’s imminently expected ruling on the summary judg-
ment motions before it. Furthermore, PLF’s contingent
offer to dismiss some claims and some of the defendants
seems a disingenuous effort to keep some of the case
alive while sacrificing part of it. However, this games
playing cannot justify sanctioning the original filing of
the motion. Because we cannot conclude that the motion
for Pullman abstention was legally frivolous in its incep-
tion, it is difficult to justify sanctions for a strategy
designed to push the district court along to a ruling.
Accordingly, we find that the district court erred in
imposing sanctions for this motion.
B. The Procedural Due Process Claim
The plaintiffs claimed that BCPUD and certain indi-
vidual defendants had violated their right to procedural
due process by failing to provide them with individual
notice of the decisions to impose and reimpose the mor-
atorium, and of various administrative decisions regard-
ing water permits requested by individuals. They also
argued that the BCPUD, whose members used water
supplied by the district, could not be neutral decision-
makers in ruling on new applications for water use. The
district court found that the “entire procedural due pro-
cess claim [was] legally frivolous, unreasonable, and pur-
sued in bad faith.” It concluded that the claim was
“frivolous under existing due process law, and was not a
good faith attempt to extend or modify that law.”
On appeal, we affirmed summary judgment in favor
of the defendants on the notice issues, holding that under
California law the plaintiffs had no property interest in
——————————
A-18
water they had not yet received, and thus were not enti-
tled to notice. Lockary II, 917 F.2d at 1156.
PLF argues its procedural due process claims were
based on good faith effort to extend existing law. In Bi-
Metallic Investment Company v. State Board of Equalization,
239 U.S. 441, 445 (1915), the Supreme Court held that
when the government imposes a “rule of conduct [that]
applies to more than a few people” or “general statute,”
individualized notice to potentially affected parties is not
necessary. The Court distinguished its earlier decision in
Londoner v. Denver, 210 U.S. 373 (1908), in which it had
held that when “[a] relatively small number of persons
was concerned, who were exceptionally affected, in each
case upon individual grounds,” those persons were enti-
tled to a hearing. Bi-Metallic, 239 U.S. at 446.
PLF argues that it was seeking an exception to the Bi-
Metallic rule, in reliance on Frontier Airlines, Inc. v. Civil
Aeronautics Bd., 349 F.2d 587 (10th Cir. 1965). That case
involved the applications of competing airlines for the
right to service certain airports. The Tenth Circuit held
that when the Civil Aeronautics Board held hearings on
service, it was required to consider Frontier’s previous
applications to provide them. It held that the Board was
required to “consolidate for hearing all applications that
are competing and mutually exclusive in nature,” because
when one application was heard and granted, all compet-
ing applications were “effectively denie[d], without a
hearing.” 349 F.2d at 590. PLF suggests that all Bolinas
residents were “competitors” for the same scarce
resource. The limited number of owners of undeveloped
property who sought water hookups were thus entitled to
notice of any administrative proceedings regarding water
ee ee
A-19
allocation, because any grant of a permit necessarily
affected their chance of getting a hookup. PLF also sug-
gests the plaintiffs’ case was closer to Londoner, the case
distinguished in Bi-Metallic, than to Bi-Metallic itself.
We agree that PLF’s litigation of this claim was a
legitimate effort to modify the law. A more recent deci-
sion by this court suggests that PLF correctly anticipated
that courts may create fact-specific exceptions to the Bi-
Metallic rule. In Harris v. County of Riverside, 904 F.2d 497
(9th Cir. 1990), we held that the county deprived Harris
of due process when it rezoned his property in such a
way as to put him out of business. The zoning change at
issue affected only two land-owners (Harris, and the
owner of land immediately adjacent to his), and was
imposed after a local developer and a city councilman
wrote the county board of supervisors requesting a zon-
ing change to eliminate Harris’ motorcycle park. Reject-
ing the county’s proposed distinction between a
“legislative” action (not requiring procedural due pro-
cess) and an “adjudicatory or administrative” action
(requiring procedural due process), we observed that
“the character of the action, rather than its label, deter-
mines whether those affected by it are entitled to consti-
tutional due process.” 904 F.2d at 501-02.
[8] Admittedly, one aspect of PLF’s litigation of this
issue is particularly troubling: PLF made this claim on
behalf of some plaintiffs who under no stretch of the
imagination could have been entitled to notice of the 1977
reenactment of the moratorium, because they did not
own property in Bolinas at that time. In addition, PLF’s
litigation tactics were at times extremely aggressive; for
example, it gratuitously insinuated that the defendants
A-20
actively attempted to keep two of the plaintiffs from
getting a water hookup under a “grandfather clause”:
“Failure to give affected property owners or at least those
with applications on file notice that the rules had been
changed and later repealed strongly suggests that defen-
dants were intentionally avoiding those such as the Gil-
berts to deprive them of the opportunity to exercise their
rights. ...” Opposition to Defendant's Motion for Summary
Judgment at 7. However, the district court imposed sanc-
tions because it found PLF’s legal position was frivolous
and taken in bad faith. We cannot agree. We thus reverse
the district court’s imposition of sanctions for the asser-
tion of this claim.
C. Failure to Comply with the Court’s Order Requir-
ing More Specific Pleading
After the piaintiffs filed their initial complaint, the
district court, in response to motions by the defendants,
ordered the plaintiffs to submit an amended complaint. It
specifically ordered them to “plead with specificity facts
which indicate a nexus between each defendant and the
alleged wrongs suffered.” The plaintiffs filed an amended
complaint, and the defendants again moved to dismiss. In
ruling on the defendants’ motions to dismiss, the district
court criticized PLF strongly, finding the amended com-
plaint “added virtually no specificity.” It found this lack
of specificity was “fatal to some of [the plaintiffs’] claims
against some defendants” and dismissed those claims.
The district court later imposed sanctions on PLF
because the amended complaint did not comply with its
earlier order, but rather “simply recycled the conclusory
A-21
allegations of the amended complaint.” It found that
“counsel for plaintiffs acted unreasonably and in bad
faith when, despite Judge Williams’ clear order, they
refused to set forth in the amended complaint the specific
acts by the individual defendants that allegedly offended
the constitutional and statutory norms relied on by plain-
tiffs.”
[9] The district court did not impose sanctions
because it found PLF had merely engaged in inept or
sloppy lawyering. A court may impose sanctions pur-
suant to its inherent powers only when it finds the action
in question was taken in bad faith. Chambers, 111 S. Ct.
at 2135-36. The district court’s comments on the amended
complaint make clear that PLF failed to comply with
district court’s direct and specific instructions. In impos-
ing sanctions, the court found that PLF’s “refusal to com-
ply” was “unreasonabl[e] and in bad faith.” Sanctions for
this conduct were thus not an abuse of discretion.
D. The Antitrust Claims
The district court sanctioned PLF for bringing “factu-
ally frivolous” antitrust claims against BCPUD and two
of its directors, Paul Kayfetz, and Doris Lemieux. Appar-
ently, the plaintiffs’ theory was that the defendants
engaged in a conspiracy to restrain or monopolize the
market in tourist accommodations. The antitrust claims
were dismissed early in the case. The district court held
that under Parker v. Brown, 317 U.S. 341 (1943), BCPUD
was not subject to Sherman Act liability, and that
the individual defendants were shielded by the
A-22
Noerr-Pennington doctrine. See United Mine Workers v. Pen-
nington, 381 U.S. 657 (1964); Eastern Railroad Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961).
The district court concluded that PLF’s “fundamental
failure” to produce any evidence supporting its theories,
“in combination with PLF’s failure to point to a cogniza-
ble property interest of the individual plaintiffs in the
relevant markets” showed that PLF “prosecuted these
particular anti-trust claims in bad faith.” It noted that
PLF repeatedly characterized the individual plaintiffs, the
Lockarys, Gilberts and Mr. Macey, as seeking only to
construct single-family homes for their own use on their
property; these statements suggested strongly that the
plaintiffs had no interest in the tourist market they
alleged the defendants sought to restrict. The court also
pointed to the absence of evidence supporting the plain-
tiffs’ theory of a conspiracy to monopolize, and to PLF’s
contradictory statements regarding the defendants’
actions. It concluded, “While the undersigned gives PLF
the benefit of reasonable doubt in the context of a sanc-
tions action, this factual support is simply far too thin to
conclude that PLF could have believed that its clients
ever had the makings of a meritorious case on the anti-
trust claims involving the tourist accommodation and
property development markets.”
[10] PLF contends that the district court could not
require it to develop evidence on a claim that was laid to
rest early in the litigation; it also contends that there was
legal foundation for this claim. PLF distorts the district
court’s position. The court found that the absence of
evidentiary support, the statements regarding the indi-
vidual plaintiffs and PLF’s weak efforts to suggest how it
A-23
might have constructed its case, indicated that the anti-
trust claims were brought in bad faith and known to be
bogus from the beginning. PLF seeks to justify after the
fact the bringing of a cause of action the magistrate found
was in bad faith from the very beginning of the case. In
view of the weakness of these justifications, and of the
detailed factual findings of the district court on PLF’s
handling of these claims, we find it was not an abuse of
discretion to sanction PLF for filing the antitrust claims.
E. The Mesa Ranch Claims
The plaintiffs included among their numbers Mesa
Ranch, a limited partnership, and its general partner,
Anton Holter. One acre of Mesa Ranch, a 210 acre prop-
erty, lies within the Bolinas water district. In their inverse
condemnation claim, these plaintiffs alleged that BCPUD
and its directors had publicized an intent to condemn the
Mesa Ranch property to depress its value, in order that it
could be acquired more cheaply. The plaintiffs also
alleged regulatory taking and substantive due process
violations.
The district court imposed sanctions on PLF not
because it found the claim legally frivolous, but because
it found “subjective bad faith” in PLF’s “presentation” of
the claim. It found that PLF deliberately avoided specify-
ing its theories underlying the claims, and identified
several contradictory statements in papers related to
these claims. It concluded that “PLF conveniently shifted
ground when it was faced with adverse facts or legal
doctrine,” and that “[t]he protean nature of the Mesa
Ranch inverse condemnation cause of action needlessly
A-24
and unreasonably multiplied and confused the proceed-
ings.”
PLF suggests that the sole basis for the “massive
sanctions” on this issue was the district court’s finding
that it “shifted the grounds of its claim during this litiga-
tion.” It also argues that the district court found it contra-
dicted itself as to the defendants’ motives for their
actions, while motive is not an element of an inverse
condemnation claim under Klopping v. City of Whittier,
500 P.2d 1345 (1972). However, the district court’s find-
ings go beyond this. It found that PLF shifted its allega-
tions to suit its purposes, in such a way as to make it
more difficult for the district court to address the claims
and more costly for the defendants to respond to them.
While PLF suggests that there were few papers filed with
respect to these claims and thus few opportunities to
“shift” claims, it seems significant that several of the
contradictory allegations came in papers filed in opposi-
tion to the defendants efforts’ to get rid of the claims, on
motions for summary judgment or motions to dismiss.
The district court concluded that “the obfuscatory and
inconsistent manner in which PLF presented this claim
throughout the course of this litigation was deliberate,
not merely a product of sloppy lawyering.” Imposition of
sanctions for PLF’s continual effort to “move the target”
was not an abuse of discretion.
F. The Motion to Strike
Early in the litigation, several defendants filed
motions to strike or dismiss certain claims. PLF filed a
counter motion to strike some of these motions. With
i iil tii ta
ee
A-25
regard to three of the motions, it contended that the
defendants had improperly submitted affidavits and
other supporting materials. It contended that another
defendant’s motion was late. In support of its motion to
strike defendant BCPUD’s motion, it argued BCPUD had
failed properly to move the court for relief because it had
not filed a motion to strike, but only a notice of motion
and a supporting memorandum. The district court found
that this final claim for relief was asserted “in bad faith
and unreasonably and vexatiously multiplied the pro-
ceedings.”
In the past, we have held that “if there is a colorable
claim to a particular type of relief on a given set of facts
and the signer relies on an unsupportable legal theory to
bolster his claim when a supportable one exists as well,
the singer cannot be sanctioned under Rule 11.” Town-
send v. Holman Consulting Corp., 914 F.2d 1136, 1141
(9th Cir. 1990) (en banc). Here, however, PLF raised only
one argument in support of its claims for relief against
BCPUD, and the district court found PLF took this post:
tion in bad faith. While the court did not find PLF’s other
claims in the same motion to be sanctionable, those sound
claims cannot shield this improper one. We thus hold that
the district court’s sanctioning of this act of gratuitous
overlitigation was not an abuse of discretion
IV. Amount of Sanctions
PLF challenges several aspects of the magistrate’s
calculation of the amount of sanctions. It finds error in
several specific calculations, in the award of attorneys
A-26
fees for the defendants’ preparation of the sanctions
motion, and in the magistrate’s method of calculation.
A. Method of Calculation
PLF argues that the district court erred in its method
of calculating the amount of sanctions. It contends that
the magistrate “proceeded without any evidence in for-
mulating the amount of the attorneys’ fees to be
awarded.” Appellants’ Opening Brief at 47.
This court has required that “a sanctions award be
quantifiable with some precision and properly itemized
in terms of the perceived misconduct and the sanctioning
authority.” In re Yagman, 796 F.2d 1165, 1184 (9th Cir.),
amended, 803 F.2d 1085 (9th Cir. 1986), cert. denied, 434 U.S.
963 (1987). “When the sanctions award is based upon
attorney’s fees and related expenses, an essential part of
determining the reasonableness of the award is inquiring
into the reasonableness of the ciaimed fees. ... [T]he
court must make some evaluation of the fee breakdown
submitted by counsel.” 796 F.2d at 1184-85.
[11] The district court has set out in detail the calcu-
lations used to determine the amount of attorneys’ fees
awarded as sanctions. The magistrate took the time sheets
and other materials the defendants’ attorneys submitted
as his point of departure. Because PLF generally
addressed more than one claim in each of its papers, and
the time sheets submitted by the defendants’ attorneys
did not break down the time spent answering a motion
into the individual claims addressed in it, the magistrate
concluded he was required to apportion the listed figures
to arrive at the time spent on the frivolous claims or
ana iti i i i i
SN
A-27
motions. This necessarily involved some estimation. In
apportioning time, the magistrate attempted to take into
consideration the rule the particular attorney played in
the legal action at issue and the complexity of the tasks
she faced. The magistrate emphasized that he attempted
to be conservative in his estimates. The magistrate thus
made careful calculations on the basis of the voluminous
records submitted to him. We find this method meets the
requirements we have set for quantifying sanctions
awards.
[12] However, two items included in the magis-
trate’s calculations are problematic. First, the magistrate
included an amount for “second chair counsel” in each
sanctions award. He reasoned that, “given the complexity
and time demands of a case like this, it was reasonable
for each law firm that represented one or more defen-
dants to have a second lawyer keep up sufficiently with
the case so that he or she was in a position to help meet
deadlines, cover appearances, or handle communications
with other counsel or clients when the lead attorney was
not available.” This part of the award is not based on the
submitted timesheets and is highly speculative. A law
firm would generally pass the billable costs of this “sec-
ond chair” to its clients, and such costs would appear in
some form in its timesheets. Without documentation, the
magistrate should not have included this item.
Additionally, the magistrate included in his appor-
tionment a figure to account for “work not directly
reflected in or inferable from papers docketed in the
court’s file,” such as time to interview and confer with
clients, analyze documents, formulate strategies, and con-
fer and coordinate with co-counsel. Again, we find that
A-28
inclusion of this additional time, which was in no way
supported by documentation, was improper.
With the exception of including these two items the
district court did not abuse its discretion in adopting the
magistrate’s method of calculation.
B. Fees for Defendants’ Pursuit of Sanctions
PLF argues that the district court erred in including
the defendants’ costs of preparing and supporting their
motion for sanctions in the amount of sanctions it
awarded.
We have not yet ruled on this question, and directly
applicable authority from other courts is scant. In a case
involving Rule 11 sanctions, the Fourth Circuit has held
that costs of preparation of a sanctions motion cannot be
included in the sanctions. Introcaso v. Cunningham,
857 F.2d 965, 970 (4th Cir. 1988). However, in a case
involving Rule 37(c) sanctions for discovery abuse, the
Eighth Circuit has held that the sanctions can include the
costs of seeking sanctions. Booker v. Stauffer Seeds, Inc. (In
re Stauffer Seeds, Inc.), 817 F.2d 47, 50 (8th Cir. 1987).
Lower courts have also taken differing positions. Com-
pare, e.g., Nasco, Inc. v. Calcasieu Television and Radio,
124 F.R.D. 120, 143 (W.D. La. 1989) (costs of bringing
sanctions motion included in sanctions), aff'd, 984 F.2d
696 (5th Cir. 1990, aff'd, 111 S.Ct. 2123 (1991); Blossom v.
Blackhawk Datsun, Inc., 120 F.R.D. 91, 102 (Rule 11 sanc-
tion award including costs of pursuit of sanctions)
(S.D. Ind. 1988) with Unanue Casal v. Unanue Casal,
132 F.R.D. 146, 151-52 (D.N.J. 1989) (declining to award
iy
A-29
attorneys’ fees for bringing sanctions motion), aff'd,
898 F.2d 839 (ist Cir. 1990).
The Supreme Court's recent decision in Cooter & Gell
v. Hartmarx Corp. fortunately provides some guidance on
this issue. The Court held that the party who sought
sanctions under Rule 11 was not entitled to reimburse-
ment for the costs of defending an award of sanctions on
appeal. The Court rejected the argument that such costs
were incurred “because of” the sanctioned party’s filing
of the offending pleading. The court refused to adopt the
position of the party seeking sanctions that “[it] would
have incurred none of [its] appellate expenses had peti-
tioner’s lawsuit not been filed.” Cooter & Gell, 110 S.Ct.
at 2461. The court found that “[t]his line of reasoning
would lead to the conclusion that expenses incurred
“because of” a baseless filing extend indefinitely. The
court reasoned:
We believe Rule 11 is more sensibly understood
as permitting an award only of those expenses
directly caused by the filing, logically, those at
the trial level. A plaintiff’s filing requires the
defendant to take the necessary steps to defend
against the suit in district court; if the filing was
baseless, attorneys’ fees incurred in that defense
were triggered by the Rule 11 violation. If the
district court imposes Rule 11 sanctions on the
plaintiff, and the plaintiff appeals, the expenses
incurred in defending the award on appeal are
directly caused by the district court’s sanction
and the appeal of that sanction, not by the plain-
tiff’s initial filing in district court.
Id. at 2447.
AS A
A-30
[13] Cooter & Gell suggests that the trial court
should limit sanctions to the opposing party’s more
“direct” costs, that is, the costs of opposing the offending
pleading or motion. We thus find that the district court
erred in including the defendants’ attorneys’ fees for
preparing their motion for sanctions in the sanctions it
imposed.
C. Specific Errors
PLF argues that “the court below erred by awarding
fees for conduct that was not found to be sanctionable.” It
cites four specific examples.
PLF argues that the court awarded fees for defen-
dants’ opposition to a motion to intervene, that, accord-
ing to it, “was completely unrelated to any conduct on
the part of the plaintiffs.” Appellants’ Opening Brief at 45.
The magistrate allowed reimbursement of 20% (a “mod-
est percentage”) of the defendants’ attorneys’ time spent
on this, on the theory that “but for PLF’s pursuit of this
action, of which, at this juncture, vis-a-vis BCPUD, some
20% was devoted to sanctionable claims, there would
have been no action in which Morganstein could have
tried to intervene; moreover, one of the substantive predi-
cates for his complaint in intervention tracked in essence
the sanctionable procedural due process claims that PLF
continued to press.” We agree that inclusion of this item
constituted an abuse of discretion: although Morgans-
tein’s intervention “piggybacked” on the action it had
filed, PLF was not responsible for his decision to seek
intervention or for the claims he chose to make.
ih macs, ne
a ek
A-31
The defendants’ attorneys indicated they spent two
hours researching and drafting their opposition to the
plaintiffs’ motion to strike. The district court found 100%
of this time to be reimbursable. PLF is correct in its
argument that because only one paragraph of this motion
was found to be sanctionable, the district court should
have apportioned the time.
PLF argues that the district court erred in awarding
fees for the defendants’ response to the original com-
plaint although, in his report on sanctions, the magistrate
refers only to the amended complaint. However, while
the magistrate cites only to the amended complaint, the
original complaint also included the claims the district
court found to be frivolous or in bad faith. Thus, the
district court did not err in ordering PLF to pay a portion
of the defendants’ attorneys’ fees for responding to it.
[14] Finally, PLF also contends the district court
erred in awarding fees for the defendants’ attorneys’
participation in “settlement conferences and . . . dis-
covery proceedings” although “there was no finding of
sanctionable conduct in any of these proceedings.” Appel-
lants’ Opening Brief at 45. PLF cites to a page in the
magistrate’s report which does not mention a “settlement
conference,” but does refer to a “status conference.” The
district court awarded reimbursement of 20% of the
defendants’ attorneys’ fees for this activity. This was not
an abuse of discretion: the conference necessarily
involved discussion of the claims the court found to be in
bad faith.
A-32
CONCLUSION
We affirm the district court’s decision to sanction
PLF. However, we find the district court erred in impos-
ing sanctions for the procedural due process claim and
the abstention motion. The elimination of these items will
necessitate a recalculation of the dollar amount of the
sanctions. We have also identified other errors in the
calculation of the amount of sanctions. We remand to the
district court for recalculation of the sanctions award in
accord with this decision. The parties shall bear their own
costs on appeal.
AFFIRMED IN PART, REVERSED IN PART AND
REMANDED).
B-1
APPENDIX B
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
MATTHEW LOCKARY, et al., ) C-82-6191 (SW)
Plaintiffs, ) ORDER ADOPTING
; ) FINDINGS OF
: ) MAGISTRATE
PAUL KAYFETZ, et al., BRAZIL
} T !
Defendants. NUNC PRO TUNC
‘ APRIL 2, 1990
(Filed Jan. 14, 1991)
Although I originally signed this order April 2, 1990,
the court records indicate that the order was not filed.
Thereforé, this order nunc pro tunc April 2, 1990, shall
serve as the official record.
| have carefully reviewed the Report and Recommen-
dations by Magistrate Brazil acting as Special Master and
filed on January 11, 1990, with respect to the liability of
plaintiffs’ attorneys for sanctions. | have also read and
considered the comments on that Report submitted by the
parties. | HEREBY ADOPT THE FINDINGS OF FACT
AND CONCLUSIONS OF LAW AND ACCEPT THE REC-
OMMENDATIONS CONTAINED THE REPORT BY
MAGISTRATE BRAZIL. I find that the circumstances of
this case clearly support the imposition of substantial
monetary sanctions on the Pacific Legal Foundation. In
addition, the Magistrate’s findings of fact and conclu-
sions of law clearly justify his issuing an order requiring
attorneys Darlene Ruiz, Ronald Zumbrun, Harold
B-2
Hughes, Orrin Finch, and Robert Best, to show cause why
they should not be sanctioned in their individual capaci-
ties. However, | concur with the comment made by
Pacific Legal Foundation in the objection filed January 29,
1990, that Ms. Ruiz may not be held liable for attorneys’
fees under Rule 11 for signing the Motion tc Strike
referred to on page 100 of the Report, because that
motion had been signed several months before the effec-
tive date of amended Rule 11, and an award of attorneys’
fees not provided for the old Rule 11.
I hereby ORDER Magistrate Brazil to commence fur-
ther proceedings on the issue of the amount of the sanc-
tions to be imposed on the Pacific Legal Foundation, and
on the issue of the liability for the sanctions of the indi-
vidual attorneys noted in the Report. If the Magistrate
concludes that any attorney or attorneys should be sanc-
tioned in their individual capacities, he should also make
findings and recommendations with respect to the nature
and degree of those sanctions.
IT IS SO ORDERED.
DATED: 1/14/91 /s/ Spencer Williams
UNITED STATES
DISTRICT COURT JUDGE
C-]
APPENDIX C
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
MATTHEW LOCKARY, NO. C 82 6191 SW/WDB
et al., REPORT AND RECOM-
Plaintiffs, MENDATIONS OF SPE-
CIAL MASTER RE
LIABILITY ASPECTS OF
PAUL KAYFETZ, et al., DEFENDANTS’ MOTIONS
FOR SANCTIONS
/ (Filed Jan. 11, 1990)
V.
Defendants.
I. INTRODUCTION
On November 16, 1987, the District Court, by the
Honorable Spencer Williams, granted summary judgment
to defendants on all remaining claims in plaintiffs’
amended complaint. Defendants subsequently moved for
sanctions against plaintiffs and plaintiffs’ counsel, the
Pacific Legal Foundation (“PLF”). The District Court
referred defendants’ motions to this court, as special mas-
ter, on June 22, 1988. Prior to referral, the parties had
briefed the motions in anticipation of hearing by Judge
Williams, who at that time had a familiarity with the case
spanning six years.
Due to conflicting schedules of counsel, a status con-
ference was not held by this court until October 6, 1988.
At that time, the court determined that defendants had
presented substantial bases for their claims for sanctions,
bases that plaintiffs had not adequately rebutted. The
court also determined that because the briefs reflected the
parties’ expectation of a hearing before a judge intimately
CS
C-2
familiar with the numerous factual and legal issues pre-
sented by this case, those briefs were inadequate to sup-
port a competent decision by a judicial officer previously
unfamiliar with the case. Thus, necessity required the
filing of supplemental briefs by the parties and this court
so ordered. Subsequently, the court also called for briefs
on the First Amendment and other concerns that may
arise when, as here, a nonprofit, public interest law firm
faces sanctions after bringing claims on behalf of plain-
tiffs who bring civil rights claims.
At the court’s invitation, the parties have submitted,
at each of several different stages of briefing on these
matters, substantial evidentiary material that it has been
necessary for the court to study. The court has taken all of
this material into account in reaching the conclusions set
forth here, but it has not assumed that all of the material
would be admissible under the rules of evidence or that
all of it carries the same persuasive power. Since the
purpose of the instant sanctions proceedings is not to try
the case on the merits, but to explore the predicates (in
information from the realaworld and in the law) for the
many different claims advanced and positions taken by
PLF on behalf of plaintiffs, it is appropriate to take into
account some matter that might not be admissible under
the rules of evidence. In some instances, however, it also
has been appropriate to pass judgment on the relative
reliability and persuasive power of the documents and
declarations that have been presented. Where the exercise
of such judgment has played a material role in the rea-
soning that supports any given conclusion or recommen-
dation, we so indicate.
C-3
The careful consideration this court gave to all of the
legal and factual matter that the parties presented in
stages over a period of months consumed a great deal of
our time. Then, in August of 1989, just before we were
ready to circulate for comment our draft findings, a panel
of Ninth Circuit judges issued Townsend v. Holman Con-
sulting Corp., 881 F.2d 788 (9th Cir. 1989), rehearing en banc
granted, 888 F.2d 646 (1989). For reasons that will become
clear, that opinion (which is being reconsidered as we
write by the Court of Appeals en banc, although it has not
been vacated) substantially changed the legal environ-
ment in which we were working and forced us back to
the drawing board.
We finally issued our findings and recommendations
in draft form on September 8, 1989. Appreciating the
sensitivity of the matters with which we were dealing,
and the magnitude of the potential sanctions, we wanted
comments from all interested parties before reaching our
final conclusions. Even though we had committed very
substantial resources to considering the materials that
already had been submitted and to preparing the draft of
our report, we received comments that compelled us to
reexamine many of the predicates for our conclusions in
the draft. In response to PLF’s submissions, in particular,
we again examined the legal theories underlying the orig-
inal and the amended complaints. Just as the District
Court did, we have had considerable difficulty under-
standing what some of plaintiffs’ theories were. This
difficulty we blame in part on ourselves, but primarily on
PLF’s repeated failure to articulate thuse theories in a
_ Straightforward manner--its papers are compromised
- repeatedly by cryptic or conclusory assertions—-and on
C-4
the fact that PLF often shifted ground on its legal theo-
ries. As we will make clear below, we were confronted in
some key instances with legal targets that were simul-
taneously shifting and opaque.
After investing a great deal of effort, and at times
searching independently for possible rationales for PLF’s
legal theories, this court decided that, given the demand-
ing standards that the Ninth Circuit imposes in these
kinds of proceedings, it was inappropriate to find, as we
had in our draft recommendations, that PLF had com-
menced and prosecuted this entire action in bad faith. As
we make clear in the pages that follow, we have con-
cluded that a finding of bad faith is appropriate for only
some of the causes of action in the original and amended
complaint, not for these pleadings in their entirety. We
also have concluded that PLF and/or individual, named
attorneys proceeded in bad faith (1) in the manner in
which they presented the inverse condemnation claims of
the Mesa Ranch/Holter plaintiffs, (2) in filing a motion to
strike, (3) in taking mutually exclusive positions on the
same abstention issue at two different stages in the litiga-
tion, and (4) in refusing to comply with Judge Williams’
order to “plead with specificity facts which indicate a
nexus between each defendant and the alleged wrongs
suffered.”
As we were working through our revisions of the
draft report the Supreme Court issued its opinion in
Pavelic & LeFlore v. Marvel Entertainment Group,
58 U.S.L.W. 4038 (U.S. Dec. 5, 1989), holding that Federal
Rule of Civil Procedure 11 as currently written cannot
serve as a basis for imposing sanctions on a law firm, but
only on the individual attorney who actually signed the
C-5
offending paper. we have considered carefully the impli-
cations of the Pavelic opinion for the motions under sub-
mission here. That opinion obviously forecloses reliance
on Rule 11 to sanction PLF as an entity. We also have
concluded, for reasons set forth in a subsequent section,
that 28 U.S.C. § 1927 probably cannot serve as authority
for imposing sanctions on PLF itself.
We believe, however, that shortfalls in the reach of
Rule 11 and § 1927 do not rob the District Court of its
inherent authority to take steps necessary to perform the
functions assigned to it under the Constitution. Rule 11
and § 1927 are each independent, affirmative grants of
authcrity to impose sanctions. They do not purport to
displace one another. Nor do they purport to displace
other grants of authority to assess attorneys’ fees (such as
42 U.S.C. § 1988). In sum, they do not occupy the entire
field of sanctioning authority (e.g., they co-exist with
Rules 26(g) and 37). A court’s exercise of its inherent
authority to reach transgressions or transgressors that are
not reached by Rule 11 or § 1927 would be problematic
only if, in exercising that authority, the court was clearly
undermining or defeating the purposes that inspired the
rule or the statute. We believe that imposing sanctions on
PLF in the circumstances of this case would have no such
untoward effect. Rather, we believe that imposing the
sanctions we recommend would advance many of the
important policies that inform both Rule 11 and § 1927.
In considering these issues, we ask the District Court
to examine the dictum at the end of the majority opinion
in Pavelic, U.S.L.W. at 4039-40, dictum that could be used
to support an argument that exercising inherent authority
in the way we recommend here might utdermine the
C-6
purposes of Rule 11.' Two points should be made about
that dictum. First, it does no more than conclude that the
a Respondents, and the opinion of the Court of
Appeals, rely heavily upon the contention that the
policies underlying Rule 11 will best be served by
holding a law firm accountable for its attorney's vio-
lation. In the Court of Appeals’ words, “[law firm]
responsibility for Rule 11 sanctions will create strong
incentives for internal monitoring, and greater mon-
itoring will result in improved pre-filing inquiries
and fewer baseless claims.” 854 F.2d, at 1480. Even if
it were entirely certain that liability on the part of the
firm would more effectively achieve the purposes of
the Rule, we would not feel free to pursue that objec-
tive at the expense of a textual interpretation as
unnatural as we have described. Our task is to apply
the text, not to improve upon it.
But in any event it is not at all clear that respon-
dents’ strained interpretation would better achieve
the purposes of the Rule. It would, to be sure, better
guarantee reimbursement of the innocent party for
expenses caused by the Rule 11 violation, since the
partnership will normally have more funds than the
individual! signing attorney. The purpose of the provi-
sion in question, however, is not reimbursement but
“sanction”; and the purpose of Rule 11 as a whole is
to bring home to the individual signer his personal,
nondelegable responsibility. it is at least arguable that
these purposes are better served by a provision which
makes clear that, just as the court expects the signer
personally—and not some nameless person within
his law firm--to validate the truth and legal rea-
sonableness of the papers filed, so also it will visit
upon him personally—and not his law firm-—-its retri-
bution for failing in that responsibility. The message
thereby conveyed to the attorney, that this is not a
“team effort” but in the last analysis yours alone, is
precisely the point of Rule 11. Moreover, psychological
—_
C-7
policy arguments relied upon by the respondents in that
case to support law firm sanctions did not compel an
interpretation of Rule 11 at odds with the Rule’s lan-
guage. The majority did not hold that permitting courts to
sanction law firms would undermine the purposes of
Rule 11. Second, the dictum in Pavelic seems to assume
that courts always are faced with an either/or decision in
imposing sanctions, i.e., that a court must. choose
between imposing sanctions solely on the individual law-
yer who signed the pleading, or solely on the law firm.
We do not believe, however, that courts always must
make this choice. Rather, courts could impose sanctions
in appropriate e€ircumstances on both the attorney who
signed the offending paper and on the law firm for which
he or she works. Courts can require the individual lawyer
personally to satisfy a specified part of the sanction
award and require the firm to satisfy a different part of
that award. Moreover, given the deterrence purpose of
effect aside, there will be greater economic deterrence
upon the signing attorney, who will know for certain
that the district court will impose its sanction entirely
upon him, and not divert part of it to a partnership of
which he may not (if he is only an associate) be a
member, or which (if he is a member) may not choose
to seek recompense from him. To be sure, the partner-
ship’s knowledge that it was subject to sanction might
induce it to increase “internal monitoring,” but one
can reasonably believe that more will be achieved by
directly increasing the incentive for the individual
signer to take care. Such a belief is at least not so
unthinkable as to compel the conclusion that the Rule
does not mean what it most naturally seems to say.
Pavelic & LeFlore, 58 U.S.L.W. at 4039-40.
C-8
the Rule, a court need not limit the size of the sanction to
the expenses actually incurred by the victim-party. If
necessary to achieve the deterrence objective, the court
could (although we do not recommend this here) order
the firm and the individual lawyer each to pay sanctions
in an amount equal to the costs incurred by the victim-
party.* In such an order a court could compel the individ-
ual attorney to make his or her payment to the victim-
party and compel the offending law firm to make its
payment to a court fund (e.g., a fund used to support
educational programs for lawyers). In some circum-
stances, sanctions imposed in these ways clearly would
advance the purposes of Rule-11.
In the circumstances of this case, which we describe
in detail infra, we feel that the District Court must have
the authority to impose sanctions on PLF itself if the
Court is to be able to protect itselt from misuse, to protect
the interests of litigants who proceed in good faith, and to
protect the viability of the rules of procedure that Con-
gress and the Supreme Court have adopted. In every
meaningful sense of the word, PLF shared responsibility
for the bad faith actions that we describe below. As we
show in subsequent sections, PLF was the source, the
sponsor, and one of the intended beneficiaries of the
offending conduct. There is no reason to believe that PLF
did not know how this litigation was being handled, or
that PLF was a mere passive and abstract institutional
2 A court that relies only on its inherent authority may not
impose sanctions that exceed the fees incurred by the
party-victim. United States v. Blodgett, 709 F.2d 608, 610-11
(9th Cir. 1983).
C-9
backdrop against which individual attorneys acted inde-
pendently. Instead, PLF’s principal officers formally asso-
ciated themselves with and publicly claimed credit for
the pleadings and other papers that we have concluded
were filed in bad faith. Moreover, because PLF circulated
at least 11 different attorneys through this case (without
ever seeking permission for any attorney to join or to
withdraw as counsel of record), it would be impossible
for the District Court to meaningfully enforce the norms
that Congress and the Supreme Court have established if
the Court could not impose liability for offending those
norms on PLF itself. These norms carry a promise of
procedural fairness that the courts could not fulfill if they
could not impose sanctions on an entity like PLF in
circumstances like those described in the pages that fol-
low. Thus we recommend that, relying on its inherent
authority, the Court impose sanctions on PLF.
We also recommend, however, that the Court order
us to initiate proceedings that cou!d lead to imposition of
sanctions on several individual PLF attorneys—Darlene
Ruiz, Ronald Zumbrun, Robert Best, Harold Hughes, and
Orrin Finch. For reasons set forth infra, we have con-
cluded that certain papers, or parts of papers, were filed
in bad faith. At this stage of the proceedings, it is not
clear to us why the lawyers who signed those papers, or
whose names appeared in the signature blocks, should
not be sanctioned. We hasten to add, however, that it
would not be fair at this juncture to impose sanctions on
these individual lawyers because none of them have
appeared or been represented, as individuals, in these
sanctions proceedings. Should the District Court concur
in our findings of bad faith and in our judgment that
C-10
sanctions proceedings with respect to the individual law-
yers should go forward, then each individual lawyer who
is exposed to possible sanctions under these recommen-
dations should be given notice of this report, and granted
an opportunity both to challenge the findings of bad faith
and to show why it would be unfair or otherwise inap-
propriate to impose personal responsibility on that indi-
vidual for the content of the papers on which his or her
name appears.
At this stage of the proceedings we have decided
only whether parts or all of certain papers were filed in
bad faith. Pursuant to an agreement with counsel, we
have decided to postpone the difficult task of determin-
ing the appropriate size of the sanctions until after resolv-
ing the liability issues. Thus, if the Court accepts some or
all of our recommendations, it should order us to set up
procedures for determining what the amounts of the
sanctions should be.
Il. BACKGROUND
Bolinas is an unincorporated township of approx-
imately 2,000 persons in southern Marin County. A group
of candidates running on an anti-development platform
swept a 1971 election for seats on the board of the Bolinas
Community Public Utility District (“BCPUD”), the only
elected local governmental entity in Bolinas.
In November of 1971 the newly constituted BCPUD
board declared a water emergency and enacted a water
moratorium that prohibited additional water hookups.
BCPUD has re-enacted the moratorium on various occa-
sions since 1971, most recently in 1977.
C-11
Plaintiffs brought this suit in November of 1982
against BCPUD and other defendants on claims arising
out of the moratorium. Plaintiffs were property owners in
the Bolinas area at the time the complaint was filed. Two
of the plaintiffs (the Gilberts) bought their land in 1955,
while others (Mr. Macey and the Lockarys) did not
acquire property in Bolinas until 1979, 1981, and 1982,
several years after the moratorium was enacted. Plaintiffs
Mesa Ranch and its general partner, Anton Holter, have
owned property partially within BCPUD jurisdiction and
partially adjacent to the district since at least the
mid-1970s.
From the outset, plaintiffs have been represented in
this action on a pro bono basis by PLF, a nonprofit, public
interest law firm. PLF also has represented plaintiffs in
two related state court actions.
PLF filed two complaints in the course of this litiga-
tion. Both alleged infringement of plaintiffs’ constitu-
tional and civil rights, as well as various antitrust
violations, by 24 individual and entity defendants,
including BCPUD and 13 of its current and former direc-
tors. The original complaint, filed in November of 1982,
sought $10 million in damages for the civil rights viola-
tions, plus trebled damages for antitrust violations; the
amended complaint, filed in August of 1983, dropped the
$10 million prayer, and asked only for damages according
to proof at trial.
- Ten defendants, BCPUD plus nine current and former
directors, now seek sanctions, in the form of attorneys’
fees, from plaintiffs and plaintiffs’ attorneys, PLF. These
defendants defended this action for a period of five years,
3 ~-
5
j ,
C-12
until the District Court’s final granting of their motion for
summary judgment in November of 1987. BCPUD
retained its own counsel for this litigation. Some of the
individual defendants were provided representation by
their insurance carriers, some defendants were repre-
sented by attorneys acting on a pro bono basis, some
initially appeared pro se, and others retained their own
counsel.
Ill. PROPOSED FINDINGS OF FACT
The findings of fact articulated here are based on the
extensive record that has developed during the course of
this action, and the substantial evidentiary submissions
that have been made in connection with the instant
motion for sanctions. Where the court has made a finding
of fact based upon a declaration, signed pleading, or
other submission, it has done so only where the allega-
tion is either uncontradicted or where all the information
available leads the court, without any significant reserva-
tion, to accept one view of a disputed issue and to reject
the opposing view. In short, the court has applied a “clear
and convincing” standard in its findings of fact even
though a less stringent standard will suffice in such pro-
ceedings. See, e.g., Judge Gesell’s opinion in Cinciarelli v.
Reagan, 556 F.Supp. 99, 101 (D.D.C. 1983) (applying pre-
ponderance of evidence standard to bad faith exception
to American Rule on attorneys’ fees). The court has
applied this stringent standard out of a caution it finds
appropriate where the sensitive concerns that generally
attend imposition of sanctions are made even more deli-
cate when sanctions are sought against a nonprofit,
C-13
public interest law firm giving pro bono representation to
plaintiffs who bring civil rights claims.
1. On November 26, 1971, the Bolinas Community
Public Utility District (“BCPUD”) declared “a water
shortage emergency condition to exist within the area
served by the District” (Resolution No. 93), and enacted
“a water moratorium on new or additional service con-
nections.” Resolution No. 173, July 20, 1977. BCPUD has
continued the moratorium and affirmed it by several
subsequent resolutions: Resolution No. 113, September
13, 1972; Resolution No. 130, January 2, 1974; Resolution
No. 173, July 20, 1977. Exhibit A to Lockary Declaration,
Dkt. No. 384. In declaring the emergency and enacting
the water connection moratorium, BCPUD purported to
act pursuant to California Water Code § 350, et seq.
2. In November of 1982, the State of California
Department of Health Services informed BCPUD that it
was conditioning the district’s state water permit on
BCPUD’s continuation of the moratorium “until addi-
tional water sources are developed and/or an adequate
supply is demonstrated to the satisfaction of the Depart-
ment of Health Services.” Exhibit D to BCPUD’s Status
Conference Statement, Dkt. No. 350 (Department of
Health Services Water Supply Permit and letter setting
forth specific provisions of the permit).
3. The moratorium has been the subject of litigation
in state court. A mandamus action filed in 1976, Bolinas
Property Owner's Association, et al. v. Bolinas Community
Public Utility District, No. 81460 (Superior Court of Marin
County), challenged the moratorium on takings and
equal protection grounds. Exhibit 10 to Finch Declaration
:
C-14
Re Prefiling Inquiry, March, 1989 (original complaint in
BPOA action). After substantial motion activity, the
action was dismissed without prejudice in May of 1979.
In a recent state court mandamus action, Gilbert v. State of
California, No. 636481-0 (Superior Court of Alameda
County), a state court dismissed, with prejudice, claims
that the moratorium resulted in an unconstitutional tak-
ing of property. BCPUD’s Comments re Draft Recommen-
dation, filed Sept. 18, 1989, at 4-5; Yuhas Declaration,
filed Jan. 6, 1989, at ¥ 8 and Exhibit F, (order in Gilbert
granting sanctions to BCPUD). Other causes of action in
the Gilbert case are apparently still pending. BCPUD’s
Comments Re Draft Recommendation, filed Sept. 18,
1989, at 4-5.
4. Plaintiff Matthew Lockary owned real property
in Bolinas, which he purchased in 1981 and 1982. Yuhas
Declaration, January, 1989, at 2, and attached Lockary
Deposition at 10, and Grant Deeds recorded June 15, 1981
and November 5, 1982. Plaintiffs Charles and Phyllis
Gilbert (“the Gilberts”) owned real property in Bolinas,
which they purchased in 1955. Yuhas Declaration, Jan.
1989, at 3, and attached Joint Tenancy Deed recorded
October 6, 1955. Plaintiff James Macey owned real prop-
erty in Bolinas, which he purchased in 1979 and 1982.
Yuhas Declaration, Jan. 1989, at 2, attached Macey Depo-
sition and Grant Deeds recorded September 11, 1979, and
June 2, 1982. These properties consisted of unimproved
lots, zoned for residential development, lying within the
jurisdiction of BCPUD.
5. Plaintiff Anton Holter was general partner of
Mesa Ranch, Inc., whose holdings included approx-
imately 210 acres of unimproved real property, about one
C-15
acre of which was within BCPUD jurisdiction. That por-
tion of Mesa Ranch within the district had been granted a
water meter sometime prior to this lawsuit, and water
service to that acre parcel continued throughout the pen-
dency of this litigation. Holter Declaration, December,
1986, Dkt. No. 344 at 1.
6. In November i981, the Gilberts contacted the
Pacific Legal Foundation (“PLF”), which sometime there-
after agreed to represent the Gilberts and the other plain-
tiffs in this action. Finch Declaration Re Prefiling Inquiry,
March 1989, at ¥ 5. PLF began investigating the facts
underlying the claims of the Gilberts and the other plain-
tiffs at least as early as March of 1982. Finch Declaration
at J 6, and attached Exhibit 4.
7. On November 10, 1982, PLF filed the original
complaint in this case on behalf of Mr. Lockary, the
Gilberts, Mr. Macey, and Mr. Holter. Dkt. No. 1. The
complaint was signed by PLF trial team leader, attorney
Darlene E. Ruiz, with the names of PLF attorneys Ronald
A. Zumbrun and Harold J. Hughes listed above the signa-
ture line. Complaint at 39. The complaint named 24
defendants, including BCPUD ana 13 of its former and
3 The attestation of the complaint reads as follows:
Respectfully submitted,
RONALD A. ZUMBRUN
HAROLD J. HUGHES
DARLENE E. RUIZ
by [signature of Darlene Ruiz]
DARLENE R. RUIZ
Attorneys for Plaintiffs
3
" a “
C-16
current directors, the Bolinas Planning Council (a private
advocacy group) and eight of its directors, as well as the
Marin County planning department.
8. The complaint alleged, inter alia, that defendants
had engaged in an “integrated course of conduct” which
“in the aggregate caused a de facto transfer of substantial
rights and interests in the undeveloped real property
from the owners thereof to defendants and the residents
of Bolinas, through depriving plaintiffs of all reasonable
use of their properties, for the benefit and enrichment of
defendants and certain of the other residents of Bolinas.”
Complaint at 9. The complaint included the following
causes of action:
(1) “taking without compensation”,
(2) “denial of due process of law”,
(3) “discrimination in application of build-
ing and safety and permitting ordinances,
BCPUD resolutions, local coastal plan, and land
regulation laws”,
(4) “deprivation of civil rights,”
(5) claims for “extraordinary relief and
interim damages for temporary taking”
(6) “antitrust violations,” pursuant to
8 USC. 81,
(7) “antitrust violations,” pursuant to
iS U5... 5 4;
and
(8) claims for “declaratory relief,” pur-
suant to 28 U.S.C. §§ 2201 and 2202.
Complaint at 13-36.
C-17
9. Plaintiffs sought damages for civil rights viola-
tions of $10 million (the claimed fair market value of the
property) trebled for antitrust violations under the Sher-
man Act, as well as “interim damages for a temporary
taking . . . [in an amount] presently not precisely ascer-
tainable”, declaratory and injunctive relief, consequential
damages, interest, attorneys’ fees, and costs. Complaint at
36-39.
10. Plaintiffs challenged, without limitation or spec-
ification
a. all existing orders and resolutions of
BCPUD declaring and continuing a water emer-
gency and building moratorium,
b. all county building and safety, water
and sewage, and permitting ordinances, which
have been wrongfully and selectively enforced
against property owners of undeveloped prop-
erty since institution of the moratorium,
c. all statutes, administrative regulations,
and county plans and ordinances in purported
implementation of the local coastal plan dealing
with Bolinas;
d. all discriminatory enforcement of land
use regulations to prohibit and restrict develop-
ment;
e. such further and additional acts of
defendants, and each of them, which are part of
the continuous and integrated course of conduct
herein described, as may hereafter be discov-
ered or determined to be violative of the consti-
tutional provisions above identified as applied
generally for the reasons herein set forth, and
C-18
which may have contributed to the damage
done to plaintiffs.
Complaint at ] 64.
11. Plaintiffs expressly stated that they were not
challenging “the right of a public utility district to law-
fully declare a water ‘emergency’ condition to exist or to
enact a moratorium pending the resolution of the ‘emer-
gency’ condition.” Consolidated Response in Opposition
to Motions Seeking Abstention, Dkt. No. 74 at 7-8; see also
Order and Memorandum Re: Defendants’ Motion for a
More Definitive Statement, Dkt. No. 109.
12. At the first status conference in this case held in
1983, Judge Williams granted defendants’ request to stay
discovery. Status conference order No. 1, Dkt. No. 41.
Notwithstanding the stay of discovery ordered by the
Court on March 7, 1983, PLF shortly thereafter filed an
action for a writ of mandate in state court seeking to
inspect under the California Public Records Act “virtually
all of the Bolinas Community Public Utility District
records.” Order Re Writ of Mandate, Wolfe v. Bolinas
Community Public Utility District, No. 115257 (Superior
Court of Marin Co., order filed Jan. 19, 1984), aff'd by
Wolfe v. Bolinas Community Public Utility District,
No. A026949 (1st App. Dist., filed May 6, 1988) (not
published), attached as Exhibits E and F to Harris Decla-
ration, Feb. 16, 1988. The Superior Court found that the
plaintiffs’ action under the Public Records Act was
“clearly frivolous” and brought “to harass the District”
and “for an improper motive.” Order at 4. The Superior
Court noted that petitioner’s counsel, PLF, “represented
C-19
plaintiffs in a federal action filed in early 1983 [sic]
against the same defendant, (the Lockary case)”, and
that the disclosures plaintiff sought in this
action were to be used in prosecuting the federal
action. A review of events leading to the filing
of this action convinces this Court that this
action was brought for an improper motive.
Order at 4. The state court awarded attorneys’ fees
and costs, which was affirmed on appeal. Exhibit F to
Harris Declaration, Feb. 1988 (Wolfe v. Bolinas Community
Public Utility District, No. A026949 (1st App. Dist., filed
May 6, 1988) (not published)).
13. Five months after the complaint was filed,
defendants moved to dismiss the complaint on the
grounds that (1) there had been no compensable taking,
(2) there were no violations of plaintiffs’ procedural
rights, (3) in the absence of a proprietary interest, and as
BCPUD’s actions were legislative in nature, there could
be no antitrust violations, and (4) all defendants enjoyed
immunity. See, e.g., Memorandum of Bolinas Planning
Council, Dkt. No. 58, and Memorandum of BCPUD, Dkt.
No. 46. Defendants argued that the complaint was time-
barred because it challenged actions of defendants
beyond the three and four year limitations periods for
constitutional and civil rights claims, and beyond the
four year limitations period for antitrust claims. [4
Defendants also argued that the nature and scope otf the
allegations were vague, overbroad, and confusing. Id.
14. On June 22, 1983, the District Court granted
defendants’ motions to dismiss as to all counts, but
granted plaintiffs’ motion for leave to amend. Order and
C-20
Memorandum Re: Defendants’ Motion for a More Defini-
tive Statement, Dkt. No. 109. The Court admonished
plaintiffs for their failure to plead with “specificity” and
their failure to plead a “proprietary interest” in the anti-
trust claims, and admonished plaintiffs’ attorneys for
their “very, very broad .. . [hJard to follow” complaint
and its “mere conclusory statements.” Transcript of Hear-
ing on Plaintiffs’ Motion to Strike and Defendants’
Motion to Dismiss, June 22, 1983, at 11, 22, 27, attached to
Exhibit 14 to Defendants’ Supplemental Appendix, filed
April 3, 1989. The Court also noted its concern over the
possible “detrimental” effect that plaintiffs’ claims of
individual liability on the part of individual BCPUD
directors could have on the willingness of citizens to
serve in local government when they may “have to put all
their entire fortune and their reputation on the line [and]
be subject to many, many lawsuits.” Id. at 39. Judge
Williams gave plaintiffs’ attorneys a final piece of advice
with respect to future complaints: “Be specific.” Id. at 41.
15. In its subsequent order and memorandum, the
District Court went to great length to explain to plaintiffs’
counsel the deficiencies of their pleading:
The court [has] granted what amounts to a
motion for a more definite statement. Plaintiffs’
counsel was instructed to file a new complaint
which states with sufficient specificity facts
which indicate how plaintiffs’ rights were vio-
lated, who was responsible for the pertinent
acts, and when these acts occurred. Counsel was
also directed to state with specificity facts
which, if proven true, prevents [sic] this action
from being time-barred by the applicable stat-
utes of limitations.
As noted, the court agreed with defendants’
contentions that plaintiffs’ claims as asserted in
the complaint are supported by little more than
overbroad, legally conclusory allegations that
fail to adequately identify their legal or factual
bases. Without specification as to who, what,
where, when and how, the complaint, among
other allegations, challenges without limitation
all statutes implementing the local coastal plan,
all BCPUD orders and regulations declaring and
continuing the water moratorium and emer-
gency, all “wrongfully enforced” county build:
ing and safety, water and sewage and
permitting ordinances, all resolutions, county
plans and ordinances implementing the local
coastal plan and all land use regulations which
are being enforced to restrict development.
Despite the breadth of these allegations, the
only clearly specified action that is alleged
involves the enactment by the BCPUD of the
water emergency and moratcrium. It is not clear
from the complaint which of the defendants par-
ticipated in their passage.
* * *
Clear, precise pleadings are particularly impor-
tant in cases such as this in which numerous
defendants are named—including many entitled
to at least some form of immunity, multiple
causes of action are pled against all defendants,
and the allegations encompass an extended
period of time.
* * +
With these considerations in mind, plaintiff is
instructed to plead with specificity facts which
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indicate a nexus between each defendant and
the alleged wrongs suffered.
Equally important, it is expected that the
amended complaint will state with specificity
the dates these acts occurred and the dates
plaintiffs were first injured or first became
aware of their injuries... It is therefore essen-
tial that plaintiffs amend their complaint to state
with specificity facts and dates that have a bear-
ing on the question of timeliness.
Order and Memorandum, July 5, 1983, Dkt. No. 109,
at 3-5.
16. Judge Williams also warned plaintiffs and plain-
tiffs’ counsel that they were running the risk of sanctions:
Finally, the court would be remiss if it failed to
remind plaintiff that it is deeply concerned
about the potential impact this kind of litigation
might have on the willingness of individuals to
become involved in government, either as pri-
vate citizens or as elected officials. If in fact
plaintiffs have been the victims of a comprehen-
sive scheme to deprive them of their civil and
constitutional rights then they shall be compen-
sated with appropriate relief from the appropri-
ate parties. If, however, this action proves, in whole
or in part, to be frivolous, if it proves to be merely a
pretext for “punishing” defendants for their political
beliefs or actions, the court will take whatever steps |
are necessary and proper to ensure that defendants |
are fully compensated for the time and resources they |
are forced to expend in defense of this action.
Id. at 5-6 (emphasis added).
17. Plaintiffs returned with their amended com-
plaint on August 4, 1983. Dkt. No. 112. It was once again
C-23
signed by PLF attorney Darlene E. Ruiz, with Ronald A.
Zumbrun and Harold J. Hughes listed above the signa-
ture line in the manner of the original complaint. See note
3, supra. The amended complaint included 16 claims for
relief, including:
(1) “First Amendment denials”,
(2) “taking of property without payment
of just compensation”,
(3) “denial of due process”,
(4) “discrimination in application of water
usage and utility regulations”,
(5) untitled claim alleging unauthorized
planning activity by the Bolinas Planning Coun-
cil, absence of notice and due process, and arbi-
trary and capricious acts,
(6) “inverse condemnation” of Mesa
Ranch,
(7) “civil rights violations”,
(8) “extraordinary relief and interim dam-
ages for temporary taking”,
(9) “conspiracy to deprive plaintiffs of
civil rights”,
(10) “conspiracy in restraint of trade”,
(11) “conspiracy to monopolize”
(12) “antitrust violations”, and
(13) “declaratory relief”
Amended Complaint at 44 44-212
C-24
Claims numbered two through sixteen “incorpo-
rate[d] by reference each and every paragraph of th[e]
amended complaint ....” Amended Complaint, Passim.
18. Defendants moved to dismiss the amended com-
plaint in October of 1983. The District Court granted the
motion to dismiss the Bolinas Planning Council and its
directors from the action for lack of specificity. Order and
Memorandum Granting In Part and Denying In [Part
Defendants’ Motion to Dismiss, Dkt. No. 168 at 17. The
Court also dismissed all the antitrust claims in the
amended complaint on the grounds that defendants
enjoyed Parker and Noerr-Pennington immunity, and dis-
missed all claims that did “not specifically concern the
enactment and enforcement of the moratorium.” 1d.
at 18-24, 29. The Court denied the motion to dismiss the
claims against BCPUD, BCPUD directors, and the County,
for constitutional and civil rights claims arising out of the
enactment and maintenance of the water moratorium. /[d.
at 27. The Court also held that individual BCPUD direc-
tors were absolutely immune from liability for their legis-
lative acts, but enjoyed only qualified immunity for their
executive acts such as moratorium enforcement. Id. at 27.
19. In order to avoid the statute of limitations bar,
the amended complaint pleaded the “fraudulent conceal-
ment” and “continuing wrong” exceptions. See order and
Memorandum of Law Granting in Part and Denying in
Part Defendants’ Motion to Dismiss, Dkt. No. 168 at 4,
n.2. Throughout the amended complaint, plaintiffs
repeatedly alleged that the acts of defendants “could not
have become known to plaintiffs until sometime after
November 11, 1979” and that plaintiffs “could not have
learned of the unlawful wrongful purpose of defendants
acts until sometime after November 11, 1979.” See, e.g.,
Amended Complaint at G7 114 and 136. The date of
November 11, 1979, had no significance, or factual basis,
apart from its being simply three years before the filing of
the original complaint. Judge Williams held that plain-
tiffs’ fraudulent conceaiment theory “failfed] for lack of
specificity.” In so ruling, he held that plaintiffs could not
“ ‘rely upon conclusory statements to avoid the bar of
limitations,’ but ‘must plead with particularity the cir-
cumstances surrounding the concealment and state facts
showing due diligence in trying to uncover the facts.’ ”
Order and Memorandum, Dkt. No. 168 at 6 (citation
omitted). However, Judge Williams also held that the
“claims which arise directly from the implementation and
enforcement of the water moratorium are not barred
because they fall within the continuing wrong exception
to the statute of limitations.” Id. at 5.
20. Although plaintiff Gilbert claimed in the
amended complaint that he had no knowledge of defen-
dants’ allegedly wrongful acts prior to November 11,
1979, he has admitted that he contributed to and commu-
nicated with the Bolinas Property Owners Association
during the nearly three years of pendency of BPOA’s 1972
state court suit-—a suit which attacked much of the same
conduct that plaintiffs attack in the instant action.4
4 The BPOA suit alleged that the moratorium was “arbi-
trary and capricious”, Complaint at 5 and 8, the water emer-
gency was a “sham” and was enacted for growth control
purposes, id. at 6, 7, 8 and 10, BCPUD failed to maintain or
increase water supply capabilities, id. at 9-10, inadequate notice
was given, id. at 4-5, and plaintiffs suffered deprivation of value
as a result, 1d. at 6.
—
C-26
Gilbert Deposition, Exhibit 3 to Finch Declaration, filed
April 3, 1989
21. In his Order and Memorandum of January 20,
1984, Judge Williams criticized plaintiffs for failing to
comply with his earlier order ‘regarding specificity of
pleading:
[a]lthough plaintiffs have doubled the isumber of
claims for relief and added 21 pages to their
complaint, they have added virtually no spect-
ficity.
Order and Memorandum, Dkt. No. 168 at 4
(emphasis added). For instance, in both the complaint
and the amended complaint, PLF failed to distinguish the
various facts regarding the circumstances of the plaintiffs
and the widely differing dates of their purchase of prop-
erty in Bolinas. Instead, PLF drafted the complaints so as
to lump together the later purchasers with the earlier
ones:
Plaintiffs have owned property and paid taxes
on property within Bolinas for as much as a quar-
ter of a century.
Amended complaint at 9 2 (emphasis added).
Plaintiffs, Lockarys, Gilberts, and Macey, pur-
chased their properties in reasonable reliance on
the ability to build single-family residences. At
all times relevant, all plaintiffs reasonably
planned, intended, and expected to develop and
utilize the property consistent with residential
zoning and building requirements.
id. at J 38 (emphasis added).
C-27
22. In May of 1984, several individual defendants
sought to gain information from plaintiffs concerning
their claims by propounding interrogatories. For exam-
ple, defendant Marguerite Harris propounded a set of six
interrogatories. The first asked:
Please describe fully all acts or omissions or
other conduct of HARRIS which you contend
are both (i) relevant to your claims in this action
and (ii) outside the scope of legislative immu-
nity. In describing such act, omission, or other
conduct, please state (a) the date or dates on
which the act, omission, or other conduct
occurred, (b) describe the place or places at
which the conduct occurred, (c) identify the per-
son or persons present during the act, omission,
or pther conduct, (d) identify all persons who
witnessed the act, omission, or other conduct,
and (e) identify all persons wnom you believe
have any knowledge of the act, omission, or
other conduct.
Exhibit A to Harris’ Memorandum in Support of
Motion for Fees, filed February 16, 1988, at 5.
23. Plaintiffs’ responses to these interrogatories,
dated June 18, 1984 (more than two years after plaintiffs
began their investigations), stated in part:
We have received to date from our clients, from
other individuals, and from public entities sev-
eral tens of thousands of feet of photographic
film and magnetic tape as well as several thou-
sand copies of documents. We have not yet had
an opportunity to review all of the information
that we have collected in this case and we do
not yet know all of the specific answers which
this interrogatory requests.
C-28
PLF then recapped the conclusory claims in the com-
plaint, i.e. that defendant Harris “participated in the fab-
rication and perpetuation of a sham water emergency
designed and implemented for the purpose of preventing
plaintiffs from using their property.” Answers to Harris’
Interrogatories, Dkt. No. 264.
24. Months later, PLF supplemented its answers
with more substantial information about defendants’
alleged wrongful acts. Most of the alleged wrongful acts
were public votes by the defendants while on the BCPUD
board to enact and re-enact the moratorium, approve
various expanded water uses, and approve various trans-
actions involving BCPUD property. See Supplemental
Answers, Dkt. Nos. 272-78.
25. The Mesa Ranch property was sold to the
United States in 1984, during the course of this litigation,
for $1,100,000. Exhibit J to Harris Declaration, filed
May 20, 1987.
26. Plaintiffs filed a motion in 1985 asking the court
to abstain from exercising its jurisdiction, under the Pull-
man abstention doctrine, so that a state court action could
be filed. Dkt. No. 298. The motion and accompanying
memorandum were both signed by Robert K. Best of PLF,
with the names of PLF attorneys Ronald A. Zumbrun and
Thomas W. Birmingham listed above the signature line.
Dkt. Nos. 298 and 299. PLF moved for abstention despite
the fact it opposed defendants’ Pullman abstention
motion brought two years earlier. In its 1985 motion, PLF
argued that “the aspect of this case relating to the alloca-
tion of water 1s a most sensitive area of social Policy during
times of a water shortage.” Plaintiffs’ Memorandum in
C-29
Support of Abstention, Dkt. No. 299 at 3 (emphasis
added). However, in response to defendants’ earlier
motion, PLF had argued that “[nJo sensitive area of social
policy exists; no definitive ruling on a state issue would
avoid the constitutional adjudication; no determinative
issue of state law would remain in doubt should the
federal court decide the issues.” Consolidated Response,
Dkt. No. 74 at 1 (emphasis added).
27. Plaintiffs renewed their abstention motion in
January of 1987. Dkt. Nos. 338 and 339.
28. In February of 1987, PLF filed a motion to dis-
miss with prejudice all of the remaining claims it brought
on behalf of the Mesa Ranch/Holter plaintiffs. Dkt.
Nos. 342 and 343. Neither the notice of motion nor the
accompanying memorandum inciuded any discussion of
fees and costs. In the proposed dismissal order PLF
included the proviso that “all parties [would] bear their
own costs and attorneys’ fees.” Mesa Ranch Proposed
Order Re Dismissal Motion, submitted with Dkt. No. 343.
29. Defendants refused to waive any right to collect
fees and costs and proposed that the dismissal order
reserve the issue of responsibility for fees and expenses.
PLF then refused to accept the reservation offered by
defendants, and the Court denied PLF’s motion to dis-
miss its claims on the terms on which it insisted. See
Transcript, March 4, 1987 at 18.
30. Following the District Court’s refusal to let
Mesa Ranch/Holter voluntarily dismiss, BCPUD and
other defendants moved for summary judgment against
plaintiffs on the remaining takings, inverse condemna-
tion, and due process claims. Dkt. Nos. 361-67, 371-80,
C-30
and 419-20. Plaintiffs filed papers opposing summary
judgment. Dkt. Nos. 381, 382, and 432.5
31. In August of 1987, while opposing the motions
for summary judgment, PLF once again renewed its
motion for abstention and simultaneously moved for dis-
missal of all claims against seven of the remaining ten
individual defendants “only to facilitate abstention.”
Consolidated Memorandum in Support of Motions for
Order Abstaining from Exercise of Jurisdiction and Dis-
missals, Dkt. No. 423 at 6. Based on their interest in
obtaining full summary judgment and an award of attor-
neys’ fees as sanctions, and on their fear of a “guaranteed
return trip to this court,” defendants opposed the
renewed motion for abstention and the dismissals.
BCPUD Response, Dkt. No. 439 at 2-10.
32. On November 16, 1987, the District Court
denied plaintiffs’ motions for voluntary dismissal and
abstention and granted defendants’ motions for summary
judgment. Order Denying Plaintiffs’ Motion For Absten-
tion and Granting Defendants’ Motions For Summary
Judgment, Dkt. No. 457. Judge Williams granted sum-
mary judgment against the taking (inverse condemna-
tion) and substantive due process claims of plaintiffs
Lockarys, Gilberts, and Macey on the grounds that these
> All three opposition papers were submitted by Ronald
Zumbrun, Robert Best, and Orrin Finch of PLF. The opposition
papers to summary judgment on the Mesa Ranch/ Holter claims
and on the inverse condemnation and due process claims were
actually signed by Mr. Best, while the opposition to summary
judgment on the procedural due process claims was signed by
Mr. Finch.
C-31
plaintiffs, as only potential water users, had no property
right recognized by California law in a water hookup
upon which to base an inverse condemnation or due
process action. Id. at 7. Judge Williams also granted sum-
mary judgment against these plaintiffs’ procedural due
process claims on the grounds that individualized notice
was not required under established principles of constitu-
tional law, that defendants’ compliance with state law
requiring notice by publication of water moratorium
enactment was sufficient to satisfy due process, and that
plaintiffs lacked a property interest in a water hookup. Id.
at 6-8. Finally, Judge Williams dismissed plaintiffs Mesa
Ranch/Holter’s “precondemnation de facto taking” claim
on the grounds that defendants’ challenged actions “do
not rise to the level of condemnation proceedings.” Id.
at 12.
33. Various defendants then moved for sanctions in
the form of attorneys’ fees, including the following defen-
dants and their attorneys, in the following claimed
amounts:
a. BCPUD, by Richard Harris: “in excess of
$250,000 [Dkt. Nos. 497-500];
b. Marguerite Harris, by Matthew White:
$17,834.12 [Dkt. Nos. 480-82];
c. Judith Weston, by Larry Langley:
$22,908.75 [Dkt. Nos. 484-85];
d. William Niman and Orville Schell, by
Gary Ginder: $27,175.82 [Dkt. Nos. 486-89];
e. Paul Kayfetz, by Michael Hardiman:
$87,961.00 [Dkt. Nos. 491-92];
ee
C-32
f. Doris LeMieux, Diana Lopez Farns-
worth, and Jack McClellan, by Laurence Pul-
gram: $36,842.39 [Dkt. Nos. 494-96];
g. Victor Amoroso, by David Becht:
$32,885.61 [Dkt. Nos. 501-03}.
34. Plaintiffs and PLF have been on notice from the
beginning of this litigation that defendants were likely to
seek sanctions. From the start, defendants have decried
these claims as frivolous and brought in bad faith.
BCPUD Answer, Dkt. No. 179 at 4 125-128 & Prayer; see
also Answers filed by other defendants, Dkt. Nos. 172-81,
185, and 186. Defendants’ pleadings included prayers for
“attorneys’ fees and costs incurred as a result of bad faith
and malice of plaintiffs and of their attorneys.” See. e.g.,
Answer of Harris, Dkt. No. 172 at 23. At least as early as
February of 1987 defendants had notified the District
Court, plaintiffs Mesa Ranch/Holter, and PLF, that they
were seeking attorneys’ fees for the “groundless” claims
asserted by counsel for those plaintiffs. BCPUD’s Status
Conference Statement, Dkt. No. 350 at 4.
35. In March of 1988, PLF brought a state court
action on behalf of plaintiffs Lockarys, Gilberts, and
Macey, Gilbert v. State of California, No. 636481-0 (Superior
Court of Alameda County), asserting, under parallel! state
constitutional provisions, some of the same claims
asserted in the dismissed federal action. Yuhas Declara-
tion, Jan. 1989, at J 8. After the state court judge sus-
tained BCPUD’s demurrer to the inverse condemnation
claims, PLF filed an amended petition which included, in
virtually unchanged form, those same causes of action. In
sustaining BCPUD’s second demurrer, the state court
invited a motion for sanctions. BCPUD’s subsequent
C-33
motion for sanctions was granted in its entirety. See
Exhibit F to id. The sanctions award to BCPUD has been
affirmed on appeal. Gilbert v. State of California,
No. A044805 (Ist App. Dist., Div. 4, filed Dec. 27, 1989)
(not published).
36. PLF was the sponsor of this litigation, and was
actively involved in all phases of the case. PLF has
repeatedly been described by its president, Ronald A.
Zumbrun, as the force behind the Lockary lawsuit:
One of the most significant PLF law suits in
recent years was filed late last year in San Fran-
cisco federal court... .
PLE filed suit on behalf of five property owners
in Bolinas. .. .
As in many land use cases brought by PLF....
The PLF suit alleges that water district policies
violate the Fifth Amendment guarantee of pay-
ment of just compensation. .. .
This case will be an extremely important one for
3 ae
Exhibit C to Harris Declaration, June 1988 (excerpts
from the Pacific Legal Foundation publication, The Repor-
ter, March 1983).
37. In claiming credit for this action, Mr. Zumbrun,
whose name was listed as a counsel of record on both
complaints, also made clear PLF’s intent in the case:
C-34
By filing this suit in federal court, PLF hopes to
stem this frightening practice from moving
nationwide.
Id.
PLF has filed suit against the [water] district in
federal court, thus circumventing the California
courts, which have been decidedly reluctant to
clarify the just compensation issue in other PLF
cases. We are seeking substantial personal dam-
ages from the water district board members,
putting all government entities on notice that
we are going to the mat on this one. We have
requested a jury trial, and will be arguing on the
basis of Fifth Amendment rights, just compensa-
tion, Civil Rights Act guarantees, and Sherman
Antitrust implications. . . . It should make for
some interesting courtroom proceedings.
Exhibit H to Harris Declaration, Feb. 1988 (excerpts
from Pacific Legal Foundation publication, The Reporter).
38. PLF’s 1985-1986 Annual Report, in a section
titled “Litigation and Regulatory Reform,” listed “cases
and issues in which PLF actively participated in fiscal
year 1985-86.” The list described this case and the Wolfe
state court action: “Lockary v. Kayfetz (supporting prop-
erty and civil rights of property owners)” .. . “Wolfe v.
Bolinas Community Public Utilities District (supporting
right of public access to public records).” Exhibit J to
Harris Declaration, Feb. 1988, at 12-13.
39. Plaintiffs have been represented throughout this
action only by PLF attorneys. PLF has circulated no fewer
than eleven attorneys through this case, none appearing
or withdrawing by formal leave of court. See, e.g., Dkt.
Pitesti
—
C-35
Nos. 1, 249, 335, 338, 506, and 510. Virtually every page of
every pleading filed by plaintiffs in this case (now con-
taining over 630 docket entries) has been on pleading
paper imprinted with the PLF logo, name, address, and
telephone number. Passim.
40. PLF has represented itself to be a law firm that
participates in litigation “as counsel” and that exercises
“quality control” in litigation. Exhibit I to Harris Declara-
tion, Feb. 1988 (PLF Tenth Annual Report at 1). PLF has
represented itself to the Internal Revenue Service and to
the Attorney General of California as a “Public Interest
Law Firm.” Exhibit G to id. (PLF’s Periodic Report to
Attorney General of California). PLF fundraising solicita-
tions are based on it status as a law firm:
[PLF is t]he largest nonprofit, public interest law
firm of its kind, dedicated to insuring that the
rights of the public prevail over the rights of
narrowly-based special interest groups.
Exhibit I to Harris Declaration, Feb. 1988, at 1
(excerpt from PLF Tenth Annual Report). PLF has repre-
sented that a plaintiff in a case filed by PLF attorneys is a
“Pacific Legal Foundation client.” Exhibit B to Harris
Declaration, June 1988 (The Recorder, May 13, 1985).
41. During the pendency of this litigation, PLF has
used its involvement in this case and the Wolfe case as a
basis to solicit financial contributions. Exhibit J to Harris
Declaration, Feb. 1988 and Exhibit C to Harris Declara-
tion, June 1988. PLF fundraising efforts generated
$2,234,349 between March 1, 1983 and February 29, 1984.
Exhibit G to Harris Declaration, Feb. 1988. Various PLF
C-36
publications, reports, and pamphlets carry PLF fundrais-
ing, solicitations based on reports of litigation in which
PLF is involved, including this case. See, e.g., Exhibits H,
|, J, and K to td. For instance:
[In 1982] PLF participated in more than 100
separate cases involving the environment, land
use, property rights ... We entered into a nation-
ally significant land use case involving a water dis-
trict in Bolinas, California, which is restricting
water access as a means of furthering its own no-
growth policies. This one may well go all the way to
the U.S. Supreme Court, and finally force the Court
to address the issue of just compensation for the
unlawful taking of private property.
ld., Exhibit I at 2 (emphasis added).
IV. LEGAL STANDARDS
Defendants propose four partially overlapping
authorities as bases for imposing sanctions. They include
the inherent equitable authority of the court, 28 U.S.C.
§ 1927, 42 U.S.C. § 1988, and both the pre- and post-1983
versions of Federal Rule of Civil Procedure 11. Each is
discussed in turn.
A. The Inherent Equitable Authority of the Court
“Although the traditional American rule ordinarily
disfavors the allowance of attorneys’ fees in the absence
of statutory or contractual authorization, 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, 93 S.Ct. 1943, 1945-46,
36 L.Ed.2d 702 (1973) (citations omitted). Accordingly,
when a prevailing party’s opponent has acted “in bad
C-37
faith, vexatiously, wantonly, or for oppressive reasons,” a
federal court may award attorneys’ fees under its unques-
tioned inherent authority.® Id., quoting 6 J. Moore, Federal
Practice ] 54.77[2], at 1709 (2d ed. 1972) (citations omit-
ted). See also Alyeska Pipeline Co. v. Wilderness Soctety,
421 US. 240, 258-259, 95 S.Ct. 1612, 1622, 44 L.Ed.2d 141
(1975); and Roadway Express, Inc. v. Piper, 447 U.S. 752,
766, 100 S.Ct. 2455, 2464, 65 L.Ed.2d 488 (1979).
The “bad-faith” exception “for the award of attor-
ney’s fees is not restricted to cases where the action 1s
filed in bad faith.” Roadway Express, Inc. v. Piper, 447 U.S.
at 765, 100 S.Ct. at 2464, (emphasis added). “” ‘[Bad] faith’
may be found not only in the actions that led to the
lawsuit, but also in the conduct of the litigation.’ ” Id.,
quoting Hall v. Cole, 412 U.S. at 15, 93 S.Ct. at 1951.
The Ninth Circuit has thus applied the concept of
bad faith to endorse use of the court’s “inherent power to
impose sanc ‘ons on counsel who ‘willfully abuse(s) judi-
cial processes.’ ” United States v. Blodgett, 709 F.2d 608, 610
(9th Cir. 1983), quoting Roadway Express, 447 US. at 766,
and citing Barnd v. City of Tacoma, 664 F.2d 1339, 1342 (9th
Cir. 1982).
6 As the Supreme Court made clear in Roadway Express,
Inc. v. Piper, 447 U.S. 752, 766, 100 S.Ct. 2455, 2464, 65 L.Ed.2d
488 (1979), “[t]he inherent powers of federal courts are those
which ‘are necessary to the exercise of all others.” 447 U.S. at
764, citing United States v. Hudson, 7 Cranch 32, 34, 11 U.S. 32, 3
L.Ed. 259 (1812).
C-38
Because the courts’ “inherent powers are shielded
from direct democratic controls, they must be exercised
with restraint and discretion.” Roadway Express, 447 U.S.
at 764-765 (citations omitted). With this caution in mind
the Supreme Court has, nonetheless, made clear that a
federal court may use its inherent authority to award fees
against both a party and the party’s attorney. “There are
ample grounds for recognizing . . . that in narrowly
defined circumstances federal courts have inherent power
to assess attorney’s fees against counsel.” Roadway
Express, 447 U.S. at 765. Those circumstances include
instances of “abusive litigation practices.” Id. A court
may use its inherent authority to impose sanctions on a
law firm, as well as individual attorneys, if such a sanc-
tion is warranted. Glass v. Pfeffer, 849 F.2d 1261, 1263,
1266-67 (10th Cir. 1988). The amount of an attorneys’ fees
sanction imposed under a court’s inherent power is lim-
ited to “the amount of fees incurred by the opposing
party.” United States v. Blodgett, 709 F.2d at 610-11, citing
Roadway Express, 447 U.S. at 766.
B. 28 U.S.C. § 1927
28 U.S.C. § 1927 provides for the assessment of sanc-
tions, including attorneys’ fees, directly against counsel.
As amended in 1980, § 1927 reads:
Any attorney or other person admitted to con-
duct cases in any court of the United States or
any Territory thereof who so multiplies the pro-
ceedings in any case unreasonably and vexa-
tiously may be required by the court to satisfy
a
C-39
personally the excess costs, expenses, and attor-
neys’ fees reasonably incurred because of such
conduct.”
Despite its explicit sanction of “unreasonable” con-
duct, courts historically limited § 1927 awards to cases of
bad faith.8 More recent Ninth Circuit opinions have made
it clear that finding of either recklessness or bad faith wil
support imposition of § 1927 sanctions. “The imposition
of sanctions under section 1927 requires a finding that
counsel acted ‘recklessly or in bad faith.’ ” United States v.
Blodgett, 709 F.2d at 610 (emphasis added), quoting Barnd,
664 F.2d at 1343. The Ninth Circuit has thus made clear
that while an attorney may be sanctioned under § 1927
for multiplying proceedings unreasonably and vex-
atiously “only on a showing of the attorney's recklessness
or bad faith . . . bad faith is present when an attorney
knowingly or recklessly raises a frivolous argument, see,
e.g., Optyl Eyewear Fashion Int'l. Corp. v. Style Cos.,
760 F.2d 1045, 1048 (9th Cir. 1985), or argues a meritorious
claim for purpose of harassing an opponent.” Estate of
7 Prior to the 1980 amendment, § 1927 did not specifically
include mention of liability for attorneys’ fees:
Any attorney or other person admitted to conduct
cases in any court of the United States or any Terri-
tory thereof who so multiplies the proceedings in any
case as to increase costs unreasonably and
vexatiously may be required by the court to satisfy
personally such excess costs.
June 25, 1948, c. 646, 62 Stat. 957.
8 See Kiefel v. Las Vegas Hacienda, Inc., 404 F.2d 1163, 1167
(7th Cir. 1968), cert. denied, 395 U.S. 908 (1969) (§ 1927 applies
only to a “serious and studied disregard for the orderly pro-
cesses of justice”).
C-40
Blas v. Winkler, 792 F.2d 858, 860 (9th Cir. 1986) (emphasis
added), citing Zaldivar v. City of Los Angeles, 780 F.2d 823,
829-32 (9th Cir. 1986), U.S. v. Blodgett, 709 F.2d at 610, and
Lone Ranger Television, Inc. v. Program Radio Corp.,
740 F.2d 718, 727 (9th Cir. 1984).
A majority of circuits include the recklessness prong
under their § 1927 tests, and in applying it some have
added helpful glosses. The Seventh and Tenth Circuits
agree that while the court’s sanctioning power under
§ 1927 must be strictly construed, it is warranted where
there has been a “serious and studied disregard for the
orderly process of justice.” Kiefel v. Las Vegas Hacienda,
Inc., 404 F.2d 1163, 1167 (7th Cir. 1968), cert. denied,
395 U.S. 908 (1969). See also Dretling v. Peugeot Motors of
America, Inc., 768 F.2d 1159, 1165 n.16 (10th Cir. 1985), and
In re TCI, Ltd., 769 F.2d 441, 445 (7th Cir. 1985) (affirming
§ 1927 and Rule 11 sanctions on an “attorney that reck-
lessly creates needless costs”). “An application of § 1927
sanctions follows where the district court finds that plain-
tiff’s ‘First and Second Amended Complaints were
merely ‘attempts to manufacture federal claims
against . . . defendants where plaintiff knew or should
have known that none existed.’ ” Wang v. Gordon, 715 F.2d
1187, 1190 (7th Cir. 1983).
Unlike Rule 11, a pleading does not have to be
entirely frivolous for § 1927 sanctions to attach, if there is
bad faith. “Some merit in counsels’ actions . . . does not
preclude an award under 28 U.S.C. § 1927.” Lone Ranger
Television, Inc., 740 F.2d at 726-27. See also Estate of Blas,
792 F.2d at 860. Compare the discussion of Rule 11 and
Townsend v. Holman, Infra. Courts may also use § 1927 to
sanction an unnecessary joinder of defendants, even
teeta
C-41
when the claims against the other defendants are proper.
Glass v. Pfeffer, 657 F.2d 252, 256 (10th Cir. 1981).
Section 1927 does not apply to initial pleadings, since
it addresses only the multiplication of proceedings, and it
is only possible to multiply or prolong proceedings after
the complaint is filed. In re Yagman, 796 F.2d 1165, 1187
(9th Cir. 1986), cert. denied, 484 U.S. 963 (1987). Sec-
tion 1927 sanctions have been imposed, however, on
amended complaints that were found to unreasonably:
multiply the proceedings. See, e.g., Wang v. Gordon,
715 F.2d 1187, 1191 (7th Cir. 1983), and Stewart v. City of
Chicago, 622 F.Supp. 35 (N.D.III. 1985).”
Under § 1927, sanctions may be imposed only against
attorneys, not parties. Zaldivar v. City of Los Angeles,
780 F.2d 823, 831 (9th Cir. 1986). We are not aware of any
published opinion in which a court has explicitly
addressed whether § 1927 is a source of authority for
imposing sanctions on a law firm, as opposed to an
individual lawyer. While a number of federal courts have
imposed § 1927 on law firms, they have done so without
discussion.!° Perhaps more important, all of these cases
9 See also M. Derfner & A. Wolfe, Court Awarded Attorney
Fees | 10.05[d] at 10-64: “[T]rial courts are not permitted to
award section 1927 fees for the mere filing of a suit... . Ifa trial
court is asked to assess section 1927 fees on the basis of an
unmeritorious motion, or an amended pleading, it may apply the
precise standards spelled out by the appellate courts.”
(emphasis added).
10 See, e.g., EEOC v. Milavetz and Associates, 863 F.2d 613
(8th Cir. 1988); Apex Oil Co. v. Belcher Co., 855 F.2d 1009 (2nd Cir.
1988); In re Arkansas Communities, Inc., 827 F.2d 1219 (8th Cir.
1987); Record Data, Inc. v. Schoolcraft, 1989 U.S. Dist. LEXIS 219
C-42
were decided before the Supreme Court’s very recent
opinion in Pavelic & LeFlore v. Marvel Entertainment Group,
58 U.S.L.W. 4038 (U.S. Dec. 5, 1989), which held that the
language of Federal Rule of Civil Procedure i1 authorizes
courts to sanction only individual lawyers who actually
sign filed papers, not law firms. The holding of Pavelic is
based explicitly on the specific reference in Rule 11 to the
“signer” of the paper, language that does not appear
verbatim in § 1927. The undersigned believes, however,
that the Supreme Court probably would conclude that the
language of § 1927 also only authorizes imposition of
sanctions on individual attorneys, not law firms. Sec-
tion 1927 requires “[a]ny attorney or other person” who
unreasonably multiplies proceedings “to satisfy person-
ally” excess costs and attorneys’ fees (emphasis added).
Moreover, we have found no indication in the legislative
history of § 1927 that Congress intended to empower
courts to impose sanctions on law firms when it enacted
the statute. We therefore cannot recommend that the Dis-
trict Court rely on § 1927 to impose sanctions on PLF
itself.
C. 42 US.C. § 1988
Under 42 U.S.C. § 1988 a court may, in its discretion,
award attorney fees to a successful defendant in a Civil
(N.D.II1. 1989); Life Fitness, Inc. v. Sears Roebuck and Co., 1988 U.S.
Dist. LEXIS 3463 (N.D.IIIl. 1988); Wold v. Minerals Engineering
Co., 575 F.Supp. 166 (D.Colo. 1983); Doane v. Metal Bluing Prod-
ucts, Inc., 36 Fed. R. Serv. 2d (Callaghan) 1402 (N.D.N.Y. 1983);
Monk v. Roadway Express, Inc., 73 F.R.D. 411 (W.D.La. 1977),
vacated on other grounds, 599 F.2d 1378, aff’d, 447 U.S. 752; In re
O.T.M., Inc., No. 80-00323, slip op. (Bankr. D. Haw. 1982).
hosel
C-43
Rights Act case upon a finding either that the plaintiff's
action was brought in bad faith, or was “frivolous, unrea-
sonable, or without foundation, even though not brought
in subjective bad faith.”'! Christiansburg Garment Co. v.
EEOC, 434 U.S. 412, 422-23, 98 S.Ct. 694, 700, 54 L.Ed.2d
648 (1978). However, sanctions under this statute may be
imposed only on parties to a lawsuit, not on their lawyers.
Roadway Express, Inc. v. Piper, 447 U.S. 752, 761, 100 S.Ct.
2455, 65 L.Ed.2d 488 (1979). Since we have concluded, for
reasons set forth infra, that it is not appropriate to sanc-
tion plaintiffs themselves in this matter, it is unnecessary
to discuss § 1988 in detail.
D. Federal Rule of Civil Procedure 11
1. Old Rule 11
Prior to the 1983 amendments, courts imposed Rule
11 sanctions only upon a finding of subjective bad faith.
See, e.g., Badillo v. Central Steel & Wire Co., 717 F.2d 1160,
1166 (7th Cir. 1983); Nemeroff v. Abelson, 620 F.2d 339 350
(2nd Cir. 1980). The bad faith standard arose from the
subjective focus of the old Rule:
The signature of an attorney constitutes a certifi-
cate by him that he has read the pleading; that to
11 As amended, 42 U.S.C. § 1988, provides in pertinent part:
In any action or proceeding to enforce a provision
of section 1981, 1982, 1983, 1985, and 1986 of this
title, title IX of Public Law 92-318, or title VI of
the Civil Rights Act of 1964, the court, in its dis-
cretion, may allow the prevailing party, other
than the United States, a reasonable attorney's
fee as part of the costs.
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the best of his knowledge, information, and belief,
there is good ground to support it.
Fed.R.Civ.P. 11 (1982) (emphasis added).
“{U]nder the former Rule, sartctions against the signing
attorney were reserved for a ‘wilful violation of this
rule....’” Zaldivar v. City of Los Angeles, 780 F.2d 823,
829 (9th Cir. 1986) (citing Rule 11). “Old Rule 11 was |
governed by a standard of willfulness and subjective bad
faith”. In re Yagman, 796 F.2d 1165, 1185 (9th Cir. 1986),
citing Zaldivar, 780 F.2d at 829.
Although a majority of circuits had concluded that
attorney’s fees and costs could be awarded under old
Rule 11,!* the Ninth Circuit held in United States v. Stan-
dard Oil Co., 603 F.2d 100, 103 n.2 (9th Cir. 1979)
[“SOCAL”], that “Rule 11... provides no authority for
awarding attorney’s fees against an unsuccessful liti-
gant.” Although it denied attorneys’ fees under old
Rule 11, the SOCAL court emphasized the traditional
authority of courts to award fees under the bad faith
exception to the American Rule, which allowed a court to
act pursuant to its inherent authority upon a finding that
a party or attorney had acted “in bad faith, vexatiously,
wantonly, or for oppressive reasons.” Id. at 103.
12 See, e.g., Westmoreland v. CBS News, 770 F.2d 1168 (D.C.
Cir. 1985); Hedison Mfg. Co. v. N.L.R.B., 643 F.2d 32, 35 (1st Cir.
1981); Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982), cert.
denied sub nom. Coyne v. Weinberger, 464 U.S. 818 (1983); Peri-
chak v. 1.U.E.R.M.W., Local 601, AFL-CIO, 715 F.2d 78 (3d Cir.
1983); Davis v. Veslan Enterprises, 765 F.2d 494 (5th Cir. 1985);
Smith v. Detroit Federation of Teachers, 829 F.2d 1370 (6th Cir.
1987); Badillo v. Central Steel & Wire Co., 717 F.2d 1160 (7th Cir.
1983); Burkhart v. Kinsley Bank, 804 F.2d 588 (10th Cir. 1986).
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Sanctions are appropriate only under the version of
Rule 11 in effect at the time the attorney signed the
sanctionable pleading. Yagman, 796 F.2d at 1185. Because
the original complaint in this action was filed in 1982, it is
subject to the old version of Rule 11. But since PLF and its
clients filed the amended complaint on August 4, 1983,
their conduct in the preparation, filing, and prosecution
of that amended pleading is governed by the version of
Rule 11 that became effective on August 1, 1983.
2. Amended Rule 11 (effective August 1, 1983)
As amended in 1983, Rule 11 requires the court to
impose sanctions whenever it finds either that an attor-
ney proceeded in bad faith in filing a pleading, motion, or
other paper, i.e. the paper was “interposed for [an]
improper purpose”, or that a paper signed by an attorney
(or the attorney’s inquiry leading to the filing of the
paper) was objectively unreasonable or “frivolous”, i.e.
not “well grounded in fact . . . [or] existing law or a good
faith argument for the extension, modification, or rever-
sal of existing law.” See, ¢.g., Stewart v. American Int'l. Oil
& Gas Co., 845 F.2d 196, 201 (9th Cir. 1988). Thus, it would
seem that either a finding of bad faith or a finding of
frivolousness is sufficient to support imposition of sanc-
tions under Rule 11. Under Ninth Circuit authorities,
however, a trial court may not reach the issue of bad faith
with respect to a complaint unless it first finds that the
pleading was “frivolous” in its entirety. Zaldivar, 780 F.2d
823: Townsend v. Holman Consulting Corp., 881 F.2d 788
(9th Cir. 1989), en banc rehearing granted and pending,
888 F.2d 646 (1989). The Ninth Circuit has not hesitated,
C-46
however, to affirm Rule 11 sanctions for papers other than
complaints on the ground that they were filed for an
improper purpose, even though no finding was made
that they were frivolous. See In re Itel Securities Litigation,
791 F.2d 672, 675 (9th Cir. 1986), cert. dented, 479 U.S. 1033
(1987). Thus, a finding of bad faith may serve as an
independent predicate for sanctions under amended
Rule 11, without a finding of frivolousness, for all papers,
other than complaints, filed after August 1, 1983.
Under the bad faith provision of the Rule, it is not
necessary to adduce direct evidence of subjective intent;
subjective intent may be inferred from circumstantial evi-
dence. “The view is nearly unanimous that an ‘improper
purpose’ is to be tested by objective standards.” Zaldivar,
780 F.2d at 829.
The second provision of the Rule requires sanctions
for a “frivolous” pleading, one that is “legally unreason-
able, or without factual foundation, even though not filed
in subjective bad faith.” Id. at 831. The Ninth Circuit has
given the term “frivolousness” an extremely demanding
definition. Under Townsend decision, it appears that trial
courts may not adjudge a complaint to be “frivolous” if,
for example, nine out of ten causes of action are totally
and patently meritless, but, at the time the complaint was
filed, it was not clear that the tenth cause of action
suffered from a blatantly fatal legal or factual infirmity.
The Townsend court also held that when “a pleading
names a party frivolously ... [such] improper inclusion of
a party in a complaint which properly includes other
parties . . . cannot render the complaint frivolous for
purposes of Rule 11 sanctions.” Townsend, 881 F.2d at 795.
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As noted supra, the Supreme Court has recently held
that Rule 11 sanctions may be imposed only on the indi-
vidual attorney who signs the offending pleading, not on
the attorney’s law firm. Pavelic & LeFlore v. Marvel Enter-
tainment Group, 58 U.S.L.W. 4038 (U.S. Dec. 5, 1989).
V. APPLICATION OF SANCTIONS LAW TO THIS LITI-
GATION
In recommending whether plaintiffs or PLF should
be sanctioned, it was necessary for this court to closely
examine the record to determine whether any claims
asserted against any of the defendants here seeking fees
were legally unreasonable, frivolous, or without factual
foundation, and whether part or all of PLF’s conduct
during the course of this litigation was in bad faith or
unreasonably multiplied the proceedings. We first discuss
the legal predicates and factual support in the record for
each of plaintiffs’ major claims for relief brought in the
two complaints. Second, we focus on the factual founda-
tion presented by PLF supporting the claims against each
of the individual director defendants. Finally, we examine
the conduct of PLF attorneys in prosecuting this litigation
after the action was filed.
A. Legal and Factual Merits of Plaintiffs’ Claims For
Relief
1. Taking Claims of the Lockarys, Gilberts, and
Macey
Plaintiffs Lockarys, Gilberts, and Macey alleged in
the third and fourth causes of action of the amended
C-48
complaint that BCPUD and four director defendants,
Kayfetz, LeMieux, McClellan, and Farnsworth, have used
the water emergency and moratorium to take their prop-
erty without just compensation. PLF was essentially
asserting a “regulatory taking” theory; defendants sought
to “control land use through the maintenance of a sham,
self-imposed ‘emergency’ ”, which has “resulted in a de
facto downzoning of plaintiffs’ property to open space.”
Amended Complaint at { 93. Plaintiffs alleged that while
defendants had a statutory duty to provide water, they
maintained a “sham” water emergency—by condoning
“extraordinary water consumption” by existing users, by
not taking steps to develop potential water sources or
encourage conservation, and by undertaking property
transactions that limited the development of potential
water source sites—all for the purpose of restricting
property development and controlling growth. Id. at ¥ 70,
71, 74, 77, 78, 85, 88-91. These actions allegedly precluded
plaintiffs from making any reasonable use of their prop-
erty (“makes plaintiffs’ land valueless and useless”), and
were “not reasonably related to any legally permissible
concerns” of the district. Id. at J] 67, 74, 81, 88, 90, and 94.
A landowner clearly has a cause of action under a
regulatory taking theory if it can show that the chal-
lenged land use regulation denies it all economically via-
ble use of its land. The Supreme Court also has
suggested, unclearly, that land use regulation must face
another, independent test: if the regulation does not “sub-
stantially advance [a] legitimate state interest”, it may
constitute a taking, perhaps even if it does not destroy all
economically viable use of the property in question.
Agins v. Tiburon, 447 U.S. 255, 260, 100 S.Ct. 2138, 2141,
C-49
65 L.Ed.2d 106 (1980); see also Nollan v. California Coastal
Commission, 483 U.S. 825, 834, 107 S.Ct. 3141, 3146,
97 L.Ed.2d 677 (1987). PLF argues, with some support
from the Supreme Court, see Nollan, 483 U.S. at 834, n.3,
that this “substantial advancement” test is stricter than
the rational basis standard ordinarily applied in constitu-
tional challenges to economic regulation under substan-
tive due process and equal protection norms.
Supplemental Opposition to Summary Judgment on
Inverse Condemnation and Due Process Claims, Dkt.
No. 398 at 3-4.
While PLF’s pleadings were not at all clear on this
matter, in the briefs it filed here PLF has suggested that
plaintiffs intended to invoke both tests. PLF asserted,
first, that the moratorium destroyed all viable economic
use of plaintiffs’ property (since plaintiffs were denied a
water permit necessary for residential development), and,
second, that the moratorium did not advance a legitimate
state interest (since there was no actual water shortage,
and since under California law a public utility is not
empowered to pursue growth control objectives). Opposi-
tion to Summary Judgment on Inverse Condemnation
and Due Process Claims, Dkt. No. 382 at 1-5; Supplemen-
tal Opposition to Summary Judgment on Inverse Con-
demnation and Due Process Claims, Dkt. No. 398 at 4.
The record presented to this court, i.e. the briefs and
exhibits submitted during the course of the substantive
litigation and the sanctions motion, is devoid of factual
support for the contention that plaintiffs were left with
no viable economic use for their land as a result of the
moratorium. PLF has presented no evidence in support of
its assertion that plaintiffs lost all property value when
C-50
their water permit applications were denied, or that none
of the plaintiffs had alternative means of obtaining water
besides a BCPUD hookup, for example drilling wells,
trucking water, forming their own water district, etc.!,
which could possibly support residential development or
some other viable economic use of the property.
We must conclude, however, that plaintiffs’ regula-
tory taking claim based on the “substantial advancement”
theory was not factually unsupported or legally frivo-
lous, and thus we cannot recommend that sanctions be
imposed for asserting the taking claim of the Lockarys,
Gilberts, and Macey. PLF arguably stated a legally cogni-
zable regulatory taking action when it alleged that the
restrictions on the use of plaintiffs’ real property imposed
by the moratorium constituted a taking because the mor-
atorium did not substantially advance a legitimate gov-
ernmental interest.
PLF’s theory seems to have been that since the water
emergency was a “sham”, the moratorium could not
plausibly be justified as advancing the stated govern-
mental purpose of conserving Bolinas’ depleted water
supply. PLF also seems to be arguing that, since land use
planning is not a “legitimate” (i.e. statutorily authorized)
13 See defendant Kayfetz’ Reply Memorandum to Opposi-
tion to Dismiss, Dkt. No. 90 at 32: “Plaintiffs nowhere claim that
BCPUD is the only possible source of water to serve their pur-
poses ... The plaintiffs nowhere describe any efforts they have
made to obtain water from other sources, either through the
formation of an additional adjoining water district or through
the construction of wells or approaches to private water com-
panies.”
C-51
function of a public utility like BCPUD, a water mor-
atorium imposed by BCPUD for a “land use” (i.e. not
water-related) purpose, such as limiting urbanization or
preserving small town character, cannot advance a legiti-
mate state interest.
PLF has presented evidence to support plaintiffs’
claims that the water emergency was a “sham”"4, that
BCPUD “refus[ed] to utilize existing supplementary
sources of water available to the district”'S, and that
14 See, e.g., Exhibit A(1) to Amended Opposition to
BCPUD’s Motion for Fees (letter to county grand jury in which
former maintenance manager for BCPUD disputes the existence
of a water shortage and describes efforts by defendant Kayfetz
to silence him); Exhibits A(6) and C(4) to id. (deposition and
declaration of former maintenance manager testifying that mor-
atorium was unnecessary and used to prevent development);
Exhibit C(2) to id. (deposition by Duncan (qualifications
unknown), testifying that the water supply in Bolinas was suffi-
cient); Stroeh Declaration, Dkt. No. 387 (conclusion of water
engineer that BCPUD has excess water storage capacity, and
that existing water supplies are adequate to support growth);
Exhibit C(3) to Amended Opposition to BCPUD’s Motion for
Fees (declaration of Bolinas property owner that water was
going to second units, and that it was “common knowledge”
that the moratorium was designed to prevent development);
Exhibit C(8) to id. (report from Van Dusen that water supplies
were full the day BCPUD “closed the town”).
15 See, e.g., Exhibit C(7) to Amended Opposition to
BCPUD’s Motion for Fees (letter from Duncan stating BCPUD’s
agreement not to build reservoirs on certain property); Answers
to Defendants’ Interrogatories, Dkt. Nos. 269, 270), 271, and 277,
and Amended Opposition to Director Defendants’ Motions for
Fees at 6 and 9 (allegations that defendants Schell and Niman
“usurp[ed] . . . one of the last possible sites for a water reservoir
(the Brunnell property] for their own use”, and that defendants
Schell, Weston, and Harris failed to exercise options on the
C-52
BCPUD “approv[ed] and maint[ained] . . . extraordinary
water consumption” by current users.'©
PLF also has presented evidence to support plaintiffs’
claim that the moratorium was instituted and maintained
for growth control purposes.'7 PLF presumably offered
“Vierra” property, a possible water source site, and agreed to a
deed restriction on the property foreclosing use of the site for
reservoir purposes); Gilbert Declaration, Dkt. No. 383 at 3 and
Exhibit B (allegations that BCPUD “voluntarily relinquished
diversion rights on Pine Gulch Creek”, claimed to be an impor-
tant source of water in past drought years). See generally Opposi-
tion to Summary Judgment Against Holter/Mesa Ranch
Plaintiffs, Dkt. No. 381 at 14-16.
16 See, e.g., Stroeh Declaration, Dkt. No. 387 {opinion of
water engineer that water delivery has increased 67% since the
moratorium, and that leakage rates were well above average in
Bolinas); Exhibit C(4) to Amended Opposition to BCPUD’s
Motion for Fees (allegation by former BCPUD maintenance
manager of “expanded” water use by existing residents);
Exhibit C(3) to id. (allegation of Bolinas property owner that
BCPUD has not imposed conservation measures on Bolinas resi-
dents); Id. at 32, and Exhibit A(14) to id. (list of 21 expanded
water permits given by BCPUD to Bolinas residents). PLF also
cites, in its responses to individual defendants’ interrogatories,
various votes by the BCPUD directors approving expanded
water permits and permits for second units.
17 See, e.g., Amended Opposition to BCPUD’s Motion for
Fees at 37 (excerpts from defendant Schell’s book re growth
control purposes of moratorium); id. at 109-120 (statements by
various defendant directors at a BCPUD water workshop);
Exhibit A(8) to id. (campaign literature of defendants LeMieux,
Kayfetz, and McClellan calling for “[c]ontinuance of the mor-
atorium on new water hook-ups until a legally foolproof
method for gradual growth is established”); Exhibits A(42),
A(43) and A(44) to id. (various campaign statement by defen-
dants addressing growth issues); Exhibit A(34) to id. (letter from
C-53
this evidence to show that the moratorium could not
substantially advance a legitimate state interest, since
BCPUD did not have the police power under state law to
pursue growth control ends.
Defendants argued in their motion for summary
judgment that since plaintiffs, as potential water users,
did not have a property entitlement to a water hookup
under California law (Swanson v. Marin Municipal Water
District, 56 Cal. App. 3d 512, 128 Cal. Rptr. 485 (1976),
Hollister Park Inv. Co. v. Goleta County Water District,
82 Cal. App. 3d 290, 147 Cal. Rptr. 91 (1978), and
McMillan v. Goleta Water District, 792 F.2d 1453 (9th Cir.
1986), cert. denied, 480 U.S. 906 (1987)), they had no prop-
erty interest that could be “taken.” Memorandum in Sup-
port of Motion for Summary Judgment on Inverse
Condemnation and Due Process Claims, Dkt. No. 367.
PLE countered that this argument misconstrued its claim:
the amended complaint, it says, does not assert that
”
BCPUD to county counsel asking for legal opinion re legality of
imposing a growth limit); Exhibit A(36) to id. (letter to county
supervisor from BCPUD expressing opposition to growth);
Exhibit A(37) to id. (statement by defendant Weston in undated
news article that “we will continue to regulate growth through
utilities”); Exhibit A(40) to id. (statement by Weston in a letter to
the editor describing moratorium as a “planning measure”
related to growth); Exhibit A(41) to id. (statements in LAFCo
staff report re BCPUD’s role as “principal governmental
agency” in Bolinas, and BCPUD’s statement that “BCPUD com-
munity opposes development”); Exhibit A(47) to id. (statement
by defendant Kayfetz in letter to the editor (undated and
uncited) linking water permit allocation and “local control”
over growth); Exhibit B(P) to id. (article by defendant Kayfetz
advocating using moratorium as means to control growth).
C-54
plaintiffs had a property right to water, only a property
right to make economic use of their real property. Opposi-
tion to Summary Judgment on Inverse Condemnation
and Due Process Claims, Dkt. No. 382. The District Court
found plaintiffs’ position unpersuasive'®, and dismissed
the takings claims.
Defendants now argue in this motion for sanctions
that “plaintiffs’ continued pursuit of their inverse con-
demnation claims in the face of dispositive Ninth Circuit
and California precedent was legally unreasonable”.!9
The undersigned concludes that, although its action was
ultimately unsuccessful, PLF made a non-frivolous effort
to distinguish its claim from the Swanson line of inverse
condemnation cases. PLF throughout this action has
emphasized that it was challenging the moratorium as a
18 “In the instant case, what plaintiffs are really suing for,
despite their protestations to the contrary, is the cumulative
right to use the land which they already possess plus the right to
have water upon the land. Any alleged interference with plain-
tiffs’ use of the land would flow from interference with the
acquisition of water rights. Plaintiffs are still free to use and to
sell the land or to develop it to the extent they can without water
from BCPUD.” Order Granting Defendants’ Motions for Sum-
mary Judgment, Dkt. No. 457 at 8.
19 It seems odd that this supposedly-dispositive legal issue
was not raised earlier by defendants as part of their motion to
dismiss for failure to state a claim (except for a passing reference
in defendant Kayfetz’ motion in the context of inverse condem-
nation as a remedy), but was first raised at the summary judg-
ment stage four years after the amended complaint was filed.
Since this argument apparently did not occur to defendants for
the first four years of this action, the undersigned cannot con-
clude that the issue should have been obviously dispositive to
plaintiffs when they filed their complaint.
C-55
de facto zoning regulation under a regulatory taking
theory, not claiming inverse condemnation damages for
loss of plaintiffs’ water rights. See, e.g., Amended Com-
plaint at 4 93; Opposition to Summary Judgment on
Inverse Condemnation and Due Process Claims, Dkt.
No. 382 at 2.
We emphasize that we are not concluding that PLF’s
takings case was meritorious. It is certainly questionable
whether a public utility’s refusal to extend municipal
services is conceptually analogous to a land use restric-
tion, such as a zoning ordinance.?° Moreover, it is not at
all clear that under current takings law the “substantial
advancement” test is independent of the “destruction of
value” question. The strength of plaintiffs’ proffered evi-
dence on this issue is also open to question. However, it
would not be appropriate to sanction plaintiffs or their
counsel for attempting to capitalize on an under-
developed area of legal doctrine, or for seeking to modify
existing law, especially in murky and unsettled areas like
takings that involve “complex constitutional ques-
tions . . . not easily resolved”, Parks v. Watson, 716 F.2d
646, 664 (9th Cir. 1983), or “new and changing principles
of constitutional law”, Colombrito v. Kelly, 764 F.2d 122,
132 (2nd Cir. 1985).
20 In the former, the locality is directly reducing property
value by limiting the range of a property's permissible uses,
while in the latter the locality can only be accused of failing to
enhance a property’s value and utility through inaction. There is
a conceptual difference between claiming a constitutional right
to stop the government from restricting the use of one’s property,
and a right to force the government to enhance the value of one’s
property by extending services upon demand.
C-56
The undersigned seriously doubts the claim of the
Lockarys and Mr. Macey that they purchased their prop-
erty with a reasonable expectation to develop residential
use, Amended Complaint at { 38, in view of the fact that
these plaintiffs bought their land seven to nine years after
the moratorium was first enacted. However, we cannot
condemn as factually frivolous these plaintiffs’ assertions
that they purchased the property in the belief that the
moratorium would be lifted in the near future, as soon as
BCPUD took steps to improve its water supply and the
community plan was adopted. Exhibits C(5) and C(6) to
Amended Opposition to BCPUD’s Motion for Fees. Sim-
ilarly, while Mr. Gilbert strains our credulity when he
claims that he was unaware, over a nearly sixteen year
period, that he was eligible for a water meter under a
grandfather exception, Gilbert Declaration, Dkt. No. 383
at 2, we cannot find that this assertion is patently implau-
sible.
2. Inverse Condemnation Claims of Mesa Ranch
and Holter
In the eighth claim for relief in the amended com-
plaint, plaintiffs Holter and Mesa Ranch brought an
inverse condemnation claim against BCPUD and direc-
tors Kayfetz, LeMieux, Farnsworth, and McClellan. The
exact nature of this claim has proven to be elusive.
PLF has obscured the issues relating to Mesa Ranch/
Holter’s claims throughout this litigation on a number of
fronts. In the amended complaint and other papers, PLF
asserted that the central wrong defendants committed
was making “representations .. . to permitting agencies
C-57
for the purpose of reducing the value of plaintiffs’ prop-
erty so as to pave the way for its acquisition... at an
artificially low... price.” Amended Complaint at q 135.
See also Amended Opposition to BCPUD’s Motion of Fees
at 64.2! In other papers, by contrast, PLF denied that
defendants’ “representations” were at issue: “The few
remaining defendants are not being sued because they
spoke out on political issues or advocated no growth
policies to other government agencies. . . . The claims
against these defendants rest on their actions in maintain-
ing the unlawful moratorium not on their actions commu-
nicating the existence of the moratorium to other
government officials or agencies.” Reply to Defendants’
Motion to Dismiss, Dkt. No. 355 at 1-2 (emphasis in
original). In still other papers, PLF cited both the repre-
4 ol
sentations to agencies and defendants’ “wide public dis-
tribution of BCPUD’s intent” to acquire the property (i.e.
sending copies of BCPUD correspondence to newspapers)
as proof that defendants were involved in “widespread
conduct” to “hold the Mesa Ranch property in limbo to
facilitate acquisition by BCPUD for the least possible
cost.” Opposition to Motion for Summary judgment
Against Mesa Ranch and Holter, Dkt. No. 381 at 8.
PLF has also been inconsistent in identifying its the-
ory of defendants’ underlying motive for lobbying
against Mesa Ranch development. In the amended com-
plaint, PLF alleged that the BCPUD defendants took their
21 “This cause of action was alleged only against BCPUD,
Kayfetz, LeMieux, Farnsworth, and McClellan. Why? Because
they urged disapproval of plaintiffs’ development project as
BCPUD officials.”
C-58
action with no intention of ever condemning the prop-
erty: “At the time the public statements were made,
defendants herein acted with knowledge that there was
no intention to condemn.” Amended Complaint at { 137.
In opposing summary judgment, PLF claimed that defen-
dants did intend to condemn the property, for use as a
reservoir: “BCPUD . . . caused a de facto precondemna-
tion taking by engaging in unreasonable and oppressive
conduct for the purpose of artificially depressing the value of
the Mesa Ranch property prior to acquiring it as a water
reservoir site.” Opposition to BCPUD’s Motion for Sum-
mary Judgment against Mesa Ranch and Hoiter, Dkt.
No. 381, at 1 (emphasis added).”? In its papers opposing
sanctions, PLF once again shifted ground; here it claimed
that BCPUD’s “true purpose” was to acquire Mesa Ranch
as open space, and that the district’s stated intent to use
the land for a reservoir site was just a ruse: “[BCPUD’s]
true purpose was to defeat any and all development
. and acquire [Mesa Ranch] as an open space buffer
between the community and the Pt. Reyes National Sea-
shore.” Amended Opposition to BCPUD’s Motion for
Fees at 51.2%
22 This theory also blatantly contradicts plaintiffs’ claims
elsewhere that BCPUD studiously avoided pursuing new water
sources; here plaintiffs charge that BCPUD directors went out of
their way devising schemes to grab the Holter property for a
reservoir site.
2% PLF compounds the confusion by referring to plaintiffs’
action interchangeably as a “precondemnation de facto taking”
claim and as a “Klopping claim”, Opposition to Summary Judg-
ment, Dkt. No. 381 at 3-4, and Opposition to BCPUD’s Motion
for Fees, at 49, not recognizing that in Klopping itself the court
made a distinction between a “precondemnation de facto
C-59
PLF also denies that it ever asserted a regulatory
taking theory for Mesa Ranch, although the amended
complaint did allege denial of ull reasonable economic
value, an element of a regulatory taking claim but not of a
“precondemnation blight” claim (where any decrease in
value is actionable). Amended Complaint at {7 133 and
138. Apparently PLF decided to drop its destruction of
value claim in view of the subsequent sale of Mesa Ranch
to the federal government for over $1 million.
PLF continued to muddy the waters at the summary
judgment stage by asserting regulatory takings and sub-
stantive due process actions in reference to the one acre
of Mesa Ranch within the boundaries of the district.?4
taking” and the issues in that case: “In de facto taking cases, the
landowner claims that because of particularly oppressive acts
by the public authority the ‘taking’ actually has occurred earlier
than the date set by statute. ... The prevailing rule... is that
before a de facto taking results there must be a ‘physical inva-
sion or direct legal restraint’. ... One example of a ‘legal
restraint’... has been a particularly harsh zoning regulation,
often calculatingly designed to decrease any future condemna-
tion award.” Klopping v. City of Whittier, 8 Cal. 3d 39, 46, 104 Cal.
Rptr. 1 (1972). By contrast, the Klopping court was faced with an
allegation of adverse precondemnation publicity, not adverse
regulation, by the condemning agency that resulted in depressed
value. Plaintiffs here seem to be arguing both theories: that the
property was “taken” when the various permitting agencies
(spurred on by BCPUD’s protests) turned down Mr. Holter’s
development applications, and that BCPUD publicized its intent
to condemn so as to depress value.
24 PLF asserts that the civil rights, conspiracy, temporary
taking, and declaratory relief causes of action in the amended
complaint made this claim, although no facts specific to Mesa
Ranch are pleaded there. It is also curious that the Mesa
Ranch/Holter plaintiffs were not joined in the primary regula-
tory taking, due process, or equal protection causes of action.
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PLF argued that this land was taken by the moratorium
(even though it already had a water meter), since a “lim-
itation on the number of animals [grazing on the land]
was imposed by BCPUD in direct reliance on the mor-
atorium”. Opposition to BCPUD’s Motion for Summary
Judgment against Mesa Ranch and Holter, Dkt. No. 381
at 13.
This court must conclude that the obfuscatory and
inconsistent manner in which PLF presented this claim
throughout the course of this litigation was deliberate,
not merely a product of sloppy lawyering. This inference
is supported in part by PLF’s abundant self-professed
expertise in property rights litigation. Moreover, PLF con-
veniently shifted ground when it was faced with adverse
facts or legal doctrine. PLF began denying that defen-
dants’ lobbying was the basis for the Mesa Ranch claim
when faced with a potent First Amendment defense,
abandoned the claim of destruction of use after Mesa
Ranch was sold for over $1 million, and abandoned (at
least temporarily) their theory that BCPUD intended to
acquire Mesa Ranch for a reservoir when the inconsis-
tency between this allegation and PLF’s portrait of defen-
dants as hostile to new water sources became glaring.
From all the circumstances, we infer that subjective bad
faith inspired the way that PLF presented this claim, and
we recommend that PLF be held liable for monetary
sanctions under the Court’s inherent sanctioning author-
ity. The protean nature of the Mesa Ranch inverse con-
demnation cause of action needlessly and unreasonably
multiplied and confused the procecdings, against the
interests of defendants, defendants’ counsel, and the Dis-
trict Court. The undersigned recommends-that sanctions
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be imposed here against the PLF firm, which, as sponsor
of this lawsuit and self-professed “quality control” moni-
tor over the litigation, was the entity most responsible for
the strategy of presenting a “moving target” cause of
action. While many of the same individual PLF attorneys
were listed on most or all of the documents cited above?5,
it is difficult for the undersigned to point to the specific
PLF attorneys responsible for the obfuscations.
While the court finds the manner of presenting the
inverse condemnation claim sanctionable, we cannot con-
clude that the claim itself was patently “frivolous” as that
term has been so stringently defined in this Circuit. A
generous reading of at least some of plaintiffs’ allega-
tions, in the context of cases like Klopping v. City of
Whittier, 8 Cal. 3d 39, 104 Cal. Rptr. 1 (1972), Jones v People
ex rel. Department of Transportation, 22 Cal. 3d 144, 148
Cal.Rptr. 640 (1978), and Richmond Elks Hall Assoc. v.
Richmond Redevelopment Agency, 561 F.2d 1327 (9th Cir.
1977), could support a conclusion that the Mesa Ranch
plaintiffs had a basis for a cause of action for inverse
condemnation arising out of defendants’ allegedly
oppressive precondemnation behavior.?* PLF has pre-
sented a variety of evidence showing that BCPUD was
25 The listed attorneys on the amended complaint were
Ms. Ruiz, Mr. Hughes, and Mr. Zumbrun. The listed attorneys
on both the reply to the motion to dismiss (Dkt. No. 355), and
the opposition to summary judgment against Mesa Ranch and
Holter (Dkt. No. 381) were Robert Best, Mr. Zumbrun, and
Mr. Finch. The listed attorneys on the amended opposition to
fees were Richard Stephens, Mr. Zumbrun, and Mr. Finch.
26 Klopping held that precondemnation publicity or other
Oppressive conduct prior to condemnation by an agency that
depresses property value can be actionable. Jones held that a
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interested in obtaining the Mesa Ranch property for a
reservoir and had taken some steps (e.g. obtained a state
Clean Water Grant) to pursue that purpose through emi-
nent domain. See Opposition to Motion for Summary
Judgment Against Mesa Ranch and Holter, Dkt. No. 381
at 6-7 and Opposition to BCPUD’s Motion for Fees
at 51-62 for a discussion and a list of citations to evidenti-
ary exhibits. While Judge Williams found that these
actions did not amount to the “firm declaration of inten-
tion to condemn” required by Klopping, Order Granting
Summary Judgment, Dkt. No. 457 at 11-12, the point was
sufficiently arguable to persuade the undersigned that it
is not appropriate to attach the label “frivolous” to this
cause of action.
There is also evidence that BCPUD and individual
defendants, acting in their capacity as BCPUD directors,
made “representations” to other agencies opposing
development of Mesa Ranch, pointing to the water emer-
gency and the designation of the site for a future reser-
voir as the reason for opposition.?7 Moreover
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