Wesolek v. Layton, No. 4:2012cv03210 - Document 32 (S.D. Tex. 2014)
Court Description: MEMORANDUM OPINION AND ORDER granting in part and denying in part 19 MOTION For Relief Seeking Recovery of Attorneys Fees and Expenses, mooting 27 Motion for Relief. Plaintiffs' counsel is ordered to pay defendants $53,390.00 for attorney's fees and $2,412.00 for reasonable expenses by 4/14/2014. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION JOHN S. WESOLEK, DEBORAH J. § WESOLEK, JOEL T. JOHNSON, § RANDY LINSTEDT, DOUGLAS A. § CARSON, DR. ENRIQUE REYES-B, § MARIA GEORGINA REYES, LEVI § LINDEMANN, STEPHANIE LINDEMANN, § MICHAEL P. WAGNER, DANIEL § MILLER, KRISTINA MILLER, § ROEL TREVINO, TIM PETERSON, § JANICE LAU, MIKE TASZAREK, § E. BRENT LUNDGREN, GLORIA § GACKLE, PETE HILL, KELCEY HILL, § KEN ULLMANN, DALE SCHNEIDER, § DEBORAH SCHNEIDER, JOHN § MCINTOSH, MARGARET MCINTOSH, § MERYL A. WILLERT, JR., JULIE § WILLERT, TYLER ROEHL, PAMELA G. § KLOOS, JEFFERY T. KLOOS, JUDY § KVAALE, CLIFF LARSON, JUDY § DVORAZK, MONA THORSTAD, ARLYN § LAND, STEVE JOHNSON, LORI § JOHNSON, JANET SKINNER, and § GEORGE SLIGHT, JERRY TALBERT, § JASON GION, VICKIE GION, MARY § OHLHAUSER, RANDY OHLHAUSER, § TIM HOLLAND, RICK ERICKSON, § PAUL QUINNILD, CAROL QUINNILD, § MARK FOLAND, KAREN FOLAND, § DEVIN LUBINUS, BRENT LARSON, § SANDRA UELAND, JOE HENJUM, § GARY HEARNEN, DON HEARDEN, § RANAIE BALL, BRIAN TJERLUND, § MIKE TASZARCK, RON BlUR, DAVE § PAULSON, BRUSE KUSLER, MIKE § HOLMGREN, and GUSTAV KOPRIVA, § Individually and Derivatively, § on Behalf of LAYTON ENERGY § WHARTON FUND, LP and LAYTON § ENERGY FUND 2, LP, § Plaintiffs, § § v. DANIEL LAYTON LAYTON ENERGY LAYTON § § LAYTON, J. CLARK LEGLER, ENERGY TEXAS, LLC, CORPORATION, LAYTON WHARTON FUND, LP, and ENERGY FUND 2, LP, Defendants. § § § § § § § § CIVIL ACTION NO. H-12-3210 MEMORANDUM OPINION AND ORDER Pending before the court is Defendants' Motion for Relief (Docket Entry No. 19) in which Defendants seek recovery of all of the attorney's fees and expenses incurred by Defendants in Wesolek I and Wesolek II in the current amount of approximately $350,000, jointly and severally, from all of Plaintiffs who were also Plaintiffs in Wesolek I and their counsel, Kevin L. Colbert, and his law firm, The Law Office of Kevin L. Colbert, JD, LL.M, PLLC. In addition, Defendants seek recovery of all of the attorney's fees and expenses incurred by Defendants in Wesolek II, jointly and severally, from Plaintiffs and their counsel, Kevin L. Colbert, and his law firm, The Law Office of Kevin L. Colbert, JD, LL.M, PLLC. 1 Also pending is Plaintiff, Michael P. Wagner's, Response and Motion for Relief (Docket Entry No. 27) seeking orders requiring defendants to provide him copies of their relevant fee agreements, requiring plaintiffs' counsel to provide a written explanation of the status of the case, and an order adding 90 days to the filing deadlines set forth (Docket Entry No. 25) in the court's Order of January 13, 2014 For the reasons stated below, defendants' motion for relief will be granted in part and denied in part, and Wagner's motion for relief will be denied as moot. I. Factual and Procedural Background Defendants in this action are partnerships and their managing partners who have twice been sued by the same attorney representing lDefendants' ~ Motion for Relief, 30. -2 - Docket Entry No. 19, p. 18 groups of plaintiffs who invested in the partnerships. The current action is the second of the two actions filed against the named defendants ("Wesolek I I") . December 21, 2011, The first action was initiated on by the filing of a class action petition in state district court, which was removed to this court on January 6, 2012 (Wesolek, et al. v. Layton, et al., Civil Action No. 4:12-cv00063, "Wesolek I") . in the current On January 25, 2012, the first 39 plaintiffs lawsuit filed Complaint in Wesolek 1.2 filed motions to Plaintiffs' On February 2 and 8, dismiss In response voluntarily dismissed one defendant Inc. - Amended Class Action to 2012, defendants which plaintiffs Platinum Energy Solutions, and argued that the claims asserted against the remaining defendants should not be dismissed. 3 On May 18, 2012, the court entered a Memorandum Opinion and Order granting defendants' motions to dismiss and a Final Judgment dismissing plaintiffs' derivative claims without prejudice and plaintiffs' direct claims with prejudice, Wesolek v. Layton (Wesolek I), 871 F. Supp. 2d 620 (S.D. Tex. 2012) 4 The court concluded that the plaintiffs' claims for common law fraud and violation of the Texas Securities Act arising from 2Wesolek I, Docket Entry No. 11. 3Id., Docket Entry Nos. 15, 16, 18, and motions to dismiss amended complaint) and (plaintiffs' responses to motions to dismiss) . 21 (defendants' 22, 23, and24 4Id., Docket Entry Nos. 30 (Memorandum Opinion and Order) and 31 (Final Judgment) . -3- misrepresentations made before they invested in the partnerships were claims that the plaintiffs could assert directly, but that the plaintiffs' claims for conversion, violation of the Texas Theft Liability Act, money had and received, breach of fiduciary duty, negligence, common law fraud, and violation of the Texas Securities Act arising from misrepresentations made after they had invested in the Funds were claims that the plaintiffs derivatively on behalf of the Funds. could only assert The court dismissed with prejudice the plaintiffs' direct claims for common law fraud and violation the of misrepresentations Texas made Securities before the Act plaintiffs from arising invested in the partnerships after concluding that the plaintiffs failed to plead fraud with particularity as required by Federal Rule of Civil Procedure 9(b), and pursuant to Rule 12(b) (6) for failure to state a claim for which relief may be granted. But the court dismissed without prejudice the claims that plaintiffs could only assert derivatively pursuant to Rule 12(b) (1) for lack of standing. Id. at 638. Plaintiffs Wesolek I. did not Instead, appeal on the August final 30, judgment 2012, entered plaintiffs in acting individually and derivatively on behalf of Layton Energy Wharton, LP or the Layton Energy Fund 2, LP filed Plaintiffs' Original Petition and Requests for Production in the 189th Judicial District Court of Harris County, Texas, against defendants Daniel Layton, J. Clark Legler, Layton Energy Texas, -4 - LLC, Layton Corporation, Layton Energy Wharton Fund, LP, and Layton Energy Fund 2, LP. The Plaintiffs' Original Petition asserted claims for common law fraud, conversion, violation of the Texas Theft Liability Act, money had and received, violations of the Texas Securities Act, fiduciary duty, Plaintiffs' and negligence. 5 breach of prayer for relief sought rescission of the sale of their limited partnership units, recovery of all sums invested in Wharton Energy Fund and Layton Energy Fund 2 on behalf of themselves and the members of the classes. Specifically, Plaintiffs seek recovery of $13,500,00[0] plus pre-judgment, postjudgment interest, costs of court, punitive damages and attorney's fees. 6 On October 29, 2012, (Docket Entry No.1) defendants filed a Notice of Removal asserting that "[t]his action is removable under the provisions of the Class Action Fairness Act u.s.C. § 1332(d), and 28 U.S.C. § (CAFA), 28 1453(b) ,"7 and that "[a]ll the elements for removal of the instant action under CAFA are met."8 The case was assigned to Judge Gilmore. On the same day defendants filed Defendants' Motion to Dismiss Plaintiffs' Original Petition (Docket Entry No.2) pursuant to Federal Rules of Civil Procedure 9(b) for failure to plead fraud with particularity and 12(b) (6) for 5Plaintiffs' Original Petition and Requests for Production ("Original Petition"), Exhibit B to Notice of Removal, Docket Entry No. 1-3. 6Id. at 19 ~ 127. 7Notice of Removal, Docket Entry No.1, p. 3 8Id. ~ V. 7. -5- ~ V.5. failure to state a claim for which relief may be granted. October 29, 2012, defendants (Docket Entry No.3) . response to the filed Defendants' Also on Original Answer On November 19, 2012, plaintiffs filed a defendants' motion to dismiss in which they "concede[d] they do not have direct claims against Defendants and that all claims are derivative in nature on behalf Wharton Energy, LP and Layton Energy II, LP."9 that "[b]ecause representations Defendants as pled do that not after about facts Plaintiffs limited partners, Defendants motion to dismiss under 12(b) 9(b) should be denied."lo At defendants' motion to dismiss, replead. 11 On December Plaintiffs' Response 3, the end of Layton Plaintiffs asserted complain occurred of their and became (6) response and to plaintiffs also sought leave to 2012, defendants (Docket Entry No. 13). filed a Reply to Also on December 3, 2012, defendants filed a Notice of Related Litigation, Motion to Transfer, No. 12) and Motion for Expedited Consideration (Docket Entry in which defendants noticed Judge Gilmore of the related Wesolek I case, and based on that case, requested transfer to this court. Plaintiffs did not oppose defendants' request to transfer. On December 5, 2012, Judge Gilmore entered an Order transferring 9Plaintiffs' Response to Defendants' Motion to Dismiss Plaintiffs' Original Petition ("Plaintiffs' Response"), Docket Entry No.7, p. 3 ~ 4. lOId. at 3-4 ([ 7 11 ¢ 11Id. at 4. -6- the current action to this court (Docket Entry No. 13). On December 18, 2012, Plaintiffs' Amended Class Action and Derivative Complaint (Docket Entry No. 16) was filed. On December 21, 2012, the court entered a Memorandum Opinion and Order granting Defendants' Motion to Dismiss (Docket Entry No. 17) and a Final Judgment dismissing all of plaintiffs' claims with prejudice (Wesolek II), (Docket Entry No. 914 F. Supp. reasons explained in § Opinion the and Order, See Wesolek v. 18). 2d 853 (S.D. Tex. 2012). Layton For the II.A of the December 21, 2012, Memorandum court concluded that the claims the plaintiffs asserted against the defendants directly for common law fraud, conversion, violation of the Texas Theft Liability Act, Tex. Civ. Prac. & Rem. Code § 134.003(a), and the Texas Securities Act, Tex. Rev. Civ. Stat. Art. 581-33, money had and received, breach of fiduciary duty, and negligence were barred by the doctrine of res judicata. 620) . Id. at 859-61 (citing Wesolek I, For the reasons explained in § 871 F. Supp. 2d at II.B of the December 21, 2012, Memorandum Opinion and Order, the court concluded that the claims that the plaintiffs asserted against the defendants derivatively on behalf of Layton Energy Wharton Fund and the Layton Energy Fund 2 for common law fraud, Texas § Theft Liability Act, Tex. conversion, violation of the Civ. Prac. & Rem. Code 134.003(a), and the Texas Securities Act, Tex. Rev. Civ. Stat. Art. 581-33, money had and received, breach of fiduciary duty, and negligence should be dismissed with prejudice pursuant to Federal -7- Rule of Civil Procedure 12(b) (6) for failure to state a claim for which relief may be granted. explained in and Order, replead. § the ld. at 861-63. For the reasons II.C of the December 21, 2012, Memorandum Opinion court denied plaintiffs' request for leave to ld. at 863-64. On January 7, 2014, the Fifth Circuit dismissed as frivolous plaintiffs' appeal from the December 21, 2012, Memorandum Opinion and Order defendants' (Docket Entry No. 24). The Fifth Circuit also denied motion for costs and damages under Federal Rule of Appellate Procedure 38. II. Analysis Defendants argue that they are entitled to relief against plaintiffs, plaintiffs' counsel, and his law firm in the form of attorneys' fees and expenses incurred defending the claims asserted in both Wesolek I and Wesolek I I because the claims asserted in both actions were frivolous claims brought in bad faith for the purpose of harassing the defendants, and because the plaintiffs' pursuit of frivolous claims in two different actions disrupted the defendants' business and caused the defendants to incur approximately $350,000 in attorney's fees and expenses. Defendants argue that they are entitled to their attorney's fees and expenses from plaintiffs, plaintiffs' counsel, and his law firm as sanctions for bad faith conduct because plaintiffs and their counsel 25. different have now filed and presented four pleadings setting forth the same defective -8- allegations and claims in two different lawsuits (original and amended pleadings in both cases), and have further presented these claims and dragged out the proceedings through various other filings, including their Responses to Defendants' Motions to Dismiss in the two lawsuits. Plaintiffs' lawsuits have had the desired effect of harassing Defendants, disrupting Defendants' business, and requiring that they spend significant time and resources defending against them. In this regard, Plaintiffs' claims have also served as support for an Internet campaign against Defendants to cast Defendants as thieves and frauds. Defendants put Plaintiffs and Plaintiffs' attorney on notice that the claims were not brought in good faith and that Defendants would seek their attorney's fees and expenses if Plaintiffs persisted in making the claims. The Court entered a Final Judgment dismissing these claims in Wesolek I, providing that the direct claims were dismissed with prejudice, and detailing the claims' deficiencies in its accompanying 38-page Memorandum Opinion and Order. 26. Nevertheless, Plaintiffs and their attorney ignored the Court's Judgment in Wesolek I and brought the same claims based on the same allegations again in Wesolek II, requiring that Defendants spend additional time and resources once again to defend themselves, and to file collectively their fifth motion to dismiss these claims, and that the Court spend its judicial resources once again to address them. In granting Defendants' Motion to Dismiss, the Court found that Plaintiffs' direct claims were barred by res judicata based on the Final Judgment in Wesolek I. In addressing Plaintiffs' derivative claims, the Court further found: The court's opinion in Wesolek I put plaintiffs on notice of the need to plead facts capable of establishing that the preconditions for asserting derivative claims under state and federal law have been satisfied. Yet, despite this notice in Wesolek I, plaintiffs filed not only an Original Petition but also an Amended Class Action and Derivative Complaint in this action asserting derivative claims without alleging with particularity facts capable of establishing that the preconditions for bringing derivative claims required by state and/or federal law have been satisfied. -9- (Wesolek II, Doc. No. 17, p. 22). Although the Court had already dismissed the claims once, Plaintiffs and their counsel were undeterred and simply filed the claims again. Such conduct should not be countenanced. 12 Defendants rely on both federal and state law in support of their motion for relief: U.S.C. § Federal Rule of Civil Procedure 11(b), 28 1927, the court's inherent authority as recognized by the Supreme Court in Chambers v. NASCO, 111 S. Ct. 2123 Business Organizations Code Civil Practices and § Remedies 153.404, Code, (1991), Texas Chapter 10 of the Texas and Texas Rule of Civil Procedure 13. Plaintiff Michael P. Wagner acting individually, and all other plaintiffs acting collectively through their counsel, Kevin L. Colbert, urge the court to deny defendants' motion for relief. 13 A. Federal Law 1. Rule 11 Does Not Entitle Defendants to Relief Defendants cite Federal Rule of Civil Procedure 11 (b) in support of the argument that they are entitled to their attorney's fees and expenses from plaintiffs, plaintiffs' counsel, and his law firm. Rule 11(b) authorizes courts to sanction parties who assert or cause to be asserted claims or defenses (1) that are made for 12Defendants' Motion for Relief, Docket Entry No. 19, pp. 15 -16 ~~ 25-26. 13See Plaintiff, Michael P. Wagner's, Response and Motion for Relief ("Wagner's Response"), Docket Entry No. 27, and Plaintiffs' Response to Defendants' Motion for Relief ("Plaintiffs' Response"), Docket Entry No. 30. -10- any improper purpose such as to harass, cause unnecessary delay, or needlessly increase the supported by existing cost of litigation; law or by a (2) that are good-faith argument not for an extension or change in existing law; or (3) that lack evidentiary support or reasonable are likely opportunity The 11 (b) (1) - (3) . to lack for evidentiary Fed. investigation. purpose of the rule support is to R. after Civ. a P. "deter baseless filings in district court," Cooter & Gell v. Hartmarx Corp., 110 S. Ct. 2447, 2454 (1990), and to insure that "victims of frivolous lawsuits do not pay the expensive defending such lawsuits." Inc., 836 F.2d 866, 879 legal Thomas v. fees associated with Capital Security Services, (5th Cir. 1988) (en banc) After notice and opportunity to respond, courts finding a Rule 11(b) violation must impose appropriate sanctions. Id. at 876 (a court abuses its discretion if it finds a Rule 11 violation and does not impose some form of sanctions). See also Fed. R. Civ. P. 11 (c) (1) . Appropriate sanctions may include monetary awards in the form of attorney's fees and expenses. See Farguson v. MBank Houston, N .A. , 808 F.2d 358, 359-60 (5th Cir. 1986). A party seeking monetary sanctions under Rule 11 must file a stand-alone motion describing specific sanctionable conduct, must comply Rule 11 (c) (2) with the safe harbor provisions provided and by The safe harbor provisions of Rule 11(c) (2) require motions for sanctions to be served under Federal Rule of Civil Procedure 5, but that the motion "not be filed or be presented to -11- the court if the challenged paper, claim defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets." These provisions "contemplate[] service of the Rule 11 motion at least 21 days prior to filing the motion with the court in order to give the parties at whom the motion is directed an opportunity to withdraw or correct the offending contention." In re Silica Products Liability Litigation, 398 F. Supp. 2d 563, 673 n.173 (S.D. Tex. 2005) Elliott v. Tilton, 64 F.3d 213, 216 (5th Cir. 1995)). (citing The movant bears the burden of showing compliance with Rule 11's safe harbor provisions. See Harris v. Auxilium Pharms., Inc., 664 F. Supp. 2d 711, 724 (S. D. Tex. 2009). Plaintiffs argue that the defendants' motion for relief under Rule 11 should be denied because defendants have not complied with the 21-day safe harbor notice provisions of Rule 11 (c) (2) .14 Defendants do not dispute that they failed to comply with the safe harbor notice provisions of Rule 11(c) (2). Instead, defendants assert that any alleged technical failure to comply with Rule 11 does not preclude this court from awarding sanctions under the other authorities in Defendants' Motion for Relief, including under 28 U.S.C. § 1927, Tex. Bus. Org. Code § 153.404, the CourVs inherent authority, Tex. Civ. Prac. & Rem. Code Chapter 10, and Tex. R. Civ. P. 13. 15 14Wagner's Response, Docket Entry No. Response, Docket Entry No. 30, p. 3 ~ 5. 27, ~ 4; Plaintiffs' 15Defendants' Reply in Support of Motion for Relief No. 19) ("Defendants' Reply"), Docket Entry No. 31, p. 11, -12- ~ (Doc. 18. Defendants filed their motion for sanctions on January 4, 2013, - two weeks after the court granted their motion to dismiss the claims asserted in Wesolek II on December 21, 2012, and over seven months after the court granted their motion to dismiss the claims asserted in Wesolek I on May 18, 2012. A motion for sanctions filed after the case has concluded does not give the opposing party an opportunity to correct a filed in violation of Rule 11. (5th Cir. complaint allegedly Tompkins v. Cyr, 202 F.3d 770, 778 The reasons for requiring that a copy of the 2000). motion itself be served on the allegedly offending party is clear. The safe harbor provisions were intended to "protect[] litigants from sanctions wherever possible in order to mitigate Rule 11's chilling effects, formaliz[e] procedural due process considerations such as notice for the protection of the party accused of sanctionable behavior, and encourag[e] the withdrawal of papers that violate the rule without involving the district court." Thus, "a failure to comply with them [should] result in the rejection of the motion for sanctions." The Cadle Co. v. Pratt (In re Pratt), 524 F.3d 580, 587 (5th Cir. 2008) (citations omitted). indicates that defendants' plaintiffs on the same Moreover, the certificate of service motion for relief was served on the date it was filed with the court. Defendants have not complied with Rule 11's requirement that the motion for sanctions be served on the party sought to be sanctioned at least 21 days before being filed with the court. The Fifth Circuit has consistently "held compliance with Rule 11 is mandatory," In re Pratt, -13- that strict 524 F.3d at 586-87, and that "[c]ompliance with the service requirement is a mandatory prerequisite to an award of sanctions under Rule 11. Id. at 586. II A motion for Rule 11 sanctions is appropriately denied when the movant fails to comply with the safe harbor provisions. Tompkins, 202 F.3d at 788; Brunig v. Clark, 560 F.3d 292, 297 (5th Cir. 2009). Informal notice and opportunity to withdraw is not an adequate substitute for serving a copy of the motion at least twenty-one days before filing the motion with the court. In re Pratt, 524 F.3d at 586-88. Because defendants have not shown that they complied with Rule 11 t safe harbor provisions by serving S their motion for sanctions on plaintiffs, plaintiffs' counsel, and his law firm at least 21 days before filing it with the court, no sanctions can be imposed under Rule 11. Brunig, 560 F.3d at 297. See also Tompkins, 202 F.3d at 778; Elliott, 64 F.3d at 216 (reversing imposition of sanctions where movant failed to serve motion for sanctions on the defendants prior to filing it with the court as required by Rule 11). 2. Defendants Are Entitled to Relief From Plaintiff's Counsel Under 28 U.S.C. § 1927 for Defense of Wesolek II (a) Plaintiffs Cannot Be Sanctioned Under Defendants cite 28 U.S.C. § § 1927 1927 in support of the argument that they are entitled to their attorney's fees and expenses from plaintiffs, plaintiffs' counsel, and his law firm. provides: -14- Section 1927 Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and at torneys' fees reasonably incurred because of such conduct. 28 U.S.C. § 1927. Thus, "[§] 1927 allows a district court to shift fees only to counsel, not to parties." Procter & Gamble Co. v. Amway Corp., 280 F.3d 519, 525 (5th Cir. 2002). See also Matta v. May, 118 F.3d 410, 413-14 (5th Cir. 1997) ("Unlike Rule 11, sanctions are, terms, offending attorneys; awards."). by the section's clients plain may not be § 1927 imposed only on ordered to pay such Accordingly, defendants' argument that the court should sanction plaintiffs - as opposed to plaintiffs' counsel - under 28 U.S.C. § 1927 has no merit. (b) Plaintiffs' Counsel Can Be Sanctioned Under (1) 1927 Standard of Review The standard for awarding sanctions under § 1927 is higher than that applicable to Federal Rule of Civil Procedure 11. v. § Military Department of Mississippi, Cir.), cert. denied, 131 S. Ct. 287 standard of culpability than § 597 (2010) 1927"). F.3d 678, Bryant 694 (5th ("Rule 11 has a lower If § 1927 and Rule 11 sanctioned the same sort of conduct, a party could circumvent the safe harbor requirements of Rule 11 simply by seeking sanctions under 28 U.S.C. § 1927. Such a rule would undermine the safe harbor provision of Rule 11. Rule 11 and -15- § 1927 have therefore been interpreted to apply to different kinds of conduct. Samuels v. Wilder, 906 F.2d 272, 275 (7th Cir. 1990) and Rule 11 are addressed to different conduct: See ("Section 1927 the statute to prolonging litigation, and Rule 11 to particular filings.") . For § 1927 to apply, the conduct mUltiplying the proceedings must be both "unreasonable" and "vexatious." Procter & Gamble, 280 F.3d at 525 (citing F.D.I.C. v. Calhoun, 34 F.3d 1291, 1297 (5th Cir. Thus, 1994)). in addition to a pursued were baseless, improper motive, § showing that 1927 requires the claims "evidence of bad faith, or reckless disregard of the duty owed to the court." Id. (quoting Edwards v. General Motors Corp., 242,246 (5th Cir. 1998)). Moreover, 153 F.3d 1927 only authorizes "[§] shifting fees that are associated with 'the persistent prosecution of a meritless claim.'" 340, 345 (5th Cir. Id. 1991)) (quoting Browning v. Kramer, 931 F.2d In order to recover all costs associated with an action, the moving party must prove, by clear and convincing evidence, that every facet of the litigation was patently meritless, . . . and counsel must have lacked a reason to file the suit and must wrongfully have persisted in its prosecution through discovery, pre-trial motions, and trial. Id. at 526 (citing National Association of Government Employees v. National Federation of Federal Employees, 844 F.2d 216, 223 Cir. 1988), and Lewis v. Brown & Root. Inc., 711 F.2d 1287, 1292 (5th Cir. 1983), clarified on reconsideration, Cir.1984)). -16- (5th 722 F.2d 209 (5th Recognizing the potential dampening effect that 1927 can § have on the legitimate zeal of counsel representing clients l the Fifth Circuit construes the statute in favor of the party against whom sanctions are sought. Procter & (citing F.D.I.C. v. Conner, 20 F.3d 1376 Gamble I 280 F.3d at 526 1384 (5th Cir. 1994)) 1 [T]he district court must make detailed factual findings when imposing large sanctions in a complex case with an extensive record. The court must (1) identify sanctionable conduct and distinguish it from the reasons for deciding the case on the merits l (2) link the sanctionable conduct to the size of the sanctions and (3) differentiate between sanctions awarded under different statutes. I Id. The decision to court/s discretion. (2) impose 1927 § sanctions lies within the Edwards, 153 F.3d at 246. Sanctions Not Warranted for Wesolek I Section 1927 prohibits the persistent prosecution of meritless claims. Thomas, 836 F.2d at 875. of claims was unreasonable claims failed in the end. merely the benefit of I In assessing whether maintenance it is not enough that plaintiffs l Defendants must show with more than hindsight, that the plaintiffs' counsel persisted in asserting claims after it became clear that the claims lacked merit. that Calhoun l 34 F.3d at 1298, 1300. plaintiffs I counsell s persistence Defendants argue in pursuing plaintiffs I direct and derivative claims in Wesolek I and Wesolek II rise to the required level of misconduct. In Wesolek derivative claims I the court dismissed asserted against -17- the the same defendants direct by the and same counsel on behalf of many of the same plaintiffs as are asserted in Wesolek II. Although the court dismissed both the direct and the derivative claims asserted in Wesolek I, the court is not persuaded that counsel's pursuit entitles the of defendants attorney's fees. the claims to Because § sanctions asserted in that in the form of lawsuit costs or 1927 sanctions are intended to punish attorneys who unreasonably and vexatiously persist in prosecuting frivolous claims, such sanctions are not warranted absent a showing that the attorney to be sanctioned persisted in prosecuting claims after becoming aware that the claims at issue had no merit. Procter & Gamble, 280 F.3d at 526 associated with an action under See (in order to recover all costs 1927, the moving party "must prove, by clear and convincing evidence, that every facet of the § li tigation was patently meri tless, and counsel must have lacked a reason to file the suit and must wrongfully have persisted in its trial") prosecution through discovery, pre-trial motions, and Defendants do not argue and the court does not find that "every facet" of the Wesolek I litigation was patently meritless. (3) Sanctions Are Warranted for Wesolek II Plaintiffs did not appeal the court's dismissal of the claims asserted in Wesolek I. Instead, approximately three months after the dismissal plaintiffs' counsel filed Wesolek II in state court. The Original Petition filed in Wesolek II asserted the same direct and derivative claims dismissed in Wesolek I on behalf of the same -18- plaintiffs and other, newly named plaintiffs. For § 1927 to apply the conduct mUltiplying the proceedings must be both "unreasonable" and "vexatious." Procter & Gamble, 280 F.3d at 525. For the reasons stated below, the court concludes that counsel's conduct in filing and persistently prosecuting Wesolek II through appeal to the Fifth Circuit unreasonably and vexatiously multiplied the proceedings against defendants. (i) Through his Reasonableness involvement ln Wesolek I counsel knew that plaintiffs' direct claims for common law fraud and violation of the Texas Securities Act arising from misrepresentations made before the plaintiffs invested in the Funds were dismissed with prejudice under Rule 12(b) (6) for failure to plead fraud with particularity. It is well-settled that "[t] he federal law of res judicata [] establishes that a judgment in a prior suit bars a subsequent cause of action between the same parties not only as to all matters litigated in the first suit, but also as to all issues that could have been litigated regarding the same cause of action." Commercial Box & Lumber Co., Inc. v. Uniroyal, Inc., 623 F.2d 371, 373 (5th Cir. 1980). Counsel's reassert ion in Wesolek II of direct claims against the defendants for common law fraud and violation of the Texas Securities Act was unreasonable because the same claims had been asserted and dismissed with prejudice in Wesolek I and as such were barred by res judicata. -19- Through his involvement in Wesolek plaintiffs' I counsel also knew that claims for conversion, violation of the Texas Theft Liability Act, money had and received, breach of fiduciary duty, negligence, common law fraud, and violation of the Texas Securities Act arising from misrepresentations made after they had invested in the Funds were claims that the plaintiffs could only assert Counsel also knew that in derivatively on behalf of the Funds. order to state a derivative claim for which relief may be granted plaintiffs were required to allege with particularity \\ (1) the effort, if any, of the plaintiff to secure initiation of the action by a general effort," (2) the required by Tex. as partner i or Bus. Wesolek I, 871 F. Supp. 2d at 628. reasons Org. for Code not § making 153.043. the See Although the court provided a detailed explanation of the standard for pleading such claims in Wesolek I, neither the Original Petition nor the Amended Class Action and Derivative Complaint filed in Wesolek No. (Docket Entry 16, which counsel deficiencies for Wesolek I. Counsel's reassertion In Wesolek II of derivative claims suffered noted that filed without II which the from court the same leave of court) dismissed these deficiencies cured the claims in in the derivative claims filed in Wesolek I was therefore unreasonable. As evidence that every aspect of this litigation was patently meritless, defendants refer to each of the pleadings, including plaintiffs' response in opposition to their motion to dismiss in which counsel failed to cite any case or legal authority in support -20- of his contentions that defendants' motion to dismiss should not be granted or that he should be allowed to replead. Defendants also point to the appeal of the court's dismissal of Wesolek II, which The court agrees with the Fifth Circuit dismissed as frivolous. defendants that in view of the information available to counsel when Wesolek II was filed, under § prosecuted, and appealed, sanctions 1927 are warranted because each of the pleadings filed by plaintiffs' counsel unreasonably and vexatiously multiplied the proceedings. By filing and pursuing the claims asserted in Wesolek II, plaintiffs' counsel multiplied proceedings that should have concluded with the resolution of Wesolek I. If counsel believed the outcome in Wesolek I was incorrect, he should have sought reconsideration or filed an appeal in the Fifth Circuit. Counsel's actions ln filing an entirely separate case were not only therefore unreasonable and without any legal basis. (ii) The Vexatiousness multiplication of proceedings unreasonable but also vexatious. showing that be This requirement is met by a in filing and maintaining the proceedings counsel acted in bad. faith, with improper motive, disregard of the duty owed to a court. 813, 817 must (5th Cir. 1995). or with a reckless Baulch v. Johns, 70 F.3d The Fifth Circuit has recognized that counsel's bad faith, improper motive, or reckless disregard may be found from objective circumstances, Calhoun, 34 F.3d at 1300; in -21- other words, Sanctions may inadvertence, The 344. it is not, strictly speaking, a subjective inquiry. not be imposed, however, Fifth Circuit has, mere negligence, Browning, or counsel's incompetence. for 931 F.2d at in the past, recognized that an attorney's actions may be so completely without merit that the court is required to conclude that recklessly or for some improper purpose. Campbell, Athey Nevertheless, Zukowski, & \\ [§] the actions were taken See McGoldrick Oil Co. v. 793 F.2d 649, 653 (5th Cir. 1927 only authorizes shifting fees 1986). that are associated with 'the persistent prosecution of a meritless claim.,ff Proctor & Gamble, 280 F.3d at 525-26. For the reasons stated in the preceding paragraphs, the court concludes that the claims prosecuted in Wesolek II were unreasonable and patently meritless when they were initially filed in state court, when counsel responded to defendants' motions to dismiss, when counsel filed an amended class action and derivative complaint, and when counsel appealed the dismissal of Wesolek II. Because the court's opinion in Wesolek I put counsel on notice of the deficiencies in his pleadings that were repeated, not remedied in Wesolek II, this is not a case in which counsel merely failed to conduct a reasonable inquiry into the factual and legal bases for the claims asserted in Wesolek II prior to filing the complaint. Instead, this is a case in which counsel purposely filed patently meritless claims for an improper purpose of harassing or annoying the defendants, or, at a minimum, -22- reli tigating claims already decided against his clients but not appealed. See Columbus v. United Pacific Insurance Co., 712 641 F. Supp. 707, (S.D. Miss. 1986) (identifying complaint seeking to relitigate claims dismissed by a prior judgment as "interposed with the improper purpose of seeking to relitigate claims which have been foreclosed"). See also Walker v. City of Bogalusa, 168 F.3d 237, 240 (5th Cir. 1999) (affirming imposition of 1927 sanctions on plaintiffs' § for persistently prosecuting a clearly meritless claim, counsel i.e., a civil rights claim for which plaintiffs neither alleged nor proved discriminatory purpose, claim) i an essential prima facie element of the McGoldrick Oil Co., 793 F.2d at 653 (finding appeal so devoid of merit as to be frivolous, and so frivolous as to warrant the imposition of sanctions under 28 U.S.C. § 1927 and Fed. R. App. P. 38). (iii) Excessive Costs and Attorney's Fees The liability created under § 1927 is only for excessive costs due to persistent prosecution of a meritless claim. F.2d at 344. under § Browning, 931 The Fifth Circuit advises courts to impose sanctions 1927 "sparingly," and cautions that except when the entire proceeding has been unwarranted, unreasonable, and vexatious, and should therefore not have been initiated or pursued, it will not be appropriate under § 1927 to shift the entire financial burden of an action's defense. F.3d 521, 535 Meadowbriar Home for Children, Inc. v. Gunn, 81 (5th Cir. 1996) (citing Calhoun, -23- -------'------'- 34 F.3d at 1297). The actions undertaken by in counsel plaintiffs' pursuing Wesolek II after the state court action was removed to this court evidence an intentional or reckless pursuit of claims that counsel knew or Further, should have known to be unwarranted in fact or law. in light of the court's dismissal of the direct claims asserted in Wesolek I with prejudice and the admonitions to counsel regarding the deficiencies of the derivative claims asserted in Wesolek I, the court concludes that the claims pursued in Wesolek II were pursued for an improper purpose of harassing and annoying the defendants, or, at a minimum, relitigating claims that had already been decided adversely to his clients but had not been appealed, and that counsel's actions in pursing those claims unreasonably and vexatiously multiplied proceedings in violation of 28 U.S.C. 1927. § Therefore, counsel should be sanctioned, and the least severe sanction sufficient to deter repetitive conduct is to hold plaintiffs' counsel liable for the attorney's fees and costs that defendants incurred defending the meritless claims pursued in Wesolek II. Since plaintiffs' counsel has not disputed the reason- ableness of the sums that defendants state they incurred defending Wesolek II, and since for the reasons stated in § II.B.2, below, the court concludes that sanctions in the form of attorney's fees and expense are also warranted against plaintiffs' counsel under Texas Rule of Civil Procedure 13 for filing in state court the Original Petition asserting baseless claims that initiated Wesolek II, counsel will be ordered to pay defendants the entire -24- amount of attorney's fees and expenses incurred defending those baseless claims, i.e., $53,390.00 for attorney's fees and $2,412.00 for reasonable expenses. 16 (4) Counsel's Opposition to Sanctions Lacks Merit Plaintiffs' counsel challenges defendants' motion for relief in the form of sanctions by arguing that plaintiffs had a good faith argument that they satisfied the requirements for pleading derivative claims under Texas law,17 and that defendants' motion for relief is barred by res judicata .18 Plaintiffs' Original Petition, Citing ~~ 65 and 66 of counsel argues that "[p]laintiffs plead that they attempted to get the general partner, Layton Energy 16Defendants' Reply, Docket Entry No. 31, p. 11 ~ 19, and Exhibits 1 and 2 thereto (Affidavit of Andrew R. Harvin in Support of Motion for Relief (Exhibit 1) and Affidavit of Daniel Layton in Support of Motion for Relief (Exhibit 2)). This amount does not include the attorney's fees or expenses associated with defending plaintiffs' appeal of Wesolek I I or pursuing sanctions. The court declines to award defendants attorney's fees and expenses incurred defending the appeal of Wesolek I I because the court is not persuaded that such relief is warranted since despite dismissing plaintiffs' appeal as frivolous, the Fifth Circuit denied defendants' request for such relief under Federal Rule of Appellate Procedure 38. The court also declines to award defendants attorney's fees or expenses incurred pursuing sanctions because the defendants sought sanctions under many theories that the court has found lack merit and because "[l]itigants should be able to defend themselves from the imposition of sanctions without incurring additional sanctions./I Blue v. United States Department of the Army, 914 F. 2 d 525, 548 ( 4 t h Ci r. 1990). 17Plaintiffs' Response, Docket Entry No. 30, p. 2 18Id. at 3 ~ 6. -25- ~ 4. Texas, LLC, to act through its two members: J. Clarke Legler."19 of the Texas actions. "20 Counsel also argues that Section 153.401(2) Business 'demand futility' Daniel Layton and Organizations Code "clearly recognizes with respect to limited partnership derivative The problem allegations contained in with ~~ 65 these arguments and 66 of is that Plaintiffs' the Original Petition were not only deficient because they failed to allege with particularity the facts required by Texas law for asserting derivative claims, but based on the court's dismissal of virtually identical derivative claims In Wesolek I, counsel knew that the derivative claims asserted in Wesolek II were also deficient. Counsel's contention that defendants' motion for relief is barred by res judicata because " [d]efendants filed a substantially similar motion in the United States Court of Appeals for the Fifth Circuit where it was denied,"21 also lacks merit. Unlimited, Inc. v. McCain, 112 F.3d 814, 817 See Creations (5th Cir. 1997) (recognizing that district courts maintain jurisdiction to "rule on a motion for ancillary attorney's fees even after the filing of a notice of appeal with respect to the underlying claims") v. Ehrman, 3 F.3d 931, 933 (5th Cir. 1993) 19Id. at 2 ~ 4. 2°Id. at 3 ~ 4. 21Id. ~ 6. -26- (same). i Topalian 3. Defendants Are Not Entitled to Attorney's Fees Based on the Court's Inherent Authority When a party's conduct is not effectively sanctionable pursuant to an existing rule or statute, i.e., Rule 11 or 28 U.S.C. § 1927, it may nevertheless be appropriate for a court to turn to its inherent power to impose sanctions. See Chambers v. NASCO, Inc., 111 S. Ct. 2123 (1991); Toon v. Wachenhut Corrections Corp., 250 F.3d 950, 952 (5th Cir. 2001) Law Firm, P.C., sanctioning 110 F.3d 290, power is and [the] proceeding[s] "based Carroll v. The Jaques Admiralty 292 (5th Cir. on the need 1997). to Inherent control necessity of protecting the exercise of judicial authority in connection with those proceedings.u 937 F.2d at 1023. court Case, Thus, a court's inherent power is not "a broad reservoir of power, ready at the imperial hand, but a limited source; an implied power squeezed from the need to make the court function. u NASCO, Inc. v. Calcasieu Televsion & Radio, Inc., 894 F.2d 696, 702 Inc., (5th Cir. 1990), aff'd sub nom., Chambers v. NASCO, 111 S. Ct. 2123 (1991). The Supreme Court has recognized that courts have the inherent power to impose sanctions against litigants for their bad faith conduct and that a court may assess attorney's fees as a sanction when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. S. Ct. at 1612. if such Chambers, 111 S. Ct. at 2123; Alyeska, 95 The threshold for invocation is high, however, and inherent power is invoked -27- it must be exercised with restraint and discretion. Maguire Oil Co. v. City of Houston, 143 F.3d 205, 209 (5th Cir. 1998). The Fifth Circuit has held that the court should only invoke its inherent power to sanction if it finds that "a fraud has been practiced upon it or that the very temple of justice has been defiled." Boland Marine & Mfg. Co. v. Rihner, 41 F.3d 997, 1005 (5th Cir. 1995) (citing Chambers, 111 S. Ct. 2123). As to the court's ability to use its inherent power to shift fees, the general rule in federal courts - known as the "American Rule" - is that a prevailing party cannot recover attorney's fees absent specific statutory authority, contractual right, or certain special circumstances. Wilderness Society, 95 See S. Alyeska Ct. 1612 Pipeline (1975) i Servo Co. Galveston v. County Navigation Dist. No.1 v. Hopson Towing Co., Inc., 92 F.3d 353, 356 (5th Cir. 1996). The Fifth Circuit has held that conduct required to invoke this exception to the American Rule must be "callous and recalcitrant, arbitrary and capricious, or willful, persistent." callous and Galveston County, 92 F.3d at 358. Judged against these standards defendants have failed to make the required showing for an award of attorney's fees under the court's inherent powers against either plaintiffs or their counsel. Since the court has already concluded that plaintiffs' should be sanctioned under 28 U.S.C. § counsel 1927, there is no need to invoke the court's inherent authority to sanction him. Although defendants argue that plaintiffs brought this litigation for an improper purpose, defendants have not offered any evidence capable -28- of proving that the plaintiffs - as opposed to their counsel engaged in sanctionable conduct, i.e., conduct that perpetrated a fraud on the court, Boland, 41 F.3d at 1005, or conduct that was "callous and recalcitrant, callous and persistent." arbitrary and capricious, Galveston County, 92 or willful, F.3d at 358. Accordingly, the court concludes that no sanctions can be imposed under the court's inherent authority. B. State Law Defendants also argue that sanctions in the form of attorney's fees and expenses against plaintiffs, plaintiffs' counsel and his law firm are appropriate (1) under: Texas Rule Procedure 13; (2) Texas Business Organizations Code § of Civil 153.404; and (3) Texas Civil Practice and Remedies Code Chapter 10. Plaintiff Wagner argues that defendants may not rely on Texas law in support of their motion for relief because defendants removed this action to federal court. 22 Defendants respond that in cases filed originally in Texas state court but later removed to federal court groundless pleadings are governed by Texas Rule of Civil Procedure 13. See Tompkins, 202 F.3d at 787 ("The federal rules do not apply to filings in state court, federal court.") .23 even if the case is later removed to Defendants also assert that because "both the 22Plaintiff, Michael P. Wagner's, Relief, Docket Entry No. 27, ~ 7. Response and Motion 23Defendants' Reply, Docket Entry No. 31, pp. 7-8. -29- for Wesolek cases were derivative suits involving partnerships both before and after removal. u24 Code § 153.404 applies. Texas limited Tex. Bus. Org. Defendants do not dispute the contention that chapter 10 of the Texas Civil Practices and Remedies Code is inapplicable. In this case removed from state court, the court considers the applicability of sanctions under Texas Rule of Civil Procedure 13 only for the filings made in state court. The federal rules of civil procedure do not apply to filings in state court, even if the case is later removed to federal court. rules did not apply, then nothing If the state pleading would govern the original pleadings in these cases, and a party who filed in bad faith might escape any penalty. Before imposing sanctions under Rule 13, a court must determine that the state court pleading was groundless, and that the pleading was brought either in bad faith or for the purpose of harassment. Tex. R. Civ. P. 13. See Dike v. Peltier Chevrolet, Inc., 343 S.W.3d 179, 183-84 (Tex. App.-Texarkana 2011, no pet.). "'Groundless' means no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law. 859, 863 use an u Harrison v. Harrison[ (Tex. App.-Houston [14th Dist.] obj ecti ve standard to determine 363 S.W.3d 2012, no pet.). whether a Courts pleading is groundless and ask whether a reasonable inquiry was made into the 24Id. at 8. -30- legal and factual bases of the claim. Great W. Drilling, Ltd. v. Alexander, 305 S.W.3d 688, 697 (Tex. App.-Eastland 2009, no pet.). A party acts in bad faith when he is on notice that his understanding of the facts may be incorrect and he does not make reasonable inquiry to ascertain App.-Austin facts before he files a Robson v. Gilbreath, 267 S.W.3d 401, 407 pleading alleging them. (Tex. the 2008, pet. denied). Bad faith is not bad judgment or negligence; bad faith requires conscious wrongdoing for dishonest, Drilling, discriminatory, 305 S.W.3d at element of bad faith. at 407. fai th, or malicious purposes. Improper motive 698. Great W. is an essential Dike, 343 S.W.3d at 193; Robson, 267 S.W.3d Courts must presume that pleadings are filed in good and presumption. the party moving for sanctions must overcome this GTE Communications System Corp. v. Tanner, 856 S.W.2d 725, 730-31 (Tex. 1993). 1. Sanctions Are Not Warranted for Filing Wesolek I For the reasons stated in II.A.2(b) (2), above, the court has § already concluded that the claims asserted in Wesolek I were not patently meritless. Because the claims asserted in Wesolek I were not patently meritless, the court is not persuaded that sanctions are warranted against plaintiffs, plaintiffs' counsel, or his law firm for filing the Original Petition that initiated Wesolek I. 2. Sanctions Are Warranted for Filing Wesolek II For the reasons stated in § II.A.2(b) (3), above, the court has already concluded the claims that plaintiffs' counsel pursued in -31- -----------------_. Wesolek II were groundless and brought to harass or annoy or, at a minimum, for the improper purpose of relitigating claims that had previously been decided adversely to his clients but not appealed. Because the groundless claims pursued in Wesolek II were initially filed in state warranted under court, the Texas court Rule of concludes Civil that sanctions Procedure 13 against plaintiffs' counsel for filing Wesolek II in state court. however, are Since, defendants have not itemized their attorney's fees and expenses in a manner that allows the court to determine what amount of attorney's fees and expenses were incurred solely as a result of the need to respond to the Original Petition filed in state court, the court is unable to determine what amount would be the least severe sanction for this violation of Rule 13. counsel has not disputed the Because plaintiffs' reasonableness of the sums that defendants state they incurred defending Wesolek II, and since for the reasons stated in concludes that § II .A.2 (b) (3) sanctions in the and form of (4), § proceedings 1927 by for unreasonably continuing to and pursue fees and counsel under 28 vexatiously the the court attorney's expenses are also warranted against plaintiffs' u.S.C. above, claims multiplying asserted in Wesolek II following removal to this court, counsel will be ordered to pay defendants the entire amount of attorney's fees and expenses -32- incurred defending those baseless claims, i. e., $53,390.00 for attorney's fees and $2,412.00 for reasonable expenses. 25 3. Sanctions Are Not Warranted Against Plaintiffs Wagner argues that \\[p]laintiffs should not be sanctioned for things they did not know about because Attorney Colbert failed to provide [p]laintiffs with copies of pleadings and reports on his court activities. ,,26 In support of his statement that plaintiffs' attorney failed to keep him fully informed of his court activities, Wagner submits authorize an Attorney affidavit Colbert stating, to file inter and alia, prosecute \\1 the did not second lawsuit, and I never gave Attorney Colbert authority (implied or 25Defendants' Reply, Docket Entry No. 31, p. 11 ~ 19, and Exhibits 1 and 2 thereto (Affidavit of Andrew R. Harvin in Support of Motion for Relief (Exhibit 1) and Affidavit of Daniel Layton in Support of Motion for Relief (Exhibit 2)). This amount does not include the attorney's fees or expenses associated with defending plaintiffs' appeal of Wesolek II or pursuing sanctions. The court declines to award defendants attorney's fees and expenses incurred defending the appeal of Wesolek II because the court is not persuaded that such relief is warranted since despite dismissing plaintiffs' appeal as frivolous, the Fifth Circuit denied defendants' request for such relief under Federal Rule of Appellate Procedure 38. The court also declines to award defendants attorney's fees or expenses incurred pursuing sanctions because the defendants sought sanctions under many theories that the court has found lack merit and because "[l]itigants should be able to defend themselves from the imposition of sanctions without incurring additional sanctions." Blue v. United States Department of the Army, 914 F.2d 525, 548 (4th Cir. 1990). 26Wagner's Response, Docket Entry No. 27, -33- ~ 5. otherwise) to violate his duties under Rule 11.1127 Wagner also states that he does not believe that any of the other plaintiffs have received notice from Attorney Colbert that there is a motion pending seeking a judgment against them for sanctions on account of his improper actions in filing and prosecuting the first and second lawsuits. 28 that either Because defendants have failed to submit any evidence contradicts Wagner's statements that he did not authorize Colbert to initiate Wagner II by filing the original petition in state court, or from which the court could conclude that any of the other plaintiffs either knew that the court had dismissed Wagner I or authorized Colbert to initiate Wagner II by filing the original petition in state court, defendants have failed to show that any of the individual plaintiffs should be sanctioned under Texas Rule of Civil Procedure 13. For these same reasons, the court concludes that plaintiffs are not individually subject to orders requiring expenses under § them to 153.404(e) pay defendants' attorney's fees and of the Texas Business Organizations Code, which allows courts to make such awards on final judgment for a defendant upon finding that suit was brought without reasonable cause. 27Affidavit of Michael P. Wagner in Opposition to Defendants' Motion for Relief (Doc. 19) and In Support of Wagner's Motion for Relief, Docket Entry No. 28, p. 6 ~ 21. 28Id. at 5-6 ~ 19. -34- III. Conclusions and Order For the reasons explained above, the court concludes that neither sanctions nor an order to pay defendants' attorney's fees and expenses should be entered against any of the plaintiffs individually, but that sanctions are warranted against plaintiffs' counsel under Texas Rule of Civil Procedure 13 Original Petition that initiated Wesolek I I under 28 U.S.C. § filing the in state court and 1927 for unreasonably and vexatiously multiplying proceedings by Wesolek following II for continuing to pursue removal plaintiffs' counsel, Kevin defendants $53,390.00 for L. to the this Colbert, attorney's claims asserted court. is fees Accordingly, ORDERED and in to pay $2,412.00 to for reasonable expenses within thirty (30) days from the entry of this Memorandum Opinion and Order. Defendants' Motion for Relief (Docket Entry No. 19) is GRANTED IN PART and DENIED IN PART. Plaintiff, Michael P. Wagner's, Motion for Relief (Docket Entry No. 27) seeking an order directing defendants and plaintiffs' counsel to provide him certain documents and adding 90 days onto the deadlines for filing responses to Defendants' Motion for Relief 1S MOOT. SIGNED at Houston, Texas, on this 14th March, 2014. SIM LAKE UNITED STATES DISTRICT JUDGE -35-
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