Appeal from orders of the United States District Court for the Eastern District of New York (Jospeh M. McLaughlin, Judge), directing defense counsel to pay $10,469.25 in sanctions to plaintiff under Fed. R. Civ. P. 37(c) for the failure to admit the truth of four statements allegedly contained in requests for admission, and directing defense counsel to pay $7,171.25 under 28 U.S.C. § 1927 (1982) for costs incurred by plaintiff as a result of the practice of requiring plaintiff to make a motion to compel discovery before providing requested information. We reverse as to the Rule 37(c) sanctions except for one request for admission which is remanded, but affirm as to the Section 1927 sanctions.
Timbers, Winter and Altimari, Circuit Judges.
This appeal requires us to consider several issues concerning a district court's power to sanction attorneys for abuses during pretrial discovery. We address whether Fed. R. Civ. P. 37(c) permits the imposition of sanctions on a law firm for its clients' failure to admit certain statements contained in requests for admission, whether sanctions may be imposed for failing to prove composite paraphrases of requests for admission, and whether sanctions under 28 U.S.C. § 1927 (1982) may be awarded for failing to confer in good faith over disputes arising in discovery.
The law firm of Shea & Gould appeals from Judge McLaughlin's orders imposing monetary sanctions on it for alleged abuses during pretrial discovery in a suit against its client, The Belcher Company of New York, Inc., and Belcher New Jersey, Inc. (together "Belcher"). Specifically, the district court, under Fed. R. Civ. P. 37(c), ordered Shea & Gould to pay $10,469.25 in sanctions to the plaintiff in the action, Apex Oil Company ("Apex"), for Belcher's failure to admit the truth of various matters contained in requests for admission. The district court further directed Shea & Gould to pay $7,171.25 under 28 U.S.C. § 1927 (1982) for the costs incurred by Apex as a result of Shea & Gould's tactic of requiring plaintiff to make a motion to compel discovery before voluntarily providing the requested information. We reverse the imposition of Rule 37(c) sanctions as to these matters because such sanctions cannot be imposed against a party's attorney. We also hold that sanctions cannot be imposed under Rule 26(g) for the failure to admit a composite paraphrase of several requests for admission. Rather, sanctions must be based on the specific requests for admission as actually made. We remand for a recalculation of sanctions under Rule 26(g) with regard to one request for admission, however. At the same time, we affirm the district court's imposition of sanctions under Section 1927.
The litigation underlying this appeal involved an acrimonious commercial dispute between Apex and Belcher, the merits of which are the subject of another decision filed this day, Apex Oil Co. v. Belcher Company of New York, 855 F.2d 997 (2d Cir. 1988), familiarity with which is assumed. Briefly, Apex claimed that Belcher had committed fraud by inducing Apex to provide a price concession to Belcher for 142,000 barrels of heating oil that Apex had delivered to Belcher, and that Belcher breached its contractual obligation to Apex by refusing to accept the remaining 48,000 barrels of oil provided for in the contract. Belcher's principal defense was that Apex had breached the contract by delivering oil that did not conform to the specifications of the contract. A jury rendered a verdict for Apex in the amount of $432,365.04. We reverse that judgment in our companion decision.
Discovery in this case was extensive and contentious. On November 20, 1985, Apex served upon Belcher its first request for admissions pursuant to Rule 36. In its response dated December 20, 1985, Belcher objected to more than one-half of Apex's ninety-one requests on the various grounds that they were "vague and argumentative" (35 requests), "improperly called upon defendants to admit a question of law" (5 requests), referenced documents that "speak for themselves" (25 requests), and were irrelevant (1 request). The parties made several attempts to resolve their differences over the admissions. On January 2, 1986 defense counsel advised Apex to file a motion to compel if it deemed the responses unacceptable. On January 3, Apex's counsel reviewed each response with Belcher's counsel, describing why plaintiff believed the responses inadequate and informed Belcher's counsel that Apex intended to file a motion to compel on January 6. Immediately prior to Apex's filing of the motion on that date, defense counsel informed Apex's counsel that the defendants intended to file supplemental responses to twelve of the requests, provided that the term "Belcher" was redefined as defense counsel suggested. Apex agreed to the redefinition. On January 7, still dissatisfied with Belcher's unwillingness to supplement more than twelve of the responses, Apex filed a motion to compel with Magistrate Caden who supervised discovery in this matter. Belcher opposed the motion, in part on the ground that the definition of Belcher contained in the requests for admission was objectionable, a matter that had already been resolved. Belcher also noted that Apex "has ample sanctions after trial in the event we are wrong." Although the motion was never decided, Belcher did file supplemental responses on January 9 and January 21.
The parties also engaged in hard-fought disputes over document production. On October 30, 1985, Apex filed a motion to compel the production of documents based on two earlier unsatisfied document demands. Apex claims that it was forced to file a motion to compel because Belcher had unnecessarily delayed production for five months and had supplied only a small number of the requested documents. Shea & Gould responds that the motion principally sought not the production of documents, but rather the identification of documents that Apex had produced in a different litigation between the parties. Shea & Gould concedes, however, that Belcher ultimately agreed to Apex's request after the motion to compel was filed.
The final discovery dispute concerned the identification of Belcher's expert witness. On September 19, 1985, Apex served interrogatories seeking the identification of Belcher's expert witness under Rule 26(b)(4). Shea & Gould responded that it "ha[d] not yet selected the expert witness or witnesses whom it intend[ed] to call at the trial of this action." Approximately three weeks prior to trial, defense counsel represented to Apex that Belcher did not intend to call an expert witness. Shortly thereafter, on January 15, 1986, defense counsel switched positions and informed Apex's counsel that Belcher "may" call an expert witness. On the morning of January 17, in a conversation regarding the exchange of witness lists for the pretrial order, defense counsel told Apex's counsel that Belcher would not identify an expert on their list, but would "reserve the right" to do so later. Apex then filed a motion dated January 17 to compel identification of Belcher's expert. On the afternoon of January 17, in a conference call with Magistrate Caden, defense counsel agreed to provide information about its expert. Shea & Gould claims that it was unaware of Apex's motion to compel and that it had not retained an expert until just prior to the conference call. The expert affirmed that he was hired only on the afternoon of January 17.
After the jury's verdict, Apex moved against Belcher and Shea & Gould for sanctions pursuant to, inter alia, Fed. R. Civ. P. 11, 30(g), 36 and 37(c), 28 U.S.C. § 1927, and the district court's inherent equitable powers. On March 20, 1987, Judge McLaughlin granted the motion in part and denied it in part. Specifically, he ruled that Shea & Gould should be sanctioned under Rule 37(c) for failing to admit four factual matters. Apex had sought sanctions for four additional factual matters that the district court determined were not properly sanctionable.
In addition, the district court awarded sanctions under 28 U.S.C. § 1927 for attorney's fees, costs and expenses incurred by Apex in moving to compel the production of documents, supplemental responses to requests for admissions and the identification of Belcher's expert witness. The district court "discern[ed]" that Shea & Gould had followed a "tactic" of first advising plaintiff's counsel to make a discovery motion and "when they did so, defense counsel mysteriously changed their minds and complied with the requests." Plaintiff's counsel, the district court found, had attempted to "resolve the matter informally" as required under Local Rule 6(a) of the Standing Orders of the Court on Effective Discovery in Civil Cases in the United States District Court for the Eastern District of New York. Shea & Gould's failure to comply with plaintiff counsel's "reasonable requests" under these circumstances, according to the district court, established the bad faith required under Section 1927 and was "precisely the kind of conduct section 1927 [was] designed to deter." The district court set the amount of sanctions against Shea & Gould at $10,469.25 under Rule 37(c), and $7,171.25 under Section 1927. No sanctions were awarded against Belcher, although Apex had made its motion for sanctions under Rule 37(c) only against Belcher and not against Shea & Gould. We need not examine the basis for determining the amount of sanctions because Shea & Gould does not contest the size of the award.
1. Sanctions Concerning Requests for Admissions
The district court imposed sanctions against Shea & Gould under Fed. R. Civ. P. 37(c) for Belcher's failure to admit four factual statements. On appeal, Shea & Gould claims that Rule 37(c) does not permit sanctions against a party's attorney. We agree.
Rule 37(c) provides, in pertinent part:
Expenses on Failure to Admit. If a party fails to admit the genuineness of any document or the truth of any matter as requested under Rule 36, and if the party requesting the admissions thereafter proves the genuineness of the document or the truth of the matter, the requesting party may apply to the court for an order requiring the other party to pay the reasonable expenses incurred in making that proof, including reasonable attorney's fees. The court shall make the order unless it finds that (1) the request was held objectionable pursuant to Rule 36(a), or (2) the admission sought was of no substantial importance, or (3) the party failing to admit had reasonable ground to believe that the party might prevail on the matter, or (4) there was other good reason for the failure to admit.
Fed. R. Civ. P. 37(c) (emphasis added). By its express terms, Rule 37(c) applies only to a party. See also Fed. R. Civ. P. 37(c) advisory committee's note to 1970 amendment ("Rule 37(c) is intended to provide posttrial relief in the form of a requirement that the party improperly refusing the admission pay the expenses of the other side in making the necessary proof at trial."); J. Moore, J. Lucas & D. Epstein, 4A Moore's Federal Practice para. 37.04, at 37.96 (1987) (Rule 37(c) precludes imposition of sanctions against party's attorney).
Moreover, we must infer from the other subsections of Rule 37 expressly providing for the imposition of sanctions against a party's attorney that the drafters intended to omit attorneys from the coverage of subsection (c). For example, Rule 37(a)(4), which permits the district court to award sanctions to the prevailing party on a motion to compel discovery, expressly states that if such a motion is granted, the "attorney advising [the] conduct" may be sanctioned, and that if such a motion is denied, "the attorney advising the motion" may be sanctioned. Similarly, Rule 37(d), which concerns a party's failure to attend a deposition or answer an interrogatory, expressly provides that "the court shall require the party failing to act or the attorney advising that party or both to pay the reasonable expenses . . . caused by the failure." Finally, Rule 37(g), which involves the failure of a party or the party's attorney to participate in the framing of a discovery plan, expressly provides for sanctions against the "party or attorney."
The only case cited by Apex for the proposition that Rule 37(c) sanctions may be imposed against an attorney, Dorey v. Dorey, 609 F.2d 1128 (5th Cir. 1980), is hardly dispositive. In Dorey, the Fifth Circuit never reached the question of whether Rule 37(c) sanctions can be imposed against an attorney, and addressed only whether the district court could award Rule 37 sanctions absent a court order compelling discovery. Id. at 1134-35. Moreover, in Akins v. McKnight, 13 F.R.D. 9 (N.D. Ohio 1952), the district court rejected a request under Rule 37(c) for sanctions against counsel, specifically noting that "Rule 37(c) provides for the assessment of expenses in a proper case only against a person serving sworn denials [a party]. The sanction of the Rule is a drastic one and should not be extended beyond its terms." Id. at 11.
We decline to adopt Apex's suggestion that we construe Rule 37(c) broadly in order to fill a so-called "gap" in the federal rules. Indeed, we note that Apex never sought sanctions against Shea & Gould under Rule 37(c) in the district court, and its arguments here are after-the-fact attempts to justify the district court's actions. In any event, whatever gap exists is small, for district courts have the power under Rule 26(g) to sanction attorneys who fail to respond properly to requests for admissions under Rule 36.
Because the sanctions imposed by Judge McLaughlin may be justified under Rule 26(g), we consider the applicability of that Rule to the instant case. See In re Sutter, 543 F.2d 1030, 1032 n.1 (2d Cir. 1976) (order imposing sanctions "must be upheld if there is any basis upon which it can be justified"); see also Dandridge v. Williams, 397 U.S. 471, 475, 25 L. Ed. 2d 491, 90 S. Ct. 1153 n.6 (1970) ("The prevailing party may, of course, assert in a reviewing court any ground in support of his judgment, whether or not that ground was relied upon or even considered by the trial court."). Rule 26(g) provides that all discovery requests, responses and objections must be signed by the party's attorney or by the party if pro se. The Advisory Committee's Note expressly states that "the term 'response' includes answers . . . to requests to admit." Fed. R. Civ. P. 26(g) advisory committee's note to 1983 amendment.
Under Rule 26(g), an attorney's signature constitutes a certification that he or she
has read the request, response, or objection, and that to the best of the signer's knowledge, information, and belief formed after a reasonable inquiry it is: (1) consistent with these rules and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; (2) not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; and (3) not unreasonable or unduly burdensome or expensive, given the needs of the case, the discovery already had in the case, the amount in controversy, and the importance of the issues at stake in the litigation.
Fed. R. Civ. P. 26(g). In interpreting Rule 26(g), district courts should look to our caselaw under Rule 11. See Fed. R. Civ. P. 26(g) advisory committee's note to 1983 amendment (Rule 26(g) "parallels the  amendments to Rule 11" and attorney's compliance with Rule 26(g) is measured by "objective standard similar to the one imposed by Rule 11"). Nevertheless, Rule 26(g) imposes a more stringent certification requirement than Rule 11 by requiring that the signer certify that the request, response or objection is: "(1) consistent with these rules . . . and (3) not unreasonable or unduly burdensome or expensive, given the needs of the case, the discovery already had in the case, the amount in controversy, and the importance of the issues at stake in the litigation." Fed. R. Civ. P. 26(g). This additional strictness is necessary because a "discovery request, response, or objection usually deals with more specific subject matter than motions or papers [governed by Rule 11]." Fed. R. Civ. P. 26(g) advisory committee's note to 1983 amendment. Discovery motions, as compared to papers filed in discovery, are governed by Rule 11. See Fed. R. Civ. P. 11 advisory committee's note to 1983 amendment.
In turning to the merits of the imposition of sanctions, we first discuss the basic provision governing requests for admission, Rule 36, and its relation to the provisions for sanctions, Rules 26(g) and 37(c). Rule 36(a) provides that a party may request another party to admit matters within the scope of Rule 26(b) that "relate to statements or opinions of fact or of the application of law to fact including the genuineness of any documents described in the request." The matter is deemed admitted, unless within thirty days of the request the party to whom the request is directed serves upon the requesting party a written answer or objection concerning the matter. This response must be signed by the party or his or her attorney. The attorney's signature brings into play the sanctioning power of Rule 26(g), while Rule 37(c) applies to the party whether or not the party has signed the response.
Under Rule 36(a), a party cannot entirely deny a request because part of it is believed to be untrue. The ...