Date: 09-20-2007

Case Style: Kevin H. Hudson, et al. v. International Computer Negotiations, Inc.

Case Number: 06-15932

Judge: Marcus

Court: United States Court of Appeals for the Eleventh Circuit on appeal from the Middle District of Florida (Orange County)

Plaintiff's Attorney: Unknown

Defendant's Attorney: Unknown

Description:

International Computer Negotiations, Inc. ("ICN") appeals from a district court order denying sanctions under Title 28 U.S.C. § 1927, against attorney Basyle J. Tchividjian, his law firm Landis Graham French, P.A., attorney Craig L. Berman, and his law firm Berman Law Firm, P.A., for their conduct in representing a plaintiff in a wrongful discharge suit against ICN. After thorough review, we affirm.

I

The essential facts and procedural history are these. This appeal regarding attorneys' fees sought under § 1927 arises out of the underlying wrongful discharge suit brought by Kevin Hudson ("Hudson") pursuant to the Florida Civil Rights Act of 1992, Fla. Stat. § 760, et seq. ("FCRA"), and § 510 of the Employee Retirement and Income Security Act, 29 U.S.C. § 1140 ("ERISA"), against his former employer, appellant ICN.

From May 1997 through November 2002, Hudson worked for ICN, a consulting and educational organization that advises and trains technology procurement professionals and others involved in negotiating large business transactions. Hudson served as the Director of CAUCUS, an operating division of ICN that serves as an association of technology procurement professionals with chapters throughout the country. CAUCUS membership provides access to quarterly educational meetings, online fora, conferences and seminars, and a certification program, and Hudson's responsibilities included organizing these meetings and increasing membership. Hudson's at-will employment agreement contained a one-year non-compete clause as well as a ten-year non-disclosure clause. By the time of his termination, Hudson's benefits included short-term disability, whose premiums ICN paid for, as well as optional long-term disability, whose premiums Hudson would be responsible for if he elected that coverage.

ICN's founder and President, Joseph Auer III ("Auer"), testified in deposition that he was "generally aware of [Hudson's] business activities and performance" early in Hudson's tenure at ICN, and that "[a]lthough there were some aspects of his performance that I thought were not particularly strong and should have been done differently or better, Hudson had usually done acceptable work." In the fall of 2001, however, Hudson came under Auer's direct supervision. Auer testified that by late 2001 or early 2002 he realized that Hudson's performance fell "far below what I expected and required." Auer began to object to several aspects of Hudson's performance. Hudson acknowledges that Auer repeatedly expressed dissatisfaction over these issues, although he defended his performance against Auer's critiques and argued that Auer's method of voicing criticism was abusive.

All parties agree that Auer and Hudson's relationship began to deteriorate at this point. However, although Auer would often object to Hudson's performance, sometimes in front of other employees, Auer indicated on more than one occasion, when asked by Hudson, that he did not want Hudson's resignation. Instead, Auer assured Hudson that he was a "valuable member of the team." Moreover, in August 2002, in anticipation of taking a sabbatical from ICN, Auer created an Executive Committee to run the company in his absence. Auer included Hudson on the committee, and gave each member of the committee a raise. Hudson also generally received annual raises during his time at ICN. Nevertheless, a few months before his termination in November 2002, Hudson began seeking alternative employment because he was not happy at ICN under Auer's supervision.

On or about September 6, 2002, Auer was entering ICN's offices while Hudson was leaving. Auer asked Hudson where he was going, and noted that Hudson had been leaving the office often. At Hudson's request, they proceeded to Auer's office, where Hudson explained that he was seeing a psychologist and a psychiatrist for depression, and that he had chosen providers close to ICN's offices so that he would not have to take much time off. According to Hudson, Auer said that he understood and that he was supportive. Both agree that the brief conversation ended there.

In early October, Auer asked Hudson how he ensured that new CAUCUS members were made aware of the "list serve" ICN provides, which allows members to communicate with each other and share ideas. According to Auer, Hudson said that it had been his longstanding practice to have his assistant, Bonnie Whitaker ("Whitaker"), contact each new member and explain the list serve to him or her. When Auer later questioned Hudson's assistant about this practice, she was at first evasive, but eventually confessed that Hudson had only recently told her to begin contacting new members to tell them about the list serve, that no one had previously been doing so, and that Hudson had further instructed her that if Auer asked, to tell him that she had been engaged in the practice for a long time. Auer testified that "[i]nstructing an employee to lie to me was the last straw," and he decided to fire Hudson. However, Auer says that he decided to wait to fire Hudson until after the conclusion of what was at that time the biggest event ICN had produced -- the annual CAUCUS conference scheduled in New Orleans for the third week of October 2002, all aspects of which Hudson was responsible for organizing and producing.

Although Auer concedes that the conference "went well overall," and that "certainly Hudson put lots of work into it," Auer observed "additional issues . . . with Hudson's performance" that confirmed his decision to terminate Hudson for poor performance. However, Hudson and Auer did not see each other after the conference until Auer fired Hudson on November 12.

Prior to that, in the weeks leading up to his termination, Hudson approached ICN's Chief Financial Officer Daniel Wallace ("Wallace"), who was responsible for certain human resources tasks, about insurance questions he had concerning some of the employees working under Hudson. Wallace apparently did not have ready answers to each of Hudson's questions at that time.

ICN's office manager, Deborah Rosenblum ("Rosenblum"), testified that during "the latter part" of Hudson's time at ICN, he confided to her that he was in counseling for job-related pressures, including the way he believed he was being treated by Auer, and that he was being treated for depression. Hudson says he confided in Rosenblum because she had confided in him about a similar situation affecting someone close to her, because she "kept track of where everyone was [so] I needed to tell her that I would be going out," because he "needed someone in the office to know what was going on, just because of the nature of the situation," and because "she was the benefits coordinator, . . . so [it was] kind of hard to hide anything from that person."

On October 28 and again on November 4, Hudson asked Rosenblum for a copy of his long-term disability policy or for detailed information about what disability benefits he had. On both occasions she said that she did not have that information, and that Hudson would have to obtain it from the insurance carrier itself. On November 5, the insurance company faxed to Hudson's home one page from his long-term disability policy concerning a mental illness/mental health provision. There is no indication from the fax itself that it was copied to anyone else, and Hudson did not share it with anyone at ICN.

On November 5 or 6, Wallace passed Hudson in the ICN offices and indicated that he would get back to him about an insurance question, which he did not more specifically describe.

On November 12, 2002, the first time Auer saw Hudson after the October conference, Auer personally terminated Hudson. Auer testified that he was the sole decision-maker. Auer explained that he "discussed with [Hudson] that things were just not working out," and Auer listed some of the performance issues that had been troubling him since late 2001 or early 2002. Auer said that "the conversation was actually pretty amicable and business-like," and that Hudson "broached the subject of his buying CAUCUS from ICN." Hudson agrees that he may have broached the idea.

On November 21, 2002, Hudson met with his attorney, Tchividjian, for the first time to seek legal advice concerning his ability to procure unemployment compensation, although he also mentioned that he was suffering from depression and had been terminated just several days after asking Rosenblum about his longterm disability insurance policy. Shortly thereafter, about one month after his termination, Hudson filed for and received unemployment benefits.

Between late November 2002 and mid-January 2003, Hudson and ICN engaged in protracted severance negotiations that grew contentious. On December 11, 2002, Wallace sent Hudson a letter reminding him of his obligation to adhere to the non-compete and non-disclosure provisions of his employment agreement, and warned that ICN would take any action necessary in response to a violation of this agreement. On January 17, 2003, Hudson responded that he was "not subject to any such agreement," that in fact he "may be engaging in employment or ownership in the technology arena," and likewise warned that he would take "all action . . . necessary" to prevent ICN from inhibiting him. On January 30, 2003, Hudson and attorney Tchividjian met again, this time to discuss Hudson's severance negotiations with ICN. Although they discussed the legal claims Hudson might have against ICN, Tchividjian advised that corroborating evidence was needed.

In March 2003, after turning down multiple job offers, Hudson started his own business, Technology Procurement Education Network, Inc. ("TPEN"). In mid-2003, ICN learned about TPEN, and on July 17, 2003, ICN sued Hudson in the Circuit Court for the Ninth Judicial Circuit, in Orange County, Florida, to enforce the non-compete, non-disclosure, and confidentiality clauses of his employment agreement.

On August 29, 2003, Tchividjian, who had not met with Hudson since January, filed an answer on Hudson's behalf. In his affirmative defenses, Hudson alleged for the first time -- nearly ten months after his termination -- that he had been unlawfully terminated because of a disability. Sometime between August and November, Hudson called Tchividjian to inform him that he had located the fax sent directly from the insurer to Hudson's home containing the portion of his insurance plan pertaining to his long-term disability benefits. In November 2003, about a year after Hudson's termination, Tchividjian filed a complaint on Hudson's behalf with the Florida Commission on Human Rights, alleging that ICN's termination of Hudson constituted discrimination on the basis of disability.

Nineteen months after his termination -- on June 10, 2004 -- Tchividjian filed this suit against ICN on Hudson's behalf in the United States District Court for the Middle District of Florida, alleging that Auer terminated him because of his depression, which he said constituted a disability, in violation of the Florida Civil Rights Act of 1992, Fla. Stat. § 760, et seq. ("FCRA"), and in order to deprive him of long-term disability benefits, in violation of § 510 of the Employee Retirement and Income Security Act, 29 U.S.C. § 1140 ("ERISA").1 Hudson also brought a claim under Florida common law, alleging that ICN negligently misrepresented that he would not be fired in the months leading up to his termination. The complaint also claimed that Auer's abuse in the workplace was the cause of Hudson's depression.

As the district court would later find in its first sanctions order, "ICN was forced to file three separate motions to compel the production of documents, complete answers to interrogatories, and Rule 26 disclosures." Despite the fact that the district court granted each of these motions, Hudson failed to comply with at least one of them, forcing ICN to file yet another motion to compel compliance with the court's order, which the court granted and pursuant to which it awarded attorneys' fees to ICN.

ICN subpoenaed Hudson's mental health records, which Hudson did not have and which Tchividjian had not reviewed prior to filing the lawsuit. They revealed that Hudson had been seeing a mental health professional well before he began working for ICN, that during all times of treatment Hudson had been able to work, and that his psychiatrist believed Hudson to be a capable person. As the district court would later find, the conflicting evidence on this issue showed that Hudson had suffered "major depression" prior to his termination, but had not been "clinically depressed" at the time of his termination. In any case, the court determined, there was no evidence that Hudson's depression substantially limited his ability to work, and the evidence showed that Hudson was, at the time of this suit, able to "fully function in life."

Tchividjian took several depositions, most of which failed to support Hudson's claims. Rosenblum testified that she had not mentioned Hudson's inquiry to anyone, including Auer and Wallace. Wallace testified that in his November 5 or 6 comment to Hudson indicating that he would get back to him about an insurance question, he was referring to one of the questions Hudson had asked him about an employee under Hudson's supervision, and that he had no knowledge that Hudson had made any insurance-related inquiries about himself or that Hudson was receiving any sort of counseling or treatment for depression. Auer testified that he had no knowledge that Hudson had inquired about his longterm disability benefits, and that he did not view Hudson as being disabled based on the single comment Hudson made to him indicating that he was seeing a professional for depression. Auer observed that he alone made the decision to fire Hudson when, after what he considered to be a year of substandard performance, he learned that Hudson had asked Whitaker to lie to him. Finally, although by the time of her deposition she herself had been terminated by ICN, Whitaker confirmed that Auer had repeatedly "raised issues with Hudson" about his performance, that Hudson had instructed her to lie to Auer, and that when Auer learned of the fabrication he became "very upset."

The only testimony to support Hudson's case came in the form of an affidavit submitted by former ICN employee Lara Proctor, Hudson's executive assistant beginning in May 2000. Proctor swore that "[e]veryone in the office knew that [Rosenblum]'s primary role at ICN was to keep [Auer] informed about what was going on in the office . . . . Based upon prior experiences, we were all aware that whatever was shared with [Rosenblum] would be subsequently communicated to [Auer]. There is no doubt that [Rosenblum] would have told [Auer] that [Hudson] was seeking information on both short and long term disability."

ICN moved for summary judgment on all three counts, arguing that, as for the ERISA claim, the evidence showed that Auer alone made the decision to terminate Hudson, that he was not aware of Hudson's inquiry regarding long-term disability, and that as for the FCRA claim, the evidence showed that Hudson's alleged depression had not come close to substantially impairing a major life activity. In sum, ICN argued that Hudson could not make out a prima facie case under either statute, and that even if he could, ICN had shown legitimate nondiscriminatory reasons for his termination. ICN also argued, with respect to the negligent misrepresentation claim, that Hudson could not have relied to his detriment on anything Auer told him because the evidence showed that Hudson had been actively seeking alternative employment months before his termination.

Hudson and Tchividjian arranged for Berman to prepare Hudson's response to ICN's motion for summary judgment. That response abandoned the negligent misrepresentation claim. It did, however, oppose summary judgment as to his claims under ERISA and the FCRA, arguing that a genuine issue of material fact existed concerning Auer's knowledge of Hudson's inquiry to Rosenblum; that his depression had substantially limited his ability to interact with others and concentrate, his emotional stability, his sexual drive, and his ability to sleep; and that even if Hudson was not disabled, Auer had terminated Hudson based on his perception that Hudson was disabled. Berman also argued generally that the undisputed facts harmful to Hudson's claims must be disregarded because they came from the testimony of interested parties.

The district court granted summary judgment to ICN on all counts. As for the ERISA claim, the court found that Hudson could not show that Auer, the sole decision-maker, "had the specific intent to interfere with [Hudson's] ERISA rights," which is the "‘ultimate inquiry in a § 510 case.'" Order at 8-9 (quoting Clark v. Coats & Clark, Inc., 990 F.2d 1217, 1222-23 (11th Cir. 1993)). The district court concluded that the "best" Hudson could do was offer his "unsupported assumption" that Rosenblum told Auer of Hudson's request concerning long-term disability -- an assumption the court said was "further weakened by evidence . . . showing that Rosenblum did not inform anyone . . ., and that Auer was not aware of that request prior to Hudson's termination."

* * *

On July 20, 2006, the district court entered its first order on this issue which, among others, assessed attorneys' fees against lawyers Tchividjian and Berman personally under § 1927. The court concluded:

While no one consideration, standing alone, would be sufficient for the Court to impose sanctions under Section 1927, the Court finds that in combination, the frivolous nature of the claim, Hudson's retaliatory motive, counsel's handling of the case particularly as it relates to discovery, and the continued efforts to support the claims in the face of both a lack of supporting evidence and clear evidence to the contrary, warrant the imposition of sanctions.

As for "the frivolous nature of [Hudson's] claim," the district court said that it "was able to make clear findings of fact" from the evidence produced through discovery, and that several of the arguments Hudson made in response to ICN's motion for summary judgment "def[ied] any semblance of logic." Specifically, the district court found, with respect to Hudson's ERISA claim, that the evidence did not support the claim that Auer knew of Hudson's request for long-term disability benefits information. The evidence "distinctly demonstrate[d]" that Rosenblum, "the only person with whom Hudson spoke about his benefits, did not advise Auer of Hudson's request." Nor was Hudson warranted in his "attempts to infer from Wallace's purported knowledge of Hudson's request for benefits information that Auer also was aware of Hudson's request."

As for Hudson's FCRA claim, the district court found that Hudson had produced "no evidence" that his depression "substantially limited his life activities," which was necessary to support his claim that he is disabled within the meaning of the FCRA. Nor, the court found, could Hudson save his FCRA claim by arguing that Auer discharged him because of a perceived disability; the "clear evidence" showed "that Auer terminated Hudson because of dissatisfaction with various aspects of Hudson's performance," rather than because of "Hudson's admission [to Auer] that he suffered from depression." The district court concluded that although "Hudson's claims were questionable at best when they were made," and then "discovery revealed (or should have revealed) an almost complete lack of factual support for his claims, Hudson and his counsel nevertheless pressed on, attempting to create argument to support their untenable position." The district court also imposed § 1927 sanctions for Hudson's appeal to this Court, noting that he "raised virtually the same argument before [us] as those presented to [the district court]."

Tchividjian moved for reconsideration because the court appeared to have overlooked his brief and considered only Berman's briefs. The district court granted the motion. On July 31, 2006, this Court issued its opinion in Amlong & Amlong, P.A. v. Denny's, Inc., 457 F.3d 1180 (11th Cir. 2006), as amended Oct. 10, 2006, in which we noted that an attorney under the threat of § 1927 sanctions is entitled to an evidentiary hearing. See id. at 1193. Shortly thereafter, both Berman and Tchividjian asked for such a hearing. The district court granted the application.

At the October 5, 2006, hearing, the district court noted that the hearing was being held, and the motion for reconsideration had been granted, in part in order to consider whether its original order granting sanctions was incorrect under Circuit precedent found in Cordoba v. Dillard's, Inc., 419 F.3d 1169 (11th Cir. 2005). After the hearing, the court concluded that it had "no option but to vacate" its prior order, and refused to award § 1927 fees. The district court said that although it continued to believe that Hudson's case had been frivolous, it read Cordoba, which involved a similar fact pattern, as precluding § 1927 fees in this case.

The district court stated that other than a typographical error in its prior order, he had "no reason to change my findings, per se. I still think this case was frivolous. I don't think that there was ever any connection between the request for disability information and the termination by the decision maker." Tr. 52:2-6. In addition, the court noted, circumstantial evidence suggested "there is reason to believe" that the federal case was brought in retaliation for ICN's suing Hudson in state court, giving at least the appearance that "federal process was being used as leverage as opposed to being used on the merits." In particular, the temporal proximity of the filing of the two cases and Hudson's offer to settle the federal case in exchange for ICN dropping the state case were "cause for concern." However, the court expressly found that it had "no basis to get into the minds of the parties involved," and therefore "can't make a finding that it's so." Id. 52:14-17. Moreover, the district court said that it had only recently learned that Tchividjian's firm had taken the federal case on a contingency fee basis, which it found "tends to weigh against" a finding that the lawyers brought the case knowing that it was frivolous and unlikely to succeed. Accordingly, the district court rejected an award of sanctions under § 1927.

* * *

Outcome: For the foregoing reasons, the judgment of the district court is AFFIRMED.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None