Mediation Costs In Sanctions For Frivolous Appeal (Quincy Bioscience v. Ellishbooks)

Frivolous? (photo by Marilyn Swanson)

By Donald L. Swanson

The opinion is Quincy Bioscience, LLC v. Ellishbooks, et al., Case No. 19-1799 (7th Cir.) (decided July 22, 2020).  

The procedural background is this: Ellishbooks loses a case before the U.S. District Court for the Northern District of Illinois (Doc. 1:17-cv-08292) and appeals to the Seventh Circuit Court of Appeals.  The Seventh Circuit’s first docket entry is dated April 25, 2019.

Mediation Required

On May 1, 2019, the Seventh Circuit issues a “Notice of Rule 33 Mediation,” which provides in part:

  • Pursuant to Rule 33 of the Federal Rules of Appellate Procedure and Circuit Rule 33, a telephonic mediation has been scheduled in this appeal for Thursday, May 30, 2019. Time: 2:00 p.m. (Central Time).
  • Rule 33 mediations vary in length and often exceed two hours. Participants should schedule no other activities for the remainder of the afternoon.  The Circuit Mediation Office will initiate the call to counsel and the parties.
  • Two business days before the scheduled mediation date, counsel must provide by email to the designated Circuit Mediator the names and telephone numbers of counsel and clients who will participate in the mediation.
  • Each party must be represented in the mediation by the lawyer or lawyers on whose judgment the party will primarily rely in making settlement decisions.
  • Clients as well as counsel are required to participate by telephone for the entirety of the mediation.
  • The mediation is expected to take place at the scheduled date and time. It will not be rescheduled unless an indispensable participant has an immovable preexisting commitment of such importance that his or her attendance is impossible. You must notify the Mediation Office of such a conflict immediately. The mediation will not be rescheduled on short notice.
  • At the mediation, be prepared to discuss the case in depth – your client’s goals and interests, the pivotal legal issues, the evidence of record, and the damages or other relief being sought.
  • In advance of the mediation, you are expected to provide your client with a copy of this notice, familiarize yourself and your client with mediation procedures, help your client realistically assess his or her interests and the prospects of the case on appeal, obtain as much settlement authority as feasible, and approach the mediation process with an open mind.
  • To encourage full and frank discussion, all communications during this mediation, and all further communications, oral and written, during the course of Rule 33 proceedings, are strictly confidential. The content of Rule 33 communications may not be disclosed to anyone other than the litigants and their counsel. Nothing said by the participants, including the mediator, will be placed in the record or disclosed by this office to the Court.
  • To enable counsel to devote their full attention to discussions of settlement, the briefing schedule will be extended. An order setting forth the new briefing schedule will be posted to the docket.

Unsuccessful Mediation and Ruling

The mediation effort fails to achieve a settlement, and the appellate process moves forward.

On April 24, 2020, the Seventh Circuit issues an appellate decision on the merits in favor of the Appellee, Quincy (the decision is reported at 957 F.3d 725).

In its decision, the Seventh Circuit finds that Ellishbooks’ arguments were both waived and “meritless.”

Motion and Preliminary Order for Sanctions

On May 8, 2020, Quincy files its “Motion for Sanctions” against Ellishbooks, for filing a “Frivolous Appeal.”   

On June 5, 2020, the Seventh Circuit issues a preliminary order granting Quincy’s Motion for Sanctions.  In such order, the Seventh Circuit directs:

  • “Within fourteen days of this opinion, Quincy shall submit a statement of its costs and fees incurred in this Case”; and
  • “Ellishbooks shall have fourteen days thereafter to raise any objections to the amounts claimed.”

Final Order for Sanctions

The parties respond as directed, and on July 22, 2020, the Seventh Circuit issues its final decision, awarding sanctions against appellants and their attorney in the sum of $44,329.50.

One of the issues, in reaching this final order, is whether fees incurred by Quincy in the Seventh Circuit mediation effort should be included in the sanctions amount.

The Seventh Circuit rules in the affirmative and includes mediation fees in the sanctions amount.  Here’s why:

  • The legal standard is that “fees awarded as sanction” will include all “time spent defending the appeal”; and
  • Such fees include time spent in the Seventh Circuit’s required mediation effort.

Conclusion

When a party is sanctioned for filing a frivolous appeal, costs incurred in a court-required mediation are to be included in the sanctions amount.

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