Pacific Legal Foundation v. Kayfetz Brief in Opposition to Petition for Writ of Certiorari
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January 1, 1992

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Brief Collection, LDF Court Filings. Pacific Legal Foundation v. Kayfetz Brief in Opposition to Petition for Writ of Certiorari, 1992. 08abfc81-c09a-ee11-be36-6045bdeb8873. LDF Archives, Thurgood Marshall Institute. https://ldfrecollection.org/archives/archives-search/archives-item/36fccf8e-be9c-40eb-82fd-8cce46220fcc/pacific-legal-foundation-v-kayfetz-brief-in-opposition-to-petition-for-writ-of-certiorari. Accessed April 29, 2025.
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N o. 92-1544 I n T he . £njtrrm? (ta r t of tljr Itmtrft ^tatro October T erm, 1992 Pacific Legal Foundation, Petitioner, v. Paul Kayfetz; V ictor A moroso; Diana Lopez Farnsworth; D oris Elaine LeMieux; Jack Bowen McClellan; William N iman; Orville Schell; Margueritte Harris; Judith Weston; and Bolinas Community Public Utility D istrict, Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit REPLY BRIEF OF PETITIONER John H. Findley Anthony T. Caso Pacific Legal Foundation 2700 Gateway Oaks Drive Suite 200 Sacramento, CA 95833 (916) 641-8888 Rex E. Lee * \ Gene C. Schaerr Kurt H. Jacobs Sidley & Austin 1722 Eye Street, N.W. Washington, D.C. 20006 (202) 736-8000 Counsel for Petitioner April 27,1993 * Counsel of Record W il s o n - Efkb P r in t in g C o . , In c . • 7 8 9 - 0 0 9 6 - W a s h i n g t o n . D .C . 2 0 0 0 1 I CASES A ir Courier Conference V. American Postal Work ers Union, 111 S. Ct. 913 (1991) ......... ......... Avirgan v. Hull, 932 F.2d 1572 (11th Cir. 1991), cert, denied, 112 S. Ct. 913, and cert, denied, 113 S. Ct. 405 (1992)............................... ........... Blank V. Bilker, 135 F.2d 962 (7th Cir. 1943) .... Blue V. Department of the Arm y, 914 F.2d 525 (4th Cir. 1990), cert, denied sub nom. Chambers V. Department of the Arm y, 111 S. Ct. 1580 (1991) ...... ........ ........ ....... ........ ................ Chambers V. Nasco, Inc., I l l S. Ct. 2123 (1991) Cooke v. United States, 267 U.S. 517 (1925) ...... Daubert V. Merrell Dow Pharmaceuticals, Inc., 113 S. Ct. 230 (1992)...................................................... Harris V. Marsh, 123 F.R.D. 204 (E.D.N.C. 1988), aff’d in part, rev’d in part, Blue V. Department of the Arm y, 914 F.2d 525 (4th Cir. 1990), cert, denied sub nom. Chambers V. Department of the Army, 111 S. Ct. 1580 (1991) ..... Michaelson V. United States ex rel. Chicago, St. P., M., & O.R. Co., 266 U.S. 42 (1924) ......... . Missouri V. Jenkins, 495 U.S. 33 (1990) ...... Panther Pumps & Equip. Co. V. Hydrocraft, Inc., 566 F.2d 8 (7th Cir. 1977), cert, denied sub nom. Beck v. Morrison Pump Co., 435 U.S. 1013 (1978) ........... ................................................... Spallone v. United States, 493 U.S. 265 (1990).... Youakim v. Miller, 425 U.S. 231 (1976) Young V. U.S. ex rel Vuitton et F'ils S.A., 481 U.S. 787 (1987) ..................................................... Zenith Radio Corp. V. Hazeltine Research, Inc., 395 U.S. 100 (1969) ................................................ TABLE OF AUTHORITIES 6 , REPLY BRIEF OF PETITIONER Respondents' lengthy brief in opposition to certiorari is striking primarily for what it does not dispute. Re spondents do not deny that, like the lower court decisions reviewed in Missouri v. Jenkins, 495 U.S. 33 (1990), Spallone v. United States, 493 U.S. 265 (1990), and Daubert v. Merrell Dow Pharmaceuticals, Inc., 1 13 S. Ct. 230 (1992) (granting certiorari), the Ninth Circuit’s decision below authorizes an enormous expansion of the “inherent power” of federal district courts— in this case the power to impose sanctions arising from an attorney's litigating behavior upon an entity that is neither a party nor an attorney. See Pet. 8-13. Respondents cite no other decisions recognizing such a power. Respond ents also do not deny that, during the proceedings before the district court, petitioner was never named as a party to the litigation or served with legal process— the usual means by which a district court obtains in personam jurisdiction. See Pet. 13-14. Nor do respondents dispute that this case is of im mense practical importance to the public-interest legal community. See Pet. 15-18. Indeed, respondents do not even address the enormous and troubling impact of the decision below on the complex relationship among public interest organizations, their employees, and the people they seek to serve— matters addressed at greater lengjh in the briefs amici curiae filed by the NAACP and Mextcan- American Legal Defense and Educational Funds (at 2- 4 ); by the American and California Farm Bureau Fed erations (at 6-7); by the New England and Atlantic Legal Foundations (at 12-13); and by the Mountain States Legal Foundation (at 11-13).’ 1 1 While respondents quibble over the impact the Ninth Circuit’s ruling likely would have had on the conduct of this litigation (opp. 17-18), they do not dispute that the decision below will com pel public-interest organizations generally to micro manage any 2 1. Nothing in respondents’ submission casts any doubt on the need to resolve the first question presented in the petition. j First, respondents’ principal argument—-that the courts below did, m fact, find the imposition of sanctions on petitioner toi be “necessary” (Opp. at 8 )— rests upon a misreading of this Court’s inherent power decisions. Pe titioner will gladly concede (see Pet. 9-10) that the courts below believed the imposition of sanctions against petitioner was “necessary” to vindicate certain “policy concerns” (see App. A - l l ) . As respondents point out, those concerns included the district court’s desire to pro tect itself from perceived “misuse,” to “protect the inter ests of litigants” (presumably from non-litigants such as petitioner), and thus to “fulfill” the “promise of proce dural fairness” which the court believed inheres in the Federal Rules of Civil Procedure. Opp. 9 (quoting App. C-8 to C -9); sec also Opp. 11. However, concluding that the power to impose sanc tions upon a non-party is necessary to achieve policy ob jectives such as “ [f lulfilling the ‘promise of procedural fair ness’ ” (Opp. 11) is quite different from concluding that such a power is “necessary to the exercise of all other[]” judicial powers— i.e., necessary for the court to function effectively. Chambers v. Nasco, Inc., 111 S .Ct. 2123, 2132 (1991) (quoting United States v. Hudson & Goodwin), 11 U.S. (7 Crunch) 32, 34 (1 8 1 2 )). This is the in quiry required by the “ rule of necessity.” 2 * litigation they wish to support, and will therefore either dis courage such support or lead to interference with the attorney- client relationship. Sec Pet. 16-18. 2 See also Young v. U.S. ex rel. Vuitton et Fils S.A., 481 U.S. 787, 796 (1987) (“f11 he ability to punish disobedience to judicial orders is regarded as essential in ensuring that the Judiciary has a means to vindicate its own authority”) (emphasis added); Cooke v. United States, 267 U.S. 517, 539 (1925) (contempt is a power “a judge must have and exercise in protecting the due and 3 Neither of the courts below even purported to address this critical question. Had they done so, they plainly could not have imposed sanctions upon petitioner, for reasons explained in the petition. Pet. 10-1 I.:l Second, respondents’ attempt to distinguish the Fourth Circuit’s decision in Blue v. Department of the Army, 914 F.2d 525 (4th Cir. 1990), cert, denied, sub nom. Chambers v. Dep’t of the Arm y, 111 S. Ct. 1580 (1991) (see Opp. 11-13) rests upon a misreading of the facts in that case. Contrary to respondents’ claim (Opp. 12- 13), Julius Chambers, one of the attorneys sanctioned in Blue, was sanctioned both for his conduct prior to leav ing his firm and for his conduct while Director-Counsel of the NAACP Legal Defense Fund (the “LD F” ). See Harris v. Marsh, 123 F.R.D. 204, 223-228 (E.D.N.C. 1988). Indeed, the district court specifically imposed $4,000 in sanctions on Chambers for his conduct during the merits trial of Blue's claims ( id. at 228), most of which occurred after Chambers moved to the LDF. Re spondents also overlook the fact that the district court initially found the conduct of a second LDF attorney, Penda Hair, to be sanctionable as well. Id. at 215 n . l l , 219-23. Because of the involvement of LDF attorneys in some of the conduct the court found to be sanction- able, the district court observed that assessing sanctions only against Chambers’ private lav/ firm would be “ a problematic and somewhat unjustified proposition.” Id. at 215 n . l l . Hence, respondents arc simply mistakch in orderly administration of justice . . .”) ; Michaelson V. United States ex rel. Chicago, St. P., M., & O.R. Co., 266 U.S. 42, 165-66 (1924) (contempt power “is essential to the administration of justice”) . 3 Moreover, respondents do not dispute that all of the specific instances of alleged misconduct found by the court of appeals could have been readied under Rule 11. See Pet. 10-11. Therefore, even the “policy concerns” cited by the courts below did not require that sanctions be imposed upon petitioner rather than the responsible attorneys. 4 asserting that all of the sanctioned conduct was “ unre lated to . . . LDF employment.” Opp. at 12. Respondents are also wrong in asserting that unlike the petitioners here, LDF did not “finance” the litigation in Blue. Opp. a|t 13. LDF “sponsored” or “financed” the litigation in Blue by providing the services of its attor neys, Chambers and Hair, free of charge. See Harris v. Marsh, 123 F.R.D. at 219 n.13 (describing differing de grees to which LDF may become involved in cases). Similarly, PLF in this case supported the litigation by providing the services of attorneys on its staff. The fact that only PLF attorneys were involved in the instant case while non-LDF as well as LDF attorneys were involved in Blue is a distinction without a material difference. Moreover, it is immaterial that there is no “preclusive order” in the present case explicitly preventing PLF from shifting the huge monetary sanctions imposed upon it to its individual attorney employees. It is unlikely that any public interest organization would shift such a burden to its employees, or that such organizations could long endure if they did so; hence there was no need for the court below to issue a “preclusive order” similar to that issued in Blue. Respondents, in short, cannot escape the fact that, in the decision below, the Ninth Circuit upheld just the kind of distributional judgment that the Fourth Circuit held impermissible in Blue: a judgment between the individual attorneys who committed the al leged misconduct and the entity that employed them. See id. at 549 (striking down district court’s prohibition on contribution from the L D F); id. (striking down dis trict court’s sanction on Chambers’ law firm and observ ing that “ we are doubtful that . . . sanctions theories will support sanctions against an entire firm rather than against the individual lawyers who acted improperly” ). Had the Ninth Circuit followed the holdings in Blue, the sanction imposed upon petitioner would have been set aside. 5 Third, much of respondents’ submission (see Opp. 14- 21) erroneously assumes that petitioner and, presumably, the other public-interest legal foundations that have ap peared as amici here, are seeking a blanket “sanctions immunity” (Opp. 15) for all litigation-oriented public- interest organizations. Thus, for example, respondents seek to minimize the significance of the Ninth Circuit’s decision by pointing to Avirgan v. Hull, 932 F.2d 1572 (11th C ir .1 9 9 1 ) , cert, denied, 112 S. Ct. 913 and cert, denied, 113 S. Ct. 405 (1992), in which the Eleventh Circuit upheld a sanctions award against a public-interest law firm. There, however, sanctions were explicitly premised upon the fact that the Christie Institute was plaintiffs’ “official law firm” (id. at 1582), whereas the Ninth Circuit in this case affirmed a sanctions award against petitioner despite its finding that petitioner “is not a law firm” and was not itself representing the plaintiffs below (App. A ll & n.2 (em phasis ad ded )). Petitioners and its amici do not contend that public- interest organizations are entitled to blanket immunity from litigation sanctions. But where, as here, the organi zation is not a party and is not itself representing any party (as it was in Avingart), there simply is no justi fication for imposing sanctions upon the organization rather than the attorney or party who actually committed the misconduct at issue. Resort to the court's inherent power in such circumstances is lawless and inappropriate. See supra at 2; Pet. 8-13. ; Most of respondents’ remaining arguments are jir relevant for the same reason.4 * * The issue here is riot 4 These include respondents’ labored arguments that “California charitable corporations are regularly held responsible for the acts of their employees” (Opp. 14-15) ; that Congress has allowed sanc tions to be imposed upon the Legal Services Corporation (Opp. 15- 16) ; that under common-law agency principles a public-interest organization may be held liable for the actions of its agents (Opp. 6 whether an organization like petitioner is immune from litigation-related sanctions. Rather, the issue is whether a federal district court has inherent power to impose sanctions upon any person or organization that is neither a party nor an attorney, based upon the attorney’s con duct of the litigation.5 2. Similarly, nothing in respondents’ brief casts any doubt on the need to grant certiorari to resolve the second issue presented, i.e., whether a district court may impose litigation sanctions upon an entity over whom the court lacks in personam jurisdiction. See Pet. i. First, even if respondents were correct about the de gree to which petitioner “participated” in the litigation below (Opp. 22-24), such participation is insufficient to confer in personam jurisdiction, for reasons explained in the petition (at 13-15)." Respondents do not dispute that 20-21) ; that “public interest litigation does not require immunity from sanctions” (Opp. 18); and that neither a federal tax exemp tion (Opp. 16) nor the First Amendment (Opp. 19) confers im munity from sanctions awards. None of these arguments provides a basis for the exercise of inherent power to sanction someone who is neither an attorney nor a part of the litigation. c Respondents also argue that, “[sjince the PLF was the potential beneficiary of any attorney’s fees awarded, equity also supports imposition [of sanctions] on the PI.F.” Opp. 16. While this argu ment goes to the merits rather than the need to review the decision below, respondents ignore the fact that any fees received by PLF would simply reimburse PLF for costs it had already incurred in supporting the litigation. A fee award would thus not have con ferred a windfall upon PLF, and there is therefore no “equity” argument for imposing sanctions upon PLF rather than the attor neys who committed the alleged misconduct. 0 Respondents do not and could not dispute that the district court was required to obtain personal jurisdiction over petitioner in order to impose sanctions against it. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110 (1969) (“[A] court has no power to adjudicate a personal claim or obligation unless it has jurisdiction over the person of the defendant.”). 7 petitioner never became a party to the litigation by suing one of the defendants or by being served with process. Nor do respondents cite any authority in support of the Ninth Circuit’s novel holding that what it termed “spon sorship” of litigation— i.e., allegedly using plaintiffs as “pawns” or “puppets” (see App. A-l 1 to A-13)-—is suffi cient to confer in personam jurisdiction. See Opp. 23-24. Instead, respondents simply quote the Ninth Circuit’s analysis (id .), as though mere repetition would give it more weight.7 * Second, respondents’ attempts to distinguish Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969), and Panther Pumps & Equipment Co. v. Hydro craft, Inc., 566 F.2d 8 (7th Cir. 1977), cert, denied sub nom. Beck v. Morrison Pump Co., 435 U.S. 1013 (1978), are misguided. As petitioner demonstrated (Pet. 13-14)— and respondents do not dispute— the Ninth Cir cuit’s analysis is indistinguishable from the “alter ego” theory which Zenith and Panther Pumps expressly re jected as a basis for in personam jurisdiction. 395 U.S. at 110; 566 F.2d at 23. The fact that those decisions “did not involve sanctions issues” (Opp. 26) is irrelevant. Respondents’ other distinction— their murky sugges tion that the parties contesting jurisdiction in those cases did not “appear” until a later stage of the proceedings (sec Opp. 26-27)— is both irrelevant and false. In both of those cases, the parties contesting jurisdiction entered appearances as soon as another party proposed thqt a judgment be entered against them. See 395 U.S. at 109; 566 F.2d at 22-23. In this case, petitioner enteredj an appearance at precisely the same point, i.e., when re spondents first formally proposed to impose sanctions on 7 Respondents’ recitation of the district court’s analysis of the jurisdictional basis for its order (Opp. 22-23) is irrelevant. As explained in the Petition (at 13-14), the court of appeals expressly rejected the district court’s conclusion that PLF itself is a law firm or that PLF, in its own capacity, represented the plaintiffs below. 8 petitioner itself. See CR 506, 510. The conflict between the decisions below on the one hand, and Zenith and Panther Pubips on the other, could hardly be more clear. Third, respondents err in claiming (Opp. 24-25) that petitioner waived its jurisdictional objection. As a thresh old matter,, the courts below never invoked waiver as a reason for rejecting petitioners’ objection.8 Accordingly, respondents’ waiver claim would not ordinarily be con sidered by this Court, even on the merits. See, e.g., Air Courier Conference v. American Postal Workers, 111 S. Ct. 913, 917 (1991); Youakim v. Miller, 425 U.S. 231 ,234 (1976). In any event, PLF repeatedly contested the district court’s in personam jurisdiction. For example, PLF’s Objections to the Report and Recommendations of the Special Master included a section entitled “The Court Lacks Jurisdiction to Sanction Pacific Legal Foundation.” There, PLF stated: PLF’s primary objection to these proceedings has always been that it is neither a party nor an attorney in this action and thus cannot be held liable for sanctions. Notwithstanding the indisputable facts of PLF’s status, the Report proposes to find PLF liable for sanctions under the Court’s “inherent au thority.” Such authority can extend only so far as the Court’s jurisdiction, however, and thus the Court should examine PLF’s status in this case carefully. CR 648 at 5 (emphasis added, footnote om itted).8 While respondents quibble with PL F’s failure to use the phrases 8 As explained in the petition (at 13-14), the district court re sponded to that objection by finding that PLF, in its own capacity, was the attorney for the plaintiffs, while the court of appeals re jected that theory in favor of its theory that PLF was the “sponsor” of the litigation and the plaintiffs mere “puppets” or “pawns” of PLF. 0 PLF made the same argument in its first responsive pleading, which was an opposition to respondents’ motion that petitioner be sanctioned : 9 “in personam” or “personal” jurisdiction, the basis for PLF’s objection could hardly be more clear: Inasmuch as diversity had never been asserted as a basis for juris diction, and the district court obviously had subject matter jurisdiction over the underlying lawsuit, the court could not have understood PLF’s argument as anything other than an objection on personal jurisdiction grounds.* 10 As pointed out in the joint brief of the NAACP and Mexican American Legal Defense and Educational Funds (at 4 ) , the decision below “has grave implications for the ability of [public interest] organizations to carry out constitutionally protected activities.” Nothing in respond ents’ submission casts any doubt on this conclusion or, more generally, on the necessity and propriety of review by this Court. To the contrary, this case is an excellent vehicle for resolving the existing confusion among the lower federal courts over the appropriate scope of a dis trict court's “inherent power” to impose fee-shifting sanc tions on public-interest organizations. Pacific Legal Foundation is not a party in this case. Pacific Legal Foundation has not signed a “pleading, motion, or other paper” to be filed in this Court. Pacific Legal FoundatioVi is not admitted to practice law before this or any other Court of the United States or its territories. CR 510 at 1. j 10 Respondents also argue that all objections to the court’s lack of in personam jurisdiction were waived for failure to enter a “special appearance.” Opp. at 24-25. While such an argument would have been valid more than half a century ago, the enactment of the Federal Rules of Civil Procedure eliminated the distinction between special and general appearances in federal court proceedings. See Blank V. Bitker, 135 F.2d 962, 966 (7th Cir. 1943). 10 CONCLUSION For ilie foregoing reasons, and for tiiosc stated in the petition for cbrliorari. the petition should be granted. t Respectfully submitted, John II. F indley Anthony T. Caso Pacific Legal Foundation 2700 Gateway Oaks Drive Suite 200 Sacramento, CA 05823 (Ol(i) OIL-8888 Rex E. Lee * Gene C. Sciiaerr Kurt H. Jacobs S idley & Austin 1722 Eye Street, N.W. Washington, D.C. 2000G (202) 730-8000 Counsel for Petitioner * Counsel of RecordApril 27,1093 i • —' No. 92-1544 In the Supreme Court i™ gat j United States October Term, 1992 Pacific Legal Foundation, Petitioner, vs. Paul Kayfetz; Victor Amoroso; D iana Lopez Farnsworth; Doris Elaine LeMieux; Jack Bowen McClellan; W illiam N iman; Orville Schell; Marguerite Harris; Judith Weston; and Bolin as Community Public Utility District, Respondents. O N PETITIO N FOR A W RIT OF CERTIORARI TO THE N IN TH CIRCUIT COURT OF APPEALS BRIEF IN OPPOSITION TO PETITION FOR WRIT OF CERTIORARI Richard E.V. Harris* George A. Yuhas Orrick, Herrington & Sutcliffe Old Federal Reserve Bank Building 400 Sansome Street San Francisco, CA 94111 Telephone: (415) 392-1122 Attorneys fo r Respondent Bolinas Community Public Utility District * Counsel of Record [O f Counsel on inside cover] i < BOW N E O F SA N F R A N C ISC O . IN C. • 3 4 3 SANSOM E ST • S F CA 9 4 1 0 4 • < 4 t S ) 3 6 2 - 2 3 0 0 David J. Becht Popelka, Allard, McGowan & Jones 633 Battery Street, 5th Floor San Francisco, CA 94111 (415) 982-8955 , Attorneys for Respondent ' Victor Amoroso i Pamela Mills Casey Langley, Lamberto & Deckard 2470 El Camino Real Suite 214 Palo Alto, CA 94306 (415) 857-1100 Attorneys for Respondent Judith Weston Matthew N. White Peavey & White 160 Spear Street, #214 San Francisco, CA 94105 (415) 543-8800 Attorneys for Respondent Marguerite Harris Laurence F. Pulgram, Esq . Howard, Rice, Nemerovskj, Canady, Roberton & Falk Three Embarcadero, #700 San Francisco, CA 94111 (415) 434-1600 Attorneys for Respondents Diana Lopez Farnsworth Jack Bowen McClellan Doris Elaine LeMieux Gary L. G inder G inder, Belkin, Foster & Doyle 1995 University Ave., #300 Berkeley, CA 94704 (510) 548-5200 Attorneys for Respondents Orville Schell William Niman Paul Kayfetz P.O. Box 310 Bolinas, CA 94924 (415) 868-0480 In Propria Persona Questions Presented 1- \\ hether the district court, in the exercise of its inherent powers, may impose a limited monetary sanction against the entity (the "public interest law firm") employing all of the attorneys, where the sanctionable matter permeated years of litigation, and where the court expressly found, inter nlia, that the entity (a) had circulated no lewer than eleven attorneys through the case, none appearing or withdrawing by formal leave of court,” <b) had “actively participated in all phases of the case” (c) had been “the sponsor of th|e] litigation;’’ (d) had represented itself “as counsel” exercising “quality control in litigation, (e) had been “one of the intended beneficiaries of Un offending conduct," and (0 where the court further found that "in the circumstances of this case” imposing such inherent powers sanctions directly upon the entity was necessary to the operations of the court Whether a district court, which found that the imposition of sanctions directly upon the entity employing the attorneys was necessary to the court’s operations, has jurisdiction over the entity sufficient to sanction it, where inter alia, (a) the entity was expressly found to have “actively participated in all phases of the [underlying! case;” 11 (b) the entity’s attorney employees signed stipulations filed in court expressly in the name of the entity during the underlying litigation; (c) I the entity’s name and logo were prominently ; displayed on virtually every sheet of paper filed in court by the entity’s attorney employees during the 1 underlying litigation; (d) the entity’s out of court statements to a party, to the counsel for other parties, and to the public claimed that the entity had filed the suit; and (e) the entity appeared and participated in the sanctions proceedings, was expressly represented by counsel for the entity, and the entity’s opposition papers filed during 1988 and 1989 did not even contain the word jurisdiction and the entity did not raise “jurisdiction” as an objection at any time prior to the Special Master’s final liability report in 1990, which expressly confirmed that the entity (and not its clients) should be sanctioned. in TABLE OF CONTENTS Questions Presented........................................................... j STATEMENT OF THE C A S E ........................................ i 1. Background ................................................ j 2. Bolinas Community Public Utility District (“BCPUD ”) .................................. 2 3. The Individual Respondents .................... 3 4. Petitioner Pacific Legal Foundation (“P L F " ) ...................................................... 3 5. PLF’s C lients............................................. 4 6. The Sanctions Proceedings....................... 5 I The Petition’s First Question Is Not Raised By The Decisions Below: Imposing Sanctions Directly On The PLF Was Expressly Found To Be Necessary Under the Particular Circumstances of This Case ............................... 8 n. There is No Conflict Between The Fourth Circuit s Decision In Blue And The Decision Herein ................................................... j j 1. Unlike Blue, no preclusive order way entered herein ..................................... j2 IV 2. Unlike Blue, the sanctionable actions herein occurred while the attorneys were employed by the PLF acting as employees o f the P L F ............................ 12 ; 3. Unlike Blue, the PLF sponsored and financed the litigation herein and did 1 so from the o u ts e t .................................. 13 HI. The Imposition Of Sanctions On The PLF Was Neither Novel, Unprecedented, Nor Inappropriate ..................................................... 13 1 California charitable corporations are regularly held responsible for the acts o f their em ployees.................................. 14 2. Congress has expressly recognized the propriety and wisdom o f imposing sanctions directly upon a pro bono legal services organization.................... 15 3. The Federal tax exemption policy regarding tax-exempt law firms like PLF neither condones nor immunizes abusive litigation ta c tic s ...................... 16 4. PLF itself not the individual PLF attorneys, would have received any attorneys ’ fees awarded in this litigation.................................................. 16 5. The imposition o f sanctions upon a tax-exempt public interest law firm has already been reviewed and approved by the Eleventh C ircuit......................... 17 v 6. The sanctions herein do not require any impermissible “interference........... 17 7. The sanctions herein do not threaten any legitimate public interest litigation activity ................................................... jg 8. The sanctions award is fully compatible with the First Amendment .................... 19 9. Numerous traditional common law principles support the District Court’s decision, which further illustrates the absence o f any novel question requiring this Court’s a tten tion ........... 20 10. Agency issues involving non-profit entities do not require this Court’s attention because they involve *,settled rules" which have already been adequately addressed in previous decisions................................................ 21 IV. The Petition’s Second Question Is Not Raised By The Decisions Below: The PLF Appeared, Did Not Contest uIn Personam Jurisdiction” From The Outset, And Was Not Outside The Court’s R eac h ........................................ 22 1 • The District Court expressly found that PLF had participated in the underlying litigation ................................................ 22 VI 2. The Ninth Circuit expressly affirmed the findings regarding the PLF's participation in the underlying | litigation.................................................. 23 ' 3. The PLF also appeared and participated in the sanctions proceedings without raising or preserving an “in personam jurisdiction ” objection ......................... 24 4. Imposing sanctions on the PLF was not “in direct conflict’’ with this court’s decision in Zenith v. Hazeltine ........... 26 5. Imposing sanctions on the PLF was also not in conflict with the Seventh Circuit’s decision in Panther Pumps . . 26 CONCLUSION ............................................................. 28 APPENDIX N ................................................................N-l APPENDIX O ............................................................... 0-1 APPENDIX P ................................................................ P-1 APPENDIX Q ...................................................................Q_1 APPENDIX R ................................................................... r _1 APPENDIX S ................................................................ s i TABLE OF AUTHORITIES CASES Allard v. Church o f Scientology, 58 Cal. App. 3d 439, 129 Cal.Rptr. 797 (1 9 7 6 ) ............................... 15 Avirgan v. Hull, 932 F.2d 1572 (11th Cir. 1991), cert, denied, 112 S.Ct. 913 (1992).............. . 17 Blue v. Department o f the Army, 914 F.2d 525 (4th Cir. 1990)........................................ 11, 12, 13, 18 Claiborne v. NAACP, 458 U.S. 886 (1982) ................. 21 Cohen v. Cowles Media, 111 S.Ct. 2513 (1991) . . . . 19 Continued Casualty Co. v. Phoenix Construction Co., 46 Cal. 2d 423, 296 P. 2d 801 (1956)....................n Gilbert et al. v. State o f California et al., No. 636481-0 (Nov. 22, 1 9 9 1 ) .................................. 3 Gilbert v. State o f California, 218 Cal. App 3d 234 (1990) .................................................................... ... Hazeltine Research, Inc. v. Zenith Radio Corporation, 388 F.2d 25 (7th Cir. 1967) ............ 26 Hydrolevel v. American Society o f Engineers 456 U.S. 556 (1 9 8 2 ) .....................................’ ..................21 In Re Primus, 436 U.S. 412 (1 9 7 8 ) .............. .. 19 Malloy v. Fong, 37 Cal.2d 356, 232 P.2d 241 (1951) . 15 Miller v. International Church, 225 Cal. App. 2d 243, 37 Cal. Rptr. 309 (1964) ............................... 15 NAACP v. Button, 371 U.S. 415 (1 9 6 2 )....................... 19 Panther Pumps & Equipment Co. v. Hydrocraft, Inc. 566 F.2d 8 (7th Cir. 1977) ............................... ' . 26 Phoenix Assur. Co. v. Salvation Army, 83 Cal. App 455, 256 P. 1106 (1 9 2 7 )...........................................I5 Rice v. California Lutheran Hospital, 27 Cal 2d 296, 163 P.2d 860 (1 9 4 5 ) ........................................15 Silva v. Providence Hospital o f Oakland, 14 Cal 2d 762, 97 P. 2d 798 (1939) ........................................15 vii Valentine v. La Societe Francaise De Bienfaisance Mutuelle De Los Angeles, 76 Cal. App. 2d 1, 172 P.2d 359 (1 9 4 6 ) ........................................................ 15 Vind v. Asamblea Apostolica De La Fe En Christo [Jesus, 148 Cal. App. 2d 597, 307 P.2d 85 (1957) 15 Zenith Corp. v. Hazelrine, 395 U.S. 100 (1968) . . . . 26 t , STATUTES California Labor Code § 2802 ...................................... 11 California Labor Code § 2865 ...................................... 11 California Corporation Code § 5238 ............................... 11 28 U.S.C. § 1927 .................................................. ’ ’ ’ ’ io 42 U.S.C. § 2996e (0 ............................................. 15, 18 OTHER Fed. R. Civ. P. 11 ...........................................................10 Restatement of Torts (Second), § 886B, 344 (1977) ................................................................ 11 Restatement of Agency (Second) § 7, p . 28 (1958) . . . 20 Restatement of Agency (Second) § 8, p. 30 (1958) . . . 20 Restatement of Agency (Second) § 8A, p . 36 (1958) . . 21 Rev. Proc. 71-39, 1971 C.B. 565 .................................. 16 Rev. Proc. 75-13, 1975 C.B. 662 ......................... 16, 23 Vlll STATEMENT OF THE CASE 1. Background. These sanctions arose out of litigation filed by the Pacific Legal Foundation (“PLF”) in 1982 against Bolinas Community Public Utility District (“BCPUD”), a small semi-rural district, and against numerous present and former directors and private citizens who had participated in civic affairs. Clerk’s Record (hereinafter “CR”) 1. The complaint included a plethora of purported antitrust and constitutional claims, which the Court quickly recognized “were supported by little more than overbroad, legally conclusory allegations that fail[ed] to adequately identify their legal or factual bases.” See, e.g., C-20-22.' The damages sought — more than $30 million plus attorneys’ fees (over 100 times the operating budget of BCPUD) - were also sought personally from the individual defendants, who were sued in their personal capacities (as well as any official capacity they might have or they might ever have had during a period extending back more than a decade). CR L C-17 C-34. Recognizing early that the mere pendency of the litigation could have a potentially chilling impact on defendants’ exercise of their First Amendment rights, the District Court directed that certain information be provided in an amended complaint. C-20-22. Despite the District Court s order, and despite its other warnings and expressions of concern regarding the potentially chilling impact of this type of litigation, the additional information was not provided. C-26. Petitioner’s Appendix "C". Citations to Petitioner’s Appendices A" through "M" will be in this form, as will citations to Respondent’s Appendices "N" through "S” (which are at the end of this opposition). 2 Instead, the amended complaint expanded the number of vague claims and added still more parties. After reviewing the circumstances of this case, the Special Master concluded during the sanctions proceedings, as did the District Court Judge, that this refusal to comply with the Court’s order had been in bad faith.I i It was but one of several specific situations involving bad faith litigation conduct where PLF had attempted to contort what could have been a relatively straightforward case into a massive, complex, conceptually dense, expensive litigation, and, along the way, persisted in pursuing theories . . . for which there was no credible factual support. E-9. 2. Bolinas Community Public Utility District (“BCPUD"). BCPUD is a small public utility district in western Marin County. Formed in 1967, BCPUD operates a water system inherited from two even smaller districts; it provides water services to approximately 580 water meter connections. In 1977 BCPUD enacted a moratorium on water hookups to its systems, which was in effect when this action was filed. (Previous moratorium resolutions, enacted in 1971 and 1973, were repealed in 1977. CR 384, Exh. A.) In 1982 the California Department of Health Services (“DOHS”) expressly conditioned BCPUD’s operating permit on a continuation of the BCPUD moratorium on new hookups, although BCPUD had made significant improvements to the system. See CR 350, Exh. D (DOHS Engineering Rptr., Aug. 1982) (“Due to the limited storage capacity and the many leaks in the aged distribution system, it is not possible for the system to support additional connections at this time.”). The DOHS imposed this condition on BCPUD’s 3 operating permit prior to the filing of this litigation. The DOHS condition has been upheld by the state courts in other PLF litigation involving the parties herein, see Gilbert v. State o f California, 218 Cal. App. 3d 234 (1990), as has the BCPUD moratorium, which the state court found to have been “justified from its inception”. Gilbert et al. v. State o f California et al., No. 636481-0 (Nov. 22, 1991).2 3. The Individual Respondents. The nine individual respondents include three current BCPUD board members (Kayfetz, Amoroso and McClellan) and six former board members (Niman, Schell, Harris, Weston, LeMieux and Farnsworth). They were among the more than twenty individual defendants who were sued personally for more than $30 million in this litigation. Several respondents, unable to secure representation, appeared in propria persona during parts of the litigation. 4. Petitioner Pacific Legal Foundation (“PLF"). PLF generally describes itself to the federal and state governments, the legal community and the public as a “public The final state court decision upholding the BCPUD moratorium concluded that (a) "there is a solid factual basis for declaring a water shortage emergency" and (b) "the moratorium has been justified from its inception to the present based upon realistic concerns . . . about the capacity of the District’s water system to meet conservative demands in times of continuing drought, particularly given the marginal capacity not only of the storage system, but the delivery system, as well." R-l-4. Ignoring the final, binding decision about the moratorium, the petition points to an earlier preliminary decision of the Ninth Circuit which reversed part of an earlier summary judgment as to certain claims, none o f which affected the bases o f the District Court's sanctions. Moreover, the Ninth Circuit’s decision "at this preliminary stage" reflected an express preference for "[r]esolution by plenary hearing rather than by summary judgment . . . [in] claims for regulatory taking.” H-8-9. 4 interest law firm.” See, e.g., C-35; 0-3-7, 10; and CR 537, Exhs. A, B, D. It claims to be the largest law firm of its type in the country. 0-3-7, 10; CR 500, Exhs. I, J; see also Q-3, 12 (PLF revenues during this litigation). The PLF’s President, CEO and Board Member (and the senior PLF attorney in this litigation) has said of this case: “The PLF filed suit” against BCPUD. The case was “brought by the PLIj.” It was “[o]ne of the most significant PLF law suits.” “This case will be an extremely important one for PLF.” C-33-34. It was, he said, “The case we have been waiting for.” 0-6-7; CR 536, Exh. C. The District Court found that “PLF has circulated no fewer than eleven attorneys through this case.” C-34. The PLF’s CEO was also joined on this case by the PLF’s Deputy Director and a PLF Section Chief. See CR 500, Exhs. G, I, J; CR 1 & CR 168; CR 249; and CR 607, Tab 40. “Plaintiffs have been represented throughout this action only by PLF attorneys.” C-34, 139. “PLF was . . . actively involved in all phases of the case.” C-33. 136. 5. PLF’s Clients? PLF’s clients in this litigation were real estate developers, Anton Holter and Mesa Ranch (his partnership) and the Lockarys, Gilberts and Macey. Holter/Mesa Ranch owned 210 acres. All was outside BCPUD boundaries, except one acre with a water meter. Contrary to the petition’s suggestion (Pet 3), Holter/Mesa Ranch were not seeking a water hookup; Holter already had one and was receiving water from BCPUD. See C-14-15, 1 5. The other plaintiffs owned small, unimproved lots within BCPUD’s boundaries without water meters. The Lockarys and Macey bought their land just before the litigation with 5 The PLF refers to a person represented by PLF attorneys as a "client" of the entity. C-35, 1 40. 5 full awareness of the existing moratorium. C-14, & C-26.4 6. The Sanctions Proceedings. BCPUD and the individual defendants filed motions for sanctions and attorneys’ fees in February 1988. CR 472, CR 480-503. The District Court Judge directed that the motion be referred initially to a special master. CR 528. United States Magistrate Judge Wayne D. Brazil, an agreed-upon candidate, acted as Special Master. CR 543. Additional briefing of sanctions issues for the Special Master was completed in early March 1989. At a conference on March 14, 1989, the Special Master noted shortcomings in the responses and submissions of PLF and the plaintiffs; he then provided them yet another opportunity to file papers. Leaving the choice up to them, he also offered the opportunity to present testimony through affidavits, or live at an evidentiary hearing (an option they declined). At the March 14 conference, the Special Master prompted sua sponte a special discussion of the First Amendment. He also provided a separate briefing opportunity to address specifically “what, if any, significance arises in the context of these proceedings due to the nature of PLF as a non profit, public interest law firm.” CR 599, 1 4. PLF filed a brief on this issue (CR 616), to which defendants responded. CR 631-32. 4 Contrary to the petition’s suggestion (Pet 2), plaintiffs were not simply "parties who could not otherwise afford to present their claims in court." The developer plaintiffs (Holter/Mesa Ranch) used private counsel when suing the United States, an adversary far more formidable than tiny BCPUD, in contemporaneous litigation for taking the same property. See, e.g. , 222 Ct. CL 623 (1980) & 2 CL Ct. 700 (1983). 6 A draft recommendation was filed by the Special Master in early September 1989. CR 634. After receiving comments from BCPUD, PLF and Holter/Mesa Ranch, the Special Master filed a Report and Recommendation re: Liability Aspects of Defendants Motions for Sanctions on January 11, 1990. C-l-106. The 103-page report contained detailed findings, including multiple findings of bad faith, as welj as a finding that PLF had “abundant” notice of the sanctions risk from the beginning, that PLF had “actively participated in all aspects of the case,” and that “in every meaningful sense of the word, PLF shared responsibility for the bad faith actions. ” The report also found that the District Court needed and possessed the inherent powers authority to sanction the PLF itself, and, with respect to certain identified matters, but not others, it recommended that sanctions be imposed on the PLF. PLF filed objections on January 29. CR 648. A review followed by the District Court Judge, who had handled the underlying action since its filing in 1982. On April 2, the Court adopted the findings of fact and conclusions of law and accepted the recommendations in the Special Master’s report. S-l-2. The Court additionally found that the “circumstances of this case clearly support” the imposition of monetary sanctions on PLF. Following the District Court’s April 2 order, the Special Master conducted further proceedings to determine the amount of the sanctions. On January 28, 1991, the Special Master issued his Recommendation re Character and Magnitude of Sanctions. E-1-105. The report ftrrther addressed considerations that shaped the sanctions recommendation, general mechanics of the calculations, and 7 specific calculations for each defendant. Id.5 PLF filed objections. CR 741. On February 11, 1991 the District Court adopted the Special Master’s recommendations and awarded the sanctions. CR 743. On September 9, 1992, the Ninth Circuit affirmed in part and reversed in part the sanctions award. A-1-32. The Special Master’s January 11, 1990, report had also recommended additional show cause proceedings with respect to potential personal liability of certain individual PLF attorneys for sanctions, and the District Court’s April 2 order accepted the recommendation. Pursuant to the briefing schedule established at the June 21 conference, briefs for the individual PLF attorneys were filed on July 23 (CR 671 & CR 674), with responses and replies on August 17 (CR 688-89 & CR 692-93) and August 30 and 31 (CR694- 702). On October 22, the Special Master recommended that the proceedings regarding the amount of the PLF sanctions continue but that those regarding personal sanctions awards be terminated CR 710. Despite believing that he could proceed with "an open, persuadable mind" in considering personal sanctions awards against individual PLF attorneys, the Special Master observed that the way the findings had been articulated in the January 1990 liability report might suggest otherwise. The Court accepted the Special Master’s recommendation, noting expressly that (i) "the expenditure of time and effort to further adjudicate these issues is not outweighed by any benefit that might accrue from the continued adjudication" (ii) the proceedings may already ‘have given counsel an opportunity to reflect upon their conduct in this case ” which ‘may be helpful to counsel in their future practice ‘ and (iii) the Special Master was to be commended “for the thorough and fair assessment of the sanctions issues. CR711 (emphasis supplied). 8 I. The Petition’s First Question Is Not Raised By The Decisions Below: Imposing Sanctions Directly On The PLF Was Expressly Found To Be Necessary Under The Particular Circumstances Of This Case I The Petition notes that inherent power sanctions may not be imposed “absent a determination that the exercise of such, power is necessary to the courts’ operation” (Pet 8) but then states, inaccurately, that no court here found that the imposition of sanctions was “necessary to protect the district court’s authority.” Pet 11. The District Court herein was keenly aware of the care, caution and restraint appropriate to the exercise of its inherent powers. See, e.g., C-36-38; E-2-12; see also CR 634 at 60-62. Sanctions were imposed only after a District Court Judge, intimately familiar with the litigation since its Filing in 1982, and an agreed-upon Special Master, previously unfamiliar with the litigation, each found that sanctions were appropriate and that imposing those sanctions upon the PLF was both appropriate and necessary under the particular circumstances of this litigation.6 Necessity was directly addressed and ruled on by the District Court. For example, the court found: 6 The PLF "appeared before the district court to defend against the sanctions motions" (Pet 13) and had a full opportunity to respond to them. See, e.g., CR 599 (Special Master sua sponte (a) provided PLF and others a third opportunity to submit additional evidence in response to sanctions motions, (b) requested briefing whether PLF’s status as public interest law firm raised any special First Amendment issues, and (c) provided the PLF an opportunity to review and comment on an initial draft report.) 9 In the circumstances of this case, which we describe in detail infra, we feel that the District Court must have the authority to impose sanctions on PLF itself if the Court is to be able to protect itself from misuse, to protect the interests of litigants who proceed in good faith, and to protect the viability of the rules of procedure that Congress and the Supreme Court have adopted. In every meaningful sense of the word, PLF shared responsibility for the bad faith actions that we describe below. As we show in subsequent sections, PLF was the source, the sponsor, and one of the intended beneficiaries of the offending conduct. There is no reason to believe that PLF did not know how this litigation was being handled, or that PLF was a mere passive and abstract institutional backdrop against which an individual attorney acted independently. Instead, PLF’s principal officers formally associated themselves with and publicly claimed credit for the pleadings and other papers that we have concluded were filed in bad faith. Moreover, because PLF circulated at least 11 different attorneys through this case (without ever seeking permission for any attorney to join or to withdraw as counsel of record), it would be impossible for the District Court to meaningfully enforce the norms that Congress and the Supreme Court have established if the Court could not impose liability for offending those norms on PLF itself. These norms carry a promise of procedural fairness that the courts could not fulfill if they could not impose sanctions on an entity like PLF in circumstances like those described in the pages that follow. Thus we recommend that, relying on its inherent authority, the Court impose sanctions on PLF. 10 C-8-9 (Emphasis supplied.); see S-l-2 (District Court adoption of findings). These findings of necessity were well- supported by the record.7 , Moreover, Rule 11 of the Federal Rules of Civil Prodedure (“Rule 11”) and 28 U.S.C. § 1927 (“Section 1927”), to the extent applicable to the individual PLF attorneys, were expressly considered, and proceedings were unddrtaken to employ them. See, e.g., C-9-10, C-105-106, E-l-2. Considerations of overall fairness, not lack of culpability, resulted in those proceedings terminating without individual monetary sanctions awards. See, e.g., F-l-2 & note 5, supra; see also A-9, nl. Although that process did not result in monetary sanctions being imposed separately on individual PLF attorneys, the PLF has no cause to complain.8 Under the particular circumstances of this 7 See e g. C-60-61 & n.25 (an example of bad faith conduct extending ‘‘throughout the course of this litigation” ; six attorneys identified on the papers; “difficult .. to point to the specific PLF attorneys responsible”), C-92-95 (continued impact of “no meaningful effort to comply with Judge Williams’ order”) & F-1 2 (district court order: sanctions proceedings attempting to allocate responsibility among individual PLF attorneys terminated; “continuation ... may harm individual attorneys not at fault, and the expenditure of time and effort to further adjudicate these issues is not outweighed by any benefit that might accrue from the continue adjudication”; “past process ... [has] given counsel an opportunity to reflect upon their conduct in this case and highlighted improper behavior ... and may be helpful to counsel in their future practice”; "PLF sanctions proceedings not terminated.”) 8 Significantly, PLF did not object at any time to termination of the sanctions proceedings against the individual PLF attorney employees, and it did not appeal the District Court’s decision to terminate those proceedings. See note 5, sopra. If anyone had cause to complain, it would have been the defendants. See. e.g., A-9, nl. 11 litigation, Rule 11 and Section 1927 were found to be inadequate to protect the Court “from misuse,” “the interests of litigants” and “the viability of the rules of procedure.” Fulfilling the “promise of procedural fairness” required use of the court’s inherent powers. The petition’s first question assumes “the absence of any determination” that invocation of the court’s inherent powers was necessary. Such a determination was made. Thus, the first question is not presented, and the petition should be denied. n . There Is No Conflict Between The Fourth Circuit’s Decision In Blue And The Decision Herein. The petition claims that the decision herein is in “conflict with the decision of the Fourth Circuit in Blue v. Department o f the Army, 914 F.2d 525 (4th Cir. 1990). ” Pet 12. In attempting to manufacture a conflict, the petition has ignored both the facts of Blue and the facts herein. No such conflict exists, as a brief comparison of the two cases readily confirms. For example: Moreover, as the corporate employer, PLF remained free to explore indemnification, if indemnification was appropriate. See e g Cal Labor Code §§ 2802, 2865, Cal. Corp. Code § 5238. ’ See,’also, Continued Casualty Co. v. Phoenix Construction Co., 46 Cal. 2d 423, 428 296 P. 2d 801 (1956) (An employer who has been held liable for the unauthorized negligent act of his employee may recoup his loss in an action against the employee), and Restatement (Second) of Torts § 886B, p. 344 (1977). The PLF’s current objections are simply another attempt to secure practical immunity for the sanctionable conduct. 12 1 Unlike Blue, no preclusive order was entered herein. In Blue, the District Court’s sanctions order prohibited the NAACP Legal Defense Fund (LDF) from paying the sanctions imposed on an attorney. The order there was clearly preclusive. No preclusive order was entered herein; the sanctions were imposed on the entity withput any effort to restrict its financial sources or to preclude internal allocations of responsibility within the organization. Moreover, the record below demonstrates appropriate sensitivity to such issues. See, e.g., CR 565 (BCPUD suggested that, if desired by PLF, any sanctions order could expressly preserve any rights to contribution that PLF might have.). The absence of a preclusive order is but one fatal flaw in the claimed conflict. 2. Unlike Blue, the sanctionable actions herein occurred while the attorneys were employed by the PLF acting as employees o f the PLF. The situation was very different in Blue. One of the attorneys sanctioned (Chambers) happened to be employed by LDF when the sanctions were imposed, and he was sanctioned for conduct unrelated to his LDF employment. The sanctionable conduct was related to his private law practice. See Blue, supra at 531-32.9 In Blue the sanctionable litigation had been 0 The pre-filing investigation by Chambers’ private law firm began in the spring of 1980. The action was filed in September 1981. The junior associate, Sumter, joined the law firm in January 1983, and trial began January 1984. With Sumter acting as counsel, Blue abandoned numerous claims. The U.S. Army moved for sanctions regarding the “abandoned claims,’’ and the “remainder of Blue’s claims went to trial in April 1984.” In 1987 the court “awarded sanctions based on the abandoned claims". The “claims which Blue ... had dropped were frivolous, ... both plaintiffs and their counsel had either entered into or maintained the baseless litigation in bad faith. The sanctions for the bad faith pursuit of the frivolous claims, which were dropped in April 1984, were unrelated to LDF, because. 13 investigated, filed and handled by attorneys at the private law firm acting as such, and Chambers was sanctioned in his private law firm role. Id. at 546 (“as an experienced senior partner in charge of the case from its outset”). The PLF’s relationship herein stands in shatp contrast to the LDF’s in Blue. PLF circulated no fewer than eleven attorneys through this case,” and the plaintiffs were “represented throughout ... only by PLF attorneys.” C-34, 1 39. 3. Unlike Blue., the PLF sponsored and financed the litigation herein and did so from the outset. Nothing in Blue supports the petition’s suggestion that the LDF “financed the litigation {see Pet 12) or that the Fourth Circuit’s opinion creates a conflict over a district court’s “authority to make distributional judgments as between attorneys and non-parties who fund their litigation activities.” Pet 13. In addition to there being no such preclusive order here, the precluded entity in Blue had not financed the litigation in which the sanctionable conduct occurred. Sanctions must be adapted to the circumstances of the case. Blue and PLF are materially different. Here, PLF was the “sponsor of the litigation,” “was actively involved in all phases of the case,” arid represented that it “exercises ‘quality control’ in litigation.” Its president, the senior PLF attorney on the case, asserted not only that “[t]he PLF filed suit,” but also that this “PLF suit .. .[would be] an extremely important one for PLF” See C-33-35. No conflict exists between the decision herein and the Fourth Circuit’s decision in Blue. If anything, Blue provides additional support for denying the petition. See III. 7. inter alia, it was not until “July 1984” that Chambers assumed his position at LDF. Id. at 532. 14 m . The Imposition of Sanctions On The PLF Was Neither Novel, Unprecedented, Nor Inappropriate. During sanctions proceedings, the PLF itself appeared, was represented by counsel and enjoyed multiple opportunities to present evidence after knowing that defendants had requested that, inter alia, sanctions should be imposed on the PLF itself. The factual findings adopted by the District Court by its April 2, 1990, order included: (i) PLF circulated eleven attorneys through the case (C-9); (ii) “deliberate” bad faith conduct “extended throughout the course of the litigation” including instances where more than half the PLF attorneys were involved (C-60 & C-56-61); (iii) PLF was “the source, sponsor and one of the intended beneficiaries of the offending conduct” (C-8); (iv) PLF shared responsibility “in every meaningful sense of the word,” (C-8) and (v) express findings of necessity that, under the circumstances of this case, the District Court “must have the authority to impose sanctions on the PLF itself” to protect the “court from misuse,” to protect the “viability of the rules of procedures,” and to “protect litigants who proceed in good faith”. C-8. These factual findings, and the extensive record supporting them, show that imposing sanctions upon the PLF itself was appropriate under the circumstances of this litigation. It is important, however, to appreciate that holding such an entity responsible for the acts of its employees is not novel, and the decision to do so presents no new policy issue or significant question requiring this Court’s attention. 1. California charitable corporations are regularly held responsible for the acts o f their employees. PLF is a California non-profit corporation. Such organizations are regularly held accountable for the misconduct of the entity 15 and of the entity’s employees or other agents. PLF has no reasonable basis for expecting the sanctions immunity which it continues to seek.10 2. Congress has expressly recognized the propriety and wisdom o f imposing sanctions directly upon a pro bono legal services organization. The petition suggests that holding the PLF responsible is both novel and bad policy. It is not, as Congress itself has already recognized. See, e.g., 42 U.S.C. § 2996e (f) (Legal Services Corporation: Costs 10 See, e.g .. Malloy v. Fong, 37 Cal.2d 356, 232 P.2d 241,247 (1951) ( The incorporated chanty should respond to private individuals, business corporations and others, when it does good in a wrong way.’"); Rice v. California Lutheran Hospital, 27 Cal. 2d 296, 163 P.2d 860 (1945) (non-profit hospital liable for professional employee’s negligence); Miller v. International Church, 225 Cal. App. 2d 243, 37 Cal. Rptr. 309 (1964) (church held liable for negligence of minister); Vind v. Asamblea Apostolica De La Fe En Christo Jesus, 148 Cal. App. 2d 597, 307 P.2d 85 (1957) (church liable for employee’s negligence); Phoenix Assur. Co. v. Salvation Army, 83 Cal. App. 455, 461-62 256 P. 1106 (1927) (rejected immunity because it would cause "the agents of charitable institutions to render less than due care"); Valentine v. La Societe Francaise De Bienfaisance Mutuelle De Los Angeles, 76 Cal. App. 2d 1, 172 P.2d 359(1946) (hospital liable for employees’ negligence); see also Allard v. Church o f Scientology, 58 Cal. App. 3d 439, 129 Cal.Rptr. 797 (1976) (church liable for both punitive damages and compensatory damages caused by church employee’s statements; "egregious case of malicious prosecution subjects the judicial system itself to abuse, thereby interfering with the constitutional rights of all litigants") and Silva v. Providence Hospital o f Oakland, 14 Cal. 2d 762, 97 P.2d 798 (1939) ( To require an injured individual to forego compensation for harm when he is otherwise entitled thereto, because the injury was committed by the servants of a charity, is to require him to make an unreasonable contribution to the charity, against his will, and a rule of law imposing such burdens cannot be regarded as socially desirable nor consistent with sound policy"). 16 and fees imposed in action commenced or pursued for harassment purpose or involving abuse of legal process “shall be paid by the Corporation.”) California has also recognized that holding charitable corporations responsible financially is good public policy. See, e.g., supra, note 10. / 3. The Federal tax exemption policy regarding tax- exempt law firms like PLF neither condones nor immunizes abusive litigation tactics. In both courts below, the PLF asserted its tax-exempt status as if it somehow should confer upon the PLF some immunity from court-awarded sanctions. It does not. If anything, the PLF’s tax-exempt status imposes upon it additional obligations to ensure that litigation abuse does not occur. See, e.g., Rev. Proc. 71-39, 1971 C.B. 565 (Requirement: The organization does not attempt to achieve its objectives through a program of disruption of the judicial system, illegal activity, or violation of the applicable canons of ethics.) 4. PLF itself, not the individual PLF attorneys, would have received any attorneys’ fees awarded in this litigation. This litigation was authorized by the PLF. The complaints expressly sought attorneys’ fees. See, e.g., CR 1, (complaint sought statutorily authorized attorneys’ fees.). The attorneys’ fees, however, could not properly have gone to the individual attorneys. See Rev. Proc. 75-13, 1975 C.B. 662 (attorneys’ fees received by public interest law firms go “to the organization rather than to individual staff attorneys.”); see also CR 500 (IRS Form 990, Part IV, schedule 7: PLF’s receipt of “court-awarded attorneys’ fees”). Since the PLF was the potential beneficiary of any attorneys’ fees awarded, equity also supports imposition on the PLF of the modest sanction which partially reimbursed defendants for some of the additional attorneys’ fee burdens caused by the sanctionable conduct. 17 5. The imposition o f sanctions upon a tax-exempt public interest law firm has already been reviewed and approved by the Eleventh Circuit. The Ninth Circuit’s decision approving the imposition of sanctions upon the PLF was not the first circuit court to approve a sanctions award against a tax-exempt, public interest law firm. See A-14 (“We agree with the Eleventh Circuit that ‘[sjtatus as a public interest law firm or the nature of a claim does not confer immunity from attorneys’ fees for bringing and maintaining frivolous lawsuits.”) In Avirgan v. Hull, 932 F.2d 1572, 1582-83 (11th Cir. 1991), cert, denied, 112 S Ct. 913 (1992) a sanction of more than $1 million was affirmed. The sanction herein was modest and only a small fraction of PLF revenues. See also Q-3 (PLF revenues exceeded $25 million from the filing of the complaint to sanctions determination) & CR 500, Exh. A; N-3 (BCPUD’s entire annual operating budget when sued herein for $30 million was approximately $280 thousand). 6. The sanctions herein do not require any impermissible minterference. ’ The petition’s “interference” point is a red herring. First, the PLF has long touted itself as exercising “‘quality control’ in litigation.” C-35, 140 (finding); C-61 (“self professed ‘quality control’ monitor over the litigation”); see also CR 676, 11 9-11. Second, no evidence offered by the PLF even suggested that the PLF’s management wanted the PLF attorney employees to behave differently but were afraid to “interfere.” Third, the PLF management had actual control all along, so no interference” was needed. Throughout the litigation, the PLF s CEO, a PLF Board Member, was the senior attorney of record, aided herein by the PLF’s Deputy Director and a 18 PLF Section Chief.11 Fourth, as Congress expressly recognized, prohibiting inappropriate interference need not prevent ensuring professionalism of the highest degree.12 | 7. The sanctions herein do not threaten any legitimate public interest litigation acthity. Contrary to the petition’s suggestion, the decision herein will not cause the decline of pubjic interest litigation. Pet 18. First, public interest litigation does not require immunity from sanctions for bad faith litigation conduct. See, e.g, Blue v. Department o f the Army, 914 F.2d 525 (4th Cir. 1990) (Sanctions affirmed; distinguished civil rights attorney held responsible for conduct of subordinates: “The authority which the federal courts possess, an authority often summoned to the side of racial justice is ... built upon respect for the judicial process. That authority cannot, in the long run, be effectively invoked on behalf of civil rights enforcement if civil rights litigants could themselves disregard it with impunity.”) Second, the decisions herein reflect consideration and sensitivity towards public interest litigation, further demonstrating the judicial caution and restraint employed here, as well as the absence " See, e.g., Appellees’ Brief on Appeal, p.23 nl5 (linking names lo PLF reports identifying management positions); CR 500, Exh. G, I & J; C-18-19, & CR 607, Tab 40 (state court litigation harassing BCPUD; another PLF Section Chief at trial level where state court found case “clearly frivolous," “brought to harass the District" and “for an improper motive"; PLF CEO and PLF Deputy Director were also on the meritless appeal for which the appellate court awarded additional fees). 12 See, e.g., 42 U.S.C. § 2996e (h)(3) (Legal Services Corporation. “ensuring]” compliance with professional responsibilities and not “interfer[ing] with carrying out professional responsibilities both mandated in same section) 19 of any threat. The district court itself observed herein: “No litigant should be penalized for a good faith, straightforward effort to extend, modify, or reverse the course of the law. Reasonable people may disagree about what the law is or ought to be, and it is imperative to the vitality of our democracy that individuals be afforded fair opportunities to try to persuade those who fix the terms of the law to change them. If PLF had engaged in a straightforward effort to change the law, there would be no occasion for these sanctions proceedings. That is not the course, however, that PLF chose to pursue. ” E-8-9; see also -1 & DA-14. 8. The sanctions award is fully compatible with the First Amendment. In the courts below, the PLF also tried to avoid responsibility by claiming that it had some type of First Amendment immunity from sanctions. Although PLF has abandoned that argument, the petition closes by citing the same two cases on which it had relied, NAACP v. Button, 371 U.S. 415, 431 (1962) and In re Primus, 436 U.S. 412 ̂ 428 (1978), neither of which supported immunity from sanctions for litigation misconduct. See A-14 (Ninth Circuit: Cases cited by PLF do not support the “PLF’s position that abuse of the court system is constitutionally protected when a public interest law organization is the perpetrator.”); see also Appellee’s Brief on Appeal, p.33, n.26; c f Cohen v. Cowles Media, 111 S.Ct. 2513, 2518 (1991) (“generally applicable laws do not offend the First Amendment simply because their enforcement against the press has some incidental effects on its ability to gather and report the news”; “‘publisher of a newspaper has no special immunity from the application of the general laws. He has no special privilege to invade the rights and liberties of others.’”). 20 9. Numerous traditional common law principles support the District Court's decision, which further illustrates the absence o f any novel question requiring this Court’s attention. The PLF is a corporation and, as such, can only act through its agents. Even without the District Court’s express findings of responsibility and of active participation, traditional principles of agency would adequately support the District Court’s decision. Here, the senior attorney was the PLF’s CEO, and the PLF’s Deputy Director was also involved. Here, the PLF paid the “improper motive” and “harassment” sanctions for other litigation against BCPUD which had been supervised by a PLF Section Chief and, following the sanctions award, promoted him to PLF Director of Litigation. See, supra, note 11 and compare CR 500, Exh. I with CR 500, Exh. J. Both actual authority and apparent authority were reasonable inferences.13 In addition to the principles of actual authority, apparent authority, and estoppel,14 there is the doctrine of “inherent agency power” which is power derived “solely from the agency relation and exists for the protection of persons harmed by or dealing with 15 See, e.g., Restatement o f Agency (Second), § 7, p. 28 (1958) (“Actual Authority”), Comment b (“agent’s conduct is authorized if he is reasonable in drawing an inference that the principle intended him so to act although that was not the principle’s intent"); Comment c (“most authority is created by implication”); & § 8, p. 30 (“Apparent Authority”), Comment a (“manifestation of the principle . . . or by continuously employing the agent”), Comment c (“to the extent that it is reasonable to believe that the agent is authorized”). 14 PLF attorneys signed in the PLF’s name; the PLF told everyone that it was a “law firm”; and one PLF attorney making an application in the PLF’s name wrote BCPUD that "PLF is the attorney for the plaintiffs in Lockary” . See 0-8-10; P-4; Q-4-14. 21 a servant or other agent.”13 10. Agency issues involving non-profit entities do not require this Court’s attention because they involve "settled rules " which have already been adequately addressed in previous decisions. The responsibility of non-profit organizations for the acts of their employees acting under colorable authority is not a new question. See, e.g., Claiborne v. NAACP, 458 U.S. 886, 930 (1982) (“The NAACP - like any other organization — o f course may be held responsible fo r the acts o f its agents throughout the country that are undertaken within the scope of their actual or apparent authority. ”) (emphasis supplied) and Hydrolevel v. American Society o f Engineers, 456 U.S. 556, 565-70 (1982) (“The apparent authority theory has long been the settled rule in the federal system." “In a wide variety of areas, the federal courts . . . have imposed liability upon principals for the misdeeds of agents acting with general authority.” Non-profit corporation held liable for act of employee writing on corporation’s stationery) (emphasis supplied). Imposing sanctions upon the PLF itself under the circumstances of this particular case was neither novel, unprecedented nor inappropriate. Numerous separate, sufficient and independent bases exist to support the District Court’s decision and the Ninth Circuit’s affirmance. The petition should be denied. 15 Sec, e.g.. Restatement o f Agency (Second), § 8A, p. 36 (1958) (“Inherent Agency Power”), Comment a (power based “neither upon consent nor upon . . . manifestations" is applicable to numerous situations including where “agent does something similar to what he is authorized to do, but in violation of orders,” where “an agent acts purely for his own purposes,” and where an agent “departs from the authorized method.”) 22 IV. The Petition’s Second Question Is Not Raised By The Decisions Below: The PLF Appeared, Did Not Contest uIn Personam Jurisdiction” From The Outset, And Was Not Outside The Court’s Reach. t The petition’s second question assumes that the District Court did not have uin personam jurisdiction” over the PLF. Pet i. The question is not presented by the petition or the record, and the petition should be denied. 1. The District Court expressly found that PLF had participated in the underlying litigation. The District Court found that the PLF had been “actively involved in all phases of the case” (C-33, 1 36), and had been “on notice from the beginning that defendants were likely to seek sanctions. C-32, 1 34; see also C-106 (“PLF has had abundant notice that sanctions were possible”). The PLF’s own public statements regarding the litigation asserted that it had “actively participated” in the underlying litigation. C-34, 1 38. Early in the case, a PLF attorney repeatedly signed papers Filed in the litigation in the PLF’s name. See 0-7-9, noting examples at CR-5, CR-6, CR-9, CR-15, CR-17, & CR-18. A government records act application expressly in the PLF’s name {see CR 604, 1 6 & Exh. B) was made to help circumvent the court’s discovery stay order. C-18. Another PLF attorney wrote on PLF letterhead to BCPUD stating openly that: “PLF is the attorney for plaintiffs in Lockary.” Id., 14 & Exh. A. The PLF’s CEO, counsel of record in the underlying litigation, also repeatedly referred to the case as one that “PLF filed. ” C-33-34. “Virtually every page of every pleading filed by plaintiffs ... has been on paper imprinted with the PLF logo, name, address, and telephone number.” C-35, 1 39. That same PLF logo is used by the PLF to represent itself as a “public interest law firm.” See CR 500, Exh. J and 0-10 (logo and PLF’s 23 description). Moreover, the underlying litigation sought attorneys’ fees under federal statutes, and any such fee recovery would have gone “to the [PLF] organization rather than to individual [PLF] staff attorneys.” See Rev. Proc. 75-13, 1975 C.B. 662. Under these circumstances, the PLF cannot reasonably be said to be the stranger to the underlying proceedings that its petition tries to portray.* 16 2. The Ninth Circuit expressly affirmed the findings regarding the PLF s participation in the underlying litigation. The Ninth Circuit said: PLF also takes issue with the district court’s factual finding that it was responsible for the sanctionable conduct. PLF contends that it merely provided logistical support to the individual attorneys who represented the plaintiffs, and did not participate as an entity in any way in this suit. The record belies this assertion. While the PLF attorneys did not identify themselves as PLF employees in the signature block of the motions and pleadings, the heading of each court paper they filed listed the attorneys’ names, followed by the name and address of PLF. Moreover, the plaintiffs were represented by a constantly changing cast of PLF attorneys, including PLF s president. PLF funded the litigation in its entirety. In its analysis of PLF’s involvement, the district court relied on statements by PLF’s president The record is also replete with PLF’s official publications and tilings with the government that describe itself as a “public interest Jaw fina.” J « , a . .O -3 -8 W Q -4 - l4 . Although the Ninth Circuit was willing to accept the PLF’s protestations that it was not really a law firm,” it also concluded that PLF had actively participated in the underlying litigation. A-12. 24 vaunting the importance of the Bolinas suit for PLF, and placing the case in the context of other, similar suits by PLF. The district court found that PLF was not “a mere passive and abstract institutional I backdrop”, but was, rather, “the sponsor of this litigation, and was actively involved in all phases of the case.” We agree. I A-12.17 * 3. The PLF also appeared and participated in the sanctions proceedings without raising or preserving an “in personam jurisdiction ” objection. The petition concedes, as it must, that the PLF “appeared before the District Court to defend against the sanctions motions” . Pet 13. Did it attempt to file a “special” appearance? No. See, e.g., CR 506 (first paper signed by attorney who separately appeared for PLF in sanctions hearing), & CR 510 (PLF’s first 17 The quoted portion of the Ninth Circuit’s opinion deals with the findings actually made by the District Court. It clearly states its agreement with the District Court’s findings of actual participation, sponsorship and responsibility. Contrary to this clear affirmance, the petition dwells on the Ninth Circuit’s incidental observations regarding post-remand events subsequent to the sanctions ruling, points on which the District Court did not rely and could not have relied, and other later events involving claims for which the PLF was not sanctioned. See BCPUD Opposition to PLF’s Petition for Rehearing, p. 5-7. From these irrelevancies, however, the petition tries to suggest that the Ninth Circuit rejected the District Court’s findings and “found" its own facts on which it affirmed. While the Ninth Circuit may not have thought it necessary to characterize the PLF as a“law firm ,” something the PLF itself had been doing for decades, it clearly agreed with the District Court that the PLF was “actively involved in all phases of the case” and was the entity “directly responsible for the sanctioned misconduct.” A-11-13 & n.2. 25 opposition brief.)1* Did it promptly raise an objection in terms of “inpersonam jurisdiction” or “personal jurisdiction” in the first paper filed? No. Did it do so in the second or third paper? No. See CR 510 & CR 585. The petition asserts, inaccurately, that when the PLF filed CR 510 (April 1988) and CR 585 (February 1989), it “opposed the sanctions motions, arguing, among other things that the district court lacked in personam jurisdiction over petitioner.” Pet 3-4. The PLF’s opposition papers, however, do not even contain the word “jurisdiction,” let alone the expressions in personam jurisdiction” or “personal jurisdiction.” In fact, the PLF did not express an objection to “in personam jurisdiction” while participating for nearly two years in the sanctions proceedings during 1988-1989. Moreover, when the District Court indicated that it was going to refer the sanctions motions to a special master, the PLF participated in the process of nominating and recommending the agreed-upon candidates. See CR 528 & CR 543 (request for nominations; agreed nominations letter & referral order). The criticism (Pet 4) that the “district court ignored petitioner’s jurisdictional argument and referred the motions to a federal magistrate sitting as special master” is unfounded. None of the PLF papers filed before the referral (CR 506 & CR 510) even contained the word “jurisdiction.” " ,n CR 506, through counsel expressly signing for the PLF, the PLF joined with the others in a stipulation setting forth and requesting a briefing and hearing schedule, but PLF did not assert or reserve any objection to “in personam jurisdiction.” . On CR 510, the attorneys for PLF in the sanctions proceedings simply listed their appearance as “Attorneys for Pacific Legal Foundation” without any attempt to qualify or restrict their appearance. 26 4. Imposing sanctions on the PLF was not “in direct conflict ” with this court's decision in Zenith v. Hazeltine. In this litigation, the District Court imposed sanctions on the PLF, which not only appeared and actively participated in the sanctions proceedings, but also was found to have “actively participated” in the underlying litigation. Zenith Corp. v. Hazeltine, 395 U.S. 100, 108-112 (1968) did not involve sanctions issues or a court’s need to protect itself or its procedures from misuse. The case is inapposite, and no conflict exists requiring this court’s attention.19 5. Imposing sanctions on the PLF was also not in conflict with the Seventh Circuit's decision in Panther Pumps. Similarly, there is no conflict between the Seventh Circuit’s decision in Panther Pumps & Equipment Co. v. Hydrocraft, Inc., 566 F.2d 8 (7th Cir. 1977), and the Ninth Circuit’s decision herein. It is also inapposite, another non-sanctions 19 For example, in contrast to the PLF’s participation in both the underlying litigation and the sanctions proceedings, Hazeltine, the corporation whose name appeared in a judgment “based wholly on the stipulation of HRI,” “did not execute the stipulation,” “never formally appeared at trial,’’ and “never had its day in court” . The judgment against Hazeltine was on a counterclaim which only named HRI as a defendant. “Hazeltine made no appearance in the litigation until Zenith proposed that judgment be entered against it, at which time, Hazeltine filed a ‘special appearance.’” The Supreme Court also noted that the record did not show that, when Hazeltine made its special appearance, the district court found it to have been “in active concert or participation” with HRI. See also Hazeltine Research, Inc. v. Zenith Radio Corporation, 388 F.2d 25, 30 (7th Cir. 1967) (“At no time during the trial did [Hazeltine] have an opportunity to show that it was not the alter ego.") The PLF herein had numerous opportunities to address the sanctions issues and actually appeared and participated in the sanctions proceedings. 27 case involving a company which did not participate in either the underlying litigation or the post-judgment proceedings. If anything, the Seventh Circuit’s willingness to hold Beck in contempt based on his relationship to the underlying litigation, although he had not been a party to the underlying litigation, would tend to support the District Court’s decision herein. That it dismissed the appeal as to Universal, a company formed by Beck after the initial judgment,’ is immaterial. Unlike Universal, which apparently did not participate in Beck’s show cause proceedings, the petition herein concedes that the PLF “appeared before the district court to defend against the sanctions motions”. Pet. 13. The District Court found that “PLF actively participated” in the underlying litigation. The petition concedes PLF’s appearance and participation in the sanctions proceeding. The petition, however, inaccurately asserts that PLF raised and argued an “in personam jurisdiction” objection in CR 510 and CR 585. Pet. 3-4. The petition’s second contention is not presented by the petition or the record, and the petition should be denied.20 The absence o f an express “in personam jurisdiction" objection and argument is telling, because the PLF did argue even minor technical points if it desired to raise them. A court order had expressly extended the time in Local Rule 270-1. CR 472. Nevertheless, PLF did try to argue in CR 510 that the motions were untimely for failure to comply with that very rule, despite the court’s express order and despite that rale’s express reference permitting the judge to “grant extensions o f time for the filing o f an application." This “point" would hardly have been “jurisdictional," and it was certainly not an “in personam jurisdiction" argument. It does illustrate, however, that the PLF’s failure to raise “in personam jurisdiction" expressly was a conscious decision. The argument now made is merely a contrivance. 28 CONCLUSION j . The claims presented by PLF’s petition are neither significant nor meritorious, and the lower court’s actions are ■ . y supported by the copious record that was developed so painstakingly by the Special Master and the District Court. or these reasons, granting the petition would serve no useful purpose. By contrast, allowing PLF to prolong these D rm m in^ W° Uld ,mpose serious additional hardship upon BCPUD. Its meager financial resources have already been severely taxed, and further litigation in this Court would only bur,denS' 71,31 hardshiP ™uld remain even after BCPUD prevailed on the merits of the issues which PLF’s petition attempts to raise. RICHARD E.V. HARRIS GEORGE A. YUHAS ORRICK, HERRINGTON & SUTCLIFFE Old Federal Reserve Bank Building 400 San some Street San Francisco, CA 94111 Telephone: (415) 392-1122 By: Richard E.V. Harris Attorneys for Respondent Bolinas Community Public Utility District APPENDICES N-l APPENDIX N RICHARD E. V. HARRIS GEORGE A. YUHAS ORRICK, HERRINGTON & SUTCLIFFE 600 Montgomery Street San Francisco, CA 94111 Telephone: (415)392-1122 Attorneys for Defendant Bolinas Community Public Utility District IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA MATTHEW LOCKARY, SUSAN IRLAND LOCKARY; PHYLLIS GILBERT; CHARLES GILBERT; JAMES MACEY; ANTON HOLTER: MESA RANCH INC., a California limited partnership, Plaintiffs, v. PAUL KAYFETZ; VICTOR AMOROSO; MARY LOWRY; ) Civ. No. ) C-82-6191 SW ) ) DECLARATION OF ) RICHARD E.V. HARRIS ) IN SUPPORT OF ) BCPUD’S ) APPLICATION FOR ) ATTORNEYS’ FEES ) AND EXPENSES ) ) Date: April 6, 1988 ) Time: 10:00 a.m. N-2 DIANA LOPEZ FARNSWORTH; ) EDWARD C. RILEY; PETER ) WARSHALL; DORIS ELAINE ) LeMIEUX; JACK BOWEN ) McCLELLAN; J. MICHAEL ) GROSHONG; WILUAM NIMAN; ) ORVILLE SCHELL; ) ‘MARGUERITTE HARRIS; ) JUDITH WESTON; BOLIN AS ) COMMUNITY PUBLIC UTILITY ) DISTRICT,an incorporated public ) utility district; BOLINAS ) PLANNING COUNCIL, a ) non-profit corporation; JOHN ) GOODCHILD; GREGORY C. ) HEWLETT; STEVE MATSON; ) PATRICIA L. SMITH; RAY ) MORITZ; ROBERT J. SCAROLA; ) DIANE MIDDLETON McQUAID; ) FREDERICK G. STYLES; and the ) COUNTY OF MARIN, ) ) Defendants. ) _____ ___________________________ ) I, Richard E. V. Harris, do hereby declare as follows: 1. I am a partner with the law firm of Orrick, Herrington & Sutcliffe and am one of the attorneys for defendant Bolinas Community Public Utility District ("BCPUD"). If called as a witness, I could testify to the following of my own personal knowledge. 2. My firm was retained by BCPUD to represent it in this action in November 1982. BCPUD is a public utility district which provides water service and sewer service N-3 to customers in the Bolinas area. As indicated by financial and other reports, BCPUD has always been in precarious financial condition. Attached to this Declaration as Exhibit A is a true and correct copy of BCPUD’s audited financial statement for the fiscal year ending June 30, 1982. As shown therein, for the fiscal year which preceded the filing of this lawsuit, BCPUD’s total revenues amounted to only $278,571. For that same period, BCPUD’s expenses totalled $277,115. To finance its defense efforts, BCPUD was forced to impose a special assessment which, I am informed, substantially increased the economic burden on users of BCPUD water sources. 3. The financial difficulties which BCPUD would (and did) face in defending the claims asserted against it in this action were well-known. Attached to this Declaration as Exhibit B are the reported comments of one of the plaintiffs, Matthew Lockary, who is said to have commented about a month before this action was filed that BCPUD was "nearly broke" and would be hard pressed to defend the suit. * * * 8. In recognition of the fact that focused discovery would be virtually impossible in light of the broad, garbage-can nature of the complaint and amended complaints, I proposed to this Court at an early stage that all discovery be stayed until the motions to dismiss were resolved. On March 3, 1983, in its initial status conference order, this Court ordered a stay of discovery until defendants’ motions to dismiss were resolved. 9. Notwithstanding the stay of discovery which was ordered by the Court, plaintiffs’ counsel made a request on September 30, 1983 under the California Public Records Act that asked BCPUD to produce virtually each and every S i d l e y 8 c A u s t i n A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS NEW YORK CHICAGO 1722 Eye Street, N.W. Washington, D.C. 20006 Telephone 202: 736-8000 Telex 89-463 Facsimile 202: 736-8711 SINGAPORE LONDON TOKYO WRITER’S DIRECT NUMBER 125th A iyiiv^lgaiy 1866-1991 (202) 736-8378 May 7, 1993 Charles Stephen Ralston, Esq. NAACP Legal Defense and Educational Fund, Inc. 99 Hudson Street Sixteenth Floor New York, NY 10013 Dear Mr. Ralston: Enclosed for your information are copies of the briefs filed by all amici in the Pacific Legal Foundation case, along with a copy of the respondents' opposition brief, and Pacific Legal Foundation's reply brief. Thank you again for supporting Pacific Legal Foundation's cert, petition. The conference in which the petition will be reviewed is expected to take place on Friday, May 14th, with the result being reported on May 17th. Y Kurt H. Jacobs Enclosures