In Rossbach v. Montefiore Med. Ctr., No. 21-2084 (2d Cir. August 28, 2023), the Second Circuit Court of Appeals affirmed the district court’s ruling imposing a case-terminating and monetary sanction against Andrea Rossbach for fabricating evidence, but the Second Circuit vacated the monetary sanction against Rossbach’s counsel, finding “the district court did not make the required ‘explicit finding of bad faith’ to impose the sanction”, and remanded the case back to the district court “for application of the correct legal standard”.

Case Background

In this employment discrimination case involving claims of sexual harassment and wrongful termination, New York District Judge Denise Cote, based on “clear and convincing evidence” of the plaintiff’s fabrication of an image of a text exchange between her and her supervisor, dismissed the action in August 2021 “with prejudice as an exercise of its inherent power to sanction and pursuant to Fed. R. Civ. P. 37(e).” A monetary sanction in the amount of the defendants’ attorneys’ fees, costs, and expenses associated with addressing the plaintiff’s fabrication was also assessed jointly and severally against the plaintiff and her counsel. On October 22, 2021, the district court fixed the monetary award at $157,026.27.

Rossbach and her attorneys (Daniel Altaras & Derek Smith Law Group, PLLC) appealed, challenging the district court’s conduct prior to, during, and following the evidentiary hearing, its dismissal of Rossbach’s remaining claims, and its imposition of a monetary sanction.

Circuit Court’s Ruling

The Circuit Court stated: “For the reasons that follow, we find all of these arguments to be without merit, save one: We hold that the district court erred by applying the incorrect legal standard in imposing sanctions against Altaras and DSLG.”

The arguments and the Circuit Court’s response were as follows:

• “Forensic” Examination of Morales’s Cell Phones: The Circuit Court rejected Rossbach’s argument that Montefiore “knowingly and willfully lied” to Altaras about how Morales’s cell phones had been examined, stating: “the record is clear that at the time the parties initially corresponded about a “forensic” examination of Morales’s cell phones, they mutually intended the simple gathering and searching of data, including all text messages.”
• Admission and Exclusion of Evidence, Findings of Fact, and Credibility Determinations at the Evidentiary Hearing: The Circuit Court responded to Rossbach’s arguments by stating: “Rossbach conflates her entitlement to a jury trial on her claims with the question of whether she engaged in sanctionable conduct by committing a fraud on the court and failing to comply with her discovery obligations… Here, the district court’s findings of fact at the evidentiary hearing, and dismissal of the remainder of Rossbach’s case based upon them, did not violate Rossbach’s right to a jury trial.”
• Perjury and Spoliation Findings: In response to the appellants argument that the district court erred in its fact findings that Rossbach testified falsely and that she and Altaras spoliated evidence, the Circuit Court stated: “The district court cited the overall incredibility of Rossbach’s testimony regarding the origin of the text message document, supported by evidence that the image was not a photograph taken on an iPhone X (or a photograph at all) and that the depicted messages were inconsistent with text messages as they would appear on an iPhone 5 (or any iPhone). Consequently, the district court’s finding that Rossbach willfully testified falsely on a material matter was not clearly erroneous… At the least, Rossbach’s failure to preserve her iPhones and their data, and Altaras’s failure to ensure that his client did so, demonstrated a disregard of their discovery obligations. Thus, the district court’s spoliation finding was not clearly erroneous.”
• Notice and Opportunity to Be Heard: Regarding the argument that Appellants were not afforded notice and an opportunity to be heard prior to the imposition of sanctions, the Circuit Court stated: “The district court in fact allowed the parties to make closing statements at the evidentiary hearing, and in any event, where a sanctions decision is ‘based on well-known facts contained in the existing record,’ ‘the opportunity to submit written briefs may be sufficient to provide an opportunity to be heard.’… We also easily reject Appellants’ contention that criminal procedural protections were warranted because the district court’s fee award was punitive, rather than compensatory… The district court awarded Montefiore only its attorneys’ fees, costs, and expenses associated with Rossbach’s misconduct.”
• Dismissal and Monetary Sanction Against Rossbach: The Circuit Court rejected Rossbach’s argument that the district court abused its discretion by failing to consider lesser sanctions by stating: “Not so. The district court explained that permitting the case to proceed to trial would be a futile waste of judicial resources, given that no reasonable juror who learned ‘of Rossbach’s campaign of willful fabrication and deception’ would credit her testimony or evidence.” They also rejected her assertion that the evidence did not support the conclusion that she acted in bad faith.

However, the Second Circuit vacated the monetary sanction against Altaras and DSLG, the Circuit Court stated: “instead of finding bad faith as is required for representational conduct, the district court applied Wilder’s standard for nonrepresentational conduct, finding that Altaras ‘negligently or recklessly failed to perform his responsibilities as an officer of the court,’ including by disobeying the New York Rules of Professional Conduct…As is the case with an attorneys’ fee sanction, a district court’s failure to make an explicit finding of a lawyer’s bad faith prior to imposing any sanction for representational conduct is a legal error that constitutes an abuse of discretion… We therefore hold that the district court erred by failing to expressly make the finding of bad faith required to support the sanction it imposed against Altaras and DSLG and, accordingly, vacate and remand for application of the correct legal standard.”

So, what do you think? Are you surprised that the Second Circuit vacated the monetary sanction against Rossbach’s counsel? Please share any comments you might have or if you’d like to know more about a particular topic.

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