     15-3150
     Rabin et al. v. Dow Jones & Co., Inc. et al.

                         UNITED STATES COURT OF APPEALS
                             FOR THE SECOND CIRCUIT

                                  SUMMARY ORDER
     RULINGS  BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER
     FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
     APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
     ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX
     OR AN ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING A SUMMARY
     ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1        At a stated term of the United States Court of Appeals for
 2   the Second Circuit, held at the Thurgood Marshall United States
 3   Courthouse, 40 Foley Square, in the City of New York, on the
 4   25th day of October, two thousand sixteen.
 5
 6   PRESENT: AMALYA L. KEARSE,
 7            DENNIS JACOBS,
 8            RAYMOND J. LOHIER, JR.,
 9                          Circuit Judges.
10
11   - - - - - - - - - - - - - - - - - - - -X
12   I. STEPHEN RABIN,
13            Plaintiff-Appellant,
14
15   RAYMOND A. BRAGAR
16            Interested Party-Appellant,
17
18                -v.-                                           15-3150
19
20   DOW JONES & COMPANY, INC.,
21            Defendant-Appellee,
22
23   THE NEW YORK TIMES COMPANY, FORBES INC.,
24             Defendants.
25
26   - - - - - - - - - - - - - - - - - - - -X
27


                                                1
 1   FOR APPELLANTS:               ALEXANDRA A.E. SHAPIRO (Chetan A.
 2                                 Patil, on the brief), Shapiro Arato
 3                                 LLP, New York, NY.
 4
 5   FOR APPELLEE:                 HILARY PRESTON (Clifford L. Thau,
 6                                 Joshua S. Johnson, on the brief),
 7                                 Vinson & Elkins LLP, New York, NY.
 8
 9        Appeal from a judgment of the United States District Court
10   for the Southern District of New York (Rakoff, J.).
11
12        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
13   DECREED that the judgment of the district court be AFFIRMED.
14
15        Plaintiff I. Stephen Rabin, a lawyer, and Raymond A. Bragar,
16   Rabin’s attorney in this action, appeal from the judgment of
17   the United States District Court for the Southern District of
18   New York (Rakoff, J.) granting a motion for sanctions pursuant
19   to 28 U.S.C. § 1927 and the court’s inherent powers. We assume
20   the parties’ familiarity with the underlying facts, the
21   procedural history, and the issues presented for review.

22        Plaintiff-appellant Rabin and appellant Bragar are, by
23   their own characterization, experienced class-action lawyers,
24   and Bragar represented Rabin in the underlying litigation.
25   Together they filed a putative class action against The New York
26   Times Company, Forbes, Inc., and appellee Dow Jones & Company,
27   Inc., alleging participation in a fraudulent
28   subscription-renewal scheme. It is undisputed that the scheme
29   was orchestrated by a third party (not sued by Rabin), which
30   sent official-looking but unauthorized “renewal” notices to the
31   subscribers of various publications, charging them inflated
32   prices to renew their subscriptions and keeping the excess after
33   passing the actual renewal cost along to the publishers.

34        The defendants moved to dismiss, arguing, among other
35   things, that plaintiff had sued the wrong parties. In response,
36   Bragar and Rabin filed an amended complaint largely reasserting
37   the same claims. After the New York Times and Forbes settled,
38   Dow Jones renewed its motion, and the district court dismissed
39   the amended complaint with prejudice. Dow Jones moved for
40   sanctions against Bragar and Rabin in the amount of its costs

                                    2
 1   and fees in defending against the dismissed claims. The
 2   district court found their conduct sanctionable only from the
 3   time of the filing of the amended complaint, ultimately holding
 4   them liable to Dow Jones for $180,000. Bragar and Rabin appeal
 5   from that judgment, arguing principally that the district court
 6   applied the wrong legal standard for finding the amended
 7   complaint not colorable and erred in finding that they pursued
 8   their claims in bad faith.

 9        “We review all aspects of a District Court’s decision to
10   impose sanctions for abuse of discretion.” Schlaifer Nance &
11   Co. v. Estate of Warhol, 194 F. 3d 323, 333 (2d Cir. 1999). “[W]e
12   bear in mind that when the district court is . . . fact finder
13   and sentencing judge all in one, our review is more exacting
14   than under the ordinary abuse-of-discretion standard,” and we
15   require that “[a] finding of bad faith, and a finding that conduct
16   is without color or for an improper purpose, must be supported
17   by a high degree of specificity in the factual findings.”
18   Wolters Kluwer Fin. Servs., Inc. v. Scivantage, 564 F. 3d 110,
19   113-14 (2d Cir. 2009) (citations and quotation marks omitted).
20   The imposition of sanctions is an abuse of discretion if it is
21   “based on an erroneous view of the law or on a clearly erroneous
22   assessment of the evidence,” or “it cannot be located within
23   the range of permissible decisions.” Id. at 113 (quotation
24   marks omitted).

25        The district court articulated and applied the correct legal
26   standard. To impose sanctions under 28 U.S.C. § 1927 or under
27   its inherent power, a district court must find “clear evidence
28   that the conduct at issue is (1) entirely without color and (2)
29   motivated by improper purposes.” Wolters Kluwer, 564 F. 3d at
30   114; see Oliveri v. Thompson, 803 F.2d 1265, 1273 (2d Cir. 1986)
31   (likening the requirements under 28 U.S.C. § 1927 to the inherent
32   power requirements). As the district court recognized, see
33   S.P.A. 4, “a claim is colorable when it has some legal and factual
34   support,” and it “lacks a colorable basis when it is utterly
35   devoid of a legal or factual basis.” Schlaifer, 194 F. 3d at
36   337 (quotation marks omitted).

37        The district court found that plaintiff pleaded no facts
38   to support the conclusory allegation of defendant’s liability
39   for a third-party’s fraud; and that even if the defendant had

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 1   an affirmative duty to act when it became aware of the fraud
 2   (which appellants now aver was a good-faith argument to extend
 3   the law), plaintiff’s own amended complaint establishes that
 4   defendant did act to warn its customers. The district court
 5   therefore concluded that the claims had no objectively
 6   reasonable basis and that the first requirement for the
 7   imposition of sanctions was satisfied. We find no error in that
 8   conclusion.

 9        The district court’s finding of bad faith is supported by
10   detailed factual findings. Specifically, the court found that
11   Rabin admitted in his deposition that “at least two” fraud
12   allegations, which were pleaded in the original complaint and
13   left uncorrected in the amended complaint, were
14   “overstatement[s],” S.P.A. 5-6; that Bragar became aware of
15   evidence showing Dow Jones’s efforts to fight the fraud (efforts
16   inconsistent with the complaint’s allegations of complicity)
17   and that he failed to conduct a good-faith investigation into
18   that evidence or to adjust the pleadings; that Bragar and Rabin
19   sought to suppress the truth by withholding relevant evidence,
20   such as the fact that prior to filing the amended complaint,
21   Rabin had received refunds of amounts he pleaded as damages in
22   that complaint; and that, when confronted with evidence of
23   dishonesty in his deposition, Rabin dubiously claimed a bad
24   memory. The district court’s assessment of the evidence is not
25   clearly erroneous and its finding of bad faith is within the
26   bounds of its permissible discretion.

27        Accordingly, and finding no merit in appellants’ other
28   arguments, we hereby AFFIRM the judgment of the district court.

29                                FOR THE COURT:
30                                CATHERINE O’HAGAN WOLFE, CLERK




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