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6th Circuit OKs sanctions for filing frivolous suit, may add sanctions for filing frivolous appeal

In a Friday ruling, the 6th U.S. Circuit Court of Appeals upheld trial-court sanctions imposed on a former corporate officer and senior engineer for filing a frivolous False Claims Act lawsuit.

But in addition to OKing the sanctions against ex-Lambda Research employee Terry Jacobs and his trial attorney James DeRoche, the Cincinnati-based appeals court also pointed the finger at Jacobs’ appellate lawyer, Patrick Perotti.

Stating in its written opinion (PDF) that Jacobs’ appeal of a summary judgment in favor of Lambda Research appears to be “both baseless and brought primarily for purposes of harassment,” the appeals court invoked its own powers under 28 U.S.C. § 1927 and Rule 38 of the Federal Rules of Appellate Procedure and ordered Perotti, to show cause why he should not be sanctioned, too.

“An appeal is frivolous if it ‘is obviously without merit and is prosecuted for delay, harassment, or other improper purposes,’ ” the court said, citing an earlier 6th Circuit case decided in 1997.

The underlying False Claims Act case brought by Jacobs followed a successful Ohio state-court suit by Lambda against Jacobs after he left the Cincinnati-based company to work for a German competitor. A jury agreed that Jacobs had breached a confidentiality agreement with his former employer and misappropriated trade secrets, awarding Lambda $8 million. A judge then awarded $1.4 million in attorney fees to Lambda, after deciding the misappropriation was willful, the 6th Circuit recounts.

Because the False Claims Act suit was filed only two months later, the trial court was concerned about possible retaliation and repeatedly warned Jacobs and DeRoche they would be sanctioned if the case turned out to be frivolous. In fact, it was frivolous, the trial court eventually determined, and the trial court required Jacobs and DeRoche to pay attorney’s fees incurred by Lambda in defending the case. The amount is not specified in the appellate opinion.

Hat tip: Sixth Circuit Appellate Blog