Attorney Jana Yocum Rine represented plaintiff James Hunt in a dispute with his employer, Moore Brothers, concerning the terms of his independent contractor operating agreement, which contained an arbitration clause in which both parties agreed “to submit  disputes to final and binding arbitration before any arbitrator mutually agreed upon by both parties.”
When a dispute arose under the contract, rather than filing an arbitration demand on behalf of her client, Ms. Rine filed a multi-count complaint in federal court, alleging Moore Brothers, among other causes of action, held Mr. Hunt in peonage in violation of 18 U.S.C. § 1581 (a criminal statute), and violated the Racketeer Influenced and Corrupt Organizations Act (“RICO“), federal antitrust laws, the Illinois Employee Classification Act and committed the Illinois tort of false representation.
In response, Moore Brothers filed a motion to compel arbitration, appoint an arbitrator, and stay the litigation. In opposition, Ms. Rine argued that (1) Hunt had no obligation to comply with the arbitration clause because Moore had materially breached the Agreements, (2) the Agreements fell outside the scope of the Federal Arbitration Act (the “FAA“) because Hunt was a transportation worker and (3) a court-appointed arbitrator should not be appointed because the arbitration clause provided for appointment of an arbitrator “mutually agreed on by the parties.” The trial court denied the first two grounds, finding that the agreement fell well within the scope of the FAA and that parties could not avoid an arbitration clause due to an argument that the other party had already materially breached the contract, or else no arbitration clause would ever be enforceable.
On the third issue, the district court found that the court’s appointment of an arbitrator was premature, and allowed the parties time to agree on one before it appointed one. Rine, however, returned to the district court under the guise of a Federal Rule of Civil Procedure 60(b) motion to, essentially, reargue her response to Moore Brothers’ motion to compel arbitration. The district court denied her attempts, finding she did not offer any newly discovered evidence or argue the existence of any fraud or misconduct as Rule 60 required. Finding that Rine’s original complaint was “vexatious” and “baseless” under 28 U.S.C. § 1927, the district court also ordered a sanction of nearly $7500 to cover the cost of Hunt Brothers’ counsel’s fees expended responding to Rine’s arguments. Rine appealed.
The Seventh Circuit affirmed the district court’s order, finding that the dispute was a “simple” commercial dispute that Ms. Rine “blew…up…beyond all rational proportion.” In particular, the Seventh Circuit noted that “her complaint was a disaster, and her efforts to avoid arbitration were meritless” and said that her attempt to obtain relief under Rule 60(b) failed because Rine had “failed to show the exceptional circumstances required by that rule.” The Seventh Circuit found that the district court did not abuse its discretion in awarding a sanction under Section 1927, and that the award of $7500 in attorney’s fees was reasonable, under the circumstances.