Free Motion for Sanctions - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-CV-1124-JLK-OES LINDA FORGACS, et al., Plaintiffs, vs. EYE CARE CENTER OF NORTHERN COLORADO, P.C. et al., Defendants.

DEFENDANTS' MOTION FOR SANCTIONS, WITH AUTHORITIES

Defendants, through counsel, under Rule 11, F.R.C.P., 28 U.S.C. § 1927 and C.R.S. § 1317-102, file their Motion for Sanctions, with Authorities.

D.C.COLO.LCivR 7.1 Certification Defendants' counsel certifies that, before filing this motion, I conferred and corresponded numerous times with Plaintiffs' attorney about the problems with Plaintiffs' claims this motion addresses. Consistent with Rule 11(c)(1)(A), I served a draft of this motion on Plaintiffs' attorney in December 2005, more than 21 days before filing it with the Court. Defendants understood in May 2006 that they had reached settlements with all Plaintiffs other than Linda Forgacs. Those settlements did not include releasing Plaintiffs' attorney from sanctions for his role in bringing and persisting with the claims. Defendants have also not settled with Plaintiff Forgacs or Plaintiffs' attorney regarding the sanctions this Motion seeks against them related to Forgacs' claims.

Introduction After over two years of litigation, and with most of their claims dismissed and the prospect of losing the rest on summary judgment, four of the five Plaintiffs finally agreed to settle their claims and should be dismissed from this case. These Plaintiffs are Monica Jones,

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Daniel Link, Grace Moreno and Pam Rogge (collectively, the "Settling Plaintiffs"). The parties' settlements did not include any release of Defendants' claims against Plaintiffs' attorney, George Price, under Rule 11, 28 U.S.C. § 1927 and C.R.S. § 13-17-102. Therefore, if the Court grants this Motion, Mr. Price should be sanctioned for his role in: (1) failing to investigate reasonably the facts on which the Settling Plaintiffs' claims were based; (2) asserting frivolous oppositions to summary judgment rather than counseling the Settling Plaintiffs to dismiss their claims after their depositions and discovery responses demonstrated the claims were groundless; and (3) failing for more than four months to comply with his obligations to his clients, the Court and Defendants to finalize the settlements reached with the Settling Plaintiffs in May 2006 with the assistance of Magistrate Judge Hegarty. In addition, there has been no settlement with the ringleader of this action, Plaintiff Linda Forgacs ("Forgacs"), who supervised the Settling Plaintiffs when she was the Practice Manager for Defendant Eye Care Center of Northern Colorado, P.C. ("Eye Care Center") and who orchestrated this action. Therefore, attorney fees should be awarded against Forgacs individually for the claims she brought that have been dismissed and that are subject to the mandatory attorney fee provisions of § 8-4-110(1), C.R.S. and in the settlement agreement she entered into with Eye Care Center over a year before filing suit..Forgacs and Mr. Price should also be sanctioned under Rule 11, 28 U.S.C. § 1927 and C.R.S. § 13-17-102 if the Court agrees Forgacs' claims that have been dismissed on summary judgment should never have filed and, having been filed, should have been dropped long before they were dismissed.

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Authorities Governing Sanctions Rule 11 applies to all pending claims that were not "formed after an inquiry reasonable under the circumstances" and "warranted by existing law" or a rational argument to change the law. "`In deciding whether to impose Rule 11 sanctions, a district court must apply an objective standard; it must determine whether a reasonable and competent attorney would believe in the merit of an argument.'" Fransen v. Terps Ltd. Liability Co., 153 F.R.D. 655, 659 (D.Colo. 1994)(quoting Dodd Ins. Servs., Inc. v. Royal Ins. Co. of Am., 935 F.2d 1152, 1155 (10th Cir.1991). See also Morrow v. Countrywide Home Loans, Inc., 2006 WL 2666040, *1 (D.Colo. 2006)(Babcock, C.J.)(awarding sanctions under Rule 11 where: "the record demonstrated beyond dispute that his allegations had no merit; [and] no rational argument based on the evidence or law appears in favor of [plaintiff's] claims" (citing Harrison v. Luse, 760 F.Supp. 1394, 1400 (D.Colo.1991), aff'd, 951 F.2d 1259 (10th Cir.1991)). Sanctions under Rule 11 may be awarded where frivolous claims are not withdrawn within twenty-one days after the date a movant serves a proposed motion on the subject parties. Rule 11(b) and (c). This Court has held that Rule 11 applies to the problems with claims when they were filed and does not impose a duty of on-going reevaluation. 28 U.S.C. § 1927 states the duty to reevaluate the merits of claims and defenses. In re Endrex Investments, Inc., 111 B.R. 939, 946 (D.Colo. 1990). See also Steinert v. Winn Group, Inc., 440 F.3d 1214, 1225 (10th Cir. 2006)(reversing part of sanctions based on filing claims and affirming §1927 sanctions for failing to dismiss them afterwards ­ Rule 11 applies to the filing of a complaint or particular paper, -3-

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while the unambiguous statutory language of §1927 means it: "necessarily excludes the complaint that gives birth to the proceedings, as it is not possible to multiply proceedings until after those proceedings have begun.") Under 28 U.S.C. § 1927, sanctions may be imposed against: "[a]ny attorney . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." Braley v. Campbell, 832 F.2d 1504, 1511 (10th Cir. 1987); see also Dominion Video Satellite, Inc. v. Echostar Satellite L.L.C., 430 F.3d 1269, 1278 (10th Cir. 2005); Drake v. City and County of Denver, 953 F.Supp. 1150, 1157 (D.Colo. 1997). Colorado's frivolous pleadings law, C.R.S. § 13-17-102, also prohibits filing or persisting with claims that are substantially groundless, frivolous or vexatious, and this state law applies to cases filed with this Court. See, e.g., Brammer-Hoelter v. Twin Peaks Charter Academy, 81 F.Supp.2d 1090, 1103 (D.Colo. 2000); O'Connor v. Check Rite, Ltd., 973 F.Supp. 1010, 1019 (D.Colo. 1997). Motion ­ Background Record 1. On June 6, 2004, Plaintiffs' filed their Complaint. Plaintiffs' counsel waited five

months, until November 2004, to serve Defendants and accomplished that only after the Court ordered him to serve the Complaint or have this case dismissed for failure to prosecute. Plaintiffs' counsel never amended the Complaint despite the careless way many claims are stated and despite the obligations under 28 U.S.C. § 1927 and C.R.S. § 13-17-102 to drop unsupportable claims and to correct the numerous material flaws in most all of the other claims. -4-

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2.

Plaintiffs' Complaint asserted the following claims: a. First Claim - four different ERISA breach of fiduciary duty claims by all

Plaintiffs against Eye Care Center and the Plan Administrators of two ERISA plans Eye Care Center offered its employees: i. Damages, penalties and attorney fees against Eye Care Center and Defendant Benedict for failing to give COBRA notice regarding all Plaintiffs' (other than Rogge's) participation in the Section 125 FlexSpend Plan after their terminations; ii. Damages, penalties and attorney fees against Eye Care Center and Defendant Meyers for failing to provide forms to request roll-over of funds and for failing to rollover funds in each Plaintiff's 401k account; iii. Damages, penalties and attorney fees for late deposits of employee and employer contributions into each Plaintiff's 401k accounts; and iv. b. An accounting of each Plaintiff's 401k accounts. Second Claim - unpaid wages under the Colorado Wage Claim Act, §§ 8-

4-101 ­ -123, C.R.S. ("CWCA"), seeking unpaid wages, the statutory penalty and attorney fees for all five Plaintiffs against all Defendants. c. Defendants. Third Claim - Defamation by Plaintiffs Forgacs, Link and Jones against all

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d.

Fourth Claim - damages, penalties and attorney fees based on unpaid

overtime under the Fair Labor Standards Act, 29 U.S.C.A. §§ 201 ­ 219; 29 C.F.R. §§ 515 ­ 580; 775 ­ 793, by Plaintiff Rogge against all Defendants. e. Fifth Claim - damages, penalties and attorney fees based on FLSA

retaliation by Plaintiff Rogge against all Defendants. f. Sixth Claim - damages, and exemplary damages based on state common

law public policy wrongful discharge by Plaintiff Rogge against all Defendants. g. Seventh Claim - damages based on state common law breach of contract

for unpaid bonus by Plaintiff Forgacs against Eye Care Center. 3. On January 18, 2005, Defendants moved to dismiss: a. The Second Claim against the individual Defendants because individual

liability may not be imposed against corporate business owners and officers for unpaid wages under the CWCA. b. The Fourth and Fifth Claims against the individual Defendants because

corporate business owners and officers do not have individual liability for unpaid overtime or for retaliation under the FLSA; and c. The Sixth Claim because Plaintiff Rogge could not base a common law

public policy wrongful discharge claim on the FLSA since that Act has its own anti-retaliation provision. 4. In their Response to the motion to dismiss, Plaintiffs conceded: (a) they could not

seek to impose liability on the individual Defendants under the CWCA, so the Second Claim -6-

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should apply only to Eye Care Center; and (b) the Sixth Claim should be dismissed because Rogge could not bring a public policy wrongful discharge claim based on FLSA retaliation. 5. On behalf of Rogge, Plaintiffs' attorney opposed the rest of the motion to dismiss.

In Plaintiffs' response, Plaintiffs' attorney opposed dismissal of Rogge's two FLSA claims for unpaid overtime and retaliation as to the individual Defendants on grounds Defendants' motion was "hypertechnical" and not supported by the facts or law. He cited incorrectly only one case in support of that argument. He also made an improper request to amend the complaint which the Court denied on February 8, 2005. 6. On March 1, 2005, the Court entered its Order granting the Motion to Dismiss and

dismissing Plaintiffs' Second Claim, Plaintiff Rogge's Fifth Claim against the individual Defendants and Rogge's Sixth Claim against all Defendants. The Court observed that Plaintiffs' response was "of troublingly inexacting standards," but denied the request for attorney fees in the motion to dismiss stating: "I DENY Defendants; request for fees, but will revisit the issues of fee shifting and sanctions should the circumstances warrant." 7. It is time to revisit the March 1, 2005 Order because Plaintiffs' attorney and

Forgacs have persisted in stubbornly pursuing claims for which there is no factual or legal support. 8. On June 6, 2005, Eye Care Center and Defendant Benedict, the Plan

Administrator for Eye Care Center's Section 125 Flex-Spend Plan, moved for summary judgment on that part of the First Claim seeking damages, penalties and attorney fees for all Plaintiffs other than Rogge based on the alleged failure to give these Plaintiffs notice of their -7-

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right to continue participating in the 125 Plan after their terminations. The moving Defendants sought summary judgment under Colorado's one-year statute of limitations governing this ERISA claim, as explained by this Court in Adams v. Cyprus Amax Mineral Co., 44 F.Supp.2d 1126, 1140 (D.Colo. 1999). 9. Plaintiffs did not concede this motion. After obtaining two extensions of time, on

July 18, 2005, Plaintiffs' attorney filed his response opposing summary judgment. He argued that the four Plaintiffs' ERISA penalty claim was not time-barred because the "real" termination dates for these Plaintiffs were weeks or months after the termination dates they alleged in their own Complaint and had stipulated to in the Undisputed Facts section of Stipulated Scheduling Order. Forgacs submitted an affidavit arguing that her settlement agreement with Eye Care Center postponed her "real" termination date for the three months after her last day of work that Eye Care Center paid her severance. Plaintiffs' attorney did not provide any affidavit from the other three Plaintiffs. Instead, he submitted copies of the April 24, 2003 termination letter for Plaintiff Moreno and a June 11, 2003 COBRA notice for her health insurance as support for the "real" termination date argument. Defendants replied with copies of the unemployment applications or wage applications Plaintiffs had filed with agencies of the state government in which these Plaintiffs all accurately stated under penalty of perjury the same dates for their terminations as they had pled in the Complaint and stipulated to in the Scheduling Order. Their actual termination dates confirmed that their claims were time-barred. 10. On November 8, 2005, the Court entered its Order granting summary judgment on

findings that the assertion by Forgacs and the other Plaintiffs about their "real" termination dates -8-

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were not credible and were contradicted by Plaintiffs' own writings and other contemporaneous records. The Court ruled that no reasonable juror could conclude that any Plaintiff was terminated later than the date he or she received a termination letter, stopped working for Eye Care Center and started receiving severance and unemployment insurance. 11. In December 2005, after completing discovery, Defendants moved for summary

judgment on all of the Plaintiffs' remaining claims, except the Third Claim for defamation as applied to Defendants Benedict and Holms. Defendants later withdrew the summary judgment motion regarding that part of the First Claim seeking ERISA penalties based on alleged delays in providing 401k plan roll-over forms. The grounds for summary judgment are set out in the opening briefs filed in support of the summary judgment motions. 12. On December 21, 2005, under Rule 11(c)(1)(A), Defendants' attorney sent

Plaintiffs' counsel a draft of this Motion together with copies of many letters and emails he had been sent before urging Plaintiffs' counsel to advise his clients to dismiss their frivolous claims. Obviously, Plaintiffs' counsel did not take that advice. A copy of the December 21, 2005 draft motion and its exhibits is attached as Exhibit A to this Motion. 13. On March 6, 2006, after Plaintiffs had moved for three extensions of time, they

finally responded to the summary judgment motions. Nearly two years after filing this action, Plaintiffs' response conceded there was no support for the following claims which should be dismissed: Plaintiffs' claim for damages and punitive damages based on late 401k deposits; Forgacs' and three other Plaintiffs' claims for unpaid wages under the CWCA; Rogge's FLSA unpaid overtime and retaliation claims; and Forgacs' breach of contract claim. -9-

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14.

Under the CWCA's mandatory attorney fee provision, §8-4-110(1), C.R.S.,

Forgacs and the three other Plaintiffs who finally agreed to dismiss their wage claims are liable for Eye Care Center's reasonable attorney fees and costs incurred in its successful defense against those claims. The settlements with the three other Plaintiffs resolved their liability. 15. Forgacs is also contractually liable to Eye Care Center for the attorney fee

incurred to defend against the claims she finally conceded. The Settlement Agreement Forgacs agreed to with Eye Care Center in February 2003, Exhibit A-1 to Dec. 9, 2005 Brief in Support of Sum. Judg. as to Colorado Wage Claim Act, etc., states at p. 5, ¶ 6.d.: "In addition to any relief, order or award that enters, the prevailing party in any arbitration or litigation between us, as determined by the arbitrator or court, will be awarded reasonable attorneys' fees, expert witness fees and costs." 16. For the claims Plaintiffs were still pursuing, Plaintiffs' counsel cited a total of two

cases in his nine-page response. 17. On March 20, 2006, Defendants filed their reply in support of summary judgment

on the claims Plaintiffs refused to dismiss. Plaintiffs' response was so confusing, the reply used a table to decipher which claims had been conceded and which were still at issue. 18. On April 11, 2006, the Court entered its Order requiring Plaintiffs to clarify their

response to identify clearly the claims each of the Plaintiffs was still pursuing "and the specific evidence on which that Plaintiff relies." 19. In the supplemental response, filed on April 24, 2006, Plaintiffs' counsel

confirmed that all Plaintiffs (other than Moreno) had all dropped their wage claims and that there -10-

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were no grounds for any Plaintiff to seek an accounting based on late payments into the 401k accounts. Plaintiffs still refused, however, to dismiss: the ERISA claim for all Plaintiffs based on alleged delays in providing 401k rollover forms; Moreno's wage claim; Rogge's ERISA claim for failure to give her COBRA notice regarding the Flex-Spend account; and the defamation claim for Forgacs, Link and Jones. Plaintiffs also disputed that the correct amounts had been paid into their 401k accounts, without identifying any error. Despite the clear wording of the Court's April 11 Order, Plaintiffs' counsel did not provide any affidavit, record or other evidence supporting the claims Plaintiffs still wanted to pursue. 20. On May 22, 2006, the parties had a settlement conference with Magistrate Judge

Hegarty. As the result of his efforts and concessions by both sides, Defendants and all Plaintiffs other than Forgacs and Rogge (who did not attend) agreed to settlements.1 The parties were to promptly finalize settlement agreements and dismissal motions and to submit them to the Court. 21. On May 25, 2006, Defendants' counsel sent Mr. Price proposed settlement

agreements for Moreno, Link and Jones, with a Stipulated Motion to Dismiss their claims and a proposed Order. With the Magistrate Judge's help, the parties negotiated a settlement with Rogge, and Defendants' counsel sent Mr. Price a proposed settlement agreement for Rogge and revised motion to dismiss and proposed order on May 30.

The Magistrate Judge's April 28, 2006 Minute Order required all parties and counsel to attend. Mr. Price and his clients initially failed to appear for the settlement conference on grounds that Rogge was sick. The Magistrate Judge was compelled to get Mr. Price on the phone and order him to come to court with his other clients for the conference. -11-

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22.

Mr. Price failed to respond to the proposed settlement agreements and motion to

dismiss. The Magistrate Judge was forced to call him, then notified the undersigned to inform Mr. Price that Defendants were ready to finalize the settlements. On July 7, 2006, Defendants' counsel sent Mr. Price copies of settlement agreements signed by all of the Defendants and copies of the checks that were ready for the Settling Plaintiffs. 23. On July 13, 2006, after further suggestions from the Magistrate Judge,

Defendants' counsel sent Mr. Price a very simple proposed settlement agreement, as a model for the four Settling Plaintiffs. Mr. Price did not respond. 24. On July 18, 2006, the Court entered its Order requiring the parties to file a status

report by August 1, and the Magistrate Judge entered his Minute Order requiring settlement documents to be filed by August 1. 25. As of July 27, Mr. Price had done nothing; so Defendants' counsel sent him

copies of the revised, simple settlement agreements signed by all Defendants and of the checks for each of the Settling Plaintiffs. 26. In the afternoon of August 1, Mr. Price finally left a voice mail message and, at

4:00 pm, sent the undersigned a proposed motion to dismiss and status report. Neither of these was accurate; so counsel worked together and by 5:45 pm had prepared the status report that was filed with the Court. The status report stated, in part: "The parties, however, do not agree about whether their settlement included a release of Defendants' claims for attorney fees and costs against Plaintiffs' attorney under Rule 11, 28 U.S.C. § 1927 and C.R.S. § 13-17-102."

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27.

August 1 was the last date on which Mr. Price did anything to contact

Defendants' counsel, and he has not returned a single signed settlement agreement or obtained the dismissal of any of the Settling Plaintiffs. 28. On August 10, 2006, the Court granted summary judgment against Forgacs'

defamation claim against the three individual Defendants who had initially moved for summary judgment on that claim and also for Defendant Holms. In addition to ruling Defendants who only nodded could not be liable for defamation, the Court's Order found the affidavit of a coworker Forgacs submitted was "utterly insufficient to establish a cause of action for defamation." Further, Defendant Holms' statements in a staff meeting were privileged. 29. On September 28, 2006, the Magistrate Judge was compelled to enter his

Recommendation for Dismissal of all claims by all the Plaintiffs, other than Forgacs. That order speaks for itself. 30. As demonstrated by the letters and emails attached to the December 21, 2005 draft

of this motion, since the Plaintiffs' depositions in October 2005, the undersigned has repeatedly discussed with Mr. Price the fact that his clients faced attorney fee exposure due to their groundless unpaid wages claims and Defendants would pursue attorney fees and costs against him if his clients did not drop the claims their testimony had confirmed were groundless. Mr. Price has repeatedly acknowledged that he has a conflict of interest due to the real possibility a motion for sanctions would mean he would have to balance his self-interest in avoiding sanctions with his overriding obligation to give his clients realistic counsel about settlement and the risks they were facing under Rule 11, §8-4-110(1), Rule 11 and §13-17-102, C.R.S. Those discussions -13-

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gained particular focus in December 2005 when I sent Mr. Price a copy of the initial draft of this Motion. The undersigned believes Mr. Price's failure to meet his obligations to his clients, the Court and Defendants to finalize the settlements is the direct result of his inability to deal with his conflict of interest and hope that he may somehow escape the consequences of his actions and inaction by perpetually postponing the inevitable. The undersigned has no explanation for the many other ways before the settlement issues arose that Mr. Price repeatedly failed to meet his obligations under Rule 11, §13-17-102 and 28 U.S.C. §1927. Argument As to the settling Plaintiffs, the record in this case establishes that Plaintiffs' attorney should be sanctioned for filing groundless claims on their behalf that the Court dismissed and for persisting with claims on which summary judgment entered. Plaintiffs' attorney should also be sanctioned for his role in expanding this case by persisting with the many groundless claims the settling Plaintiffs refused to dismiss. Finally Mr. Price should be sanctioned for expanding this case by failing to finalize the settlements with those Plaintiffs reached in May 2006. Forgacs and Mr. Price should be sanctioned for filing her frivolous claims and for persisting with them despite: (1) Forgacs' admissions demonstrating they never investigated the factual support for her claims; (2) the settlement agreement she signed releasing her claims; and (3) controlling law which barred her defamation claim against four Defendants that the Court was ultimately compelled to dismiss on summary judgment.

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A.

Sanctions are Appropriate for Plaintiffs' ERISA Claim based on the FlexSpend Plan and for their Opposition to the June 6 Summary Judgment Motion.

Sanctions should enter against Forgacs and Plaintiffs' attorney for bringing the claim for damages, ERISA penalties and attorney fees based on the Flex-Spend Plan. The true dates of Plaintiffs' terminations established that this claim was time-barred when it was filed. Forgacs and Plaintiffs' attorney unreasonably and vexatiously expanded this action by making the utterly false assertion that Forgacs and the three other Plaintiffs facing summary judgment were not really terminated on the last dates they worked for Eye Care Center, that they relied on in seeking unemployment or making wage complaints to state agencies, and that they pled in the Complaint and stipulated to in the Scheduling Order. The moving target Forgacs and Mr. Price created by the deceitful argument about the "real" termination dates is exactly the type of action the court found deserving of sanctions in Shackelford v. Courtesy Ford, Inc., 96 F.Supp.2d 1140, 1146 (D.Colo. 2000) (awarding sanctions against attorney for former employee/plaintiff under Rule 11: "As a result of plaintiff's pleadings, defendant was obligated to defend against `moving target' claims, sort through obfuscated issues and research and respond to the different claims plaintiff asserted to try to avoid summary judgment."). B. Sanctions should enter based on Seven of the other Claims

Forgacs and Plaintiffs' attorney should be sanctioned for filing and then for persisting with the following seven claims Plaintiffs' admissions conclusively demonstrated never had merit and that were contradicted by controlling law.

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1.

Plaintiff Forgacs ­.Second and Seventh Claims. Forgacs' second and seventh

claims for unpaid wages and breach of contract aver that Eye Care Center failed to pay her "bonuses." These claims were addressed by the December 9, 2005 summary judgment motion and were not dropped until March 2006, after Plaintiffs moved for three extensions of time and then finally responded. Plaintiffs' response conceded Forgacs' wage claim should be dismissed but opposed any award of attorney fees. The response failed to make any argument in support of that opposition. The response did not mention Forgacs' breach of contract claim. Thus, the response did not provide any reason why Forgacs is not required to pay Defendants' attorney fees and costs incurred defending against her unpaid wages claim under the mandatory attorney fee provisions of the CWCA and against the wages and breach of contract claim under the mandatory attorney fee clause of the settlement agreement between Eye Care Center and Forgacs. Forgacs should not be solely liable for the fees and costs. She and her counsel should be held jointly liable for the fees and costs Defendants incurred defending against her claims under Rule 11, §1927 and §13-1-102, C.R.S. because her breach of contract claim and unpaid wages claim were groundless and frivolous and were filed without any reasonable inquiry. In her deposition, Forgacs testified that the wage and breach of contract claims were based on the incentive bonus part of her pay. She admitted Eye Care Center had paid her $511.19 as the incentive bonus for February 2003 and sent her a letter with financial records supporting the bonus calculation on April 24, 2003. Forgacs cashed the bonus check. At her deposition, she was unable to identify a single error that was made in calculating her bonus. She also admitted -16-

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that she had received all the financial records Eye Care Center used to calculate her bonus but had never used those records to determine what she should have been paid. In fact, so far as Forgacs knew, it was possible that Eye Care Center had paid her a larger bonus than she had actually earned. Fogacs Dep. Trans. at 69:14-70: 5; 87:4-21, Ex. C. to Brief in Support of Motion for Summary Judgment as to Colorado Wage Claim Act Claims, FLSA Claims and Breach of Contract Claims. Forgacs' admission request responses admit that she sued Eye Care Center for unpaid wages and breach of contract without doing any calculation to determine whether those claims were correct. Admis. Resp. ¶ 25. The other major problem with Forgacs' claims based on the February 2003 bonus was her complete release of Eye Care Center from any obligation arising before March 14, 2003. Settlement Agreement § II.3.c. In the Settlement Agreement, Forgacs released Eye Care Center from any claim arising before March 14 and agreed the only payment she would receive after March 14 would be three months' base salary. Thus, the Settlement Agreement contradicted Forgacs' claims that Eye Care Center breached her contract by failing to pay her incentive bonus for February 2003 and that Eye Care Center was also liable to her for unpaid wages based on the February bonus. Bennett v. Coors Brewing Co., 189 F.3d 1221, 1232 (10th Cir. 1999) (affirming summary judgment dismissing employees' state law claims based on releases in settlement agreement); Pierce v. St. Vrain Valley School Dist. RE-1J, 981 P.2d 600, 607 (Colo. 1999) (enforcing settlement agreement as written).

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In the 1½ years between filing the Complaint and her October 6, 2005 deposition, Forgacs and her counsel persisted with the unpaid bonus claims and continued to ignore their obligation to do something to see if she had really been shorted on her pay. Because she never calculated what she thought the bonus should have been, Forgacs did not disclose any damages for the Seventh Claim or her part of the Second Claim, either in Plaintiffs' initial disclosures or in the Stipulated Scheduling Order. Plaintiffs' Rule 26(a)(i) Initial Disclosures § C.h. Forgacs' continued failure to do her own bonus calculation is particularly disturbing because she was the former Practice Administrator of Eye Care Center. In that role, she created the bonus program, and she was the one who then calculated her own bonus each month for several years. Defendants have no idea why Plaintiffs' attorney never went through the bonus calculation issue with Forgacs to see if there was any factual support for her claims, as Rule 11 and §13-17-102 require, or to calculate her damages, as Rule 26 requires. Defendants also have no idea why, as a matter of legal analysis, Mr. Price asserted that the Settlement Agreement created claims for wages and breach of contract for Forgacs, rather than releasing those and all other claims. If Mr. Price had done even a sketchy factual investigation, he would have asked Forgacs to tell him why she was owed anything more for the February bonus and to show him the results of her own calculation. If he did not do that in the rush to file the Complaint, it certainly should have occurred to him in the following months when he helped Plaintiffs file their initial disclosures, and later when he prepared Forgacs' damages statement in the Stipulated Scheduling Order, helped her prepare for her deposition, and then heard her deposition testimony. -18-

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In addition to Mr. Price's Rule 11 obligations, the fact that he had counseled Forgacs to assert a claim under Colorado Wage Claim Act made it especially important for him to rigorously review the facts with Forgacs before filing that claim for her because that Act has a mandatory award of attorney fee provision, C.R.S. § 8-4-110(1). The Settlement Agreement's mandatory attorney fees and costs provision is another factor Forgacs and Mr. Price should have considered before asserting the breach of contract claim against Eye Care Center. Finally, Mr. Price ignored Defendants' attorneys' repeated requests to jettison Forgacs' unpaid bonus claims. See Exhibit A to this Brief at (c) p. 3-4, pp. 8, 12, 14. Therefore, Forgacs and Mr. Price should be sanctioned under Rule 11, 28 U.S.C. §1927 and C.R.S. §13-17-102. There was never any factual support for the breach of contract and unpaid wages claims, and, after filing the complaint, Forgacs and Mr. Price completely failed in their obligation to do anything to see whether those two claims had any basis in fact. 2. Third Claim - Defamation against Meyers, Tilden and Olijnyk. Forgacs and

Mr. Price should also be sanctioned for bringing and persisting with the defamation claim Forgacs, Link and Jones filed against all of the individual Defendants. No Plaintiff had any evidence, even hearsay from a third party, that Defendants Joel Meyers, M.D., Morris Tilden, M.D. or Irene Olijnyk, M.D. ever said or otherwise communicated anything that defamed Forgacs, Jones or Link. The relevant deposition testimony of Plaintiffs Rogge, Link, Moreno, Jones and Forgacs is in Exhibits A to E attached to the Brief in Support of Motion for Summary Judgment as to Plaintiffs' Defamation Claim. See Ex. A. Rogge Dep. at 117: 8 ­ 125:4; Ex. B.

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Link Dep. at 68:10 ­ 80:1; Ex. C. Moreno Dep. at 81:12 ­ 94:4; Ex. D. Jones Dep. at 146: 4 ­ 159: 3; Ex. E. Forgacs Dep. at 93: 5 ­ 25; 105: 4 ­ 108: 20. At most, Plaintiffs alleged that these Defendants silently stood by while the two other individual Defendants committed defamation. This Court's August 10, 2006 Order confirms that simply being silent does not create liability for defamation. Wayment v. Clear Channel Broadcasting, 116 P.3d 271, 287 (Utah 2005); Wilson v. Meyer, 126 P.3d 276 (Colo.App. 2005), certiorari denied, 2006 WL 381641 (Jan. 17, 2006). Immediately after Plaintiffs' depositions, Defendants' attorney alerted Plaintiffs' attorney to Wilson and asked Mr. Price to counsel his clients about the reasons why they must dismiss the defamation claim against Meyers, Tilden and Olijnyk. See Exhibit A to this Brief at p. 14. Forgacs, Jones and Link refused to dismiss their defamation claim against those Defendants, compelling them to seek summary judgment. These Plaintiffs and their attorney opposed summary judgment on the defamation claim. In his response, Plaintiffs' attorney cited only Wilson and Wayment, both of which support Defendants, not Plaintiffs. Thus, there are grounds to sanction Forgacs and Mr. Price under Rule 11 and C.R.S. § 13-17-102 for initially filing the defamation claim against the three silent Defendants. Forgacs and Mr. Price should also be sanctioned under 28 U.S.C. § 1927 and C.R.S. § 13-17-102 for refusing to drop the defamation claim after discovery demonstrated no Plaintiff had heard anything from anyone about negative statement Defendants Meyers, Tilden or Olijnyk ever said about Forgacs, Link or Jones.

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In addition, as the Practice Administrator, Forgacs also had direct knowledge that Olijnyk had resigned as a shareholder and was only an employee long before Defendants Holms and Benedict allegedly defamed Forgacs. Thus, Forgacs and her attorney knew or should have known that the "silent" communication argument Plaintiff's attorney made in an apparent attempt to impose shareholder liability for communications by corporate officers could never apply to Olijnyk. 3. First Claim - Damages and Penalty for Breach of Fiduciary Duty under

ERISA for Late 401k Deposits. All Plaintiffs claimed they suffered an identical $13,500 in compensatory damages and should also be awarded penalties and attorney fees based on late deposits into their 401k accounts. Section C, Plaintiffs' Rule 26(a)(i) Initial Disclosures; Stipulated Scheduling and Discovery Order, § 4.a. Computation of Damages. Eye Care Center and the Plan Administrator have always admitted they were late in making certain deposits into Plaintiffs' 401k accounts. Plaintiffs had no claim for damages or penalties based on the late deposits because those Defendants fully complied with 29 CFR § 2510.3-102. This governing ERISA regulation states the exclusive remedy when an employer makes late contribution deposits into employees' 401k accounts. Livers v. Wu, 6 F.Supp.2d 921, 930 (N.D.Ill. 1998). Therefore, there were no grounds for Plaintiffs to seek damages, penalties or fees based on this part of their ERISA claim, and it should never have been made. Then, having been asserted, this claim should have been dropped after Defendants provided copies of records Plaintiffs had received years before (the quarterly account reports sent to them

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showing regular deposits, the late deposits and the additional deposits of the regulatory penalties). From the start of this case, Defendants' attorney has asked Plaintiffs' attorney to provide any authority for seeking damages under ERISA, which Mr. Price never provided. See Exhibit A to this Brief at (d), p. 4; pp. 7, 9-11. The legal bar to this part of the ERISA claim is something a reasonable attorney should have known before filing claims with this Court or, at least, should have acknowledged and responded to after applicable law was cited to him. Plaintiffs' refusal to dismiss this part of their ERISA claim lead Defendants to move for summary judgment. Plaintiffs still did not drop this claim. After moving for three extensions of time, Plaintiffs' attorney filed a response conceding Plaintiffs could not seek damages but denying the penalty had been properly calculated. He failed to state what the penalty should have been or any way in which it was improperly calculated for any Plaintiff. Finally, after Defendants filed their reply and the Court ordered Plaintiffs to clarify their response, Mr. Price agreed he had no grounds to dispute the 401k payments, and Plaintiffs agreed to dismiss this part of the ERISA claim. Therefore, sanctions should enter against Forgacs and Mr. Price under Rule 11 and C.R.S. §13-17-102 for filing the damages claim and under C.R.S. §13-17-102 for persisting in seeking damages and penalties based on late deposits into the 401k accounts. This part of the ERISA claim was frivolous and groundless due to a complete lack of factual or legal support when this case was filed, and was still groundless in the nearly two years this case was pending before this part of the claims was finally conceded. Plaintiffs' attorney needlessly expanded the -22-

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scope of this case and should be sanctioned under 28 U.S.C. §1927 based on his part in refusing to drop this claim until after the Court ordered Plaintiffs to clarify their response opposing summary judgment. 4. Plaintiffs' Attorney should be Sanctioned based on Rogge's Second, Fourth

and Fifth Claims. Rogge admitted in her October 2005 deposition and discovery responses that Eye Care Center paid all of her accrued vacation and all of the overtime she worked and that she did not complain about not receiving overtime pay before her termination. Admis. Resp. ¶¶ 10, 11, 12; Rogge Dep. 60: 18 ­ 63:4; 81: 4 ­ 89: 14 and Depo. Exh.s 20, p. 2-4; 22; 27, Exhibits G and H to Brief in Support of Motion for Summary Judgment as to Colorado Wage Claim Act Claims, FLSA Claims and Breach of Contract Claims. As a matter of law, the facts Rogge admitted meant she never had claims for unpaid wages or unpaid overtime. While she worked for Eye Care Center, Rogge submitted time sheets and received pay and pay records that showed Eye Care Center paid her for every hour of overtime she claimed she had worked. Therefore, Rogge knew and had reason to know before filing her Complaint that there was no unpaid overtime about which she could sue Eye Care Center and the individual Defendants. While Rogge worked for Eye Care Center, she received the personnel policies Forgacs implemented and that Plaintiff Jones administered stating Eye Care Center's vacation policies. On her last employment anniversary date in February 2003, Rogge received ten days or 80 hours of vacation, and she then took seven days or 56 hours of vacation. On her termination, she received pay for 28 hours of vacation, which meant Eye Care Center had actually paid her for a -23-

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total 84 hours in 2003, four more hours than she had earned. Rogge received her pay and also received pay stubs. Thus, she knew and had reason to know before filing her Complaint that Eye Care Center had paid all of the vacation pay she had earned. If Plaintiffs' attorney had done even a rudimentary review of the facts on which Rogge based her four wage-related claims, he would have known she had no facts supporting the claims for unpaid overtime or vacation. Her attorney also should have known applicable law meant Rogge could not assert a FLSA retaliation claim because she had never complained. 29 U.S.C. §215(a)(3); McKenzie v. Renberg's Inc., 94 F.3d 1478, 1487 (10th Cir. 1996). In addition to the caution he should have exercised in light of Rule 11, the Colorado Wage Claim Act's mandatory reciprocal attorney fee provision made it especially important for Mr. Price to rigorously review the facts with his clients before filing a CWCA claim for them, which he obviously failed to do with Rogge. Rogge may have forgotten she was fully paid between the summer of 2003 (when she claimed and was paid overtime, and took vacation and was paid for all remaining earned vacation time), and June 2004, when the Complaint was filed. Rogge was deposed on October 5, 2005. In her deposition, Rogge reviewed copies of her time sheets and pay records for June and August 2003 (when she claimed she was not paid overtime) and admitted Eye Care Center paid all of the overtime she worked. She also reviewed her vacation and pay records and admitted she received ten days' vacation on her February 2003 anniversary date, took seven days vacation, and that Eye Care Center paid her more than the remaining 3 days she was owed.

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Thus, even if Plaintiffs' attorney thought Rogge had wage-related claims when this case was filed, he clearly knew she had no claims after her deposition. That knowledge is demonstrated by Rogge's admission request responses completed on November 29, 2005 in which she admits she received all the overtime she claimed and that she had never complained about unpaid overtime. Defendants' attorney repeatedly pointed out to Mr. Price the problems with Rogge's wage claims. See Exhibit A to this Brief at (c), pp. 3-4, pp. 7-8, 12-14. Yet, despite certain knowledge and binding admissions that there was no factual or legal support for her wage-related claims, Plaintiffs' attorney did nothing to cause his client to voluntarily withdraw those claims, forcing Eye Care Center to seek summary judgment. Therefore, Mr. Price should be sanctioned under Rule 11, 28 U.S.C. §1927 and C.R.S. §13-17-102 for his role in bringing and persisting with Rogge's wage-related claims. C. Plaintiffs' Counsel should be Sanctioned based on his Failure to Finalize Settlements. The record and orders from the Court and Magistrate Judge demonstrate the number of times since the May settlement conference Mr. Price has been ordered to finalize the settlements and dismissals. He was repeatedly provided with agreements and pleadings that would permit him to do just that. He has only briefly surfaced, at 4:00 pm on the Court's August 1 deadline, and has not otherwise been heard from. His repeated and continuing refusal to finalize the settlements so four of his clients can be paid and dismissed from this case has needlessly

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prolonged this litigation, forced everyone else to waste time, and compelled Defendants to incur still more legal expenses. Conclusion Plaintiff Forgacs and Plaintiffs' attorney waited more than one year after the Plaintiffs' terminations to file a sloppy, "throw it against the wall and see if anything sticks," complaint. That complaint asserted three claims that were so defective they could not survive a Rule 12(b)(6) motion. The complaint's truthful allegations about the Plaintiffs' actual discharge dates confirmed that the failure to give COBRA notice claim, by far the largest dollar claim, was time-barred for four of the five Plaintiffs. Rather than concede that problem, the four Plaintiffs (including Forgacs) and their attorney opposed dismissal with contrived and obviously false assertions about their "real" termination dates. Thus, sanctions are warranted against Forgacs and Plaintiffs' attorney for the three claims asserted in the Complaint that were not claims at all and for the fourth claim that stated a cognizable cause of action but that was clearly time-barred and that they opposed with manufactured "facts." Plaintiffs' claim for damages, penalties and attorney fees based on ERISA breach of fiduciary duty for late deposits into the 401k accounts has always been barred by applicable law. Forgacs and the other Plaintiffs had 401k account reports since 2003 that showed the late deposits had been made and that they had also received the statutory penalties. Plaintiffs' attorney never responded to repeated requests during the first two years of the case to drop the claims based on the late deposits. Forgacs and Plaintiffs' attorney waited until the response opposing the summary judgment finally to concede that Plaintiffs had been paid all they were -26-

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owed and had no grounds to seek damages or any penalty other than the penalties the Plan Administrators had paid in 2003. The defamation claim by Forgacs, Link and Jones against the three silent individual Defendants was contrary to law and completely without factual support, yet Forgacs and Mr. Price filed and persisted with that claim. Rogge's and Forgacs' deposition testimony and admission responses demonstrated beyond dispute that they never had factual support for the five wage-related claims Plaintiffs' counsel filed for them. The record further demonstrates that neither of these two Plaintiffs or Mr. Price reviewed the facts with any reasonable care before bringing the CWCA unpaid wages, FLSA unpaid overtime, FLSA retaliation, public policy wrongful discharge, or breach of contract claims. They also did not review any facts in the two years that followed. Even a cursory review of the facts and applicable law would have given a reasonable attorney pause before filing these claims. No reasonable attorney would have n persisted with the claims after hearing his clients' admissions. Forgacs also knew she would be liable for Eye Care Center's attorney fees if she brought litigation based on claims she had released. For all these reasons, Defendants respectfully request the Court to grant this Motion and to enter its Order entering sanctions as follows: A. Under Rule 11 and C.R.S. §13-17-102, against Plaintiff Forgacs and Mr. Price,

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Center's Section 125 Flex-Spend Plan. Mr. Price and Forgacs should also be sanctioned under 28 U.S.C. §1927 and §13-17-102 based their expansion of this case by opposing summary judgment with the contrived and false assertions about Forgacs' and the other Plaintiffs' "real" termination dates. B. Under Rule 11, C.R.S. §§ 8-4-110(1) and 13-17-102, and the attorney fee

provision of the Settlement Agreement, against Plaintiff Forgacs: the attorney fees and costs Eye Care Center reasonably incurred defending against Forgacs' claims for unpaid wages under the Colorado Wage Claim Act and for breach of contract. Under Rule 11, §13-17-102 and 28 U.S.C. §1927, Mr. Price should be sanctioned and should be found jointly and severally liable with Forgacs for Defendants' attorney fees and costs, based on his role in bringing these frivolous claims for Forgacs and then expanding this case by opposing summary judgment without any factual or legal support. C. Under Rule 11 and C.R.S. §13-17-102, against Plaintiff Forgacs and Mr. Price,

jointly and severally: the attorney fees and costs Defendants Meyers, Tilden, Olijnyk and Holms reasonably incurred defending against the defamation claim by Forgacs, Link and Jones. Mr. Price should also be sanctioned under 28 U.S.C. §1927 based on his role in expanding this case by opposing summary judgment as to this claim and these Defendants rather than acknowledging Plaintiffs had no facts to support the claim and that the claim against these Defendants is barred by applicable law. D. Under Rule 11 and C.R.S. §13-17-102, against Plaintiff Forgacs and Mr. Price,

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reasonably incurred defending against the claims for damages, penalties and attorney fees based on the late deposits into Plaintiffs' 401k accounts. Mr. Price should also be sanctioned under 28 U.S.C. §1927 based on his role in expanding this case by initially opposing summary judgment as to that part of the ERISA claim rather than acknowledging it was always barred by applicable law. E. Under Rule 11 and C.R.S. §13-17-102, against Mr. Price: the attorney fees and

costs Eye Care Center reasonably incurred defending against Plaintiff Rogge's claim for unpaid wages under the Colorado Wage Claim Act, and that all Defendants reasonably incurred defending against Rogge's claims for unpaid overtime under the FLSA and for retaliation under the FLSA. Mr. Price should also be sanctioned under 28 U.S.C. §1927 based on his role in expanding this case by failing to review the facts after filing the complaint and by failing to have Rogge drop these claims after she admitted she had been fully paid and had never complained. F. Under 28 U.S.C. §1927, Mr. Price should be sanctioned based on his role in

expanding this case by prolonging this litigation through his inexcusable failure to complete settlements and file motions to dismiss for the Settling Plaintiffs, despite this Court's Order and the repeated efforts of the Magistrate Judge to have Mr. Price take this simple action to benefit his clients and to spare the Court and Defendants the expense and wasted time that have been the direct result of his continued procrastination. G. Defendants also request the Court to find Plaintiff Forgacs and Mr. Price jointly

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Dated: October 3, 2006. Respectfully submitted,

By:. .s/ John R. Paddock, Jr. . . . . . . . . . . . John R. Paddock, Jr. Attorney for Defendant Eye Care Center of Northern Colorado, P.C. and Joel Meyers, M.D. CERTIFICATE OF SERVICE I certify that on this 3rd day of October, 2006, a copy of the foregoing Defendants' Motion for Sanctions, with Authorities was served by ECF filing on the following: George Price, Esq. 1115 Grant Street, Suite 106 Denver, CO 80203 Fax: 303-484-2421 s/ Mary E. McNichols __________________________________

00302963.WPD; October 3, 2006 (5:20pm)

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