Court Opinion: 10th Circuit Court of Appeals Opinion for June 23

The 10th Circuit Court of Appeals

Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.

Matios v. City of Loveland

Eyoel-Dawit Matios, proceeding pro se, appealed from the district court’s order imposing monetary sanctions under its inherent powers. Exercising jurisdiction, the 10th Circuit Court of Appeals affirmed. 

After receiving a speeding ticket, Matios unilaterally obtained a purported $300 million arbitration award against the city of Loveland from Brett “Eeon” Jones of Sitcomm Arbitration Association. He then filed a petition in district court to confirm the award. The city filed a motion to vacate the award and dismiss the action, which the district court referred to a magistrate judge for a recommendation.

In addressing the city’s motion, the magistrate judge stated, “it is clear on the face of the materials submitted by Mr. Matios that there was no valid agreement between him and the City,” and “[t]he City never agreed to arbitrate anything.” The judge recommended the district court deny the petition to confirm and grant the city’s motion to vacate the award. He further said that “Mr. Matios’ instant attempt to enforce in federal court this non-existent arbitration ‘contract’ and the accompanying patently ridiculous $300 million arbitration award is fraudulent, an undue imposition on the City, and an extreme waste of judicial resources.” Noting the city’s motion to dismiss also requested an award of attorney fees, he stated “Mr. Matios’ entire course of conduct in this case demonstrates objective bad faith.” But he recognized the city had to file a separate sanctions motion before the court could award fees.

The city then moved for an award of attorney fees under the court’s inherent powers. The district court referred that non-dispositive motion to the magistrate judge for decision. While the sanctions motion was pending before the magistrate judge, the district court accepted the recommendation to deny the petition and vacate the arbitration award, finding the city never agreed to arbitrate. Its dismissal order didn’t discuss fees. Matios appealed. 

After Matios filed his notice of appeal, the magistrate judge granted the motion for sanctions, stating he had “already determined that [] Mr. Matios’ prosecution of this case was frivolous, without any basis in fact, and conducted in bad faith.”

“Though Mr. Matios’ procurement of the fraudulent arbitration award necessarily occurred before the litigation, his attempt to have this Court confirm the fraudulent arbitration award is itself an abuse of the litigation process that merits the imposition of sanctions,” the judge said. He then ordered an award of $11,764.50 to the city. Matios timely objected. The district court upheld the sanctions order and rejected other pending motions.

In the meantime, in Matios’s appeal from the dismissal order, the 10th Circuit held the district court had no subject matter jurisdiction to entertain the petition to confirm and directed it to dismiss for lack of jurisdiction. On remand, following the 10th Circuit’s directive, the district court vacated its prior order and dismissed the petition without prejudice.

Matios appealed the district court’s post-judgment order imposing sanctions. The 10th Circuit construed his filings liberally.  The 10th Circuit noted it is well-established that “a court may assess attorney’s fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons”  Chambers v. NASCO, Inc. but “[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion.” 

The 10th Circuit reviewed an inherent-powers sanction for abuse of discretion. “A district court abuses its discretion when it (1) fails to exercise meaningful discretion, such as acting arbitrarily or not at all, (2) commits an error of law, such as applying an incorrect legal standard or misapplying the correct legal standard, or (3) relies on clearly erroneous factual findings,” Farmer v. Banco Popular of N. Am. 

According to the 10th Circuit, Matios incorrectly stated the district court lost jurisdiction to consider the attorney fees motion while Matios I was pending. The 10th Circuit added he also incorrectly stated that arbitration matters are not subject to the Federal Rules of Civil Procedure. The civil rules applied in arbitration cases “except as [United States Code Title 9] provide[s] other procedures,” according to Federal Rules of Civil Procedure. Matios hasn’t identified any such “other procedures” that would apply, according to the 10th Circuit

Matios’s arguments regarding the magistrate judge’s participation in the sanctions matter similarly were meritless, according to the 10th Circuit. He also asserted the district court made no findings that he engaged in bad faith or fraud, and he “emphatically denies that his actions in pursuing confirmation of his arbitration award constituted fraud or bad faith.” But the magistrate judge had made ample findings of bad faith and fraud to support an inherent-powers sanction, the 10th Circuit explained, and the district court wasn’t required to make its own findings. It instead properly reviewed the magistrate judge’s findings for clear error, the 10th Circuit noted.

Contrary to Matios’s contention that the court’s sanction authority didn’t extend to prelitigation conduct, the 10th Circuit allowed inherent-powers sanctions where prelitigation misconduct influenced or extended into the court proceedings. The award, which was tailored to the city’s costs for being hauled into federal court, was compensatory rather than punitive, the 10th Circuit said.

Finally, Matios denounced various district court and appellate orders as fraudulent. According to the opinion, his unsupported, speculative accusations were insufficient to undermine those orders. The 10th Circuited affirmed the district court’s order imposing sanctions. They granted Matios’s motion to supplement the record on appeal and directed the clerk to compile in a supplemental record on appeal the requested documents that weren’t already included in the record on appeal.

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