Lasalle National Bank, as Trustee under Pooling & Servicing Agreement dated as of… v. FIRST CONNECTICUT HOLDING GROUP, L.L.C. XXIII, A New Jersey Limited Liability Company

PRECEDENTIAL
Filed April 24, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-2783
LASALLE NATIONAL BANK, as Trustee under Pooling &
Servicing Agreement dated as of May 1, 1998, Mortgage
Pass Through Certificates, Series 1998-CI
v.
FIRST CONNECTICUT HOLDING GROUP, L.L.C. XXIII, A
New Jersey Limited Liability Company; JAMES J. LICATA;
HAMILTON PARK HEALTH CARE CENTER, LTD., A New
Jersey Corporation; PUBLIC SERVICE ELECTRIC & GAS
COMPANY; RICHARD AUSTIN; MCCLINCH EQUIPMENT
CORP.; JAMES MITCHELL CONSTRUCTION
MANAGEMENT
*ZEICHNER ELLMAN & KRAUSE; STEPHEN F. ELLMAN,
Esq.; PHILIP S. ROSEN, in their own right and as
attorneys for Plaintiff LaSalle National Bank as Trustee
under Pooling & Service Agreement dated as of May 1,
1998 Pass through Certificates, Series 1998-CI,
Appellants
(*Pursuant to Rule 12(a), F.R.A.P.)
On Appeal From United States District Court
for the District of New Jersey
Civil No. 00-cv-003191
District Judge: Hon. Faith S. Hochberg
Argued November 8, 2001
BEFORE: MCKEE, RENDELL and STAPLETON,
Circuit Judges
(Filed April 24, 2002)
William T. Marshall, Jr.
Zeichner, Ellman & Krause
One Gateway Center
22nd Floor
Newark, NJ 07102
John J. Gibbons
Kevin McNulty (Argued)
Gibbons, Del Deo, Dolan,
Griffinger & Vecchione
A Professional Corporation
One Riverfront Plaza

-- 1 of 17 --

Newark, NJ 07102-5497
Attorney for Appellants
James A. Scarpone (Argued)
Hellring Lindeman Goldstein &
Siegal LLP
One Gateway Center
Newark, NJ 07102-5386
Attorney for Appellees
OPINION OF THE COURT
McKEE, Circuit Judge.
I. Introduction
The law firm of Zeichner Ellman & Krause LLP (the
"Zeichner firm"), and two of its attorneys, Philip S. Rosen
and Stephen F. Ellman, appeal sanctions the district court
imposed under 28 U.S.C. S 1927. The sanctions were
largely based upon the court’s conclusion that Rosen
deliberately misrepresented facts to the court’s chambers.
The court came to this conclusion by taking "judicial
notice" of the contents of two telephone conversations that
the court did not personally hear, and was not a party to.
For the reasons that follow, we will reverse.
2
II. Background
This dispute arose out of a mortgage foreclosure action.
LaSalle National Bank ("LaSalle") held a recorded first
mortgage on several multi-family apartment houses in East
Orange, New Jersey that were owned by First Connecticut
Holding Company ("First Connecticut"). First Connecticut
defaulted on its loan obligations to LaSalle around
November of 1999. LaSalle thereafter retained the Zeichner
firm to represent LaSalle’s interests in the mortgage
foreclosure action that LaSalle brought against First
Connecticut in the District Court of New Jersey.
The LaSalle mortgage was not the only encumbrance on
the East Orange properties. James Licata, a principal in
First Connecticut, had previously entered into a joint
venture with Peter Mocco, and First Connecticut and its
holdings were part of that joint venture agreement.
Hamilton Park Health Care Center Ltd. ("Hamilton Park")
had taken a second recorded mortgage on the East Orange
properties to secure advances it made to the Licata/Mocco
joint venture. In time, the relationship between Licata and
Mocco deteriorated to the point that Mocco sued Licata in
New Jersey Superior Court over a dispute related to their
joint venture. See Mocco v. Licata, Docket No. ESX-C-397-
99 (the "Mocco litigation").1 The law firm of Hellring
Lindeman Goldstein & Siegal, LLP (the "Hellring firm")
represented Hamilton Park and Mocco in that litigation, but
LaSalle was not a party to the Mocco litigation.

-- 2 of 17 --

Rosen and Ellman filed the aforementioned federal
foreclosure action in the United States District Court for
the District of New Jersey on behalf of LaSalle based upon
that court’s diversity jurisdiction. Both Rosen and Ellman
were aware that the Mocco litigation involving the status of
the East Orange properties was already pending in the New
Jersey Superior Court. On February 1, 2000, the New
Jersey Superior Court heard oral argument regarding the
appointment of a rent receiver for the East Orange
properties in the Mocco litigation. Both Rosen and Ellman
_________________________________________________________________
1. The Mocco litigation was pending in the New Jersey Superior Court as
one of five cases consolidated under Titan Management L.P., et al. v.
Licata, Docket No. ESX-C-280-98, at the time this appeal was argued.
3
attended that oral argument. However, that court refused to
appoint a receiver, and instead appointed a Special Fiscal
agent.
Rosen asserts that before he filed LaSalle’s Complaint in
the district court, he researched the issue of who should
receive notice of the foreclosure action. He claims that his
research included a treatise that indicated that only those
parties that would be adversely affected by the receivership
(such as an owner of the property, or parties having a
contractual relationship with the lender) were entitled to
notice. Rosen performed a title search and found that the
sole record owner of the property was First Connecticut.
Purportedly in reliance upon his research, Rosen therefore
concluded that First Connecticut was the only party
entitled to notice of the federal receivership application.
Accordingly, before filing the foreclosure action in district
court, Rosen contacted First Connecticut’s general counsel,
Pieter S. de Jong, and informed him that he (Rosen) was
about to file a complaint in foreclosure and a motion for
appointment of a rent receiver. De Jong told Rosen that
First Connecticut would not oppose the rent receivership as
long as New Vistas Corporation was recommended as the
receiver. Ellman then informed the Hellring firm that the
Zeichner firm would be filing the motion.
On June 29, 2000, Rosen filed both a Complaint in
Foreclosure and a Motion for Appointment of a rent receiver
along with an accompanying proposed Order.2 The
Complaint named First Connecticut, James Licata,
Hamilton Park, and other relevant parties as defendants.
However, the motion for a rent receivership and the
accompanying proposed Order named First Connecticut as
the sole defendant and provided for service only on First
Connecticut. The foreclosure action was assigned to the
Hon. Faith S. Hochberg. Thereafter, Rosen prepared an
Order to Show Cause why a rent receiver should not be
appointed directed at First Connecticut, and forwarded it to
the judge’s chambers.
_________________________________________________________________

-- 3 of 17 --

2. Rosen initially filed the Complaint on June 26, 2000, but that
Complaint was immediately dismissed because diversity of citizenship
was not established on the face of the complaint.
4
It is undisputed that Rosen subsequently had two
telephone conversations with the judge’s law clerk
pertaining to the Order to Show Cause. However, the
substance of those conversations is very much in dispute.
In the first conversation, Rosen claims that he told the law
clerk that "borrower’s counsel" did not object to a
receivership so long as New Vistas was appointed receiver.
Rosen claims that his use of the term "borrower’s counsel"
referred solely to First Connecticut as mortgagor. As we will
discuss below, the court concluded that Rosen told the law
clerk something quite different.
Rosen also submitted a certification from Stephen K.
Williams, Vice President of GMAC Commercial Mortgage
Corporation ("Williams Certification") in conjunction with
his motion for a rent receiver. The Williams Certification
was an 18 page document containing a single footnote.
That footnote informed the district court of the dispute
between Licata and Mocco relating to their joint venture,
and further informed the district court of the ongoing
litigation in New Jersey Superior Court. The footnote
mentioned that LaSalle was not a party to the dispute, and
that the state court had appointed a Special Fiscal agent.
Rosen then had a second telephone conversation with
Judge Hochberg’s law clerk the same afternoon as the first
one. According to Rosen, the law clerk told him that the
court wanted confirmation from "borrower’s counsel" that
the proposed receivership was unopposed. Rosen relayed
that request to de Jong, and de Jong thereafter supplied a
letter stating that First Connecticut (as borrower) did not
object to a rent receivership so long as New Vistas was
appointed receiver. Rosen forwarded that letter to Judge
Hochberg’s chambers the next day, and on June 30, the
court granted the motion and appointed New Vistas as the
rent receiver using the proposed Order that Rosen had
drafted. The proposed Order provided for notice only to
First Connecticut as follows:
THIS MATTER having been opened to the Court by
Zeichner Ellman & Krause LLP, Attorneys for Plaintiff,
upon notice to the defendant-mortgagor, First
Connecticut Holding Group, L.L.C. XXIII, upon motion
for the appointment of a rent receiver . . .
5
A0023 (emphasis added). Paragraph 18 of the proposed
Order also stated that "[a] conformed, executed copy of this
Order shall be served by plaintiff ’s counsel upon counsel
for defendant-mortgagor, First Connecticut Holding Group,
L.L.C. XXIII[.]" A0029. In issuing the proposed Order, the

-- 4 of 17 --

court made certain handwritten changes to the language
Rosen had submitted. Most importantly for our purposes,
the court added a sentence stating: "defense counsel [ ]
submitted a letter to this Court indicating that it does not
object to the entry of this Order[.]" A0024 (emphasis
added).
After the Order came to the attention of the Hellring firm
two attorneys from that firm -- Matthew Moloshok and
James Scarpone -- called Rosen and informed him of their
displeasure with the receivership order. On July 5, 2000,
Scarpone sent a letter brief to Judge Hochberg’s chambers
informing the judge that Hamilton Park objected to the
appointment of a receiver. The letter also informed the
judge that Hamilton Park had not received notice of the
receivership petition, and that, contrary to the judge’s
understanding, Hamilton Park did oppose the receivership.
The letter also advised the court of the on-going litigation in
the New Jersey Superior Court and specifically mentioned
that the Superior Court had already denied one motion for
the appointment of a receiver and was currently
considering a second motion for appointment of a receiver.
The letter noted that the attorneys from the Zeichner firm
had attended the hearing for the appointment of a receiver
in Superior Court, and that the Hellring firm was going to
file a motion asking the district court to abstain under the
Princess Lida3 doctrine in light of the pending state court
litigation. The next day, the Zeichner firm sent a letter to
the court in which the firm defended the propriety of its
actions in obtaining the receivership in the district court
and argued against application of the Princess Lida
doctrine.
_________________________________________________________________
3. Princess Lida v. Thompson, 305 U.S. 456 (1939) holds that where two
cases are filed in separate courts and involve in rem or quasi in rem
jurisdiction over the same property, the court in which the suit was first
filed obtains jurisdiction to the exclusion of all other courts.
6
The district court then, sua sponte, scheduled a hearing
for July 10 to determine whether the receivership order
should be vacated, whether it should refrain from acting
under the Princess Lida doctrine, and the extent of the
Zeichner firm’s knowledge of the state court proceedings. At
the hearing, the court expressed understandable concern
that Rosen and Ellman had misrepresented that the
receivership application was unopposed given the
communication the court had subsequently received from
agents of Hamilton Park.4 The following exchange occurred
between Rosen and the court:
THE COURT: Mr. Rosen, I am mystified, shocked, you
name it, that a matter that was presented to this Court
as unopposed, when there was no defense counsel that
in fact consented to the entry of the order that you
sought.

-- 5 of 17 --

MR. ROSEN: Judge, let me address that.
THE COURT: No--no. No. Just tell me. Did any
defense counsel in this case consent to the entry of
your motion for a rent receiver?
MR. ROSEN: Yes. I was advised by Mr. DeJong 5 [sic]
that he had authority to bind the owner and that he
indicated there would be no opposition to the motion.
THE COURT: But he’s not counsel in this case.
Correct? And he told you that.
MR. ROSEN: He told me that he’s a registered agent,
has authority to bind the owner of the property.
THE COURT: . . . And further did you have consent
_________________________________________________________________
4. De Jong was also questioned by the court during the hearing. He told
the court that he was not authorized to represent First Connecticut in
the litigation, and that by sending the letter to Rosen, he did not intend
to enter an appearance. The district court expressed extreme displeasure
with de Jong’s having sent a letter to Rosen, since de Jong did not clarify
in the letter that he was not entering an appearance on behalf of First
Connecticut, and de Jong knew that Rosen would be forwarding the
letter to the court. A0177-0182.
5. The hearing transcript misspells counsel’s name as "DeJong."
However, counsel’s name is properly spelled "de Jong."
7
from any of the other defendants who you sued in this
action to your motion for appointment of a rent
receiver?
MR. ROSEN: No, because I did not think that that was
required.
A0183.
Rosen explained that he sought consent only from First
Connecticut because he believed, based upon his research,
that only the owner of the property (First Connecticut)
could object or consent to the appointment of a receiver.
The court, however, told Rosen in no uncertain terms that
consent must be obtained from all defendants to properly
represent to the matter as unopposed:
THE COURT: . . . let me tell you right now, that if you
inform a court that a motion is unopposed, unless you
say to that court, defendant X, Y, Z takes the following
position, but I don’t believe it’s relevant, then it’s my
determination, and not yours, Mr. Rosen, as to who
has a right to be heard on a motion. The only reason
that the order was entered was based upon your
representation that there was no opposition to the
motion for appointment of a rent receiver from the

-- 6 of 17 --

defendants in this case. All defendants are entitled to
notice of motions, as you well know. And in this case
you presented the consent of one person which was
misleading, and that he is not even appearing in this
action. And the other defendants did not give you
consent, and yet you represented that the motion was
unopposed. This is misleading to the Court, Mr. Rosen.
The motion is vacated. The appointment of the rent
receiver is hereby vacated based upon your
misrepresentations to this Court.
MR. ROSEN: Judge, I would just say that there was
absolutely no intent whatsoever to deceive or mislead
this Court. In my experience with rent receivers, I’ve
never had a situation where notice had to be given to
anyone other than the owner of the property. The
documents I have in my file, which I’ve submitted to
this Court, evidence that there’s only one owner of the
property.
8
A0184-85. The next day the district court entered an order
vacating the receivership, and taxing all costs resulting
from the receivership as of that date against the Zeichner
firm.
The court also sua sponte issued an Order to Show
Cause why sanctions should not be imposed under 28
U.S.C. S 1927 for unreasonably multiplying the litigation,
and a show cause hearing was held on July 14, 2000.
William Marshall, another partner at the Zeichner firm,
represented Rosen and Ellman at the show cause hearing.
During that hearing the court quickly made it very clear
that it believed that Rosen had misrepresented the
circumstances surrounding the receivership petition during
discussions with the judge’s law clerk. Rosen took the
stand and testified about those discussions as follows:
Q: . . . Did you have any conversation with anyone
from the Judge’s chambers?
A: I did. I explained to [the law clerk] again that I had
a conversation, I do not believe I ever referenced Mr.
DeJong’s [sic] name. The way I stated it was I had a
conversation with borrower’s counsel. I explained to
her that initially we were seeking Sutton and Edwards
as a rent receiver. But that First Connecticut didn’t feel
that they were an appropriate receiver, but that New
Vistas Corporation would be more appropriate. That we
confirmed with our client that it would be appropriate
to utilize New Vistas, and that based upon that that
they had told me, "they" being the borrower’s counsel,
that they would not be objecting to the entry of the
receivership application. [The law clerk] suggested that
she would advise the court of that, and I left.
Q: Okay. And did there come a time when you had
subsequent contact with [the law clerk]?

-- 7 of 17 --

A: Yes. That afternoon being the afternoon of June
29th, I received a call from [the law clerk], who
suggested that the Court would like, either by way of a
letter or some other communication from borrower’s
counsel, that in fact the statement that I had made to
the Court was true, that they were not objecting, and
to secure that, and then FAX it over, and she indicated
9
that the Court doesn’t really accept FAXes, but for this
purpose I could get the letter and FAX it over. I hung
up from [the law clerk] and called Mr. DeJong[sic] to
explain the instructions that I had. Mr. DeJong[sic]
was not available. I left a voice mail message and the
morning of June 30th, which was the next morning,
that being a Friday, I’ll send you the letter in about two
hours. I got the letter, stuck it in the FAX machine and
sent it to [the law clerk].
Q: Okay.
Did you ever make the representation to the Court
either directly to the Court or through the court clerk,
the law clerk, that you had the consent of all parties to
the action to the receivership?
A: No, I--no, I’m sorry, Mr. Marshall, no, I did not.
Q: Okay.
Did you ever intend to deceive the Court in
connection with your application?
A: I never intended to deceive the Court.
A0270-72.
Rosen specifically denied ever using the term "defense
counsel" in speaking to the judge’s law clerk.
Q: Did you ever use the term "defense counsel" in
dealing with the Court’s chambers?
A: No, sir, I didn’t.
A0274.
The law clerk was never called to the stand to testify. The
law clerk’s version of events, therefore, was never placed on
the record, and Rosen’s counsel was not able to cross
examine her regarding any inconsistencies with Rosen’s
account, or explore whether differing recollections merely
resulted from an innocent misunderstanding.
Consequently, the only sworn testimony regarding the
communications between the law clerk and Rosen came
from Rosen. Nevertheless, the court rejected Rosen’s
testimony outright. The court did so by taking "judicial

-- 8 of 17 --

10
notice" that Rosen had used the term "defense counsel"
rather than "borrower’s counsel" in his communications
with the law clerk. The following exchange reflects the
court’s reasoning:
THE COURT: I can tell . . . that the reason that the
words "defense counsel" appear in handwriting is
because that’s what was requested, that Mr. Rosen
provide a letter stating that defense counsel does not
object. That is, as you know from years of litigation,
the very standard way in which one demonstrates non-
opposition.
MR. MARSHALL: Well, Your Honor, not to be
argumentative, but it is--it is contrary to the first page
of the order.
THE COURT: No, the first page talks about notice. I’m
talking about the representation to chambers. Mr.
Rosen was told--Mr. Rosen, as you conceded earlier in
our colloquy, represented to chambers that the matter
was unopposed, and you earlier said yes, that’s right.
MR. MARSHALL: Well--
THE COURT: And then he was told, because I was told
about this, to get a written statement, either
certification or letter from defense counsel, so stating.
And that’s why the words "defense counsel" appear in
the order. Because in response to that, that’s when the
letter came in. There was never distinction [sic] made
by "borrower’s counsel" and "defense counsel."
MR. MARSHALL: I believe that Mr. Rosen’ testimony
was he talking [sic] in terms of borrower’s.
THE COURT: That’s what he now says. But the words
that were used by chambers were to provide a letter
from "defense counsel" and without that being
corrected the letter comes in and it is only natural for
the Court to assume that he’s complied with the
request to provide a letter from defense counsel, which
is why the words "defense counsel" appear in that, a
handwritten notation editing the form of the order.
MR. MARSHALL: But those are not his words, Your
Honor. Those are the words at the time the order was
11
issued, not at the time that he prepared this order and
--
THE COURT: No, those were the words that reflect the
Court’s direction to him, that he is to produce a writing

-- 9 of 17 --

from defense counsel.
MR. MARSHALL: Your Honor, I believe this was
prepared after the Court received the letter, because it
says the Court, I’m sorry, and defense counsel having
submitted a letter to the court.
THE COURT: Exactly.
MR. MARSHALL: A letter, which letter on its own face
says that he’s only general counsel to First
Connecticut.
THE COURT: Mr. Marshall, I know you’re trying the
best you can, but that letter doesn’t say "I’m not
defense counsel." It doesn’t say "I’m not making an
appearance in this action." And that letter was
produced, I am telling you as a matter of fact, of which
I take judicial notice, that that letter was produced by
Mr. Rosen in response to an oral request from my
chambers to produce either a certification or a letter
from defense counsel stating that there was no
opposition.
A0299-0302 (emphasis added).
On August 22, the court entered an Order and
accompanying published Opinion sanctioning Rosen and
Ellman under 28 U.S.C. S 1927. Rosen and Ellman were
ordered to personally pay attorneys’ fees to the Hellring firm
for time it spent working on the receivership issue in the
amount of $3,378. Rosen and Ellman were also ordered to
personally bear the costs of the rent receiver in the amount
of $10,874.25. This appeal followed.
III. DISCUSSION
We review the district court’s imposition of attorney
sanctions under 28 U.S.C. S 1927 for an abuse of
discretion. See In re Orthopedic Bone Screw Products, 193
F.3d 781, 795 (3d Cir. 1999); Zuk v. East. Pennsylvania
12
Psych. Inst., 103 F.3d 294, 297 (3d Cir. 1996). An abuse of
discretion occurs when the court bases its opinion on a
clearly erroneous finding of fact, an erroneous legal
conclusion, or an improper application of law to fact. See In
re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions,
278 F.3d 175, 180 (3d Cir. 2002). Moreover, inasmuch as
a district court’s finding of bad faith on the part of an
attorney is a finding of fact, we review it for clear error. See
Hackman v. Valley Fair, 932 F.2d 239, 242 (3d Cir. 1991).
A. 28 U.S.C. S 1927
928 U.S.C. S 1927 provides:
Any attorney or other person admitted to conduct

-- 10 of 17 --

cases in any court of the United States or any Territory
thereof 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.
28 U.S.C. S 1927 (1999). The statute thus limits attorney
sanctions imposed thereunder to those situations where an
attorney has: (1) multiplied proceedings; (2) unreasonably
and vexatiously; (3) thereby increasing the cost of the
proceedings; (4) with bad faith or with intentional
misconduct. See In re Prudential Ins., 278 F.3d at 188. The
sanctions that may be imposed under S 1927 are also
limited to excess costs and expenses that are incurred
"because of such conduct." 28 U.S.C. S 1927.
The sanctions are intended to deter an attorney from
intentionally and unnecessarily delaying judicial
proceedings, and they are limited to the costs that result
from such delay. See Zuk, 103 F.3d at 297. Although
S 1927 provides a court with a mechanism for sanctioning
vexatious and willful conduct, "courts should exercise [this
sanctioning power] only in instances of a serious and
studied disregard for the orderly process of justice." Ford v.
Temple Hosp., 790 F.2d 342, 347 (3d Cir. 1986), quoting
Overnite Transp. Co. v. Chicago Industr. Tire Co. , 697 F.2d
789, 795 (7th Cir. 1983).
The power to sanction under S 1927 necessarily"carries
with it the potential for abuse, and therefore the statute
13
should be construed narrowly and with great caution so as
not to stifle the enthusiasm or chill the creativity that is the
very lifeblood of the law." Mone v. Commn’r of Intern.
Revenue, 774 F.2d 570, 574 (3d Cir. 1985); see also Ford,
790 F.2d at 349 ("The uncritical imposition of attorneys’
fees can have an undesirable chilling effect on an attorney’s
legitimate ethical obligation to represent his client
zealously."); Baker Industr. Inc. v. Cerberus, Ltd., 764 F.2d
204, 208 (3d Cir. 1985) ("Th[e] bad faith requirement is . . .
necessary to avoid chilling an attorney’s legitimate ethical
obligation to represent his client zealously[.]").
Consequently, sanctions may not be imposed under
S 1927 absent a finding that counsel’s conduct resulted
from bad faith, rather than misunderstanding, bad
judgment, or well-intentioned zeal. See Zuk, 103 F.3d at
297; Ford, 790 F.2d at 347; Baker Industr., 764 F.2d at
208. In Baker Industr., we approvingly noted the bad faith
standard adopted in Colucci v. New York Times Co., 533 F.
Supp. 1011 (S.D.N.Y. 1982). The Colucci court stated that
under S 1927, an attorney’s "conduct must be of an
egregious nature, stamped by bad faith that is violative of
recognized standards in the conduct of litigation." Baker
Industr., 764 F.2d at 208, quoting Colucci , 533 F. Supp. at
1014. Thus, we have stated that the bad faith requirement

-- 11 of 17 --

is necessary for a finding of liability, otherwise"an attorney
who might be guilty of no more than a mistake in
professional judgment in pursuing a client’s goals might be
made liable for excess attorneys’ fees . . . ." Baker Industr.,
764 F.2d at 209.6
B. Rosen and Ellman’s Conduct
The sanctions imposed on Rosen and Ellman were based
upon the following findings: (1) Rosen and Ellman failed to
provide notice to all defendants that LaSalle was seeking a
receivership; (2) the judge’s law clerk told Rosen to supply
a letter to chambers from "defense counsel" that the motion
_________________________________________________________________
6. The Supreme Court has also cautioned that courts must employ
restraint in deciding to impose sanctions, as over eagerness could have
the effect of "discourag[ing] all but the most airtight claims[.]" See
Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 422 (1978)
(discussing attorneys’ fees under Title VII).
14
was unopposed; (3) the de Jong letter that Rosen provided
only reflected the position of one "defendant"; and (4) with
the exception of the aforementioned footnote in the
Williams Certification, Rosen’s papers did not disclose the
simultaneous state court litigation. However, it seems clear
to us that the district court’s requisite finding of bad faith
rests primarily, if not entirely, upon the court’s conclusion
that Rosen intentionally misrepresented that the
receivership was unopposed in his discussions with the
court’s law clerk. Moreover, to the extent that the court’s
finding of bad faith does not rest solely on that factor, it
certainly appears to have been colored by it. That
conclusion, in turn, results from the "judicial notice" that
the court took of what Rosen told the law clerk during his
telephone discussions with her. Rosen insists that his
discussions with the law clerk referred only to"borrower’s
counsel," but the court took "judicial notice" and found as
a matter of fact that he had deliberately and falsely stated
that "defense counsel" did not object.
Federal Rule of Evidence 201(b) defines a judicially
noticed fact as one that is "not subject to reasonable
dispute in that it is either (1) generally known within the
territorial jurisdiction of the trial court or (2) capable of
accurate and ready determination by resort to sources
whose accuracy cannot reasonably be questioned." FED. R.
EVID. 201(b). For all practical purposes, judicially noticing a
fact is tantamount to directing a verdict against a party as
to the noticed fact. See Werner v. Werner, 267 F.3d 288,
295 (3d Cir. 2001), citing United States v. Jones, 29 F.3d
1549, 1553 (11th Cir. 1994).
Here, there was clearly a disputed issue of fact as to
whether Rosen referred to "borrower’s counsel" or "defense
counsel" in speaking to the judge’s law clerk, and whether
the clerk had requested a letter from "borrower’s counsel"

-- 12 of 17 --

as opposed to "defense counsel." As noted above, Rosen
took the witness stand at the show cause hearing and
testified under oath that he used the term "borrower’s
counsel" when speaking to the court’s chambers. The
record from that hearing shows that, without any contrary
testimony whatsoever, the district court rejected Rosen’s
account and thereafter based a conclusion of bad faith
15
under S 1927 upon a finding that Rosen’s explanation was
not credible. As noted above, the court explained its
rejection of Rosen’s account as follows: "I am telling you as
a matter of fact, of which I take judicial notice, that [the de
Jong letter] was produced by Mr. Rosen in response to an
oral request from my chambers to produce either a
certification or a letter from defense counsel stating that
there was no opposition." A0300-0302 (emphasis added).
The court’s finding of fact of the content of the disputed
conversations between Rosen and the law clerk
understandably colored the court’s view of Rosen’s conduct
here. The court took judicial notice of those two
conversations even though the court did not hear any part
of the disputed conversations and had no way of knowing
what was said other than asking the law clerk; the only
participant other than Rosen. We must, therefore, conclude
that the judge’s certainty as to the substance of Rosen’s
communications with her chambers was based on private
discussions she had with her law clerk--discussions that
neither Rosen nor his attorney were privy to or informed of.
There is absolutely no way that the contents of Rosen’s
disputed conversations with the judge’s law clerk even
remotely satisfies the requirements for judicial notice in
Rule 201(b). The contents of those conversations are
certainly not a matter of common knowledge, nor are they
easily provable from a source whose accuracy cannot
reasonably be questioned. See e.g. Oran v. Stafford, 226
F.3d 275, 289 (3d Cir. 2000) (taking judicial notice of the
contents of properly authenticated public disclosure
documents filed with the SEC); Policeman’s Benevolent
Ass’n v. Washington Township., 850 F.2d 133, 137 (3d Cir.
1988) (taking judicial notice of Township’s police force
regulations); Gov’t of the Virgin Islands v. Testamark, 528
F.2d 742, 743 (3d Cir. 1976) (upholding judicial notice of
defendant’s prior conviction).
We certainly understand that a judge would be most
reluctant to allow his/her law clerk to be called to the
witness stand and questioned under oath under the
circumstances here. Moreover, we are not unsympathetic to
the dilemma this created for the judge. However, that
dilemma does not justify short circuiting the fact finding
16
process by a mantra-like reliance on "judicial notice." This

-- 13 of 17 --

is especially true in light of the severe consequences that
flowed from the court’s resolution of the factual dispute
about the conversations with the law clerk. The court’s
conclusion regarding those conversations was a key factor
in finding bad faith. Yet, Rosen was not able to confront the
only witness who could possibly corroborate or dispute his
version of the conversations.7 Thus, not only was the
court’s resort to "judicial notice" improper, it also denied
Rosen "a meaningful opportunity to be heard." Fellheimer v.
Charter Tech., 57 F.3d 1215, 1227 (3d Cir. 1995).
We have previously stated that:
Sanctions are not to be assessed without full and fair
consideration by the court. They often entail a fine
which may have more than a token effect upon an
attorney’s resources. More importantly, they act as a
symbolic statement about the quality and integrity of
an attorney’s work -- a statement which may have[a]
tangible effect upon the attorney’s career.
Id. (emphasis added). The sanctions here were not based
upon "full and fair consideration." Given the importance of
the factual finding arising from that hearing, and the
sanctions that followed, we hold that the court’s resort to
"judicial notice" to resolve what was said in the
conversations between the sanctioned attorney and the
court’s law clerk simply can not withstand scrutiny.
We are aware, or course, that the court’s finding of bad
faith could also have been influenced by the circumstantial
evidence relating to the language the court added to the
receivership order, as well as the court’s concern with the
"veiled" reference to the state court proceedings that Rosen
had arguably "buried" in the single footnote of the Williams
_________________________________________________________________
7. Of course, Marshall could have called the law clerk to the stand on
behalf of Rosen at the Show Cause hearing. However, we also recognize
that an attorney would be reluctant (to say the least) to call a law clerk
to the witness stand to testify before the very judge the clerk was
clerking for under circumstances that might require a fairly aggressive
cross examination in front of the "clerk’s judge." Under these
circumstances, it is hardly appropriate, practical, or fair to require the
"opposing" party to call a judge’s law clerk to the witness stand.
17
Certification. However, we doubt that that evidence alone
would have caused the court to so readily conclude that
Rosen was acting in bad faith absent the court’s belief that
Rosen had made misrepresentations to its law clerk.
Moreover, the fact that Ellman orally notified the Hellring
firm of the receivership before Rosen filed the papers, and
the fact that Rosen made copies of the papers available to
the Hellring firm after the receivership Order was entered
could very well have precluded a finding of bad faith absent
the court’s belief about the substance of Rosen’s
conversations with the law clerk. Similarly, we believe that

-- 14 of 17 --

the court’s reaction to Rosen’s disclosure of the state court
litigation in a footnote in the Williams Certification may
have been affected, at least in part, by the court’s view of
Rosen’s credibility.8 Inasmuch as the court’s conclusion
regarding bad faith under S 1927 can not be divorced from
the judicial notice of the two conversations, we conclude
that the sanctions that were imposed were an abuse of
discretion.
The July 11 Order sanctioning the Zeichner firm was
equally an abuse of discretion. A law firm can only speak
and act through its agents. See In re Am. Biomaterials
Corp., 954 F.2d 919, 923 (3d Cir. 1992) (noting that a
_________________________________________________________________
8. We realize the court expressed a reluctance to parse the footnote’s
finer points given the court’s belief that "defense counsel" did not object
to the requested relief. Given the crowded dockets that district courts
must manage, we certainly understand that the court’s belief that the
matter was unopposed may have resulted in a more cursory examination
of the Williams Certification than the court would otherwise have given
it. However, the fact that discussion of the state court litigation was
limited to a footnote in that Certification does not necessarily mean that
Rosen was intentionally hiding that information. The Certification was
not lengthy, and the footnote at issue was the only one in the entire
document. That footnote stated in pertinent part:
Plaintiff has also learned that Messrs. Licata and Mocco are having
serious disputes concerning their so-called joint venture and are
parties to Titan Management, L. P. v. Licata, et al., . . . Plaintiff is not
a party to [this] matter but has learned that the court has appointed
a fiscal agent . . . .
App. 11. Absent the court’s negative view of Rosen’s candor, the judge
may not have viewed this footnote with such a jaundiced eye.
18
corporation can act only through its agents and employees).
Here, the Zeichner firm acted through Rosen and Ellman.
The July 11 Order relied upon the same findings of fact as
the August 22 Order. Inasmuch as the court’s improper
reliance upon "judicial notice" was the underpinning for
both Orders, neither can stand.
We are aware that this disposition allows for the
possibility of further hearings to determine what Rosen said
to Judge Hochberg’s law clerk. We have already commented
upon the awkwardness of any judge being placed in a
position of making credibility determinations regarding
his/her law clerk’s testimony in an adversarial setting.
Moreover, if S 1927 sanctions are to be pursued, "opposing
counsel" would be placed in the untenable position that we
noted above of having to cross examine the judge’s law
clerk and possibly attack her credibility. This extremely
difficult scenario is exacerbated because the judge has
already made a finding of fact as to the contents of the
disputed conversations between Rosen and her law clerk.
Having already made that finding, it will be difficult for

-- 15 of 17 --

Judge Hochberg to maintain the appearance of objectivity if
she reimposes sanctions on remand. This holds true even
if she objectively concludes that sanctions are warranted
without considering Rosen’s communications with her
chambers.
"[P]ublic confidence in the judicial system mandates, at a
minimum, the appearance of neutrality and impartiality in
the administration of justice." Alexander v. Primerica
Holdings, Inc., 10 F.3d 155, 157 (3d Cir. 1993); see also In
re School Asbestos Litigation, 977 F.2d 764, 776 (3d Cir.
1992). "When the judge is the actual trier of fact, the need
to preserve the appearance of impartiality is especially
pronounced." Primerica Holdings, 10 F.3d at 166.
"[J]ustice must satisfy the appearance of justice." Offutt
v. United States, 348 U.S. 11, 14 (1954). Thus, in Haines v.
Liggett Group, 975 F.2d 81 (3d Cir. 1992), we stated that
the polestar of a judge’s decision is "[i]mpartiality and the
appearance of impartiality," inasmuch as they are the sine
qua non of the American legal system. Haines , 975 F.2d at
98. Therefore, despite the reservations we always have
when reassigning a case from an excellent and dedicated
19
jurist, we nevertheless have a responsibility to exercise our
supervisory authority and will do so in an appropriate case.
We conclude that such reassignment is appropriate here
under either the All Writs Act, 28 U.S.C. S 1651(a), or 28
U.S.C. S 2106. See Primerica Holdings, 10 F.3d at 167,
citing United States v. Torkington, 874 F.2d 1441, 1446
(11th Cir. 1989).
Accordingly, we will direct the Chief Judge of the United
States District Court for the District of New Jersey to order
the Clerk of that court to reassign this case to another
judge in that district for any further proceedings in this
case.
Before closing we pause to note that, in reversing these
Orders, we do not in any way intend to minimize the
importance of an attorney’s candor with the court, or the
court’s staff. Nor do we intend to limit a court’s ability to
respond appropriately when an attorney’s bad faith
burdens judicial proceedings. As an officer of the court, an
attorney must comport himself/herself with integrity and
honesty when making representations regarding a matter in
litigation. "An attorney’s obligation to the court is one that
is unique and must be discharged with candor and with
great care. The court and all parties before the court rely
upon representations made by counsel. We believe without
qualification that an attorney’s word is his bond." Baker
Industr., 764 F.2d at 212. However, the record before us
does not support the district court’s conclusion that Rosen,
Ellman, or the Zeichner firm breached that duty here and
we therefore conclude that the court abused its discretion
in imposing sanctions under S 1927.

-- 16 of 17 --

IV. Conclusion
For the reasons set forth above, the district court’s
August 22, 2000 Order is vacated in full, and the July 11,
2000 Order is vacated in part, insofar as it imposes
sanctions.9
_________________________________________________________________
9. Inasmuch as we are reversing based upon the district court’s use of
judicial notice to resolve a factual dispute, we need not further address
20
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
appellants’ argument that the district court’s procedures denied them
due process. Moreover, since the only issue before us is the propriety of
the sanctions under S 1927, our discussion has no impact on the portion
of the district court’s July 11 Order vacating the receivership.
21

-- 17 of 17 --