Nick v. Morgan’s Foods, Inc.

Nick (plaintiff) filed a sexual harassment suit against Morgan’s Foods, Inc. (Morgan’s) (defendant). The parties agreed to alternative dispute resolution (ADR) with a court appointed mediator. The district court issued an order referring the case to ADR (Referral Order). The Referral Order mandated that each party draft a memorandum outlining the facts and the party’s arguments and submit the memo to the mediator at least seven days before the first mediation conference. The Referral Order also mandated that each party participated in the mediation in good faith and that noncompliance with any court deadline could result in sanctions. Morgan’s failed to file its memorandum seven days in advance of the first conference. In addition, at the conference, Morgan’s’ in house counsel—who made all its business decisions—was not present. Although he was reachable by phone, no settlement offer over $500 could be accepted without his approval. Nick made two offers at the mediation, but both were rejected without a counteroffer. After the conference, at a show cause hearing on Morgan’s’ conduct, it was established that Morgan’s felt that the Referral Order was non-binding and chose not to follow it. The district court found that Morgan’s did not participate in the mediation in good faith. The court sanctioned and fined Morgan’s, ordering it to pay Nick and her attorneys’ fees for the mediation, as well as a fine to be paid to the clerk for failing to file the pre-conference memorandum on time. Morgan’s filed a motion for reconsideration. The district court denied the motion and also imposed additional sanctions and fines against Morgan’s for filing a frivolous motion. Morgan’s appealed only the fees to be paid to the clerk, arguing that Rule 16 of the Federal Rules of Civil Procedure does not authorize fines payable to the court and that Morgan’s did not know about the actions of its counsel.