Month: July 2012

First Circuit Affirms Dismissal of Lawsuit As Sanction For Discovery Noncompliance

Mulero-Abreu v. Puerto Rico Police Dept., 675 F. 3d 88 – Court of Appeals, 1st Circuit 2012 – Google Scholar.

The federal courts continue to hand out sanctions for discovery noncompliance and to enforce said sanctions, sometimes with the dismissal of the entire case.

Here the plaintiffs filed a sexual harassment lawsuit against the Puerto Rico Police Department. They failed to answer discovery, and, after several warnings, the district court dismissed the case with prejudice.

The First Circuit affirmed.

The timeline is a cautionary tale. The interrogatories were served in November 2010. Plaintiffs missed the due date and the discovery cutoff was extended. By March 2011, the district court ran out of patience and dismissed the entire case. The court warned the plaintiffs to answer the requests by February 28, 2011 or the case would be dismissed.

The plaintiffs did not answer and the case was dismissed. Indeed, the plaintiff made no attempt to answer the discovery requests.

Edward X. Clinton, Jr.

Second Circuit Weighs In On The Rule 11 Safe Harbor

STAR MARK MANAGEMENT, INC. v. KOON CHUN HING KEE SOY & SAUCE FACTORY, LTD., Court of Appeals, 2nd Circuit 2012 – Google Scholar.

A party seeking Rule 11 sanctions must serve the opposing party with a copy of the motion and give that party 21 days to withdraw or correct the offending pleading.

Contrary to popular belief, writing a letter will not do the job.

Here the party seeking sanction served a copy of the motion, but that copy did not include an affidavit or other exhibits to the motion.

The Second Circuit held that the moving party met the requirements of Rule 11. It explains:

“We hold, in the circumstances here, that Koon Chun met the procedural requirements of the safe harbor provision of Rule 11(c)(2) by serving its notice of motion for Rule 11 sanctions with its January 9, 2008, letter, even though it did not serve at that time supporting affidavits or a memorandum of law.

First, Koon Chun complied literally with the requirements of the rule, as it served its notice of motion more than 21 days before it filed the motion with the district court; the motion was made separately from any other motion; and the notice of motion described the specific conduct that allegedly violated Rule 11(b). Fed. R. Civ. P. 11(c)(2).

Second, while Li contends that Koon Chun did not serve supporting papers such as a memorandum of law or affidavits, Rule 11(c)(2) requires only the service of “[a] motion” or “[t]he motion.” See id. It does not require the service of a memorandum of law or affidavits, nor does it use the words “formal fully supported motion.” See Ideal Instruments, Inc. v. Rivard Instruments, Inc., 243 F.R.D. 322, 339 (N.D. Iowa 2007) (“Rule 11 says nothing about requiring service of the brief in support of a Rule 11 motion to trigger the twenty-one day `safe harbor.'”). While at least one district court in this Circuit has suggested that only “a fully supported motion” satisfies the safe harbor requirement, see Carruthers v. Flaum, 450 F. Supp. 2d 288, 306 (S.D.N.Y. 2006), that is not what Rule 11 requires. We decline Li’s invitation to read into the rule a requirement that a motion served for purposes of the safe harbor period must include supporting papers such as a memorandum of law and exhibits. The motion for Rule 11 sanctions filed with the district court rested on substantially the grounds set forth in the earlier notice of motion, undercutting the argument that the motion did not comply with the safe harbor requirement. The additional ground listed in the filed motion — no evidence of fraud — was part of Koon Chun’s separate request for sanctions under § 1927, which is not subject to the safe harbor requirement….

We reject Li’s contention that he was not able to make an independent, professional judgment as to whether to withdraw the offending pleading “without being given any opportunity to see the movant’s legal arguments, affidavits and exhibits.” Appellant’s Reply Br. at 4. Koon Chun’s notice of motion gave Star Mark and Li notice of the alleged sanctionable conduct, and Li thus had the opportunity to determine whether there was a non-frivolous basis for the pleading. Here, Li made that very professional judgment, informing Koon Chun (in response to its earlier notice of motion) that none of its points had any merit.”

Comment: this decision stretches the safe harbor to the limit. It might be appropriate to seek a writ of certiorari here.

Edward X. Clinton, Jr.

Plaintiff Loses Discrimination Claim – But Prevails On Sanctions Claim

Gibson v. SOLIDEAL USA, INC., Court of Appeals, 6th Circuit 2012 – Google Scholar.

The plaintiff filed a discrimination claim – alleging that he was fired because of his filing of a workers compensation claim. He did not take discovery or obtain affidavits of any kind. As a result, the former employer obtained summary judgment.

The employer’s motion for sanctions was denied and the denial was affirmed in an unpublished opinion.

The 9th Circuit explained:

“As an initial general proposition, we are not entirely unsympathetic to Solideal’s position. Statutes designed to empower employees in the vindication of their rights may, at times, be used as bases on which a plaintiff asserts claims that are later determined to be without merit. Undeniably, large employers may be forced to incur significant litigation expenses in defending against such claims. However, if this Court were to follow the course now advocated by Solideal, it would effectively hold that a plaintiff who elects to forgo formal discovery and whose claims are unable to withstand summary judgment is responsible for paying all fees and costs the defendant incurred in connection with the litigation. This is a bridge too far.”

Edward X. Clinton, Jr.

Florida District Court Awards Sanctions For False Claims

BCJJ, LLC. v. LeFEVRE, Dist. Court, MD Florida 2012 – Google Scholar.

The plaintiffs filed suit against several parties after they lost their investment in a real estate transaction. They also sued the Marshall & Isley Bank, which had a minor role in the transaction.

After the claims against the Bank were dismissed, the Bank moved for sanctions. The District Court awarded sanctions, finding that the claims against the bank were not just unfounded but were manufactured out of whole cloth.

“In the Second Amendment Complaint, BCJJ claims that, “[t]o entice BCJJ to invest the necessary capital, Wild, Berlin, and LeFevre each described the substance of the false appraisal to Jason Turkish, and represented the value of the Commercial property as $23.9 million.” (Dkt. 148, at ¶ 29), And lest there be any confusion as to whether this statement was inadvertent, BCJJ again stated in its Response to M&I’s Third Motion to Dismiss: “[Karyn] Wild told BCJJ’s managing member, Jason Turkish, that the Commercial Property had an appraised value of $23.9 million, and described to Turkish the substance of the false appraisal which she had received.” (Dkt. 166, at 2).

Unfortunately for BCJJ, the facts have not borne out its assertions regarding Karyn Wild or M&I’s actions. William and Jason Turkish, BCJJ’s representatives, have both deposed that nobody, and certainly not Wild, communicated the substance of the Appraisal to them prior to the closing of the deal. See Dkt. 180, at 5-8 (citing and excerpting deposition testimony to that effect). Further, in its response to the extant motion for sanctions, BCJJ does not attempt to justify — perhaps because it cannot — the the alleged inaccuracies regarding its statements about Wild having relayed the substance of the Appraisal. Given that the factual inaccuracies were included in BCJJ’s filings only after this Court dismissed its complaint for failing to specify how M&I was responsible for BCJJ being furnished the Appraisal, the Court cannot escape the conclusion that these assertions were cut out of whole cloth. And even if BCJJ did not affirmatively fabricate these claims, its failure to ask the Turkishes about their truth before making them evinces a failure to conduct reasonable inquiry into the evidentiary basis of BCJJ’s factual claims. See Mortensen v. Bank of Am., N.A., No. 3:10-CV-13(CDL), 2012 WL 1424502, at *3 (M.D. Ga. Apr. 24, 2012) (granting sanctions where parties’ deposition testimony belied their assertions and attorney could have discovered with minimal diligence that parties’ claims lacked merit); see Worldwide Primates, 87 F.3d at 1255 (“We . . . hold that, under Rule 11, an attorney must make a reasonable inquriy into both the legal and factual basis of a claim prior to filing suit.”).”

Edward X. Clinton, Jr.