6th Circuit Rules That The Failure to Comply with Rule 11 Safe Harbor Negates Sanctions Motion


PENN, LLC v. PROSPER BUSINESS DEVELOPMENT CORPORATION, Court of Appeals, 6th Circuit 2014 – Google Scholar.

Rule 11(c) contains a safe harbor, which requires that a sanctions motion be separate from any other motion and that the sanctions motion be served upon the opposing party 21 days before the motion for sanctions is filed. The text of the safe harbor is as follows:

(2) Motion for Sanctions. A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b). The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets. If warranted, the court may award to the prevailing party the reasonable expenses, including attorney’s fees, incurred for the motion.”

The purpose of the safe harbor is to allow the other party time to withdraw the challenged pleading or paper.

In the Penn, LLC v. Prosper Business Development Corporation case, the Sixth Circuit affirmed the denial of a sanctions motion on the ground that the defendant seeking sanctions did not comply with the safe harbor.

Plaintiff filed a complaint alleging violations of the RICO statute and other torts. Defendants James Arnold and Arnold & Associates wrote what is commonly known as a warning letter. On December 6, 2010, the Arnold defendants stated that the complaint had no factual basis and that it should be withdrawn. The Arnold defendants stated that they would seek sanctions if the complaint was not dismissed before the time to answer.

On May 27, 2011, the district court dismissed the lawsuit.

On June 8, 2011, the Arnold defendants served their sanctions motion.

The district court denied the motion for sanctions.

On appeal the Sixth Circuit affirmed on the ground that the Arnold firm had not complied with the safe harbor in that its motion for sanctions was served after the case was dismissed. The Sixth Circuit held that a warning letter does not comply with the safe harbor.

The court explained:

“Here, the Arnold Firm served P&C with a copy of its Rule 11 motion on June 8, 2011, twelve days after the district court dismissed Penn’s claims against the firm. P&C contends that this late service deprived it of the safe-harbor period’s protection and, therefore, foreclosed the firm’s sanctions motion. Unable to rely on the June 8 letter under Ridder, the Arnold Firm argues that its December 6, 2010 letter satisfied Rule 11’s safe-harbor provision because it notified P&C of the firm’s intent to pursue sanctions approximately six months before the court dismissed Penn’s complaint and eight before the Arnold Firm moved for sanctions. But “[i]t would . . . wrench both the language and purpose of . . . the Rule to permit an informal warning to substitute for service of a motion.” Barber v. Miller, 146 F.3d 707, 710 (9th Cir. 1998).

First and most important, the rule specifically requires formal service of a motion. The safe-harbor provision states that “[t]he motion must be served under Rule 5” at least twenty-one days before filing it with the court. Fed. R. Civ. P. 11(c)(2) (emphasis added). We have no doubt that the word “motion” definitionally excludes warning letters, and our reading of the rule’s plain language finds support in the Advisory Committee’s Notes. In its gloss on the 1993 amendments, the Committee refers to letters as “informal notice” and recommends that attorneys send a warning letter as a professional courtesy “before proceeding to prepare and serve a Rule 11 motion.” Fed. R. Civ. P. 11 Advisory Committee Notes (1993 Amendments). “In other words, the Advisory Committee’s Notes clearly suggest that warning letters . . . are supplemental to, and cannot be deemed an adequate substitute for, the service of the motion itself.” Roth v. Green, 466 F.3d 1179, 1192 (10th Cir. 2006); accord In re Pratt, 524 F.3d 580, 588 (5th Cir. 2008) (“We may not disregard the plain language of the [rule] and our prior precedent without evidence of congressional intent to allow `substantial compliance’ through informal service.”); Barber,146 F.3d at 710 (“That requirement, too, was deliberately imposed, with a recognition of the likelihood of other warnings.”).

Furthermore, important policy considerations counsel against the Arnold Firm’s more permissive reading. We previously commented that “[t]he inclusion of a `safe harbor’ provision is expected to reduce Rule 11’s volume, formalize appropriate due process considerations of sanctions litigation, and diminish the rule’s chilling effect.” Ridder, 109 F.3d at 294. Similarly, the Advisory Committee reasons that “the `safe harbor’ period begins to run only upon service of the motion” in order “[t]o stress the seriousness of a motion for sanctions and to define precisely the conduct claimed to violate the rule.” Fed. R. Civ. P. 11 Advisory Committee Notes (1993 Amendments).”

The holding is noteworthy because of its clarity. Also, the Sixth Circuit criticized a Seventh Circuit case, Nisenbaum v. Milwaukee County, 333 F.3d 804, 808 (7th Cir. 2003) on the ground that the case did not follow the text of the rule.

This is an interesting issue and one that the Supreme Court may decide someday to resolve. For now, if you want sanctions, make sure to serve a motion for sanctions at least 21 days before judgment is entered. A warning letter is not sufficient to meet the requirements of Rule 11(c).

Edward X. Clinton, Jr.

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