Justice sued Gemini for alleged violations of the Fair Debt Collection Practices Act (FDCPA). Gemini’s lawyers contacted Justice and explained that the case was precluded by a prior judgment between the parties. The lawyers for Justice then withdrew the complaint within the 21 day safe harbor period under Rule 11.
Gemini then moved for sanctions under 28 U.S.C. § 1927, but the court denied that motion on the ground that Justice had promptly withdrawn the complaint when it was advised that the complaint lacked a good faith basis.
“Justice’s counsel did not represent Justice in the County Court Action. Justice’s counsel certainly should have inquired of Justice more thoroughly regarding the outcome of the County Court Action, but nothing in this lawsuit amounted to the sort of unsupportable multiplication of proceedings displayed in Home Indemnity. A little over two weeks after learning of the judgment in the County Court Action, Justice’s counsel agreed to dismiss Justice’s complaint….
Perhaps a colorable claim under Federal Rule of Civil Procedure 11(b) would have existed if counsel had not withdrawn the complaint within twenty-one days from Gemini’s October 28 Letter. See Fed. R. Civ. P. 11(c)(2) (requiring 21 days’ warning and opportunity to withdraw the challenged filing before moving for Rule 11 sanctions). But, having withdrawn the complaint, and under the circumstances presented, the Court does not find an unreasonable multiplication of proceedings.”
In sum, the lawyer should do proper due diligence before filing the case. Here, the lawyer may not have done that due diligence but he was able to avoid sanctions by promptly withdrawing the complaint.
Edward X. Clinton, Jr.