Defendant’s Sanctions Motion Falls Flat Where Defendant’s Allegations of Wrongful Conduct Were “Frivolous.”


It is common to see Rule 11 sanctions motions filed in litigation. Defendants often file motions for sanctions. Here, the motion for sanctions was poorly prepared and did not meet the basic requirements to shift the burden to the Plaintiff to respond. The result: sanctions denied.

The legal standard:

By filing a Rule 11 motion for sanctions based on non-frivolous allegations, a party successfully makes a prima facie showing of sanctionable conduct. Vandeventer v. Wabash Nat’l Corp., 893 F. Supp. 827, 840 (N.D. Ind. 1995) (citing Shrock v. Altru Nurses Registry, 810 F.2d 658 (7th Cir. 1987). Once the prima facie showing is made, “the burden of proof shifts to the non-movant to show it made a reasonable pre-suit inquiry into its claim.” Digeo, Inc. v. Audible, Inc., 505 F3d 1362, 1368 (Fed. Cir. 2007). Thus, the burden of reasonable investigations falls on the proponent of a proposition, not the opponent. Vandeventer, 893 F. Supp. at 840. Here, the burden shifts to Plaintiffs to show that they reasonably investigated their claims against Defendants before filing their complaint now that Defendants have filed the instant motion for sanctions.

Assessing the reasonableness of a party’s pre-filing inquiry requires the court to ascertain whether “the party or his counsel [objectively] should have known that his position is groundless.” Cuna Mut. Ins. Soc’y v. Office & Prof’l Emps. Int’l Union, Local 39, 443 F.3d 556, 560 (7th Cir. 2006) (citations omitted). Plaintiffs are not required to have sufficient information to prevail on a motion for summary judgment, a motion to dismiss for failure to state a claim, or at trial to comply with Rule 11. Vista Mfg., Inc. v. Trac-4, Inc., 131 F.R.D. 134, 138 (N.D. Ind. 1990)(citation omitted). A plaintiff’s pre-filing inquiry must only be reasonable under the circumstances, which vary from case to case. Id. Therefore, the court must consider all the circumstances of a case before awarding Rule 11 sanctions. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 401 (1990). Moreover, Rule 11 sanctions are a rarity. District judges must “reflect seriously, and consider fully, before imposing (or denying) sanctions.” II Ltd. v. English, 217 Fed. App’x 527, 529 (7th Cir. 2007) (citing Mars Steel Corp. v. Cont’l Bank N.A., 880 F.2d 928, 936 (7th Cir. 1989)).

Here, neither party made a showing concerning the pre-filing investigation of the plaintiff.

The court noted that the allegations of sanctionable conduct were conclusory and “frivolous.”

In a footnote, Defendants also assert with confidence, but no factual or legal support, that their discovery responses to Plaintiffs have established that the marks at issue in this case have not been used such that Plaintiffs’ trademark infringement and unfair competition claims are now “patently frivolous.” [DE 63 at 9 n.4]. Defendants then seem to want the Court to extrapolate from their unsupported conclusion on the merits of this case that Plaintiffs’ refusal to dismiss those claims is evidence of Rule 11 sanctionable conduct. Similarly, Defendants argue that Plaintiffs’ production of FIT’s incorporation documents does not establish use of the mark in commerce making Plaintiffs’ refusal to dismiss the infringement and unfair competition claims sanctionable conduct showing lack of reasonable pre-complaint inquiry.

Once again, this is a quite a stretch to make at this early stage of litigation before discovery has closed, before any motions for summary judgment have been filed or considered, and before trial. Even assuming for the sake of argument that Defendants’ confidence is justified, Defendants have more persuasively suggested that Plaintiffs’ claims may lack substantive merit than they have shown that Plaintiffs’ pre-complaint inquiry into their claims was unreasonable under Rule 11 standards. As a result, the Court finds Defendants’ allegations of Rule 11 sanctionable misconduct to be unreasonable, and therefore, frivolous making them insufficient to establish a prima facie case of sanctionable conduct.

via AARON, MacGREGOR & ASSOCIATES, LLC v. ZHEIJIANG JINFEI KAIDA WHEELS CO., LTD., Dist. Court, ND Indiana 2017 – Google Scholar

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