The plaintiff, Dawn Bach-Reffitt, believed that she had been defrauded in her divorce action, which was settled in 2013. She filed a federal RICO action against her ex-husband. That RICO action was dismissed and the district court granted Husband’s motion for Rule 11 sanctions.
After the divorce was settled in 2013 and a consent judgment entered, the plaintiff brought a claim to reopen the divorce case on the ground that the consent judgment was procured through fraud. The divorce judge rejected that motion, partly on the ground that the plaintiff had released her claims against her ex-husband. The plaintiff then filed a separate fraud lawsuit in state court, which she also lost. Her third strike was the federal RICO action.
The court concluded that plaintiff’s claims were barred by the release and by the consent judgment. Further, she lacked RICO standing as federal courts have denied standing to disappointed family law litigants.
The court granted Rule 11 sanctions on the ground that the claims asserted by Dawn were frivolous and were not warranted by existing law or a good faith argument to extend existing law. The explanation:
This dispute has a contentious and lengthy history and evinces a high level of animosity not only between the clients, but also counsel. Moreover, the universe of information available for determining the propriety of sanctions is not limited to Dawn’s complaint.
Setting aside the question of whether Dawn filed her complaint for an improper purpose under subsection (b)(1), in this Court’s judgment, Dawn’s claims violate subsection b(2) because they are contrary to both the facts and the law and are not otherwise supported by a nonfrivolous legal argument. To begin, as noted above, regardless of Dawn’s characterizations in her complaint, she alleges intrinsic fraud in the divorce proceeding—Kevin committed discovery fraud by failing to disclose the true value of his Peninsula stock, which caused her to accept a less favorable property division under the Consent Judgment. The Michigan cases discussed above require that, in such instances, the proper remedy is a motion for relief from judgment filed in the court that rendered the judgment—in this case, the family court. Dawn filed such a motion, which the family court denied as untimely. She also filed an independent fraud action in the circuit court, which the circuit court dismissed because Dawn should have been filed a motion for relief from judgment in the family court. Filing a RICO complaint in federal court was not a viable third option, particularly in light of the preclusive effect of the Consent Judgment and the broad release contained therein. Dawn’s (or her counsel’s) argument that the Consent Judgment authorizes or does not preclude additional lawsuits outside of the family court is based on an unreasonable reading of the Consent Judgment. Moreover, none of the Michigan cases Dawn cited in her opposition to Defendants’ motion to dismiss supported her position. In short, Dawn’s counsel should have known that filing a RICO claim in federal court to skirt the Consent Judgment was legally improper.
Having concluded that Dawn’s complaint violated Rule 11(b)(2), the Court concludes that an award of reasonable attorney’s fees and costs is an appropriate sanction. The Court will not grant Defendants’ request to impose fees against Dawn, however, in light of Rule 11(c)(5)(A), which precludes courts from imposing monetary sanctions “against a represented party for violating Rule 11(b)(2).” Accordingly, the Court will order Defendants’ counsel to submit appropriate documentation for an award of fees against Dawn’s counsel and their firms. Fed. R. Civ. P. 11(c)(1).
Edward X. Clinton, Jr.
Source: BACHI-REFFITT v. Reffitt, Dist. Court, WD Michigan 2017 – Google Scholar