Month: May 2019

Rule 11 Motion Denied As Premature


The facts in D’Ottavio v. Slack Technologies, 18-cv-9082 (D. New Jersey April 15, 2019) are disputed. The plaintiff sued alleging that the Defendant’s website sent him unsolicited text messages. Defendant denied these allegations and filed a counterclaim which alleged that plaintiff deliberately caused the text messages to be sent to himself. Plaintiff denied the allegations in the counterclaim. Defendant then moved for Rule 11 sanctions arguing that the denials violated Rule 11 and were without factual basis.

Because no discovery had been taken and the facts were in dispute, the court denied the Rule 11 sanctions motion. The reasoingin:

Plaintiff’s counsel objects to Slack’s arguments. Counsel relates that on July 26, 2018, the parties participated in a Rule 16 initial conference before the Magistrate Judge, and at that conference, Slack’s counsel advised the Magistrate Judge that it wished to take a forensic examination of Plaintiff’s electronic devices to back up its claims that Plaintiff used these devices to repeatedly send himself text messages using Slack’s messaging platform. The Magistrate Judge then ordered the parties to confer as to a forensic examination protocol. The parties submitted a stipulation agreeing to the protocol which was then so-ordered by the magistrate judge on August 13, 2018. The Court then ordered that Slack was to conduct the forensic examination of Plaintiff’s computers and cell phones by no later than September 10, 2018. To date, however, counsel states that Slack has not taken a forensic examination of Plaintiff’s electronic devices.

Plaintiff’s counsel argues that Slack’s motion for sanctions must be denied because it lacks any proof that Plaintiff actually did what Slack says he did. Counsel argues that Slack is seeking sanctions against counsel and Plaintiff for filing an answer that has not been found to be false or frivolous. Counsel contends that Slack could have obtained the forensic examination it demanded, but instead when Plaintiff filed a denial to the counterclaims, Slack tried to bully Plaintiff into withdrawing his response by threatening him and his counsel with sanctions….

…

In support of its motion for sanctions, Slack takes the position that its proof as to Plaintiff’s conduct — and the conduct of Plaintiff’s counsel — is unrebutted and unrebuttable. The Court cannot credit Slack’s position at this stage in the case.

Slack has asserted counterclaims against Plaintiff alleging that Plaintiff fraudulently manufactured his TCPA claim by sending thousands of text messages to himself. Plaintiff has filed an answer to Slack’s counterclaims denying that allegation. Slack’s claims are pending, still in dispute, and they will proceed to discovery. Slack may view Plaintiff’s denials to be disingenuous and unsupported by the facts, but the procedural posture of the case precludes the Court from applying what is essentially a summary judgment standard to Slack’s motion for sanctions, which, if Slack’s position were credited, would ultimately result in a judgment in Slack’s favor prior to discovery.[5]

Consequently, the Court will deny without prejudice Slack’s motion for sanctions, reserving Slack’s right to reassert its motion at the appropriate time after discovery on its counterclaims.

In sum, the sanctions motion was premature. Should defendant prove that the answer to the counterclaim contained false denials, defendant can reassert the sanctions motion.

Edward X. Clinton, Jr.

 

Fifth Circuit Upholds Denial of Rule 11 Sanctions – despite false allegations in Complaint


The case is titled, Mr. Mudbug Incorporated v. Bloomin’ Brands, Inc., (5th Cir. 18-30626). Mr. Mudbug sued Bloomin and its claims were dismissed. The underlying dispute was a claim by Mr. Mudbug that Bloomin had breached the parties’ food supply contract. The district court dismissed the claims. Bloomin then moved for Rule 11 sanctions on the ground that some of the allegations in the complaint were false and that the lawyer who signed the complaint had not done a sufficient investigation of the matter. The district court denied the motion for sanctions and the Fifth Circuit affirmed. Its reasoning:

BBI’s Rule 11 motion was based on the theory that some factual assertions in MMI’s complaint had no evidentiary support and were wholly false. The district court did not definitively determine if MMI had violated Rule 11. Instead, it denied the motion because even if MMI had violated Rule 11, it thought that the dismissal of MMI’s claims was already sufficient to deter future misconduct. BBI now argues that dismissing frivolous claims with no evidentiary support—a result that is already accomplished on the merits—is not an adequate deterrent and therefore does not fulfill the purposes of Rule 11.

BBI’s position has some logic to it. But we cannot say that the district court abused its discretion by denying the Rule 11 motion on the grounds that dismissal was a sufficient sanction. While we have noted that dismissal is “better grounded, not on misconduct [under Rule 11], but on the merits under Rules 12, 41, 55, and 56,” we have also held in the same case that “district courts may theoretically still dismiss baseless claims or defenses as sanctions” under Rule 11. Thomas v. Capital Sec. Servs., Inc., 836 F.2d 866, 878 (5th Cir. 1988) (en banc). As we have never outlawed dismissal as an appropriate sanction under Rule 11, the district court’s denial of BBI’s Rule 11 motion was not based on an erroneous view of the law and was consequently not an abuse of discretion. BBI may feel that further sanctions are justified, but the district court found otherwise. Its decision is entitled to deference.