Category: Sanctions For Frivolous Lawsuits

Pro Se Litigants Escape Sanctions Despite the Lack of Merit of their pleadings

This case was brought by pro se litigants against several banks and financial institutions to challenge a foreclosure sale. The plaintiffs filed three sanctions motions against Defendants’ counsel. The court noted that all three motions were procedurally defective because the plaintiffs did not comply with the Rule 11 safe harbor. Additionally, the motions were substantively meritless. The court declined to grant sanctions because plaintiffs were pro se litigants.

Edward X. Clinton, Jr.


via Hopson v. SPECIALIZED LOAN SERVICING, LLC, Dist. Court, SD Mississippi 2018 – Google Scholar

Plaintiffs’ Counsel Complies with Safe Harbor = Rule 11 Sanctions Denied

Rule 11 contains a safe harbor under which a party can serve a sanctions motion on the opposing party. That party has 21 days to withdraw the complaint or other offending paper.

Here, Defendant served the Rule 11 motion and the Plaintiffs complied and withdrew the complaint.  Understandably, the court rejected the request for sanctions.  The reasoning is simple – because plaintiffs complied with the Rule, there is no motion for them to answer:

The Court finds that Rule 11 sanctions are unavailable in light of the Patels’ voluntary withdrawal of the complaint. See Hockley by Hockley v. Shan Enter. Ltd. P’ship, 19 F. Supp. 2d 235, 240 (D.N.J. 1998) (citing Fed. R. Civ. P. 11 Advisory Committee Notes (1993 Amendment) at 89 (West 1998)) (“The court can impose sanctions only if, after twenty-one days, the non-moving party has not withdrawn the offending petition or acknowledge[d] candidly that it does not currently have evidence to support a specified allegation.'”). To impose sanctions here under Rule 11 would undermine the purpose of the safe harbor provision, which is to curb apprehension that withdrawal may be viewed as evidence of a violation. See Fed. R. Civ. P. 11 Advisory Committee Notes (“Under the former rule, parties were sometimes reluctant to abandon a questionable contention lest that be viewed as evidence of a violation of Rule 11.”). In any event, the rule is clear: “If the pleading is withdrawn in timely fashion, the matter is at an end and sanctions become unavailable; a `safe harbor’ is provided.” Thomas v. Treasury Mgmt. Ass’n, Inc.,158 F.R.D. 364, 366 (D. Md. 1994)See Fed. R. Civ. P. 11 advisory committee’s note (“If, during this period, the alleged violation is corrected, as by withdrawing . . . some allegation or contention, the motion should not be filed with the court.”).

Further, Defendants provide no past examples of sanctions imposed for threatening to refile a complaint that has been voluntarily dismissed without prejudice. Indeed, even a successful Rule 11 motion does not preclude the sanctioned party from refiling its complaint. See Cooter & Gell v. Hartmarx Corp.,496 U.S. 384, 396 (1990). That does make defendants answerable to a unending sequence of abortive litigation. Rather, the threat of successive withdraw-and-refiling is met by Rule 41(a)(1), which provides that voluntary dismissal counts as a final adjudication if “the plaintiff previously dismissed any federal- or state-court action based on or including the same claim . . . .” Fed. R. Civ. P. 41(a)(1)(B). See Cooter & Gell, 496 U.S. at 397 (citations omitted) (“Rule 41(a)(1) was intended to eliminate the annoying of a defendant by being summoned into court in successive actions and then, if no settlement is arrived at, requiring him to permit the action to be dismissed and another one commenced at leisure.”). Defendants’ Rule 11 motions are therefore denied.

The court also denied a motion for Section 1927 sanctions because there was no multiplication of the proceedings. The court noted that such a motion could be brought if the Plaintiffs refiled their complaint.

via Patel v. COLE SCHOTZ, PC, Dist. Court, D. New Jersey 2018 – Google Scholar

An Old But Important Sanctions Case Where Sanctions Were Defeated Because the Defendant Did not Comply with the Safe Harbor.

This is a case where the Defendant sought sanctions from an attorney but never complied with the safe harbor required by Rule 11(c)(2). The safe harbor requires the party seeking sanctions to serve an actual motion on the other side. Instead, the Bank argued that it had “substantially complied” by writing two letters to the lawyer. The District Court awarded sanctions, but the Seventh Circuit reversed the award. The explanation follows:

To return to the case at hand, PNC Bank simply did not comply with this warning–shot/safe–harbor requirement. It did not prepare and serve a Rule 11 motion on NITEL and Riffner, nor did it allow 21 days for them to withdraw NITEL’s claims. The district court concluded that PNC Bank’s two settlement offers with Rule 11 threats to Riffner were sufficient warning shots under Rule 11(c)(2) on the theory that they substantially complied with the rule. NITEL II, 2015 WL 1943271, at *4. To support the substantial compliance approach, the court cited our decisions in Methode Electronics, Inc. v. Adam Technologies, Inc., 371 F.3d 923, 927 (7th Cir. 2004) (dicta), and Matrix IV, Inc. v. American National Bank & Trust Co. of Chicago, 649 F.3d 539, 552–53 (7th Cir. 2011).

Our line of cases on “substantial compliance” with the warning–shot requirement began with Nisenbaum v. Milwaukee County, 333 F.3d 804, 808 (7th Cir. 2003), where we concluded that where the failure to satisfy the warning–shot requirement was only “technical,” the moving party’s substantial compliance with the warning–shot requirement entitled it “to a decision on the merits.” In Nisenbaum, we held that there was substantial compliance with Rule 11 because the defendants sent a letter—rather than a motion—that explained the grounds for sanctions and provided more than 21 days to remedy the problem. Insisting on a formal motion seemed unduly formalistic.


PNC Bank’s warning–shot letters fell far short of even the generous target of substantial compliance.5

On July 31, 2012, before discovery began, PNC Bank’s lawyer sent a letter to Riffner offering to settle the case. The letter explained the defects in the breach of contract claim. We assume the explanation of those defects was sufficient. The problems in terms of substantial compliance were that the letter demanded dismissal of the suit within eight days, as well as payment to PNC Bank of $9,195 for its fees and costs. The letter also demanded within five days a written response agreeing to the demand. The letter concluded: “If I do not receive written confirmation by that date, please be advised that PNC will be seeking sanctions under Federal Rule 11 against NITEL and your firm ․ .”

On April 2, 2013, shortly after the close of discovery and before moving for summary judgment, PNC Bank’s lawyer sent a second settlement offer. It again reviewed the serious problems with NITEL’s case and explained why the suit was frivolous. This letter proposed different settlement terms, demanding that NITEL dismiss the complaint with prejudice and pay PNC Bank $24,000. The letter demanded written acceptance within six days. The settlement proposal concluded much as the earlier letter had: “If I do not receive written confirmation by that date, please be advised that PNC will seek sanctions under Federal Rule 11 against your firm and NITEL, for all fees and costs incurred by the bank in defending your client’s baseless and patently false complaint.”

The Rule 11 threats did not transform PNC Bank’s settlement offers into communications that substantially complied with the Rule 11(c)(2) warning–shot/safe–harbor requirements. Even if we treat the criticisms of NITEL’s case and litigation tactics as containing the equivalent of a Rule 11 motion, the letters simply did not offer NITEL or Riffner the 21–day safe harbor that was offered in Nisenbaum or Matrix IV. Substantial compliance requires the opportunity to withdraw or correct the challenged pleading within 21 days without imposition of sanctions. Neither PNC Bank letter offered that opportunity. PNC Bank was entitled, if it chose, to huff and puff about Rule 11 in its settlement demands for dismissal of baseless claims. But its posturing did not amount even to substantial compliance with the warning–shot/safe–harbor provision, let alone to the actual compliance that other circuits demand.

The district court’s award of sanctions against Riffner is REVERSED.


Employment Lawsuit Avoids Sanctions Despite Arbitration Clause in Employment Agreement

Plaintiff was employed by Defendant for 22 years. He became involved in a dispute with Robert Mercer, who was Co-CEO of the Company. The dispute concerned the political views of Mercer. Plaintiff was suspended, then terminated. Despite have an employment agreement with the Defendant which required him to submit any dispute “relating to” his employment to arbitration, plaintiff filed suit in federal court.

Defendant moved to compel arbitration and moved for Rule 11 sanctions. Defendant argued that there was no basis for the case to be filed in federal court and that the lawsuit was filed in court to generate adverse publicity for the Company.

Federal law supporting arbitration clauses in employment agreements is exceptionally strong. Despite that long-standing federal law, the district court denied the motion for sanctions. The court discounted the claim of an improper purpose by finding it speculative. The court held that the sanctions motion was premature because the dispositive motion (to compel arbitration) had not been decided).

via MAGERMAN v. Mercer, Dist. Court, ED Pennsylvania 2018 – Google Scholar

Rule 11 Motion Denied Where It Was Used Incorrectly to Substitute for A Dispositive Motion

This is an intellectual property dispute, where the defendant answered the complaint alleging trademark infringement and then moved for Rule 11 sanctions. The case caption is FCOA, LLC v. Foremost Title and Escrow Services, LLC,  Case No. 17-Civ-23971-WILLIAMS/TORRES.  United States District Court, S.D. Florida.

Plaintiff claimed that the defendant’s use of the term “Foremost” infringed Plaintiff’s trademarks and other intellectual property rights.

Defendant did not file a dispositive motion. Instead, it filed a Rule 11 motion. Defendant argued that the lawsuit was frivolous, given that the two companies were in different lines of business and there was no likelihood of confusion.

The court denied the Rule 11 motion on two grounds. First, it noted that the use of Rule 11 was improper because Rule 11 is not designed to serve as a dispositive motion. The court explained:

Defendant’s motion is unpersuasive for at least two independent reasons. First, the motion represents an improper attempt to convert a disagreement over the factual allegations and legal arguments in Plaintiff’s complaint into a sanctions dispute. Defendant’s motion is merely an attempt to seek disposition on the merits of this case via Rule 11. Yet, a Rule 11 motion is not an avenue to seek judgment on the merits of a case. Instead, its purpose is to determine whether an attorney has abused the judicial process. See Bigford v. BESM, Inc., 2012 WL 12886184, at *2 (S.D. Fla. Oct. 12, 2012) (“`Rule 11 should not be used to raise issues as to the legal sufficiency of a claim or defense that more appropriately can be disposed of by a motion to dismiss, a motion for judgment on the pleadings, a motion for summary judgment, or a trial on the merits.'”) (quoting In re New Motor Vehicles Canadian Export Antitrust Litigation, 244 F.R.D. 70, 74 (D. Me. 2007) (denying Rule 11 motion without prejudice to its renewal “if and when [Defendant] obtains summary judgment”) (citations omitted)); see also Safe-Strap Co., Inc. v. Koala Corp., 270 F. Supp. 2d 407, 417-21 (S.D.N.Y. 2003) (discussing that Rule 11 sanctions are not a substitute for motions for summary judgment).

As the plain language of Rule 11 indicates, “an attorney . . . certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances” that a court document “is not being presented for an improper purpose”, “the claims, defenses, and other legal contentions are warranted by existing law,” and the “factual contentions have evidentiary support. . . .” Fed. R. Civ. Pro. 11(b). Instead of relying on a Rule 11 motion to dispose of this case, Defendant should have filed a dispositive motion — such as a motion to dismiss — rather than answering Plaintiff’s complaint. Because Defendant relies on the wrong type of motion for the relief sought, Defendant’s motion must be DENIED.

The second reason for the denial was that the motion was premature. Again the explanation:

Second, Defendant’s motion must be denied because it is premature at this stage of the litigation. As the Eleventh Circuit has found, Rule 11 sanctions are ordinarily not determined until the end of a case:

Although the timing of sanctions rests in the discretion of the trial judge, it is anticipated that in the case of pleadings the sanctions issue under Rule 11 normally will be determined at the end of the litigation, and in the case of motions at the time when the motion is decided or shortly thereafter.Donaldson v. Clark, 819 F.2d 1551, 1555 (11th Cir. 1987) (quotation marks and citation omitted). The Eleventh Circuit’s position is consistent with the Rules Advisory Committee which “anticipated that in the case of pleadings the sanctions issue under Rule 11 normally will be determined at the end of the litigation. . . .” Fed. R. Civ. P. 11 (Advisory Committee Notes, 1983 Amendment); see also Lichtenstein v. Consolidated Serv. Group, Inc., 173 F.3d 17, 23 (1st Cir. 1999)(

In other words, if the Defendant had filed and won a summary judgment motion, it would be able to seek sanctions. Using Rule 11 was improper as the case had not been decided.

Edward X. Clinton, Jr.

Sanctions Awarded For Frivolous Foray Into Federal Court

This case involves two litigants who lost a state court custody case.  They then sued everybody the could think of for violating their constitutional rights. Everybody included two state court judges, two guardians ad litem and five lawyers. The court dismissed the action and awarded sanctions.  One basis for the dismissal was the Rooker-Feldman doctrine which, to simplify, prohibits a litigant who lost in state court from trying to relitigate the same issue in federal court.

The rationale:

I agree with defendants that the claims that plaintiffs asserted in their complaint are legally frivolous. As discussed above, plaintiffs have not even attempted to assert an arguable basis for suing defendants Veith, Otto or Asher. Further, plaintiffs’ counsel should have known that plaintiffs’ claims were legally groundless. Plaintiffs’ counsel violated Rule 11(b)(2) by asserting claims that are not “warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.” By failing to withdraw the frivolous claims after being warned by defendants, plaintiffs’ counsel caused both defendants and the court to expend significant time and resources in addressing the claims. Accordingly, I conclude that an appropriate sanction is to require plaintiffs’ counsel, Eliyahu Yuli Kaplunovsky, to pay the attorney fees and expenses defendants Veith, Otto and Asher incurred in defending against the frivolous claims. Brandt v. Schal Associates, Inc., 960 F.2d 640, 646 (7th Cir. 1992)(“When defending a spurious lawsuit attorneys’ fees are an inevitable ingredient in the expenses, and they represent one reasonable measure of sanctions aimed at deterring the perpetrator and compensating the victim.”).

via Pettengill v. Cameron, Dist. Court, WD Wisconsin 2018 – Google Scholar

Wisconsin District Court Rejects Effort to Attack Illinois Sanctions Award

David Novoselsky was sanctioned in the sum of $100,000 in the Circuit Court of Cook County for actions related to a case he was handling. For some reason, Novoselsky then filed a lawsuit in the federal district court for the Eastern District of Wisconsin to challenge the sanctions award.

His lawsuit was dismissed and the District Court awarded further sanctions for the filing of a frivolous lawsuit.

The district court dismissed the case for lack of subject matter jurisdiction under the Rooker-Feldman doctrine. That doctrine generally prohibits federal courts from reviewing State Court judgments.

The district court also awarded sanctions pursuant to Rule 11 and 28 U.S.C. §1927.

The court first ruled that the Rule 11 letter sent to Novoselsky constituted “substantial compliance” with the safe harbor requirement in Rule 11. That usually requires the moving party to serve an actual draft motion for sanctions on the other party. The letter was deemed sufficient in this case.

The district court then found that Novoselsky’s arguments for jurisdiction were frivolous:

The Court agrees that these arguments were frivolous. It will address each in turn. First, and easiest, is Novoselsky’s claim that subject-matter jurisdiction could be premised on the Declaratory Judgment Act. It cannot. Rueth v. U.S. E.P.A., 13 F.3d 227, 231 (7th Cir. 1993). There is no ambiguity in the case law on this point; in any event, Novoselsky has apprised the Court of none. He should have known that this was an untenable argument.

Second, Novoselsky contended that the amount in controversy was satisfied as to Stevens because Judge Propes’s sanctions order “requires not only the payment of the face amount of $75,000 but interest accruing” on that sum. (Docket #23 at 5). However, the diversity statute, 28 U.S.C. § 1332, excludes interest. That statute requires that “the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332(a). In her order, Judge Propes awarded Cushing the sum of $25,000 and Stevens $75,000. Neither meets the amount-in-controversy requirement standing alone. Anthony v. Sec. Pac. Finan. Servs., Inc., 75 F.3d 311, 315 n.1 (7th Cir. 1996). Judge Propes’ order that interest accrue on the amounts does not change things, since that interest is incidental, arising only by virtue of delay in payment, and is not itself a basis for the present suit. See Principal Mut. Life. Ins. Co v. Juntunen, 838 F.2d 942, 943 (7th Cir. 1988); 14AA Charles Alan Wright et al., Fed. Prac. & Proc. § 3712 (2011). Whatever post-judgment interest has accrued on these awards cannot be considered.

Moreover, the two amounts cannot be aggregated in order to cross the jurisdictional threshold; that is permitted “only if the defendants are jointly liable; however, if the defendants are severally liable, plaintiff must satisfy the amount in controversy requirement against each individual defendant.” LM Ins. Corp. v. Spaulding Enters. Inc., 533 F.3d 542, 548 (7th Cir. 2008). Novoselsky did not credibly contend that payment to Stevens would affect his obligation to Cushing, or vice versa, other than to baldly state that Judge Propes awarded them as a “unitary sum.” (Docket #23 at 6); Batson v. Live Nation Entm’t, Inc., 746 F.3d 827, 833 (7th Cir. 2014) (finding an argument “forfeited because it was perfunctory and underdeveloped”). A plain reading of her order reveals that the two awards are distinct despite being issued at the same time. Thus, this argument too was wholly meritless.[6]

Third, and finally, is Novoselsky’s allegation that personal jurisdiction existed over Movants. The Fourteenth Amendment’s Due Process Clause protects a defendant from being haled into court in a state where it has no meaningful connections. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 464 (1985). Due process requires that for personal jurisdiction to exist over a nonconsenting, out-of-state defendant, the defendant must have “certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'” Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).

However, for specific personal jurisdiction—the only type arguably relevant in this case—mere minimum contacts are not enough. uBID, Inc. v. GoDaddy Grp., Inc.,623 F.3d 421, 429 (7th Cir. 2010). It is also important that the plaintiff’s claims arise from or relate to the defendant’s contacts with the forum State. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)Int’l Shoe, 326 U.S. at 317-18. Specific personal jurisdiction exists only where the defendant’s contacts with the forum state “directly relate to the challenged conduct or transaction.” Tamburo v. Dworkin, 601 F.3d 693, 702 (7th Cir. 2010).

The sole allegation connecting Movants with the State of Wisconsin was their decision to preserve Judge Propes’ sanctions award by filing proofs of claim and an adversary complaint for nondischargeability in Novoselsky’s ongoing bankruptcy proceedings in this district. See (Docket #1 ¶ 7) (“[T]he dispute over the sum in controversy in this complaint arises from claims brought against Plaintiff by Defendants seeking relief against Plaintiff in the Courts of the Eastern District of Wisconsin.”). Those actions have nothing at all to do with Novoselsky’s claims in this case.

As the allegations of the complaint itself make clear, this case rests entirely on the parties’ interactions in Illinois. Novoselsky engaged in sanctionable conduct there, Judge Propes’ sanctions award was issued there, and the parties disputed the legality and interpretation of the sanctions award there. Id. ¶¶ 8-11. Indeed, even the several other cases that Novoselsky thought had some bearing on the sanctions award were all either Illinois state or federal cases. See id. ¶¶ 12-28. Although not relevant to the propriety of personal jurisdiction over Movants, it is worth noting as well that the breach-of-contract claim against the Estate was likewise based solely in agreements and conduct that occurred in Illinois. See id.¶¶ 29-33. Thus, while it is true that Movants sought to reap their sanctions award from Novoselsky’s bankruptcy estate, his claims regarding the sanctions award have no connection whatsoever to this State. Personal jurisdiction over Movants was not plausible in this case. See Burger King, 471 U.S. at 474-75 (a defendant must have sufficient contacts with the forum, related to the suit at bar, that it “should reasonably anticipate being haled into court [in the forum State]” on that suit).

Novoselsky’s opposition to Movants’ motion to dismiss did not help matters. It was scattered, incoherent, and quite clearly the product of no meaningful legal research. For instance, without any citation to authority, Novoselsky maintained that the Declaratory Judgment Act “on its face does provide for jurisdiction.” (Docket #23 at 5). This is simply not true.

The brief also fell well short on the matter of personal jurisdiction. Novoselsky stressed that Movants tried to obtain sanctions despite—for reasons he did not cogently explain—the need for those sanctions to be paid to the Estate. Id. at 8-9. This, he reasoned, represented Movants’ affirmative choice to enter Wisconsin and fight Novoselsky here over the sanctions award. See id. But here again, his brief is devoid of appeal to any authority other than, apparently, his own intellect.

Litigants of all kinds—and perhaps especially lawyer-litigants— should be expected to conduct reasonably careful research in finding that jurisdictional premises for suit are satisfied. Novoselsky did not do so, and that failure is worthy of sanctions. Movants’ cited cases support this view. First, in International Shipping Co., S.A. v. Hydra Offshore, Inc., 875 F.2d 388, 393 (2d Cir. 1989), plaintiff’s counsel was sanctioned for filing a complaint that on its face ran afoul of the complete diversity requirement of 28 U.S.C. § 1332. In particular, he had named aliens on both sides of the dispute, thereby clearly and unequivocally destroying diversity. Id. at 391. The jurisdictional defect was unmistakable to a reasonably prudent lawyer. Id.

Even more apt is a comparison to a prior instance in which a federal court meted out sanctions against Novoselsky. In MB Financial, N.A. v. Stevens, 678 F.3d 497, 498 (7th Cir. 2012), the Seventh Circuit affirmed a sanctions award against Novoselsky for frivolously removing an Illinois state case to federal court. The problems with removal were manifold— Novoselsky was not a party in the state case, much less a defendant; he did not secure any of the defendants’ consent to remove; removal was not proper because the defendants were all Illinois citizens; and the time for removal had long since expired. Id. at 498-99.

Here, as in numerous prior cases, Novoselsky offered outlandish jurisdictional claims backed up by uninformed, spurious arguments. The problems in this case would be plain to any lawyer of reasonable ability after consultation with pertinent authorities. Novoselsky apparently eschewed those authorities in favor of his own beliefs about what the law is. Consequently, the Court finds that Novoselsky’s jurisdictional contentions in this case were frivolous, violated Rule 11(b)(2), and are deserving of an appropriate sanction.[7]

In sum, the court awarded sanctions in the form of attorney’s fees, but the left the specific amount of those fees for a further hearing.

via NOVOSELSKY v. ZVUNCA, Dist. Court, ED Wisconsin 2017 – Google Scholar