Fifth Circuit Dismisses Appeal of Sanctions Order

This is a case that was removed from the state court to the federal court. The plaintiff filed a motion to remand the case and the court, sua sponte, ordered defense counsel to show cause as to why he should not be sanctioned. The magistrate was concerned that some of the representations made by counsel were not true.  Ultimately the trial court allowed the Defendant to amend its notice of removal. The court also sanctioned defense counsel under Rule 11. The magistrate then sanctioned the attorney for one of the defendants:

On January 18, 2017, the magistrate judge held a hearing on the order to show cause. Following this hearing and an in camera inspection of documents in connection with the drafting of the initial notice of removal, including U&E’s efforts to obtain jurisdictional facts related to the LLC members, the magistrate judge issued a long, detailed order. See Nogess v. Poydras Ctr., LLC, No. CV 16-15227, 2017 WL 396307 (E.D. La. Jan. 30, 2017). The court granted Velocity’s motion to amend the notice of removal. Id. at *11. The court found that U&E failed to conduct a reasonable inquiry prior to filing the initial notice of removal and its failure merited Rule 11 sanctions. Id. at *12-14. The court also found that Ungarino misrepresented material facts at the December 21 hearing and that Ungarino’s ex parte communications with the district judge’s chambers were improper. Id. at *15-17. Accordingly, the court concluded that Ungarino’s conduct violated one or more of the Louisiana Rules of Professional Conduct and referred the matter to the Eastern District of Louisiana’s Lawyers’ Disciplinary Enforcement Committee for further investigation, proceedings, and discipline, if warranted. Id. at *17.

The District Court denied the appeal and the lawyer moved to certify an interlocutory appeal. The district court entered a final judgment on the sanctions award under Rule 54(b).

The Court of appeals dismissed the appeal because the requirements of Rule 54(b) were not met. Rule 54(b) allows the court to enter a partial judgment on some, but not all, of the claims for relief. Because the sanctions motion was not a “claim for relief” the district court could not enter a Rule 54(b) judgment. The appeal was dismissed.  The court also rejected an appeal under the collateral order doctrine.

The result here is significant because the lawyer who was the subject of the sanctions motion and award must wait until the end of the entire case to appeal the sanctions award. That could mean several years of waiting for the end of the case with a sanctions award hanging in the balance.

via NOGESS v. POYDRAS CENTER, LLC, Court of Appeals, 5th Circuit 2018 – Google Scholar

Court Sanctions Attorney For Filing Frivolous FDCPA Claim

A lawyer filed a claim under the Fair Debt Collection Practices Act, 15 U.S.C. Section 1692 (FDCPA) alleging that a debt collection letter from a law firm was misleading. The problem with this allegation is that the law firm defendant faithfully used the “safe harbor” language approved by the Second Circuit. The Defendant moved for judgment on the pleadings and the court granted the motion.  The court declined to sanction the plaintiff. However, the court awarded Rule 11 sanctions, on its own motion, against the plaintiff’s attorney.

The court reasoned that any competent lawyer practicing in the area of debt collection would know that the case,  Avila v.Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016), provided a safe harbor for the debt collector. If the debt collector followed the language of Avila, he or she could not be held to have violated the FDCPA, at least in the Second Circuit. The court concluded that the lawyer for the plaintiff, Igor Litvak, should not have brought the claim or should have dropped it once he became aware of the safe harbor. The court explained:

Here, Timoshenko’s claim is patently frivolous in light of the Avila safe harbor, for all of the reasons discussed above. Moreover, the evidence suggests that Litvak, her attorney, knew this to be the case. As described in Defendant’s brief (and undisputed by Litvak), Defendant’s counsel spoke with Litvak on August 9, 2017 and advised him that the Collection Letter did not violate the FDCPA because the language at issue conforms to the safe-harbor language endorsed by the Second Circuit in Avila. See ECF No. 8-1 at 12. Any competent attorney would know Avilaforecloses Timoshenko’s claim, and once made aware of that case (assuming, generously, that he did not already know about it), Litvak should have advised his client to voluntarily dismiss this action. Instead, he responded with the same frivolous argument that the Court dispensed with above, pointing to Carlin and Balke and vowing to press on. But the patina of legality afforded by reference to plainly inapposite case law does little to cloak what looks to the Court suspiciously like a shakedown. Defendant likely could have settled this case for significantly less than the legal expenses it has incurred in filing its answer and motion, and no doubt Litvak knew as much when he decided to defend an indefensible position.

In view of the above, the Court will issue an order requiring Litvak to show cause why he should not be sanctioned for violating Rule 11(b)(2).[2] Litvak is advised that the Court will also be considering whether to order him to pay Defendant’s attorneys’ fees and costs pursuant to 28 U.S.C. § 1927. Defendant is welcome (though not required) to weigh in on the § 1927 issue, but no legal expenses incurred in briefing the issue will be included in any eventual award.

via TIMOSHENKO v. MULLOOLY, JEFFREY, ROONEY & FLYNN, LLP, Dist. Court, ED New York 2018 – Google Scholar

Sanction Award for Fabricated Evidence Is Affirmed by the Fifth Circuit


The sanctions were awarded based on the court’s inherent power. The ruling affirming the sanctions award is quoted here:

Plaintiff-Appellant Jon Deutsch and his attorney, Omar Rosales, appeal from a sanctions order against Rosales in the form of an award of attorney’s fees to opposing counsel. The district court concluded that Rosales engaged in bad faith by (1) making numerous false and abusive statements, (2) fabricating evidence and lying about doing so in filings and a show cause hearing, and (3) filing a groundless police report and protective order against defense counsel. The court imposed sanctions under its inherent power, awarding defense counsel $175,673.78 in fees and costs.

The standard of review for inherent power sanctions is abuse of discretion. “We review the facts underlying the district court’s decision to sanction for clear error and `its underlying conclusions of law de novo.‘” The court may award attorney’s fees as a sanction under its inherent power. To do so, “[the] court must make a specific finding that the attorney acted in `bad faith.'” But the court “must comply with the mandates of due process,” both in assessing bad faith and in determining the amount of fees to award.

Much of Rosales’s argument stems from his mischaracterization of the sanctions as Rule 11 sanctions. But the defendants’ motion for sanctions and the sanctions order itself expressly invokes the court’s inherent power. This is one instance when Rule 11 is not “up to the task,”[7] because the conduct at issue involved not only improper filings, but also falsifying evidence and using a state court tribunal to delay the litigation.

Rosales never challenges any of the magistrate judge’s factual findings regarding his conduct and his bad faith. Nor could he. Rosales’s bad faith is apparent from the record. Further, there is no serious doubt that Rosales was given due process; that is, notice and opportunity to be heard. The defendants’ briefing described the allegedly sanctionable conduct, as did the magistrate judge’s show cause order. The magistrate judge held a hearing at which Rosales had the opportunity to present evidence.

Rosales’s contentions are frivolous and involve serious misstatements of the law and facts. He mounts numerous attacks on the magistrate judge assigned to the cases and the district judge assigned to some of them. Rosales’s insistence on placing the blame for his conduct anywhere but on himself—to the point of impugning the integrity of the courts—underscores the appropriateness of these inherent power sanctions. We agree with the magistrate judge that it is regrettable that someone who purports to enforce the rights of disabled persons engages in such reprehensible conduct. We are baffled by Rosales’s claims that his actions, including falsifying evidence, were somehow justified. Not only did Rosales make many inappropriate remarks, he perpetuated a fraud on the court. The award of inherent power sanctions was not an abuse of discretion.

The judgment of the district court awarding sanctions is AFFIRMED. The motions carried with the case are dismissed as moot.

via Deutsch v. PHIL’S ICEHOUSE, INCORPORATED, Court of Appeals, 5th Circuit 2018 – Google Scholar 

Footnotes were omitted.


Rare and Exceptional Case Does not Warrant Rule 11 Sanctions

This is a case where the third party defendants moved for sanctions, apparently before they obtained a dismissal of the complaint.  The court could have rejected the sanctions motion on that ground. Instead, the court rejected the motion on the ground that the case was “rare and exceptional” and did not merit sanctions. A brief quotation explains the ruling:

The Court cannot accept the Third Party Defendants’ invitation to accept they would prevail and obtain dismissal with prejudice. Even if Third Party Defendants did prevail, on this record, the Court cannot find the third party claims were sufficiently frivolous or brought for an improper purpose. See, e.g., Hochman Decl., Dkt. No. 85-1. The Court cannot find that this is the type of “rare and exceptional case” justifying the imposition of Rule 11 sanctions.

via EUROSESMILLAS, SA v. PLC DIAGNOSTICS INC., Dist. Court, ND California 2018 – Google Scholar

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.