it feels a little bit like walking into a hornet's nest here my issues are much more narrow than those that you just heard in this appeal your honour's i'm appealing and my firm is appealing the trial court's decision not to award sanctions for the frivolous filing of a complaint that included claims of mail fraud wire fraud conversion breach of fiduciary duty against me and my law firm when all i did all i have ever done for prosper business development is serve as its counsel but before we get to the underlying merits of rule eleven motion case poses the proposition that nothing was given to the offending party before the rule of a motion was filed the there was no letter and no motion in contrast here in june of two thousand and eleven i'm sorry on december sixth of two thousand and ten i wrote a letter to opposing counsel demanding that they dismiss all of the claims against my law firm in may because they were outrageous and completely unfounded but why should the thundering of a letter comply with the rules requirement that there be a filing a motion giving the twenty one days they are the because the purpose of the rule is to offending party twenty one days to correct their behavior and it elevates form over substance to suggest that a letter doesn't serve the same purpose when the letter in this case used the same language and supply the same information that a motion would have in other words the argument or reason for requiring a motion which is that it brings to the attention of the offending party lawyer that there is a fundamental problem under rule eleven mean that the whole theory you know in the advisory committee notes and so forth it is your honor that that the purpose i think is this court has pronounced in red or that the purpose is to give notice to the offending party that they and give them an opportunity to correct the improper behavior to suggest that that same notice and the same opportunity isn't provided by letter is to elevate form over substance it's to suggest that if i had written the word motion on my letter that that would properly  comply with rule eleven whereas otherwise it doesn't i think it's also important your honor to note that the purpose is served to give them the opportunity to withdraw the offense of pleading and in this case within approximately a week i did hear back be required it would certainly be an exercise in futility now when they have told us before the twenty one days have expired that they're not going to do it in your research mr arnold with respect to other circuits taking put the position on this matter did you see a consistent benefit to your side with respect to those cases that have upheld this strict otherwise been given a motion by my count assuming that that it's a correct and accurate as of today i think there are five circuits that require strict conformity to the motion practice and three including this circuit that doesn't necessarily require it be in the form of a motion i would i would ask the court to to review the barker case although i can see that it's unpublished unlike ritter but it is identical to this case where two letters were sent to the opposing party to withdraw the offensive pleading they refused the judgment was entered then the motion was served and the court granted sanctions and this court approved of that it would be an exercise in futility after sending a letter and after having that letter proposal rejected to suggest that we now need to send the motion the i'm sorry i didn't then you think the standard here to be applied by the court in connection with the ruling on the sanctions motion however was improper i think on page five of judge sauls decision essential he said that the standard in that district in southern district of ohio was to only punish people in the event they persisted in pursuing emeritus claim that's the wrong standard it effectively gives a free pass to anybody who files a frivolous complaint until they finally withdraw it i had to spend tens of thousands of dollars to respond to a complaint that alleged i engaged in rico violations of mail fraud and wire fraud i converted to funds i engaged in breaches of fiduciary duty to an entity to which i didn't owe a duty after they refused to withdraw the offense of pleading we then did file a motion to dismiss and i think that the trial court's statements in connection with the ruling on that are illuminating on may twenty seven the court granted that motion to dismiss and it said among many other things as a pertains to the rico claims for example the plaintiff's complaint is replete with conclusory allegations they have failed to provide any facts identifying the persons involved or the time place or contents of the allegedly fraudulent mail or wire communications and he went on and on now we heard in response to the motion for sanctions that the underlying counsel and i do want to point out it was not present counsel for p had they reviewed numerous documents and they talked with their clients and they came to the conclusion based upon those conversations in the review of documents that we have engaged in this misconduct but what they don't tell us why did why did well i mean you know if we want to call it a complaint yeah yeah he did he think just filled a little it suggests that there's an appreciation of the the difference and the need to file  and that of course provoked another abuse of process or case of but having not gotten any response favorable at least we then went to motions practice and a judge frost ruled that the although it was a close call it was the practice in that district court to only sanction persistent conduct a rather than the initial conduct now the missing element between what penn consistent well punk at coney and it's lawyers say is they claim to have had a reasonably objective basis which is the standard in the six circuit to file the complaint they tell us about many documents and conversations that they've had that caused them to form that belief but they don't tell us how they got there they can look at documents in the entire library of congress but unless we see something in those documents that suggests that i did anything of our traditional legal services was no effort to pursue any of that other than the filing of the complaint in other words they didn't pursue that you were a rico they label you as such in their complaint but there was no continuation of that is i get it it was simply the filing that's correct your honor because we filed a motion to dismiss and it was granted it was granted that's why did they oppose the motion to dismiss it of course so there was litigation at the motion grounding they had well the information that they that they provided your honor it was characterized by the district court in the reason that was dismissed was are closed with regard to the law firm defendants plaintiffs complaint is particularly deficient neither the complaint nor the memorandum in opposition contains any facts suggesting that the law firm defendants is involvement in the alleged enterprise constituted anything more than the provision of legal services i got sued for being a lawyer for prosper business development corp spent about forty thousand dollars as of the date mr satanic wrote his letter and then and against that backdrop having no reasonable basis to have made those claims the judge denied our motion for sanctions because it wasn't a persistent conduct of me or misconduct it was only the following of the complaint ok supposing that you hadn't sent a letter before the dismissal of rico claim to we're dealing with a hypothetical now if you simply filed a motion to dismiss the rico claim and you want should you then be able to file a motion for rule eleven thanks for the filing  a rico claim against you runner in those circumstances i think that the the offending party has been deprived of the twenty one day safe harbor by which they could withdraw the offense of pleading and so the answer would be no but i do think you had a telephone conference and in the telephone conference you threatened the think ins motion well i think under the circumstances your honor it gets closer but i think the writing so that we can all look back at it later and see that it c forms otherwise with the provisions of rule eleven is sufficient we would then get into the sufficiency of an oral conversation of whether it complied with the with the mandates ruhleben see and i'm sure there would be litigation over that i think  hall mark is notice and the opportunity to withdraw the offense of pleading and here they were given notice they were given the opportunity to withdraw the offense of pleading and every time every opportunity they refused and that's  judge's ruling that they should not be sanctioned because they didn't engage in a persistent course of conduct is an abuse of discretion it didn't apply the correct standard at all if the district judge didn't apply the correct thing under and if we agreed with your no need to file the actual motion argument what would be the proper remedy for this court would be to remain incident the district judge could apply the correct standard i think that the proper remedy would be to remand to permit us to conduct discovery because he rolled before permitting me to make it determined to inquire what the reasonable basis was upon which the complaint was filed and then consider using the reasonably objective standard whether he will award sanctions or not because simply because obviously be filed a motion doesn't mean we're entitled to it but he does need to apply the correct standard thank you in your red light  that substantial compliance with a warning letter is ok but again the ritter case instructs that there be strict adherence to the rules procedure and granted that case didn't address a warning letter it just had to do with the motion has to be served twenty one days before a final judgment or a decision on the issue and my understanding is your opponent was referring to a case that was called barker and is this the i've found a burker case from  ninety eight that is the rule thirty four orders that what yes i saw parker versus bank one and then had inverses let and both of those sort of imply that a warning letters ok proposition that it seems that the issue is unsettled here because it was in a footnote and this court just said that this opinion does not endorse the use of a letter in place of the requisite safe harbor motion but that issue wasn't raised in the case because so your opponent makes the argument that this  matter of form over substance and if you only put motion on the letter then he would be home free how do you respond to that well if you're going to adopt a substantial compliance th vs credit collection services which is a southern district of ohio case and basically they said if the drafters of the rule wanted you to be able to use that warning letter they could have put that in the rule but the rule it's just that's their argument yeah  there's a rule and there's a rule and that's a rules correct and that's not serving a motion as of the day i wondered if there were any policy reasons behind it well i would just say if i like a practical reason i think maybe judge he was getting at there tends to be a lot of blustering back and forth between attorneys and we've all got our i phones attached to us and when we start firing off text messages or e mails threatening ruhleben sanctions we have to draw a line somewhere as far as the substance and stumps to have issues i realize that all of our claims are dismissed on the pleadings but just because a claim is shown to be groundless it doesn't mean that sanctions are required or even appropriate it's basically discretion i don't want to throw myself or my law firm under the purpose rather the complaint was the probably have an aptitude and misguided legal research rather than a failure to attempt a reasonable inquiry into the law so not that i think that's what happened here but even if the district court thought that or if you were to think that it still doesn't mean that sanctions are required is there a problem here from where that for your for in that the whole basis for going to federal court is the rico claim and you're you're not giving it in the ass tick support for the rico claim here you're saying well maybe this was properly dismissed so the whole federal action shouldn't be in federal court if there is no rico claim correct as you  firm represented prosper and obtain the four point seven five million dollar award on their behalf and step on big research as the half which would have been titled panned to their share which is what they later had to  arnold argued in the in the trial court agreed that that was just saying that was traditional legal services there's nothing more but i did find some support in the case law where you can have traditional legal services but if you know that it's in further further ends up you know a fraudulent act and the case i cited granted come after it was a published case from this circuit that has been a star in two thousand and twelve and they said that you can show that the the attorney participated in the enterprise by either making decisions on behalf of the enterprise or by knowingly carrying them out so even if we didn't do a good job of cleaning it that was our theory that the you know the law firm was kneedeep in all these things that we were saying were improper and so even if they're just doing traditional legal services it can still state rico claim you could have tell me if i'm wrong you could have appealed the dismissal of the rico claim in this appeal that was just argued a half an hour ago right but you did not but we didn't and i guess that would go back to what we were saying before the reasoning that the district court used in this case to deny the sanctions if you persist in a claim that's been shown to be groundless  that's more of a reason for sanctions than if you are just if you just assert something that's that dismissed i did provide some opposite examples of that in my brief there was to help the nicholson case and this else the court found sanctions appropriate because counsel continually perpetuated an irrational view of the law and admitted that they had no causation proof because that was a that was a court case why don't the district judge exercise supplemental jurisdiction over what was essentially state law claims and counterclaims here after the district judge dismissed the rico claim i am not sure your honor i would defer to  answer that question and i was a trial counsel so i'm not sure that seems like there's an awful lot of litigation in the federal court on totally state matters here that does seem was there diversity of citizenship is there that wasn't alleged well penn is an illinois company and i believe somebody else was in ohio so maybe that was it i think i was i had once you had any additional questions suppose that we agree with your opponent that this letter was enough to constitute compliance with the mechanics of ruhleben did the district judge applied the wrong standard and should we so that he can apply the right standard well i guess i would agree that he didn't use the language is objectively reasonable he did say that it was a close call but it was his discretion to say he didn't think it rose to the level where sanctions were warr didn't see the repeated assertion of a frivolous claim so i would say no sanctions aren't warranted thank you thank you your hon there was nothing close about it i had never in my firm had never engaged in any male wire or common law fraud never had the opportunity to prove that those allegations were utterly baseless because the sanctions ruling came out before any discovery was completed but you proved it by getting all the claims dismissed yasin and i thought i heard my opponent say that they didn't persist in an appeal because to do that would have warranted sanctions which is the circular way of saying it was baseless in the first place or could have opened them up to an argument that sanctions would be appropriate under the tests that the district judge was a g and respectfully sanctions were already warranted under the circumstances where there was no basis for filing the complaint against me or my firm so if as i heard your opponent talk about this being kneedeep in the the the diversion of assets you know and so she mentions this case where there was the so i'm interested in that that that was news to me i would be interview because if counsel steered the choice of parties to be the plaintiff that sort of thing i mean that's her suggestion that they don't law firm could could participate in project an activity with with legal choices being made who should be the plaintiff here who should recover she sort of sets up a matter that's of interest to me i haven't thought about that but that that's something we didn't see there's a four point million recovery proposal asper that was in for big research yes that was a that was an issue that involved who the proper party was in the market star arbitration to pursue a claim against market right right it sounded interesting  contract that had been entered into long before my involvement was between prosper us for our own good start not ok but big research event so big research intervenes the formation of big research and thereby the interest of penn as a member upin wanted it to be read big research in so far as who the market store contract was with because penn was at the time a forty seven percent member in big research it was their preference that it had been a big research contract but in fact it was a prosper contract existing prosper against long before my involvement i didn't have anything to do with it and was in need deep in any of it's off topic but i guess i thought we couldn't clear that up just a bit and write the contract that's the reason for that it was litigated in the arbitration and the arbitrator decided it was a prosper contract they tried to read litigated in front of judge frost and judge frost said it's a prosper contract thank you thank you thank you both for your argument the case to be submitted with the court call the next case