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Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 15Ȭ2142

NORTHERN ILLINOIS TELECOM, INC.,

Plaintiff,

and

ROBERT G. RIFFNER,

RespondentȬAppellant,

v.

PNC BANK, N.A.,

DefendantȬAppellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:12ȬcvȬ02372 — John Robert Blakey, Judge.

____________________

ARGUED JANUARY 18, 2017 — DECIDED MARCH 10, 2017

____________________

Before WOOD, Chief Judge, and POSNER and HAMILTON, CirȬ

cuit Judges.

HAMILTON, Circuit Judge. This appeal pivots on the proceȬ

dural requirements of Federal Rule of Civil Procedure 11 for

seeking sanctions against a party and its attorney for asserting

Case: 15-2142 Document: 54 Filed: 03/10/2017 Pages: 18
2 No. 15Ȭ2142

a frivolous claim or defense. Rule 11(c)(2) requires a party

seeking Rule 11 sanctions first to serve a proposed motion on

the opposing party and to give that party at least 21 days to

withdraw or correct the offending matter. Only after that time

has passed may the motion be filed with the court. To mix naȬ

val metaphors, the party seeking sanctions must first fire a

warning shot that gives the opponent time to find a safe harȬ

bor.

In this case, the party who sought sanctions failed to comȬ

ply with that procedure. It argued, however, that two letters

it sent containing both settlement demands and threats to

seek Rule 11 sanctions if its demands were not met amounted

to “substantial compliance” with Rule 11(c)(2) and thus preȬ

served its right to move for sanctions after the district court

granted summary judgment in its favor. The district court acȬ

cepted that argument and imposed sanctions. Northern Illinois

Telecom, Inc. v. PNC Bank, NA (NITEL II), No. 12 C 2372, 2015

WL 1943271, at *9 (N.D. Ill. Apr. 29, 2015).

We reverse. Whether “substantial compliance” with the

warningȬshot/safeȬharbor requirement of Rule 11(c)(2) can

ever be sufficient is controversial. We are the lone circuit to

say yes. Compare Penn, LLC v. Prosper Business Dev. Corp., 773

F.3d 764, 768 (6th Cir. 2014) (eight circuits reject substantial

compliance theory), with Nisenbaum v. Milwaukee County, 333

F.3d 804, 808 (7th Cir. 2003) (substantial compliance with

warningȬshot requirement was sufficient to allow sanctions).

Even assuming substantial compliance is sufficient, the deȬ

fendant’s settlement demands in this case fell far short of subȬ

stantial compliance. We therefore reverse the district court’s

award of sanctions.

ȱ ȱ

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No. 15Ȭ2142 3

I. Factual and Procedural Background

A. Plaintiff’s Breach of Contract Claim

In 2007, a company called Nexxtworks contracted with

two banks in the Chicago area to upgrade communications

facilities. Northern Illinois Telecom, Inc. v. PNC Bank, NA (NITEL

I), No. 12 C 2372, 2014 WL 4244069 (N.D. Ill. Aug. 27, 2014).

Nexxtworks subcontracted with plaintiff NITEL to install

data and telephone cable at four bank branches. NITEL perȬ

formed the work, but Nexxtworks did not pay NITEL all that

it thought it was owed. Nexxtworks asserted there had been

quality problems that had required it to hire other subcontracȬ

tors to redo or finish NITEL’s work. In 2009, before their disȬ

pute was resolved, Nexxtworks filed for bankruptcy protecȬ

tion in Florida and listed NITEL’s claim as a disputed debt.

NITEL filed a proof of claim for $115,000, but the bankruptcy

court disallowed it because it was filed too late.

In 2012, still seeking payment for what it thought it was

owed, NITEL filed this breach of contract suit in an Illinois

state court against PNC Bank, which by that time had acȬ

quired both of the original banks in whose branches NITEL

had installed the cables. NITEL sought damages of $81,300,

plus late fees, attorney fees, and costs. With the amount in

controversy greaterthan $75,000, PNC Bank removed the case

to federal court based on diversity of citizenship under 28

U.S.C. § 1332. The problem for NITEL was that it had no conȬ

tract with PNC Bank, which moved for summary judgment

on that basis. District Judge St. Eve granted summary judgȬ

ment for PNC Bank. NITEL I, 2014 WL 4244069. NITEL did

not appeal.

ȱ ȱ

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4 No. 15Ȭ2142

B. District Court Rule 11 Sanctions Order and Award

The present appeal stems from the district court’s postȬ

judgment award of Rule 11 sanctions against both NITEL and

its lawyer, appellant Riffner. Before discovery began and

again before PNC Bank moved for summary judgment, PNC

Bank’s lawyer sent letters to Riffner asserting that NITEL’s

breach of contract claim was frivolous. Both letters proposed

to settle the case by having NITEL dismiss its suit and pay

PNC Bank its attorney fees. Both letters concluded by threatȬ

ening to seek Rule 11 sanctions if NITEL did not agree to the

demands within a few days. Riffner did not respond to those

letters. Two months after final judgment, PNC Bank moved

for sanctions under Rule 11. The case was reassigned to DisȬ

trict Judge Blakey.

Judge Blakey awarded sanctions against NITEL and RiffȬ

ner, jointly and severally, for $84,325. The judge held that the

contract claim was frivolous and asserted in bad faith. The

court found “clear evidence that, in fact, NITEL knew NexxtȬ

works (and not PNC) was contractually obligated to pay for

the work NITEL did at the branches, and even a cursory inȬ

vestigation would have shown that the Nexxtworks email and

the work orders could not support a breach of contract claim.”

NITEL and Riffner both appealed the sanctions order, but

NITEL was later dismissed as an appellant. We have before us

only Riffner’s appeal.

II. Analysis

We review a district court’s grant of Rule 11 sanctions for

abuse of discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S.

384, 409 (1990); Mars Steel Corp. v. Continental Bank, N.A., 880

F.2d 928, 933 (7th Cir. 1989) (en banc). An abuse of discretion

Case: 15-2142 Document: 54 Filed: 03/10/2017 Pages: 18
No. 15Ȭ2142 5

may be established if the district court based its decision on

an erroneous view of the law or a clearly erroneous evaluation

of evidence. Gastineau v. Wright, 592 F.3d 747, 748 (7th Cir.

2010).

Riffner raises both substantive and procedural objections

to the district court’s award of sanctions. The substantive arȬ

guments are not persuasive, and Riffner’s attempt to walk

away from his and NITEL’s earlier reliance on work orders to

prove it had contracts with the banks is flatly contradicted by

the record.1 The district court did not abuse its discretion in

finding that the breach of contract claim that Riffner pursued

against PNC Bank on behalf of NITEL was objectively baseȬ

less because NITEL never had a contract with PNC Bank.

The problem with the sanctions award is procedural. PNC

Bank simply failed to follow the requirements of Rule 11. To

explain, we start with a word about the role of Rule 11 in fedȬ

eral civil litigation and then examine the amendments that led

to the warningȬshot/safeȬharbor requirement.

In civil cases within our jurisdiction, federal courts exerȬ

cise considerable discretion and great power. The proper exȬ

ercise of that power can be essential in preserving the rule of

law and the rights and liberties of the American people, in

cases large and small, landmark and mundane. When a plainȬ

tiff invokes those powers in a civil case, it puts machinery in

gear that can be powerful, intimidating, and often expensive.

ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

1 In its response to PNC Bank’s motion for summary judgment, NITEL,

through Riffner, said: “NITEL’s allegations against MidAmerica and NaȬ

tional City are based on purported work orders for each of the Branches,”

and that “the Work Order acted as a contract for the work done.”

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6 No. 15Ȭ2142

Those powers and machinery can be abused by litigants. FedȬ

eral Rule of Civil Procedure 11 seeks to ensure that those powȬ

ers and machinery are engaged only to address claims and

defenses that have a reasonable basis in fact and law and that

are asserted only for a proper purpose. Because Rule 11 can

affect so powerfully the ability of parties to seek the protecȬ

tion of the federal courts, the details of its provisions have

long been controversial.

In the current version of the rule, the substantive proviȬ

sions are in subsection (b):

(b) Representations to the Court. By presenting

to the court a pleading, written motion, or other

paper—whether by signing, filing, submitting,

or later advocating it—an attorney or unrepreȬ

sented party certifies that to the best of the perȬ

son’s knowledge, information, and belief,

formed after an inquiry reasonable under the

circumstances:

(1) it is not being presented for any improper

purpose, such as to harass, cause unnecessary

delay, or needlessly increase the cost of litigaȬ

tion;

(2) the claims, defenses, and other legal contenȬ

tions are warranted by existing law or by a nonȬ

frivolous argument for extending, modifying,

or reversing existing law or for establishing new

law;

(3) the factual contentions have evidentiary supȬ

port or, if specifically so identified, will likely

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No. 15Ȭ2142 7

have evidentiary support after a reasonable opȬ

portunity for further investigation or discovery;

and

(4) the denials of factual contentions are warȬ

ranted on the evidence or, if specifically so idenȬ

tified, are reasonably based on belief or a lack of

information.

Subsection (c) then authorizes district courts to impose sancȬ

tions, including monetary sanctions, against parties, attorȬ

neys, and law firms who violate the substantive standards of

subsection (b), as Riffner and NITEL did in this case. SubsecȬ

tion (c) provides:

(c) Sanctions.

(1) In General. If, after notice and a reasonable opȬ

portunity to respond, the court determines that

Rule 11(b) has been violated, the court may impose

an appropriate sanction on any attorney, law firm,

or party that violated the rule or is responsible for

the violation. Absent exceptional circumstances, a

law firm must be held jointly responsible for a vioȬ

lation committed by its partner, associate, or emȬ

ployee.

(2) Motion for Sanctions. A motion for sanctions

must be made separately from any other motion

and must describe the specific conduct that allegȬ

edly violates Rule 11(b). The motion must be served

under Rule 5, but it must not be filed or be presented to

the court if the challenged paper, claim, defense, contenȬ

tion, or denial is withdrawn or appropriately corrected

within 21 days after service or within another time the

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8 No. 15Ȭ2142

court sets. If warranted, the court may award to the

prevailing party the reasonable expenses, including

attorney’s fees, incurred for the motion.

(3) On the Court’s Initiative. On its own, the court

may order an attorney, law firm, or party to show

cause why conduct specifically described in the orȬ

der has not violated Rule 11(b).

(4) Nature of a Sanction. A sanction imposed under

this rule must be limited to what suffices to deter

repetition of the conduct or comparable conduct by

others similarly situated. The sanction may include

nonmonetary directives; an order to pay a penalty

into court; or, if imposed on motion and warranted

for effective deterrence, an order directing payment

to the movant of part or all of the reasonable attorȬ

ney’s fees and other expenses directly resulting

from the violation.

(5) Limitations on Monetary Sanctions. The court

must not impose a monetary sanction:

(A) against a represented party for violating Rule

11(b)(2); or

(B) on its own, unless it issued the showȬcause orȬ

der under Rule 11(c)(3) before voluntary dismissal

or settlement of the claims made by or against the

party that is, or whose attorneys are, to be sancȬ

tioned.

(6) Requirements for an Order. An order imposing a

sanction must describe the sanctioned conduct and

explain the basis for the sanction.

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No. 15Ȭ2142 9

Our focus here is on the procedural requirements in Rule

11(c)(2) for a party’s motion for sanctions. Before filing a moȬ

tion for sanctions, a party must first serve the motion on the

challenged party, and the motion may not be filed with the

court for 21 days. That gives the challenged party that time to

withdraw or correct the challenged claim, defense, contenȬ

tion, or denial. This combination of a warning shot and a safe

harbor was a critical change adopted in the 1993 amendments

to Rule 11. A little history explains its importance.

As adopted in the original Federal Rules of Civil ProceȬ

dure in 1938, Rule 11 required attorneys to sign all pleadings

and treated the signature as a certificate that the lawyer had

read the pleading and that, to the best of the lawyer’s

knowledge, information, and belief, there was good ground

to support it and it was not interposed for delay. While the

rule authorized sanctions, it did so in only this vague lanȬ

guage: “For a wilful violation of this rule an attorney may be

subjected to appropriate disciplinary action.” Fed. R. Civ. P.

11 (1938), as promulgated at 308 U.S. 645, 676 (1938). The foȬ

cus on the attorney’s subjective knowledge and the requireȬ

ment of willful violation meant that sanctions were very rare

before the rule was amended in 1983. Georgene M. Vairo, Rule

11: A Critical Analysis, 118 F.R.D. 189, 190–92, 205 (1988).

Growing impatience with lawsuits and litigation tactics

perceived as frivolous led to the most controversial amendȬ

ment to the Federal Rules of Civil Procedure since their adopȬ

tion, the 1983 amendment to Rule 11. Id. at 190. The principal

changes were to adopt an objective standard of reasonableȬ

ness, to impose on counsel a preȬfiling duty of inquiry, and to

add language that the court “shall impose” sanctions when

the rule was violated. Fed. R. Civ. P. 11 advisory committee’s

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10 No. 15Ȭ2142

note to 1983 amendment. The amendment left no room for an

“empty head, pure heart” defense.

The newly amended Rule 11 quickly became a favorite

weapon in litigators’ briefcases, often used and even more ofȬ

ten brandished to threaten. Its use exploded in the late 1980s.

One commentator wrote in 1988 that Rule 11 had become “the

cottage industry of the litigation bar.” Vairo, 118 F.R.D. at 199.

As it turned out, the 1983 amendments had been an overȬcorȬ

rection. The new problems led to the 1993 amendments at the

heart of this appeal.2 One unintended consequence of the

threat of Rule 11 sanctions was that “parties were sometimes

reluctant to abandon a questionable contention lest that be

viewed as evidence of a violation.” Fed. R. Civ. P. 11 advisory

committee’s note to 1993 amendment.3

ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

2 For detailed accounts of the problems encountered after the 1983 amendȬ

ments, see the following sources cited by the Advisory Committee in 1993:

New York State Bar Committee on Federal Courts, Sanctions and Attorneys’

Fees (1987); Thomas Willging, The Rule 11 Sanctioning Process (1989); AmerȬ

ican Judicature Society, Report of the Third Circuit Task Force on Federal Rule

of Civil Procedure 11 (Stephen Burbank ed., 1989); Elizabeth Wiggins et al.,

Federal Judicial Center, Report on Rule 11 (1991). The 1993 committee also

cited three bookȬlength analyses of the case law: Gregory Joseph, SancȬ

tions: The Federal Law of Litigation Abuse (1989); Jerold Solovy, The Federal

Law of Sanctions (1991); Georgene Vairo, Rule 11 Sanctions: Case Law, PerȬ

spectives and Preventive Measures (1991). A recent search of Westlaw

showed that Rule 11 was cited in only five appellate decisions in 1978, but

in 236 appellate decisions in 1988. For district courts, the comparable figȬ

ures are 19 in 1978 and 615 in 1988.

3 For a broader review of the criticisms and process that led to adoption of

the 1993 amendments, see Carl Tobias, The 1993 Revision to Federal Rule 11,

70 Ind. L.J. 171, 174–88 (1994)

Case: 15-2142 Document: 54 Filed: 03/10/2017 Pages: 18
No. 15Ȭ2142 11

The 1993 amendments preserved the objective standard of

reasonableness and the enhanced duty of preȬfiling inquiry

into the law and facts. The amendments sought, however, to

constrain the imposition of sanctions and to “reduce the numȬ

ber of motions for sanctions presented to the court.” Id. The

1993 amendments were numerous. They included new proceȬ

dural requirements to enhance due process and fair use of the

rule, and they removed the “shall impose” language to restore

trial judges’ discretion in deciding whether to impose sancȬ

tions at all.

One of the most important changes was to add the proviȬ

sion at issue in this appeal, the warningȬshot/safeȬharbor proȬ

cedure in Rule 11(c)(2). The Advisory Committee explained:

The rule provides that requests for sanctions

must be made as a separate motion, i.e., not

simply included as an additional prayer for reȬ

lief contained in another motion. The motion for

sanctions is not, however, to be filed until at

least 21 days (or such other period as the court

may set) after being served. If, during this peȬ

riod, the alleged violation is corrected, as by

withdrawing (whether formally or informally)

some allegation or contention, the motion

should not be filed with the court. These proviȬ

sions are intended to provide a type of “safe harbor”

against motions under Rule 11 in that a party will

not be subject to sanctions on the basis of another

party’s motion unless, after receiving the motion, it

refuses to withdraw that position or to acknowledge

candidly that it does not currently have evidence to

support a specified allegation. Under the former

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12 No. 15Ȭ2142

rule, parties were sometimes reluctant to abanȬ

don a questionable contention lest that be

viewed as evidence of a violation of Rule 11; unȬ

der the revision, the timely withdrawal of a conȬ

tention will protect a party against a motion for

sanctions.

To stress the seriousness of a motion for sanctions

and to define precisely the conduct claimed to violate

the rule, the revision provides that the “safe harbor”

period begins to run only upon service of the motion.

In most cases, however, counsel should be exȬ

pected to give informal notice to the other party,

whether in person or by a telephone call or letȬ

ter, of a potential violation before proceeding to

prepare and serve a Rule 11 motion.

Id. (emphasis added). A letter may thus warn about impendȬ

ing service of the motion, but a letter is not a substitute for a

motion.

To return to the case at hand, PNC Bank simply did not

comply with this warningȬshot/safeȬharbor 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 setȬ

tlement offers with Rule 11 threats to Riffner were sufficient

warning shots under Rule 11(c)(2) on the theory that they subȬ

stantially 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).

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No. 15Ȭ2142 13

Our line of cases on “substantial compliance” with the

warningȬshotrequirement began with Nisenbaum v. Milwaukee

County, 333 F.3d 804, 808 (7th Cir. 2003), where we concluded

that where the failure to satisfy the warningȬshot requirement

was only “technical,” the moving party’s substantial compliȬ

ance with the warningȬshot requirement entitled it “to a deciȬ

sion on the merits.” In Nisenbaum, we held that there was subȬ

stantial 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 formalȬ

istic.

In Matrix IV, the moving party similarly sent a letter that

explained the grounds for the sanctions and informed the opȬ

posing party it would seek Rule 11 sanctions if the claim were

not dismissed voluntarily. 649 F.3d at 552. The letter explicitly

asserted that it served “as notice” of the party’s intention to

seek sanctions at the close of the case. We found that this

warning also amounted to substantial compliance with the

warningȬshot requirement, though we ultimately decided the

case on other grounds, finding that the sanctions were unwarȬ

ranted on the merits. Id. at 553.

There are both legal and factual problems with this theory

of “substantial compliance” to save the sanctions order in this

case. The legal problem is that the substantial compliance theȬ

ory we adopted in Nisenbaum stands alone and is difficult to

reconcile with the explicit requirements of the Rule and the

clear explanation from the Advisory Committee. No other cirȬ

cuit has adopted this approach. See Penn, LLC v. Prosper BusiȬ

ness Dev. Corp., 773 F.3d 764, 767–68 (6th Cir. 2014)ȱȱ(reviewing

circuit split: Second, Third, Fourth, Fifth, Sixth, Eighth, Ninth,

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14 No. 15Ȭ2142

and Tenth Circuits have rejected “substantial compliance,”

and only Seventh Circuit has adopted it). Our colleagues in

other circuits have been highly critical of the terse treatment

of the issue in Nisenbaum. E.g., Cadle Co. v. Pratt (In re Pratt),

524 F.3d 580, 587–88 (5th Cir. 2008) (Nisenbaum did not adȬ

dress language of Rule 11, Advisory Committee notes, or

other Rule 11 jurisprudence); Roth v. Green, 466 F.3d 1179, 1193

(10th Cir. 2006) (same). As the Ninth Circuit explained in BarȬ

ber v. Miller, “warnings were not motions” and “the Rule reȬ

quires service of a motion.” 146 F.3d 707, 710 (9th Cir. 1998).

The 1993 amendment “deliberately imposed” the requireȬ

ment of service. Id. “It would therefore wrench both the lanȬ

guage and purpose of the amendment to the Rule to permit

an informal warning to substitute for service of a motion.” Id.

4

The Advisory Committee notes warn against treating anyȬ

thing less than formal service of a motion as sufficient to comȬ

ply with the warningȬshot/safeȬharbor requirement: “To

stress the seriousness of a motion for sanctions and to define

precisely the conduct claimed to violate the rule, the revision

provides that the ‘safe harbor’period begins to run only upon

service of the motion. In most cases, however, counsel should

ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

4 Accord, Star Mark Management, Inc. v. Koon Chun Hing Kee Soy & Sauce

Factory, LTD, 682 F.3d 170, 175–76 (2d Cir. 2012) (warning letter not suffiȬ

cient; rule requires service of motion to trigger safeȬharbor provision);

Ettinger & Assocs., LLC v. Miller (In re Miller), 730 F.3d 198, 204 (3d Cir.

2013) (emphasizing importance of the safeȬharbor provision in analogous

bankruptcy context); Brickwood Contractors, Inc. v. Datanet Engineering, Inc.,

369 F.3d 385, 389 (4th Cir. 2004) (Rule 11 “thus establishes conditions precȬ

edent to the imposition of sanctions under the rule. If those conditions are

not satisfied, the Rule 11 motion for sanctions may not be filed with the

district court.”); Gordon v. Unifund CCR Partners, 345 F.3d 1028, 1030 (8th

Cir. 2003) (same).ȱȱ

Case: 15-2142 Document: 54 Filed: 03/10/2017 Pages: 18
No. 15Ȭ2142 15

be expected to give informal notice to the other party, whether

in person or by a telephone call or letter, of a potential violaȬ

tion before proceeding to prepare and serve a Rule 11 moȬ

tion.” By treating a mere warning letter as sufficient, a standȬ

ard of substantial compliance leaves the recipient unclear as

to both whether the opposing party is serious and when the

21Ȭday safeȬharbor clock starts to run.

Despite the criticism, though, Nisenbaum remains controlȬ

ling circuit law on this point. We need notrevisit here whether

substantial compliance can ever satisfy the warningȬshot reȬ

quirement of Rule 11(c)(2). PNC Bank’s warningȬshot letters

fell far short of even the generous target of substantial comȬ

pliance.5

On July 31, 2012, before discovery began, PNC Bank’s lawȬ

yer sent a letter to Riffner offering to settle the case. The letter

explained the defects in the breach of contract claim. We asȬ

sume the explanation of those defects was sufficient. The

problems in terms of substantial compliance were that the letȬ

ter 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 reȬ

ceive written confirmation by that date, please be advised that

PNC will be seeking sanctions under Federal Rule 11 against

NITEL and your firm ... .”

ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

5 It should not be difficult for a party who is serious about seeking Rule 11

sanctions to comply with Rule 11(c)(2). Parties and district courts that rely

on a theory of substantial compliance should understand that, at least in

the present landscape, they are inviting possible en banc and/or Supreme

Court review of the question.

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16 No. 15Ȭ2142

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, deȬ

manding that NITEL dismiss the complaint with prejudice

and pay PNC Bank $24,000. The letter demanded written acȬ

ceptance within six days. The settlement proposal concluded

much as the earlier letter had: “If I do not receive written conȬ

firmation by that date, please be advised that PNC will seek

sanctions under Federal Rule 11 against yourfirm and NITEL,

for all fees and costs incurred by the bank in defending your

client’s baseless and patently false complaint.”ȱȱ

The Rule 11 threats did not transform PNC Bank’s settleȬ

ment offers into communications that substantially complied

with the Rule 11(c)(2) warningȬshot/safeȬharbor requireȬ

ments. Even if we treat the criticisms of NITEL’s case and litiȬ

gation tactics as containing the equivalent of a Rule 11 motion,

the letters simply did not offer NITEL or Riffner the 21Ȭday

safe harbor that was offered in Nisenbaum or Matrix IV. SubȬ

stantial compliance requires the opportunity to withdraw or

correct the challenged pleading within 21 days without impoȬ

sition of sanctions. Neither PNC Bank letter offered that opȬ

portunity. PNC Bank was entitled, if it chose, to huff and puff

about Rule 11 in its settlement demands for dismissal of baseȬ

less claims. But its posturing did not amount even to substanȬ

tial compliance with the warningȬshot/safeȬharbor provision,

let alone to the actual compliance that other circuits demand.

The district court’s award of sanctions against Riffner is

REVERSED.

Case: 15-2142 Document: 54 Filed: 03/10/2017 Pages: 18
No. 15Ȭ2142 17

POSNER, Circuit Judge, dissenting. Federal Rule of Civil

Procedure 11(c)(2), captioned “Motion for Sanctions,” proȬ

vides, so far as bears on this case, that such “a motion ...

must not be filed or be presented to the court if the chalȬ

lenged paper, claim, defense, contention, or denial is withȬ

drawn or appropriately corrected within 21 days after serȬ

vice ... .” Our court has held that “substantial compliance”

with the rule is sufficient. Nisenbaum v. Milwaukee County,

333 F.3d 804, 808 (7th Cir. 2003); Methode Electronics, Inc. v.

Adam Technologies, Inc., 371 F.3d 923, 927 (7th Cir. 2004); MaȬ

trix IV, Inc. v. American National Bank & Trust Co. of Chicago,

649 F.3d 539, 552–53 (7th Cir. 2011). And this case is a good

example of substantial compliance, as the district judge

found and my colleagues on this panel, enamored as they

appear to be of legal technicalities, or reluctant to punish

misbehaving lawyers, miss.

Lawyer Riffner, representing NITEL, filed this suit on

NITEL’s behalf against PNC Bank, N.A., the appellee, in

February 2012. The district judge correctly deemed the suit

frivolous. Riffner’s irresponsible conduct of it was clearly

sanctionable. PNC sent Riffner a letter in July 2012 explainȬ

ing in detail the legal and factual problems with his lawsuit,

demanding withdrawal of NITEL’s complaint, and advising

Riffner that if it wasn’t withdrawn PNC would seek sancȬ

tions against him under Rule 11. This placed Riffner on noȬ

tice that if his suit against PNC was indeed frivolous, as it

was, he’d better withdraw it or face Rule 11 sanctions. He

didn’t withdraw the complaint—boorishly, he didn’t even

respond to the letter.

After conducting further discovery, which yielded addiȬ

tional evidence of the frivolousness of NITEL’s suit, PNC

Case: 15-2142 Document: 54 Filed: 03/10/2017 Pages: 18
18 No. 15Ȭ2142

sent Riffner a second, similar letter in April 2013 outlining

the evidence of its frivolousness in detail and threatening to

file a Rule 11 motion for sanctions against him if he didn’t

dismiss the suit. Not only did he not dismiss the suit, or

withdraw any of the charges made in it; he didn’t even reply

to the letter, thus repeating his earlier rudeness. Although

PNC did not serve a formal Rule 11 motion on Riffner prior

to filing the motion with the court, PNC’s letters were the

equivalent of Rule 11 motions, and gave Riffner two opporȬ

tunities to abandon or at least curtail his frivolous lawsuit

without having to pay sanctions. Instead he signaled by his

failure to answer either letter that he was persisting in his

frivolous suit—that he really was a boor.

Because PNC’s letters constituted substantial compliance

with Rule 11(c)(2), as permitted by the cases in this court that

I cited earlier and that the majority opinion does not chalȬ

lenge, we should affirm the district court.

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