Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-00847/USCOURTS-azd-2_14-cv-00847-5/pdf.json

Nature of Suit Code: 380
Nature of Suit: Other Personal Property Damage
Cause of Action: 28:1335 Interpleader Action

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Andrew Berrey, 

Plaintiff, 

v. 

Plaintiff Investment Funding LLC, et al., 

Defendants.

No. CV-14-00847-PHX-BSB

ORDER 

 Plaintiff Andrew Berrey has filed a Motion for Rule 11 Sanctions against 

Defendant Injury Assistance, LLC (Injury Assistance), and its counsel.1

 (Doc. 84.) 

Berrey asserts that the Court should impose sanctions on Injury Assistance and its 

counsel based on Injury Assistance’s Motion to Disgorge Michael Love’s Attorney’s 

Fees (Doc. 79), which the Court denied. (Doc. 93.) Berrey seeks a sanctions award of 

$26,588, with additional sanctions to be determined after the deposition of Injury 

Assistance’s counsel. (Doc. 84 at 1.) Injury Assistance has responded to the motion for 

sanctions (Doc. 87), and Berrey has filed a reply. (Doc. 88.) For the reasons below, the 

Court denies the motion for sanctions. 

 

1

 Berrey also filed a First Supplement to His Motion for Rule 11 Sanctions. 

(Doc. 85.) Berrey filed this supplement shortly after Injury Assistance filed its reply in support of its motion to disgorge attorney’s fees. (Doc. 82.) In the supplement, Berrey asserts that Injury Assistance has filed “yet another frivolous pleading” (apparently referring to Injury Assistance’s reply in support of its motion to disgorge attorney’s fees) and, therefore, he has “no other option” but to supplement his motion for sanctions. (Doc. 85 at 1.) The supplement, however, reargues the merits of the motion to disgorge attorney’s fees in what appears to be an improper surreply. Therefore, the Court strikes and does not consider Berrey’s First Supplement to His Motion for Sanctions. (Doc. 85.) 

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I. Motion for Sanctions 

 In the motion for sanctions,2

 Berrey argues that the motion to disgorge attorney’s 

fees was filed for an improper purpose and that it was frivolous because it was based on 

inadequate legal research and factual investigation. (Doc. 84 at 8, 12.) In response, 

Injury Assistance opposes the motion for sanctions by arguing the merits of the motion to 

disgorge attorney’s fees. (Doc. 87.) 

 A. Rule 11 Standard 

 Pursuant to Rule 11(b) of the Federal Rules of Civil Procedure, a lawyer who 

signs and files a paper in federal court “certifies that to the best of the person’s 

knowledge, information, and belief, formed after an inquiry reasonable under the 

circumstances[,]” that the motion “is not being presented for any improper purpose” and 

that “the claims, defenses, and other legal contentions are warranted by existing law or by 

a nonfrivolous argument for extending, modifying, or reversing existing law.” Fed. R. 

Civ. P. 11(b)(1) and (2). 

 Rule 11 permits sanctions “when a filing is frivolous, legally unreasonable or 

without factual foundation, or is brought for an improper purpose.” Estate of Blue v. 

Cnty. of Los Angeles, 120 F.3d 982, 985 (9th Cir. 1997) (plaintiff’s complaint in third 

lawsuit violated Rule 11 because it was time barred and “alleged the identical § 1983 

claims at issue in [prior two lawsuits] against the same defendants”) (citations omitted). 

The objective standard of reasonableness applies when determining whether a motion is 

frivolous or has been filed for an improper purpose. Hudson v. Moore Bus. Forms, Inc., 

836 F.2d 1156, 1159 (9th Cir. 1987) (citation omitted); see also G.C. and K.B. Invs., Inc., 

v. Wilson, 326 F.3d 1096, 1110 (9th Cir. 2003) (reasonableness is viewed from the 

perspective of a competent attorney admitted to practice before the district court). When 

applying Rule 11, courts must prevent abuse of the judicial process while also allowing 

zealous advocacy. Hudson, 836 F.2d at 1159-60. 

 

2

 The factual and procedural background of this interpleader action, and the motion to disgorge attorney’s fees, has been set forth in previous orders (Docs. 89, 93) and is not repeated here. 

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B. Improper Purpose under Rule 11(b)(1) 

 Berrey argues that Injury Assistance filed the motion to disgorge attorney’s fees 

for an improper purpose. A litigant files a motion for an improper purpose when the 

motion is meant to “harass or to cause unnecessary delay or needless increase in the cost 

of litigation.” G.C. and K.B. Invs., Inc., 326 F.3d at 1110 (explaining that successive 

complaints based on propositions of law previously rejected may constitute harassment 

under Rule 11). Berrey argues that Injury Assistance filed its motion to disgorge 

attorney’s fees in a spiteful and vindictive response to Berrey’s reply in support of his 

motion for partial summary judgment because, based on Berrey’s reply, Injury Assistance 

realized its claims to the settlement proceeds would fail.3

 (Doc. 84 at 2, 5, 12.) This 

argument is speculative and based on Berrey’s unsupported allegations of ill motive. 

Berrey has not presented any objective evidence that Injury Assistance filed the motion to 

disgorge attorney’s fees for an improper purpose. Therefore, Berrey has presented no 

basis from which the Court could conclude that Injury Assistance filed the motion out of 

spite, to be vindictive, or to lash out and personally attack Berrey’s counsel. 

 Furthermore, Berrey’s argument is based on his counsel’s perception of the 

strength of his reply to support his motion for partial summary judgment. However, as 

set forth in the Court’s March 30, 2015 Order, the cross motions for summary judgment 

were complicated, presented an issue of first impression, and were not adequately briefed 

and thus required supplemental briefing. (Doc. 89.) Given the nature of the briefing on 

summary judgment, it is very unlikely Injury Assistance perceived Berrey’s reply in the 

 

3

 Berrey argues that Injury Assistance realized its claims were “marginalized” by his reply and therefore “lashed out” and “personally attack[ed]” Berrey’s counsel. (Doc. 84 at 2.) Berrey also argues that his reply “all but assur[ed] that Injury Assistance’s claims . . . would fail” and, therefore, Injury Assistance “took vindictive action.” (Id.) In addition, Berrey argues that his reply “strongly demonstrate[ed] that Injury Assistance’s . . . claims against the settlement proceeds must fail as a matter of law” and therefore Injury Assistance “spitefully” filed its motion to disgorge attorney’s fees. (Id. at 5.) Berrey also argues that “a thirst for vengeance motivated” Injury Assistance, and that Injury Assistance “fear[ed] the success of Berrey’s summary judgment motion so much it was willing to use the judicial system for an improper purpose.” (Id. at 12.) Finally, Berrey argues that Injury Assistance filed its motion to disgorge attorney’s fees to retaliate against Berrey because of his “strong reply.” (Id. at 

14.) 

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same way that Berrey perceived it. Thus, the Court concludes that Berrey has not 

established that Injury Assistance was motivated to file its motion to disgorge attorney’s 

fees for an improper purpose in reaction to the strength of Berrey’s reply. 

 The record contains no evidence that Injury Assistance intended to harass Berrey, 

cause unnecessary delay, or needlessly increase the cost of this litigation. Therefore, 

Berrey has not established that Injury Assistance filed the motion to disgorge attorney’s 

fees for an improper purpose and the Court denies the motion for sanctions on this basis. 

C. Frivolous under Rule 11(b)(2) 

 Berrey argues that the motion to disgorge attorney’s fees was frivolous because 

Injury Assistance’s claims were “not well grounded in fact or law,” and Injury Assistance 

“failed to make reasonable inquiry into governing law.” (Doc. 84 at 6.) “Rule 11 sets a 

low bar: It deters ‘baseless filings’ by requiring a ‘reasonable inquiry’ that there is some 

plausible basis for the theories alleged.” Strom v. United States, 641 F.3d 1051, 1059 

(9th Cir. 2011) (citations omitted). Thus, frivolous filings are “both baseless and made 

without a reasonable and competent inquiry.” Estate of Blue, 120 F.3d at 985 (citation 

omitted); In re Girardi, 611 F.3d 1027, 1062 (9th Cir. 2010) (citation omitted). “The key 

question in assessing frivolousness is whether a complaint states an arguable claim — not 

whether the pleader is correct in his perception of the law.” Hudson, 836 F.2d at 1159. 

In addition, “ultimate failure on the merits is irrelevant.” Id. (citation omitted). 

 Furthermore, Rule 11 sanctions are not appropriate when a litigant has “some

plausible basis, albeit quite a weak one” for the argument advanced. United Nat’l Ins. 

Co. v. R & D Latex Corp., 242 F.3d 1102, 1117 (9th Cir. 2001). At least two circuit 

courts have reasoned that “to constitute a frivolous legal position for purposes of Rule 11 

sanction, it must be clear under existing precedents that there is no chance of success and 

no reasonable argument to extend, modify or reverse the law as it stands.” Strom, 641 

F.3d at 1059 (quoting Simon DeBartolo Grp., L.P. v. Richard E. Jacobs Grp., Inc., 186 

F.3d 157, 167 (2d Cir. 1999)). A legal theory or argument is not frivolous simply 

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because it failed to persuade the district court. Hurd v. Ralphs Grocery Co., 824 F.2d 

806, 811 (9th Cir. 1987). 

 To establish that the motion to disgorge attorney’s fees was frivolous, Berrey 

argues that Injury Assistance was attempting to assert a tort claim against Love, Berrey’s 

attorney, “in the nature of a breach of fiduciary duty.”4

 (Doc. 84 at 7.) Thus, Berrey 

argues that the motion “represents that a claim for relief exists when — in fact — it does 

not. Arguing for a legally impossible duty is frivolous on its face.” (Id. at 12.) This 

argument fails to establish that the motion to disgorge attorney’s fees was frivolous. As 

set forth in the Court’s order denying that motion, Injury Assistance was not attempting 

to assert a tort claim for breach of fiduciary duty against Love, but was requesting that 

the Court grant relief from an order and judgment under Rule 60. (Doc. 93 at 3-4.) 

Therefore, this argument is irrelevant and does not establish that the motion to disgorge 

attorney’s fees was frivolous. 

 Berrey also argues that “Injury Assistance believes [Love] owed it a fiduciary duty 

and that Love somehow breached that duty by depositing the settlement funds into the 

Court’s registry . . . .” (Doc. 84 at 6-7.) He further asserts that Injury Assistance failed to 

adequately investigate the facts of the case “causing it to jump to the erroneous 

conclusion that Love somehow failed to safeguard to funds at issue . . . despite the fact 

that Mr. Love deposited the entire balance of the action into the Court’s registry for 

safekeeping.” (Id. at 12.) This argument fails to establish that the motion to disgorge 

attorney’s fees was frivolous because Injury Assistance did not argue that Berrey failed to 

safeguard the settlement proceeds by depositing them in the Court’s registry. 

 

4

 Thus, Berrey argues that Love is not a party in the interpleader action and has not been served and, therefore, the Court lacks jurisdiction over the purported claim for breach of fiduciary duty and Injury Assistance must bring an action against Love. (Doc. 84 at 7). Berrey also argues that Love does not owe any “actionable duty” or “legal duty” to Injury Assistance. (Id. at 8, 9-10.) He also argues that the ethical rules cannot form the basis for civil liability, or establish duty or the standard of care, again treating Injury Assistance’s motion as an attempt to assert a claim against Love. (Id. at 

8.) Finally, Berrey asserts that the motion to disgorge attorney’s fees “demonstrated a fundamental misunderstanding of how to plead a case.” (Id. at 17.) 

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 Instead, Injury Assistance argued that Berrey’s attorney, Love, did not disclose 

that he represented another Defendant, Plaintiff Investment Funding, LLC (PIF), in 

another matter in state court. (Doc. 82 at 2.) Injury Assistance further argued that by 

failing to disclose that he represented PIF, Love obtained the stipulation for the 

disbursement of attorney’s fees (Doc. 62) under false pretenses. (Doc. 82 at 2; see also

Doc. 87 at 2, 5.) The Court rejected Injury Assistance’s arguments in the motion to 

disgorge attorney’s fees and found that Injury Assistance did not prove by clear and 

convincing evidence, as Rule 60 requires, that Berrey obtained the stipulation to disburse 

fees through false pretenses. (Doc. 93 at 5-6.) 

 The Court found that there was information in the state court docket that provided 

notice to Injury Assistance that Love represented PIF in that matter. (Id. at 5.) However, 

the Court also found that Berrey did not disclose that Love represented PIF in another 

matter (id. at 4), and Berrey has not argued in response to the motion to disgorge 

attorney’s fees, or in the motion for sanctions, that Love disclosed that he also 

represented PIF. Therefore, it is plausible that a court could have concluded that the 

failure to affirmatively disclose this information mislead Injury Assistance and caused it 

to enter the stipulation to disburse fees under false pretenses. Therefore, Injury 

Assistance’s argument had some plausible basis because Injury Assistance did not know 

that Love represented PIF. (Doc. 82 at 2.) 

 Berrey also argues that the motion to disgorge attorney’s fees was frivolous 

because Injury Assistance improperly asserted that Love owed Injury Assistance and the 

other parties a duty under E.R. 1.15(d) when Berrey was the “sole beneficiary of Love’s 

fiduciary duty.” (Doc. 84 at 8-9.) This argument also fails to establish that Injury 

Assistance’s motion to disgorge attorney’s fees was frivolous. Relying in part on E.R. 

1.15(d), Injury Assistance argued that Love had a fiduciary duty to Injury Assistance and 

the other claimants to safeguard the settlement funds. (Doc. 79 at 3; Doc. 82 at 2.) Injury 

Assistance argued that Love violated that duty when he failed to disclose that he 

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represented PIF in another matter and, thus, obtained the stipulation to disburse attorney’s 

fees under false pretenses. (Doc. 79 at 2-3; Doc. 82 at 2.) 

 The Court found that Love did have a duty to protect the interests of the claimants 

under E.R. 1.15(d), and that Love apparently recognized that duty when he deposited the 

settlement proceeds in the Court’s registry. (Doc. 93 at 8.) The Court, however, rejected 

Injury Assistance’s argument that Love had violated this duty for the same reasons it 

rejected Injury Assistance’s argument that Berrey had obtained the stipulation for 

disbursement of attorney’s fees under false pretenses. (Id. at 9.) However, as set forth 

above, it is plausible that a court could find that Love’s failure to affirmatively disclose 

his relationship with PIF mislead the other claimants, including Injury Assistance, thus 

leading them to enter the stipulation to disburse attorney’s fees under false pretenses, in 

violation of E.R. 1.15(d). Therefore, Injury Assistance’s argument, while not persuasive 

to the Court, was not frivolous. 

 Finally, Berrey argues that Injury Assistance improperly argued that Love’s 

representation of Berrey and PIF created a conflict of interest because only a client could 

assert that conflict, and Love’s clients had waived any conflict under E.R. 1.7.5

 (Id. at 

13-14.) This argument also fails to establish that the motion to disgorge attorney’s fees 

was frivolous. In that motion, Injury Assistance argued that Love’s representation of PIF, 

another claimant to the interpleaded funds, created a “clear conflict of interest between 

Love, Berrey, and all parties to this action” and that “Love is clearly putting PIF’s 

interests ahead of everyone, including Berrey and all other claimants.” (Doc. 79 at 3, 5.) 

In its response to the motion for sanctions, Injury Assistance further argues that Love’s 

representation of Berrey and PIF was a conflict of interest, and that Love had a duty to 

 

5

 Injury Assistance did not argue any violation of E.R.1.7 in its motion to disgorge attorney’s fees or in its reply. (See Docs. 79, 82.) Instead, Berrey raised E.R. 1.7 by arguing that Love could obtain a waiver of any concurrent conflict between Berrey and PIF. (Doc. 80 at 2, 10.) Therefore, the Court considered E.R. 1.7(a) in its order denying the motion to disgorge attorney’s fees. (Doc. 7-8.) Despite Berrey’s argument that there was no conflict, the Court found, “from the limited record,” that Love’s representation of Berrey and PIF created a concurrent conflict, that both clients had waived that conflict, 

and it appeared that the elements of E.R. 1.7(b) had been satisfied. (Doc. 93 at 7-8.) 

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disclose this conflict. (Doc. 87 at 2, 5.) Injury Assistance argues that because Love did 

not disclose that he represented PIF, he violated his duty and obtained the stipulation to 

disburse fees under false pretenses. (Id.) 

 Thus, it appears that Injury Assistance was arguing in the motion to disgorge 

attorney’s fees, in another form, that Love’s undisclosed representation of PIF created a 

conflict with his duty to protect the interests of all claimants to the settlement funds. 

Although the Court found that Injury Assistance had not established that Love violated 

ethical obligations, it is plausible that a court could find that Love’s failure to disclose 

that he represented PIF created a conflict with his duty to the other claimants under 

E.R. 1.15(d). Therefore, there is some plausible basis for the theories Injury Assistance 

asserted in the motion to disgorge attorney’s fees. The Court finds that the motion was 

not frivolous and will not impose sanctions on this basis. 

II. Conclusion 

The Court concludes that Injury Assistance did not violate Rule 11 because the 

motion to disgorge attorney’s fees was not filed for an improper purpose and was not 

frivolous. 

 Accordingly, 

IT IS ORDERED that Berrey’s Motion for Rule 11 Sanctions (Doc. 84) is 

DENIED. 

IT IS FURTHER ORDERED that Berrey’s First Supplement to His Motion for 

Rule 11 Sanctions (Doc. 85) is stricken. 

 Dated this 8th day of May, 2015. 

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