1Federal Rule of Civil Procedure 11 requires that attorneys

present pleadings based on the attorney’s knowledge, information,

and belief, formed after an inquiry reasonable under the

circumstances. Fed. R. Civ. P. 11(b). An inquiry is considered

reasonable under the circumstances if it provides the party with an

“objective knowledge or belief at the time of the filing of a

challenged paper that the claim was well-grounded in law and fact.”

Bensalem Township v. International Surplus Lines Ins. Co., 38 F.3d

1303, 1314 (3d Cir. 1994). “Rule 11 authorizes sanctions against

a signer of a pleading presented for an improper purpose and

requires only a showing of objectively unreasonable conduct.” In

re Prudential Ins. Co. Am. Sales Practice Litig. Actions, 278 F.3d

175, 188 (3d Cir. 2002). Counsel must conduct a reasonable

investigation of the facts and a normally competent level of legal

research to support the presentation. Simmerman v. Corino, 27 F.3d

58, 62 (3d Cir. 1994); Lieb v. Topstone Indus., 788 F.2d 151, 157

(3d Cir. 1986). The allegations and other factual contentions in

the pleadings must have evidentiary support. Fed. R. Civ. P.

11(b)(3). Rule 11 sanctions may be awarded in exceptional

circumstances in order to "discourage plaintiffs from bringing

baseless actions or making frivolous motions." Bensalem Township,

38 F.3d at 1314. Thus, the mere failure of a complaint to

withstand a motion for summary judgment or a motion to dismiss

should not be thought to establish a rule violation. Simmerman, 27

F.3d at 62. Sanctions are discouraged where conduct does not reach

the point of clear abuse. Kuhns v. CoreStates Fin. Corp., 998 F.

1

IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CHESTER COUNTY HOSPITAL ) Civil Action

)

v. )

)

INDEPENDENCE BLUE CROSS, ET AL. ) No. 02-2746

ORDER

AND NOW, this 3rd day of September, 2002, upon

consideration of Defendants’ Motion for Sanctions Pursuant to

Federal Rule of Civil Procedure 11, and the response thereto, IT IS

HEREBY ORDERED that said Motion is DENIED.

1

Case 2:02-cv-02746-JP Document 27 Filed 09/06/2002 Page 1 of 3
Supp. 573, 577 (E.D. Pa. 1998).

Defendants contend that the Complaint is based on facts that

Plaintiff knows to be false. Specifically, Defendants contend that

the Complaint’s allegations contradict prior statements made by

Plaintiffs in certain marketing materials. In the materials for

marketing of a $23 million revenue bond, Plaintiff stated that

“[i]n October 2000, the Hospital entered into a new five-year

contract with Blue Cross . . . . Based upon the contracts

renegotiated to date, management expects that managed care

reimbursement will be slightly at or above current costs for care.”

(Defs.’ Mot. Ex. B at A-26). In the Complaint, Plaintiff alleges

that Defendants reimburse Plaintiff at levels below cost.

Plaintiff responds that the cited bond statement refers to all of

the Hospital’s contracts with its managed care organizations in

aggregate, and does not specifically or individually refer to its

contract with Defendants. Plaintiff points out that the same bond

document also states that the Hospital had contracted to provide

care to certain Medicaid patients “at Blue Cross HMO rates, which

are at or slightly below the Hospital’s per diem costs required to

provide the service.” (Defs.’ Mot. Ex. B at A-27). 

Defendants also argue that the Complaint contradicts a bond

document statement that the source of pressure to accept lower

reimbursement rates was “largely statutory.” (Defs.’ Mot. at 5).

In fact, the passage cited by Defendants clearly states that the

source is both statutory and resulting from efforts by managed care

organizations. 

At this time, the Court cannot say that the allegations are

frivolous or that the Complaint constitutes abusive litigation or

a misuse of the Court’s process. Given Plaintiff’s explanations of

its statements in the bond document, it is not absolutely clear

that the bond document contradicts the Complaint. Moreover, to the

extent the documents may contradict each other, the contradictions

are insufficient to establish that the Complaint was not filed with

an objective knowledge or belief that the claims were well-grounded

in law and fact. In fact, Plaintiff cites multiple passages from

the bond document, as well as evidence from other sources,

demonstrating evidentiary support for its Complaint. Although it

is too early to determine whether the evidence is sufficient to

withstand a motion for summary judgment, the evidence easily

withstands the instant Rule 11 motion. See, e.g., Berger v.

Institute of Pa. Hosp., Civil Action No.88-6650, 1989 U.S. Dist.

LEXIS 4956, at *6 (E.D. Pa. May 8, 1989) (“Although the Court will

grant the defendant’s Motion for Summary Judgment, the defendant’s

Motion for Sanctions under Fed. R. Civ. P. 11 will be denied.

Considering all the evidence in the case, and notwithstanding

certain allegations of the Complaint which are contrary to the

2

Case 2:02-cv-02746-JP Document 27 Filed 09/06/2002 Page 2 of 3
seemingly undisputed facts, the Complaint does not appear to be

frivolous or filed in bad faith or otherwise violative of Rule

11.”). See also Mellon Bank Corp. v. First Union Real Estate

Equity & Mortg. Inv., 951 F.2d 1399, 1413 (3d Cir. 1991) (“Merely

because [plaintiff’s] arguments failed to win the day does not

warrant Rule 11 sanctions.”); Teamsters Local Union No. 430 v.

Cement Express, Inc., 841 F.2d 66, 69 (3d Cir. 1988), cert. denied,

488 U.S. 848 (1988) ("Rule 11 may not be invoked because an

attorney, after time for discovery, is unable to withstand a motion

for summary judgment."). 

3

BY THE COURT:

______________________

John R. Padova, J.

Case 2:02-cv-02746-JP Document 27 Filed 09/06/2002 Page 3 of 3