## F I LED United States C ourt of Appeals Tenth Circuit 

### A u gu s t30,2006 Elisab eth A. Shumaker C l erk of C ourt UNI TED S TATES CO URT O F AP PEALS

T E N T H C IR C U IT
J AM E S F
. KE AR NE Y, P l ai nti ff-A pp el l ee-C ross A p p e llan t,
v. VI NC E NT DI M ANNA; KE N A. OVE RMAN; M AR K HANE Y; F RA NK J
. VE S S A, S R. ; ANT HONY P. I AC OV ETTA; J I M M Y J
. GO SE; THOM AS S
. LAHEY; J AM ES R. SM I TH; KEN NETH C. PAD GETT; G E O R G E A
. G R A Y ; S T E V E N W. P ANC K; P AUL M
. P AZ E N; J E S US QUI NON ES ; DOU GLAS BRADER; A N D R E W A
. R A M IR E Z ; D A V ID N E I L , i ndi vi dual l yand as D i r ect orof t he Pol i ce Pr ot ect i ve A s s oci at i on of the C ityan d C o u n tyo f D en v er; M A R T I N V I G I L , i ndi vi dual l yand as D i r ect orof the Pol i ce Pr ot ect i ve A s s oci at i on of the C i t yand C ountyof D e n v e r ; J O N A T H Y N P R I E S T ; A MY M AR T I N, M
. D. ; DAVI D J
. BR UNO; B R U N O , B R U N O & C O L IN , P .C .; M I C H A E L ST A C K , i ndi vi dual l yand as an O ffi cerand D i r ect orof the Pol i ce Pr ot ect i ve A s s oci at i on of the C ityan d C o u n tyo f D en v er; B E R N A R D O A R A B A L O , ind iv id u a lly and as an O ffi cerand D i r ect orof the Pol i ce Pr ot ect i ve A s s oci at i on of the Ci t ya n d Co u n t yo f

De n v e r ; J OHN W Y C K O FF, i ndi vi dual l yand as an N o. 04- 1439, 04- 1443 ( D
. C
. N o. 03- C V
- 146) (D . C o lo .)T hi s O r derand J udgm enti s notbi ndi ng pr ece dent , exce ptundert he * d o ctri n es o f law o f th e c ase , res jud icata, and co ll ateral estop p el. T h e c o u rt gener al l ydi s favor s t he ci t at i on of or der s and j udgm ent s ; neverthel es s , an or der and j udgm entm aybe ci t ed undert he t erm s and condi t i ons of 10th C i r . R
. 36. 3. - 2 - O ffi cerand D i r ect orof the Pol i ce Pr ot ect i ve A s s oci at i on of the C i tyand Co u n t yo f

De n v e r ; KI RK M I LL ER, i ndi vi dual l yand as an O ffi cerand D i r ect orof the Pol i ce Pr ot ect i ve A s s oci at i on of the C i t yand C ountyof Den v e r ; KEN NETH CH AV EZ, i ndi vi dual l yand as an O ffi cerand D i r ect orof the Pol i ce Pr ot ect i ve A s s oci at i on of the C i t yand C ountyof Den v e r ; M AR CO K. VA SQU EZ; M I CH AE L QUI NONE S ; T HOMAS D A V ID S A N C H E Z ; D A V ID AB RA M S ; GE RA L D R
. WHI T M AN; T IM O T H Y L E A R Y ; D A V ID TH O M A S; STEV EN EV A N S; W I LLI AM M I TCH ELL, D efen dan t s- C ross -A pp el l ees, and P OL I CE P RO T E CT I VE AS S OC I AT I ON OF T HE CI T Y AND COUNTY OF DENVER , D efen dan t -A pp el l ant- C ross A ppel l ee.
OR DER AND J UDGM EN T *
B efor e B RI S CO E , M c KAY , and EBEL , C i rcui tJudg es.B eca us e the di s t r i ctcour tgr ant ed D efe ndant s ’ m ot i ons t o di s m i s s under 1 Fed. R
. C i v. P. 12( b) ( 6) , w e r eci t e the fa ct s as al l eged i n the compl ai ntand as s um e forpurpos es of thi s appea l t hattheyar e true. See El l i ot tI ndus
. L t d. P ’ship v . B P A m . P rod
. C o . , 4 0 7 F
. 3 d 1 0 9 1 , 1 1 2 3 (10 th C ir
. 2 0 0 5 ).

- 3- J ames K earney , a pr i vat e i nves t i gat or , br oughtt hi s ci vi l cl ai m undert he Ra c k e t e e rI n fl u e n c e d a n d Co r ru p tOr g a n i z a t i o n s Ac t( “ RI CO” ) , 1 8 U. S
. C. §§ 1961–68, agai ns tt hi r t y - fouri ndi vi dual defe ndant s , a l aw fi r m , and a nonpr ofi tcorpor at i on ( col l ect i vel y , “D efe ndant s ”)
. T he di s tr i ctcourtgr ant ed
m ot i ons byal l D efe ndant s t o di s m i s s forfai l ur e t o s t at e a c l ai m , butdeni ed a
m ot i on byone D efe ndantfors anct i ons agai ns tK earney . W e affi r m t he di s m i s s al of K earney ’s cl ai m s but r everse and rem and on t he is sue of sanct i on s. I . BA CKGROUND 1 O n Sept ember29, 1999, a SW A T t eam fr om t he D enverPol i ce D epart m ent ent er ed I s m ael M ena’ s r es i dence pur s uantt o a “no- knock” s ear ch w arr antt hat
m i s t akenl yl i s t ed M ena’ s addr es s i ns t ead of t he “c r ack hous e” ne xtdoor
. D ur i ng t he r ai d, M ena w as s hotand ki l l ed. A l though ther e w as an i ni t i al cover - up, t he fa c t th a t th e S W A T tea m h a d ra id e d th e w ro n g h o u se w a s a n o n ym o u slylea k e d to t he medi a and publ i ci zed i n N ovember1999. A n att o rne yfo r M en a’s fam il yh ir ed P lai n ti ff K ea rne y , a fo rm er F
. B
. I. agent , t o i nves t i gat e the ki l l i ng. K earneyi nves t i gat ed and c oncl uded thatM ena h a d b e e n u n a rm e d a n d th a t th e S W A T tea m m e m b e rs h a d in iti a llysh o t h im so lely- 4-

beca us e theyoverr eac t ed t o t he s i tuat i on. K earneyfur therconcl uded thatw hen t he SW A T t eam m ember s r eal i zed thattheyhad r ai ded the w r ong hous e and
near l yki l l ed an una r m ed man, t heydeci ded t o coverup the truth: the SW A T t eam
s hotM ena a gai n, ki l l i ng hi m , t hen al t er ed the cr i m e s cene t o l ook as i f M ena ha d been s hoot i ng at t hem. A ccor di ng t o K earney , t he pol i ce de part m entt hen engage d i n a tw o- m ont h cover
- up of the true natur e of M ena’ s death. K earneyat t empt ed t o convi nce both a s peci al pr os ecut orand the F. B
. I
. of h is c o n sp ira c yth e o ry , b u t w a s e ss e n tiallyig n o re d . H e th e re fo re b e g a n to p u b lic iz e h is a lle g a tio n s d u ri n g a p p e a ra n c e s o n a D e n v e r r a d io ta lk s h o w . D efen dan t s r eal i zed thatK earneypo sed a t hreatas a potent i al exp ertw i tness agai ns tt hem and began t o di s cus s how t o s i l ence hi m . E ventual l y , t he Pol i ce P ro tec tiv e A ss o c iatio n o f th e C itya n d C o u n tyo f D e n v e r (“ P P A ” ) a n d its
m e m b e rs c o n sp ire d w ith a tto rn e yD a v id B ru n o a n d h is la w firm to in tim id a te K earneybyfi l i ng a defamat i on l aw s ui tagai ns tK earney , t he t al k s how hos t , and t he r adi o s t at i on. T he PPA funded the l aw s ui t , B runo r epr es ent ed the defamat i on pl ai nt i ffs , and manyD efe ndant s part i ci pat ed bygi vi ng fal s e orm i s l eadi ng d e p o sitio n tes tim o n y . A f ter th e ra d io sta tio n a n d talk sh o w h o st a g re e d to se ttl e th e c a se , D e fe n d a n ts v o lu n tar ilyd ism iss e d th e e n tire d e fa m a tio n law su it, i ncl udi ng al l cl ai m s agai ns tK earney— w ho had r efus ed t o s et t l e. K earney nonethel es s al l eges t hatt he l aw s ui t“i nj ur ed hi m pr ofes s i onal l y , per s onal l y , and
e c o n o m ic a lly, a n d h is [ s ic ] b u s in e s s a n d b u s in e s s re p u ta tio n .”- 5-

Ke a r n e yt h e r e a f

t e rfi l e d t h e p r e s e n ts u i ta g a i n s tDe fe n d a n t s , a l l e g i n g RI CO , R IC O con spi racy , and st at e l aw cl ai m s. T he d i stri ctcou rtgrant ed D efen dan t s’
m ot i ons t o di s m i s s K earney ’ s R I C O cl ai m s underR ul e 12( b) ( 6) beca us e: ( 1) he

“ fa iled to sh o w th a t h e h a s sta n d in g to p u rsu e th e R IC O c laim s” ; (2 ) h is “def i ni t i on of the cr i m i nal ent erpr i s e i s notdi ffe r entfr om hi s al l egat i ons of a pat t ern of r acke t eer i ng act i vi t y ”; ( 3) he l acke d “s uppor tfora val i d cl ai m of an effecton i nt er s t at e comm er ce” ; and ( 4) “[t ] he cons pi r acycl ai m i s i ns uffi ci ent becau se the .
. . R IC O viol at i on s . . . hav e no tbeen adeq uatel yal l eged
. ” B ecause there w ere n o rem ainin g fe d era l cl aim s, the d istri ct co u rtd ism issed K ea rne y ’s
s ta te la w c la im s u n d e r R u le 1 2 (b )( 1 ) fo r l a c k o f ju ri s d ic tio n . D uri ng t he li t i gati on , D efen dan tP P A soug ht R ule 11 sancti on s agai nst Ke a r n e y . Th e d i s t r i c tc o u r t , h o we v e r , d e c l i n e d t o s e p a r a t e t h e fe d e r a l c l a i ms fr om t he unr es ol ved s t at e l aw cl ai m s fors anct i ons purpos es and ther efor e deni ed t he r eques t . PPA appea l s t he deni al of i t s m ot i on fors anct i ons and K earney
cross -appeals t he d i sm i ssal of h i s R IC O and R IC O con spi racycl ai m s. I I . DI S CU S S I ON A. Di s mi s s a l o f

Ke a r n e y ’ s RI CO Cl a i ms As e x p l a i n e d a b o v e , t h e d i s tr i c tc o u r td i s mi s s e d Ke a rn e y ’ s RI CO a n d RI CO
c o n s p i r a c yc l a i ms ( t o g e t h e r , “ RI CO c l a i ms ” ) o n n u me r o u s g r o u n d s . Be c a u s e we agr ee thatK earneyfai l ed t o pl ead a n ent erpr i s e di s t i nctfr om t he patt ern of
ra c k e tee rin g a c tiv ity , w e n e e d n o t ad d re ss th e o th e r g ro u n d s fo r d ism iss a l.- 6- 1. St andard of r evi ew We r e v i e w de novo t he di s tr i ctcourt ’ s gr antof a mot i on t o di s m i s s for fai l ur e t o s t at e a c l ai m . Sut t on v. U t ah St at e Sch. fort he D eaf and B l i nd, 173 F. 3d 1226, 1236 ( 10t h C i r . 1999)
. I n ourr evi ew , w e ac ceptal l w el l
- pl eade d fac tual al l egat i ons as t rue and vi ew t hem i n the l i ghtm os tfavor abl e t o the
no nm ov i ng party . Id. at12 36
. “A 12 (b) (6) m oti on shou l d n ot be grant ed u nles s i tappea r s bey ond doubtt hatt he pl ai nt i ff c an pr ove no s etof fa ct s i n s uppor tof h is cl aim w h ich w o u ld en ti tl e h im to reli ef
. ” Id
. (qu o tat ion o m itted).

2. E n terpri se S u b se c tio n 1 9 6 2 (c ) o f R IC O m a k e s it
un l aw ful for anyperson em ploy ed b yor ass ociat ed w i th an yenterpri se en g ag ed i n, ort he ac t i vi t i es of w hi ch affec t , i nt er s t at e orfor ei gn comm er ce, t o conductorpart i ci pat e, di r ect l yori ndir ect l y , i n the conductof s uch ent erpr i s e’ s affai r s thr ough a patt ern of r acke t eer i ng a c tiv ityo r c o llec tio n o f u n law f u l d e b t. 1 8 U .S .C . § 1 9 6 2 (c ). S u b se c tio n 1 9 6 2 (d ) m a k e s it “ u n law f u l fo r a n yp e rso n to
c o n sp ire to v io late ” su b se c tio n 1 9 6 2 (c ). Id . § 1 9 6 2 (d ). R IC O p ro v id e s a p riv a te
c i v i l c a u s e o f

a c t i o n fo rt h o s e wh o a r e i nj u r e d b yv i o l a t i o n s o f § 1 9 6 2 a n d a l l o ws fo r reco v eryo f treb le da m ag es, co sts, an d att o rne yfe es. Id. § 1 9 6 4 (c). “T o succe ssful l yst at e a R IC O cl ai m , a plai nti ff m ustal l ege fou r el em ents : (1 ) c o n d u c t ( 2 ) o f

a n e n te rp ri s e (3 ) t h ro u g h a p a tte rn (4 ) o f ra c k e te e ri n g a c tiv ity.” R o b b in s v . W ilk ie , 3 0 0 F .3 d 1 2 0 8 , 1 2 1 0 (1 0 th C ir . 2 0 0 2 ) ( q u o ta tio n o m itte d ). T he s econd RICO el ement , an ent erpr i s e, “i ncl udes anyi ndi vi dual , partner s hi p,- 7-

corpor at i on, as s oci at i on, orot herl egal ent i ty , and anyuni on orgr oup of in d iv id u a ls a s s o c ia te d in fa c t a lth o u g h n o t a le g a l e n tity.” 1 8 U .S .C . § 1 9 6 1 (4 ). D es pi t e the appa r entbr eadth of thi s defi ni t i on, t o pr oper l ypl ead a n ent erpr i s e a pl ai nt i ff mustal l ege thr ee c om ponent s : ( 1) thatther e i s “an ongoi ng or gani zat i on
w i t h a dec i s i on- m aki ng fr amew or k orm echa ni s m forcontr ol l i ng the gr oup, ” ( 2) “t hat var i ou s ass ociat es fun ct i on as a con t i nu i ng un i t , ” and (3) “t hat the en t erpr i se exi s t s s epar at e and a par tfr om t he patt ern of r acke t eer i ng act i vi ty . ” U ni t ed St at es
v . S m ith , 4 1 3 F
. 3 d 1 2 5 3 , 1 2 6 6

– 6 7 (10 th C ir
. 2 0 0 5 ) (qu o tat ion s o m itted). W e c o n c lu d e th a t K e a rn e yh a s fa iled to a lleg e th e th ird c o m p o n e n t — exi s t ence of an e nt erpr i s e “s epar at e and apartfr om the patt ern of ac t i vi tyi n w hi ch iten g ag es.” U n it ed S tat es v . T u rke tt e, 45 2 U
. S
. 5 7 6 , 5 8 3 (19 8 1 ). K ea rne y ’s
a m e n d e d c o m p lain t m e re lysta tes , in r e lev a n t p a rt: T hi s C om pl ai nt ’ s foundat i onal cl ai m s are abus e of l egal pr oces s and m a licio u s p ro se c u tio n o f K E A R N E Y b y the S W A T T e a m d e fe n d a n ts w ith th e d ir e c t a s s is ta n c e a n d a id o f th e o th e r d e fe n d a n ts . . . . A tal l r el evantt im es, t he defendant s act ed as a gr oup of per s ons a ss o c iate d to g e th e r in fa c t fo r th e c o m m o n p u rp o se o f m a licio u sly pr os ecut i ng K E A R N E Y , and ther ebyabus i ng l egal pr oces s , obs truct i ng j us t i ce, an d co ns pi r i ng t o comm i tand comm i t t i ng per j ur y . T her efor e, t h e i rc o n d u c ta s s u c h c o n s t i tu t e s a n a s s o c i a t i o n - i n - fa c t“ e n t e rp r i s e” w ith in th e m e a n in g o f R IC O
. . . . C om pl
. at49–50. I ti s cl earfr om t hes e as s er t i ons t hatt he al l eged e nt erpr i s e and the al l eged p a ttern o f

ra c k e tee rin g a c tiv itya re th e sa m e . K e a rn e yc laim s th a t th e D e fe n d a n ts- 8-

a ss o c iate d in fa c t to o b stru c t ju stic e b ym a licio u slyp ro se c u tin g h im , b u t th e re is no i ndi cat i on t hatt he “a s s oci at i on” had a nyexi s t ence orpurpos e out s i de of the al l eged mal i ci ous pr os ecut i on and i nt i m i dat i on of K earneyt o pr eventhi m fr om
c o n tin u in g to e x p o se th e su p p o se d ill e g a l ac tiv itya n d c o v e r-u p p e rta in in g to M ena’ s death. See U ni t ed St at es v. C i anci , 378 F. 3d 71, 82 ( 1s tC i r . 2004) ( “[C]r i m i nal act or s w ho j oi nt l yengage i n cr i m i nal conductthatamount s t o a pat t ern of ‘ r acke t eer i ng act i vi t y ’ do notaut om at i cal l yther ebycons t i tut e an
as s oci at i on- i n- fac tR I C O ent erpr i s e s i m pl ybyvi r tue of ha vi ng engage d i n the j oi ntconduct
. Som ethi ng m or e mustbe found— s om ethi ng t hatdi s t i ngui s hes R I C O ent erpr i s es fr om ad hoc one
- t i m e cr i m i nal ventur es . ”) ; M ont es ano v. Seafi r s tC om m er ci al C orp. , 818 F. 2d 423, 427 ( 5th C i r . 1987) ( “[I ] ndi vi dual s w ho j oi n t ogetherfort he comm i s s i on of one di s cr et e cr i m i nal offe ns e have notcr eat ed
a n ‘a ss o c iatio n -in -fa c t’ e n terp rise , ev e n if th e yc o m m it tw o [ o r m o re ] p re d ica te act s dur i ng t he comm i s s i on of thi s offe ns e, beca us e thei rr el at i ons hi p t o one
a n o th e r h a s n o c o n tin u ity .”). S im p lyp u t, K e a rn e y ’s a lleg a tio n s fa il t o sh o w th a t, i n t he abs ence of the al l eged mal i ci ous pr os ecut i on and s cheme of i nt i m i dat i on agai ns thi m , t her e w oul d have be en anyas s oci at i on- i n- fac tatal l among t he D efen d an ts. S ee H an d ee n v . L em aire, 1 1 2 F
. 3 d 1 3 3 9 , 1 3 5 2 (8th C ir
. 1 9 9 7 ) (“In
as s es s i ng w hetheran al l eged e nt erpr i s e has an as cert ai nabl e s tructur e di s t i nct f ro m th a t in h e re n t in a p a ttern o f ra c k e tee rin g , itis o u r n o rm a l p ra c tice to det erm i ne i f the ent erpr i s e w oul d s t i l l exi s tw er e the pr edi cat e ac t s r emoved fr omI n hi s r es pons e t o D efe ndant s ’ m ot i ons t o di s m i s s , K earneycl ai m ed that 2 “the D enverPol i ce D epart m entand thos e cl os el yaff i l i at ed w i th i ti s t he ent erpr i s e. ” O n appea l , he as s ert s t hatt her e w er e f ourent erpr i s es : t he B runo l aw firm , the P P A , the D e n v e r P o lice D e p a rtm e n t, an d th e a ss o c iatio n -in -fa c t o f a ll D efe ndant s . W e dec l i ne t o cons i dert hes e cl ai m s beca us e theyw er e notpl eade d i n t he compl ai nt . “I ti s w el l
- es t abl i s hed .
. . t hati n det erm i ni ng w hethert o gr ant a m o tio n to d ism iss , the d istric t co u rt, an d c o n se q u e n tlyth is c o u rt, are lim ited to asse ssing the leg al su ffici en cyo f th e a ll eg ati o n s co n tai n ed w ith in the fo u r co rne rs of the com plai nt. ” Joj ola v. C hav ez, 55 F
. 3d 48 8, 49 4 (10th C i r. 19 95 ); see al so C a r C a rrie rs, In c . v . F o rd M o to r C o ., 7 4 5 F .2 d 1 1 0 1 , 1 1 0 7 (7 th C ir. 1 9 8 4 ) (“ [ I]t is axi om at i c thatt he compl ai ntm aynotbe amended byt he br i efs i n oppos i t i on t o a m o ti o n to d ism iss. ”). B eca us e di s m i s s al of K earney ’ s § 1962( c) cl ai m w as pr oper , di s m i s s al of 3 hi s R I C O cons pi r acycl ai m w as ther efor e al s o pr oper . See Tal v. H ogan, 453 F. 3d 1244 at1270 ( 10t h C i r . 2006) ( “B yi t s t erm s , § 1962( d) r equi r es t hata pl ai nt i ff m us tfi r s tal l ege a n i ndepende ntvi ol at i on of s ubs ect i ons ( a) , ( b) , or( c) , i n or der t o pl ead a cons pi r acycl ai m unders ubs ect i on ( d)
. ”) ; C ondi ctv. C ondi ct , 826 F. 2d 9 2 3 , 9 2 7 (1 0 th C ir. 1 9 8 7 ) (“ [ A ]n yc laim u n d e r § 1 9 6 2 (d ) b a se d o n a c o n sp ira c yto v io late th e p ro v isio n s o f 1 8 U .S .C . § 1 9 6 2 (a ), (b ), o r (c ) m u st n e c e ss a rilyfa ll i f the s u b stan ti v e c lai m s are them selv es d efici en t. ”).

- 9- t he equa t i on. ”)
. T her efor e, K earneyhas fai l ed t o pr oper l ypl ead a n ent erpr i s e, 2 and hi s R I C O cl ai m s w er e pr oper l ydi s m i s s ed. 3 B. R ul e 11 Sanc t i ons W e n o w turn to the sec o n d issue in this ca se: w h ethe r th e d istri ct co u rt p ro p e rl yd e n ie d D e fe n d a n t P P A ’s m o tio n fo r s a n c tio n s a g a in s t K e a rn e y . W e concl ude thatt he deni al w as i m pr operand r emand forfur thercons i der at i on.

1. St andard of r evi ew “A l l as pect s of the di s t r i ctcourt ’ s R ul e 11 det erm i nat i on ar e r evi ew ed for abus e of di s cr et i on, w hi ch i s s how n i f the di s tr i ctcourtbas ed i t s rul i ng on an- 10-

err oneous vi ew of the l aw oron a cl ear l yerr oneous as s es s m entof the evi dence
. ” B arrettv . T all o n , 3 0 F
. 3 d 1 2 9 6 , 1 3 0 1 (10 th C ir
. 1 9 9 4 ) (qu o tat ion o m itted).

2 . A n a ly sis T h e d i s t r i c tc o u r td e n i e d P P A ’ s m o t i o n fo rs a n c t i o n s a g a i n s tK e a rn e y,
c o n c lu d in g th a t [t ] he i ns uffi ci encyof the feder al cl ai m s does not w arr anta det erm i nat i on t hat s anct i o n s sh o u ld be i m pos ed. T hatw oul d r equi r e a s epar at i on of the fe der al cl ai m s fr om t he st at e cl ai m s and thi s cour thas no bas i s fordet erm i ni ng t hat n o n e o f th e sta te c laim s m a d e a g a in st P P A c o u ld b e su p p o rte d b ye v id e n c e if th o se c laim s w e re f

u llylit ig a ted . T h is c o u rt h a s n o b a sis fo r m a k in g a R u le 1 1 d e ter m in a tio n w ith re sp e c t to th e s ta te la w c laim s a n d is u n w ill in g to s epar at e them for thi s purpos e. W e agr ee w i t h t he PPA t hatt he di s tr i ctcourtm ade “ the err oneous l egal
as s um pt i on t hatt he s anct i on anal y s i s fort he di s m i s s ed fe der al cl ai m s . . . w as
s om ehow depende nton ei t hert he val i di tyort he adj udi cat i on of the s t at e l aw
c la im s .” Subdi vi s i on ( b) of R ul e 11 pr ovi des , i n r el evantpart , t hat [b] ypr es ent i ng t o the court( w hetherbys i gni ng, fi l i ng, s ubm i t t i ng, orl at er a d v o c a tin g ) a p lea d in g , w ritten m o tio n , o r o th e r p a p e r, an a tto rn e y. . . is cert i fy i ng t hat t o t he best of the per s on’ s know l edge, i nform at i on, and bel i ef, fo rm ed af

ter an inq u iryrea so n ab le un d er the circu m stan ce s, --

. . . (2) the claim s, d efen ses, an d o ther leg al co n tention s th e re in are w arr ant ed byexi s t i ng l aw orbya nonfr i vol ous ar gum entfort he ext ens i on, m odi fi cat i on, orr ever s al of exi s t i ng l aw orthe es t abl i s hm ent of new l aw ; [and] (3) th e all eg ati o n s an d o ther fac tual co n tention s h av e e v iden ti ary su p p o rto r, if sp ec ifi ca ll yso iden ti fied , are li k elyto h av e e v iden ti ary s uppor taft era r eas onabl e opportuni tyforfur theri nves ti g at i on or d is c o v e ry; . . . .- 11-

Fed. R
. C i v. P. 11( b)
. R ul e 11 furtherpr ovi des that“[i ] f, aft ernot i ce a nd a
r eas onabl e oppor tuni t yt o r es pond, the courtdet erm i nes thats ubdi vi s i on ( b) has been vi ol at ed, the courtm ay. . . i m pos e an appr opr i at e s anct i on upon the att o rne y s, law firm s, o r pa rt ies th at ha v e v iolated s u b d ivisi o n (b) o r are resp o n sible fo r th e v iolati o n . ” Id
. at 11 (c). I n D odd I ns ur ance Ser vi ces , I nc. v. R oy al I ns ur ance C om panyof A m er i ca, 935 F. 2d 1152 ( 10t h C i r . 1991) , w e not ed a c i r cui ts pl i tas t o the pr oper i nt erpr et at i on of R ul e 11: Som e court s have i nt erpr et ed R ul e 11 narr ow l y , s ugges t i ng th at s anct i ons ar e i nappr opr i at e w hen a pl eadi ng cont ai ns bot h val i d and f ri v o lo u s c la im s . S e e , e .g ., F D IC v . T e k fe n C o n s tr . & In s ta lla tio n C o ., 847 F. 2d 440, 444 n. 6 ( 7t h C i r . 1988) ( “[E] ven i f thi s m i norar gum ent w e re o ff

th e m a rk , the fa c t th a t o n e a rg u m e n t in a n o th e rw ise v a lid p a p e r is n o t m e r it o r io u s” d o e s n o t w a rra n t R u le 1 1 sa n c tio n s.); B u ru ll v. Fi r s t N at ’ l B ank of M i nneapol i s , 831 F. 2d 788, 789 ( 8th C i r . 1987) ( l aw s ui tcont ai ni ng m er i t l es s and fa ctual l ygr oun d l es s cl ai m s di d not m andat e R ul e 11 s anct i ons beca us e c o m pl ai nt , “t aken a s a w hol e, w as l egal l yand fa ctual l ys ubs t ant i al enough t o r eac h a j ury ”) , cert . deni ed, 4 8 5 U .S . 9 6 1 (1 9 8 8 ); G o ld e n E a g le D is tr ib . C o rp . v . B u rr o u g h s C o rp ., 801 F. 2d 1531, 1540 ( 9t h C i r . 1986) ( “R ul e [11] perm i t s the i m pos i t i on o f sa n c tio n s o n lyw h e n th e ‘p lea d in g , m o tio n , o r o th e r p a p e r’ itse lf is fr i vol ous , notw hen one of the ar gum ent s i n su p p or tof a pl eadi ng or m o t i o n i s f

r i v o l o u s . ” )
. O t h e rc o u r t s i n t e rp r e tR u l e 1 1 m o r e b r o a d l y, fin d in g th a t itm a yb e v io late d b ya p lea d in g c o n tain in g a sin g le fr i vol ous cl ai m . See, e. g. , C r os s & C r os s Pr operti es v . E ver et tA l l i ed C o. , 886 F. 2d 497, 504 ( 2d C i r . 19 8 9) ( “[T] o adopta s t andar d that w o u ld d e n ysa n c tio n s fo r a sig n ifica n t an d o b v io u slym e r it les s c laim sim p ly b ec au se the rest o f the p lead ing w as so u n d str ikes u s as c o n tr ary t o t hi s cour t ’ s es t abl i s hed r eadi ng of R ul e 11. ”) ; Pat t er s on v. A i ken, 841 F. 2d 386, 387 ( 11t h C i r . 1988) ( “R ul e 11 does n o t p reve ntthe i m pos i t i on of s anct i ons w her e i t i s s how n that the R ul e w as vi ol at ed as t o a por t i on of a pl eadi ng, even though i tw as notvi ol at ed as t o other por t i ons . ”) ; Fr ant z v. U ni t ed St at es Pow er l i ft i ng Fed’ n, 836 F. 2d 1063,- 12-

1 0 6 7 (7 th C ir. 1 9 8 7 ) ( “ R u le 1 1 a p p lies to a ll state m e n ts in p a p e rs it cover s . E ach c l ai m m us thave s uffi ci ents uppor t ; eac h m us tbe inv esti g ated an d rese arc h ed b efo re fil ing
. ”). I d. at1158. W e chos e i n D odd t o fol l ow the br oaderi nt erpr et at i on of R ul e 11 and ther efor e hel d “thata pl eadi ng cont ai ni ng both fr i vol ous and nonfr i vol ous cl ai m s m ayviol at e R ule 11. ” Id. W e fi rm l yst at ed that“[t ]o conc l ud e otherw i se
w o u ld a llo w a p a rtyw ith o n e o r m o re p a ten tlym e rito rio u s c laim s to p e p p e r h is compl ai ntw i t h one orm or e hi ghl yadvant ageous , y etw hol l yfr i vol ous , cl ai m s , for th a t p a rtyw o u ld b e a ss u re d th a t th e w e ig h t o f h is m e rito rio u s c laim (s) w o u ld sh iel d h im fro m san cti o n s. ” Id
. (qu o tat ion o m itted). W e c o n clud e tha t D o d d is co n tr o ll ing in this ca se. T h e d istri ct co u rt
e s s e n t i a l l yd e c l i n e d t o c o n s i d e rwh e th e rth e i n s u ffi c i e n c yo f Ke a rn e y ’ s RI CO
c l a i ms me r i t e d s a n c t i o n s b e c a u s e i twa s u n wi l l i n g t o “ s e p a r a t [ e ] ” th o s e c l a i ms fr om K earney ’ s ot her— pot ent i al l ym er i t or i ous — s t at e- l aw cl ai m s . Y etD odd
s p e c i fi c a l l yh e l d t h a tp r o p e ra p p l i c a t i o n o f Ru l e 1 1 r e q u i r e s e v a l u a t i n g c l a i ms i ndi vi dual l yfors anct i ons purpos es . T hi s comport s w i th the pl ai n l anguage of the Rul e , w hi c h s pe a ks i n t e r ms o f “ c l a i ms” a nd “ l e ga l c on t e nt i on s . ” Fe d. R. Ci v. P. 11( b) ( 2)
. E ach c l ai m m us tbe i ndi vi dual l yeval uat ed and the mer i t , orpot ent i al
m e rit, o f

o n e leg a l cla im d o e s n o t d im in ish th e c o m m a n d o f R u le 1 1 th a t each
c laim h a v e th e n e c e ss a ryleg a l su p p o rt. K earneyar gues t hatt he di s tr i ctcour t ’ s r efus al t o s epar at e the cl ai m s w as p r o p e rb e c a u s e h i s s t a t e - l a w c l a i m s w e r e “ a tth e h e a r t ” o f h i s R I C O c l a i m s . We- 13-

do nott hi nk t hatr el at ednes s m att er s . A l though ther e ar e, nots urpr i s i ngl y , m any
s i m i l a r i t i e s b e t w e e n t h e s t a t e a n d fe d e r a l c a u s e s o f a c t i o n a s s e r t e d b y K e a rn e y, R IC O c o n ta in s s p e c ia l r e q u ir e m e n ts th a t d o n o t a p p ly to th e s ta te la w c la im s . T her efor e, even i f K earneyw er e t o pr evai l on hi s s t at e- l aw cl ai m s , thatw oul d be qui t e i r r el evantt o t he ques t i on of w hetherthe fe der al cl ai m s — w i th thei runi que requi rem ents — w ere w arr anted and no nfri vo l ou s. W e em ph asi ze t hat our deci si on , of co urse, shou l d n ot be t aken as a concl us i on t hats anct i ons ar e mer i t ed i n thi s cas e; thati s a dec i s i on forthe di s t r i ct
co u rtto m ak e in th e fir st i n stan ce . O u r co n clus ion is si m p lythat the d istri ct co u rt “bas ed i t s rul i ng on an err oneous vi ew of the l aw , ” B arr et t , 30 F. 3d at1301 ( quot at i on om i t t ed) , and ther ebyabus ed i t s di s cr et i on. C ons equent l y , w e r emand fort he di s t r i ctcour tt o addr es s w hethers anct i ons ar e mer i t ed. I I I . CO NC L US I ON F o rt h e fo r e g o i n g r e a s o n s , we AFF I RM t h e d i s mi s s a l o f Ke a rn e y ’ s RI CO cl ai m s butR E V E R SE t he di s t r i ctcourt ’ s deci s i on on s anct i ons and R E M A N D for a det erm i nat i on of w hethers anct i ons ar e mer i t ed.

ENT ERE D FOR T HE COURT

D avi d M
. E bel C i r cui tJ udge