Opinion ID: 1436592
Heading Depth: 2
Heading Rank: 3

Heading: The Court Properly Imposed Sanctions

Text: Civil Rule 11 allows the Superior Court to impose sanctions on an attorney who has presented a pleading without evidentiary support or for any improper purpose. [9] The reasonableness of the attorney's inquiry depends on the circumstances of the case. An inquiry that is unreasonable when an attorney has months to prepare a complaint may be reasonable when he has only a few days before the statute of limitations runs. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 401-02, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) (quoted in Gray v. Washington, 612 A.2d 839, 843 (D.C.1992)). Moreover, Rule 11 sanctions are not to be imposed simply because the allegations in the challenged pleading are found wanting. Bredehoft v. Alexander, 686 A.2d 586, 594 (D.C.1996) (internal quotation marks and citation omitted). Although we eschew the benefits of 20/20 hindsight, Park v. Sandwich Chef, Inc., 651 A.2d 798, 803 (D.C.1994); accord, Kleiman, 633 A.2d at 1382, we no longer limit our scrutiny to the pre-filing investigation. The 1993 amendment to [federal] Rule 11 [adopted by the Superior Court in 1995] emphasizes an attorney's continuing obligation to make inquiries, and thus the rule allows sanctions when an attorney continues `insisting upon a position after it is no longer tenable.' Battles v. City of Ft. Myers, 127 F.3d 1298, 1300 (11th Cir. 1997) (quoting FED.R.CIV.P. 11, Advisory Committee Notes (1993 Amendment)). Accord, Morris v. Wachovia Securities, Inc., 448 F.3d 268, 279 (4th Cir.2006); Ridder v. City of Springfield, 109 F.3d 288, 293 (6th Cir.1997) (Rule 11 embrac[es] a continuing duty of candor). [10] The Advisory Committee Notes to the federal rule explain: The rule continues to require litigants to `stop-and-think' before initially making legal or factual contentions. It also, however, emphasizes the duty of candor by subjecting litigants to potential sanctions for insisting upon a position after it is no longer tenable and by generally providing protection against sanctions if they withdraw or correct contentions after a potential violation is called to their attention. . . . [A] litigant's obligations with respect to the contents of [its] papers are not measured solely as of the time they are filed with or submitted to the court, but include reaffirming to the court and advocating positions contained in those pleadings and motions after learning that they cease to have any merit. . . . [I]f evidentiary support is not obtained after a reasonable opportunity for further investigation or discovery, the party has a duty under the rule not to persist with that contention. FED.R.CIV.P. 11, Advisory Committee Notes (1993 Amendment Subdivisions (b) and (c)).
A party intending to move for sanctions under Rule 11 first must give his opponent an opportunity to withdraw or correct the offending pleading or allegation. A draft of the motion shall be served as provided in Rule 5, but shall not be filed with or presented to the court unless, within 21 days after service of the motion (or such other period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. Super. Ct. Civ. R. 11(c)(1)(A) (1995 Supp.). The purpose of the `safe harbor' provision is to give an opposing party the opportunity to admit candidly that it cannot support its contention, and withdraw that position before the Rule 11 motion has been filed with the court. Goldberg, Marchesano, Kohlman, Inc. v. Old Republic Surety Co., 727 A.2d 858, 864 (D.C.1999) (citing FED.R.CIV.P. 11, Advisory Committee Notes (1993 Amendment)). This court has required compliance with the safe harbor provision in order for sanctions to be awarded pursuant to Rule 11. In re Jumper, 909 A.2d 173, 175 (D.C. 2006) (citation omitted). A party cannot initiate the Rule 11 process after judgment has been entered. Under such circumstances, there would be no way to provide the twenty-one day notice and opportunity for correction required by the safe harbor provision of Rule 11(c)(1)(A). For example, in Goldberg, we held that the motion for sanctions must be served on the opposing party while the opposing party still has the opportunity to correct the offending position or papers. 727 A.2d at 864. In that case, the movant filed her Rule 11 motion six weeks after [the Superior Court] rendered summary judgment. At that time, there were no papers, claims, or contentions pending before the judge which GMK could have withdrawn or corrected in response to the motion. Id. See also Roth v. Green, 466 F.3d 1179, 1193 (10th Cir. 2006) (and cases cited therein; Rule 11 motions should have been denied because they were not filed until after the district court had dismissed the complaint); Ridder v. City of Springfield, 109 F.3d at 297 (Quite clearly then, a party cannot wait until after summary judgment to move for sanctions under Rule 11.). This case is unusual because the trial court dismissed the initial Rule 11 motion as premature rather than holding the motion in abeyance. After summary judgment had been granted against Fischer, Paley Rothman renewed its motion for sanctions. Appellants protest that there was nothing they could do at that point to withdraw their offending pleadings and that they therefore were deprived of their safe harbor warning. We disagree. The procedural posture of this case is similar to that considered in Divane v. Krull Electric Co., Inc., 200 F.3d 1020 (7th Cir.1999). There, as here, the trial court dismissed the first Rule 11 motion as premature because it could not rule on the issue of sanctions until certain factual disputes were resolved. After judgment had been entered, a second Rule 11 motion was filed, and the court awarded sanctions. Although acknowledging that taking [the] motion under advisement pending the resolution of the factual dispute would have been a more appropriate method, the Seventh Circuit concluded that Trustees effectively complied with the twenty-one day safe harbor provision of Rule 11(c)(1)(A), and the dismissal of Trustees initial motion to sanction Curry as premature did not extinguish this effective notice. Id. at 1027. [11] Accord, Holgate v. Baldwin, 425 F.3d 671, 678 (9th Cir.2005) (initial motion was denied without prejudice in 2002: We hold that Levinson received all the process due to him when Baldwin initially satisfied the safe harbor requirements of Rule 11. There was no need for Baldwin to satisfy a second safe harbor period when he re-filed his Rule 11 motion in 2003.); see also Hamil v. Mobex Managed Services Co., 208 F.R.D. 247, 250 (N.D.Ind.2002) ([A] motion for sanctions may be filed with the court after judgment as long as the moving party has first served the motion for sanctions on the offending party twenty-one (21) or more days prior to final judgment.); Powell v. Squire, Sanders & Dempsey, 990 F.Supp. 541, 542-43, 545 (S.D.Ohio 1998) (safe harbor provision was complied with when copy of proposed Rule 11 motion was served on opposing counsel approximately four months before court granted judgment on the pleadings, but motion was not filed until after judgment was granted), aff'd in relevant part, 182 F.3d 918 (6th Cir.1999); 5A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE: CIVIL 3D § 1337.2, at 730 (2004) ([A] motion for sanctions may be filed with the district court after a dismissal or a final order in the actions if the Rule 11 motion was served upon the opposing party at least twenty-one days before the dismissal or judgment.). Here Kahn and Goldschmidt received ample warning that Paley Rothman intended to seek Rule 11 sanctions, and they had many opportunities to withdraw the allegations before summary judgment was granted. Paley Rothman gave the safe harbor warning on January 21, 1998, while Mr. Kahn was representing Fischer. Kahn did not withdraw until June 11, 1998. Mr. Goldschmidt was also given notice on January 21, although he did not formally represent Fischer at that time. On July 10, 1998, after Mr. Goldschmidt reentered his appearance, and with the Rule 11 motion still pending, Paley Rothman again requested that he dismiss the claims, making specific reference to Rule 11. Although the court denied the Rule 11 motion on July 24, 1998, the lawyers could not have been under any illusion that the court had rejected the request for sanctions as unfounded. Summary judgment was not entered until July 21, 1999. Each lawyer had many more than twenty-one days after notice was given in which he could have withdrawn the amended complaint. See Holgate, 425 F.3d at 677 (The fact that Levinson was allowed to withdraw as counsel . . . does not protect him from sanctions based on a filing that he made before that withdrawal.); id. at 678 (During the entire safe harbor period in 2002, Levinson was still acting as the Holgates' counsel and therefore had ample ability and opportunity to avoid Rule 11 sanctions by withdrawing or otherwise correcting the offending paper.). Both Mr. Goldschmidt and Mr. Kahn received the safe harbor protections of Rule 11(c)(1)(A).
Following the Supreme Court's lead, we apply an abuse-of-discretion standard in reviewing all aspects of [the trial] court's Rule 11 determination. Cooter & Gell, 496 U.S. at 405, 110 S.Ct. 2447. Mr. Goldschmidt and Mr. Kahn devote most of their briefs to arguing that they had a legal and factual basis for suing Mark and Paley Rothman. [12] For example, Mr. Goldschmidt asserts that he had a good faith factual basis for maintaining that Mark intentionally asserted a baseless claim on behalf of Flax in bad faith, in order to obtain compensation for Flax to which Flax had no cognizable legal entitlement. In stark contrast, when granting summary judgment to Paley Rothman on the tortious interference claim, Judge Graae concluded that there is no doubt Mr. Mark had a lawyer's obligation to represent his client Flax on its compensation claim. Even though Flax was holding out for a larger fee than Fischer was prepared to pay, there is not a shred of evidence to support Fischer's claim that Paley Rothman was proceeding in bad faith. [13] Considering the same argument under Rule 11 standards, the trial court was struck by the fact that the exhibits attached to [Fischer's] complaint . . . establish the necessity for Mr. Mark's representation of Mr. Flax's interests. Both Mr. Goldschmidt and Mr. Kahn disagree with these and several other of Judge Graae's assessments of the evidence, but they have not demonstrated that those findings are clearly erroneous. See Cooter & Gell, 496 U.S. at 401, 110 S.Ct. 2447 (A court of appeals would be justified in concluding that a [trial] court had abused its discretion in making a factual finding only if the finding were clearly erroneous.); id. at 400, 110 S.Ct. 2447 (In practice, the `clearly erroneous' standard requires the appellate court to uphold any district court determination that falls within a broad range of permissible conclusions.). Only in rare circumstances will a party be justified in suing his opponent's lawyer. An attorney `who pursues in good faith his or her client's interests on a matter fairly debatable in the law' cannot be held liable to an opposing party. Fischer I, 816 A.2d at 6 (quoting Strid v. Converse, 111 Wis.2d 418, 331 N.W.2d 350, 356 (1983)). Similarly, there can be no conspiracy when an attorney acts within the scope of his employment . . . [that is,] where an attorney's advice or advocacy is for the benefit of his client and not for the attorney's sole personal benefit. Fraidin v. Weitzman, 93 Md.App. 168, 611 A.2d 1046, 1079-80 (1992). On the other hand, an attorney may be liable if he possess[es] a desire to harm which is independent of the desire to protect his client. This would constitute actual malice and therefore substantiate a tortious interference with contract claim. Id. at 1080. Fraidin recognizes that an attorney sometimes may be liable to the opposing party, but there was no factual basis for concluding that this was one of those rare instances. [14] Mr. Fischer speculated that Mr. Mark was motivated by malice because of his friendship with Flax, but we have rejected a similar inference on comparable facts. In Ammerman v. Newman, 384 A.2d 637 (D.C.1978), the trial court had granted summary judgment for the defendants in a suit claiming that Mrs. Newman and her attorneys were guilty of malicious prosecution. One of the attorneys was Mrs. Newman's son-in-law, and the plaintiffs argued that his uncharacteristically close ties to the family's decision-making process [raised] a basic question of material fact regarding [his] degree of involvement in permitting an unwarranted suit to run its full course. We concluded that [s]uch an unsupported allegation is clearly insufficient. Id. at 641. The attorney's decision to associate himself with a suit involving a close member of his family, while perhaps unwise, in no way establishes malice on his part. . . . Id. There was even less reason in this case to believe that Mr. Mark was acting out of malice. Mr. Goldschmidt and Mr. Kahn failed to recognize the difference between mere speculation and a legitimate inference. See Majeska v. District of Columbia, 812 A.2d 948, 950 (D.C. 2002) ([T]he courts of this jurisdiction have emphasized the distinction between the logical deduction and mere conjecture. (internal quotation marks and citation omitted)). The trial court did not abuse its discretion by imposing Rule 11 sanctions.
Rule 11 specifies that [a] sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated. Super. Ct. Civ. R. 11(c)(2) (1995 Supp.). If the sanction is imposed on motion and warranted for effective deterrence, the court may direct payment to the movant of some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation. Id. Being thoroughly familiar with the record, the trial court recognized that the claims made against Paley Rothman infected the entire litigation . . . [and] had a huge impact . . . in terms of time and expense. . . . Mr. Mark and Paley Rothman, although thoroughly vindicated on the merits, were badly hurt by this litigation . . . a case they should never have had to defend. Nevertheless, the court did not attempt to make them whole. Instead, it focused on the deterrent purpose of Rule 11 and the resources of Kahn and Goldschmidt. The court noted that the total sanction it imposed was less than 14% of Paley Rothman's bill. . . . Mr. Goldschmidt had initiated the litigation, but [g]iven the history of the case  including Mr. Kahn's filing of a new Count IV and his failure to take advantage of the 21-day `safe harbor' in Rule 11  the court [saw] no basis for finding either lawyer more or less culpable than the other. This record reflects a careful exercise of the trial court's discretion. Although Messrs. Kahn and Goldschmidt view the evidence differently, they have not demonstrated that the trial court based its decision on a clearly erroneous evaluation of the evidence. . . . Kleiman, 633 A.2d at 1383. Nor did the court abuse its discretion in setting the amount of the sanctions. See Cunningham, 719 A.2d at 502. Accordingly, we affirm the judgments imposing sanctions.