Opinion ID: 44555
Heading Depth: 2
Heading Rank: 1

Heading: Propriety of Sanctions Against Appellants

Text: The district court did not abuse its discretion in awarding sanctions against Appellants. Rule 11 provides for sanctions against “the attorneys, law firms, or parties that have violated [the Rule] or are responsible for the violation.”5 The Advisory Committee notes regarding the 1983 Amendment further make clear that If the duty imposed by the rule is violated, the court should have the discretion to impose sanctions on either the attorney, the party the signing attorney represents, or both, ... and the new rule so provides. ... Even though it is the attorney whose signature violates the rule, it may be appropriate under the circumstances of the case to impose a sanction on the client.6 3 Smith v. Our Lady of the Lake Hosp., Inc., 960 F.2d 439, 444 (5th Cir. 1992). 4 Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 324 (5th Cir. 1995) (citation omitted). 5 FED. R. CIV. P. 11(c) (emphasis added). 6 FED. R. CIV. P. 11 Advisory Committee Notes (emphasis added). 4 We have previously approved sanctions against a client as well as his attorney, because both have a duty “to conduct a reasonable inquiry into the facts or law before filing the lawsuit.”7 1. No Sanctioning of Clients for Legally Frivolous Pleading Although a represented party may be held responsible for a pleading that violates Rule 11, the 1993 Amendment to the Rule specifically provides that “[m]onetary sanctions may not be awarded against a represented party for a violation of subdivision (b)(2)” concerning legally frivolous pleadings, which are peculiarly within the province of lawyers.8 Appellants thus argue that the district court abused its discretion in sanctioning them for filing a legally frivolous pleading, for which only their lawyer could properly be sanctioned. They further assert that the district court made no specific findings that they had knowingly participated in sanctionable conduct.9 Although this last point is 7 Jennings v. Joshua Indep. Sch. Dist., 948 F.2d 194, 197 (5th Cir. 1991). 8 FED. R. CIV. P. 11(c)(2)(A); Bynum v. Am. Airlines, No. 0420921 (5th Cir. Feb. 6, 2006) (unpublished) (“monetary sanctions can be imposed against the attorney but not the client for violations of Rule 11(b)(2)”). Under subdivision (b)(2) the person presenting the pleading certifies that “the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.” FED. R. CIV. P. 11(b)(2). 9 See Byrne v. Nezhat, 261 F.3d 1075, 1117-18 (11th Cir. 2001) (discussing liability of client for “knowing participation” in sanctionable conduct, misrepresenting facts, or for being the “mastermind” behind a frivolous case). 5 perhaps debatable,10 the district court would have abused its discretion if it had sanctioned Appellants for violating Rule 11(b)(2) by filing a legally frivolous pleading. 2. Sanctions for Factually Frivolous Pleading The district court did not, however, sanction Appellants for the legally frivolous nature of their pleading: It sanctioned them for the numerous factually groundless allegations in their Complaint, for which clients may properly be sanctioned.11 The district court observed the “common thread weaving its way through this case ... is the puzzling lack of legal or factual support articulated for the pleadings,” and repeatedly noted “Plaintiffs’ failure to articulate any evidentiary support for their claims.” The court discussed in detail the testimony of Michael Gustin, 10 In its Orders of March 17 and May 18, 2005, the district court agreed with Defendants-Appellees that Appellants had “taken a commercial legal dispute in Morocco between well-defined parties and used it as a vehicle to harass and embarrass them by suing numerous individuals with little or no connection to the dispute and publicly accusing them in the suit of unfounded sensational wrongdoing,” and that they exhibited a “reckless willingness to impose the burden of unwarranted litigation upon others,” thereby knowingly participating in conduct violative of Rule 11(b)(1) (improper purpose). The court described Appellants as “active participants.” Also, the record contains a March 2004 letter from Sullivan to Michael Gustin, Skidmore’s owner, acknowledging the aggressive legal positions they were advancing, the possibility of sanctions, and stating that “part of this reason for our lawsuit was to act as a counteroffensive to the lawsuit ... in Morocco.” 11 See FED. R. CIV. P. 11(b)(3) (factual evidentiary support); see also Byrne, 261 F.3d at 1118. 6 Skidmore’s owner,12 who assured the court that he had reviewed the pleadings before they were filed. Nevertheless, the district court found, he was “entirely unable to articulate a factual nexus between any of the Defendants and verifiable money laundering activity,” organized crime, terrorism financing, or any of the other “sensational allegations peppered throughout the complaint and RCS.” The court found “[t]he bulk of Plaintiff[s’] causes of action ... are without evidentiary support and thus appear to have been instigated as a gamble that something might come of it rather than on the basis of the facts at hand.” The court awarded sanctions because it found “that reasonable factual and legal inquiries would have prevented this suit from being filed.” Moreover, adhering to the distinction between factual and legal grounds for sanctions, the district court “fully considered Sullivan’s missteps when apportioning [the] fee award such that Plaintiffs bear responsibility for twenty-five percent of the award and Sullivan seventy-five percent.” The district court did not abuse its discretion in awarding sanctions against Appellants based 12 We acknowledge the argument of Appellants’ counsel that only Skidmore’s — and not Geoscience’s — involvement in sanctionable conduct is reflected in the Record. We also observe, however, that these two entities were represented by common counsel in the district court, as they are on appeal, and that in all of their filings no distinction is made between them. We cannot say, particularly in light of the district court’s inherently superior vantage point, that the court erred in sanctioning Appellants jointly. 7 on the lack of support for the factual allegations in their pleading.