Opinion ID: 675236
Heading Depth: 3
Heading Rank: 1

Heading: Grounds for Sanctions

Text: 24 Rule 11, as applicable to the plaintiffs' amended complaint, provides in part: 25 The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. 26 Fed.R.Civ.P. 11 (prior to amend. effective Dec. 1, 1993). 27 The district court found two reasons for Rule 11 sanctions against the plaintiffs: (1) there was no reasonable, good faith basis for attempting to sue under RICO, and (2) the court viewed the federal complaint as having been filed vexatiously, in bad faith, for the purposes of harassing the defendants with duplicative litigation and avoiding adverse rulings in a similar suit in state court. Sanctions Order at 2. 28 As to the first ground, the district court properly applied an objective standard--whether a reasonable and competent attorney would believe the argument has merit--in concluding that there was no good faith basis to sue under RICO. See Dodd Ins. Co. v. Royal Ins. Co. of America, 935 F.2d 1152, 1155 (10th Cir.1991); White v. General Motors Corp., 908 F.2d 675, 680 (10th Cir.1990), cert. denied, 498 U.S. 1069, 111 S.Ct. 788, 112 L.Ed.2d 850 (1991). Considering that the complaint fell short of pleading two of the necessary elements for a RICO claim, and that plaintiffs under new counsel abandoned their RICO argument altogether on appeal, we cannot say that the district court abused its discretion in justifying sanctions on this ground. 29 The second ground--improper motive--is more troublesome. Certainly, [a]s an appellate court we must give deference to fact findings by a district court, Crabtree ex rel. Crabtree v. Muchmore, 904 F.2d 1475, 1478 (10th Cir.1990), and particularly when reviewing sanctions under Rule 11, we must give [d]eference to the determination of courts on the front lines of litigation. Cooter & Gell, 496 U.S. at 404, 110 S.Ct. at 2460. Nevertheless, the record gives no support to the district court's finding that the plaintiffs acted vexatiously, in bad faith, or with intent to harass the defendants or avoid rulings by the Oklahoma court. 30 The district court was displeased that the plaintiffs brought into federal court the same parties and claims already proceeding in state court. Apparently, though, the plaintiffs did not choose the state forum; the Bank named them as third party defendants, along with Fox. See Appellant's App., No. 93-7029, Tab 3 at 9. The plaintiffs, in fact, argued to the district court that the Bank joined Fox, whose interests (and domicile) are apparently more in line with the Bank's than the plaintiffs', as a third party defendant in order to defeat diversity and, presumably, removal. While the district court did not discuss the alignment of the parties in state court, and we need not do so here, it is clear that plaintiffs Barrett and Slover did not initiate duplicative actions in state and federal court, as the district court seemed to suggest. And even if they had, [g]enerally, as between state and federal courts, the rule is that the pendency of an action in the state court is no bar to proceedings concerning the same matter in the federal court having jurisdiction. Colorado River Conserv. Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976) (recognizing that exceptional circumstances might warrant a stay or dismissal of federal action in favor of concurrent state action) (quotation deleted); Fox v. Maulding, 16 F.3d 1079, 1081-82 (10th Cir.1994) (reversing dismissal because district court failed to explain its reliance on Colorado River doctrine). 31 If there was any evidence, other than the existence of a concurrent state action, that the plaintiffs had an improper motive in bringing their federal complaint, the district court did not cite it. While the abuse of discretion standard relieves us from the duty of reweighing evidence, we still must consider whether Rule 11 sanctions were based on a clearly erroneous assessment of the evidence. Cooter & Gell, 496 U.S. at 405, 110 S.Ct. at 2461. Since nothing in the record shows an improper motive, we hold that the district court abused its discretion in imposing Rule 11 sanctions on this ground.