Court Opinion

ID: 3216386
Source: CourtListenerOpinion
Date Created: 2016-06-23 15:01:12.326345+00
Date Added: 2024-06-11T14:04:23.069955
License: Public Domain

Case: 14-15334   Date Filed: 06/23/2016   Page: 1 of 13

                                                        [DO NOT PUBLISH]

           IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT
                     ________________________

                            No. 14-15334
                        Non-Argument Calendar
                      ________________________

               D.C. Docket No. 6:13-cv-00418-GKS-GJK

DANIELLE TACORONTE,

                                                       Plaintiff–Appellant/
                                                       Cross-Appellee,

versus

MARC B. COHEN,
individually,
GREENSPOON MARDER, P.A.,

                                                       Defendants–Appellees/
                                                       Cross-Appellants,

GREENSPOON MARDER & ASSOCIATES, INC., et al.,

                                                       Defendants.

                      ________________________

              Appeals from the United States District Court
                   for the Middle District of Florida
                     ________________________

                             (June 23, 2016)
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Before MARTIN, JULIE CARNES, and ANDERSON, Circuit Judges.

PER CURIAM:

      The district court imposed Rule 11 sanctions against Plaintiff Danielle

Tacoronte and ordered her to pay reasonable attorney’s fees and costs to

Defendants Greenspoon Marder and Marc Cohen. Plaintiff appeals the district

court’s order imposing Rule 11 sanctions against her. Defendants concede that

Plaintiff’s debt to them was discharged in her Chapter 7 bankruptcy proceeding.

However, Defendants cross-appeal, arguing that the district court should have

levied the sanctions against Plaintiff’s attorney as the person primarily responsible

for the underlying Rule 11 violations. We hold that the district court abused its

discretion in imposing sanctions against Plaintiff on the ground that Plaintiff’s

arguments were not warranted based on existing law or a nonfrivolous extension of

existing law. Accordingly, we vacate the district court’s Rule 11 orders and

remand for further proceedings consistent with this opinion.

                               I.     BACKGROUND

      Plaintiff obtained a $130,000 line of credit from Wells Fargo Bank. She

eventually defaulted on a balance of approximately $129,000. Wells Fargo sued

Plaintiff in Florida state court to recover her unpaid balance. Defendant

Greenspoon Marder represented Wells Fargo in the litigation against Plaintiff.

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Defendant Marc Cohen, a shareholder of Greenspoon Marder, took the lead. The

Florida state court entered judgment against Plaintiff in the amount of $129,000.

       Plaintiff then sued Defendants in federal district court. 1 Plaintiff’s amended

complaint contained three counts. Count I asserted violations of the Fair Debt

Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692. Count II asserted

violations of the Florida Consumer Collection Practices Act (“FCCPA”), Fla. Stat.

§ 559.55–.785. And Count III asserted violations of the Fair Credit Reporting Act

(“FCRA”), 15 U.S.C. § 1681 et seq. Each claim centered on two aspects of the

state court litigation. First, Defendant Cohen had failed to file a notice of

appearance until almost a year after he was retained by Wells Fargo. Second,

Defendant Cohen had pulled Plaintiff’s consumer report from Equifax, and

because Equifax had failed to update its records, an inquiry was placed on

Plaintiff’s report in the name of Cohen’s previous employer.

       Defendants moved for summary judgment on January 14, 2014. Plaintiff

moved for summary judgment on January 31, 2014—more than two weeks after

the deadline for filing dispositive motions. That same day, Plaintiff sought leave to

file a second amended complaint in which she would abandon Counts I and II.

The district court denied Plaintiff’s motion to amend. Plaintiff then moved to

1
  Plaintiff’s original complaint also asserted claims against Jodi Cohen, who had previously
represented Wells Fargo in the state litigation, and Wells Fargo. The district court dismissed
Plaintiff’s claims against Jodi Cohen, and Plaintiff’s amended complaint dropped the claims
against Wells Fargo.
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voluntarily dismiss Counts I and II of her amended complaint. The district court

granted Plaintiff’s motion but conditioned dismissal on Plaintiff paying

Defendants’ attorney’s fees incurred in defending the claims in Counts I and II.

After the district court issued its order, Plaintiff sought to withdraw her motion to

voluntarily dismiss Counts I and II, which the district court denied.

      On April 1, 2014, the district court denied Plaintiff’s motion for summary

judgment on Count III, the only remaining Count. The district court granted

Defendants’ summary judgment motion on Count III and entered final judgment.

      Defendants subsequently moved for Rule 11 sanctions. The district court

granted Defendants’ motion, ordered Plaintiff to pay the reasonable attorney’s fees

and costs that Defendants had incurred since the date Plaintiff filed her amended

complaint, and directed Defendants to “renew their motion for attorney’s fees and

costs and provide an accounting of the costs, fees, and expenses sought.”

Defendants filed a renewed motion for attorney’s fees and costs with a

memorandum detailing the hours and billing rates for each person who had worked

on the case. Defendants sought $198,787.81 in attorney’s fees and $1,301.96 in

costs. The district court referred the initial determination of the proper amount of

fees and costs to a magistrate judge. The magistrate judge issued a report and

recommendation (“R&R”), which recommended that the district court award

Defendants the full amount of costs sought but only $117,552.13 in fees, reflecting

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a reduced hourly rate and a reduced number of hours. Plaintiff objected to the

R&R; Defendants did not. The district court adopted the R&R, awarding

Defendants a total of $118,854.09 in fees and costs.

       On November 25, 2014, Plaintiff appealed the district court’s sanctions

orders.2 Defendants cross-appealed on December 5, 2014. Plaintiff then filed for

Chapter 7 bankruptcy, which triggered an automatic stay effective March 2, 2015.

Plaintiff named Defendants as creditors, and the bankruptcy court discharged

Plaintiff’s debt to Defendants.

                                    II.    DISCUSSION

       Plaintiff’s initial brief advances two arguments. First, Plaintiff asserts that

her appeal is moot in light of the bankruptcy discharge. Second, Plaintiff contends

that the district court’s order awarding fees and costs is “void ab initio” in light of

the bankruptcy discharge and, accordingly, Defendants’ cross-appeal is improper.

Defendants readily acknowledge that the award of attorney’s fees and costs was

discharged as to Plaintiff. However, Defendants argue that Plaintiff’s bankruptcy

2
  Plaintiff had previously appealed the following district court orders to this Court: (1) the order
granting Plaintiff’s motion to voluntarily dismiss two of her counts, which conditioned dismissal
on payment of attorney’s fees and costs incurred in defending those counts; (2) the order denying
Plaintiff’s subsequent motion to withdraw her motion to dismiss those two counts; (3) the order
granting summary judgment in favor of Defendants; and (4) the order directing Plaintiff to pay
Defendants’ reasonable fees and costs. We consolidated the appeals of the first three orders and
dismissed the appeal of the fourth order because the amount of fees had not yet been set. See
Santini v. Cleveland Clinic Fla., 232 F.3d 823, 825 n.1 (11th Cir. 2000) (“Because the magistrate
judge has not yet reduced the sanctions order to a specific sum, the order it not final and the court
lacks jurisdiction over Miller’s appeal.”). As to the first three orders, we affirmed the district
court’s rulings in toto. See Tacoronte v. Cohen, 594 Fed. App’x 605 (11th Cir. 2015).
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did not altogether void the district court’s judgment imposing sanctions. In their

cross-appeal, Defendants argue that “[t]he Rule 11 violations found by the district

court involve elementary errors in understanding and applying legal principles, or

ascertaining the existence of facts that would meet applicable legal standards.”

Defendants contend that these errors are “uniquely faults of the lawyer, not the

represented party,” and accordingly, that the district court abused its discretion in

imposing sanctions against Plaintiff rather than her attorney. Notably, neither

party disputes that sanctions were warranted, and neither party takes issue with the

amount of fees and costs awarded.

      We reject Plaintiff’s argument that the bankruptcy court’s order discharging

Plaintiff’s debt to Defendants rendered the district court’s orders awarding

Defendants attorney’s fees and costs void ab initio, thereby dooming Defendants’

cross-appeal. Plaintiff’s only authority for this novel proposition is an unpublished

opinion from the District Court for the District of Connecticut. See In re Heating

Oil Partners, No. 3:08-cv-1976, 2009 WL 5110838 (D. Conn. Dec. 17, 2009). As

relevant here, that opinion held, unremarkably, that a district court order entered in

violation of an automatic stay is void ab initio. Id. at *8 (“In the Second Circuit, as

a general rule, any action taken in violation of the automatic stay is void ab initio

and thus without effect.”). Here, the district court’s order awarding Defendants

attorney’s fees and costs pre-dated Plaintiff’s bankruptcy suit. Therefore, the order

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was not entered in violation of an automatic stay, and the order is not void ab

initio. Thus, Defendants’ cross-appeal is properly before us. We “apply an abuse-

of-discretion standard in reviewing all aspects of a district court’s Rule 11

determination.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990). “A

district court abuses its discretion when it misapplies the law in reaching its

decision or bases its decision on findings of fact that are clearly erroneous.” Arce

v. Garcia, 434 F.3d 1254, 1260 (11th Cir. 2006).

       In general, Rule 11 is violated, and sanctions are warranted, when a party

files a pleading, motion, or paper that (1) is filed in bad faith or for an improper

purpose (see Rule 11(b)(1)); (2) is based on a legal theory that has no reasonable

chance of success and that cannot be advanced as a reasonable argument to change

existing law (see Rule 11(b)(2)); or (3) has no reasonable factual basis (see Rule

11(b)(3)).3 See also Baker v. Alderman, 158 F.3d 516, 524 (11th Cir. 1998). An

attorney may be sanctioned when a pleading suffers any of these defects.

However, district courts are forbidden from imposing monetary sanctions on a

party for a violation of Rule 11(b)(2), i.e., when a pleading advances a legal theory

that is unwarranted under existing law or a nonfrivolous extension of existing law.

See Fed. R. Civ. P. 11(c)(5)(A) (“The court must not impose a monetary sanction

3
  Additionally, under Rule 11(b)(4), an attorney or party may be sanctioned when denials of
factual contentions are unwarranted based on the evidence. But that provision is not relevant to
this appeal.
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. . . against a represented party for violating Rule 11(b)(2).”); see also Byrne v.

Nezhat, 261 F.3d 1075, 1118 (11th Cir. 2001) (“Rule 11 does not permit

sanctioning a client, however, when the basis for the sanction is that the pleading

was legally frivolous.”), abrogated on other grounds by Bridge v. Phoenix Bond &

Indem. Co., 553 U.S. 639 (2008).

      Defendants’ motion for Rule 11 sanctions was based on Plaintiff’s amended

complaint, which contained three Counts. Count I asserted claims under the

FDCPA; Count II asserted claims under the FCCPA; and Count III asserted claims

under the FCRA. The district court concluded that each Count violated Rule 11

and therefore ordered Plaintiff to pay Defendants’ attorney’s fees incurred in

defending Counts I, II, and III. As catalogued below, the district court found that

sanctions were warranted based on violations of subsections (1), (2), and (3) of

Rule 11(b).

      With respect to Plaintiff’s five FDCPA claims asserted in Count I, the

district court first noted that the statute of limitations had likely run as to each

claim. On the merits, the district court found that sanctions were warranted as to

Count I because:

      • “[Plaintiff’s] claims under § 1692e(2) and § 1692f(1) contained in Count

          I of her First Amended Complaint were brought without evidentiary

          support and without any reasonable expectation that the discovery

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   process would produce any evidentiary support for these claims.” (Rule

   11(b)(3))

• “[Plaintiff] fail[ed] to provide a single citation to any primary legal

   authority that supports her legal theory . . . . Nor does [Plaintiff] present

   this theory as a good faith argument for extending existing law,

   modifying existing law, or establishing new law.” (Rule 11(b)(2))

• “[Plaintiff] repeatedly quoted [15 U.S.C.] § 1681b in her filings with this

   Court, each time curiously neglecting to reproduce the phrase ‘review or

   collection of an account of[] the consumer . . . .’ A plain reading of

   § 1681b(a)(3)(A) reveals that Defendants had permissible purpose in

   obtaining [Plaintiff’s] Equifax consumer report for the purpose of

   reviewing or collecting upon the account [Plaintiff] had with Wells

   Fargo.” (Rule 11(b)(2))

• “[Plaintiff’s] attempts to ignore and hide relevant, controlling authority

   are sanctionable in themselves.” (Rule 11(b)(2))

• “Most importantly, though, no provision of the FDCPA imposes liability

   on a user of a consumer report (such as Defendants) for a consumer

   reporting agency’s misstatement on a consumer report that the agency

   furnishes to the consumer. Unsurprisingly, [Plaintiff] fails to identify any

   primary legal authority that would support such liability. Nor does she

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           present any argument for modifying or extending existing law.” (Rule

           11(b)(2))

      Regarding Count II, the district court concluded that Plaintiff’s FCCPA

claims “lacked arguable merit” and “evidentiary support” for the following

reasons:

      • “[Plaintiff] does not delineate how either defendant violated section

           559.72(9). . . . For the same reasons stated above with respect to

           [Plaintiff’s FDCPA claims], [Plaintiff’s] claims under section 559.72(9)

           would fail.” (Rule 11(b)(2) and 11(b)(3))

      • “Ultimately, [Plaintiff] has not filed any material with the Court that

           would explain the basis for [her] claim [under § 559.72(10)] or provide

           evidentiary support for this claim. Nor does [Plaintiff] present this claim

           as a non-frivolous argument for changing existing law or creating new

           law.” (Rule 11(b)(2) and 11(b)(3))

      • “[Plaintiff’s] First Amended Complaint is devoid of any fact that would

           even tend to support [] a claim [under § 559.72(15)]. . . . Ultimately,

           [Plaintiff] has not filed any material with the Court that would explain the

           basis for this claim or provide support for this claim. . . . Finally,

           [Plaintiff] does not present this claim as a non-frivolous argument for

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           changing existing law or creating new law.” (Rule 11(b)(2) and

           11(b)(3))

       And as for Count III, the district court concluded that Plaintiff’s FCRA

claims “lacked any arguable legal merit.” The court specifically noted that:

       • “[Plaintiff] has repeatedly failed to recognize that a plain reading of 15

           U.S.C. § 1681b(a)(3)(A) reveals that Defendants had permissible purpose

           to obtain her Equifax consumer report.” (Rule 11(b)(2))

       • “[Plaintiff] did not present her FCRA claim as a non-frivolous argument

           for changing existing law or to establish new law. Therefore, it is clear

           that [Plaintiff’s] claim was frivolous and that her counsel failed to

           conduct even a basic inquiry into the relevant law concerning the FCRA

           claim contain in the First Amended Complaint.” (Rule 11(b)(2))

       In summing up, the district court explained that “it is clear that prior to filing

the First Amended Complaint, [Plaintiff’s] counsel failed to conduct a reasonable

inquiry into the facts of this case and the relevant law.” The court also noted that it

was “left with the general impression that [Plaintiff] initiated and prosecuted this

case . . . solely in the interest of vexatious retaliation towards Wells Fargo and its

attorneys.” 4 The district court ultimately ordered Plaintiff to pay Defendants’

reasonable attorney’s fees and costs incurred in defending the case since the date

4
  This suggests the district court found that, on the whole, Plaintiff’s amended complaint
violated Rule 11(b)(1).
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Plaintiff had filed her amended complaint. The district court did not impose any

sanctions on Plaintiff’s attorney.

      No one disputes that Plaintiff’s obligation to pay Defendants’ fees and costs

was discharged in Plaintiff’s bankruptcy proceeding. However, as catalogued

above, it appears that the sanctions imposed against Plaintiff were premised in

significant part on the fact that Plaintiff’s legal theories were not supported by

existing law or a reasonable extension thereof. This plainly violates Rule

11(c)(5)(A), which prohibits courts from imposing sanctions against a represented

party based on Rule 11(b)(2), and thus amounts to an abuse of discretion. See

Massengale v. Ray, 267 F.3d 1298, 1303 (11th Cir. 2001) (“The award violated the

plain language of Rule 11, and the district court abused its discretion in imposing

it.”). Because this error so infused the district court’s reasoning, the appropriate

course of action is to vacate and remand the district court’s sanctions orders and

allow the district court to reconsider whether any portion of the sanctions should

have been imposed against Plaintiff’s attorney, keeping in mind “the basic policies

of deterrence and education behind Rule 11.” Indep. Fire Ins. Co. v. Lea, 979 F.2d

377, 379 (5th Cir. 1992) (quotation marks omitted); see also Byrne, 261 F.3d at

1120 (“[B]ecause Rule 11 directs that the sanction should fall upon the individual

responsible for the filing of the offending document, we cannot affirm the Rule 11

monetary sanctions against [the represented client].” (quotation marks and citation

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omitted)). We express no view as to the proper apportionment of sanctions. Of

course, if the district court determines that some portion of the sanctions were

proper as to Plaintiff, she is under no obligation to pay her portion of the fees and

costs.

                               III.   CONCLUSION

         For the foregoing reasons, the district court’s sanctions orders are

VACATED and REMANDED for further proceedings consistent with this

opinion.

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