Court Opinion

ID: 4249572
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:19:36.357972+00
Date Added: 2024-06-11T14:44:04.369489
License: Public Domain

IN THE SUPREME COURT OF IOWA
                              No. 10–1172

                          Filed June 15, 2012

KRISTIN L. ROWEDDER, as
Conservator of GARY KRAL,

      Appellee,

vs.

MICHAEL ANDERSON, RICHARD F. ROSENER, MARK HELKENN,
RAYMOND HELKENN, McCORD INSURANCE & REAL ESTATE CORP.,
ROGER PREUL, and BERNEIL PREUL,

      Appellants,

and

COMSTOCK BROTHERS, MERRITT DANIEL COMSTOCK,
GEARY STEVEN COMSTOCK, DOUGLAS E. COMSTOCK,
and D.R. FRANCK,

      Defendants.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Crawford County, Jeffrey P.
Neary, Judge.

      Parties appeal an award of sanctions entered by the district court

under Iowa Rule of Civil Procedure 1.413(1).      COURT OF APPEALS

DECISION AFFIRMED IN PART AND VACATED IN PART; DISTRICT

COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART;

AND CASE REMANDED WITH INSTRUCTIONS.
                                     2

      Michael P. Jacobs of Rawlings, Nieland, Killinger, Ellwanger,

Jacobs, Mohrhauser & Nelson, L.L.P., Sioux City, for appellant Rosener.

      Earl G. Greene, III, of Woodke & Gibbons, P.C., L.L.O., Omaha,

Nebraska, for appellants Helkenns.

      Brandon R. Tomjack of Baird Holm, LLP, Omaha, Nebraska, for

appellant Anderson.

      Sean A. Minahan, Patrick G. Vipon, and Gage R. Cobb of Lamson,

Dugan & Murray, LLP, of Omaha, Nebraska, for appellants McCord

Insurance and Preuls.

      Mark McCormick of Belin McCormick, P.C., Des Moines, Robert L.

Laubenthal and Marvin O. Kieckhafer of Smith Peterson Law Firm, LLP,

Council Bluffs, for appellee Rowedder.
                                      3

WIGGINS, Justice.

      Parties seek further review of a court of appeals decision affirming

a district court order awarding $1000 in sanctions against plaintiff’s

counsel and making the sanctions payable to the Crawford County Jury

and Witness Fund.        We conclude the trial court did not abuse its

discretion in fixing the amount of the sanction.         We also conclude,

however, the court abused its discretion in making the sanction payable

to the jury and witness fund. Given the preference in our rule toward

compensating victims, on remand the district court should enter an

order requiring the sanction be paid in equal parts to the parties seeking

the sanctions.

      I. Background Facts and Proceedings.

      Between February 2004 and February 2005, Gary Kral, as the

executor and sole heir of his father’s estate, sold four forty-acre parcels of

farmland located in Crawford County and owned by his father’s estate to

four different buyers.    Kral worked with Roger and Berneil Preul of

McCord Insurance and Real Estate Corporation to sell the parcels. Kral

primarily communicated with Roger about his desire to sell the parcels.

In order to avoid capital gains taxes, Kral demanded each parcel be sold

for $2000 per acre, which was the value placed on the land in the

probate estate.

      Michael Anderson purchased the first parcel in February 2004.

Comstock Brothers, a partnership consisting of Merritt Daniel Comstock,

Geary Steven Comstock, and Douglas Comstock, bought the second

parcel in March.     In May, Richard Rosener bought the third parcel.

Finally, Raymond Helkenn purchased the fourth parcel in February

2005. All of the buyers paid $2000 per acre.
                                          4

       In August 2005, Kral met with attorney Bradley Nelson about

evicting Helkenn’s brother, Mark, who was living in one of Kral’s rental

properties. Nelson became concerned Kral lacked the mental ability to

take care of his own financial matters.             After examining Kral’s bank

records, Nelson discovered what he deemed to be suspicious checks

totaling over $200,000 to certain individuals. Nelson became convinced

these individuals were taking advantage of Kral. Nelson then petitioned

the district court to establish a conservatorship for Kral, which Kral

accepted voluntarily.      The court appointed Kristin Rowedder, Nelson’s

office manager, as conservator for Kral in September 2005.

       In May 2006, Rowedder, as conservator for Kral, filed suit against

Anderson, the Comstocks, the Helkenn brothers, the Preuls, and McCord

Insurance.      Robert Laubenthal served as the attorney on behalf of

Rowedder and Kral. In that capacity, he signed and filed the petition as

well as subsequent pleadings, motions, and resistances.

       The petition alleged the buyers, the Preuls, and their real estate

company defrauded Kral by purchasing or facilitating the purchase of his

land at “extremely low” prices, despite the fact that they knew or should

have known that he was incompetent to conduct these transactions. The

petition also alleged “certain of the defendants” 1 conspired to divest Kral

of his assets through real estate purchases. Finally, it alleged the Preuls

and their real estate company were professionally negligent and breached

a fiduciary duty to Kral in facilitating the sales. The petition sought to

rescind the sales and requested that the court establish a constructive

trust on each property.

       1The   district court sustained motions to dismiss by various defendants, noting
the petition was too vague, but later allowed Rowedder to recast the allegations. A
recast petition alleged all of the defendants had participated in the conspiracy.
                                     5

      After discovery commenced, Rosener, the Comstocks, the Preuls,

and McCord Insurance filed motions to compel discovery. These motions

centered on Rowedder’s answers to interrogatories relating to evidence of

the alleged fraud and conspiracy.         Rowedder’s answers repeatedly

indicated she could not provide the specifics of her allegations until after

the completion of discovery.    In December, the district court ordered

Rowedder to answer all of the discovery requests by January 20, 2007, or

be subject to sanctions.     On January 23, Rowedder filed a motion

seeking an extension of this deadline.

      Meanwhile, the Helkenns offered to sell their parcel back to Kral

for the purchase price.    After Rowedder refused, the Helkenns filed a

motion for sanctions alleging Rowedder brought the action to harass,

cause unnecessary delay, and needlessly increase the cost of litigation.

      The Comstocks, Rosener, and Anderson filed separate motions for

summary judgment. Rowedder resisted each. Following a hearing, the

district court entered summary judgments finding Rowedder had failed to

show any facts supporting her allegations despite the court having given

her several opportunities to do so.      Rowedder later resisted separate

motions for summary judgment filed by the Preuls, McCord Insurance,

and the Helkenns.     Nonetheless, the district court entered summary

judgments.

      In January 2008, the Helkenns filed a request for a hearing on

their previously filed motion for sanctions. Anderson, Rosener, and the

Comstocks also filed motions for sanctions. Rowedder filed a notice of

appeal. In February, the court stayed all of the motions before it pending

the disposition of Rowedder’s appeal.

      All of the defendants, except the Helkenns, moved to dismiss the

appeal as to them, arguing Rowedder had not timely or properly
                                   6

perfected an appeal. We dismissed Rowedder’s appeal without comment

with respect to Anderson, the Comstocks, and Rosener, thereby

upholding the summary judgments in their favor.

      We transferred the balance of the appeal, which involved the

claims against the Helkenns, the Preuls, and McCord Insurance, to the

court of appeals. The court of appeals affirmed summary judgment in

favor of the Helkenns, but reversed and remanded with respect to the

claim of professional negligence against the Preuls and McCord

Insurance.

      On remand, the district court held a trial on the professional

negligence claims against the Preuls and McCord Insurance.         A jury

found they did not breach any fiduciary duty but were negligent in the

sales to Rosener and Helkenn. The jury awarded damages of $15,400.

Rowedder filed a motion for a new trial.       The Preuls and McCord

Insurance moved for a directed verdict and later for judgment

notwithstanding the verdict or, alternatively, a new trial.   The district

court denied these motions.

      Meanwhile, following the dismissal of the appeal as to them,

Rosener, Anderson, and the Helkenns renewed their motions for

sanctions. These renewed motions asked the district court to sanction

Rowedder and her attorneys. Rowedder resisted each motion.

      The district court ordered sanctions against Rowedder’s attorney,

Laubenthal.   In doing so, the court found that although Laubenthal’s

actions were not willful, vindictive, or taken in bad faith, the evidence

demonstrated “the only actionable claims that ever existed were those

against . . . McCord Insurance and Real Estate and the Preuls.”       The

court noted Laubenthal did not have a prior history of sanctions.

Further, the court stated it was presented with itemizations of attorney
                                    7

fees incurred by the various parties seeking sanctions, but not with

evidence of Laubenthal’s ability to pay any sanctions imposed by the

court. It also stated its belief that each party personally paid its own

legal fees because it was not presented with any indication the parties

had insurance coverage for their legal fees.      The court assessed a

sanction of $1000 and directed payment to the Crawford County Jury

and Witness Fund. The court did not order sanctions against Rowedder.

      The Helkenns, Anderson, and Rosener filed notices of appeal. The

Preuls and McCord Insurance appealed the negligence verdict.          We

transferred the case to the court of appeals. The court of appeals found

sufficient evidence to support the jury verdict in favor of Rowedder and

against the Preuls and McCord Insurance.         The court rejected the

arguments by Anderson, Rosener, and the Helkenns that the sanctions

were too low and that the court should not have made the sanction

payable to the jury and witness fund.

      Rosener and the Helkenns filed applications for further review,

which we granted.

      II. Issues.

      The court of appeals determined the district court did not abuse its

discretion by awarding sanctions for $1000. The court of appeals also

determined the order requiring the sanctions be paid to the Crawford

County Jury and Witness Fund was proper under Iowa Rule of Civil

Procedure 1.413(1). Finally, the court of appeals found the district court

correctly overruled the motions of the Preuls and McCord Insurance for a

directed verdict and for judgment notwithstanding the verdict or,

alternatively, for a new trial. When we grant further review, we have the

discretion to review all or part of the issues raised on appeal or in the

application for further review. In re Marriage of Becker, 756 N.W.2d 822,
                                     8

824 (Iowa 2008). In exercising our discretion, we choose only to review

the amount of the sanctions and whether the court can require the

sanction be paid to the jury and witness fund. Accordingly, we will let

the court of appeals’ determinations that the award of sanctions was not

an abuse of discretion and the affirmance of the judgment against the

Preuls and McCord Insurance stand as the final decisions of this court.

See Hills Bank & Trust Co. v. Converse, 772 N.W.2d 764, 770 (Iowa

2009).

      III. Standard of Review.

      We review a district court’s order imposing sanctions under our

rules of civil procedure for an abuse of discretion.   Everly v. Knoxville

Cmty. Sch. Dist., 774 N.W.2d 488, 492 (Iowa 2009).           An abuse of

discretion occurs “when the district court exercises its discretion on

grounds or for reasons clearly untenable or to an extent clearly

unreasonable.” Schettler v. Iowa Dist. Ct., 509 N.W.2d 459, 464 (Iowa

1993). An erroneous application of the law is clearly untenable. Waits v.

United Fire & Cas. Co., 572 N.W.2d 565, 569 (Iowa 1997).         When we

review for an abuse of discretion, we will correct an erroneous

application of the law.     Weigel v. Weigel, 467 N.W.2d 277, 280 (Iowa

1991).

      IV. The Amount of the Sanction.

      The Iowa Rules of Civil Procedure provide in relevant part:

      If a motion, pleading, or other paper is signed in violation of
      this rule, the court, upon motion or upon its own initiative,
      shall impose upon the person who signed it, a represented
      party, or both, an appropriate sanction, which may include
      an order to pay the other party or parties the amount of the
      reasonable expenses incurred because of the filing of the
      motion, pleading, or other paper, including a reasonable
      attorney fee.

Iowa R. Civ. P. 1.413(1).
                                             9

       The      primary    purpose      of   sanctions     under     rule    1.413(1)    is

deterrence, not compensation.            Barnhill v. Iowa Dist. Ct., 765 N.W.2d
267, 276 (Iowa 2009). Under the American Rule, the losing litigant does

not normally pay the victor’s attorney’s fees. Alyeska Pipeline Serv. Co. v.

Wilderness Soc’y, 421 U.S. 240, 247, 95 S. Ct. 1612, 1616, 44 L. Ed. 2d
141, 147 (1975). “Therefore, any sanction or shifting of fees and costs

which is made, need not reflect actual expenditures.” United States ex

rel. Evergreen Pipeline Constr. Co. v. Merritt Meridian Constr. Corp., 95
F.3d 153, 171 (2d Cir. 1996).

       We have dealt with the amount of a sanction under rule 1.413(1)

on several occasions.         In one case, we found the failure to impose a

sanction to be an abuse of discretion. See Breitbach v. Christenson, 541
N.W.2d 840, 845–46 (Iowa 1995).                  In another, our most recent case

involving the award of sanctions, we found the district court abused its

discretion because the sanction included fees expended prior to the

sanctionable conduct.          See Everly, 774 N.W.2d at 495.                  There, we

required the district court to determine the appropriate amount of a

sanction after making specific findings as to “ ‘(1) the reasonableness of

the opposing party’s attorney’s fees; (2) the minimum to deter; (3) the

ability to pay; and (4) factors related to the severity of the . . . violation.’ ”

Barnhill, 765 N.W.2d at 277 (quoting In re Kunstler, 914 F.2d 505, 523

(4th Cir. 1990)); accord Everly, 774 N.W.2d at 495. In addition to these

four factors, we have encouraged district courts to consider factors set

forth by the American Bar Association. 2               See Barnhill, 765 N.W.2d at

277.

       2These   factors include (1) the good or bad faith of the offending party; (2) the
degree of willfulness, vindictiveness, negligence, or frivolousness involved in the offense;
(3) the offending party’s knowledge, experience, and expertise; (4) the offending party’s
                                           10

        In making its ruling, the district court attempted to make the

specific findings of fact as required by Everly.

        The court noted that the parties presented it with itemizations of

attorney fees incurred by the parties seeking sanctions, that the parties

did not present it with any indication of the parties’ insurance coverage

for their legal fees, and that it “was left with the impression that each

party who sought sanctions personally paid their legal fees.” 3 The court,

however, failed to make a specific finding as to the reasonableness of the

fees.

        Further, the court made a finding as to the minimum amount to

deter. It found that

      the mere imposition of sanctions has in and of itself an
      impact of significance deterrence upon the person upon
      which the sanctions are imposed. . . . [T]he court is satisfied
________________________
prior history of sanctionable conduct; (5) the reasonableness and necessity of the out-
of-pocket expenses the offended party incurred as a result of the misconduct; (6) the
nature and extent of prejudice suffered by the offended party as a result of the
misconduct, not including out-of-pocket expenses; (7) the relative culpability of the
client and his or her counsel, and the impact an inquiry into their relative culpability
would have on their privileged relationship; (8) the risk of chilling the specific type of
litigation involved; (9) the impact the sanction would have on the offending party,
including the offending party’s ability to pay a monetary sanction; (10) the impact the
sanction would have on the offended party, included the offended party’s need for
compensation; (11) the relative magnitude of the sanction necessary to achieve the
sanction’s goals; (12) any burdens on the court system attributable to the misconduct,
including the consumption of judicial time, incurrence of juror fees, and other court
costs; (13) the degree to which the offended party attempted to mitigate any prejudice
he or she suffered; (14) the degree to which the offended party’s behavior caused the
expenses for which recovery is sought; (15) the extent to which the offending party
persisted in advancing a position while on notice that the position was not well
grounded in fact, warranted by existing law, or warranted by a good faith argument for
the extension, modification, or reversal of existing law; and (16) the time of, and the
circumstances surrounding, any voluntary withdrawal of a pleading, motion, or other
paper. Barnhill v. Iowa Dist. Ct., 765 N.W.2d 267, 276–77 (Iowa 2009); ABA Section of
Litigation, Standards and Guidelines for Practice Under Rule 11 of the Federal Rules of
Civil Procedure (1988), reprinted in 121 F.R.D. 101, 125–26 (1988).
        The fact that an opposing party’s attorney fees are paid by an insurance
        3

coverage will not defeat a party’s claim for sanctions. Pelletier v. Zweifel, 987 F.2d 716,
718 (11th Cir. 1993).
                                    11
      that a court-ordered sanction of $1,000 along with the
      stigma attached to the mere imposition of sanctions is [a]
      sufficient sanction [to deter future conduct].

      As to the ability to pay, the court stated it could not make a finding

as to the ability of Laubenthal to pay a sanction because the court did

not have any evidence as to Laubenthal’s financial situation. We agree

with the district court that the record is devoid of any evidence that

would allow the court to make a finding as to Laubenthal’s ability to pay.

      Finally, the court made specific findings as to the severity of the

violation. In this regard, the court found Laubenthal did not take his

actions in bad faith. The court also found his actions were not vindictive

or willful insofar as to suggest he acted with evil intent.      The court

further found Laubenthal did not have a prior history of court-imposed

sanctions.

      We realize the district court erred by not making a specific finding

as to the reasonableness of the opposing parties’ attorneys’ fees.

Additionally, the record did not contain any evidence as to Laubenthal’s

ability to pay. It was Laubenthal’s obligation to set forth evidence of his

ability to pay. Kunstler, 914 F.2d at 524. By not producing evidence of

his ability to pay, Laubenthal took the risk that he would not have the
ability to pay. However, even with these deficiencies, the district court

did not abuse its discretion in fixing the amount of the sanction.

Deterrence is the primary goal of sanctions, not compensation of the

opposing party.    The district court went to great length to make a

detailed finding that a $1000 sanction is sufficient to deter any future

conduct regardless of the opposing parties’ attorneys’ fees.     Therefore,

under the record made, we find the district court did not abuse its

discretion in awarding a $1000 sanction. Consequently, we affirm the

district court’s award of $1000 as the proper sanction.
                                           12

       V. Who Should Receive the Sanction Payment?

       The district court directed Laubenthal to pay the sanction to the

Crawford County Jury and Witness Fund rather than to the parties

seeking sanctions.        It is true that rule 1.413(1) does not require that

sanctions be paid to the opposing parties. The rule merely provides that

       the court . . . shall impose . . . an appropriate sanction,
       which may include an order to pay the other party or parties
       the amount of the reasonable expenses incurred because of
       the filing of the motion, pleading, or other paper, including a
       reasonable attorney fee.

Iowa R. Civ. P. 1.413(1).         Accordingly, while the rule states the court

“shall impose” an appropriate sanction for any violation of the rule, the

proceeds of that sanction may be allocated at the court’s discretion. Id.

       However, rule 1.413(1) does not specifically name any particular

authorized recipient other than the offended party. This is different from

Federal Rule of Civil Procedure 11, which, after it was amended in 1993,

directs payment of a penalty “into court” as the first potential destination

for sanction proceeds.         Fed. R. Civ. P. 11(c)(4).        Rule 11 also allows,

“payment to the movant of part or all of the reasonable attorney’s fees

and other expenses directly resulting from the violation” but only if

specifically requested in a motion and warranted by the situation. 4 Id.

       4The   1993 amendments to Rule 11 consciously elevated the primacy of
deterrence and significantly demoted concerns about victim compensation, thereby
giving preference to the courts as the recipient of sanction proceeds: “Since the purpose
of Rule 11 sanctions is to deter rather than to compensate, the rule provides that, if a
monetary sanction is imposed, it should ordinarily be paid into court as a penalty.”
Fed. R. Civ. P. 11 advisory committee’s notes to 1993 amendments.
         However, federal courts have held compensation of wronged parties remains a
valid subordinate purpose that supports the primary goal of deterrence. For example,
the Sixth Circuit stated, “[I]t is . . . clear that effective deterrence sometimes requires
compensating the victim for attorney fees arising from abusive litigation.” Rentz v.
Dynasty Apparel Indus., Inc., 556 F.3d 389, 400 (6th Cir. 2009). Therefore, even if
victim compensation is not considered a stand-alone purpose equivalent to deterrence,
it will sometimes be necessary if deterrence is to be fully achieved. “If compensation
                                          13

Our rule 1.413(1) makes victim compensation a more prominent concern

than Rule 11 because it allows offended parties to be partially or

completely reimbursed either “upon motion or upon [the court’s] own

initiative.” Id.

       There are strong reasons for first directing sanctions to the injured

parties. First, as we have noted, the reasonable expectation that parties

will be the beneficiaries of sanctions should they prevail provides some of

the incentive needed to motivate those parties to invest the time and

money necessary to pursue legitimate sanction claims. If injured parties

do not expect even to recoup the cost of their additional sanction filings,

some may not be willing or financially able to file motions for sanctions.

This would not only compound the personal injustice that they have

already suffered, but it could undermine the integrity of our judicial

system by diminishing the deterrent effect of sanctions.                Accordingly,

because the primary goal of rule 1.413(1) is deterrence, the primary goal

is best achieved in most circumstances if sanctions are first allocated to

the victims who made the investment to pursue them. 5

       Second, under Iowa law, although deterrence is clearly the primary

goal of rule 1.413(1), the rule serves other purposes, such as maintaining
professionalism in the practice of law.           Barnhill, 765 N.W.2d at 273.

Perhaps the most important secondary purpose is partial compensation

of the victims.     See id. at 276.     Of course, victim compensation must

________________________
was not a recognizable basis for Rule 11 awards, aggrieved litigants would have little
incentive to pursue sanctions thus diminishing the important deterrent effect of Rule
11.” Brandt v. Schal Assocs., Inc., 960 F.2d 640, 646 (7th Cir. 1992).
       5The  Federal Rules also recognize that sometimes “deterrence may be ineffective
unless the sanction not only requires the person violating the rule to make a monetary
payment, but also directs that some or all of this payment be made to those injured by
the violation.” Fed. R. Civ. P. 11 advisory committee’s notes to 1993 amendments.
                                    14

clearly defer to deterrence when it comes to setting the amount of a

sanction. See id. (“ ‘A sanction . . . must be limited to what suffices to

deter repetition of such conduct.’ ” (quoting Fed. R. Civ. P. 11(c)(4))).

Nonetheless, courts should accommodate the secondary purpose of

compensation when considering the allocation of the proceeds of a

sanction.

      We do not now define the precise standards for choosing between

parties and the judicial system, but given the strong arguments in favor

of victim compensation, we would expect courts to provide special

reasons with specific findings as to why they exercised their discretion

not to benefit those who have been most directly harmed by the

sanctionable conduct. One valid reason for allocating sanctions to the

judicial system would be the fact that the minimum sanction necessary

for deterrence actually exceeded the costs to the harmed litigants.     In

such a case, the excess should be paid to the judicial system so that

parties do not receive a windfall and so that the system can be partially

reimbursed for the unnecessary costs it incurred.

      Therefore, we find the district court’s order requiring Laubenthal to

pay the sanction to the Crawford County Jury and Witness Fund without

a specific finding as to why it should be paid to the jury and witness fund

unreasonable in light of the preference in rule 1.413(1) to award the

sanction to the party seeking it.    Consequently, the court abused its

discretion when it ordered Laubenthal to pay the sanction to the

Crawford County Jury and Witness Fund.

      VI. Disposition.

      Although we find, under the record made, the district court did not

abuse its discretion in fixing the amount of the sanction at $1000, the

court abused its discretion by ordering Laubenthal to pay the sanction to
                                     15

the Crawford County Jury and Witness Fund.          Given rule 1.413(1)’s

preference of compensating victims, we hold the district court should

enter an order requiring Laubenthal to pay the sanction in equal sums to

defendants   Anderson,    Rosener,    and   the   Helkenns    as   partial

reimbursement of the legal fees they incurred in defending against the

unfounded claims brought against them.       We assess the costs of this

appeal against Laubenthal.

      COURT OF APPEALS DECISION AFFIRMED IN PART AND

VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED IN

PART AND REVERSED IN PART; AND CASE REMANDED WITH

INSTRUCTIONS.

      All justices concur except Waterman, J., who concurs in part and

dissents in part, and Mansfield, J., who takes no part.
                                    16
                                         #10–1172, Rowedder v. Anderson

WATERMAN, Justice (concurring in part and dissenting in part).
      I respectfully concur in part and dissent in part. I agree with the

majority’s affirmance of the district court’s findings that attorney

Laubenthal violated Iowa Rule of Civil Procedure 1.413(1) and that the

imposition of sanctions is warranted. And, I agree with the majority that

the district court, under the circumstances of this case, abused its

discretion by directing payment of the monetary sanction into the

Crawford County Jury and Witness Fund rather than to the victims. I

must dissent, however, on the amount of the sanction, $1000, which in

this context is so low as to constitute another abuse of discretion.

      Citing Barnhill v. Iowa District Court, 765 N.W.2d 267, 276 (Iowa

2009), the majority correctly recognizes “the primary purpose of

sanctions under rule 1.413(1) is deterrence, not compensation.”        But,

victim compensation remains a subsidiary goal of the rule, as the

majority also acknowledges. See Barnhill, 765 N.W.2d at 279 (“[A]

$25,000 sanction is appropriate both to deter Barnhill (and other

attorneys) from similar conduct in the future and to partly compensate

[the victim] for expenses incurred.”). Neither goal is served by this slap

on the wrist.   The victims in this case incurred fees totaling $63,926

defending the frivolous claims through appeal.        Laubenthal did not

challenge the reasonableness of those fees.     Those fees are a factor to

determine the appropriate amount of a monetary sanction. Id. at 276–

77. Curiously, the majority cites Barnhill for other propositions without

noting the $25,000 sanction we so recently approved in that case for

analogous misconduct. It is difficult to understand how a sanction of

one sixty-fourth of the victims’ expenses sends the right message here.
                                    17

      The majority opinion gives short shrift to the underlying facts

warranting sanctions.   The victims were forced to spend several years

defending the fraud and conspiracy claims found so meritless as to be

sanctionable.   Laubenthal continued to litigate those claims despite

lacking evidence or caselaw to support them. He vigorously resisted the

victims’ motions for summary judgment, even though he could not back

up his client’s claims after conducting discovery. “Summary judgment is

not a dress rehearsal or practice run; it ‘is the put up or shut up moment

in a lawsuit, when a party must show what evidence it has that would

convince a trier of fact to accept its version of the events.’ ” Hammel v.

Eau Galle Cheese Factory, 407 F.3d 852, 859 (7th Cir. 2005) (citation

and internal quotation marks omitted). Today’s majority fails to mention

the criticism by Judge Jacobson, who granted summary judgment

against Laubenthal’s client:

             At the time they were served, interrogatories and
      requests for production of documents many months ago,
      Plaintiffs apparently had no evidence to support the
      allegations in the petition against these defendants. Despite
      a motion to compel, the plaintiffs still were not able to
      produce any such evidence. After the court’s order of
      December 21, 2006, the plaintiffs were unable to produce
      any such evidence.        When asked directly at both the
      January 29 hearing and the February 23 hearing, “Where is
      your evidence?” Neither of plaintiffs’ attorneys were able to
      provide any whatsoever.
            ....
             Plaintiffs have not only been challenged to produce
      evidence of such a tort by the court’s rulings, but have been
      challenged to do so in open court, in the court’s chambers,
      at least three times. The court cannot help but believe if this
      evidence existed, the court would have seen it by now.

      Laubenthal did not stop there.     He appealed despite the lack of

evidence to support these claims.     The court of appeals, in affirming

summary judgment, noted “plaintiff points us to no case law identifying
                                      18

similar conduct as actionable.” Rowedder v. Helkenn, No. 08–0117, 2009
WL 1492558, at *7 (Iowa Ct. App. 2009). Rule 1.413 allows ample room

for creativity and “fight[ing] uphill battles.” Barnhill, 765 N.W.2d at 279.

Laubenthal, however, crossed the line “between zealous advocacy and

frivolous claims.” Id. This record warrants a sanction much larger than

$1000, particularly given the considerable amount of scarce judicial

resources needlessly spent on these frivolous claims.         See id. at 273

(noting that, by deterring frivolous lawsuits, sanctions “avoid the general

cost to the judicial system in terms of wasted time and money”).

      The district court, with the apparent approval of today’s majority,

justified the low amount by noting the accompanying “stigma” of court-

ordered sanctions.       Stigma will accompany every judicial finding

sanctioning an attorney, and any court-ordered sanction would be an

anathema to most Iowa lawyers.          Yet, no authority is cited for the

proposition   that   a   low-dollar   sanction   can   be   justified   by   the

accompanying stigma. “Stigma” is not one of the sixteen factors in the

American Bar Association guidelines or the four Kunstler factors we

encouraged courts to apply in Barnhill.          Id. at 276–77 (citing In re

Kunstler, 914 F.2d 505, 523 (4th Cir. 1990); ABA Section of Litigation,

Standards and Guidelines for Practice Under Rule 11 of the Federal Rules

of Civil Procedure (1988), reprinted in 121 F.R.D. 101, 125–26 (1988)).

Nor is the stigma of a sanction mentioned as a factor to consider in

setting the dollar amount in any of the numerous cases applying the

Federal Rule of Civil Procedure 11, the counterpart to our rule 1.413(1).

Laubenthal made no record that the stigma of this sanction would

impact his practice. No substantial evidence in the record supports a

finding that stigma enhanced his sanction.          Accordingly, the district

court misapplied the law by relying on stigma to justify the low amount.
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This misapplication of the law is an abuse of discretion.           Everly v.

Knoxville Cmty. Sch. Dist., 774 N.W.2d 488, 492 (Iowa 2009) (“Although

our review is for an abuse of discretion, we will correct erroneous

applications of law.”).

      More importantly, the $1000 sanction is a small downside to the

large upside Laubenthal apparently saw in this case when he agreed to a

one-third contingent fee for all recoveries in a written agreement

acknowledging “[i]n excess of $200,000 has been fraudulently obtained.”

The tension between fear and greed regulates much human behavior,

including tax compliance and hardball litigation. What is the deterrent

effect of a $1000 sanction when the lawyer anticipates a potential fee

over sixty times that amount? See Barnhill, 765 N.W.2d at 278 (noting a

larger sanction needed for deterrence in cases “where there is a potential

for a hefty settlement”). Notably, Laubenthal offered no evidence of an

inability to pay a larger sanction.         Cf. id. at 277 (affirming $25,000

sanction despite Barnhill’s statement “a large sanction will put [my firm]

out of business”).

      In Barnhill, we approvingly quoted federal appellate precedent

concluding “de minimis sanctions are ‘simply inadequate to deter Rule 11

violations.’ ” Id. at 276 (quoting Rentz v. Dynasty Apparel Indus., Inc.,

556 F.3d 389, 400–02 (6th Cir. 2009) (reversing $2500 sanction as so

low as to be an abuse of discretion)).           We specifically concluded a

sanction of less than $25,000 against Barnhill would be insufficient “ ‘to

deter repetition of such conduct or comparable conduct by others

similarly situated.’ ”    Id. at 278 (quoting Fed. R. Civ. P. 11(c)(4)).   We

noted in Barnhill that the Sixth Circuit determined “a $2,500 sanction

was not sufficient to deter where defendants incurred nearly $30,000 in

attorneys’ fees due to sanctionable conduct.” Id. (citing Rentz, 556 F.3d
20

at 402).   Yet, three years later the majority now concludes a $1000

sanction is sufficient despite victim fees exceeding $63,000.

      Today’s majority pays lip service to the primary goal of our rule—

deterrence—while approving a de minimis sanction. In Barnhill, we noted

“the twin purposes of compensation and deterrence set forth in our case

law” were served by the sanction of $25,000 when that victim’s fees were

$148,596. Id. at 277. Applying the same one-to-six ratio here warrants

a sanction of $10,500. The Eighth Circuit affirmed a $25,000 sanction

imposed sua sponte by Chief Judge Pratt, noting it was approximately

three-fourths the victim’s fees and expenses.     MHC Inv. Co. v. Racom

Corp., 323 F.3d 620, 621, 627–28 (8th Cir. 2003). That case involved

similar misconduct, sanctioning counsel who “persisted in asserting

claims and defenses which were not justifiable either in law or in fact.”

Id. at 626.      As here, the sanctioned attorneys had previously

unblemished records and impressive credentials.      As here, the district

court found the counsel in Racom Corp. violated the rule by continuing to

litigate claims and defenses discovery revealed to be meritless. Id. But,

unlike here, the sanction upheld in Racom Corp. was calibrated to send

the right message.

      I would reverse the $1000 amount of the sanction and remand for

the district court to enter a sanction of at least $10,000 payable to the

victims in equal parts.