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Sua Sponte Sanctions — State of Mind

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There is a split in the Circuits as to whether subjective bad faith is a prerequisite for the imposition of Rule 11 sanctions issued sua sponte. A split panel decision of the Second Circuit in In re Pennie & Edmonds LLP, 323 F.3d 86 (2d Cir. 2003), answered this question Yes. On January 31, 2007, the Fifth Circuit — correctly — held that the answer is No. Jenkins v. Methodist Hosps. of Dallas, Inc., No. 05-10117-18 (5th Cir. Jan. 31, 2007).

In imposing a bad faith prerequisite, the Pennie majority relied on the following statement in the Committee Note to Rule 11: ‛Since show cause orders will ordinarily be issued only in situations that are akin to a contempt of court, the rule does not provide a ‘safe harbor’ … after a show cause order has been issued on the court's own initiative.“ Focusing on the phrase ‛akin to a contempt of court,“ the Pennie majority concluded that ‛a finding of bad faith … is essential to a finding of contempt“ and proceeded to require bad faith for any sanction imposed sua sponte.

Three other Circuits, post-Pennie, have applied an ‛akin-to-contempt“ standard to impositions of sanctions sua sponte, but none of them has adopted the related bad-faith requirement imposed by the Pennie majority and advocated by Appellant. See Kaplan v. DaimlerChrysler, A.G., 331 F.3d 1251, 1256 (11th Cir. 2003) (embracing the akin–to–contempt standard but reversing decision without ‛resolving the related ‘mens rea’ issue that split the Pennie panel“); United Nat'l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1116, 1118 (9th Cir. 2001) (applying akin–to–contempt standard but not addressing whether bad faith must be shown); Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 151 (4th Cir. 2002) (observing in dicta that ‛[t]he Advisory Committee contemplated that a sua sponte show cause order would only be used `in situations that are akin to a contempt of court,' and thus it was unnecessary for Rule 11's `safe harbor' to apply to sua sponte sanctions“ — not addressing issue of bad faith).

The Fifth Circuit in Jenkins, on a straightforward reading of Rule 11, concluded that there is no bad faith requirement for the imposition of sua sponte sanctions. It has long been my view as well that the dissent in Pennie -- and now the panel in Jenkins -- was right (Sua Sponte Sanctions, National Law Journal, April 14, 2003). Rule 11(c)(1)(B) — the provision authorizing sua sponte sanctions — does not create a separate standard for assessing sanctionable behavior. Rather, it incorporates the standard of Rule 11(b), which is uniformly interpreted as erecting an objective standard for assessing litigation conduct.

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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