Commercial Litigation and Arbitration

Letters Threatening Rule 11 Sanctions Do Not Violate Order Staying All Proceedings

The lawsuit in Nilssen v. General Electric Co., 2008 U.S. Dist. LEXIS 94448 (N.D. Ill. Nov. 12, 2008), was stayed at the plaintiff’s request pending the appeal of another action deciding that the plaintiff’s patents were unenforceable.

Plaintiffs also take issue with four letters that GE sent to Plaintiffs' counsel, either threatening to file a motion for sanctions under Rule 11, or requesting that Plaintiffs dismiss the case in light of the various rulings by the Federal Circuit. Plaintiffs offer no reasons as to why these letters violate the stay, except to say that GE did not seek leave of Court to send the letters to Plaintiffs. Yet, arguably, seeking leave would only trigger another round of briefing in this contentious, protracted litigation. Either way, the Court disagrees with Plaintiffs.

The letters sent in light of the Federal Circuit's decisions do not constitute violations of the stay order, despite Plaintiffs' contention. Indeed, the stay order was not so far-reaching so as to preclude all communications between the parties' counsel. Such an order would be unreasonable, especially since the parties could potentially settle the matter as the Federal Circuit issued its decisions. Notwithstanding a stay of the case, the Court should only expect that the parties keep each other abreast of the case's procedural posture and, in turn, attempt to resolve any disputes as the litigation progresses. GE's letters served only to further these expectations. As a result, they did not violate the stay.

As to the "Rule 11 Letter," the Court finds that GE was within its rights when it threatened the Plaintiffs with Rule 11 sanctions. Rule 11 provides relief from unwarranted pleadings. Given Judge Darrah's previous ruling and the Federal Circuit's subsequent decisions on that ruling, it is plausible that GE perceived Plaintiffs' lawsuit in this Court as unwarranted. Moreover, it is significant that GE did not file the motion for sanctions, GE simply threatened to file it, which gave Plaintiffs an opportunity to resolve the issue without the Court's intervention. GE's conduct under the circumstances certainly conformed with Rule 11, and, as such, the Rule 11 letter did not violate the stay.

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