Commercial Litigation and Arbitration

Sanctions — Rule 11 Sanctions Impermissible for Oral Misstatement that Does Not Advocate Position from Prior Written Filing

From Columbia Venture LLC v. FEMA, 2009 U.S. App. LEXIS 6926 (4th Cir. April 3, 2009):

[Extemporaneous Oral Advocacy Unrelated to Filing Not Sanctionable Under Rule 11]

Rule 11 … severely limits a court's ability to sanction counsel for oral statements. It permits a court to impose sanctions only on the basis of a false, misleading, or otherwise improper "pleading, written motion, or other paper." Fed. R. Civ. P. 11 (b). Thus, as the Advisory Committee has explained, Rule 11 "applies only to assertions contained in papers filed with or submitted to the court." Fed. R. Civ. P. 11 advisory committee's note (1993 Amendments, Subdivisions (b) and (c)). The rule "does not cover matters arising for the first time during oral presentations to the court, when counsel may make statements that would not have been made if there had been more time for study and reflection." Id. In sum, an oral statement may form a basis for Rule 11 sanctions only if it advocates a contention previously contained within a written submission. See Christian v. Mattel, Inc., 286 F.3d 1118, 1129-31 (9th Cir. 2002); O'Brien v. Alexander, 101 F.3d 1479, 1488-90 (2d Cir. 1996).

In sanctioning Bees the district court did not find that Bees's oral statements advocated an argument previously contained in a written submission. Nor could the court have so found, for no previous written submission contains an erroneous or misleading statement regarding the comment period. Moreover, Rule 11 requires a district court to order counsel "to show cause why conduct specifically described in the order has not violated Rule 11(b)" prior to imposing sua sponte sanctions in order to allow counsel to respond to specific asserted Rule 11 violations. Fed. R. Civ. P. 11(c)(3); see also Hunter, 281 F.3d at 157 ("[A] court, especially when acting sua sponte, must particularize the behavior it deems sanctionable." (citing Fed. R. Civ. P. 11(c))). Here, the district court never ordered Bees to show cause with respect to the comment period issue [the subject of the oral misstatement]. Accordingly, the district court committed legal error and so abused its discretion in sanctioning Bees on the basis of the comment period statement.

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