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Amended Complaint Containing Dismissed Claims Warrants Rule 11 Sanctions Even If It Also Contains New, Non-Frivolous Claims

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From Rady Children's Hospital v. Service Employees International Union, Local 2028, 2008 U.S. Dist. LEXIS 109828 (N.D. Cal. May 5, 2008):

It was not objectively reasonable for Plaintiff's counsel to refile its claims for breach of contract and declaratory relief. The Court previously dismissed these exact same claims and even warned Plaintiff that the amended complaint should not reiterate the original complaint. The addition of allegations regarding fraud in the inducement and an invalid trusteeship did not change the character of the breach of contract and declaratory relief claims and did not alter the fact that they fall within the primary jurisdiction of the NLRB. Given the Court's prior decision, the breach of contract and declaratory relief claims are frivolous. See Committee notes on Amendments to Federal Rules of Civil Procedure, 146 F.R.D 401, 585 (1993) (explaining that Rule 11 "emphasizes the duty of candor by subjecting litigants to potential sanctions for insisting upon a position after it is no longer tenable . . . ."). The Court also finds that the refiling of these claims was for an improper purpose. See Zaldivar, 780 F.2d at 832 ("[W]ithout question, successive complaints based upon propositions of law previously rejected may constitute harassment.")

Assuming for the moment that Plaintiff's claims for fraud in the inducement and violation of 29 U.S.C. § 462 are not frivolous, sanctions would still be warranted due to the unjustified refiling of the claims for breach of contract and declaratory relief. Rule 11 sanctions may be imposed where a party files a pleading containing a frivolous claim even if the pleading also contains non-frivolous claims. Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1363 (9th Cir. 1991) (explaining that it would defeat Rule 11's purpose of deterrence if a party that has one nonfrivolous claim could pile on frivolous allegations without fear of sanction). In determining whether sanctions should be imposed when frivolous as well as non-frivolous claims are filed, courts should consider the significance of the allegedly frivolous allegations in the pleading as a whole. Id. at 1364. "[A] minor or insignificant allegation or subclaim should not render a pleading sanctionable." Id. at 1365 n. 4. Here, the breach of contract claim and declaratory relief claim are not insignificant but, rather, are the main thrust of the FAC. Therefore, Rule 11 sanctions are warranted.

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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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