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Sanctions Motion that Requires Reference to Dismissal Motion for Details of Frivolousness Fails Specificity Requirement of Rule 11 — At Least in the Absence of Explicit Incorporation by Reference

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From Miller v. Saint Felix, 2011 U.S. App. LEXIS 2617 (11th Cir. Feb. 10, 2011) (decided under Bankruptcy Rule 9011, which is substantially identical to Federal Rule of Civil Procedure 11):

In its entirety, the sanctions motion read as follows:

1. The factual and legal assertions set forth in the Plaintiff's complaint do not give rise to even a colorable claim for relief against the Defendant, are not warranted by existing law, and are not supported by the facts of the case.

2. By pursuing their meritless claims against the Defendant, the Plaintiff and her counsel have unduly vexed, taxed, and brought costs upon the Defendant.

3. The Debtor, the Plaintiff, and/or their counsel should be ordered to pay to the Defendant sufficient sums to compensate him for his costs and expenses in this matter, including but not limited to attorneys fees as set forth in Federal Rule of Bankruptcy Procedure 9011.

***

In addition to the service requirement of the "safe harbor" provision [i.e., that a separate sanctions motion be served], ***, the rule also requires that the motion "describe the specific conduct alleged to violate" the rule. Fed.R.Bankr.P. 9011(c)(1)(A). "Since this requirement serves a valuable notice function, a failure to do so may result in the [lower] court rejecting the motion." 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1337.1 (3d ed. 2004); see also Nagel v. ADM Investor Servs., Inc., 65 F. Supp. 2d 740, 756 (N.D. Ill. 1999) (holding that "[b]ecause the motion must identify the 'specific conduct' that violates Rule 11, [the defendant] has not preserved any demand for sanctions based on other allegations of the complaint," beyond the one specifically mentioned in the motion for sanctions); Bergquist v. Caskie-Johnson (In re Caskie-Johnson), No. 06-cv-01431-EWN, 2007 WL 496675, at *3 (D. Colo. Feb. 13, 2007). This notice requirement "permits the subjects of sanctions motions to confront their accuser and rebut the charges leveled against them" and to "withdraw the potentially offending statements before the sanctions motion is officially filed." See Storey v. Cello Holdings, LLC, 347 F.3d 370, 389 (2d Cir. 2003). Saint Felix conceded at oral argument that the motion for sanctions itself was insufficient to satisfy Bankruptcy Rule 9011. Nevertheless, Saint Felix maintains that the simultaneously filed motion to dismiss provided Abrams with adequate notice of the basis for the sanctions motion.

Upon review, we find that Saint Felix's deficient motion for sanctions cannot be cured by looking to his motion to dismiss. Permitting a party to rely on some other motion to satisfy the notice requirements of Bankruptcy Rule 9011(c)(1)(A) would circumvent the plain language of the rule. See Fed.R.Bankr.P. 9011(c)(1)(A) ("A motion for sanctions under this rule shall be made separately from other motions or requests . . . ."). Moreover, motions to dismiss and motions for sanctions serve different purposes and are governed by different standards. Compare Acosta v. Campbell, 309 F. App'x 315, 317 (11th Cir. 2009) (per curiam) (unpublished decision) ("A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint against the legal standard set forth in Rule 8: 'a short and plain statement of the claim showing that the pleader is entitled to relief.'"), and Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1288-90 (11th Cir. 2010) (discussing the applicable standard for evaluating the sufficiency of a complaint on a motion to dismiss), with Kaplan v. DaimlerChrysler, A.G., 331 F.3d 1251, 1255 (11th Cir. 2003) ("The purpose of Rule 11 sanctions is to reduce frivolous claims, defenses, or motions, and to deter costly meritless maneuvers." (internal quotation omitted)). Indeed, a court may assess Bankruptcy Rule 9011 sanctions only "when (1) the papers are frivolous, legally unreasonable or without factual foundation, or (2) the pleading is filed in bad faith or for an improper purpose." See In re Mroz, 65 F.3d at 1572; see also Kaplan, 331 F.3d at 1255 (discussing the circumstances warranting Rule 11 sanctions). Thus, many arguments which might support a motion to dismiss would fail to provide a sufficient basis for a motion for sanctions. As such, the mere filing of a motion to dismiss in conjunction with the service of a motion for sanctions does not provide a party with specific notice as to which of its factual or legal claims allegedly violate the Bankruptcy Rule 9011 standards. See generally AI Consulting LLC v. Cellco P'ship, No. 304CV1841, 2006 WL 860947 (D. Conn. Mar. 31, 2006); see also Weiss v. Weiss, 984 F. Supp. 682, 685 (S.D.N.Y. 1997) ("[D]efendant's previously-filed papers . . . are equally unspecific in that they fail to address the Rule 11 standards . . . ."). Therefore, under the facts of this case, neither the bare-bones motion for sanctions, nor the simultaneously filed motion to dismiss, provided Abrams with notice of the specific conduct alleged to warrant the imposition of sanctions. Because Abrams was entitled to notice under the rule, we find that the bankruptcy court's decision to award sanctions in this case was based on an erroneous view of Bankruptcy Rule 9011 and thus, amounted to an abuse of discretion.

[Footnote 4] Notably, Saint Felix withdrew the motion to dismiss prior to the filing of the motion for sanctions. To the extent Saint Felix contends that his later filed motion for summary judgment provided adequate notice, this argument fails because the motion for summary judgment was not filed twenty-one days prior to the motion for sanctions. See Macort v. Prem, Inc., 208 F. App'x 781, 786 (11th Cir. 2006) (per curiam) (finding that the "failure to give [plaintiff] the twenty-one day safe harbor period forecloses Rule 11 sanctions for the initial filing of a frivolous suit").

[Footnote 5] We emphasize the fact that Saint Felix's Motion for Sanctions did not reference the Motion to Dismiss at all. Thus, this is not a case where a party has specifically incorporated certain of its arguments for dismissal into a motion for sanctions and explained why those arguments also support the imposition of sanctions.

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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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