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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.
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Seventh Circuit Rules that a Letter Satisfies the Motion Requirement of Rule 11(c)(1)(A) and that Post-Judgment Motion Is Timely Despite Safe Harbor (Circuit Split)

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From Matrix IV, Inc. v. Am. Nat’l Bank & Trust Co. of Chi., 2011 U.S. App. LEXIS 15537 (7th Cir. July 28, 2011):

Before taking up the merits of Gateway's argument for sanctions, we address certain concerns raised below and reiterated here that the motion for sanctions was procedurally defective. Rule 11(c)(2) provides that a motion for sanctions must be served on the opposing party, but that it cannot be filed with the court until 21 days have passed from the date of service of the motion. This 21-day window gives the offending party a "safe harbor" within which to withdraw or correct the offending pleading.

Matrix argues that Gateway failed to comply with the safe-harbor provision by not providing sufficient notice of its motion for sanctions. It also claims that motions for Rule 11 sanctions filed after a final judgment, like the one at issue here, are not permissible. Matrix is incorrect on both points. Gateway put Matrix on notice of its intent to seek sanctions by a letter sent two weeks after Matrix filed its initial complaint. In this letter Gateway noted that "[i]n light of the judgment in the bankruptcy matter and the failure to allege any involvement by Gateway Park, LLC," filing the new claims was sanctionable under Rule 11. Gateway told Matrix it would seek sanctions if Matrix did not voluntarily dismiss the complaint and that the letter served "as notice of [its] intention to seek sanctions if and when the counts against Gateway Park, LLC are dismissed." More than two years later, the district court dismissed the case, and as promised, Gateway filed for Rule 11 sanctions 23 days after the dismissal.

The 21-day window specified in Rule 11 is a floor, not a ceiling, as Matrix seems to suggest. That Matrix had much more "safe harbor" time before the Rule 11 motion was filed only underscores the fact that it had sufficient opportunity to decide whether to dismiss its suit in response to Gateway's notice. Moreover, we have held that a letter informing the opposing party of the intent to seek sanctions and the basis for the imposition of sanctions — like the one Gateway sent in this case — is sufficient for Rule 11 purposes. See, e.g., Fabriko Acquisition Corp. v. Prokos, 536 F.3d 605, 610 (7th Cir. 2008) (finding a letter informing offending party of sanctions to be adequate); Nisenbaum v. Milwaukee Cnty., 333 F.3d 804, 808 (7th Cir. 2003) (same). That Gateway filed its motion for sanctions 23 days after the district court dismissed the suit — and more than two years after the Rule 11 notice letter was sent — does not mean that the requirements of Rule 11 have not been satisfied. Postjudgment motions for sanctions are permissible so long as the moving party substantially complies with Rule 11's safe-harbor requirement, as Gateway did here. See Divane v. Krull Elec. Co., 200 F.3d 1020, 1025 (7th Cir. 1999). Finally, we have recognized that the "outer parameters" for filing motions for sanctions after final judgment is 90 days. Sullivan v. Hunt, 350 F.3d 664, 666 (7th Cir. 2003). Gateway's motion, filed within 23 days of entry of judgment, was comfortably within this post-judgment window.

No other Circuit holds that a letter satisfies the motion requirement of Rule 11(c)(1)(A) in these circumstances. See Joseph, Sanctions: The Federal Law of Litigation Abuse § 17(A)(2) (4th ed. 2008; Supp. 2011). Nor is a post-judgment motion generally permitted because the opportunity to withdraw the offending position has evaporated. Id. at § 17(B)(2). Indeed, that was one specific purpose of the 1993 rule amendment.

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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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