Commercial Litigation and Arbitration

Rule 11 Safe Harbor Satisfied by Service of Naked Motion — Unnecessary to Serve Accompanying Brief and Affidavit — Judge’s Warning that Proposed Motion May Trigger Sanctions Proper

Star Mark Mgmt., Inc. v. Koon Chun Hing K&E Soy & Sauce Factory, Ltd., 2012 U.S. App. LEXIS 12002 (2d Cir. June 13, 2012):

The safe-harbor provision is a strict procedural requirement. Perpetual Sec., Inc. v. Tang, 290 F.3d 132, 142 n.4 (2d Cir. 2002); see also Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1327-29 (2d Cir. 1995). An informal warning in the form of a letter without service of a separate Rule 11 motion is not sufficient to trigger the 21-day safe harbor period. L.B. Foster Co. v. Am. Piles, Inc., 138 F.3d 81, 89-90 (2d Cir. 1998) (request for sanctions in letter without separate service of motion did not comply with Rule 11's requirement that sanctions motion be made separately); Gal v. Viacom Int'l, Inc., 403 F. Supp. 2d 294, 309 (S.D.N.Y. 2005) ("[T]he plain language of the rule states explicitly that service of the motion itself is required to begin the safe harbor clock -- the rule says nothing about the use of letters."); accord Roth v. Green, 466 F.3d 1179, 1191-93 (10th Cir. 2006); Gordon v. Unifund CCR Partners, 345 F.3d 1028, 1029-30 (8th Cir. 2003); Radcliffe v. Rainbow Constr. Co., 254 F.3d 772, 789 (9th Cir. 2001). But see Nisenbaum v. Milwaukee Cnty., 333 F.3d 804, 808 (7th Cir. 2003) (party's "letter" or "demand" sent to opposing counsel constituted substantial compliance with safe harbor provision).

Here, however, Koon Chun did more than send a Rule 11 letter -- it attached to its letter a copy of its notice of motion for sanctions. After waiting the requisite 21 days, Koon Chun filed its sanctions motion -- which included as grounds for Rule 11 sanctions several of those listed in the earlier notice -- with the district court. Li nonetheless argues that Koon Chun failed to comply with the procedural requirements of Rule 11(c)(2) because it failed to serve a "formal fully supported motion," Appellant's Br. at 21, i.e., without "any supporting legal and factual materials," Appellant's Reply Br. at 1.

We hold, in the circumstances here, that Koon Chun met the procedural requirements of the safe harbor provision of Rule 11(c)(2) by serving its notice of motion for Rule 11 sanctions with its January 9, 2008, letter, even though it did not serve at that time supporting affidavits or a memorandum of law.

First, Koon Chun complied literally with the requirements of the rule, as it served its notice of motion more than 21 days before it filed the motion with the district court; the motion was made separately from any other motion; and the notice of motion described the specific conduct that allegedly violated Rule 11(b). Fed. R. Civ. P. 11(c)(2).

Second, while Li contends that Koon Chun did not serve supporting papers such as a memorandum of law or affidavits, Rule 11(c)(2) requires only the service of "[a] motion" or "[t]he motion." See id. It does not require the service of a memorandum of law or affidavits, nor does it use the words "formal fully supported motion." See Ideal Instruments, Inc. v. Rivard Instruments, Inc., 243 F.R.D. 322, 339 (N.D. Iowa 2007) ("Rule 11 says nothing about requiring service of the brief in support of a Rule 11 motion to trigger the twenty-one day 'safe harbor.'"). While at least one district court in this Circuit has suggested that only "a fully supported motion" satisfies the safe harbor requirement, see Carruthers v. Flaum, 450 F. Supp. 2d 288, 306 (S.D.N.Y. 2006), that is not what Rule 11 requires. We decline Li's invitation to read into the rule a requirement that a motion served for purposes of the safe harbor period must include supporting papers such as a memorandum of law and exhibits. The motion for Rule 11 sanctions filed with the district court rested on substantially the grounds set forth in the earlier notice of motion, undercutting the argument that the motion did not comply with the safe harbor requirement. The additional ground listed in the filed motion -- no evidence of fraud -- was part of Koon Chun's separate request for sanctions under § 1927, which is not subject to the safe harbor requirement.

Third, while motions usually are accompanied by a memorandum of law and exhibits, the issue here is not whether Koon Chun satisfied the district court's local rules or a judge's individual practices, but whether it satisfied Rule 11's safe harbor provision. Indeed, the district court accepted the motion. Moreover, under the federal rules, a motion need only: "(A) be in writing unless made during a hearing or trial; (B) state with particularity the grounds for seeking the order; and (C) state the relief sought." Fed. R. Civ. P. 7(b)(1). A "motion" can take different forms, and it is distinct from a memorandum of law or affidavit. The drafters of the rule surely understood this distinction when crafting the safe harbor requirement.

Finally, Koon Chun complied with the spirit of Rule 11 as it gave notice that it would be seeking sanctions under Rule 11 and identified six reasons why it believed Rule 11 had been violated. We reject Li's contention that he was not able to make an independent, professional judgment as to whether to withdraw the offending pleading "without being given any opportunity to see the movant's legal arguments, affidavits and exhibits." Appellant's Reply Br. at 4. Koon Chun's notice of motion gave Star Mark and Li notice of the alleged sanctionable conduct, and Li thus had the opportunity to determine whether there was a non-frivolous basis for the pleading. Here, Li made that very professional judgment, informing Koon Chun (in response to its earlier notice of motion) that none of its points had any merit.

To require that a party go through the expense of preparing a fully supported motion with a memorandum of law and exhibits would undermine one of the main purposes of the safe harbor provision, i.e., "to reduce, if not eliminate, the unnecessary expenditure of . . . adversary resources." Lawrence, 620 F.3d at 158. The purpose of the provision is not to cause the party opposing a frivolous filing to incur costs merely to have the filing withdrawn, but to give the opponent notice and an opportunity to consider withdrawing the filing without the court's involvement. There is no question that Li had such notice and opportunity.

Accordingly, we hold that the safe harbor requirement was satisfied here.***

A judge's warning that a proposed filing appears meritless and may subject that party and/or counsel to sanctions is, plainly, not a procedural rule precluding that party from bringing the filing. Here, the magistrate judge expressly informed Li that he had no authority to prevent him from moving to amend his clients' answer, stated that he was making no final decision as to whether sanctions would be appropriate, and noted on the docket sheet that Li could move to amend the answer at any time deemed appropriate. Furthermore, the magistrate judge directed Li to "look at the law," App. at 76, reminding him that he had an independent obligation to determine if the proposed claims had merit, and pointed out to Li that his own clients had been found to sell hoisin sauce, suggesting that Li's contentions that Koon Chun was deceiving consumers and mislabeling its products with the term "hoisin" were specious at best.

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