Commercial Litigation and Arbitration

Rule 11 Sanctions Apt for Failing to Dismiss Claim after Becoming Aware They Lack Merit

Baker v. Chevron USA Inc., 2013 U.S. App. LEXIS 16219 (6th Cir. Aug. 2, 2013):

Rule 11 sanctions are appropriate when an attorney refuses to dismiss a claim after becoming aware that it lacks merit. See Merritt, 613 F.3d at 627 ("Rule 11 imposes a continual obligation on attorneys to refrain from pursing meritless or frivolous claims at any stage of the proceedings . . . .") (citation and internal quotation marks omitted); Runfola, 88 F.3d at 373 (affirming Rule 11 sanctions against counsel who failed to dismiss the action after becoming aware of their inability to assert any evidence in support of their claims). Given the history of this case, the district court did not commit a clear error of judgment by sanctioning counsel for continuing to litigate meritless claims. Further, counsel's false dilemma argument--either dismiss and lose appeal rights or litigate and pay costs--is unpersuasive. The district court offered counsel a Raceway dismissal that would have allowed counsel to promptly challenge the district court's rulings in this court. Despite this offer, counsel refused to dismiss only the claims of the medical monitoring plaintiffs and continued litigating under the specter of Rule 11 at their own peril.



Footnote 6. In Raceway Properties v. Emprise Corporation, the district court entered an interlocutory order in a private antitrust case that made it impossible for the plaintiffs to prevail. 613 F.2d 656 (6th Cir. 1980) (per curiam). The plaintiffs requested, and the district court entered, a formal order of dismissal with prejudice that would permit a challenge of the order on appeal. This court subsequently affirmed that it had appellate jurisdiction over the matter because the plaintiffs' "solicitation of the formal dismissal was designed only to expedite review of an order which had in effect dismissed appellants' complaint." Id. at 657; see also Libbey-Owens-Ford Co. v. Blue Cross and Blue Shield Mut. of Ohio, 982 F.2d 1031, 1034 (6th Cir. 1993) (describing the Raceway dismissal).

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