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Rule 11 — Unsupportable Individual Allegations in Pleading Are Sanctionable Despite Presence of Other, Supported Allegations

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Heller v. Cepia LLC, 2014 U.S. App. LEXIS 4064 (9th Cir. Mar. 4, 2014):

The district court did not abuse its discretion in concluding that individual factual misrepresentations in a pleading can be sanctionable under Rule 11. Rule 11 requires an attorney to certify that factual allegations in a pleading have evidentiary support, and the failure to comply may warrant sanctions. Fed. R. Civ. P. 11(b), (c); see also Truesdell v. S. Cal. Permanente Med. Grp., 293 F.3d 1146, 1153 (9th Cir. 2002). In addition, the presence of some supported allegations in a pleading does not necessarily shield from sanctions an attorney who also includes unsupported allegations. See Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1363 (9th Cir. 1990) (en banc) ("It would ill serve the purpose of deterrence to allow . . . a 'safe harbor' for improper or unwarranted allegations.").

Further, the district court did not clearly err in finding  [*3] that no evidence supported the allegation that the sign-in sheets "appear[ed] to confirm" that representatives of Cepia L.L.C. (Cepia) had visited the premises of The Bean Project Company Limited. The district court likewise did not clearly err in finding that no evidence supported the allegation that the plaintiff in the underlying action, Heller, had "confronted" some of the defendants, who in turn had "refused" to provide information regarding their connections with Cepia. And whether Heller (and Matz) subjectively intended to confront the defendants is irrelevant, given that the inquiry is objective. See Zaldivar v. Los Angeles, 780 F.2d 823, 829 (9th Cir. 1986), abrogated on other grounds by Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S. Ct. 2447, 110 L. Ed. 2d 359 (1990).

Finally, the district court did not abuse its discretion in ordering [counsel] to pay $5,000 in sanctions to Cepia. See Christian, 286 F.3d at 1126. Such a sanction is hefty, especially given that the district court did not conclude that the complaint was baseless, but the amount is not so unreasonable that it constitutes an abuse of discretion.

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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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