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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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Rule 11 Sanctions May Be Sought for Successfully Opposing Sanctionable Rule 11 Motion without Filing Cross-Motion — Filing Unauthorized Substantive Reply Disguised as Sanctions Motion = Improper Purpose Violation

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Smith v. Psychiatric Solutions, Inc., 2014 U.S. App. LEXIS 8477 (11th Cir. May 6, 2014):

Smith next argues that the district court erred in awarding Appellees attorneys' fees for the expenses they incurred opposing her Rule 11 motion. When a party moves for sanctions under Rule 11, the court "may award to the prevailing party the reasonable expenses, including attorney's fees,  [*15] incurred for the motion." Fed. R. Civ. P. 11(c)(2). "[A]n appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court's Rule 11 determination." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990).

Rule 11 authorizes a court to sanction a party who submits a pleading for an improper purpose. Fed. R. Civ. P. 11(b)(1). "[T]he filing of a motion for sanctions is itself subject to the requirements of the rule and can lead to sanctions." Fed. R. Civ. P. 11 advisory committee's note. Ordinarily, this does not require a cross-motion for sanctions, since a court is authorized to award fees to a party that successfully opposes a Rule 11 sanctions motion. Id. Thus, when a party files a Rule 11 motion for an improper purpose, the court may award fees to the target of the motion. Such is the case here.

Smith's counsel filed a Rule 11 motion purportedly to correct four misrepresentations in a memorandum that Appellees filed in support of their motion for attorneys' fees. First, Smith alleged Appellees mischaracterized the impact of an administrative ruling from the Department of Labor. Second, she maintained Appellees cited a California appellate  [*16] case without indicating the opinion had been super[s]eded pending review by the state supreme court. Third, she argued Appellees had misrepresented her Rule 26 disclosures. Fourth, she contended Appellees had made several frivolous arguments regarding Sarbanes-Oxley's fee provision.

The district court considered each alleged misrepresentation in turn. It determined that Smith's arguments about the administrative ruling and Sarbanes-Oxley's fee provisions lacked merit and should not have been included in her Rule 11 motion. The district court likewise determined that while Appellees could have been more careful in citing the California appellate case or characterizing Smith's Rule 26 disclosures, these matters were of no real consequence and did not warrant sanctions. The district court thus concluded that "[n]one of the four grounds raised by [Smith] in her Rule 11 motion present[s] significant concerns in the context of this particular case, and none comes close to warranting the imposition of Rule 11 sanctions." Based on these findings, the district court determined Smith's counsel filed the Rule 11 motion both to harass Appellees, and to file what was effectively an unauthorized reply  [*17] brief to Appellees' motion for fees. It awarded Appellees attorneys' fees on that basis.

The district court acted within its discretion in awarding Appellees attorneys' fees. The relevance of the administrative ruling is debatable. That Smith and Appellees find themselves on different sides of that debate does not mean Appellees misrepresented the significance of the ruling. We likewise agree with the district court that none of arguments pertaining to Sarbanes-Oxley's fee provision in Appellees' memorandum were frivolous or warranted sanctions. Each of these supposed bases for sanctions concerned areas of substantive disagreement between the parties. After reading Smith's arguments, the district court could reasonably have concluded that Smith filed her Rule 11 motion to address the merits of Appellees' arguments, not to correct alleged misrepresentations.

Similarly, we conclude that the district court did not err in its determination that the remaining bases for sanctions concerned trivial matters. Appellees certainly should have included a complete citation to the California appellate case, but their mention of that case was brief, and their argument did not rely on it. Appellees'  [*18] error describing Smith's Rule 26 disclosures was even less consequential. "Rule 11 motions should not be made or threatened for minor, inconsequential violations . . . ." Fed. R. Civ. P. 11 advisory committee's note. Given the district court's familiarly with the parties and the litigation, we find no error in its determination that Smith's counsel filed the Rule 11 motion at least in part as an improper combative tool.

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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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