Commercial Litigation and Arbitration

Rule 11 Sanctions on Client for Legally Frivolous Claims Reversed Even Though Issue First Raised on Appeal — Counsel’s Conflict below Excuses Untimely Assertion — Reassertion of Previously Dismissed Claims Sanctionable

Mitchel v. City of Santa Rosa, 2015 U.S. App. LEXIS 1348 (9th Cir. Jan. 28, 2015):

The district court did not err by concluding that the identified claims were legally unfounded and therefore sanctionable. See Fed. R. Civ. P. 11(b)(2). These claims attempted to re-litigate, without modification, contentions previously dismissed by the district court as lacking legal merit. The district court's assessment of the contents of Mitchel's pleadings is consistent with the record. Mitchel's contrary assertion on appeal is not persuasive.


Mitchel claims*** that he, as a represented party, may not be assessed a monetary sanction for advancing claims without legal support, pursuant to Rule 11(c)(5)(A). ***

[W]e conclude that his Rule 11(c)(5)(A) claim has merit, and therefore exercise [*4]  our discretion to consider the issue for the first time on appeal. See AlohaCare v. Hawaii Dep't of Human Servs., 572 F.3d 740, 744 (9th Cir. 2009).

The district court originally awarded attorney's fees to the city as Rule 11 sanctions, payable jointly and severally by Mitchel and Lewis. Rule 11(c)(5)(A) prohibits the imposition of monetary sanctions against Mitchel for his counsel's advocacy of legally deficient claims. Lewis signed the pleadings that the district court found lacking in legal support. By doing so, Lewis certified that these pleadings were legally sound. See Fed. R. Civ. P. 11(b)(2). Mitchel may not be held personally responsible for a sanctions award based on his counsel's violation of Rule 11(b)(2). "Monetary responsibility for such violations is more properly placed solely on the party's attorneys." Fed. R. Civ. P. 11(c)(5)(A) advisory committee's note (1993 amendment).

We recognize that this issue was not presented to the district court. However, a conflict of interest between Mitchel and his counsel may have prevented Mitchel a full and fair opportunity to litigate his Rule 11(c)(5)(A) claim in prior proceedings. Lewis's financial interest favored maintaining that apportionment of liability, while Mitchel's financial interest favored asserting his personal liability was barred by Rule 11(c)(5)(A). Although we do not reach any conclusions about whether conflict [*5]  interfered with the assertion of the claim, the possibility of a conflict is sufficient for us to exercise our discretion to consider this issue for the first time on appeal.

Taking the full import of Rule 11(c)(5)(A) into account, we must direct a modification of the sanction award. We therefore remand with instructions to assess the entire sum of attorney's fees as sanctions for advancing legally unsupported arguments solely against Mitchel's counsel. Mitchel and Lewis may remain jointly and severally liable only for the portion of the award based on the arbitrator misconduct claim. The parties shall bear their own costs on appeal.

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