Hourani v. Mirtchev, 2015 U.S. App. LEXIS 13342 (D.C. Cir. July 31, 2015) (the RICO rulings of this decision are excerpted in a separate post):

Rule 11 Sanctions

Mirtchev and Krull Corporation cross-appeal the district court's denial of their motion for Rule 11 sanctions. They claim that the plaintiffs relied on forged documents in district court..... They also urge sanctions because the two versions of the complaint are contradictory over who took the Houranis' assets: the Kazakh government (in the original complaint), or Dariga Nazarbayeva (in the amended complaint).

The district court acknowledged that the different versions of the complaint were mutually contradictory, and found the plaintiffs' explanations for the inconsistencies "difficult to accept." Hourani, 943 F. Supp. 2d at 171-172. The court made no finding on the forgery issue, however. Id. at 161-162 n.4.

Rule 11 requires a party to certify, among other things, that "the factual contentions [in a pleading] [*36]  have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery[.]" Fed. R. Civ. P. 11(b)(3). Since the Rule was amended in 1983, courts must apply an objective standard of reasonableness in determining whether there has been a violation of the Rule; a finding of bad faith is not required. See Business Guides, Inc. v. Chromatic Communications Enterprises, Inc., 498 U.S. 533, 554 (1991). But once a district court finds a Rule 11 violation, it retains broad discretion in imposing sanctions. A sanction imposed under Rule 11 "must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated." Fed. R. Civ. P. 11(c)(4). Proper considerations in exercising that discretion specifically include "[w]hether the improper conduct was willful, or negligent," and "whether it was intended to injure." Fed. R. Civ. P. 11, Advisory Committee Note to 1993 amendment.

Here, the district court cited the correct objective standard for determining the existence of a Rule 11 violation at the outset. See Hourani, 943 F. Supp. 2d at 170. After examining the allegations of contradictory pleadings, the court stated that it chose "not to impute bad faith on the part of the [p]laintiffs, finding ample grounds for dismissing the complaint on the substantive grounds" identified in its decision. [*37]  Id. at 172.

Mirtchev and Krull Corporation claim that the court abused its discretion by applying a pre-1983 subjective test when it declined to impute bad faith on the part of the plaintiffs. We disagree. The court below did not find that there was any violation of Rule 11; it made no finding either way so thus had no occasion to apply the Rule's objective test. Instead, the court skipped that step and determined that, even if there had been a violation, it would not exercise its discretion to dismiss the complaint because of both the lack of bad faith and the complaint already being dismissed on the merits. The district court acted well within its discretion in deciding that devoting further resources to investigating the alleged forgeries was not worth the candle since the case was already terminated.