Citation. 22 Ill.48 F.3d 1320 (2d Cir. 1995)
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Brief Fact Summary.
Plaintiff sought post-trial relief from Defendant in federal court arising from litigation that was pending in state court which had been resolved in another action. Plaintiff represented to the Court that he had not worked in four years, and that an agency in collaboration with Defendant had barred him from work. Plaintiff failed to disclose the pending state court action. The District Court imposed sanctions against Plaintiff and Plaintiff’s attorney for these incidents from which Plaintiff appealed.
Synopsis of Rule of Law.
Under Rule 11 of the Federal Rules of Civil Procedure, sanctions cannot be imposed on a party before the 20 day “safe harbor” period expires because the point of the period is to give the accused party time to correct the mistakes. In addition, sanctions should only be imposed on a party’s attorney for failure to investigate his/her client’s statements if the attorney did not conduct a reasonable inquiry under the circumstances as to whether the statements have evidentiary support. If the record shows evidence supporting the client’s assertions, sanctions should not be imposed on the attorney.
Plaintiff Hadges sued Defendant Yonkers Racing Corp. in both state and federal court for barring Plaintiff from working at Defendant’s racetracks. The federal claim was based on violation of due process and was dismissed for lack of state action. There was also an affidavit filed by Defendant that the court understood to mean that Plaintiff could work at other tracks. The Court noted that if a racetrack in New Jersey followed Defendant’s decision, Plaintiff could establish state action. In the state suit, where Plaintiff claimed he was “blackballed” from working at all New York racetracks, all counts were dismissed.
Plaintiff then sued Meadowlands Raceway, a New Jersey agency, in federal court on the same grounds as his original claim against Defendant, which was settled and included an affidavit, stated that Defendant’s ban provided a basis for Meadowlands’ ban.
Plaintiff appealed the New York federal action under Rule 60(b) of the Federal Rules of Civil Procedure on the grounds that the original federal action should be vacated because the affidavit of Defendant which stated that Plaintiff could work at other tracks was fraudulent. Plaintiff and his attorney both submitted affidavits that said that Plaintiff had not worked in 4 years and presented evidence that a racing board had barred him from a race in 1989. It was later revealed that Plaintiff was barred from the race in 1987. Defendant moved to dismiss the action, and presented evidence that Plaintiff had raced in Monticello, another track, and also moved to impose sanctions for misrepresentation of the date Plaintiff was barred from the 1987 race and failing to disclose the state action to the federal court.
The District Court dismissed the complaint but did not impose sanctions because the suit was not so frivolous as to warrant sanctions under Rule 11 of the Federal Rules of Civil Procedure. The District Court requested Plaintiff and attorney submit arguments against the imposition of sanctions. The District Court then imposed sanctions against Plaintiff for misrepresentation and his attorney for failure to investigate his client’s assertions and for not disclosing the state court action. Plaintiff’s attorney sent a letter to the Court, arguing that the Court erred in imposing sanctions against him and his client, and objecting to comments the Court made about the attorney in its order imposing sanctions. The District Court considered this letter an application to reargue the sanctions and wrote an order denying the application, which contained additional comments about Plaintiff’s attorney. Plaintiff appealed from these rulings.
Is Plaintiff entitled to Rule 60(b) of the Federal Rules of Civil Procedure relief?
Should Plaintiff be sanctioned for misrepresenting when he was barred from the 1987 race, not accurately representing where he had worked in the past four years and failure to disclose the state court action?
Should Plaintiff’s attorney be sanctioned for relying on his client’s word regarding the 1987 incident when Plaintiff was barred from the race, relying on his client’s word regarding his work history for the past four years and for failing to disclose the state court action?
No as to all issues. The District Court’s ruling on Rule 60(b) relief is affirmed. The District Court’s imposition of sanctions is reversed.
Under Rule 11 of the Federal Rules of Civil Procedure, parties are afforded a “safe harbor” period before sanctions are imposed. A party seeking sanctions must send a motion to the opposing party. The opposing party has 21 days to cure the issue for which sanctions are sought before the party seeking sanctions may file the motion with the court.
In this case, Defendant did not file a separate motion seeking sanctions, nor did it afford Plaintiff 21 days of “safe harbor” prior to filing the motion with the District Court.
The District Court must file a separate order illustrating the sanctionable conduct if the District Court files a motion for sanctions sua sponte. The District Court stated that it was considering sanctions upon Defendant’s request and not sua sponte. In addition, sua sponte sanctions must rise to a level to be considered a contempt of court violation, which does not appear to be the case with the conduct at issue.
Because Plaintiff was not given the benefit of the “safe harbor” provision of Rule 11 of the Federal Rules of Civil Procedure (recently amended in 1993 at the time of the case), and Defendant did not follow the procedural requirements of Rule 11, imposition of sanctions on Plaintiff is reversed.
Regarding sanctions against Plaintiff’s attorney, Rule 11 of the Federal Rules of Civil Procedure requires that attorneys conduct a reasonable inquiry under the circumstances as to whether the attorney can find evidence to support the factual statements.
There was evidence on the record indicating that the 1987 incident took place in 1989, based on an undated sheet and the affidavit from Plaintiff. In addition, Plaintiff’s attorney admitted the error and indicated the sheet was relevant anyway because it showed “state action” between Defendant and a New York agency.
There was evidence on the record indicating that Plaintiff had not worked for four years. Plaintiff had sent letters to racetracks requesting work and none responded. In addition, the New Jersey agency admitted that it had banned Plaintiff from working. Therefore, it was reasonable for Plaintiff’s attorney to believe Plaintiff had not worked in four years.
Finally, both Plaintiff and Defendant would have an obligation to disclose the state court action if it would have been helpful to the District Court. Because there was no final decision in the state court action, there is support that disclosure was not helpful. Even if it was, Defendant would have to disclose its existence as well.
The District Court’s comments in its sanctions order shows bias either towards Plaintiff’s attorney personally or those that represent unpopular clients, which further supports reversal of the sanctions order.
The “safe harbor” provision of Rule 11 gives a party or an attorney a chance to rectify errors that are alleged to be sanctionable. This case illustrates a court’s strict interpretation of Rule 11 and reluctance to impose sanctions.
An attorney’s investigation of his/her client’s statements must only be reasonable. In this case, it shows that evidence supporting the client’s statements is “evidentiary support” notwithstanding that evidence clearly controverts such statements and the attorney later admits the er