$113,667 Rule 11 Sanctions Award Against Plaintiffs and His Attorneys Falls as a Result.
Although we do not venture out of California that often, here is an interesting recent decision about a vacated sanctions award under Federal Rules of Civil Procedure, Rule 11 that comes out of the U.S. Court of Appeals, Second Circuit.
Lawrence v. Richman Group of CT LLC, __ F.3d __, 2010 WL 3583415 (2d Cir. Sept. 16, 2010) involved a Rule 11 sanctions award against plaintiff and his attorneys in the amount of $113,667. It was hinged upon a determination that plaintiff filed a second amended complaint without a reasonable basis in law and fact. The sanctions decision was vacated, reminding all federal court litigators that Rule 11” “safe harbor” filing requirements are strictly construed in many, many situations.
What happened was that defendants initially moved for Rule 11 sanctions in conjunction with their motion to dismiss plaintiff’s first amended complaint. Soon after the dismissal motion was granted with leave and express directives on what needed to be cured, the magistrate judge determined the Rule 11 motion should be denied without prejudice to renew. Plaintiff filed a second amended complaint, but the district court determined that the new complaint did not meet the directives he had laid out before for amendment and then later denied reconsideration of the dismissal order. Ninth months after plaintiff filed the second amended complaint and four months after the district court denied reconsideration of dismissal, defendants renewed their Rule 11 sanctions motion. Finally, the $113,667 sanctions order was issued, which was appealed from by plaintiffs and their attorneys.
Plaintiff and his attorneys were successful on appeal. The winning argument? They were never given a new Rule 11 safe harbor notice with respect to the second amended complaint. “[W]e conclude that where, as here, a defective complaint is dismissed and a party is granted leave to replead, the filing of an amended pleading resets the clock for compliance with the safe harbor requirements of Rule 11(c)(2) before a party aggrieved by the new filing can present a sanctions motion based on that pleading to the district court.” 2010 WL 3583415 at *4.
So, a bright line rule has been laid out by the Second Circuit on how to set up a successful Rule 11 motion in cases that involve amended pleadings.