Ninth Circuit So Holds in 2-1 Decision, Drawing a Sharp Dissent.
Federal Rule of Civil Procedure 11(b) has a safe harbor by which a party may deflect exposure if it timely withdraws claims identified by the opponent within 21 days after service of the safe harbor request. At issue before the Ninth Circuit was this issue: whether plaintiffs properly withdrew challenged claims during the safe harbor period when they dismissed them without prejudice by serving a motion to amend that deleted the offending claims. The answer to that question drew very disparate conclusions by a panel of the Ninth Circuit Court of Appeals.
In Sneller v. City of Bainbridge Island, Case No. 09-35056 (9th Cir. May 25, 2010) (for publication), the majority, in an opinion authored by Circuit Judge Tashima, held that plaintiffs did not face sanctions, reversing a sanctions order entered by a district judge under both Rule 11 and 28 U.S.C. § 1927.
The majority found that plaintiffs were not required to dismiss the withdrawn claims with prejudice and properly withdrew them through filing of the new motion to amend. (This occurs because a motion for leave to amend under Rule 15 constitutes an effective withdrawal of claims.) With respect to the new claims added to the motion to amend, the proper procedure for challenge was to file a new Rule 11 motion.
The sanction under section 1927 was reversed because (1) the district judge erroneously imposed it against both counsel and client (even though the section only authorizes imposition of sanctions against counsel), and (2) the lower court made no finding that counsel acted with the purpose to unreasonably and vexatiously multiply the proceedings.
Circuit Judge Tallman, in dissent, surveyed the past conduct of plaintiffs and found it to be intolerable, if not frivolous in nature. He believed that there was invited error, given that plaintiffs had even asked the district judge to rule on the Rule 11
motion—conduct inconsistent with claiming safety under the safe harbor provision. The dissent believed the majority took a more charitable view of the plaintiffs’ behavior than did the district judge who observed it firsthand, justifying an opinion that departed company with the majority’s rationale.