Navigating Rule 11 Sanctions: Examples from Actual Litigation

What Are Sanctions Under Rule 11?

The general purpose of Rule 11 of the Federal Rules of Civil Procedure is to "deter lawyers and parties from filing papers that are either improper or without factual or legal foundation." Schlaifer Nance & Co. v. S.E.C., 359 F.3d 926, 929 (7th Cir. 2004). Rule 11(b) contains the general representations to which attorneys and parties must adhere. Rule 11(c) provides a mechanism for courts to impose sanctions for violations of the requirements in Rule 11(b). Sanctions may be imposed when a party signs an initial pleading, motion, or paper that is "presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; the claims, defenses, and other legal contentions are not warranted by existing law or by a nonfrivolous argument for changing existing law; the factual contentions have no evidentiary support or, if specifically so identified, are likely to have no evidentiary support after a reasonable opportunity for further investigation or discovery; or the denials of factual contentions are not warranted by the evidence[.]" Federal Rules of Civil Procedure 11(b)(1 -4). Courts have wide discretion in the imposition of Rule 11 sanctions, but the power to impose sanctions is generally only exercised where "there is a ‘finding of conduct tantamount to bad faith.’" Schlaifer Nance, 359 F.3d at 930 (quoting Business Guides v. Chromatic Comm’n, 498 U.S. 533, 548 (1991)) . As the Supreme Court explained: "Parties to lawsuits have a duty to make only those factual contentions that have evidentiary support … or to assure that they will likely have evidentiary support after a reasonable opportunity for further investigation. … [L]itigants that make factual contentions without evidentiary support do not merely run the risk of losing on the merits. If a district court undertakes a reasonable inquiry and concludes that a litigant who made a factual contention did not have evidentiary support, the district court can ensure compliance with the Rules by requiring that litigants who make factual representations in a pleading, written motion, or other paper pay ‘the reasonable expenses incurred by the other parties as a result of the filing of the pleading, written motion, or other paper, including a reasonable attorney’s fee.’" Business Guides, 498 U.S. at 551 (citations omitted). In other words, as discussed in Part C, one of the goals of the Rule 11(c) sanctions provision is providing the victim of the sanctionable behavior with monetary compensation for defending frivolous claims. Some courts have held that sanctions should be imposed only in the "exceptional circumstance where a claim or motion is patently unmeritorious or frivolous, or where a party has engaged in a continued pattern of litigation that shows bad faith, harassment, or an attempt to create additional pressure or costs in order to gain leverage in the litigation." Schlaifer Nance, 359 F.3d at 931 (citations and quotations omitted).

Rule 11 Sanctions Requirements

Courts use a three-prong test to determine whether to impose Rule 11 sanctions: The violation must be "(1) untrue, (2) frivolous, and (3) presented for improper purposes such as harassment or delay." McGowan v. Faulkner Concrete Prod. Corp., 659 F. App’x 788, 798 (11th Cir. 2016) (citation and internal quotation marks omitted). As noted above, the standard for Rule 11 sanctions is objective, not subjective. Courts consider the information available to a litigant at the time a pleading, motion, or other paper is signed in determining whether the run-of-the-mill reasonable inquiry persisting in the world of normal, commercial, business transactions would support the factual contentions in the paper at issue.
In deciding whether to impose Rule 11 sanctions, courts also require, among other things, that "the party undertaking investigation and research reasonably believes that the discovery will turn up evidence to support the pleading." Id. (citation omitted). In this regard, sanctions may be imposed for failure to perform a reasonable inquiry before signing a pleading or post-filing failure to conduct a reasonable inquiry following the receipt of allegedly conflicting information, but not by simply performing no pre-filing inquiry. See id. (affirming finding of Rule 11(b)(2) violation based on post-filing failure to conduct reasonable inquiry, despite pre-filing inquiry by counsel).
With respect to Rule 11(b)(2), courts also consider whether the "pleading . . . at least ha[s] an objective, good faith hope of prevailing on the merits," meaning that a party, "based on the information it had at the time of distribution, could reasonably expect success on the merits." See id. (internal quotation marks omitted). Additionally, in deciding whether Rule 11 sanctions are warranted, courts apply a rule of law that requires "the district court to sanction the complete absence of factual support for a pleading or the absence of a cogent legal argument." Thomason v. Nachamie, No. 14-14162, 2015 WL 3637469, at *5 (11th Cir. June 16, 2015) (affirming imposition of Rule 11(b)(2) sanctions for lack of support for all of the plaintiff’s legal and factual contentions).
In the context of Rule 11(b)(3), courts consider whether a party’s filing was "for an improper purpose." Courts have found pleadings were filed for an improper purpose when they subjected the opposing party to a threat of future litigation, see Thomas v. Kapordelis, 955 F. Supp. 2d 1330, 1344 (N.D. Ga. 2013), or sought to harass the opposing party by "merely attempt[ing] to put [the opposing party] through the ordeal of further litigation," id. (alterations in original) (internal quotation marks omitted).

Notable Rule 11 Sanction Cases

Even high-profile attorneys have paid the price for not complying with Rule 11. The following are just a handful of high profile examples of failure to adhere to F.R.Civ.P. 11.
Kashani v. Tsann Kwan, 118 F.3d 1477 (9th Cir. 1997)
In 1997, the Ninth Circuit Court of Appeals upheld a $5,000 sanctions award against plaintiff Kashani and his attorney. In this case, Kashani’s counsel filed a complaint against his landlord claiming that the landlord had intentionally failed to fix large cracks in the property that had caused his wife to be bitten by a spider, which left her disfigured. In response, the defendant filed a counterclaim claiming that the plaintiff had lied in attempting to obtain a larger settlement. Defense counsel then sought Rule 11 sanctions against Kashani and his attorney, and after the district court conducted a hearing, awarded monetary sanctions. Kashani appealed, arguing that there was no factual support for the counterclaim and thus the claim was frivolous. After hearing arguments, however, the Ninth Circuit affirmed the district court’s ruling, and cautioned counsel that the allegations were "in fact frivolous under the terms of Rule 11." The Ninth Circuit also stated that the trial court "did not abuse its discretion in sanctioning Mr. Kashani," and as such, the sanctions judgment was upheld.
Robertson v. Stockton & DuPont, 36 F.3d 66 (5th Cir. 1994)
In this case, the Fifth Circuit appeals court upheld sanctions against four attorneys who had knowingly prepared a case they knew or should have known was frivolous. In this particular case, one of the attorneys had in fact informed the other attorneys that their case was bad after reading the transcript from a prior hearing. Despite being told that their case was bad, the four attorneys allowed the case to continue for nearly three years, which included an additional appeal and a request for a rehearing. Although the Fourth Circuit case held that the four attorneys had acted in bad faith and with reckless disregard for the law, they were not monetarily sanctioned. However, the court did state that "[a] violation of Rule 11 may result in various types of sanctions, ranging from stern words to outright dismissal of the case with prejudice. In more egregious cases, the offending parties have suffered attorneys’ fees and even bar suspensions." As such, the court left open the possibility that the attorneys could seek extra sanctions in the lower court.
Davidson & Associates v. Berg, 138 F.3d 980 (8th Cir. 1998)
In Davidson & Associates v. Berg, an attorney was denied sanctions against opposing counsel after he failed to show the court that opposing counsel’s pre-filing investigation had not met the minimum standard under Rule 11. While the trial court refused to impose sanctions, the Eighth Circuit Court of Appeals reversed the trial court’s ruling, and imposed monetary sanctions against opposing counsel. Although the Fourth Cox software defendants had asserted their affirmative defenses in their answer, as well as in their motion to dismiss, opposing counsel Davidson & Associates continued to file motions and pursue discovery pertaining to the affirmative defenses. After agreeing to dismiss the case with prejudice, Davidson & Associates notified opposing counsel that it would be seeking Rule 11 sanctions against the party. However, the court found that opposing counsel had complied with Rule 11 by conducting an adequate and reasonable pre-filing inquiry, as was required under the rule. In addition, the court found that opposing counsel had simply attempted to clear Johnston’s name and prove that the lawsuit was frivolous, and as such, did not violate the rule.

Rule 11 Sanctions Procedure

Before a motion for Rule 11 sanctions may be filed, a party must serve the "offending" party (i.e., the party who allegedly violated Rule 11) with a copy of the motion and a "safe harbor" provision letter. The notice must be served according to the Fed. R. Civ. P. 5 methods of service at least 21 days prior to filing the motion so as to provide the offending party an opportunity to withdraw or correct its offending pleading or motion upon receipt of the notice and safe harbor letter. If the offending party withdraws or corrects the offending pleading or motion within this period of time, then a motion for Rule 11 sanctions cannot subsequently be filed as to that pleading. However, "evasive or incomplete discovery responses" do not trigger the safe harbor provision. See Fed. R. Civ. P. 11, Advisory Committee Notes (emphasis added). Potentially, the safe harbor provision can also apply to an amended initial pleading, unless that pleading is filed "as a matter of course." See Fed. R. Civ. P. 15(a)(1). In addition, a party may have to wait to bring a Rule 11 sanctions motion until the underlying action is resolved, especially if the rule violation relates to matters outside of the initial complaint: "Post-filing motions in the context of an evolving case may lead to delays that would be less likely to occur if the case had to be institutionally `ripe’ before a motion could be considered." Fed. R. Civ. P. 11, Advisory Committee Notes (emphasis added).
Importantly, the specific requirements for the motion depend on the nature of the client signature on the initial pleadings or discovery responses. Accordingly, Rule 11(b) provides that: By presenting to the court [a pleading, written motion, or other paper], an attorney . . . also certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: In addition, Rule 11(b)(2) requires the initial pleadings, written motions, and other papers "to the best of [the signer’s] knowledge, information, and belief, formed after an inquiry reasonable under the circumstances": (1) not to be frivolous, legally unreasonable, or without factual foundation; or (2) not to be intended to harass or to cause unnecessary delay or needless increase in the cost of litigation. Fed. R. Civ. P. 11(b); see, e.g., Smart v. Cook, No. 80-CV-888, 2004 U.S. Dist. LEXIS 2055, at *7 (E.D.N.Y. Jan. 26, 2004); Caton, 157 F.R.D. at 234. Thus, both the attorney(s) and the client could be subject to Rule 11 sanctions, depending on the status of the client’s signature(s) on the challenged pleading. Finally, potential defenses against the imposition of Rule 11 sanctions include: (1) bona fide arguments in support of the complaint; (2) problems with the underlying facts; and (3) use of the information discovered in related litigation. See, e.g., Brook v. Isuzu Motors, Ltd., 883 F. Supp. 1508, 1547 (D.N.M. 1995); Equitec Props. v. Invs. Realty Grp., Inc., No. C-81-6640-MHP, 1985 U.S. Dist. LEXIS 16776, at *17 (N.D. Cal. Sept. 19, 1985).

Effects of a Rule 11 Sanction

Sanctions under Rule 11 can range from the insignificant to the severe. At the most benign end of the spectrum, a court can simply admonish a lawyer for misconduct. At the other end, a court can provide for the sanctioning lawyer’s attorney’s fees for work associated with the offending pleading or motion, expenses, and even with respect to facts not within the offending document but which were required to be uncovered as a result of the offending conduct. The court can also impose sanctions on the client alone (i.e., the offending litigant) in the form of a monetary award against that litigant alone, without reference to the architect(s) of the offending pleading or motion, or against all or any combination of persons and entities involved in the offending document. See, e.g., Collins v. Jordan, 2011 U.S. Dist. LEXIS 2086 (E.D. Cal. Jan. 5, 2011) (court imposed monetary sanction only against relevant parties, including an independent contractor whose affidavits in support of movant’s arguments the court did not find credible, because that contractor "was not privy to matters" in the court’s analysis of, and reason for, sanctions), aff’d sub nom., Collins v. Dep’t of Water Res., 2011 U.S. App. LEXIS 6226 (9th Cir. Apr. 11, 2011). In Lee v. First Lenders Ins. Servs., Inc., 236 F.R.D. 215 (E.D. Cal. 2006), an insurance agent brought suit against an insurance company, his former employer, asserting various employment-related claims. The court, however, found as to his first amended complaint that his claims were barred by the applicable statute of limitations and denied him leave to amend to attempt to defeat that bar. Plaintiff appealed the district court’s decision , but the Ninth Circuit affirmed, finding the district court had abused its discretion in allowing plaintiff to amend. At that point, the defendant sought sanctions for the agent’s filing of an untimely pleading, and for his repeated attempts to retain a claim without leave. The district court granted that motion, awarding the insurance company $15,524.50 as sanctions under Rule 11, which included $7,421.50 in attorneys’ fees and costs and $8,103 in expert fees. Id. But Rule 11 has a further reaching impact in this context, such that an adverse party may move to block the offending party’s ability to recover on a claim. In Scurti v. Town of Madison Beach & Recreation, 2007 Conn. Super. LEXIS 1214 (Conn. Super. Ct. June 27, 2007), the defendant moved for sanctions, including defendant’s attorneys’ fees "for bringing a frivolous claim in violation of Connecticut Rule of Professional Responsibility (RPC) 3.11." Id., at *1 (footnote omitted). At the outset, the court acknowledged that "a party and his attorney are not deemed responsible for every piece of paper that is filed in the court records"; they are, however, also "not totally free from responsibility to the court." Id., at *5. Thus, the imposition of sanctions under Rule 11 lies within the court’s discretion and, "in deciding whether to impose sanctions, [the court] should consider: ‘(1) whether the pleadings, motions or other papers were reasonable; (2) whether `the claims, defenses, and other legal contentions in the action were warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law.’" Id., at *5-6.

Avoiding a Rule 11 Sanction

The best way to avoid Rule 11 sanctions is to comply with the Rule and its requirements in the first place. There are several things practitioners need to be aware of in order to comply with their Rule 11 obligations. First, before filing any motion, practitioners must conduct a reasonable inquiry into the facts and law governing their case. Both the factual and legal bases for their claims must be sound. Second, the legal arguments and claims made cannot be frivolous, legally unreasonable, or without merit or purpose. This is a relatively low standard because a party need only support its case with "some evidence" in order to avoid sanctions. The legal arguments, however, must also be warranted by existing law, not necessarily adversely held by good faith argument in favor of their adoption. Third, practitioners have an affirmative duty to inform the trial court of controlling authority adverse to the position of their client, even if that controlling authority is not cited within the moving papers by opposing counsel. Fourth, practitioners need to avoid abusing the discovery process. Sanctions may be awarded for the abuse of discovery, such as seeking to depose a party’s president without obtaining leave of court, or when discovery is sought from a party who is already provided with the same requested evidence by another party and it would return no more relevant evidence if a party were required to produce the requested information again. Fifth, practitioners need to be respectful in their pleadings. A litigator goes too far when she abuses the discovery process by "embroidering" the facts with inflammatory words, such as "fraud," or when using "strong arm" tactics. Sixth, practitioners have to be aware of the facts and the law of the case so as to properly advise their clients and avoid Rule 11 sanctions.

The Impact of Rule 11 on Practice

The widespread application of Rule 11 sanctions in the Southern District of Florida and the Eleventh Circuit has resulted in the development of a strong body of case law interpreting the Rule.
Many cases have discussed when sanctions are appropriate and the impact of those sanctions. As a result, attorneys now have substantial guidance on how to comply with Rule 11 when filing a pleading or other paper with the court. As one court stated, the "proper way to apply the standards of Rule 11 is not to focus on frivolousness, but on whether or not the [pleading or motion] was well-grounded in fact or not meritorious or futile." Heiss v. Humana Medical Plan, Inc., 207 F. Supp. 2d 1359, 1360 n.1 (S.D. Fla. 2002). The Eleventh Circuit stated: "sanctions against an attorney for failure to conduct a reasonable inquiry into the facts before filing are to be granted only in exceptional circumstance." Baker v. Alderman, 158 F. 3d 518, 523 (11th Cir. 1998).
The Southern District of Florida has granted motions for Rule 11 sanctions when counsel: 1) failed to conduct a reasonable inquiry by ignoring documents that countered his clients’ claims, Schiller v . City of New Smyrna Beach, 351 F. Supp. 2d 1308, 1311 (M.D. Fla. 2005); 2) failed to adequately investigate and cite statutes regarding civil racketeering, David E. Watson, P.A. v. Phillip Morris Companies, Inc./Liggett Group, Inc., 274 F. Supp. 2d 1289 (M.D. Fla. 1997); 3) filed a federal securities claim that contained blatantly contradictory allegations, Mallard v. Wellcare Management Grp., Inc., 564 F. Supp. 2d 1307 (S.D. Fla. 2008); 4) filed a meritless declaratory action regarding real property rights, Crescent Resources, LLC v. Watersong Realty, LLC, 2010 WL 4941649 (M.D. Fla. Dec. 2, 2010); 5) brought a frivolous suit without investigating whether the allegations could be properly supported after discovery, Bank of Brooklyn v. Dotson, 2010 WL 3927313, *1 (S.D. Fla. Jan. 25, 2010); and 6) advanced frivolous claims in a response to a motion to dismiss that failed to address the arguments raised in the motion, Garcia v. Varela, 2009 WL 3367104 (S.D. Fla. Oct. 14, 2009).