Attorneys & Lawyers & Counselors, Civilized Proceedings

Research Report: Rule 11 Sanctions for Filing Frivolous Rule 11 Sanction Motions for Frivolity

Following is my research report of actual case quotes/snippets that I found interesting (for some reason or another) while I was imageresearching the Question: Can you be sanctioned for bringing a frivolous or otherwise improper Rule 11 Motion for Sanctions?

Answered: Yes and you don’t even need to provide the 21-day safe-harbor period! See Fed.R.Civ.P. 11 (c)(2)(“If warranted, the court may award to the prevailing party the reasonable expenses, including attorney’s fees, incurred for the motion”) and Minn.R.Civ.P. 11.03 (a)(“If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney fees incurred in presenting or opposing the motion.”).

  • A Rule 11 violation is a serious thing, and “an accusation of such wrongdoing is equally serious.” Draper & Kramer, Inc. v. Baskin-Robbins, Inc., 690 F. Supp. 728, 732 (N.D. Ill. 1988).
  • imageThe imposition of Rule 11 sanctions should not be imposed so as to “ ‘chill an attorney’s enthusiasm or creativity in pursuing factual or legal theories [.]’ ” Robinson Rubber Prod. Co., Inc. v. Hennepin County, Minn., 12 F. Supp. 2d 975, 981 (D. Minn. 1998).
  • When a Rule 11 motion itself is not well grounded in fact or law, or is filed for an improper purpose, the court may sanction the moving party. Safe-Strap Co., Inc. v. Koala Corp., 270 F. Supp. 2d 407 (S.D.N.Y.2003).
  • The Court may impose sanctions for a Rule 11 motion that was “not well-grounded in fact,” and was “filed solely as a litigation tactic,” having “the effect of unnecessarily confusing consideration of the real issues.” Judin v. U.S., 34 Fed. Cl. 483, 493 (Fed. Cl. 1995).
  • “Counsel’s reliance on Gaiardo v. Ethyl Corp., 835 F.2d 479, 483 (3d Cir.1987) to rationalize his performance as a good faith effort to challenge existing law is to no avail. He did not even mention the Gordon case . . .” Borowski v. DePuy, a Div. of Boehringer Mannheim Co., 850 F.2d 297, 304-05 (7th Cir. 1988).

11-11-11_m

  • “His conduct throughout the entire case demonstrated the “ostrich-like tactic of pretending that potentially dispositive authority against [his] contention does not exist,” precisely the type of behavior that would justify imposing Rule 11 sanctions.” Id.
  • “The district court was correct in sanctioning plaintiff, who should not be permitted to rely on the defendants to do the research either to make his case or expose its fallacies.” Id.
  • “Rule 11 is not a toy. A lawyer who transgresses the rule abuses the special role our legal system has entrusted to him.” Draper & Kramer, Inc. v. Baskin-Robbins, Inc., 690 F. Supp. 728, 732 (N.D. Ill. 1988). “He can suffer severe financial sanctions and, if his misconduct persists, he can find himself before a disciplinary commission. See, e.g., Model Rule of Professional Responsibility 3.1 (“A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous.”). In short, a Rule 11 violation is a serious thing, and an accusation of such wrongdoing is equally serious.” Id.

_woodshed

 

MKT

Standard
Attorneys & Lawyers & Counselors, Litigation of Business | Business of Litigation

Help Wanted–Attorney with 0-3 Years of Experience–Apply Within

MKT Law, PLC, a boutique St. Paul law firm, is looking to add its first associate attorney with 0-3 years of experience. Experience in a law firm setting, as well as an interest in business litigation is preferred. 2014 graduates are strongly encouraged to apply. Interested and qualified candidates should send a cover letter and resume to Mark K. Thompson at mkt@mktlawoffice.com. No phone calls, faxes or snail mail please.

MKT LAW, PLC copy

Standard
Attorneys & Lawyers & Counselors, It's Criminal!, Litigation of Business | Business of Litigation

Minnesota’s Worthless Check Statute–Bounce! Bounce! Bounce!

BounceBounceBounceBounce

~Fatty Koo circa 2005

Rubber Checks

I got a call today for the first time in years by someone who got a bad check as payment for services rendered. I remembered at some point in time there was a Minnesota Statute on point and I seemed to recall it had some significant penalties. Significant as in the penalty doubled the amount of the check.

The Statute 

Never took a bad check

Never took a bad check

I took a look through the books and found the statute and it looked right on at first blush. It is Minnesota Statute, Section 604.113 and it goes like this:

Whoever issues any check that is dishonored is liable for the following penalties:

A service charge, not to exceed $30 . . . if notice of the service charge was conspicuously displayed on the premises when the check was issued . . .

If the amount of the dishonored check is not paid within 30 days after the payee or holder has mailed notice of dishonor . . . and a description of the penalties contained in this subdivision, whoever issued the dishonored check is liable to
the payee or holder of the check for . . .

the amount of the check, the service charge . . .  plus a civil penalty of up to $100 or the value of the check, whichever is greater.  In determining the amount of the penalty, the court shall consider the amount of the check and the reason for nonpayment.

Minn.Stat. § 604.113.

A Couple Problems

  • #1

Well, I had a few problems here. The first is rather obvious: Unless you are a retail store, odds are you do not have a sign prominently exhibited stating a service charge of $30.00 will be charged on all bounced checks. My caller was not a retail store and instead provides services at someone else’s place of business. So one down.

  • #2

So you read along deeper into the statue and you see the $100 penalty.

Well, that’s mighty nice of our legislators to toss us that bone but, well, it’s just nice, I guess. That’s it.

coinsA hundred bucks is not that big of an incentive if the rubber check that bounced is for a couple/few thousand dollars or more.

As you read on you come across the “or the value of the check, whichever is greater” part and you say:

Oh you brilliant elected officials! You based it on the amount of the check! It could not make more sense or been done in a better way. That has some teeth!

As usual, nothing is a good as it looks at first and you have to read the next sentence. With a casual read, it seems like it’s all good: It has the word Penalty and the word Court and the word Must. Nothing wrong here. But that is exactly what is wrong.

  • #3

It is highly likely the Court will save the harshest penalty for the most egregious situations.It is doubtful the Court will throw the book at a check writer who bounced a single check for less than a couple hundred dollars. This only makes since since the statute says the court has to consider the amount and reason for the rubber check. And by saying the Court has to consider these factors, you cannot get a default judgment with the penalties added on (no one there to say why). See also Metro Gold, Inc. v. Coin, 757 N.W.2d 924, 928 (Minn. Ct. App. 2008)(due to doctrine of impossibility, comatose man not liable for penalties since he could not make the check good within the 30 day window allowed).

Attorney’s Fees to Save the Day?twistedcheck

Attorney’s fees are available if all bad checks together are over $1,250. However, the amount of those fees are also discretionary with the Court and it just doesn’t make a whole lot of sense to impose a lot in attorney’s fees on a person whose bank account couldn’t fund the initial purchase as it is. So there’s that . . .

It’s a Crime to Bounce

There are criminal penalties for issuing worthless checks too: It is a misdemeanor if the check is under $250; A gross misdemeanor if the check is over $250 but less than $500; A felony if the check is over $500 (or if all bad checks written in a six month period added together are more than $500). Minn. Stat. § 609.535.

Fun, Fun, Fun with the FDCPA

Finally, if you are a debt collector, be wary of using this statute at all. A violation of the FDCPA can subject the debt collector to liability for actual damages, a $1,000.00 statutory penalty and an award of the debtor’s attorney’s fees (attorney’s fees are mandatory and have been 6 and even 10 times the amount recovered for the plaintiff). Phenow v. Johnson, Rodenberg & Lauinger, PLLP, 766 F. Supp. 2d 955, 959 (D. Minn. 2011).

There are cases with claims under the Fair Debt Collection Practices Act (FDCPA) where the Court found the FDCPA was violated by a collector for overstating the effect and amount of Minn. Stat. § 604.113 by saying the penalties “would be” imposed or that the debtor “was liable” for the penalties. Picht v. John R. Hawks, Ltd., 236 F.3d 446 (8th Cir. 2001)womancheque.

Because the amounts are not fixed and the amount can only be finally determined by a Court, collection letters that state the penalties “will” or “shall” be imposed have been found to be volitional under the FDCPA §1692f(1)(prohibiting the attempt to collect any sum not specifically authorized by contract or law and strictly applied using the “unsophisticated consumer” as the baseline for determining violations).  See Duffy v. Landberg, 215 F.3d 871, 875 (8th Cir. 2000)(debt collector stating interest that was inflated by $0.65-yes 65 cents-found to have violated FDCPA).

Carefully Closing

Minnesota’s worthless check statute: It’s not totally toothless–it can bite you back.

MKT

Standard
Fraudulently Fooled

Not So Fancy . . . It’s a Forgery?

Oh no, Iggy is suing an ex-boyfriend for copyright infringement and other intellectual property claims! The lawsuit alleges that in 2008 the ex (he was 33 and she was 17 at the time) downloaded some songs Iggy had stored on her laptop. Iggy had recorded the raps long before becoming so well known and overplayed (don’t get me wrong, she’s awesome). The ex says he has a signed contract giving him the rights to use (and profit from) the early material.

But the Complaint alleges the contract is bogus:

The Forged Agreement contains tell-tale signs that it is not genuine.
For example, it includes mismatched fonts on the signature page; the signature page
contains no substantive text; the paragraph numbers are out of sequence; the signature line is for “Wine Enterprises, inc.” [sic] rather than, as is customary, for an authorized agent; and it provides, as an address for legal notices, the contact information of an attorney who had no knowledge of the Forged Agreement until Azalea’s representatives recently brought it to his attention.

I love the part where they list an attorney’s name on the document, someone contacts the attorney and he doesn’t know what the hell they’re talking about. Can he charge a fee to the ex for listing him as the attorney on the agreement? I hope so.

Anyway, the story gets more interesting but you have to read between the lines and make things up, I guess. Here’s the Complaint and a much more complete and compelling version of the story.

BTW: No pictures because I don’t want Izzy to sue me too!

Standard
Civilized Proceedings, Discovered on Demand

The Neverending Battle . . .

record-and-archiveNew amendments have been proposed again to the Federal Rules of Civil Procedure. Once again, the proposals have the goal of limiting discovery and the burden and expense that goes along with it. As the Judicial Conference described the recommendations from the Advisory Committee on the Federal Rules of Civil Procedure that were sent to the US Supreme Court this week:

The proposed changes seek to reduce litigation costs and delays by encouraging early case management by judges, increased cooperation among the parties, and the proportional use of discovery based on the needs of the case.

pending-rulesYou can find the proposed civil rule amendments here: Pending Rules Amendment page. And if you really want to learn more, you can review a memo describing the changes here: Proposed Amendments.

The most interesting aspect for me is the increased involvement of Judges early in the discovery process to try and keep it under control. I have not found a Judge yet that wants to be more involved with the discproposed-amendmentsovery process in civil cases.

I think it may be what is needed (or at least should be tried) to reign in the out of control and overly broad discovery process that results in a a lot of time and money being consumed while providing information that is not even colorably relevant to a case.

But I have my doubts that after 4 decades of trying to alter discovery under the procedural rules that this will have much of an impact even if it is adopted by the SCOTUS and Congress allows the amendments to the rules. I hope so, but we’ll have to wait and see . . . Even if all goes as planned, the amendments won’t go into effect until December of 2015.

Standard
Minding My Own Business, On Lines & Inner Nets, Technically Lawful

Despite Denials, Court says Yelp! May Alter Ratings as Ad Sales Tactic

yelp_logo (1)How much trust do you put in online reviews of local businesses? A lot of people use  them as a decision-making tool before spending their hard-earned money on a good or service. Quite often and understandably, small business owners with a poor review or rating want to sue the messenger.

Recently, Yelp! was sued for manipulating some small businesses’ online ratings after the companies would not buy, or quit, advertising on Yelp!’s website. Continuing to deny what restaurateurs have said was true for years, Yelp! says it does not rearrange positive and negative reviews so they are higher or lower on a review list. At times in can seem the reviews are posted without any discernible reason other than to impact consumers’ perceptions.

However, Yelp! got another positive review from a federal court last week and this one is at the top of the list. The Ninth Circuit Court of Appeals, ruled in Yelp!’s favor and confirmed the business owners that brought the suit did not sufficiently allege they suffered from “economic extortion.”  The allegations included that the businesses’ ranking’s had plunged following negative encounters with Yelp! staff or sales reps usually over ad sales. The Court explained:

The business owners may deem the posting or order of user reviews as a threat of economic harm, but it is not unlawful for Yelp to post and sequence the reviews. As Yelp has the right to charge for legitimate advertising services, the threat of economic harm that Yelp leveraged is, at most, hard bargaining.

Did you catch that? Yelp! may legally post the reviews it wants to, and not the ones it does not, and in any order it wants. That means Yelp! has the right to not post particular reviews (good or bad), can bury a bad review or raise an older, positive review from the obscure second or unseen third page to the most prominent top spot on page one.

The yelpblindly trusted, and unreliable, user reviews we dutifully turn to and place so much credence in before making a purchasing decision may lawfully be manipulated by the companies that own them. Worse yet, the purely portrayed common man’s opinion may be dishonestly altered in order to deceive consumers to make a profit.

The other conduct Yelp! was accused of was writing negative reviews itself. The Court didn’t find it plausible and found dismissal of the claim proper. Although Yelp! has admitted it used to pay folks to write reviews during its infancy, the Court determined the factual allegations were insufficient to allow the case to continue.promo_yelp

In 2007, the CEO for Yelp! even wrote in a blog post (where else?) for The New York Times “there was a time in our earlier days where we experimented with paying for reviews directly in cities outside of San Francisco to help get the ball rolling in our otherwise empty site.”  Yet, pleading this fact coupled with some rather weak allegations did not suffice.

But the Court does offer an assurance to small business owners everywhere when it concludes the opening the Court’s written opinion by hinting there may be a way to attack Yelp!’s alleged conduct:

We emphasize that we are not holding that no cause of action exists that would cover conduct such as that alleged, if adequately pled. But for all the reasons noted, extortion is an exceedingly narrow concept as applied to fundamentally economic behavior. The business owners have not alleged a legal theory or plausible facts to support the theories they do argue.

The hint is nice. Kinda like “Come on lawyers, the answer is right there! Just use it!”

Don’t worry Yelp!. I won’t say what claim to use either . . .

More on This:

The Terrible Yelp Ruling Isn’t So Bad–The New Yorker

Court rules for Yelp in suit over online ratings – SFGate.

MKT

Standard