Opinion
08 Civ. 6062 (NRB).
August 3, 2011
MEMORANDUM AND ORDER
Plaintiff Roxanne Torres Beecher ("Beecher") filed this action against defendants Riverdale Riding Corporation, Charles Rustin Holzer, Anthony Zumpano, Jeanne Ruh, Theodore Beale, Jr., ABC Corporation, and the County of Westchester pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the First Amendment to the United States Constitution, and New York State law. Presently before the Court is a motion by defendants Anthony Zumpano and Jeanne Ruh ("Moving Defendants") for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure and 28 U.S.C. § 1927.
Beecher is an attorney who proceeded pro se during the pendency of this action. After the action was dismissed with prejudice, and the Moving Defendants advised the Court of their intention to file a motion for sanctions, Beecher retained a lawyer who now represents her in connection with this motion.
For the reasons discussed herein, the motion for sanctions is denied.
BACKGROUND
Beecher commenced this action on July 2, 2008 and amended her complaint on September 3, 2008. The allegations in Beecher's amended complaint concern the operation of the River Ridge Equestrian Center ("River Ridge"), a riding facility operated by defendant Riverdale Riding Corporation. According to Beecher, the defendants perpetrated a so-called "bust-out" scheme, in which they looted the riding facility at the expense of the County of Westchester and the individuals that boarded their horses at the facility, including Beecher. The Moving Defendants were employed at River Ridge.
The allegations in the amended complaint are detailed in an earlier Memorandum and Order, dated December 21, 2010. Beecher v. Riverdale Riding Corp., No. 08 Civ. 6062 (NRB), 2010 WL 5298017, at *1-3 (S.D.N.Y. Dec. 21, 2010). We restate the allegations and the procedural history of this action only to the extent necessary to provide clarity to our decision.
On April 2, 2009, when this action was pending before then-District Judge Stephen C. Robinson, counsel for the Moving Defendants sent a letter to Beecher, stating that Beecher's complaint lacked factual and legal support. In that letter, counsel requested that Beecher dismiss the action against the Moving Defendants. Counsel also stated that the Moving Defendants were prepared to serve Beecher with a motion for sanctions if she failed to dismiss them from the action. (Declaration of Allison C. Pierre ¶ 13 Ex. E.) Following her receipt of the letter, Beecher did not withdraw her complaint or dismiss the Moving Defendants from the action. (Id. ¶ 14.) Consequently, on May 13, 2009, the Moving Defendants served Beecher with a motion for sanctions. After receiving that motion, Beecher again declined to withdraw her complaint or dismiss the Moving Defendants from the action.
Despite serving Beecher with the motion for sanctions, the Moving Defendants did not file the motion with the Court. However, the Moving Defendants filed a motion for summary judgment on the same day that they served their motion for sanctions. Then, on March 30, 2010, Judge Robinson issued an opinion in which he converted the motion for summary judgment into a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure. In so doing, Judge Robinson reasoned that the Moving Defendants' core arguments were legal arguments and therefore the Moving Defendants would not be prejudiced by his decision. Judge Robinson then directed the parties to submit opposition and reply briefs addressing the Moving Defendants' arguments in light of the legal standard applicable to a motion for judgment on the pleadings.
Specifically, the motion for sanctions was not filed following the expiration of Rule 11's 21-day safe harbor period. See Fed.R.Civ.P. 11(c)(2).
The instant action was reassigned to this Court on November 12, 2010. At that time, the motion for judgment on the pleadings was fully briefed and the motion for sanctions had yet to be filed.
On December 21, 2010, this Court issued a Memorandum and Order granting the Moving Defendants' motion for judgment on the pleadings. In the opinion, we reasoned that Beecher lacked standing to assert a RICO claim against the Moving Defendants and therefore dismissed that claim. In addition, we dismissed Beecher's First Amendment claim against the Moving Defendants on the grounds that Beecher failed to allege government action. Finally, because we dismissed all of the federal claims against the Moving Defendants, we declined to exercise supplemental jurisdiction over Beecher's state law claims against them.
In our ruling, we stated that our reasons for granting the Moving Defendants' motion for judgment on the pleadings were equally applicable to the claims asserted against the non-moving defendants. As a result, we directed Beecher to show cause why the action should not be dismissed as to the non-moving defendants. Thereafter, Beecher informed the Court that she did not intend to pursue her claims against the non-moving defendants. Accordingly, on January 13, 2011, this Court issued an order dismissing the instant case with prejudice.
After this Court granted the motion for judgment on the pleadings, counsel for the Moving Defendants advised the Court that they intended to revive their motion for sanctions. In their motion, the Moving Defendants seek an award of attorney's fees and costs and request that we impose a fine on Beecher. In support of their request for sanctions under Rule 11, the Moving Defendants contend that: (1) the action was filed for an improper purpose; (2) Beecher advanced frivolous legal arguments that were not warranted by existing law; and (3) the factual assertions in the complaint lacked evidentiary support. In addition, the Moving Defendants contend that Beecher should be subjected to sanctions under § 1927 because she acted in bad faith, as evidenced by the fact that she filed seven complaints against River Ridge in local, state, and federal courts.
In response, Beecher argues that: (1) her actions were not taken for an improper purpose and that River Ridge commenced four actions against her and fourteen other actions against boarders at the equestrian facility; (2) her legal positions were warranted under existing law; and (3) her factual allegations, which were made "upon information and belief," do not run afoul of Rule 11. Additionally, Beecher contends that her conduct in this action does not warrant sanctions under § 1927.
DISCUSSION
I. Federal Rule 11Under Rule 11(b) of the Federal Rules of Civil Procedure, "[b]y presenting to the court a pleading, written motion, or other paper," an attorney or unrepresented party certifies "to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances" that:
(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; [and]
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; . . .
Fed.R.Civ.P. 11(b). "If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation." Fed.R.Civ.P. 11(c)(1).
"Although the imposition of sanctions is within the province of the district court, `any such decision [should be] made with restraint and discretion.'" Pannonia Farms, Inc. v. USA Cable, 426 F.3d 650, 652 (2d Cir. 2005) (quoting Schlaifer Nance Co., Inc. v. Estate of Warhol, 194 F.3d 323, 334 (2d Cir. 1999)). "When divining the point at which an argument turns from merely losing to losing and sanctionable, . . . we have instructed district courts to resolve all doubts in favor of the signer." Rodick v. City of Schenectady, 1 F.3d 1341, 1350 (2d Cir. 1993) (emphasis in original) (quoting Associated Indem. Corp. v. Fairchild Indus., Inc., 961 F.2d 32, 34-35 (2d Cir. 1992)).
Here, we cannot conclude that sanctioning Beecher is a proper exercise of our discretion. We address the three primary reasons for this conclusion in turn.
First, we are not persuaded that Beecher commenced this action or presented any other written paper to the Court for an improper purpose. Although the Moving Defendants do not clearly specify their reasons for seeking sanctions under Rule 11(b)(1), a fair reading of their motion papers suggests that they believe that: (1) as mere employees of River Ridge, they were improperly joined in this action; and (2) that Beecher's history of litigious conduct supports the inference that she intended to harass the Moving Defendants in this action. We disagree.
This action arises in the context of a complicated, contentious relationship among the various parties. In fact, this action is one of approximately twenty-five lawsuits filed in recent years that involve River Ridge, Beecher, and/or other individuals who boarded their horses at River Ridge. Beecher, we should note, has not commenced all of those lawsuits or even a majority of them; rather, River Ridge commenced eighteen of the actions. Additionally, according to Beecher's counsel, as of February 2011, none of the other actions commenced by Beecher had been dismissed or withdrawn. (Declaration of Annette G. Hasapidis ¶ 12.) By contrast, fifteen of the cases commenced by River Ridge were dismissed, three were withdrawn, and three default judgments were entered against River Ridge after it failed to respond to counterclaims. (Id. ¶¶ 12-16 Ex. M.)
After closely reviewing the parties' submissions, including the facts concerning the other lawsuits, we cannot conclude that Beecher's filings in this case were presented for an improper purpose. In fact, if any inference is to be drawn from the other lawsuits, it may be the competing inference.
Likewise, we cannot conclude that Zumpano and Ruh were improperly joined in this action. In our ruling on the motion for judgment on the pleadings, we did not address this issue, nor have the Moving Defendants presented arguments or facts in connection with this motion that would enable us to reach this conclusion at present. In sum, the Moving Defendants have not adequately established that their joinder was improper.
Second, although we previously held that Beecher's federal causes of action should be dismissed, we cannot conclude that Beecher's legal arguments are sanctionable under Rule 11(b)(2). With respect to her RICO claims, the Moving Defendants now contend that Beecher could not make a nonfrivolous argument that she had standing. We disagree.
"[T]o constitute a frivolous legal position for purposes of Rule 11 sanction, it must be clear under existing precedents that there is no chance of success and no reasonable argument to extend, modify or reverse the law as it stands." Simon DeBartolo Grp., L.P. v. Richard E. Jacobs Grp., Inc., 186 F.3d 157, 167 (2d Cir. 1999) (quoting Mareno v. Rowe, 910 F.2d 1043, 1047 (2d Cir. 1990)). Additionally, arguments for an extension, modification, or other change of the law "are not required to be specifically so identified." Margo v. Weiss, 213 F.3d 55, 64 (2d Cir. 2000).
As we previously ruled, Beecher's reliance on City of New York v. Smokes-Spirits.com, Inc. in support of her standing argument was ultimately incorrect. 541 F.3d 425 (2d Cir. 2008), rev'd sub nom. Hemi Grp., LLC v. City of New York, 130 S. Ct. 983, 175 L. Ed. 2d 943 (2010). Yet her position, "however faulty, [was] not so untenable as a matter of law to necessitate sanction." See Mareno, 910 F.2d at 1047; see also Salovaara v. Eckert, 222 F.3d 19, 34 (2d Cir. 2000). As noted in our earlier opinion, Beecher's position concerning taxpayer standing has been rejected by district courts in this Circuit and other circuit courts. See Beecher, 2010 WL 5298017 at *4 (collecting cases). That said, we cannot conclude that Beecher's attempt to distinguish her position, albeit implicitly, had no chance of success.
Nor can we conclude that Beecher's failure to learn thatSmokes-Spirits had been reversed by the Supreme Court of the United States warrants sanctions. Beecher attests that she conducted research on the issue of standing before filing her amended complaint in 2008. (Declaration of Roxanne Torres Beecher ¶ 4.) She further states that, although she typically checks her legal citations, she did not do so before filing her opposition to the motion for judgment on the pleadings in 2010 and thus failed to learn that Smokes-Spirits had been reversed in the interim. (Id.) Although it is elementary that a lawyer must cite check the cases upon which he or she relies, we hesitate to label Beecher's failure to do so sanctionable.
Moreover, the Moving Defendants appear to have adopted their position concerning the frivolity of Beecher's RICO standing argument only after this Court ruled on that issue. Notably, the opening memorandum of law, which was drafted in May 2009, includes only a passing reference to standing and does not include a single citation to support the argument. Rather, the motion papers advance the argument that the allegations in the complaint were not plausible and that the Moving Defendants were not properly joined in this action. However, when resolving the dispositive motion, we never addressed the factual allegations in the complaint, the viability of Beecher's state law claims, or the propriety of joining the Moving Defendants. More specifically, we did not conclude that Beecher's state law claims were implausible, nor did we conclude that Beecher's joinder of the Moving Defendants was improper. Thus, the arguments actually addressed in the motion do not justify sanctions, nor does Beecher's position concerning standing warrant sanctions — a conclusion that is not inconsistent with a close reading of the Moving Defendants' own papers.
This conclusion is also supported by the Moving Defendants' briefing on the motion for judgment on the pleadings. Although those papers included a more fulsome standing argument, the Moving Defendants nevertheless failed to identify some of the case law this Court found to be relevant to its conclusion that Beecher lacked standing to assert a RICO claim. If Beecher's standing argument were as sanctionable as the Moving Defendants now assert, we would have hoped that the Moving Defendants would have brought the relevant case law to Beecher's attention and to the Court's attention, rather than relying on the Court's own research.
With respect to Beecher's First Amendment claims, we again disagree with the Moving Defendants' contention that Beecher's position was frivolous. Although we concluded that Beecher failed to adequately allege joint activity between the defendants and state actors, we are not persuaded that Beecher advanced anything beyond a mere losing argument. See Salovaara, 222 F.3d at 34 ("A distinction must be drawn between a position which is merely losing, and one which is both losing and sanctionable.") (citations omitted).
Third, we cannot conclude that Beecher's factual assertions are so baseless or speculative as to be sanctionable under Rule 11(b)(3). An erroneous statement of fact within a pleading "can give rise to the imposition of sanctions only when the `particular allegation is utterly lacking in support.'" Kiobel v. Millson, 592 F.3d 78, 81 (2d Cir. 2010) (quoting Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 388 (2d Cir. 2003)). "Rule 11 neither penalizes overstatement nor authorizes an overly literal reading of each factual statement." Kiobel, 592 F.3d at 83. Moreover, "a plaintiff is not required to know at the time of pleading all facts necessary to establish the claim," see Commercial Cleaning Servs., LLC v. Colin Serv. Sys., Inc., 271 F.3d 374, 386 (2d Cir. 2001), and thus may make allegations based on information and belief.
After reviewing the submissions in connection with the instant motion, we cannot conclude that Beecher's factual allegations, which were made "upon information and belief," and which were not grounds for this Court's dismissal of Beecher's federal claims, merit sanctions under Rule 11. In fact, we were presented with little that would enable us to conclude that the factual allegations were false. In this regard, it must be reemphasized that we did not rule on the factual or legal sufficiency of Beecher's state law claims.
Accordingly, we deny the motion for Rule 11 sanctions. II. 28 U.S.C. § 1927
As we previously stated to counsel for the Moving Defendants, we were disappointed that this motion was not brought to this Court's attention at any time prior to our ruling on the motion for judgment on the pleadings. We recognize that Rule 11 does not require parties to file a motion for sanctions at a predetermined time. Nevertheless, we think the facts of this case illustrate how inefficient it is for a party to await a merits-based decision before alerting the Court to its intention to file a motion for sanctions.
The Moving Defendants also request sanctions under § 1927, which provides that:
[a]ny attorney or other person admitted to conduct cases in any court of the United States . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.28 U.S.C. § 1927. "A court may award § 1927 sanctions only `when the attorney's actions are so completely without merit as to require the conclusion that they must have been undertaken for some improper purpose.'" Johnson ex rel. United States v. Univ. of Rochester Med. Ctr., 642 F.3d 121, 125 (2d Cir. 2011) (quotingGollomp v. Spitzer, 568 F.3d 355, 368 (2d Cir. 2009)). In addition, sanctions may be imposed under § 1927 "only when there is a finding of conduct constituting or akin to bad faith."60 E. 80th St. Equities, Inc. v. Sapir (In re 60 E. 80th St. Equities, Inc.), 218 F.3d 109, 115 (2d Cir. 2000) (quoting Sakon v. Andreo, 119 F.3d 109, 114 (2d Cir. 1997)) (internal quotations omitted). We note that although this statute expressly applies to attorneys, where a pro se litigant is a lawyer, § 1927 applies to abusive tactics and bad faith conduct by that individual. See Sassower v. Field, 973 F.2d 75, 80 (2d Cir. 1992).
We are totally unpersuaded that sanctions are warranted under § 1927. It is our understanding that Beecher conducted no discovery in this action and that she consented to a stay of discovery pending the resolution of the dispositive motion. Additionally, Beecher elected to dismiss her action against the non-moving defendants after we granted the Moving Defendants' motion for judgment on the pleadings. Such conduct is neither vexatious nor unreasonable.
The Moving Defendants also point to Beecher's commencement of other lawsuits as grounds for imposing sanctions under § 1927. As discussed above, we cannot infer from these lawsuits that Beecher intended to harass the defendants. However, even if we could infer such intent, we would be hesitant to construe the lawsuits as conduct that has "multiplie[d] the proceedings" in this case, 28 U.S.C. § 1927, especially where, as here, the previously-filed lawsuits are not based on the identical facts, do not involve the same causes of action, and where relief on these facts has not been denied to Beecher in another forum. See generally Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse § 23(A)(2) (4th ed. 2008) (noting situations in which a lawyer "may arguably" be subject to sanction under § 1927 by commencing lawsuits or proceedings in other courts).
Thus, the Moving Defendants have not alerted us to conduct, other than Beecher's failure to withdraw this action, that could be construed as falling within the ambit of this statute. In the present context, we cannot conclude that Beecher's mere failure to terminate this action is sanctionable. Cf. Calloway v. Marvel Entm't Grp., 854 F.2d 1452, 1481-82 (2d Cir. 1988) (stating, without holding, that sanctions might be appropriate where an attorney needlessly rejects a settlement offer that would have afforded complete relief to his client), rev'd sub nom. on other grounds, Pavelic LeFlore v. Marvel Entm't Grp., 493 U.S. 120 (1989).
In sum, having concluded that the imposition of sanctions is not warranted under Rule 11, we cannot conclude that the same conduct warrants sanctions under § 1927. Accordingly, we deny the motion for sanctions under § 1927.
CONCLUSION
For the foregoing reasons, the motion for sanctions (docket no. 59) is denied.