United States District Court, D. Arizona
BRIDGET S. BADE, Magistrate Judge.
Plaintiff Andrew Berrey has filed a Motion for Rule 11 Sanctions against Defendant Injury Assistance, LLC (Injury Assistance), and its counsel. (Doc. 84.) Berrey asserts that the Court should impose sanctions on Injury Assistance and its counsel based on Injury Assistance's Motion to Disgorge Michael Love's Attorney's Fees (Doc. 79), which the Court denied. (Doc. 93.) Berrey seeks a sanctions award of $26, 588, with additional sanctions to be determined after the deposition of Injury Assistance's counsel. (Doc. 84 at 1.) Injury Assistance has responded to the motion for sanctions (Doc. 87), and Berrey has filed a reply. (Doc. 88.) For the reasons below, the Court denies the motion for sanctions.
I. Motion for Sanctions
In the motion for sanctions,  Berrey argues that the motion to disgorge attorney's fees was filed for an improper purpose and that it was frivolous because it was based on inadequate legal research and factual investigation. (Doc. 84 at 8, 12.) In response, Injury Assistance opposes the motion for sanctions by arguing the merits of the motion to disgorge attorney's fees. (Doc. 87.)
A. Rule 11 Standard
Pursuant to Rule 11(b) of the Federal Rules of Civil Procedure, a lawyer who signs and files a paper in federal court "certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances[, ]" that the motion "is not being presented for any improper purpose" and that "the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law." Fed.R.Civ.P. 11(b)(1) and (2).
Rule 11 permits sanctions "when a filing is frivolous, legally unreasonable or without factual foundation, or is brought for an improper purpose." Estate of Blue v. Cnty. of Los Angeles, 120 F.3d 982, 985 (9th Cir. 1997) (plaintiff's complaint in third lawsuit violated Rule 11 because it was time barred and "alleged the identical § 1983 claims at issue in [prior two lawsuits] against the same defendants") (citations omitted). The objective standard of reasonableness applies when determining whether a motion is frivolous or has been filed for an improper purpose. Hudson v. Moore Bus. Forms, Inc., 836 F.2d 1156, 1159 (9th Cir. 1987) (citation omitted); see also G.C. and K.B. Invs., Inc., v. Wilson, 326 F.3d 1096, 1110 (9th Cir. 2003) (reasonableness is viewed from the perspective of a competent attorney admitted to practice before the district court). When applying Rule 11, courts must prevent abuse of the judicial process while also allowing zealous advocacy. Hudson, 836 F.2d at 1159-60.
B. Improper Purpose under Rule 11(b)(1)
Berrey argues that Injury Assistance filed the motion to disgorge attorney's fees for an improper purpose. A litigant files a motion for an improper purpose when the motion is meant to "harass or to cause unnecessary delay or needless increase in the cost of litigation." G.C. and K.B. Invs., Inc., 326 F.3d at 1110 (explaining that successive complaints based on propositions of law previously rejected may constitute harassment under Rule 11). Berrey argues that Injury Assistance filed its motion to disgorge attorney's fees in a spiteful and vindictive response to Berrey's reply in support of his motion for partial summary judgment because, based on Berrey's reply, Injury Assistance realized its claims to the settlement proceeds would fail. (Doc. 84 at 2, 5, 12.) This argument is speculative and based on Berrey's unsupported allegations of ill motive. Berrey has not presented any objective evidence that Injury Assistance filed the motion to disgorge attorney's fees for an improper purpose. Therefore, Berrey has presented no basis from which the Court could conclude that Injury Assistance filed the motion out of spite, to be vindictive, or to lash out and personally attack Berrey's counsel.
Furthermore, Berrey's argument is based on his counsel's perception of the strength of his reply to support his motion for partial summary judgment. However, as set forth in the Court's March 30, 2015 Order, the cross motions for summary judgment were complicated, presented an issue of first impression, and were not adequately briefed and thus required supplemental briefing. (Doc. 89.) Given the nature of the briefing on summary judgment, it is very unlikely Injury Assistance perceived Berrey's reply in the same way that Berrey perceived it. Thus, the Court concludes that Berrey has not established that Injury Assistance was motivated to file its motion to disgorge attorney's fees for an improper purpose in reaction to the strength of Berrey's reply.
The record contains no evidence that Injury Assistance intended to harass Berrey, cause unnecessary delay, or needlessly increase the cost of this litigation. Therefore, Berrey has not established that Injury Assistance filed the motion to disgorge attorney's fees for an improper purpose and the Court denies the motion for sanctions on this basis.
C. Frivolous under Rule 11(b)(2)
Berrey argues that the motion to disgorge attorney's fees was frivolous because Injury Assistance's claims were "not well grounded in fact or law, " and Injury Assistance "failed to make reasonable inquiry into governing law." (Doc. 84 at 6.) "Rule 11 sets a low bar: It deters baseless filings' by requiring a reasonable inquiry' that there is some plausible basis for the theories alleged." Strom v. United States, 641 F.3d 1051, 1059 (9th Cir. 2011) (citations omitted). Thus, frivolous filings are "both baseless and made without a reasonable and competent inquiry." Estate of Blue, 120 F.3d at 985 (citation omitted); In re Girardi, 611 F.3d 1027, 1062 (9th Cir. 2010) (citation omitted). "The key question in assessing frivolousness is whether a complaint states an arguable claim - not whether the pleader is correct in his perception of the law." Hudson, 836 F.2d at 1159. In addition, "ultimate failure on the merits is irrelevant." Id. (citation omitted).
Furthermore, Rule 11 sanctions are not appropriate when a litigant has " some plausible basis, albeit quite a weak one" for the argument advanced. United Nat'l Ins. Co. v. R & D Latex Corp., 242 F.3d 1102, 1117 (9th Cir. 2001). At least two circuit courts have reasoned that "to 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." Strom, 641 F.3d at 1059 (quoting Simon DeBartolo Grp., L.P. v. Richard E. Jacobs Grp., Inc., 186 F.3d 157, 167 (2d Cir. 1999)). A ...