New Appellate Ruling—Rule 11 Sanctions May Be Sought And Awarded After A Judgment Has Been Entered

As Published in the Daily Business Review

A SPECIAL REPORT by Tripp Scott's Chuck Tatelbaum and Corey Cohen

On July 12, the U.S. Court of Appeals for the Eleventh Circuit issued a precedential ruling that can have significant import for civil litigants in Florida, Georgia and Alabama. In the case of Wilbur Huggins v. Lueder, Larkin & Hunter, the appellate court reversed a ruling by the U.S. District Court in the Northern District of Alabama, which held that once a summary judgment had been granted in favor of the defendant, the defendant was precluded from seeking an award of sanctions or damages under Rule 11 of the Federal Rules of Civil Procedure.

The separate plaintiffs, in a series of six consolidated appeals of companion civil cases, sought damages against a law firm for alleged violations of the Federal Fair Debt Collection Practices Act. The defendant law firm believed that the plaintiffs’ claims were frivolous and without merit, and in connection with the separate filing of motions for summary judgment, the defendant law firm served on the plaintiffs the “safe harbor” notice required by Rule 11. The safe harbor notice, once required by Section 57.105 of the Florida Statutes for Florida state court civil cases, requires an aggrieved party to provide 21 days’ notice to the opposing party (with an accompanying copy of the proposed Rule 11 motion) prior to seeking sanctions for frivolous or unsupported pleadings. Ultimately, the safe harbor notice allows the opposing party an opportunity to withdraw or correct the potentially sanctionable/offensive pleading prior to the motion for sanctions being filed.

In a detailed analysis of the drafting history of the current Rule 11, the circuit court of appeals found that there is nothing in the current rule or its history that mandates that the motion seeking the award of sanctions be filed prior to the court’s ruling on the substance of the offending motion or pleading.

As circuit Judge Britt Grant succinctly stated:

“Nothing in Rule 11’s text suggests that a party may not file an otherwise proper sanctions motion after final judgment. But even if there were any question, Baker v. Alderman settled the issue. That case explains that because “Rule 11 motions are collateral to an action” they may be filed and considered even after the merits are resolved. The motions thus “are not barred if filed after a dismissal order, or after entry of judgment.”

This ruling reinforces a strategic advantage that may and should be utilized by counsel when contemplating the filing of a Rule 11 motion. Many experienced counsel believe that there is a perception, if not the reality, that judges may be unwilling to favorably rule on motions to dismiss, motions for summary judgment, and other pretrial motions granting the relief requested if they know that the losing party may then be subject to sanctions based upon the prior filing of a Rule 11 motion. By waiting until after the court has ruled on the substance of the allegedly offensive pleading to file the Rule 11 motion, the aggrieved party will be secure that there will be no subjective influence based upon the pendency of a Rule 11 motion for sanctions.

In distinguishing a bankruptcy case opinion that was cited by the plaintiffs as support for their position, the appellate opinion also confirmed that based upon the virtually identical language contained in Rule 9011 of the Bankruptcy Rules of Procedure, the same holding would be true in a bankruptcy proceeding. Since bankruptcy cases tend to have more interlocutory type ancillary motions and pleadings in adversary proceedings and contested matters that are tangential to the main bankruptcy case, being able to wait until after the bankruptcy court has ruled upon the claimed offensive pleading can provide a benefit to the aggrieved party.

With the anecdotal perceptive increase in frivolous pleadings noticed by many long-time civil litigation practitioners, the increased use and utilization of Rule 11 sanctions may be an important tool in order to protect clients’ rights and help to eliminate unnecessary time and expense in connection with the litigation.