Michael J. Dubisky, Trustee for the V.S. Trust I, appeals from the district court’s order sanctioning him in the amount of $36,117 under Federal Rule of Civil Procedure 11 for filing a complaint that incorrectly alleged diversity jurisdiction. On appeal, Dubisky concedes that Rule 11 sanctions were properly imposed, but argues that the defendаnts failed to mitigate their damages and that the district court abused its discretion by awarding the defendants the entire amount of attorney’s fees incurred in defending the litigation. We reverse.
I.
On March 19, 1986 Dubisky filed suit in the United States District Court for the Northern District of Illinois to recover a substantial investment in Comark, a California limited pаrtnership which became insolvent. Dubisky’s suit named as defendants the various parties that participated in the formation and operation of Comark, including Oppenheim, Appel, Dixon and Co. (OAD), Comark’s auditors. 1 The complaint alleged that OAD committed professional malpractice and perfоrmed its work on behalf of Comark in a negligent manner.
Dubisky’s complaint asserted that the district court had subject matter jurisdiction over the dispute under 28 U.S.C. § 1332 because there was complete diversity of citizenship between the plaintiff and defendants. The complaint, as properly construed by the district court, alleged that Dubisky was an Illinois citizen for diversity purposes. Specifically, the complaint provided that:
Plaintiff, Michael J. Dubisky, an individual, was at all times up to August, 1983 domiciled in and a citizen of the state of Illinois____ Subsequent to August, 1983, plaintiff has resided in Brookfield, Wisconsin, although he continues to own the residence in Downers Grove, Illinois and intends to reside there again.
The complaint also alleged that OAD was a California professional corporation with its principal place of business in California and that none of OAD’s members were domiciled in or citizens of Illinois. This allegation was incorrect. It is now undisputed that OAD was a general partnership, not a corporation, and that several OAD partners were citizens and residents of Illinois.
On May 28, 1986, OAD filed a motion to dismiss the complaint for lack of subject matter jurisdiction under Rule 12(b)(1) or, in the alternative, for improper venue under Rule 12(b)(3) (hereinafter the “motion to dismiss”).
2
Because a general partnership is deemed to be a citizen of each state in which its partners are citizens,
Elston Investment, Ltd. v. David Altman Leasing Corp.,
The obvious failure of plaintiff and his counsel to make “reasonable inquiry” as to fundamental jurisdictional facts before the filing of the complaint and counsel’s attempt to obfuscate the issues, thrоugh the filing of numerous pages of irrelevant argument on personal jurisdiction which did not address the questions of subject matter jurisdiction and venue raised by the OAD defendants’ motion, constitute the basis for the court’s imposition of sanctions.
Dubisky v. Owens,
No. 86 C 1920, mem. op. at 10-11 (N.D.Ill. Oct. 22, 1986) (emphasis in original) [available on WESTLAW,
II.
A.
Rule 11 states in part:
If a pleading ... is signed in violation of this rule, the court ... shall impose upon the person who signed it, a rеpresented party, or both, an appropriate sanction, which may include an order to pay the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading ..., including a reasonable attorney’s fee.
Fed.R.Civ.P. 11 (emphasis added). When Rule 11 is violated, the district court must imposе sanctions against the offending party.
Brown v. Federation of State Medical Bds.,
The issue raised by this case is the amount of fees and costs that OAD is entitled to recover under Rule 11. Dubisky first argues that OAD violated its duty to mitigate its injury. Accordingly, in Dubi-sky’s view, only a small portion of the jurisdictional expenses should be recoverable under Rule 11. Second, even if OAD’s efforts specifically related to having Dubi-sky’s suit dismissed for lack of subject matter jurisdiction were consistent with its duty to mitigate, Dubisky claims that a substantial portion of the $36,117 awarded in sanctions was related to work done by OAD’s counsel in preparation for defending the underlying merits of the dispute. Du-bisky reasons that the phrase “because of” indicates that Rule 11 contains a causation requirement. He then argues that a dismissal of his suit for lack of diversity only resulted in a change of forum because he has intervened as a plaintiff in a suit brоught in California state court by other investors. As a result, OAD is forced to incur substantially the same expenses defending the California suit, and therefore only the expenses related to subject matter jurisdiction were caused by the improper filing in federal court.
The district court found OAD’s conduct consistent with its duty to mitigatе and explicitly rejected Dubisky’s argument that the award should be limited to those fees directly related to the incorrect allegation of subject matter jurisdiction. The court first observed that Dubisky violated Rule 11 by filing his complaint, not by filing a
B.
Rule 11 authorizes the district court to award as a sanction “reasonable expenses” which may include “a reasonable attorney’s fee.” The reasonableness requirement by its nature hinges on the particular facts and circumstances presented in a given case and looks not only to the hours and billing rate involved in responding to the other party’s sanctionable conduct, but also to the appropriateness of the response taken. A party defending against a frivolous paper has a duly under Rule 11 to mitigate its legal fees and expenses by resolving frivolous issues quickly and efficiently.
Brown,
United Food & Commercial Workers Union Local No. 115 v. Armour and Co.,
Under the particular circumstances of this case, what troubles the court greatly is the extеnsive amount of work Armour’s counsel did in utilizing the formal ... machinery of litigation, when Armour’s attorney might have brought about the same result by a less formal and less costly means.
Id. at 349. The court recognized that informal methods of resolution would not always be successful, but determined that Armour’s failure to attempt informal resolutiоn under the facts of the case violated its duty to mitigate. The court stated: “The very reason why Unions’ counsel’s actions in this case were so egregious, makes this the kind of case were [sic] Armour should have immediately brought the frivolity of the action to the court’s attention” through a conference cаll or status conference. Id. at 350.
The present case is similar. Once OAD received Dubisky’s complaint, it was forced to begin to defend the suit. OAD’s counsel must have realized almost immediately that OAD, its client, was an Illinois
OAD argues, however, that Dubisky’s subsequent behavior demonstrates that such an informal approach would have been futile. Upon receiving OAD’s motion to dismiss, Dubisky did not acknowledge his error. Rather, he asserted that complete diversity did in fact exist by claiming that the complaint properly alleged that he was a Wisconsin citizen for diversity рurposes. 4 He also set forth an elaborate argument as to why the district court retained personal jurisdiction over the defendants, but did not directly address the venue issue raised by OAD. OAD incurred additional expenses responding to this memorandum. The district court succinctly summarized the situation when it stated that Dubisky “attemрted to swing like a willow branch in the wind between the Illinois-Wisconsin border when making his arguments on jurisdiction and venue.” Dubisky v. Owens, No. 86 C 1920, mem. op. at 10 (N.D.Ill. Oct. 22, 1986).
Although we acknowledge that Dubi-sky’s conduct upon having his error pointed out was far from exemplary, it does not excuse OAD’s failure to comply with its duty to mitigate. It is reasonable to believe that informal contact such as a phone call or letter in response to a frivolous paper will have a different effect on the party filing such a paper than a full blown motion and memorandum filed in court. The latter course of action may put an opponent on the defensive and render him or hеr less likely to admit an error. Dubi-sky might have acted differently if OAD’s counsel had notified him informally of the error with respect to OAD’s citizenship. If Dubisky had chosen to press his jurisdictional allegations despite OAD’s informal efforts, OAD would then have been required to and justified in filing its motion and supporting memorandum. Once its reasonable еffort to mitigate proved fruitless, OAD would have been entitled to sanctions for the effort expended on these arguments. But because OAD did not contact Dubisky, we decline to hold that informal contact would have been futile.
We subscribe to the Fifth Circuit’s position in
Thomas
that litigants should be strongly encouraged to use the least expensive alternativе to alert the court and the offending party of a possible Rule 11 violation, but emphasize that “what constitutes the appropriate alternative will vary depending on the nature of the case and the severity of the violation.”
Thomas,
836
Notes
. Two of OAD’s partners, Stephen Rubenstein and Kenneth Schwartz, were also named individually as defendants. For simplicity, we refer to both partners and the partnership itself collectively as "OAD.”
. As the quoted portion of the complaint indicates, it was ambiguous as to whether the complaint alleged thаt Dubisky was a citizen of Illinois or Wisconsin for purposes of diversity jurisdiction. The district court correctly determined that it alleged the former. If Dubisky had properly alleged Wisconsin citizenship, diversity would have been complete. Even if diversity was complete, however, the district court determined that venue in Illinois wаs not proper under 28 U.S.C. § 1391(a), because neither the plaintiff nor all of the defendants resided there, and the action arose in California, where all the operative facts of plaintiff’s claims against OAD occurred.
Dubisky v. Owens,
No. 86 C 1920, mem. op. at 7 (N.D.Ill. Oct. 22, 1986)[available on WESTLAW,
As a third alternative, OAD asked that if the “interest оf justice” required that the suit not be dismissed, the case should at least be transferred to the Central District of California pursuant to 28 U.S.C. § 1406(a).
. The district court also awarded $20,651.03 in sanctions in favor of another defendant, Robinson, Wayne & Greenburg (RWG). Dubisky also appealed from this award, but by joint motion RWG and Dubisky moved to have the appeal dismissed with respect to RWG. This motion was granted on August 25, 1987.
. As noted, the district court properly interpreted the complaint as alleging that Dubisky was an Illinois citizen for diversity purposes. See infra text accompanying note 1. Dubisky explained the allegation in his complaint in the following manner:
The fact that Dubisky still owns a home in Downers Grove was highlighted to emphasize the fact that Dubisky has several substantial assets within this judicial district that are now in grave jeopardy as a result of [OAD's] acts. The Downers Grove property, however, does not alter the fact that Dubisky is currently a citizen of Wisconsin.
Plaintiff’s Memorandum in Opposition to Motion for Dismissal By [OAD] at 5-6.
. Accordingly, we also deny defendants' claim for sanctions under Fed.R.App.P. 38.