Edwin RECTOR; Edwin Rector, Trustee; Edwin Rector 1995 Charitable Remainder Trust, Plaintiffs-Appellants, v. APPROVED FEDERAL SAVINGS BANK; Approved Financial Corporation; Allen D. Wykle; Stephen R. Kinnier, Defendants-Appellees, and Coopers & Lybrand, LLP; Price Waterhouse; Patrick M. Barberich; Gray Lambe, Defendants.
No. 01-1191
United States Court of Appeals, Fourth Circuit
September 11, 2001
GREGORY, Circuit Judge
Argued June 6, 2001. Decided Sept. 11, 2001.
Thus, the union organizers in this case not being members of the public who might benefit Weis’ enterprise, including potential customers and employees, their uninvited intrusion on the private property, the easement of Weis, was unlawful under the real estate law of Pennsylvania, which prevails here.
We should add that the reasoning of Justice Marshall in the dissenting opinion in Hudgens is consistent with that of the Pennsylvania Court:
It is irrelevant, in my view, that the property was owned by the shopping center rather than by the employer. The nature of the property interest is the same in either case.
Hudgens v. NLRB, 424 U.S. 507, 525, 532, n. 5, 96 S.Ct. 1029, 47 L.Ed.2d 196, Justice Marshall, dissenting, (1976).
Those aspects of the order which require Weis to renounce the authority to prevent handbilling by the union organizers are not enforced.
VI.
By reference to part I of this opinion, we indicate which parts of the Board‘s order are enforced, enforced as amended or denied.
Enforced:
Part I (1), (4), (5), (9), (10), (11), (14)
Enforced as amended:
Part I (2)-Amended only by adding to the order “when coupled with the threat of plant closure.”
Part I (8)-Amended only by removing the words “file a criminal complaint.”
Part I (13)-Amended only by removing the words “and petition the Pennsylvania State Police to remove from its files any reference to the criminal complaint filed against him.”
Enforcement Denied:
Part I (3), (6), (7), (12)
THE PETITION FOR REVIEW IS ACCORDINGLY GRANTED IN PART AND DENIED IN PART, AS IS THE PETITION OF THE BOARD FOR ENFORCEMENT, AND THE ORDER OF THE BOARD IS AMENDED.
Before WILLIAMS, KING, and GREGORY, Circuit Judges.
Affirmed by published opinion. Judge GREGORY wrote the majority opinion, in which Judge WILLIAMS joined. Judge KING wrote a dissenting opinion.
OPINION
GREGORY, Circuit Judge:
In this case of first impression, we must decide whether the 21-day “safe harbor” provision of
I.
On April 9, 1999, Virginia attorney Edwin Rector (“Rector“), personally and as trustee for the Edwin Rector 1995 Charitable Remainder Trust (“the Trust“), filed suit against Approved Financial Corporation, Approved Financial Federal Savings Bank, Coopers and Lybrand, PriceWaterhouse Coopers, Allen D. Wykle, Stephen R. Kinnier, Peter Coode, Patrick M. Barberich, and Gray Lambe (collectively “Approved“), seeking “at least 60 billion dollars” in compensatory damages and an additional 20 billion dollars in punitive damages. The suit arose from a 1995 agreement in which Rector and the Trust agreed to sell to Approved all of Rector‘s majority interest in First Security Federal Savings Bank. Closing occurred on September 11, 1996. Rector and the Trust claimed that the contract required Approved to pay “at least 20 billion dollars” more than the $3,157,743 purchase price.
On July 3, 1999, the district court dismissed Rector and the Trust‘s conspiracy, RICO, and fraud claims, finding that they failed to state fraud and RICO with particularity and that no private right of action existed for bank fraud under
On September 27, 1999, Approved filed a motion for sanctions under
[o]n June 11, 1999, [Approved] served [Rector and the Trust] with [its] Objections to Plaintiffs’ First Request for Production of Documents, [its] initial Motion to Dismiss ... and [its] Memorandum in Support of such motion. [It] also believed that the Federal Express package containing these three items also included a Notice of Motion and Motion for the Award of Litigation Expenses and so certified that pleading. . . . [Approved] cannot confirm that the notice and motion were included in the June 11, 1999 Federal Express packet as intended and as believed and it is possible that a clerical error resulted in their inadvertent omission.
Appellees’ Br. at 16 n. 4. Additionally, counsel for another party submitted an affidavit stating that he was not served with the motion until September 27, 1999.
Importantly, though, Rector and the Trust‘s opposition to the motion for sanctions argued only that they conducted an appropriate prefiling investigation. They did not argue that the motion failed to comply with the 21-day “safe harbor” provision of Rule 11.
On January 14, 2000, the district court entered a Memorandum Order granting Approved‘s motion for sanctions and attorney‘s fees and ordering Rector and the Trust to pay Approved $33,503.82. Rector v. Approved Financial Corp., Civil Action No. 99-499 A (E.D.Va. Jan. 14, 2000). On appeal, though, this Court vacated and remanded the suit, explaining that the district court applied an incorrect standard in assessing the amount of the sanction. Rector v. Wykle, 230 F.3d 1353, 2000 WL 1294238, at *1 (4th Cir. 2000) (unpublished). The Court vacated the district court‘s judgment and remanded the matter “so that the district court may apply the proper standard in assessing the Rule 11 sanctions.” Id. at *1. Notably, on appeal, Rector and the Trust did not argue that the sanctions motion failed to comply with the Rule‘s “safe harbor” provision.
During Rector‘s deposition following remand, he testified that the Trust contained assets of “something over” $1,000,000, that he is the Trust‘s sole income beneficiary, and that the Trust pays him two distributions annually in an amount equaling twelve percent of the Trust‘s assets. Rector testified that he received approximately $230,000 in income distributions from the Trust in 1999, received approximately $100,000 on June 30, 2000, and would receive the same amount on December 31, 2000. Rector testified that he also has several checking and savings accounts in a combined amount of approximately $163,000, and that he owns his home and a condominium in Florida. He pays approximately $2,000/month on the home mortgage and approximately $450/month on the condominium mortgage, which represent his only liabilities. Rector further testified that he is not married and has no financial dependents, and that the Trust similarly has no significant liabilities.
On this record, and without any argument by Rector or the Trust about Approved‘s service of the Rule 11 motion, the district court once again imposed a sanc
[t]he dismissal of the Complaints in their entirety, the finding of Rule 11 liability for frivolous claims and the finding that the attorney‘s fees and costs sought were reasonable, supports this award of sanctions under Rule 11. In view of Rector‘s deposition concerning his and the Trust‘s ability to pay and the continuing litigation in state court after imposition of the sanction, it is clear that all of the elements of the [In re] Kunstler [, 914 F.2d 505 (4th Cir. 1990),] analysis have been met and the amount of the sanction is appropriate.
II.
A district court‘s decision to impose Rule 11 sanctions is reviewed for abuse of discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 400-01, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). Thus, we review the district court‘s factual findings for clear error, id. at 401, and its legal conclusions de novo. Id. at 402.
The only meritorious argument raised in this appeal is whether the 21-day “safe harbor” provision of Rule 11 is a non-waivable jurisdictional rule. Under
Congress amended Rule 11 in 1993 by adding the 21-day “safe harbor” provision. The primary purpose for this amendment was to provide immunity from sanctions to those litigants who self-regulate by withdrawing potentially offending filings or contentions within the 21-day period. See, e.g., Ridder v. City of Springfield, 109 F.3d 288, 294 (6th Cir. 1997). The Advisory Committee Notes to Rule 11‘s 1993 Amendments explain that the
provisions are intended to provide a type of “safe harbor” against motions under Rule 11 in that a party will not be subject to sanctions on the basis of another party‘s motion unless, after receiving the motion, it refuses to withdraw that position or to acknowledge candidly that it does not currently have evidence to support a specified allegation. Under the former rule, parties were sometimes reluctant to abandon a questionable contention lest that be viewed as evidence of a violation of Rule 11; under the revision, the timely withdrawal of a contention will protect a party against a motion for sanctions.
Several courts have termed the “safe harbor” provision “mandatory” or an “absolute requirement.” See Ridder, 109 F.3d at 294 (safe harbor provision is “absolute requirement“); AeroTech, Inc. v. Estes, 110 F.3d 1523, 1529 (10th Cir. 1997) (safe harbor provision is “mandatory“); Elliott v. Tilton, 64 F.3d 213, 216 (5th Cir. 1995) (same); Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1328 (2nd Cir. 1995) (reversing sanctions award in part because no evidence indicated compliance with safe harbor period); Thomas v. Treasury Management Ass‘n, 158 F.R.D. 364, 369 (D.Md. 1994) (finding that failure to comply with the “absolute[] prerequisite” of the safe harbor provision precludes imposition of sanctions).
While these cases may stand for the proposition that the safe harbor provision is mandatory, they do not stand for the proposition that it is jurisdictional.1 Not only do the cases fail to define the requirement as a rule of jurisdiction, but nothing in the language of the Rule supports such a conclusion. While Rule 11 does, indeed, state that a sanctions motion “shall be served” at least 21 days before it is filed, the Rule also states that the motion “shall be made separately from other motions” and “shall describe the specific conduct” violating Rule 11.
Further evidence that the safe harbor provision is not jurisdictional is found in the Advisory Committee Notes accompanying Rule 11. The Notes explain that the safe harbor provision was added to Rule 11, in part, to help reduce the number of sanctions motions filed in the courts. The number would be reduced not by narrowing the courts’ jurisdiction, but by giving litigants a specific amount of time in which to withdraw an offending filing or allegation before a motion is filed. As the Notes explain, “[u]nder the former rule, parties were sometimes reluctant to abandon a questionable contention lest that be viewed as evidence of a violation of Rule 11; under the revision, the timely withdrawal of a contention will protect a party against a motion for sanctions.”
An analogy can be drawn to the statutes of limitation context. A statute of limitation requires a litigant to file a claim within a specified period of time. If the litigant files the claim after the time period expires, the defendant may assert the statute of limitation as an affirmative defense. Importantly, the litigant‘s untimely filing does not preclude the court from addressing the claim; the court does not lack jurisdiction simply because the litigant filed an untimely claim. Rather, the court may address the claim, limited only by the defendant‘s assertion of a statute of limitation defense. Moreover, the defendant may waive the defense by failing to raise it.
Similarly, a movant filing under Rule 11 must serve the motion at least 21 days before filing it with the court. If the movant files the motion less than 21 days after giving notice, the party against whom the motion is filed may assert the 21 day safe harbor provision as a defense. Should the litigant fail to do so, the defense is waived.
Moreover, a significant difference exists between
Accordingly, we hold that the 21-day safe harbor provision of Rule 11 is not jurisdictional and may be waived.2 Here, it is undisputed that neither Rector nor the Trust objected to Approved‘s service of the Rule 11 motion until the case reached this Court on its second appeal, after remand.3 Neither Rector nor the Trust raised the argument to the district court in the first instance nor raised it to this Court in their first appeal. When presented with that appeal, we vacated the district court‘s opinion and remanded solely “so that the district court may apply the proper standard in assessing the Rule 11 sanctions.” Rector, 2000 WL 1294238 at *1. Our remand order did not allow the district court to consider any issue other than the proper assessment of the sanction amount.4 Rector and the Trust‘s failure to raise Approved‘s failure to comply with the 21-day safe harbor provision in the district court in the first instance constituted a waiver of this argument.
For the foregoing reasons, the judgment of the district court is affirmed.5
AFFIRMED.
KING, Circuit Judge, dissenting:
Stripped to its essence, the question before us is not whether a party may defeat a motion for Rule 11 sanctions by complaining it has received insufficient notice of the proceeding against it, and therefore no meaningful opportunity to cure the alleged defect in its submission to the court. The language of the Rule is plain, and the majority does not contend otherwise: “A motion for sanctions under this rule ... shall not be filed with or presented to the court unless, within 21 days after service of the motion ... the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.”
Rather, the question is whether any action (or inaction) on the part of the party against whom sanctions are sought can somehow justify disregarding Rule 11‘s mandatory “safe harbor” provision, thereby vitiating the institutional protections it affords. In this case, the majority penalizes a hapless plaintiff for invoking the Rule only belatedly. As a result, the defendants’ counsel-who was at least as much responsible for protracting the unfortunate proceedings below-not only escapes sanction for his lack of diligence, but delivers his clients a windfall. Because I cannot subscribe to the “ignore it and hope it goes away” approach advocated by the defendants and adopted by the majority, I am constrained to dissent.
I.
It is, admittedly, difficult to marshal a meaningful response to the majority‘s implacable decree that the elementary command “shall not” means something other than what it manifestly says. How should one acknowledge the dawning reality that “[r]ed is grey and yellow white?”1 I have no facile answer.
It is not as if others have paved the way gradually for the majority‘s frolic into Wonderland.2 Up to now, every court that has addressed the safe harbor provision has, in no uncertain terms, confirmed its gatekeeping aspect. See Ridder v. City of Springfield, 109 F.3d 288, 290 (6th Cir. 1997) (Rule 11 sanctions imposed against plaintiff‘s counsel disallowed for city‘s failure to comply with the safe harbor‘s “explicit procedural requisite“); Elliott v. Tilton, 64 F.3d 213, 216 (5th Cir. 1995) (plaintiffs’ non-compliance with “procedural prerequisite” of safe harbor provision required reversal of fees assessed by district court against defense counsel pursuant to Rule 11); Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1328 (2d Cir. 1995) (sanctions under Rule 11 improperly imposed on plaintiff and his counsel where “specific mandate” of safe harbor provision ignored).3
The majority nonetheless imagines a hairline fracture in that otherwise impermeable shield, see ante at 251, distinguishing a rule that is “mandatory” from one that is “jurisdictional” (the latter, one might surmise, means “really” mandatory). Hence, time limits for appeals must be observed, but time limits for claims need not; jurisdiction over the person can be waived, but jurisdiction over the subject matter cannot. Ante at 252-53 & n. 2. The safe harbor provision of Rule 11 is, according to the majority, more like statutes of limitations and personal jurisdiction, and less similar to appeal deadlines and subject matter jurisdiction.
Although the majority correctly recites the black-letter law, it mis-perceives the method behind the seeming madness. An untimely claim may or may not be stricken, it is true, but a court cannot rule either way until suit is filed. A party (or an entire action) might be dismissed for lack of jurisdiction, but, absent a lawsuit, we may only hypothesize. The point is that nothing prevents a party from filing an otherwise valid complaint with stale claims, or against persons outside the court‘s reach, or even in the wrong court. In each case, the district court is authorized to determine its own jurisdiction, rendering any facts relevant to the question appropriate for judicial consideration.
By contrast, in accordance with the plain language of Rule 11, a motion for sanctions cannot be properly filed or presented to the court-period-unless the movant has complied with the safe harbor provision. This is not to say that such motions are not, in actuality, physically filed or presented; they obviously are. The court, however, has no initial authority to rule upon the merits of the motion, or to consider any collateral fact (such as waiver) ostensibly bearing on the propriety of its filing, apart from ascertaining whether the safe harbor provision (or another of Rule 11‘s procedural requisites) has been ignored. If the answer to this inquiry is in the affirmative, the motion‘s filing is, in effect, a nullity.
I am not persuaded. In Ridder, the Sixth Circuit noted the presiding magistrate judge‘s observation, inter alia, that the safe harbor “requirement does not appear to be jurisdictional.” Ridder, 109 F.3d at 292. The Ridder court took no specific issue with this statement, contained as it was within a larger excerpt, but we may reasonably assume that its accuracy was called into serious question by the very fact of reversal. And there is little doubt in my mind that had the question been framed in jurisdictional terms, the Sixth Circuit-and every other court that has addressed the issue-would hold that no jurisdiction exists to entertain a motion for Rule 11 sanctions absent compliance with the safe harbor provision. The majority‘s decision therefore creates a split in authority with at least five other circuits and a host of district courts. See supra note 3 and accompanying text.
II.
I understand and share the majority‘s consternation with a plaintiff who would file a complaint with scant basis in law or fact, seeking to recover “an infinite amount of money.” But Rector does not deserve to stand alone against the full force of the majority‘s wrath. Had counsel for the defendants actually served Rector with the motion for Rule 11 sanctions-as he erroneously certified to the court that he had-Rector might have withdrawn his complaint, thus avoiding the entire mess.
Consider just a partial list of what occurred in this case after June 11, 1999, the date on which Rector was, according to the erroneous Certificate of Service accompanying the motion, purportedly made aware that the defendants were seeking expenses and attorneys’ fees pursuant to Rule 11:
- July 2, 1999-Court hearing on Rector‘s motion to bifurcate and defer RICO pleading issues
- July 22, 1999-Court hearing on defendants’ motion to dismiss
- July 23, 1999-Complaint dismissed
- August 6, 1999-Amended Complaint filed
- September 17, 1999-Following court hearing, Amended Complaint dismissed
- September 27, 1999-Motion for sanctions filed
- October 22, 1999-Court hearing on motion for sanctions
- January 14, 2000-Motion granted and sanctions awarded
- January 21, 2000-Notice of appeal filed
- September 14, 2000-Our opinion issues, vacating award of sanctions and remanding cause
- October 10, 2000-Judgment on appeal received in district court
- December 15, 2000-Court hearing on renewed motion for sanctions
- January 4, 2001-Sanctions again awarded
- January 29, 2001-Notice of Appeal filed
- June 6, 2001-Oral argument heard J.A. 6-10B.
Of course, most of the above proceedings entailed complex written submissions from the parties, obliging the court to read and contemplate each one. In light of all this, the majority‘s assertion that the safe harbor provision may be waived because it primarily “protects litigants,” with less regard for institutional interests, see ante at 253 n. 2, is baffling. Rule 11 could and should have fulfilled its overriding institutional purpose in this case by conserving the valuable time and resources of two federal courts. It did not, in fact, serve its intended purpose here, but that was through no fault of Rector.5
No award pursuant to Rule 11 ought to be made to the defendants in this case, because their counsel failed to comply with the Rule‘s safe harbor provision prior to filing the motion for sanctions. The majority, unwilling to adhere to the firmly established concept that “no” means “no,” holds to the contrary.
I respectfully dissent.
Noor Begum KARIM, Wife of; Fazal Karim, Plaintiffs-Appellants-Cross-Appellees, v. FINCH SHIPPING COMPANY, LTD.; et al., Defendants, Finch Shipping Company, Ltd., Defendant-Appellee-Cross-Appellant.
No. 00-30683
United States Court of Appeals, Fifth Circuit
Sept. 5, 2001.
Notes
Here, the safe harbor provision was added to Rule 11 primarily to provide litigants the opportunity of avoiding sanctions by withdrawing offending filings or contentions within the 21-day period and, thereby, reducing the number of sanctions motions brought before the courts. See, e.g., Ridder, 109 F.3d at 294. Thus, the provision protects litigants; it does not establish a structural limitation on the power of the courts. Accordingly, it was incumbent upon Rector and the Trust to “insist that the limitation be observed, or forgo that right[.]” I do not intend my glib hyperbole to convey the impression that my fine colleagues in the majority-for whom I have profound respect and admiration-have given this case anything less than their most thoughtful and serious consideration. The majority‘s disregard of the prohibition “shall not,” however, brings to mind a famous encounter between a little girl and a certain ovoid character (reputed to be prone to clumsiness):
“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean-neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master-that‘s all.”
Lewis Carroll, Through the Looking-Glass and What Alice Found There 123 (The MacMillan Co. 1899) (1862).
The impressive array of circuit authority cited above has, cumulatively, been followed dozens of times by the lower courts within those jurisdictions. District courts in other circuits, unconstrained by binding precedent, have nonetheless uniformly arrived at the same conclusion. See VanDanacker v. Main Motor Sales Co., 109 F.Supp.2d 1045, 1053 (D.Minn. 2000) (adopting recommendation of magistrate judge that Rule 11 motion be denied because movants had not fulfilled safe harbor prerequisite: “[a]dequate time is . . . required for the [offending] party to correct its improper conduct, before such serious sanctions would be warranted“); Omega Sports, Inc. v. Sunkyong America, Inc., 872 F.Supp. 201, 203 (E.D.Pa. 1995) (plaintiff‘s failure to comply with safe harbor provision rendered any award of sanctions against defendant “unwarranted“); Thomas v. Treasury Mgmt. Assoc., Inc., 158 F.R.D. 364, 369 (D.Md. 1994) (noting that compliance with safe-harbor provision “is absolutely prerequisite“).
First, imagine, if you will, we discovered on this appeal that we lacked subject matter jurisdiction. We would be compelled to dismiss, despite not having addressed the issue in the earlier appeal. The law of the case doctrine “does not apply to issues not addressed by the appellate court.” United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1186 (9th Cir. 2001).
Second, if we assume, arguendo, that the majority properly characterizes our initial remand as a limited one, the district court on remand could appropriately have determined the amount of the sanction award to be zero, given the utter failure of the defendants to comply with the Rule 11 safe harbor provision.