Omni Elevator Corp. v. Int'l Union of Elevator Constructors

OMNI ELEVATOR CORPORATION and CHRISTIAN GOETTING, Plaintiffs, v. INTERNATIONAL UNION OF ELEVATOR CONSTRUCTORS and its LOCAL 27 AFFILIATE; ALAN ROTHFUSS; CRANE-HOGAN STRUCTURAL SYSTEMS, INC.; TRUSTEES OF THE NATIONAL ELEVATOR INDUSTRY PENSION, HEALTH BENEFIT, EDUCATIONAL, ELEVATOR INDUSTRY WORK PRESERVATION FUNDS, ELEVATOR CONSTRUCTORS ANNUITY AND 401K RETIREMENT PLAN; DELAWARE ELEVATOR, INC., Defendants.

No. 19-CV-6778-CJS

United States District Court, W.D. New York

March 15, 2022

For Plaintiffs: For Defendants International Union of Elevator Constructors and its Local 27 Affiliate; Alan Rothfuss; the Trustees of the National Elevator Industry Pension, Health Benefit Educational, Elevator Industry Work Preservation Funds; and the Elevator Constructors Annuity and 401(k) Retirement Plan: John M. Regan, Jr., Esq. Dibble &amp Miller, P.C., Jennifer A. Clark, Esq. Blitman & King LLP

For Defendant Crane-Hogan Structural Systems, Inc., Daniel P Adams, Esq. Adams Bell Adams, P.C.

DECISION AND ORDER

CHARLES J. SIRAGUSA UNITED STATES DISTRICT JUDGE

INTRODUCTION

On January 3, 2022, ECF No. 42, the Court granted summary judgment to the named defendants and dismissed the Amended Complaint (“Am. Compl.”), ECF No. 1-1 at 18-30 ^[1] with prejudice. The only matter left to be resolved in this case is the Motion for Sanctions pursuant to Federal Rule of Civil Procedure 11 (“Rule 11”) brought by defendants International Union of Elevator Constructors and its Local 27 Affiliate; Alan Rothfuss; the Trustees of the National Elevator Industry Pension, Health Benefit, Educational, Elevator Industry Work Preservation Funds; and the Elevator Constructors Annuity and 401(k) Retirement Plan (collectively, “Funds/Union Defendants”). ECF No. 19. For the reasons discussed below, the Motion for Sanctions, ECF No. 19, is granted.

BACKGROUND

The factual and procedural history has been set forth at length in the Court's previous Decisions and Orders and need not be repeated in detail here. See ECF No. 42 at 3-11; ECF No. 33 at 3-6. Briefly, Omni Elevator Corporation (“Omni”) and Christian Goetting (“Goetting”) (collectively, “Plaintiffs”) brought this case in September 2019 in New York State Supreme Court, Monroe County, seeking to enjoin enforcement of two money judgments obtained by the Funds/Union Defendants in the Eastern District of Pennsylvania in 2010 and 2014 (“the EDPA judgments”) for violations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and a 2016 Judgment for breach of contract obtained by defendant Crane-Hogan Systems, Inc. (“Crane-Hogan”) in New York State Supreme Court, Monroe County. Plaintiffs claimed that they were entitled to equitable indemnification from the Union because Alan Rothfuss (“Rothfuss”), the business manager of the Union's local affiliate, “engineered” the judgments because he had a personal vendetta against Goetting.

The Funds/Union Defendants, with Crane-Hogan's consent, removed the state court action to this Court. Plaintiffs sought remand and a temporary restraining order/preliminary injunction, which this Court denied. The Funds/Union Defendants and Crane-Hogan filed motions to dismiss, which the Court converted to summary judgment motions. Plaintiffs did not meaningfully oppose summary judgment and instead requested that the matter be referred to mediation. As noted above, the Court granted summary judgment and dismissed the Amended Complaint.

The Funds/Union Defendants' Motion for Sanctions, ECF No. 19, is supported by the Affidavit of Andrew Kelser, Esq. (“Kelser”) with Exhibits, ECF No. 19-1; the Affidavit of Jennifer A. Clark, Esq. (“Clark”), with Exhibits, ECF No. 19-2; and a Memorandum of Law in Support, ECF No. 19-3. Plaintiffs filed a Memorandum of Law in Opposition on December 19, 2019, ECF No. 22, characterizing the Funds/Union Defendants' motion as itself “sanctionable, ” rearguing the merits of their case and their then-pending remand motion, and demanding an award of attorney's fees under 28 U.S.C. § 1447(c). The Funds/Union Defendants filed a Reply on December 26, 2019. ECF No. 24. The motion was submitted without oral argument on January 6, 2020. ECF No. 26.

DISCUSSION

I. Legal Principles Relevant to Rule 11 Motions

A. Scope of Rule 11

Rule 11 provides in relevant part that “[b]y presenting to the court a pleading, written motion, or other paper-whether by signing, filing, submitting, or later advocating it, '” an attorney or unrepresented party “certifies” the following:

(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;

(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; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

Fed. R. Civ. P. 11(b)(1)-(3).

“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); see also, e.g., Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 57 (2d Cir. 2000). The Court may act on its own initiative or on motion by the aggrieved party. Fed.R.Civ.P. 11(c)(2), (3). “A sanction imposed under . . . [R]ule [11] must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” Fed.R.Civ.P. 11(c)(4). Appropriate sanctions “may include nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney's fees and other expenses directly resulting from the violation.” Id.

Sanctions may be imposed not only against attorneys, but also against represented parties, where the party “is responsible for the violation.” Fed.R.Civ.P. 11(c)(1); see also, S. Pac. Shipping Co. Inc. v. Redi-Fresh Produce Inc., No. 14cv04157 (LAK)(AJP), 2014 WL 6968039, at *11 (S.D.N.Y. Dec. 9, 2014) (“Sanctions frequently are assessed against both represented parties and their attorneys when the Court finds the party has acted in bad faith, or proceeded with an improper purpose.”). However, sanctions for a violation of Rule 11(b)(2) may not be imposed against a represented party. Fed.R.Civ.P. 11(c)(5)(A). When sanctions are imposed against an individual attorney, “[a]bsent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee.” Fed.R.Civ.P. 11(c)(1).

B. Applicability of Rule 11 to Pleadings Removed from State Court

As amended in 1993, Rule 11 now “allow[s] a district court to impose sanctions not only for a party's ‘signing' a paper filed with the district court, but for ‘presenting to the court (whether by signing, filing, submitting, or later advocating)' a document that is otherwise sanctionable.” Dellefave v. Access Temporaries, Inc., No. 99 CIV. 6098 (RWS), 2001 WL 286771, at *5 (S.D.N.Y. Mar. 22, 2001) (quoting Fed.R.Civ.P. 11(b) (as amended eff. Dec. 1, 1993)). “The Advisory Committee Notes explain that ‘if after a notice of removal is filed, a party urges in federal court the allegations of a pleading filed in state court (whether as claims, defenses, or in disputes regarding removal or remand), it would be viewed as ‘presenting'-and hence certifying to the district court under Rule 11-those allegations.'” Id. (quoting Buster v. Greisen, 104 F.3d 1186, 1190 n.4 (9th Cir. 1997) (affirming imposition of sanctions by federal removal court for pursuing allegations in complaint first filed in state court), cert. denied, 522 U.S. 981 (1997)).

Furthermore, the 1993 Advisory Committee Notes to Rule 11 specifically state that “a litigant's obligations with respect to the contents of [papers filed with the court] are not measured solely as of the time they are filed with or submitted to the court, but include reaffirming to the court and advocating positions contained in those pleadings and motions after learning that they cease to have any merit.” Loving v. Pirelli Cable Corp., 11 F.Supp.2d 480, 493 (D. Del. 1998) (quotation omitted), aff'd, 178 F.3d 1279 (3d Cir. 1999).

C. Safe Harbor Provision

For the imposition of sanctions to comply with due process “[a]t a minimum, ” the subject of a sanctions motion must “be informed of: (1) the source of authority for the sanctions being considered; and (2) the specific conduct or omission for which the sanctions are being considered so that the subject of the sanctions motion can prepare a defense.” Schlaifer Nance & Co. v. Est. of Warhol, 194 F.3d 323, 334 (2d Cir. 1999) (citations omitted). “[O]nly conduct explicitly referred to in the instrument providing notice is sanctionable.” Id. (citation omitted). “This notice requirement permits the subjects of sanctions motions to confront their accuser and rebut the charges leveled against them in a pointed fashion.” Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 389 (2d Cir. 2003).

With regard to Rule 11 in particular, the statutory text states “that a party's motion initiating the sanctions process ‘shall describe the specific conduct alleged to violate subdivision (b).'” Id. (quoting Fed.R.Civ.P. 11(c)(1)(A)). Wh...