F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS FEB 7 1997 FOR THE TENTH CIRCUIT PATRICK FISHER Clerk
AUTOMOBILE ASSURANCE FINANCIAL CORPORATION, a Utah corporation; VENUTI AND ASSOCIATES, INC., a Utah corporation; VENUTI PARTNERS, No. 96-4036 LTD., a Utah limited partnership; (D.C. No. 90-CV-224-S) FRANK P. VENUTI, an individual, (D. Utah)
Plaintiffs,
PARKER M. NIELSON,
Appellant,
v.
SYRETT CORPORATION, a Delaware corporation, formerly a Utah corporation,
Defendant-Appellee,
JOHN R. RILEY, an individual,
Third-Party-Defendant.
ORDER AND JUDGMENT *
* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. Before PORFILIO, BALDOCK, and HENRY, Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore
ordered submitted without oral argument.
Appellant Parker M. Nielson, counsel for plaintiffs and counterclaim
defendants, appeals from an order of the district court imposing sanctions on him
pursuant to Rule 11 of the Federal Rules of Civil Procedure (1983). The court
based the $5,000 sanction on its conclusion that Mr. Nielson had brought and
advanced claims and defenses that were not warranted by the facts or law. We
affirm.
As counsel for plaintiffs and counterclaim defendants (referred to
hereinafter as plaintiffs), Mr. Nielson signed and filed a complaint and two
amended complaints against Syrett Corporation (Syrett) alleging that Syrett had
violated federal and state securities laws and breached its contract with plaintiffs.
Syrett countersued plaintiffs. On the merits, the district court denied all of
plaintiffs’ claims and awarded judgment against plaintiffs in Syrett’s favor based
on plaintiffs’ fraudulent actions. Final judgment was entered on June 15, 1994.
-2- On July 26, 1994, Syrett filed its motion for sanctions. A hearing on the motion
for sanctions was held on March 31, 1995, and on October 4, 1995, the district
court issued its memorandum decision ordering sanctions against Mr. Nielson.
Mr. Nielson’s objections to the decision were denied. Because the conduct for
which Mr. Nielson was sanctioned occurred before the 1993 amendments to Rule
11, the district court applied the 1983 version of Rule 11.
Syrett has moved to dismiss the appeal on the ground that Mr. Nielson’s
notice of appeal was filed late, thus depriving this court of jurisdiction. Our
review of the applicable dates reveals that the post-judgment motion tolled the
running of the time for filing the notice of appeal, the notice was timely, and this
court has jurisdiction over the appeal. See Fed. R. App. P. 4(a)(4); Fed. R. Civ.
P. 6(a).
On appeal, Mr. Nielson argues that the district court was without
jurisdiction to enter its sanction order. He also maintains the district court erred
in: (1) failing to give him the benefit of the safe harbor provision of the 1993
rule; (2) failing to identify the conduct sanctioned; (3) imposing a continuing duty
to update previously filed pleadings, not required under the 1983 rule; and (4)
sanctioning him for conduct not covered by Rule 11.
Mr. Nielson claims that the district court did not have jurisdiction because
the motion for sanctions was filed after final judgment on the merits. “It is well
-3- established that a federal court may consider collateral issues after an action is no
longer pending.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395 (1990).
The district court had jurisdiction over the issue of Rule 11 sanctions after the
underlying action was concluded. See id.; Rule 11 (1983) advisory committee’s
note (“[I]t is anticipated that in the case of pleadings the sanctions issue under
Rule 11 normally will be determined at the end of the litigation . . . .”). We also
reject Mr. Nielson’s laches argument and his claim that it was necessary to serve
the parties to the underlying lawsuit with the motion for sanctions in order to
invoke the court’s Rule 11 jurisdiction over him as the attorney who had filed and
tried the case, notwithstanding the fact that he was granted leave to withdraw on
September 15, 1993.
Under Rule 11 (1983), the signer of a pleading certifies that he has
conducted a reasonable inquiry into the factual and legal bases for the filing, and
that the substance of the pleading is well grounded in fact and law. Coffey v.
Healthtrust, Inc., 955 F.2d 1388, 1393 (10th Cir. 1992). The district court applies
an objective standard to determine whether a reasonable, competent attorney
would have believed in the merit of the claims made. Dodd Ins. Servs., Inc. v.
Royal Ins. Co. of Am., 935 F.2d 1152, 1155 (10th Cir. 1991). We review the
district court’s order imposing sanctions under Rule 11 for abuse of discretion,
applying that standard to both factual issues and the conclusion that a pleading
-4- was not warranted by existing law or a good faith argument to change the law. Id.
The district court rejected Mr. Nielson’s claim that he was entitled to the
safe harbor provisions of the 1993 rule, which require the party seeking sanctions
to notify the offending party and give him or her an opportunity to correct the
situation before filing a motion for sanctions. See Rule 11(c)(1)(A)(1993). After
the motion for sanctions was filed, Mr. Nielson filed a “‘Safe Harbor’ Election
Pursuant to Rule 11(c)(1)(A),” in which he attempted to withdraw, retract and
disavow any and all sanctionable claims or statements. Mr. Nielson’s attempt to
avoid sanctions by a general, blanket withdrawal, filed well after the damage was
done, does not entitle him to the safe harbor.
The remainder of Mr. Nielson’s arguments are directed to his position that
the district court did not identify any conduct that would subject him to sanctions
under Rule 11. The district court’s orders clearly stated that Mr. Nielson’s clients
had acted fraudulently and wrongfully in their dealings with Syrett. Mr. Nielson
signed the complaint, the amended complaint, the second amended complaint, and
numerous additional documents advancing his clients’ claims and defenses based
on their fraudulent and wrongful actions. See Coffey, 955 F.2d at 1394 (signed
supplemental pleading is “other paper” contemplated by Rule 11); Mann v. G & G
Mfg., Inc., 900 F.2d 953, 961 (6th Cir.
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F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS FEB 7 1997 FOR THE TENTH CIRCUIT PATRICK FISHER Clerk
AUTOMOBILE ASSURANCE FINANCIAL CORPORATION, a Utah corporation; VENUTI AND ASSOCIATES, INC., a Utah corporation; VENUTI PARTNERS, No. 96-4036 LTD., a Utah limited partnership; (D.C. No. 90-CV-224-S) FRANK P. VENUTI, an individual, (D. Utah)
Plaintiffs,
PARKER M. NIELSON,
Appellant,
v.
SYRETT CORPORATION, a Delaware corporation, formerly a Utah corporation,
Defendant-Appellee,
JOHN R. RILEY, an individual,
Third-Party-Defendant.
ORDER AND JUDGMENT *
* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. Before PORFILIO, BALDOCK, and HENRY, Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore
ordered submitted without oral argument.
Appellant Parker M. Nielson, counsel for plaintiffs and counterclaim
defendants, appeals from an order of the district court imposing sanctions on him
pursuant to Rule 11 of the Federal Rules of Civil Procedure (1983). The court
based the $5,000 sanction on its conclusion that Mr. Nielson had brought and
advanced claims and defenses that were not warranted by the facts or law. We
affirm.
As counsel for plaintiffs and counterclaim defendants (referred to
hereinafter as plaintiffs), Mr. Nielson signed and filed a complaint and two
amended complaints against Syrett Corporation (Syrett) alleging that Syrett had
violated federal and state securities laws and breached its contract with plaintiffs.
Syrett countersued plaintiffs. On the merits, the district court denied all of
plaintiffs’ claims and awarded judgment against plaintiffs in Syrett’s favor based
on plaintiffs’ fraudulent actions. Final judgment was entered on June 15, 1994.
-2- On July 26, 1994, Syrett filed its motion for sanctions. A hearing on the motion
for sanctions was held on March 31, 1995, and on October 4, 1995, the district
court issued its memorandum decision ordering sanctions against Mr. Nielson.
Mr. Nielson’s objections to the decision were denied. Because the conduct for
which Mr. Nielson was sanctioned occurred before the 1993 amendments to Rule
11, the district court applied the 1983 version of Rule 11.
Syrett has moved to dismiss the appeal on the ground that Mr. Nielson’s
notice of appeal was filed late, thus depriving this court of jurisdiction. Our
review of the applicable dates reveals that the post-judgment motion tolled the
running of the time for filing the notice of appeal, the notice was timely, and this
court has jurisdiction over the appeal. See Fed. R. App. P. 4(a)(4); Fed. R. Civ.
P. 6(a).
On appeal, Mr. Nielson argues that the district court was without
jurisdiction to enter its sanction order. He also maintains the district court erred
in: (1) failing to give him the benefit of the safe harbor provision of the 1993
rule; (2) failing to identify the conduct sanctioned; (3) imposing a continuing duty
to update previously filed pleadings, not required under the 1983 rule; and (4)
sanctioning him for conduct not covered by Rule 11.
Mr. Nielson claims that the district court did not have jurisdiction because
the motion for sanctions was filed after final judgment on the merits. “It is well
-3- established that a federal court may consider collateral issues after an action is no
longer pending.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395 (1990).
The district court had jurisdiction over the issue of Rule 11 sanctions after the
underlying action was concluded. See id.; Rule 11 (1983) advisory committee’s
note (“[I]t is anticipated that in the case of pleadings the sanctions issue under
Rule 11 normally will be determined at the end of the litigation . . . .”). We also
reject Mr. Nielson’s laches argument and his claim that it was necessary to serve
the parties to the underlying lawsuit with the motion for sanctions in order to
invoke the court’s Rule 11 jurisdiction over him as the attorney who had filed and
tried the case, notwithstanding the fact that he was granted leave to withdraw on
September 15, 1993.
Under Rule 11 (1983), the signer of a pleading certifies that he has
conducted a reasonable inquiry into the factual and legal bases for the filing, and
that the substance of the pleading is well grounded in fact and law. Coffey v.
Healthtrust, Inc., 955 F.2d 1388, 1393 (10th Cir. 1992). The district court applies
an objective standard to determine whether a reasonable, competent attorney
would have believed in the merit of the claims made. Dodd Ins. Servs., Inc. v.
Royal Ins. Co. of Am., 935 F.2d 1152, 1155 (10th Cir. 1991). We review the
district court’s order imposing sanctions under Rule 11 for abuse of discretion,
applying that standard to both factual issues and the conclusion that a pleading
-4- was not warranted by existing law or a good faith argument to change the law. Id.
The district court rejected Mr. Nielson’s claim that he was entitled to the
safe harbor provisions of the 1993 rule, which require the party seeking sanctions
to notify the offending party and give him or her an opportunity to correct the
situation before filing a motion for sanctions. See Rule 11(c)(1)(A)(1993). After
the motion for sanctions was filed, Mr. Nielson filed a “‘Safe Harbor’ Election
Pursuant to Rule 11(c)(1)(A),” in which he attempted to withdraw, retract and
disavow any and all sanctionable claims or statements. Mr. Nielson’s attempt to
avoid sanctions by a general, blanket withdrawal, filed well after the damage was
done, does not entitle him to the safe harbor.
The remainder of Mr. Nielson’s arguments are directed to his position that
the district court did not identify any conduct that would subject him to sanctions
under Rule 11. The district court’s orders clearly stated that Mr. Nielson’s clients
had acted fraudulently and wrongfully in their dealings with Syrett. Mr. Nielson
signed the complaint, the amended complaint, the second amended complaint, and
numerous additional documents advancing his clients’ claims and defenses based
on their fraudulent and wrongful actions. See Coffey, 955 F.2d at 1394 (signed
supplemental pleading is “other paper” contemplated by Rule 11); Mann v. G & G
Mfg., Inc., 900 F.2d 953, 961 (6th Cir. 1990) (district court did not abuse its
-5- discretion in assessing Rule 11 sanctions where plaintiff’s theories of causation
were not well-grounded in fact). Accordingly, the district court did not abuse its
discretion in concluding that Mr. Nielson had brought and advanced claims and
defenses that a competent attorney, after reasonable inquiry, would have
determined were not warranted by facts or law.
Mr. Nielson maintains that there was necessarily a sufficient factual basis
to satisfy Rule 11 because the district court denied Syrett’s motion for summary
judgment. The summary judgment proceedings do not direct a result in the
Rule 11 context. Here, the district court had ample opportunity during a lengthy
bench trial to determine that plaintiffs’ claims and defenses were frivolous and
meritless, and further, that Mr. Nielson had failed to conduct an adequate inquiry
before filing his pleadings to advance those claims and defenses. We conclude
that the district court did not abuse its discretion in deciding, based on all the
evidence, that Rule 11 sanctions were warranted. See Mann, 900 F.2d at 961
(affirming Rule 11 sanctions even though claims had survived summary
judgment).
We have reviewed the entire district court record and we have considered
Mr. Nielson’s arguments in light of the record. We find no abuse of discretion in
the district court’s decision to impose sanctions against Mr. Nielson.
-6- The judgment of the United States District Court for the District of Utah is
AFFIRMED. The mandate shall issue forthwith.
Entered for the Court
Bobby R. Baldock Circuit Judge
-7-