Chapman & Cole v. Itel Container International B.V.

116 F.R.D. 550, 1987 U.S. Dist. LEXIS 8182
CourtDistrict Court, S.D. Texas
DecidedJuly 22, 1987
DocketCiv. A. No. H-83-5945
StatusPublished
Cited by6 cases

This text of 116 F.R.D. 550 (Chapman & Cole v. Itel Container International B.V.) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chapman & Cole v. Itel Container International B.V., 116 F.R.D. 550, 1987 U.S. Dist. LEXIS 8182 (S.D. Tex. 1987).

Opinion

MEMORANDUM AND ORDER

SINGLETON, Chief Judge.

INTRODUCTION

The matters currently before this Court are the plaintiffs’ and third-party defendant’s Motions for Sanctions against Itel Container International (hereinafter “Itel”), and its attorneys, Urquhart & Hassel. This action was tried before this Court during a bench trial that began on April 6, 1987 and lasted seven-days. At the conclusion of the trial, this Court indicated from the bench that sanctions would not be imposed. However, prodded by plaintiff’s motion to reconsider, this Court subsequently reviewed the tapes from two pretrial conferences in this action, as well as the recent Fifth Circuit case law addressing the imposition of sanctions, and determined that a show cause hearing should be conducted to determine whether sanctions should be imposed. Notice was sent to the parties and a hearing was held on May 5, 1987. Having now considered the arguments and testimony presented at the May 5,1987 Show Cause Hearing, along with all memoranda filed in support of each sides respective positions, this Court makes the following findings from the facts presented in this action.

DISCUSSION

1. Preliminary Matters

As a preliminary matter, this Court must address defendant’s contention that third-party defendant, Norman Ehrentraut’s post-trial request for sanctions violates the terms of the approved settlement agreement. Defendant’s attorneys contend that as part of an approved settlement with Mr. Ehrentraut, Itel agreed to dismiss its third-party complaint in return for which Mr. Ehrentraut agreed to withdraw his motion for sanctions. Mr. Ehrentraut argues, however, that the agreement only applied with reference to his motion against Itel and does not apply to his request for sanctions against Itel’s attorney’s, Urquhart & Hassell.

To support its contention that Mr. Ehrentraut’s request for sanctions amounts to a breach of the approved settlement agreement, Itel’s attorneys draw reference to two letters sent by Mr. Ehrentraut’s attorney, Fritz Barnett. The letters clearly indicate that Mr. Ehrentraut agreed to drop his motion for sanctions as part of the settlement agreement. Mr. Barnett’s post-trial assertion that Mr. Ehrentraut’s agreement was only intended to apply with reference to his motion against Itel, and not with reference to his motion against Itel’s attorneys, seems slightly contrived. If Mr. Barnett intended to dismiss only a portion of Mr. Ehrentraut’s motion for sanctions as part of the agreement, then his correspondence with Itel’s attorneys was certainly misleading. In addition, if Itel’s attorneys had known that this was Mr. Barnett’s intention then it is unlikely that they would have agreed to settle with Mr. Ehrentraut.

Notwithstanding the terms of the settlement agreement with Mr. Ehrentraut, however, this Court has the authority, if not the duty, to impose Rule 11 sanctions against any attorney who fails to make an [552]*552objectively reasonable inquiry into the merits of a claim. See Southern Leasing Partners, Ltd. v. McMullan, 801 F.2d 788 (5th Cir.1986). In its Note to Rule 11, the Advisory Committee on rules states succinctly the purpose behind the Rule:

[t]he word “sanctions” in the caption ... stresses a deterent orientation in dealing with improper pleadings, motions or other papers____ And the words “shall impose” in the last sentence focus the Court’s attention on the need to impose sanctions for pleading and motion abuses. The court, however, retains the necessary flexibility to deal appropriately with violations of the rule. It has discretion to tailor sanctions to the particular facts of the case, with which it should be well acquainted.

As the Fifth Circuit has noted, Rule 11 “is simple and poses no threat to competent lawyers. Simply put, a lawyer must have a basis for his pleadings.” Southern Leasing, 801 F.2d at 789. The law is abundantly clear: where an attorney does not have an objectively reasonable basis for filing or continuing to urge a pleading before the Court, the Court must impose some type of Rule 11 sanctions. Robinson v. National Cash Register Co., 808 F.2d 1119, 1126 n. 12 (5th Cir.1987).

In addition to the authority granted the Court by the rule itself, the defendant’s attorneys are also aware that this Court retained jurisdiction during two pretrial conferences to impose sanctions if the allegations against Mr. Ehrentraut proved to be baseless. In fact, this Courts’ exact words during those conferences were that sanctions “would be imposed” if these allegations proved to be false. While this Court must accept the terms of the settlement agreement as it applies to Mr. Ehrentraut’s motion against Itel, this Court will not extend that agreement to protect Itel’s attorneys. In fact, this Court finds that the “twelfth-hour” settlement with Mr. Ehrentraut on the eve of the trial was nothing more than a ploy used by Itel’s attorneys in an effort to avoid sanctions. The justifications given by Urquhart and Hassell for their client’s last minute settlement with Mr. Ehrentraut are unpersuasive and require very little discussion.

Basically, the law firm alleges that it supported Itel’s decision to settle because it feared that this Court would grant a continuance which would have had the “potential adverse effects” of unavailability of key Itel witnesses and increased costs of litigation to Itel. See Affidavit of Pascal Paul Piazza, May 10,1987. In addition, the firm questioned whether Itel would be able to collect any judgment it might obtain against Mr. Ehrentraut. Id.

The argument that a continuance, which defendant’s attorneys had no way of knowing would even be considered by this Court, would have had such a devastating impact on witness availability in a case filed over three years ago is totally unpersuasive. In addition, this Court is knowledgable enough to know that the additional expense that a continuance might have caused would have been trivial when compared to the total costs of this litigation to Itel. Finally, there is nothing to support the claim that Itel’s attorneys learned anything in March of 1987 about the status of Mr. Ehrentraut’s financial situation that they were not aware of previously. Simply stated, the reasons given by Urquhart & Has-sell for the last minute settlement with Mr. Ehrentraut are nothing more than feeble attempts to justify their position. This Court, however, rejects all of the justifications offered by the law firm and finds instead that the real justification for the settlement with Mr. Ehrentraut was to avoid possible sanctions.

This Court wishes to address one additional prefatory argument raised by Itel in its Memorandum of Law Supporting the Denial of Sanctions. Itel’s attorneys argue that sanctions should not be imposed because “[t]his Court has recognized the plausibility of Itel’s case by denying all previous motions to dismiss, previous motions for summary judgment, and previous motions for sanctions.” See Memorandum of Law Supporting the Denial of Sanctions Against Itel Container International B.V. [553]*553and Itel Container International Corporation and Their Attorneys, May 11, 1987, at 3. This argument is unpersuasive because, as noted earlier, defendant’s attorneys were present at the two pretrial conferences when this Court deferred ruling on the issue of sanctions until after the trial.

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Bluebook (online)
116 F.R.D. 550, 1987 U.S. Dist. LEXIS 8182, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chapman-cole-v-itel-container-international-bv-txsd-1987.