Henry v. Farmer City State Bank

127 F.R.D. 154, 1989 U.S. Dist. LEXIS 8794, 1989 WL 83500
CourtDistrict Court, C.D. Illinois
DecidedJuly 27, 1989
DocketNo. 85-3365
StatusPublished
Cited by3 cases

This text of 127 F.R.D. 154 (Henry v. Farmer City State Bank) is published on Counsel Stack Legal Research, covering District Court, C.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Henry v. Farmer City State Bank, 127 F.R.D. 154, 1989 U.S. Dist. LEXIS 8794, 1989 WL 83500 (C.D. Ill. 1989).

Opinion

OPINION

RICHARD MILLS, District Judge:

A matter of sanctions.1

They are imposed against Plaintiffs’ attorney.

The facts of this cause have been well chronicled. Henry v. Farmer City State Bank, 808 F.2d 1228 (7th Cir.1986); Henry v. Farmer City State Bank, 651 F.Supp. 17 (C.D.Ill.1985); Henry v. Farmer City State Bank, 630 F.Supp. 844 (C.D.Ill.1986); Farmer City State Bank v. Henry, 138 Ill.App.3d 854, 93 Ill.Dec. 196, 486 N.E.2d 297 (1985); Farmer City State Bank v. Champaign National Bank, 138 Ill.App.3d 847, 93 Ill.Dec. 200, 486 N.E.2d 301 (1985).

We hit only the highlights here.

I—Facts

Plaintiffs’ 30 count amended complaint, naming 29 Defendants, alleged RICO and 42 U.S.C. § 1983 claims. The cause arose out of a routine mortgage foreclosure action against a bankrupt tire and service dealer. Plaintiffs fought the foreclosure in state court, then filed a civil RICO action in federal court, then, having been dismissed from federal court, brought the same charges in another state court action. In the instant case, Plaintiffs claimed that the Defendants conspired to forge a “letter of direction” to the Plaintiffs’ land trustee, which directed the trustee to place a second mortgage on Plaintiffs’ business to secure a prior indebtedness of $345,000. The bank subsequently foreclosed on this second mortgage. In a series of orders, this Court dismissed all the Defendants on motions to dismiss based upon Plaintiffs’ failure to state a cause of action upon which relief could be granted. In its last order dismissing the Farmer City State Bank Defendants, this Court retained jurisdiction over this cause for the purpose of considering the sanction issue. Henry, 651 F.Supp. at 20. „

[156]*156II—Rule 11

Rule 11 of the Federal Rules of Civil Procedure provides that the signature of an attorney on a pleading certifies “that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law____” The standard for imposing sanctions under this rule is an objective question of reasonableness under the circumstances. Brown v. National Board of Medical Examiners, 800 F.2d 168, 171 (7th Cir.1986). Under Rule 11, an attorney must make a reasonable inquiry into both the facts and the law before filing a complaint. Id. at 172; In re TCI Ltd., 769 F.2d 441, 447 (7th Cir.1985).

Though we find no subjective bad faith here, as Plaintiffs’ attorney spent much time researching this cause before filing the complaint, we cannot allow the Defendants to absorb the cost of this litigation—litigation which never should have been. “Extended research alone will not save a claim that is without legal or factual merit from the penalty of sanctions.” Zaldivar v. City of Los Angeles, 780 F.2d 823, 831 (9th Cir.1986) (quoted with approval in Beeman v. Fiester, 852 F.2d 206, 212 (7th Cir.1988)). Notwithstanding an attorney’s sincere belief in his client’s cause, the attorney has a duty “to review the law to determine whether the facts fit within a recognized entitlement to relief.” In re TCI, 769 F.2d at 446.

Ill—RICO Allegations

All the Defendants involved in the motions for sanctions were dismissed on motions to dismiss. In a series of orders, this Court found several deficiencies in the amended complaint’s RICO allegations: (1) the predicate acts required were not adequately pled nor, given the facts, could they have been adequately pled; (2) no “pattern of racketeering” was alleged; and (3) Plaintiffs were not injured in any way cognizable under RICO. See Henry, 651 F.Supp. at 18-19.

These deficiencies were present in the amended complaint despite the fact that Plaintiffs’ attorney had the benefit of the Defendants’ motions to dismiss which were filed two months prior to the filing of the amended complaint. Despite being alerted to the original complaint’s deficiencies, Attorney Jack C. Vieley filed an amended complaint, identical to the original complaint, curing only his failure to sign the original complaint.

We shall not rehash here the deficiencies of the amended complaint. Those deficiencies are detailed in the Court’s series of unpublished orders dismissing the non-Farmer City State Bank (FCSB) Defendants and the opinion dismissing the FCSB Defendants. Henry, 651 F.Supp. at 17. Those orders make clear that Plaintiffs’ attorney either inadequately researched the requirements necessary to sustain a RICO claim or knowingly proceeded in spite of the complaint’s deficiencies under RICO. In his defense, Attorney Vieley states: “This Court is aware that the applicability and parameters of the RICO statute have been in a great state of fluctuation and development. Interpretation of certain facets of the statute continues to be done on a case-by-case basis and the particulars of activities which fall within its purpose and purview are stil [sic] not wholly predictable.”

Attorney Vieley’s argument is unpersuasive. This is not a case which presented issues in the gray area of the RICO statute. Certainly, some aspects of RICO are difficult to deal with for attorneys and judges alike. But here, Plaintiffs’ allegations did not fall into the gray area of possibly colorable claims. The claims presented were patently inadequate, even in light of the state of development of RICO at the time the complaint was filed. To paraphrase Judge Easterbrook, in Szabo Food Service, Inc. v. Canteen Corp., 823 F.2d 1073, 1080 (7th Cir.1987), cert. dismissed, 485 U.S. 901, 108 S.Ct. 1101, 99 L.Ed.2d 229 (1988): the Henrys’ RICO theory was wacky, sanctionably so.

Attorney Vieley further argues that sanctions should not be imposed based on [157]*157Beeman v. Fiester, 852 F.2d 206 (7th Cir.1988), in which the Seventh Circuit upheld the district court’s refusal to impose Rule 11 sanctions in a RICO case which the district court had found was filed “ ‘in retaliation for some bareknuckle union infighting,’ ” id. at 210, and “ ‘was not well grounded in fact.’ ” Id. Beeman is distinguishable on two grounds. First,

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Cite This Page — Counsel Stack

Bluebook (online)
127 F.R.D. 154, 1989 U.S. Dist. LEXIS 8794, 1989 WL 83500, Counsel Stack Legal Research, https://law.counselstack.com/opinion/henry-v-farmer-city-state-bank-ilcd-1989.