Sheehan v. Starbucks Corp.

• Court: Court of Appeals for the Second Circuit
• Decided: March 17, 2026
• Docket: 25-189
• Status: Unpublished

Opinion

25-189 Sheehan v. Starbucks Corp.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 17th day of March, two thousand twenty-six.

PRESENT: REENA RAGGI, ALISON J. NATHAN, Circuit Judges, JESSE M. FURMAN, District Judge.* _____________________________________

Spencer Sheehan, Sheehan and Associates, P.C.,

Respondents-Appellants,

Kristie Brownell, individually and on behalf of all others similarly situated,

Plaintiff,

* Judge Jesse M. Furman, of the United States District Court for the Southern District of New York, sitting by designation. v. No. 25-189

Starbucks Corporation,

Defendant-Appellee.

_____________________________________

FOR RESPONDENT-APPELLANT: Daniel R. Rose, Costello, Cooney & Fearon, PLLC, Syracuse, NY.

Appeal from a judgment of the United States District Court for the Northern

District of New York (Scullin, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is

REVERSED.

Respondents-Appellants Spencer Sheehan and his law firm appeal from a

November 30, 2023 order of the United States District Court for the Northern

District of New York (Scullin, J.) holding Sheehan in civil contempt, and a January

2, 2025 order of that court directing him to pay $500 as a sanction for violating

Federal Rule of Civil Procedure 11(b). Sheehan argues that he violated no court

orders that could form the basis for a contempt sanction, and that Rule 11 sanctions

2 were unwarranted because he did not act in bad faith. We agree and therefore

reverse.

We assume the parties’ familiarity with the underlying facts, procedural

history, and issues on appeal, to which we refer only as necessary to explain our

decision.

I. Contempt

We begin with the November 30, 2023 contempt order. “[B]ecause the

power of a district court to impose contempt liability is carefully limited, our

review of a contempt order for abuse-of-discretion is more rigorous than would

be the case in other situations in which abuse of discretion review is conducted.”

CBS Broad. Inc. v. FilmOn.com, Inc., 814 F.3d 91, 98 (2d Cir. 2016) (quotation marks

omitted). “A court may hold a party in contempt if (1) the order the party failed

to comply with is clear and unambiguous, (2) the proof of noncompliance is clear

and convincing, and (3) the party has not diligently attempted to comply in a

reasonable manner.” Id. (emphasis added). Civil contempt may be imposed “to

secure future compliance with court orders and to compensate the party that has

been wronged,” but not “as a purely punitive measure.” Paramedics

3 Electromedicina Comercial, Ltda v. GE Med. Sys. Info. Techs., Inc., 369 F.3d 645, 657 (2d

Cir. 2004). A civil contempt order therefore “has much different purposes than a

Rule 11 sanction,” which “is designed to punish a party who has already violated

the court’s rules.” Willy v. Coastal Corp., 503 U.S. 131, 138–39 (1992).

We are aware of no court order that Sheehan violated, nor did the district

court identify any such violation in its contempt adjudication. See App’x at 145–

58. Rather, the district court apparently considered civil contempt and Rule 11

sanctions as a single issue, holding that “Mr. Sheehan [was] in civil contempt of

court and, thus, subject to sanctions pursuant to Rule 11[.]” Id. at 143. In

support, the court cited only cases involving Rule 11 sanctions, not contempt. See

Id. at 144–45. In the absence of a violated order, we therefore conclude that,

regardless of whether Rule 11 sanctions were warranted, the court’s contempt

order was erroneous and must be reversed.

II. Rule 11

We review Rule 11 sanctions orders for abuse of discretion, “which we will

identify only where a district court ruling is based on an error of law or a clearly

erroneous view of the facts, or cannot be located within the range of permissible

4 decisions.” Lawrence v. Richman Grp. of CT LLC, 620 F.3d 153, 156 (2d Cir. 2010)

(quotation marks omitted). But “when, as here, the court issues sanctions sua

sponte without offering the offender the opportunity to withdraw the offending

submission, our review is more exacting than under the ordinary abuse-of-

discretion standard.” Muhammad v. Walmart Stores E., L.P., 732 F.3d 104, 108 (2d

Cir. 2013) (quotation marks omitted).

Unlike party-initiated Rule 11 sanctions, which are subject to safe-harbor

protection and require only a finding of objective unreasonableness, Rule 11

sanctions initiated by a court “long after the lawyer had an opportunity to amend

or withdraw” the filing in question require a finding of “subjective bad faith.”

ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 579 F.3d 143, 151 (2d Cir. 2009) (quotation

marks omitted). “When a lower court sanctions a litigant for bad faith, the court

must outline its factual findings with a high degree of specificity,” Huebner v.

Midland Credit Mgmt., Inc., 897 F.3d 42, 53 (2d Cir. 2018) (quotation marks omitted),

and we review those findings for clear error, see Fishoff v. Coty Inc., 634 F.3d 647,

654 (2d Cir. 2011). A factual finding is clearly erroneous either if it “is without

support” in the record, Motown Prods., Inc. v. Cacomm, Inc., 849 F.2d 781, 787 (2d

5 Cir. 1988), or if “although there is evidence to support it, the reviewing court on

the entire evidence is left with the definite and firm conviction that a mistake has

been committed,” United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).

Here, the district court imposed sanctions both because Sheehan relied on

meritless legal theories, see Fed. R. Civ. P. Rule 11(b)(2), and because he failed to

adequately verify the factual allegations in Plaintiff’s complaint, see Fed. R. Civ. P.

Rule 11(b)(3). Sheehan first argues that Rule 11(b)(3) sanctions were improper

because the district court’s order to show cause referred only to Rule 11(b)(2). We

disagree. While “a party is entitled to notice of the provision under which

sanctions are sought,” Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52,

57 (2d Cir. 2000) (quotation marks omitted), Sheehan had sufficient notice here.

Although the court’s initial order to show cause cited only Rule 11(b)(2), the court

subsequently held a hearing where it questioned Sheehan about his pre-filing

investigation and permitted Sheehan to file additional materials in his defense.

Sheehan then filed the additional materials, confirming that he was aware of the

court’s interest in his fact investigation. And Sheehan is incorrect that the district

court’s November 30 order cited only Rule 11(b)(2); rather, it cited Rule 11 and

6 11(b) more generally.1 We therefore conclude that the court adequately notified

Sheehan of both potential bases for sanctions.

We agree with Sheehan, however, that the district court abused its

discretion in imposing sanctions. We have urged a construction of Rule 11 “that

allows innovation and zealous representation while punishing only those who

would manipulate the federal court system for ends inimicable to those for which

it was created,” and have cautioned that “judges [should] refrain from imposing

sanctions where such action would stifle the enthusiasm or chill the creativity that

is the very lifeblood of the law.” Motown Prods., 849 F.2d at 785 (quotation marks

omitted). Here, Sheehan’s legal arguments, even if unpersuasive, were not

objectively frivolous, nor does the record support a conclusion that he acted in bad

faith. Cf. id. at 787. Thus, the district court’s bad faith finding was clearly

erroneous, and its imposition of sanctions was therefore an abuse of discretion.

With respect to Sheehan’s legal theory, the district court determined that

there could be no consumer deception because no reasonable consumer would

1 That said, the district court’s January 2, 2025 order imposed a $500 fine on Sheehan “as a sanction for violating Rule 11(b)(2)” and made no reference to Rule 11(b)(3). App’x at 145. In any event, we proceed on the assumption that the district court imposed sanctions pursuant to Rule 11(b)(3) as well.

7 interpret the label “Ground 100% Arabica Coffee” to mean that Defendant’s coffee

does not contain added potassium. App’x at 58; see id. at 151–52. While that

interpretation may be better than Sheehan’s, it is not so obviously correct that the

lawsuit was frivolous. Indeed, the Seventh Circuit has allowed similar claims

about additives in parmesan cheese to proceed past a motion to dismiss,

explaining that “certainly a plausible reading” of the phrase “100% Grated

Parmesan Cheese” “is that ‘100%’ applies to all three words: it's all cheese; all the

cheese is Parmesan, and it's all grated.” Bell v. Publix Super Mkts., Inc., 982 F.3d

468, 476-77 (7th Cir. 2020). And the First Circuit, in a case featuring nearly

identical language to that present here, observed that it would be “by no means

unreasonable” for a consumer to read “Freshly Ground 100% Arabica Coffee” to

mean “that the package contains only coffee (and Arabica coffee at that), with no

nuts (or anything else).” Dumont v. Reily Foods Co., 934 F.3d 35, 41 (1st Cir. 2019).

While this court has not interpreted similar language, we do not think that

advancing an argument supported by the reasoned opinions of our sister circuits

to argue for an extension of our law can support a finding of bad faith. “[T]o

constitute a frivolous legal position for purposes of Rule 11 sanction, it must be

8 clear under existing precedents that there is no chance of success and no

reasonable argument to extend, modify or reverse the law as it stands.” Mareno

v. Rowe, 910 F.2d 1043, 1047 (2d Cir. 1990). While perhaps “not persuasive,”

Sheehan’s arguments “were not so untenable as a matter of law as to necessitate

sanction.” Id.

With respect to Sheehan’s fact investigation, the district court faulted the

complaint for failing to incorporate “any reports” to substantiate its allegation that

“laboratory analysis indicated the Product has significantly greater than expected

levels of potassium.” App’x at 145–46 (quotation marks omitted). The court also

noted that the study on which Sheehan relied “appeared to be an advertisement

for Puroast Coffee Company . . . , which is a competitor in the coffee market, rather

than a scientific study.” Id. at 146.

But “[w]ith regard to factual contentions, sanctions may not be imposed

unless a particular allegation is utterly lacking in support.” Storey v. Cello

Holdings, L.L.C., 347 F.3d 370, 388 (2d Cir. 2003) (quotation marks omitted). The

report that Sheehan provided to the district court states that Puroast collaborated

with an academic research laboratory to test potassium levels in Defendant’s

9 coffee and confirmed higher levels in the product at issue here. Sheehan also

attested that he investigated further and found multiple newspaper articles

reporting on those laboratory tests. After filing the complaint, he sent out

samples of the coffee to a different laboratory for independent testing, further

militating against a finding of bad faith. Together, this satisfies Rule 11’s

requirement of a “reasonable inquiry.” See Com. Cleaning Servs., L.L.C. v. Colin

Serv. Sys., Inc., 271 F.3d 374, 386 (2d Cir. 2001).

Rather than determining that Sheehan’s fact investigation was inadequate,

the district court appears to have disregarded much of what Sheehan submitted

after the sanctions hearing because the sources were not “attached to Plaintiff’s

complaint or her response in opposition to Defendant’s motion [to dismiss], nor

did Mr. Sheehan provide them to the Court in his initial responses to the Court’s

order to show cause prior to the hearing.” App’x at 151. But Sheehan was not

required to “plead evidence” in the form of studies or reports as long as the

underlying allegations in the complaint were not entirely devoid of support. See

Kaplan v. Lebanese Canadian Bank, SAL, 999 F.3d 842, 860 (2d Cir. 2021). Nor does

it matter that Sheehan sought independent testing only after filing the complaint,

10 as “a plaintiff is not required to know at the time of pleading all facts necessary to

establish the claim.” Com. Cleaning Servs., 271 F.3d at 386. As for Sheehan’s

delay in describing his fact investigation to the district court, the court’s order to

show cause cited only Rule 11(b)(2) as a potential basis for sanctions. It is

therefore understandable that Sheehan focused his initial responses on his legal

theory, and only addressed his fact investigation after the court questioned its

adequacy at the sanctions hearing.

In sum, Sheehan signed a complaint containing a colorable, if not ultimately

successful, legal theory, and the district court erroneously disregarded Sheehan’s

proof that he conducted a reasonable pre-filing inquiry. The district court

therefore clearly erred in finding that Sheehan acted in bad faith, and accordingly

abused its discretion in sua sponte imposing Rule 11 sanctions.

* * *

Accordingly, we REVERSE the district court’s orders holding Sheehan in

civil contempt and imposing sanctions under Rule 11.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court