Katharine H. Parker U.S. Magistrate Judge

REPORT & RECOMMENDATION

Katharine H. Parker U.S. Magistrate Judge

TO: THE HON. JED S. RAKOFF, United States District Judge

FROM: KATHARINE H. PARKER, United States Magistrate Judge

Pro Se Plaintiff Sherri Cohen brought this action initially in state court on May 25, 2018 pursuant to the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681 et seq., and New York's Fair Credit Reporting Act (“New York FCRA”), N.Y. GBL §§ 380 et seq. against several credit reporting agency Defendants. The matter weas removed to this Court on July 9, 2018. Plaintiff contended that Defendants violated their statutory obligation to report her consumer credit information accurately, causing her to be denied credit cards and loans. She contended that Defendants failed to implement and follow reasonable procedures to assure maximum possible accuracy of the information in consumer reports and to comply with reinvestigation requirements when inaccuracies are brought to their attention by a consumer. Plaintiff sought actual and statutory damages, punitive damages, attorneys' fees and costs.

According to Defendant Transunion LLC (“Trans Union”), it communicated to Plaintiff on several occasions in late 2018 and early 2019 that her claims were meritless, had no basis on which relief could be granted, and requested Plaintiff withdraw her claims against it. (Def.'s Mem. in Supp. of Mot. at 3, ECF No. 205 (hereinafter “Def.'s Brief”).) Then, on March 1, 2019, Trans Union sent a letter (the “safe harbor letter”) to Plaintiff advising her of that her claims were frivolous, requested dismissal, and attached a draft of its motion pursuant to Federal Rule of Civil Procedure 11 (“Rule 11”). (Ex. C to Def.'s Reply in Supp. of Mot., ECF No. 218-3.) However, Trans Union did not file the motion shortly after the expiration of the required 21-day waiting period for Rule 11 motions. See Fed.R.Civ.P. 11(c)(2).

On March 18, 2019, after receiving the safe harbor letter from Trans Union, Plaintiff sought leave to amend her pleadings. (ECF No. 61.) Following this Court's rulings granting her leave on April 17 and May 20, 2019, Plaintiff's Second Amended Complaint (“SAC”), which was the operative complaint, asserted the following claims: (1) willful violations of the FCRA and New York's FCRA by failing to follow reasonable procedures to assure maximum possible accuracy of the information in her consumer report and failing to comply with reinvestigation requirements upon being notified of inaccuracies in her consumer report; (2) negligent violations of the FCRA and New York's FCRA by failing to follow reasonable procedures to assure maximum possible accuracy of the information in her consumer report and failing to comply with reinvestigation requirements upon being notified of inaccuracies in her consumer report; and (3) willful violation of the FCRA by placing a “litigation lock” on or taking her credit information “off line” after she commenced litigation.

In June of 2019, Plaintiff and Defendants filed cross-motions for summary judgment as to all claims in the SAC. On September 13, 2019, the District Court granted Defendants' separate motions for summary judgment in all respects. Specifically, the Court held:

Plaintiff has failed to produce admissible evidence substantiating her assertion that most of the disputed information in either her Equifax credit report or her Trans Union credit report was false. Even as to those few items for which plaintiff's deposition suffices to create a genuine dispute of fact as to falsity, plaintiff has adduced no evidence that the falsity was the result of Equifax's or Trans Union's failure to follow reasonable procedures. Nor has plaintiff produced any evidence that either Equifax or Trans Union ever failed, following notification of a dispute directly from her, to conduct a reasonable reinvestigation. Even taking all evidence in the light most favorable to plaintiff and resolving all credibility disputes in her favor, no reasonable jury could render a verdict in her favor against either defendant. Accordingly, defendants are entitled to summary judgment on all counts, and plaintiff's case must be dismissed with prejudice.

Just prior to the Second Circuit's decision on appeal, on November 25, 2020, Trans Union filed a motion for attorneys' fees and sanctions pursuant to the FCRA, Rule 11, and the Court's inherent powers. (ECF No. 204 (hereinafter, “Trans Union's Motion).) In its motion, Trans Union argues that, under all three theories, Plaintiff's refusal to withdraw her claims after Trans Union told her on multiple occasions that her claims were meritless is sanctionable and entitles Trans Union to their reasonable attorneys' fees and costs in defending this action. On December 3, 2020, Plaintiff filed her opposition to Trans Union's Motion and included her own cross-motion for sanctions against Trans Union, pursuant to Rule 11, on the theory that Trans Union's Motion itself was sanctionable conduct. (ECF No. 209 (hereinafter, Plaintiff's Opposition & Motion”).)

On December 8, 2020, the District Court referred the parties' cross-motions for sanctions to the undersigned. (ECF No. 215.) After an unnecessary letter writing campaign by Plaintiff, and warnings from the Court, the parties' cross-motions were fully briefed by January 2021. For the reasons that follow, I recommend denying both parties' motions in their entirety.

DISCUSSION

Trans Union asserts three distinct bases for seeking sanctions and recovery of its attorneys' fees against Plaintiff. First, Trans Union argues that per the FCRA, it is entitled to the reasonable fees and expenses incurred in its defense of this litigation because Plaintiff acted in bad faith in maintaining this lawsuit in the face of multiple warnings from Trans Union. The FCRA allows a prevailing party to recover attorneys' fees for pleadings, motions, or other papers filed by a plaintiff in bad faith or for the purposes of harassment. See 15 U.S.C. §§ 1681n(c), 1681o(b). In an attempt to evidence Plaintiff's bad faith, Trans Union points to the fact that, prior to moving for summary judgment, it provided Plaintiff with several warnings that her claims were frivolous and that she would have no success in this litigation. To drive home this point, Trans Union then points to this Court's decision on summary judgment, in which it held Plaintiff's claim could not withstand summary judgment, and dismissed them with prejudice. However, it does not follow that a grant of summary judgment automatically renders the non-prevailing party's claims frivolous and sanctionable. See Galin v. Hamada, 753 Fed.Appx. 3, 8 (2d Cir. 2018) (“[I]t would not be appropriate for a district court to impose sanctions [under Rule 11] simply because a party unsuccessfully opposed summary judgment. . . .”).

Trans Union cites to several out-of-Circuit district courts in support of its argument for fees under the FCRA's bad-faith provision. These cases are distinguishable because all of them involved a request for sanctions or attorneys' fees in instances when the plaintiff clearly knew, or clearly should have known, that their lawsuit was meritless and frivolous before the lawsuit was ever initiated. See, e.g., Williams v. Experian Info. Sols., No. 3:09-cv-1146, 2010 WL 572098, at *3 (N.D. Tex. Feb. 10, 2010) (finding plaintiff initiated suit in bad faith as evidenced by plaintiff's voluntary dismissal of his claims, subsequent default on defendants' counterclaims, and that defendants' well-pleaded counter-allegations, taken as true following default judgment, entitled plaintiff to reasonable attorneys' fees under the FCRA); O'Connor v. Trans Union, LLC, No. 05-cv-74498, 2008 WL 4910670, at *6-7 (E.D. Mich. Nov. 13, 2008) (finding plaintiff initiated suit in bad faith because at the time of filing plaintiff knew that the claims he made were false and awarding attorneys' fees under FCRA); Lewis v. Trans Union, LLC, No. 04-cv-6550, 2006 WL 2861059, at *4 (N.D. Ill. Sept. 29, 2006) (same and distinguishing the facts of the case from one in which it was not clear that plaintiff was aware of the frivolousness of the claims prior to initiating the lawsuit); Shipley v. Trans Union Corp., No. 04-cv-2560, 2006 WL 1515594, at *4 (W.D. Wash. May 25, 2006) (finding plaintiff filed complaint and pursued lawsuit in bad faith based on an altered document submitted by plaintiff to the credit reporting agency and awarding defendant reasonable attorneys' fees under FCRA); Mayle v. Equifax Info. Serv., Inc., No. 03-cv-8746, 2006 WL 398076, at *2 (N.D. Ill. Feb. 14, 2006) (finding plaintiff knew or should have known the claims were frivolous prior to initiating their suit and awarding defendants attorneys' fees pursuant to the FCRA). There is insufficient evidence that Plaintiff, who was pro se, knew her claims were frivolous before she initiated the suit in May 2018 as opposed to a misunderstanding of the law regarding the nature of the corrections that defendant was obliged to make and possibly the facts as to the asserted litigation lock.

Further, Trans Union does not present sufficient facts showing that Plaintiff's maintenance of this lawsuit rises to the level of sanctionable bad faith. Trans Union first points to Plaintiff's opposition to its summary judgment motion and the Court's decision holding Plaintiff had not adduced sufficient evidence to support her claims. But Plaintiff's unsuccessful opposition of summary judgment is not bad faith conduct here, where, even though the Court ultimately determined that Defendants were entitled to summary judgment, the Court did not state or otherwise determine Plaintiff's claims were so non-meritorious that they merited an award of sanctions. It is noteworthy that at pleading stage, in opposing Plaintiff's attempt to file the SAC, the Court rejected Trans Union's argument that amendment was futile as to the FCRA claims, and the Court permitted Plaintiff to file the SAC. The Court also permitted Plaintiff to argue the facts surrounding the litigation lock, which provided obstacles to Plaintiff's inquiries regarding her credit reports, as potentially supporting the willfulness of any violation. Trans Union also argues elsewhere that Plaintiff “admitted” she was not aware of the contents of certain disputes automatically submitted on her behalf by CreditRepair.com and that she was unable to explain what the inaccuracies were in her credit reports, and that her maintenance of the lawsuit in light of those admissions constitutes bad faith. (Def.'s Brief at 8.) While these facts ultimately supported entering summary judgment against Plaintiff, Trans Union has not shown that Plaintiff's conduct rose to the level of sanctionable bad faith, or cited to any court finding bad faith maintenance, as opposed to initiation, of a suit by a pro se plaintiff pursuant to the FCRA under similar facts. As such, Trans Union has not shown Plaintiff initiated and maintained this lawsuit in bad faith. Accordingly, it's request for sanctions under the FCRA is denied.

Trans Union's second theory supporting their request for attorneys' fees is based on Rule 11. Trans Union argues that the same set of facts discussed above evidences Plaintiff's bad faith, and that given its compliance with Rule 11's safe-harbor/notice requirement, and the case law that pro se plaintiffs are not exempt from Rule 11, Plaintiff should be sanctioned under Rule 11.

However, “Rule 11 does not [] authorize sanctions for merely frustrating conduct. It authorizes sanctions only for the filing of a document with the court that fails to satisfy the rule's certification requirements.” Lawrence v. Richman Grp. of CT LLC, 620 F.3d 153, 158 (2d Cir. 2010). Rule 11(b) states that a lawyer or unrepresented party's signature to a court document certifies four aspects of the document: (1) that it is not being presented for an improper purpose; (2) the legal arguments are supported by existing law or are not frivolous; (3) the factual contentions have been investigated and are supported; and (4) denials are also likewise well-supported. Fed.R.Civ.P. 11(b)(1)-(4). The Rule's inclusion of unrepresented parties means that Rule 11 applies with equal force to pro se litigants, although the Rule does allow for the Court to exercise its discretion and account for a litigant's pro se status. See Fed.R.Civ.P. 11 advisory committee's notes to 1983 amendment (“Although the standard is the same for unrepresented parties, who are obliged themselves to sign the pleadings, the court has sufficient discretion to take account of the special circumstances that often arise in pro se situations.”). Given the aim of the Rule to minimize expenditure of judicial resources and encourage correction or withdrawal of defective documents, see Lawrence, 620 F.3d at 158, Perpetual Secs., Inc. v. Tang, 290 F.3d 132, 141 (2d Cir.2002), the Rule contains a safe-harbor provision requiring the moving party to first provide notice and a draft of the motion for sanctions to the non-moving party and provide them 21 days to cure. Fed.R.Civ.P. 11(c)(2). Only after the safe-harbor period has passed may a party file a Rule 11 motion. Additionally, “[a]lthough Rule 11 contains no explicit time limit for serving the motion, the ‘safe harbor' provision functions as a practical time limit, and motions have been disallowed as untimely when filed after a point in the litigation when the lawyer sought to be sanctioned lacked an opportunity to correct or withdraw the challenged submission.” In re Pennie & Edmonds LLP, 323 F.3d 86, 89 (2d Cir. 2003) (collecting cases). The procedural safe-harbor requirements of Rule 11 are strictly applied. See Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., 682 F.3d 170, 175 (2d Cir. 2012).

The above legal standards show that Trans Union's request should be rejected for two reasons. First, regarding the safe-harbor requirements, Trans Union contends that the safe harbor letter sent to Plaintiff on March 1, 2019, attaching a draft of the motion, satisfies this requirement for its fees and sanctions motion, filed on November 25, 2020. Putting aside whether notice provided more than 20 months before a motion is filed fairly and adequately puts a non-moving party on notice, because Rule 11 is aimed at addressing particular defective or frivolous documents, a Rule 11 motion aimed at an initial complaint must be re-noticed upon the filing of an amended complaint. See Lawrence, 620 F.3d at 158 (holding that defendant had to provide new notice of the defects in plaintiff's amended complaint after it had provided plaintiff with a safe-harbor letter regarding the initial complaint). As such, because the SAC was filed after Plaintiff received the safe harbor letter-which is true for both the date on which the proposed SAC was filed on the docket (March 19, 2019) and the dates of the Court's opinions accepting the SAC (April 17 and May 20, 2019)-the letter was ineffective in satisfying the safe- harbor requirements. Rather, Trans Union was obligated to provide Plaintiff with a new letter and draft of a motion describing the defects in the SAC to trigger the 21-day safe-harbor period. As such, given the strict compliance demanded with the safe-harbor requirements, Trans Union is not entitled to sanctions under Rule 11 against Plaintiff. However, even if the safe-harbor provision could be viewed as satisfied by the safe harbor letter as potentially giving sufficient notice to Plaintiff of Trans Union's eventual motion, the Court would still recommend denying Trans Union's Motion under Rule 11 because the motion was not filed shortly after summary judgment was granted or at a point in time that the non-moving party could provide a cure. Circuit courts throughout the country readily hold that Rule 11 motions filed at late stages of a case or after a case has been closed are inappropriate. See Lawrence, 620 F.3d at 158-59 (collecting cases). Given the almost 16-month delay in filing its Rule 11 motion since the Court ruled on summary judgment and the case was closed, let alone the almost two-years that have passed since the SAC was accepted, Trans Union is not entitled to sanctions under Rule 11.

Finally, Trans Union argues that this Court should sanction Plaintiff and award it attorneys' fees pursuant to the Court's inherent powers. “Under the ‘inherent power' doctrine, attorneys' fees can be imposed when the losing party has continued an action ‘in bad faith, vexatiously, wantonly, or for oppressive reasons.'” Corp. Printing Co. v. N.Y. Typographical Union No. 6, 886 F.Supp. 340, 343 (S.D.N.Y. 1995) (quoting Oliveri v. Thompson, 803 F.2d 1265, 1272 (2d Cir. 1986)). Trans Union argues that, in addition to the conduct discussed above, sanctions are warranted against Plaintiff given that her “behavior in this action resulted in 27 months of unnecessary and costly litigation, including over 200 electronic filings and 9 conferences, the majority of which were necessitated by Plaintiff's improper, frivolous and harassing filings.” (Def.'s Brief at 10.) Trans Union also points to the volatile, inflammatory, and accusatory language used by Plaintiff in the numerous and excessive filings and letters that Plaintiff submitted during this litigation. However, as discussed above, Trans Union has failed to show that Plaintiff initiated or maintained this suit in bad faith. Further, Trans Union has not persuaded this Court that Plaintiff's actions in maintaining this litigation, while certainly overzealous and unduly burdensome at times, rise to the level of sanctionable conduct. The Court's prior opinions in this matter have not treated Plaintiff's claims summarily or been dismissive of them, and the fact that Plaintiff was ultimately unable to adduce any evidence during discovery to support her claims does not automatically convert her zealous pursuit of this litigation into sanctionable, bad-faith conduct. Further, Plaintiff was well within her rights to pursue an appeal of this Court's determination on summary judgment, and doing so does not evidence any bad faith. As such, I also recommend denying Trans Union's request for sanctions and an award of fees pursuant to this Court's inherent powers.

As to Plaintiff's Rule 11 motion, Plaintiff did not comply with Rule 11(c)(2)'s strict requirement that the moving party provide the non-moving party with notice and a draft of the Rule 11 motion at least 21 days' before filing it with the Court. Therefore, she is not entitled to sanctions under that rule.

CONCLUSION

For the reasons set forth above, I respectfully recommend that both parties' motions for sanctions be denied in their entirety.