Opinion
Case No. 01-31324, AP: 01-3159
May 13, 2002
MEMORANDUM OPINION
Hearing on defendant's motion to dismiss and trial on plaintiff's motion for sanctions were held on April 8, 2002. For the reasons stated below, the court will grant the motion to dismiss based on plaintiff's failure to comply with the safe harbor provision of Bankruptcy Rule 9011.
FACTS
Debtor Howard Kilgore filed a voluntary petition under chapter 7 on March 5, 2001. Prior to filing, Chevy Chase Bank held a security interest in debtor's 1995 Chevrolet pickup truck and sought repossession of the truck. Chevy Chase filed a complaint against debtor objecting to his discharge in bankruptcy under 11 U.S.C. § 727(a)(2). The complaint alleged that debtor concealed the vehicle with the intent to hinder, delay or defraud Chevy Chase from repossessing it from August 1998 to the time the complaint was filed. The bank later discovered that the vehicle was in its possession and had been sold at auction in June 2000. Chevy Chase filed a motion to dismiss its complaint on August 13, 2001, and the adversary proceeding was dismissed on September 21, 2001.
On September 14, 2001, debtor filed the instant motion for sanctions against Chevy Chase Bank pursuant to Bankruptcy Rule 9011. Debtor did not serve a copy of the motion on Chevy Chase prior to filing it with the court. The motion alleges in part that Chevy Chase's failure to make a reasonable inquiry into the location of the truck and its inadequate responses to interrogatories in the first adversary proceeding were a violation of Rule 9011.
DEFENDANT'S MOTION TO DISMISS
Chevy Chase filed a motion to dismiss the motion for sanctions on December 20, 2001, for violating the procedural requirements of the rule. Specifically, the motion to dismiss states that Kilgore's motion was not served on Chevy Chase prior to filing with the court and that Chevy Chase was not given time to cure as required by the rule. Kilgore's response to the motion to dismiss asserts that he gave Chevy Chase repeated notice of his intent to file for sanctions and denies that he was required to serve Chevy Chase with a copy of the motion.
CONCLUSIONS OF LAW
Rule 9011 requires a party to certify that the pleadings or papers it files before the court are not frivolous, are not filed for any improper purpose, and have some factual or evidentiary support. If the pleadings do not meet the requirements set out in 9011(b), an attorney may move for sanctions under Rule 9011(c). See F.R.Bankr.P. 9011(b). Subsection (c) requires the movant to serve a copy of the motion for sanctions, along with a request to withdraw the offending pleading, on opposing counsel. See id. at 9011(c). Movant must then allow opposing counsel 21 days after service of the motion to respond before presenting said motion to the court. See id.
(b) Representations to the Court. By presenting to the court a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, —
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.
F.R.Bankr.P. 9011(b).
(c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation.
(1) How initiated.
(A) By motion. A motion for sanctions under this rule shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). It shall be served as provided in Rule 7004. The motion for sanctions may not be filed with or presented to the court unless, within 21 days after service of the motion (or such other period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected, except that this limitation shall not apply if the conduct alleged is filing a petition in violation of subdivision (b). If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees.
F.R.Bankr.P. 9011(c)(1)(A) (emphasis added).
The 21-day requirement provides a safe harbor, "in that a party will not be subject to sanctions on the basis of another party's motion unless, after receiving the motion, it refuses to withdraw that position or to acknowledge candidly that it does not currently have evidence to support a specified allegation." Fed.R.Civ.P. 11 advisory committee notes (1993 amendment). The intent behind this provision of Rule 11 was "primarily to provide litigants the opportunity of avoiding sanctions by withdrawing offending filings or contentions within the 21-day period and, thereby, reducing the number of sanctions motions brought before the court." Rector v. Approved Fed. Sav. Bank, 265 F.3d 248, 254 n. 3 (4th Cir. 2001).
Compliance with the safe harbor provision is mandatory and cannot be ignored by a party filing a motion for sanctions under Rule 11. Since 1993, when the rule was amended to add the provision, a number of courts have ruled that the provision is an absolute prerequisite to filing a Rule 11 motion for sanctions. See Rector, 265 F.3d at 251-252 (ruling that the safe harbor provision is mandatory, though not jurisdictional); Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1328 (2d Cir. 1995) (holding that the safe harbor period is a specific mandate of Rule 11 that must be complied with); Elliott v. Tilton, 64 F.3d 213, 216 (5th Cir. 1995) (stating that the plain language of Rule 11 indicates that the safe harbor provision is mandatory); Ridder v. City of Springfield, 109 F.3d 288, 296 (6th Cir. 1997) (finding that the safe harbor provision is an absolute requirement); Aerotech, Inc. v. Estes, 110 F.3d 1523, 1528-29 (10th Cir. 1997) (stating that the provision is mandatory).
In his motion, debtor asserts that the complaint by Chevy Chase was filed for an improper purpose and that the factual contentions in the complaint are unsupported by evidence. Debtor points to Chevy Chase's negligence in failing to discover that it had possession of the truck, and its persistence in pursuing the initial adversary proceeding even after discovering that it had possession of the truck.
Debtor did not, however, send a copy of the motion for sanctions to counsel for Chevy Chase prior to filing it with the court, as required by Rule 11. Counsel for Chevy Chase was not given formal notice, served with the motion, or given the opportunity to cure the issues raised in the motion. Debtor asserts that notice of his intent to file a motion for sanctions satisfies the conditions of Rule 9011, and denies that he needed "to serve Chevy Chase Bank with a copy of the motion for sanctions." Pl.'s Answer to Mot. to Dismiss Pursuant to Bankr. Rule 7012(B)(6) at 1. The court disagrees with debtor's assessment of the rule.
Debtor's omission of this mandatory procedural requirement is fatal to his motion for sanctions. Chevy Chase Bank's cross-motion to dismiss is granted. Debtor's motion will be dismissed for failure to comply with the specific mandates of Rule 11. Further exploration of the merits of the motion for sanctions is unnecessary.
A separate order will be entered.