Opinion
Civil Action No. 04-1161.
September 29, 2004
MEMORANDUM
I. Introduction
Presently before the Court is a Motion for Rule 11 sanctions against Steven R. Petersen, Esquire, counsel for Plaintiff James Morrow, Jr. ("Plaintiff's counsel"). Defendants Maribeth Blessing, Maribeth Blessing, LLC, Elvelina Howard and Ruth Henry (collectively referred to as "Defendants") contend that Plaintiff's claims brought under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) ("RICO"), the Lanham Act and several pendent state law theories, are frivolous on their face. Another defendant, John Prince, has represented himself pro se in these proceedings and has not joined in this motion.
Defendants' Motion will be granted; however, further proceedings will be necessary to determine the sanctions to be imposed.
II. Background
Whether Plaintiff's counsel failed to comply with Rule 11 must be set against the background of hearings held on April 15, 2004 at which the Court addressed motions filed by Defendants seeking a judgment on the pleadings and to dismiss the Complaint (filed by Defendant Prince), and on August 25, 2004, specifically on the issue of Rule 11. At the first hearing, the Court expressed serious concern regarding the viability of Plaintiff's RICO cause of action.
Pursuant to an Order entered after the April 15, 2004 hearing, Plaintiff filed a RICO Case Statement on May 5, 2004, but, although granted leave to do so, never filed an Amended Complaint. Responses to the RICO Case Statement were received. Thereafter, the Court issued a Memorandum and Order dated July 23, 2004, granting Defendant John Prince's Motion to Dismiss and the other Defendants' Motion for Judgment on the Pleadings, finding that Plaintiff failed to state a claim under RICO and the Lanham Act and dismissing the pendent state claims for lack of jurisdiction. This Memorandum will not repeat the reasons stated in the earlier Memorandum in support of the ruling.
At an August 25, 2004 hearing regarding Rule 11 sanctions, Plaintiff's counsel claimed to have been working on Plaintiff's Amended Complaint up until the time the Court dismissed Plaintiff's Complaint on July 23, 2004. This constituted a period of 99 days. At that point it was unreasonable for the Court to wait any longer for Plaintiff's counsel to file an Amended Complaint or even to believe that Plaintiff's counsel ever intended to file an Amended Complaint.
At the August 25, 2004 hearing, the Court acknowledged that Plaintiff's Complaint sufficiently connected only Defendant Prince to the creation and mailing of the November 2002 anonymous letter. Although these facts would have given Plaintiff and his counsel grounds to institute litigation against Prince in state court, the Court concludes that there was no basis on which to sue any of the other Defendants, and no basis on which to assert federal claims under RICO and the Lanham Act. At the hearing, the Court challenged Plaintiff's counsel to show possession of any facts to connect any other Defendant to the November 2002 or November 2003 letters, or to allege violations of RICO or the Lanham Act. At the conclusion of the hearing, the Court granted Plaintiff leave to file additional briefing regarding Defendants' Motion for Rule 11 Sanctions and granted Defendants leave to respond. Plaintiff filed a Supplemental Brief in Opposition to Defendant's Motion for Sanctions on August 30, 2004. Defendants filed a response on August 31, 2004.
As will be discussed in detail below, Plaintiff's Complaint and RICO Case Statement failed to allege facts sufficient to satisfy RICO or the Lanham Act. Further, the infirmities of Plaintiff's claims are made more obvious by counsel's carelessness in filing the RICO Case Statement. Plaintiff's counsel has failed to show that he satisfied his Rule 11 obligations in preparing and signing his pleadings in this case. These deficiencies warrant a finding that Plaintiff's attorney violated Rule 11.
For a detailed discussion of these letters see the Court's previous Memorandum and Order dated July 23, 2004 at pages 3-4, and at pages 5, fn. 2, 18, fn. 7, 19, fn.8-9.
III. Legal Standard
Rule 11 authorizes the Court to impose "sanctions upon the signer of any pleading, motion or other paper that was presented for an improper purpose, e.g., `to harass or to cause unnecessary delay or needless increase in the cost of litigation.'" Martin v. Brown, 63 F.3d 1252, 1264 (3d Cir. 1995) (quoting Landon v. Hunt, 938 F.2d 450, 452 (3d Cir. 1991)). The goal of Rule 11 is the "correction of litigation abuse." Gaiardo v. Ethyl Corp., 835 F.2d 479, 483 (3d Cir. 1987). And, while it is rare that a court will impose Rule 11 sanctions, they are nonetheless appropriate where "a claim or motion is `patently unmeritorious or frivolous.'" Arab African Int'l Bank v. Epatein, 10 F.3d 168, 175 (3d Cir. 1993). In evaluating the appropriateness of sanctions under Rule 11 courts must view an attorney's actions based on an "objective standard of reasonableness under the circumstances.'" Gaiardo, 835 F.2d at 483 (quoting Landon, 938 F.2d at 453 n. 3).
IV. Discussion
A. RICO
In applying the standard of "reasonableness under the circumstances," the Court finds that Plaintiff's claims under RICO were not only unmeritorious but also frivolous. In reaching this conclusion, the Court notes that Plaintiff's Complaint and RICO Case Statement, as explained in the Court's July 23, 2004 Memorandum and Order, completely failed to meet any of the requirements of RICO. Similar to a previous case in this District, Plaintiff's Complaint and RICO Case Statement "contain[ed] nothing more than the most conclusory of allegations and the repetitious use of RICO catchwords." See Alexander v. Jenkins, No. 89-4050, 1990 WL 98960, at *5 (E.D. Pa. 1990) (imposing sanctions where, as in the present case, plaintiff, a disappointed home buyer filed a RICO suit, but failed to allege an enterprise, a pattern of racketeering, a cognizable RICO injury or any particular act that constitutes a conspiracy among the defendants). Additionally, at the August 25, 2004 hearing and in his supplemental briefing, Plaintiff's counsel presented the Court with no reason to believe that he could have reasonably believed Plaintiff to possess a valid RICO cause of action.
To state a cause of action under RICO, a Plaintiff must allege: (1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity as well as an injury resulting from the offensive conduct. Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985); Warden v. McLelland, 288 F.3d 105, 114 (3d Cir. 2002). Hence, while fraud constitutes an element of RICO, not every cause of action for fraud constitutes a RICO violation. A "plaintiff proceeding to trial in a RICO case must show more than fraud. [He] must show that the conduct of the fraudulent scheme was perpetrated through an enterprise." Healthguard of Lancaster, Inc. v. Gartenberg, No. 02-2611, 2004 U.S. Dist. LEXIS 4437, at *17-18 (E.D. Pa. Mar. 5, 2004) (Baylson, J.).
The existence of an enterprise through which defendants act, therefore, is the most basic precept of a RICO cause of action. Although the Court's prior Memorandum found that the Plaintiff had failed to adequately allege a RICO enterprise, the Court will not rest its finding of a Rule 11 violation on this point because the cases, particularly in the District Courts, have widely varied on the requirements of an enterprise. See July 23, 2004 Memorandum, pages 9-14.
In his opposition to Defendants' Motion for Sanctions, Plaintiff's counsel argues that the Supreme Court's holding inU.S. v. Turkette, 452 U.S. 576 (1981) provides him with a reasonable basis to allege an enterprise composed of Howard and Prince. The Supreme Court in Turkette held that "an enterprise includes any union or group of individuals associated in fact." 452 U.S. at 580-81. However, these few words do not reflect the extensive jurisprudence which sets forth the definition of an enterprise. For example, Turkette predates, by many years, the Third Circuit's holding in Jaguar Cars v. Royal Oaks Motor Car Co., 46 F.3d 258 (3d Cir. 1995), and a subsequent controlling decision by the Supreme Court, Cedric Kushner Motions Ltd. v. King, 533 U.S. 158 (2001), both of which require distinctiveness between the enterprise and the individually named defendants. The Court discussed both of these opinions and the significant impact they had on RICO jurisprudence in its July 23, 2004 Memorandum and Order; Plaintiff's counsel did not cite them in his briefs at any time. Plaintiff correctly cites the case of Perlberger v. Perlberger, NO. 97-4105, 1998 U.S. Dist. LEXIS 1964 (E.D. Pa. Feb. 25, 1998), in support of his argument that there can be a complete overlap of individual defendants and a RICO enterprise. Because of Perlberger and similar District Court holdings, the deficiencies in pleading a RICO enterprise will not be grounds for Rule 11 sanctions.
A more fundamental failure by Plaintiff's counsel is the lack of any facts alleged to connect any Defendants, other than Prince, to conduct actionable under RICO or the Lanham Act. Specifically, Plaintiff's Complaint and RICO Case Statement did not connect any other defendant to the alleged predicate acts of creating and mailing the November 2002 and November 2003 anonymous letters. Plaintiff had grounds to allege that Defendant Prince played a role in the creation and mailing of at least the first anonymous letter. However, this alone does not give rise to a RICO cause of action, nor does it supply grounds to make allegations against other defendants.
The Court questioned Plaintiff's counsel about this deficiency at the August 25, 2004 hearing. (Tr. at 11-18). With respect to Defendant Howard, Plaintiff's counsel reasserted the allegation that Defendant Howard and Defendant Prince had engaged in a longstanding romantic relationship. However, this alone does not suffice to allege that Defendant Howard participated in the creation and mailing of the November 2002 and November 2003 letters. See July 23, 2004 Memorandum and Order at 15.
Additionally, at the August 25, 2004 hearing, Plaintiff's counsel argued that the two anonymous letters contained information that could only be known by someone — such as Howard — who had access to Plaintiff's residence. (Tr. at 8). However, this allegation is nowhere to be found in Plaintiff's Complaint or RICO Case Statement. Instead, Plaintiff's Complaint, regarding the November 2002 letter, only broadly alleges that the letter contains various statements "that have defamatory meaning with respect to plaintiff Morrow." (Complaint ¶ 23.)
Assuming arguendo for a moment that this belated explanation suffices to explain Plaintiff making some common law allegation against Defendant Howard, Plaintiff's counsel has still failed to provide a reasonable basis to connect Defendants Henry, Blessing and Blessing LLC to the creation or mailing of the November 2002 and November 2003 letters. Furthermore, Plaintiff's counsel has not justified making RICO and Lanham Act allegations against any of the Defendants. In his post-hearing briefs, Plaintiff's counsel has merely rehashed arguments already rejected in the July 23, 2004 Memorandum and Order, or presented new theories of liability which were not previously articulated in Plaintiff's Complaint or RICO Case Statement.
The RICO Case Statement is similarly deficient. Although it generally avers that "Howard and Prince directed or participated in the creation and mailing of [the November 2002] letter," (RICO Case Statement ¶ b.1) the RICO Case Statement does not provide any facts to support this statement. This runs contrary to the requirement, spelled out in the Court's Order following the April 15, 2004 hearing, and as discussed on page 15 of the Court's July 23, 2004 Memorandum and Opinion, that allegations of fraud be stated with particularity. Additionally, Plaintiff's counsel never amended the Complaint.
The allegations regarding the November 2003 anonymous letter are similarly deficient. Plaintiff's Complaint asserts that the author purports to "have personal knowledge of [Plaintiff's daughter] Jamesa Morrow and sufficient knowledge of psychology to conclude that Morrow was hurting his daughter emotionally and psychologically." (Complaint ¶ 39.) However, at no point in the Complaint does Plaintiff assert that the contents of the letter had been expressed by Howard or any other defendant. In fact, Plaintiff's RICO Case Statement states that "Plaintiff alleges that Defendant Henry directed or participated in the creation and mailing of the letter, but is presently unable to allege whether defendants directed or participated in the creation and mailing of the letter because the defendants having knowledge thereof have concealed such knowledge." (RICO Case Statement ¶ b.2.) Thus, while this statement is internally contradictory, assuming it implicates Henry, it does not implicate Howard or any other defendant. Additionally, Plaintiff's RICO Case Statement provides no facts to support the allegation that Henry participated in the creation and mailing of the letter. In fact, Plaintiff's RICO Case Statement concedes that he lacks a basis to connect any defendant to the creation and mailing of the November 2003 letter. Thus, this allegation also fails the Rule 9(b) particularity requirement, and essentially admits Plaintiff did not have grounds for these allegations, as required by Rule 11.
Although it is impossible to determine, this may be yet another instance in which Plaintiff's counsel confuses Defendant Henry with Defendant Howard, as Defendant Henry's participation in the creation and mailing of the November 2003 anonymous letter does not fit with Plaintiff's overall depiction of the alleged scheme against him, wherein Defendant Henry, through Defendants Blessing and Blessing, LLC, only became involved in the alleged fraudulent scheme by filing the anonymous November 2002 and November 2003 letters as attachments to court documents.
Regarding Defendants Blessing and Blessing, LLC, Plaintiff's counsel wholly failed to connect them to any prohibited conduct under RICO. At the August 25, 2004 hearing, Plaintiff's counsel merely reiterated the same argument already rejected in the July 23, 2004 Memorandum and Order — namely that Henry, Blessing and Blessing, LLC are liable under RICO for Blessing's actions in attaching the November 2002 and November 2003 letters to legal documents in state court custody proceedings and mailing Plaintiff's counsel a letter stating that Blessing's clients did not author the letters. As discussed in the July 23, 2004 Memorandum, it is well settled by precedent that such conduct by a lawyer in the context of representing clients in litigation simply cannot constitute mail fraud under RICO and, therefore, cannot constitute a RICO predicate act. July 23, 2004 Memorandum at 26-27. A review of case law would have revealed this simple legal truth to Plaintiff's counsel. Plaintiff's RICO Case Statement failed to supply the required details for the skimpy allegations in the Complaint. Plaintiff's briefs opposing the Motions to Dismiss and for Judgment on the Pleadings did not have any case support for the claims against Ms. Blessing and her law firm.
In Plaintiff's Supplemental Brief in Opposition to Defendant's Motion for Sanctions, Plaintiff's counsel cites to two cases not cited in any of the previous memoranda of law submitted with the Court — State Farm Auto. Ins. Co. v. Makris, No. 01-5351, 2003 U.S. Dist. LEXIS 3374 (E.D. Pa. Mar. 4, 2003), and U.S. v. Eisen, 974 F.2d 246 (2d Cir. 1992) — for the proposition that the activities of counsel acting in the course of legal representation can give rise to RICO liability. Lawyers assuredly do not have immunity from RICO or the Lanham Act. However, it was Plaintiff's obligation under Rule 11, at the time he signed and filed the Complaint and the RICO Case Statements, to provide support for the allegations that he had made. See Mary Ann Pensiero, Inc., 847 F.2d at 94 ("The wisdom of hindsight should be avoided; the attorney's conduct must be judged by `what was reasonable to believe at the time the pleading, motion, or other paper was submitted.'") (quoting Fed.R.Civ.P. 11 advisory committee note). Nonetheless, the Court finds these cases to be inapplicable to the case at hand.
In Makris, defendant attorneys and their law firm were alleged to have participated in a RICO scheme to defraud the plaintiff insurance company. In this scheme, the clients of defendant attorneys would stage automobile accidents, after which defendant attorneys would assist their clients in: (1) preparing false and fraudulent insurance claims which were submitted to the plaintiff insurance company, (2) filing lawsuits and arbitrations knowing that their clients suffered no injuries and (3) testifying falsely in connection with the lawsuits and arbitrations. Makris, 2003 U.S. Dist. LEXIS at *28-29. On a Motion to Dismiss, this case was permitted to go forward. However, the pertinent issue — whether or not the conduct of an attorney in the course of representation can result in RICO liability — was never raised. Instead, the attorney defendants challenged the plaintiff's claims on the grounds that the "Amended Complaint and RICO Case Statement [did] not contain sufficient specific factual allegations concerning their participation in the pattern of racketeering activity." Id. at *28. Additionally, Makris can be distinguished on its facts. In Makris it was alleged that the attorney defendants went beyond their role as legal counsel and took on an active role in participating and creating fraudulent documents for their defendant clients. Here, it is only alleged that Defendant Blessing, through her law firm, Blessing, LLC, in the course of representing Defendant Henry submitted, in state court, two anonymous letters that she knew or should have known to be false, and falsely represented to Plaintiff's counsel that her clients did not author the letters. This significantly differs from specific factual allegations that an attorney actively directed and participated in a fraudulent scheme. Thus, the holding in Makris has no applicability to the issue raised by defendants in this case.
The same deficiencies are present in the Eisen case. Again, the issue of whether an attorney can be liable under RICO for actions taken in the course of representation in litigation was never raised. Additionally, the actions of the attorney defendants in Eisen, like the attorneys in Makris, went well beyond their capacities as legal representatives. The attorneys in Eisen allegedly pressured accident witnesses to testify falsely that they had witnessed accidents, bribed unfavorable witnesses not to testify and created false photographs, documents and physical evidence for use before and during trial. Eisen, 974 F.2d at 246. The facts of Eisen are at odds with those of the present case. Defendant Blessing, through her law firm, only made use of two anonymous letters in the course of her representation of her clients Howard and Henry. Even assuming Blessing had reason to know they were false does not give rise to a RICO case. In the July 23, 2004 Memorandum, the Court finds that Plaintiff possessed no reasonable basis to bring suit against Defendants Henry, Blessing and Blessing, LLC based upon Defendant Blessing's use of the anonymous letters in state custody proceedings and her representation to Plaintiff's counsel that her clients did not author the letters.
Plaintiff's counsel also cites generally to the case ofPerlberger v. Perlberger, supra, note 3, for the proposition that Plaintiff's claims were not unreasonable. While that case named an attorney and his law firm as defendants, the attorney inPerlberger, like the attorneys in Makris and Eisen, was actively participating in and directing an alleged fraudulent scheme, whereby he utilized his law firm to shield his assets and income from the scrutiny of his wife in anticipation of divorce proceedings. Perlberger, 1998 U.S. Dist. LEXIS at *6. Again, such facts are totally distinct from the alleged actions of Blessing and her law firm.
The Plaintiff's naming of attorney Blessing and her law firm under the paucity of facts is the most egregious abuse under Rule 11. The Court does not find any grounds whatsoever for naming them as defendants under any theory of law as they were merely representing their clients in domestic relations litigation. However, assuming arguendo that the Plaintiff had adequate grounds for filing a RICO Complaint against the other defendants, it was Plaintiff's obligation to specify the grounds for RICO with the specificity required by the RICO statute in many decided cases in this and other districts upholding the requirement of a detailed RICO Case Statement. At the hearing on April 15, 2004, Plaintiff's counsel was advised that the Court was concerned as to whether he had fulfilled his Rule 11 obligations. The RICO Case Statement was an opportunity to justify those RICO allegations by coming forward with the specificity required in the Court's Order of April 15, 2004.
The Court also notes that Plaintiff's counsel failed to allege how the anonymous letters proximately caused Plaintiff any injury. July 23, 2004 Memorandum at 29-30. As the Court held, even if the state court ordered Plaintiff to pay additional child support, and assuming child support payments constituted a cognizable RICO injury, too many other factors, such as the testimony of the parties and witnesses, would be involved in the ultimate decision to allow a conclusion that the anonymous letters constituted the proximate cause of Plaintiff's injuries. July 23, 2004 Memorandum at 30. When confronted with this issue at the August 25, 2004 hearing, Plaintiff's counsel merely asserted that if child support payments were ordered, the only possible assumption is that they were proximately caused by the alleged defamatory content in the anonymous letters. Tr. at 16. For reasons discussed in the July 23, 2004 Memorandum, the Court finds Plaintiff's counsel had no grounds to allege causation.
It should be noted that at the time Plaintiff's Complaint was filed no child support payments had been Ordered, creating further doubt that Plaintiff could prove proximate causation.
The last particularly notable failure by Plaintiff's counsel regarding Plaintiff's RICO's claim was counsel's failure to allege an effect on interstate commerce. See July 23, 2004 Memorandum at 16-18. As discussed in the Court's previous Memorandum, intrastate child support payments do not, as a matter of law, constitute interstate commerce. July 23, 2004 Memorandum at 16-18. Additionally, Plaintiff's allegations regarding interstate commerce were extremely meager. The Complaint alleges nothing regarding interstate commerce, and the RICO Case Statement, instead of providing specific facts, as required, alleges only "the scheme described herein affect[s] interstate commerce" (RICO Case Statement ¶ g). Such a conclusory allegation evidences that Plaintiff's attorney did little or no investigation and/or research regarding what constitutes an effect on interstate commerce.
At the August 15, 2004 hearing Plaintiff's attorney argued that he justifiably plead an effect on interstate commerce because the anonymous letters were sent through the mail. (Tr. at 21). In support, Plaintiff's counsel cites to the case of Curtin v. Tilley Fire Equip. Co., No. 99-2373, 1999 U.S. Dist. LEXIS 19467 (E.D. Pa. Dec. 14, 1999). In that case, the plaintiff alleged a scheme through which the defendant attempted to deprive plaintiff of his worker's compensation payments by utilizing the U.S. Mail Service to send plaintiff's worker compensation payments to the incorrect address. Although this alleged scheme was held to affect interstate commerce, the facts are completely distinguishable from the facts of the present case. In Curtin, a payment made out to the Plaintiff passed through the U.S. mail. In contrast, all that passed through the mail in the present case were allegedly defamatory letters. These letters had no commercial content, and as previously stated, the alleged scheme — to extract intrastate child support payments — did not, as a matter of law, affect interstate commerce. If the Court were to agree with the argument articulated by Plaintiff's counsel, then every letter sent through the U.S. mail, including personal correspondence, could have an impact on interstate commerce. Thus, even through the lens of Curtin the Court strains to see how the mailings of the November 2002 and November 2003 letters possibly relate to interstate commerce.
B. Lanham Act
With respect to Plaintiff's Lanham Act claim, Plaintiff's counsel argued at the August 25, 2004 hearing that his client's claims were based on a plain language interpretation of the Lanham Act itself. (Tr. at 22-26). This contention is clearly wrong and unreasonable. As explained in the Court's previous Memorandum and Opinion, the Lanham Act applies to:
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which —
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . .
(B) . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
July 23, 2004 Memorandum and Opinion at 32 (quoting 15 U.S.C. § 1125(a) (emphasis added).
By its plain terms, the Lanham Act requires some nexus to commerce. This plain language interpretation is supported by Third Circuit precedent holding that the Lanham Act primarily applies to the protection of commercial interests. Serbin v. Ziebart Int'l Co., Inc., 11 F.3d 1163, 1177 (3d Cir. 1993). In the present case, Plaintiff has no commercial interests at stake, and Plaintiff's attorney did not cite the applicable cases.
At the August 25, 2004 hearing, Plaintiff's counsel additionally argued that Plaintiff's claims were based on a theory of prudential standing, arguing that Plaintiff as a taxpayer possessed standing to present the claims of the Upper Merion School District, whose name was used in the letterhead of the anonymous letters allegedly authored by Defendants and Prince. This argument also fails, as Plaintiff's Complaint does not allege a commercial injury to the Upper Merion School District. Moreover, the Court finds the precedent to which Plaintiff's counsel cites, Thorn v. Reliance Van Company, Inc., 736 F.2d 929 (3d Cir. 1984), to be unsupportive of his theory of prudential standing. In Thorne, the Third Circuit granted prudential standing to a shareholder of a corporation that was in bankruptcy where the trustee in bankruptcy refused to pursue a Lanham Act claim on behalf of the corporation. Id. at 931. As a shareholder, the plaintiff in Thorne possessed a cognizable financial and ownership interest in the corporation at issue. In contrast, Plaintiff, in the present case, is a taxpayer who possesses no financial or ownership interest in the Upper Merion School District. Unlike an investor, Plaintiff can never reap financial benefits from his tax dollars spent to support the Upper Merion School District. Plaintiff can only reap the benefits of sending his children to the Upper Merion public schools. However, even this does not suffice to establish prudential standing. By sending his children to the Upper Merion public schools, Plaintiff is in a position that is more analogous to that of a consumer than of an investor. And, as the Third Circuit held in Thorne, consumers do not have standing to bring claims under the Lanham Act. Id. (holding that the court's decision was not influenced by a prior decision of the Second Circuit, in Colligan v. Activities Club of New York, Ltd., 442 F.2d 686 (2d Cir. 1971), wherein prudential standing was denied to consumers seeking to maintain a class action under the Lanham Act.).
Thus, it is clear that whether Plaintiff's claims are critiqued based on the issues of commercial activity or prudential standing, Plaintiff possessed no reasonable basis to file a cause of action under the Lanham Act. This is evident not only from a plain language reading of the Act, but also from a review of leading precedent.
C. Sanctions
In their Motion for Rule 11 sanctions, Defendants have requested monetary compensation as well as a punitive fine to deter Plaintiff's counsel from filing frivolous lawsuits in the future. Defendants claim to have incurred $9,311.25 in legal fees.
In punishing conduct under Rule 11, the Third Circuit has held that the Court possesses wide latitude in choosing an appropriate sanction, which at a minimum should "serve to adequately deter the undesirable behavior." Zuk v. Eastern Pa. Psych. Inst. of the Med. College of Pa., 103 F.3d 294, 301 (3d Cir. 1996). "Fee-shifting is but one of several methods of achieving the various goals of Rule 11." Id. Other permissible sanctions include monetary penalties to be paid into the court, reprimands, orders to undergo continuing legal education and referrals to disciplinary authorities. Id. (citing 5A Charles Allen Wright Arthur R. Miller, Federal Practice and Procedure § 1336 (2d ed. Supp. 1996)). Additionally, before courts impose monetary sanctions, they must undertake an investigation into an attorney's ability to pay. Id. District Courts are also encouraged to consider mitigating factors such as "whether the attorney has a history of this sort of behavior, the defendant's need for compensation, the degree of frivolousness and the willfulness of the violation."Id.
In this case, Defendants Henry, Blessing and Blessing LLC seek payment of their counsel fees and costs. The Court will not impose any financial sanctions without first giving Plaintiff's counsel an opportunity to demonstrate to the Court any mitigating factors, and whether he has the ability to pay such sanctions. The Court, having found a violation of Rule 11, invites Plaintiff's counsel, if he so desires, to discuss an amicable resolution of the sanctions issue with defense counsel. Alternatively, Plaintiff's counsel may file a statement as to Plaintiff's financial ability, or lack thereof, to pay sanctions as sought by defense counsel, or at all. Plaintiff's counsel shall report to the Court in writing within two weeks as to his position on this point and may file his statement under seal forin camera examination.
V. Conclusion
As set forth above, the Plaintiff's counsel did not posses an objectively reasonable basis to support the claims set forth in the Amended Complaint and RICO Case Statement filed with the Court. This conclusion is evident from the Court's discussion above and when viewed in light of five factors deemed by the Third Circuit to be relevant to the issue of reasonableness:
(1) The amount of time available to the signer for conducting the factual and legal investigation — Plaintiff's counsel possessed adequate time to develop Plaintiff's case and present valid claims. In fact, Plaintiff's counsel was granted leave to file a RICO Case Statement and an Amended Complaint. However, Plaintiff's counsel failed to make good use of this time and neglected to amend the Complaint;
(2) The necessity for reliance on Plaintiff for the underlying factual information — Although Plaintiff's counsel had to rely on his client to develop the underlying facts of the case, he did not have to rely on his client to present the legal theory of Plaintiff's case;
(3) The plausibility of the legal position advocated — As discussed above, the plausibility of the legal theory advanced by Plaintiff's counsel was weak, especially given that Plaintiff's counsel failed to properly allege even the most fundamental factors of a RICO cause of action or support his claim with specific facts in his RICO Case Statement, and failed to allege a violation of the Lanham Act;
(4) The complexity of the legal and factual issues implicated — Although the claims asserted in Plaintiff's Complaint present fairly complex legal issues, the facts are not complicated and Plaintiff's counsel failed to allege adequately even the most fundamental aspects of Plaintiff's claims; and
(5) Whether the case was referred to the signer by another member of the Bar — The Court does not possess information regarding this factor, and Plaintiff's counsel did not mention this at either hearing. However, given the inability of Plaintiff's counsel to state valid claims, the absence of this one factor does not impact upon the Court's holding that Rule 11 sanctions are appropriate in this case.Mary Ann Pensiero, Inc. v. Lingle, 847 F.2d 90, 95 (3d Cir., 1988).
An appropriate Order follows.
ORDER
AND NOW, this 29th day of September 2004, it is hereby ORDERED that Defendant's Motion for Sanctions under Rule 11 Federal Rules of Civil Procedure is GRANTED for the reasons stated in the foregoing Memorandum. Plaintiff's counsel shall submit within fourteen (14) days a statement regarding any mitigating factors and his ability to pay monetary sanctions, and may file his statement under seal.