Take Back Control through Rule 11 of the Federal Rules of Civil Procedure

Take Action on Direction Sign - Green Arrow on a Grey Background.

In an attempt to reorganize my personal library, I stumbled upon some sociology textbooks dating back to my college years. While reading through a chapter on learned helplessness[i], I couldn’t help but anecdotally ponder the question as to whether members of the Credit and Accounts Receivable Management Industry are experiencing some form of organizational learned helplessness. The industry is in a twilight zone of sorts, finding itself up against inflexible and powerful bureaucratic forces that are demanding monies and unrealistic obedience to cure-findings that haven’t actually been found, while also combatting metastasizing myths that are not rooted in empirical reality. With that being said, there is an established method for unlearning helplessness, which is to change perception by taking back control.

An on-point application of this technique is to maintain a firm stance against helplessness by fighting frivolous claims and attempted exploitation. Even though this idea or ideal might sound like superficial and clichéd motivational dogma, it is actually consistent with findings by courts around the country that are beginning to see the light. It should come as no surprise that these positive court findings are undoubtedly connected with individual members of the industry taking a principled stance against helplessness by fighting frivolous claims. Point being, while a basic cost-benefit analysis may consistently lead to the conclusion that it’s simply less expensive to pay nuisance value for an entirely manufactured action, this analysis might be shortsighted, because it does not take into account all potential variables, for example the effect on the industry at large and the possibility for a positive shift in perception by refusing to give credence to the surreal. To further this point, just recently, the federal court with quite possibly the highest number of consumer lawsuits in the country, noted the following:

“In this Court…and I suspect in many others, the use of the [FDCPA] has evolved into something quite different than its original purpose would suggest….Frequently, these cases are brought on behalf of the same debtor-plaintiffs, who seize on the most technical alleged defects in collection notices or telephone communications, often raising claims of ‘confusion’ or ‘deception’ regarding practices as to which no one, not even the least sophisticated consumer, could reasonably be confused or misled. These cases are often brought for the non-salutary purpose of squeezing a nuisance settlement and a pittance of attorneys’ fees out of a collection company, which it will often find cheaper to pay than to litigate….The collection company in this case did everything by the book, and yet has still found itself a defendant in an FDCPA action.”[ii]

 Just in the last year, there have been some interesting case developments with companies affirmatively and successfully using Rule 11 of the Federal Rules of Civil Procedure,[iii] which stands as the ne plus ultra of deterrent sanctions. To better understand this possible shift in perception, I reviewed a random sample of 15 FDCPA cases containing Rule 11 filings by respective defendants within the last year.[iv] This does not account for effectively using a Rule 11 letter to compel a voluntary dismissal of an objectively frivolous lawsuit, nor does it account for other sanctions powers, such as vexatious litigation,[v] discovery sanctions,[vi] pretrial conference sanctions[vii] and the Inherent Power of the Court to issue applicable sanctions.

However, this article would not be complete without mentioning the recent victory out of the Northern District of Texas, in which the defendant went all the way to trial and beyond to expose what amounted to a shakedown by a massive multi-state “consumer attorney” operation.[viii] While the defendant strictly requested discovery sanctions[ix] and sanctions for vexatious conduct,[x] the court found that “[plaintiff’s attorneys] effected a fraud on the Court through evasion, prevarication and outright lies, in an attempt to avoid negative legal consequences against them and their firm…,” and used the Inherent Power of the Court to deliver three-year suspensions to the plaintiff’s attorneys. Once again, it goes without saying that this result would not be possible without the defendant’s decision to decisively defend against frivolous allegations and attempted exploitation.

In reviewing the random sample of cases, I was surprised to see that Rule 11 sanctions were actually granted in 6 out of the 15 cases, and I was even more surprised as to the considerate and at times sympathetic tone of the courts throughout the country in cases where sanctions were denied for mostly technical reasons.

In cases where sanctions were granted, courts found various abuses by plaintiffs and their attorneys in reaching a determination that Rule 11 was a proper deterrent to prevent against future misconduct. See:

  • Shetiwy v. Midland Credit Mgmt., a finding that plaintiffs’ attorney has brought numerous meritless claims;[xi]
  • Duncan v. CitiMortgage, Inc., the11th circuit upholding a finding of Rule 11 sanctions, due to a lack of factual basis in the complaint and the plaintiff’s failure to address why individual defendants were included, despite having multiple opportunities to do so;[xii]
  • Farley v. Bank of Am., N.A., a holding that courts have the authority to protect defendants from the harassment of frivolous and vexatious lawsuits, and to protect themselves from having to process frivolous and repetitive papers;[xiii]
  • Tacoronte v. Cohen, entering an order for Rule 11 sanctions, as the plaintiff’s claims were frivolous, presented for the improper purpose of harassment, and asserted without evidentiary support);[xiv] and
  • Diaz v. First Marblehead Corp, finding bad faith where the plaintiff’s attorney knew his client’s claim was frivolous and still chose to pursue it.[xv]

In conclusion, in arrogating to themselves the power to determine guilt without perceived consequence, some attorneys and regulators claiming to represent consumers have done everything possible to usurp the role of the court as the fundamental arbiter of justice. To this point, I’m not advocating for expending gratuitous monies on every case or for a letter threatening litigation, but if a matter is unequivocally objectively frivolous, I do advocate that we Take Back Control.

by Scott E. Wortman, Partner Warshaw Burstein, LLP

555 Fifth Avenue, New York, NY 10017

www.wbcsk.com,  attorney profile

E-Mail: SWORTMAN@wbcsk.com

Direct Telephone:  212-984-7723 , Cell phone: 646-709-6408, Facsimile: 212-972-9150


[i] By way of example, see http://www.britannica.com/topic/learned-helplessness

[ii] Huebner v. Midland Credit Mgmt., 2015 U.S. Dist. LEXIS 16677 (E.D.N.Y. Feb. 11, 2015)

[iii] Rule 11(b): By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies 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, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support or, if specifically so identified, will likely 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 belief or a lack of information.

[iv] Hopkins v. Capital One Bank, USA, N.A., 2015 U.S. Dist. LEXIS 8346 (W.D. Wis. Jan. 26, 2015); Bernard v. MGC Mortg., Inc., 2015 U.S. Dist. LEXIS 47818 (W.D. Tex. Apr. 10, 2015); Justice v. Gemini Capital Group, LLC, 2015 U.S. Dist. LEXIS 60623 (D. Colo. May 8, 2015); Kniley v. Citibank, N.A., 2015 U.S. Dist. LEXIS 53021 (N.D. Cal. Apr. 22, 2015); Wood v. Citibank, N.A., 2015 U.S. Dist. LEXIS 73067 (M.D. Fla. June 4, 2015); Mulato v. Wells Fargo Bank, N.A., 2014 U.S. Dist. LEXIS 176404 (N.D. Cal. Dec. 19, 2014); Dicion v. Mann Mortg., LLC, 2014 U.S. Dist. LEXIS 159675 (D. Haw. Nov. 10, 2014); Schwantes v. Monco Law Offices, 2014 U.S. Dist. LEXIS 116532 (D. Minn. Aug. 21, 2014); Rojas v. Forster & Garbus LLP, 2014 U.S. Dist. LEXIS 105780, 2014 WL 3810124 (E.D.N.Y. July 31, 2014); Shetiwy v. Midland Credit Mgmt., 2014 U.S. Dist. LEXIS 104244, 2014 WL 3739512 (S.D.N.Y. July 28, 2014); Huebner v. Midland Credit Mgmt., 2015 U.S. Dist. LEXIS 16677 (E.D.N.Y. Feb. 11, 2015); Duncan v. CitiMortgage, Inc., 2015 U.S. App. LEXIS 10111 (11th Cir. Ga. June 16, 2015); Farley v. Bank of Am., N.A., 2015 U.S. Dist. LEXIS 75972 (E.D. Va. June 11, 2015); Tacoronte v. Cohen, 594 Fed. Appx. 605, 2015 U.S. App. LEXIS 2622 (11th Cir. Fla. 2015); Diaz v. First Marblehead Corp., 2014 U.S. Dist. LEXIS 174853 (M.D. Fla. Nov. 3, 2014)

[v] 28 U.S.C. § 1927

[vi] Federal Rules of Civil Procedure §§ 26(g), 30(d), 37(c) and (d)

[vii] Federal Rules of Civil Procedure § 16(f)(1)

[viii] White v. Regional Adjustment Bureau, Inc. 11-cv-01817-B, Northern District of Texas (Dallas)

[ix] Fed. R. Civ. P. 37

[x] 28 U.S.C. § 1927

[xi] 2014 U.S. Dist. LEXIS 104244, 2014 WL 3739512 (S.D.N.Y. July 28, 2014)

[xii] 2015 U.S. App. LEXIS 10111 (11th Cir. Ga. June 16, 2015)

[xiii] 2015 U.S. Dist. LEXIS 75972 (E.D. Va. June 11, 2015)

[xiv] 594 Fed. Appx. 605, 2015 U.S. App. LEXIS 2622 (11th Cir. Fla. 2015)

[xv] 2014 U.S. Dist. LEXIS 174853 (M.D. Fla. Nov. 3, 2014)

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