Alcan Alum. Corp. v. Lyntel Products, Inc.

• Citation: 656 F. Supp. 1138
• Decision Date: 27 March 1987
• Docket Number: No. 85 C 10006.,85 C 10006.
• Parties: ALCAN ALUMINUM CORPORATION, Plaintiff, v. LYNTEL PRODUCTS, INC., Brian C. Egan, Honorable George A. Higgins, Judge, Cook County Circuit Court, Defendants.
• Court: United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)

656 F. Supp. 1138

ALCAN ALUMINUM CORPORATION, Plaintiff, v. LYNTEL PRODUCTS, INC., Brian C. Egan, Honorable George A. Higgins, Judge, Cook County Circuit Court, Defendants.

No. 85 C 10006.

United States District Court, N.D. Illinois, E.D.

March 27, 1987.

Darlene A. Vorchek, Sidley & Austin, Chicago, Ill., Lawrence A. Salibra II, Peter D. Miller, Gorden P. Becker, Alcan Aluminum Corp., Cleveland, Ohio, for plaintiff.

George J. Cotsirilos, Robert M. Stephenson, Matthew F. Kennelly, Cotsirilos & Crowley Ltd., Chicago, Ill., for respondents, Lawrence Salibra II, Peter Miller, and Gorden Becker.

Terry McDonald, Patrick J. Agnew, Chicago, Ill., for defendants.

MEMORANDUM

LEIGHTON, Senior District Judge.

Judgment was entered against Alcan Aluminum Corporation in the Circuit Court of Cook County for breach of contract and, having appealed in the courts of Illinois, it filed this civil rights suit seeking a declaration that the judgment was null and void and an injunction restraining its enforcement. The following is the factual background of this controversy.

I

Alcan was sued by Lyntel Products for breach of contract; and after a bench trial presided over by Judge George A. Higgins, a judgment was entered against it for $100,000. Alcan appealed to the appellate court of Illinos under various legal theories. The court reversed and remanded the case to Judge Higgins, holding that liability should not have been imposed on Alcan without a determination whether payment of front money was a condition precedent to the formation of the contract. Lyntel Products Inc. v. Alcan Aluminum Products Corp., 107 Ill.App.3d 176, 63 Ill.Dec. 4, 437 N.E.2d 653 (1st Dist.1981).

On remand, Alcan requested an evidentiary hearing which it claimed was necessary for the record. Judge Higgins denied Alcan's motion and made the required factual finding on the basis of his recollection of the case. In his findings he stated that prior to imposing liability on Alcan, he had weighed all the evidence and "did then and does now determine that the payment of front money by plaintiffs to defendants was not a condition precedent to the formation of their contract." Lyntel Products Inc. v. Alcan Aluminum Corp., No. 75 L 11387 (Cir.Ct. Cook Co., Ill.; February 25, 1983). Accordingly, he again entered judgment for Lyntel.

Alcan appealed to the appellate court of Illinois, this time claiming as one of its contentions that the trial court erred by entering judgment without holding a full hearing on whether the payment of front money was a condition precedent to the formation of the contract. The appellate court, without an opinion, affirmed Judge Higgins' decision, holding that his failure to hold an evidentiary hearing was not error. Lyntel Products Inc. v. Alcan Aluminum Corp., No. 83-729, Rule 23 Order at 5 (Ill.Ct.App. Dec. 24, 1984) 132 Ill. App.3d 1159, 98 Ill.Dec. 836, 494 N.E.2d 958 (table). Alcan asked for rehearing which was denied; it then petitioned the Supreme Court of Illinois for leave to appeal, which was also denied. No petition for a writ of certiorari from the Supreme Court was filed.

Alcan then instituted this suit, alleging violation of its constitutional rights. In Count I of its amended complaint¹ it alleged that the judgment entered against it, based on a factual finding that was made without an evidentiary hearing, was a denial of due process under the Fourteenth Amendment. In Count II, it alleged that the judgment imposed was a denial of due process in violation 42 U.S.C. § 1983.² Alcan sought a judgment declaring that the state court judgment was null and void and a preliminary and permanent injunction restraining enforcement and execution of that judgment.

On June 13, 1986, this court granted defendants' motion to dismiss the suit with prejudice, concluding that it lacked subject matter jurisdiction over Alcan's claim, one which in essence sought to relitigate issues that had been adjudicated against it in the state court. Alcan Aluminum Corp. v. Lyntel Products Inc., No. 85 C 10006 (N.D. Ill. June 13, 1986) Available on WEST-LAW, DCTU database. In its opinion, the court held that Judge Higgins was clearly an improper party to this suit; noting that he had simply entered judgment in a case where he had jurisdiction over the parties and the subject matter. Based on these considerations, on its own motion, this court entered a rule against Lawrence A. Salibra II, Peter D. Miller and Gordon P. Becker, attorneys for Alcan,³ to show cause why, pursuant to Rule 11, Fed.R. Civ.P., they should not be ordered to pay costs and attorneys' fees each defendant incurred in procuring dismissal of this case and $15,000 into the court's registry. In issuing the rule, the court determined that Alcan's suit had no basis in law; and that this court's dismissal of the suit was based on well known principles of federal jurisdiction which "are known by competent attorneys generally, or which any prudent lawyer can ascertain." Id. at 11.

II

Now before the court is respondents' return to the rule.⁴ They argue that Rule 11 sanctions are appropriate only where the pleader has no plausible good faith argument for his view of the law. They contend that District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), provided a plausible good faith argument that this court had subject matter jurisdiction over the complaint attacking the constitutionality of state court procedures. They assert that the claim that state court rules and procedures denied Alcan procedural due process is comparable to the constitutional claim raised in Feldman over which the Supreme Court found federal district courts have jurisdiction, and that the constitutionality of these procedures can be adjudicated independently from the merits of the state court suit. They insist that federal law permits a party to a state suit to later attack the procedures with constitutional challenges not raised in the state suit.

Judge Higgins has responded. He was the only defendant named in the original complaint and one of the defendants named in the amended complaint. The only action that he took which respondents presumed made him a proper defendant to this suit was entering judgment against respondents' client in the state court proceedings. In his response, he argues that the conclusions reached by this court in dismissing the complaint show that it was not based on a plausible view of the law and was contrary to well established precedent. He asserts that Rhoades v. Penford, 694 F.2d 1043 (5th Cir.1983), relied on by Alcan in bringing suit, was rejected by this court. At the very least, he argues, respondents should have dismissed him from the suit once Lyntel Products was made a defendant. He contends that sanctions may be imposed when a plaintiff sues without sufficient basis to include a party as a defendant; and where a litigant attempts to use the Civil Rights Act to avoid a state court judgment against it. He claims Alcan's suit was contrary to established precedent and was therefore devoid of any reasonable inquiry as to the legal merits of the claim. Thus, he concludes he is entitled to expenses incurred in securing dismissal of this suit.

Brian C. Egan has also responded. Respondents named him as a defendant in the amended complaint when he, along with Lyntel Products Inc., sought to enforce the state court judgment. He argues that the only allegations against him in the suit were that he availed himself of the state courts to obtain a judgment and that these allegations presented no ground for federal relief. He contends there was no constitutional issue in this case and respondents' action was merely an attempt to relitigate in federal court an adverse ruling by the state court. He asserts that the question whether refusal of the state trial judge to hear evidence on remand was proper is simply not a constitutional issue; and consequently, this suit was not well grounded in fact or warranted by existing law. Therefore, he argues he is entitled to fees and costs pursuant to Rule 11.

In reply, respondents argue that this court recognized the proposition of law for which the Rhoades decision stood, but rejected it and held that the allegations of the original and the amended complaint failed to state a claim for deprivation of due process. Thus, respondents assert this court accepted the theory of law under which this case was filed but concluded that the allegations of the complaint failed to state a constitutional claim. For this reason, they contend that imposition of sanctions is inappropriate in this case.

III

Under Rule 11, Fed.R.Civ.P., a lawyer has a duty to limit litigation to contentions well grounded in fact and warranted by existing law, or a good faith argument for its extension or modification. In re TCI Ltd., 769 F.2d 441, 445 (7th Cir.1985). Under the 1983 amendment to the rule, the requirement of bad faith has been eliminated; the standard is now an objective one of reasonableness under the circumstances. Rodgers v. Lincoln Towing Service, Inc., 771 F.2d 194, 205 (7th Cir.1985). Sanctions are proper "where a competent attorney after reasonable inquiry, must say a claim was destined to fail." Zick v. Verson Allsteel Press Co., 623 F.Supp. 927, 932 (N.D.Ill.1985).

Since the rule was amended, the court of appeals for this circuit has not hesitated to impose sanctions to discourage groundless litigation. See e.g., Dreis & Krump Mfg. Co. v. International Ass'n of Machinists, 802 F.2d 247 (7th Cir.1986); Thornton v. Wahl, 787 F.2d 1151 (7th Cir.1986); In re TCI Ltd., 769 F.2d 441 (7th Cir.1985). It has imposed sanctions on its own motion to "remind counsel that they may not make assertions of law for which there is no support," Thornton, 787 F.2d at 1153, and has held it is an abuse of discretion for the district court to decline to impose sanctions in appropriate circumstances. Dreis, 802 F.2d at 255. In Drei...