U.S. v. Milam, 87-8342

Decision Date19 September 1988
Docket NumberNo. 87-8342,87-8342
Citation855 F.2d 739
Parties, 48 Ed. Law Rep. 1119 UNITED STATES of America, Plaintiff-Appellee, v. Henry L. MILAM, Defendant-Appellant, W. LaRue Boyce, Jr., Appellant.
CourtU.S. Court of Appeals — Eleventh Circuit

W. LaRue Boyce, Jr., Atlanta, Ga., pro se.

Richard H. James, Decatur, Ga., for Milam.

Robert L. Barr, Jr., U.S. Atty., Myles E. Eastwood, Asst. U.S. Atty., Atlanta, Ga., for the U.S.

Appeals from the United States District Court for the Northern District of Georgia.

Before KRAVITCH and CLARK, Circuit Judges, and NICHOLS *, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

Henry L. Milam and his former attorney, W. LaRue Boyce, appeal the district court's imposition of sanctions against them for pursuing a frivolous statute of limitations defense in violation of Fed.R.Civ.P. 11. We affirm.

I.

This dispute arises out of an attempt by the United States to collect on three federally insured student loans that Milam obtained from the First National Bank of Chicago in the early 1970's. Milam borrowed a total of $4500 for study at Meharry Medical College in Nashville, Tennessee. The terms of the loans required Milam to begin repayment nine months after he ceased to carry at least half of a normal workload at an academic institution. Milam ceased to carry such a workload on or before June 1974, but he failed to make any repayments as required. Under the law applicable at the time, the loans went into default either 120 or 180 days after the nine-month period expired. 1 Milam was in default on his obligations by August 1975.

The statute of limitations applicable to contract actions for money damages brought by the United States, 28 U.S.C. Sec. 2415(a), bars such actions "unless the complaint is filed within six years after the right of action accrues." Assuming the date of accrual of the government's action against Milam to be August 1975, the government should have brought its action on Milam's loans by August 1981. 2 Nonetheless, Milam made two partial repayments on the loans in July and September 1983. By doing so, he invoked a provision in 28 U.S.C. Sec. 2415(a) that "in the event of later partial payment or written acknowledgment of debt, the right of action shall be deemed to accrue again at the time of each such payment or acknowledgment." The language of the statute does not distinguish between partial payments made during the original limitation period and partial payments made after the sixth year. Milam's partial payments thus gave the government another six years to commence its action.

The government filed a complaint for the recovery of the remainder of the debt on April 9, 1985. Proceeding pro se, Milam filed a motion to dismiss, asserting that the action was barred by the statute of limitations. The district court denied Milam's motion and stated in a footnote that "if [the government's] version of the relevant events is correct, it will likely prevail on the statute of limitations issue." The district court cited 28 U.S.C. Sec. 2415(a) as support for this observation. Milam failed to take the hint, however, and filed pro se an answer that alleged the statute of limitations as a defense. Milam thereafter filed an untimely amended answer through his attorney Boyce, again raising the statute of limitations. In an order permitting Milam to file the untimely amended answer, the district court warned that "this student loan troubles the Court.... [Milam] must be prepared to face the consequences of asserting a frivolous defense.... [D]efendant's statute of limitations argument appears to be spurious. Defendant and his counsel should be advised that if the court's suspicions about the merits of his defense are confirmed, it will not hesitate to award plaintiff attorney's fees in prosecuting this action. See 28 U.S.C. Secs. 1927, 2412(b). In addition, the Court is likely to impose sanctions against defendant and his counsel under Fed.R.Civ.P. 11."

Milam obtained new counsel, Richard James, after Boyce was suspended from the practice of law for six months by the Supreme Court of Georgia. James and the government's attorneys filed a preliminary statement pursuant to the local rules of the district court, stating that the applicability of the statute of limitations was the controlling issue in the case. The government then moved for summary judgment. Milam and his counsel failed to file any papers in response to the government's motion. The district court granted summary judgment for the government and directed Milam and his attorney to show cause why they should not be sanctioned pursuant to Rule 11.

After an evidentiary hearing, 3 the district court imposed sanctions on Milam and Boyce but not James. 4 The district court first concluded that Milam's motion to dismiss was frivolous in light of the plain language of the statute of limitations. The district court further determined that Milam should be held responsible for the actions taken by Boyce after Boyce assumed his representation, for "Milam played a prime role in establishing his litigation posture and indeed may well have dictated many of counsel's tactics." Boyce deserved sanctions, according to the district court, because his assertion of the limitations defense on Milam's behalf "resulted from a failure to conduct the basic inquiry required by Rule 11." The district court held Milam and Boyce liable to the government for attorney's fees in the amount of $3,080, reflecting 44 hours of work at the rate of $70 per hour. The court additionally found "aggravating factors" for imposing further punitive sanctions on Milam, as Milam's steadfast refusal to recognize a valid debt was a "willful abuse of judicial resources," and levied an additional fine of $5000 on Milam.

II.

Rule 11 of the Federal Rules of Civil Procedure provides in part:

Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in the attorney's individual name, whose address shall be stated. A party who is not represented by an attorney shall sign the party's pleading, motion, or other paper and state the party's address.... The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.... If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.

This court recently had occasion to consider the application of Rule 11 in Donaldson v. Clark, 819 F.2d 1551 (11th Cir.1987) (en banc). In Donaldson, we noted that Rule 11 sanctions were designed to "discourage dilatory or abusive tactics and help to streamline the litigation process by lessening frivolous claims or defenses." Id. at 1556 (citation omitted). We further observed that at least three distinct, but at times overlapping, types of conduct by a party or attorney might warrant the imposition of Rule 11 sanctions. First, a party might file a pleading or other paper that has no reasonable factual basis. Second, a party might advance a legal theory that has no reasonable chance of success under the state of the decisional and statutory law and that cannot be advanced as a reasonable argument to reverse, modify, or extend the law. Third, a party might file a motion or pleading for purposes of harassment or delay. In Donaldson we distinguished these three kinds of behavior in establishing standards for appellate review of a district court's decision to impose Rule 11 sanctions: "Whether (1) factual or (2) dilatory or bad faith reasons exist to impose Rule 11 sanctions is for the district court to decide subject to review for abuse of discretion; on the other hand, a decision whether a pleading or motion is legally sufficient involves a question of law subject to de novo review by this court." Id. at 1556. 5

Parties appealing from Rule 11 sanction orders should also understand that appellate review of the district court's conclusion that certain behavior warrants sanctions is conceptually distinct from appellate review of the particular sanction imposed. This distinction should be apparent from a general appreciation of the operation of Rule 11 and from a reading of the Donaldson opinion. In Donaldson, the district court ordered the appellant to pay reasonable attorney's fees to the appellees and additionally fined the appellant $500. Id. at 1554. We gave extended consideration to the propriety of ordering a party to pay a financial penalty in addition to costs and attorney's fees. Id. at 1556-58. As appellate review of Rule 11 sanction orders becomes more common, the issue of whether a particular sanction is appropriate undoubtedly will develop parts and sub-parts. For example, an appellant might urge us to consider whether the district court should have sanctioned the attorney as opposed to the represented party; 6 whether the particular type of sanction was appropriate; 7 and whether the particular sanction imposed was excessive.

We mention this distinction between review of the decision to impose sanctions and review of the actual sanction imposed because appellants urged at oral argument that the fine imposed by the district court was excessive....

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