Brickwood Contrs. v. Datanet Engineering

Decision Date26 May 2004
Docket NumberNo. 00-2325.,No. 00-2324.,00-2324.,00-2325.
Citation369 F.3d 385
PartiesBRICKWOOD CONTRACTORS, INCORPORATED, Plaintiff-Appellant, v. DATANET ENGINEERING, INCORPORATED; John V. Cignatta, Defendants-Appellees. Brickwood Contractors, Incorporated, Plaintiff-Appellee, v. Datanet Engineering, Incorporated; John V. Cignatta, Defendants-Appellants.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: James Joseph Tansey, Washington, D.C., for Appellant. James F. Lee, Jr., LEE & MCSHANE, P.C., Washington, D.C., for Appellees. ON BRIEF: Brandon M. Gladstone, LEE & MCSHANE, P.C., Washington, D.C.; Edward J. Pesce, EDWARD J. PESCE, P.A., Ellicott City, Maryland, for Appellees.

Before WILKINS, Chief Judge, and WIDENER, WILKINSON, NIEMEYER, LUTTIG, WILLIAMS, MICHAEL, MOTZ, TRAXLER, KING, GREGORY, SHEDD, and DUNCAN, Circuit Judges.

Reversed by published opinion. Judge TRAXLER wrote the majority opinion, in which Chief Judge WILKINS and Judges WILKINSON, NIEMEYER, WILLIAMS, MICHAEL, MOTZ, GREGORY, SHEDD, and DUNCAN joined. Judge WIDENER wrote an opinion concurring in the judgment. Judge LUTTIG wrote an opinion concurring in part and concurring in the judgment. Judge KING wrote an opinion concurring in the judgement.

ON REHEARING EN BANC

OPINION

TRAXLER, Circuit Judge:

Brickwood Contractors, Inc., filed suit against Datanet Engineering and John Cignatta (together, the "defendants"), asserting claims of defamation and tortious interference with business relations. After the district court granted summary judgment in favor of the defendants, the defendants filed a motion seeking sanctions under Rule 11 of the Federal Rules of Civil Procedure. The district court imposed against Brickwood sanctions in the amount of $15,000. Brickwood appealed, and a panel of this court reversed the sanctions order. Sitting en banc, we likewise reverse the district court's order imposing sanctions.1

I.

The facts underlying this dispute are as follows. After submitting the lowest bid, Brickwood entered into a contract with Charles County, Maryland, to repair, clean and restore a water storage tank. K & K Painting, a losing bidder, submitted a bid protest to the county, asking that Brickwood's contract be terminated. The bid protest included a letter written to K & K by defendant John Cignatta, president of defendant Datanet Engineering, Inc. In his letter, Cignatta stated that the "containment method" being used by Brickwood in connection with the removal of lead paint from the water tank violated various OSHA regulations, and the letter used the word "illegal" several times when describing the containment method being used. See J.A. 10-11. The county later terminated Brickwood's contract, but for reasons unconnected to the bid protest. After losing the county contract, Brickwood filed an action in federal district court against Cignatta and Datanet, asserting that the Cignatta letter amounted to defamation and tortious interference with business relations. The district court granted summary judgment in favor of the defendants, and Brickwood appealed.

A few days after judgment had been rendered but before Brickwood filed its notice of appeal, the defendants filed with the district court and served on Brickwood a motion requesting monetary sanctions under Rule 11 of the Federal Rules of Civil Procedure. In the motion, the defendants claimed that Brickwood frivolously filed this action, failed to reevaluate its case throughout discovery, and filed a meritless response to their summary judgment motion. Brickwood filed an opposition to the sanctions motion, but did not argue that the defendants failed to comply with Rule 11's 21-day "safe-harbor" provisions. See Fed. R. Civ. 11(c)(1)(A). The district court held the sanctions motion in abeyance pending a decision by this court on the summary judgment ruling. After this court affirmed that decision, see Brickwood Contractors, Inc. v. Datanet Eng'g, Inc., No. 99-1818, 2000 WL 292641 (4th Cir. March 21, 2000), the district court imposed Rule 11 sanctions against Brickwood in the amount of $15,000.

Brickwood appealed the sanctions, arguing that the defendants' Rule 11 motion did not comply with the safe-harbor provisions set forth in Rule 11(c)(1)(A). Although Brickwood did not raise the safe-harbor issue before the district court, a panel of this court nonetheless concluded that the defendants' failure to comply with Rule 11(c)(1)(A) precluded the imposition of sanctions. The panel therefore reversed the district court's order imposing sanctions. See Brickwood Contractors, Inc. v. Datanet Eng'g, Inc., 335 F.3d 293 (4th Cir.2003). After a call for a poll by a circuit judge, a majority of active circuit judges voted to vacate the panel opinion and rehear the case en banc. We now reverse the district court's order imposing sanctions against Brickwood.

II.

At the center of this case is Rule 11(c)(1)(A), which states:

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 5, but shall 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.

Fed.R.Civ.P. 11(c)(1)(A).

The requirements of the rule are straightforward: The party seeking sanctions must serve the Rule 11 motion on the opposing party at least twenty-one days before filing the motion with the district court, and sanctions may be sought only if the challenged pleading is not withdrawn or corrected within twenty-one days after service of the motion. See id. Because the rule requires that the party submitting the challenged pleading be given an opportunity to withdraw the pleading, sanctions cannot be sought after summary judgment has been granted. See Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 152 (4th Cir.2002) (explaining that "the `safe harbor' provisions of Rule 11(c)(1)(A) preclude the serving and filing of any Rule 11 motion after conclusion of the case"); see also In re Pennie & Edmonds LLP, 323 F.3d 86, 89 (2nd Cir.2003) ("[T]he `safe harbor' provision functions as a practical time limit, and motions have been disallowed as untimely when filed after a point in the litigation when the lawyer sought to be sanctioned lacked an opportunity to correct or withdraw the challenged submission."); Ridder v. City of Springfield, 109 F.3d 288, 297 (6th Cir.1997) (noting that because of the requirements of Rule 11(c)(1)(A), "a party cannot wait until after summary judgment to move for sanctions under Rule 11").

It is clear from the language of the rule that it imposes mandatory obligations upon the party seeking sanctions, so that failure to comply with the procedural requirements precludes the imposition of the requested sanctions. See, e.g., Elliott v. Tilton, 64 F.3d 213, 216 (5th Cir.1995) ("The plain language of [Rule 11(c)(1)(A)] indicates that this notice and opportunity prior to filing is mandatory. Plaintiffs did not comply with this procedural prerequisite. Therefore, the sanction and payment of costs and attorneys' fees ordered by the district court cannot be upheld under Rule 11."); accord Gordon v. Unifund CCR Partners, 345 F.3d 1028, 1030 (8th Cir.2003); Radcliffe v. Rainbow Constr. Co., 254 F.3d 772, 789 (9th Cir.2001); AeroTech, Inc. v. Estes, 110 F.3d 1523, 1528-29 (10th Cir.1997); Ridder, 109 F.3d at 296; Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1328 (2d Cir.1995). In addition, the rule serves to limit the power of the district court to impose sanctions under the rule, by expressly conditioning the court's authority to impose sanctions upon compliance with the safe-harbor provisions. See Fed.R.Civ.P. 11(c) ("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....") (emphasis added).

Rule 11(c)(1)(A) thus establishes conditions precedent to the imposition of sanctions under the rule. If those conditions are not satisfied, the Rule 11 motion for sanctions may not be filed with the district court. If a non-compliant motion nonetheless is filed with the court, the district court lacks authority to impose the requested sanctions.2

In this case, the defendants did not serve their Rule 11 motion on Brickwood before filing it with the district court. Moreover, because the defendants waited until after summary judgment had been granted, Brickwood could not have withdrawn or otherwise corrected the complaint even if the motion had been served before it was filed. It seems clear, then, that the defendants utterly failed to comply with the procedural requirements of Rule 11(c)(1)(A). The conclusion that the defendants failed to comply with the procedural requirements of Rule 11(c)(1)(A) would be enough, at least in most cases, to require reversal of the district court's imposition of sanctions. See, e.g., Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) (concluding that a district court's decision to impose Rule 11 sanctions should be reviewed for abuse of discretion); Gordon, 345 F.3d at 1030 ("The district court's awarding of sanctions against Appellant in contravention of the explicit procedural requirements of Rule 11 was an abuse of discretion.").

As mentioned previously, however, Brickwood did not argue below that the defendants' failure to comply with Rule 11(c)(1)(A) precluded an award of sanctions under Rule 11. The defendants contend that Brickwood's failure to raise the safe-harbor issue below prevents it from raising that issue on appeal. See, e.g., Williams v. Professional Transp., Inc., 294 F.3d 607, 614 (4th Cir.2...

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