Hashemi v. Campaigner Publications, Inc.
| Decision Date | 26 March 1986 |
| Docket Number | No. 85-8550,85-8550 |
| Citation | 784 F.2d 1581 |
| Parties | Cyrus HASHEMI, Plaintiff-Appellee, v. CAMPAIGNER PUBLICATIONS, INC., et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Reid W. Kennedy, Marietta, Ga., A. David Davis, Boston, Mass., for defendants-appellants.
Thomas R. Todd, Jr., Atlanta, Ga., for Cook.
Charles Ratz, Atlanta, Ga., for Pottinger.
Appeal from the United States District Court for the Northern District of Georgia.
Before JOHNSON and HATCHETT, Circuit Judges, and MURPHY *, District Judge.
In this case involving alleged attorney misconduct, the district court refused to impose sanctions pursuant to Federal Rule of Civil Procedure 11. We affirm.
During July, 1980, Campaigner Publications, Inc., doing business as the Executive Intelligence Review (EIR), along with other news organizations, published articles linking Cyrus Hashemi, an Iranian citizen living in the United States, to a variety of unlawful activities purportedly conducted in furtherance of the revoluntionary efforts of the Ayatollah Khomeini. On September 8, 1980, Hashemi filed an action for defamation, slander per se, and libel per se.
The original complaint was filed against three groups of defendants; however, only the group identified in Hashemi's supplemental complaint filed November 5, 1981, as the "EIR defendants," remained at the time EIR propounded its first interrogatories to Hashemi on August 2, 1982. On January 7, 1983, EIR filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 37(d) on the ground that Hashemi failed to respond to the interrogatories. The district court denied the motion to dismiss when Hashemi answered the interrogatories.
On March 23, 1983, in a second motion to dismiss, EIR asserted three grounds: (1) that Hashemi failed to appear for depositions; (2) that Hashemi failed to make complete responses to interrogatories despite specific directives from the court; and (3) that Hashemi's actions deprived EIR of the discovery essential to mounting a successful defense. On June 29, 1983, the district court granted EIR's second motion to dismiss. On August 1, 1984, this court affirmed. Hashemi v. Campaigner Publications, Inc., 737 F.2d 1538 (11th Cir.1984). On March 1, 1985, EIR filed a motion under Federal Rule of Civil Procedure 11 asking for sanctions against Hashemi and two of his attorneys, Stanley Pottinger and Jackson Cook, including costs and attorney's fees.
EIR filed its Rule 11 motion based on information which came to its attention after this court affirmed the district court's judgment. EIR discovered that Hashemi had been indicted in the United States District Court for the Southern District of New York in connection with an illegal operation to export arms and military spare parts to Iran. The indictment cited Pottinger for having advised Hashemi on how to export the arms. EIR also discovered that a "stipulation of settlement" was approved by the same court on the eve of a trial in an action for securities fraud brought against Hashemi and Cook. Court documents indicated that the dealings between Hashemi and Cook involved fraud and demonstrated a pattern of abuse of the judicial system.
EIR claims that its investigation reveals that Hashemi and his attorneys had a long-term business relationship that was the "predominant relationship between them"; that the business relationship involved unlawful activity; that they used litigation in
general, and the EIR suit in particular, to avoid prosecution. Finding that Hashemi did not file his complaint or notice of appeal in bad faith, the district court denied EIR's Rule 11 motion for sanctions.
On appeal, EIR contends that the district court erred in: (1) employing the pre-amendment Rule 11 standard; (2) finding that Hashemi's counsel did not act in bad faith; and (3) failing to consider sanctions pursuant to the court's inherent powers or 28 U.S.C. Sec. 1927.
Before its amendment in 1983, Rule 11 provided for sanctions against an attorney only if it could be shown that he acted in bad faith. 1 Nemeroff v. Abelson, 620 F.2d 339, 350 (2d Cir.1980). The amendments abrogated the bad faith standard in favor of a more stringent objective standard. 2 Eastway Construction Corp. v. City of New York, 762 F.2d 243 (2d Cir.1985). The drafters of the amended rule stated that their aim was to "reduce the reluctance of courts to impose sanctions." Fed.R.Civ.P. 11 advisory committee notes.
EIR contends that the district court erred in applying the pre-amendment bad faith standard to determine whether or not to impose sanctions on Pottinger and Cook. Hashemi and Pottinger contend that the district court applied the correct standard because the defamation action was filed and dismissed before the amendments became effective.
EIR fails to cite any authority for its proposition that this court should apply the amended rule without regard to when the underlying action was originally filed. EIR's reliance on Tedeschi v. Smith Barney, Harris Upham & Co., Inc., 579 F.Supp. 657 (S.D.N.Y.1984) is misplaced. In Tedeschi, where the defendants moved for Rule 11 sanctions before the enactment of the 1983 amendments, the court stated that "[t]he amendments are not applicable to this motion." Tedeschi at 659-60, n. 3. It would be speculative to conclude, based on this statement in a footnote, that if the defendants had filed their motion for sanctions after the effective date of the amended rule, the Tedeschi court would have applied the amended rule standards without regard to when the underlying action was filed.
EIR also contends that the amended Rule 11 standards should have been applied "because the case was pending on appeal by the plaintiff at the time the Rule became Hashemi filed his action against EIR in September, 1980. The action was dismissed in June, 1983. Rule 11 was amended in 1983. We find no persuasive reason for applying the 1983 Rule 11 standard to Hashemi's 1980 action; therefore, we hold that the district court did not err in applying the "bad faith" standard to EIR's Rule 11 motion for sanctions.
effective." In Blair v. Shenandoah Women's Center, Inc., 757 F.2d 1435 (4th Cir.1985), the court applied the pre-amendment bad faith standard after noting that the amendments did not become effective until the case was dismissed. Blair at 1437. This holding does not support an inference that, had the case been on appeal at the time the rule became effective, the amended Rule 11 standards would have been applied
EIR contends, alternatively, that the district court erred in finding that Cook and Pottinger did not act in bad faith. "An action is brought in bad faith when the claim is entirely without color and has been asserted wantonly, for the purposes of harassment or delay, or for other improper purposes." Tedeschi, 579 F.Supp. at 661. The district court denied EIR's Rule 11 motion for sanctions stating:
It is apparently defendant's contention that the indictment and the settlement agreement attached to the motion for sanctions demonstrate that the statement made was true, and plaintiff and his attorney should have known it was true, such that the complaint was filed in bad faith. None of the documents in support of the motion for sanctions pursuant to rule 11 demonstrate to this court that the published statement of which Mr. Hashemi sued for libel and defamation was true. That being the case, the court cannot say that the complaint was filed in bad faith, and therefore defendant's motion for sanctions under rule 11 is denied.
We hold that the district court's finding that Pottinger and Cook did not act in bad faith in this case is not clearly erroneous.
EIR also contends that in arriving at its determination...
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