Lighthouse Point Marina & Yacht Club, LLC v. Int'l Marine Underwriters, Civ. No. 14-2974 (WHW)(CLW)

• Decision Date: 20 January 2015
• Docket Number: Civ. No. 14-2974 (WHW)(CLW)
• Parties: LIGHTHOUSE POINT MARINA & YACHT CLUB, LLC, Plaintiff, v. INTERNATIONAL MARINE UNDERWRITERS, Defendant.
• Court: U.S. District Court — District of New Jersey

LIGHTHOUSE POINT MARINA & YACHT CLUB, LLC, Plaintiff, v. INTERNATIONAL MARINE UNDERWRITERS, Defendant.

Civ. No. 14-2974 (WHW)(CLW)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

January 20, 2015

NOT FOR PUBLICATION

AMENDED OPINION

Walls, Senior District Judge

Plaintiff brought this action against its insurer, seeking payment for alleged wind and water damage to residential property during Hurricane Sandy. Defendant alleged that the lawsuit was fraudulent. The Court dismissed the action and ordered Plaintiff to show cause why the Court should not impose sanctions for filing a complaint that lacked factual basis. Plaintiff did not respond, despite timely receiving the order through ECF and by certified mail. The Court now imposes sanctions.

FACTUAL AND PROCEDURAL BACKGROUND

This was one of more than 250 actions brought in New Jersey courts by Plaintiff's attorneys, a Texas firm working with local counsel, against insurers to recover for alleged property damage caused by Hurricane Sandy. The complaints bear the signature of Audwin Levasseur, Esq., and an illegible signature under the typed name of the Voss Law Firm, P.C., along with the names Bill L. Voss, Scott G. Hunziker, and The Voss Law Center. See Compl. 7,ECF No. 1-1. The original complaints are nearly identical, including typos. Compare, e.g., Compl. ¶ 4, ECF No. 1-1 with Compl. ¶ 4, ECF No. 1-2, Aquarian Condo Assoc. v. Scottsdale Ins. Co., 2:14-cv-02822-SDW-SCM (D.N.J. 2014) (both filed on the same day, both stating, "[t]hrough it [sic] insurance policy, Plaintiff was objectively insured for the subject loss by Defendants [sic]"). Plaintiff's First Amended Complaint corrected the typos and updated Defendant's name and address, but did not add factual details apart from the policy number. Compl., ECF No. 1-1. The amended complaint alleged that Defendant did not pay Plaintiff the benefit owed for "extreme external and internal damages, as well as other wind-related losses" to property at 1 Crabbe Road, Toms River, New Jersey, but did not specify the value or nature of the damages. Id. ¶¶ 2, 11-12. The amended complaint changed the description of the property from commercial to residential. Id. ¶ 2. Plaintiff further alleged that Defendant acted in bad faith by failing to conduct a reasonable investigation into the "denial or underpayment." Id. ¶ 14.

In response, Defendant asserted that it had already sufficiently compensated Plaintiff for its losses. Defendant issued a policy to Plaintiff for the period from July 18, 2012 through July 18, 2013, which was for commercial property, not residential. Decl. of Mark L. Antin in Supp. of Def.'s Mot. to Dismiss ("Antin Decl. MTD") ¶ 5, Ex. A. The storm hit on or about October 29, 2012. Compl. ¶ 4. On November 7, 2012, Plaintiff sent Defendant a Property Loss Notice alleging "wind damage to buildings." Antin Decl. MTD ¶ 6, Ex. B. An adjuster inspected Plaintiff's property on December 4, 2012. Antin Decl. MTD ¶ 7, Ex. C. The inspection report found wind damage to two fences, and "[n]o damage to any of the 4 buildings." Id. It valued the claim at $1,612.00, and recommended a payment of $612.00, after applying a $1,000 deductible. Id. Defense counsel's declaration asserted that Defendant paid Plaintiff $612.00, id. ¶ 8, though counsel did not submit evidence of the payment. Notwithstanding this appraisal, in June of 2013,Plaintiff's counsel wrote Defendant demanding $540,000 to pay for the wind damage, and an additional $135,000 in attorney's fees. Compl. 22. Plaintiff filed the original complaint in New Jersey Superior Court on October 23, 2013, filed the amended complaint on April 3, 2014, and Defendant removed the case to this Court on May 9, 2014. Notice of Removal, ECF No. 1.

The policy at issue requires that the insured allow the insurer to inspect the property "[a]s often as may be reasonably required." Antin Decl. MTD ¶ 11, Ex. A. § E(3)(6). It also requires the insured to fully comply with its terms before commencing legal action. Antin Decl. MTD ¶ 12 Ex. A (D)(1). Defendant made multiple requests to reinspect the property after receiving the demand letter from Plaintiff's counsel. Antin Decl. MTD ¶¶ 13-16, Ex. D. Plaintiff never responded to these requests. Id. ¶ 15. The parties entered into a Joint Discovery Plan for the litigation, ordered by Magistrate Judge Waldor on July 28, 2014, under which Plaintiff was required to make the property available for inspection before August 15, 2014. Joint Discovery Plan, ECF No. 8. When Plaintiff did not allow an inspection even after entering into the Joint Discovery Plan, Defendant requested the Court's guidance. Antin Decl. MTD ¶¶ 19-20. The Court held a conference call and instructed Plaintiff that any further avoidance of an inspection would put the case at risk of dismissal. Id. Since then, Defendant made frequent requests to reinspect the property, but Plaintiff denied or ignored them. Id. ¶¶ 21-22.

Defendant moved to dismiss on September 11, 2014. Mot. to Dismiss, ECF No. 13. Attached to the motion are five separate letters from an insurance adjuster to Plaintiff's counsel, over the course of six months, requesting an opportunity to inspect the property on behalf of Defendant. Id. Ex. D. The letters detail the multiple ways the adjuster attempted to communicate with Plaintiff's counsel, including by certified letter, fax, email, and phone. Id. Ex. D-E. The adjuster left messages on Plaintiff's counsel's voicemail and with an administrative assistant. Id.Plaintiff did not respond to the adjuster's requests or to Defendant's motion, and did not submit any evidence to counter Defendant's assertions of fraud, Answer ¶ 27, ECF No. 3, accord and satisfaction, id. ¶ 22, or failure to comply with contractual obligations. Id. ¶ 20. The Court granted the motion on November 13, 2014, finding that the case deserved dismissal under Poulis v. State Farm Fire & Casualty Co., 747 F.2d 863 (3d Cir. 1984). ECF Nos. 15-16.

The same day, the Court ordered Plaintiff to show cause why the Court should not impose sanctions under Fed. R. Civ. P. 11(c)(3) for filing a claim that lacked merit, and for failing to properly investigate before filing. ECF No. 14. Specifically, the Court asked Plaintiff to provide the evidentiary basis for alleging in ¶ 12 of the complaint that Defendant "fail[ed] to pay Plaintiff's benefits relating [to] the cost to properly repair the Property, as well as, for all alternate living expenses and content-related losses." Id. ¶ 2. Plaintiff was ordered to include documentary evidence of any appraisal of the damage claimed, along with a description of the method of appraisal, the credentials of the appraiser and the date of inspection. Id. The Court warned Plaintiff's counsel of possible consequences, including revocation of pro hac vice status, liability for Defendant's attorney's fees, and referral to disciplinary authorities.

Plaintiff did not respond to the Court's order. Defendant's counsel submitted a declaration setting forth its litigation expenses. Decl. of Mark L. Antin in Resp. to Order to Show Cause ("Antin Decl. OSC"), ECF No. 17. Attached to the declaration was an itemized billing invoice to Defendant from its counsel, ECF No. 17-1, along with certified mail receipts indicating that Plaintiff's counsel had received a copy of the Court's opinion, Order of Dismissal and Order to Show Cause. ECF No. 17-2. Mr. Levasseur received a copy of these documents on November 24, 2014, and the Voss Law Firm received its copy on November 21, 2014. ECF No. 17-1. Defendant's counsel also stated in his declaration that he had not received anycommunication of any kind from Plaintiff's counsel, or from Plaintiff, since the Court issued the Order. Antin Decl. OSC ¶ 4.

STANDARD FOR RULE 11 SANCTIONS

An attorney who submits a complaint certifies that there is a reasonable basis in fact and law for the claims made, to the best of the attorney's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances. Fed. R. Civ. P. 11; see also Napier v. Thirty or More Unidentified Federal Agents, etc., 855 F.2d 1080, 1090 (3d Cir. 1988). Rule 11 "imposes on counsel a duty to look before leaping and may be seen as a litigation version of the familiar railroad crossing admonition to 'stop, look, and listen.'" Leuallen v. Borough of Paulsboro, 180 F. Supp. 2d 615, 618 (D.N.J. 2002) (citing Lieb v. Topstone Indus., 788 F.2d 151, 157 (3d Cir. 1986)). The rule is intended to discourage the filing of frivolous, unsupported, or unreasonable claims. Id. The Third Circuit has written that "[t]he legal standard to be applied when evaluating conduct allegedly violative of Rule 11 is reasonableness under the circumstances." Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 289 (3d Cir. 1991) (citations omitted), cert. denied, 502 U.S. 939 (1991). Reasonableness in the context of a Rule 11 inquiry has been defined as "an objective knowledge or belief at the time of the filing of a challenged paper that the claim was well grounded in law and fact." Ford Motor Co., 930 F.2d at 289. Bad faith is not required for a Rule 11 violation, see Martin v. Brown, 63 F.3d 1252, 1264 (3d Cir. 1995), and thus there can be no "empty head, pure heart" justification for the filing of frivolous claims. See Leuallen, 180 F. Supp. 2d at 618 (quoting Fed. R. Civ. P. 11, adv. cmte. notes (1993)).

"On its own initiative, the court may enter an order describing the specific conduct that appears to violate subdivision (b) [of Rule 11] and directing an attorney, law firm, or party toshow cause as to why it has not violated subdivision (b) with respect thereto." Fed. R. Civ. P. 11(c)(1)(B). In the case of sanctions imposed sua sponte under Rule 11(c)(3), "[t]he party sought to be sanctioned is entitled to particularized notice including, at a minimum, 1) the fact that Rule 11 sanctions are under consideration, 2) the reasons why sanctions are under consideration, and 3) the...