Nyer v. Winterthur Intern.
| Citation | 290 F.3d 456 |
| Decision Date | 16 May 2002 |
| Docket Number | No. 01-1411.,01-1411. |
| Parties | Paul NYER, Appellant, v. WINTERTHUR INTERNATIONAL, Appellee. Ismar Hochen, as Administrator of the Estate of Ismael Hochen; Richard Dufault; Christine Dufault, Individually and as Mother and Next Friend of Richard Dufault, Jr.; Leah Dufault, Plaintiffs, v. Bobst Group, Inc., Defendant. |
| Court | United States Courts of Appeals. United States Court of Appeals (1st Circuit) |
Christopher Maffucci, with whom Casner & Edwards, LLP was on brief, for appellant.
Kimberly M. McCann, with whom Daniel P. Gibson and Gibson & Behman, P.C. were on brief, for appellee.
Before TORRUELLA, Circuit Judge, STAHL, Senior Circuit Judge, and LYNCH, Circuit Judge.
Attorney Paul Nyer ("Nyer") appeals from an order sanctioning him under Federal Rule of Civil Procedure 11 for his attempt to bring an unfair trade practices claim against Winterthur International Insurance Company ("Winterthur") in connection with Winterthur's defense of a personal injury suit against its insured. For the following reasons, we affirm.
In 1994, Avery Dennison Corp. ("Avery") contracted with Bobst Group, Inc. ("Bobst") to install and service certain controls and equipment on Avery's printing press. On August 2, 1994, an explosion in the printing press seriously injured two Avery employees, Ismael Hochen and Richard Dufault. The two men retained Nyer as their attorney and filed suit against Bobst in 1996, alleging inter alia that Bobst's negligent maintenance of the presses caused the explosion. Bobst filed several motions for summary judgment and obtained partial summary judgment in 1997 on the statute of repose issue and partial summary judgment in 2000 on Hochen's claims regarding breach of warranty and failure to warn.1 After the summary judgment motions, only the negligent maintenance issue remained for trial.
On February 18, 2000, approximately two and a half months before the trial was set to begin, the plaintiffs attempted to add Winterthur, Bobst's insurance carrier, as a direct defendant in the lawsuit. In their motion to amend, the plaintiffs alleged that Winterthur had violated Massachusetts General Laws chapter 93A because its negotiation tactics ran afoul of Massachusetts General Law chapter 176D, which regulates insurance companies.2 The magistrate judge deferred ruling on the motion in order to see whether the plaintiffs would prevail at trial against Bobst.3 After the magistrate judge directed a verdict in favor of Bobst and entered judgment on May 19, 2000, he denied the motion to amend the complaint as moot. On June 9, 2000, Winterthur filed a motion for attorney fees, costs and sanctions against the plaintiffs' attorney Nyer pursuant to Fed.R.Civ.P. 11 and 28 U.S.C. § 1927. Nyer opposed the motion on June 30, 2000, and Winterthur filed its response on July 12, 2000.
In determining whether sanctions were appropriate, the magistrate judge reviewed the history of negotiations between the parties. Plaintiffs began the settlement negotiations by making a demand to settle of $5 million — $3 million for Hochen and $2 million for Dufault. On June 22, 1999, the plaintiffs, Bobst and representatives from Winterthur participated in a mediation session, during which Winterthur made an offer to settle the case for $475,000. According to Nyer, the plaintiffs rejected the offer because (1) Winterthur did not apportion the settlement among the individual plaintiffs and (2) with the workers' compensation liens at $417,000, the settlement would be virtually unprofitable. The parties met again for settlement discussions on September 22, 1999. Although the record does not include the specifics of any offer allegedly made by Winterthur at that meeting, Nyer claims that Winterthur refused to put its offer in writing and again rejected Nyer's request that it apportion the proposed settlement among the individual plaintiffs.
After this September meeting, Nyer sent Winterthur a 93A demand letter alleging that Winterthur's failure to apportion the offer or put it in writing violated Massachusetts General Law chapters 93A and 176D. After retaining outside counsel, Winterthur responded to the letter by offering $550,000 to resolve the case, although still insisting that the plaintiffs had not demonstrated that liability was reasonably clear. Shortly thereafter, Winterthur presented a proposed apportionment of the offer, allocating $110,000 to each of the five plaintiffs.4 Nyer and the workers' compensation carrier, however, rejected this offer.
In its motion for sanctions, Winterthur claimed that it was under no obligation to make a settlement offer to the plaintiffs under chapter 176D because they could not show that Bobst's liability was reasonably clear. As it had no duty even to negotiate, Winterthur argued, it could not be found liable for violating the insurance regulations laid out in chapter 176D or unfair trade practices provision in chapter 93A. Therefore, Winterthur concluded, the 93A claim that the plaintiffs attempted to assert against it was frivolous and made only for the improper purpose of forcing Winterthur to offer a higher settlement figure.
In his defense, Nyer claimed that the parties understood that Bobst's liability was reasonably clear, as reflected by the size of Winterthur's settlement offers. Therefore, in Nyer's view, Winterthur's refusal to apportion the settlement offer to the individual plaintiffs and the fact that the offer was barely above the amount of the workers' compensation lien constituted an unfair settlement practice. Consequently, Nyer insisted that his attempt to assert a 93A claim against Winterthur should not be sanctionable.
Before reaching the merits of Winterthur's motion, the magistrate judge rejected Nyer's arguments that Winterthur did not have standing to seek sanctions and that Winterthur's motion was untimely. He then determined that there was no basis for a 93A claim against Winterthur in light of relevant Massachusetts law, and imposed sanctions pursuant to Rule 11, along with attorneys' fees and costs.5 Hochen v. Bobst Group Inc., 198 F.R.D. 11 (D.Mass.2000). Nyer timely appealed.
Before assessing the propriety of the magistrate judge's ruling, we must first inquire as to whether Winterthur had standing to seek sanctions under Rule 11. We review issues of standing de novo. New Hampshire Right to Life Political Action Comm. v. Gardner, 99 F.3d 8, 12 (1st Cir.1996).
As a general rule, non-parties to a case may not bring a motion for sanctions pursuant to Rule 11. New York News, Inc., v. Kheel, 972 F.2d 482, 488 (2d Cir.1992). In limited circumstances, however, a non-party may have standing to move for Rule 11 sanctions. For example, in Westmoreland v. CBS, Inc., 770 F.2d 1168 (D.C.Cir.1985), a non-party witness was permitted to bring a Rule 11 motion stemming from defense counsel's commencement of contempt proceedings against him. On the other hand, individuals that are either explicitly discussed in a complaint or entities that are indirectly implicated by a complaint's allegations may not intervene in the litigation for the sole purpose of seeking Rule 11 sanctions. See New York News, Inc., 972 F.2d at 488-89 (individual); Port Drum Co. v. Umphrey, 852 F.2d 148 (5th Cir.1988) (corporate entity).
In Greenberg v. Sala, 822 F.2d 882 (9th Cir.1987), the Ninth Circuit ruled that individuals who had been named in a frivolous complaint could seek Rule 11 sanctions, even though they had never actually become official parties to the litigation due to lack of service. In finding that the would-be defendants had standing, the court noted that Id. at 885.
We consider this case to be closely analogous to Greenberg. Winterthur was never formally made a party to the litigation, but this was due to the fact that the magistrate judge decided to reserve judgment on the motion to amend plaintiffs' complaint until the underlying issues regarding Bobst's liability were resolved. Furthermore, although Winterthur was never required to refute the chapter 93A allegations contained in the amended complaint, Winterthur was forced to prepare a possible defense against the charge of unfair trade practices. In this sense, Winterthur was similarly situated to the non-party witness in Westmoreland who had to defend himself against a petition for civil contempt arising out of his refusal to allow his deposition to be videotaped. Therefore, we find that, even under the reasoning of New York News, Inc., Winterthur qualifies as one of the types of non-parties that may bring a motion for Rule 11 sanctions. See 972 F.2d at 488-89 (distinguishing Westmoreland and Greenberg). Accordingly, we find that Winterthur has standing to file a motion for Rule 11 sanctions.
One additional issue remains before we can turn to the merits of the Rule 11 determination. Nyer has not sought review of the district court's ruling that Winterthur's motion for sanctions was timely filed. In his appeal, however, Nyer alleges for the first time that Winterthur failed to comply with the "safe harbor" provision of Rule 11, which requires a movant to wait twenty-one days after serving a motion for sanctions on opposing counsel before filing the motion with the court. Fed.R.Civ.P. 11(c)(1)(A). This provision is designed to allow an attorney to correct his error before a party commences Rule 11 proceedings. In this case, however, we need not decide whether there was any failure to comply with the "safe harbor" provision because Nyer did not present this issue to the magistrate judge in his opposition to the motion for sanctions. "If any principle is firmly established in this circuit, it is that, in the absence of excusatory circumstances — and none are apparent...
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