Peer v. Lewis

• Decision Date: 20 May 2010
• Docket Number: 09-10883.,No. 09-10882,09-10882
• Citation: 606 F.3d 1306
• Parties: Christopher James PEER, Plaintiff-Appellee,v.Daniel Warfield LEWIS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

606 F.3d 1306

Christopher James PEER, Plaintiff-Appellee,v.Daniel Warfield LEWIS, Defendant-Appellant.

Nos. 09-10882, 09-10883.

United States Court of Appeals Eleventh Circuit.

May 20, 2010.

COPYRIGHT MATERIAL OMITTED

Colleen Kathryn O'Loughlin, Colleen Kathryn O'Loughlin, PA, Ft. Lauderdale, FL, for Lewis,

Stephen Martin Zukoff, Miami, FL, for Rosenbaum.

Appeals from the United States District Court for the Southern District of Florida.

Before PRYOR and FAY, Circuit Judges, and QUIST,^* District Judge.

QUIST, District Judge:

Daniel Lewis (“Lewis”) appeals the district court's¹ order denying sanctions against the three attorneys who represented his political rival, James Peer (“Peer”). Although Lewis filed numerous motions for sanctions during the pendency of this case, he only appeals the disposition of two of these motions: (1) his July 9, 2007, motion for sanctions against Peer's original counsel, Richard L. Rosenbaum (“Rosenbaum”), pursuant to Rule 11, 28 U.S.C. § 1927, and the court's inherent power; and (2) his October 10, 2006, motion for sanctions against Barry G. Roderman (“Roderman”)² and Scott M. Greenbaum (“Greenbaum”)³ pursuant to Rule 11.

On appeal, Lewis argues that Rosenbaum's conduct is sanctionable because he knowingly filed a baseless Fair Credit Reporting Act (“FCRA”) claim in federal court. Similarly, Lewis contends Roderman and Greenbaum violated Rule 11 by representing Peer in his meritless federal suit. Rosenbaum claims that he had a reasonable basis to file suit because (1) there was “suspicious” access which showed on Peer's credit report, (2) Lewis filed his state court complaint with ¶ 19, which mentioned Peer's credit report, and (3) Lewis refused to disclose the source of his information in interviews with the Miami Herald and the Sun-Sentinel Digest newspapers. Roderman and Greenbaum did not respond to Lewis' appeal or appear at oral arguments. For the reasons stated below, this Court will affirm in part, reverse in part, and remand the case to the district court for further proceedings consistent with this Opinion.

I. BACKGROUND

This case arises from yet another contentious Florida election. Initially, Jim Naugle, the incumbent mayor, and Lewis were the only candidates in the City of Fort Lauderdale's 2006 mayoral race, which, according to Lewis, increased Lewis' chance of success in the election. Peer entered the mayoral race on January 10, 2006. Lewis sought to have Peer disqualified because Lewis felt a three way race would benefit the incumbent mayor.⁴

A. Lewis' State Court Complaint

On January 17, 2006, Lewis filed a state court claim challenging Peer's Fort Lauderdale residency and seeking to have Peer disqualified as a candidate. In paragraph 19 (“¶ 19”) of his state court complaint, Lewis stated, “What is more, an October 15, 2005, credit report by TransUnion, one of the three major credit bureaus, reported that Defendant's [Peer's] current address is ‘18 Charter Drive, Wilmington, North Carolina 28403.’ ”

On February 1, 2006, the state court held a hearing on Lewis' complaint and dismissed the complaint for ineffective service of process. At this time, Lewis was represented by Robert Malove, and Peer was represented by Rosenbaum. After the state court hearing, there was a “heated discussion” in the hallway of the courthouse, and Malove and his law clerk told Rosenbaum and Peer that ¶ 19 of Lewis' complaint was inaccurate because Peer's address was obtained from a Westlaw People Finder report, and not Peer's credit report.⁵ Later that same day, Malove amended Lewis' state court complaint to delete ¶ 19's reference to any credit report and served the amended complaint on Peer. Sometime on February 1 or February 2, 2006, Peer met with Rosenbaum to discuss Lewis' amended state court complaint and determine whether to bring a claim under the Fair Credit Reporting Act. (Videotaped Dep. of Christopher Peer, docket no. 42, Ex. 1, at 34-39.) On February 2, 2006, Peer obtained a copy of his credit report and faxed this report to Rosenbaum. Peer's credit report showed that Lewis never accessed it. ( Id. at 30.)

B. Peer's FCRA Claim in Federal Court

The next day, February 3, 2006, Peer, with Rosenbaum acting as his attorney, filed suit against Lewis in federal court for a violation of the Fair Credit Reporting Act. Rosenbaum prepared and filed Peer's complaint based on ¶ 19 of Lewis' state court complaint and “suspicious activity” on Peer's credit report. Lewis counterclaimed for abuse of process.

Between February 3 and June 19, 2006, Rosenbaum conducted very little discovery. On June 13, 2006, Lewis retained counsel to represent him in this federal suit. Six days later, Rosenbaum withdrew from his representation of Peer for medical reasons and a breakdown in the attorney-client relationship. Peer then retained Roderman and Greenbaum as substitute counsel in mid-July 2006, and Peer was deposed on July 25, 2006. Immediately prior to the start of Peer's deposition, Roderman gave Lewis' counsel a copy of Peer's February 2, 2006, credit report. In his deposition, Peer testified that he knew before he filed his federal complaint that Lewis had amended his state court complaint to delete ¶ 19's reference to a TransUnion credit report.

On August 18, 2006, Lewis moved for summary judgment on Peer's complaint, arguing that Peer's claim lacked any evidentiary support. Peer responded to this motion on September 12. That same day, Lewis' counsel complied with Rule 11(c)(2)'s safe harbor provision by notifying Roderman and Greenbaum that Lewis would file a Rule 11 motion for sanctions unless they withdrew the response. On October 10, 2006, Lewis filed his motion for Rule 11 sanctions. Roderman sought leave to withdraw as counsel on October 11, 2006, and his motion was granted on October 31, 2006. Greenbaum did not withdraw, and after failing to respond to numerous court orders, was sanctioned for reasons other than pursuing a frivolous case.

On June 26, 2007, the district court struck Peer's complaint and answer to Lewis' abuse of process counterclaim as a sanction for Greenbaum's disregard for the court's orders. Thirteen days later, on July 9, 2007, Lewis moved for sanctions against Rosenbaum pursuant to Rule 11, 28 U.S.C. § 1927, and the court's inherent power.

On October 15, 2007, the district court commenced a four day jury trial on the issue of damages for Lewis' abuse of process counterclaim. The jury returned a special verdict against Peer in the amount of $133,500 in compensatory damages and $657,000 in punitive damages. (Jury Verdict, docket no. 221.) Peer moved to renew his motions for a directed verdict pertaining to compensatory and punitive damages, and legal fees. Peer also moved for a new trial or judgment as a matter of law.

On May 13, 2008, the district court denied Peer's motion for a new trial or judgment as a matter of law, and denied Peer's renewed motion for a directed verdict pertaining to legal fees. Additionally, the district court granted in part and denied in part Peer's motions for a directed verdict regarding compensatory and punitive damages. (Omnibus Order on Rule 50 and 59 Mots., docket no. 243.) The district court reduced the jury's award of compensatory damages to $12,500 and the award of punitive damages to $112,500. Lewis appealed the reduction, and this Court affirmed the district court's order. See Peer v. Lewis, No. 08-13465, --- Fed.Appx. ----, 2009 WL 323104, 2009 U.S.App. LEXIS 2428 (11th Cir. Feb. 10, 2009).

While the appeal was pending, the district court addressed the collateral matters of Lewis' October 10, 2006, and July 9, 2007, motions for sanctions against Rosenbaum, Roderman, and Greenbaum. The district court denied Lewis' motions for sanctions on January 14, 2009, holding that (1) Rosenbaum had a good faith basis to file the complaint, and (2) Rosenbaum did not act in bad faith. The district court did not address the merits of Lewis' Rule 11 motion against Greenbaum and Roderman. Lewis now appeals the district court's denial of these motions.

II. STANDARD of REVIEW

A court's decision to deny sanctions under Rule 11, 28 U.S.C. § 1927, and the court's inherent power is reviewed for an abuse of discretion. See, e.g., Cordoba v. Dillard's, Inc., 419 F.3d 1169, 1179 (11th Cir.2005); Baker v. Alderman, 158 F.3d 516, 521 (11th Cir.1998). A district court abuses its discretion if it applies an incorrect legal standard, follows improper procedures in making the determination, or bases the decision “upon findings of fact that are clearly erroneous.” Cordoba, 419 F.3d at 1180 (citation omitted).

III. DISCUSSION

A. Rule 11

“The purpose of Rule 11 is to deter baseless filings in district court and thus streamline the administration and procedure of federal courts.” 2 James Wm. Moore et al Moore's Federal Practice § 11.03 (3d ed.2010) (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393, 110 S.Ct. 2447, 2454, 110 L.Ed.2d 359 (1990)). When an attorney files a pleading in federal court, the attorney signs the pleading to certify that, among other things, (1) the pleading is not being presented for an improper purpose; (2) the legal contentions are warranted by existing law or a nonfrivolous argument to change existing law; and (3) the factual contentions have evidentiary support or will likely have evidentiary support after discovery. Fed.R.Civ.P. 11(b).

In assessing the propriety of Rule 11 sanctions, this Court asks: “(1) whether the party's claims are objectively frivolous, and (2) whether the person who signed the pleadings should have been aware that they were frivolous.” Byrne v. Nezhat, 261 F.3d 1075, 1105 (11th Cir.2001) (citing Baker v. Alderman, 158 F.3d 516, 524 (11th Cir.1998)). The advisory committee notes on the amendments to Rule 11 aid the Court in interpreting and applying this rule. For example, the advisory committee note of 1993 states that Rule 11 was amended to emphasize “the duty of candor by subjecting litigants to...