Runfola & Associates, Inc. v. Spectrum Reporting II, Inc.

• Decision Date: 08 July 1996
• Docket Number: Nos. 95-3063,95-3134 and 95-3136,s. 95-3063
• Parties: 1996-2 Trade Cases P 71,465 RUNFOLA & ASSOCIATES, INC., Plaintiff-Appellant (95-3063), Cross-Appellee, Russell A. Kelm, Esq., Attorney-Appellant (95-3063), Cross-Appellee, v. SPECTRUM REPORTING II, INC., Barbara Rogers (95-3134), Angie Coder (95-3136), and Bev Dillman, Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 368

88 F.3d 368

1996-2 Trade Cases P 71,465

RUNFOLA & ASSOCIATES, INC., Plaintiff-Appellant (95-3063) Cross-Appellee Russell A. Kelm, Esq., Attorney-Appellant (95-3063), Cross-Appellee, v. SPECTRUM REPORTING II, INC., Barbara Rogers (95-3134), Angie Coder (95-3136), and Bev Dillman Defendants-Appellees, Cross-Appellants.

Nos. 95-3063, 95-3134 and 95-3136.

United States Court of Appeals Sixth Circuit.

Argued April 10, 1996.

Decided July 8, 1996.

Russell A. Kelm (argued and briefed), Schwartz, Kelm, Warren & Ramirez, Columbus, OH, for Runfola & Associates, Inc. and Russell A. Kelm.

Michael J. Renner, Bricker & Eckler, Columbus, OH, for Spectrum Reporting II, Inc.

Joseph D. Lonardo, Vorys, Sater, Seymour & Pease, Columbus, OH, Jeffrey W. Hutson (briefed), Lane, Alton & Horst, Columbus, OH, for Professional Reporters, Inc.

Richard T. Taps, Bricker & Eckler, Columbus, OH, Charles Jewett Kurtz, III, Porter, Wright, Morris & Arthur, Columbus, OH, Randall W. Knutti (argued and briefed), Ulmer & Berne, Columbus, OH, for Bev Dillman.

Randall W. Knutti, Ulmer & Berne, Columbus, OH, for Angie Coder.

Barbara Rogers (argued and briefed), Spectrum Reporting II, Inc., Columbus, OH, pro se.

Before: MERRITT, Chief Judge; MILBURN, Circuit Judge; COHN, ^* District Judge.

The court delivered a PER CURIAM opinion. COHN, District Judge (p. 376), delivered a separate concurring opinion.

PER CURIAM.

Plaintiff Runfola & Associates, Inc. and its counsel, Russell A. Kelm, appeal the district court's judgment imposing Federal Rule of Civil Procedure 11 sanctions against them in this antitrust action. Defendants Spectrum Reporting II, Inc.; Barbara Rogers; Angie Coder; and Bev Dillman cross-appeal the district court's denial of additional sanctions. Defendants Coder and Dillman also appeal the district court's denial of their motion for discovery. For the reasons that follow, we affirm the district court.

I.

This case is the culmination of a series of disputes between rival court reporting businesses. Plaintiff Runfola & Associates, Inc. began operating in Columbus, Ohio in the 1970s. In 1988, two of Runfola's most widely utilized reporters, Barbara Rogers and Nicholas Marrone, left Runfola and formed their own court reporting firm, Spectrum Reporting, Inc. Rogers and Marrone had entered into noncompetition agreements at the inception of their employment with Runfola, and after their departure they sued to have the agreements declared invalid. Ultimately, the Ohio Supreme Court ordered that the noncompetition agreements be enforced for one year. See Rogers v. Runfola & Assoc., Inc., 57 Ohio St.3d 5, 565 N.E.2d 540 (1991). In the period following the defection of Rogers and Marrone, Runfola lost both clients and staff to Spectrum and to Professional Reporters, Inc. ("PRI"), another new Columbus-based court reporting firm.

The losses led Runfola to file the present action in December of 1990 against PRI, Spectrum Reporting II, and sixteen individuals, of whom only Barbara Rogers, Angie Coder, and Bev Dillman are party to this appeal. Runfola's amended complaint, filed on February 12, 1991, alleges violations of the Sherman Antitrust Act, 15 U.S.C. § 1, and unfair business practices in violation of state law.

Following the filing of Runfola's amended complaint, defendants moved to dismiss the complaint for failure to state a claim under federal antitrust law. In a November 12, 1991, Memorandum and Order, the district court denied defendants' motions to dismiss, citing liberal federal pleading rules. J.A. at 210. However, the court noted that plaintiffs' allegations were "phrased in somewhat vague and conclusionary terms," and warned that, although plaintiffs had alleged sufficient facts in their complaint, "[a]s this case proceeds, plaintiffs will be required to show evidence of anti-competitive effects to meet the elements of a Sherman Act claim, and this must involve more than unfair competition to one market participant." J.A. at 209, 210.

In late November 1991 defendants Spectrum Reporting, Nicholas Marrone, and Barbara Rogers ("the Spectrum defendants") renewed an earlier motion for summary judgment. In February 1992 the district court granted the motion on all but one of the counts, relying on a previous state court settlement agreement among the parties. The sole remaining count, alleging a breach of a covenant not to compete, was stayed pending resolution of an action in state court.

In spite of the district court's November 1991 admonition that plaintiff should produce evidence, between September 1991 and late January 1993, Runfola pursued no discovery in this case. On January 19, 1993, plaintiff served defendant with thirteen notices of deposition. However, these depositions, for reasons upon which the parties do not agree, did not go forward. On February 17, 1993, this case was transferred to another district judge, and a discovery deadline of August 1, 1993 was ordered. On March 1, 1993, defendants filed motions for summary judgment, to which plaintiff did not timely reply, arguing that there was no evidence of an antitrust violation. After several procedural skirmishes, plaintiff finally filed a response to defendants' motions for summary judgment on September 9, 1993, over six months from the date that defendants had filed their motions. In opposing summary judgment, plaintiff offered only one exhibit, a fifteen page affidavit of Thomas Runfola. Plaintiff had completed none of the depositions that it had noticed.

On November 1, 1993, the district court granted defendants' motions for summary judgment on all claims except for the claim of interference with contractual relations against PRI, which it dismissed for lack of jurisdiction. In granting summary judgment, the court found that plaintiff had produced no evidence of harm to competition by defendants. The court also granted defendants' motions to strike Runfola's affidavit, stating that the affidavit was "fraught with obvious examples of speculation, hearsay, supposition, and innuendo...." J.A. 352.

On December 1, 1993, Bev Dillman, Angie Coder, and PRI filed a motion for sanctions. The Spectrum defendants filed their motion on December 6, 1993. Following a hearing on the motions, the district court imposed sanctions against plaintiff Runfola and counsel Kelm and directed defendants to file itemized statements of their attorneys' fees and costs. Subsequently, defendants Dillman and Coder made a motion for financial discovery of plaintiff and plaintiff's counsel in an effort to rebut their claims of lack of funds.

Having considered the defendants' submission of $109,305.90 in attorney fees and $5,671.14 in costs, the district court imposed a joint liability of $15,671.14 in sanctions against Runfola and Kelm. Defendant PRI was awarded its costs of $3,138,81. Defendants Dillman and Coder were awarded their costs of $2,532.33. A lump sum of $10,000 was also divided three ways among PRI, Dillman and Coder, and the Spectrum defendants. Plaintiff and plaintiff's counsel timely appeal, and the Spectrum defendants and Dillman and Coder timely cross-appeal the district court's award of Rule 11 sanctions. Defendants Dillman and Coder also timely appeal the district court's denial of their motion for discovery.

II.

A.

Plaintiff Runfola and counsel Kelm appeal the award of sanctions to defendants Dillman and Coder and to the Spectrum defendants, ¹ arguing that the district court abused its discretion. All other defendants, including defendant PRI, have either been dismissed from this appeal by stipulation or are not included in the appeal because they were not awarded sanctions. We apply the deferential abuse of discretion standard of review to "all aspects of a district court's Rule 11 determination." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 2460-61, 110 L.Ed.2d 359 (1990); see also Bodenhamer Bldg. Corp. v. Architectural Research Corp., 989 F.2d 213, 217 (6th Cir.1993). In determining whether Rule 11 sanctions are appropriate, the district court should examine whether an "attorney's conduct was reasonable under the circumstances." Mann v. G & G Manufacturing, Inc., 900 F.2d 953, 958 (6th Cir.), cert. denied, 498 U.S. 959, 111 S.Ct. 387, 112 L.Ed.2d 398 (1990).

In considering the motion for sanctions under Rule 11, the district court stated that the issue was whether plaintiff and/or plaintiff's counsel "should be held liable for sanctions for improperly pursuing a federal cause of action, when in fact Plaintiff was able to present no evidence of any anti-trust violation, even three years after commencing the action." J.A. 394 (emphasis in original). In reaching the conclusion that sanctions were appropriate in this case, the district court emphasized plaintiff's "extensive, persistent and unwarranted litigation ... after being granted a more than reasonable period of time within which to conduct discovery." J.A. 406. In the district court's opinion, sanctions were needed to deter future behavior of this kind by plaintiff and plaintiff's counsel.

Plaintiff argues that the district court abused its discretion in four ways when it imposed the Rule 11 sanctions. First, plaintiff argues that defendants' motions for sanctions were not timely. As recognized by the Supreme Court, "Rule 11 does not establish a deadline for the imposition of sanctions...." Cooter & Gell, 496 U.S. at 398, 110 S.Ct. at 2457. However, prompt motions for sanctions further the deterrent purposed of Rule 11. Id.

In the present case, the motion for sanctions by defendants Coder and Dillman came only one month after the district court granted their motion for summary judgment. The motion for sanctions by the Spectrum defendants followed the state court action which resolved the sole remaining count of the complaint against them. Because plaintiff withstood the motion to dismiss, the question for Rule 11 application is not whether the original Complaint...