7th Circuit Upholds $30K Jones Day Sanction, Applies Rule 11
Saying that the sanction was on the lenient side, a federal appeals court has upheld a $30,000 penalty against Jones Day for filing a frivolous counterclaim and, in effect, recommended that federal judges feel free to apply Rule 11 more frequently.
U.S. District Judge Barbara Crabb did not abuse her discretion by fining the 2,300-attorney Cleveland-based firm for filing a counterclaim that was unsupported by any evidence, says the Chicago-based 7th U.S. Circuit Court of Appeals. And, in fact, the $30,000 was hardly a harsh penalty, under the circumstances, since it represented only discovery costs directly attributable to the counterclaim, a three-judge appellate panel says in a written opinion Tuesday authored by Judge Frank Easterbrook.
“But for the baseless counterclaim, the suit could have been resolved without a trial,” Easterbrook writes. “As a practical matter, all of the [counterclaim defendant’s] legal expenses are attributable to the counterclaim, though the district judge awarded only $21,754 for the time counsel spent dealing with [one witness’] deposition and testimony. That sanction is modest.”
However, the judge did err, Easterbrook writes, in determining that Rule 11 of the Federal Rules of Civil Procedure wasn’t applicable, because the opposing party wouldn’t have realized early enough in the proceedings that the counterclaim was baseless. In fact, Rule 11(c)(3) allows sanctions for frivolous filings on a judge’s own initiative at any time, and is the most appropriate basis for sanctions in this case, he writes. Crabb originally imposed the $30,000 sanction on a statutory basis.
The firm says in a written statement that it respectfully disagrees with the 7th Circuit and still believes it had a reasonable basis to file the counterclaim in the Western District of Wisconsin case, reports the National Law Journal.
