Sanctions Due to Delay

Florida Statute 57.105(3) contains the following language:
“At any time in any civil proceeding or action in
which the moving party proves by a
preponderance of the evidence that any action
taken by the opposing party, including, but not
limited to, the filing of any pleading or part
thereof, the assertion of or response to any
discovery demand, the assertion of any claim
or defense, or the response to any request by
any other party, was taken primarily for the
purpose of unreasonable delay, the court shall
award damages to the moving party for its
reasonable expenses incurred in obtaining
the order, which may including attorney’s fees,
and other loss resulting from the improper
delay.”
Federal Courts have Rule 11 as a corollary to the above Florida statute.  Rule 11 gives a Federal Judge the power to punish both litigants and counsel for bringing frivolous actions or for unnecessarily or improperly delaying of an action.  The recent case of Federal Deposit Ins. Corp. v. Maxxam, Inc., 523 F. 3d 566 (C.A. 5 (Tex.) 2008) provides a guideline to both State and Federal Courts as to the Court’s power to prevent unconscionable attempts at delay and harassment.  In that case, the FDIC brought an action against an investor in a Federal savings and loan which went bankrupt during the 1983 thrift crisis when more than 1,000 such banks failed throughout the United States after being squeezed between their earnings on fixed rate long-term mortgages and rising market rates.  The theory under which the FDIC sued Charles Hurwitz, a prominent Texas businessman and chairman and CEO of the bank in question, was at best tenuous.  The District Court found that the real reason for the suit was the hope of forcing a settlement to require Mr. Hurwitz to deed over certain California redwood lands which environmental groups and several government agencies wanted to protect from logging.  The suit commenced despite memoranda from the FDIC’s own lawyers recommending against suit based upon the improbability of prevailing.  In addition, the Federal District Court found that throughout the litigation, the FDIC intentionally attempted to delay the District Court suit so as to gain an advantage in the companion administrative action.
On appeal, the Fifth Circuit found insufficient evidence to support the trial judge’s finding that the suit had been brought solely to force a settlement encompassing the sale of the redwoods but did find that the delay and harassment tactics utilized by the FDIC warranted million of dollars of fines imposed by the trial court.  At Page 577, the Court explains how Federal Rule 11 parallels the language of Fla. Stat. sec. 57.105.
“Rule 11 gained bite in an expanded version,
requiring that a party, when signing a
pleading or any other paper before the court,
certify four specific representations:  that the
party is not filing the paper ‘for any improper
purpose, such as to harass or to cause
unnecessary delay or needless increase in
the cost of litigation’; its claims or defenses
are plausible under existing or potential
future law; the allegations are supported by
evidence or likely to be supported with further
investigation; and that any denials of allegations
are so supported. . . . .
[T]he rule reaches [those pleadings] which,
although not without merit, constitute an
abuse of legal purpose because brought for
an improper purpose such as causing
harassment, unnecessary delay or
needless increase in the cost of litigation.”
(Emphasis in original.)
In this case the appellate court focused on the way litigation was conducted rather than the reason for its inception.  At Page 584, the Court held:
“Although the case had sufficient merit to
surpass the bar of non-frivolous factual and
legal pleading as well as a proper purpose
for filing suit, the court recognized that
as the case proceeded, the FDIC began to
exert other pressures upon realizing that
sheer exposure to liability might be
insufficient to force negotiations.  As we
found in National Association of
Government Employees v. National
Federation of Federal Employees, 844 F.
2d 216, 224 (5th Cir. 1988), we do not hold
that the filing of a paper for an improper
purpose is immunized from Rule 11 sanctions
simply because it is well grounded in fact
and law.  The case can be made, for example . . .
that the filing of excessive motions, even if
each is ‘well grounded,’ may under some
circumstances constitute ‘harassment’
sanctionable under the Rule.
Litigation calculated to harass or increase
costs warrants sanctions, the merits of the
case notwithstanding.”

Neither Rule 11 nor Fla. Stat. 57.105 are used with any frequency.  Nevertheless, their use is appropriate when actions are either brought for improper purposes or are conducted in such a manner as to constitute nothing more than harassment or delay.  The Courts of Florida are undergoing a budgetary crisis.  Litigation has not slowed down despite the lack of Courts and ancillary personnel to handle that litigation.  As the complexity of litigation increases, the temptation to “stonewall” in discovery and interpose pleadings and motions for delay increases dramatically.  Both Florida and Federal Courts have a means at their disposal to make the use of those tactics dangerous and unrewarding.

Originally published in December 2008