Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 86 C 3831--Prentice H. Marshall, Judge.
William J. Bauer, Chief Judge, Richard A. Posner and Joel M. Flaum, Circuit Judges.
JOEL M. FLAUM, Circuit Judge.
Robert Beeman, President of Local 666 of the International Alliance of Theatrical Stage Employees and Moving Picture Machine Operators of the United States and Canada ("Local 666") and a member of Local 666's executive board, filed suit in federal district court alleging that other members of Local 666's executive board (the defendants) engaged in conduct that violated the Racketeering Influenced and Corrupt Organizations Act (RICO). 18 U.S.C. § 1961 et seq. The district court determined that the complaint failed to state a claim upon which relief could be granted and dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6). The defendants moved to amend the judgment to include sanctions under Federal Rule of Civil Procedure 11. The district court, after conducting a hearing, denied the defendants' motion to amend the judgment. The district court also denied defendants' motion to reconsider its ruling on this issue. We affirm the district court's decision denying sanctions under Rule 11.
Beeman filed his RICO suit against the defendants on May 29, 1986. Beeman's complaint was a hefty 46 pages in length. The complaint alleged that the defendants wanted to require all Local 666 members to pay minimum annual membership dues of $200. The minimum dues, in Beeman's view, were part of defendants' plan to "dump" Local 666's present attorney and hire defendant, James F. Mazzulla, as both legal counsel and a fill time business agent at an inflated salary. In order to attain this objective, the defendants allegedly issued voting ballots which were accompanied by financial information which was known by the defendants to be false. The complaint also claimed that Beeman had once been wrongfully unseated as president of Local 666, was reinstated by the union's international office, but was then threatened by the defendants with physical injury if he did not resign as president. The thrust of the complaint therefore was that the defendants sought to oust their opposition and use their positions on the executive board for their own purposes and to the union's detriment. The complaint sought both injunctive relief and damages.
On June 20, 1986 the defendants' counsel sent a letter to Beeman's attorney stating that he believed that the complaint was not well-grounded in fact or warranted by existing law. The letter advised that if the plaintiff had no legal authority to support the complaint, then the plaintiff should voluntarily dismiss it. The letter further advised that if the complaint was not dismissed the defendants would "spare no expense in holding you and the plaintiff personally responsible under Rule 11."
Plaintiff's counsel responded in writing to this letter on June 26, 1986, denying that the complaint was frivolous or unwarranted by existing law. In addition, he included a seven page legal memorandum, apparently prepared by his firm, which he believed supported the validity of the complaint. This letter also requested that defendants' counsel, after reviewing the complaint and the enclosed material, provide the legal authority that supported his view that the complaint was frivolous. The defendants' counsel did not directly respond, but rather moved to dismiss the complaint under Rule 12(b)(6).
On February 6, 1987 the district court issued a memorandum opinion granting defendants' motion to dismiss and using language which can only be labelled as highly critical of the plaintiff's complaint. The district court stated that "what plaintiff has alleged is a good old-fashioned local union fight" and that the complaint was a "paroxysm of RICO rage." Beeman v. Fiester, No. 86 C 3831, mem. op. at 1, 2 (N.D. Ill. Feb. 6, 1987). The district court concluded:
Plaintiff's complaint does not state a RICO claim. Plaintiff has not alleged an enterprise. He has not alleged a pattern of racketeering. He has not adequately alleged predicate acts. He proceeds improperly by way of information and belief. He purports to allege extortion but fails to do so. The complaint is really nothing other than a nightmare.
The defendants moved pursuant to Federal Rule of Civil Procedure 59(e) to amend the judgment to include sanctions under Rule 11, including attorneys' fees of $13,473.96. The district court conducted a hearing on the appropriateness of Rule 11 sanctions on March 23, 1987. At this hearing the district court judge indicated that he had "grave doubts" about whether the suit was fled for a proper purpose, and therefore requested additional information. The plaintiff submitted material both before and after the hearing which included his own affidavit as well as affidavits from his counsel and from two attorneys from the firm of Schiff, Hardin & Waite ("Schiff") who were acting as local counsel. Plaintiff's affidavit explained in detail why he brought the suit and the alternatives he explored before filing the suit. His counsel's affidavit indicated that he had requested that attorneys from Schiff review the complaint before it was filed, that at least three attorneys from that firm had done so, and that they determined that it was warranted by existing law. This was re-affirmed by the affidavits of Schiff's attorneys.
On July 21, 1987 the district court denied the defendants' motion to amend the judgment. The district court stated that it would "not undertake to recharacterize plaintiff's complaint other than as we already have in dismissing it." Beeman v. Fiester, No. 86 C 3831 (N.D. Ill. July 21, 1987) (order denying motion to amend judgment). The district court further stated:
This lawsuit was brought in retaliation for some bareknuckle union infighting. It was not well grounded in fact and was not supported by existing law. But we are unable to conclude that plaintiff's counsel lacked a good faith belief that RICO could be extended to embrace the sort of intraunion tactics disclosed by the complaint. Upon reflection, ...