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Halim v. Great Gatsby's Auction Gallery

March 12, 2007


The opinion of the court was delivered by: Charles P. Kocoras, District Judge


This matter is before this Court on Defendant The Great Gatsby's Auction Gallery, Inc. ("Gatsby")'s motion for sanctions against Plaintiff Cameel Halim ("Halim") for filing a motion to vacate an arbitral award. Gatsby contends that Halim's motion to vacate was frivolous, needlessly increased the costs of litigation, and warrants sanctions pursuant to Fed. R. Civ. P. 11. For the reasons set forth below, Gatsby's motion is granted.


This matter originally came before this Court on Halim's complaint against Gatsby, arising out of purchases Halim made from one of Gatsby's auctions. Halim alleged that the items he purchased did not match the descriptions in Gatsby's auction catalog and asserted claims of breach of warranty, misrepresentation, novation, and rescission. We ordered the parties to arbitration pursuant to an arbitration clause contained in the auction agreement ("Auction Agreement") entered into by Halim and Gatsby. See Halim v. The Great Gatsby's Auction Gallery, Inc., 2004 WL 434191 (N.D. Ill., Mar. 5, 2004). The parties submitted the matter to an arbitrator, who, in his award of September 15, 2006, denied Halim's claims in their entirety and ordered that the parties share the costs of the arbitration. Halim then filed an application with this Court, seeking vacatur of the award and a remand for further arbitral proceedings. Gatsby moved to confirm the award and filed the instant motion for Rule 11 sanctions. On February 15, 2006, this Court denied Halim's motion to vacate and granted Gatsby's motion to confirm the arbitral award.


Fed. R. Civ. P. 11(b) requires that attorneys make a reasonable inquiry into the facts and the law prior to presenting any pleading, motion, or other paper before the court, so that they may certify that:

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

Fed. R. Civ. P. 11(c) permits a court to impose sanctions upon an attorney for violations of Rule 11(b). See, e.g., Nat'l Wrecking Co. v. Int'l Bhd. of Teamsters, Local 731, 990 F.2d 957, 963 (7th Cir. 1993). Before imposing sanctions for the filing of frivolous or improper papers, a court must "undertake an objective inquiry into whether the party or his counsel should have known that his position is groundless." Id. (quoting CNPA v. Chicago Web Printing Pressmen's Union No. 7, 821 F.2d 390, 397 (7th Cir. 1987)). A finding of bad faith is not a prerequisite to imposing Rule 11 sanctions. Id. at 963. With these legal principles in mind, we consider the instant motion.


Rather than argue for an extension or modification of existing law, Halim sought to justify vacatur by framing the arbitrator's errors within the limited grounds for vacatur set out in the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10(a). In his motion, Halim argued that the arbitrator refused to hear pertinent and material evidence, under § 10(a)(3), and manifestly disregarded the law, under §10(a)(4), when he: 1) he refused to resolve a material discovery dispute; 2) he neglected to issue a reasoned opinion; and 3) he allowed Halim's expert to testify as an undisclosed witness for Gatsby. Halim withdrew his third contention in his reply in support of his motion to vacate within the 21-day "safe harbor" provided by Rule 11(c). Thus, we address only whether or not Halim's first two arguments were so groundless as to merit sanctions.

Halim's first argument was premised on the arbitrator's purported failure to resolve a discovery dispute over the production of certain invoices. In response to earlier discovery disputes between the parties, the arbitrator had issued an order requiring the parties to cooperate in good faith in the completion of discovery. Halim argues that this order constituted a "ruling" on the parties' discovery disputes. Later, when another dispute arose over the production of invoices, the arbitrator did not issue a second order but instead referred the parties to his earlier order. Halim argues that the arbitrator's actions in this matter amounted to (1) a refusal to hear material and pertinent evidence, because the invoices were never produced; and (2) a manifest disregard of the law ...

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