United States District Court, N.D. Illinois, Eastern Division
REPORT AND RECOMMENDATION
M. Rowland, Magistrate Judge
Rolling Meadows and Anthony Peluso (City Defendants) move for
sanctions against Plaintiff Gregory Dempsey (Plaintiff)
following the District Court's grant of summary judgment
in favor of the City Defendants. The City Defendants seek
reimbursement for all of their fees and costs incurred since
the beginning of this litigation. For the reasons stated
below, the Court recommends that the motion for sanctions
 be GRANTED IN PART.
Background and Procedural History
case arises from a business dispute between Plaintiff and
Richard Nathan and RTC Industries Inc. (RTC Defendants).
During that dispute, Mr. Nathan filed a citizen's
complaint accusing Plaintiff of removing an original
freelance agreement from RTC. (See Dkt. 144). After
Detective Peluso (Peluso) conducted a month-long
investigation into other missing property, including flag
stem axles, he signed a criminal complaint on behalf of Mr.
Nathan and arrested Plaintiff. Id.; Dkt. 100.
filed an eleven-count complaint against the City Defendants
and the RTC Defendants, alleging violations of 42 U.S.C.
§ 1983, including false arrest, and state law tort
claims. On September 30, 2014, the District Judge dismissed
the illegal search and seizure claims against the City
Defendants because Plaintiff failed to show that he had a
legitimate interest in the property seized and dismissed the
false arrest claim against the City finding Plaintiff failed
to state a Monell claim. (Dkt. 41). The false arrest
claim against Peluso survived based on Plaintiff's
allegation that Peluso knew the charges against Plaintiff
7, 2016, the District Judge granted the City Defendants'
motion for summary judgment. (Dkt. 144). The City Defendants
now seek sanctions, arguing that Plaintiff's claims were
frivolous and designed to harass them. (Dkt. 151). The
City Defendants attach to their motion a March 27, 2014
letter to Plaintiff, written pursuant to Federal Rule of
Civil Procedure 11, warning that Plaintiff's claims
violate Rule 11(b)(1) and (3) and that the City Defendants
would seek sanctions if Plaintiff did not voluntarily dismiss
all claims against them. (Dkt. 151-1, Exh. A).
The City Defendants' Letter Meets Rule 11's
argues that the City Defendants' letter does not comply
with Rule 11 because it is “not a draft of the Motion
to Compel.” (Dkt. 162, at 2). This argument is
unpersuasive. A party may send a Rule 11 letter instead of
serving a motion for sanctions. Matrix IV, Inc. v. Am.
Nat'l Bank & Tr. Co., 649 F.3d 539, 552 (7th
Cir. 2011) (“we have held that a letter informing the
opposing party of the intent to seek sanctions and the basis
for the imposition of sanctions...is sufficient for Rule 11
purposes”). Plaintiff was on notice of the City
Defendants' intention to seek sanctions at least as early
as March 27, 2014, when they sent their Rule 11 letter. The
letter stated the City Defendants' intent to seek
sanctions if Plaintiff did not dismiss them from the lawsuit
because of the lack of evidentiary and legal support for
Plaintiff's claims. Defendants' letter is sufficient
under Rule 11.
Sanctions Are Warranted Under Rule 11(b)(3)
false arrest theory was that the RTC Defendants gave Peluso
false in-formation-that Plaintiff had taken RTC property
without authority-and Peluso knew the information was
false when he arrested Plaintiff. (Dkt. 1-1, Compl.
¶¶31, 45-50). On summary judgment Plaintiff produced
no evidence that Peluso knew the information was false.
Instead, Plaintiff argued that: (1) Peluso knew that the
first complaint was the “result of a recent breakdown
in business relations” (Dkt. 113 at 2); (2) Plaintiff
had permission to take the property (Id., Dempsey
Decl. ¶9); and (3) Peluso should have investigated
further. Id. at 3.
District Court found no evidence “suggest[ing] that
Detective Peluso had reason to believe RTC's complaint
was ‘fishy'.” (Dkt. 144 at 12, n. 6). The
citizen's complaint filed by the RTC Defendants alone
established probable cause. Id. at 12. Peluso's
alleged awareness of a “recent breakdown in business
relations” did not show that he knew the information in
the complaint was false. Id. at 12, n. 6.
Importantly, Plaintiff never informed Peluso that he had
permission to take the property, so Plaintiff's
explanation, in response to Defendants' summary judgment
motion, for why he took the property was not relevant to
determining whether Peluso had probable cause. Id.
at 13, n. 9. Finally, once Peluso had probable cause based on
the complaint Mr. Nathan signed, Peluso had no further
obligation to investigate. Id. at 12-13.
predicted in the City Defendants Rule 11 letter, Plaintiff
had no evidence to support his false arrest claim. The
District Court's ruling on the motions to dismiss should
have served as further warning. That ruling was clear that
the only way Plaintiff's false arrest claim could succeed
was if Plaintiff had some evidence that Peluso knew the
charges were false. (Dkt. 41 at 11). Despite have no such
evidence, even by the time of summary judgment, Plaintiff
tried to gloss over his lack of evidentiary support by making
opposing sanctions, Plaintiff asserts that Peluso's
investigation was faulty, and the City Defendants violated
their own policies regarding the handling of evidence. (Dkt.
162). He relies on the fact that the state court judge in his
criminal case was “incredulous” with the
States' presentation of evidence. Plaintiff misses the
point. The District Court found that there was no genuine
issue of fact whether: (1) Peluso had probable cause to
arrest Plaintiff based on Mr. Nathan's complaint; or (2)
Peluso knew the information contained in the criminal
complaint was false. The fact that the State did not meet its
burden of proof in Plaintiff's criminal case has no
bearing on Plaintiff's ability to meet his
burden of proof in this case.
Rule 11, a court may impose sanctions on an attorney or party
who maintains a claim that is “unwarranted by existing
law or has no reasonable basis in fact, and that applies to
claims presented to the court ‘whether by signing,
filing submitting, or later advocating it.'”
Fabriko Acquisition Corp. v. Prokos, 536 F.3d 605,
610 (7th Cir. 2008). The decision to impose sanctions, and
the amount and form of ...