United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Jeffrey Cole Magistrate Judge.
defendant, Peter Stone, has filed a motion for sanctions
against the plaintiff, Native American Arts, and its
attorney, Peter Lubin. Defendant contends that the filing of
the lawsuit violated Fed.R.Civ.P. 11 and 28 U.S.C. §1927
because: (1) the lawsuit was frivolous because the plaintiff
did not have standing to file it; (2) the plaintiff did not
have a good faith basis for alleging it was entitled to
astronomical damages; (3) the jewelry sold by the defendant
was, in fact, designed by a Native American; and (4) the
plaintiff named two experts who were previously barred from
testifying in similar lawsuits.
11 imposes a duty on attorneys to certify that they have
conducted a reasonable inquiry and have determined that any
papers filed with the court are well grounded in fact,
legally tenable, and ‘not interposed for any improper
purpose.'” Hahn v. Walsh, 762 F.3d 617,
632 (7th Cir. 2014). Representations in a filing in a federal
district court that are not grounded in an “inquiry
reasonable under the circumstances” or that are
unlikely to “have evidentiary support after a
reasonable opportunity for further investigation or
discovery” violate Rules 11(b) and 11(b)(3). City
of Livonia Employees' Ret. Sys. & Local
295/Local 851 v. Boeing Co., 711 F.3d 754, 762 (7th Cir.
2013). Whether a contention fails to clear that bar is
determined by “an objective inquiry into whether the
party or his counsel should have known that his position is
groundless.” Cuna Mut. Ins. Soc. v. Office &
Prof'l Employees Int'l Union, Local 39, 443 F.3d
556, 560 (7th Cir.2006). But, it is important to remember
that, not every unaccepted argument violates Rule 11:
“[S]anctions do not inevitably flow from being wrong on
the law” Harlyn Sales Corp. Profit Sharing Plan v.
Kemper Fin. Servs., Inc., 9 F.3d 1263, 1270 (7th
Cir.1993). Were this long accepted Rule to the contrary,
sanctions would be automatically imposed on the loser in
every case. Obviously they are not, and they are imposed only
where they are necessary to deter repetition of the offending
conduct. Fries v. Helper, 146 F.3d 452, 459
(7th Cir. 1998). Ultimately the choice of
sanctions is a discretionary call by the district court,
reviewable under the deferential abuse of discretion
standard. White v. Williams, 423 Fed.Appx. 645,
646-647 (7th Cir.2011). Cf., Thomas v. General Motors
Acceptance Corp., 288 F.3d 305, 308 (7th Cir.2002).
1927 authorizes a court to sanction an attorney who
“multiplies the proceedings unreasonably and
vexatiously” by requiring the attorney to
“satisfy personally” the excess costs (including
fees) “reasonably incurred because of such
conduct.” A finding of subjective bad faith on the part
of the offending attorney will support the imposition of
sanctions under §1927, but such a finding is not
necessary; “objective bad faith” will also
support a sanctions award. Dal Pozzo v. Basic Mach.
Co., 463 F.3d 609, 614 (7th Cir. 2006)(collecting
cases). “‘If a lawyer pursues a path that a
reasonably careful attorney would have known, after
appropriate inquiry, to be unsound, the conduct is
objectively unreasonable and vexatious. To put this a little
differently, a lawyer engages in bad faith by acting
recklessly or with indifference to the law, as well as by
acting in the teeth of what he knows to be the law . . .
.'” Boyer v. BNSF Ry. Co., 824 F.3d 694,
708 (7th Cir. 2016). “Simple negligence, on the other
hand, will not suffice to invoke section 1927.”
Id. at 708. It bears repeating that “[a] court
should not impose sanctions on a party that loses an
argument, as long as the argument was not entirely
groundless.” Philos Techs., Inc. v. Philos & D,
Inc., 802 F.3d 905, 917 (7th Cir. 2015). After a review
of the proceedings here, it has to be concluded that
sanctions are not appropriate under either provision.
underlying facts of this case, which the plaintiff brought
against the defendant under the Indian Arts and Crafts Act
(“IACA”), 25 U.S.C. § 305, have been
discussed at length in the ruling on the defendant's
motion for summary judgment and will not be revisited here.
See Native Am. Arts, Inc. v. Peter Stone Co.,
U.S.A., 2015 WL 3561439 (N.D. Ill. June 9, 2015). After
extensive briefing, the plaintiff's lawsuit was dismissed
for lack of standing. In that briefing, the defendant's
primary position was that the plaintiff was collaterally
estopped from establishing standing. Its secondary position
was that plaintiff did not qualify as an Indian arts and
crafts organization under the Indian Arts and Crafts Act
(“IACA”), 25 U.S.C. § 305 IACA. Both
arguments were rejected as non-starters. Native Am. Arts,
Inc., 2015 WL 3561439, at *5-7. An intemperate opponent
might have called them frivolous, but the mere fact that a
position is a loser does not make it frivolous.
the defendant's third position - the absence of an
Article III injury in fact - had any traction, and it proved
a fact-intensive and legally complex issue to address.
See Native American Arts, 2015 WL 3561439, at *8-15.
While the court strongly disagreed with the plaintiff's
stance on that issue and felt its presentation in response to
the defendant's motion for summary judgment was lacking,
that does not mean the suit was frivolous or filed in bad
faith without adequate investigation. And, while the court
did note that plaintiff had been warned by Judge Darrah about
the consequences of failing to adduce proof of standing in
the past, those consequences were not sanctions but the
dismissal of its suit. See Native American Arts,
2015 WL 3561439, at *8.
fact that plaintiff tried, and failed, to establish standing
does not necessitate sanctions. The sanction issue was
extremely intricate, and the court had to go beyond the
briefing of both sides to resolve it. The
challenging nature of the issue makes the court extremely
reluctant to award sanctions. See, e.g., Malec Holdings
II Ltd. v. English, 217 Fed.App'x 527, 530 (7th Cir.
2007)(noting that complexity of the Rooker-Feldman
doctrine might be sufficient reason to deny motion for
sanctions). “Lawyers do not come from cookie cutters. .
. . Some have deeper insight and . . . may find ways to
prevail (or to curtail costly discovery) that will elude
their colleagues.” Gusman v. Unisys Corp., 986
F.2d 1146, 1150 (7th Cir. 1993). That plaintiff's lawyers
did not come up with a way to prevail does not mean their
efforts were sanctionable.
failure to establish the concreteness prong of standing is,
essentially, what scuttled plaintiff's suit here. The
Supreme Court recently held that the Ninth Circuit failed to
perform what the Court said was the proper analysis of
standing and that the Court of Appeals had impermissibly
overlooked the requirement that an injury be concrete.
See Spokeo, Inc. v. Robins, ___ U.S. ___, ___, 136
S.Ct. 1540, 1549 (2016):
Congress' role in identifying and elevating intangible
harms does not mean that a plaintiff automatically satisfies
the injury-in-fact requirement whenever a statute grants a
person a statutory right and purports to authorize that
person to sue to vindicate that right. Article III standing
requires a concrete injury even in the context of a statutory
intricacy of the issue is perhaps further highlighted by the
fact that, in the wake of Spokeo, the Seventh
Circuit has chosen an easier and more judicially economical
path than standing to dispose of a recent case. Meyers v.
Oneida Tribe of Indians of Wisconsin, ___ F.3d ___, ___,
2016 WL 4698949, at *3 (7th Cir. Sept. 8, 2016). Nonetheless,
it must be pointed out that “[r]ecidivism is relevant
in assessing sanctions.” City of Livonia
Employees' Ret. Sys. & Local 295/Local 851 v. Boeing
Co., 711 F.3d 754, 762 (7th Cir. 2013).
this time, however, it's worth noting that the defendant
was unable to mount a challenge to plaintiff's standing
until six years into this litigation; that tends to
further undermine defendant's position that this was an
obvious flaw in the plaintiff's suit and one that
plaintiff should have readily conceded and should have
dropped its suit early on. Indeed, if it were such a
frivolous suit it would seem that defendant could have put
together a successful motion for summary judgment based on
the standing issue some time ago, thereby avoiding many of
the costs and expenses of which it now complains.
the defendant complains that the plaintiff alleged exorbitant
damages and demanded an excessive settlement amount, without
any good faith basis. While the claim for damages in this
case was definitely exorbitant, as was indicated in the
ruling on standing, this was more a function of the language
of the statute, Native American Arts, 2015 WL
3561439, at *1, 5, 14-15, than any bad faith or lack of
investigation by the plaintiff or counsel. The IACA allows
for statutory damages of $1000 per day for each item offered
for sale, and ...