Manhattan Construction Co. v. Cecil Phillips, et al

Filing

Opinion issued by court as to Appellants Place Collegiate Properties Company and Place Properties LP. Decision: Affirmed. Opinion type: Non-Published. Opinion method: Per Curiam. 12-15899X.

Case: 12-15626

Date Filed: 03/17/2014

Page: 1 of 5

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-15626
________________________
D.C. Docket No. 1:09-cv-01917-WSD
MANHATTAN CONSTRUCTION COMPANY,
Plaintiff-Appellee,
versus
PLACE PROPERTIES LP,
PLACE COLLEGIATE PROPERTIES COMPANY,
Defendants-Appellants.
________________________
Appeals from the United States District Court
for the Northern District of Georgia
________________________
(March 17, 2014)
Before WILSON, Circuit Judge, BUCKLEW, ∗ and LAZZARA, ∗∗ District Judges.
PER CURIAM:
∗

Honorable Susan C. Bucklew, United States District Judge for the Middle District of Florida,
sitting by designation.
∗∗

Honorable Richard A. Lazzara, United States District Judge for the Middle District of Florida,
sitting by designation.

Case: 12-15626

Date Filed: 03/17/2014

Page: 2 of 5

Place Collegiate Properties Company (“PCPC”) appeals the district court’s
decision denying its motion for sanctions. After review and with the benefit of oral
argument, we affirm.
I.

BACKGROUND
Cecil Phillips controls a family of affiliated corporate entities collectively

known as Place Properties. PCPC and Place Properties LP (“PPLP”) are two of
those entities. In 2003, Manhattan Construction Company (“Manhattan”)
contracted with Place Collegiate Development (“PCD”), another Place Properties
entity, to serve as general contractor on a construction project at Kennesaw State
University. PCD was a wholly owned subsidiary of PPLP, and PCPC served as
PPLP’s general partner. Disputes arose between Manhattan and PCD. After PCD
ceased making payments to Manhattan, Manhattan obtained a multi-million dollar
judgment against PCD. PCD was unable to satisfy the judgment.
Manhattan filed a single “piercing the corporate veil” claim against several
Place Properties entities, including PCPC and PPLP, in an attempt to hold those
entities liable for its judgment against PCD. Manhattan also sued Phillips and
another individual associated with Place Properties.
After a contentious discovery process that the district court labeled as
“unusually grueling and discordant,” PCPC and PPLP moved for summary

2

Case: 12-15626

Date Filed: 03/17/2014

Page: 3 of 5

judgment. PCPC also moved for sanctions pursuant to Federal Rule of Civil
Procedure 11, 28 U.S.C. § 1927, and the district court’s inherent power.1
The district court denied PCPC and PPLP’s motions for summary judgment
finding that genuine issues of material fact existed regarding the corporate
relationship between PCD and PPLP. Furthermore, the district court found that as
PPLP’s general partner, PCPC could be held liable to the same extent as PCPC
under Georgia law. The district court also denied PCPC’s motion for sanctions
without further comment.
Prior to trial, Manhattan sought dismissal of its claim with prejudice. The
district court granted the motion and imposed several conditions should Manhattan
choose to refile. Both parties appealed various orders by the district court, but the
sole issue remaining before us is whether the district court abused its discretion in
denying PCPC’s motion for sanctions.
II.

STANDARD OF REVIEW
Because the district court is “familiar with the issues and litigants, the

district court is better situated than the court of appeals to marshal the pertinent
facts and apply the fact-dependent legal standard mandated by Rule 11.” Cooter &
1

However, on appeal, PCPC raises no argument that the district court abused its
discretion in denying sanctions on the basis of 28 U.S.C. § 1927 or the district court’s inherent
power and instead exclusively rely upon Rule 11. Accordingly, any argument with respect to 28
U.S.C. § 1927 or the district court’s inherent power is abandoned. United States v. Ardley, 242
F.3d 989, 990 (11th Cir. 2001).
3

Case: 12-15626

Date Filed: 03/17/2014

Page: 4 of 5

Gell v. Hartmarx Corp., 496 U.S. 384, 402, 110 S. Ct. 2447, 2459, 110 L. Ed. 2d
359 (1990). Accordingly, we review a district court’s decision to deny sanctions
under Federal Rule of Civil Procedure 11 for abuse of discretion. Peer v. Lewis,
606 F.3d 1306, 1311 (11th Cir. 2010). “A district court abuses its discretion if it
applies an incorrect legal standard, follows improper procedures in making the
determination, or bases the decision upon findings of fact that are clearly
erroneous.” Id. (internal quotation marks omitted).
III.

DISCUSSION
Rule 11 sanctions are proper (1) when a party files a pleading that has
no reasonable factual basis; (2) when the party files a pleading that is
based on a legal theory that has no reasonable chance of success and
that cannot be advanced as a reasonable argument to change existing
law; and (3) when the party files a pleading in bad faith for an
improper purpose.

Jones v. Int'l Riding Helmets, Ltd., 49 F.3d 692, 694 (11th Cir. 1995) (internal
quotation marks omitted). Upon review, we conclude that the district court did not
abuse its discretion in declining to impose sanctions against Manhattan. Tellingly,
Manhattan’s sole legal claim survived summary judgment. The advisory
committee notes to Rule 11 provide that “if a party has evidence with respect to a
contention that would suffice to defeat a motion for summary judgment based
thereon, it would have sufficient ‘evidentiary support’ for purposes of Rule 11.”
Fed. R. Civ. P. 11 advisory committee notes of 1993.

4

Case: 12-15626

Date Filed: 03/17/2014

Page: 5 of 5

Furthermore, upon review of the evidence documenting Manhattan’s
prefiling factual inquiry, we cannot say that there was no factual basis for the
allegations in the complaint. See Davis v. Carl, 906 F.2d 533, 536 (11th Cir. 1990)
(explaining that sanctions premised on factually groundless allegations are
appropriate when “plaintiffs offered no evidence to support their allegations”).
While PCPC correctly points out that Manhattan’s factual allegations were made
collectively against the various corporate and individual defendants, this
generalization is likely attributable to the complex corporate structure of the Place
Properties entities. Even Cecil Phillips, the undisputed leader of Place Properties,
explained that he had difficulty in discerning the relationships between the various
entities.
AFFIRMED.

5