Miletak v. Acuity Mutual Insurance Company

Filing 75

ORDER DENYING 66 MOTION FOR SANCTIONS. Signed by Judge Beth Labson Freeman on 11/21/2022. (blflc2, COURT STAFF) (Filed on 11/21/2022)Any non-CM/ECF Participants have been served by First Class Mail to the addresses of record listed on the Notice of Electronic Filing (NEF)

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Case 5:22-cv-00633-BLF Document 75 Filed 11/21/22 Page 1 of 6 1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 NICK MILETAK, Plaintiff, 8 9 10 11 Case No. 22-cv-00633-BLF ORDER DENYING PLAINTIFF’S RULE 11 SANCTIONS MOTION v. ACUITY MUTUAL INSURANCE COMPANY, [Re: ECF No. 66] United States District Court Northern District of California Defendant. 12 13 In this case, pro se Plaintiff Nick Miletak sues Defendant Acuity Mutual Insurance 14 Company for defamation, intentional infliction of emotional distress, and intentional interference 15 with economic advantage. Miletak alleges that Darcel Lang, an employee of Acuity, falsely 16 reported Miletak to Miletak’s employer about improper conduct related to an insurance claim 17 made by Miletak’s goddaughter. Miletak alleges that the report caused him humiliation and led 18 him to resign from his employment. 19 Miletak filed this lawsuit in Santa Clara Superior Court on November 10, 2021. See ECF 20 No. 6–1. Defendant Darcel Lang brought a cross-claim for defamation, which accompanied 21 Defendants’ Answer. See ECF No. 6–2. Defendants removed the case to this Court on January 22 31, 2022. See ECF No. 1. Miletak then filed a motion to dismiss and a motion to strike Lang’s 23 cross-claim, as well as a motion to remand the case in its entirety for lack of subject matter 24 jurisdiction. See ECF Nos. 16, 17, 20. Defendants also filed a motion to deem Miletak a 25 vexatious litigant. See ECF No. 41. The Court denied Miletak’s motion to remand, granted 26 Miletak’s motion to dismiss Lang’s cross-claim with leave to amend, denied Miletak’s motion to 27 strike without prejudice, and denied Defendants’ motion to declare Miletak a vexatious litigant. 28 See ECF No. 51 at 10–11 (“Order re. Pending Mots.”). Defendant filed an amended answer, as Case 5:22-cv-00633-BLF Document 75 Filed 11/21/22 Page 2 of 6 1 well as cross-claims by Lang for Intentional Infliction of Emotional Distress (“IIED”) and 2 Negligent Infliction of Emotional Distress (“NIED”) and by Acuity for malicious prosecution. 3 See ECF No. 55 (“Am. Answer & Cross-cl.”). Miletak then filed a motion to dismiss and a 4 motion to strike each of these cross-claims, see ECF 59, both of which the Court granted, see ECF 5 No. 74 (“Order re Am. Mots.”). Now before the Court is Miletak’s motion for sanctions. Miletak’s motions to dismiss the United States District Court Northern District of California 6 7 cross-claims that accompanied Defendant’s amended answer also included a cursory assertion that 8 cross-plaintiffs’ counsel should be sanctioned pursuant to Federal Rule of Civil Procedure 11. See 9 ECF 59–1 (“Original Mot.”) at 15. Defendants then filed an opposition, arguing their counsel 10 should not be sanctioned. See ECF No. 64 (“Opp.”). Subsequently, Miletak filed a separate, more 11 detailed motion for sanctions that identified the allegedly violative conduct, as required by Rule 12 11(c)(2). See ECF No. 66–1 (“Mot.”) at 4 (citing the requirement in Rule 11(c)(2) that “[a] 13 motion for sanctions must be made separately from any other motion and must describe the 14 specific conduct that allegedly violates Rule 11(b)”). Miletak also filed the required Certificate of 15 Service for his motion for sanctions. See ECF No. 73; Fed. R. Civ. P. 11(c)(2) (“The motion must 16 be served under Rule 5 . . .”); see also Mot. at 4. Defendants did not file any further opposition, 17 and the deadline for doing so has passed. See ECF No. 66. For the reasons discussed herein, the Court DENIES Miletak’s motion for this Court to 18 19 20 21 sanction Defendants’ counsel pursuant to Rule 11. I. LEGAL STANDARD Rule 11 of the Federal Rules of Civil Procedure imposes upon attorneys a duty to certify 22 that they have read any pleadings or motions they file with the court and that such 23 pleadings/motions are well-grounded in fact, have a colorable basis in law, and are not filed for an 24 improper purpose. See Fed. R. Civ. P. 11(b); Bus. Guides, Inc. v. Chromatic Commc’ns Enters., 25 Inc., 498 U.S. 533, 541–542 (1991). If a court finds that Rule 11(b) has been violated, the court 26 may impose appropriate sanctions to deter similar conduct. Fed. R. Civ. P. 11(c)(1); see also 27 Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990) (“[T]he central purpose of Rule 11 is 28 to deter baseless filings in district court.”). However, “Rule 11 is an extraordinary remedy, one to 2 Case 5:22-cv-00633-BLF Document 75 Filed 11/21/22 Page 3 of 6 1 be exercised with extreme caution.” Operating Eng'rs Pension Trust v. A-C Co., 859 F.2d 1336, 2 1345 (9th Cir. 1988). Rule 11 sanctions should be reserved for the “rare and exceptional case 3 where the action is clearly frivolous, legally unreasonable or without legal foundation, or brought 4 for an improper purpose.” Id. at 1344. “Rule 11 must not be construed so as to conflict with the 5 primary duty of an attorney to represent his or her client zealously.” Id. In determining whether Rule 11 has been violated, a “court must consider factual questions United States District Court Northern District of California 6 7 regarding the nature of the attorney's prefiling inquiry and the factual basis of the pleading.” 8 Cooter, 496 U.S. at 399. However, courts should “avoid using the wisdom of hindsight and 9 should test the signer's conduct by inquiring what was reasonable to believe at the time the 10 pleading, motion, or other paper was submitted.” Fed. R. Civ. P. 11 Advisory Comm. Notes 11 (1983 Amendment). “[T]he imposition of a Rule 11 sanction is not a judgment on the merits of an 12 action. Rather, it requires the determination of a collateral issue: whether the attorney has abused 13 the judicial process, and, if so, what sanction would be appropriate.” Cooter, 496 U.S. at 396. 14 In the Ninth Circuit, Rule 11 sanctions are appropriate where: “(1) attorneys make or use a 15 court filing for an improper purpose; or (2) such a filing is ‘frivolous.’” See Townsend v. Holman 16 Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990) (en banc); see also Christian v. Mattel, 17 Inc., 286 F.3d 1118, 1127 (9th Cir. 2002). A “frivolous” argument or claim is one that is “both 18 baseless and made without a reasonable and competent inquiry.” Townsend, 929 F.2d at 1362. 19 20 II. DISCUSSION Miletak argues that the Court should order sanctions because Defendants’ cross-claims are 21 frivolous. See Mot. at 6. Miletak argues that the cross-claims are frivolous because they fail to 22 plead the required elements, as the underlying statements are protected by litigation privilege. See 23 id. Additionally, Miletak asserts that Defendants’ cross-claims are frivolous because Defendants 24 allegedly did not follow the directions the Court provided in a previous order. See id. Defendants 25 counter that, in a previous case management conference, this Court indicated that malicious 26 prosecution was different than the previous defamation claim — presumably to address the 27 accusation that they did not follow the Court’s orders. See Opp. at 2. Defendants also assert that 28 the “gravamen of a malicious prosecution is the filing of a frivolous lawsuit,” and that, therefore, 3 Case 5:22-cv-00633-BLF Document 75 Filed 11/21/22 Page 4 of 6 1 the allegedly frivolous lawsuit by Miletak merits their claim of malicious prosecution. See id. 2 The Opposition does not appear to address Miletak’s arguments as to their cross-claims for IIED 3 and NIED. See Opp. 4 5 Defendants’ cross-claims might ultimately be without merit, an “imposition of 6 a Rule 11 sanction is not a judgment on the merits of an action.” Cooter, 496 U.S. at 396. 7 Instead, the Court analyzes the “collateral issue” of whether counsel has abused the judicial 8 process. There is little evidence of such abuse. 9 United States District Court Northern District of California Miletak’s motion for sanctions is clearly not warranted under the circumstances. While the For the malicious prosecution cross-claim, Miletak is incorrect that the substance of this 10 claim remains protected by litigation privilege. See Mot. at 6. This is because “[c]ourts have 11 applied the litigation privilege to all torts, with the exception of actions for malicious prosecution.” 12 Ingrid & Isabel, LLC v. Baby Be Mine, LLC, 70 F. Supp. 3d 1105, 1140 (N.D. Cal. 2014) 13 (emphasis added). The filing of this cross-claim consequently heeds the Court’s prior admonition 14 that Defendants should be cautious to not bring amended cross-claims that would be invalid due to 15 litigation privilege. See Order re Pending Mots. at 7; see also Order re Am. Mots. Thus, there is 16 no basis for this Court to conclude that Defendants’ cross-claim for malicious prosecution would 17 merit a Rule 11(b) sanction, as it is certainly not “clearly frivolous, legally unreasonable or 18 without legal foundation.” Operating Eng'rs Pension Trust., 859 F.2d at 1344. Defendants are 19 indeed correct that that the “gravamen of a malicious prosecution is the filing of a frivolous 20 lawsuit.” Opp. at 2; see Barry A. Lindahl, Misuse of legal process: Malicious prosecution, 21 malicious use of civil process and abuse of process compared, 4 MODERN TORT LAW: LIABILITY 22 AND LITIGATION, 23 free from unjustifiable litigation.”). Therefore, while the failure of Defendants’ counsel to 24 adequately plead the prima facie case for malicious prosecution did lead to its dismissal, see Order 25 re Am. Mots. at 4–5, a failure to adequately plead the elements in this case does not meet the high 26 bar required to justify sanctions. § 39:2 (2d ed.) (May 2022) (“The essence of the tort is said to be the right to be 27 The filing of the IIED and NIED cross-claims presents a closer question. However, while 28 the Court has already found that Darcel Lang’s amended cross-claims for IIED and NIED cannot 4 United States District Court Northern District of California Case 5:22-cv-00633-BLF Document 75 Filed 11/21/22 Page 5 of 6 1 move forward because the underlying statements are protected by litigation privilege, see Order re 2 Am. Mots. at 3–4, the filing of these cross-claims still fails to constitute an abuse of the judicial 3 process that would merit Rule 11(b) sanctions. The Court had allowed an amended filing by Lang 4 in its initial order because it determined that Lang may have a colorable claim that would not be 5 blocked by litigation privilege. See Order re Pending Mots. at 7 (“[I]t is not absolutely clear that 6 amendment would be futile.”). Defendants’ counsel ultimately failed to plead a cause of action 7 that would overcome litigation privilege. While Defendants’ counsel should have realized that the 8 amended cross-claims would fail due to litigation privilege, see Am. Answer & Cross-Cl. ¶ 9 9 (basing IIED cross-claim on Miletak’s “frivolous litigation alleging defamation and related causes 10 of action”); id. ¶ 15 (basing NIED cross-claim on Miletak’s filing of “a frivolous, ridiculous and 11 baseless lawsuit”), the Court still finds it inappropriate to grant Miletak’s motion for sanctions in 12 this matter. 13 The Court has significant discretion in determining whether Rule 11 sanctions shall be 14 applied. See Cooter, 496 U.S. at 402–404. Moreover, it bears repeating that “Rule 11 is an 15 extraordinary remedy, one to be exercised with extreme caution.” Operating Eng'rs Pension 16 Trust, 859 F.2d at 1345 (emphasis added). Sanctions should only be brought under “rare and 17 exceptional” circumstances. Id. at 1344 (emphasis added). Defendants’ counsel brought these 18 claims ostensibly in a good faith effort to address the harm done to their client by an allegedly 19 frivolous lawsuit. Moreover, though Defendants’ counsel did not provide counterarguments to 20 defend their claims of NIED and IIED against Miletak’s motion for sanctions, this was likely 21 because the Defendants’ opposition was filed before Miletak’s official motion for sanctions. 22 Miletak only made cursory mention of sanctions in his initial motion to dismiss/strike and failed to 23 identify any specific, violative conduct. See Original Mot. at 15. Miletak then filed a separate, 24 formal motion for sanctions in a later motion over a month later. See Mot. Though Miletak’s 25 unorthodox filings are permitted in light of the liberal constructions afforded to pro se litigants, 26 see Hebbe v. Pliler, 627 F.3d 338, 342 (9th Cir. 2010), the reality that Defendants’ counsel has 27 been responding to such unconventional motion practice colors the Court’s perception of whether 28 they have engaged in abuse of judicial process. Ultimately, the purpose of Rule 11, which, inter 5 Case 5:22-cv-00633-BLF Document 75 Filed 11/21/22 Page 6 of 6 1 alia, is to discourage “dilatory or abusive tactics,” would simply not be served by sanctions 2 against Defendants’ counsel in this matter. See Kathleen M. Dorr, Annotation, Comment note— 3 general principles regarding imposition of sanctions under Rule 11, Federal Rules of Civil 4 Procedure, 95 A.L.R. FED. 107, § II.3 (1989). 5 III. 6 7 ORDER For the foregoing reasons, IT IS HEREBY ORDERED that Miletak’s motion for Rule 11 sanctions is DENIED. 8 9 10 United States District Court Northern District of California 11 Dated: November 21, 2022 ______________________________________ BETH LABSON FREEMAN United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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