Cope v. Auto-Owners Insurance Company

Filing 190

ORDER GRANTING IN PART AND DENYING IN PART 148 Motion for Sanctions. The the Motion is GRANTED IN PART, to the extent Defendant seeks a finding that Mr. Bell violated Rule 11(b) by knowingly making false statements to the Court, and relief in the form of monetary sanctions. It is DENIED IN PART, to the extent Defendant seeks non-monetary sanctions. Accordingly, IT IS ORDERED that the Court finds that Bell has violated Rule 11(b). IT IS FURTHER ORDERED that the Court hereby awards Defen dant its reasonable attorneys fees in preparing and filing the Motion and Reply. Finally, IT IS FURTHER ORDERED that Defendant shall file an affidavit of fees and costs within ten (10) days of this Order; and, Mr. Bell shall have ten (10) days from the date Defendant files its affidavit to submit a response over the reasonableness of the claimed fees and costs. SO ORDERED by Magistrate Judge S. Kato Crews on 3/30/2020. (skclc2)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
U.S. Magistrate Judge S. Kato Crews

Civil Action No. 1:18-cv-00051-WJM-SKC
Consolidated with Civil Action No. 1:18-cv-02000-WJM-SKC
TODD COPE,
Plaintiff,
v.
AUTO-OWNERS INSURANCE COMPANY,
Defendant.

KENNETH MERRITT and
CHRISTY MERRITT,
Plaintiffs,
v.
AUTO-OWNERS INSURANCE COMPANY,
Defendant.

ORDER RE: DEFENDANT’S MOTION FOR SANCTIONS
UNDER FRED. R. CIV. P. 11 [#148]

Counsel for Defendant Auto-Owners Insurance Company and counsel for Plaintiffs
Merritt have enjoyed an unfortunately contentious relationship in this litigation. Their
history has included Defendant’s unsuccessful attempt to obtain leave to depose and
disqualify Gary Bell (“Bell”), the Merritt’s attorney, as a necessary witness in this case.

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[#186.] It has also included Bell’s (through his own attorney) admission that a purported
CM/ECF electronic filing receipt for a discovery brief his office filed was “false.” 1 [See
generally #178 and #181; see also #178-7.] This matter is currently before the Court on
Defendant’s Motion for Sanctions (“Motion) under Rule 11 of the Federal Rules of Civil
Procedure. [#148.] Defendant’s seek monetary and non-monetary sanctions against the
Merritts and their attorneys for the attorneys’ alleged misrepresentations to the Court. [Id.
at p. 11.] The Court reviewed the briefing on the Motion and finds that no hearing is
necessary. After considering the Parties’ arguments, the Motion is GRANTED IN PART,
and DENIED IN PART WITHOUT PREJUDICE.
A. LEGAL STANDARDS
Arguing that Bell violated Rule 11, Defendant wants this Court to: (1) find that Bell
violated Rule 11(b) by knowingly making factually inaccurate statements to the Court; (2)
strike the factually inaccurate information as untrue and unreliable; and (3) order Bell and
the Merritts jointly and severally responsible for Defendant’s reasonable attorney fees and
costs incurred in filing this Motion.
Rule 11 provides that by presenting a pleading, written motion, or other paper, to
the court, “an attorney . . . certifies that to the best of the person's knowledge, information,
and belief, formed after an inquiry reasonable under the circumstances;” (1) the filing is
not presented for any improper purpose; (2) the claims and legal contentions are

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Normally, the existence of a Committee on Conduct investigation is a confidential matter.
However, several public filings in this case, including filings by Bell’s law firm, have
disclosed the investigation. [See #177-1 at 2; #181 at 6–7.] This example was not included
in the Motion and has not been considered by the Court in this ruling.
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warranted by existing law or a non-frivolous argument for the extension, modification or
reversal of existing law; and, (3) “the factual contentions have evidentiary support, or, if
specifically so identified, will likely have evidentiary support after a reasonable opportunity
for further investigation or discovery.” Fed. R. Civ. P. 11(b).
Rule 11 establishes a standard of objective reasonableness. Adamson v. Bowen,
855 F.2d 668, 673 (10th Cir. 1988). The test for imposition of Rule 11 sanctions is whether
counsel’s conduct was reasonable under the circumstances of the case. Ridder v. City of
Springfield, 109 F.3d 288, 293 (6th Cir. 1997). It does not require a finding of subjective
bad faith on the part of the offending attorney. Cf. Scott v. Boeing Co., 204 F.R.D. 698,
700 (D. Kan. 2002) (noting that an attorney’s subjective good faith belief in the merits of
an argument will not suffice to satisfy the standard of objective reasonableness).
The duty of candor established under Rule 11 exposes counsel to sanctions for
arguing a false position or continuing to advocate a position after learning that it ceases
to have merit or is no longer tenable. Young v. Corbin, 889 F. Supp. 582, 585 (N.D.N.Y.
1995). Ultimately, Rule 11 seeks to curb abuses of the litigation process. Bus. Guides,
Inc. v. Chromatic Commc’ns Enters., Inc., 498 U.S. 533, 542 (1991). It is not intended to
function as a fee-shifting provision or to reward parties who are victimized by litigation.
See, e.g., Tidik v. Ritsema, 938 F. Supp. 416, 426 (E.D. Mich. 1996); Watson v. City of
Salem, 934 F. Supp. 666, 667 (D.N.J. 1996). 2

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Rule 11 imposes certain procedural requirements on parties seeking sanctions. A party
must submit the motion for sanctions separately from other motions or requests and
specifically describe the conduct that allegedly violates Rule 11(b). The party must serve
the motion on the opposing party. If, after 21 days, the offending party does not withdraw
the challenged conduct, the party seeking sanctions may file its motion for sanctions with
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[I]n determining whether (and what) sanctions are appropriate, a court
should consider: “(1) the degree of actual prejudice to the defendant; (2) the
amount of interference with the judicial process; . . . (3) the culpability of the
litigant,” [and] (4) whether the court warned the party in advance that
dismissal of the action would be a likely sanction for noncompliance.” Before
a court orders dispositive sanctions, it should also consider the efficacy of
lesser sanctions.
Grady v. Broderson, No. 13-cv-00752-REB-NYW, 2015 WL 1384371, at *4 (D. Colo. Mar.
23, 2015) (quoting Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir. 1992)). “[T]he
Ehrenhaus factors should be considered even in cases that do not involve dispositive
sanctions.” Id. (citing Gates Rubber Co. v. Bando Chem. Indus., Ltd., 167 F.R.D. 90, 102
(D. Colo. 1996)).
B. ANALYSIS
Defendant argues three instances warrant Rule 11 sanctions: (1) Bell told the court
no conferral occurred on a motion and the presiding judge found to the contrary; (2) he
filed false representations in a joint status report; and, (3) he misrepresented to the court
the nature of the Parties’ conferrals over a 30(b)(6) deposition. [See #148.] Defendant
claims the “apparent purpose” of Bell’s alleged false representations is “prejudicing AutoOwners and its counsel and driving up the cost of this litigation unnecessarily;” and
“paint[ing] Auto-Owners’ counsel as uncooperative in the eyes of the Court.” [#148 at p.2.]
The Court considers these instances under the Ehrenhaus factors.

the court. See Fed. R. Civ. P. 11(c)(2). It is undisputed that Defendant complied with the
procedural requirements of Rule 11 prior to filing the Motion. [#131.]
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1. Degree of Actual Prejudice to Defendant
Fortunately for defense counsel, the Court can draw its own impartial conclusions
about their cooperativeness irrespective of the representations of their opposing counsel.
Case-in-point, Judge Martinez’s prior conclusion that “[t]he Court is deeply troubled by
what appears to be credible assertions by defense counsel that Attorney Gary Bell has
on at least two occasions made false representations to this Court.” [#134 (emphasis
added).] Further, while lies and falsehoods might serve to drive up the costs of litigation,
the record does not suggest that the nature of the lies and falsehoods claimed by
Defendant were designed to increase costs. Indeed, as Defendant argues, they appear
designed to portray defense counsel in a poor light before the Court. Since those efforts
have fallen flat, this factor does not favor sanctions and Defendant has not suffered actual
prejudice. 3
2. The Amount of Interference with the Judicial Process
With exceptions not relevant here, the United States District Court for the District
of Colorado has adopted the Colorado Rules of Professional Conduct (“Colo. RPC”) to
govern attorney conduct in this District. See D.C.COLO.LAttyR 2(a). Those rules contain
one rule dedicated to the subject of “Candor Toward the Tribunal.” Colo. RPC 3.3. That
rule provides, in relevant part, that a lawyer “shall not knowingly: (1) make a false
statement of material fact or law to a tribunal or fail to correct a false statement of material

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The Court acknowledges some prejudice to Defendant in increased attorneys’ fees to
comb-through the record to disprove falsehoods. But the court does not perceive that
defense counsel has spent an inordinate amount of time combating the three alleged
falsehoods from the Motion—certainly not more than spent in other contentious litigation
in which defense counsel has surely been involved.
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fact or law previously made to the tribunal by the lawyer; . . . or (3) offer evidence that the
lawyer knows to be false.” Id. These specific attorney-mandates suggest that a failure to
adhere to them interferes with the judicial process. Indeed, it is hard to fathom how
multiple falsehoods to the court would not interfere with the judicial process.
Analysis of this factor boils down to whether Bell made falsehoods to the Court.
On the current record, it appears that he did: (1) he told the court no conferral occurred
when it actually had; (2) he filed false representations in a joint status report; and, (3) he
misrepresented to the court the nature of the Parties’ conferrals over a 30(b)(6)
deposition. The Court is not persuaded by the revisionist characterizations of Bell’s
statements argued in the Response. [#162.] To the contrary, his misrepresentations
appear clear, as detailed by Defendant. [See generally #162 and #169.]
This factor favors sanctions.
3. Culpability of the Litigant, and 4. Prior Warning
Bell is culpable and the Court previously warned him that sanctions may result if
his conduct continued. On July 3, 2019 – a month-and-a-half before Defendant filed the
Motion – Judge Martinez warned:
The Court is deeply troubled by what appears to be credible assertions by
defense counsel that Attorney Gary Bell has on at least two occasions made
false representations to this Court. The Court will not at this time take the
time and effort to determine, as a factual matter, whether these allegations
have merit. While lies and falsehoods have unfortunately become a daily
reality in Washington, D.C., they WILL NOT be tolerated by this Court. Mr.
Bell is advised that further false statements to this Court, if proven, will result
in this Court referring him to the Colorado Attorney Regulation Counsel, as
well as the filing of a judicial complaint against him with the District of
Colorado's Committee on Conduct. Such future conduct may also subject
him to the imposition of financial and other appropriate sanctions by this
Court. . . .
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[#138 (emphasis added).]
These factors favor sanctions.
C. CONCLUSION
“The imposition of Rule 11 sanctions is properly reserved for exceptional
circumstances . . . .” United States ex rel. Maxwell v. Kerr Mc-Gee Oil & Gas Corp., 2010
WL 582393, at *8 (D. Colo. Feb. 17, 2010) (citing Wartsila NSD North America, Inc. v. Hill
Int’l, Inc., 315 F. Supp.2d 623, 627–28 (D.N.J.2004)); see also Estate of Strong v. City of
Northglenn, Colorado, No. 1:17-CV-1276-WJM-SKC, 2018 WL 6589813 (D. Colo. Dec.
14,

2018)

(Rule

11

sanctions

awarded

under

exceptional

circumstances),

recommendation adopted 01/14/19. The Court finds those circumstances here, for the
reasons stated above.
For these reasons, the Motion is GRANTED IN PART, to the extent Defendant
seeks a finding that Mr. Bell violated Rule 11(b) by knowingly making false statements to
the Court, and relief in the form of monetary sanctions. It is DENIED IN PART, to the
extent Defendant seeks non-monetary sanctions.
Accordingly, IT IS ORDERED that the Court finds that Bell has violated Rule 11(b).
IT IS FURTHER ORDERED that the Court hereby awards Defendant its reasonable
attorneys’ fees in preparing and filing the Motion and Reply. Finally, IT IS FURTHER
ORDERED that Defendant shall file an affidavit of fees and costs within ten (10) days of
this Order; and, Mr. Bell shall have ten (10) days from the date Defendant files its affidavit
to submit a response over the reasonableness of the claimed fees and costs.

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DATED: March 30, 2020.
BY THE COURT:

S. Kato Crews
United States Magistrate Judge

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