Southeast Business Network, Inc. v. Security Life of Denver Insurance Co. et al

Filing 30

ORDER granting in part 25 Motion for Sanctions. Thomas Kastelz is ordered to pay $2,827.08 directly to Defendants not later than 10/31/15. The Clerk is directed to enter judgment in favor of the Defendants and close this case. Signed by Judge J. Randal Hall on 10/6/15. (cmr)

IN THE

UNITED

STATES

DISTRICT

SOUTHERN DISTRICT

OF

COURT

FOR THE

GEORGIA

SAVANNAH DIVISION

SOUTHEAST

NETWORK,

BUSINESS

*

INC.,

*
*

Plaintiff,

*
*

V.

*

CV 415-159

*

SECURITY LIFE

OF DENVER

*

INSURANCE CO.

and VOYA

*

RETIREMENT

INSURANCE AND

*

ANNUITY CO. f/k/a ING LIFE

*

COMPANIES,

*
*

Defendants.

*

ORDER

Presently
sanctions.

(Doc.

before
25.)

the

Court

is

Defendants'

With this motion,

motion

for

Defendants seek a court

order requiring Plaintiff to pay "all reasonable attorney's fees
and

costs

(Id.)

incurred

in

[Defendants']

For the reasons below,

defense

Defendants'

of

this

action."

motion is GRANTED IN

PART.

I.

This

case

arises

BACKGROUND

from a

$5 million

life

insurance policy

issued by Defendants for the life of Sushila K. Shah.
Doc.

1-1.)

Effective on July 19,

2006,

Trust as owner and sole beneficiary.

(Compl.,

the policy named DDS

(Id.)

Shortly thereafter,

DDS Trust collaterally assigned certain rights under the policy
to

Plaintiff,

benefit.

(Id.)

including a
Then,

right

to

a

portion

on or about September 5,

of
2008,

the

death

DDS Trust

designated Dharmistha Shah as
the

policy.

Sushila

(Doc.

Shah

competing

7-2,

died,

claims

Ex.

and

to

an
A.)

the
filed

Plaintiff

Dharmistha

Shah

District

Court

States

Georgia.

Security

an
in

and

for

Plaintiff

Life of

filed

a

the

(Id.,

Savannah

the

M-0.)

action

against

Division

of

District

Co.

v.

against

Company

("Security
Q.)

Ex.

Security

Life's

the

of

Shah,
In

Defendant

7-2,

(Doc.

interpleader and summary judgment.

made

Exs.

Southern

counterclaim

granted

later,

2012), Doc. 1-1, Ex. E.)

Denver Insurance

Court

years

Plaintiff

interpleader
the

(S.D. Ga. Aug. 29,

alleging breach of contract.
claims,

Shah

two

(See Security Life of Denver Life Ins.

No. 4:ll-cv-008

response,

than

benefit.

Defendants

United

Less

Dharmista

Consequently,
and

irrevocable beneficiary under

Life")

As to those
motions

for

(Id., Ex. A.)

Plaintiff then initiated this case on January 18,

2015,

by

filing a complaint in the Eighteenth Judicial Circuit in and for
Seminole
complaint,
of

County,

Florida.

Defendants

were

served

with

the

which alleged one count of negligence and one count

tortious

interference

with

contract,

on

April

9,

2015.

Within the United States District Court for the.Middle District

of Florida on April

27,

removal,

to

an

answer

2015,

Defendants

Plaintiff's

filed a notice of

complaint,

a

motion

to

transfer venue, and a motion to dismiss Plaintiff's complaint on

grounds of res judicata, and collateral estoppel.

On May 22, 2015,

the Middle District of Florida transferred

the instant action to this Court.
a motion to remand,

Subsequently,

Plaintiff filed

and Defendants filed a motion for sanctions.

On August 27, 2015, this Court denied Plaintiff's motion to

remand,

granted Defendants'

grounds,

and

Defendants'

Plaintiff

ordered

motion

Plaintiff

motion for sanctions.

has

submitted

a

to dismiss

res judicata

on

to

show

cause

(Doc.

26.)

Since

memorandum

stating

regarding
that

why

time,

sanctions

should not be imposed (Doc. 28), and Defendants have submitted a
memorandum
result,

the

detailing
Court

its

litigation

will

now

costs

consider

(Doc.

29) .

Defendants'

As

motion

a
for

sanctions.
II,

DISCUSSION

According to Federal Rule of Civil Procedure 11(c),
after notice and a reasonable opportunity to respond,
determines

that

Rule

11(b)

has

been

violated,

impose an appropriate sanction on any attorney,
party

that

violation."

Rule

1Kb)

violated
Fed.

the

R. Civ.

can be

rule

or

is

P. 11(c)(1).

violated

in

three

the

" [i] f

the court
court

law firm,

responsible

for

may

or
the

In the Eleventh Circuit,

ways:

"Ml")

when

a party

files a pleading that is based on a legal theory 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
3

a reasonable argument to

change existing law; and

(3)

when the party files a pleading in

bad faith for an improper purpose.'"
1097,

1104

(11th Cir.

F.2d 1465,

issue,

1514

1993)

(11th Cir.

Didie v.

Howes,

(quoting Pelletier v.

1991)).

988

F.2d

Zweifel,

921

In evaluating the conduct at

the Court uses an objective standard of reasonableness to

determine

"'whether

the

motion,

pleading,

or

other

paper

reflected what could reasonably have been believed by the signer

at

the

time

of

signing.'"

Aetna Ins. Co. v. Meeker,

If

"a

party

facts,"

exhibits

sanctions

are

Didie,

988

F.2d

at

1104

(quoting

953 F.2d 1328, 1331 (11th Cir. 1992)).

a

deliberate

warranted,

indifference

"but

not

when

to

obvious

the

party's

evidence to support a claim is merely weak." Baker v. Alderman,
158 F.3d 516,

Yet,

524

(11th Cir.

1998).

before a motion for sanctions can be considered,

the

movant must provide a copy of the motion to the opposing party

and provide
matter.

that

Fed.

R.

party

with

Civ.

P.

twenty-one

11(c)(2).

days
Here,

to correct
Defendants

certified that they complied with this requirement

Court

will

counsel,

Thomas

McGreal,

87

F.3d

only

consider

Kastelz.

1252,

See

1254

sanctions

as

Worldwide

Primates,

(11th

Cir.

sanctions on the attorney rather than,

client

is sometimes proper.");

25)

However,

Plaintiff's
Inc.

v.

1996)("Imposition

of

or in addition to,

Williams v.
4

to

have

(Doc.

thus making Defendants' motion ripe for consideration.
the

the

Fla.

the

Health Scis.

Ctr.,

Inc.,

Fla.

Feb.

Ransaw v.

No.

26,

8:05-CV-68-T-23,

2007),

Hernando

WL 4163396,

at

*5

aff'd 293

F.

2007

WL

641328,

App'x 757

at

*2

(11th Cir.

(M.D.

2008);

Cnty.

Sch.

Bd. , No.

8:06-CV-2393-T-23,

(M.D.

Fla.

Nov.

2007) .

20,

Kastelz

2007

is

the

individual who signed the pleadings and was obligated to advise
his

client

that

the

doctrine

of

res

judicata

barred

further

litigation.
A,

Propriety of Sanctions

"Rule 11 sanctions are appropriate where
claim barred by res judicata." Williams,

a party files a

2007 WL 641328,

at *4

(citing Thomas v. Evans, 880 F.2d 1235, 1240 (11th Cir. 1989)).
For the doctrine of res judicata to apply to a given claim, four

elements must be present:
merits;

(2)

"(1) there is a final judgment on the

the decision was rendered by a court of competent

jurisdiction;

(3)

the parties,

or those in privity with them,

are identical in both suits; and (4) the same cause of action is
involved in both cases."

1235,
same

1238

(11th Cir.

nucleus

of

Ragsdale v. Rubbermaid,

1999).

operative

Inc., 193 F.3d

"[I] f a case arises out of the

fact,

or

is

based

upon

the

same

factual predicate, as a former action, the two cases are really
the

same

judicata."

Aclaim'

or

xcause

Ic^ at 1239.

of

action'

for

purposes

of

res

As

claims,
(Doc.

noted

in

the

Court's

order

dismissing

Plaintiff's

all four res judicata elements are present in this case.

26.)

While the causes of action in the two cases differ

in form, they are nevertheless the same in substance:
In its prior lawsuit,
Plaintiff alleged a
breach of contract by Security Life on two
grounds.
(Doc. 7-2, Ex. Q.)
First, Security
Life
"fail[ed]
to
protect
[Plaintiff's]
assignee interests and fail[ed] to pay the
insurance

benefits

assignee."
"process [ed]
notice

to

Plaintiff

to

(Id.)
various

[Plaintiff]

[Plaintiff]."

has

as

Second,
Security Life
change requests without
Now,

asserted

a

in

this

negligence

case,

claim

alleging that Defendants "breached their duty
to Plaintiff by filing the interpleader and
requiring
the
Plaintiff
to
litigate
over
benefits to which it was rightfully entitled."
(Doc. 1-1.)
Plaintiff has also asserted a
tortious

interference

with

contract

claim

alleging that "Defendant[s] inducted [sic] the
parties to breach the agreement by filing an
(Id.)
interpleader
forcing
litigation."
Based on these pleadings,

the

present

tort

it is apparent that

claims

and

the

previous

contract claims arose from the same nucleus of

operative fact:
with

Defendants acted inconsistent

its obligations

to Plaintiff

by

failing

to award it with the death benefit.
(Doc.

26.)

Because Plaintiff's

of res judicata,
Kastelz

filed

a

claims have been dismissed as

reasonable

ultimate

result

the appropriate sanctions inquiry is whether
case

"based

on

a

legal

reasonable chance of success and that

a

a

argument

question

for

to

change

this

Court

theory

[could]

existing

is

that

[had]

no

not be advanced as

law."

whether

Thus,

a

the

reasonable

attorney

in

Plaintiff's

Kastelz'
claims

circumstances

were

"not

should

warranted by

have

existing

good faith argument for the extension, modification,
of existing law."

Williams,

known
law[]

that
or

a

or reversal

2007 WL 641328, at *4.

Given the well-known doctrine of res judicata and the close

relationship between the
instant

actions,

would

have

claims

were

reasonable

known—or

not

claims

modification,

the

or

reasonable
would

attorney

have

in

his

were

reversal

arguments

position

not
of

within

in

existing

As

would

have

by

Plaintiff's complaint justified the suit.

position

Plaintiff's

for

an

law,"

"Public

earlier and

Kastelz'

law.

warranted

the

in the

discovered—that

warranted by existing

attorney

Plaintiff's

that

a

Plaintiff's claims

whether

known

(Doc.

that

"extension,

Kastelz

Policy"

a

contends

section

28.)

of

Although

Kastelz did present arguments discussing why the tort claims he
asserted were

viable

causes

of

action,

he

did

not

present

any

arguments stating why the doctrine of res judicata should not
preclude the instant action.
Regardless

of

whether

(Compl., Doc. 1-1.)
such

reasonable attorney in Kastelz'
were

arguments

were

present,

position would have

Plaintiff's

claims

not

warranted

modification,

or reversal of existing law.

by

a

known that
extension,

The doctrine of res

judicata exists to "bar[] the filing of claims which were raised
or could have been raised in an earlier proceeding,"
7

and here,

the present claims could have been brought in the previous suit.
Ragsdale,
claims,

193 F.3d at 1238.
the

Court

would

Therefore, had it permitted these

have

thwarted

the

purpose

of

res

judicata.

Finally,

it should also be noted that within Plaintiff's

show cause memorandum (Doc. 28), Kastelz states that Plaintiff's

causes of action in the present case had "nothing to do with the

interpleader filed by
However,

regarding

asserted that

filing

the

Regarding

the Defendants
Plaintiff's

"Defendant[s]

interpleader."
Plaintiff's

their

agreement

by

the previous

negligence

claim,

case."
Kastelz

breached their duty to Plaintiff by

(Compl.,

tortious

asserted that "Defendant[s]

in

Doc.

1-1)(emphasis

interference

claim,

added.)
Kastelz

inducted [sic] the parties to breach

filing

an

interpleader."

(Id.)(emphasis

added.)

In

sum,

Kastelz'

conduct

in

maintaining

this

suit

is

sanctionable.1

I Although Kastelz originally filed Plaintiff's complaint in state court, Rule
II sanctions

are applicable because Kastelz

filed a copy of Plaintiff's

complaint and a motion to remand in federal court.

See Worldwide Primates,

Inc.

Cir.

v.

McGreal,

26

F.3d

1089,

1091

(11th

1994) (w [A] 1though

[Plaintiff's] complaint, which was filed in state court, cannot be the basis
of a Rule 11 violation, any subsequent federal filings . . . are sanctionable
if thev resulted in the continuation of a baseless lawsuit.").
8

B.

Under

Rule

directives";

11,

(2)

Sanctions Imposed

sanctions

may

include

(1)

"nonmonetary

"an order to pay a penalty into court";

or

(3)

"if imposed on motion and warranted for effective deterrence, an
order

directing

payment

to

the

movant

of

part

or

all

of

the

reasonable attorney's fees and other expenses directly resulting
from the violation."

must

be

conduct
Id.

limited

or

to

Fed.

what

comparable

Furthermore,

in

R.

Civ.

P.

"suffices

conduct

by

11(c)(4).

to

deter

others

determining

Yet,

repetition

similarly

sanctions,

the

consider the sanctioned party's ability to pay.
at

sanctions

of

the

situated."
Court

must

Baker, 158 F.3d

529.

Based on the circumstances in this case,

some part

of

Defendants

have

Costs,
have

the attorneys'
incurred.

and Expenses
incurred

(Doc.

$22,500.00

expenses and costs.

fees,

With its

29),
in

costs,

Kastelz should pay

and

expenses that

Memorandum Detailing Fees,

Defendants represent that they

attorneys'

fees

and

$577.08

in

Nevertheless, Kastelz is sanctioned in the

amount of $2,827.08.

While Defendants may have

incurred attorneys'

fees,

costs,

and expenses greater than this amount, the Court cannot award an
amount in excess of that needed to deter Kastelz and others from

practicing in this fashion.

After due consideration, the Court

believes that this sanction presents a reprimand and a financial
burden

sufficient

future.

with

to

deter

Additionally,

details

considering

and

other

attorneys

in

the

though Kastelz did not provide the Court

regarding

Kastelz'

Kastelz

his

ability

to

pay,

the

representation

of

Court,

Plaintiff

in

when

multiple

actions in multiple jurisdictions, deems that Kastelz is able to

pay the assessed sanction.
00-360,

2001

WL

435873,

See Taylor v.
at

*5

(S.D.

Gaither, No.

Ala.

March

Civ. A.

22,

2001)

(holding that court does not have to consider violating party's

ability to pay when the party did not raise inability to pay as
a defense), aff'd,

273 F.3d 116
Ill,

Upon
motion

the

for

foregoing,

sanctions

(11th Cir. 2001).

CONCLUSION

the Court GRANTS IN PART Defendants'

(Doc.

18)

and ORDERS

Thomas

Kastelz

$2,827.08 directly to Defendants no later than October 31,
The

Court

DIRECTS

the

Clerk

to

ENTER

JUDGMENT

in

to pay

2015.

favor

of

Defendants and CLOSE this case.

ORDER ENTERED
October,

at

Augusta,

Georgia,

this

(Q

day of

2015.

DAL

HALL

/STATES DISTRICT JUDGE
SOUTHERN DISTRICT OF GEORGIA

10