Iosello et al v. Orange Lake Country Club Inc.

Filing 63

MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 5/14/2015:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CHRISTOPHER IOSELLO and
LEANN IOSELLO, for
Themselves and Others
Similarly Situated,

Case No. 14 C 3051

Plaintiffs,

Judge Harry D. Leinenweber

v.
ORANGE LAKE COUNTRY
CLUB INC.,
Defendant.

MEMORANDUM OPINION AND ORDER
Before

the

Court

are

Defendant

Orange

Lake

Country

Club

Inc.’s (“Orange Lake”) Motions for Sanctions pursuant to FED. R.
CIV. P. 11 [ECF No. 47], and for Attorneys’ Fees pursuant to 28
U.S.C. § 1927 [ECF No. 51].

For the reasons stated herein, the

Motions are denied.
I.
The

instant

motions

BACKGROUND

for

sanctions

and

fees

arise

from

Plaintiffs Christopher and Leann Iosello’s two-count Class Action
Complaint alleging violations of the Telephone Consumer Protection
Act (the “TCPA”), 47 U.S.C. § 227, and Illinois Restricted Call
Registry Act, 815 ILCS 402/10.
Iosellos
attending

began
a

receiving

sales

According to the Complaint, the

unsolicited

presentation

for

telemarketing
timeshares

at

calls

after

Orange

Lake.

From the beginning of this lawsuit, Orange Lake insisted that it
had never used any of the telephone numbers from which the calls
were placed.

On July 23, 2014, Orange Lake provided affidavits

from its Director of Telecommunications and Director of Marketing
averring the same.

The

following

month,

the

Iosellos’

counsel

issued subpoenas on several telecom providers to determine who
owned the phone numbers at issue.
No. 58-2.)
Iosellos.

(See, Ex. 2 to Pls.’ Opp., ECF

At the same time, Orange Lake served discovery on the
On October 1, 2014, just days before their discovery

responses were due, the Iosellos moved for voluntary dismissal
pursuant to Rule 41(a), “hav[ing] concluded that further pursuit
of their claims would be imprudent.”
Dismissal, ECF No. 27.)

(Pls.’ Mot. for Voluntary

Orange Lake opposed the Motion to the

extent that the dismissal was without costs or payment of Orange
Lake’s attorneys’ fees.

(See, Def.’s Opp. to Mot. for Voluntary

Dismissal, ECF No. 31.)

On December 11, 2014, the Court granted

the

Iosellos’

Motion,

dismissing

prejudice and without costs.
On

January

8,

2015,

the

Iosellos’

claims

with

(ECF No. 40.)
Orange

Lake

filed

a

Motion

for

Reconsideration, urging the Court to award costs pursuant to Rule
54(d).

(ECF No. 41.)

On January 27, 2015, the Court denied the

Motion [ECF No. 53], but agreed to take up Orange Lake’s Motion
for Sanctions, filed the night before, and Motion for Fees under
§ 1927, filed the following day.

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II.
A.
Orange

Lake

Rule 11(b)(3)

for

Rule 11 Sanctions

argues
two

ANALYSIS

that

the

reasons:

Iosellos

(1)

because

have

they

violated

filed

their

Complaint without conducting a meaningful factual investigation,
and (2) because they failed to reevaluate their claims or dismiss
the lawsuit when Orange Lake denied involvement.
Rule 11(b) provides that each time an attorney presents a
pleading to a court, he or she “certifies that to the best of the
person’s

knowledge,

information,

and

belief,

formed

after

an

inquiry reasonable under the circumstances” that the pleading is
not being presented for an improper purpose and that “the factual
contentions

have

identified,

will

reasonable

evidentiary
likely

opportunity

for

support

have

deter baseless filings.

if

evidentiary

further

FED. R. CIV. P. 11(b)(1), (3).

or,

specifically
support

investigation

or

after

so
a

discovery.”

A core purpose of Rule 11 is to

Jimenez v. Madison Area Tech. Coll., 321

F.3d 652, 656 (7th Cir. 2003) (citing Cooter & Gell v. Hartmarx
Corp., 496 U.S. 384, 393 (1990)).

A court may impose sanctions on

a party or his or her counsel — including an award of attorneys’
fees

—

for

failure

to

comply

with

Rule

11(b).

FED. R. CIV.

P. 11(c)(1).
“The decision to impose sanctions is left to the discretion
of the trial court in light of the available evidence.”

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Divane v.

Krull Elec. Co., Inc., 200 F.3d 1020, 1025, 1028 (7th Cir. 1999).
In determining whether sanctions are appropriate, the Court must
make “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

omitted).

(7th

Cir.

2006)

(citation

and

internal

quotations

Rule 11 sanctions are to be imposed sparingly, Hartmarx

Corp. v. Abboud, 326 F.3d 862, 867 (7th Cir. 2003), and the party
seeking sanctions carries a “high burden” in showing that they are
warranted.

Lundeen v. Minemyer, No. 09 C 3820, 2010 WL 5418896,

at *3 (N.D. Ill. Dec. 17, 2010).
The Court first turns to whether counsel for the Iosellos had
a reasonable factual basis for filing the Complaint.

According to

Orange Lake, the Iosellos’ attorneys did nothing to confirm or
independently test their clients’ assertions that the telephone
calls

at

Iosellos

issue

originated

contend

that,

with

prior

Orange
to

Lake.

filing

the

Counsel

for

Complaint,

the
they

solicited information about the substance of the telephone calls
over the phone and through and a series of emails.

(Pls.’ Reply

in Supp. of Voluntary Dismissal, ECF No. 34, at 3 n.2.)

This

information equipped the Iosellos’ counsel with a two-prong basis
for the TCPA and Restricted Call Registry Act claims:

“[1] the

callers stated that they were contacting plaintiffs on behalf of

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Orange Lake, and [2] the calls came after plaintiffs had attended
a timeshare presentation put on by Orange Lake.” (Id. at 3.)
Rule

11

tempers

Rule

8’s

liberal

pleading

standards

by

requiring an attorney to conduct a “reasonable inquiry” into the
factual basis of a complaint before filing it with a court.

Doe

v. Franco Prods., No. 99 C 7885, 2000 WL 816779, at *2 (N.D. Ill.
June 22, 2000), aff’d sub nom. Doe v. GTE Corp., 347 F.3d 655 (7th
Cir.

2003).

“What

constitutes

a

reasonable

pre-filing

investigation depends on the circumstances of each case.” Beverly
Gravel, Inc. v. DiDomenico, 908 F.2d 223, 225 (7th Cir. 1990).
Relevant factors include the extent to which the attorney had to
rely on his or her client for factual information, the complexity
of

the

case

and

attorney’s

ability

to

conduct

a

pre-filing

investigation, and whether discovery would have been beneficial to
the development of the underlying facts.
Am.,

Inc.,

No.

09-CV-3690,

2015

WL

In re Dairy Farmers of

753946,

at

*15

(N.D.

Ill.

Feb. 20, 2015) (citing Brown v. Fed’n of State Med. Bds., 830 F.2d
1429, 1435 (7th Cir. 1987)).
Under the circumstances of this case — in which the Iosellos
claimed to receive telephone calls from an entity purporting to be
Orange

Lake,

telephone

and

numbers

little
from

information
which

the

was

calls

available
originated

about

the

—

was

it

reasonable for the Iosellos’ counsel to rely on the information
their clients provided.

See, e.g., Stove Builder Int’l, Inc. v.

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GHP Grp., Inc., 280 F.R.D. 402, 403 (N.D. Ill. 2012) (“[I]n this
Court's

view

no

Rule

11

sanction

should

attend

counsel’s

acceptance of their client’s version as they have described it.”).
Defense counsel argues that the Iosellos’ attorneys should have,
at minimum, explored inexpensive avenues of investigation, such as
conducting

an

Internet

search

for

the

telephone

numbers,

contacting Orange Lake to complain, or calling back the telephone
numbers at issue.

(Def.’s Mem., ECF No. 47, at 11.)

One member

of defense counsel conducted her own Internet search and dug up
information on two of the three telephone numbers, and noted that
Orange Lake was not referenced on any of the websites she located.
(Id. at 3.)

She also called the telephone numbers and received

(1) a busy signal, (2) a fax machine sound, and (3) a response
from someone who claimed to work at another business.
Nevertheless,
negates

nor

a

pre-suit

corroborates

investigation

such

the

claims.

Iosellos’

as

(Id. at 4.)
this

neither

Under

these

conditions, it was reasonable for the Iosellos’ counsel to rely on
the factual contentions that their clients relayed to them.
The Court next examines the Iosellos’ post-filing conduct.
Orange

Lake

voluntarily

argues
provided

that

by

July

affidavits

23,

2014,

denying

its

when

Orange

involvement,

Lake
the

Iosellos were on notice that continuation of the litigation would
be

unreasonable.

Shortly

after

Orange

Lake

provided

the

affidavits, counsel for the Iosellos issued subpoenas to telecom

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providers to determine who owned the phone numbers.
to Pls.’ Opp., ECF NO. 58-2.)

(See, Ex. 2

In an email to defense counsel, one

of the Iosellos attorneys summarized the purpose of the subpoenas:
Our clients say that Orange Lake called them from the
numbers listed, based on what was said to them and what
their Caller ID showed.
Your clients say this is not
the case.
The subpoenas we have sent out are going to
get both of us, and our clients, the information to
resolve this dispute.
(Ex.

1

to

Pls.’

Opp.,

ECF

NO.

58-2.)

Although

they

fail

to

articulate what information the subpoenas ultimately revealed, the
Iosellos state that once their investigation was complete, and the
claims “turned out to be unsustainable,” they moved to dismiss the
case.

(Pl.’s Opp., ECF No. 58, at 3.)

Based

on

this

sequence

of

events,

it

appears

that

the

Iosellos’ attorneys were pursuing the case after July 23, 2014 to
corroborate their clients’ allegations through necessary discovery
—

not

to

harass

Orange

Lake

or

delay

the

litigation.

Under

Rule 11, an attorney certifies “that there is (or likely will be)
‘evidentiary support’ for the allegation, not that the party will
prevail with respect to its contention regarding the fact.”
R. CIV. P. 11(b) advisory committee’s note to 1993 amendment.

FED.
If

an attorney cannot obtain evidentiary support for an allegation
after a reasonable opportunity for further investigation, he or
she

“has

a

duty

contention.” Id.

under

[Rule

11]

not

to

persist

with

the

The Court finds that the Iosellos complied with

this duty when they moved to voluntarily dismiss the action after
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their discovery efforts came up empty.

The

Court

concludes

that

the Iosellos’ counsel’s pre-filing investigation, though minimal,
was

sufficient

their

under

post-filing

the

conduct

circumstances
was

of

proper.

declines to impose Rule 11 sanctions.

this

case,

Accordingly,

and
the

that
Court

Although the Iosellos also

contend that Orange Lake’s motion was procedurally improper, the
Court need not reach the merits of these arguments.
B.

Attorneys’ Fees Under 28 U.S.C. § 1927

Orange Lake has moved separately for attorneys’ fees pursuant
to

28

U.S.C.

multiplies

§

the

1927.

Under

proceedings

§

in

1927,
any

any
case

attorney

“who

unreasonably

so
and

vexatiously” may be required to pay the excess costs and fees
incurred because of their conduct.

The Seventh Circuit has held

that § 1927 sanctions are appropriate when an attorney has:
acted in an objectively unreasonable manner by engaging
in serious and studied disregard for the orderly process
of justice; pursued a claim that is without a plausible
legal or factual basis and lacking in justification; or
pursued a path that a reasonably careful attorney would
have known, after appropriate inquiry, to be unsound.
Jolly Grp., Ltd. v. Medline Indus., Inc., 435 F.3d 717, 720 (7th
Cir.

2006)

omitted).

(citations,

internal

quotations,

and

alterations

Attorneys also have a continuing duty under § 1927 to

dismiss claims that are no longer viable. Id.

To establish that

an attorney’s conduct was vexatious, the moving party must show
either

subjective

or

objective

bad

faith.

Chalmers, 966 F.2d 1181, 1184 (7th Cir. 1992).
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Kotsilieris

v.

“Subjective bad

faith must be shown only if the conduct under consideration had an
objectively colorable basis.”

Dal Pozzo v. Basic Mach. Co., 463

F.3d 609, 614 (7th Cir. 2006).

No finding of malice or ill will

is required to show objective bad faith — “reckless indifference
to the law will qualify.” Id.
Orange Lake argues that opposing counsel acted with objective
faith bad faith when they (1) filed the complaint without proper
pre-suit investigation, and (2) continued to litigate the case
after

Orange

Lake

involvement.

provided

the

Alternatively,

employee

Orange

Lake

affidavits

argues

that

denying
opposing

counsel acted with subjective bad faith in continuing to litigate
the case.

Orange Lake’s arguments in support of fees under § 1927

echo those made in its Rule 11 motion.
In explaining the rationale behind Rule 11 and § 1927, the
Seventh

Circuit

has

noted

that

it

would

“warp

the

system”

if

attorneys could shift costs onto their opponents by requiring them
to

identify

claims,

craft a response.
Cir. 1985).

perform

necessary

background

research,

and

See, In re TCI Ltd., 769 F.2d 441, 446 (7th

The greater the disparity between the costs incurred

by a client and the costs imposed on an adversary, “the more
litigation becomes a predatory instrument rather than a method of
resolving honest disputes.” Id.
The Court cannot conclude that Iosellos improperly shifted
the burden of investigating their claims onto Orange Lake, or that

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their conduct demonstrated objective or subjective bad faith.

The

Iosellos’ counsel filed the Complaint based on the facts relayed
to

them

by

their

clients.

When

presented

with

the

employee

affidavits that contradicted their clients’ story, they engaged in
targeted discovery to resolve a factual dispute.

When discovery

came up empty, they moved for voluntary dismissal.

This conduct

does not show “reckless indifference to the law,” malice, or ill
will.

Orange Lake’s production of the affidavits did not trigger

an immediate duty to dismiss the case — if a sworn denial of
liability could, no plaintiff would ever prevail.
Orange Lake argues that courts within the Seventh Circuit
have consistently awarded fees in situations “just like this one.”
(Def.’s Mem., ECF No. 51, at 11.)
Orange

Lake

relies

involve

However, the cases on which

substantially

stronger

facts.

For

instance, in Walter, the Seventh Circuit affirmed the district
court’s imposition of § 1927 sanctions when, after almost four
years of discovery and the dismissal of three similarly situated
defendants,
sufficient

plaintiff
facts

or

failed

to

voluntarily

shore
dismiss

up
the

Fiorenzo, 840 F.2d 427, 435–36 (7th Cir. 1988).
sanctions

were

appropriate

when

his

attorneys

claims

case.

with

Walter

v.

In Mangel, § 1927
filed

a

“fallback

lawsuit,” which they only intended to pursue if their client was
not included in another class action.

Mangel v. Loeb Rhoades &

Co., No. 77 C 2536, 1990 WL 37682, at *3 (N.D. Ill. Mar. 12,

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1990).
or

move

It was the attorneys’ refusal to either dismiss the case
forward

unreasonable

and

with

discovery

vexatious.

that

the

The

Court

Id.

court
finds

found
the

to

be

Iosellos

conduct distinguishable and concludes that § 1927 sanctions are
inappropriate in this case.
IV.
For

the

reasons

stated

CONCLUSION
herein,

Orange

Lake’s

Motions

for

Sanctions pursuant to FED. R. CIV. P. 11 [ECF No. 47], and for
Attorneys’ Fees pursuant to 28 U.S.C. § 1927 [ECF No. 51] are
denied.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
Dated:5/14/2015

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