Fifth Third Bank v. Double Tree Lake Estates LLC et al

Filing 254

OPINION AND ORDER: Denying 220 MOTION for Sanctions by Defendant Kenneth Matney. Signed by Chief Judge Philip P Simon on 9/16/2014. (rmn)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
FIFTH THIRD BANK,
Plaintiff,
v.
DOUBLE TREE LAKE ESTATES, LLC,
et al.,
Defendants.

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) NO: 2:11-cv-0233-PPS-PRC
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OPINION AND ORDER
Defendant Kenneth Matney is seeking Rule 11 sanctions against Fifth Third Bank
and its attorneys claiming that Fifth Third’s case is groundless and is only being
pursued in order to harass him [DE 220]. He claims that he has the documents to prove
this, and argues that Fifth Third deliberately omitted reference to these documents in
order to mislead the court. Matney made a version of this argument in his motion for
summary judgment [DE 185]. He has since reprised it in his motion for reconsideration
[DE 250]. As I have stated in a previous order, I do not think Fifth Third’s lawsuit is
groundless [DE 242]. While Matney’s ultimate liability remains an open question, Fifth
Third has made a plausible claim against him and has not misled the Court. Therefore,
Matney’s motion for sanctions [DE 220] is DENIED.
Anyone looking for an exhaustive account of this case is referred to my July 23,
2014 Order on the parties’ cross-motions for summary judgment [DE 242]. Here’s the
quick version. In 2004, Matney and some partners bought a real estate development in
Northwest Indiana called Double Tree Lake Estates. The partners, through Double Tree,

regularly borrowed money from Fifth Third Bank to finance the development. Each
time Double Tree borrowed money, the partners — including Matney — had to
personally guaranty repayment of the loans. Eventually, Double Tree went bust and
defaulted on the loans. Fifth Third initiated this lawsuit in order to collect on the
guaranties.
Simple enough, or at least it would have been had Fifth Third sued on the right
guaranty. In its amended complaint, Fifth Third alleged that Matney’s liability was
based on the 2004 guaranty he had signed when buying Double Tree [DE 78]. But that
guaranty is no longer in force, as it was superseded and replaced by a guaranty Matney
signed in 2006.
Somewhere along the line Fifth Third realized its mistake. But it chose to move
for summary judgment on the 2006 guaranty instead of amending the complaint to
correct the claim [DE 183]. At a hearing, Fifth Third’s attorney explained that the bank
felt it had given Matney adequate notice of the claim on the 2006 guaranty as the
complaint let Matney know he was liable for a guaranty, even if it wasn’t the right one.
I disagreed and granted Matney’s motion for summary judgment because Fifth
Third had not given Matney adequate notice of the claim [DE 242]. But I recognized that
Fifth Third’s notice argument was reasonable, and its claim on the guaranty plausible,
so I gave Fifth Third leave to amend its complaint.

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This motion for sanctions predates my ruling on the cross-motions for summary
judgment as Matney filed the motion while the parties were still briefing the summary
judgment motions. The motion has now been fully briefed and is ripe for disposition.
Rule 11 of the Federal Rules of Civil Procedure authorizes sanctions against a
party or attorney who files frivolous pleadings, files pleadings for an improper purpose
such as to harass, or makes allegations that they know have no basis in law or fact. A
court may impose sanctions for a violation of Rule 11 either upon a party's motion or on
its own initiative. Fed.R.Civ.P. 11(c). The purpose of Rule 11 is to deter baseless filings
in the district court. Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384, 393 (1990). In
determining whether Rule 11 sanctions are warranted, the Court must "undertake an
objective inquiry into whether the party or his counsel should have known that his
position was groundless." Cuna Mut. Ins. Soc. v. Office and Prof'l Employees Int'l Union,
Local 39 , 443 F.3d 556, 560 (7th Cir. 2006)(quoting CNPA v. Chicago Web Printing
Pressmen's Union No. 7 , 821 F.2d 390, 397 (7th Cir. 1987)).
The crux of Matney’s case for sanctions is the same as the crux of his case against
summary judgment. Matney argues that Fifth Third’s claim is groundless because the
2006 guaranty, which forms the basis for the claim, was itself superseded and replaced
by another guaranty. In 2007, Matney’s erstwhile partner Randy Minas signed a new
guaranty in the course of borrowing money on behalf of Double Tree. Matney claims
this guaranty superseded and replaced his own 2006 guaranty, so that it’s Minas who is
on the hook for Double Tree’s debts, not Matney. Fifth Third disagrees. It argues that
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since Matney wasn’t a party to the 2007 guaranty, that agreement did not have any
effect on Matney’s liability. The 2007 guaranty may have superseded and replaced
Minas’s 2006 guaranty, but it is irrelevant to Matney’s 2006 guaranty, which is why Fifth
Third did not bring the document to the Court’s attention.
Matney might ultimately be correct about the 2007 guaranty, but that is a matter
that will be decided later. What can be said at this point is that Fifth Third’s claim is far
from frivolous or groundless. Lee v. Clinton, 209 F.3d 1025, 1026 (7th Cir. 2000)
(describing a frivolous claim as one “that no reasonable person could suppose to have
merit.”). Fifth Third has made a reasonable case that the 2006 guaranty, which Matney
admits to signing, is still in force. Matney disagrees, but Matney’s disagreement is not a
reason to impose sanctions. Matney will have ample opportunity to make his case when
he responds to Fifth Third’s pending motion for summary judgment. Accordingly,
Matney’s motion [DE 220] is DENIED.
SO ORDERED
ENTERED: September 16, 2014
s/ Philip P. Simon
Philip P. Simon, Chief Judge
United States District Court

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