Landmark American Insurance Company v. Gulf Coast Analytical Laboratories, Inc.

Filing 46

ORDER AND REASONS denying 30 Motion for Sanctions. Signed by Judge Ivan L.R. Lemelle on 3/26/2012. (LAG)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

LANDMARK AMERICAN INSURANCE COMPANY

CIVIL ACTION

VERSUS

NO. 10-809

GULF COAST ANALYTICAL LABORATORIES, INC.

SECTION "B"

ORDER & REASONS
ORDER AND REASONS

It is ORDERED that the opposed motion for Rule 11 sanctions
is DENIED. (Rec. Doc. No. 30, 33, & 36).

Gulf Coast Analytical

Laboratories’, Inc. (“GCAL”) claim for bad faith damages does
have a reasonable basis in law and fact. There is existing legal
support for the theory of law that GCAL advances in its memo.
Therefore, GCAL’s claim is not frivolous and sanctions would be
inappropriate.

Landmark

American

Insurance

Company’s

(“Landmark”) attempt to impose sanctions on its insured’s claim
for bad faith is highly questionable.
Fed. R. Civ. P. 111 places three duties on counsel:

1

Fed. R. Civ. P. 11 states:
(b) Representations to the Court. By presenting to the court a pleading,
written motion, or other paper--whether by signing, filing, submitting, or
later advocating it--an attorney or unrepresented party certifies that to
the best of the person's knowledge, information, and belief, formed after
an inquiry reasonable under the circumstances:
(1) it is not being presented for any improper purpose, such as to
harass, cause unnecessary delay, or needlessly increase the cost of
litigation;
(2) the claims, defenses, and other legal contentions are warranted by
existing law or by a nonfrivolous argument for extending, modifying, or
reversing existing law or for establishing new law;
(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; and
1

(1) counsel must make a reasonable inquiry into the
factual basis of any pleading, motion, or other paper;
(2) counsel must make a reasonable inquiry into the
law; and (3) counsel must not sign a pleading, motion,
or other paper intended to delay proceedings, harass
another party, or increase the costs of litigation.
St. Amant v. Bernard, 859 F.2d 379, 382 (5th Cir. 1988).
attorney

“need

correctness
files.”
1994).

of

not
the

F.D.I.C.

provide
legal

v.

an

absolute

guarantee

theory

advanced

in

the

1291,

1296

Calhoun,

34

F.3d

An

of

the

papers
(5th

he

Cir.

“Rather, the attorney must certify that he has conducted

reasonable inquiry into the relevant law.”

Smith v. Our Lady of

the Lake Hosp., Inc., 960 F.2d 439, 444 (5th Cir. 1992).
regardless

of

whether

the

attorney's

view

of

the

“Then,
law

is

erroneous, sanctions can be imposed only if his position can
‘fairly be said to be unreasonable from the point of view of
both existing law and its possible extension, modification, or
reversal.’”
In

the

F.D.I.C., 34 F.3d at 1296 (citations omitted).
instant

action

it

cannot

be

said

that

GCAL’s

position on the law is unreasonable. GCAL’s claim for bad faith
damages relies principally on Louisiana Bag Co., Inc. v. Audubon
Indem. Co., 999 So.2d 1104 (2008). GCAL argues for a narrow
application of the holding in Louisiana Bag that “an insurer
must take the risk of misinterpreting its policy provision . . .

(4) the denials of factual contentions are warranted on the evidence
or, if specifically so identified, are reasonably based on belief or a
lack of information.

2

error will not be considered a reasonable ground for delaying
payment of benefits.”

Id. at 1117.

GCAL further cites policy

reasons and other Louisiana court decisions in support of such a
holding.

(Rec. Doc. No. 33 at 4-6).

For the above stated

reasons, GCAL’s position can be said to be reasonable from the
point

of

view

of

existing

law

and

its

possible

extension,

modification, or reversal. Therefore, Landmark’s motion for Rule
11 sanctions clearly fails.
New Orleans, Louisiana, this 26th day of March, 2012.

____________________________
UNITED STATES DISTRICT JUDGE

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