United States District Court, N.D. California, San Jose Division
A. FROST, ET AL., Plaintiffs,
LG ELECTRONICS INC., et al., Defendants.
ORDER DENYING MOTION FOR SANCTIONS [RE: ECF
LAB SON FREEMAN United States District Judge.
bring this class action suit alleging that the LG and Samsung
defendants engaged in an unlawful conspiracy to fix and
suppress compensation for their employees, violating section
1 of the Sherman Act, 15 U.S.C. § 1; the Cartwright Act,
California Business & Professions Code §16720, et
seq.; and the New Jersey Antitrust Act, N.J. Stat Ann. §
56:9-3. Compl., ECF 48. Before the Court is Defendants LG
Electronics U.S.A. and LG Display America, Inc.
(“LG”)'s motion for sanctions under
Fed.R.Civ.P. 11 and 28 U.S.C. § 1927. Mot., ECF 85.
Pursuant to Civ. L.R. 7-1(b), the Court finds LG's motion
for sanctions suitable for submission without oral argument
and hereby VACATES the hearing scheduled for July 13, 2017.
For reasons set forth below, the Court DENIES the motion.
complaint alleges that no later than January 1, 2005, LG and
other Samsung defendants engaged in an unlawful conspiracy to
fix and suppress compensation for their employees, including
their workforce in the United States. Compl. ¶¶ 1,
4 n.2, 45. According to the complaint, Plaintiff Frost was
contacted via Linked In by a recruiter seeking to fill a
position with Samsung, but who later informed Frost “I
made a mistake! I'm not supposed to poach LG for
Samsung!!! Sorry! The two companies have an agreement that
they won't steal each other's employees.”
Id. ¶ 79. Plaintiffs also allege that Plaintiff
Ra was told by a manager at Samsung's finance department
that “We do not hire people from LG.”
Id. ¶ 80.
to LG, Plaintiffs' allegations are false because LG does
not have a policy or prohibition against recruiting,
“cold-calling, ” or hiring Samsung employees.
Kliwinski Decl. ¶ 3, ECF 85-4; Lee Decl. ¶ 3, ECF
85-3. Specifically, LG asserts that LG United States has
hired employees directly from Samsung-affiliated companies
over the last 11 years. Kliwinski Decl. ¶ 5. In December
22, 2016, about a month after the complaint is filed, LG
counsel provided Plaintiffs' counsel with evidence
allegedly showing that LG does not have the policy or
prohibitions against hiring Samsung employees. Mot. 4.
However, Plaintiffs refused to withdraw or correct the
complaint as requested by LG. Letter, ECF 85-1.
Fed. R. Civ. Proc. 11
of the Federal Rules of Civil Procedure imposes upon
attorneys a duty to certify that they have read any pleadings
or motions they file with the court and that such pleadings
and motions are well-grounded in fact, have a colorable basis
in law, and are not filed for an improper purpose.
Fed.R.Civ.P. 11(b); Business Guides, Inc. v. Chromatic
Comm. Enters., Inc., 498 U.S. 533, 542 (1991). If a
court finds Rule 11(b) has been violated, the court may
impose appropriate sanctions to deter similar conduct.
Fed.R.Civ.P. 11(c)(1); see also Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 393 (1990) (“[T]he
central purpose of Rule 11 is to deter baseless filings in
district court.”). However, “Rule 11 is an
extraordinary remedy, one to be exercised with extreme
caution.” Operating Eng'rs Pension Trust v. A-C
Co., 859 F.2d 1336, 1345 (9th Cir. 1988). Rule 11
sanctions should be reserved for the “rare and
exceptional case where the action is clearly frivolous,
legally unreasonable or without legal foundation, or brought
for an improper purpose.” Id. at 1344.
“Rule 11 must not be construed so as to conflict with
the primary duty of an attorney to represent his or her
client zealously.” Id.
determining whether Rule 11 has been violated, a “court
must consider factual questions regarding the nature of the
attorney's pre-filing inquiry and the factual basis of
the pleading.” Cooter, 496 U.S. at 399.
However, courts should “avoid using the wisdom of
hindsight and should test the signer's conduct by
inquiring what was reasonable to believe at the time the
pleading, motion, or other paper was submitted.”
Fed.R.Civ.P. 11 Advisory Comm. Notes (1993 Amendments).
“[T]he imposition of a Rule 11 sanction is not a
judgment on the merits of an action. Rather, it requires the
determination of a collateral issue: whether the attorney has
abused the judicial process, and, if so, what sanction would
be appropriate.” Cooter, 496 U.S. at 396.
Ninth Circuit, Rule 11 sanctions are appropriately imposed
where: (1) a paper is filed with the court for an improper
purpose; or (2) the paper is “frivolous.”
Intamin Ltd. v. Magnetar Techs., Corp., 483 F.3d
1328, 1338 (Fed. Cir. 2007). A “frivolous”
argument or claim is one that is “both
baseless and made without a reasonable and competent
inquiry.” Townsend v. Holman Consulting Corp.,
929 F.2d 1358, 1362 (9th Cir. 1990)) (emphasis added).
Accordingly, when sanctions are sought on the basis of a
complaint, the Court must determine: “(1) whether the
complaint is legally or factually ‘baseless' from
an objective perspective, and (2) if the attorney has
conducted ‘a reasonable and competent inquiry'
before signing and filing it.” Christian v. Mattel,
Inc., 286 F.3d 1118, 1127 (9th Cir. 2002).
U.S.C. § 1927
U.S.C. § 1927 provides that “[a]ny attorney . . .
admitted to conduct cases in any court of the United States .
. . who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and
attorneys' fees reasonably incurred because of such
conduct.” The statute is intended to deter harassing
legal tactics and to compensate their victims. See Haynes
v. City and Cty. of San Francisco, 688 F.3d 984, 987-88
(9th Cir. 2012). A court may award sanctions under §
1927 if the moving party shows (1) that opposing counsel
acted “unreasonab[ly]”; (2) that, by doing so,
counsel “multipl[ied] proceedings”; and (3) that
counsel acted with subjective “bad faith.”
MGIC Indem. Corp. v. Moore, 952 F.2d 1120, 1121 (9th
Rule 11 authorizes sanctions only for filings that were
frivolous when they were made, see id.,
“Section 1927 imposes a continuing duty on counsel to
dismiss claims that are no longer viable.” Burda v.
M. Ecker Co., 2 F.3d 769, 778 (7th Cir. 1993);
accord Trulis v. Barton, 107 F.3d 685, 692 (9th Cir.
1995) (holding that a district court abused its discretion by
refusing to impose sanctions under § 1927 where the
plaintiffs “vexatiously multiplied the
proceedings” by forcing the defendant to move for
summary judgment rather than dismissing their claims
voluntarily after it became clear that they would fail).