MEMORANDUM OPINION AND ORDER
AMIT
P. MEHTA UNITED STATES DISTRICT JUDGE
I.
On July
12, 2018, the court dismissed this action against all
Defendants. See generally Quick v. EduCap, Inc., 318
F.Supp.3d 121 (D.D.C. 2018). Among the dismissed counts were
two brought under the Racketeer Influenced and Corrupt
Organizations Act (“RICO”). The court dismissed
the RICO claims for a host of reasons, including: (1) the
Rooker-Feldman doctrine divested this court of
subject-matter jurisdiction, see Id. at 133-34; (2)
as pleaded, Plaintiffs Dewaine Quick and Lynn Davis lacked
standing to press any claim against Defendant HSBC Bank USA,
N.A., see Id. at 136-38; (3) Plaintiff Quick lacked
standing to advance the RICO claims because he alleged no
injury to business or property, see Id. at 138; and
(4) the RICO counts did not state plausible causes of action,
see Id. at 141-43. Now, two Defendants- Weinstock,
Freidman & Friedman and Educap, Inc.-ask the court to
sanction Plaintiffs and their counsel under Rule 11(b) of the
Federal Rules of Civil Procedure and 28 U.S.C. § 1927.
See Defs.' Mot. for Sanctions Pursuant to Rule
11 & 28 U.S.C. § 1927, ECF No. 32 [hereinafter
Defs.' Mot.]; Defs.' Mem. of P&A in Support of
Defs.' Mot. for Sanctions, ECF No. 32-1 [hereinafter
Defs.' Mem.]. They argue that the RICO claims were
presented “for an improper purpose, were unwarranted by
existing law and frivolous, and lacked evidentiary
support.” Defs.' Mem. at 1. Defendants also argue
that by persisting in the RICO claims despite their obvious
flaws Plaintiffs and their counsel multiplied the proceedings
in an unreasonable and vexatious manner. See Id. at
10.
For the
reasons that follow, the court declines to impose the
requested sanctions.
II.
Before
addressing the merits, the court narrows the basis on which
it considers the request for sanctions. As noted, the court
dismissed the RICO claims for a host of reasons. However,
when movants presented their Rule 11(c)(2) “safe
harbor” notice to Plaintiffs, the sole basis on which
they demanded voluntary dismissal of the RICO claims was that
“Plaintiffs fail to meet the high threshold required to
state a viable RICO claim-there are no allegations to support
several elements of the claims, and several key contentions
are made without any support.” Defs.' Mot., Exs.,
ECF No. 32-2 [hereinafter Defs.' Exs.], at
11.[1]
In other words, Defendants urged Plaintiffs to withdraw their
RICO claims for reasons that would warrant dismissal under
Rule 12(b)(6) for failure to state a claim. They did not
demand dismissal on jurisdictional grounds, such as the
Rooker-Feldman doctrine or lack of standing. The
court's sanctions inquiry therefore will focus only on
whether sanctions are warranted for filing insufficiently
pleaded RICO claims under Rule 12(b)(6).[2]
When
viewed through that narrowed lens, sanctions are not
warranted here. “A complaint does not merit sanctions
under Rule 11 simply because it merits dismissal pursuant to
Rule 12(b)(6).” Cheeks of N. Am., Inc. v. Fort Myer
Const. Corp., 807 F.Supp.2d 77, 99 (D.D.C. 2011)
(quoting Tahfs v. Proctor, 316 F.3d 584, 595 (6th
Cir. 2003)). The court agrees with the Sixth Circuit's
admonition in Tahfs:
As a general proposition, a district court should be hesitant
to determine that a party's complaint is in violation of
Rule 11(b) when the suit is dismissed pursuant to Rule
12(b)(6) and there is nothing before the court, save the bare
allegations of the complaint. . . . At the pleading stage in
the litigation, ordinarily there is little or no evidence
before the court at all, and such facts as are alleged, must
be interpreted in favor of the nonmovant. While a party is
bound by Rule 11 to refrain from filing a complaint
“for any improper purpose, ” from making claims
“[un]warranted by existing law, ” or from making
“allegations and other factual contentions [without]
evidentiary support, ” see Fed. R. Civ. P.
11(b)(1)-(3), making those determinations is difficult when
there is nothing before the court except the challenged
complaint.
Tahfs, 316 F.3d at 594. The court in Tahfs
added that, although courts must be vigilant to identify
baseless allegations, Rule 11 “‘is not intended
to chill an attorney's enthusiasm or creativity in
pursuing factual or legal theories.'” Id.
at 595 (quoting McGhee v. Sanilac County, 934 F.2d
89, 92 (6th Cir. 1991) (citing Fed.R.Civ.P. 11 advisory
committee's note)).
In this
case, while the court ultimately found that Plaintiffs had
failed to plead sufficient facts to sustain their RICO
claims, the court cannot conclude that the claims were
frivolous or unwarranted under existing law. See
Fed. R. Civ. P. 11(b)(2). The court found two grounds on
which to dismiss the RICO claims under Rule 12(b)(6). First,
the court held that Plaintiffs' pleading of fraud in
connection with litigation activities did not constitute
racketeering activity. See Quick, 318 F.Supp.3d at
141-42. That ruling, however, was based on several district
court decisions, not on any binding precedent. See
Id. Therefore, no “existing law” squarely
foreclosed Plaintiffs' claims. Cf. Burns v. George
Basilikas Tr., 599 F.3d 673, 677 (D.C. Cir. 2010)
(reversing imposition of sanctions where no circuit authority
foreclosed the party's position and there existed a
favorable unpublished district court case). Second, the court
ruled that Plaintiffs had not pleaded sufficient facts to
establish a plausible RICO “enterprise.” See
Quick, 318 F.Supp.3d at 142-43. The court's
dismissal on that ground was far from extraordinary, however,
as dismissals for failure to plead a RICO enterprise are not
uncommon. See, e.g. Brink v. Continental Ins. Co.,
787 F.3d 1120, 1127 (D.C. Cir. 2015) (affirming dismissal for
failure to “allege any facts establishing required
elements of a RICO enterprise”). Thus, the court cannot
find that Plaintiffs' pleading of their RICO claims was
so unreasonable as to warrant sanctions.
For
related reasons, the court does not find that Plaintiffs or
their counsel brought the RICO claims for an “improper
purpose” or that the claims' limited factual
contentions lacked “evidentiary support.”
Fed.R.Civ.P. 11(b)(1), (3). With no more than the complaint
itself to evaluate motive and pre-filing diligence, the court
lacks a sufficient evidentiary basis from which to take the
serious step of imposing sanctions. For that same reason, the
court rejects Defendants' request for sanctions under 28
U.S.C. § 1927. See United States v. Wallace,
964 F.2d 1214, 1217 (D.C. Cir. 1992) (holding that a
lawyer's conduct must at least be “reckless”
before imposing sanctions under 28 U.S.C. § 1927).
III.
Before
concluding, the court cannot leave unaddressed
Plaintiffs' counsel's responses to HSBC's
“safe harbor” notices. Among other things,
Plaintiff's counsel chastised HSBC's counsel for
being “legends in their own mind, ” Defs.'
Exs. at 35; accused them of “want[ing] to rack up those
billable hours, ” id. at 38; and sarcastically
suggested that the sanctions motion was drafted “deep
within the bowels of one of your nine office locations by an
associate eager to escape another soul-deadening document
review for a brief taste the adversarial process, ”
id. at 35. And, if that were not enough, there is
this ugly flourish: “Your baseless accusations would be
bizarre but for the fact that the insurance company is paying
for your fee churning-seemingly without monitoring.
Apparently, sleaze, like rust, never sleeps.”
Id. at 68.
Such
rhetoric is not simply discourteous, it is unprofessional and
unbecoming of a member of this bar. The court will not
tolerate it. Should Plaintiffs' counsel appear before
this court again, and should he dare to treat opposing
counsel in a ...