Virginia Lawyers Weekly VA Lawyers Weekly
The plaintiff in a long-running dispute over the management and distribution of the assets of a bankrupt partnership must pay the defendant’s legal fees, a federal judge has ruled.
In this case, the plaintiff’s amended complaint “is baseless on all counts in terms of evidentiary support,” U.S. District Judge Claude M. Hilton of the Eastern District of Virginia noted.
“[T]he Court finds that an award of attorney’s fees and costs is a necessary deterrent to Plaintiff and others similarly situated from pursuing frivolous litigation, especially where an improper purpose may be inferred,” he wrote.
Hilton authored the opinion granting the defendants’ motions for sanctions in Sopkin v. Mendelsen (VLW 022-3-393).
Decades-long dispute
The case involves a decades-long dispute over the management and distribution of the assets of Interlase Limited Partnership during its receivership and bankruptcy proceedings.
Multiple state law claims and one federal law claim were raised by Barbara Sopkin against the defendants in 2016 but were ultimately dismissed by the Eastern District court under Rule 12 (b) (6).
In March 2017, the defendants moved for sanctions against Sopkin, who filed an opposition shortly thereafter. The court entered a preliminary order granting attorneys’ fees to the defendants in June 2017, with the defendants later filing statements of costs and fees amounting to more than $60,000 in total.
Sopkin objected to the attorneys’ fees statements. The court then stayed further Rule 11 proceedings “pending Plaintiff’s appeal of the case dismissal to the United States Court of Appeals for the Fourth Circuit.”
The stay was lifted Aug. 26, 2022, after the dismissal was affirmed on appeal.
Sanctions
Hilton said that, under Rule 11, the court may impose sanctions for a party that files a motion that is presented for an improper purpose, that is not warranted by existing law, that lacks evidentiary support or contains denials “not warranted by the evidence, belief, or lack of information.”
“The main purpose of Rule 11 is to deter baseless filings in district courts and to ‘streamline the administration and procedure of the federal courts,’” he pointed out.
In evaluating the motions for sanctions, Hilton said Sopkin’s “own conduct sufficiently violated 11(b) (1) and (3) to warrant sanctions,” which relate to presenting a filing for an improper purpose and the evidentiary support of factual contentions.
Noting the court must first consider a pleading’s legal and factual foundation, Hilton wrote that Sopkin’s causes of action against the defendants “have no factual basis.”
“As the Court explained when dismissing the case under 12(b)(6), the conspiracy claim was factually deficient because Plaintiff failed to allege that Defendants engaged in any unlawful act or purpose,” he said.
Hilton added that an additional legal malpractice claim against one of the defendants was “baseless as Plaintiff failed to allege any facts suggesting she or Interlase had an attorney-client relationship with Defendant.”
Regarding the breach of fiduciary duty claim, Hilton said it “was deficient on several grounds.”
“Plaintiff misrepresented when she had discovered her claims against the Mendelson Defendants in order to satisfy her erroneously proposed discovery rule for the statute of limitations analysis,” the judge wrote, noting that filings show Sopkin was “fully aware of her claims against the Mendelson Defendants as early as July 2008” after she claimed she discovered her claims in July 2015.
“No reasonable plaintiff would believe the claims … were factually justified. Therefore, the Court finds that Plaintiff’s conduct squarely violated 11(b)(3)’s requirement that the factual contentions in a party’s pleadings have or will likely have evidentiary support.” – U.S. District Judge Claude M. Hilton
The judge further ruled that Sopkin “did not identify any contract that the Defendants interfered with” to support her claim for wrongful interference of contract.
“No reasonable plaintiff would believe the claims above were factually justified,” Hilton wrote. “Therefore, the Court finds that Plaintiff’s conduct squarely violated 11(b)(3)’s requirement that the factual contentions in a party’s pleadings have or will likely have evidentiary support.”
Moreover, Sopkin’s “conduct indicates she filed this action with an improper purpose in violation of 11(b)(1),” the judge said.
“The Court infers the existence of an improper purpose partly because of the baselessness of all her claims,” Hilton wrote. The judge added that, along with the factual concerns, Sopkin filed suit “despite a state court injunction preventing her from asserting any interest in Interlase, and even after she expressly withdrew a claim of interest in Interlase with prejudice during previous bankruptcy proceedings.”
Attorneys’ fees
Finding that sanctions are warranted, Hilton said the defendants are entitled to legal fees and costs sustained during the case, with counsel for the defendants having submitted affidavits for attorneys’ fees and costs incurred through the court’s original stay of Rule 11 proceedings.
“The total costs and fees incurred by the [defendants] must be taken into account because Plaintiff’s Rule 11 violations infected all the counts she raised against them, as outlined earlier,” Hilton said.
The judge concluded by stating “the severity of Plaintiff’s conduct, as demonstrated by her multiple violations of Rule 11(b), warrants a monetary penalty.”
The judge granted the motions for sanctions and ordered the plaintiff to pay the requested fees and expenses to two sets of defendants, totaling $58,828.42 and $4,026 respectively.
The plaintiff filed a notice of appeal to the 4th U.S. Circuit Court of Appeals earlier this month.
