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Brice v. Hoffert

United States District Court, E.D. Pennsylvania

August 7, 2019



          Joseph F. Leeson, Jr. United States District Judge.

         I. BACKGROUND

         This case arose from a dispute over family-owned businesses and real estate that had been transferred from Mom and Dad (plaintiffs) to their adult Daughter (defendant). Mom and Dad alleged Daughter “stole” the properties with the help of the family lawyers through a real estate deed and stock certificates that contained forged or fraudulently obtained signatures. Daughter responded that the businesses and real estate were gifted to her from Mom and Dad. There was extensive litigation on the claims, which ended in this Court on September 13, 2016, when summary judgment was granted in favor of Mom and Dad on the sole federal count alleging a violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961. The Court declined to exercise supplemental jurisdiction over the remaining state law claims and denied all pending motions.

         Litigation of the state law claims then proceeded through the state courts. Because this Court had had an obligation to decide Daughter's pending Motion for Sanctions on the merits, however, the matter was returned from the Third Circuit Court of Appeals for a decision on the merits of the sanctions motion. See ECF Nos. 223, 225. A decision on the Motion for Sanctions was stayed pending final resolution of the state court proceedings.[1] See Order dated July 14, 2017, ECF No. 247 (explaining the reasons for the stay (citing Fed.R.Civ.P. 11 advisory committee's note to 1993 amendment (providing that “the court may defer its ruling . . . until final resolution of the case . . .”); Fiala v. B&B Enters., 738 F.3d 847 (7th Cir. 2013) (Posner, J.) (holding that “what the district judge should have done, given his uncertainty about the merits of the motion [for sanctions] and his belief that the state court litigation might cast light on those merits, was to stay action on the motion pending findings in the state case that might undermine or bolster it”)). After a jury trial and post-trial motions, the state court proceedings concluded. A hearing was thereafter scheduled in this Court on the Motion for Sanctions.

         In the Motion for Sanctions, [2] Daughter asserts that Mom and Dad, as well as the attorneys who represented her parents in this action (Clifford B. Cohn, Esquire and Alan L. Frank, Esquire) should be held jointly liable to her for the attorney's fees, expenses, and costs she incurred in this litigation.[3] Daughter contends that this action was premised on the assertion that she, along with Attorney Defendants John Hoffert, Thomas Klonis, and Hoffert & Klonis, PC, colluded to forge her parents' signatures on a property deed and on stock certificates, but that the “forgery claims are complete fallacies.”[4] Daughter asserts that none of the twelve third-party witnesses deposed testified that the signatures were forged; rather, a number of people testified that they witnessed Mom and Dad sign the deed. Daughter further contends her parents' statements are inconclusive or contradictory, in themselves and to other evidence, that the gift tax returns defeat her parents' claims, and that her parents' own handwriting experts would not opine that the signatures were forged.[5]

         Mom and Dad[6] respond that the Motion for Sanctions is based entirely on the forgery claims. They argue that the claims are not dependent on an actual forgery, but may by proven by evidence that the signatures were obtained under false or fraudulent pretenses. Mom and Dad assert that there is evidence to support these claims, including emails indicating their intent to “consider” gifting sent months after the transfers to Daughter were allegedly complete. Additionally, they sought leave to amend the challenged paragraphs within twenty-one days of service of the sanctions motion. See Fed. R. Civ. P. 11(c)(2) (stating that a motion for sanctions must be served, “but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets”).

         Next, Daughter argues that Attorney Cohn failed to conduct a proper investigation to verify any alleged facts before filing the Complaint. Finally, Daughter, citing a letter Attorney Frank sent after entering his appearance that requested a continuance so he could “become acclimated with the case, ” asserts that Attorney Frank failed to conduct a proper investigation before entering the case. Attorney Cohn and Attorney Frank respond that the allegations of an insufficient investigation before filing and/or entering the case are untrue, as each met with Mom and Dad and reviewed estate planning documents, which supported Mom and Dad's statements, before filing and/or entering the case.

         Since Daughter's Motion for Sanctions was filed on July 15, 2016, Daughter, Mom and Dad, Attorney Cohn, and Attorney Frank electronically submitted hundreds of pages of argument and of exhibits pertaining to the Motion. See, e.g. ECF Nos. 126, 129, 149, 153, 165, 173, 232, 234-246. They also sent the Court dozens of emails, containing hundreds of pages of supplemental arguments. The Court has had numerous telephone conferences with the parties, and a hearing, although not required, [7] was held on the Motion for Sanctions. Additionally, even before the sanctions motion was filed, this Court was heavily involved in the instant litigation: deciding motions, holding conferences, and resolving disputes. Consequently, the Court is intimately familiar with the alleged facts, the disputed issues, and the respective arguments of all parties. Because the Court writes primarily for the parties, and given the extensive history of this case, only the facts necessary for a decision are discussed herein.

         For the reasons set forth below, the Motion for Sanctions is denied. No. fees or costs are awarded to any party regarding litigation of the sanctions motion.


         Rule 11 of the Federal Rules of Civil Procedure provides that the court may sanction an attorney or party for presenting to the court “a pleading, written motion, or other paper- whether by signing, filing, submitting, or later advocating it-” for an improper purpose, asserting frivolous arguments, [8] or alleging facts that lack evidentiary support. See Fed. R. Civ. P. 11(b)-(c). “The legal standard to be applied when evaluating conduct allegedly violative of Rule 11 is reasonableness under the circumstances, Business Guides, Inc. v. Chromatic Communications Enterprises, Inc., 498 U.S. 533');">498 U.S. 533 [] (1991), with reasonableness defined as an ‘objective knowledge or belief at the time of the filing of a challenged paper' that the claim was well-grounded in law and fact.' Jones v. Pittsburgh National Corp., 899 F.2d [1350, 1359 (3d Cir. 1990)].” Ford Motor Co. v. Summit Motor Prods., 930 F.2d 277, 289 (3d Cir. 1991). “The wisdom of hindsight should be avoided; the attorney's conduct must be judged by what was reasonable to believe at the time the pleading, motion, or other paper was submitted.” Mary Ann Pensiero v. Lingle, 847 F.2d 90, 94 (3d Cir. 1988) (internal quotations omitted). Any doubt as to the filer's reasonable belief or inquiry should be resolved in favor of the party charged with the violation.” Sanders v. Hale Fire Pump Co., C.A. No. 87-2468, 1988 U.S. Dist. LEXIS 5239, at *2-3 (E.D. Pa. June 1, 1988). “Sanctions are to be applied only ‘in the ‘exceptional circumstance' where a claim or motion is patently unmeritorious or frivolous.'” Ario v. Underwriting Members of Syndicate 53, 618 F.3d 277, 297 (3d Cir. 2010) (quoting Doering v. Union Cnty. Bd. of Chosen Freeholders, 857 F.2d 191, 194 (3d Cir. 1988)).

         III. ANALYSIS

         A. Daughter's request for sanctions against Mom and Dad is denied.

         Unfortunately, the courts are not unfamiliar with the type of family dispute seen in this case. In Falah, the district court denied a motion for sanctions against the plaintiff and the plaintiff's attorney for their alleged failure to conduct a reasonable inquiry before filing suit. See Falah v. Statt Corp., No. 08-1269 (JBS), 2008 U.S. Dist. LEXIS 104738 (D.N.J. Dec. 16, 2008). The complaint alleged that the defendant-sisters[9] refused to comply with their mother's directive to transfer 20% interest in the family company to their other sister, the plaintiff; and, instead, the defendant-sisters kept their mother's interest for themselves. The defendant-sisters argued that sanctions were warranted because the plaintiff-sister's claims of an inter vivos gift from their mother lacked factual support. Although the plaintiff-sister was unable to prove an inter vivos gift, the court concluded that the conduct of the plaintiff-sister and of counsel “was not so abusive as to require sanctions.” Id. at *4. The court “recognize[d] the acrimonious and litigious family history behind [the] action, ” but found “insufficient evidence that th[e] complaint was brought to harass Defendants.” Id.

         Similarly here, Mom and Dad did not improperly initiate litigation with the intent to harass their Daughter. Rather, this action evolved from an unresolvable family matter. There are facts that support Mom and Dad's theory of the case, including the late filing of the deed, Dad's testimony, deemed truthful during a polygraph examination, that he did not intent to transfer any of his properties, businesses, or stock certificates to Daughter, memoranda memorializing Dad's intent regarding estate planning, and emails Dad sent months after the alleged transfer to Daughter in which he stated that was ready to start gifting, as well as the circumstances that provided Daughter with intimate knowledge of the businesses and properties and with access to records, deeds, stock certificates, and documents requiring the signatures of her parents. Because Mom and Dad reasonably believed the instant litigation was well-grounded, see Sanders, 1988 U.S. Dist. LEXIS 5239, at *2-3 (holding that “[a]ny doubt as to the filer's reasonable belief or inquiry should be resolved in favor of the party charged with the violation”), their conduct did not violate Rule 11. See Simmerman v. Corino, 27 F.3d 58, 62 (3d Cir. 1994) (holding that because “Rule 11 targets abuse” only “abusive litigation or misuse of the court's process” warrants the imposition of sanctions (quoting Teamsters Local Union No. 430 v. Cement Express, Inc., 841 F.2d 66, 68 (3d Cir. 1988))). Thus, the initiation and continuation of the above-captioned case was neither abusive nor done with the intent to harass.

         Furthermore, unlike the complaint in Falah, which could not even make it beyond discovery, Mom and Dad's claims proceeded to a jury trial in state court. Because the jury determined that (1) the transfers were “done freely and voluntarily with knowledge of the consequences and free from undue influence or deception” and (2) there was no fraud in the deed transfer, but also (3) held Daughter liable for breach of contract and for unjust enrichment, see Verdict Slip, Ex. 64, ECF No. 265-1, all parties suggest that the jury verdict supports their arguments. Regardless of who's position is supported by the verdict, the fact that the claims proceeded to trial shows that they were not “patently unmeritorious or frivolous”[10]See Perry v. Ethan Allen, Inc., 115 F.3d 143, 154 (2d Cir. 1997) (finding that the district court did not abuse its discretion in denying the motion for sanctions and highlighting the district court's statements that (1) although the defendant prevailed at trial, it is clear the plaintiff's complaint was not frivolous in that the jury did find [Perry] had been subjected to harassment, (2) the plaintiff is a troubled and somewhat confused individual, and (3) the record displayed tenacious advocacy by attorneys on both sides, but no clear evidence of bad-faith conduct meriting sanctions); Gimbel v. Feldman, CV-93-4761 (CPS), 1995 U.S. Dist. LEXIS 21429, at *13 (E.D.N.Y. Aug. 8, 1995) (denying the defendant-sister's motion for sanctions because ...

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