United States District Court, D. Colorado
PHILIP A. BRIMMER, District Judge.
This matter is before the Court on Defendants' Joint Motion for Sanctions Under Rule 11, 28 U.S.C. § 1927, and the Court's Inherent Powers, with Points and Authorities [Docket No. 39] filed by defendants Valley Park Apartments, Inc. ("VPA"), SJW Management, Inc. ("SJW"), William Wesley Hewitt, and Steve Sutter, and on Plaintiffs' Motion for Attorneys' Fees [Docket No. 55] filed by plaintiffs Fabiola Mendoza, Amanda Muñoz, Jose "Albert" Gomez, and Isidro Hernandez. Defendants request sanctions be imposed on plaintiffs and/or their attorney in the amount of the $59, 100 they incurred in attorneys' fees. Docket No. 39 at 2. Plaintiffs seek attorney's fees in the amount of $25, 324.98 under the fee shifting provision of the Fair Labor Standards Act. Docket No. 55 at 1.
Plaintiffs brought this case on January 2, 2013 alleging violations of the Fair Labor Standards Act ("FLSA"), see 29 U.S.C. §§ 201 et seq., and the Colorado Minimum Wage Act, see Colo. Rev. Stat. §§ 8-6-101 et seq. and 7 C.C.R. 1103-1, as well as common law claims for breach of contract. Docket No. 1. Specifically, plaintiffs alleged that defendants paid Mr. Hernandez, Mr. Gomez, and Ms. Mendoza less than the minimum hourly wage mandated by federal law for both regular and overtime hours. Docket No. 1 at 12, ¶¶ 63-66. Plaintiffs brought their FLSA claims as a collective action pursuant to 29 U.S.C. § 216(b). Docket No. 1 at 8-9. Their state law claims were likewise asserted as class claims under Federal Rule of Civil Procedure 23. Docket No. 1 at 9-11.
On February 28, 2013, defendants filed a joint motion to dismiss. Docket No. 23. In their response to the motion to dismiss, plaintiffs waived their Colorado Minimum Wage Act claim, their Rule 23 allegations with respect to their breach of contract claim, and the collective action component of their FLSA claims. Docket No. 24 at 2.
On June 3, 2013, defendants filed the joint motion for sanctions currently before the Court, arguing that plaintiffs' counsel's conduct during the litigation was objectively unreasonable and undertaken in bad faith. Docket No. 39.
On May 31, 2013, in response to plaintiffs' revised settlement demand, defendants made the following offers of judgment: (1) $5, 475 to Mr. Gomez; (2) $10, 707.75 to Mr. Hernandez; and (3) $1, 415 to Ms. Mendoza to resolve their claims for unpaid overtime under the FLSA. Docket Nos. 40-42. The offers state that plaintiffs are also entitled to "reasonable attorney fees... if any, after the Court rules on defendants' motion for sanctions." See, e.g., Docket No. 42 at 1. Plaintiffs accepted the offers of judgment and the Clerk entered judgment against defendants. Docket Nos. 40-45.
The Court, not having ruled on the merits of defendants' pending motion to dismiss, denied it as moot. Docket No. 47. The Court noted that the offers of judgment did not resolve the breach of contract claim and, declining to exercise supplemental jurisdiction in the absence of a federal claim, dismissed it without prejudice. Id. at 2-3.
On July 9, 2013, plaintiffs filed a motion to collect attorney's fees as the prevailing party under the FLSA. Docket No. 55.
Defendants seek sanctions under both Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927. Docket No. 39.
A. Standard Under Rule 11
Rule 11(b) of the Federal Rules of Civil Procedure provides as follows:
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
(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.
Fed. R. Civ. P. 11(b). "If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation." Fed.R.Civ.P. 11(c)(1).
Rule 11 requires a "party's attorney to conduct a prefiling investigation of the legal and factual basis for his claims." Davis v. Hudgins, 896 F.Supp. 561, 573 (E.D.Va. 1995). "For a complaint to be reasonable, the factual investigation must have uncovered some information to support the allegations in the complaint." Id. (internal citations omitted). In determining ...