United States District Court, D. Colorado
ORDER
Scott
T. Varholak United States Magistrate Judge
This
matter is before the Court on the Motion for Sanctions (the
“Motion”) filed by Defendants Telluride School
District R-1 (the “District”) and Colleen Mahoney
(collectively, the “Moving Defendants”) [#130],
which was referred to this Court [#131]. This Court has
carefully considered the Motion and related briefing,
argument from the June 4, 2019 Motion Hearing, and the entire
case file. For the following reasons, the Motion is GRANTED
IN PART and DENIED IN PART.[1]
I.
BACKGROUND
Plaintiff
initiated this action on December 3, 2017. [#1] On December
26, 2017, Plaintiff filed her First Amended Complaint [#11],
and the following day she filed a corrected First Amended
Complaint to redact the names of minors [#12]. Neither the
original Complaint nor the First Amended Complaint named the
District or Ms. Mahoney as defendants. [##1, 12]
On June
17, 2018, Plaintiff filed her Motion for Leave to File
Proposed Second Amended Complaint. [#53] On July 19, 2018,
this Court granted that motion, but rather than accepting the
proposed Second Amended Complaint that Plaintiff had
proffered, the Court ordered Plaintiff to file a new Second
Amended Complaint that removed certain irrelevant and
especially vitriolic allegations. [#63] On August 14, 2018,
Plaintiff filed her Second Amended Complaint. [#68]
Plaintiff's Second Amended Complaint named the District
and Ms. Mahoney as Defendants. [Id.] The Second
Amended Complaint alleged that all Defendants, including the
Moving Defendants, violated the Racketeer Influenced and
Corrupt Organizations Act of 1970 (“RICO”), the
Colorado Organized Crime Control Act (“COCCA”),
and the Civil Rights Act of 1871, codified as 42 U.S.C.
§§ 1981-1988. [Id.] The Second Amended
Complaint alleged wire fraud as the predicate offense for the
RICO and COCCA claims. [Id. at ¶¶ 339-40,
348]
The
Moving Defendants and Defendants Town of Mountain Village,
Colorado (“Mountain Village”), Chris Broady, Tom
Halper, Brian Carlson, Kip Albanese, and Nathan Santos each
moved to dismiss the Second Amended Complaint. [##72, 75,
101, 106, 124] In the Motion to Dismiss filed by the Moving
Defendants on December 10, 2018 (the “Moving
Defendants' Motion to Dismiss”), the Moving
Defendants made several arguments in support of dismissal of
the claims against them. [See generally #101] Of
relevance to the instant Motion, the Moving Defendants argued
that: (1) Plaintiff lacked standing to bring RICO and COCCA
claims because she did not suffer injury to business or
property [id. at 5-7], and (2) Plaintiff did not
allege that the District or Ms. Mahoney invested in,
controlled, or conducted an “enterprise” through
a “pattern of racketeering activity”
[id. at 7-9]. On February 4, 2019, Plaintiff
responded to the Moving Defendants' Motion to Dismiss
[#111], and on February 19, 2019, the Moving Defendants filed
a reply [#116].
Meanwhile,
on February 19, 2019, counsel for the Moving Defendants
served Plaintiff's counsel, George Allen, with a copy of
the instant Motion. [#130 at 1; #130-1] Mr. Allen did not
respond within the 21 days provided by Federal Rule of Civil
Procedure 11(c)(2).[2] [#130 at 2] The Moving Defendants thus
filed the instant Motion on March 14, 2019. [#130]
On
March 25, 2019, Chief Judge Brimmer issued an order granting
the Motions to Dismiss filed by Defendants Mountain Village,
Broady, and Carlson. [#137] In his Order, Chief Judge Brimmer
found that the Second Amended Complaint failed to plead the
continuity required to establish a pattern of racketeering
activity under RICO.[3] [Id. at 9-11] Chief Judge Brimmer
likewise concluded that Plaintiff failed to plausibly plead
either a COCCA or Section 1983 claim.[4] [#137 at 11-16] The same day
Chief Judge Brimmer issued his order dismissing Defendants
Mountain Village, Broady, and Carlson [id.],
Plaintiff filed a Notice of Dismissal of the instant Action
[#138]. As a result of the Notice of Dismissal, the claims
against the Moving Defendants were dismissed without
prejudice. [#141]
On
April 13, 2019, Plaintiff filed her Response to the instant
Motion. [#143] In the Response, Plaintiff requested a hearing
on the Motion. [Id. at 8] On April 26, 2019, the
Moving Defendants filed their Reply. [#148] On May 3, 2019,
this Court granted Plaintiff's request for a hearing
[#151], and on June 4, 2019, this Court held a hearing on the
Motion [##172, 187]. Mr. Allen appeared in person and
Plaintiff appeared telephonically for the hearing.
[Id.] Plaintiff also submitted an additional
declaration, dated June 3, 2019, in support of her opposition
to the Motion. [#171] Since the hearing, Plaintiff has
submitted both an additional Supplemental brief in opposition
to the Motion (the “Supplement”) [#180], and
additional documentation for the Court's consideration
[## 179, 181, 182].
II.
JURISDICTION
In her
response to the Motion, Plaintiff relies upon a 1996 decision
from the Middle District of Florida to argue that “a
party that has voluntarily withdrawn the offending Complaint
is no longer subject to sanctions, as the jurisdiction of the
District Court has terminated.” [#143 at 4 (citing
Morroni v. Gunderson, 169 F.R.D. 168, 171 (M.D. Fla.
1996))] Contrary to Plaintiff's representation, however,
the Morroni decision did not address the court's
jurisdiction to impose Rule 11 sanctions following the
voluntary dismissal of a complaint. Instead, the court in
Morroni merely held that, pursuant to the
safe-harbor provision found in Rule 11(c), “a party who
seeks Rule 11 sanctions based upon allegations in a
complaint, cannot wait until the action has been voluntarily
dismissed by the opposing party because the party who
voluntarily dismisses a case has withdrawn the offending
pleading by dismissing the case.” 169 F.R.D. at 171.
The Morroni decision thus has no applicability here,
because the defendants in Morroni did not file their
motion for Rule 11 sanctions until two months after the
plaintiffs had voluntarily dismissed their claims, whereas
here, Plaintiff did not voluntarily dismiss her claims until
after the Moving Defendants filed the instant Motion and thus
after the safe-harbor period had expired. Moreover, the Tenth
Circuit has held that even when a court lacks subject-matter
jurisdiction over the substantive merits of a case, such as
by the filing of a notice of voluntary dismissal, “it
retains the inherent authority to issue orders on matters
collateral to the merits and to conduct sanction proceedings
and to impose any sanction for abusive conduct for which
sanctions are authorized by the federal rules of procedure or
federal statutes, including awarding costs or attorney fees,
imposing punishment for criminal contempt, and issuing
sanctions under Rule 11.” Lundahl v. Halabi,
600 Fed.Appx. 596, 605-06 (10th Cir. 2014).
III.
STANDARD OF REVIEW
Federal
Rule of Civil Procedure 11(b) provides:
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 ...