Katz v. Rabkin , 213 F. App'x 387 ( 2007 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 07a0029n.06
Filed: January 9, 2007
No. 05-4342
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
IDA S. KATZ,
Plaintiff-Appellee,
On Appeal from the
v. United States District Court for
the Southern District of Ohio
ARNOLD RABKIN , ET AL.,
Defendant-Appellants.
______________________________
Before: KENNEDY and GIBBONS, Circuit Judges; ALDRICH, District Judge*
KENNEDY, J. Arnold M. Rabkin, et al. seek review of the district court’s denial of their
motion to assess monetary and non-monetary sanctions against Ida S. Katz pursuant to Fed. R. Civ.
P. 11. This appeal is based on assertions that the district court abused its discretion because its
refusal to grant sanctions was based upon erroneous determinations that (1) Katz’s claims had not
been fully litigated in state court and (2) the evidence in the record was insufficient to demonstrate
Katz’s improper purpose in bringing her case in federal court. We hereby assess monetary sanctions
against Katz for filing a frivolous appeal and remand to the district court to determine whether it is
appropriate to assess fees for the trial court proceedings following appellants’ motion for summary
judgment.
*
The Honorable Ann Aldrich, United States District Judge for the Northern District of Ohio,
sitting by designation.
BACKGROUND
Ida Katz, the founder and former director of the Save the Animals Foundation, a non-profit
charitable organization, alleges that appellants, the Save the Animals Foundation and several of its
board members (hereinafter “STAF”), have committed a myriad of improprieties related to the
management of the foundation. Katz has instituted state and federal court litigation, in addition to
attempting various administrative remedies, essentially alleging the same improprieties against the
same defendants, all to no avail. The Court of Common Pleas, Hamilton County, Ohio, dismissed
Katz’s state action in its entirety. The state appellate court upheld the dismissal of the vast majority
of Katz’s causes of action but remanded for further proceeding on two claims. Katz did not appeal
the affirmance of the state district court’s dismissal of the majority of her claims, and the Court of
Common Pleas for Hamilton County, Ohio, provided final resolution of the two remanded claims,
dismissing them on the merits pursuant to Ohio Civil Rule 41(B)(1) based on Katz’s failure to
prosecute following her attorney’s withdrawal from the case.
Despite the resolution of all of her claims on the merits and a lack of any source of federal
jurisdiction, Katz filed her case in federal court before the United States District Court for the
Southern District of Ohio. In agreement with the magistrate’s recommendation, the district court
dismissed the complaint for lack of subject-matter jurisdiction and for failure to state a claim upon
which relief can be granted over Katz’s objections. A separate panel of this court affirmed the
dismissal based on plaintiff’s failure to establish any state action for her 42 U.S.C. § 1983 claim.
Expressing frustration at the considerable time and money expended to defend against Katz’s
jurisdictionally-insufficient and essentially duplicative federal suit, STAF moved the district court
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to assess sanctions, seeking recoupment of the attorneys’ fees incurred in moving to dismiss the
federal action and in filing the motion for sanctions, as well as an injunction to prevent Katz from
filing future suits against STAF without a magistrate’s pre-approval. The district court denied this
motion for sanctions. STAF here appeals that denial, asserting that Katz’s decision to sign and file
the complaint in federal court was not reasonable under the circumstances within the terms of Rule
11 jurisprudence. Union Planters Bank v. I & J Dev. Co., 115 F.3d 378, 384 (6th Cir. 1997)(citation
omitted.).
ANALYSIS
We hereby determine that Katz’s actions do warrant the assessment of monetary sanctions.
Although we review the district court’s sanctions determination with the deference prescribed by the
abuse of discretion standard, we must conduct a thorough examination based on this circuit’s Rule
11 jurisprudence and the record before us. See Apostolic Pentecostal Church v. Colbert, 169 F.3d
409, 417 (6th Cir. 1999). Rule 11 requires that:
. . . to the best of [an unrepresented party’s] knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances, . . . claims . . . [presented
to the court in a paper] are warranted by existing law or by a nonfrivolous argument
for the extension, modification or reversal of existing law or the establishment of
new law [and] the allegations and other factual contentions have evidentiary support
or, if specifically so identified, are likely to have evidentiary support after a
reasonable opportunity for further investigation or discovery . . . .
Fed. R. Civ. P. 11(b). As the district court correctly noted, “[i]n this circuit, the test for the
imposition of Rule 11 sanctions is ‘whether the individual’s conduct was reasonable under the
circumstances.’” Tropf v. Fid. Nat’l Title Ins. Co., 289 F.3d 929, 939 (6th Cir. 2002) (citation
omitted). Here, even if Katz possessed an initial good-faith belief that her claims were cognizable
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in federal court, STAF’s motion to dismiss reasonably should have put her on notice that these
claims were legally insufficient. Accordingly, the law afforded her twenty-one days after service of
the motion for sanctions to withdraw the complaint. Fed. R. Civ. P. 11(c)(1)(A).
Although the district court did not find sanctions to be appropriate, it failed to consider the
fact that Katz’s underlying complaint had no legally viable basis for federal jurisdiction. While the
court might have considered it reasonable for the plaintiff to believe, as she argued, that the favorable
tax treatment STAF received as a nonprofit would make it subject to suit in federal court, STAF’s
motion to dismiss the case and the district court’s decision to grant that motion surely was sufficient
to notify Katz that her claim was groundless. Instead of resting its decision on this issue, the district
court came to its conclusion that Katz was not behaving unreasonably in bringing the federal case
based on: (1) the notion that all of her state court claims were not dismissed on the merits, which was
an erroneous interpretation of Ohio law, and (2) the fact that discovery had not yet occurred in the
case. See Ohio Civ. R. 41(B) (stating that “[a] dismissal under division (B) [pertaining to
involuntary dismissal] of this rule [for dismissal of actions], operates as an adjudication upon the
merits unless the court, in its order for dismissal, otherwise specifies”) (emphasis added).
We find the district court’s analysis and conclusion to the contrary to be an abuse of
discretion. Further, the district court’s prior dismissal of Katz’s claims based on the absence of
jurisdiction and failure to state a claim was sufficient to alert a reasonable plaintiff to the frivolous
nature of her case. Nevertheless, Katz, in filing a groundless appeal, forced STAF to incur additional
expenses and waste even more time to continue to defend the case.
Based on our conclusion that Katz’s frivolous appeal satisfies the standard set in Rule 11,
we assess monetary sanctions in the amount of $500 to deter Katz from instituting further costly and
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unmeritorious litigation. Additionally, we remand the case to the district court with instructions to
award monetary sanctions to the defendants for attorneys’ fees incurred in the trial court following
the filing of the motion to dismiss. It is prudent to permit the district court to determine the full
amount of the sanctions, as it could consider the plaintiff’s financial situation and other relevant
factors unknown to this court in doing so. Because we trust that issuing monetary sanctions in the
form of attorneys’ fees would sufficiently deter Katz from filing additional frivolous actions, we find
it unnecessary to enjoin the plaintiff from instituting future litigation against the defendants without
a magistrate’s approval.
CONCLUSION
For the foregoing reasons, we REVERSE the district court’s judgment and REMAND for
further proceedings in accordance with this opinion.
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