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Sateriale v. RJ Reynolds Tobacco Co., No. 2:09-cv-08394-CAS(SSx) - 2014 U.S. Dist. LEXIS 176856 (C.D. Cal. Dec. 19, 2014)

Rule:

Under Federal Rule of Civil Procedure 11, a court may impose sanctions upon attorneys or unrepresented parties for submitting papers to a court that are frivolous, legally unreasonable, baseless, or filed for an improper purpose, such as harassment.

Facts:

Plaintiffs filed a third amended class action complaint (“TAC”) against defendant R.J. Reynolds Tobacco Company (“RJR”), alleging that RJR breached its contractual obligations to plaintiffs – smokers of defendant’s Camel brand cigarettes and holders of “Camel Cash” or “C-Notes”  - when RJR announced the termination of its Camel Cash loyalty program, but failed to make available limited amounts of merchandise for redemption by plaintiffs with Camel Cash during the final six months of the program. In response to plaintiffs’ complaint, RJR filed a motion for sanctions pursuant to Federal Rule of Civil Procedure 11, arguing that plaintiffs’ counsel filed the TAC without conducting an adequate investigation into the underlying facts, specifically on the issue of plaintiffs’ allegation that RJR failed to provide any merchandise to Camel Cash participants during the final six months of the Camel Cash program. As a defense, plaintiffs alleged that their allegation that no merchandise was available for redemption has always been accurate, since merchandise – i.e., ash trays, pool tables, computers, pinball machines, etc. – was not available during the last six months of the Camel Cash program. Plaintiffs sought costs incurred responding to RJR's motion, and sanctions to deter future abuses under Rule 11.

Issue:

Should RJR’s motion for sanctions pursuant to Federal Rule of Civil Procedure 11 be granted?

Answer:

No.

Conclusion:

The court denied RJR's motion for sanctions under Rule 11. The arguments advanced by RJR in its concurrently filed summary judgment motion were similar to the arguments RJR advances in its motion for sanctions. Namely, RJR argued that summary judgment should be granted as to plaintiffs' breach of contract claim because the term "merchandise" included cigarettes and coupons for cigarettes, and it was undisputed that RJR made available both cigarettes and coupons during the last six months of the Camel Cash program. This similarity—coupled with RJR's five-year delay in bringing the motion for sanctions convinced the court that RJR's motion should be denied. The court reserved the question as to whether sanctions were appropriate under Rule 11 against RJR until the conclusion of the case.

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