The absence of a purpose to cause unnecessary delay or needless expense--or, for that matter, the absence of bad faith--is irrelevant to the imposition of sanctions under the first prong of Fed. R. Civ. P. 11.
The purchaser alleged that the computer system sold to it by the manufacturer was defective. The purchaser brought suit against the manufacturer, alleging fraud and negligence. The manufacturer argued that the purchaser's claim for economic loss arising from negligent manufacture was barred by California law. The court denied this argument for lack of merit and ordered the manufacturer's counsel to submit a memorandum explaining why sanctions should not be imposed under Rule 11.
May sanctions under Rule 11 be applied where a defendant asserted an unmeritorious defense?
The Court finds and concludes, first, that defendant's memorandum in support of its motion based on the statute of limitations was not warranted by existing law, contrary to the representation made therein by counsel, and, second, that counsel failed to make a reasonable inquiry to determine whether the motion to dismiss the economic loss claim was warranted by existing law. The memorandum therefore was signed in violation of Rule 11.