Dude v. Congress Plaza, LLC et al, No. 9:2017cv80522 - Document 276 (S.D. Fla. 2018)
Court Description: ORDER denying 261 Aldo Beltrano's Rule 11 Motion for Sanctions; denying 262 Dietmar Dude's and Harold Dude's Rule 11 Motion for Sanctions. Signed by Magistrate Judge William Matthewman on 10/5/2018. See attached document for full details. (kza)
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Dude v. Congress Plaza, LLC et al Doc. 276 UN ITED STA TES D ISTRICT COU RT SOUTHERN DISTRICT OF FLORIDA CivilN o.17-80522-CIV -M arra/M atthew m an D IETM A R DU D E, FILED by Plaintiff, D.C. V S. 22T 25 2213 CON GRESS PLAZA,LLC,eta1., STEVEN M LARIMOAE CLERKu.knl s' r .cT. s. o.oFFt.-w.R:. D efendants. / ORDER DENYING ALDO BELTRANO 'S RULE 11M OTION FOR SANCTIONS IDE 2611AND DENYING DIETM AR DUDE'S AND HARALD DUDE'S RULE 11 M OTION FOR SANCTIONS IDE 2621 TH IS CA U SE is before the Courtupon Third-party D efendant,Aldo Beltrano's Rule 11 M otion for Sanctions against Congress Plaza,LLC,Congress 1010,LLC , Barry G.Roderman and David M .Goldstein (collectively,ûsDefendants'') (DE 2611 and Counterclaim Defendant DietmarDude and Third-party DefendantHarald Dude's (the ûsDudes'')Rule 11 M otion for SanctionsagainstCongress Plaza,LLC ,Congress 1010,LLC,Barry G .Roderm an and D avid M . Goldstein gDE 262). Thesematterswerereferred to theundersigned by United StatesDistrict JudgeKennethA.M arra. SeeDE 272. Defendantshave filed responses (DES265,2701,the Dudes'counsel,Beltrano & Associates,filed onereply gDE 2671on the1aw firm'sown behalf, andtheDudestlledareply gDE 2751. Themotionsarenow ripeforreview. M O TIO N S.R ESPO N SE S.A N D R EPLIES The tw o m otions are virtually identical. A ldo Beltrano, D ietm ar Dude, and H arald Dude argue thatParagraph 9 ofthe Counterclaim and Third-party Claim (DE 149)tiled by 1 Dockets.Justia.com Defendantson February 8,2018,containsa misrepresentation in Paragraph 9. (DE 261-1,p.3' , DE 262-1,p.31. Paragraph 9oftheCounterclaim andThird-party Claim statesthefollowing: çkA. ta1ltimesmaterialhereto CM L (CongressM anagement,LLC)had a federaltax liability to thelnternalRevenueServicefortheyears1998through 2009 (asofDecember31,2009)inthe approximateamountof$5,305,976.59....'' (DE 149,p.31. A ccording to A ldo Beltrano, D ietm ar Dude, and H arald D ude, Paragraph 9 ttsorely misrepresentsthe realities ofthe tax issueswhich have becom e a key pointofthiscase and are the lynchpin of the Counterclaim . The Tax Liability w as and is against H arald D ude, not againstthe entity,CM ,itself.'' gDE 261-1,p.3, 'DE 262-1,p.31. Aldo Beltrano,Dietmar Dude,and Harald DudefurthercontendthatCtlwlhattax liabilitiesexisted and whenthey came into existence are materialto the Counterclaim . The information aboutthe Harald Dude Tax Lien and the CM Tax Lien is publicly available and can be located w ithout substantialtrouble andwithouttheinclzrsionofsigniticantcosttotheCP parties.'' gDE 261-1,p.6' ,DE 262-1,p. 6j. Finally,Aldo Beltrano,DietmarDude,and Harald Dude argue that,atbest,Defendants' counsel Sldid nottake the tim e to conduct a sim ple records search''and,at w orst,D efendants' counsel içare ignoring these facts.'' Id They assert that, either w ay, D efendants çsfiled a Counterclaim and Third Party Claim w hich they knew orshould have know n w ere notsupported by the m aterialfacts necessary to supporttheir claim s for conspiracy or fraud...and should thus besubjecttosanctions.'' In response to D ietm ar D ude and H arald D ude's m otion,Defendants sim ply argue that Beltrano & Associates should be Sçdisqualified from filing any pleadings on behalf of (the Dudes),includingaM otionforSanctions(DE-262-1Jthatwasfiledcontemporaneouslywiththe MotiontoW ithdraw andtheDefendants'M otion forFinalJudgment(DE-26-1).'' (DE 265,p. 2). In otherwords,Defendantscontend that,ifBeltrano& Associatesand itsclientshavehad fundam entaldisagreem ents aboutthe clients'conductin this case,Beltrano & A ssociates should beprecluded from filing m otions on the clients'behalf. Beltrano & A ssociates argues in response that,untilthe Courthas granted the m otion to withdraw ,the law tirm rem ains counsel of record for the D udes, and the law finn tsrem ains obligated to provide representation to the Dudes.'' (DE 267,p.21. Beltrano & Associates further asserts that the D udes can still ptlrsue their Rule 11 m otion even after the m otion to w ithdraw isgranted. D efendants have also filed a substantive response to D ietm ar Dude and H arald D ude's Rule 11 M otion for Sanctions. See DE 270.1 They argue that, in this case, H arald and D ietm ar D ude (lundertook substantialefforts to concealthe underlying debt of Congress Plaza from the IRS''and that D efendants ttw ere thwarted in the discovery efforts to obtain testim ony from (DietmarDude)asto the reasonsormotivation fortheactsofconcealment.'' 1d.atpp. 6-7. D efendants contend that,given the evidence,Stno reasonable attorney could assertthatthe facts(assertedintheCounterclaimlwereobjectivelyfrivolous.'' Id atp.7. ln reply,the D udes argue thatD efendants failed to w ithdraw or appropriately correctthe Counterclaim andThird-party Complaintwithin the21-daysafeharborprovision. (DE 275,p. 2). TheDudescontend thattheAmendedCounterclaim wasfiled morethan amonth afterthe safe harborperiod and $124 daysaftertheir self-im posed,lo-day deadline of Septem ber3,2018.9' 1d. The Dudes argue that tdgal reasonable attorney ofM r.Roderman's or Mr.Goldstein's l ItappearsthatDefendants intended to respond to both pending Rule 11m otionsforsanctions, notjustthemotion filed by the Dudes. experienceshould havebeen abletoreview (thejdocumentsand objectively and gsicjdetermine thatthe tim eline they propose sim ply doesnotsupporttheir allegations.'' 1d atpp.4-5. A PPL IC AB LE LA W FederalRule ofCivilProcedtlre 11(b) states in relevant partthat,when an attorney Presents to the court a pleading, that attorney ddcertifies that to the best of the person's know ledge,inform ation,and belief,form ed after an inquiry reasonable tm der the circum stances'' thatthe pleading itnotbeing presented for an im properpurpose,the claim s and legalcontentions are supported by existing law or a non-frivolous argum ent for changing existing law , and the factualconditionshave evidentiary support. Fed.R.Civ.P.11(b). Stltule 11sanctionsare designed to discourage dilatory or abusive tacticsand help to stream line the litigation process by lessening frivolous claim s or defenses.'' Shi pping & Transit, LL C v. D em andware, Inc., N o. 15-80098-ClV,2015W L 11438496,at*1(S.D.Fla.Aug.4,2015)(quotingDidiev.Howes,988 F.2d 1097,1104 (11th Cir.1993)(internalquotation marksomittedl). ts-fheymay beimposed forthepurpose ofdeterrence,compensation and punishment.'' f#. (intemalquotation marks omitted). Cklkule 11 is nota vehicle fora defendantto testits defenses to a claim . ltis a device to sanctionplaintiffswho assertclaims(ordefendantswho assertdefenses)withno legalorfactual basis. Fairly debatable legalcontentions are beyond Rule 11's reach. D ue to both the gravity ofthe consequences ofa Rule 11 m otion and the need to nottrivialize conductthattruly m erits sanctions,Rule 11 m otions should be em ployed sparingly.'' O 'Boyle v. Sweetapple, No. l4-CV-81250-KAM ,2016W L 9559959,at*4(S.D.Fla.M ay 17,2016). 4 FederalRuleofCivilProcedure 11(c)(2)statesthefollowing: A m otion for sanctions m ustbe m ade separately from any otherm otion and m ust describe the specific conductthat allegedly violates Rule 11(b). The motion m ustbe served under Rule 5,butitm ustnotbe filed orbe presented to the court if the challenged paper, claim , defense, contention, or denial is w ithdrawn or appropriately corrected w ithin 21 dates after service or w ithin another tim e the court sets. lf w arranted, the court m ay aw ard to the prevailing party the reasonable expenses,including attorney's fees,incurred forthe m otion. Fed.R.Civ.P.11(c)(2). $((A)pal' tyseekingRule11sanctionsmustcomplywithtwoproceduralrequirements:(1) the party m ust file a separate m otion seeking the sanctions and describe the specific conduct warranting sanctionsand (2)theparty mustservethemotion ontheopposing party pursuantto Rule 5, but cannot file the m otion w ith the Court until after the offending party has been provided w ith twenty-one days in w hich to cure the challenged filing/behavior. This second requirement is commonly referred to as the tsafeharbor'requirement.'' Ross v.Dep'tof Children,No.3:13-CV-1185-J-39JRK,2014 W L 12628541,at*2 (M .D.Fla.M ay 27,2014). étl-hepurposeofRule11(c)(2)'ssafeharborprovision isto allow an attorney who violatesRule 11to correctthealleged violation within twenty-one dayswithoutbeing subjectto sanctions.'' Peerv.fewis,606F.3d 1306,1315(11thCir.2010). A N ALY SIS The Courthas review ed the m otions,responses,replies,and the entire docketin tiliscase. According to the m otions,D efendants w ere served w ith both R ule 11 m otions on A ugust 3, 2018,thereby initiating the 21-day safe harbor provision. O n A ugust 24, 2018,D efendants tiled a Notice of Election of Disposition (DE 2581, electing to m aintain their pending Counterclaim and prom ising to file w ithin ten days a m otion for leave to am end and proposed amended counterclaim to address any jurisdictionalissues that may be created ifthe Court dism issed D ietm arD ude's claim s. D efendant'sN otice w as tiled w ithin the safe harborperiod. Then,on August29,2018,the Courtentered an Orderdismissing withoutprejudicethe D ietm ar Dude's claim s and dism issing the m otions to dism iss the Counterclaim in light of D efendants' representation thatthey w ould be filing an am ended counterclaim . See D E 259. In otherwords,the Courtm ade an im plicittinding thatthere w as no operative counterclaim once D efendants filed theirN otice. The Rule 11 m otions w ere filed on Septem ber 12, 2018. D efendants later tiled an Amended Counterclaim (DE 2711 on September 27,2018. Paragraph 6 of the Amended Counterclaim statesthe following:$çAta1ltime (sic)materialhereto CML,asthe alterego of H D ,had a federaltax liability to the lnternalRevenue Service forthe years 1998 through 2009 (asof December 31,2009) in the approximate amountof$5,305,976.59.'5 gDE 271,p.2). Therefore,Defendantsarguably correctedorclarifiedtheobjected-to factualallegationcontained in the originalcounterclaim . In light of the proceduralhistory of the case,the Courtfinds that D efendants com plied w ith Rule 11 w hen they prom ised to file an am ended counterclaim w ithin the safe harbor provision and then ultim ately filed an A m ended Counterclaim thatcorrected the paragraph relied on by the Dudes and Aldo Beltrano asbeing the basis forthe Rule 11 m otions. See Robinson v. Alutiq-Mele,LLC,643 F.Supp.2d 1342, 1351 (S.D.Fla.2009)($çThesafeharborprotection ofRule1l isavailable to a litigantwho Swithdraws'the offending paper. F.R.C.P.11(c).''). Here,the safe harbor period w ould have ended on A ugust24,2018,and D efendants filed their Noticeonthatdate. Defendantseffectively withdrew theoffendingpleading.2 The Court also finds that the m otions are due to be denied as the claim s pursued by D efendants in their Counterclaim do not appear to be frivolous or brought for an im proper purpose. This is a unique case involving rather confusing underlying evidence and a plaintiff, Dietm ar D ude, who w as not w illing to fully participate in the discovery process.3 H ad the plaintiff,D ietm ar D ude, participated in the discovery process,D efendants could have leam ed m ore aboutthe tax lien from Dietm arD ude. Based on the foregoing,the CourtO RD ER S thatThird-party D efendant,A ldo Beltrano's Rule 11 M otion for Sanctions against Congress Plaza, LLC, Congress 1010, LLC, Barry G . RodermanandDavidM .Goldstein gDE 261)beDENIED and Counterclaim DefendantDietmar Dude and Third-party D efendantH arald D ude's Rule 11 M otion for Sanctions against Congress Plaza,LLC,Congress 1010,LLC,Barry G.Roderman and David M .Goldstein (DE 2621be DEN IED . $ DO N E and O R DE RED in Cham bers this day of October,2018, at W est Palm Beach,Palm Beach County in the Southern D istrictofFlorida. % > W ILLIA M M ATT W M AN UN ITED STA TES M A G ISTM TE JU D GE 2 The Dudes argue in theirreply thatDefendants did notsufficiently w ithdraw the offending counterclaim within thesafeharborperiod. TheCourtnotesthat,pursuanttoFederalRuleofCivilProcedure15(a)(2),Defendants couldnotfilean am ended counterclaim w i thouttheopposing party'swrittenconsentortheCourt'sIeave. Defendantsdid notofficially obtain courtleave untilA ugust29,2018. 3Because ofplaintiff,D ietm arDude'sfailureto appearathisdepositionand atmediation, hiscomplaintw as dism issed,and attorney'sfeesandcostswereawardedagainsthim . SeeDEs241,242,253,259. 7
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