JOHN MOORE, Senior District Judge
Before the Court is Key Bank, N.A.'s ("Key Bank") Motion for Rule 11 Sanctions (Dkt. 196) with Memorandum of Law in Support (Dkt. 197). The Plaintiffs filed a Response (Dkt. 206) to Key Bank's Motion, and both parties have filed affidavits, deposition testimony and other documentary evidence in support of and against sanctions pursuant to Rule 11, Federal Rules of Civil Procedure.
I. Background
The Plaintiffs filed their fifteen-count Second Amended Complaint (Dkt. 84) on February 13, 2004, stating claims against the various Defendants for breach of contract, third party beneficiary of contract, negligence, breach of fiduciary duty, conversion, theft, and intentional interference with business relations. The claims arise out of a scheduled July 3, 2001 shipment of 2,505 cartons of cigars from Puerto Rico, where they were delivered to common carrier NPR (Navieras), to Tampa, Florida. The cigars were to be received by Altadis, which was the holder of the bill of lading and owner of the shipment. According to the Plaintiffs, NPR agreed to ship the cigars to Tampa, but it failed to deliver the cargo in like condition, as the entire shipment was instead lost by the Defendants. The cargo was allegedly stolen somewhere between Jacksonville and Tampa when it was negligently left by B-Right in an unattended parking lot over the weekend.
The Plaintiffs further allege that B-Right received settlement funds for the lost cargo from its insurance company, National. These funds were allegedly to be paid to Altadis, but B-Right failed to pay the settlement to Altadis as the owner of the lost shipment. The Plaintiffs then asserted a right to receive these funds as a third party beneficiary of the insurance contract between B-Right and National. The Plaintiffs previously alleged that B-Right nonetheless kept possession of the funds and refused to pay Altadis or hold the funds in trust for its benefit, instead ultimately depositing the funds in its regular checking accounts at Key Bank.
The Plaintiffs alleged that Key Bank knew that the settlement funds were to be held in trust for the benefit of Altadis, but the bank nonetheless induced, instructed or directed B-Right to commingle the funds with the funds deposited in its normal checking account, under the bank's threat of discontinuing B-Right's line of credit previously granted. The Plaintiffs claim that Key Bank therefore tortiously interfered with the agreement B-Right had with its insurer, National, to keep the settlement funds in trust for the benefit of Altadis.
On August 25, 2004, the Court granted Key Bank's Motion for Summary Judgment (Dkt. 125). The Court found that there was no evidence that the bank did anything other than seek proper payment of a more than $5 million debt owed to it by B-Right, and as such its actions were privileged and did not amount to a tortious interference with any relationship between B-Right and the Plaintiffs. The Court agreed with Key Bank that even though its workout agreement with its debtor, B-Right, may have interfered with some obligation B-Right had with a third party (Altadis), Ohio case law is clear that the bank was privileged to interfere with any agreement between its debtor and Altadis, and could not be held liable for tortious interference. See, e.g., Pearse v. McDonald's Systems of Ohio, Inc., 351 N.E.2d 788, 791 (Ohio Ct.App. 1975); Super Sulky, Inc. v. U.S. Trotting Assoc., 174 F.3d 733, 742 (6th Cir. 1999).
Key Bank is now seeking its legal expenses as sanctions under Rule 11, claiming that "[a]fter nearly two years of discovery in this case, Altadis has not uncovered a factual basis to support an allegation that Key Bank did not believe that B-Right's performance under the alleged trust agreement would impair B-Right's ability to repay its Key Bank loans." Dkt. 196, pg. 3. Key Bank argues that documents in Altadis' possession have demonstrated all along that the bank was privileged to seek repayment of its debt, and that despite the bank's warnings, Altadis nonetheless chose to pursue its frivolous tortious interference claim in the Second Amended Complaint. Subsequently, the bank points out that Altadis provided no factual evidence to support its claim in response to Key Bank's Motion for Summary Judgement. Given Altadis' knowledge of a lack of evidentiary support or a legal basis for its tortious interference claim, Key Bank therefore argues that sanctions pursuant to Rule 11 are appropriate.
II. Discussion
Rule 11, Federal Rules of Civil Procedure, requires that a plaintiff have evidentiary support for its claims against a Defendant. By filing its complaint and continuing to pursue its claims, the plaintiff continually certifies to the Court throughout the litigation that there is an evidentiary and legal basis for those claims. If at any time there is no reasonable factual or legal basis for the plaintiff's claims, and yet the plaintiff continues to pursue those claims, sanctions against the plaintiff upon proper motion by the defendant may be appropriate.
Rule 11 sanctions should be assessed when the party's claims are objectively frivolous, and that party should have reasonably been aware that its claims were frivolous. See, e.g., Baker v. Alderman, 158 F.3d 516, 524 (11th Cir. 1998). As the Eleventh Circuit explained in Baker, claims are frivolous where they have no factual basis, are based on a legal theory that has no reasonable chance of success and cannot be advanced as a reasonable argument to change existing law, or when they are filed in bad faith or with an improper motive. See id. However, the Court went on to explain that claims are frivolous when the party exhibits a "deliberate indifference to obvious facts," but they are not frivolous when "evidence is merely weak but appears sufficient, after a reasonable inquiry, to support a claim under existing law." Id.
In this case, Key Bank argues that sanctions against Altadis are appropriate because Altadis knew it had no basis to allege that the bank tortiously interfered with an alleged trust agreement, and because it knew that the bank was privileged to interfere with such an agreement even if it existed. Key Bank argues that Altadis and its counsel knew that there was no reasonable factual basis for these claims, and that they were based on a legal theory that had no chance of success. Instead, the bank asserts that Altadis' claims against it were steadfastly pursued solely for the purpose of extracting some sort of settlement from Key Bank. Dkt. 196, pg. 7. Because Altadis' "bad faith, or at least ostrich-like" behavior caused Key Bank to devote substantial legal expenses to discovery, research, and motion and trial preparation, the bank therefore argues that it is entitled to its attorneys' fees as Rule 11 sanctions. See also Borowski v. DuPuy, Inc., 850 F.2d 297, 304-05 (7th Cir. 1988); Pelletier v. Zweifel, 921 F.2d 1465, 1522 (11th Cir. 1991).
The Court finds that Rule 11 sanctions against Altadis are not appropriate under these circumstances. Although the Court ultimately granted judgment as a matter of law in favor of Key Bank prior to trial, holding that Altadis could not maintain its tortious interference claim against the bank, the Court cannot find that Altadis' factual claims and legal theories, while certainly tenuous, were completely frivolous. Altadis argues that it investigated its claims by speaking with representatives of both B-Right and the bank, ultimately concluding that the bank improperly induced B-Right to deposit the insurance proceeds into its account. These proceeds were allegedly earmarked for Altadis as owner of the shipment.
Altadis further alleged that specific representatives of the bank knew that these funds were being separately held for the benefit of Altadis, and yet they chose to force B-Right into depositing those funds into its bank account to cover the unpaid debt. Dkt. 206, pp. 3-5. Altadis claims that its review of bank account documents demonstrated that the funds had in fact been deposited in B-Right's bank accounts and therefore became unavailable to pay for Altadis' loss. Moreover, Altadis argues that its investigation revealed that individuals from Key Bank met with B-Right principals and were informed that the funds were to be paid to Altadis, and yet the Key Bank representatives demanded that the funds be deposited in the bank to cover B-Right's line of credit.
Altadis alleged that B-Right received the insurance funds from National as an agent or trustee, and had a fiduciary duty to hold those funds for the benefit of Altadis. Altadis claimed that Key Bank tortiously interfered with this relationship. Although these claims were ultimately unproven and unsuccessful, and although the Court finds this to be an extremely close case, the Court cannot find that at the time summary judgment was granted in Key Bank's favor, the claims were lacking any basis whatsoever under the facts or law.
Accordingly, Key Bank's Motion for Rule 11 Sanctions (Dkt. 196) is DENIED.
DONE AND ORDERED.