Marshall v. Smith & Nephew, Inc

Background

Wayne M. Marshall sued Smith & Nephew, Inc. in Minnesota state court. Smith & Nephew removed the case to federal court and later moved to dismiss. Marshall then moved to send the case back to state court, arguing that Smith & Nephew’s registration of an agent in Minnesota made the company a Minnesota citizen. The opinion states that Marshall cited cases about personal jurisdiction but did not cite authority supporting his theory about citizenship and diversity jurisdiction.

Smith & Nephew opposed the motion. Three days before the scheduled hearing, Marshall withdrew it. Smith & Nephew then sought $4,725 in sanctions under Federal Rules of Civil Procedure 11 and 37, arguing that the motion was frivolous and had no legal basis. Marshall responded that the motion had been filed in good faith and was supported by existing law or a nonfrivolous argument for changing or creating law.

Rule 11

Rule 11 requires an attorney who presents a motion to certify that the legal arguments are supported by existing law or by a nonfrivolous argument for changing or creating law. But Rule 11 also provides a 21-day “safe harbor”: a party seeking sanctions must serve the sanctions motion, and the challenged filing can avoid sanctions if it is withdrawn or corrected within the required period.

The court found Rule 11 sanctions inappropriate. Smith & Nephew’s email and its opposition to the motion to remand did not mention possible Rule 11 sanctions. The court held that informal warnings do not satisfy Rule 11’s notice requirement. According to the court, the earliest possible notice was Smith & Nephew’s oral motion at the November 8, 2019 hearing, which occurred after Marshall had already withdrawn the motion. The court therefore concluded that Marshall’s conduct fell within Rule 11’s safe harbor.

Rule 37

Rule 37 permits sanctions when a party fails to obey a discovery order. The court found that Smith & Nephew had not identified any discovery order that Marshall failed to follow. The court also noted that, although the formal motion requested sanctions under both Rules 11 and 37, Smith & Nephew’s earlier letter did not address Rule 37 sanctions. The court therefore declined to impose sanctions under Rule 37.

Ruling

The court denied Smith & Nephew’s Motion for Sanctions. Judge Donovan W. Frank stated that the denial did not approve of Marshall’s conduct. The court described Marshall’s motion to remand and his continued argument about the effect of a registered agent as baseless and confused, but it nevertheless imposed no sanctions.