Pederson v. Kesner

Background

Lee Michael Pederson represented himself in this case. A prior order had dismissed claims against Steven Rubin, Jane Hsiao, and OPKO Health, Inc. for lack of personal jurisdiction and had found that Pederson violated Federal Rule of Civil Procedure 11(b)(1) and (2). The prior order left open the amount and form of the Rule 11 sanctions and whether Pederson should receive additional time to serve Harvey Kesner, Barry Honig, Michael Brauser, and Brian Keller.

The court described this case as Pederson’s third lawsuit arising from the same core facts. It said that several judges and two appellate panels had concluded in the earlier related proceedings that Pederson had not shown personal jurisdiction over the defendants. The court also noted that Pederson had not paid a prior aggregate $10,000 sanction and that he had filed a lengthy amended complaint with 2,212 pages of exhibits.

Rule 11 sanctions

Rule 11 requires sanctions to be limited to what is needed to deter repeated misconduct. The court determined that a filing restriction was justified because Pederson had brought multiple lawsuits involving the same core allegations, had continued pursuing a personal-jurisdiction theory that had already been rejected, and had used gaps in an earlier filing restriction to bring this case against different defendants and in state court before removal to federal court.

The court therefore restricted Pederson from prosecuting new cases in the District of Minnesota, whether filed there originally or removed there, against defendants named in this case or based on the same nucleus of operative allegations as this case and the two earlier related proceedings. The restriction does not apply if Pederson is represented by counsel or obtains prior written authorization from a judicial officer of the District of Minnesota to file or prosecute the case.

The court also imposed a $20,000 monetary sanction payable to Rubin, Hsiao, and OPKO Health, Inc. It found that the additional sanction was reasonably necessary because the earlier $10,000 sanction and filing restriction had not stopped Pederson from pursuing this case. The court considered Pederson’s statement that he had no assets or money left, but found his financial disclosures incomplete and questioned whether that statement justified declining to impose the sanction.

The defendants had requested $124,670 in attorneys’ fees and costs. The court did not award that full amount. Instead, after reviewing the submitted billing information, it concluded that the defendants’ reasonable fees and costs substantially exceeded $20,000 and that $20,000 was the appropriate sanction under Rule 11.

Failure to serve defendants

Pederson mailed the original complaint and waiver forms to Kesner, Honig, Brauser, and Keller, but none responded or waived service. He later sent the amended complaint and waiver requests to lawyers who had represented some of the defendants in other litigation. He also exchanged emails with Keller about settlement and other matters. The court found that Pederson had not made a serious attempt to complete formal service, had not asked the United States Marshal or another authorized person to serve the defendants, and had not acted diligently even after being warned that the claims could be dismissed.

The court rejected Pederson’s arguments that his self-represented status, limited financial resources, concerns about burdening the court, the defendants’ alleged efforts to avoid service, and their actual notice of the lawsuit justified an extension. It stated that actual notice does not replace legally proper service.

Disposition

The court ordered the $20,000 Rule 11 sanction, imposed the filing restriction, and dismissed the claims against Kesner, Honig, Brauser, and Keller without prejudice under Rule 41(b) for failure to prosecute. It directed that judgment be entered.