Kesner v. Buhl

Background

Teri Buhl moved for sanctions against Harvey J. Kesner and Kesner’s attorney, Steven Biss. Buhl argued that Kesner and Biss had no basis for bringing claims against her. She emphasized that Kesner had not taken discovery and argued that his failure to voluntarily dismiss the case showed an effort to impose time and expense on her.

Before deciding the sanctions motion, the court had granted Buhl summary judgment against Kesner in its entirety. The court had also granted Kesner’s motion to dismiss Buhl’s counterclaim. Kesner appealed the summary-judgment ruling after the sanctions motion and opposition were filed.

Legal standard

The court explained that Federal Rule of Civil Procedure 11 allows sanctions when a filing is made for an improper purpose, lacks legal support, or contains factual assertions without evidentiary support. The court also discussed its inherent authority to impose monetary sanctions, which must be used cautiously. Before imposing such sanctions, the court generally must find both that the challenged claim lacked any legal or factual basis and that it was brought in bad faith, meaning for an improper purpose such as harassment or delay. Those findings must be supported by detailed factual findings.

A claim is “colorable” when it has some legal and factual support, viewed in light of the reasonable beliefs of the person making it. A claim that ultimately loses is not necessarily frivolous.

Analysis

The court described Buhl’s application as a close question but found sanctions unwarranted. It concluded that Kesner’s defamation claims were, at least in part, colorable even though they did not ultimately succeed. The court had previously allowed some claims to proceed past Buhl’s motion to dismiss, including claims based on blog statements accusing Kesner of committing a crime.

The court also found some evidence supporting Kesner’s concerns about Buhl’s reporting, including an allegation by Daniel Fisher that statements he believed he had provided to Buhl had been falsely reported. Although the court later found insufficient evidence of actual malice for the defamation claims to be decided by a jury, it found enough evidence of possible carelessness in Buhl’s blogs to make the claims non-frivolous. The court further noted that no prosecutor or securities regulator had charged Kesner over his dealings with his client, Barry Honig, although the accusation of criminality had substantial circumstantial support.

The court found no evidence of bad faith by Kesner or Biss. Other than Kesner’s failure to take discovery, Buhl identified no evidence that they acted for an improper purpose. The court found no effort to multiply or delay the proceedings and noted that the limited discovery record allowed efficient briefing on the summary-judgment motion.

Disposition

The court denied Buhl’s motion for sanctions. It directed the clerk to terminate the motion at docket 159 and stated that the case remained closed.