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From Antitrust Law Daily, May 8, 2015

Attorney fined $2.5K for baseless claims, lack of reasonable inquiry

By Greg Hammond, J.D.

An attorney, bringing an antitrust action against real estate investment trust Public Storage, was ordered to pay $2,500 in legal costs as a sanction under Federal Rule of Civil Procedure 11. The federal district court in Los Angeles determined that the sanction was appropriate because the attorney brought factually baseless claims and did not conduct an objectively reasonable inquiry (Urenia v. Public Storage, May, 7, 2015, Pregerson, D.).

Background. Individuals Victoria Urenia and Soledad Corona filed suit against Public Storage, the City of Los Angeles, and Bank of America, N.A. under antitrust and unfair competition laws, alleging that Bank of America transferred certain personal property from Corona’s home to a Public Storage unit. However, later factual allegations demonstrated that the property was held by US Public Storage and that the plaintiffs were billed by “US Storage Centers—Mission Hills.” Public Storage alleged that it sent a letter to the plaintiffs’ counsel, informing her that the plaintiffs’ allegations lacked factual support as to Public Storage. After the action was dismissed, Public Storage moved for sanctions.

Safe Harbor. The court first rejected plaintiff counsel’s argument that Public Storage failed to comply with the “safe harbor” provision of Rule 11(c)(2), which requires moving parties to first serve the motion on the attorney to give an opportunity to withdraw the challenged claim. While Public Storage did serve counsel with the motion, it revised the motion prior to filing the motion for sanctions with the court. The court, nevertheless, found that the grounds on which the sanctions were sought were the same and most of the language was identical. Plaintiffs’ counsel therefore had sufficient notice to make a decision on whether to withdraw the filing, and the defendants were found to have substantially complied with the “safe harbor” provision.

Factually baseless claims. The court additionally found that plaintiffs’ counsel asserted that Public Storage and another facility, where Hernandez’s property was actually stored, were in some kind of “joint venture.” She based the assertion entirely on a Los Angeles Times article from 1985. The court, however, found that the article was “several logical leaps short” of demonstrating that there was any factual basis for allegations of liability against Public Storage. The allegations against Public Storage were therefore deemed factually baseless.

Reasonable Inquiry. Plaintiff counsel also argued that the newspaper article proved that an “independent inquiry” was made to assess the claims against Public Storage. While the court conceded that a newspaper article could, at least in combination with investigative efforts, be a reasonable source of information, the article provided no support for the allegations against Public Storage. The court concluded that plaintiffs’ counsel’s inquiry revealed no supporting facts, but she nevertheless proceeded with the allegation anyway. The motion for sanctions was consequently granted and plaintiffs’ counsel was ordered to reimburse Public Storage $2,500 in unnecessary legal fees incurred as a result of her “sanctionable conduct.”

The case number is CV 13-01934 DDP (AJWx).

Attorneys: Lenore L. Albert (Law Offices of Lenore L. Albert) for Roes. Mathew M. Wrenshall (Reed Smith LLP) for Public Storage, and Bank of America N.A. Cory M. Brente (Office of the Los Angeles City) for City of Los Angeles.

Companies: Bank of America N.A.

MainStory: TopStory Antitrust CaliforniaNews

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