Dennis J. Wall

 

An early version of Rule 11 was recognized in some of the early cases explicitly cited as such in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 2:7, at n. 9 (Thomson Reuters West Publishing Co. Third Edition, with 2025 Supplements).  Modern procedure under Federal Rule of Civil Procedure 11 is set out in the case of  Johnson v. Nationstar Mort. LLC, No. 1:25-cv-00855-JRR, 2025 WL 2938356, at *3 (D. Md. Oct. 16, 2025):

 

     Federal Rule of Civil Procedure 11 requires attorneys (and unrepresented parties) "to certify, on the basis of a reasonable inquiry, that any pleading or paper they file with a district court (1) is not filed 'for any improper purpose'; (2) is 'warranted by existing law'; and (3) alleges facts that 'have evidentiary support.' " Lokhova v. Halper, 30 F.4th 349, 354 (4th Cir. 2022) (quoting FED. R. CIV. P. 11(b)). This court may, in its discretion, impose sanctions for violations of Rule 11. FED. R. CIV. P. 11(c). "[I]n exercising that discretion to impose sanctions for a pleading or paper's lack of legal support, the court must apply an objective standard, inquiring whether 'a reasonable attorney in like circumstances could not have believed his actions to be legally justified.' " Lokhova, 30 F.4th at 354 (quoting Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 153 (4th Cir. 2022)). To be sanctionable, a legal argument must have "absolutely no chance of success under the existing precedent." Hunter, 281 F.3d at 153.

 

In the Johnson v. Nationstar case, the Court denied the Plaintiff's motion for Rule 11 sanctions because the record did not show that the Defendants' "counsel made sanctionable legal arguments or otherwise violated Rule 11."   Johnson, 2025 WL 2938356, at *3.  Further, the motion for sanctions "does not relate to a paper filed in this court[.]"  Johnson, 2025 WL 2938356, at *3.

 

As to a party Defendant, Progressive, the Court noted that once again the Plaintiff's motion for sanctions under Rule 11 related to matters outside the record, "not a filing made with the court for an improper purpose or without basis."  Johnson, 2025 WL 2938356, at *4.

 

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In Colt's Mfg. Co., LLC v. Am. Int'l Spec. Lines Ins. Co., No. 3:23-CV-01156 (JCH), 2025 WL 1753691 (D. Conn. June 25, 2025), the U.S. District Court for the District of Connecticut disarmed Colt's Manufacturing and denied its motion for summary judgment on breach of contract and bad faith claims.  (The Court also went into the carrier's motion for summary judgment issues, but we will not address them in this space today.)

 

The first thing the Court decided was to follow established Connecticut law to the effect that a later agreement can supersede the terms of an earlier insurance contract between the parties:  "Under Connecticut law, '[a] recognized test for whether a later agreement between the same parties to an earlier contract constitutes a substitute contract looks to the terms of the second contract. If it contains terms inconsistent with the former contract, so that the two cannot stand together it exhibits characteristics ... indicating a substitute contract.'"  Colt's Manufacturing, 2025 WL 1753691, at *8 (quoting a Connecticut Supreme Court opinion). 

In this case, the District Court held that an Interim Defense Funding Agreement (IDFA) superseded the original insurance contract between the parties under Connecticut law.

 

With respect to Colt's Bad Faith Claim, the Court held that there were triable issues of material fact not as to Colt's claim under the insurance contract, but as to Colt's bad faith claim under the IDFA with its insurance carrier:

 

          "For the reasons the court has already explained, Colt's cannot bring its bad faith claim pursuant to the Insurers' supposed failure to abide by language in an insurance policy that does not govern the parties' obligations to pay defense expenses. See, supra, part IV.A.4. Regarding Colt's bad faith claim under the Fourth IDFA, Colt's has failed to adduce sufficient evidence to foreclose the possibility that a jury could find in the Insurers' favor as to this claim. It is, therefore, a triable issue of fact as to whether the Insurers acted in bad faith under to [sic] the Fourth IDFA. Accordingly, the court denies Colt's Motion to the extent it seeks summary judgment as to its claim of bad faith."

 

Colt's Manufacturing, 2025 WL 1753691, at *18.

 

The issues addressed in Colt's Manufacturing are also addressed in a collection of case law in the context of Informing the Insured:  Insurer Assertion of Rights to Reimbursement From the Insured of Clearly Noncovered Indemnity and Defense Expense, § 3:6 in Volume 1 of DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West Publishing Co. 3d Edition, with 2025 Supplements).

 

Please read the disclaimer.  ©2025 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  There's more on my Substack newsletter.