Lexplug logoLexplug

Sussman v. Bank of Israel

United States Court of Appeals for the Second Circuit
56 F.3d 450, cert denied (1995)
ELI5:

Rule of Law:

The filing of a complaint that is well-grounded in fact and warranted by existing law cannot be sanctioned under Federal Rule of Civil Procedure 11's 'improper purpose' clause, even if a significant motivation for the filing is to pressure the defendant into settling a separate, pending lawsuit.


Facts:

  • Erwin Sussman and Ira Guilden were founders, directors, and shareholders of North American Bank Ltd. ('NAB'), an Israeli bank.
  • In 1985, NAB collapsed due to fraud and mismanagement by its senior managers in Israel.
  • The Bank of Israel ('BOI'), which insured NAB's deposits, appointed a Receiver who, in 1989, commenced a civil action in Israel against Sussman and Guilden, alleging they were negligent and breached their fiduciary duties as directors.
  • In the Israeli action, Sussman and Guilden filed third-party claims against BOI, alleging that BOI had misrepresented NAB's financial condition and contributed to its collapse.
  • Sussman and Guilden retained attorney Nathan Lewin, who prepared a complaint to be filed in New York against BOI and other Israeli entities.
  • Before filing the New York complaint, Lewin sent letters to Israeli officials warning of the impending lawsuit and its potential to damage foreign investment in Israel, proposing settlement discussions to resolve both the Israeli action and the claims in the draft complaint.
  • After Israeli officials informed Lewin they were unwilling to settle the dispute, Lewin filed the complaint in New York.

Procedural Posture:

  • Erwin Sussman and the estate of Ira Guilden sued the Bank of Israel (BOI) and others in the U.S. District Court for the Southern District of New York (trial court).
  • Defendants moved to dismiss the complaint on the ground of forum non conveniens.
  • The district court granted the motion to dismiss, conditioned on defendants waiving any statute-of-limitations defense in Israel and providing Sussman with assurances of safe passage to and from Israel.
  • The plaintiffs (appellants) appealed the dismissal to the U.S. Court of Appeals for the Second Circuit (intermediate appellate court), which affirmed the district court's decision.
  • BOI then moved in the district court for sanctions against the plaintiffs' attorney, Nathan Lewin, pursuant to Rule 11 and the court's inherent power.
  • The district court granted the motion, imposing a $50,000 sanction against Lewin on the ground that the complaint was filed in part for an improper purpose.
  • Lewin (appellant) appealed the sanction order to the U.S. Court of Appeals for the Second Circuit, and BOI (appellee) cross-appealed, seeking a higher sanction amount.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does an attorney violate Federal Rule of Civil Procedure 11 by filing a non-frivolous complaint if one of the attorney's motives is to pressure the defendant to withdraw or settle a separate, pending action?


Opinions:

Majority - Kearse, J.

No. The filing of a non-frivolous complaint does not violate Rule 11's improper purpose clause, even if one of the party's multiple motives is to exert pressure on an adversary in another proceeding. The district court erred as a matter of law by imposing sanctions, as the complaint was not frivolous and secured a measure of judicially imposed relief for the plaintiffs. First, the complaint was not objectively frivolous; the district court did not find the claims lacked merit and instead dismissed them without prejudice, even granting relief (a safe passage guarantee for Sussman) to ensure the claims could be adjudicated in Israel. Second, this court agrees with the Ninth Circuit's analysis that for an initial complaint, a determination of improper purpose must be supported by a finding of frivolousness. Penalizing the assertion of non-frivolous claims, even when motives are not entirely pure, would be counterproductive and deter the vindication of legitimate rights. Finally, the alleged purpose itself was not improper; warning a party of an intent to file non-frivolous claims and predicting their public reception does not violate Rule 11.



Analysis:

This decision significantly clarifies the scope of Rule 11's 'improper purpose' clause as it applies to the filing of a complaint. By holding that a non-frivolous complaint is effectively immunized from sanctions based on motive, the court protects access to the judiciary and reinforces an objective standard for Rule 11. It prevents courts from engaging in subjective inquiries into an attorney's intent when the legal filing itself is sound. This precedent makes it more difficult to sanction attorneys for aggressive but legally valid litigation strategies, such as filing a countersuit to gain leverage in an existing dispute.

🤖 Gunnerbot:
Query Sussman v. Bank of Israel (1995) directly. You can ask questions about any aspect of the case. If it's in the case, Gunnerbot will know.
Locked
Subscribe to Lexplug to chat with the Gunnerbot about this case.

Unlock the full brief for Sussman v. Bank of Israel