United States Court of Appeals
FO R THE D ISTR IC T O F C O LU M BIA C IR C U IT
Argued January 18, 2011 Decided March 1, 2011
No. 09-7095
BETTY GENE ALI,
APPELLEE
v.
RICHARD L. TOLBERT ,
APPELLEE
ANTHONY G. NOBLE,
APPELLANT
Consolidated with 09-7096
Appeals from the United States District Court
for the District of Columbia
(No. 1:02-cv-02271)
Thomas C. Willcox argued the cause for appellee/cross-
appellant Betty Gene Ali.
Peter F. Axelrad argued the cause for appellee/cross-
appellee Richard L. Tolbert. Michael S. Steadman, Jr. was on
brief.
2
Pamela A. Bresnahan argued the cause for appellant/cross-
appellee Anthony L. Noble. Elizabeth Treubert Simon was on
brief.
Before: HENDERSON , GARLAND and BROWN , Circuit
Judges.
KAREN LE CRAFT HENDERSON , Circuit Judge: Betty Gene
Ali appeals the district court’s grant of summary judgment,
pursuant to Rule 56 of the Federal Rules of Civil Procedure, on
her claim that Richard Tolbert and Anthony L. Noble violated
the District of Columbia Consumer Protection Procedures Act
(CPPA) by inducing her to sell her house to Noble and then
failing to pay her the full amount promised. See Ali v. Mid-Atl.
Settlement Servs., Inc., 640 F. Supp. 2d 1 (D.D.C. 2009). In
addition, Noble appeals the district court’s sanction under Rule
11 of the Federal Rules of Civil Procedure awarding Ali $25,230
for litigation expenses incurred because Noble evaded service of
the complaint and failed to file an answer after service was
effected. See Ali v. Mid-Atl. Settlement Servs., Inc., 235 F.R.D.
1 (D.D.C. 2006). We affirm the summary judgment because the
court correctly concluded on the record before it that Tolbert is
not a “merchant” subject to the CPPA. We vacate the sanction
award because Noble’s conduct did not involve
“[r]epresentations to the Court” made by “presenting to the court
. . . a pleading, written motion, or other paper” sanctionable
under Rule 11 and we remand to the district court to decide
whether to sanction Noble instead under its inherent judicial
authority.
I.
The record reveals the following facts. In 1998, Ali
inherited a house at 1010 G St. S.E. after her parents died. In
1999, she listed the house for sale for $299,000 but was unable
to sell it. In January 2000, she secured a mortgage on the house
for approximately $100,000. As of July 2000, the mortgage
3
balance was approximately $105,000 and Ali was some $11,000
in arrears. Faced with foreclosure, Ali met with an employee of
the “EZ Mortgage” company in Lanham, Maryland to refinance
her mortgage but was turned down. As the meeting ended, Ali
learned that Tolbert, whom she knew from junior high school,
was affiliated with EZ Mortgage and on the premises. She
asked Tolbert—who was an “advertising consultant” at the
company—for assistance in securing a loan but he was unable
to help. In the days following the conversation, Ali telephoned
Tolbert more than once to ask if he wanted to purchase her
property and Tolbert eventually agreed to buy it on behalf of
Noble, whom Tolbert referred to as his “step-son.”
On August 3, 2000, Ali and Noble signed a sales contract
under which Noble was to purchase the property from Ali for
$150,000. They also signed an “Addendum Contract” which
provided that Ali pay six per cent of the sales contract price
toward Noble’s closing costs and which further stated: “Both
parties realize property is facing forecloser [sic]. Property is
sold below market value to prevent forecloser [sic] sale.”
Addendum Contract to D.C. Real Estate Sales Contract, Ali v.
Mid-Atl. Settlement Servs., Inc., C.A. No. 02-2271 (D.D.C. Sept.
17, 2007) (JA 474). Noble paid Ali an immediate deposit of
$500.00. On August 9, 2000, Noble paid $11,404.53 to Riggs
Bank to bring Ali’s mortgage current and prevent foreclosure.
From that date to the closing on November 21, 2000, Noble
tendered Ali six checks totaling $15,600.
Ali and Tolbert both attended the closing but Noble did not.
At that time, Ali signed a “HUD-1” settlement sheet that
identified Ali as the seller, Noble as the purchaser and the
purchase price as $150,000. HUD-1 at 1, Ali v. Mid-Atl.
Settlement Servs., Inc., C.A. No. 02-2271 (D.D.C. Oct. 21, 2007)
(Ex. C, Ali’s Resp. to Def. Tolbert’s Mot. for Summ. J) (JA
623). The HUD-1 also stated that Noble was paying Ali
$199.22 for prepaid taxes, increasing the “GROSS AMOUNT
4
DUE TO SELLER” to $150,199.22, and listed deductions from
this amount of $105,725.14 to satisfy the existing mortgage,
$300 for a water bill escrow and $9,000 for Noble’s closing
costs, leaving $35,174.08 identified as “CASH TO SELLER.”
Id. Ali also signed a notarized “Agreement” of the same date,
which stated:
I, Betty G. Ali, hereby acknowledge that I have
received a total sum of $29,996.42 from Anthony
Noble for the real property located at 1010 G Street,
S.E., Washington, D.C. All monies advanced through
November 21, 2000 will be reimbursed to Mr. Noble at
closing. Pre pay [sic] rent in the amount of $1,500.00
good thru [sic] January 2nd. Grand total of $31,496.42.
Agreement, Ali v. Mid-Atl. Settlement Servs., Inc., C.A. No. 02-
2271 (D.D.C. Jan. 24, 2006) (Ex. D, Opp’n to Pl.’s Mot. for
Recons. of Ord. Denying Pl. Atty’s Fees & Req. that Court
Vacate Default J.) (JA 242). The settlement company then
issued Ali a check in the amount of $3,177.66 reflecting the
balance due Ali after these sums were deducted.1
On October 28, 2002, Ali filed an action in District of
Columbia Superior Court, which was removed to the district
court pursuant to 28 U.S.C. § 1441 based on diversity of
citizenship. See Notice of Removal, Ali v. Mid-Atl. Settlement
Servs., Inc., C.A. No. 02-2271 (D.D.C. Nov. 18, 2002). The
amended complaint asserts six counts against Tolbert, Noble or
both but this appeal involves only Count 1 alleging that Tolbert
1
As the district court noted, this balance is $500 less than the
$35,174.08 figure on the HUD-1, which may reflect deduction of the
$500 deposit Noble paid Ali at the time of the sales contract. See Ali
v. Mid-Atlantic, 640 F. Supp. 2d at 5 n.3.
5
violated the CPPA, D.C. Code § 28-3904.2
On July 13, 2004, Ali filed a request for entry of default
against Noble on the ground he had not filed an answer despite
having been served multiple times, in both Forest Heights,
Maryland, where he maintained his permanent residence, and in
Philadelphia, where he was attending law school. The clerk of
court entered a default the same day. The court then issued an
order to show cause why the motion for default judgment should
not be granted. Noble moved to set aside the entry of default,
asserting he had not been personally served and therefore was
not on legal notice of the court filings. Ali opposed the motion
and requested Rule 11 sanctions against Noble and his counsel
in the form of attorney’s fees to cover the costs of repeated
service attempts and of responding to Noble’s motion to set
aside default, asserting she had served Noble three times over a
one-year period and characterizing his denial of service as
“frivolous and unfounded.” Pl.’s Resp. to [Noble’s] Mot. to Lift
Entry of Default, at 6, 8, Ali v. Mid-Atl. Settlement Servs., Inc.,
C.A. No. 02-2271 (D.D.C. Oct. 12, 2004) (JA 75, 77). The court
denied the motion to set aside default as “deficient” because it
was “not accompanied by a verified answer as is required by
Local Civil Rule 7(g)” and directed Noble, inter alia, to respond
with supporting affidavits to Ali’s claim that he had been served
with the complaint and to her request for attorney’s fees. Ali
subsequently filed a formal motion for sanctions.
Following additional filings, the court issued a decision on
January 6, 2006 granting the sanctions motion in part. The court
concluded that Ali had indeed effected service on Noble three
times—in November 2002, May 2003 and September
2003—and declared Noble’s counsel “admonished for his role
2
The other five counts against Tolbert and Noble allege common
law fraud, civil conspiracy to defraud, aiding and abetting fraud,
negligence and equitable rescission of the sale.
6
in Noble’s failure to respond as required after Noble was served
with the summons and complaint by making factual assertions
that were not based on a reasonable inquiry or supported by the
evidence, and by making fact-based legal arguments that were
not based on a reasonable inquiry into the facts and not
warranted by existing law.” Mem. Op. & Order at 19-20, Ali v.
Mid-Atl. Settlement Servs., Inc., C.A. No. 02-2271 (D.D.C. Jan.
6, 2006) (JA 211-12).3 The court denied the sanctions motion
“in all other respects.” Id. at 20 (JA 212). The court advised
both Noble and his counsel, however, that “any further delays
attributable in whole or in part to any continued baseless
assertion that Noble was not served may result in the imposition
of monetary sanctions” and that a judgment of default and an
order for rescission of the sale would be entered unless Noble
filed a verified answer by January 17, 2006. Id. at 19 (JA 211).
Ali moved for reconsideration of the denial of monetary
sanctions, which the court granted on March 10, 2006. Ali v.
Mid-Atlantic, 235 F.R.D. at 4. In its decision, the court imposed
monetary sanctions on Noble personally, concluding that his
conduct in evading process and failing to file a verified answer,
even after seeking to set aside the entry of default, warranted
Rule 11 sanctions. Id. Specifically, the court found that
“Noble’s attempts to evade service and his four-year delay in
filing a required responsive pleading was willful and part of a
sustained pattern over time that needlessly delayed the progress
of this action and has caused unnecessary expense for Ali.” Id.
The court directed Ali “to submit proof of the fees and expenses
incurred in twice serving Noble in Philadelphia and in the filings
3
The court noted Ali’s process servers served the complaint by
hand on Noble’s mother at his permanent home address on November
13, 2002, by hand on the concierge at his apartment in Philadelphia on
May 13, 20003 and, after Noble moved to a new Philadelphia
apartment, by placing the complaint under his door on September 23,
2003 as Noble directed him to do in a telephone conversation.
7
related to the entry of default and the motion for default
judgment.” Id.
Noble filed a motion to reconsider and vacate the sanctions,
asserting that the sanctioned conduct was attributable to his
then-counsel rather than to him. The court denied Noble’s
motion, stating:
Noble was sanctioned because of what he did. He
“played a cat and mouse game in order to evade the
jurisdiction of the court.” Mem. Op. at 6, Mar. 10,
2006. He “elected to ignore repeated summonses.” Id.
His “attempt to evade service was ‘disingenuous.’ ”
Id. His pattern of evasion “was willful, deliberate and
sustained[.]” Id. at 7. Those immutable facts are
independent of and unmitigated by how his lawyer
decided to argue those facts or when his lawyer sought
to remedy them.
Order, Ali v. Mid-Atl. Settlement Servs., Inc., C.A. No. 02-2271
(D.D.C. June 2, 2006) (emphasis in original) (JA 330). After
Ali’s counsel filed proof of fees and expenses, as directed, the
court issued a minute order directing Noble to pay Ali $25,230.4
On July 17, 2009, the district court granted summary
judgment in favor of Tolbert and Noble on all six counts against
them, concluding as to Count 1 that Tolbert was not a
“merchant” subject to liability under the CPPA. Noble timely
appealed the sanctions order and Ali timely appealed the
summary judgment. We treat the two appeals separately.
4
The court subsequently directed the sanctions be “payable to
plaintiff’s counsel, alone.” Order, Ali v. Mid-Atl. Settlement Servs.,
Inc., C.A. No. 02-2271 (D.D.C. June 15, 2007) (JA 349).
8
II.
A. Noble’s Appeal: Rule 11 Sanctions
“Sanctions for violation of Federal Rule of Civil Procedure
11(b) are reviewable for abuse of discretion.” Burns v. George
Basilikas Trust, 599 F.3d 673, 677 (D.C. Cir. 2010) (citing
Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)).
We conclude that the sanction award against Noble cannot stand
because it is not authorized by the language of Rule 11. See
Lucas v. Duncan, 574 F.3d 772, 776-77 (D.C. Cir. 2010)
(vacating Rule 11 sanction award because rationale for
magistrate judge’s sanction had “no basis in the text” of Rule 11
and “trial court ‘necessarily abuse[s] its discretion if it base[s]
its ruling on an erroneous view of the law’ ” (quoting Cooter &
Gell, 496 U.S. at 405)) (alterations in original).
By its terms, Rule 11 applies to “[r]epresentations to the
Court” made in “presenting to the court (whether by signing,
filing, submitting, or later advocating) a pleading, written
motion, or other paper.” Fed R. Civ. P. 11(b) (2006). In Hilton
Hotels Corp. v. Banov, 899 F.2d 40 (D.C. Cir. 1990), we noted
that six other circuits had concluded, applying the version of
Rule 11 then in effect, the “emphasis on the need to perform a
‘reasonable inquiry’ before ‘sign[ing]’ a ‘pleading, motion, or
other paper’ suggests that the rule authorizes sanctioning an
attorney only for unreasonably filing such a submission.” 899
F.2d at 44-45 (emphasis in original)’ see also Chambers v.
NASCO, Inc., 501 U.S. 32, 41 (1991) (“Rule 11 . . . governs
only papers filed with a court”). The current version of the
Rule, promulgated in 1993, is at least as emphatic in its focus on
“Representations to the Court” in “a pleading, written motion,
9
or other paper” that is “present[ed] to the court.”5 See Milltex
Indus. Corp. v. Jacquard Lace Co., 55 F.3d 34, 37 n.5 (2d Cir.
1995) (“In the instant case, the district court found Rule 11 of
the Federal Rules of Civil Procedure inapplicable because the
misconduct it observed did not involve any pleading or paper
submitted to the court. We find this aspect of the district court's
decision unexceptionable.”) (internal citation omitted). In this
case, the court made clear that Noble’s sanctionable conduct was
not his representation in a document presented to the court but
the failure to present a document—namely, a verified
answer—in response both to the summons and complaint served
5
Current Rule 11(c) authorizes the court to “impose an
appropriate sanction on any attorney, law firm, or party” that it
determines has violated Rule 11(b). Fed. R. Civ. P. 11(b)(1) (2010).
Rule 11(b), titled “Representations to the Court,” provides that “[b]y
presenting to the court a pleading, written motion, or other
paper—whether by signing, filing, submitting, or later advocating
it—an attorney or unrepresented party certifies that to the best of the
person’s knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances” the presented paper meets
specified standards in that (1) it is not “presented for any improper
purpose,” (2) its “claims, defenses, and other legal contentions” are
warranted under the law (3) its “factual contentions” are at least likely
to “have evidentiary support” and (4) its “denials of factual
contentions” are reasonably warranted “on the evidence” or on “a lack
of information.” Id. 11(b)(1)-(4). The previous version authorized
sanctions against a party or counsel for violating its directive that
“[e]very pleading, motion, and other paper” be signed by counsel or
by the party if unrepresented and that the signature “constitute[d] a
certificate by the signer that the signer ha[d] read the pleading, motion,
or other paper; that to the best of the signer’s knowledge, information,
and belief formed after reasonable inquiry it [wa]s well grounded in
fact and [wa]s warranted by existing law or a good faith argument for
the extension, modification, or reversal of existing law, and that it
[was] not interposed for any improper purpose.” Fed. R. Civ. P. 11
(1990).
10
on Noble three times and to the motion for entry of default—in
combination with the “cat and mouse game” Noble played to
evade service. See 235 F.R.D. at 4. Because the sanctioned
misconduct did not involve representations in a document
presented to the court as required under Rule 11, we vacate the
sanction award.
Notwithstanding Noble’s conduct is not sanctionable under
Rule 11, sanctions may nonetheless be warranted under the
district court’s inherent authority, which “enables courts to
protect their institutional integrity and to guard against abuses
of the judicial process with contempt citations, fines, awards of
attorneys’ fees, and such other orders and sanctions as they find
necessary, including even dismissals and default judgments.”
Shepherd v. Am. Broad. Cos., 62 F.3d 1469, 1472 (D.C. Cir.
1995); see generally Chambers, 501 U.S. at 43-46 (describing
extent of inherent judicial authority). Accordingly, we remand
for the district court to consider whether to exercise its inherent
authority to sanction Noble. To support a sanction under this
authority, the court must make a finding by clear and convincing
evidence that Noble committed sanctionable misconduct that is
tantamount to bad faith. Shepherd, 62 F.3d at 1472 (clear and
convincing evidence); Roadway Exp., Inc. v. Piper, 447 U.S.
752, 767 (1980) (bad faith).
B. Ali’s Appeal: District of Columbia Consumer Protection
Procedures Act
We review a grant of summary judgment de novo, viewing
the evidence in the light most favorable to the nonmoving party.
Tate v. District of Columbia, 627 F.3d 904, 908 (D.C. Cir.
2010). Summary judgment is appropriate “ ‘if the pleadings, the
discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.’ ” Id.
(quoting Fed. R. Civ. P. 56(c)) (other internal quotation
omitted). Applying this standard, we conclude the district court
11
properly granted summary judgment on Count 1 of the amended
complaint, the only ruling Ali challenges on appeal. See Ali Br.
23-30.
Count 1 alleges that Tolbert, in “brokering the sale of
1010[ ]G Street,” violated the CPPA by “ha[ving] Ms. Ali agree
to sell 1010 G Street on unconscionable terms, in violation of
subsection (r)” of D.C. Code § 28-3904—which makes it a
violation of the CPPA “for any person to . . . make or enforce
unconscionable terms or provisions of sales or leases”—and by
doing so “with full knowledge of [Ali’s] inability to negotiate a
fair price for the sale of her property, or to avoid foreclosure by
negotiations with her lender.” Am. Compl. ¶¶ 44, 47, Ali v.
Mid-Atl. Settlement Servs., Inc., C.A. No. 02-2271 (D.D.C. Mar.
31, 2004) (JA 35-36). The district court granted summary
judgment on Count 1 on the ground that “the pleadings and the
evidence demonstrate there is no genuine issue of material fact
as to whether Tolbert was a merchant under the [CPPA]” and he
therefore cannot be held liable thereunder. Ali v. Mid-Atl., 640
F. Supp. 2d at 7. The district court was correct.
“In answering questions involving the proper interpretation
of D.C. statutes, this court relies on the construction of these
laws by the D.C. Court of Appeals.” Poole v. Kelly, 954 F.2d
760, 761 (D.C. Cir. 1992). The D.C. Court of Appeals has
repeatedly concluded that the CPPA “ ‘was designed to police
trade practices arising only out of consumer-merchant
relationships.’ ” Snowder v. District of Columbia, 949 A.2d
590, 599 (D.C. 2008) (quoting Howard v. Riggs Nat’l Bank, 432
A.2d 701, 709 (D.C. 1981)) (citing Carleton v. Winter, 901 A.2d
174, 179 (D.C. 2006); DeBerry v. First Gov’t Mortg. &
Investors Corp., 743 A.2d 699, 701 (D.C.1999)). At the time of
the sale of Ali’s property, the CPPA defined “merchant” as a
“person who does or would sell, lease (to), or transfer, either
directly or indirectly, consumer goods or services, or a person
who does or would supply the goods or services which are or
12
would be the subject matter of a trade practice.” D.C. Code
§ 28-3901(a)(3) (2000). Ali has pointed to no evidence in the
record even suggesting Tolbert supplied, or held himself out as
a person who would supply, any goods or services to Ali in
connection with her ownership or sale of the house. At most,
Tolbert assisted Noble in purchasing the property, placing him
on the “consume” rather than the supply side of the transaction.
See Howard, 432 A.2d at 709 (merchant “must be a ‘person’
connected with the ‘supply’ side of a consumer transaction”
(quoting Council of the District of Columbia, Comm. on Pub.
Servs. & Consumer Affairs, Rep. on Bill 1-253, at 13 (Mar. 24,
1976)).6
Ali contends Tolbert’s conduct was comparable to that of
the defendant in Byrd v. Jackson, 902 A.2d 778 (D.C. 2006),
6
In 2007, the District of Columbia City Council amended the
definition of “merchant” by, inter alia, adding the qualification that a
person supply goods or services “in the ordinary course of business.”
Nonprofit Organizations Oversight Improvement Amendment Act of
2007, § 2(a), 2007 D.C. Legis. Serv. (West). This requirement was
not met here as Ali identified no evidence that Tolbert was in the
“business” of brokering real estate transactions, refinancing
mortgages, curing credit problems or any similar service. In fact, she
acknowledged in district court that Tolbert’s role at EZ Mortgage was
as an “advertising consultant.” Resp. to Tolbert Statement of
Undisputed Facts ¶ 10, Ali v. Mid-Atl. Settlement Servs., Inc., C.A. No.
02-2271 (D.D.C. Oct. 21, 2007) (JA 593). We will not apply the 2007
amendment retroactively, however, because there is “no indication
that the Council intended [the change] to be retroactive.” Childs v.
Purll, 882 A.2d 227, 238 (D.C. 2005) (declining to apply retroactively
2000 CPPA amendment eliminating limit on jurisdiction of D.C.
Department of Consumer and Regulatory Affairs (citing Mayo v.
District of Columbia Dep’t of Employment Servs., 738 A.2d 807, 811
(D.C.1999) (“retrospective operation will not be given to a statute . . .
unless such be the unequivocal and inflexible import of the terms”)
(ellipsis in Childs))) (bracketed alteration added).
13
who was found to be a “merchant” under the CPPA because he
offered to assist a homeowner—the plaintiff’s late
grandmother—prevent foreclosure on her home. In Byrd,
however, the court found “there was ample evidence supporting
the judge’s finding that [the defendant] had advertised himself
to [the homeowner] as one who would help her avoid
foreclosure, and that she dealt with him on that understanding”:
he had mailed the decedent a “notice advising her of the services
offered” by his company, which typically promoted the
company’s staff as “foreclosure specialists” with “a number of
creative programs” that had helped many homeowners keep
their homes and would do the same for the recipient. 902 A.2d
at 781. Ali has identified no such evidence in this record to
support her claim that, “[a]s in the Byrd case, Mr. Tolbert
offered his services to ‘help’ [Ali].” Ali Br. 28 (italics omitted
in original). Because Ali “failed to make a sufficient showing
on an essential element of her case with respect to which she has
the burden of proof,” the grant of summary judgment to Tolbert
on Count 1 was appropriate. Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986).7
7
In support of this claim, Ali cites only Noble’s interrogatory
response stating that, by advancing funds to stave off foreclosure
pending his purchase of the property, he “believed that he was helping
[Ali] minimize any damage to her financial records by her previous
nonpayments, while also helping her secure a chance of home
ownership in the future.” Ali Br. 20 (citing Def. Noble’s Third
Supplemental Resps. to Pl.’s First Set of Interrogs. at 10, Ali v. Mid-
Atl. Settlement Servs., Inc., C.A. No. 02-2271 (D.D.C. Oct. 21, 2007)
(Ex. G, Pl.’s Mem. in Resp. to Tolbert’s Mot. for Summ. J.) (JA 639).
This statement does nothing to satisfy Ali’s burden to “designate
‘specific facts showing that there is a genuine issue for trial’ ” as to
whether Tolbert held himself out to Ali as a merchant—“an essential
element of her case.” Celotex, 477 U.S. at 323-24 (quoting Fed. R.
Civ. P. 56(e)). Ali also claims Tolbert was a merchant because he
“benefitted from the transaction by acquiring a beneficial interest in
14
For the foregoing reasons, we affirm the district court’s
grant of summary judgment on Count 1 of the amended
complaint, vacate its Rule 11 sanction award and remand for the
court to consider whether to impose sanctions under its inherent
authority.
So ordered.
the Property.” Ali Br. 29. Not only is this claim unsupported in the
record, it is quite beside the point as the CPPA’s definition of
“merchant” makes no reference to whether a person derives a benefit
from a challenged transaction. In any event, as noted earlier, Tolbert’s
participation in the purchase of Ali’s house does not place him on the
supply side of the transaction. See Howard, 432 A.2d at 709.