42 U.S.C. § 3604. New York antidiscrimination laws and regulations are likewise directed at discrimination by housing and services providers rather than community activity. In Clifton Terrace Assoc., Ltd. v. United Technologies Corp., 289 U.S. App. D.C. 121, 929 F.2d 714, 721 (D.C. Cir. 1991), the District of Columbia Court of Appeals held that the owner of a federally subsidized low-income housing complex, whose residents were predominantly Black, lacked standing to assert claims under Sections 1981 and 1982. The court found that there was an insufficient identity of interest between the landlord and the tenants, and as the tenants themselves were plainly identifiable, they were best able to assert claims on their own behalf.
At oral argument in this case plaintiff conceded that it lacked standing to assert claims of discrimination under either federal law or New York law and that its claims of discrimination were without merit. Therefore, limiting this conclusion to the facts of this case plaintiff's discrimination claims under both New York law and federal law fail because there is neither legal nor factual basis for plaintiff's claims.
Plaintiff alleged in its complaint that defendants have publicly and falsely accused plaintiff of failing to maintain adequate security at the Hotel and that defendants had worked to create a perception that there has been an increase in crime in and around the Hotel. Plaintiff alleged that these false accusations have resulted in damages reasonably believed to be in excess of seven million dollars.
Under New York state law, an action to recover damages for defamation must be commenced within one year after the cause of action has accrued (i.e., publication of the defamatory statements). CPA § 215(3). See Municipal Training Center, Inc. v. National Broadcasting Corp., 87 Misc. 2d 1044, 387 N.Y.S.2d 40 (Sup. Ct. N.Y. Co. 1976) (one year statute of limitations). Three of the four "publications" about which the Hotel complained occurred in March, May, and July 1991, respectively, and as this action was not commenced until two of the defendants were served on September 4, 1992, the defamation claim with respect to these publications are untimely.
With respect to the fourth publication, the August 1992 letter, plaintiff failed to plead, inter alia, the falsity of the publication. See 600 West 115th Street Corp. v. Von Gutfeld, 80 N.Y.2d 130, 603 N.E.2d 930, 1992 N.Y. LEXIS 3424, *13 (N.Y. Oct. 20, 1992) ("because falsity is a necessary element in a defamation claim involving statements of public concern . . . only statements alleging facts can properly be the subject of a defamation action").
The letter of August 1992 is an inquiry as to the status of the case manager program at the Hotel, an expression of an opinion that such services are needed, and an inquiry as to whether the HRA has a contract with the Hotel. See Milkovich v. Lorain Journal Co., 497 U.S. 1, 111 L. Ed. 2d 1, 110 S. Ct. 2695 (1990) (expressions of opinion, not fact, cannot be false, and they are therefore protected). Defendants are not subject to plaintiff's defamation claim because they commented, without malice, on a matter concerning government policy. See New York Times v. Sullivan, 376 U.S. 254, 270, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964) ("debate on public issues should be uninhibited, robust, and wide-open"); Von Gutfeld, 80 N.Y.2d 130, 603 N.E.2d 930, 1992 N.Y. LEXIS 3424 (statements made to city officials at public meeting by member of condominium board of managers were protected). Plaintiff conceded at oral argument that there was no basis for any defamation claim. Viewing the facts in a light most favorable to plaintiff, plaintiff as a matter of law has no cause of action for defamation. Therefore, plaintiff's second cause of action fails.
C. Tortious Interference with Business
Plaintiff alleged that defendants' actions were unlawful and that defendants had tortiously interfered with plaintiff's business relations and ability to provide housing for AIDS victims.
Petitions to a governmental agency are privileged under the First Amendment and cannot form the basis of a claim for tortious interference with business interests. See Fantaco Enterprises, Inc. v. Iavarone, 161 A.D.2d 875, 876-77, 555 N.Y.S.2d 921 (3d Dep't 1990) (to succeed on a cause of action for tortious interference with prospective business relations or advantage, plaintiff must show that a competing defendant used unlawful means or that the defendant's sole motive was to injure the plaintiff).
Furthermore, the tort of interference with business relations requires that the defendants' actions be "improper." Fantaco, 555 N.Y.S.2d at 922; Restatement (Second) of Torts § 766 comment a. See also Guard-Life Corp. v. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 187, 406 N.E.2d 445, 428 N.Y.S.2d 628 (1980) (improper and malicious behavior required for claim of tortious interference with contract). Defendants' as members of a community organization that has been in existence for over ninety years were simply participating in the democratic process by petitioning their government. While defendants' actions in seeking to maintain the cap on the number of homeless HIV and AIDS sufferers at the Hotel may not be laudable, their actions were not improper. A claim of tortious interference cannot be made where, as here, defendants' First Amendment right to petition government outweighs the harm that their actions may have produced indirectly. See Rudoff v. Huntington Symphony Orchestra Inc., 91 Misc. 2d 264, 397 N.Y.S.2d 863, 865 (1977) ("right to petition government is privileged and is superior to right to maintain an action for [tortious] interference").
Viewing the facts and the pleadings in a light most favorable to plaintiff, plaintiff, as a matter of law, has no cause of action for tortious interference with business. Plaintiff has shown no impropriety or malice in defendants' actions, and plaintiff has failed to overcome defendants' First Amendment interest. Therefore, plaintiff's claim for tortious interference fails.
D. Antitrust Claim
Plaintiff alleged in its complaint that defendants conspired, combined and arranged to restrain plaintiff's free exercise of their business and have unlawfully interfered with the conduct of plaintiff's business in violation of the Donnelly Act, New York General Business Law §§ 340
As § 341 indicates, plaintiff's fourth cause of action is based on a criminal statute, rather than a civil statute. Plaintiff admitted at oral argument that it had no authority to sue under these statutes. Moreover, plaintiff presented absolutely no evidence that defendants' were attempting to establish a monopoly of any type or even that defendants' competed with plaintiff in any area. Therefore, viewing the facts and pleadings in a light most favorable to plaintiff, plaintiff, as a matter of law, has no antitrust cause of action.
Defendants move for sanctions against the party plaintiff, (and not plaintiff's attorney), pursuant to Rule 11 of the Federal Rules of Civil Procedure and pursuant to the inherent powers of the court. Defendants allege that plaintiff had no legal or factual basis for its claims and that plaintiff brought this action with the intent to harass and intimidate defendants and deprive them of their right to petition public officials.
A. Rule 11
Plaintiff brought suit originally in New York State Supreme Court. At that time, plaintiff was represented by their attorney, Hyman Braven who died shortly after the suit was filed. Defendants removed the action to federal court. Martin Kurlander subsequently assumed representation of the Hotel.
Rule 11 states in pertinent part:
. . . . If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.
Thus, Rule 11 is focussed on the signing of specific documents rather than a party's motivation for litigating. Stiefvater Real Estate, Inc. v. Hinsdale, 812 F.2d 805 (2d Cir. 1987) (Rule 11 deals exclusively with "the certification flowing from the signature to a pleading, motion, or other paper in a lawsuit," and imposes no continuing duty on the parties or their attorneys) (citation omitted). Defendants' motion for sanctions was prompted by plaintiff's filing of the complaint,
an action taken by plaintiff in state court. In fact, defendants made their first request for sanctions in their Memorandum of Law in Support of their Motion for Judgment on the Pleadings before plaintiff had filed any papers in federal court. Rule 11, however, applies to court papers submitted in federal court. Mareno v. Jet Aviation of America, 970 F.2d 1126, 1128 (2d Cir. 1992) (once a case is removed from state court, Rule 11 applies to papers submitted to the federal court).
Even though defendants removed the case to federal court, Rule 11 may not be extended to apply to a complaint that was not filed in federal court. U.S. v. International Brotherhood of Teamsters, 948 F.2d 1338, 1344 (2d Cir. 1991) ("Rule 11 'does not license a district court to sanction any action by an attorney or party that it disapproves of. . . . Imposition of sanctions must be based on a pleading, motion or other paper signed and filed in federal court. . . .'") (quoting McMahon v. Shearson/American Express, Inc., 896 F.2d 17, 22 (2d Cir. 1990)). This is especially true where defendants have removed the case from state court to federal court. Oliveri v. Thompson, 803 F.2d 1265 (2d Cir. 1986); Hinsdale, 812 F.2d at 809.
In Stiefvater Real Estate, Inc. v. Hinsdale, the plaintiff brought an action in state court to recover a brokerage commission for finding a purchaser for the defendant's house. The defendant removed the action to federal court on the basis of diversity of citizenship. The court granted defendant's 12(b)(6) motion for judgment on the pleadings, treating it as a motion for summary judgment, and granted defendant's motion for attorneys' fees pursuant to Rule 11. The Second Circuit ruled that Rule 11 could not be applied to a complaint filed in state court and removed by defendants:
[Plaintiff] commenced this action in state court; it was defendants' removal petition that landed it in a federal forum. Therefore, at the time the complaint was signed rule 11 simply did not apply, and the district court had no authority to give it retrospective application.
Hinsdale, 896 F.2d at 809. Rule 11, therefore, may not be applied to plaintiff's complaint in this case.
Moreover, the signed papers that were filed in federal court, namely plaintiff's opposition to defendants' motion for judgment on the pleadings and motion for voluntary dismissal, do not warrant Rule 11 sanctions. These papers, which do little more than restate plaintiff's view of the facts and background of the case, were a necessary response to defendants' motion and were clearly directed at terminating the litigation.
Therefore, because plaintiff's complaint is immune from Rule 11 sanction and because plaintiff's actions in federal court do not warrant Rule 11 sanction, defendants' request for Rule 11 sanctions is denied.
B. Inherent Sanction Power
The district court possesses the inherent power to levy sanctions. Neither the adoption of 28 U.S.C. § 1927, a federal statute authorizing sanctions, nor the Federal Rules of Civil Procedure displace the inherent power of the court to sanction. Chambers v. Nasco, Inc., 115 L. Ed. 2d 27, 43, 46, 111 S. Ct. 2123 (1991). The court's inherent power includes the authority to sanction where "a party has 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons.'" Chambers, 115 L. Ed. 2d at 45 (quoting Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 44 L. Ed. 2d 141, 95 S. Ct. 1612 (1975)). See also Sassower v. Field, 973 F.2d 75, 80-81 (1992) ("The Supreme Court has made clear that a district court has inherent authority to sanction parties appearing before it for acting in bad faith, vexatiously, wantonly, or for oppressive reasons.") (citing Chambers, 115 L. Ed. 2d at 45). The inherent sanctioning power of the court may be particularly relevant where, as here, "the conduct at issue is not covered by one of the other sanctioning provisions." Chambers, 115 L. Ed. 2d at 48.
The inherent sanctioning power of the court is not without bound, however. Courts must exercise restraint in sanctioning parties. "Because of their very potency, inherent powers must be exercised with restraint and discretion. Chambers, 115 L. Ed. 2d at 45. (citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 65 L. Ed. 2d 488, 100 S. Ct. 2455 (1980). The Supreme Court explained that a "primary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process." Chambers, 115 L. Ed. 2d at 45.
In Chambers, the Court noted that the inherent power of courts to sanction is in some ways narrower than sanctioning power authorized by statute or rules: the inherent sanctioning power is limited to "cases in which a litigant has engaged in bad-faith conduct or willful disobedience of a court's orders." Chambers, 115 L. Ed. 2d at 46. While plaintiff's complaint in this case is completely devoid of merit, as a matter of law, it is not clear that plaintiff acted in bad faith. While it is certainly possible that plaintiff filed its complaint to silence and harass defendants' into capitulating to its goals of increasing its financial stability by increasing the number of AIDS victims housed at the hotel, it is equally possible that some members of the community were motivated by stereotypical views of the homeless and of AIDS victims in seeking to limit the number of AIDS and HIV positive residents in the Hotel. For example, while the Hotel may not be blameless in its management of the Hotel and mercenary interests, the possibility that HIV positive residents of color may have been made the scapegoat for increased crime in the area precludes a finding, without more, that the Hotel acted in bad faith in bringing this legally baseless action. In Chambers, the Court held that sanctions may be appropriate "if a court finds 'that fraud has been practiced upon it, or that the very temple of justice has been defiled.'" Chambers, 115 L. Ed. 2d at 46 (quoting Universal Oil Products Co. v. Root Refining Co., 328 U.S. 575, 580, 90 L. Ed. 1447, 66 S. Ct. 1176 (1946)). Plaintiff's actions in this case do not clearly constitute fraud or an affront to justice.
Moreover, beyond the mere allegations that plaintiff's suit is a strategic Lawsuit Against Public Participation,
defendants' presented little evidence of plaintiff's bad faith. "A court must . . . exercise caution in invoking its inherent power, and it must comply with the mandates of due process, both in determining that the requisite bad faith exists and in assessing fees." Chambers, 115 L. Ed. 2d at 48 (citation omitted).
In this Circuit, a finding of bad faith requires "a particularized showing of bad faith to justify the use of the court's inherent power." International Brotherhood of Teamsters, 948 F.2d at 1345. The Second Circuit has declined to uphold sanction awards absent both "'clear evidence' that the challenged actions 'are entirely without color, and [are taken] for reasons of harassment or delay or for other improper purposes'" and "a high degree of specificity in the factual findings of [the] lower courts." International Brotherhood of Teamsters, 948 F.2d at 1345 (quoting Oliveri v. Thompson, 803 F.2d 1265, 1272 (2d Cir. 1986), cert. denied, 480 U.S. 918 (1987)). There has been no clear evidence of harassment or improper purpose in this case necessary for the levying of sanctions pursuant to the court's inherent power.
Finally, any harassing or improper actions that may have been taken by plaintiff were completed before plaintiff came under the jurisdiction of this court. Plaintiff did not attempt to pursue any of its claims in federal court or delay the litigation in any fashion; rather plaintiff moved for voluntary withdrawal upon the removal of the case from state court by the defendants. Thus, it is unquestionable that plaintiff attempted no fraud, harassment or disobedience while under the jurisdiction of this court. Therefore defendants' motion for sanctions pursuant to this court's inherent power is denied.
For the foregoing reasons, defendants' motion for judgment as a matter of law, which this court has treated as a motion for summary judgment, is granted. Plaintiff's motion for voluntary withdrawal is, therefore, denied. Defendants' motion for sanctions, either pursuant to Rule 11 or the inherent power of the court, is denied.
Dated: April 20, 1993
New York, New York
CONSTANCE BAKER MOTLEY
United States District Judge