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Keywords

contractbreach of contractplaintiffdefendantjurisdictionattorneynegligencepleamotioncorporationmotion to dismiss
contractbreach of contractplaintiffdefendantjurisdictionnegligencecorporation

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Golden Eagle Distributing Corp. v. Burroughs Corp., 103 F.R.D. 124, 40 Fed.R.Serv.2d 346

Facts

Plaintiff Golden Eagle Insurance Co. filed an action in Minnesota state court against Burroughs Corporation for fraud, negligence, and breach of contract related to a defective computer system. The case was removed to federal court based on diversity jurisdiction and subsequently transferred to the Northern District of California. The defendant argued that all claims were time-barred under California law, while the plaintiff contended that Minnesota law applied, which would not bar the claims. The court found that the defendant's motion to dismiss was not warranted by existing law and that sanctions were appropriate due to the misleading nature of the arguments presented.

Plaintiff brought this action in Minnesota state court for fraud, negligence, and breach of contract against Burroughs Corporation, the manufacturer of an allegedly defective computer system sold to plaintiff.

Issue

Whether the defendant's motion to dismiss the claims as time-barred was warranted by existing law and whether sanctions should be imposed on the defendant's counsel for violating Rule 11.

The unsettled question raised by this case is whether a Minnesota court would have refused to apply this doctrine to Golden Eagle's complaint solely because it would be time-barred if filed in other jurisdictions.

Rule

Legal arguments that misrepresent existing law or fail to disclose adverse authority violate Rule 11, which requires attorneys to certify that their pleadings and motions are warranted by existing law and that they have made a reasonable inquiry into the law.

Legal argument based on a knowingly false representation of law constitutes dishonesty toward the tribunal.

Analysis

The court analyzed the arguments presented by the defendant's counsel and found that they misrepresented the law by claiming that their motion was supported by existing law when it was not. The court noted that the arguments made in support of the motion were not the same as those presented in the subsequent memorandum defending against sanctions, indicating a lack of candor and a violation of Rule 11. The court emphasized the importance of attorneys providing a full and fair representation of the law to the court.

The contrast between the two memoranda speaks for itself. It is a dramatic illustration of the sort of practice at which Rule 11 is aimed and of the result it seeks to achieve.

Conclusion

The court denied the defendant's motion to dismiss and imposed sanctions on the defendant's counsel for violating Rule 11 by failing to present a warranted legal argument and for not disclosing adverse authority.

Sanctions shall be paid by the firm of Kirkland & Ellis and shall not be reimbursed by the defendant.

Who won?

Plaintiff, Golden Eagle Insurance Co., prevailed because the court found that the defendant's motion to dismiss was not supported by existing law and imposed sanctions on the defendant's counsel for their misleading arguments.

Sanctions ordered.

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