Rector v. Approved Federal Savings Bank
265 F.3d 248 (4th Cir. 2001)
was the administrator of a trust.After he got into a disagreement about a deal in which he woudl sell the trust's interests in another bank to Approved Federal, he sued Approved Federal for a whopping $80 billion for conspiracy, RICO, and bank
purchase price of the trusts interest in the bank was only $3 million, so $80 billion was a ridiculous amount to sue for.
Trial Court dismissed Rector's complaint.However, they allowed
him to file an amended complaint.
filed an amended complaint seeking "an infinite amount of
money" in damages.
Trial Court again dismissed Rector's complaint.
Federal filed a motion for sanction
under FederalRule 11 for filing frivolous lawsuits.They claimed that they served
notice of the motion on Rector in a timely fashion, but Rector claimed he
did not receive the motion until months later.
FederalRule 11 required that notices be served within 21 days (the safe
provision was included in FederalRule 11 in order to
provide protection to litigants who self-regulate by withdrawing bad
filings within a 21 day period.
Federal was unable to show evidence that they had served Rector.
FederalRule 11 deals with frivolous claims.
did not state in his pleading that the motion for sanction failed to
comply with the safe harbor
provision of FederalRule 11.
Trial Court approved Approved Federal's motion for sanction, and awarded them $33k in attorney's
Appellate Court overturned and remanded to the Trial Court to apply FederalRule 11 correctly.
Trial Court once again found for Approved Federal.Rector appealed again.
Trial Court felt that it had applied the FederalRule 11 standards correctly.
Appellate Court affirmed the decision.
Appellate Court held that the purpose of FederalRule 11 was not to avoid the consequences of filing a frivolous lawsuit
because the other party improperly filed a motion to dismiss.
order to assert the safe harbor
provision, Rector needed to file a motion asserting the provision as a
defense.He did not do this,
so the possibility of raising the defense is waived.