KAREN LeCRAFT 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.
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 balance was approximately
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 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:
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.
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
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 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).
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
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:
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.
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.
"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, 110 S.Ct. 2447, 110 L.Ed.2d 359 (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.2009) (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, 110 S.Ct. 2447)) (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, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) ("Rule 11 ... governs only papers filed with a court"). The current version
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, 111 S.Ct. 2123 (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, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980) (bad faith).
We review a grant of summary judgment de novo, viewing the evidence in the light most favorable to the nonmoving
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 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)).
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.