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Metlife Bank, N.A v. John Badostain

December 30, 2010

METLIFE BANK, N.A., PLAINTIFF,
v.
JOHN BADOSTAIN, JON L. LEWIS, BRIAN J. NEVILLE,
MICHAEL D. MCLEAN, AND EAGLE HOME MORTGAGE, LLC, DEFENDANTS.



The opinion of the court was delivered by: Honorable Candy W. Dale Chief United States Magistrate Judge

MEMORANDUM DECISION AND ORDER

INTRODUCTION

Defendants John Badostain, Jon Lewis, and Eagle Home Mortgage, LLC, filed a motion requesting that the Court impose sanctions against Plaintiff MetLife Bank under Rule 11 of the Federal Rules of Civil Procedure. (Dkt. No. 28). Defendants contend that sanctions are warranted in this case because the factual allegations contained in Plaintiff's complaint "have absolutely no evidentiary support," Mot. For Rule 11 Sanctions at 2, and that the appropriate sanction in this case is for the Court to strike Plaintiff's allegedly unsupported claims. Id., at 4. Plaintiff opposes the motion and has filed a Motion for an Award of the Fees It Incurred Opposing Rule 11 Sanctions (Dkt. No. 32), and a Motion to Strike the Declarations Attached to Defendants' Motion for Rule 11 Sanctions (Dkt. No. 33).

The Court heard arguments from counsel on the motions on November 30, 2010. During the hearing, it was brought to the Court's attention that a substantively identical motion for sanctions was filed by counsel for Defendants in a related case pending in the United States District Court for the District of Nevada and that the motion was denied because "Defendants failed to comply with the strict procedural requirements of the safe harbor provision in Rule 11." See MetLife Bank, N.A. v. Riley, 3:10-cv-122-ECR-VPC, at 6 (D. Nev. Oct. 13, 2010). The Court is not amused by what has been accurately characterized as an ongoing "Rule 11 war" between the parties, and the Court is particularly displeased that the motion for sanctions before this Court was not withdrawn after United States Magistrate Judge Valerie Cooke denied the same motion in the District of Nevada based on Ninth Circuit precedent governing Rule 11's safe harbor provision.

Having fully reviewed the parties' submissions and considered their arguments during the hearing, for the reasons discussed below, the Court will deny Defendants' Motion for Rule 11 Sanctions, grant Plaintiff's fee motion, and deny Plaintiff's Motion to Strike.

Factual and Procedural History

In 2008, MetLife Bank, N.A. ("MetLife") acquired First Horizon Home Loans and become involved in the home mortgage business. John Badostain acted as MetLife's Regional Sales Leader, overseeing the company's branches in the Mountain West Region, which included all of MetLife's Idaho branches. While employed by MetLife, Mr. Badostain's office was located in Eagle, Idaho. Jon Lewis was employed by MetLife as a District Sales Leader, overseeing the company's branch managers throughout the state of Idaho. While employed by MetLife, Mr. Lewis's office was also in Eagle, Idaho, and he reported to Mr. Badostain. Brian Neville worked as the branch manager of MetLife's Eagle branch and Michael McLean worked as the branch manager of MetLife's McCall branch. Both Messrs. Neville and McLean reported to Mr. Lewis.

While employed as managers by MetLife, each of the above individual defendants signed a non-piracy agreement, which provides in part:

For 18 months following the termination of my employment with MetLife for any reason:

I will not solicit any employee of MetLife or its affiliated entities ("Employee") to become employed, associated, or contracted by or with me or any entity in which I become an employee, owner or investor ("Other Company"). I will not solicit any Employee to become employed, associated or contracted with an organization providing services to me or any Other Company. For example, I will not inform an Employee of a job opportunity with me or any Other Company, or suggest that any person or entity contact an Employee to discuss or mention such a job opportunity. I also will not interview an Employee for a job, or offer, authorize, approve or agree to hire an Employee for any job opportunity with me or any Other Company.

Pl.'s Compl. at 2 (Dkt. No. 1).

In late November or early December 2009, both John Badostain and Jon Lewis resigned their positions with MetLife and shortly afterwards accepted comparable positions with Eagle Home Mortgage, LLC ("Eagle"). MetLife's Complaint alleges that, after leaving MetLife, Mr. Badostain became the Vice President or regional manager at Eagle, "with responsibility for overseeing mortgage home loan branches in a region that covers several states, including Idaho [and] . . . his responsibilities include hiring, and/or approving the hiring, of loan officers at branches within his region." Pl.'s Complaint at 5. Concerning Defendant Jon Lewis, MetLife's Complaint alleges that he now holds a managerial position with Eagle in which he supervises the branch managers at the company's branches throughout Idaho, and "[w]ithout limitation, his responsibilities include hiring, and/or approving the hiring, of loan officers at Eagle's branches in Idaho." Id.

Between January 20, 2010, and February 1, 2010, all seven loan officers employed by MetLife in its Eagle, Idaho, branch resigned. During the same time period, five of the seven loan officers employed at MetLife's Meridian branch resigned. Finally, one day after Defendant Michael McLean resigned as MetLife's McCall branch manager, both of the loan officers whom he was supervising resigned. MetLife alleges that John Badostain and Jon Lewis participated in the hiring of these loan officers for Defendant Eagle, stating "[e]ach of these defendants solicited these loan officers to join Eagle; hired, authorized the hire, or approved the hire by Eagle of these loan officers; participated in extending job offers to them; participated in interviewing them for Eagle or suggested that others interview them for positions at Eagle; and/or informed them of job opportunities at Eagle." Pl.'s Compl. at 6.

On March 2, 2010, MetLife filed a Complaint against John Badostain, Jon Lewis, Brain Neville, Michael McLean, and Eagle. MetLife's Complaint alleges that, after the individual defendants left MetLife, they (with Eagle's assistance) caused a "mass exodus" from MetLife branch offices in Idaho in violation of the non-piracy agreement by soliciting and hiring MetLife employees. MetLife claims that these actions constitute tortious interference by Eagle and breach of contract by the individual defendants.

On July 16, 2010, following initial discovery, Defendants sent Plaintiff MetLife notice of their intent to file a motion for Rule 11 sanctions and a draft of the motion.*fn1

Defendants informed MetLife that they intended to move for sanctions under Rule 11 because the complaint included factual contentions that had no evidentiary support. The draft motion sent to MetLife was unsigned and the declarations on which the motion relies were not provided to MetLife. MetLife states that it twice requested the declarations from the Defendants, but that both requests were refused. Pl.'s Opp. to Mot. For Sanctions at 11-12 (Dkt. No. 31). According to Defendants, following the notice of intent to file a motion seeking sanctions, MetLife conceded that its claims against Defendants Brian Neville and Michael McLean for breach of contract lacked merit. Def.s' Reply in Supp. of Mot. For Sanctions at 1 (Dkt. No. 35). MetLife has not, however, withdrawn its claims against Defendants John Badostain, Jon Lewis, and Eagle.

In response to Defendants' motion for sanctions, MetLife filed its Motion for an Award of the Fees It Incurred Opposing Rule 11 Sanctions. (Dkt. No. 32). MetLife contends that Defendants' motion for sanctions lacks merit and that MetLife should be awarded fees as the "prevailing party" under Rule 11(c)(2). MetLife also contends that Defendants' motion misrepresents the holdings of multiple cases, misrepresents facts, and "it seems likely that defendants had ulterior motives for filing th[e] motion." Pl.'s Mot. for an Award of Fees at 2 (Dkt. No. 32). Finally, MetLife also filed a Motion to Strike All Declarations Attached to Defendants' Motion for Rule 11 Sanctions. (Dkt. No. 33). MetLife contends that the declarations cannot be considered in support of the motion for sanctions because Defendants refused to provide a copy of them to MetLife prior to filing the motion for Rule 11 sanctions with the Court.

DISCUSSION

1. Motion for Rule 11 ...


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