Opinion
94 Civ. 5620 (JFK)
April 15, 2002
Peter D. Raymond, Esq., HALL DICKLER KENT GOLDSTEIN WOOD LLP, for Plaintiff Advanced Portfolio Technologies, Inc.
Jacob E. Amir, Esq., FELDMAN AMIR, for Defendant Advanced Portfolio Technologies Limited.
OPINION and ORDER
Before the Court is the motion of Defendant Advanced Portfolio Technologies Limited (now known as "CONSILI@Ltd." and herein referred to as "APT/UK"), pursuant to Fed.R.Civ.P. 60(b), to vacate the default judgment entered in favor of Plaintiff Advanced Portfolio Technologies, Inc. ("APT/NY") on April 18, 2000. APT/NY opposes the motion to vacate and crossmoves for sanctions against APT/UK and its counsel, Feldman Amir, pursuant to Fed.R.Civ.P. 11, on the grounds that APT/UK's motion to vacate has no basis in either fact or law. APT/UK (and its counsel) opposes the cross-motion for sanctions. For the reasons stated below, the Court denies both the motion to vacate and the cross-motion for sanctions.
The Court grants APT/UK's request for leave to replace its counsel of record with the law firm of Feldman Amir.
Background
This dispute arises out of a software licensing agreement between APT/NY, a U.S. corporation, and APT/UK, a U.K. company, entered into in October 1990, under which APT/UK became the exclusive licensee of APT/NY's computerized investment risk management system ("APT system") in most of Europe, the Middle East and South Africa. See Advanced Portfolio Technologies, Inc. v. Advanced Portfolio Technologies Ltd, No. 94 Civ. 5620, 1999 WL 64283, at *1 (S.D.N.Y. Feb. 8, 1999). In return for the right to market the APT system, APT/UK agreed, among other things, to make quarterly royalty payments to APT/NY and to maintain the confidentiality of the software by refraining from using the software "for any purpose, except as stated [in the Agreement] or as agreed in writing by the parties [to the Agreement]." Id. (quoting the licensing Agreement). The Agreement also provided that these confidentiality obligations survive the termination of the Agreement for a set time period, and that upon termination, APT/UK must cease using the proprietary software and return all confidential materials to APT/NY. See id.On August 2, 1994, APT/NY initiated this action against APT/UK and Peter J. Ainsworth, a citizen and resident of Great Britain who was, at that time and at least till January 1999, a shareholder and managing director of APT/UK, seeking damages for APT/UK's failure to remit royalty payments due under the Agreement for the first quarter of 1994 and seeking the imposition of a constructive trust on assets fraudulently conveyed by APT/UK to Ainsworth. In October 1994, APT/NY served an amended complaint as of right additionally asserting claims for APT/UK's failure to pay second-quarter 1994 royalties, anticipatory breach of its duty to pay third-quarter 1994 royalties, and refusal to allow inspection of its records as required by the Agreement. Sometime thereafter, APT/NY sought leave to file a second amended complaint to add contract and common law claims predicated on the defendants' unlawful use of APT/NY's confidential information to develop a competing software product. At that time, APT/NY also sought leave to dismiss Ainsworth as a defendant without prejudice, after defense counsel asserted that the claims against Ainsworth were frivolous given the lack of personal jurisdiction over him and given that injunctive relief could not be enforced against Ainsworth in the United Kingdom. By Opinion and Order dated December 28, 1994, this Court granted both motions.
On February 14, 1995, APT/UK answered the second amended complaint and filed counterclaims, and, on March 24, 1995, APT/NY replied to the counterclaims. With leave of Court, APT/NY filed its third amended complaint on February 15, 1996, which added as defendants, Ainsworth and Decision Analysis Investment System (UK) Ltd. (now known as E.M. Applications, Ltd. and herein referred to as "DAIS/UK"), a U.K. company of which Ainsworth is a shareholder and managing director. Thereafter, on April 17, 1996, APT/UK answered the third amended complaint and filed counterclaims. These counterclaims generally alleged that APT/NY, among others, committed fraud and various intentional torts against APT/UK. Defendants Ainsworth and DAIS/UK did not answer the third amended complaint, but instead moved to dismiss the complaint for lack of personal jurisdiction. This Court denied the motion to dismiss on July 16, 1997. See Advanced Portfolio Technologies, Inc. v. Advanced Portfolio Technologies Ltd, No. 94 Civ. 5620, 1997 WL 401810 (S.D.N.Y. July 16, 1997). Despite this ruling, neither Ainsworth nor DAIS/UK ever answered the third amended complaint. As a result, upon APT/NY's application, the Court entered a default order, pursuant to Fed.R.Civ.P. 55, against Ainsworth and DAIS/UK on December 12, 1997.
In the meanwhile, from January of 1995 on, the parties engaged in a contentious discovery process during which APT/UK resisted discovery requests directed at obtaining comprehensive deposition testimony from Ainsworth, APT/UK's primary shareholder and managing director, who was to be deposed on behalf of the company. Following Ainsworth's failure to appear for a duly noticed deposition, Magistrate Judge Bernikow, who oversaw discovery in this case, held a conference on January 11, 1995 to resolve this discovery dispute. The conference gave rise to a February 9, 1995 Stipulation and Order directing Ainsworth to appear for his deposition on February 24, 1995 and providing that the deposition must continue from day to day until completed. According to Magistrate Judge Bernikow, during the deposition, APT/NY could question Ainsworth on all matters relating to the case as an individual and as an officer, director, and principal of APT/UK and DAIS/UK, as well as on the whereabouts of certain funds allegedly due APT/NY and on the status of the technology at issue in the case. See Advanced Portfolio Technologies, 1999 WL 64283, at *2. In light of the February 9, 1995 Order, Ainsworth was deposed on February 24 and 28, 1995, and on August 14 and 15, 1995. See id. At the end of the day on August 15th, the parties agreed to discontinue the deposition, even though APT/NY had not finished its examination, because APT/UK's counsel promised, on the record, to produce Ainsworth at a mutually convenient time so that APT/NY could complete his deposition. See id. (quoting August 15, 1995 deposition transcript).
Based upon Ainsworth's August 1995 deposition testimony, APT/NY filed the third amended complaint in this case, adding Ainsworth and DIAS/UK as defendants. As mentioned above, Ainsworth and DIAS/UK brought a motion to dismiss the complaint for lack of personal jurisdiction, which the Court denied. Following this decision, APT/NY attempted to resume the Ainsworth deposition, but APT/UK declined to produce him. See Decl. of Peter Raymond, Esq., June 25, 2001, ¶ 12 ("Raymond Decl."). In light of this, Magistrate Judge Bernikow held yet another conference to resolve the conflict over Ainsworth's deposition, this time on January 28, 1998. During the conference, APT/UK argued that the Ainsworth deposition should continue in London because APT/UK should not have to pay expenses in connection with a deposition in New York. See Advanced Portfolio Technologies, 1999 WL 64283, at *2. APT/NY then offered to cover the cost of Ainsworth's trip to New York, at which time, APT/UK's counsel indicated that APT/UK might not produce Ainsworth for the continued deposition unless it took place in London. See id. In response to this exchange, Magistrate Judge Bernikow stated that the deposition could take place in London, but only if APT/UK paid to bring APT/NY's counsel, the documents, and possibly an APT/NY representative to London. See id. At this point, Magistrate Judge Bernikow instructed APT/UK's counsel to confer with its client about these alternatives and scheduled a February 11, 1998 conference call to once and for all resolve the issue. See id.
Just before the February 11th conference call, Magistrate Judge Bernikow received a letter from APT/UK's counsel stating that Ainsworth would not come to New York for a deposition even if APT/NY covered his expenses. See id. at *3. The letter explained that Ainsworth, based upon the advice of his U.K. counsel, did not intend to travel to the U.S. for further depositions. See id. Then, APT/UK later declined to produce Ainsworth for a deposition in London, claiming that it could not afford to pay APT/NY's travel expenses. See id. Notwithstanding its purported lack of funds, shortly thereafter, APT/UK incurred expenses in connection with obtaining discovery on its behalf by having its counsel conduct five additional depositions. See id.
By this point, APT/NY had become frustrated with APT/UK's failure to comply with discovery orders in refusing to produce Ainsworth for his deposition. Therefore, in August 1998, APT/NY filed a motion pursuant to Fed.R.Civ.P. 37(b)(2)(C) requesting an order striking APT/UK's answer and counterclaims as a sanction for APT/UK's failure to produce Ainsworth, its principal, for his court-ordered deposition. Despite APT/UK's dilatory conduct and inexcusable disregard of judicial directives, by Opinion and Order dated February 9, 1999, this Court, mindful of the severity of the requested sanction, denied APT/NY's motion to strike, but ordered that Ainsworth must submit to a deposition by May 3, 1999 if APT/UK were to avoid a subsequent order striking its answer and counterclaims and rendering a default order against it. Specifically, this Court ruled:
Rule 37(b) authorizes a court to impose various sanctions against a party that violates an order compelling discovery. See Fed.R.Civ.P. 37(b). Under Rule 37(d), if a party or an officer, director, or managing agent of a party fails to appear for a deposition after being served with proper notice, the court "may make such orders in regard to the failure as are just," including an order striking a disobedient defendant's answer and rendering a default judgment in favor of the plaintiff. Fed.R.Civ.P. 37(b)(2)(C) (d).
Although the Court believes that striking the Answer and Counterclaims is too harsh a sanction at this time, APT/UK is now on a very short leash. The Court determines that it is necessary for Ainsworth to be deposed by APT/NY. . . . The deposition is to commence by no later than May 3, 1999 and shall continue on consecutive days (excluding weekends) for as long as APT/NY needs to fully depose Ainsworth. . . . [S]hould the deposition of Ainsworth not commence by May 3, 1999, the Court, upon application by APT/NY, will strike the Answer and Counterclaims of APT/UK and enter a default order against APT/UK.Advanced Portfolio Technologies, Inc., 1999 WL 64283 at *3-4
Following this ruling, APT/NY's counsel sent a letter to APT/UK's counsel enclosing a copy of the February 8, 1999 Opinion and Order and inquiring whether APT/UK intended to produce Ainsworth for his deposition. See Raymond Decl. ¶ 18, Ex. B. After receipt of the letter, APT/UK's lawyer informed opposing counsel that he had sent a copy of the Order to Ainsworth, but expressed doubt that Ainsworth would agree to submit to a deposition. See id. ¶¶ 17-18, Ex. C. With the May. 3, 1999 deadline looming, on April 6, 1999, APT/NY's counsel sent a letter to APT/UK's lawyer asking whether, and if so where, Ainsworth would appear for his deposition. See id. ¶ 19, Ex. D. In a letter dated April 9, 1999, APT/UK's counsel wrote: "Thank you for your letter dated April 6, 1999. Since our last telephone conversation, I have been instructed by my client to take no further action. While I have not yet abandoned efforts to induce my client to accept one of the alternatives for continued depositions presented by the Court, I must advise you, that I believe it unlikely that I will be able to do so. If my efforts are unsuccessful, I will seek leave to withdraw from further representation. I will advise you of any changes to the foregoing prior to April 15, 1999." Id. ¶ 20, Ex. E. APT/UK's counsel then sent a letter to the Court on April 13, 2000, stating: "I advised my clients by mail and e-mail (at their last known addresses) of the Plaintiff's intention to move for entry of a default judgment against them. I have heard nothing from my client in response thereto." Id. ¶ 22, Ex. F.
APT/UK never produced Ainsworth for his continued court-ordered deposition, so, on April 18, 2000, APT/NY moved for an order to show cause and subsequent order striking APT/UK's answer and counterclaims and entering a default order against APT/UK. At the hearing on the order to show cause, the Court questioned APT/UK's counsel regarding whether its clients received notice of plaintiff's motion, to which, APT/UK's counsel responded in the affirmative. See id. ¶ 25, Ex. G. APT/UK's counsel requested an adjournment of the hearing, but the Court denied that application in light of APT/UK's refusal to produce Ainsworth for a court-ordered deposition and given APT/UK's failure to respond to the letter from counsel informing APT/UK of the impending default judgment.See id. Thus, on April 18, 2000, this Court issued a default judgment against APT/UK as a sanction for failing to produce Ainsworth, its principal, for a deposition in accordance with this Court's February 8, 1999 Order.
APT/UK now moves, pursuant to Fed.R.Civ.P. 60(b), to vacate the April 18, 2000 default judgment issued in favor of Plaintiff APT/NY. For the reasons stated below, the Court denies the motion.
Discussion
I. Motion to Vacate
Rule 55(c) provides that "[f]or good cause shown the court may set aside an entry of default and, if a judgment of default has been entered, may likewise set it aside in accordance with Rule 60(b)." Fed.R.Civ.P. 55(c). Rule 60(b), in turn, contains six subsections that set forth various grounds under which a court may relieve a party from a default judgment: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud, misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged; or (6) any other reason justifying relief from operation of the judgment. See Fed.R.Civ.P. 60(b). Aside from determining if one of these grounds exists, a court must take into account certain equitable factors as well; specifically, the willfulness of the default, the existence of a meritorious defense, and the level of prejudice to the non-defaulting party. See Pecarsky, 249 F.3d at 171. This three-prong equitable standard balances the competing interests in favoring an adjudication on the merits and in protecting the finality of judgments that underlie Rule 60(b). See House v. Secretary of Health Human Services., 688 F.3d 7, 9 (2d Cir. 1982) ("Properly applied, [Rule 60(b)] preserves a balance between serving the ends of justice and ensuring that litigation reaches an end within a finite period of time.").
A. Rule 60(b)(6) Relief
APT/UK seeks relief from the default judgment here on the ground that its former counsel's misconduct during the course of this litigation, which allegedly included lying to the Court and opposing counsel and misleading APT/UK about the progress of the case, constitutes "extraordinary circumstances" justifying relief under Rule 60(b)(6). See Nemaizer v. Baker, 793 F.2d 58, 63 (2d Cir. 1986) ("[Clause 6 of Rule 60(b)] is properly invoked only when there are extraordinary circumstances justifying relief, when the judgment may work an extreme and undue hardship, and when the asserted grounds for relief are not recognized in clauses (1)-(5) of the Rule."); Amoco Overseas Oil Co. v. Compaigne-Nationale Algerienne de Navigation, 605 F.2d 648, 656 (2d Cir. 1979) ("To prevail on its alternative motion under Rule 60(b)(6), which has no specific time limit, the appellant had to demonstrate that there are extraordinary circumstances or extreme hardship that warrant relief from the judgment."). Despite the fact that the record here indicates otherwise, APT/UK now claims that prior to the entry of default in this case it was unaware of the Court's February 8, 1999 Order directing it to produce Ainsworth. In an attempt to reconcile the record, APT/UK contends that unbeknownst to it, its former lawyer blatantly lied to this Court and/or to opposing counsel in at least the following communications: (1) a telephone conversation in March 1999 with opposing counsel in which APT/UK's former lawyer stated that he had sent a copy of the February 8, 1999 Order to Ainsworth, see Raymond Decl. ¶¶ 17-18, Ex. C; (2) a letter dated April 9, 1999 informing opposing counsel that his client directed him to take no action to schedule the deposition, see id. ¶ 20, Ex. E. (letter from APT/UK's counsel expressing serious doubt as to the likelihood that its client would accept one of the alternatives for continued depositions presented by the Court in the February 8, 1999 Order); (3) a letter dated April 13, 2000 informing this Court that he had notified APT/UK of APT/NY's intention to move for default and that he had not received any response from his clients, see id. ¶ 22, Ex. F; and (4) a statement at the order to show cause hearing by co-counsel to the effect that APT/UK received notice of that hearing from the former lawyer, see id. ¶ 25, Ex. G. The Court finds APT/UK's story incredible.
Some authority exists for the notion that in some circumstances an attorney's gross or willful misconduct creates an exception to the rule that a client is bound by the actions of its attorney and constitutes "extraordinary circumstances" under Rule 60(b)(6). See United States v. Cirami, 563 F.2d 26 (2d Cir. 1977); Nurani v. Marissa, 151 F.R.D. 32 (S.D.N.Y. 1993); but see Pantola v. Texas Gas Transmission Corp., 890 F.2d 955, 960(7th Cir. 1989) ("Even if their allegations of attorney misconduct are true, Rule 60(b)(6) does not address their situation. Instead, the plaintiffs' remedy lies against the attorney."). The client, however, bears a substantial burden of establishing this basis for relief from judgment. Indeed, the client must produce highly convincing material in support of its Rule 60(b)(6) motion and must establish that it diligently supervised the progress of its case. See Cirami, 563 F.3d at 33; United States v. Cirami, 535 F.2d 736, 740-41 (2d Cir. 1976); see also China Mariners' Assurance Corp. v. M.T. W.M. Vacy Ash, No. 96 Civ. 9553, 1999 WL 126921, at * 3 (S.D.N.Y. Mar. 9, 1999).
APT/UK has failed to meet either requirement. APT/UK merely supports the accusations regarding its former counsel with a vague, self-serving and unsupported affidavit. See Decl. of Henry Pellowe, Mar. 30, 2001 ("Pellowe Decl."). This submission fails to satisfy APT/UK's burden. Based on the nature of APT/UK's allegations, the Court would have expected to receive (a) an affidavit from APT/UK's former lawyer illuminating the circumstances surrounding his alleged misrepresentations; (b) an affidavit from Ainsworth detailing his split from APT/UK as well as other aspects of the litigation; and/or (c) an affidavit from APT/UK's present counsel indicating what efforts, if any, it made to elicit the former lawyer's testimony, either voluntarily or under subpoena, and setting forth what attempts, if any, it made to secure a sworn statement from Ainsworth. See United States v. Cirami, 535 F.2d 736, 739 (2d Cir. 1976). APT/UK submits nothing of the sort.
Even assuming, though, that this Court credited APT/UK's accusations regarding its former counsel, APT/UK is nonetheless not entitled to relief pursuant to clause 60(b)(6) because it has failed to demonstrate that it had been diligent despite its attorney's misconduct. APT/UK provides no details regarding any specific effort on its part to contact its former counsel to ascertain the status of the case prior to the entry of default. See Cirami, 535 F.2d at 741 ("[E]ven if gross negligence provides a basis for relief, the record before us fails to establish any gross negligence or misleading of the [movants] by counsel and is bereft of any indication of client diligence."); Inryco v. Metropolitan Eng. Co., 708 F.2d 1225, 1234 (7th Cir. 1983) (stating that relief under Rule 60(b)(6) on the ground of attorney misconduct requires a "diligent, conscientious client.").
Based on the forgoing, APT/UK has failed to show any "extraordinary circumstances" with respect to its former counsel's conduct so as to warrant relief from judgment under Rule 60(b)(6).
To the extent that APT/UK also argues that Rule 60(b)(1) justifies relief based on its lawyer's alleged misconduct, the Court rejects this claim as well. That is so because mistake or excusable neglect does not include willful or contumacious conduct. See In re Salem Mortg. Co., 791 F.2d 456, 460(6th Cir. 1986).
B. Rule 60(b)(1) Relief
Next, APT/UK invokes Rule 60(b)(1), which permits a court to vacate a default judgment on the ground of excusable neglect. See Fed.R.Civ.P. 60(b)(1). APT/UK argues that it deserves relief from judgment under this subsection because it neither knew of the February 8, 1999 Order directing it to produce Ainsworth for a deposition or face entry of a default judgment against it, nor had the ability to produce Ainsworth for a deposition given that, as of January 1999, he no longer had any affiliation with APT/UK. As indicated earlier, APT/UK must establish the basis for vacating the default judgment by producing some evidence to support its argument. See China Mariners' Assurance Corp., 1999 WL 126921, at *3 APT/UK has failed to do so here. Quite the contrary, the record reflects that APT/UK's counsel sent a copy of the Order to its clients (i.e., APT/UK and Ainsworth) by March 1999. Even assumingarguendo that APT/UK never received this Order, at the time the Court issued that ruling, APT/UK was already under an existing obligation to produce Ainsworth for his deposition based on a directive issued by Magistrate Judge Bernikow — a directive APT/UK deliberately ignored. To be sure, in the February 8, 1999 decision, this Court stated: "Although [the sanction of striking APT/UK's Answer and Counterclaims] is not yet warranted, the Court does find that APT/UK is guilty of some wrongdoing in connection with the deposition of Ainsworth [by failing to comply with Magistrate Judge Bernikow's clear intentions that it produce Ainsworth for his continued deposition.]" See Advanced Portfolio Technologies, 1999 WL 64283, at *3.
APT/UK goes on to argue that, even if it knew of this Court's February 8, 1999 Order, it could not have complied because it had no ability to produce Ainsworth for a deposition given that, as of January 1999, he no longer had any affiliation with APT/UK. APT/UK contends that by January 1999, Ainsworth had resigned his directorship and had tendered all of his equity interests back to APT/UK. See Pellowe Decl. ¶¶ 25-26. Again, APT/UK simply relies upon a vague, self-serving affidavit to support this allegation and fails to provide an iota of documentary evidence to substantiate this claim. As support for this assertion, one would expect to see, for instance, documentation regarding the stock sale or a resignation letter from Ainsworth. APT/UK provides no documentation whatsoever.
In any event, even if the Court accepted the contention that Ainsworth ended his relationship with APT/UK in January 1999, APT/UK had an obligation at that time to inform the Court and opposing counsel of this change. It did not do so; nor does it offer an explanation for why it neglected to do so. Under these circumstances, the Court finds that APT/UK has failed to show any "excusable neglect" under Rule 60(b)(1).
Moreover, to obtain relief from judgment based on "excusable neglect" under subsection 60(b)(1) or in the case of a "extraordinary circumstances" under subsection 60(b)(6), a movant must first and foremost demonstrate that its default was not willful, that it has a meritorious defense or counterclaims, and that the nonmoving party will not be prejudiced if the judgment is vacated. See Malanga v. Grand Union Co., No. 91 Civ. 4659, 1993 WL 255107, at *1 (S.D.N.Y. July 1, 1993). APT/UK cannot meet this requirement given that it willfully defaulted by ignoring this Court's February 8, 1999 Order directing it to produce its, principal, Peter Ainsworth, for his deposition. Indeed, in that ruling, the Court warned APT/UK in no uncertain terms that failure to comply would result in a default judgment. Despite this impending sanction, APT/UK's lawyer informed opposing counsel that his client directed him to take no action to schedule the deposition. See Raymond Decl. ¶ 20, Ex. E. (letter from APT/UK's counsel expressing serious doubt as to the likelihood that its client will accept one of the alternatives for continued depositions presented by the Court). In addition, according to APT/UK's counsel, APT/UK never responded to the notification of APT/NY's decision to move for a default judgment. See id. ¶ 22, Ex. F. (letter to the Court from APT/UK's counsel). What is more, APT/UK's earlier stonewalling tactics during discovery also support a finding of willfulness. See Advanced Portfolio Technologies, Inc., 1999 WL 64283, at *3 ("[T]he Court finds that [APT/UK's actions were] taken to frustrate APT/NY's legitimate need to depose Ainsworth.").
Because this Court finds that APT/UK willfully defaulted in this case, there is no need to consider whether APT/UK had meritorious counterclaims and the possible prejudice to APT/NY if the default judgment is vacated.See Bank of Montreal v. Mitsui Mfrs. Bank, No. 85 Civ. 1519, 1992 WL 79293, at *1 (S.D.N.Y. Apr. 7, 1992) ("A finding of willful default, however, concludes the Court's inquiry under Rule 60(b)"); Bank United Bank of Kuwait PLC v. Enventure Eneroy Enhanced Oil Recovery Assocs., 755 F. Supp. 1195, 1205 (S.D.N.Y. 1989) (ruling that if defendant's default was willful, there is "no need to consider whether [defendant] has a meritorious defense and the resulting prejudice to [plaintiff] if the default judgment [were] vacated").
Accordingly, APT/UK's motion to set aside the default judgment is denied.
II. APT/NY's Motion For Rule 11 Sanctions
APT/NY cross-moves for sanctions against APT/UK and its counsel, pursuant to Fed.R.Civ.P. 11, on the grounds that APT/UK's motion to vacate has no basis in either fact or law. Specifically, APT/NY first argues that APT/UK violated Rule 11 by failing to make reasonable inquiry into the law before filing the motion to vacate the default judgment because it brought this motion without any valid basis under Rule 60(b). Rule 11 authorizes the imposition of sanctions upon an attorney who, after reasonable inquiry, presents signed papers to the Court containing "claims, defenses, and other legal contentions" not "warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law." Fed.R.Civ.P. 11(b)(2). APT/NY argues that APT/UK's claim that it is entitled to relief from judgment under Fed.R.Civ.P. 60(b)(6) based on its former counsel's alleged misconduct is frivolous. APT/UK's motion, however, does satisfy the reasonableness test in this regard because some authority exists for the notion that an attorney's misconduct justifies relief from judgment in some circumstances. Even though the Court ultimately found APT/UK's position unpersuasive, it is not so frivolous as to justify awarding sanctions. This is also the case with respect to APT/NY's motion for Rule 11 sanctions based on APT/NY's claim that APT/UK allegedly failed to establish a meritorious defense because the Court did not reach that issue and because APT/UK's arguments in that regard are not so frivolous as to warrant sanctions.
Although Rule 11 generally requires that the party seeking sanctions bring the motion separately from the challenged pleading, see Sartini v. Portofino Sun Center Columbus Ave. Corp., No. 96 Civ. 4550, 1997 WL 400209, at *4 (S.D.N.Y. July 16, 1997), this Court ruled at the April 12, 2001 pre-motion conference that APT/NY could cross-move for Rule 11 sanctions in this instance.
Next, APT/NY argues that APT/UK violated Rule 11 by misrepresenting material facts about Ainsworth's current relationship with APT/UK in support of its motion to vacate. In this regard, APT/NY cites some material indicating that Ainsworth's wife is currently a director of and an equity shareholder in APT/UK. But as APT/UK points out, these facts are not dispositive on the issue of Ainsworth's association with the company. Therefore, the Court also declines to impose sanctions based on this argument.
As such, APT/NY's cross-motion for sanctions pursuant to Rule 11 is denied.
Conclusion
For the reasons set forth above, the Court denies APT/UK's motion to vacate the default judgment entered against it in this case. The Court also denies APT/NY's cross-motion for sanctions.