Sussman v. Bank of Israel
56 F.3d 450 (2d. Cir.), cert. denied, 516 U.S. 916 (1995)

Facts:

Sussman and his co-plaintiffs were founders, directors, and shareholders of an Israeli bank accused of fraud, embezzlement, and mismanagement. When they were sued for negligence and breach of fiduciary duties, their lawyer, Lewin, warned Israeli officials that he would file a counterclaim, and proposed a settlement. They refused, and Lewin filed.

History:

  • The district court dismissed the complaint on forum non conveniens grounds, and conditioned the dismissal on assurances that Sussman would not be detained in Israel.
  • BOI then moved for an award of sanctions:

(1) The suit was filed for improper purpose.

(2) The complaint contained numerous arguments lacking factual and legal basis.

  • The district court granted the motion:
    • They didn’t address the complaint’s merits and instead based their decision solely on improper purpose – Lewin filed a complaint in a “highly doubtful venue for the purpose of putting pressure on a foreign government.”

Issue:

Can a non-frivolous complaint be sanctioned if it was filed for an improper purpose?

Holding:

In some rare cases, yes, but generally, no. Sanctions against Lewin reversed.

Reasoning:

  • Rule 11 is based on an objective standard, therefore a party’s subjective purpose is disregarded:
    • The issue of frivolousness becomes the basis for improper purpose.
  • Here, the claim wasn’t frivolous:
    • The fact that the district court included the condition about not detaining Sussman proved that they wanted the case to be assessed on its merits and that the case was not frivolous.
    • Further, attorneys are under no obligation to file in the most convenient forum; their only obligation is to file in a proper forum.
  • Finally, it was not improper either – it’s hardly unusual for a plaintiff to seek to resolve disputes without resorting to legal action.
    • BOI had contact with a New York bank.

In short, a party should not be penalized for or deterred from seeking and obtaining judicial relief merely because one of his multiple purposes in seeking that relief may have been improper.