The Court of Appeals for the 2nd Circuit held that a filing of an Amended Complaint resets the clock for Defendants seeking sanctions under Rule 11 and that the Plaintiff must be given twenty-one days to correct or withdraw the pleading before a Motion for Sanctions is formally presented to the District Court. In Lawrence v. Richman Group of CT LLC, 620 F3d 153 (2nd Cir. 2010), Plaintiff sued for commissions owed on the sale of securities. Defendants gave notice and filed a Motion for Sanctions on the ground that a First Amended Complaint failed to plead a contract that was legal and enforceable. Based on allegations of counsel that this defect could be cured, the court gave leave to replead the Complaint and said that it would be subject to Rule 11 Sanctions. The new Complaint was subject to the same deficiencies and was dismissed upon motion. Defendants then renewed their Motion for Rule 11 sanctions which were granted by the District Court. The Court of Appeals said,
“In these circumstances, the filing of the Second Amended Complaint reset the clock for seeking sanctions pursuant to Rule 11(c)(2), so that Lawrence was entitled to notice of any defect in the filing and safe harbor of twenty-one days to correct or withdraw the pleading before a Motion to Sanctions based on that pleading, could be presented to the District Court”. (160).
Since the sanctions were imposed without affording Plaintiff the mandated safe harbor protection of Rule 11(c)(2), the judgment awarding sanctions was vacated.