The Court Appeals for the Seventh Circuit recently held that two letters were not substantial compliance with the Rule 11 Warning ? Shot/Safe Harbor Requirements. In Northern Illinois Telecom, Inc. v. PNC Bank, N.A., ____ F.3d ____ (7th Cir. 2017), 2017 WL 945092 the defendant obtained summary judgment and then sent two letters to defendant containing settlement demands and threats to seek Rule 11 Sanctions if its demands were not met. Plaintiff moved for sanctions and the district court accepted plaintiffs’ argument that the letters amounted to “substantial compliance” with Rule 11(c)(2) and thus preserved its right to move for sanctions. The court held that the contract claim was frivolous and asserted in bad faith. The district court awarded sanctions against the defendant and its attorney for $84,325.00.
“We reverse. Whether “substantial compliance” with the warning-shot/safe-harbor requirement of Rule 11(s)(2) can ever be sufficient is controversial. We are the lone circuit to say yes. Compare Penn, LLC v. Prosper Business Dev. Corp., 773 F.3d 764, 768 (6th Cir. 2014) (eight circuits reject substantial compliance theory), with Nisenbaum v. Milwaukee County, 333 F.3d 804, 808 (7th Cir. 2003) (substantial compliance with warning-shot requirement was sufficient to allow sanctions). Even assuming substantial compliance is sufficient, the defendant’s settlement demands in this case fell far short of substantial compliance. We therefore reverse the district court’s award of sanctions.”