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Court Sanctions Plaintiffs for Failing to Voluntarily Dismiss Baseless Complaint

December 23, 2014

My clients sometimes bemoan the reluctance of courts to award attorneys’ fees to litigants forced to defend frivolous lawsuits. However, in Norkus v. ING U.S. Inc., the Honorable Robert Holmes Bell reaffirmed that in the Western District of Michigan, the Court is prepared to award attorneys’ fees under Fed. R. Civ. P. 11 where the Court concludes that a party’s claims, defenses, or legal contentions are frivolous, or that its factual contentions do not have evidentiary support.

Defendant ING was the issuer of two life insurance policies to Mr. Norkus. Mr. Norkus used the life insurance policies as collateral for a loan from Old Kent Bank. Mr. Norkus assigned the net proceeds of the life insurance policies to the bank. The assignment expressly provided the bank the “sole right to surrender the Policy and receive its surrender value at any time provided by the terms of the Policy and at any other times as Insurer may allow.”

Upon Mr. Norkus defaulting on his loan to the bank, the bank directed ING to surrender the cash value of the insurance policies to the bank. ING did so. The plaintiffs sued ING, alleging that the insurance policy was breached because Mr. Norkus did not direct ING to surrender the insurance proceeds to the bank.

Counsel for ING approached counsel for the plaintiffs on numerous occasions to make it clear that the complaint utterly lacked merit, yet the plaintiffs failed to voluntarily dismiss their complaint. The plaintiffs’ counsel was also extremely sloppy in his response to ING’s motion for summary judgment, failing to correctly identify the insurance policy that formed the basis of the claims and referring to his own clients’ claims as “utterly meritless.” The court concluded that “the actions of plaintiffs’ counsel meet the ‘objectively unreasonable conduct’ standard” and that an award of the defendant’s attorneys’ fees for the cost of filing its motion for summary judgment was warranted.

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