Court of Appeals vacates Rule 11 sanctions in Starbucks coffee case

In the movie A Civil Action, a lawyer representing the big, bad chemical company moves for Rule 11 sanction against the plaintiff's mass-tort lawyer played by John Travolta. The story takes place in the early 1980s, before Rule 11 became a prominent fixture in the Federal Rules of Civil Procedure. Travolta's character told the judge he had to look up Rule 11 to see what it said. The judge said that he did the same. Rule 11 is now well-known, and lawyers fear being hit with Rule 11 sanctions, which can be costly and wreck your reputation. The lawyer in this case was sanctioned, but the Court of Appeals finds the trial court abused its discretion, and the sanctions are gone.

The case is Sheehan v. Starbucks, a summary order issued on March 17. This consumer deception case alleges that the coffee company misled the public in claiming it was "Ground 100% Arabica Coffee." The argument is that the coffee also contained potassium, thus fooling the unsuspecting consumer. The district court sanctioned the plaintiff for making the frivolous claim that the 100% thing was false.

When a trial court sanctions the lawyer under Rule 11, it must be convinced the lawsuit was completely frivolous and filed in bad faith, and/or without any factual support. Courts are reluctant to impose this punishment to ensure that lawyers will bring innovative lawsuits and zealously represent their clients. The Court of Appeals writes that "judges should refrain from imposing sanctions where such action would stifle the enthusiasm or chill the creativity that is the very lifeblood of the law."

Sanctions were not warranted here, says the Second Circuit (Raggi, Nathan and Furman [D.J.]), even though the trial court determined that the "Ground 100% Arabica Coffee" advertisement was so obviously incorrect as to be frivolous. While the district court had a better interpretation than the plaintiff's lawyer, other courts around the country have said cases like this are not frivolous.

the Seventh Circuit has allowed similar claims about additives in parmesan cheese to proceed past a motion to dismiss, explaining that “certainly a plausible reading” of the phrase “100% Grated Parmesan Cheese” “is that ‘100%’ applies to all three words: it's all cheese; all the cheese is Parmesan, and it's all grated.” Bell v. Publix Super Mkts., Inc., 982 F.3d 468, 476-77 (7th Cir. 2020). And the First Circuit, in a case featuring nearly identical language to that present here, observed that it would be “by no means unreasonable” for a consumer to read “Freshly Ground 100% Arabica Coffee” to mean “that the package contains only coffee (and Arabica coffee at that), with no nuts (or anything else).” Dumont v. Reily Foods Co., 934 F.3d 35, 41 (1st Cir. 2019).

The district court also sanctioned the plaintiff's lawyer for not sufficiently investigating the facts prior to filing the lawsuit. But the record shows he reviewed a report about a study into the potassium levels in the coffee, and he found multiple newspaper articles reporting on these laboratory tests. He then sent coffee samples to a different laboratory for independent testing. This evidence undermines any finding of bad faith by the plaintiff's lawyer. While this evidence was not attached to the lawsuit, plaintiff was not required to "plead evidence" in filing the lawsuit. 

For the plaintiff's lawyer, the Rule 11 sanctions are gone. So is the contempt of court finding that the district court imposed, seemingly an addendum to the Rule 11 order. For the plaintiff's lawyer, even though he lost the case on the merits, yesterday was a very good day.