United States v. Henry L. Milam, W. Larue Boyce, Jr.

Citations: 855 F.2d 739; 12 Fed. R. Serv. 3d 65; 1988 U.S. App. LEXIS 12809; 1988 WL 90117Docket: 87-8342

Court: Court of Appeals for the Eleventh Circuit; September 19, 1988; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Henry L. Milam and his former attorney, W. LaRue Boyce, appeal a district court's imposition of sanctions for pursuing a frivolous statute of limitations defense under Fed. R.Civ. P. 11. The case stems from the U.S. government's attempt to collect on three federally insured student loans totaling $4,500 taken by Milam in the 1970s. Milam was required to begin repayment nine months after dropping below half-time enrollment, which he did by June 1974, leading to loan default by August 1975. 

Under 28 U.S.C. § 2415(a), the U.S. had six years to file a lawsuit, which would have expired in August 1981. However, Milam made partial repayments in July and September 1983, which under the same statute, extended the time frame for the government to initiate legal action. The government filed a complaint on April 9, 1985. 

Despite the district court's indications that the government would likely prevail based on the statute of limitations, Milam filed a motion to dismiss citing this defense, which was denied. He later submitted an untimely amended answer through Boyce, again asserting the statute of limitations. The court warned that pursuing what appeared to be a frivolous defense could result in sanctions, including attorney's fees for the government under 28 U.S.C. §§ 1927 and 2412(b). Ultimately, the court affirmed the sanctions against Milam and Boyce.

Milam hired new counsel, Richard James, after his previous attorney, Boyce, was suspended for six months. Following local district court rules, James and the government attorneys submitted a preliminary statement identifying the statute of limitations as the central issue. The government subsequently filed for summary judgment. Milam and James did not respond to this motion, leading the district court to grant summary judgment for the government and order Milam and his attorney to show cause for potential sanctions under Rule 11.

After an evidentiary hearing, the court sanctioned both Milam and Boyce but not James. The court deemed Milam's motion to dismiss frivolous based on the statute's clear language and held Milam accountable for Boyce's actions, asserting that Milam influenced the litigation strategy. Boyce was sanctioned for inadequately investigating the limitations defense. The court ordered Milam and Boyce to pay $3,080 in attorney's fees to the government. Additionally, the court identified "aggravating factors" due to Milam's refusal to acknowledge a valid debt, imposing a further $5,000 fine for abusing judicial resources.

Rule 11 of the Federal Rules of Civil Procedure mandates that all filings must be signed by an attorney or party, certifying the submissions are well-grounded in fact and law, not intended for improper purposes. Violations can lead to sanctions, including payment of reasonable expenses incurred due to the offending filing. The court referenced Donaldson v. Clark, which emphasized that Rule 11 aims to deter abusive tactics and streamline litigation by minimizing frivolous claims. It outlined three behaviors that could trigger sanctions: filing baseless pleadings, advancing unviable legal theories, or submitting motions intended for harassment or delay.

The district court is responsible for determining whether there are factual, dilatory, or bad faith reasons to impose Rule 11 sanctions, with its decisions subject to abuse of discretion review. In contrast, the legal sufficiency of a pleading or motion is reviewed de novo. When appealing Rule 11 sanctions, parties must recognize the distinction between reviewing the district court's conclusion that certain behaviors merit sanctions and reviewing the specific sanctions imposed. The Donaldson case exemplifies this distinction, as it involved a district court ordering the appellant to pay attorney's fees and a fine of $500. The review of sanctions may involve various considerations, such as whether to sanction the attorney or the represented party, the appropriateness of the sanction type, and the severity of the imposed sanction. The court expressed concern regarding a $5000 fine levied on Milam, given his financial circumstances. However, the court did not assess the excessiveness of the fine or attorney's fees because the appellants waived this issue on appeal by not adequately raising it in their briefs. Their appeal focused solely on whether the defense of the statute of limitations was sufficiently non-meritorious to justify sanctions, leading the court to abandon all other issues.

The district court imposed a severe sanction on Milam after determining he was "the principal actor" in a case characterized by his belligerent litigation behavior. The appellants failed to comply with Fed.R.App. P. 10(b) regarding the inclusion of a transcript for the appeal, preventing a determination of whether the sanctions were warranted. Under amended Rule 11, which applies an objective "reasonableness" standard, the court found that Milam and Boyce acted unreasonably by arguing that a partial repayment made after the expiration of the statute of limitations was "gratuitous" and did not restart the limitation period. The court referenced 28 U.S.C. Sec. 2415(a), which clearly states that any partial payment or acknowledgment of debt restarts the limitation period, regardless of when the payment occurs. Despite the lack of explicit provision in the statute for payments made after the original six-year period, established common law supports the view that such payments restart the limitation period. This principle is reflected in authoritative sources, indicating that partial payments can revive the right to bring an action, irrespective of whether the original obligation has been barred. A voluntary transfer of money as part payment constitutes a binding promise to pay the antecedent debt, as long as the debt remains enforceable.

Appellants asserted to the district court that the statute of limitations defense had been previously reviewed in five cases, all of which did not address the impact of partial repayments made after the limitation period. The first four cases focused on when the limitation period for government recovery on federally insured student loans begins—either at the first missed payment or when the government pays the lender. The fifth case examined the now-repealed definition of "default" under 20 U.S.C. Sec. 1080(e)(2). The court noted that Rule 11 allows for innovative legal arguments, but appellants failed to engage with relevant precedents or provide a reasonable basis for their claim that the government's action was barred by the statute of limitations. They did not challenge existing legal principles regarding statutes of limitations or cite analogous state court decisions. The court affirmed that the government's cause of action accrues upon payment to the lender, not upon the student's default. While the district court suggested that the limitation period began in 1976, the record did not clarify this assertion, and the court concluded that the limitation period had indeed expired by the time of Milam's partial repayments in 1983.

Appellants failed to order the transcript of the hearing, significantly hindering the review of the district court's decision. The government has requested dismissal of the appeal, citing Federal Rule of Appellate Procedure 10(b), which mandates that an appellant must provide either the complete transcript or a statement of issues within ten days of notice of appeal. The appellants did not comply with either requirement, although appeals have been dismissed in similar cases. However, the current appeal will not be dismissed because the district court issued a memorandum order regarding the Rule 11 issue, and the appellants have submitted the remaining record. The court expresses reluctance to extend any leniency to the appellants due to the lack of a transcript they should have obtained. The district court determined that James effectively followed the guidance set by Milam and Boyce. The court's standard of review aligns with that of the D.C. Circuit, while other circuits utilize varying standards or an overarching abuse-of-discretion standard. Rule 11 allows the district court to impose sanctions on the signer of a filed paper or a represented party. The court referenced the case of Donaldson for different types of sanctions available under Rule 11. It is assumed that the information provided in the relevant form is accurate. Additionally, the Eleventh Circuit has adopted, as precedent, decisions of the former Fifth Circuit issued before October 1, 1981, in Bonner v. City of Prichard.