United States District Court, M.D. Florida, Tampa Division
VIRGWNIA M. HERNANDEZCOVINGTON UNITED STATES DISTRICT JUDGE
matter comes before the Court upon consideration of Plaintiff
Michael Kosterlitz's Motion to Strike Defendant's
Affirmative Defenses and Counterclaim as Fraud on the Court,
Dismiss Counterclaim and Defenses with Prejudice and Enter
Default (Doc. # 24), filed on May 3, 2018. Defendant Robert
E. Libbey, Jr. responded on May 17, 2018. (Doc. # 28). For
the reasons that follow, the Motion is denied.
question dominates all the claims and counterclaims in this
case: who owns the 40-foot catamaran, the Knotta Klu?
Kosterlitz initiated this action on March 9, 2018, alleging
he is the vessel's true owner and asserting a petitory
and possessory claim in admiralty as well as claims for
malicious prosecution, civil theft, conversion, and false
arrest. (Doc. # 1). The gist of Kosterlitz's claims is
that he and Libbey, who used to be friends, had tried to
negotiate the sale of the Knotta Klu from Kosterlitz to
Libbey. (Id. at 3). Although their negotiations
began in June of 2015, Kosterlitz and Libbey still had not
settled on a sales price over two years later. (Id.
at 4-5). Nevertheless, Libbey kept the Knotta Klu docked on
his property and made payments to Kosterlitz. (Id.
at 3-4). According to Kosterlitz, Libbey maintained that they
had executed a bill of sale for the Knotta Klu in October of
2017, while Kosterlitz asserted no such sale had taken place
and sought return of the Knotta Klu. (Id. at 5).
eventually decided to take possession of the Knotta Klu by
going to Libbey's property and removing the vessel on
December 26, 2017. (Id.). Libbey then filed a report
with the Lee County Sheriff alleging that Kosterlitz had
stolen the Knotta Klu. (Id. at 5-6). Kosterlitz was
arrested for grand larceny. (Id. at 6). The Lee
County State Attorney ultimately determined that no charges
should be brought. (Id.).
sings a different tune. In his Answer and Counterclaim,
Libbey contends he is the true owner of the Knotta Klu
because he and Kosterlitz completed the sale of the vessel.
(Doc. # 15 at 7-8). Libbey alleges the sale occurred in
August of 2015, with Libbey “assum[ing] the monthly
payment of an unsecured Note owed to its holder, Ned
Christensen; convey[ing] possession and title to a F-27
trimaran to Kosterlitz; and assum[ing] the balloon payment of
the ‘Christensen' Note when it became due.”
(Id. at 7). Libbey attaches a bill of sale to his
Answer. (Id. at 13). Also in August of 2015, Libbey
“entered into an agreement with ‘Christensen'
to assume the monthly debt and the balloon payment due on the
unsecured note to complete the purchase of the subject vessel
free and clear of any claim.” (Id. at 8).
Libbey attaches an unsigned “Promissory Note, ”
dated December 1, 2017, which purports to “replace
[the] prior Promissory Note between” Kosterlitz and
Christensen. (Id. at 14).
addition to assuming the Note and giving Kosterlitz the
trimaran, Libbey also made “an initial payment”
of $5, 000 to Kosterlitz's account. (Id. at 8).
Libbey summarizes all that he paid to purchase the Knotta Klu
in his second affirmative defense to Kosterlitz's
Complaint: “the sum of $40, 974.60 in cash together
with the in-kind value of a F-27 trimaran vessel with an
agreed minimum value of $30, 000, together with
[Libbey's] assumption of the Promissory Note.”
(Id. at 5). Yet, Kosterlitz “surreptitiously
entered onto the Libbey property and attempted to remove the
subject vessel to an unknown location.” (Id.).
Based on these allegations, Libbey asserts a petitory and
possessory counterclaim as well as counterclaims for
conversion and unjust enrichment against Kosterlitz.
filed the instant Motion, which this Court construes as a
motion for sanctions, on May 3, 2018. (Doc. # 24). Kosterlitz
argues that Libbey has committed a fraud upon the Court
because Libbey alleged a different sales price for the Knotta
Klu in a state court complaint filed on March 9, 2018 - the
same day Kosterlitz filed this case. (Id. at 4-5;
Doc. # 24-2). He asserts that Libbey's unexecuted
promissory note, by which Libbey supposedly assumed
Kosterlitz's debt to Christensen and which Libbey
attached to his Counterclaim, (Doc. # 15 at 14), is
manufactured evidence. Kosterlitz also notes that
Christensen, who is represented by the same counsel as
Libbey, has filed a state court action against Kosterlitz. In
that action, Christensen alleges that Kosterlitz - not Libbey
- owes him money under the promissory note. (Doc. # 24-3).
Because of these inconsistencies, Kosterlitz contends Libbey
should be sanctioned for perpetrating a fraud on the Court by
having his Answer and Affirmative Defenses stricken, having
default entered against him, and having the Counterclaim
dismissed with prejudice. (Doc. # 24 at 7).
has now responded, (Doc. # 28), and the Motion is ripe for
Court construes Kosterlitz's Motion as a motion for
sanctions because Kosterlitz alleges that Libbey's
pleadings and Counterclaim should be respectively stricken
and dismissed because of a supposed fraud on the Court.
courts derive their power to sanction any attorney, law firm,
or party from three primary sources: Rule 11 of the Federal
Rules of Civil Procedure, 28 U.S.C. § 1927, and the
inherent power of the court.” Stonecreek - AAA, LLC
v. Wells Fargo Bank N.A., No. 1:12-CV-23850, 2014 WL
12514900, at *1 (S.D. Fla. May 13, 2014)(citing Chambers
v. NASCO, Inc., 501 U.S. 32, 41 (1991)).
“Invocation of the Court's inherent power requires
a finding of bad faith.” Island Stone Int'l
Ltd. v. Island Stone India Private Ltd., No.
6:16-cv-656-Orl-40KRS, 2017 WL 1437464, at *11 (M.D. Fla.
Apr. 4, 2017), report and recommendation adopted,
No. 6:16-cv-656-Orl-40KRS, 2017 WL 1426664 (M.D. Fla. Apr.
21, 2017). “In determining whether sanctions are
appropriate under the bad faith standard, the court focuses
on the conduct and motive of a party, rather than on the
validity of the case.” Id.
which degrade the judicial system, ' including
‘attempts to deprive the Court of jurisdiction, fraud,
misleading and lying to the Court, ' . . . are sanctioned
through the court's inherent power.” Stonecreek
- AAA, 2014 WL 12514900, at *1 (quoting
Chambers, 501 U.S. at 32, 42). “A court has
the power to conduct an independent investigation in order to
determine whether it has been the victim of fraud.”
Chambers, 501 U.S. at 44 (citing Universal Oil
Products Co. v. Root Refining Co., 328 U.S. 575, 580
(1946)). “A ‘fraud on the court' occurs where
it can be demonstrated, clearly and convincingly, that a
party has sentiently set in motion some unconscionable scheme
calculated to interfere with the judicial system's
ability impartially to adjudicate a matter by improperly
influencing the trier or unfairly hampering the presentation
of the opposing party's claim or defense.”
Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1118 (1st
Cir. 1989); see also Gupta v. Walt Disney World Co.,
482 Fed.Appx. 458, 459 (11th Cir. 2012)(“[C]lear and
convincing evidence of egregious conduct [is] required to
establish fraud on the court.”).
Court's inherent power permits a broad spectrum of
sanctions that include striking frivolous pleadings and
defenses, imposing attorney's fees and costs, and
outright dismissal of a lawsuit.” Stonecreek -
AAA, 2014 WL 12514900, at *2 (citing Allapattah
Servs., Inc. v. Exxon Corp., 372 F.Supp.2d 1344, 1372-73
(S.D. Fla. 2005)). “Because of their very potency,
inherent powers must be exercised with restraint and
discretion.” Chambers, 501 U.S. at 44.
“[S]anctions for fraud are reserved for the most
egregious misconduct, such as bribery of a judge or ...