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MONTANA EIGHTH JUDICIAL DISTRICT COURT, CASCADE COUNTY

______________________________________________________________________________

)

MICHAEL D. SCHNITTGEN, )) Cause No. ADV-13-168

Plaintiff, )

)vs. ) FINDINGS OF FACT, CONCLUSIONS

) OF LAW, AND ORDER RE: RULE 11

BNSF RAILWAY CO., a corporation, )

)Defendant. )

____________________________________)_________________________________________

INTRODUCTION

This matter is before the Court on Plaintiff Michael Schnittgens Motion for Rule 11

Sanctions filed on June 20, 2014. [Doc. 90]. Defendant BNSF Railway Co. responded on July

7, 2014. [Doc. 96]. Schnittgen replied on July 21, 2014. [Doc. 100]. The Court held a hearing

on September 23, 2014.

John A. Kutzman and Anthony S. Petru appeared for Schnittgen. Thomas L. Beam,

Anthony M. Nicastro, and Maxon R. Davis appeared for BNSF. Mr. Davis was retained by

BNSF after this motion was filed, and he is not responsible in any way for the Rule 11 violations

or sanctions.

The Court, having considered all of the pleadings, records, files and oral argument, issues

the following Findings of Fact, Conclusions of Law, and Order.

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FINDINGS OF FACT

1. On July 19, 2011, Plaintiff Michael Schnittgen and engineer Randy Zeman were

driving a BNSF train from Stanford to Great Falls.

2. A BNSF dispatcher in Ft. Worth, Texas, issued a track warrant authorizing the

train to proceed from milepost 205 to the Great Falls yard. The track warrant did not warn of

any open switches that might divert the train onto an adjacent track.

3. When the train reached Gerber, about 12 miles southeast of Great Falls,

Schnittgen noticed the track switch was open, diverting them onto an adjacent track. The train

collided with a parked train. Schnittgen was injured in the collision.

4. In its internal investigation, BNSF determined Andre Kaluza failed to close the

switch. BNSF also found Kaluza improperly reported to BNSF dispatch the switch was closed.

Kaluza admitted his failure. BNSF fired Kaluza.

5. BNSF cleared Schnittgen of wrongdoing. The collisions cause was so clear

BNSF did not request Schnittgen submit a drug and alcohol test.

6.

Schnittgen sued BNSF for his injuries under the Federal Employers Liability Act,

45 U.S.C. 51, et seq.,on February 26, 2013. [Doc. 1].

7. BNSF answered on June 28, 2013. [Doc. 4]. In its Answer, BNSF admitted the

collision occurred, but denied liability and asserted contributory negligence.

8. On July 10, 2013, Schnittgen demanded BNSF admit liability and withdraw its

contributory negligence defense.

9. In an Amended Answer filed on September 19, 2013, BNSF maintained its

contributory negligence defense, but averred:

6. Defendant admits that Plaintiff was working for BNSF as aconducted on July 19, 2011 on a train near Great Falls and that Mr.

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Kaluza, an employee of 17 years, operated a sliding switch to

allow the Georgetown train to pull into the siding and off the

mainline tracks. Mr. Kaluza forgot to reline the switch and thetrain Plaintiff was working on entered the siding and hit the

Georgetown train. Three locomotives and 10 cars of out of the 110

cars on Plaintiffs train derailed.

7. Defendant does admit that an employee of 17 years failed to

exercise reasonable care when he forgot to reline a switch tomainline travel and if he had relined the switch then Plaintiffs

train would have traveled down the mainline instead of into the

siding and hitting the Georgetown train and derailing threelocomotives and 10 cars out of 110.

(Am. Ans. 6-7). [Doc. 11]. BNSF contends this admits liability.

10. On May 12, 2014, Schnittgen moved for partial summary judgment on liability

and contributory negligence. [Doc. 41.2]. Schnittgen separately served, but did not file, his

motion for Rule 11 sanctions. Schnittgen again demanded BNSF withdraw its contributory

negligence defense. BNSF refused.

11. The Court granted partial summary judgment for Schnittgen on August 28, 2014.

[Doc. 102].

CONLCUSIONS OF LAW

From the foregoing Findings of Fact, the Court enters the following Conclusions of Law:

1. Any Conclusion of Law in the preceding Findings of Fact is incorporated as a

Conclusion of Law.

2. This Courts findings of fact are reviewed on whether they are clearly erroneous

and the conclusions of law for abuse of discretion. See Davenport v. Odlin, 2014 MT 109, 9,

374 Mont. 503, 327 P.3d 478. A court abuses its discretion when it acts arbitrarily without

conscientious judgment or exceeds the bounds of reason resulting in substantial injustice. See

Larchick v. Diocese of Great Falls-Billings, 2009 MT 175, 39, 350 Mont. 538, 208 P.3d 836.

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3. By presenting a pleading to the Court, BNSF represents that to the best of its

knowledge, information and belief, formed after completing a reasonable inquiry:

(1) it is not being presented for any improper purpose, such as

to harass, cause unnecessary delay, or needlessly increasethe cost of litigation;

(2) the claims, defenses, and other legal contentions are

warranted by existing law or by nonfrivolous argument forextending, modifying, or reversing existing law or for

establishing new law;

(3) the factual contentions have evidentiary support or, ifspecifically so identified, will likely have evidentiary

support after a reasonable opportunity for further

investigation or discovery; and

(4) the denials of factual contentions are warranted on the

evidence or, if specifically so identified, are reasonably

based on belief or lack of information.

Rule 11(b), MRCP.

4. The purpose of Rule 11 is to discourage dilatory or abusive tactics and help to

streamline the litigation process by lessening frivolous claims or defenses. Byrum v. Andren,

2007 MT 107, 32, 337 Mont. 167, 159 P.3d 1062. Before a district court may impose

sanctions under Rule 11, it must conduct a hearing for that purpose, so the party will be

provided with due process before it is punished. Id.

5. Schnittgen notified BNSF of the alleged Rule 11 violations before filing his

motion. Schnittgen provided BNSF with a reasonable opportunity to withdraw its frivolous

defense before filing his Rule 11 motion. Schnittgen complied with Rule 11(c)(2), MRCP.

6. This Court followed the due process requirements under Byrum. BNSF was

notified of the Rule 11 motion. BNSF filed a written response. A hearing was held on

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September 23, 2014. The Court will hold a post-trial hearing before entering sanctions. The

Court complied with Rule 11(c)(1). MRCP.

7. This Court has broad discretion in imposing sanctions under Rule 11. See Morin

v. State Farm Mut. Auto. Ins. Co., 2013 MT 146, 33, 370 Mont. 305, 302 P.3d 96. A district

court has the flexibility to deal appropriately with violations of Rule 11 and to tailor sanctions to

fit the particular case. Id.(citing Gold Reserve Corp. v. McCarty, 228 Mont. 512, 515, 744 P.2d

160 (1987)). This Court is in the best position to evaluate the credibility of the evidence in a

Rule 11 proceeding. Id.(citing Bulen v. Navajo Refining Co., 2000 MT 222, 16, 344 Mont.

374, 188 P.3d 1013).

8. There are two grounds for imposing sanctions under Rule 11: the frivolousness

clause, meant to cover pleadings not grounded in fact or law; and the improper purpose

clause, meant to cover pleadings filed for an improper purpose. Id.at 37 (citingDAgostino v.

Swanson, 240 Mont. 435, 445, 784 P.2d 919, 925 (1990)).

9. Schnittgen asserts BNSF violates Rule 11 by equivocating its admission of

liability in paragraphs 6 and 7 of the Amended Answer and asserting contributory negligence.

10. Paragraphs 6 and 7 in BNSFs Amended Answer do not violate Rule 11. While

the Court agrees with Schnittgen that BNSF unreasonably equivocated its admission of liability

by irrelevantly referencing mistakes made by a 17-year employee, this equivocation does not

violate Rule 11.

11. BNSFs contributory negligence defense violates both the frivolousness clause

and improper purpose clause of Rule 11. See id. BNSF correctly notes contributory negligence

is an available defense under FELA. See 45 U.S.C. 53. To satisfy Rule 11, however, a defense

not only must have a basis in law, but also the factual contentions must have evidentiary support

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or will likely have evidentiary support after further investigation or discovery. The standard for

determining whether a pleadings has a sufficient factual basis is reasonableness under the

circumstances. See DAgostino v. Swanson, 240 Mont. 435, 445, 784 P.2d 919 (1990).

BNSFs factual explanation for its contributory negligence defense is feeble. BNSF

asserts Schnittgen failed to timely apply the emergency brake and maintain a proper lookout for

the parked train. BNSF concedes, however, the collision was unavoidable. BNSF posits, if

Schnittgen had applied the emergency brake sooner, his injuries may be less severe. In that

regard, BNSF contends its contributory negligence defense addresses damages.

BNSF fails to explain how it can admit liability for the train collision but blame

Schnittgen by asserting contributory negligence. See, e.g., Joseph v. United States, 121 F.R.D.

406, 412 (D. Haw. 1988) (imposing Rule 11 sanctions against the defendant for continuing to

deny liability and for asserting contributory negligence after becoming aware of facts

establishing liability);Hummer v. Pulley, Watson, King & Lischer, P.A., 536 S.E.2d 349, 380-81

(N.C. Ct. App. 2000) (same).

For contributory negligence, BNSF must prove Schnittgens conduct was a cause-in-fact

of his injury and the injury is the direct or indirect result, proximately caused by the negligent

act. See MPI2d 2.14;Pappas v. Midwest Motor Express, 268 Mont. 347, 350-51, 886 P.2d 918

(1994). Proximate cause is an act or omission which, in a natural and continuous sequence,

unbroken by any new, independent cause, produces injury, and without which the injury would

not have occurred. Id. at 351; see also Roe v. Kornder-Owen, 282 Mont. 287, 937 P.2d 39

(1997) (affirming dismissal of contributory negligence defense where there was no evidence the

plaintiffs conduct caused the collision). BNSF cleared Schnittgen of wrongdoing. BNSF

concedes the collision was unavoidable. Given those circumstances, there are no conceivable

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facts establishing Schnittgens alleged breach of a duty was a proximate cause of the collision

and his damages.

BNSF also lamely asserts its contributory negligence defense does not violate Rule 11

because it couched its pleading with the word, may. This is simply a last-ditch argument by

BNSF to maintain its defense at all costs, only compounding the frivolous, bad faith nature of its

pleading. To borrow lyrics from a Jimmy Buffett song, Thats my story and Im stickin to it

seems to aptly describe BNSFs strategy to maintain its frivolous defense. See Jimmy Buffett,

Thats My Story And Im Stickin To It , Off to See the Lizard, (MCA Records 1989).

Rule 11 does not permit a party to raise every conceivable claim or defense simply to

preserve them for trial. One court emphatically condemned the practice by holding, It would

appear [Defendants] assertion isthat it may simply have thrown in boilerplate defenses into

its answer without anything to support them, speculating on what the future might unearth. Rule

11 of course would preclude that kind of pleading practice. Gould v. Lumonics Research, Ltd.,

1982 WL 594705, at *1 fn. 2 (N.D. Ill. Apr. 12, 1982). The Rule 11 violation here is of the

worst kind: it is personal. This is not a situation, for instance, where a defendant alleges laches

when it does not apply. Rather, BNSF deliberately and with no hesitation maliciously alleges

Schnittgen is at fault for this train wreck. InDAgostino, the court admonished all members of

the Montana bar that the language of Rule 11 is mandatory. If a district court finds that a

pleading or motion is groundless or filed for an improper purpose, the court shall impose an

appropriate sanction. 230 Mont. at 448. A failure to impose sanctions when circumstances

reveal the rule has been violated is reversible error. See id.at 446.

Given BNSF cleared Schnittgen of wrongdoing before he sued, the only conceivable

motivation for BNSFs assertion of contributory negligence is to emotionally grind down

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Schnittgen to abandon his case, accept some nuisance-value settlement, or to otherwise

intimidate or pressure him. Given the numerous opportunities Schnittgen provided BNSF to

withdraw its frivolous defense, the Court concludes asserting and maintaining contributory

negligence was an improper delay, deny, and defend tactic by BNSF. None of these purposes is

proper under Rule 11, and BNSFs conduct must be sanctioned.

12. Having found BNSF in violation of Rule 11, this Court must impose an

appropriate sanction. See Morin, 38. The overriding objective of imposing sanctions is

punishment for wasteful and abusive litigation tactics in order to deter the use of such tactics in

the future. Id.(citingDAgostino, 240 Mont. at 445);see also Hartsoe v. Tucker, 2013 MT 256,

14, 371 Mont. 539, 309 P.3d 39 (Courts have the inherent power to levy sanctions to curb

abusive litigation practices.) (citingRoadway Express, Inc. v. Piper, 447 U.S. 752, 765 (1980)).

13. This Court has the flexibility to deal appropriately with violations of Rule 11 and

to tailor sanctions to fit the particular case. Morin. 33. Each case of Rule 11 sanctions must

be based upon its own facts and circumstances. Id. 42.

14.

There are myriad sanctions available to the Court, including, inter alia, the

payment of attorneys fees and costs; fines payable to the Court; a referral for attorney

disciplinary proceedings; requiring distribution of the sanction order to every member of the

offending attorneys firm; ordering distribution of the sanction order to all Montana judges; or

striking the offending pleading or affirmative defenses. See DAgostino, 240 Mont. at 446-47;

see also Pae Govtt Serv., Inc. v. MPRI, Inc., 514 F.3d 856, 859 fn. 3 (9th

Cir. 2008) (if bad faith

is found, under the procedures outlined in Rule 11, the district court has wide latitude to impose

sanctions, including striking the offending pleading). The Court will strongly consider creative

sanctions, such as requiring apologies from BNSF executives and attorneys for the offending

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conduct. See, e.g., De Ponce v. Buxbaum, No. 90-CIV-6344 (SWK), 1992 U.S. Dist. Lexis

15730 (S.D.N.Y. Oct. 14, 1992) (cataloging the small but growing body of reported decisions

reflect[ing] the creative approaches taken by a number of judges in fashioning Rule 11

sanctions).

15. Trial is set for October 14, 2014. The Court will hold a post-trial on the

appropriate sanctions for BNSFs violations of Rule 11. See Cooter & Gell v. Harmarx Corp.,

496 U.S. 384, 395-96 (1990) ([I]t is well established that a federal court may consider collateral

issues after an action is no longer pending like the imposition of costs, attorneys fees, and

contempt sanctions, the imposition of a Rule 11 sanction is not a judgment on the merits of an

action Such a determination may be made after the principal suit has been terminated.);

Masalosalo v. Stonewall Ins. Co., 718 F.2d 955, 956-57 (9th

Cir. 1983) (the filing of an appeal

does not deprive the court of jurisdiction over the question of whether sanctions are appropriate);

see also Rule 5(a)(ii), MRAP;Estate of Earl M. Pryun v. Axmen Propane, Inc., 2008 MT 329,

5, 346 Mont. 162, 163, 194 P.3d 650 (a district court retains jurisdiction over ancillary matters

while an appeal is pending).

ORDER

IT IS HEREBY ORDERED, Plaintiff Michael Schnittgens Motion for Rule 11

Sanctions is GRANTED.

IT IS FURTHER ORDERED, a post-trial hearing on sanctions will be held at a date

and time to be determined by the Court.

Dated: October 9, 2014.

/s/ Gregory G. Pinski_________________GREGORY G. PINSKI

CHIEF DISTRICT JUDGE

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c: David R. Paoli/John A. Kutzman, P.O. Box 8131, Missoula, MT 59802

Anthony S. Petru, 350 Frank H. Ogawa Plaza, 4th

Floor, Oakland, CA 94612

Anthony Nicastro/Brian Taylor, 401 North 31stStreet, Suite 1650, Billings, MT 59101

Thomas L. Beam, 1001 17th

Street, Suite 300, Denver, CO 80202

Maxon Davis, P.O. Box 2103, Great Falls, MT 59403