## Facts

- Methode Electronics and Adam Technologies competed in the electronic connector business.
- After prior litigation, the parties entered a settlement and related exclusive licensing arrangement: Methode sold Adam Tech stock and trademarks to Vincent DeVito but retained an exclusive right to market certain remaining Adam Tech products; Adam Tech and DeVito agreed not to interfere with that exclusivity.
- Methode alleged that shortly after the agreements were executed, Adam Tech and DeVito interfered by issuing a press release offering to accept orders for millions of connectors stocked in New Jersey.
- Rather than returning to the federal court in New Jersey that had overseen the settlement, Methode sued in the Northern District of Illinois seeking a temporary restraining order.
- In a verified complaint signed by counsel and verified by a corporate officer, Methode asserted venue was proper in Northern District of Illinois based on a factual allegation that the press release had been sent to customers and distributors in that district.
- Defendants challenged venue and warned they would seek Rule 11 sanctions if Methode proceeded in Illinois.
- At the TRO hearing, defendants orally sought Rule 11 sanctions focused on the venue allegation; the district court issued an order to show cause why the venue paragraph did not violate Rule 11(b)(3).
- Methode voluntarily dismissed the underlying action, but the court retained jurisdiction to decide sanctions; the parties conducted discovery directed to the venue allegation.
- Discovery showed the press release had not been sent to recipients in the Northern District of Illinois, and supported an inference that Methode and its counsel knew, or strongly suspected, the allegation lacked a factual basis.
- The district court found the conduct “intentionally deceptive” and imposed $65,000 in monetary sanctions against Methode and its attorney.

## Issues

1. Whether Rule 11 sanctions were proper where a verified complaint alleged a venue-supporting fact without evidentiary support, in violation of Rule 11(b)(3).
2. Whether the district court abused its discretion in imposing monetary sanctions against both the corporate plaintiff and its counsel.
3. Whether the court of appeals could affirm the sanctions on a rationale supported by the record even if not the primary theory advanced below.

## Decision

- The Seventh Circuit affirmed the sanctions order.
- The court held that the venue allegation lacked evidentiary support and therefore violated Rule 11(b)(3).
- The court held the district court acted within its discretion in imposing $65,000 in monetary sanctions.
- The court confirmed that both counsel and the represented party (including a corporate officer who verifies the pleading) may be sanctioned for certifying unsupported factual contentions.
- The court stated it could affirm the sanctions on any ground supported by the record, even if different from the theory emphasized by the parties or the district court.

## Legal Principles

- Rule 11(b)(3) requires that factual contentions in pleadings have evidentiary support or, if specifically identified, will likely have such support after a reasonable investigation.
- Verification of a pleading by a client does not insulate counsel from Rule 11 responsibility; attorneys and parties share obligations to ensure factual accuracy.
- Rule 11 sanctions are reviewed for abuse of discretion, with substantial deference to a district court’s assessment of litigation conduct.
- A finding of subjective bad faith is not required for Rule 11 sanctions, though evidence suggesting deliberate misrepresentation may support the sanction determination and amount.
- An appellate court may affirm an order on any basis supported by the record, even if that rationale was not the focus of arguments below.

## Conclusion

The Seventh Circuit upheld substantial Rule 11 sanctions where a verified complaint asserted a venue-creating factual allegation without evidentiary support, emphasizing the duty of both counsel and client to investigate and certify pleadings accurately and deferring to the district court’s discretionary sanction choice.


Methode Electronics, Inc. v. Adam Technologies, Inc., 371 F.3d 923 (7th Cir. 2004)