## Facts

- Edwin Rector (a Virginia attorney), individually and as trustee of a charitable remainder trust, sued Approved Federal Savings Bank and related defendants over a 1995 agreement to sell his majority interest in a bank; the closing occurred in 1996.
- Rector filed the federal action in 1999 seeking extraordinarily large damages, asserting claims including conspiracy, RICO, fraud, and theories premised on federal bank-fraud statutes.
- The district court dismissed major claims for failure to plead fraud and RICO with required particularity and ruled there was no private right of action under the federal bank-fraud statute; plaintiffs were allowed to amend.
- Plaintiffs filed an amended complaint that continued to assert expansive allegations and revised the damages demand to “an infinite amount of money.”
- The district court dismissed the remaining claims.
- Defendants sought sanctions under Federal Rule of Civil Procedure 11 based on the amended complaint.
- A dispute existed over whether the sanctions motion was served early enough to trigger Rule 11’s 21-day “safe harbor,” but plaintiffs did not raise any safe-harbor objection in the district court when opposing sanctions.
- The district court imposed Rule 11 sanctions of $33,503.82 in attorney’s fees and expenses; after a prior remand to apply the correct standard for the amount, the district court reimposed the same amount.
- In the second appeal, plaintiffs argued for the first time that the sanctions motion violated Rule 11’s safe-harbor requirement.

## Issues

1. Whether Rule 11’s 21-day safe-harbor requirement is jurisdictional and therefore nonwaivable.
2. Whether a party that did not timely raise a safe-harbor objection in the district court may assert it for the first time on appeal to defeat Rule 11 sanctions.

## Decision

- The Fourth Circuit affirmed the sanctions order.
- The court held Rule 11’s 21-day safe-harbor provision is not jurisdictional and may be waived.
- Because plaintiffs did not raise any safe-harbor objection in the district court, they waived the issue and could not rely on it on a second appeal.
- A dissent would have given greater effect to the asserted service defect.

## Legal Principles

- Rule 11’s 21-day safe-harbor requirement is a procedural protection, not a limit on the court’s subject-matter jurisdiction.
- Noncompliance with Rule 11 safe-harbor procedures can be waived if not timely asserted in the district court.
- An appellate court will not treat a waived safe-harbor objection as a jurisdictional bar to a district court’s authority to impose Rule 11 sanctions.

## Conclusion

The court sustained the Rule 11 fee award because the safe-harbor requirement does not restrict jurisdiction and the sanctioned parties forfeited any service-and-timing objection by failing to raise it in the district court.


Rector v. Approved Fed. Sav. Bank, 265 F.3d 248 (4th Cir. 2001)