opinion: FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Plaintiff-Appellee, v. John L. MOLINARO, et al., Defendants, and Kurahara & Morrissey, Real Party in Interest-Appellant.
  No. 88-6216.
  United States Court of Appeals, Ninth Circuit.
  Argued and Submitted Dec. 5, 1989.
  Decided Jan. 17, 1991.
  Michael T. Morrissey, Joseph R. Kafka, Kurahara & Morrissey, San Jose, Cal., for real party in interest-appellant.
  Carol Burney, Lawler, Felix & Hall, Los Angeles, Cal., for plaintiff-appellee.
  Before GOODWIN, Chief Judge, SCHROEDER and O’SCANNLAIN, Circuit Judges.
  SCHROEDER, Circuit Judge:
  Michael Morrissey and Kurahara & Mor-rissey, a law firm, appeal from a district court order imposing Rule 11 sanctions against them. The court imposed the sanctions after it had determined that the counterclaims they had filed against the Federal Savings & Loan Insurance Corporation (FSLIC) were barred by the doctrine of sovereign immunity. The appellant’s client, Kimberleigh Ferm, had been married to John Molinaro, a former officer and director of the failed Ramona Savings & Loan Association. FSLIC’s claims against Ferm, and her sanctioned counterclaims at issue in this appeal, briefly occupied a very small corner of the stage where FSLIC, Molinaro and other defendants litigated the financial liability of the officers and directors for Ramona’s defalcations. See Federal Savings and Loan Insurance Corporation v. Ferm, 909 F.2d 372 (9th Cir.1990); Federal Savings and Loan Insurance Corporation v. Molinaro, 901 F.2d 1490 (9th Cir.1990).
  FSLIC originally instituted the underlying action in September of 1986, and did not name Ferm as a party. The amended complaint, filed in June of 1987, contained two claims against Ferm along with 39 other claims against various defendants, including Molinaro. The claims against Ferm alleged that she engaged in a 'conspiracy with Molinaro, through certain property transfers, to prevent FSLIC from recovering property which belonged to Mo-linaro.
  On September 14, 1987, the district court entered summary judgment in favor of FSLIC and against Molinaro in the amount of more than $2 million. In still another judgment, also against Molinaro, entered approximately two months later, the district court awarded FSLIC an additional $6.4 million plus interest. Neither of these judgments ran against Ferm, and Ferm did not participate in the proceedings which led up to them.
  FSLIC moved for summary judgment against Ferm in January of 1988. In response, Ferm moved, pursuant to Fed.R. Civ.Pro. 12, to dismiss FSLIC’s claims against her on the ground that the transfers were not subject to the law of fraudulent conveyances because they were transfers of community property by way of a marriage settlement. On March 7, 1988, the district court denied Ferm’s motion to dismiss FSLIC’s claims against her. The court, significantly and expressly, did not treat her motion as a motion for summary judgment and thus did not enter any judgment at that time in favor of FSLIC and against Ferm. The March 7 order dealt with eight different pending motions and included an order that the funds being held by the clerk be paid over to FSLIC in partial satisfaction of FSLIC’s judgments against Molinaro which had not been superseded.
  Much confusion in this appeal has been generated by the suggestion on the part of FSLIC, apparently accepted by the dissent, that the March 7 order was an adjudication of the merits of the dispute between FSLIC and Ferm concerning the funds that had been deposited with the Clerk. It was not such an adjudication. What the order did, in fact, was to deny Ferm’s motion to dismiss and to permit FSLIC to supplement its claims against Ferm. The March 7 order also granted FSLIC’s motion to direct the funds to be paid to FSLIC. The district court thereby rejected Ferm’s position, as stated in her opposition to FSLIC’s motion, that no such order should issue until there had been adjudication of her claims to the money. The March 7 order did not decide or even consider the merits of those claims.
  Subsequently, FSLIC filed the supplemental complaint that the order contemplated. Later, in March of 1988, Ferm answered this supplemental complaint. She also raised the now sanctioned counterclaims against FSLIC in order to assert her claims to the money that by now had been paid by the Clerk to FSLIC pursuant to the March 7 order.
  Ferm’s counterclaims were therefore not an effort to relitigate matters previously decided in the March 7 order. At the sanctions hearing, the district court made it clear that the sanctions were not a response to Ferm’s decision to assert her counterclaims at this point in the case. When counsel for Ferm pointed out that Ferm’s claims had become ripe only as a result of the very recent transfer of funds to FSLIC, the district court said “I quite agree with you, insofar as the timing of the claim and nobody suggests that anyone is to be sanctioned for that.”
  The district court entered its ruling on the merits of Ferm’s claim in the same order in which the district court imposed sanctions. The order stated as follows:
  1. The Court grants plaintiff’s motion to dismiss defendant Ferm’s First Amended Counterclaim and Cross-Claim with prejudice. Ferm’s pleading is procedurally unauthorized to the extent that she did not obtain leave of Court to file it. See Fed.R.Civ.P. Rules 13(e), 14(a) and 15(a). Furthermore, Ferm’s claims against FSLIC for fraudulent conveyance, abuse of process, trespass and conversion are barred by the doctrine of sovereign immunity as they are torts arising outside the scope of the Federal Tort Claims Act, 28 U.S.C. § 1371, et seq. See FDIC v. Citizens Bank & Trust Co., 592 F.2d 364, 371 (7th Cir.), cert. denied, 444 U.S. 829, 100 S.Ct. 56, 62 L.Ed.2d 37 (1979); Colony First Federal Savings & Loan Association v. FSLIC, 643 F.Supp. 410, 416 (C.D.Cal.1986).
  2. The Court grants plaintiff’s request for the imposition of Rule 11 sanctions. Ferm’s claim merits sanctions on the grounds that it is frivolous, legally unreasonable and without factual foundation. See Hewitt v. City of Stanton, 798 F.2d 1230, 1232 (9th Cir.1986).
  Accordingly, the law firm of Kurahara & Morrissey shall pay the sum of $5641.00 to plaintiff not later than May 16, 1988.
  The court thus made no underlying findings of fact as to the merits of Ferm’s claims. The basis articulated for dismissal of those claims was sovereign immunity. In addition, at the hearing the district court indicated that it considered Ferm’s claims of fraud and conspiracy against FSLIC to be without merit because FSLIC, in receiving the property in question, was acting pursuant to a court order stating that Moli-naro had no claim to the property and that it could therefore be turned over to FSLIC. These two purported justifications for sanctions involve fundamentally legal issues: sovereign immunity of FSLIC and the extent to which the earlier orders in FSLIC’s claims against Molinaro barred Ferm’s claims as well.
  We review the district court’s sanctions under Rule 11 for abuse of discretion. A district court necessarily abuses its discretion when it bases sanctions on an erroneous view of the law. See Cooper & Gell v. Hartmarx Corp., et al., — U.S. -, 110 S.Ct. 2447, 2461, 110 L.Ed.2d 359 (1990). Sanctions are inappropriate where counsel has made a good faith argument for the “extension, modification or reversal of existing law” and where the legal arguments put forth are not frivolous. Fed.R. Civ.Pro. 11. See Golden Eagle Distributing Corp. v. Burroughs Corp., 801 F.2d 1531, 1539 (9th Cir.1986); see also Advisory Committee Notes on 1983 Amendment to Rule 11 (“The Rule is not intended to chill enthusiasm or creativity in pursuing factual or legal theories.”).
  We consider first the district court’s conclusion that Ferm’s legal argument on sovereign immunity was frivolous. We conclude that Ferm’s position was not frivolous. Ferm at the very least plausibly argued that Congress had waived sovereign immunity for lawsuits against FSLIC pursuant to the “sue and be sued” provision of 12 U.S.C. § 1725(c)(4). In Woodbridge Plaza v. Bank of Irvine, 815 F.2d 538, 542-543 (9th Cir.1987), we held that the FTCA was not the only applicable waiver of sovereign immunity in suits against the Federal Deposit Insurance Corporation (FDIC); the “sue and be sued” language of 12 U.S.C. § 1819(a) acted as a general waiver. The same language is in section 1725(c)(4). The FDIC and FSLIC have served similar purposes. In fact, FSLIC has recently been succeeded in interest by the FDIC. See Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub.L. No. 101-73, § 215, 103 Stat. 183, 252; FSLIC v. Butler, 904 F.2d 505 (9th Cir.1990). Ferm, therefore, could reasonably argue that our holding in Wood-bridge Plaza should apply to FSLIC as well.
  Second, we consider FSLIC’s contention that it could not be liable to Ferm because the issue of its right to the funds had already been adjudicated. This argument misses the mark because none of the preceding orders in the litigation had ever adjudicated Ferm’s claims to the property. When the government moved to dismiss her claims on the ground of sovereign immunity, she had the first and only opportunity to have the district court look at the justiciability and the justice of her claims.
  Ferm’s principal claims, that FSLIC obtained funds that belonged to Ferm through conspiracy and abuse of process, are not patently without foundation. Since the court's order authorized FSLIC to take possession of funds belonging to Molinaro, not to Ferm, and since the court never expressly resolved the issue of Ferm’s interest in the $498,000.00 conveyed to FSLIC, Ferm could plausibly argue that the order did not give FSLIC the authority to take possession of that money. Since neither Ferm nor New Trend, the corporation from which the funds were paid out, received any consideration in return for the transfer, Ferm could argue that FSLIC’s receipt of that money constituted a fraudulent conveyance under California law. See Cal.Civ.Code § 3439.04(b) (transfer without consideration constitutes fraud upon creditors, irrespective of intent). Any agreement between FSLIC and New Trend in conjunction with this transfer would thus be a conspiracy to defraud Ferm. Similarly, it could constitute abuse of process for FSLIC to obtain a writ of execution to acquire property that it knew might belong to Ferm. See Spellens v. Spellens, 49 Cal.2d 210, 317 P.2d 613, 625-26 (1957) (en banc). Ferm’s claims of conspiracy and abuse of process were not so groundless as to warrant the imposition of sanctions.
  The district court’s order imposing Rule 11 sanctions is REVERSED.
  . The order reads, in pertinent part:
  MOTION(S) PENDING:
  1) Defendant Ferm’s Motion to Dismiss Plaintiff's First Amended Complaint as Supplemented for Failure to State a Claim
  2) Plaintiffs Motion to Supplement the First Amended Complaint
  3) Defendant Trapani’s Motion to Dismiss Count 35 of the First Amended Complaint
  4) Plaintiff’s Motion for Summary Judgment against Defendant Trapani on Count 35 of the First Amended Complaint
  5) Plaintiff’s Motion for Entry of Final Judgment against Defendant Trapani
  6) Plaintiff’s Motion for a Charging Order
  7) Plaintiff's Motion for an Order Directing Payment of Monies Held by Clerk to Plaintiff
  8) Defendant Molinaro’s Motion for Leave to File a Third-Party Complaint
  1. The Court denies Ferm’s motion to dismiss.
  Transfers of community property by way of a marriage settlement agreement are subject to the law of fraudulent conveyances. See Cal. Civ.Code § 5120.320; American Olean Tile Co. v. Schultze, 169 Cal.App.3d 359, 364, 215 Cal.Rptr. 184 (1985). Therefore, FLSIC has stated a valid claim for relief.
  The Court declines to treat defendant Ferm’s motion as one for summary judgment.
  ******
  7. The Court grants plaintiff's motion for an order directing that funds now deposited with the Clerk be paid to plaintiff. This Court has entered final judgments against Molinaro in the amount of $8.4 million plus interest. Without a supersedeas bond, Molinaro is not entitled to a stay of the judgments. Fed.R. Civ.P. 62(d); Geddes v. United Financial Group, 559 F.2d 557, 560 (9th Cir.1977). Molinaro's Sixth Amendment right to counsel of choice in his criminal action is a qualified right. Ability to pay is a valid qualification, and the possibility exists that a creditor may obtain a lien against a criminal defendant’s property, thus preventing him from hiring counsel of choice. In re Forfeiture Hearing as to Caplin & Drysdale, 837 F.2d 637 (4th Cir.1988) (en banc) (overruling United States v. Harvey, 814 F.2d 905 (4th Cir.1987)).
  FSLIC’s proposed order will be amended to provide for payment to plaintiff of the amount currently on deposit.
  . Although the court’s order was entered in the same form as the original tentative ruling and its first sentence states as one basis for dismissal of the counterclaims that they were procedurally defective, FSLIC agrees on appeal that the district court’s statements in the transcript as to the propriety of the time of the filing control, and there is no procedural impropriety supporting the sanction order.
instruction: What follows is an opinion from a United States Court of Appeals.
  Intervenors who participated as parties at the courts of appeals should be counted as either appellants or respondents when it can be determined whose position they supported. For example, if there were two plaintiffs who lost in district court, appealed, and were joined by four intervenors who also asked the court of appeals to reverse the district court, the number of appellants should be coded as six.
  When coding the detailed nature of participants, use your personal knowledge about the participants, if you are completely confident of the accuracy of your knowledge, even if the specific information is not in the opinion. For example, if "IBM" is listed as the appellant it could be classified as "clearly national or international in scope" even if the opinion did not indicate the scope of the business. 
  
  Your task concerns the first listed appellant. The nature of this litigant falls into the category "private business (including criminal enterprises)", specifically "other". Your task is to determine what subcategory of business best describes this litigant.
choices: medical clinics, health organizations, nursing homes, medical doctors, medical labs, or other private health care facilities private attorney or law firm media - including magazines, newspapers, radio & TV stations and networks, cable TV, news organizations school - for profit private educational enterprise (including business and trade schools) housing, car, or durable goods rental or lease entertainment: amusement parks, race tracks, for profit camps, record companies, movie theaters and producers, ski resorts, hotels, restaurants, etc. information processing consulting security and/or maintenance service other service (including accounting) other (including a business pension fund) unclear