Court Sanctions for Frivolous and Improper Litigation
by Ron W. Widener* and George J. Vogler**
DECIDEDLY UNFUNNY
Lawyer jokes are sure to evoke laughter from any crowd. They are a slam dunk on every occasion. Lawyers laugh, as well, if only politely themselves, and they bear the mirth of others at their expense. A reason for that, we think, is the glimmer of truth skulking in the derisive comment. It is the glimmer of truth showing through overstated misbehavior that makes lawyer jokes quite funny. You are probably thinking about one now and having a good chuckle. Perhaps, for you, it is difficult to separate the overstatement from the truthful glimmer.
Actual misbehavior by lawyers and their clients is decidedly unfunny. That is the message of Rule 11, Federal Rules of Civil Procedure. This is the law that obligates the federal courts to impose sanctions on lawyers and clients who file and pursue lawsuits in unreasonable ways. Rule 11 breaks with precedent that required proof of bad faith to trigger sanctions. Unreasonableness is a lighter trigger that has proven beneficial to persons burdened by lawyer and client misbehavior. By the way, sanctions is legal terminology for getting your expenses back in some degree from an attorney or party who did you wrong in a lawsuit.
This issue of Practice Notes will inform you on the relief available under Federal Rule 11 through recent cases, and we will carry the discussion into state court sanctions, particularly states that have adopted a version of Federal Rule 11. The state rules considered here are not exhaustive but were selected for the primary Practice Notes readership. All state laws are not discussed.
You get to know your rights here, and you become better qualified to discuss them with your attorney. All your rights are not in Rule 11 or any counterpart. States have enacted frivolous suit statutes, professional panel reviews, prior expert certification and other devices to thwart baseless suits. These are not considered here. In this paper, you are sued, you have been run around the legal may pole, and you want the judge to make misbehaving persons pay you money.
WHAT REMEDY RULE 11 PROVIDES
Rule 11 prescribes sanctions for certain basic misdeeds: (1) the filing of a frivolous suit or document; (2) the filing of a document or lawsuit for an improper purpose; (3) actions that needlessly increase the cost or length of litigation.
Relevant parts of the rule are these:
The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation... If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee (emphasis added).
Sanctions may apply against an attorney, the client, or both; therefore, we have adopted the collective convention, attorney/client.
A. The Pen Still is Writing
Before we begin our discussion of Rule 11 as it is, we must acknowledge that Rule 11 is changing. Two key bodies have approved changes which will, if passed by Congress, dull the teeth of Rule 11. The Judicial Conference's Standing Committee on Rules of Practice and Procedure and the United States Supreme Court have both approved changes. Next, Congress may approve, reject, or rewrite Rule 11. Action may come as early as December 1993.
There are a half dozen major proposals, and, when your time is done here, you will see the hands of lawyers who foil with paper blizzards working also in the proposed amendments.
First, where Rule 11 provides that sanctions shall be imposed for a Rule 11 violation, the proposed revisions substitute the direction, may...impose an appropriate sanction. If enacted, a court that is historically strict on sanctions under the current rule will likely retain its grit. Courts less stern have an additional reason to refrain from sanctions.
Second, Proposed Rule 11 provides a safe harbor provision allowing a party 21 days to withdraw or correct a pleading before a complaining party could move for sanctions. Pleadings would not typically meet Rule 11 standards when signed; the signer would have 21 days to investigate the reasonable basis for them. Presumably, in exchange for that leniency, a signer would have an affirmative duty to dismiss a complaint within 21 days if there is no basis or none can be developed within the safe harbor.
Third, clients would not be sanctioned for complaints not well grounded in law. The attorney and law firm would be solely responsible for Rule 11 purposes.
Fourth, under the proposed revisions, Rule 11 would not provide sanctions for abuse of discovery. Those sanctions would arise under separate rules 26(g) and 37.
Fifth, sanctions may be non monetary or monetary. If monetary, they may be paid into a court fund, or attorneys' fees and costs may be awarded to the offended party when warranted for effective deterrence of the offending conduct. Under this proposal, you could, but would not necessarily be able to get your attorneys' fees and costs paid by the offender. The current rule is much the same in practice, although the rule is less explicit.
Our discussion will proceed under Rule 11 as it is. In politics, anything and nothing is possible at the same time, and the proposed amendments run counter to the reform mood recently fueled by popular dissatisfaction with the legal system. If that fire has died quietly, we did not notice, but a back fire has gained some strength in Congress and the United States Supreme Court. Rule 11, if changed once, likely will be changed again as fuel feeds one fire then another. But, your education cannot wait forever, and, as we must begin somewhere, we begin with the rule as it is.
B. Frivolous Lawsuits
A frivolous lawsuit is one not grounded in fact and not supported by either a basis in current law or a sincere argument for a novel legal theory. An attorney/client who fails to conduct a reasonable inquiry into the facts of the case and the applicable law (and who does not otherwise accidentally hit sufficient fact or law) is in frivolous lawsuit territory. The rule creates an attorney/client duty to ascertain, by reasonable inquiry before filing suit, the accuracy of the facts alleged. No longer can a client demand, without possible repercussions, that an attorney file an immediate lawsuit. The attorney must attempt to discover whether a lawsuit is appropriate. If the attorney fails to inquire into the facts of the case and the law supporting a suit, sanctions may result. A client who misleads counsel creates an additional basis for personal sanctions.
1. Subjective Bad Faith Test is No Longer Required in Some Courts
Traditionally, federal and state courts required proof of bad faith before sanctions were warranted. The federal courts have eliminated the bad faith requirement under the current Rule 11, as explained in Navarro Ayala v. Hernandez Colon, 143 F.R.D. 460 (D.Puerto Rico 1991). Also, several states have adopted a form of Rule 11 eliminating the bad faith requirement. For example, Oklahoma, Washington, Kansas, Minnesota, Nevada, Ohio, Illinois, and Missouri have enacted versions of Rule 11 into their state statutes.
The test has been changed from a subjective standard to the objective standard embodied in an affirmative duty of reasonable inquiry, which is more stringent than the original good faith formula. Attorney/client claims of good faith conduct will not acquit Rule 11 liability. The attorney/client who was careless, hasty, incompetent, or inept is not excused by claims of bumbling good faith. The courts will pass by the good faith claim to examine whether the attorney/client conducted a reasonable pre-filing inquiry such that the document, when signed, could be considered well grounded in fact. The duty of reasonable inquiry is tested by the attorney/client knowledge at the time the document was signed. Violation of Rule 11 is not based through hindsight on the information and evidence established later through discovery or trial proceedings.
The changed standard is advantageous for architects and engineers who may be sued simply because they are somehow involved with a particular project. The attorney/client cannot excuse a groundless lawsuit by saying (as was once done), "I meant no harm; I bear the architect or engineer no malice; My motives were only to protect my side of the case. " Since an attorney in our adversarial system owes a duty to vigorously pursue one side of the case, proof of bad motivation is especially difficult. But, the requirement to satisfy a separate duty of reasonable inquiry balances the field somewhat and should temper the impulse (over time with corrective teaching) to sue anybody and everybody remotely connected with a project.
2. State Courts Which Apply a Rule 11 Objective Test
If you are sued in state court in Illinois, Kansas, Minnesota, Missouri, Nevada, Ohio, Oklahoma, or Washington, states which have adopted Rule 11 along with an objective test, you have good assurance that the state courts are willing to impose sanctions without a bad faith showing. In Illinois, see Edwards v. Estate of Harrison, 601 N.E.2d 862 (Ill.App.1Dist. 1992). In Kansas, see Fankhauser v. Bank IV Emporia, 833 P.2d 1002 (Kan. 1992). In Minnesota, see Uselman v. Uselman, 464 N.W.2d 130 (Minn. 1990). In Missouri, see State Ex Rel. Accurate Const. v. Quillen, 809 S.W.2d 437 (Mo.App. 1991). In Nevada, see Marshall v. District Court, 836 P.2d 47 (Nev. 1992). In Ohio, see Gordon Food Service v. Hot Dog John's, 601 N.E.2d 131 (Ohio App.6Dist. 1991). In Oklahoma, see Unit Petroleum Co. v. Nuex Corp., 907 P.2d 251 (Okl. 1991). In Washington, see Bryant v. Joseph Tree, Inc., 829 P.2d 1099 (Wash. 1992).
3. Subjective Bad Faith Test Lives On
Some states have not yet enacted a state version of Rule 11. In those states, the federal courts will follow Rule 11, while the state courts will apply various other rules. The following are examples:
In California, the imposition of sanctions is governed by the Code of Civil Procedure, Section 128.5. The court, in Brewster v. Southern Pacific Transportation Co., 1 Cal.Rptr.2d 89 (Cal.App.4Dist. 1991), held that Section 128.5 allows a court to order sanctions when expenses are incurred by the opposing party as a result of bad faith actions or tactics that are frivolous or solely intended to cause unnecessary delay. Thus, a bad faith subjective standard is still in place in California.
In Connecticut, a trial court attempted to adopt Rule 11 on its own, but the Connecticut Appeals Court ruled in Fattibene v. Kealey, 558 A.2d 677 (Conn.Application 1989) that a court has no authority to impose sanctions without the presence of bad faith. Connecticut does have a statute, General Statutes, Section 51-84(b), that allows the court to sanction an attorney one hundred dollars for violating court rules.
In Florida, Section 57.105 of the Florida Statutes governs the sanctioning of attorneys. Section 57.105 provides that before awarding attorneys' fees, a court must find that there is a total or absolute lack of a justifiable issue, which is tantamount to a finding that the action is frivolous and so clearly devoid of merit both on the facts and the law as to be completely untenable. In Muckerman v. Burris, 553 So.2d 1300 (Fla.App.3Dist. 1989), the court held that bad faith was required to prove a violation of Section 57.105.
Likewise, Georgia has not enacted Rule 11 into its statutes and does not favor imposing sanctions without a showing of bad faith. See Nodvin v. Investguard, Ltd., 411 S.E.2d 709 (Ga. 1992).
In New Jersey, no court rule or statute will allow a court to impose sanctions when a party has not acted in bad faith. New Jersey courts will only impose sanctions in severe cases where bad faith is present. See Oliviero v. Porter Hayden Co., 575 A.2d 50 (N.J.Super.A.D. 1990).
New York, when sanctioning, follows a court rule that imposes a duty on a party and his or her attorney to act in good faith to investigate a claim and promptly discontinue it where inquiry would reveal that the claim lacks a reasonable basis. An action is deemed frivolous when it is commenced or continued in bad faith. Where a claim is found to be frivolous, the court rules mandate that sanctions be imposed against the party, the attorney, or both. Sanctions are available, but only after a showing of bad faith. See Smullens v. MacVean, 584 N.Y.S.2d 335 (A.D.3Dept. 1992).
North Carolina has not adopted Rule 11 but does allow sanctions to be imposed against an attorney or client for actions taken in bad faith. See Foy v. Hunter, 418 S.E.2d 299 (N.C.App. 1992). South Carolina, likewise, has not adopted Rule 11. Its statute, 15 South Carolina 36-20, requires a showing of bad faith.
Maine, in Chiappetta v. LeBlond, 544 A.2d 759 (Me. 1988), allows sanctions if "the abuse of the process by parties or counsel is clear. " The historic term "abuse of process " is likely synonymous with bad faith, as the court did not adopt the readily available Rule 11 reasonableness standard.
In Oregon, the statute governing wrongful litigation is ORS 20.105(1), 656.390. That statute provides in relevant part: "In any civil action, suit, or other proceeding in a district or circuit court, the court may, in its discretion, award reasonable attorneys' fees appropriate in the circumstances to a party against whom a claim is asserted, if that party is a prevailing party in the proceeding and to be paid by the party asserting the claim, upon a finding by the court that the party willfully disobeyed a court order or acted in bad faith, wantonly, or solely for oppressive reasons " (emphasis added). Clearly a bad faith subjective standard is still required by Oregon courts. See Westfall v. Rust International, 826 P.2d 64 (Or.App. 1992).
By contrast, if an appeal is involved in Oregon, the statute provides an exception to the bad faith requirement. ORS 20.105(1), 656.236 governs the imposition of sanctions on appeal. The statute states that frivolousness or bad faith or harassment will suffice for the imposition of sanctions.
Pennsylvania has not adopted Rule 11 into its statutes and is very reluctant to impose sanctions, except in extreme cases of bad faith. See Amaker v. Board of Probation & Parole, 576 A2d 50 (Pa. 1990).
Rhode Island is an unusual state in its imposition of sanctions. Rhode Island has enacted Rule 11 into its state statutes, but courts have refused to apply an objective standard. A bad faith showing is still required in Rhode Island, despite the adoption of Rule 11. All other states that have adopted Rule 11 have also adopted the objective test and done away with the bad faith requirement.
It is important to remember that, even though California, Connecticut, Florida, Georgia, Maine, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, and Rhode Island require bad faith before imposing sanctions in state court, sanctions can still be awarded in Federal District Court in these states. That may be a factor, among others, in deciding whether to remove a lawsuit to federal court. There, if the opposing party engages in frivolous or improper conduct, sanctions can be imposed without a showing of bad faith.
C. Short on the Law or Ahead of One's Time?
A lawsuit lacking case law or a statutory basis warranting the action is also frivolous under Rule 11. An attorney can not file a lawsuit in the hope that the court will buy an unsupported, outrageous argument. If one presses the limit, sanctions are avoided by demonstrating a novel legal theory that argues for a feasible extension or reversal of existing law.
The line between a lawsuit grounded and a lawsuit not grounded in existing law is wide. On the line and still in bounds are lawsuits that may reform the law. The courts are not likely to impose sanctions under Rule 11 for an argument that is creative. A portion of the legal system aims to encourage arguments that could advance, modernize, clarify, or particularize existing law. A good deal of reform (and some wreckage) has resulted from lawyers working on that line.
Pierce v. Commercial Warehouse, 142 F.R.D. 687 (M.D.Fla. 1992) establishes the attorney's duty under Rule 11 to support a lawsuit with existing law. The court held that an attorney cannot mislead the court by contending that his or her argument is supported by existing law, in the sense that the issue has been decided, when that is not true. An attorney must be clear in presenting the argument for what it is. If acceptance of the argument would require extension, modification, or reversal of existing law, Rule 11 requires disclosure and precludes presentation of the argument as though it rested on existing law.
In Harverstick Enterprises v. Financial Fed. Credit, 803 F.Supp. 1251 (E.D.Mich. 1992), the defendant asked for sanctions against an attorney for bringing a frivolous lawsuit not well-grounded in law. The court refused to issue sanctions, despite the fact that only one of several claims was reasonably grounded in law. The balance of the claims were wholly unsupported in fact and law, and much money was expended in defending the meritless claims. The court held that Rule 11 was not intended to chill an attorney's enthusiasm or creativity in pursuing factual or legal theories. That is the case even when the initial support may be thin but more discovery might prove the claim. By extension of that reasoning, sanctions would be inappropriate when (having begun with a basis) an exhaustive inquiry would be necessary to discover the claims were without merit. The court, in Harverstick Enterprises, makes the reluctance to impose sanctions on an attorney plain if there is even a slim chance that existing law might have been extended. There is a deliberate inclination favoring novel legal theory. More latitude is allowed to hit on a legal basis than a factual basis because the law is intentionally a moving target.
D. Improper Purpose and Tactics
If a frivolous lawsuit is not presented as described to this point, pleadings and tactics of another ilk will mandate Rule 11 sanctions. The second ground for Rule 11 sanctions is a lawsuit or pleadings filed for an improper purpose. In Boese, supra, the court held that an improper lawsuit is presented when an attorney/client files any document, pleading, or motion for the purposes of delay, harassment, or increasing the costs of litigation. A lawsuit started for legitimate purposes can turn into a candidate for sanctions.
Fundamentally, a party cannot use litigation or litigation techniques to punish the opposing party. The playing field is leveled by this--a well padded party cannot litigate for the purpose of grinding the rest of us into submission. A party genuinely harassed with needless litigation should petition the court for sanctions under Rule 11. At the least, this may help to define the limits allowable by the court for the balance of the case. It helps when the court (if not ready to sanction) admonishes, "You are this close, and that is as close as you want to get! " At best, improper behavior or the entire litigation may be stopped.
Improper litigation includes requests for excessive discovery, filing unnecessary motions, filing a lawsuit and dismissing it only to refile it later, and other dilatory tactics that cause litigation to hang over a party's head. The courts will find these tactics abusive under Rule 11, or local court rules, and will impose sanctions.
That said, Rule 11 does not mean that a party cannot bring a lawsuit to pressure the opposing party to settle a dispute. In Gillette Foods v. Bayernwald-Fruchteverwertung, 977 F.2d. 809 (3rdCir. 1992), this issue was determined. In Gillette Foods, a food distributor filed a lawsuit against a wholesaler over a sales agreement dispute. The district court said the lawsuit was without merit and awarded the wholesaler $50,000 in attorney's fees. The appeals court reversed, stating that the trial court was wrong to impose sanctions solely because the trial court felt the lawsuit was brought for the purposes of making the wholesaler succumb to the food distributor's demands.
The court held that Rule 11 does not prevent one litigant from bringing a claim against another in order to force its demands if the claim asserted has a reasonable basis. Lawsuits are generally brought for that specific purpose. Suits filed to force settlement are not, for that reason alone, a violation of Rule 11.
ATTORNEY AND CLIENT BOTH POTENTIALLY LIABLE
The two grounds for sanctions under Rule 11 now behind us, it is important to establish what persons are liable for bringing frivolous or maintaining improper lawsuits. Rule 11's hook is double barbed.
Rule 11 clearly establishes liability for any person who signs a pleading, motion, or other paper. Thus, a client and/or attorney can be sanctioned by the court. Pending Rule 11 amendments, you recall, would relieve the client from sanctions for the attorneys' failure to supply an adequate basis in law.
Navarro Ayala v. Hernandez Colon, supra, is an instructive example of sanctions against a client. In Navarro Ayala, the Assistant Secretary of Mental Health for Puerto Rico signed a document certifying that patients could leave a hospital any time they wanted to leave. This was a factual matter. The Assistant Secretary told his attorney that he had reservations about signing the document, but his lawyer assured him it was proper to sign. The court found that the document was not entirely accurate, factually. Therefore, the document misled the court. The court imposed $20,000 in sanctions against the Assistant Secretary under Rule 11. The attorney was not sanctioned.
The court was willing to sanction a client, even when his attorney assured him it was acceptable to sign the document. This is an excellent example of the court's desire to enforce Rule 11. The courts are not inclined to excuse a party due to extenuating circumstances, as evidenced in Navarro Ayala. Even if a client signs a document, regardless of an attorney's advice, he can be liable for Rule 11 sanctions, and the court is required to sanction the signer.
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