1741 ALI-ABA Course of Study Civil Practice and Litigation Techniques in Federal and State Courts Sponsored with the cooperation of the Federal Judicial Center July 11-13, 2007 Santa Fe, New Mexico Sanctions in Civil Litigation: A Review of Sanctions by Rule, Statute, and Inherent Power By David F. Herr Nicole Narotzky Maslon Edelman Borman & Brand, LLP Minneapolis, Minnesota
1742 2
1743 Sanctions In Civil Litigation: A Review of Sanctions by Rule, Statute, and Inherent Power 1 David F. Herr and Nicole Narotzky TABLE OF CONTENTS Page 2 I. HISTORICAL OVERVIEW... 1 II. ANALYTIC OVERVIEW... 1 III. STATE COURT SANCTIONS... 2 IV. RULE 11: PLEADINGS, WRITTEN MOTIONS AND OTHER PAPERS... 3 A. TEXT OF RULE... 3 B. VALIDITY... 5 C. SCOPE... 5 1. Courts... 5 a. Appeals Court... 5 b. Removed Proceedings... 6 c. Arbitration... 8 d. Effect of Bankruptcy Stay on Rule 11 Motion.... 8 2. Proceedings... 8 a. Criminal Cases... 8 b. Habeas Corpus and Related Proceedings... 8 c. Securities Fraud Cases... 8 3. Proscribed Conduct: Presenting to the Court a Violative Paper... 9 a. Presenting.... 9 b. Later Advocating.... 9 c. By Whom Present[ed].... 10 d. Relationship to Other Powers.... 10 e. Unpresented Sanctions Motions.... 10 4. Sanctionable Papers: Pleadings, Written Motions and Other Papers.... 10 a. Pleadings and Motions... 10 b. Other Papers... 11 1 These materials are derived in significant part and updated from materials prepared by Gregory P. Joseph, Esq., of Gregory P. Joseph Law Offices, LLC, New York, for the Civil Practice and Litigation Techniques in Federal and State Courts course presented on December 9, 1999 and entitled Sanctions: Rules 11, 26(g), 30(d), and 37, 1927, Inherent Power, Appellate Rule 38, and 1912. These materials were originally based in part on GREGORY J. JOSEPH, SANCTIONS: THE FEDERAL LAW OF LITIGATION ABUSE (2d ed. 1994; Supp. 2005). 2 Internal pagination.
1744 c. Excluded Papers... 12 5. Persons Liable... 12 a. Vicarious Liability.... 12 b. Predecessor and Successor Counsel Liability... 15 6. Proper Movant.... 15 D. BASIC REQUIREMENTS... 15 1. Signing Requirement.... 15 2. Presenting Requirement... 15 3. Reading Requirement.... 16 4. Certification.... 16 a. Objective Standard for Testing Certification... 16 b. Time of Testing Certification.... 16 c. Presumptive Validity of Certification... 16 d. No Continuing Obligation to Correct or Withdraw... 16 e. Rule Is Not a Rule of Strict Liability.... 17 E. REASONABLE INQUIRY (1): GENERAL DUTY TO INVESTIGATE FACT AND LAW... 17 1. Generally... 17 a. Fact vs. Law... 17 b. Cost-Justified Standard.... 17 c. No First Amendment Defense.... 17 2. Timing of Investigation.... 17 3. Objective Standard... 17 a. Generally... 17 b. Represented Parties... 18 c. Pro Se Litigants.... 18 d. Ex Parte Proceedings.... 18 F. REASONABLE INQUIRY (2): INQUIRY INTO FACT... 19 1. Factors Generally... 19 a. Time Pressure.... 19 b. Factual or Legal Complexity.... 19 c. Feasibility... 19 d. Accessibility of Data... 19 e. Personal Knowledge.... 19 f. Reliance on Client... 19 g. Prior Pendency of Action... 20 h. Reliance on Other Counsel.... 20 i. Available Resources.... 21 j. Warnings of Factual Baselessness; Refiling Deficient Papers.... 21 k. Fiduciary Status.... 21 l. Not Credibility Assessments by Counsel... 21 2. Pro Se Status... 22 G. EVIDENTIARY SUPPORT... 22 1. Generally... 22 2. Merely Losing on the Merits... 22 ii
1745 3. Litigable Issues of Fact.... 22 4. Isolated Factual Errors; Papers As a Whole.... 22 5. Inferences vs. Speculation; Information-and-Belief Pleading.... 23 6. Unfounded or Untrue Statements.... 23 7. Omissions; Duty of Candor.... 23 H. REASONABLE INQUIRY (3): INQUIRY INTO LAW... 23 1. Factors Generally... 23 a. Time Pressure.... 23 b. Factual or Legal Complexity.... 23 c. Clarity or Ambiguity of Law.... 23 d. Plausibility; Citing Adverse Authority.... 23 e. Knowledge, Experience and Expertise; Need to Retain Expert.... 23 f. Prior Pendency of Action... 24 g. Reliance on Client... 24 h. Reliance on Other Counsel.... 24 i. Available Resources.... 24 j. Warnings of Legal Baselessness; Refiling Deficient Papers.... 24 k. Fiduciary Status.... 25 2. Recent Changes in the Law... 25 3. Pro Se Status... 25 a. Attorneys Appearing Pro Se.... 25 b. Lawyers Opposing Pro Se Litigants.... 25 I. WARRANTED BY EXISTING LAW... 26 1. Generally... 26 2. Merely Losing on the Merits... 26 3. Litigable Issues of Law... 26 4. Unasserted Meritorious Arguments... 26 5. Isolated Unwarranted Positions; Paper as a Whole.... 26 6. Judicial Endorsement of Position.... 26 a. Losing Case Below.... 27 b. Winning Case Below.... 27 c. Merit Recognized Elsewhere... 27 d. Arbitration and ADR.... 27 e. Defeating Summary Judgment... 27 f. Defeating Dismissal Motion.... 27 g. Subsequent Change in the Law... 28 7. Misrepresentation of Law.... 28 8. No Requirement to Identify Arguments for Change in Law... 28 9. Failure to Cite Adverse Precedent.... 28 10. Susceptibility to Affirmative Defense.... 28 J. WARRANTED BY A NONFRIVOLOUS ARGUMENT FOR CHANGE IN THE LAW... 28 1. Objective Standard... 28 2. Factors... 28 a. Supporting Arguments: Was A Change Advocated?... 28 iii
1746 b. Discussion of Existing Law and Adverse Precedent.... 28 c. Clarity or Ambiguity of Law.... 29 d. Nature of the Case... 29 e. Risk of Chilling Zealous Advocacy... 29 K. IMPROPER PURPOSE... 29 1. Objective Standard vs. Subjective Focus... 29 a. Presenter s Subjective Intent.... 30 b. Subjective Effect on Opponent... 30 c. Abusive Language.... 30 2. What Purpose is Improper?... 30 a. Generally... 30 b. Mixed Purposes.... 31 3. Ill-Motivated Meritorious Positions.... 31 L. PERMISSIVE NATURE OF SANCTIONS... 31 1. Generally... 31 2. Securities Fraud Actions... 32 3. Technical or De Minimis Violations... 32 M. AN APPROPRIATE SANCTION... 32 1. Discretion... 32 2. Types of Sanctions and Limitations... 32 a. Generally... 32 b. Limitations... 32 c. Power to Sanction Not Unfettered... 33 d. Special Rules for Securities Cases... 33 e. Types of Sanctions Imposed.... 34 3. Relationship Between Sanction and Purpose of Sanction.... 37 a. Least Severe Sanction... 37 b. Purpose of Rule 11... 38 4. Mitigating and Aggravating Factors.... 38 a. State of Mind of Offender... 38 b. Knowledge, Experience and Expertise of Offender.... 38 c. Prior Misconduct of Offender... 38 d. Amount, Reasonableness and Necessity of Out-of-Pocket Expenses.... 38 e. Mitigation Requirement... 38 f. Risk of Chilling Effects.... 39 g. Impact on Offender... 39 h. Effect on Injured Party... 39 i. Burdens on the Court System.... 39 j. Voluntary Withdrawal of Violative Paper.... 39 5. Allocation of Sanctions... 39 a. Relative Culpability.... 39 b. Impact on Attorney-Client Relationship... 40 N. PROCEDURAL MATTERS... 40 1. Generally... 40 a. Separate Motion Requirement.... 40 iv