Opinion ID: 527112
Heading Depth: 2
Heading Rank: 2

Heading: The Claim Against the Plan's Attorneys

Text: 18 The district court imposed $3,000 in sanctions on the Townsends' attorney for suing the Plan's lawyers. It appears that the court found that this claim both was frivolous within the meaning of Rule 11 and had been filed in order to harass the Plan's lawyers. The court relied on its finding that the undisputed facts showed that the Plan's lawyers had had no involvement in the adoption of the MAP. 19 There appears to be a problem with this finding of the district court. The court's order strongly suggests that the sanctions were based on the First Amended Complaint, although it fails specifically to identify the pleading involved. Yet, the First Amended Complaint, unlike the original version, did not allege that the Plan's lawyers had participated in the adoption of the MAP. All that the First Amended Complaint alleged was that, in their capacity as the Plan's regular counsel, the lawyers had improperly advised the Plan not to pay the Townsends' claims. 3 The Plan's lawyers undoubtedly contributed to the confusion by failing to advise the district court, in their request for sanctions, that the Townsends' amended complaint no longer alleged that the Plan's counsel had played a role in the adoption of the MAP. 4 20 Preliminarily, we address the district court's apparent conclusion that the claim against the Plan's attorneys was included for an improper purpose. We note first that there is nothing in the order itself, and we have been able to find nothing in the record, which supports a conclusion that--merely because the complaint named the attorneys as defendants--it was filed for an improper purpose. The district court made no findings of fact with respect to improper purpose, nor does its order refer specifically to the reason(s) upon which the court apparently concluded that the pleading had been filed to harass. In light of these facts, we cannot affirm the imposition of Rule 11 sanctions on an improper purpose ground. An order sanctioning counsel for engaging in the type of 'harassment' that Rule 11 proscribes, should be based on specific supportable factual findings warranting the conclusion that the pleader unnecessarily delayed and multiplied the proceedings or that the pleading was pretextual. See Stewart, 845 F.2d at 201. The district court failed to make any such findings here; nor does the record independently support a conclusion that sanctions based on Rule 11's improper purpose prong were justified in this case. 5 We must therefore proceed to analyze the order exclusively in reference to the frivolousness component of Rule 11. 21 Turning to the frivolous inquiry, we recognize that the Plan's attorneys themselves recognize its ambiguity with respect to the pleading actually sanctioned. Nonetheless, they argue, even if we conclude (as the order seems to show) that the order sanctioned allegations not actually before the court, we should uphold the imposition of sanctions since the claims against them pleaded in the First Amended Complaint were themselves baseless. Thus, they argue, the First Amended Complaint can properly serve as the basis for a finding of frivolousness. Although we will assume that argument to be correct from a procedural standpoint, our conclusion is unchanged. Our precedents make clear that, even if the claim against the Plan's lawyers were baseless, Rule 11 sanctions would still have been inappropriate. 22 As explained above, the law of this circuit clearly requires a judge determining whether a pleading is frivolous to look at the entire pleading objectively, and prohibits the imposition of sanctions on the basis of a single frivolous argument or ground for relief. Golden Eagle, 801 F.2d at 1540-41; see also Stewart, 845 F.2d at 201 (citing Hudson, 836 F.2d at 1159). 6 This requirement is a manifestation of the development of distinct requirements for Rule 11 frivolousness and improper purpose prongs. See Community Electric Serv. of Los Angeles v. National Electrical Contractors Ass'n, 869 F.2d 1235, 1243 (9th Cir.1989) (frivolous as a whole analysis is distinct from the different examination a court must make to determine whether a pleading has been filed for an improper purpose) (Community Electric ); Zaldivar, 780 F.2d at 830-31 (distinguishing between the two separate problems addressed by the two prongs of Rule 11); Golden Eagle, 801 F.2d at 1537-38 (discussing the two separate parts of Rule 11, which impose differing requirements on litigants). Thus, it is critical that a court first determine the basis upon which Rule 11 sanctions were imposed and then ensure that in its application of caselaw it bears in mind the distinctions between the two prongs of the Rule. 23 When viewed with this caveat in mind, it becomes clear that Hudson is not, as the dissent claims, infra at 799, inconsistent with our decision today. In Hudson, the court determined that the damages prayer of a single counterclaim was baseless and unconscionable. On the basis of this finding, it concluded that the defendant's attorney had filed the counterclaim to harass [the plaintiff]. 836 F.2d at 1162. Hudson recognized that instituting a claim for damages that might destroy the defendant economically, or cause him to abandon rights he might otherwise assert, could well constitute harassment, regardless of the merits of other aspects of the pleading. Thus, as we have said elsewhere, Hudson is essentially an improper purpose case. See Community Electric, 869 F.2d at 1243 ([Hudson 's] holding rested on the improper purpose of the employer and the harassing nature of the counterclaim). 7 24 Returning to the facts of this case, it is uncontroverted that the Plan's attorneys were the only parties alleged to have been improperly sued. Given this fact and given the nature of the pleadings filed by the Townsends' attorney, our prior holdings that a single frivolous claim in a multiple-claim pleading cannot render the pleading sanctionable under Rule 11 preclude a holding here that the single claim with respect to the Plan's attorneys in a pleading with multiple claims against multiple parties can be sanctioned under the frivolousness prong of the Rule. Since the judge considering Rule 11 sanctions is required to examine the entire pleading, a pleading which contains a non-frivolous claim cannot be sanctioned as frivolous under Rule 11, even if other claims in that pleading are frivolous. The same analysis applies to instances in which a pleading names a party frivolously. Accordingly, we hold that the improper inclusion of a party in a complaint which properly includes other parties (as we have already held, see supra n. 2, the Townsends' pleadings do) cannot render the complaint frivolous for purposes of Rule 11 sanctions. 8 25 Finally, it bears noting that appellees' arguments blur the distinction between a motion to dismiss a claim under Fed.R.Civ.P. 12(b)(6) and a motion for sanctions under Rule 11. The distinction is worth reiterating, particularly inasmuch as many attorneys now combine the two motions, seemingly as a matter of course, when responding to a complaint. As we have said before, the key question [in determining whether Rule 11 has been violated] is whether a complaint states an arguable claim--not whether the pleader is correct in his perception of the law. Therefore, courts 'do not examine the complaint in the same manner as a court considering a Rule 12(b)(6) motion', because ultimate failure on the merits is irrelevant. Hudson, 836 F.2d at 1159 (quoting Zaldivar, 780 F.2d at 830-32 (citations omitted)). There is no question that the Townsends' complaint taken as a whole, as it must be for Rule 11 purposes, stated at least an arguable claim. While the district court may have (rightly or wrongly, see n. 2, supra ) concluded that their claim was meritless, it could not rightly have imposed sanctions upon their attorney for his amended pleading. 9 26