Opinion ID: 538785
Heading Depth: 2
Heading Rank: 1

Heading: The Sanction Order

Text: 7 The District Court based its sanction order on two findings: first, that Banov was unreasonable in filing the amended complaint without first making reasonably certain that it could be supported in fact and law; and second, that Banov unreasonably continued the litigation for over a year and one-half when virtually each passing day confirmed that the complaint had no merit. Rice I, slip op. at 5, reprinted in J.A. 21. We affirm on the basis of the first finding alone. 8
9 We review for abuse of discretion a finding that a pleading, motion, or other paper was not well grounded in fact, Fed.R.Civ.P. 11, 2 affording great weight to the views of the trial court because of its intimate familiarity with the underlying litigation. See Westmoreland v. CBS, Inc., 770 F.2d 1168, 1174 (D.C.Cir.1985). The District Court in this case determined that Banov failed to conduct an adequate prefiling inquiry because he made no attempt independently to corroborate Rice's second-hand account of the alleged defamations. See Rice I, slip op. at 2, reprinted in J.A. 18. We can find no basis to overturn this determination. 10 Although we do not believe that it is invariably sanctionable to rely solely on the client's word before filing suit, see, e.g., Kamen v. American Tel. & Tel. Co., 791 F.2d 1006, 1012 (2d Cir.1986), 3 we conclude that the District Court stood on firm ground in deeming it unreasonable for Banov to do so here. Banov should have realized that Rice could not possibly prevail at trial unless one or more persons could be found to testify to having received the alleged defamations. Nor was this a case in which the relevant information was largely in the control of the defendant[ ], Kamen, 791 F.2d at 1012, for at least ten of the recipients identified in the amended complaint were not associated with HHC. Banov maintains that he had reason to credit Rice's allegations because an HHC employee testified at Rice's unemployment hearing that HHC fired Rice for theft. HHC's willingness to accuse Rice of misconduct in one, privileged setting, however, does not support the inference that HHC defamed Rice in various, specifically identified nonprivileged settings. 11 In sum, Banov does not come close to showing that the District Court abused its discretion in finding that he failed to make a reasonable inquiry into the factual basis of the amended complaint. And that finding by itself is sufficient to uphold the trial court's imposition of Rule 11 sanctions. See Danik, Inc. v. Hartmarx Corp., 875 F.2d 890, 896 (D.C.Cir.), cert. granted sub. nom. Cooter & Gell v. Hartmarx Corp., --- U.S. ----, 110 S.Ct. 275, 107 L.Ed.2d 256 (1989). 4 12 2. Banov's Alleged Unreasonable Failure to Abandon the Suit When Postfiling Contingencies Revealed It to Be Unfounded 13 We specifically do not rely on the District Court's second finding--that Banov unreasonably continued his representation of Rice after postfiling contingencies revealed Rice's amended complaint to be without merit. Although we asked the parties at oral argument to address the question of whether Rule 11 imposes postfiling obligations on the signer of a particular pleading, we decline for two reasons definitively to resolve that issue now. First, as we have explained, the trial court's finding that Banov failed to conduct a reasonable prefiling inquiry is sufficient to uphold the imposition of Rule 11 sanctions. Indeed, once the District Court made this finding, it was obliged to sanction Banov, see Westmoreland, 770 F.2d at 1175, making the court's views on Banov's postfiling conduct immaterial. 14 Second, although HHC defended the District Court's finding that Banov should be sanctioned for continuing to represent Rice, 5 Banov did not raise or brief the specific question of whether Rule 11 imposes ongoing duties on the signer of a pleading, motion or other paper. Consequently, this issue is not fit for disposition on appeal. See, e.g., Maryland People's Counsel v. FERC, 760 F.2d 318, 319 (D.C.Cir.1985) (Scalia, J.). 15 But insofar as the District Court will no doubt have occasion to revisit this question, we do feel constrained to note the source of our concerns. At least five of our sister circuits have held that Rule 11 does not impose a general obligation to discontinue a suit once the factual or legal allegations in the complaint have been discredited. 6 As these courts have pointed out, Rule 11's emphasis on the need to perform a reasonable inquiry before sign[ing] a pleading, motion, or other paper suggests that the rule authorizes sanctioning an attorney only for unreasonably filing such a submission, not for failing to withdraw or to amend the submission when postfiling contingencies reveal it to be unfounded. See, e.g., Oliveri v. Thompson, 803 F.2d 1265, 1274 (2d Cir.1986), cert. denied, 480 U.S. 918, 107 S.Ct. 1373, 94 L.Ed.2d 689 (1987). 7 See generally Pavelic & LeFlore v. Marvel Entertainment Group, --- U.S. ----, 110 S.Ct. 456, 458, 107 L.Ed.2d 438 (1989) (Rule 11 must be construed narrowly with emphasis on plain meaning of its text). 16 This reading of Rule 11 also avoids the significant ethical dilemmas associated with sanctioning an attorney for declining to abandon a law suit. An attorney has broad latitude in deciding whether he will initiate representation of a client, see, e.g., MODEL CODE OF PROFESSIONAL RESPONSIBILITY EC 2-26 (1981), or even whether he will take a particular step once litigation has begun, see, e.g., MODEL RULES OF PROFESSIONAL CONDUCT Rule 1.2(a) (1983). But, as Banov himself learned in this litigation, an attorney does not enjoy perfect freedom to withdraw from representation or to settle a case against his client's wishes. See id. Rules 1.2(a), 1.16(b)-(c). 17 Cutting the other way is the District Court's legitimate interest in controlling abusive litigation practices after a suit has been initiated. We note, however, that the prevailing construction of Rule 11 by no means deprives the trial court of the power to sanction such abuses. The sanction authorized by Rule 11 extends to all reasonable expenses incurred because of the filing of [an unreasonable] pleading, motion, or other paper, including a reasonable attorney's fee. FED.R.CIV. P. 11 (emphasis added). Thus, so long as the attorney should have known that his client's cause was without merit when the action commenced, the attorney can be held responsible for expenses incurred by virtue of his continuing representation. Cf. Danik, 875 F.2d at 897 (authorizing award of fees incurred in defending Rule 11 sanction on appeal). 8 Moreover, regardless of what an attorney knew of his client's position at the outset of the litigation, if the attorney multiplies the proceedings in any case unreasonably and vexatiously, he may be held liable for the opposing party's excess costs, expenses, and attorneys' fees pursuant to 28 U.S.C. Sec. 1927 (1982). 9 18 Finally, Rule 11 by its own terms applies to [e]very pleading, motion, and other paper. FED.R.CIV. P. 11 (emphasis added). Thus, even if the District Court could not sanction an attorney for continuing a nonmeritorious lawsuit generally, the court could sanction counsel for any specifically identified pleading, motion, or other paper unreasonably submitted during the course of the litigation. See F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1268 (2d Cir.1987). 10 Indeed, in some cases, there may be little practical difference between obliging an attorney to abandon a nonmeritorious suit and obliging him not to file additional submissions necessary to sustain the suit. Nonetheless, the burden specifically to articulate which submissions are defective and why does provide some check against the unwarranted exercise of the trial court's sanction powers. See, e.g., id. 19 While we need not rule on whether Rule 11 should be read to impose postfiling obligations in this case, we do highlight the foregoing considerations as factors to be taken into account should the District Court again confront this question.