Opinion ID: 2008593
Heading Depth: 2
Heading Rank: 1

Heading: The Standard of Review and the Decision to Impose Sanctions

Text: A trial court decision to impose sanctions under Rule 11 is a two-step process. First, the court must determine whether there was a Rule 11 violation at all. If the court concludes that a violation occurred, it has no discretion to refrain from sanctioning an offending party or attorney, [4] but it must then choose what sanction to impose. The courts are in agreement that the latter decision is subject to review for abuse of discretion. E.g., Robinson v. National Cash Register Co., 808 F.2d 1119, 1126 (5th Cir.1987); Zaldivar v. City of Los Angeles, 780 F.2d 823, 828 (9th Cir.1986); Westmoreland v. CBS, Inc., supra, 248 U.S.App.D.C. at 262, 770 F.2d at 1175; see MOORE'S FEDERAL PRACTICE, supra, ¶ 11.02[4], at 11-27 & n. 8; Vairo, Rule 11: A Critical Analysis, 118 F.R.D. 189, 225 & n. 200 (1988). The several circuits do not agree on the standard by which they review the initial finding of a violation. See G. JOSEPH, SANCTIONS: THE FEDERAL LAW OF LITIGATION ABUSE 307-310 (1989) (hereafter SANCTIONS). We said, however, in Stansel v. American Security Bank, supra , that we would interpret our local rule in the same manner as the United States Court of Appeals [for the District of Columbia Circuit] read the corresponding federal rule in Westmoreland v. CBS, Inc., [ supra ]. 547 A.2d at 995 (footnote omitted). Following Westmoreland, we hold that the trial court's decision on whether a violation of the factual inquiry or improper purpose prongs of Rule 11 has occurred is subject to review for abuse of discretion, but a decision on whether a paper was supported by law or a good-faith argument for a change in the law is subject to de novo review because the issue is strictly one of law. Westmoreland, supra, 248 U.S.App.D.C. at 261-262, 770 F.2d at 1174-1175. [5] Applying these standards to the case at bar, we conclude that we must remand the case for factual findings and, under the circumstances, a hearing. The record simply does not tell us whether the trial court recognized that it had any discretion and, if so, what it relied upon in deciding that sanctions were warranted. While the order does refer generally to responsive papers filed on behalf of AFS, it does not sufficiently state the basis for the court's conclusion that reasonable inquiry has not been made into the factual grounds for those papers. See Stansel, supra, 547 A.2d at 990. It is far from clear that Mr. Montgomery failed to conduct the reasonable factual inquiry required by Rule 11. While it is true that Montgomery did not put on any evidence at trial to substantiate AFS's proffered defenses, it must be remembered that AFS's witnesses did not appear at trial because the court denied Mr. Montgomery's last-minute request for a continuance. It may well be that these witnesses would have given testimony to support AFS's answer. It is one thing to conclude that AFS lost at trial because it failed to prove its asserted defenses, but quite another to say that those defenses could not be supported by facts pleaded in AFS's papers which were signed by Mr. Montgomery. The trial court, before ordering sanctions, must find that there was no support for the factual assertions made by AFS through its counsel Montgomery. Under Rule 11, papers must not be viewed with 20/20 hindsight; rather, the court must determine whether, before they were filed, an objectively reasonable factual inquiry was undertaken which supported the filing. The court is expected to avoid using the wisdom of hindsight and should test the signer's conduct by inquiring what was reasonable to believe at the time the pleading, motion, or other paper was submitted. Fed.R.Civ.P. 11, Advisory Committee Note, 97 F.R.D. 198, 199 (1982); see, e.g., Thomas v. Capital Security Services, Inc., supra note 4, 836 F.2d at 874-875. That the trial court sanctioned Mr. Montgomery for, inter alia, AFS's opposition to appellee's motion for summary judgment is particularly troubling because Judge Weisberg had previously denied both the motion for summary judgment and appellee's subsequent motion to reconsider. Those denials at least suggest that Judge Weisberg may have agreed with the position advocated by Montgomery in the papers he signed. For a trial judge to rule in favor of a party, the trial judge necessarily must conclude that the party's position 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.' Indianapolis Colts v. Mayor & City Council of Baltimore, 775 F.2d 177, 181 (7th Cir.1985), quoting Fed.R. Civ.P. 11. It may be that Judge Weisberg's denial of summary judgment, apparently agreeing (or at least not disagreeing) with Montgomery's papers, can be reconciled with Judge Goodrich's unexplained finding that those papers were sanctionable. Nevertheless, because Judge Weisberg ruled that summary judgment was unwarranted, we think that Judge Goodrich should at least explain why, in the exercise of his discretion, he concluded that the papers filed by Montgomery in opposition to the motion for summary judgment and in opposition to appellee's motion to reconsider warranted sanctions under Rule 11.