Court Opinion

ID: 8969711
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:24:57.271349+00
Date Added: 2024-06-11T17:10:24.574842
License: Public Domain

SCHROEDER, Circuit Judge:
I concur in Judge Skopil’s opinion. I write separately because this case so dramatically illustrates that even in the hands of our ablest judges Rule 11 can lead to costly and aimless satellite litigation having nothing to do with the dispute between the parties. Here indeed the sanctions tail is wagging the dog.
In this case four Article III judges, the district judge and three circuit judges, have grappled with the issue of attorney sanctions without ever seeing the merits of the underlying lawsuit. We have spent valuable time attempting to evaluate the reasonableness of a single filing divorced from the context of the parties’ dispute. This came to pass because, while the parties commendably agreed to arbitrate the dispute between the plaintiff and the defendant, the district court retained jurisdiction to handle Rule 11 matters.
The scenario of the underlying dispute is a familiar one. A buyer sued a seller because of an allegedly defective product, and the seller filed a third-party complaint against one of the designers of the product, alleging that if the defendant was liable to the plaintiff, the ultimate liability for the defect should fall on the designer. Such a pleading is clearly contemplated by the terms of Fed.R.Civ.P. 14(a), which provides that a defendant (third-party plaintiff) may bring in a third party “who is or may be liable to the third-party plaintiff for all or part of the plaintiff’s claim against the third-party plaintiff.” Judge Skopil’s opinion quite properly holds that there is nothing in this record to indicate any impropriety in the filing of that third-party complaint.
The arbitrator resolved the underlying dispute by deciding that the defendant was not liable to the plaintiff, and hence the *1331third-party defendant was not liable to the defendant. The third-party defendant then moved for sanctions against the defendant’s counsel in the district court.
With the sanctions issues torn out of the fabric of any case or controversy between the parties, the district court was simply not in a position to evaluate the basis for the filing of the third-party complaint. Nor could the district court have evaluated the strength or weakness of that complaint without wasteful reexamination of the merits of the underlying dispute. That dispute, ironically for purposes of judicial economy, had already been determined by an arbitrator.
The result was that the district court heard and accepted arguments in favor of sanctions which in different circumstances would have appeared patently ludicrous and in conflict with established principles designed to avoid wasteful and repetitive litigation. For example, the appellee maintained that defendant’s lawyer could not have had a proper purpose for filing the third-party complaint because the lawyer filed only one third-party complaint, and did not implead everyone involved in the design of the product. If accepted, this argument would signal to lawyers that they should protect themselves from Rule 11 sanctions by suing everyone in sight, the very antithesis of the stated purpose of Rule 11 to discourage unnecessary litigation. The Advisory Committee Notes to the 1983 amendments to Rule 11 declared that the Rule’s purpose was to “discourage dilatory or abusive tactics and help to streamline the litigation process by lessening frivolous claims or defenses.” Fed.R.Civ.P. 11, Advisory Committee Note. In this case, the Rule subverted rather than served that goal.
Appellee pointed out that the underlying theory of the third-party complaint was based upon indemnification, and then argued from that premise that the complaint should not have been filed until after the liability of the defendant was established. In other words, appellee urged that it is better to have two lawsuits rather than one, a proposition that would wholly frustrate the purpose of Rule 14 and ignore the fifty years of successful experience we have had under it. The original 1938 Advisory Committee Notes to Rule 14(a) recognized the “many advantages” of the im-pleader device. A leading authority has said that Rule 14 “is intended to provide a mechanism for disposing of multiple claims arising from a single set of facts in one action expeditiously and economically.” 6 C. Wright and A. Miller, Federal Practice and Procedure § 1442 (1971). This court has said that the Rule is designed “to promote judicial efficiency by eliminating the necessity for the defendant to bring a separate action against a third individual who may be secondarily or derivatively liable to the defendant for all or part of the plaintiff’s original claim.” Southwest Administrators, Inc. v. Rozay’s Transfer, 791 F.2d 769, 777 (9th Cir.1986), cert. denied, 479 U.S. 1065, 107 S.Ct. 951, 93 L.Ed.2d 999 (1987). The filing of the third-party complaint here was in keeping with these goals. An award of sanctions against the attorney who filed the third-party complaint is in conflict with them.
Another even more discouraging argument was made in support of sanctions here. The appellee contended that the third-party complaint was sanctionable because the defendant’s key employees, by stating in deposition that they did not know of anything that the third-party defendant did wrong, conceded that the third-party complaint was frivolous and hence sanc-tionable. This argument ignores the procedural posture of the underlying lawsuit. There the defendant, who did not initiate the litigation, was maintaining that its product was not defective and that it was not liable to the plaintiff in any amount. If the defendant was justified in that defense, the responses to the answers in the deposition were appropriate and clearly not a basis for sanctioning the third-party complaint.
That these arguments ever appeared plausible is, I believe, due to the fact that Rule 11 diverted the district court’s attention to one document and away from the exercise of the judicial power conferred in Article III to decide cases and controver-*1332síes between parties. The case is, I hope, an aberration, but one which may help us bear in mind our primary responsibilities.