Court Opinion

ID: 8972151
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:39:12.507787+00
Date Added: 2024-06-11T17:10:28.085019
License: Public Domain

NOONAN, Circuit Judge,
dissenting:
The majority’s opinion is a straightforward gutting of Rule 11. Before analyzing the court’s opinion, it is worth restating the case.
The Townsends’ original Complaint, filed December 18, 1986, alleged that the defen*798dants Robert Wilson and John Reitman were a partnership and that Robert Wilson had advised the Plan “to adopt MAP, knowing that it was not in the best interests of Plan beneficiaries.” This allegation was amplified by the Townsends’ First Amended Complaint which asserted that all the defendants, including Wilson, Reitman and their partnership “were active in designing, planning and implementing” MAP; that the adoption of MAP was for the purpose “of enabling defendants to make more money from the Plan”; and that “by using the MAP program as a means to secretly reduce benefits without good reason, and to increase the amount of moneys they would receive from the Plan, defendants breached their fiduciary obligations to Plan beneficiaries.” Finding that these allegations violated Federal Rules of Civil Procedure 11, the district court awarded sanctions of $3,000 against counsel for the Townsends.
The district court’s order of March 16, 1987 reads in relevant part:
As to the plan’s lawyers, the undisputed facts are that they did not participate in what is the alleged (if inadequate) basis of the lawsuit — the adoption of the amendment to the plan — but were merely called in to defend the plan in the state court lawsuit and advise the plan and the connected entities in their capacities as lawyers. Plaintiff shows nothing contradicting this showing. Not only does plaintiff not state a cause of action against the plan’s lawyers, or submit any facts in opposition to the motion for summary judgment, the act of suing the opponent’s lawyers in this situation is plainly nothing short of outrageous. Plaintiff did not make the “reasonable inquiry” required by Rule 11 and it is found that suing the lawyers was not in good faith and for the purposes of harassment. Plaintiff’s attorney, [name omitted], shall pay to Wilson and Reitman the sum of $3,000 in the form of sanctions under Rule 11. The court also advises plaintiff’s attorney to read Rule 11, and the cases under it, with respect to the remaining allegations. The day has long passed in federal court where a suit may be brought on speculation to see what might turn up, as it may have formerly been the custom in state court; Rule 11 means what it says and is not an empty letter. (Italics supplied)
Rule 11 provides that the signature of an attorney constitutes a certificate by him that he has read the pleading he has signed and that “to the best of his knowledge, information and belief formed after reasonable inquiry it is well grounded in fact ... and that it is not interposed for an improper purpose”
In the Rule 11 hearing before the district court, counsel did not point to any inquiry that he had made that would have furnished the basis for asserting the lawyers had .advised adoption of the Plan, had designed, planned, or implemented the Plan, or had made more money by reason of the Plan’s adoption. Counsel had no grounds for making the allegations in the Complaint or in the First Amended Complaint against Wilson, Reitman and the partnership. Counsel had no basis for making defendants out of the lawyers opposing him in the state court.
In the oral argument of the case before this court the sanctioned attorney was asked why he had made defendants out of the opposing law firm. The colloquy went as follows:
Judge Pregerson: Well, what were you going to get? What did you hope to get from the law firm?
Attorney: Well, what I hoped to get from the law firm was their recusal. Period. Their recusal from further representation of the Plan itself because of what we perceived to be conflict of interest. You know, if he could be perceived to be a fiduciary and he’s advising the Plan in that fashion, then he’s asking the Plan to waste its money basically.
Judge Pregerson: You could have brought a motion to disqualify the firm for conflict of interest.
Attorney: I suppose that could have been done.
(Italics supplied)
*799This statement of the sanctioned attorney amounts to a direct admission of the improper purpose with which he named the attorneys in his suit. As the improper purpose has been acknowledged, it is difficult to see why the count finds that it has not been established. According to the court’s own announced standards, a pleading brought for an improper purpose violates Rule 11 and should be sanctioned. The case should end with this conclusion.
Our court has earlier held that Rule 11 “permits the imposition of sanctions only when the ‘pleading, motion or other paper’ itself is frivolous, not when one of the arguments in support of a pleading or motion is frivolous.” Golden Eagle Distributing Corp. v. Burroughs Corp., 801 F.2d 1531, 1540 (9th Cir.1986). That case does not address the situation where a pleading, frivolously and improperly, makes defendants out of persons entirely unconnected with the plaintiffs’ cause of action. The dragging in of such innocent persons is not of course “an argument.” It is the addition to a case of persons going about their lawful business and not subject to judicial process except for the effrontery of a plaintiff who has an ulterior and improper reason for making them defendants. When the innocent parties are themselves lawyers and attacked in this fashion by a fellow member of the bar, the conduct of offending counsel is, as the district court concluded, “outrageous.” Rule 11 applies with full force. Sanctions are mandatory.
When the sanctioned attorney moved for reconsideration of the sanctions he already had filed a notice of appeal with this court. The district court no longer had jurisdiction. The sanctioned attorney had no basis in law for making his motion. The motion was entirely baseless. He had failed to inquire into the law. Sanctions under Rule 11 were again mandatory and were again properly applied. Pipe Trades Council, Local 159 v. Underground Contractors Association of Northern California, 835 F.2d 1275, 1281 (9th Cir.1988).
To reach its remarkable result to the contrary the opinion of the majority converts Golden Eagle from a case about mis-identification of an argument to a case saying that the entire pleadings must be frivolous for Rule 11 to be invoked. Nothing in Golden Eagle, however, prohibits the imposition of sanctions on the basis of a single frivolous ground for relief.
The majority compounds its misreading of Golden Eagle by invoking two cases in which Rule. 11 sanctions were upheld. Stewart v. American Intern. Oil and Gas Co., 845 F.2d 196 (9th Cir.1988); Hudson v. Moore Business Forms, Inc., 836 F.2d 1156 (9th Cir.1987). Neither case stands for the proposition for which it is cited. In Stewart counsel were subjected to Rule 11 because they had filed a groundless third party complaint and had done so for an improper purpose. The court held that on either basis the district court’s imposition of sanctions would be upheld. Not a word in Stewart was addressed to imposition of sanctions being prohibited if there is only a single frivolous ground for relief.
Hudson far from supporting the majority opinion is directly contrary to it. In Hudson the sanctioned complaint was found generally to be legitimate but the prayer for damages was to be excessive. Hudson at 1163. This court remanded the case to permit the district court to impose Rule 11 sanctions for the damages prayer alone. Id. at 1164. The very contention that the majority opinion makes in this case that Golden Eagle prohibited the sanction was made by the sanctioned law firm and was answered negatively by Hudson. It is extraordinary that the court should attempt to invoke Hudson on its side when it flouts Hudson in fact.
The opinion is also contrary to another case cited by the majority, Partington v. Gedan, 880 F.2d 116 (9th Cir.1989). In Partington sanctions were awarded under Rule 11 against the appellees for frivolously seeking Rule 11 sanctions against the appellants. Although chracterized as a separate motion, the request for Rule 11 sanctions was made in the appellee’s brief, which, taken as a whole, was far from frivolous. In passing, Partington reaffirmed the established rule of this circuit that Rule 11 applies to appeals — a rule *800which the majority in the present case appears to doubt or regret.
The opinion is not only squarely contrary to current Ninth Circuit law; it puts the circuit in conflict with other circuits. The general rule is clear that a lawyer may not name a party without adequate factual investigation in hopes that some basis will emerge during discovery. Southern Leasing Partners Ltd. v. McMullan, 801 F.2d 783, 788 (5th Cir.1986). Negligently suing the wrong party is not countenanced. Callahan v. Schoppe, 864 F.2d 44 (5th Cir.1989). A fortiori, suing the wrong party is unacceptable when the wrong party, as here, is sued deliberately.
The majority opinion compounds its basic disrespect for precedent by presenting a confused analysis of what the district court in fact did. The district court sanctioned counsel both for the original Complaint’s allegations against opposing attorneys and for the Amended Complaint’s allegations against the opposing attorneys. The majority makes a mystery out of what is evident on the record. Moreover, even if the Amended Complaint had improved on the original Complaint, there was no bar to the imposition of sanctions for the first baseless charges against the defendants’ lawyers. Greenburg v. Sala, 822 F.2d 882, 885 (9th Cir.1987). See also Muthig v. Brant Point Nantucket, Inc., 838 F.2d 600, 603 (1st Cir.1988).
Again, in treating the sanctions for the motion to reconsider, the majority opinion repeats it basic error of insisting that the whole pleading must be groundless and then confuses what the district court did by engaging in analysis of the requirements for a stay — an analysis which is irrelevant to the question of the district court’s jurisdiction to have heard a motion for reconsideration. Again, Ninth Circuit precedent is flouted. Pipes Trades Council, Local 159, 835 F.2d at 1281.
The whole opinion breathes a hostility to the imposition of sanctions that is truly extraordinary. The court ends with marked disapproval of lawyers who legitimately seek the protection of the rule. The court complains that “much of this court s time m the last six years has been occupied by the subject of Rule 11 sanctions. In fact, since August 1983 there have been no more than 73 published opinions addressed to Rule 11 in this circuit. This number of opinions is less than one percent of the total opinions filed by this court. It is hard to believe that anyone seriously thinks that issues arising in less than one percent of this court’s cases take up “much of its time.”
The opinion’s hostility to Rule 11 is further reflected in its complaint that nationwide there are now about 1,000 decisions construing Rule 11. The proper reading of that statistic is that Rule 11 was addressed to a very serious problem and that there has been a great need to apply the rule and, necessarily, to refine the rule in applying it. The Advisory Committee on Rules stress that the purpose of the 1983 amendment was “to reduce the reluctance of courts to impose sanctions” and to reach “a greater range of circumstances.” Fed.R. Civ.P. 11 advisory committee note. The rule was premised on the position that a federal court should not be treated as “the private playpen of the litigants.” Miller, The Adversary System: Dinosaur or Phoenix?, 69 Minn.L.Rev. 1, 19 (1984).
There are lawyers and judges who seriously and in good faith believe that professional responsibility is exercised by most lawyers and that more harm than good is done by the supervisory intervention of judges. These persons may be right and are of course entitled to their personal views. But when the issue is before this court, the court is not entitled to disregard the authority of the Supreme Court of the United States which promulgated the Rules of Civil Procedure, nor is the court free to disregard the authority of Congress which has approved the rules; nor is the court at liberty to disregard our own precedents and strike out in a direction without basis in law.