Rule 11 — Duty to Inquire — Irrelevance of Signature — Duties of Local Counsel

A nightmare scenario. You are representing the foreign plaintiffs suing Texaco and Chevron for cancer caused by their Ecuadorian oil operations, and one your clients testify as follows:

Q: Ms. [plaintiff], isn't it true that the first biopsy that was performed on you to see whether you had breast cancer was performed after April 2006?

A: Yes, in 2006.

Q: After the complaint was filed; right?

A: Yes.

Q: And before the complaint was filed, you knew that you did not have breast cancer; correct?

A: I had no -- I had not been treated by a doctor, no. Just a suspicion, because I was getting dizzy spells.

Q: So you self-diagnosed yourself with breast cancer; is that correct?

A: That's what I suspected because of the dizzy spells, the headache, pains in my body. Because of the contamination they told me that what I had was cancer.

* * *

Q: Did you know that you were going to sue Texaco?

A: Now I do.

Q: At the time you did not understand that you were going to sue Texaco?

A: No.

Q: What did you understand was happening?

A: Since I was not well-informed, I didn't know anything yet.

Q: Did you authorize anybody to sue Texaco for having breast cancer?

A: No.

Q: Did you tell [the paralegal you met with] that you had cancer?

A: At the time, yes.

Q: Even though it had not been diagnosed; is that right?

A: Yes.

This is what happened in Gonzales v. Texaco, Inc., 2007 U.S. Dist. LEXIS 81222 (N.D. Cal. Oct. 16, 2007). Sanctions were sought under Rule 11 for failure to conduct a reasonable pre-filing inquiry, but the defendants neglected to honor the 21-day safe harbor of Rule 11(c)(1)(a), barring their motion. Problem? Not at all. District Judge William Alsup issued an Order to Show Cause why sanctions should not be entered on the court’s own initiative.

Local counsel protested that he was merely a mail drop. Judge Alsup held that ‛there is no exception in Rule 11 for local counsel.“ He added that:

A few questions by [local counsel] would have easily laid bare the incompetence and unreasonableness of the pre-suit inquiry. Asking "How do we know they have cancer" and "Do we have their medical records" would have likely done it. This order recognizes that the duty of inquiry may vary according to one's role in the case. But one who signs a complaint and launches litigation must honor Rule 11, which was not met in this instance. [Emphasis in original.]

Lead counsel argued that the had not signed the complaint and, therefore, was not subject to sanction under Rule 11. Judge Alsup pointed out that, under the 1993 (current) version of the Rule, signing is not essential — just ‛presenting“ the meritless position to the Court. (Rule 11(c) also provides that, once a violation is found, the Court may ‛impose an appropriate sanction upon the attorneys, law firms, or parties that *** are responsible for the violation“ of the Rule.)

Held, lead plaintiffs’ counsel must pay $45,000 in defense costs to the adversary and, if he should fail to do so by year end, local counsel must do so.

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