Legislation has been introduced in Congress to reinstate, in a more aggressive form, the 1983 version of Federal Rule of Civil Procedure 11, under which sanctions were mandatory, not discretionary. The House held hearings on H.R. 966, the Lawsuit Abuse Reduction Act (“LARA”), in March of 2011. This article analyzes this legislation.
LARA would amend Rule 11(c) to accomplish four things: (1) make Rule 11 sanctions mandatory, by changing “may” to “shall” in Rule 11(c)(1); (2) eliminate the safe harbor of Rule 11(c)(2), which affords the alleged offender 21 days to withdraw the challenged position before a Rule 11 motion may be filed; (3) convert the purpose of the rule from one of deterrence, alone, to add a compensatory dimension, by appending “and to compensate the parties that were injured by such conduct” to the end of the first sentence of Rule 11(c)(4); and (4) mandate an award of attorneys' fees, in addition to any other sanctions the Court deems appropriate, by adding, inter alia, to Rule 11(c)(4) the statement that: “the sanction shall consist of an order to pay to the party or parties the amount of the reasonable expenses incurred as a direct result of the violation.”
These ideas are not new. From 1983 to 1993, Rule 11 mandated a sanction if a violation was found; there was no safe harbor; and attorneys’ fees were the prevailing sanction. The Rule was amended in 1993 to eliminate mandatory sanctions, to add the safe harbor, and to bar awards of attorneys' fees except when “warranted for effective deterrence.”
The 1993 amendments were adopted, not due to hospitable feelings toward misconduct, but because the mandatory sanctions regime did not work. It was costly to administer — wasting enormous time of judges and money of litigants — and produced no discernible benefits. As the past 18 years have demonstrated, judges confronted with misconduct do not hesitate to impose sanctions, including serious financial penalties, case-ending sanctions, citations of contempt, and disbarment or suspension from practice. See Joseph, SANCTIONS: THE FEDERAL LAW OF LITIGATION ABUSE §§ 3(B), 16(B)(9), 16(B)(12) (4th ed. 2008; Supp. 2011).
The problems with mandatory sanctions arise out of the nature of the inquiry that Rule 11 requires. Basically, the Rule addresses two kinds of misconduct — (i) that committed in bad faith, which is captured in the “improper purpose” clause, Rule 11(b)(1), and (ii) misconduct that takes the form of a frivolous position, either a legal position (11(b)(2)) or a factual position (11(b)(3)-(4)). All of these present problems when sanctions are mandated.
Bad Faith. Judges have never hesitated to punish bad faith litigation abuse, and Rule 11 is in many ways irrelevant to how they do so. Judges have many other powers that they can exercise to sanction bad faith, including the inherent power of the court, 28 U.S.C. § 1927, and the contempt power. Joseph, SANCTIONS at §§ 16(B)(16)(c), 19-29.
Consequently, mandating sanctions for violations of Rule 11(b)(1), to the extent it is not superfluous, can only serve to stimulate litigation in marginal cases in which someone attempts to push the boundaries of what constitutes an “improper purpose.” This phrase has already been litigated heavily (Joseph, SANCTIONS at § 13), and forcing judges to address marginal cases merely increases the likelihood that, in any given case, no violation will be found. The result is that the parties are forced to bear litigation costs that do not turn a profit for anyone. This effectively sanctions both sides in the absence of a violation by anyone.
Legal Positions. There is sometimes a fine line between a meritless argument and a good faith argument for a change in the law. Under Rule 11(b)(2), the court must decide whether a particular argument is merely unwarranted in law (and thus sanctionable) or instead amounts to a good faith argument for a change in the law (which is not). When Brown v. Board of Education was briefed and argued, the plaintiffs’ position was arguably frivolous —a clear and unambiguous Supreme Court precedent, Plessy v. Ferguson, rejected it.
LARA attempts to address this problem by providing a rule of construction: “Nothing in this Act shall be construed to bar or impede the assertion or development of new claims, defenses, or remedies under Federal, State, or local laws, including civil rights laws.” But this merely highlights the problem. It does not solve it. In hindsight, we know that Brown succeeded. But what if it had been filed the day after Plessy was decided. Or a year later. Or a decade. What if the plaintiffs filed suit year after year until they were vindicated?
When is a Rule 11 sanction not an impediment to the development of a new claim but, rather, mandated to punish the abusive litigant who, despite repeated rebuffs, “like Ahab hunting the whale, ... relentlessly pursue[s] the claims.” Norelus v. Denny’s, Inc., 2010 U.S. App. LEXIS 26286 (11th Cir. Dec. 28, 2010). Vesting judges with discretion obviates problems like this.
Factual Positions. Under Rule 11(b)(3)-(4), the judge must decide whether an asserted factual conclusion represents impermissible speculation or a permissible inference — two ends of the same continuum. There are no meaningful benchmarks available to assist the court in forming its judgment. Decisions, while ostensibly objective (in the sense that a reasonable-person test applies), are too often subjective (the judge's sensibilities necessarily gravitate toward center stage). Different judges looking at the same set of facts will come to differing conclusions. This leads to increased appellate activity, as well as increased district court activity.
Given that every violation, no matter how marginal, must be sanctioned, courts are sometimes required to waste time engaging in extended analysis to deal with trivial matters. For example, under the 1983 Rule, courts had to decide whether it was sanctionable for a lawyer to fail to read the final word processing printout of a complaint which, due to a computer glitch, included extraneous matter. See, e.g., Ault v. Hustler Magazine, Inc., 860 F.2d 877 (9th Cir. 1988), cert. denied, 489 U.S. 1080 (1989). Or whether punishment was mandated for a mistake in a pleading that was clearly corrected by appended exhibits. See, e.g., Kisan, Inc. v. Alpha Distribs., Inc., 693 F. Supp. 1372, 1375–76 (D. Conn. 1988). If there is an error, when does it comprise a sanctionable misstatement, as opposed to an unsanctionable isolated mistake? There is no point to this sort of activity, all of which cost judges time and litigants money.
The transaction costs soar when appeals are necessary, particularly given that appeals of sanctions decisions must await the end of the case — under Cunningham v. Hamilton County, 527 U.S. 198 (1991) — thereby prolonging the litigation.
Safe Harbor. Absent the safe harbor, Rule 11 motions are filed when served. Parties cannot thereafter control the litigation by conclusively deciding to settle or dismiss it and withdraw all pending sanctions issues. Once a sanctions issue is flagged, the judge is not merely empowered by Rule 11 to impose a sanction, but is affirmatively required to do so if he or she concludes that a violation had occurred. Settlement is discouraged because the attempt to withdraw or settle a claim may itself be viewed as evidence of culpability on the party of the alleged offender. See, e.g., Blue v. U.S. Dep't of Army, 914 F.2d 525 (4th Cir. 1990), cert. denied, 499 U.S. 959 (1991).
Compensatory Awards. Under the 1983 version of Rule 11, attorneys' fees awards were the most common sanction both sought and awarded. The result was a deluge of Rule 11 activity. While there were fewer than 8,000 Rule 11 decisions reported on LEXIS during the ten years from 1984 to 1993 (inclusive), it is apparent from the Federal Judicial Center's empirical studies that the actual Rule 11 activity dwarfed this number. See FJC DIRECTIONS No. 2, at 7 (Nov. 1991) (in five districts studied, only 66 published opinions addressed Rule 11 during the years 1983-89, but almost 1,000 cases actually involved Rule 11 activity in the shorter period of 1987-90). This volume of activity is expensive and counterproductive.
Rulemaking Process. Congress enacted the Rules Enabling Act, 28 U.S.C. § 2072, in recognition of the fact that the courts are best suited to adopt procedural rules that fit the countless, nettlesome factual scenarios they face. The rules committees take their jobs seriously. They analyze alternatives meticulously. They call on leading scholars for academic insight; empiricists at the FJC for hard data; and judges and lawyers for a practical appreciation of problems and solutions. If Congress believes that improvements to Rule 11 are in order, it should direct the Advisory Committee on the Federal Rules of Civil Procedure to revisit it.
Mr. Joseph is the President of the American College of Trial Lawyers and a past Chair of the Litigation Section of the American Bar Association. He practices with Gregory P. Joseph Law Offices LLC in New York and can be reached at firstname.lastname@example.org.
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