A Young Lawyer's Guide to Rule 11 Sanctions

Prefiling Investigation

Rule 11 states in part that attorneys must not file suit without evidentiary support for the allegations contained in the complaint. Put simply, Rule 11 requires an attorney to “stop, think, and investigate” before filing a paper with the court. This requires an attorney to make an objectively reasonable inquiry into the facts and law prior to filing and  not to pursue an action that is not objectively reasonable based on the facts. Both prongs are highly fact-dependent, with broad discretion reserved to the trial court.

Prefiling Investigation

Rule 11 states in part that attorneys must not file suit without evidentiary support for the allegations contained in the complaint. Put simply, Rule 11 requires an attorney to “stop, think, and investigate” before filing a paper with the court. This requires an attorney to make an objectively reasonable inquiry into the facts and law prior to filing and  not to pursue an action that is not objectively reasonable based on the facts. Both prongs are highly fact-dependent, with broad discretion reserved to the trial court.

In some jurisdictions, reasonable inquiry into the facts is a threshold requirement that first examines whether the prefiling investigation was unreasonable based on the circumstances—in which case sanctions should be imposed—rather than whether there was a reasonable belief that the facts supported the allegations. See Chandler v. Nw. Bank Minn., Nat’l Ass’n, 137 F.3d 1053, 1057 (10th Cir. 1998) (imposing sanctions when attorney failed to conduct a reasonable inquiry, despite a reasonable belief that the allegations were based in fact); see Henry v. Farmer City State Bank, 127 F.R.D. 154 (C.D. Ill. 1989) (imposing sanctions when claim was not well grounded in law, despite being adequately investigated). In these jurisdictions, only after it is determined that an initial investigation was reasonable, the focus then shifts to whether there is any factual support for the allegations. Thus, sanctions would be appropriate only if either the prefiling investigation was unreasonable or the prefiling investigation was reasonable but the claims are baseless.

By contrast, other jurisdictions, such as the court in In re Keegan Management Co., Securities Litigation, 78 F.3d 431, 434–35 (9th Cir. 1996), treat the conditions as disjunctive such that sanctions would not be appropriate so long as there was either a reasonable prefiling investigation or reasonable factual support for the allegations. In other words, sanctions are appropriate only when the prefiling investigation was unreasonable and the allegations are baseless.

Reasonable Inquiry

There are several factors a district court could consider to determine whether an investigation was reasonable:

• the time available for investigation;
• the extent of the attorney’s reliance on the client for the factual support for the document;
• the feasibility of a prefiling investigation;
• whether the signing attorney accepted the case from another member of the bar or forwarding attorney;
• the complexity of the factual and legal issues; and
• the extent to which development of the factual circumstances underlying the claim requires discovery.
  

The court considers the totality of the factors based on the circumstances; no one factor is dispositive or given greater weight than another. However, considering the desire for restraint on sanctions, in close calls the attorney whose filing is challenged is entitled to be given the benefit of the doubt.

In general, attorneys should attempt to corroborate their client’s story. What indicia of corroboration are needed depend on the circumstances, but, generally, an attorney should interview the client in detail; review available documents (i.e., for the initial complaint, those within the client’s possession or that are publicly available; and for subsequent filings, what has been produced through discovery); interview witnesses identified by the client; and when necessary, consult an expert (especially if the case is legally or factually complex). However, it is not necessary to interview all possible witnesses in a case, nor is it necessary to search for and review all existing documents before filing papers.

If an attorney fails to review relevant documents in the public record or available to the client, or if an attorney fails to interview witnesses, courts may sanction the attorney. Generally, where a prefiling investigation other than conversations with a client could objectively establish whether a claim is well grounded in fact, failure to do such research may result in sanctions.

Discovery may also result in the need to further corroborate what a client has said. For example, in Childs v. State Farm Mutual Automobile Insurance Co., 29 F.3d 1018 (5th Cir. 1994), the court found that the plaintiff’s attorney had conducted a reasonable investigation before filing an action against the insurance company on behalf of his client, who had been involved in a hit-and-run accident. The insurance company presented substantial evidence that the accident had been staged. The plaintiff’s attorney then failed to conduct any discovery of his own into the insurance company’s allegations. That failure to investigate or withdraw the claim led the district court to impose sanctions. The Fifth Circuit affirmed:

We must agree that this inquiry was deficient. [Defendant’s] evidence of fraud was powerful, and yet, all of [the attorney’s] investigative efforts can be summed up as asking [his client] and his alleged co-conspirators if they were frauds and reviewing the evidence. Never did [the attorney] conduct any affirmative discovery to test the veracity of the evidence developed by [defendant]. He never conducted a single deposition. He never sent out any interrogatories, requests for production or requests for admission. Lastly, he never hired his own experts to support his client and to refute the damaging reports by [defendant’s] experts. In light of the compelling evidence of fraud in this case, [the attorney’s] inquiry cannot be said to be reasonable.

29 F.3d at 1025.

Thus, in most cases, a reasonable inquiry includes going beyond the client’s story to corroborate with documentation, witnesses, or experts.

However, under certain circumstances, attorneys have avoided sanctions even though they did not corroborate their client’s stories. For example, attorneys may rely on their clients’ statements when there is no way to corroborate the story, particularly in cases in which the defendant controls much of the relevant evidence. Furthermore, an attorney’s failure to corroborate a story has been excused when the client deliberately misled the attorney. However, to be on the safe side, as recognized in Nassau-Suffolk Ice Cream, Inc. v. Integrated Res., Inc., 114 F.R.D. 684, 689 (S.D.N.Y. 1987), “[w]hen the attorney can obtain the information necessary to certify the validity of the claim in public fashion and need not rely solely on the client, he must do so.”

Allegations Based in Fact

The standard for determining whether a pleading is well grounded in fact for Rule 11 purposes is, according to Hillsborough County v. A & E Road Oiling Service, Inc., 160 F.R.D. 655, 659 (M.D. Fla. 1995), “objectively reasonable under the circumstances.” A filing meets this requirement if there is some evidentiary basis for the position taken at the time the pleading is signed. Even if the factual assertions in a paper are later disproven or are insufficient to survive a summary judgment motion, the paper is not sanctionable.

Whether or not there is factual support can shift as parties learn new information. Thus, the attorney has a continuing obligation to ensure that the allegations are not baseless each time he or she files a paper with the court. An attorney might be subject to sanctions if he or she continued to assert baseless allegations after learning of the facts or legal precedent that undermined them. For example, in Mercury Air Group, Inc. v. Mansour, 237 F.3d 542, 549 (5th Cir. 2001), the Fifth Circuit affirmed sanctions in the form of reasonable attorney fees and expenses against an attorney who conducted 150 hours of investigation prior to filing suit but who continued to pursue the claim even after learning that claim was baseless.

The second article in this series will cover what to do after the document has been filed. It will provide recommendations for what to do when opposing counsel threatens sanctions and address the procedural requirements needed before sanctions can be imposed.

Keywords: young lawyers, Rule 11 sanctions, prefiling investigation

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