IV. Other Liability Concerns Arising from the Pursuit of Frivolous Claims

• Library: Professional Responsibility in Litigation (ABA) (2016 Ed.)

IV. Other Liability Concerns Arising from the Pursuit of Frivolous Claims

Lawyers' concerns related to the pursuit of allegedly frivolous claims are not confined to ethics violations. First, lawyers' pursuit of allegedly frivolous claims or contentions is more commonly the subject of motions for sanctions under court rules or statutes. Second, tort liability for abuse of process or malicious prosecution may be a legitimate concern.

A. Rule 11 and Other Sanctions for Frivolous or Vexatious Litigation

Although lawyers' pursuit of frivolous claims or contentions may lead to professional discipline, lawyers accused of such conduct are more frequently targets of sanctions motions. Federal courts and all state courts have rules established to permit lawyers to be sanctioned for pursuing frivolous claims. State court rules are all derived, more or less, from Federal Rule of Civil Procedure 1 1.²⁰⁵ Rule 11(b) provides:

By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney . . . certifies that to the best of the [attorney's] knowledge, information and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of the litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.²⁰⁶

Unlike Model Rule 3.1, Rule 11 does not directly address whether a paper or pleading must be frivolous in its entirety or only in part.²⁰⁷ Nevertheless, as with the ethical restriction against pursuing frivolous claims, courts have concluded that Rule 11 requires an analysis of each claim or defense in a lawsuit and not just the merits of the action or defense as a whole.²⁰⁸

Not surprisingly, and particularly so in light of the mandatory procedural prerequisites for seeking Rule 11 sanctions—including the 21-day safe harbor provision²⁰⁹—most Rule 11 controversies deal with allegations that entire lawsuits were frivolous, as where a New York attorney purported to represent a nonexistent entity, the Association of Holocaust Victims for Restitution of Artwork & Masterpieces (AHVRAM).²¹⁰ In Association of Holocaust Victims for Restitution of Artwork & Masterpieces v. Bank Austria Creditanstalt AG,²¹¹ attorney Edward Fagan filed a lawsuit on behalf of AHVRAM against several defendants, including Bank Austria, for claims relating to alleged looting of artwork during the Holocaust. The first amended complaint he drafted did not set forth any basis for federal jurisdiction and, worse, was filed only after a separate lawsuit against Bank Austria was comprehensively settled.²¹² The district court also took issue with the fact that AVHRAM was a fictitious entity, reasoned that by falsely claiming to be a member of AVHRAM and suing on the fictitious entity's behalf Fagan was engaged in champerty, and observed that he had made a number of other false statements in the first amended complaint.²¹³ The district court fined Fagan $5,000 and ordered him to reimburse the defendants for over $340,000 in attorneys' fees and costs.²¹⁴

As with analysis of lawyers' obligations under Model Rule 3.1 and state analogs, cases weighing potential Rule 11 violations turn upon an objective standard of reasonableness under the circumstances and not the lawyer's good faith or other subjective motivation.²¹⁵ With respect to court-initiated Rule 11 sanctions, federal circuits are split on whether a finding of subjective bad faith on the offending attorney's part is required.²¹⁶ Consistent with the language in the rule regarding "inquiry reasonable under the circumstances,"²¹⁷ courts have generally concluded that Rule 11 requires lawyers to conduct a reasonable investigation before suing, and that satisfaction of that duty in a particular case will require fact-specific analysis.²¹⁸ Courts have determined that reliance upon a newspaper article that relies heavily on anonymous sources,²¹⁹ an affidavit from a client that a reasonable lawyer should recognize as perjurious,²²⁰ and even investigations performed or representations made by other attorneys²²¹ may not substitute for a thorough investigation. As with the corresponding ethical duty under Rule 3.1, lawyers' Rule 11 duty to reasonably investigate or inquire may be postponed because of exigent circumstances, but not excused.

The First Circuit affirmed sanctions against New Hampshire lawyer Gordon Blakeney for not having made the kind of investigation reasonably necessary before filing a disqualification and sanctions motion alleging that the City of Concord had engaged in communications that amounted to obstruction of justice.²²² In Northwest Bypass Group v. United States Army Corps of Engineers,²²³ Blakeney sued the Army Corps of Engineers over its issuance of a highway construction permit that required two of the plaintiffs, the Tuttles, to relocate property designated as historical. The City of Concord had been discussing relocation with the Tuttles for years and had been trying to find an acceptable lot. After unsuccessfully attempting to obtain a variance necessary to relocate the Tuttles's property to a particular new lot and after the lawsuit had been filed, a city employee, Martha Drukker, called the Tuttles to tell them that the variance had been denied and that Concord might not further investigate relocation given their lawsuit. Mr. Tuttle indicated to Drukker that Blakeney was not representing him and that he had not sued the city.

The city then wrote to Blakeney to ask that he clarify in writing his authority to represent the Tuttles. In response, Blakeney filed the motion to disqualify Concord's counsel and seeking sanctions against the city, which the district court concluded, and the First Circuit agreed, was "ill-founded, frivolous, and without legal or factual foundation."²²⁴ The First Circuit had before it Drukker's affidavit making clear that she "did no more than explain to the Tuttles that it was not clear the city would make yet another effort since they were suing the city."²²⁵

Given the nature of Blakeney's allegations—namely that the city was attempting to criminally obstruct justice—the First Circuit explained that the charge should not have been made until Blakeney had made "an adequate investigation and found a realistic basis on which to make such a claim. Nothing . . . establishe[d] that [Blakeney] made such an investigation, let alone that he uncovered evidence that justified this charge."²²⁶ The First Circuit easily shrugged off Blakeney's argument that it was unfair to judge his conduct in hindsight. The court just as easily dispatched his defense that the fact that he had made a right-to-know request and secured handwritten notes from the city employee, which the First Circuit found consistent with the affidavit later filed by that city employee, justified filing the motion.²²⁷ "Zeal is to be expected in litigation," the court wrote, "but not of this kind."²²⁸

Northwest Bypass Group, like Ex parte Gregory²²⁹ in the Rule 3.1 context, raises an interesting question: do different types of allegations impose on lawyers a greater or higher duty to investigate under Rule 11? Would the First Circuit so readily have affirmed the sanctions against Blakeney had he not accused his opponent of criminal obstruction of justice? There is nothing in the language of Rule 11 that suggests the existence of tiered investigation standards. Nor is there any basis for differing standards, because frivolous litigation unfairly taxes parties and unnecessarily burdens the judicial system regardless of the exact nature of the case or allegations. As a practical matter, however, lawyers must realize that some allegations are especially inflammatory or offensive and accordingly increase the likelihood of a responsive Rule 11 motion if they are unfounded. A similar phenomenon seemingly exists with respect to disciplinary complaints alleging violations of Rule 3.1.²³⁰ Thus, when preparing to assert claims or make contentions that might reasonably be expected to especially incense, inflame, or insult an adversary, lawyers are well advised to make sure that their investigations into the bases for those allegations can withstand judicial scrutiny under the bright light of hindsight.

As with Rule 3.1 violations, Rule 11 sanctions may flow from suing the wrong party.²³¹ This is especially true where attorneys fail to acknowledge and correct their mistakes, as in Ratliff v. Stewart.²³² The lawyers in Ratliff sued Dr. Lawrence Stewart when they should have sued his father, Dr. Edsel Stewart. The plaintiffs' lawyers, who knew that their client had been prescribed medication by a Dr. Stewart, failed to check to see which of the two doctors was actually involved in their client's case. The district court initially imposed Rule 11 sanctions requiring the plaintiff's lawyers to pay almost $4,500 in fees and costs incurred by the defendant. Although the Fifth Circuit ultimately concluded that the district court acted correctly in later vacating that order and imposing the sanctions pursuant to a separate federal statute,²³³ the court made clear that this was solely because a Rule 11 procedural requirement had not been satisfied. The plaintiff's lawyers were faulted not merely for suing the wrong doctor, but for ignoring communications from defense counsel regarding the mistake, failing to even seek...