Sanctions for nonfrivolous complaints? Implications for the improper purpose prong of Rule 11.

• Author: Kruzansky, Barbara Comninos
• Position: Case Note

1. INTRODUCTION

   A lawsuit is filed. It states a valid claim. It possesses a legitimate basis in law and fact; it is not a frivolous action. Yet, its meets notwithstanding, this lawsuit may have been filed by someone with mixed or ulterior motives. The plaintiff, or the plaintiff's attorney, may have been inspired by more than a simple desire "to secure judgment on a well-grounded complaint in which the plaintiff sincerely believes."(1) Arguing that the claim has been brought for an improper purpose, the opposing party moves for sanctions. Are sanctions warranted?

   In 1995, the United States Court of Appeals for the Second Circuit became the most recent federal appellate court to rule on this issue. Sussman v. Bank of Israel,(2) a case of first impression for the Second Circuit, presented the following question: can a court properly impose sanctions under Federal Rule of Civil Procedure 11 (Rule 11) against a party, or an attorney, who files a nonfrivolous claim for an improper purpose?(3) In other words, can the commencement of a lawsuit, well-grounded in law and fact, nevertheless subject its filer to sanctions--ranging from mild to severe(4)--merely because the motivation underlying the suit is deemed inappropriate?

   The Second Circuit's examination of this issue revealed "divergent views" among the various circuit courts that had previously addressed the question.(5) In fact, in the absence of Supreme Court guidance, two distinctly different schools of thought had arisen.(6) The more widely-held view among the circuits (majority position) reflects the philosophy that courts must be particularly cautious about imposing sanctions for the filing of a complaint, since the complaint is the vehicle through which a party has the ability to right a legal wrong.(7) Therefore, this position holds, neither a party nor the party's attorney should be deterred by the spectre of sanctions from bringing a valid claim, "even when the motives [for bringing the action] are not entirely pure."(8)

   The competing, albeit minority' view (minority position) holds that filing a nonfrivolous (or colorable) suit for an improper purpose is a violation of Rule 11.(9) Consequently, according to this school of thought, a legally-legitimate suit can give rise to sanctions, assuming that the existence of an improper motive can be proven.(10)

   At the heart of this debate lies Rule 11, a rule that sets forth grounds upon which a federal court may sanction attorneys, law firms, or parties.(11) Under the current version of Rule 11(b), any "pleading, written motion, or other paper" presented to a court is presumed to have met four requirements.(12) Two of those requirements, that a filing not be presented for an improper purpose and that a claim be warranted by existing law or by a nonfrivolous argument for change, are central to the circuit court split.(13) According to Rule 11(c), if either of those prongs is violated, a court may impose appropriate sanctions.(14) However, under the majority position, courts effectively disregard the improper purpose prong if the filing is a complaint and the complaint is nonfrivolous.(15) Thus, the filer of a nonfrivolous lawsuit is not to be sanctioned for bringing that suit, regardless of his purpose.(16) In contrast, the minority position authorizes a court to impose sanctions if a lawsuit is either brought for an improper purpose or based upon a frivolous argument.(17)

   It was into this fray that the Second Circuit entered when it considered the case of Sussman v. Bank of Israel. While the court ultimately adopted the majority position and concluded that "[a] party should not be penalized for or deterred from seeking and obtaining warranted judicial relief merely because one of his multiple purposes in seeking that relief may have been improper,"(18) this decision resolved only the way in which Rule 11 would be applied within the circuit. The ruling did not put to rest the larger issue: the continuing division among federal appellate courts.

   This Note discusses the controversy surrounding the sanctioning of filers of nonfrivolous complaints, addressing both the origin and the implications of the division among the circuit courts. Part II defines the problem by tracing the evolution of Rule 11 and by analyzing the competing interests that Rule 11 seeks to balance.(19) Part III focuses on the application of Rule 11 at the circuit court level, examining the circuit court split in general and the Sussman decision in particular.(20) Part IV proposes the theory that the improper purpose prong of Rule 11 is unnecessary and confuses the court's inquiry.(21) This section of the Note contends that the improper purpose prong should be eliminated since the majority of circuit courts allow sanction decisions to turn solely on the frivolous or nonfrivolous nature of the complaint. Further, Part IV demonstrates that federal courts currently have at their disposal more effective tools for responding to bad faith actions. Finally, Part V concludes that significant practical considerations also support the elimination of the improper purpose prong of Rule 11.(22)

2. THE HISTORY AND EVOLUTION OF RULE 11

   Central to the question of whether a filing can be sanctioned by a federal court is Federal Rule of Civil Procedure 11, entitled "Signing of Pleadings, Motions, and Other Papers; Representations to Court; Sanctions."(23) First promulgated in 1938, Rule 11 has been twice amended: in 1983 and in 1993.(24) Both the 1983 and 1993 amendments have proven highly controversial.(25)

   1. The Federal Rules of Civil Procedure and the Original Rule 11 (1938)

      Rule 11 debuted in 1938 as part of the original Federal Rules of Civil Procedure (FRCP).(26) The enactment of this body of rules marked the first time in the 150-year history of the federal judicial system that federal courts across the country were to adhere to a uniform procedure.(27) In the years preceding enactment of the FRCP, "there were as many different federal rules and procedures as there were states."(28) Thus, implementation of the original FRCP was aimed at standardizing the process, and this development, in fact, "dramatically changed litigation in federal courts."(29)

      Although the FRCP was a source of momentous change for the federal court system,(30) Rule 11 played a very minimal role in that change for almost the first fifty years of its existence.(31) The 1938 version of Rule 11 provided in relevant part:

      Every pleading of a party represented by an attorney shall be

      signed by at least one attorney of record.... The signature of

      an attorney constitutes a certificate by him that he has read

      the pleading; that to the best of his knowledge, information,

      and belief there is good ground to support it; and that it is not

      interposed for delay.... For a wilfull violation of this rule an

      attorney may be subjected to appropriate disciplinary

      action.(32)

      The original Rule 11 embodied the first efforts of federal rulemakers to deter frivolous actions.(33) It sought to do so by making an attorney's signature certification of three key elements: first, that the attorney had read what he or she was filing; second, that it was supported by good grounds; and third, that it was not being brought for the purpose of delay.(34) Another significant aspect of the Rule pertained to the power it vested in the courts to respond to violations: such power was completely discretionary. The original Rule did not require a court to sanction the violator.(35)

      One commentator reports that "[t]he main purpose of the rule was not to deter pleadings that lacked factual or legal merit, but rather to deter pleadings that manifested a subjective intent to abuse the judicial process."(36) However, the original version of Rule 11 seems to have had limited success in achieving that goal. There was confusion regarding what standard of attorney conduct could trigger sanctions.(37) Additionally, once it became clear that the standard was one of subjective bad faith--an attorney's knowledge upon filing the pleading that it was not based upon "good ground[s]"(38)--this stringent standard proved extremely difficult to enforce.(39)

      As a consequence of the confusion surrounding application of the Rule and as a result of the wholly discretionary nature of the sanctions a court might impose, Rule 11 was rarely invoked.(40) One commentator states that between 1937 and 1970, litigants in reported cases sought Rule 11 sanctions only about twenty times.(41) Another reports that during the entire forty-five-year period preceding its amendment, no more than two dozen published opinions addressed the Rule.(42)

   2. The 1983 Version of Rule 11

      Rule 11 was amended in 1983 in an effort to counter the ineffectiveness of the 1938 version.(43) The revisors' goals were to eliminate the "considerable confusion" associated with the old Rule and to "reduce the reluctance of courts to impose sanctions by emphasizing the responsibilities of the attorney and reenforcing those obligations by the imposition of sanctions."(44)

      The new version of Rule 11 sought to accomplish these goals through definitive changes. As amended, the 1983 version of Rule 11 provided in relevant part:

      The signature of an attorney or party constitutes a certificate by him

      that he has read the pleading, motion, or other paper; that to the best

      of his knowledge, information, and belief formed after reasonable

      inquiry it is well grounded in fact and is warranted by existing law or a

      good faith argument for the extension, modification, or reversal of

      existing law, and that it is not interposed for any improper purpose,

      such as to harass or to cause unnecessary delay or needless increase

      in the cost of litigation.... If a pleading, motion, or othe[r] paper is

      signed in violation of this rule, the court, upon motion or upon its own

      initiative, shall impose . . . an appropriate sanction....(45)

      As with the original Rule 11, a signature on a filing(46) constituted...