Sanctioning a Party Under Rule 11: To What Standard of Conduct Should A Client Be Held?

Abstract

This article previews the issues and arguments in Business Guides, Inc. v. Chromatic Communications, on the Supreme Court’s 1990-91 appellate docket. There are two issues in Business Guides. The first issue is whether a party to a lawsuit in federal court will be held to the same objective standard of conduct as lawyers, or whether parties should be held only to a subjective good-faith standard. The second issue is whether Rule 11, in imposing sanctions on parties under an objective standard, is an impermissible "fee-shifting" exercise of judicial authority contravening the Rules Enabling Act.

This case involving the federal courts' sanctioning power under Rule 11 of the Federal Rules of Civil Procedure is destined to have great importance in further defining the professional responsibilities of both lawyers and clients to the federal courts in practice and pleading. This will be the Supreme Court's third Rule 11 case in two terms, following last year's decisions in Pavelic & LeElore v. Marvel Entertainment Group, 100 S.Ct. 456 (1989) and Cooter & Gell v Hartmarx, 110 S.Ct. 2447 (1990). In those cases, the Court addressed broad questions relating to lawyers' professional responsibility, the purpose of Rule11, and the standard of review on the imposition of sanctions. In Business Guides, the Supreme Court turns its attention to the standard of conduct expected of parties who would pursue litigation in federal court.

The Business Guides case will be the third time since Rule 11's amendment in 1983 that the Supreme Court addresses the contours of federal court sanctioning power under the rule. As is well-known, Rule 11 was amended in 1983 to put more teeth into the courts' ability to police lax pleading practices. Last term, the Supreme Court in Pavelic determined that the attorney who signs a pleading, motion, or other paper is individually responsible for the contents of the document, rather than the attorney's law firm. The Court indicated that "the purpose of Rule 11 as a whole is to bring home to the individual signer his personal, nondelegable responsibility" and further suggested that the purpose of Rule 11 sanctions was to punish an offending lawyer for failure to validate the truth and legal reasonableness of papers filed. Consequently, federal courts could visit upon the lawyer "its retribution for failing that responsibility."

Perhaps even more important than the issue of the standard of conduct for parties under Rule 11, Business Guides is attempting a full-scale frontal assault on the constitutional validity of Rule 11 and the sanctioning power that the rule confers on federal courts. This attack is based on constitutional theory, separation of powers doctrine, and the requirements of the Rules Enabling Act, 28 U.S.C. § 2072. Pursuant to the Rules Enabling Act, the Supreme Court through its committees has the power to promulgate rules of practice and procedure for the federal courts that subsequently are enacted into law by Congress. This judicial rulemaking authority, however, is circumscribed by the condition that such rules be procedural rules that do not abridge, enlarge, or modify any substantive right.

Business Guides' Rules Enabling Act challenge to Rule 11, inspired by Public Citizen's friend-of-the-court brief, is predicated on the theory that Rule 11 is an impermissible fee-shifting rule that trenches on substantive rights and is therefore unconstitutional. It is unclear whether the Supreme Court will address this broader Rules Enabling Act challenge or whether it will limit itself to the question it granted certiorari to review: the issue of standards for client conduct in federal court. If the Court does address the Rules Enabling Act, however, there is no doubt that the Court's resolution of this issue will be of the greatest importance for the continuing validity of amended Rule 11 and the authority of federal courts to impose attorney fee sanctions under the rule. If the Court fails to address this issue, there also can be little doubt that the Rules Enabling Act issue will resurface again and again until the Court speaks to the Rule's validity.