The United States had the "American Rule" for most of its history. In recent years, the practice of law has been practically criminalized by judges imposing financial sanctions on attorneys. Here is a case where sophisticated defense counsel gave repeated "warnings" (rather than making a Rule 11 motion), and then got a judge and a circuit court to sanction the attorney by going around Rule 11, sanctioning the attorney, giving the defendant a windfall. Here's how:
In Tillman v. Newline Cinema, 2010 WL 1452500 (7th Cir. April 13, 2010), the 7th Circuit affirmed a lower court's decision to sanction both a client and an attorney. The decision would be rather routine had the court proceeded under Rule 11 of the Federal Rules of Civil Procedure, which provides that a party seeking sanctions must first serve the person against whom sanctions are sought a copy of a motion seeking sanctions, and if the party withdraws the offending pleading, the Rule 11 sanctions motion can't be filed.
The Tillman court didn't rely on Rule 11, it relied on the court's inherent power to impose sanctions:
§ 1927. Counsel’s liability for excessive costs
Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.
Rule 11 (not discussed by the court at all), provides as follows:
Rule 11. Signing Pleadings, Motions, and Other Papers; Representations to the Court; Sanctions
(a) Signature.
Every pleading, written motion, and other paper must be signed by at least one attorney of record in the attorney's name — or by a party personally if the party is unrepresented. The paper must state the signer's address, e-mail address, and telephone number. Unless a rule or statute specifically states otherwise, a pleading need not be verified or accompanied by an affidavit. The court must strike an unsigned paper unless the omission is promptly corrected after being called to the attorney's or party's attention.
(b) Representations to the Court.
By presenting to the court a pleading, written motion, or other paper — whether by signing, filing, submitting, or later advocating it — an attorney or unrepresented party certifies that to the best of the person'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 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.
(c) Sanctions.
(1) In General.
If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation. Absent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee.
(2) Motion for Sanctions.
A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b). The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets. If warranted, the court may award to the prevailing party the reasonable expenses, including attorney's fees, incurred for the motion.
(3) On the Court's Initiative.
On its own, the court may order an attorney, law firm, or party to show cause why conduct specifically described in the order has not violated Rule 11(b).
(4) Nature of a Sanction.
A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated. The sanction may include nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney's fees and other expenses directly resulting from the violation.
(5) Limitations on Monetary Sanctions.
The court must not impose a monetary sanction:
(A) against a represented party for violating Rule 11(b)(2); or
(B) on its own, unless it issued the show-cause order under Rule 11(c)(3) before voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.
(6) Requirements for an Order.
An order imposing a sanction must describe the sanctioned conduct and explain the basis for the sanction.
(d) Inapplicability to Discovery.
This rule does not apply to disclosures and discovery requests, responses, objections, and motions under Rules 26 through 37.
All of us have been frustrated with adversaries making frivolous motions and taking positions unwarranted by the law and the facts. But the big firms almost never get sanctioned, it always seems to be the little guys. Rule 11 gives attorneys almost no procedural protections and may create an ethical conflict between attorney and client. It provides no real due process for an attorney. Yet for all its weakness, it requires action of an adversary to impose a sanction. I don't know why the court didn't issue the show-cause order required by Rule 11(c)(3). Sanctions were imposed for 1. filing a long complaint; 2. filing an improper interlocutory appeal; 3. patently inadequate investigation of a conspiracy claim and 4. filing claims under 42 USC 1983 when there were no state actors. There is not a law firm in the nation that didn't tack on an extra "in the alternative" claim in a complaint without thinking twice, or add an extra stupid claim that ought not to have been in the complaint - but this is usually thought to be prudent because one can't anticipate all of the facts one might find in discovery.
The Seventh Circuit's decision is a bad one for spirited and healthy advocacy (i.e. the American system). Every attorney blunders in practically every case - by an act or omission - especially where resources are limited. Where an attorney is inexperienced or simply makes a huge error - the adversary process permits the adversary to turn it to advantage. There is no reason to impose criminal-like penalties on top of that. This attorney may lose his house and his license for conduct that was found by the Seventh Circuit to be neither dishonest nor contumacious. The courts should not be used to criminalize the practice of law and where Rule 11 sets out a mandatory procedure, the Seventh Circuit should not ignore it. Sophisticated defense counsel sat on its hands rather than making a Rule 11 motion and should have waived the right to cash in at the poor lawyer's expense.
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