Rоbert Beeman, President of Local 666 of the International Alliance of Theatrical Stage Employees and Moving Picture Machine Operators of the United States and Canada (“Local 666”) and a member of Local 666’s executive board, filed suit in federal district court alleging that other members of Local 666’s executive board (the defendants) engaged in conduct that violated the Racketeer Influenced and Cоrrupt Organizations Act (RICO). 18 U.S.C. § 1961 et seq. The district court determined that the complaint failed to state a claim upon which relief could be granted and dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6). The defendants moved to amend the judgment to include sanctions under Federal Rule of Civil Procedure 11. The district court, after conducting a hearing, denied the defendants’ motion to amend the judgment. The district court also denied defendants’ motion to reconsider its ruling on this issue. We affirm the district court’s decision denying sanctions under Rule 11.
I.
Beeman filed his RICO suit against the defendants on May 29, 1986. Beeman’s complaint was a hefty 46 pages in length. The complaint alleged that the defendants wanted to require all Local 666 members to pay minimum annual membership dues of $200. The minimum dues, in Beeman’s view, were part of defendants’ plan to “dump” Local 666’s present attorney and hire defendаnt, James F. Mazzulla, as both legal counsel and a full time business agent at an inflated salary. In order to attain this objective, the defendants allegedly issued voting ballots which were accompanied by financial information which was known by the defendants to be false. The complaint also claimed that Beeman had once been wrongfully unseated as president of Local 666, was reinstated by the union’s international office, but was then threatened by the defendants with physical injury if he did not resign as president. The thrust of the complaint therefore was that the defendants sought to oust their opposition and use their positions on the executive board for their own purposes and to the union’s detriment. The complaint sought both injunctive relief and damages.
On June 20, 1986 the defendants’ counsel sent a letter to Beeman’s attorney stating that he believed that the cоmplaint was not well-grounded in fact or warranted by existing law. The letter advised that if the plaintiff had no legal authority to support the complaint, then the plaintiff should voluntarily dismiss it. The letter further advised that if the complaint was not dismissed the defendants would “spare no expense in holding you and the plaintiff personally responsible under Rule 11.”
Plaintiff’s counsel responded in writing to this letter on June 26,1986, denying that the complaint was frivolous or unwarranted by existing law. In addition, he included a seven page legal memorandum, apparently prepared by his firm, which he believed supported the validity of the complaint. This letter also requested that defendants’ counsel, after reviewing the complaint and the enclosed material, provide the legal authority that supported his view *208 that the complaint was frivolous. The defendants’ counsel did not directly respond, but rather moved to dismiss the complaint under Rule 12(b)(6).
On February 6, 1987 the district court issued a memorandum opinion granting defendants’ motion to dismiss and using language which can only be labelled as highly critical of the plaintiff’s complaint. The district court stated that “what plaintiff has alleged is a good old-fashioned local union fight” and that the complaint was a “paroxysm of RICO rage.”
Beeman v. Fiester,
No. 86 C 3831, mem. op. at 1, 2 (N.D.Ill. Feb. 6, 1987) [available on WEST-LAW,
Plaintiff’s complaint does not statе a RICO claim. Plaintiff has not alleged an enterprise. He has not alleged a pattern of racketeering. He has not adequately alleged predicate acts. He proceeds improperly by way of information and belief. He purports to allege extortion but fails to do so. The complaint is really nothing other than a nightmare.
Id. at 3.
The defendants moved pursuant to Federal Rule of Civil Procedure 59(e) to amеnd the judgment to include sanctions under Rule 11, including attorneys’ fees of $13,-473.96. The district court conducted a hearing on the appropriateness of Rule 11 sanctions on March 23, 1987. At this hearing the district court judge indicated that he had “grave doubts” about whether the suit was filed for a proper purpose, and therefore requested additional information. The plaintiff submitted material both before and after the hearing which included his own affidаvit as well as affidavits from his counsel and from two attorneys from the firm of Schiff, Hardin & Waite (“Schiff”) who were acting as local counsel. Plaintiff’s affidavit explained in detail why he brought the suit and the alternatives he explored before filing the suit. His counsel’s affidavit indicated that he had requested that attorneys from Schiff review the complaint before it was filed, that at least three attorneys from that firm had done so, and that-they determined that it was warranted by existing law. This was re-affirmed by the affidavits of Schiff’s attorneys.
On July 21, 1987 the district court denied the defendants’ motion to amend the judgment. The district court stated that it would “not undertake to recharacterize plaintiff’s complaint other than as we already have in dismissing it.” Beeman v. Fiester, No. 86 C 3831 (N.D.Ill. July 21, 1987) (order denying motion to amend judgment). The district court further stated:
This lawsuit was brought in retaliation for some bareknuckle union infighting. It was not well grounded in fact and was not suppоrted by existing law. But we are unable to conclude that plaintiff’s counsel lacked a good faith belief that RICO could be extended to embrace the sort of intraunion tactics disclosed by the complaint. Upon reflection, while we have disapproved the lawsuit we conclude Rule 11 sanctions are not called for.
Id. The defendants moved for reconsideration of the denial of sanctions, arguing that the district court employed the wrong legal standards in its July 21, 1987 order. This motion was denied without explanation on August 3, 1987.
II.
The defendants’ argument is straightforward. They claim that the district court specifically made the findings necessary to conclude that Rule 11 was violated, but refused to impose sanctions. Rule 11 is composed of three prongs. First, the person who signs a pleading, motion or other paper (“the paper”) certifies that the paper was not “interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation (the “improper purpose clause”).” Fed.R.Civ.P. 11. Second, the signer warrants that to the best of his or her “knowledge, information, and belief formed after a reasonable inquiry” that the paper is “well grounded in fact.”
Id.
Finally, the signer also certifies that he or she hаs conducted a reasonable inquiry and that the paper is “warranted by existing
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law or a good faith argument for the extension, modification, or reversal of existing law.”
Id.
If any one of these three prongs has been violated, Rule 11 sanctions must be imposed.
Brown v. Federation of State Medical Bds.,
On appeal, we review findings of fact made by the district court under a clearly erroneous standard.
Brown,
[T]he decision whether there has been a violation is a judgment call. The Rulе speaks of “reasonable” prefiling inquiry, the language of tort law. And although the definition of a frivolous legal position is itself a question of law, there will often be factual questions concerning the actual position the litigant took — questions on which the court of first instance has the leading role.
In the Matter of Central Ice Cream Co.,
Implementing these standards in the present case is particularly difficult. The defendants legitimately argue that there is a discrepancy between what the district court seems to have said and its refusal to amend its judgment to include Rule 11 sanctions. They claim that the district court explicitly found that two of Rule ll’s three prongs were violated but did not impose sanctions and that the district court applied an incorrect standard in its evaluation of the third prong. We cannot escape from the district court’s language; it is the type of language which usually accompanies the imposition of sanctions. But because we find ample support for the denial of sanctions in this case and do not believe that the district court was merely disregarding our precedent, we affirm the district court’s judgment.
A.
The “improper purpose” clause is directed at abusive litigation practices. Schwarzer,
Sanctions Under the New Federal Rule 11
— A
Closer Look,
Here the district court judge specifically inquired about Beeman’s purpose in filing the lawsuit at the hearing conducted pursuant to the defendants’ motion for Rule 11 *210 sanctions. After listening to each party’s presentations, the court noted that none of Beeman’s counsel’s comments had addressed the improper purpose clause and stated that he was concerned about “the good faith of the lawsuit.” He then invited the parties to submit additional materials on this issue.
In response to this invitation Beeman submitted an affidavit which specifically denied that the complaint was filed to harass the defendants. More importantly, the affidavit carefully detailed step-by-step the course of events that culminated in Beeman’s decision to file the lawsuit. According to his affidavit, Beeman initially opposed the proposed minimum fee assessment because he believed it would be detrimental to unemployed and retired union members. He later discovered that the defendants sought the minimum assessment in order to create a new union position and install their “own man,” and further that they provided false information аbout the union’s financial status in the material accompanying the voter solicitation. When Beeman attempted to combat this formally in his capacity as president, the defendants removed him from office. When the union’s international office reinstated him after he was wrongfully unseated, he chose not to bring legal action. The defendants then threatened him with physical injury if he did not resign. At this point Beeman’s affidavit states that he filed suit seeking injunctive relief and damages in order to carry out his duties to the union members, to protect his good name, and because he believed he was entitled to relief under federal and state law.
The defendants contend that Beeman’s complaint was filed for an improper purpose and further, that the district court specifically made this finding when it stated that “[t]his lawsuit was brought in retaliation for some bareknuckle uniоn infighting.” This position implicitly equates “retaliation” with “improper purpose.” Such a conclusion does not automatically follow from what the district court said. Most lawsuits are in some sense filed in “retaliation” for a perceived wrong committed by the named defendants. Still, the district court’s use of the term “retaliation” in its decision denying Rule 11 sanctions is grounds for pause, particularly in view of the court’s stated concern about the “good faith of the lawsuit” at the hearing.
The defendants, however, offer little else besides this statement to support their improper purpose argument. They basically reason that because the lawsuit (in their view) was frivolous, it must have been brought to harass them. Beeman’s affidavit clearly indicates that he believed that he had been repeatedly wronged by the defendants and was entitled to redress. If his purpose was prоper but his legal theory was frivolous, then the other prongs of Rule 11, not the improper purpose clause, are implicated. In view of the record in this case and the inability of defendants to point to specific facts indicating an improper purpose, we believe that the district court’s use of “retaliation” is properly construed to mean that the lawsuit was brought as a result of “some bareknuckle union infighting.” We therefore do not find that the district court determined that Beeman’s complaint was filed for an improper purpose and affirm the district court’s denial of sanctions under the improper purpose clause.
B.
The defendants’ second argument on appeal is based on the district court’s statement that Beeman’s lawsuit “was not well grounded in fact.” Rule 11 states that the signature of an attorney certifies that to the best of thе attorney’s knowledge and belief “formed after a reasonable inquiry” the paper is “well grounded in fact.” The district court therefore invoked the specific language of Rule 11 to describe the complaint and yet declined to impose sanctions.
The crux of this prong of Rule 11, however, particularly at the motion to dismiss stage, is the reasonable inquiry requirement. Under the notice pleading system adopted by the Federal Rules of Civil Procedure, the plaintiff and his counsel are not required to know all the facts before they file a complaint; it is the purpose of dis
*211
covery to fill in the details. “The amount of investigation required by Rule 11 depends on both the time available to investigate and on the probability that more investigation will turn up important evidence; the Rule does not require steps that are not cost-justified.”
Szabo,
The district court did not make a finding that Beeman and his counsel failed to ascertain critical facts before his complaint was filed in this case, nor do the defendants identify such facts. The basis of the district court's statement that the complaint was not well grounded in fact is simply a pleading failure. The facts reasonably discovered by plaintiff and his counsel, as alleged, failed to fit within the pattern of facts to which RICO provides a remedy. This alone, however, cannot be the basis for sanctions; otherwise every complaint dismissed under Rule 12(b)(6) would be sanctionable.
This reading does not render the “well grounded in fact” prong meaningless. Rather, it correctly focuses the district court’s attention for purposes of Rule 11 on the attorney’s inquiry into the facts before he or she files a paper. In
Hays v. Sony Corp.,
C.
The final issue in this case is whether the third prong of Rule 11 is satisfied. The signature of an attorney certifies that “to the best of his [or her] knowledge, information, and belief formed after a reasonable inquiry” that the paper is “warranted by existing law or a good faith argument for the extension ... of existing law.”
The district court concluded that the plaintiff’s complaint was not warranted by existing law but went on to state that “we are unable to conclude that plaintiff’s counsel lacked a good faith belief that RICO could be extended_” Defendants correctly point out that the good faith requirement of the third prong of Rule 11 looks to the quality of the argument for the extension of a doctrine, not to the counsel’s state of mind. The rule speaks in terms of the signer’s “knowledge, information and
belief,”
but it is well established that the standard is an objective one.
See, e.g., Brown,
Having determined that the district court used the correct legal standard, we turn to the court’s application of the standard in this case. Beeman’s counsel represents that he spent at least 40 hours investigating this case before filing the complaint. Further, the complaint was reviewed by-attorneys аt Schiff who specialize in the particular areas of law addressed in the complaint. They concluded that the alleged facts supported the view of the law asserted in the complaint. “Of course, the conclusion drawn from the research undertaken must itself be defensible. Extended research alone will not save a claim that is without legal or factual merit from the penalty of sanctions.”
Zaldivar,
Defendants contend that regardless of the amount of pre-filing investigation, Bee-man’s complaint was legally frivolous. They emphasize the disparaging statements made by the district court when it dismissed the complaint and argue that no complaint so characterized could be a good faith argument for the extension of existing law. We have, however, independently reviewed the complaint and hold that the legal position taken therein wаs not frivolous. 2
The defendants’ final point is that Bee-man never claimed to be seeking a modification or extension of RICO law, but rather always maintained that the complaint was warranted by existing law. They cite numerous district court opinions for the proposition that an attorney who seeks to advance a position that is not warranted by existing law must specifically indicate this to the court and his or her adversary. We havе recently made a similar statement, noting that “[pjarties who want to distinguish or alter existing law must acknowledge its force; they may not pretend that the law favors their view and impose on the court or their adversaries the burden of legal research to uncover the basic rule.”
Central Ice Cream,
Notes
. We have observed that "[sjubjective bad faith or malice is important only when the suit is objectively colorable.”
In re TCI Ltd.,
. We also note that our conclusion is not at odds with the district court’s ultimate disposition of this issue. The statements relied on by the defendants were made in the order dismissing the complaint and despite the district court’s disclaimer to the contrary, we cannot help but believe that upon further reflection during the course of the Rule 11 proceedings, the district court tempered its view of the complaint.