426 Mass. 410 | Mass. | 1998
Attorneys LisaAyn Padilla and John N. Greenwood appeal from an order of the Superior Court awarding the defendant, Dean Ricciardi, attorney’s fees and costs as a sanction for their violation of Mass. R. Civ. P. 11 (a), 365 Mass. 753 (1974). We transferred the appeal to this court on our own motion.
On July 24, 1992, Padilla filed an action for damages in the Superior Court on behalf of the plaintiff, Van Christo Advertising, Inc. (VCA), in which VGA alleged that Ricciardi had participated in the misappropriation of its contract (an agreement concerning advertising and public relations services) with Light Control Systems, Inc. (LCS).
1. The record on appeal is fragmented and requires considerable reconstruction. Based on our review of the record, we glean the following relevant facts.
a. Ricciardi’s employment with VCA. In January, 1988, Ricciardi was hired by VCA as an independent contractor to provide temporary administrative assistance to the president, treasurer, and sole shareholder of the company, Van Christo. In this position, he maintained the files related to the LCS account, although other employees had access to those files. VCA terminated Ricciardi’s employment in October, 1988, after he had completed training the person hired to succeed him on a permanent basis. According to Christo, Ricciardi left VCA on “good terms,” and he provided Ricciardi with a “very strong reference” for his next job.
During the time Ricciardi was employed by VCA, the company was the advertising agency and public relations counsel to LCS, pursuant to a letter agreement.
VCA alleged that Ricciardi informed Bissett about the contents of Christo’s letter to LCS. VCA further alleged that Bissett wrongfully took documents that pertained to the LCS
Christo noticed that LCS files were missing prior to Ricciardi’s departure and questioned Ricciardi about the files. Ricciardi consistently denied any knowledge of them. During the course of discovery, the missing files were found in a VGA storage facility.
b. Padilla’s and Greenwood’s representation of VC A. On September 23, 1992, in response to VGA’s complaint, Ricciardi filed a motion to dismiss. The statute of limitations was not raised by Ricciardi in that motion. Padilla submitted an opposition to Ricciardi’s motion to dismiss (October, 1992), and a memorandum on the fiduciary duty owed by an employee to an employer as requested by the judge who heard oral argument on Ricciardi’s motion to dismiss (November, 1992).
In September, 1992, Ricciardi’s counsel filed a complaint regarding Padilla with the Board of Bar Overseers (board), on which the board took no action. While the board was investigating the complaint, Padilla advised VGA to seek other counsel. Padilla withdrew from the case in January, 1993, at which point Greenwood appeared as VGA’s attorney.
Soon after he entered his appearance, Greenwood filed a motion to extend the time for filing an opposition to Bissett’s motion to dismiss. In addition to signing a notice of appearance on behalf of VGA in January, 1993, Greenwood filed a number of motions regarding discovery tracking orders that applied to Ricciardi, and he hired Attorney Brian M. Olmstead to take Ricciardi’s deposition.
During Christo’s deposition in 1993, Greenwood learned that VGA maintained a storage facility in Saugus. He immediately informed opposing counsel of the existence of the storage facility, and on discovering the missing LCS files at the facility, he promptly withdrew from his representation of VGA (October, 1993).
2. Rule 11 (a) provides, in pertinent part, that “[t]he signature of an attorney to a pleading constitutes a certificate by him that he has read the pleading; that to the best of his knowledge, information, and belief there is a good ground to support it; and
The Massachusetts Rules of Civil Procedure, adopted in 1974, were patterned on the Federal Rules of Civil Procedure, Giacobbe v. First Coolidge Corp., 367 Mass. 309, 315 (1975), and the text of our mle 11 (a) continues to be virtually identical to the text of its Federal analog prior to the latter’s amendment in 1983.
Liability under the original Federal mle was predicated on an attorney’s wilful filing of a pleading that did not have a “good ground to support it.” See 2 Moore’s Federal Practice
Like our rule, the pre-1983 Federal rule did not specify the kinds of disciplinary action that could be taken by a judge in response to a violation of the rule. See 5A C.A. Wright & A.R. Miller, Federal Practice and Procedure § 1336, at 97 (2d ed.
The principles enunciated above lead us to conclude that our rule 11 (a) authorizes a judge to impose attorney’s fees and costs where an attorney has failed to show a subjective good faith belief that the pleading was supported in both fact and law. See Robinson v. Dean Witter Reynolds, Inc., 129 F.R.D. 15, 18 (D. Mass. 1989). Good faith includes, among other things, an absence of design to defraud or to seek an unconscionable advantage. See Black’s Law Dictionary.693 (6th ed. 1990).
3. A judge has discretion in imposing sanctions under rule 11 (a), and our function is to determine whether the judge abused that discretion, which includes considering whether proper legal standards were applied and whether there was reasonable support for the judge’s evaluation of the facts. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990); Media Duplication Servs., Ltd. v. HDG Software, Inc., 928 F.2d 1228, 1238 (1st Cir. 1991). Because our rule employs a subjective standard, we agree with Padilla and Greenwood that the judge committed an error of law when he relied on the amended Federal rule’s objective standard in evaluating their conduct.
a. Padilla. In awarding sanctions against Padilla, the judge concluded that the complaint she filed on behalf of VC A had neither good factual nor good legal ground. He concluded that Christo had “no more than a hunch” that Ricciardi was involved in any alleged wrongdoing regarding the LCS account, relying on part of Christo’s deposition testimony that Ricciardi was named as a defendant because Christo “want[ed] to know what role he played in the missing files.” He also concluded that no reasonable legal argument could be made that a temporary file clerk owes a fiduciary duty to his employer and thus Padilla was not reasonable in urging the creation of a new duty in that regard. Finally, the judge concluded that Padilla should be sanctioned for including in the complaint a “nonexistent” and “wholly contrived” cause of action for “lost profits.”
Furthermore, while we recognize that there are limits to the extent to which an attorney may, in good faith, argue for extensions in existing law, rule 11 (a) “is not intended to chill an attorney’s enthusiasm or creativity in pursuing factual or legal theories. The court is expected to avoid using the wisdom of hindsight and should test the signer’s conduct by inquiring what was reasonable to believe at the time the pleading, motion, or
The record demonstrates that Padilla proceeded with a good faith belief that VGA’s claims against Ricciardi were legally viable. Accordingly, attorney’s fees and costs should not have been assessed against her.
Because we conclude that sanctions were improperly imposed on Padilla, we need not address her contentions regarding the inequities in awarding attorney’s fees and costs against her where counsel for Ricciardi had threatened to file a complaint with the Board of Bar Overseers if she did not dismiss the complaint against Ricciardi. We take note of Padilla’s allegations regarding opposing counsel’s unprofessional conduct, see Mass. R. Prof. C. 3.4(h), post 1301, 1389 (1998),
b. Greenwood. In awarding sanctions against Greenwood, the judge concluded that he violated rule 11 (a) by signing an op
Greenwood maintains that the judge erred in awarding sanctions against him because he did not sign any offensive pleadings which would warrant the imposition of sanctions. He relies on the United States Supreme Court’s decision in Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120 (1989), for the proposition that the “signing attorney” language of rule 11 is to be read literally.
As Greenwood points out, the judge incorrectly found that Greenwood signed the opposition to Ricciardi’s motion for summary judgment. In fact, Padilla signed and filed this document prior to Greenwood’s appearance in this case.
In addition to signing a notice of appearance on behalf of VGA in January, 1993, Greenwood filed a number of motions regarding discovery tracking orders that applied to Ricciardi, and he hired Olmstead to take Ricciardi’s deposition. These actions clearly evince Greenwood’s intent to continue prosecuting the claims against Ricciardi. In these circumstances, our rule imposes on Greenwood an affirmative obligation to be satisfied, in good faith, that good grounds continued to exist for the
Ricciardi suggests that, because he adopted the statute of limitations argument raised by Bissett, to which Greenwood responded when opposing Bissett’s motion to dismiss, then Greenwood was aware that the claims were time barred as to him. However, Ricciardi did not raise the statute of limitations as a defense until he supplemented his motion to dismiss. This supplemental motion was filed after the LCS files were discovered and Greenwood had withdrawn from the case.
Furthermore, Greenwood stated that throughout his representation of VGA, Christo maintained that Ricciardi had actively worked with Bissett against VGA, and repeatedly stated that
4. While rule 11 (a) may be criticized for embodying a less stringent standard of conduct than the amended Federal rule, we note that the 1983 amendments to the sanctions provision of Fed. R. Civ. R 11 generated significant controversy, satellite litigation, and a new “cottage industry.” See generally Pamess, Fines Under New Federal Civil Rule 11: The New Monetary Sanctions for the “Stop-and-Think-Again” Rule, 1993 B.Y.U. L. Rev. 879, 879.
Whether a different standard under our rule 11 (a) should be articulated should first be considered by our Standing Advisory Committee on the Rules of Civil Procedure. Had the amendments to the Federal rule been deemed appropriate for incorporation into our rule, we must assume that the committee would have proposed modifications to the rule. No such proposals have been made. Our committee undoubtedly is aware of the controversy over the evolution of the Federal rule, and the efforts made in 1993 to ameliorate the difficulties created by the 1983 revisions. The committee may wish to review rule 11 (a) in light of this decision and to consider whether any revisions are warranted.
5. The order imposing attorney’s fees and costs on Padilla and Greenwood is vacated. An order is to be entered denying Ricciardi’s motion for such fees and costs.
So ordered.
The complaint asserted five claims against Ricciardi, including breach of contract, breach of fiduciary duty, tortious interference with the contractual relationship between Van Christo Advertising, Inc. (VGA), and LCS, fraud on VGA, and wrongfully causing loss of profits. The fraud and breach of contract claims were dismissed.
In December, 1993, VGA made an assignment for the benefit of creditors, and is no longer an operating business entity.
The judge denied that part of Ricciardi’s motion which sought to impose sanctions under Mass. R. Civ. P. 11 (a), 365 Mass. 753 (1974), against another attorney, Brian M. Olmstead, who assisted Greenwood by conducting deposi
The agreement provided that the appointment of VCA was for one year, automatically renewed on a yearly basis, until terminated by either party on sixty days’ written notice.
The Reporters’ Notes surmise that a “ [violation of the [r]ule would probably constitute a breach of DR 7-102(A) and (B), American Bar Association, Code of Professional Responsibility.” See Reporters’ Notes to Mass. R. Civ. P. 11, Mass. Ann. Laws, Rules of Civil Procedure, at 226 (Law Co-op. 1997). Modeled on the ABA rule, S J.C. Rule 3:07, Canon 7, DR 7-102 (A) (1), as appearing in 382 Mass. 785 (1981), provides, in pertinent part, that “(A) In his representation of a client, a lawyer shall not: (1) File suit, assert a position, conduct a defense, delay a trial, or take other action on behalf of his client when he knows or when it is obvious that such action would serve merely to harass or maliciously injure another.”
“The rules applicable to captions, signing, and other matters of form of pleadings apply to all motions and other papers provided for by these rules.” Mass. R. Civ. P. 7 (b) (2), 365 Mass. 748 (1974).
The only substantive difference between the rules at that time was the provision in the Federal rule that authorized courts to strike pleadings as “sham and false” if the signatory requirements of the rule were violated. The Reporters’ Notes to our mle state that “[t]he words ‘sham and false’ ... do not seem to add to the force of the [Federal] [r]ule," see Reporters’ Notes, supra, and, despite the deletion of this phrase from our mle, we have said that rule 11 “imposes an obligation on attorneys ... to ensure that sham pleadings are not employed.” Community Nat’l Bank v. Dawes, 369 Mass. 550, 557 n.6 (1976).
The 1983 amendment to Fed. R. Civ. R 11 significantly altered the rule by deleting the original rule’s reference to “wilful,” and by rewriting the sentence tracked by Mass. R. Civ. P. 11 (a) to provide: “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.” Amendments to Federal Rules of Civil Procedure, 97 F.R.D. 165, 167 (1983). Because the amendment expanded the type of attorney conduct that was sanctionable, it was expected that a greater range of circumstances would trigger violation of the amended rule. Advisory Committee Note to 1983 Revision to Fed. R. Civ. P. 11, supra at 198-199.
By its terms, the 1983 version of the Federal rule mandated sanctions, which explicitly included attorney’s fees and costs, on a violation of the rule. The 1983 amendment was intended to reduce the reluctance of courts to impose sanctions and to make the rule more effective in deterring abuses of the litigation process. See Advisory Committee Note, supra at 198.
Under the original Federal rule, a conclusion that an attorney acted in bad faith required “ ‘clear evidence’ that the claims [were] ‘entirely without color and made for reasons of harassment or delay or for other improper purposes.’ ” Nemeroff v. Abelson, 620 F.2d 339, 348 (2d Cir. 1980), quoting Browning Debenture Holders’ Comm. v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir. 1977).
The Appeals Court has stated that “our rule embodies a less stringent standard, bad faith, than that imposed under Federal Rule 11, as amended in 1983.” New England Allbank for Sav. v. Rouleau, 28 Mass. App. Ct. 135, 141 (1989). However, the court has also stated, on three occasions, that our rule requires that the pleadings be based on a “reasonable inquiry,” in addition to an absence of bad faith. See Doe v. Nutter, McClennen & Fish, 41 Mass. App.
The judge concluded that Padilla had violated rule 11 (a) by “failing to make a reasonable inquiry before signing the complaint against Ricciardi.” The judge similarly concluded that Greenwood violated rule 11 (a) by “failing to make a reasonable inquiry into the factual and legal support for the charges [against Ricciardi] before he signed an opposition to Ricciardi’s [m]otion for [sjummary [¡judgment.”
In particular, she stated that prior to filing the complaint, she interviewed Christo and his wife, as well as Christo’s permanent administrative assistant, Ricciardi, Bissett, and the president of LCS. She also reviewed another action brought against LCS in which the plaintiff alleged that LCS had engaged in conduct similar to that alleged by Christo, and she interviewed plaintiff’s counsel in that action. Padilla further stated that she had represented Christo on other matters. She maintained that she had relied on statements made by Christo in a sworn affidavit in which he stated that he “entrusted Ricciardi and Bissett with confidential information,” that “at the time he terminated Bissett, Ricciardi had dominion and control over the LCS file,” and that Ricciardi passed VGA’s property to Bissett. Finally, Padilla indicated that she “researched some law” to assist her in preparing the complaint, including issues related to applicable statutes of limitations.
Although the judge characterized a portion of Christo’s deposition testimony as indicating that Christo was not at all sure of Ricciardi”s alleged role in the missing LCS files, Christo also testified in his deposition that Ricciardi, “as the keeper of the files,” “was aware” that “some of the files were missing”; that Ricciardi “made available to [Bissett] the letter that precipitated” Christo’s argument with her and her subsequent termination; that “[Ricciardi] became evasive and agitated every time [Christo] tried to question him about [Bissett] or anything to do with the LCS file.” In an affidavit attached to VGA’s opposition to Ricciardi’s motion to dismiss (dated September 22, 1992), Christo further stated that “[w]hile Ricciardi had control over the LCS file, it disappeared”; and that he “[thought] that Ricciardi was responsible for giving Bissett access to proprietary segments of the LCS file.” Christo’s sworn statements are further indication of good faith on Padilla's part.
We view Padilla’s claim for “lost profits” as merely an analog to the fiduciary claim.
Rule 3.4 (h) of the Massachusetts Rules of Professional Conduct, post 1301, 1389, effective January 1, 1998, provides: “A lawyer shall not ...(h) present, participate in presenting, or threaten to present criminal or disciplinary charges solely to obtain an advantage in a private civil matter.”
We also note that counsel for Ricciardi could have terminated this action more than one and one-half years before judgment entered in the Superior Court. The record indicates that in November, 1993, she rejected VGA’s offer of a stipulation of dismissal with prejudice and then opposed VGA’s motion to voluntarily dismiss. Voluntary dismissal of a claim does not deprive a trial court of its power to impose rule 11 (a) sanctions, see Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 398 (1990); Bakker v. Grutman, 942 F.2d 236, 241 (4th Cir. 1991), but had the dismissal been accepted here, it would have reduced the size of the legal bill Ricciardi sought to recover from Padilla and Greenwood.
Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120 (1989), concerned the impermissibility of holding a law firm susceptible to sanctions for a complaint filed by one of its members before the partnership was formed.
The confusion apparently arose from the fact that Bissett had also filed a motion to dismiss while Ricciardi’s motion to dismiss was pending. VGA’s opposition to Bissett’s motion was signed by Greenwood.
This approach is consistent with the Advisory Committee Notes to the 1993 amendments which indicate that “a litigant’s obligations with respect to the contents of [papers subject to rale 11] are not measured solely as of the time they are filed with or submitted to the court, but include reaffirming to the court and advocating positions contained in those pleadings and motions after learning that they cease to have any merit.” The effect of this change is to create something in the nature of a continuing duty to monitor the content of signed documents submitted to the court. 5A C.A. Wright & A.R. Miller, Federal Practice and Procedure § 1335, at 17 (Supp. 1997).
The supplemental motion is not included in the record, nor is it noted on the docket sheet.
Because we conclude that the judge erred in imposing sanctions against Padilla and Greenwood, we need not discuss their contention that they should not be held jointly and severally liable for attorney’s fees and costs incurred when one or the other was not involved in the action.
Numerous commentators criticized the 1983 amendments to rule 11 and the resulting sanctions. See, e.g., Cochran, Rule 11: The Road to Amendment, 61 Miss. L.J. 5, 7 (1991) (objecting to over-broad application of rule 11 sanctions which could deter otherwise desirable litigation); Tobias, Public Law Litigation and the Federal Rules of Civil Procedure, 74 Cornell L. Rev. 270, 301 (1989) (noting that by 1989 there were nearly 1,000 reported opinions involving sanctions and perhaps thousands more unreported opinions); Walker, A Comprehensive Reform for Federal Civil Rulemaking, 61 Geo. Wash. L. Rev. 455, 457 (1992-1993) (the 1983 amendment transformed rule 11 into fountain of litigation and criticism); Note, Plausible Pleadings: Developing Standards for Rule 11 Sanctions, 100 Harv. L. Rev. 630, 632 (1987) (contending that rule 11 sanctions have “undermined the value of open access to court embodied in the liberal pleading regime of the Federal Rules of Civil Procedure”).
The 1993 amendment made the imposition of sanctions again discretionary rather than mandatory.
