The Supreme Court yesterday enhanced the power of federal judges to discipline lawyers for filing frivolous lawsuits.
The court, upholding $21,000 in sanctions imposed against the Washington law firm of Cooter & Gell, said lawyers cannot escape the consequences of filing unfounded lawsuits even if they agree to drop the suits at an early stage of the litigation.
In an 8 to 1 opinion by Justice Sandra Day O'Connor, the court said trial judges continue to have the authority to fine lawyers for costs incurred by the other side even after a voluntary dismissal. Such jurisdiction is necessary, she said, as a means of "curbing abuses of the judicial system."
In addition, O'Connor said, appeals courts reviewing such sanctions should apply a deferential standard of review, overturning the decisions of district court judges only when they find "abuse of discretion." She said that "Deference to the determination of courts on the front lines of litigation will enhance these courts' ability to control the litigants before them."
In response to complaints about frivolous lawsuits, Rule 11 of the Federal Rules of Civil Procedure -- which provides for disciplinary sanctions against lawyers and litigants -- was strengthened in 1983 to require that attorneys certify they have conducted a reasonable inquiry before filing suit and have determined that their case is well-grounded in fact and based on a tenable legal theory.
Since then, there has been an explosion of sanctions awarded against lawyers. In the case decided yesterday, Cooter & Gell v. Hartmarx Corp., one of the law firm's clients, a discount men's clothing store chain, filed an antitrust suit against Hartmarx, one of the country's largest men's clothing manufacturers, claiming a nationwide conspiracy to fix prices and eliminate competition. Hartmarx manufactures clothing under the Hart Schaffner & Marx, Hickey-Freeman and Country Miss labels.
Hartmarx filed a motion for Rule 11 sanctions, and the firm moved to dismiss the lawsuit, five months after it was filed. Nearly four years later, the trial judge imposed $21,452.52 in sanctions against the Cooter law firm and another $10,701.26 against the client, finding that the firm had surveyed only four Eastern cities before alleging a nationwide conspiracy.
The law firm argued that Rule 11 sanctions had turned into "the cottage industry of the litigation bar," threatening lawyers with injury to their reputations, investigations by local bars and adverse effects on their malpractice coverage. Dale A. Cooter, senior partner at Cooter & Gell, expressed disappointment with the decision yesterday, but added, "I think we got a fair and full hearing there."
Justice John Paul Stevens, dissenting from part of the opinion, said it was not necessary for courts to have power to impose sanctions after voluntary dismissals since they would occur at early stages of litigation, before large costs have been incurred or judicial time has been taken up.
Stevens also blasted the decision as "an unwarranted perversion of the Federal Rules" that "can only have the unfortunate consequences of encouraging the filing of sanction motions and discouraging voluntary dismissals." Although the legal profession has changed since he left practice 20 years ago, Stevens said, "I still believe that most lawyers are wise enough to know that their most precious asset is their professional reputation. Filing unmeritorious pleadings inevitably tarnishes that asset. Those who do not understand this simple truth can be dealt with in appropriate disciplinary proceedings, state law actions for malicious prosecution or abuse of process, or, in extreme cases, contempt proceedings."
Staff writer Sharon Walsh contributed to this report.