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RISK MANAGEMENT ADVISORY |
FEBRUARY 1995 |
Baseless and frivolous lawsuits. Shotgun litigation which names you as a party simply in an attempt to find money somewhere. Just to mention these issues is enough to set one's teeth on edge. At last, there is a change in the law which may help you extricate yourself from groundless and improper litigation more quickly and save precious defense dollars.
At the beginning of this year, the Governor signed into law California Code of Civil Procedure Section 128.7. This law establishes a slightly modified version of Federal Rule of Civil Procedure 11 as the new law governing sanctions for improper conduct in filing and advocating pleadings, motions, and other legal papers. This change may give you and your attorney a useful tool for fighting back against baseless suits. Although it should be a help, it is not a panacea, so read on to find out the benefits and the limitations of this new rule.
The first big change in the law is a modification of what courts will look for to determine if sanctionable conduct has occurred. As the law stands now, the opposing party has to act with "bad faith" when it drafts legal papers in order for sanctions to apply. "Bad faith" is ultimately determined by what the moving party or his attorney was thinking or feeling at the time he or she drafted the legal paper being complained of. The new law requires that the party or attorney certify certain objective criteria have been met and that they have used due diligence in making reasonable inquiry under the circumstances to assure themselves that these criteria have been met.
Since a subjective element is notoriously hard to prove, this change should make sanctions easier to get the court to impose. If sanctions are easier to impose, you'll have an easier time of making life harder on a litigant that won't listen to reason. Hopefully added sanctions pressure will help to make frivolous litigants change their tactics more quickly. Since the new law requires the sanction to be commensurate with the amount required to "deter repetition of the conduct", it's clear that the Legislature intended such a result.
Note, however, that the new law provides that most sanctions are to be paid to the court, and not to the opposing party. Only where "warranted for effective deterrence" will the court impose a sanction which directs that attorneys' fees be paid to the moving party. This means that it will be more difficult to get the court to put money in your pocket, even though it will be easier to make the opposing party pay that same money into the court's pocket.
A party or attorney can get into trouble with the new law when the pleading, motion or other legal paper filed with or later advocated before the court does not meet the objective criteria set forth in the law. The legal paper may not be used to harass, to cause unnecessary delay, or to cause needless increase in the cost of litigation. In addition, the paper must make claims, defenses or other legal contentions which are warranted by existing law, a legitimate extension of it, or by the establishment of new law. Finally, a legal paper can't make allegations or deny facts where there isn't a good evidentiary reason for doing so.
The rules do not provide for the immediate imposition of sanctions, but give a 30 day "safe-harbor" where the party can amend or withdraw the allegedly offending paper without being subject to sanctions. Although this provision softens the blow, it may be of eventual benefit to the architect/engineering community. Since California courts aren't used to the looser standards which will govern the imposition of sanctions, they may be slow on the uptake in implementing the law. This "safe harbor" provision may give them a buffer to actually implementing sanctions which will make them more likely to use the new law. In addition, because of the "safe harbor" provision, this rule gives the offended party an opportunity to float their concerns before the court, and an opportunity for the court to get involved in discussing a possible fix.
As a welcome change, a represented party can not be held liable for sanctions for the improper citation of law, now only the attorneys may bear that cost. Note that this restriction does not cover improper allegation of factual matters.
Finally, the Legislature added a special clause to the California rule which does not appear in Federal Rule 11. This clause says, basically, "since this rule loosens up the standard for finding sanctions, the courts had better make darned sure that they step on anybody who uses this new rule itself to harass the opposing party". Notwithstanding this stick, the carrot provided by this new rule is worth celebrating.
Since this new rule affects your legal position, and can be used against you as well as for you, be sure to discuss its implications with counsel. Although this rule stakes out new ground for California courts, it should be a welcome change, and one you can use to your benefit.
© 2000 Hilb Rogal & Hobbs Professional Practice Insurance Brokers, Inc. All Rights Reserved. California License #0641361.