Transcript

IN THE SUPREME COURT OF THE UNITED STATES

BUSINESS GUIDES, INC., Petitioner v. CHROMATIC COMMUNICATIONS ENTER-PRISES, INC. AND MICHAEL SHIPP

No. 89-1500

November 26, 1990

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 11:02 a.m.

APPEARANCES:

STEPHEN V. BOMSE, ESQ., San Francisco, California; on behalf of the Petitioner.

NEIL L. SHAPIRO, ESQ., San Francisco, California; on behalf of the Respondents.

PROCEDINGS

11:02 a.m.

CHIEF JUSTICE REHNQUIST: We'll hear now in No. 89-1500, Business Guides, Inc. v. Chromatic Communications Enterprises, Inc.

Mr. Bomse, you may proceed whenever you're ready.

ORAL ARGUMENT OF STEPHEN V. BOMSE ON BEHALF OF THE PETITIONER

MR. BOMSE: Mr. Chief Justice, and may it please the Court:

This action began as a suit for copyright infringement. It was filed after the plaintiff below, Business Guides, that it had detected copying of entries in several of its published directories put out by the defendant, Chromatic Communications.

Unfortunately much of the evidence of defendant's copying turned out to be in error. When that became apparent to the district court, judge called a halt to the proceedings and referred the matter to the chief magistrate to determine whether sanctions were appropriate against both Business Guides and its attorneys under Rule 11.

The magistrate initially concluded that Business Guides and its counsel were guilty of deliberate misrepresentations and recommended not only sanctions, but disciplinary proceedings against plaintiff's attorneys. At that point both the client and its lawyers retained new counsel, who were able to demonstrate in a subsequent hearing to the satisfaction of the chief magistrate that the erroneous filings were in fact a product of error, not any intended desire to mislead the court or misuse the judicial process.

QUESTION: What does the term chief magistrate mean, Mr. Bomse? Is that the senior magistrate in the northern district of California?

MR. BOMSE: Yes, Mr. Chief Justice.

QUESTION: Pretty impressive title.

(Laughter.)

MR. BOMSE: I'm sure he appreciates it.

Nonetheless, while the magistrate explicitly found that neither Business Guides nor its counsel had engaged in any intended misrepresentation or acted for any improper purpose, nonetheless, he recommended that both the plaintiff and the its attorney be sanctioned for their carelessness.

That order was then affirmed first by the district court and then by the court of appeals over Business Guide's contention that Rule 11 does not permit the imposition of sanctions against a represented party for good-faith errors. It is that question which is now before this Court.

As to that matter, it is our submission that while there is no doubt that Rule 11, properly applied, serves not only a salutary but a necessary purpose, in the case of represented parties we believe that purpose can be fully satisfied by limiting that application of the rule to intentional abuse or recklessness that is substantially its equivalent.

It is our view that construing Rule 11 in that fashion is not only consistent with its history and language but that it will strike an appropriate balance between maintaining the efficiency and integrity of the litigation process while no overly deterring resort to that process and will as well strike an appropriate balance between the different roles and responsibilities of counsel and of representative parties.

QUESTION: Well, Mr. Bomse, why isn't it consistent with the rule and with the deterrent purpose of the Rule 11 to impose a reasonable inquiry standard on parties when they have occasion to file with the court, for example, factual affidavits or declarations in support of a motion for a preliminary restraining order or an injunction? Why isn't that reasonable inquiry standard applicable to parties?

MR. BOMSE: Well, I think there are several reasons that we would suggest, Justice O'Connor. First of all, we believe --

QUESTION: The rule itself doesn't draw a distinction, does it?

MR. BOMSE: No, I think the rule itself is actually silent on this particular point. Having in mind what this Court observed in Pavelic and LeFlore, a recent Rule 11 case, one does of course begin with the language of the rule. But in this case I believe that language does not help us or, at least in an dispositive way, permit us to answer the question.

QUESTION: Well, I -- you know, it's possible I think to conclude that what's reasonable for a party to make an inquiry might be somewhat different for what's reasonable for an attorney. But it would appear that the same standard would apply.

MR. BOMSE: Well, I'm not sure, Justice O'Connor, whether you're speaking now to the text of the rule or to how this Court as a matter policy ought to interpret it. If you were speaking to the text of the rule, I would respectfully suggest that a parsing of its language would lead to the conclusion that we are not in fact given the answer to that question. And indeed, if you refer to the advisory committee notes to the rules, they are quite clear in saying that it is the signature of the attorney that violates the rule. It then goes on in the same sentence to say although it may be appropriate, in appropriate circumstances, also to impose the sanction upon the client.

QUESTION: Well, Mr. Bomse, when you get to the part that says the signature of any attorney or party constitutes a certificate by the signer. The -- then it goes on to talk about formed after a reasonable inquiry that is well-grounded in fact and is warranted by existing law. That sentence surely refers both the party and the attorney, does it not?

MR. BOMSE: I believe it refers to a party, Mr. Chief Justice, only in the context of a pro se party.

QUESTION: How do you -- certainly that's not clear from the language I just read.

MR. BOMSE: No, but I believe that if you look at the rule in its total context you will see that the reference above to a signer is only to a pro se party. I believe that the second sentence of the rule --

QUESTION: (Inaudible) that you left out in your quotation in your brief unfortunately.

MR. BOMSE: I'm sorry. We certainly didn't --

QUESTION: No, no, but that -- it would have made it clearer had you put it in there. It does -- the first sentence says, every pleader shall be signed by an attorney, and the second one says, a party who is not represented by an attorney shall sign the pleading, blah, blah, blah, blah.

MR. BOMSE: Yes.

QUESTION: And then it said a signing by an attorney or party, and what you're saying that reference to party refers back to the sentence that you left out.

MR. BOMSE: You're surely right, both as to what the rule says and that it would have been better if we had put that sentence in.

QUESTION: Right.

MR. BOMSE: But I think, Mr. Chief Justice, that in fact if you think about the way in which the process operates in the Federal courts, pleadings, motions, and other papers are not signed by parties at all, with the single exception of affidavits. We do not indeed require a verification. In fact, the rule specifically so provides.

So I think that it would be straining the context of the rule to suggest that although it would have been better if the rule had said "or pro se party," I don't believe that the rule can fairly be read to say that a party is under the obligation that is the same as a --

QUESTION: Well, but you concede that affidavits are filed by parties.

MR. BOMSE: Yes.

QUESTION: -- represented parties.

MR. BOMSE: I do concede that. And in fact affidavits, at least in the context of a summary judgment motion, are specifically dealt with by Rule 56(g).

QUESTION: Yes, but this wasn't a summary judgment motion.

MR. BOMSE: No, although I must say I cannot understand why the policy would be any different for an affidavit in support of an injunction on the one hand or an affidavit in support of a motion for summary judgment.

QUESTION: Well, the Rule 56 was in existence at the time that Rule 11 was modified to its present form. And it seems to -- Rule 11 seems to cover a lot of things that Rule 56 obviously didn't.

MR. BOMSE: Yes, although again, if one looks to the advisory committee note, you will find a reference to the fact -- I think it's the very conclusion of those notes -- that Rule 11 literally read would apply as well to discovery motions, although the advisory committee suggested that it was not intended to and rather that one should look to a different rule.

So by its literal terms this rule does apply to an affidavit not submitted in support of a motion for summary judgment. Indeed, I suppose it literally applies even to a motion submitted in support of a motion for summary judgment or opposing a motion for summary judgment, but I think it would difficult to square an application of a negligence standard to such a summary judgment affidavit in the face of the explicit language of Rule 56(g) which indicates that it is only affidavits submitted in effect for bad faith or an improper purpose. That ought to be so sanctioned.

QUESTION: Why isn't it possible to interpret Rule 11 as covering -- it says pleading motion or other paper. Why, why shouldn't other paper be interpreted to mean another paper that deals with the conduct of the litigation. I mean, the rule talks -- makes a distinction between when you're represented by counsel and when you're not represented by counsel. That distinction makes no sense except with respect to control of the litigation. Isn't that correct?

MR. BOMSE: I think that is correct.

QUESTION: And not with respect to general affidavits about any factual matters.

MR. BOMSE: I would think that is correct. Yes.

QUESTION: Have you argued that here?

MR. BOMSE: I'm not -- no, I don't think we have argued that here. But I'm not sure that we need to argue that in order to prevail.

QUESTION: Well, on that point, it seems to me that your argument concedes the proposition that there can be a Rule 11 violation by the client and not by the attorney.

MR. BOMSE: I believe there can be a Rule 11 violation by the client and not by the attorney.

QUESTION: It would seem to me that based on your reading of the rule you could take the argument a step further and say that a predicate to a Rule 11 violation is a violation by the attorney when the party's represented. But there must be an attorney violation before you can even consider imposing sanctions on the attorney. Yet you don't seem to argue that -- on the client. Yet you don't seem to argue that.

MR. BOMSE: We don't, Justice Kennedy, and I'm not sure why that would necessarily follow. It seems to me there can be circumstances --

QUESTION: Well, it seems to me it would necessary follow if you say that the purpose of Rule 11 is to control the conduct of attorneys as they control litigation.

MR. BOMSE: Well, it is certainly the purpose of Rule 11, as the first sentence of the advisory committee notes say, to control abuses in the signing of pleadings, which ordinarily will be by counsel. But I think you can -- one can readily envision a situation in which the client, set on some illicit purpose, misleads his or her counsel and thereby commits a violation of Rule 11.

In those circumstances I see no reason why although<*> counsel becomes the agent through which the violation occurs, just as the advisory committee notes say, I see no reason why it would not be entirely appropriate to sanction the client rather than instead of in addition to counsel under those circumstances. I think that would be a relatively unusual circumstance, but I think the rule specifically provides that can be done, and I think that the hypothetical I've suggested is not unreasonable situation.

QUESTION: Oh, I think it might be quite usual that clients might often mislead attorneys deliberately.

MR. BOMSE: I think -- I hope not.

QUESTION: But it seems to me that there are sanctions in 28 U.S.C. and in the law of malicious prosecution that cover that base without extending Rule 11 to do so. But you don't seem to argue that.

MR. BOMSE: Well, I'm not -- I'm not sure that we have to -- in Rule 11 surely covers situations in which malicious prosecution or abuse of process actions could be brought. One of our concerns is that as interpreted by the Ninth Circuit it would appear to go beyond that and permit a client to be punished by the payment of fees, and hereby the dismissal of its action, even where a malicious prosecution or an abusive process action could not be brought. And we do have some question about the propriety of that.

But I don't think we need to reach the question of whether or not there would be any inhibition upon the rule establishing such a Rule 11 tort as we've called it in our brief, because I believe that the rule, properly interpreted, simply doesn't reach that issue.

And I believe that if one accepts my view of the language of the rule, as leading us in effect agnostic as to this particular question, then what one needs to do is to turn to the purpose of the rule which, Justice O'Connor, you observed both in your question to me and in your opinion in Cooter & Gell is deterrence. But if I may, in that very opinion, in the same paragraph in which you announced that deterrence is the central purpose of Rule 11, you also made clear to caveat the fact that it must read with two other concerns in mind.

First of all that it will lead to satellite litigation, something that the bar is very concerned with and which we think is implicated by this case. And second, that it will tend to chill the enthusiasm or willingness, if you will, of clients to be willing to bring litigation if they are concerned that their carelessness in the best of faith; their mistakes as in this case, will lead them to be sanctioned by a court.

It seems to me that when one asks about deterrence, one is not asking a question either about an absolute nor are you asking a question in a vacuum. Rather it seems that deterrence first of all can be perfectly properly achieved by reading Rule 11 as we would have it read, that is, to apply to counsel who are professionals after all. We do expect of counsel competence as well as good faith. And indeed there can be no question that the rule was amended in 1983 precisely to make that point explicit and to make the rule more robust when it came to counsel.

But just as we expect certain things from our counsel, also we expect and tolerate certain things from parties. We certainly expect them not to proceed in bad faith. We do not expect them to harass, to use litigation, to impose costs or delays upon opposing parties, and that is surely a properly subject for the sanctioning of a party who engages in that kind of behavior.

At the same time it does not seem to me that we either should nor need to achieve the purposes of the rule impose a sanction upon a client who is proceeding after all in good faith, who wishes to prevail in its case. It avails such a party nothing to file a law suit based upon a mistake. If a mistake in fact is so obvious that a reasonable investigation would promptly reveal it, then it seems to me that mistake will be very quickly revealed as well to the court. And at that point the client will have expended his or her resources in vain. I see --

QUESTION: Well, in this -- $13,000 worth of counsel fees on the other side to reveal it. I mean that isn't all that simple, is it?

MR. BOMSE: Well, first of all, Justice Souter, of the 13,000, although I don't have a specific breakdown, most of it was expended actually in pursuing the sanctions. Almost nothing happened in this litigation itself. Indeed, there was never an appearance at all by Chromatics, the defendant, until after the sanctions proceedings and all three of the hearings and the magistrate's recommendations had already been made.

QUESTION: Well, isn't that only because they were all inextricably bound up with the request for temporary orders?

MR. BOMSE: Well, if the temporary restraining order had been heard on its merits, there would have been an opportunity for counsel to appear and oppose. Actually, they would have appeared and opposed in response to a preliminary injunction. But the temporary restraining order was never even issued. When the judge's law clerk discovered that there were errors, it was at that point before Chromatics had ever filed a piece of paper, if my recollection serves, that the case was brought to a halt and the sanction proceedings began.

But I think -- I'm a little bit unfair to your question if I suggest that because in this case that occurred that there may not be circumstances in which people will incur expenses as the result of a mistake. The answer is they will, whether this is a good illustration of that or not.

QUESTION: Mr. Bomse, it isn't just expenses. Certainly the judge is at its very weakest so far as separating truth from error and so -- on application for a temporary restraining order where there's no factual record developed, it's often heard largely ex parte. And that's the very place where a negligent statement by a client can really do damage, because there isn't -- you don't have discovery in that sort of thing before you get a temporary restraining order.

QUESTION: I will concede that. But I am not aware of virtually any other Rule 11 case, and we are after all, at least as we would argue it, arguing for a rule of interpretation as to Rule 11. This is a very unique set of circumstances. And it seems to me that we have to take into account that we are willing to tolerate mistakes. We are willing indeed to tolerate the very essence of the American rule as to attorneys' fees is that we tolerate burdens being placed on people who are found sometimes, Justice Souter, after the expenditure of hundreds of thousands or millions of dollars and years in discovery before a summary judgment motion is granted.

We do not in this country, as a matter of policy, and other countries draw the policy line differently, but we do not elect to impose those kind of burdens. Just as we are tolerate, indeed tolerant beyond anything that remotely appears in this case, of clients in the form of witnesses or nonparty witnesses not merely being mistaken but actually getting on a witness stand and lying.

It seems to me the court's decision in Briscoe against LaHue in which a police officer had testified in an admittedly perjured fashion was the nonetheless held to be absolutely immune specifically because of the concern that to have any different rule would unduly chill the adversary process.

QUESTION: Mr. Bomse -- am I saying your name right?

MR. BOMSE: You are.

QUESTION: You might have a different rule for a person appearing as a witness than you have for a person who manages the litigation before the court, who is the attorney or acting as the attorney on his own behalf. I don't think that what you do on the one situation indicates what you do on the other. So, if Rule 11 is only limited to persons managing the litigation, that explanation would be quite reasonable.

MR. BOMSE: I quite agree. And, and I think that the distinction that I am drawing is between those persons who manage the litigation, that is, attorneys or pro se parties and that when somebody comes forth to attempt to explain the facts whether on a witness stand or here in it equivalent -- I mean, one could envision a TRO hearing with a witness appearing, Chief Justice Rehnquist, and there we would have a rule of absolutely immunity. And it seems to me that the policies which lead the court to that kind of rule as to witnesses certainly are instructive when the question here is whether or not we are prepared --

QUESTION: To say that there's a policy that witnesses may lie, I think misconceives it. There's certainly nothing in our opinion in Briscoe against Lahue that suggests witnesses are not subject to prosecution for perjury. That was an action by an individual against another individual in Briscoe against Lahue.

MR. BOMSE: Yes, that's correct.

QUESTION: So I don't think it's correct to say that we have a policy that tolerates witnesses lying on the --

MR. BOMSE: No, we -- in fact we would have a policy that would be very strongly against that. But because of the policy that we do have of not chilling the adversary function, we are willing to tolerate perjured testimony by --

QUESTION: To say we are willing to tolerate it suggests that prosecutions are not available against witnesses who perjure themselves, and that simply isn't the case. We all know in cases we've tried probably people have taken the stand on various occasions and lied and weren't prosecuted, but that doesn't mean that the remedy isn't available.

MR. BOMSE: No, there is a remedy in the form of criminal sanctions, albeit there for intentional misconduct. And I'm not suggesting --

QUESTION: That lying is intentional misconduct.

MR. BOMSE: So do I. And indeed if we having lying in this case, we would say that Rule 11 should apply. There is no question. I merely cite the decision in Briscoe against Lahue in order to indicate. Because the court did explain the reason for the decision in that case as being based in large part upon this policy of not chilling advocacy, a policy which is then echoed in the course of Justice O'Connor's opinion in Cooter & Gell.

Now, we draw this line between intentional misconduct and negligent misconduct rather frequently. It's drawn sometimes as a statutory matter, as in 1927. It's been drawn by this Court in terms of the inherent power which the judiciary has to sanction misconduct. It's been drawn in the course of interpreting Rule 10(b)(5) in Hochfelder. We do it for all sorts of reasons, and we suggest that it ought to be done here for even stronger reasons.

I submit to the court that we are not very much threatened by a party's innocent errors. Innocent errors do happen all the time. Witnesses are on the stand in courts all the time, and they testify on direct examination with a great deal of certainty about the contents of a critical meeting only to be met on cross-examination by a memorandum that they had written a year earlier --

QUESTION: Yes, by of course, this rule deals with written submissions where presumably the person has time to check the facts and so forth, so it's a special -- specially limitative context.

Would you tell me precisely what written papers form the basis of the sanction in this case -- just --

MR. BOMSE: Yes, there are two. The first is the filing of the initial TRO application itself.

QUESTION: Which was signed of course by the attorney and not by the client?

MR. BOMSE: Which was signed by the attorney, although as, as it turned out there was a signature never referred to in any of the proceedings below. But there was in fact unneedless verification submitted by the president of the corporation.

QUESTION: So it's the motion to TRO is one.

MR. BOMSE: And then second was the supplemental declaration and papers accompanying it, signed by Mr. Lamb, who was an employee of --

QUESTION: And that's the -- that's the affidavit.

MR. BOMSE: That's the affidavit that we're concerned with here.

QUESTION: Excuse me, with respect to both of these was the signature the company by somebody or -- the verification on the complaint, was that verification by an individual or was it by literally a party? Was it by the company?

MR. BOMSE: A verification is always an individual, but the form of verification that is used in Federal court where you have a corporate party does not state and is not required to state that I know the facts to be true, because that would be very difficult in many cases. It states rather that I am informed and believe that the information is correct. And --

QUESTION: But I want to know was it signed Business Guides by somebody -- it was signed -- the individual's name?

MR. BOMSE: It's may recollection that it was signed -- I'm wrong. Page 31 of the Joint Appendix says that, "I, J. Roger Friedman, President of Business Guides, being first duly sworn say that the foregoing complaint is true and correct. Business Guides, Inc., by" --

QUESTION: By --

MR. BOMSE: By J. Roger --

QUESTION: So it was signed -- it was verified by the party --

MR. BOMSE: Yes, although that --

QUESTION: -- which is what this rule refers to, the party, not an employee of the party, which is the party.

MR. BOMSE: That is -- that is true. It refers to that, although I must --

QUESTION: Now, this latter affidavit --

MR. BOMSE: Yes.

QUESTION: -- was not signed by Business Guides.

MR. BOMSE: No.

QUESTION: It was just signed by the individual.

MR. BOMSE: Of course.

QUESTION: So it was not signed by the party.

MR. BOMSE: It could not be.

QUESTION: But if a party is a corporate party, a corporate party can't verify. That has to be verified by an individual on behalf of the party.

MR. BOMSE: Of course. Of course.

It seems to me that what we need to do or ought to do in interpreting Rule 11 --

QUESTION: May I just -- I'm sorry, but --

MR. BOMSE: Of course.

QUESTION: The sanction against the corporation as opposed to the original sanction against the law firm, which I know is later, was for signing for both the motion and supporting papers or just the latter?

MR. BOMSE: No, it was for both.

QUESTION: Both, yeah.

MR. BOMSE: It was for both.

We submit that the nature of the obligation imposed by Rule 11 should be related to the harm that we are trying to rectify and the problems we foresee. We suggest that for the lawyer that problem is not making sure that a claim is well grounded as well proceeding for an improper purpose. However, for a client we suggest it is simply the misuse of the process.

Mr. Chief Justice, I would like to reserve my remaining time.

QUESTION: Very well, Mr. Bomse.

Mr. Shapiro, we'll hear now from you.

ORAL ARGUMENT OF NEIL L. SHAPIRO ON BEHALF OF THE RESPONDENTS

MR. SHAPIRO: Mr. Chief Justice, and may it please the Court:

The key question before the Court today is whether a represented party who authorizes and participates directly in the filing of a meritless action without performing anything that even comes close to a reasonable inquiry into the facts of the case can be held accountable for the direct economic consequences which flow from his actions. We respectfully submit that the factual hypothesis of that question is in fact in the record before you and that the answer to the question itself is most assuredly in the affirmative.

Raised by petitioner, and in fact the focus of petitioner's petition and argument today, is the issue of whether the conduct of such a represented party should be judged by an objective standard or by a subjective one. For reasons which I will discuss, we urge that the proper interpretation of Rule 11 leads to the application of an objective standard to such a party when viewed from the bench mark perspectives of statutory or rule construction, public policy, or judicial case management.

As I believe Business Guides agrees, we should start the interpretive process with the words of the rule or statute at issue. In fact, this Court said last term in the Pavelic case, we give the Federal rules of civil procedure their plain meaning and generally with them as with the statute, when we find the terms unambiguous, judicial inquiry is complete.

We submit that the words themselves of Rule 11 are substantially unambiguous as they apply to the facts now before the Court.

QUESTION: Mr. Shapiro, can I raise with you the question that Justice Scalia has been raising? The first sentence of the rule requires certain papers to be signed by a lawyer, if the party is represented by a lawyer. In this case the -- your opponent was represented by a lawyer at all times.

MR. SHAPIRO: Correct.

QUESTION: So does the rule encompass any other papers than those which a lawyer must sign?

MR. SHAPIRO: I believe by its very terms it must be read as incorporating other papers.

QUESTION: It must be read as, but the plain language --

MR. SHAPIRO: Well, I believe the words of the rule when it speaks of "pleading, motion, or other paper," intends to encompass within its reach all papers filed with the court.

QUESTION: Even if they need not be signed by an attorney?

MR. SHAPIRO: Correct, such as --

QUESTION: Because the first sentence just refers to papers that shall be signed by an attorney?

MR. SHAPIRO: Yes.

QUESTION: So you're saying that the first sentence is, is not as broad as the rest of the rule?

MR. SHAPIRO: I am saying that, yes. I believe the rule expands its application as one reads it.

And I also think it important to note that nowhere in the rule is there a statement that it applies to counsel and pro se litigants only. It applies to any writing before the court.

QUESTION: So that every affidavit must be signed by the attorney?

MR. SHAPIRO: No, no. No, I'm saying the first rule says that essentially every complaint must be signed by the attorney. Affidavits are not signed by counsel, but by, in this instance, parties, or it could be by --

QUESTION: Well, why, if other paper means every document filed with the court?

MR. SHAPIRO: Because I believe when drafting the rule the framers of the rule had in mind the fact that certain documents initiating a legal proceeding such as a complaint, certain other documents such as motions, must be signed by counsel or by a party appearing without counsel. But I believe that the drafters recognized that there were other documents which can be signed by parties themselves. And I believe it was the intention of the rule to apply to those other documents and to the parties that signed them the reasonable inquiry requirement.

And I suggest that --

QUESTION: Well, in any event -- in any event here I gather they -- the documents in question were signed by the attorney as well as by the party?

MR. SHAPIRO: The complaint itself was signed by both. The declarations were not. The temporary restraining order application was signed by counsel. It was supported by an affidavit signed by a representative of the client.

QUESTION: And in your view the Rule 11 sanction could be sustained based simply on the complaint?

MR. SHAPIRO: I think it clear from some of the court's previous opinions that it is frequently loathe to hold a party responsible for misconduct of a lawyer with which it had no participation and that raises the possibility of a complaint being signed by a lawyer in violation of the rule but without any wrong on the part of the client.

In this instance --

QUESTION: But in this -- in this action what do you think constitute the gravamen of the Rule 11 violation, which papers?

MR. SHAPIRO: The original complaint and the temporary restraining order package if you will including the moving papers and the affidavit, together with the supplemental affidavit of Michael Lamb, and as I will get to in a moment --

QUESTION: If any one of those papers were admitted would they be -- were excluded from our discussion would there still be a Rule 11 violation?

MR. SHAPIRO: I don't it would be possible to exclude the complaint itself from the discussion, and that was a document signed both by the party and by the attorney and it posited a case based on false, totally false evidence. It would hard I think to carve that out of the application of Rule 11.

QUESTION: I thought that it was found below that the attorney was not -- was not guilty of a Rule 11 violation with respect to the filing of the complaint.

MR. SHAPIRO: With respect to the initial filing of the complaint --

QUESTION: Right.

MR. SHAPIRO: -- yes.

QUESTION: The attorney was not -- was there a finding that the client was?

MR. SHAPIRO: Yes, directly.

I think it's also helpful to look at the words of Justice Stevens in a separate concurring and dissenting opinion in Cooter & Gell. Justice Stevens noted if a plaintiff files a false or frivolous affidavit in response to motion to dismiss for lack of jurisdiction, I have no doubt that he can be sanctioned for that filing. I find it difficult if not impossible to draw a meaningful distinction from a plaintiff who files a false or frivolous affidavit in support of a motion to dismiss for lack of jurisdiction and one who does so in support of an application for a temporary restraining order.

Indeed I could posit the argument I think with good, with good heart, that it is worse when seeking a temporary restraining against a small competitor to file a declaration that is based on false facts because, in the case of a motion to dismiss, the worst that can happen is that the matter will remain the Federal judicial system.

The other circumstance --

QUESTION: Of course, that's separate opinion --

MR. SHAPIRO: -- is the worse that could happen is the economic death of the party against whom the temporary restraining order is sought based on that false declaration.

QUESTION: That separate opinion was not exactly overwhelming indorsed by the rest of the Court.

(Laughter.)

MR. SHAPIRO: But I think its words still have much wisdom to them --

(Laughter.)

MR. SHAPIRO: -- and much application to what's before us.

QUESTION: Please, just so I'm sure about it. What -- was -- because I have trouble with the latter affidavit -- was the sanction based independently upon the -- upon the party's signing of the originally complaint, independently upon that?

MR. SHAPIRO: The district court found and the Ninth Circuit affirmed two violations of Rule 11 on the part of the party. The first was the filing of the initial packet of papers, which include the complaint, the application for temporary restraining order with the affidavit as part of it.

The Court found a second violation, and that was in the submission of a supplemental affidavit some 6 or 7 days later and on the eve of the temporary restraining order hearing. For what it is worth, the court pointed out that at the time of the filing of the second affidavit, it had become abundantly clear that the sole corporate document, the sole record, upon which plaintiff relied -- it relied in bringing the action had been found to be terribly flawed, yet there was no further inquiry.

The application of an objective standard, I submit to you, not only has the support of the courts that have considered what standard to apply for lawyers and for unrepresented parties, but I think it draws some support from an analysis of the rule itself and the purposes for which it was adopted.

Now, I concede that neither the rule itself nor the advisory committee note speaks directly to the standard by which one shall judge the conduct of a represented party. But I think there are certain things that we may look to to aid us in interpreting whether that was the intention of the rule.

I think first and foremost is the 1983 amendments to the rule removed references to bad faith. Implicit in that, I submit, was the intention to adopt an objective standard. To the extent that one wishes to read the rule as only allowing sanctioning of a party for subjective bad faith, amending the rule at all as it related to parties, and it was amended by speaking of represented parties, would have been entirely unnecessary and a futile lack.

This Court has the inherent power and has always had the inherent power to sanction a party for frivolous or bad-faith conduct.

QUESTION: Mr. Shapiro, are you suggesting that the rule itself does not speak directly to whether or not it should be a negligence or objective standard or a subjective standard?

MR. SHAPIRO: I believe that the fair of the rule and interpretation of the rule using standard methods of interpretation leads to that conclusion. What I'm suggesting or conceding is that the rule does not say that a represented party shall only be responsible for sanctions in the case of bad faith, nor does it expressly say that, yes, we mean a represented party as judged by the same objective standard as is applied to an unrepresented party.

QUESTION: So where the rule says if a pleading motion or other papers signed in violation of this rule, you don't think that says one way or the other whether it should be subjective or objective?

MR. SHAPIRO: The inference I draw from the words the Court has just read and the words of the rule in toto is that the objective standard is the apt one for everyone.

QUESTION: Well, I would think so, too, because the preceding sentence says "the signature of any attorney or party formed after reasonable inquiry" -- I would think that supports your position.

MR. SHAPIRO: I very definitely agree with Your Honor, Mr. Chief Justice. As I was going to say earlier, the wording of the rule, the signature of any attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper that to the best of the signer's knowledge, information, and belief, formed after reasonable inquiry, it is well grounded in fact, et cetera.

I submit to you that a fair reading of that, and using all proper methods of statutory rule interpretation suggests, that when it says the signer, it means the signer, whether an attorney or party. And if a party whether represented or in pro per.

But I think if we go further and look at some of the, the other factors as I was mentioning, I think they simply bolster the conclusion that the objective standard was intended and is appropriate.

QUESTION: When a civil litigant files an action with the court is not an exercise of the right of petition under the First Amendment, and if so, do you know of any authority which holds a party monetarily liable based on an objective standard for the exercise of a right of petition? This is a very far-reaching rule you're making here.

MR. SHAPIRO: No, I don't, although I think I could posit one. Certainly, standing outside this Court and protesting a decision it has made or has failed to make would constitute arguably petitioning one's Government for redress of grievances. But I think it might also violate various trespass laws or other laws regarding civil behavior, which by their nature are not judged on a subjective standard but by an objective standard. If I have trespassed, I have trespassed, whether I intended to or not. And if I have trespassed on government property to petition that same government for redress of grievances, I will be held accountable criminally based on an objective --

QUESTION: Yes, yes, but what you're doing is you're saying that there's a liability based on an objective standard judged by the content of what is spoken.

MR. SHAPIRO: No, I think --

QUESTION: And I think that's a far-reaching rule.

MR. SHAPIRO: In this -- in this instance, based on the content, only if that content is characterized properly as false as having been subscribed to --

QUESTION: Under an objective standard?

MR. SHAPIRO: Yes. Well, I think in this case it's somewhat easy in that the facts are false. That has been determined by the district court. It concluded on the basis of the record before it that the action has absolutely no factual basis whatsoever. That was a factor in its decision to dismiss the action.

The review of --

QUESTION: You concede that filing a civil law suit constitutes petitioning the Government for redress of grievances?

MR. SHAPIRO: I believe an argument to that effect could be made. I cannot honestly say that I've seen a case that says that it does, although I can understand that kind of argument being posited, yes.

QUESTION: You, you don't think grievances mean grievances against the Government?

MR. SHAPIRO: I think that's the intent. I'm simply saying --

QUESTION: You think it could be first to petition of the Government for redress of your grievance against a third party?

MR. SHAPIRO: Normally, that's what I say, I don't know of a single case that applies it in that context, but I would concede that one could make that argument. I view it as a constitutional right to petition my government for a grievance of mine as to that government, not as to some third party.

I would never foreclose the creativity of counsel in making an argument to the contrary.

(Laughter.)

MR. SHAPIRO: I think in looking at Rule 11 also and the question of whether the conduct of a represented party and an unrepresented party should be judged by a different standard, I think we have to ask ourselves whether there is in fact any fundamental difference between the two. Yes, one had taken on the burden, if you will, of representing himself in a system somewhat alien to him. But nevertheless he is a party. He is not trained as a lawyer.

In reviewing his conduct under the objective standard, the courts will take into account his absence of legal training and the fact that he will not be held to perhaps precisely the same standards as I would expect this Court would hold me or Mr. Bomse or anyone else before it.

Is a represented party that different? Both are knowledgeable about the facts of their case. Both have as their primary role in the litigation the presentation of those facts, first to their counsel and then to the court. To say that one who has the benefit for whatever reason of having counsel is not held to the same standard of care, if you will, as one who is not to me makes no sense and has no basis in the rule.

Finally, I don't believe that there is any inferential basis in the rule in reading its terms to distinguish between parties who are represented and parties who are not. The latter clearly are judged by the objective standard. I submit that the former should be as well.

As a matter of public policy, I think that a subjective standard brings with it some problems that probably exceed in scope the value of the rule itself. They argue by their discussion really for an objective standard.

As this Court said last term, the primary purpose of Rule 11 is to deter frivolous litigation. Implicit in that ruling, however, was the notion I believe that the deterrence should be accomplished with as little burden on the court as possible. The Court even noted that a secondary consideration is the avoidance of unnecessary satellite proceedings. It is hard to imagine how a subjective standard would not cry out for satellite proceedings, such as were held in this case even though the Court was using an objective standard.

I think it takes no skilled practitioner of liable law to know that in public official liable law perhaps more attention is spent on the issue on the state of mind of the defendant than on the truth or falsehood of the charges made. Determining subjective state of mind is neither easy nor quick, and if the rule is intended to deter abuse without burdening the court, a subjective standard simply will not do that.

To the extent this Court believes there is value in the attorney-client relationship, I would submit that a subjective standard does more damage to that relationship than could an objective standard. First, it impinges on the attorney-client privileged communications because it is important in a subjective standard to determine what the party knew and what it thought and when. It also I think creates a greater prospect of client and attorney blaming each other and pointing fingers at each other, thus destroying whatever might remain of that relationship. All of that of course would occur in satellite proceedings, which I think are largely unnecessary under an objective standard.

It also would allow, as in this case, a party to say, well, I got all my facts wrong, I didn't check them, but I subjectively believed in my case and be absolutely immune from any sanction under Rule 11. The attorney in that same case can say, well, the client was the expert, as it did in this case. We relied on the client for the facts, and that was not unreasonable. So on an objective standard, we're immune as well. I don't think the purpose of the rule is well served by creating such a distinction.

Finally, I think that use of an objective standard creates an even application of the rule as to all who come before it: attorney, client, or unrepresented party.

QUESTION: Excuse me. As I understand it, however, you can't get to the client even if the client doesn't have a -- reasonable belief. You can't even get to the client unless the attorney that represents him is in violation of the rule. If you have a paper that need only be signed by the attorney, it's clear that unless the attorney is in violation, you can -- cannot impose a sanction upon the client under Rule 11, isn't that so?

MR. SHAPIRO: I would agree, yes.

QUESTION: And would that apply for complaints? Is there any requirement in the rules that a complaint must be verified by the party?

MR. SHAPIRO: No, there is not, but I do believe that the rule itself in its application, as articulated by various courts, has said that where the rule is violated because the attorney signed the complaint and the attorney did not make a reasonable inquiry -- nor did his client -- sanctions may be imposed on the attorney or the client or both.

QUESTION: Quite so. But if the attorney did make a reasonable inquiry --

MR. SHAPIRO: Yes.

QUESTION: -- but the client didn't, and thereby misled the attorney, there's no problem. You can't -- you can't reach either one. Isn't that right?

MR. SHAPIRO: Assuming -- yes, assuming an objective standard for the client and no subjective bad faith client to implicate the court's inherent power, yes.

QUESTION: And assuming the client didn't sign the paper?

MR. SHAPIRO: Correct.

QUESTION: So, in this case if the court -- district court, were wrong and we stipulate that there was no Rule 11 violation for filing the complaint and signing the complaint, then case has to fail?

MR. SHAPIRO: No, I don't agree that that's necessary.

QUESTION: Well, why isn't that so, because what, what paper did the attorney sign other than the complaint?

MR. SHAPIRO: Well, the attorney signed the complaint and all the other moving papers in connection with the temporary restraining application, save and except the affidavit.

The question as posited by Justice Scalia I believe was aimed at the initial filing of a complaint, no other papers filed, can the party be sanctioned for the lawyer's violation of Rule 11 in connection with that complaint. That I think is a fair and accurate statement of the law. But I don't think that it necessarily follows that if the client signs either the same paper or subsequently signs other papers that are filed with court, that the client cannot be held in violation of Rule 11 and sanctioned accordingly.

QUESTION: Well, what were the papers, other than the complaint, that the attorney signed?

MR. SHAPIRO: Other than the complaint, the application for temporary restraining order of which the affidavit was a supporting piece, the legal memorandum, the application itself, the order for sealing of these records so that the defendant could not see them.

QUESTION: All right.

QUESTION: You -- I take it that you say if only the attorney signs a complaint and he commits a violation, the party -- I mean, the client -- may never be sanctioned?

MR. SHAPIRO: I don't agree with that, Justice White, no.

QUESTION: You don't suggest that?

MR. SHAPIRO: No, I don't. I don't.

QUESTION: Even if the -- even if the -- even if only the attorney is blameworthy?

MR. SHAPIRO: If only the attorney is at all blameworthy, then I would suggest that it is only the attorney who should be sanctioned.

QUESTION: Well, it should be, but the rule seems to say that the court can impose a -- whenever there is a violation by the attorney, can impose an appropriate sanction on the attorney or his client.

MR. SHAPIRO: Well, I think that the court --

QUESTION: Maybe -- maybe the sanctions could be different for the two.

MR. SHAPIRO: They certainly could be different for the two and I think the drafters also contemplated the circumstances in which the attorney's signature violates the rule because the complaint is frivolous, but the client provided the facts, and the court may determine that it is those facts which make it a frivolous complaint. The attorney should have checked further. Had he done so he would not have violated the rule. The case would not have been filed.

QUESTION: Well, Mr. Shapiro, the rule, though, speaks in terms of imposing sanctions only on people who have signed the relevant papers. If the client does not sign, how is it the client could ever be held liable under the terms of the rule?

MR. SHAPIRO: As I read the rule, Justice O'Connor, it is without doubt that the signer can be sanctioned. But as I read the rule, if a violation occurs because of the signing of the paper in violation of Rule 11, the signer himself, which normally would be the attorney, may be sanctioned, but so may the party he represents depending upon the circumstances.

QUESTION: Well, that's a curious interpretation of the language of the rule, isn't it, which speaks only in terms of if a paper is signed in violation of the rule, then the court may impose upon the person who signed it, a represented party or both -- or both -- an appropriate sanction? So apparently it speaks in terms only people who have signed.

MR. SHAPIRO: I think that in that sense that the rule may be somewhat ambiguous. I think it certainly can be read as suggesting that whoever signs the paper, whether an attorney or represented party, can be held liable for sanctions for the violation of the rule occasioned by that signing. I don't think it forecloses the possibility. And I think some courts have said that it in fact honors the possibility that the Rule 11 violation occurring when the attorney signs the complaint may be attributable to misconduct, if you will, on the part of the party; and the court in that circumstance say both the attorney and the party are sanctioned for the violation.

QUESTION: In any event, both have signed.

MR. SHAPIRO: Yes, I was going to say, here, fortunately we do not have to resolve that apparent ambiguity or question in the rule, because here it was the party who signed some of the key documents.

QUESTION: Unless -- excuse me.

QUESTION: The supplemental affidavit was signed only by the party?

MR. SHAPIRO: Correct. But it was -- I would submit to the Court it was in further of and part of the application for a temporary restraining order. It was required only because the original application is too vague.

QUESTION: Well, it really -- it really was signed by the party technically, absolutely technically. It was signed by an employee of the party.

MR. SHAPIRO: That is absolutely correct.

QUESTION: If you have a corporation everything is done by the party will be done by some employee of the corporation.

MR. SHAPIRO: It has to be. A corporation simply cannot sign things on its own.

QUESTION: Where you say -- you just said a moment ago that there's no problem since the party did sign the complaint. Well, that depends upon whether you read Rule 11 as applying to all signatures, whether they're required or not. In other words, if the certification was not required by Rule 11 you might argue that the mere fact that it was there does not justify imposing a sanction because of it.

MR. SHAPIRO: Well, one might view it that way, but I read that rule as saying that anyone who signs a document which is going to be filed with the Federal court must make the reasonable inquiry called for by the rule, even if that document needn't be signed by that party. Now in this case an affidavit would have to be sworn by a party or a party representative.

There is no question, and I think it was the Third Circuit that spoke to this in Gaiardo, that a Rule 11 violation creates multiple victims. Certainly the judicial system and all those who come before it or who attempt to come before it but must wait are victims. But the judicial system has its own mechanisms for resolving that problem and for attempting to assert its own rights against counsel who would violate the rule or against parties who would violate the rule.

But there are other victims whenever Rule 11 is violated. And in this case another such victim is Michael Shipp and his small company. Mr. Shipp has had to incur fees and cost in this case from the inception to the moment and presumably beyond. His business has been damaged. He's been under a cloud of the accusation of a plagiarist for over 4 years. The action was dismissed, but that is still on appeal.

The district court recognized that under Rule 11 it could not do complete justice, but what it could do is dismiss the case both as a sanction for the violation of the rule and because it determined on the basis of the record before it that the case had absolutely no factual merit whatsoever.

It also recognized that it could at least as some recompense give the wrongfully accused defendant those limited expenses incurred before the trial court itself. It did that. That justice was all it could do or at least all it believed it could do at the time and was limited. And we would simply ask this Court to affirm that limited grant of justice.

QUESTION: Thank you, Mr. Shapiro.

Mr. Bomse, do you have rebuttal?

MR. BOMSE: Yes, Mr. Chief Justice.

REBUTTAL ARGUMENT OF STEPHEN V. BOMSE ON BEHALF OF THE PETITIONER

MR. BOMSE: Yes, Mr. Chief Justice.

My reading of the rule is both narrower and broader than that suggested by opposing counsel and indeed by some of the Court's questions. I believe that the language of the second sentence of the rule, which in an attempt to redeem myself, Justice Scalia, we did cite at -- in our discussion of the language at page 4 of our reply brief, that the language of the rule makes clear that it is intended to apply when it uses the term "or party to a pro se party."

Beyond that, however, it seems to me that the rule which will be the situation in the vast majority of cases and I realize this Court sits to decided cases or controversies, but in the vast majority of Rule 11 cases, the courts are going to be confronted with cases in which the represented party has signed nothing. Thus, the rule which talks later about a represented party being sanctioned would not under the literal interpretation, which only would permit sanctions against a signer, have any application in that circumstance.

QUESTION: How do you -- how do you deal with the language, "the rule and sanction that can be imposed against the person who signed it, the party or both," even only one person signed it?

MR. BOMSE: It is precisely what I'm trying -- trying to do, Justice Stevens. I am suggesting that that sentence is there to tell the district court that in an appropriate circumstance somebody who did not sign, namely a represented party, may be sanctioned. And indeed that is precisely what the rules advisory committee said. Let me read, "Even though it is the attorney whose signature violates the rule, it may be appropriate under the circumstance of the case to impose a sanction on the client." I believe this rule can be read in an integrated, sensible fashion and I believe we are left when we do that with the question of what rule is it that will best accommodate the competing policy considerations.

On the one hand, the desire to deter the filing of frivolous litigation. Sanctioning an attorney who does not make a reasonable inquiry will do that. The only reason that the sanction cannot be collected in this particular case is the unfortunate circumstance that Business Guides' attorneys are in bankruptcy, although following Pavelic and LeFlore, they could have sued -- and should indeed have only sued -- the individual attorneys. So there is not a situation where my interpretation will leave parties who incur expenses without a remedy. They will have that remedy against counsel.

As to the parties, we need not for any purpose of deterrence, have a rule which deters the useless of filing a law suit which they believed to be legitimate but is not in fact because that will readily be revealed. It will, on the other hand, chill the expression of people who are concerned that a judge may someday view their actions as objectionably unreasonable.

A subjective standard of bad faith is easy for a client to know about. And clients come in all shapes, sizes, and degrees of intelligence. I think we should not permit them to be sanctioned under those circumstances. It seems to me that a rule makes sense only when as the economist would say, ex ante, it provides adequate guidance. I suggest that the rule we propose does that.

QUESTION: And is that the case when client is representing himself as well, so that you have nobody to go against for simply no reasonable inquiry? Or are you proposing this rule only when you're going behind the lawyer to get the client?

MR. BOMSE: Only when you're going behind the lawyer. The rule I think is quite clear. If you are a pro se party, you have elected, perhaps unwisely, to take on those burdens. And I think that that is clearly what the rule has in mind. But I think that the rule plainly applies as we suggest.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Bomse.

The case is submitted.

(Whereupon, at 12:00 noon, the case in the above-entitled matter was submitted.)