Amendments to the Federal rules of civil procedure : hearing before the Subcommittee on Intellectual Property and Judicial Administration of the Committee on the Judiciary, House of Representatives, One Hundred Third Congress, first session, June 16, 1993 online

unjust. When the Rule is mandatory, courts are often tempted to
conclude in error that there is no violation in order to avoid this
unfairness. Thus, a mandatory Rule 11 does not guarantee a
consistently applied Rule 11. In addition, a court retains
substantial discretion in selecting a sanction. All of these trial
court prerogatives are reviewed under the relatively lenient "abuse
of discretion" standard. In short, practice under even the
Proposed Amended Rule 11 will likely continue to be characterized
by individual judicial variance. Under these circumstances, the
Committee prefers that such variance be openly acknowledged through
a discretionary standard rather than masked through the mandatory
language.

The Committee otherwise agrees with the language of Proposed
Rule 11(c), particularly its express recognition that Rule 11
targets must have adequate notice and a reasonable opportunity to
be heard. The Committee also endorses Rule 11(c) 's overruling of
Pavelic & LeFlore v. Man/el Entertainment Group . '^ which limited
Rule 11 liability only to lawyers who physically signed an
offending paper.

The Committee also generally approves of the "safe harbor"
provisions of Proposed Rule 11(c)(1)(A) which provide a 21-day
opportunity for a warned target of a prospective Rule 11 motion to
withdraw the offending item and avoid sanctions. However, a
substantial portion of the Committee views this as too safe a
harbor. If, for example, a claimant has made baseless allegations
that result in years of litigation,"* the language of the proposed



'^ 493 U.S. 120 (1989) .

'* See, e.g. . Dayan v. McDonald's, 126 Ill.App.3d 11, 466
N.E.2d 945, 81 111. Dec. 143 ( 1984 )( Parisian fast food franchisee
obtained preliminary injunctive relief and prompted years of
litigation through false claims and affidavits but was ultimately
assessed $1.3 million in sanctions pursuant to state version of 28



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rule would appear to preclude Rule 11 sanctions if the offending
claimant withdrew the allegations when finally "the jig is up" by
virtue of a pending Rule 11 motion. Clearly, such insulation from
sanctions liability is unfair to the Rule 11 movant that has
expended thousands of dollars in counsel fees during the pendency
of the baseless claim.

We do not believe it is a sufficient answer to this concern
that in cases of outrageous conduct, the offending lawyer will
often be subject to sanctions pursuant to 28 U.S.C. §1927 or a fee-
shifting statute. In many cases of outrageous conduct, the parties
are at least as culpable as counsel but are less easily reached by
sanction devices other than Rule 11. Although courts retain
substantial inherent power to punish outrageous conduct,
particularly in the wake of Chambers v. Masco. Inc. . " this tool is
subject to the criticism that it lacks sufficiently clear standards
of application.'* Where there exists a specific federal rule
governing a type of litigation misconduct, courts should be
hesitant to invoke their inherent powers to reach what the Rule
does not.

In fact, the Committee believes that Proposed Rule 11 should
be further revised to provide that its procedural protections apply
to any judicial imposition of sanctions, even those ordered
pursuant to 28 U.S.C. §1927 or the court's inherent power.
Whenever counsel is targeted for sanctions, he or she should have
specific notice of the alleged violation and an opportunity to be
heard as well as an articulated rationale for any resulting
sanction.

However, to prevent the proposed safe harbor from becoming
impregnable, the Committee recommends that Proposed Rule
11(c)(1)(A) be modified to permit continued pursuit of Rule 11
sanctions despite a withdrawn item upon application to a Magistrate
Judge. If the Magistrate Judge agrees that the outrageousness of
the conduct justifies an exception to the safe harbor of voluntary
withdrawal, leave would be granted to file the Rule 11 motion with
the court for decision. The party seeking Rule 11 sanctions
despite voluntary withdrawal should be required to demonstrate such
outrageously abusive conduct by clear and convincing evidence.



U.S.C. §1927).

" U.S. , 111 S.Ct. 2123, reh'g denied . 1991 U.S. Lexis

4061 (1991) (affirming award of approximately $ 1 million in
sanctions pursuant to district court's inherent power).

'• See 111 S.Ct. at 2146, 2152 (Scalia, J., dissenting;
Kennedy, J., joined by Souter, J. and Rehnquist, C.J. , dissenting).



371



The Committee approves the language of Proposed Amended Rules
11(c)(2) regarding the amount of sanctions and particularly
approves the codification of the "least severe sanction" approach.

The Committee disagrees with Proposed Rule 11(c) (2) (A) , which
provides that a represented party may be sanctioned only for items
that violate the improper purpose prong of Rule 11. This
limitation is peculiarly inapt in light of the absence of any
consensus as to exactly what constitutes a sufficient indication
of an improper purpose. Parties should be subject to Rule 11 for
violations of its fact prong as well. Despite the Rule's
aspiration that lawyers conduct independent factual investigations,
and thereby uncover those instances in which they have been misled
by their clients as to the facts, the reality is that even diligent
lawyers are often crucially dependent upon their clients to develop
the facts surrounding a dispute.

Where clients fail to aid the la'</yer's inquiry, to produce
documents or to give candid accounts, they must be as subject to
Rule 11 as are the lawyers who fail to make a reasonable inquiry.
The Committee appreciates that this provision attempts to avoid an>^
potential infirmity of Rule 11 under the Rules Enabling Acf
alluded to in Business Guides, Inc. v. Chromatic Communications
Enterprises. Inc. " Nonetheless, we continue to believe that
holding clients accountable for reasonable inquiry into the fact
prong of Rule 11 abridges none of their rights under the law. In
the wake of Chambers v. Nasco. Inc. ," a court's inherent power to
sanction parties is quite broad. Under these circumstances, a
requirement that clients be held to the same standard of conduct
as lawyers regarding factual investigation does not violate the
Enabling Act and encourages candor from the parties as well as
counsel.

Although limiting party sanctions to the improper purpose
prong of Rule 11 reduces the potential for difficulties in the
attorney-client relationship that can accrue when both are faced
with a Rule 11 motion alleging violation of the fact prong of the
Rule, this does not provide sufficient support for permitting
represented parties to avoid their obligations as litigants
adequately to assist (and certainly not to mislead) counsel in
reasonable investigation into the facts of the dispute.
Furthermore, limiting client sanctions to improper purpose
violations will hardly eliminate potential attorney-client



" 28 U.S.C. §2072, which provides that Rules promulgated
under the Act can not "abridge, enlarge, or modify any substantive
right."

'" 111 S.Ct. 922 (1991) .

" 111 S.Ct. 2123 (1991) .



372



tensions. Instead of pointing fingers at one another over
defective fact investigations, lawyers and clients at odds will
instead point fingers regarding the motivation underlying the
litigation.

We agree, however, that clients should have somewhat more
insulation from Rule 11 than do lawyers. Consequently, the
Committee reiterates its earlier view that represented parties
should be subject to monetary sanctions only where the court makes
specific findings that the party's violation of Rule 11 resulted
from conduct that was done in subjective bad faith. Although this
standard, which had been the governing test in the Second Circuit,
was rejected by the Supreme Court in Business Guides " on the basis
of the text and structure of the current rule, neither the Court
nor anyone else has convincingly argued that the subjective bad
faith standard for clients is bad public policy. On the contrary,
the standard would grant clients a wide zone of protection but
would provide appropriate incentives for proper behavior.

Although the Committee has reservations about the "voluntary
dismissal" safe harbor from sua sponte monetary sanctions
established in Proposed Amended Rule 11(c)(2)(B) for the same
reasons it has misgivings about the broad safe harbor of Proposed
Rule 11(c)(1)(A), it accepts the Rule 11(c)(2)(B) approach under
the assumption that in cases of genuinely outrageous conduct, which
will often involve gross deception, the matter is far more likely
to be brought to the court's attention by the motion of a party
rather than the court's own motion. Consequently, if Proposed Rule
11(c)(1)(A) is revised pursuant to the Committee's suggestion, it
would not view the sua sponte safe harbor as unreasonably
protective of Rule 11 violators.

Regarding Proposed Amended Rule 11(c)(3), the Committee
recommends that courts imposing Rule 11 sanctions be required to
make written findings of fact and conclusions of law, regardless
of whether they are requested by a party. Although due process
does not strictly require such written findings, we believe it
would be wise to require that sanctioned parties and counsel have
the benefit of such a precise writing rather than the less tailored
remarks of the court at a hearing or in chambers. Trial judges
should be suitably reluctant to impose Rule 11 sanctions and
requiring them to render written findings and conclusions as part
of the sanctions decision tests the seriousness of their conviction
that Rule 11 has been violated and imposes an apt period for
reflection. Faced with such a requirement, courts are less likely
to impose Rule 11 sanctions in anger or from tensions of the
moment. A requirement of written findings and conclusions in
effect functions as a "stop and think" rule for the courts.



" Business Guides, Inc. v. Chromatic Communications
Enterprises, Inc., Ill S.Ct. 922 (1991).



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Regarding the draft Conraittee Note acccnpanying Proposed
Amended Rule 11, we particularly approve the view that evidence
sufficient to defeat a motion for summary judg^ient is sufficient
evidentiary support to insulate a party from Rule 11 sanctions
under the fact prong of Rule 11.^' The Committee also particularly
endorses the Note's language limiting any monetary sanction to
losses directly flowing from conduct violative of Rule 11 and the
Note's admonition to courts that Rule 11 sanctions should not be
inconsistent with the substantive law of fee-shifting statutes such
as 42 U.S.C. §1988.



Rule 16

The Civil Justice Reform Act of 1990, 28 U.S.C. § 473(a)(1),
proposes "individualized and specific case management" as a guiding
principle behind the new rules. In many respects, Proposed Amended
Rule 16 furthers that goal in that the amendments ensure that the
Court will become familiar with the issues in the case at its early
stages. Cases should proceed more expeditiously because the Court
will have the opportunity to refine the disputes between the
parties by focusing, scheduling, and perhaps narrowing discovery
with a view towards simplifying the issues for trial as well as
eliminating some claims and defenses while establishing ground
rules and procedures for necessary but not unduly burdensome
discovery. In addition, the Court may initiate discussions
concerning settlement.

The Committee believes that the subject matters identified in
the proposed rule are appropriate for consideration and discussion
by counsel. The judicial officer may make such determinations even
at an early stage in the case, with the understanding that these
matters will be revisited at a second conference after discovery
has been completed or is close to completion after having been
conducted upon a realistic schedule agreed to by the parties. This
will enable the District Judge (or Magistrate Judge) to evaluate
the complexity of the case, the positions of the parties and the
likelihood that some issues may be disposed of by motion pursuant
to Rule 56 or separate trial pursuant to Rule 42(b). The Court may
also at this initial conference schedule preparation of a pretrial



2' See Proocsed Amendments . 933 F.2d at CLXXVI . The Note
could give greater guidance ~o courts and discourage inappropriate
imposition of Rule II sanctions by also stating that a claim which
sur'/ives A Rule 12 motion or sur.mary judgment motion is also
sufficiently warranted by existing law or a nonfrivolous law reform
argument that it can not later be sanctioned upon these grounds.
See Stempel, Sanctions. Svnmetrv, and Safe Harbors: Limiting
Misapplication of Rule 11 by Harmonizing It with Pre -Verdict
Dismissal Devices . 60 FORDHAM L.REV. 501 ( 1991) ( forthcoming) .



374



order regarding the issues that remain in serious dispute and to
establish a pretrial briefing schedule.

As proposed. Rule 15(b) provides the opportunity for the
judicial officer to fashion, limit and restrict discovery pursuant
to a schedule agreed to by the parties or, in absence of such
agreement, as ordered by the Court, taking into consideration
specific issues and problems raised by the case. ^

After the pretrial order is submitted, "^he Court should
conduct a "final pretrial conference" to attempt to settle the
case. In many cases, it may be helpful for the parties or the
insurers to attend this final conference.

With respect to reservations about Proposed Rule 16 by other
commentators,^^ we appreciate the concern that early pretrial
conferences, if misused by the court, could result in premature
determinations of important substantive matters. On balance,
however, the Committee believes that the benefits of hands-on case
management by the Court at various stages in the litigation
outweigh concerns about timing or hurried decision making. All
rules require prudent exercise of judicial discretion. Rule 16 is
no exception. The parties always may request a conference with the
Court or Magistrate Judge if any difficulties during discovery
arise. The Court will have the power to exercise its considered
judgment with a view towards expediting either settlement or trial
of the action. Nonetheless, the Advisory Committee should
seriously consider extending somewhat the time period for
conducting the initial conference. However, since there exists
considerable delay in scheduling civil actions for trial owing to
the criminal docket, there appears to be little need to set a trial
date within eighteen months of the filing of a complaint of the
initial Rule 16 conference.



Rule 26faWl^ (the "Disclosure" scheme)

Proposed Amended Rule 26(a) provides that, unless altered by
local rule, parties to litigation shall disclose "baseline"
information (naming persons with knowledge of the dispute,
identifying documents, outlining damage claims, disclosing
insurance agreements and providing a copy of relevant insurance
policies) and expert information (discussed in more detail below)
to other parties prior to receiving discovery requests. This is to
occur within 30 days uf service of the answer or "in any event"



22



See Frank, et al., supra note 5,



375



within 30 days after receipt of another party's disclosures and
written demand for early disclosure."'

The Committee does not object to the early exchange of basic
information about the case so long as this can be accomplished
efficiently. However, the Committee harbors substantial concern
that the disclosure provisions of the proposed rule will add
relatively little to the expeditious processing of civil litigation
while simultaneously imposing reasonably significant transaction
costs upon the system by requiring counsel and courts to learn,
interpret, and apply new rules provisions. We are also concerned
about the proposed rule's potential intrusion upon lawyer-client
relationships in the adversary system.

Although the civil litigation system faces substantial
difficulties, it was not our understanding that assembly of
baseline discovery was one of these systemic flaws requiring
correction.'* A ma^or Federal Judicial Center study of discovery
controls found not only that half of federal cases concluded with
no discovery but also that most discovery requests were eventually
satisfied.'' This study did not analyze the content of discovery
sought or resisted but its findings certainly cannot be read as
suggesting that lawyers are unable to obtain baseline information.'



" In addition, prior to trial, all parties are required to
disclose witness information and identify documents and depositions
planned for use at trial.

" A Rand Institute for Civil Justice Study of case
terminations in the 1971-86 period found approximately 40 percent
of cases terminated with no court involvement (and, implicitly, no
discovery imbroglios). See T. Dungworth & N. Pace, Statistical
Overview of Civil Litigation in the Federal Courts 26-29 (1990).
On average during this tine, an additional 35 percent of the cases
terminated by motion. To the Committee, this suggests that lawyers
can generally obtain basic information used to drop a case, settle
a case, or isolate dispositive issues in a case. Although too many
resources may be spent obtaining the information, this appears
certainly not to occur in a great many federal cases.

" See P. Connolly, E. Holleman & M. Kuhlman, Judicial
Controls and the Civil Litigation Process 18-25, 29 (Federal
Judicial Center 1973) ( "Connolly" ) .

'' The Connolly study, although perhaps dated since it was
published in 1973, remains one of the most comprehensive and
authoritative empirical examinations of actual discovery practice.
Ironically, few of its findings support the proposed discovery
amendments, and in some cases they contradict the assumptions
underlying the proposed amendments. See infra , discussing limits
on depositions and interrogatories.



376



The Committee members have not encountered such difficulty in their
own practices. In the absence of required disclosure, competent
counsel almost always obtain baseline information in the "first
wave" of discovery, as they have for more than 50 years without
benefit of a disclosure mechanism distinct from the discovery
rules.

Problems do appear to exist regarding the delay faced by
requesting parties in obtaining information. Responding parties
are slow to provide discovery and often need the prodding of a Rule
37 motion." One study found that only 20 percent of discovery
requests were answered within the 3 days provided by the Federal
Rules; however, 80 percent were responded to within four months.*'
Some may interpret this as evidence that even basic discovery is
unduly delayed. Another explanation, one which the Committee finds
plausible, is that attorneys in good faith stipulate, with court
approval, to enlarge discovery response times where discovery
requires more than the 30 days provided in the Rules. Certainly,
minimal delay of this sort is not a particularly acute failing of
the federal system and may in fact be a necessity. Although the
proposed disclosure provisions may speed the pretrial and
settlement process somewhat, this potential gain may prove
illusory, too costly, or negligible in relation to the costs of its
implementation when compared to the overall problem of litigation
expense and delay.

As previously noted, a large percentage of federal court cases
involve no discovery." In these cases, informal exchange and



" See Connolly, supra note 25, at 18-25, Although this
study found either the making of a Rule 37 motion or the Court's
order resulted in discovery production in approximately 90 percent
of cases studied (id. at 20) , judges seldom awarded counsel fees
to the prevailing party. Further, requesting counsel were often
slow to bring a Rule 37 motion. Occasionally, lawyers decline to
pursue even meritorious Rule 37 motions because of the expense and
opportunity cost involved. These findings, to the extent they
reflect the contemporary situation, suggest that judges should more
frequently order payment of counsel fees pursuant to Rule 37 in
order to facilitate use of the Rule. This conclusion also supports
the Committee view that Rule 37 should not be made the exclusive
basis for discovery sanctions (eliminating Rule 11) unless Rule 37
is enforced far more vigorously than it has been during the past
50 years.

" See Connolly, supra note 25, at 18.

" According to preliminary findings of the Eastern District
of New York Discovery Project (M. Berger, Reporter) , data from
1986-1990 show nearly one-half of cases tarminated without any
formal discovery.



377



setrlement occur without required disclosure. In more complex or
contested matters, the disclosure provisions will not eliminate
counsel's need to conduct at least a modicum of discovery in order
to assess the litigation. Here, required disclosure may speed
earlier exchange of basic information without speeding completion
of discovery or case disposition and thus may not decrease delay
or lower legal expenses at all (i.e. . complying with the disclosure
requirements will require as much attorney time as acquisition of
baseline information via discovery) . In addition, in many complex
cases, legal issues (and not factual issues) are dispositive. In
short, the Committee feels the disclosure mechanism as currently
envisioned will not bring sufficient benefit to justify the costs
of change.

Some cost is inherent whenever a new rule, mechanism, or
system is implemented. For example, courts will undoubtedly face
litigation over the question of what comprises "information that
bears significantly" on the claims and defenses of litigation and
requires that a witness be listed through disclosure declarations.
Similar motion practice will likely focus upon the concept of
"documents reasonably likely to bear significantly" on claims and
defenses as well as what constitutes sufficient "computation of any
category of damage."'"'

Judges will ordinarily decide disclosure disputes with wisdom
and common sense, but this consumes judicial resources.
Eventually, a body of "disclosure law" arises so that counsel will
have sufficient guidance for compliance with the new rule language.
In the meantime, open questions will be litigated, with some
positions bordering on the frivolous. The Proposed Amended Rules
admit that adoption of the disclosure provisions will require an
increase in the bar's level of professionalism. However, even with
a substantial rise in the level of professionalism, significant
costs will attend the new rules, at least at the outset.^'



" Although the case law of existing discovery devices may
provide some guidance for resolving such disputes, the Committee
doubts that courts can completely import discovery precedent to
disclosure controversies. For example, at the disclosure stage,
it may often be unreasonable to expect the same degree of precision
expected of damage calculations occurring later in the pretrial
proceedings. This concern is echoed by Frank et al., supra note
5, at 7-9.

" Even well formulated arguments favoring the disclosure
mechanism have, in the ComjTiittee ' s view, underestimated this
factor. See , e.g. . Schwarzer, Slaving the monsters of cost and
delay: would disclosure be Tiore effective than di f^coverv?. 74
Judicature 178, 182-83 (Dec. -Jan. 1991).



378



The Draft Committee Note clarifies the meaning of the phrase
"information that bears significantly" as it pertains to witnesses
by explaining that persons with "significant" information are those
who, if their potential testimony were known, "night reasonably be
expected to be deposed or called as a witness by any of the
parties." The notes do not clarify the phrase as it pertains to
documents, however. We believe that Proposed Amended Rule 26(a),
if adopted at all, should be redrafted so as to incorporate in its
text specific guidance and clarification.

Even as clarified, however, it is clear that an attorney
cannot decide what is "significant" without giving an adversary the
benefit of the attorney's wits. Thus, a very troubling aspect of
Proposed Amended Rule 26(a) is its impingement upon the traditional
adversary system and the proprietary nature of an attorney's
assessment of the case. Although Proposed Amended Rule 26(a) (1) (B)
requires only a "general description" of documents "reasonably
likely to bear significantly on the claims and defenses" of the
matter, the Proposed Rule holds potential for mischief. If, for
example, it is interpreted to require that disclosing counsel not