Judiciary
HomepageMy name is John P. Frank and I am the senior partner of the law firm of Lewis and Roca in Phoenix, Arizona. I attach my Who's Who identification to this statement and will say briefly only that I have my law graduate degrees from the University of Wisconsin and Yale Law School and prior to September 15, 1954, taught law at Indiana University and at Yale, in both schools teaching procedure. I have taught on shorter term bases at various schools in the United States and have lectured, commonly on either constitutional or procedural subjects, in many states. I am the author of numerous books and articles on court administration and procedure and constitutional and legal historical subjects.
I served on the then Supreme Courts Advisory Committee on Civil Procedure by appointment of Chief Justice Warren under the chairmanship of Mr. Dean Acheson from approximately 1960 to 1970. I was a member and from time to time chairman of the Arizona State Committee for Civil Procedure for some thirty years and have participated in and have appeared at all hearings by the Committee on the Rules of Civil Procedure from 1960 to the present time. I am serving now as an emeritus member of the present Advisory Committee on Civil Procedure of the Judicial Conference chaired by Judge Patrick E. Higginbotham of the Fifth Circuit. I have repeatedly appeared before House and Senate committees on jurisdictional and procedural matters.
In connection with the matters presently before this Committee, I have been active in connection with them throughout their several year history. I have been particularly involved in respect to Rule 11 and can perhaps properly say that as coordinator of the Bench-Bar Committee to Revise Civil Procedure Rule 11, I was one of the moving spirits for the change. I attach the names of the Bench-Bar Committee to this statement; it will be apparent to you that it represents all parts of the judiciary, the bar and academia. I am appearing today at the request of the American Trial Lawyers Association. I am not a member of that group but have frequently been the coordinator of the group with other national bar organizations, including the American Bar Association. In connection with the adoption of Rule 11, I presented to the official committee and in the hearings before this Committee and the equivalent Senate subcommittee the views of numerous United States Court of Appeals Circuit and District judges, the leadership of the Litigation Section of the American Bar Association, the Board of Governors of the American Trial Lawyers Association, the committee on civil procedure of the American College of Trial Lawyers, and the views of numerous state bars. In this connection, I worked particularly closely with the New York bar and the outstanding chairman of its civil procedure committee, Judge Hugh Jones, formerly of the New York State Court of Appeals.
Due to the fact that the House of Delegates of the American Bar Association cannot pass on the recommendations to it of its Litigation Section until its mid-winter meeting which begins on February 13, a week from today, I cannot and do not purport to present any official views of the ABA. However, in the course of my remarks I will tell you of the recommendations which the Litigation Section of the ABA has made to the House of Delegates. I take the liberty of asking that you keep this record open for at least three weeks so that the ABA, if it cares to do so, can add an official written statement. Similarly, the Executive Committee of the American College of Trial Lawyers cannot meet on this matter until the middle of this week. The American College had a substantial hand in the creation of the new and present Rule 11 and, indeed, originated its most important parts. I have reason to believe that it is quite likely that the College will wish to put in a statement on at least some of the matters now before you, including particularly Rule 11, and I ask that the record be kept open for the brief period requested in connection with possible ABA action so that the American College of Trial Lawyers can also be heard from.
Let me divide my statement into the background for the 1993 change in Rule 11, the present situation, and present proposal.
I. RULE 11.
A. Background of the 1993 Change.
Rule 11, as adopted in 1983, was described by Professor Charles Alan Wright as the worst self-inflicted wound in the history of the rules-making process. Seldom was an effort made with better intentions or higher purposes, but, as has been trenchantly observed by Professor Judith Resnik of the University of Southern California, most of the time rules reformers are mopping up after the mistakes of past rules reformers; the old Rule 11 was a brilliant example.
The old Rule 11 was a genie which came out of a small bottle and filled all available space. No one would have supposed in 1983 that it would be so consequential. The rule was short and in both prose and intention benign. It provided that every pleading, motion and other paper must be signed by the attorney and if there is no attorney, by the party. The signature then became a certificate that the attorney has made a reasonable inquiry and that to the best of his or her knowledge, information and belief, the document was well grounded in fact and warranted by existing law or represented a good faith effort to alter existing law. If the pleading or motion or other paper was found to have been signed in violation of the rule, the court was authorized to impose an appropriate sanction which could include an order to pay to the other party the reasonable expenses involved in countering the pleading, including attorneys fees.
Great oaks from little acorns grow. In the less than ten years after the adoption of old Rule 11, we had thousands of cases invoking its application. Asking for sanctions because of challenges to the allegedly good faith inquiry into either facts or law became a major industry. It became routine that the attorneys had a double duty, one to try the case and the other to try the opposing counsel.
The rule became more of a defendant's mechanism than a plaintiff's, but the defendants did not liked it either. Approximately 75 percent of the sanction applications were against plaintiffs. Nonetheless, there were enough against defendants to create a mutual burden. Indeed, the Rule 11 operation was just as obnoxious to the leaders of the defense bar as it was to the plaintiff's bar. The root goal was the desire to sanction frivolous cases. The underlying problem here is that the phrase "frivolous cases" has a happy ring to it as though it were saying something meaningful, when in truth this is false. One judge's frivolous case is another's serious question. In a Federal Judicial Center study, a group of judges who considered the same complaint divided fifty-fifty on whether it was frivolous.l
The system was been particularly onerous on civil rights plaintiffs.
I do not pause with what I think were the substantive misfortunes under Rule 11 because the point that particularly concerned me was the grossly unreasonable and unwholesome burden it added to judicial administration. The American Judicature Society did a major study. That study reported that in 7.6 percent of the cases studied there were Rule 11 sanctions and in 24.3 percent there was some involvement without sanctions. That meant that there had been some kind of Rule 11 activity of a formal enough sort to be noticed in a third of the cases This in turn means that a great number of time-consuming and dollar-consuming decision points have been put into the legal system.
When the attention goes from the frequency of Rule 11 in a batch of cases to the frequency of Rule 11 problems for lawyers in general, the American Judicature Society came up with the astonishing figure that 82 percent of the bar studied has had some Rule 11 contact. This was a terrible and costly burden to put on the profession. It was particularly undesirable because under Rule 11 there were no uniform standards. As I have mentioned, one Federal Judicial
lJ. M. Kassenkissen, An Empirical Study of Rule 11 Sanctions, 26 (1985).
Study, judges divided fifty-fifty as to which cases were and which were not frivolous.
The Judicature Society also spoke of the threat element in Rule 11, as lawyers charge each other. The Seventh Circuit study on the rising incivility of the bar, an appreciable part of it dependent on Rule 11 combat, illustrated the vices of this system. Exchanges between lawyers of the "I'm going to get you" variety don't help civility very much.
It was, in short, a bad rule that needed changing.
B. The Present Situation Under New Rule 11.
As against that background, I had the pleasure and opportunity to be coordinator on the Bench-Bar proposal to revise Rule 11. It included an astonishingly complete representation of the bar, the Litigation Section, ATLA, the College of Trial Lawyers, numerous state bars, and numerous judges and professors; the list speaks for itself. We asked for a very comprehensive revision of Rule 11.
We did not get what we asked for. I regret that. The plain fact is that the Rule 11 dispute reflects class difference within the profession. Most of the judges who have the Rule 11 power like it. The lawyers on whom it is exercised or feel its consequences do not. In the world of cats and mice, it is more attractive to be a cat. This is illustrated in the dissent by Justices Scalia and Thomas from even the modest Rule 11 changes which were made.
Nonetheless, while the changes are less than I would have liked, the improvements are noteworthy. A strenuous concern of the American College of Trial Lawyers was the provision in the 1983 rule that sanctions were mandatory.
If the judge found any of the triggering circumstances existed, the court had no discretion to waive the sanctions but was compelled to impose them. That aspect is changed by the new rule. Another improvement is that the sanctioning power was broadened to cover firms as well as persons who actually sign documents in court. Frequently the signer is a junior attorney who is simply doing what he is told. He is not a policy maker. It would have been better to eliminate any sanctions on such persons, but at least now the courts will have discretion to put the responsibility where it belongs, which is on the firm itself.
The worst feature of the 1983 rule, which I have already mentioned, is that the rule became a fee-shifting device. The Bench-Bar proposal urged that any sanctions under the rule should be paid into the court. That proposal was not entirely adopted in the new rule but long steps were taken in that direction. The Court adopted the views of Justice O'Connor in a recent opinion that there should be heavy stress on deterrence, not profiteering, as the rule's objective. Hence, the Committee provided that any sanctions "should ordinarily be paid into court as a penalty" and that fee shifting should be limited to "unusual circumstances." This is an improvement. In addition, the new rule provides that there shall be no sanctions if the offending pleading is withdrawn, and the objecting party must give the other side this opportunity.
A major improvement in the rule is its improvement on the notice, hearing and determination practices required before sanctions will be allowed. Anybody sanctioned must have a specific charge, must have a reasonable opportunity to respond, and the court must show its reasons on the record for any order it makes. This is particularly important because the court's order is reviewed only for abuse of discretion, so there must be a record to show whether discretion has been abused.
Former Rule 11 created a situation which was simply intolerable. The present rule was urgently needed. You gave it your blessing in 1993, and you were right.
C. Problems Under HR 10.
The proposal to erase new Rule 11 and impose old Rule 11 by statute is unfortunate from several standpoints.
1. The new rule has already reduced the great load of satellite litigation created by the old rule and restored a great degree of civility to the practice of law. Lawyers are no longer required to attack each other. Under the old rule, if a lawyer failed to charge his opponent with all sorts of malfeasance, he might be guilty of malpractice to his own client. Please notice that this is very different from the fee-shifting proposal which is the next item on your agenda and to which I shall turn in a moment. Old Rule 11 was not a simple fee-shifting rule. It required the prevailing party to show that the losing party had mispracticed his profession to the point of unethical conduct. It precipitated what became an actual personal dispute between attorneys. All this added heavily to the caseloads of the courts.
Under the new rule, this satellite litigation has markedly diminished. We do not know, because the rule is so new, just how much it has lightened the court's load. Judge Higginbotham, the Fifth Circuit judge who is the current chairman of the Civil Rules Committee, has asked the Federal Judicial Center for a study on this point to determine how new Rule 11 is working out. But while we do not yet have clear statistics, we do know from discussions throughout the country that there is much reduction in the satellite litigation. The reduction in satellite litigation presents the question of whether the new rule has become a toothless tiger, whether the diminution of the number of actual sanctions claims means that the bar can now be as irresponsible as it wishes.
The answer is a very clear "No." A portion of the new rule which is working extremely well is the safe harbor provision. Under the new rule, before a Rule 11 sanction can be sought, the party asserting the violation of the rule must serve a notice on his opposing counsel and give him a reasonable time to correct or modify the alleged erroneous or unsupported filing. If the adjustment is not made to the satisfaction of the lawyer making the demand, he is free to ask for Rule 11 sanctions.
The safe harbor provision works. It calls to the attention of the other side that there may be something too loose or erroneous in the papers, and it creates an incentive to correct these errors because of the potential of the Rule 11 sanction.
Let me give a brief, personal illustration. Perhaps two weeks ago, I had to file a pleading and counterclaim very rapidly, perhaps too rapidly, in a case asserting damages in the amount of many millions of dollars. The deadline precluded much meditation over the pleading. Shortly thereafter, I received a letter from opposing counsel telling me that a given portion of the pleading might be entirely unwarranted. The safe harbor provision of Rule 11 was invoked and I was given the rule-provided time to reconsider the matter. I wrote in return that the pressures of life, including the necessity of preparing for and being at this hearing, made it impossible for me to examine his point ~o quickly and I suggested that we mutually agree on a ten-day extension of the whole case so that I would have time to check the point out. The other side was, thus, relieved of pleading for the extra time and the suggestion was quickly accepted. When I return, I shall examine the matter closely and either conclude to stand on my position and risk the Rule 11 sanction or, perhaps, discover that I was in error and amend my pleading.
This is the way the system is supposed to work. This is what is happening all over America. The name calling and epithet slinging which was a part of former Rule 11 practice is gone. I remember vividly a particularly moving speech by Chief Justice Burger on the necessity of restoring civility to the practice of law. New Rule 11 is a long step in that direction.
2. There is another consideration for leaving the current rule alone. That is that it has just been adopted, it has had only a year in which to operate, and its strengths and weaknesses are just now beginning to be evaluated. No objection to the rule was made by either house of Congress after full hearing in 1993. The rule should not be allowed to become a flap jack, to be turned over so casually.
I met recently with a large aggregation of representatives from all of the major bar associations, including some thirty or more of the state bars. The general sentiment expressed was that the Rules Enabling Act provides a good, thoughtful method of making rules by committee, with hearings, and with final consideration, both by the Supreme Court and Congress. This bill simply end 10 runs that whole process, eliminating committees, eliminating the Supreme Court, and moving the matter entirely here. I fully respect the fact that the Congress can make such rules as it desires, but the exercise of the power should be with restraint. The Judicial Conference should not be bypassed in this fashion without even an inquiry as to whether a rule change should be made.
3. The report of the Litigation Section of the American Bar Association, which will be before the House of Delegates next week, speaks of old Rule 11 as "a colossal waste of judicial time." As the report said, "Things had obviously wandered far afield when there existed exposure to sanctions for asserting even meritorious positions in good faith." The conclusion of the Litigation Section was:
This restoration of the status quo ante would ignore all experience under the 1983 version of Rule 11, exacerbate its worst features, and resuscitate and accelerate the enormous amount of judicial time and attention devoted to non substantive motion practice. It should not be enacted into law.
I respectfully that the Litigation Section is quite right. I renew my expression of hope that you will keep this record open so that the American Bar Association and the American College of Trial Lawyers can be heard.
II. THE LOSER PAYS PROPOSAL.
In respect to this proposal, I adopt as my own the recommendation of the Litigation Section of the American Bar Association to its House of Delegates:
H.R. 10 would reverse the prevailing rule in the federal system and provide that the attorneys' fees and expenses for a prevailing party be paid, upon application to the court, by the losing party. The court would have the discretion to reduce such an award if it concluded that the prevailing party had engaged in conduct during the proceeding, which unduly and unreasonably protracted the final resolution of the case.
The hallmark of the ABA has been the goal of providing access to justice for all. The closer pays" provisions of H.R. 10 would also undo much of the good that has been accomplished on access to justice issues.
This provision would end class actions and virtually all other security actions by victims of fraud. By definition, a securities class action is a suit by one or a few investors who have lost relatively small amounts of money and who sue on behalf of all those similarly injured. No victim will stand up and sue as the champion of the class if the risk -under the English rule -- is paying millions in attorneys' fees incurred by insurance companies, public corporations, investment banking houses, accounting firms and law firms. Access to the courts by all will be seriously undermined. The English rule is simply inconsistent with the class action device.
Moreover, the provision cannot be fixed by changing the standard to shift fees on the basis of a lower standard. The in terrorem chilling effect exists because of the possibility that fees will be shifted; therefore any threat of a fee shift would be sufficient to deter a plaintiff from pursuing a class claim. As Professor Arthur Miller of Harvard Law School so cogently testified last summer:
"As a practical matter, fee shifting is almost invariably an intimidation device designed to inhibit people from seeking access to the courts. Fee shifting would eviscerate all -- or virtually all -plaintiffs' securities claims, the meritorious along with the merit less. The practical mathematics of deciding whether to bring a lawsuit are clear. No one except the extremely wealthy -- no matter how strong his or her claims appear to be -- would assume the risks of pursuing a class claim against well-researched defendants with counsel who are compensated on an hourly basis if there was any risk of having to pay the defendants' attorneys' fees. That would create a risk that would be hundreds, if not thousands, of times as great as the loss of any individual class representative.
"Litigation success from the plaintiff's perspective is never certain at the point of institution. Therefore, it does not matter much whether fee shifting is mandatory or discretionary with the court, or even what the standard for imposing it is. As a practical matter, in the context of class actions under the anti fraud provisions of the federal securities laws, even a remote possibility that the class representative would have to pay the legal fees of defendants would be a major deterrent to anyone seeking to remedy a justiciable wrong. Who would risk the staggering legal fees if there was a chance the defendants would prevail in a civil suit -- leaving the loser responsible for the fees?
"The 'loser pays' proposal in class actions is radical and inconsistent with traditional American values involving equal access."
l would add to what the Litigation Section has said one further observation. The loser pays provision is hard on plaintiffs and will, as suggested by the Litigation Section, keep some of them out of court. But my own practice is largely on the defense side, and I must bring to the attention of the Committee that this is very bad from a defense standpoint. The realistic fact of the matter is that the deep-pocket defendants will normally be able to pay the other side's fees. A great many plaintiffs will not be able to pay and will avoid their responsibility because of insufficient funds. Bankruptcy will become an easy out. The practical effect of this provision is that defendants who lose will generally be paying the other side's fees, but as a practical matter plaintiffs who lose will frequently not be paying. This imbalance is highly undesirable.
Thank you for the opportunity to appear before you.
John P. Frank
February 6, 1995
JOHN P. FRANK, born Appleton, Wisconsin, 1917; admitted to bar, 1940, Wisconsin; 1954, Arizona; 1966, District of Columbia. Education University of Wisconsin (B.A., 1938; M.A., 1940; LL.B., 19~0); Yale University (J.S.D., 1947). Awarded LL.D., by La vrence University, 1981. Order of the Colt. Recipient, Harley Award, 1984. Author and Editor: ~Cases and Materials on Constitutional Law," Callaghan & Co.; "Cases on the Constitution," McGraw-Hill; "Mr. Justice Black,~ Alfred A. Knopf, Inc.; "Marble Palace, The Supreme Court in American Life," Alfred A. Knopf, Inc.; "Lincoln as a Lawyer," University of Illinois Press; ~Justice Daniel I)issenting," Harvard University Press; ~The Warren Court," The MacMillan Co.; "American Law: The Case for Radical Refonn,~ The MacMillan Co.; "Clement Haynsworth, the Senate, and the Supreme Court,~ University Press of Virginia. Assistant Professor of Law, Indiana University, 194 1949; Associate Professor of ~aw, Yale University, 1949-1954. Law Clerk to Mr. Justice Hugo L. Black, October, 1942, telTn. Member, Committee on Rules of Practice and Procedure of the Judicial Conference of U.S., 19591970. Member: Arizona Salary Commission, 197~1982; Arizona Appellate Court Nominating Committee, 1972-1984. Chairman, Merit Selection Committee, U.S. 9th Circuit, South, 1977-1979. Member: American Law Institute (Member, Council, 1973--); American Judicature Society. Fellow, American Bar Foundation. CONCENTRATION: Appeals; Civil Litigation; Antitrust Law.
BENCH-BAR COMMITTEE TO REVISE
CIVIL PROCEDURE RULE 11
Robert G. Begam, Esq., President, ATLA, 1976-77
James E. Carbine, Esq., Baltimore, Maryland
Edmund L. Carey, Jr., Esq., Nashville, Tennessee
Professor Erwin Chemerinsky, University of Southern California Law Center
Professor George C. Cochrsn, University, Mississippi
Judge Avern Cohn, U.S. District Court, Eastern District of Michigan
Philip H. Corboy, Sr., Esq., Chicago, Illinois
Professor Dennis E. Curtis, University of Southern California Law Center
Delaware State Bar Association
Francis Fox, Esq., Boston, Massachusetts
John P. Frank, Esq., Phoenix, Arizona
Judge A. Leon Higginbotham, Jr., Third Circuit Court of Appeals
Judge Patrick Higginbotham, Fifth Circuit Court of Appeals
Hugh Jones, Esq., Syracuse, New York
Laura Kaster, Esq., Chicago, Illinois
Michael A. Maness, Esq., Houston, Texas
Judge Monroe G. McKay, Tenth Circuit Court of Appeals
NAACP Legal Defense and Educational Fund, Inc.
David Nachman, Esq., New York, New York
Professor Judith Resnik, University of Southern California Law Center
Judge Stephen Reinhardt, Ninth Circuit Court of Appeals
Judge Mary M. Schroeder, Ninth Circuit Court of Appeals
Leonard W. Schroeter, Esq., Chair & Co-Chair Three Major ATLA Committees
Professor Aviam Soifer, Boston University School of Law
Jerold S. Solovy, Esq., Chicago, Illinois
Mark Stein, Esq., Chicago, Illinois
Professor Michael E. Tigar, Chairman, ABA Litigation Section, 1989-90
Professor Georgene Vairo, Fordham University School of Law
Bill Wagner, Esq., Tampa, Florida