Subject:  BUSINESS GUIDES v. CHROMATIC COMM. ENTERPRISES, Syllabus



 
    NOTE: Where it is feasible, a syllabus (headnote) will be released, as
is being done in connection with this case, at the time the opinion is
issued.  The syllabus constitutes no part of the opinion of the Court but
has been prepared by the Reporter of Decisions for the convenience of the
reader.  See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES


Syllabus


BUSINESS GUIDES, INC. v. CHROMATIC COMMUNICATIONS ENTERPRISES, INC., et al.


certiorari to the united states court of appeals for the ninth circuit

No. 89-1500.  Argued November 26, 1990 -- Decided February 26, 1991

Federal Rule of Civil Procedure 11 provides, in relevant part, that "[t]he
signature of an attorney or party constitutes a certificate by the signer
that the signer has read the pleading, motion, or other paper" and "to the
best of the signer's knowledge, information, and belief formed after
reasonable inquiry it is well grounded in fact," and that a court shall
impose an appropriate sanction "upon the person who signed" a pleading,
motion, or other paper in violation of the Rule.  (Emphasis added).  After
finding that there was no basis in fact for the copyright infringement
action and request for a temporary restraining order (TRO) filed by
petitioner, through its counsel, against respondents, the District Court
imposed Rule 11 monetary sanctions against petitioner on the ground that it
had failed to make a reasonable inquiry before its president signed the
initial TRO application and its research director signed a supplemental
affidavit.  The Court of Appeals affirmed.

Held:

    1. Rule 11 applies to represented parties.  The Rule's relevant portion
unambiguously states that a party who signs a pleading or other paper
without first conducting a reasonable inquiry shall be sanctioned, and
there is nothing in the Rule's full text that detracts from this plain
meaning.  The reading urged by petitioner -- that since the Rule does not
require a represented party to sign most pleadings, a party who chooses to
sign need not comply with the certification procedure -- is inconsistent
with the Rule's language and purpose.  That a represented party may not be
required to sign a pleading does not prohibit that party from attesting to
the merit of a document filed on its behalf, and the signature of "an
attorney or party" conveys the same message of certification.  Thus,
whether it is required or voluntary, a represented party's signature is
capable of violating the Rule.  A represented party's signature would fall
outside the Rule's scope only if the phrase "attorney or party" were given
the unnatural reading "attorney or unrepresented party."  Had the Advisory
Committee responsible for the Rule intended to limit the certification
requirement's application to pro se parties, it would have expressly
distinguished between represented and unrepresented parties, which it did
elsewhere in the Rule, rather than lumping the two types together.
Including all parties is also an eminently sensible reading of the Rule,
since the Rule's essence is that signing denotes merit.  Pavelic & LeFlore
v. Marvel Entertainment Group, 493 U. S. ---, which held that the Rule
contemplates sanctions against an attorney signer rather than the law firm
of which he or she is a member, is entirely consistent with the result here
that a represented party who signs his or her name bears a personal,
nondelegable responsibility to certify the document's truth and
reasonableness.  The issue whether the signatures of petitioner's agents
can be treated as its signature need not be resolved here, since it was not
raised below.  Pp. 7-14.

    2. The certification standard for a party is an objective one of
reasonableness under the circumstances.  The Rule speaks of attorneys and
parties in a single breath and unambiguously states that the signer must
conduct a "reasonable inquiry" or face sanctions.  In amending the Rule in
1983, the Advisory Committee specifically deleted the existing subjective
standard and replaced it with an objective one at the same time that it
amended the Rule to cover parties.  There is no public policy reason not to
hold represented parties to a reasonable inquiry standard.  The client is
often better positioned to investigate the facts supporting a pleading or
paper, and the fact that a represented party is less able to investigate
the legal basis for a paper or pleading means only that what is objectively
reasonable for a client may differ from what is objectively reasonable for
an attorney.  Pp. 14-17.

    3. The imposition of sanctions against a represented party that did not
act in bad faith does not violate the Rules Enabling Act.  Rule 11 is not a
fee-shifting statute.  The sanctions are not designed to reallocate the
burdens of litigation, since they are tied not to the litigation's outcome,
but to the issue whether a specific filing was well founded; they shift
only the cost of a discrete event rather than the litigation's entire cost;
and the Rule calls only for an appropriate sanction but does not mandate
attorney's fees.  Alyeska Pipeline Service Co. v. Wilderness Society, 421
U. S. 240, 247, 258-259, distinguished.  Also without merit is petitioner's
argument that the Rule creates a federal common law of malicious
prosecution.  The Rule's objective is not to reward parties who are
victimized by litigation; it is to deter baseless filings and curb abuses.
While the Rule may confer a benefit on other litigants, the Rules Enabling
Act is not violated by incidental effects on substantive rights where the
Rule is reasonably necessary to maintain the integrity of the federal
practice and procedure system.  Pp. 17-20.

892 F. 2d 802, affirmed.

O'Connor, J., delivered the opinion of the Court, in which Rehnquist, C.
J., and White, Blackmun, and Souter, JJ., joined.  Kennedy, J., filed a
dissenting opinion, in which Marshall and Stevens, JJ., joined, and in
Parts I, III, and IV of which Scalia, J., joined.
------------------------------------------------------------------------------




Subject: 89-1500 -- OPINION,   BUSINESS GUIDES v. CHROMATIC COMM. ENTERPRISES

NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.
SUPREME COURT OF THE UNITED STATES


No. 89-1500



BUSINESS GUIDES, INC., PETITIONER v.
CHROMATIC COMMUNICATIONS
ENTERPRISES, INC. and
MICHAEL SHIPP


on writ of certiorari to the united states court of appeals for the ninth
circuit

[February 26, 1991]



    Justice O'Connor delivered the opinion of the Court.
    In this case we decide whether Rule 11 of the Federal Rules of Civil
Procedure imposes an objective standard of reasonable inquiry on
represented parties who sign pleadings, motions, or other papers.

I
    Business Guides, Inc., a subsidiary of a leading publisher of trade
magazines and journals, publishes directories for 18 specialized areas of
retail trade.  In an effort to protect its directories against copying,
Business Guides deliberately plants in them bits of false information,
known as "seeds."  Some seeds consist of minor alterations in otherwise
accurate listings -- transposed numbers in an address or zip code, or a
misspelled name -- while others take the form of wholly fictitious listings
describing nonexistent businesses.  Business Guides considers the presence
of seeds in a competitor's directory to be evidence of copyright
infringement. {1}
    On October 31, 1986, Business Guides, through its counsel Finley,
Kumble, Wagner, Heine, Unterberg, Manley, Myer son, and Casey (Finley,
Kumble), filed an action in the United States District Court for the
Northern District of California against Chromatic Communications
Enterprises, Inc., claiming copyright infringement, conversion, and unfair
competition, and seeking a temporary restraining order (TRO).  The TRO
application was signed by a Finley, Kumble attorney and by Business Guides'
president on behalf of the corporation.  Business Guides submitted under
seal affidavits in support of the application.  These affidavits charged
Chromatic with copying, as evidenced by the presence of 10 seeds in
Chromatic's directory.  One affidavit, that of sales representative
Victoria Burdick, identified the 10 listings in Business Guides' directory
that had allegedly been copied, but did not pinpoint the seed in each
listing.
    A hearing on the TRO was scheduled for November 7, 1986.  Three days
before the hearing, the District Judge's law clerk phoned Finley, Kumble
and asked it to specify what was incorrect about each listing.  Finley,
Kumble relayed this request to Business Guides' Director of Research,
Michael Lambe.  This was apparently the first time the law firm asked its
client for details about the 10 seeds.  Based on Lambe's response, Finley,
Kumble informed the court that Business Guides was retracting its claims of
copying as to three of the seeds.  The District Court considered this
suspicious and so conducted its own investigation into the allegations of
copying.  The District Judge's law clerk spent one hour telephoning the
businesses named in the "seeded" listings, only to discover that 9 of the
10 listings contained no incorrect information.
    Unaware of the District Court's discovery, Finley, Kumble prepared a
supplemental affidavit of Michael Lambe, identifying seven listings in
Chromatic's directory and explaining precisely what part of each listing
supposedly contained seeded information.  Lambe signed this affidavit on
the morning of the November 7 hearing.  Before doing so, however, Lambe
crossed out reference to a fourth seed that he had determined did not in
fact reflect any incorrect information but which Finley, Kumble had not
retracted.
    At the hearing, the District Court, based on its discovery that 9 of
the original 10 listings contained no incorrect information, denied the
application for a TRO.  More importantly, the judge stayed further
proceedings and referred the matter to a Magistrate to determine whether
Rule 11 sanctions should be imposed.  The Magistrate conducted two
evidentiary hearings, at which he instructed Business Guides and Finley,
Kumble to explain why 9 of its 10 charges of copying were meritless.  Both
claimed it was a coincidence.  Doubting the good faith of these
representations, the Magistrate recommended that both the law firm and the
client be sanctioned.  See App. to Pet. for Cert. 64a-75a.
    Later, claiming to have uncovered the true source of the errors, the
parties asked for and received a third hearing.  Business Guides explained
that in compiling its "master seed list," it had departed from its normal
methodology.  Usually, letters and numbers were transposed deliberately and
recorded on the seed list before the directory was published.  In this
case, the company had compiled the master seed list after publication by
looking for unintended typographical errors in the directory.  To locate
such errors, sales representative Victoria Burdick had compared the final
version of the directory against initial questionnaires that had been
submitted to Business Guides by businesses that wanted to be listed.  When
Burdick discovered a disparity between a questionnaire and the final
directory, she included it on the seed list.  She assumed, without
investigating, that the information on the questionnaires was accurate.  As
it turned out, the questionnaires themselves sometimes contained transposed
numbers or misspelled names, which other employees had corrected when
proofreading the directory prior to publication.  Consequently, many of the
seeds appearing on the master list contained no false information.  The
presence of identical listings in a competitor's directory thus would not
indicate copying, but rather accurate research.
    The Magistrate accepted this explanation, but determined that sanctions
were nonetheless appropriate.  Id., at 48a.  First, he found that Business
Guides, in filing the initial TRO application, had "failed to conduct a
proper inquiry, resulting in the presentation of unreasonable and false
information to the court."  Id., at 53a.  The Magistrate did not recommend
that Finley, Kumble be sanctioned for the initial application, however, as
the firm had been led to believe that there was an urgent need to act
quickly and thus relied on the infor mation provided by its sophisticated
corporate client.  Id., at 54a-55a.  Next, the Magistrate recommended that
both Business Guides and Finley, Kumble be sanctioned for having failed to
inquire into the accuracy of the remaining seeds following Michael Lambe's
discovery, based on only a few minutes of investigation, that 3 of the 10
were invalid.  Id., at 55a-56a.  Finally, the Magistrate recommended that
both the law firm and its client be sanctioned for their conduct at the
first two evidentiary hearings.  Instead of investigating the cause of the
errors in the seed list, Business Guides and Finley, Kumble had relied on a
"coincidence" defense.  Id., at 51a.  The Magistrate determined that "[n]o
reasonable person would have been satisfied with these explanations. . . .
Finley, Kumble and Business Guides did not need this court to point out the
blatant errors in the logic of their representations."  Id., at 59a.
    The District Court agreed with the Magistrate, stating: "The standard
of conduct under Rule 11 is one of objective reasonableness.  Applying this
standard to the circumstances of this case, it is clear that both Business
Guides and Finley Kumble have violated the Rule."  119 F. R. D. 685,
688-689 (ND Cal. 1988).  The court reiterated the Magistrate's conclusion
that: (1) Business Guides violated Rule 11 by filing the initial TRO
application; (2) Business Guides and Finley, Kumble violated the Rule by
failing to conduct a reasonable inquiry once they were put on notice of
several inaccuracies; and (3) Business Guides and Finley, Kumble violated
the Rule in their arguments to the Magistrate at the first two evidentiary
hearings.  Id., at 689.  Rather than impose sanctions at that time, the
District Court unsealed the proceedings and invited Chromatic to file a
motion requesting particular sanctions.  Id., at 690.
    Chromatic brought a motion for sanctions against both Business Guides
and Finley, Kumble.  It later moved to withdraw the motion with respect to
Finley, Kumble, after learning that the law firm had recently dissolved and
that all proceedings against the firm were stayed under MDRV 362 of the
Bankruptcy Code.  121 F. R. D. 402, 403 (ND Cal. 1988).  The District Court
accepted this withdrawal and issued its ruling without prejudice to
Chromatic's right to pursue sanctions against Finley, Kumble at a later
date.  Ibid.
    Before ruling on the motion for sanctions against Business Guides, the
District Court made additional fact findings.  It observed that of the 10
seeds that had originally been alleged to be present in Chromatic's
directory, only one ac tually contained false information.  Ibid.  This
seed was a wholly fictitious listing for a company that did not exist.
Chromatic denied that it had copied this listing from Business Guides'
directory; it offered an alternative explanation -- that Business Guides
had "planted" the fake listing in Chromatic's directory.  A Business Guides
employee had requested a copy of Chromatic's directory, filled out a
questionnaire providing information about the nonexistent company, and
mailed this questionnaire to Chromatic intending that the company publish
the false listing in its directory.  Id., at 403-404.  Business Guides did
not deny the truth of these charges, and the District Court found that
petitioner's silence amounted to a "tacit admission."  Id., at 404.  In
light of this finding, the court had no choice but to conclude that
"Business Guides' entire lawsuit has no basis in fact. . . .  [T]here was,
and is, no evidence of copyright infringement."  Ibid.
    The court then ruled on Chromatic's motion for sanctions.  Citing "the
rather remarkable circumstances of this case, and the serious consequences
of Business Guides' improper conduct," it dismissed the action with
prejudice.  Id., at 406.  Additionally, it imposed $13,865.66 in sanctions
against Business Guides, the amount of Chromatic's legal expenses and
out-of-pocket costs.  Id., at 405.
    The Court of Appeals for the Ninth Circuit affirmed the District
Court's holdings that Business Guides was subject to an objective standard
of reasonable inquiry into the factual basis of papers submitted to the
court, and that Business Guides had failed to conduct a reasonable inquiry
before (1) signing the initial TRO application, and (2) submitting Michael
Lambe's supplemental declaration.  892 F. 2d 802, 811 (1989).  The court
relied on the plain language of Rule 11, which "draws no distinction
between the state of mind of attorneys and parties. . . .  On the contrary,
the rule, by requiring any `signer' of a paper (attorney or party) to
conduct a `reasonable inquiry,' would appear to prescribe similar standards
for attorneys and represented parties."  Id., at 809 (emphasis original).
The Court of Appeals reversed, however, the District Court's holding that
oral representations and testimony before the Magistrate violated Rule 11.
Id., at 813.  Because it reversed one of the three bases on which Business
Guides had been sanctioned, the Court of Appeals vacated the order of
sanctions and remanded to the District Court for reconsideration.  Id., at
813-814.  We granted certiorari to determine whether the Court of Appeals
properly held Business Guides to an objective standard of reasonable
inquiry.  497 U. S. --- (1990).  Subsequently, the District Court issued an
order reaffirming the dismissal and monetary sanctions.  App. to Pet. for
Cert. 1a-2a.

II


A
    "We give the Federal Rules of Civil Procedure their plain meaning."
Pavelic & LeFlore v. Marvel Entertainment Group, 493 U. S. ---, --- (1989)
(slip op. 3).  As with a statute, our inquiry is complete if we find the
text of the Rule to be clear and unambiguous.  Rule 11 provides in relevant
part: "The signature of an attorney or party constitutes a certificate by
the signer that . . . to the best of the signer's knowledge, information,
and belief formed after reasonable inquiry it is well grounded in fact . .
. .  If a pleading, motion, or other paper is signed in violation of this
rule, the court . . . shall impose upon the person who signed it . . . an
appropriate sanction" (emphasis added).  Thus viewed, the meaning of the
Rule seems plain: a party who signs a pleading or other paper without first
conducting a reasonable inquiry shall be sanctioned.  Business Guides
argues, however, that the Rule's meaning is not so clear when one reads the
full text.  Accordingly, we reproduce below the full text of Rule 11,
adding bracketed numbers before each sentence to clarify the discussion
that follows:

    "[1] Every pleading, motion, and other paper of a party represented by
an attorney shall be signed by at least one attorney of record in the
attorney's individual name, whose address shall be stated.  [2] A party who
is not represented by an attorney shall sign the party's pleading, motion,
or other paper and state the party's address.  [3] Except when otherwise
specifically provided by rule or statute, pleadings need not be verified or
accompanied by affidavit.  [4] The rule in equity that the averments of an
answer under oath must be overcome by the testimony of two witnesses or of
one witness sustained by corroborating circumstances is abolished.  [5] The
signature of an 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 and is warranted by existing
law or a good faith argument for the extension, modification, or reversal
of existing law, and that it is not interposed for any improper purpose,
such as to harass or to cause unnecessary delay or needless increase in the
cost of litigation.  [6] If a pleading, motion, or other paper is not
signed, it shall be stricken unless it is signed promptly after the
omission is called to the attention of the pleader or movant.  [7] If a
pleading, motion, or other paper is signed in violation of this rule, the
court, upon motion or upon its own initiative, shall impose upon the person
who signed it, a represented party, or both, an appropriate sanction, which
may include an order to pay to the other party or parties the amount of the
reasonable expenses incurred because of the filing of the pleading, motion,
or other paper, including a reasonable attorney's fee."


    We find nothing in the full text of the Rule that detracts from the
plain meaning of the relevant portion quoted initially.  Rule 11 is "aimed
at curbing abuses of the judicial system."  Cooter & Gell v. Hartmarx
Corp., 496 U. S. ---, --- (1990) (slip op. 11).  To this end, it sets up a
means by which litigants certify to the court, by signature, that any
papers filed are well founded.  The first three sentences of the Rule
explain in what instances a signature is mandatory.  Sentence [1] states
that where a party is represented by counsel, the party's attorney must
sign any motion, pleading, or other paper filed with the court.  Sentence
[2] provides that where a party is proceeding pro se, the unrepresented
party must sign the documents.  Sentence [3] acknowledges that in some
situations represented parties are required by rule or statute to verify
pleadings or sign affidavits.  Sentence [4] explains that certification by
signature replaces some older forms of oath and attestation.
    The heart of Rule 11 is sentence [5], which explains in detail the
message conveyed by the signing of a document.  A signature certifies to
the court that the signer has read the document, has conducted a reasonable
inquiry into the facts and the law and is satisfied that the document is
wellgrounded in both, and is acting without any improper motive.  See 5A C.
Wright & A. Miller, Federal Practice and Procedure MDRV 1335, pp. 57-58 (2d
ed. 1990) (hereinafter Wright & Miller).  This sentence, by its terms,
governs any signature of "an attorney or party," thereby making it
applicable not only to signatures required by sentences [1], [2], and [3],
but also to signatures that are not required but nevertheless present.
"The certification requirement now mandates that all signers consider their
behavior in terms of the duty they owe to the court system to conserve its
resources and avoid unnecessary proceedings."  Id., at 21, MDRV 1331
(emphasis added).  The final two sentences describe the means by which the
Rule is enforced.  Sentence [6] dictates that where a required signature is
missing and the omission is not corrected promptly, the document will be
stricken.  Sentence [7] requires that sanctions be imposed where a
signature is present but fails to satisfy the certification standard.
    Business Guides proposes an alternative interpretation of the text.  As
mentioned, sentence [1] indicates that a party who is represented by
counsel is not itself required to sign most papers or pleadings; generally,
only the signature of the attorney is mandated.  Business Guides concludes
from this that a represented party may, if it wishes, sign a document, but
that this signature need not comply with the certification standard
described in sentence [5].  Because a client's signature is not normally
required by Rule 11, the occasional presence of one cannot run afoul of the
Rule.  In short, Business Guides maintains that a represented party is free
to sign frivolous or vexatious documents with impunity because its
signature on a document carries with it no additional risk of sanctions.
    This reading is inconsistent with both the language and the purpose of
Rule 11.  As an initial matter, it is not relevant that represented parties
rarely sign filed documents because Business Guides did sign in this case.
Indeed, it was required to do so.  Rule 65(b) of the Federal Rules of Civil
Procedure provides specifically that a TRO application must be accompanied
by an affidavit or verified complaint that sets forth the facts.  A TRO
application is thus one of the situations provided for in sentence [3],
where a party's verification or signed affidavit is mandatory.  Even if
Business Guides had not been required to sign the TRO application but did
so voluntarily, the language of Rule 11 would still require that the
signature satisfy the certification requirement.  Sentence [1] may not
require a represented party to sign papers and pleadings, but neither does
it prohibit a represented party from attesting to the merit of documents
filed on its behalf.  "When a party is represented by counsel, it is
unnecessary, but not improper, for the represented party to sign as well."
Wright & Miller MDRV 1333, at 47.  Accordingly, sentence [5] declares that
the signature of a party conveys precisely the same message as that of an
attorney: "The signature of an attorney or party constitutes a certificate
by the signer that the signer has read the pleading, motion, or other
paper; that . . . it is well grounded in fact and is warranted by existing
law" (emphasis added).  It seems plain that the voluntary signature of a
represented party, no less than the mandatory signature of an attorney, is
capable of violating the Rule.
    The only way that Business Guides can avoid having to satisfy the
certification standard is if we read "attorney or party" as used in
sentence [5] to mean "attorney or unrepresented party."  Only then would
the signature of a represented party fall outside the scope of the Rule.
We decline to adopt this unnatural reading, as there is no indication that
this is what the Advisory Committee intended.  Just the opposite is true.
Prior to its amendment in 1983, sentence [5] referred solely to "[t]he
signature of an attorney" on a "pleading."  The 1983 amendments
deliberately expanded the coverage of the Rule.  Wright & Miller MDRV 1331,
at 21.  Sentence [5] was amended to refer broadly to "[t]he signature of an
attorney or party" on a "pleading, motion, or other paper" (emphasis
added).  Represented parties, despite having counsel, routinely sign
certain papers -- declarations, affidavits, and the like -- during the
course of litigation.  Business Guides, for example, submitted to the
District Court no fewer than five signed papers in support of its TRO
application.  The amended language of sentence [5] leaves little room for
doubt that the signatures of the "party" on these "other papers" must
satisfy the certification requirement.
    Had the Advisory Committee intended to limit the application of the
certification standard to parties proceeding pro se, they would surely have
said so.  Elsewhere in the text, the Committee demonstrated its ability to
distinguish between represented and unrepresented parties.  Sentence [1]
refers specifically to "a party represented by an attorney," while sentence
[2] applies to "[a] party who is not represented by an attorney" (emphasis
added).  Sentence [5], however, draws no such distinction; it lumps
together the two types of parties.  By using the more expansive term
"party," the Committee called for more expansive coverage.  The natural
reading of this language is that any party who signs a document, whether or
not the party was required to do so, is subject to the certification
standard of Rule 11.
    Leading scholars are in accord.  Professors James Wm. Moore and Jo
Desha Lucas, authors of Moore's Federal Practice, state: "The current Rule
places an affirmative duty on the attorney or party to investigate the
facts and the law prior to the subscription and submission of any pleading,
motion or paper. . . .  The rule applies to attorneys, parties represented
by attorneys, and parties who appear pro se."  2A J. Moore & J. Lucas,
Moore's Federal Practice MDRV 11.02[3], pp. 11-15 to 11-17, (2d ed. 1990)
(footnotes omitted).  Professors Charles Alan Wright and Arthur R. Miller
describe in their treatise on Federal Practice and Procedure "seven major
alterations" of Rule 11 practice occasioned by the 1983 amendments, one of
which is that "the range of people covered by the certification requirement
. . . has been expanded.  Now, all signers, not just attorneys, are on
notice that their signature constitutes a certification as to the contents
of the document."  Wright & Miller, MDRV 1331, at 21.  "The expansion of
the scope of the certification requirement to include non-attorney signers
was accomplished by changing `signature of an attorney' in the fifth
sentence of the rule to `signature of an attorney or party.' "  Id., at
21-22, n. 54 (emphasis added).
    In addition to being the most natural reading, it is an eminently
sensible one.  The essence of Rule 11 is that signing is no longer a
meaningless act; it denotes merit.  A signature sends a message to the
district court that this document is to be taken seriously.  This case is
illustrative.  Business Guides sought a TRO on the strength of an initial
application accompanied by five signed statements to the effect that
Chromatic was pirating its directory.  Because these documents were filed
under seal, the District Court had to determine the credibility of the
allegations without the benefit of hearing the other side's view.  The
court might plausibly have attached some incremental significance to the
fact that Business Guides itself risked being sanctioned if the factual
allegations contained in these signed statements proved to be baseless.
Business Guides asks that we construe Rule 11 in a way that would render
the signatures on these statements risk free.  Because this construction is
at odds with the Rule's general admonition that signing denotes merit, we
are loath to do so absent a compelling indication in the text that the
Advisory Committee intended such a result.  Because we find no such
indication, compelling or otherwise, we conclude that the word "party" in
sentence [5] means precisely what it appears to mean.
    The dissent contends that this conclusion is inconsistent with our
decision last Term in Pavelic & LeFlore.  See post, at 2-3, 9-10.  Just the
opposite is true; our decision today follows naturally from Pavelic &
LeFlore.  We held in Pave lic & LeFlore that Rule 11 contemplates sanctions
against the particular individual who signs his or her name, not against
the law firm of which that individual is a member, because "the purpose of
Rule 11 as a whole is to bring home to the individual signer his personal,
nondelegable responsibility . . . to validate the truth and legal
reasonableness of the papers filed."  493 U. S. at --- (slip op. 7).  This
is entirely consistent with our decision here that a represented party who
signs his or her name bears a personal, nondelegable responsibility to
certify the truth and reasonableness of the document.  The dissent agrees
that a party proceeding without the benefit of legal assistance bears this
responsibility, but insists that a party represented by counsel -- even one
whose signature is mandatory -- is absolved from any duty to vouch for the
truth of papers he or she signs because he or she has delegated this
responsibility to counsel.  See post, at 2-3.
    The dissent's dichotomy between represented and unrepresented parties
is particularly troubling given that it has no basis in the text of the
Rule.  Sentence [5] refers to "[t]he signature of an attorney or party"
(emphasis added).  We emphasized in Pavelic & LeFlore that this Court will
not reject the natural reading of a rule or statute in favor of a less
plausible reading, even one that seems to us to achieve a better result.
493 U. S., at --- - --- (slip op. 6-7).  Yet Justice Kennedy proposes that
we construe "party" to mean "unrepresented party" -- notwithstanding the
Advisory Committee's ability, demonstrated only three sentences earlier, to
distinguish between represented and unrepresented parties -- because he
thinks it unwise to punish clients.  See post, at 3-5.
    The dissent also criticizes us for treating the signatures of Business
Guides' president and director of research as signatures of the company.
Justice Kennedy suggests that this is "in square conflict" with our holding
in Pavelic & LeFlore that " `the person who signed' " was the individual
attorney, not the law firm.  Post, at 9.  The dissent overlooks an
important distinction.  In Pavelic & LeFlore, we relied in part on Rule
11's unambiguous statement that papers must be signed by an attorney "in
the attorney's individual name."  493 U. S., at --- (emphasis omitted)
(slip op. 6).  A corporate entity, of course, cannot itself sign anything;
it can act only through its agents.  It would be anomalous to determine
that an individual who is represented by counsel falls within the scope of
Rule 11, but that a corporate client does not because it cannot itself sign
a document.  In any event, the question need not be resolved definitely
here; Business Guides concedes that it did not raise this argument in the
courts below.  Brief for Petitioner 35, n. 38.
B
    Having concluded that Rule 11 applies to represented parties, we must
next determine whether the certification standard for a party is the same
as that for an attorney.  The plain language of the Rule again provides the
answer.  It speaks of attorneys and parties in a single breath and applies
to them a single standard: "The signature of an 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 and is warranted by existing law or a good faith
argument for the extension, modification, or reversal of existing law, and
that it is not interposed for any improper purpose, such as to harass or to
cause unnecessary delay or needless increase in the cost of litigation."
As the Court of Appeals correctly observed: "[T]he rule draws no
distinction between the state of mind of attorneys and parties."  892 F.
2d, at 809.  Rather, it states unambiguously that any signer must conduct a
"reasonable inquiry" or face sanctions.
    Business Guides devotes much of its brief to arguing that subjective
bad faith, not failure to conduct a reasonable inquiry, should be the
touchstone for sanctions on represented parties.  It points with approval
to Rule 56(g) of the Federal Rules of Civil Procedure, which appears to
subject affidavits in the summary judgment context to a subjective good
faith standard.  This argument is misdirected, as this Court is not acting
on a clean slate; our task is not to decide what the rule should be, but
rather to determine what it is.  Once we conclude that Rule 11 speaks to
the matter at issue, our inquiry is complete.  See Pavelic & LeFlore, 493
U. S., at ---.  As originally drafted, Rule 11 set out a subjective
standard, but the Advisory Committee determined that this standard was not
working.  See Cooter & Gell, 496 U. S., at ---.  Accordingly, the Committee
deleted the subjective standard at the same time that it expanded the rule
to cover parties.  See 5A Wright & Miller, at 58-60, MDRV 1335.  That the
Advisory Committee did not also amend Rule 56(g) hardly matters.  Rather
than fashion a standard specific to summary judgment proceedings, the
Committee chose to amend Rule 11, thereby establishing a more stringent
standard for all affidavits and other papers.  Even if we were convinced
that a subjective bad faith standard would more effectively promote the
goals of Rule 11, we would not be free to implement this standard outside
of the rulemaking process.  "Our task is to apply the text, not to improve
upon it."  Pavelic & LeFlore, supra, at --- (slip op. 6).
    Nor are we convinced that, as a policy matter, represented parties
should not be held to a reasonable inquiry standard.  Quite often it is the
client, not the attorney, who is better positioned to investigate the facts
supporting a paper or pleading.  This case is a perfect example.  Business
Guides brought the matter to Finley, Kumble and requested the law firm to
obtain an immediate injunction against Chromatic.  Given the apparent
urgency, the District Court reasoned that the firm could not be blamed for
relying on the factual representations of its experienced corporate client.
Rather, the blame -- and the sanctions -- properly fell on Business
Guides:

    "This case illustrates well the dangers of a party's failure to act
reasonably in commencing litigation.  Here Business Guides, a sophisticated
corporate entity, hired a large, powerful and nationally known law firm to
file suit against a competitor for copyright infringement.  This competitor
happened to be a one-man company operating out of a garage in California.
Two years later, after extensive time and effort on the part of the court,
the various counsel for Business Guides, as well as various counsel for
Business Guides' counsel, it turns out there was no evidence of
infringement.  The entire lawsuit was a mistake.  In the meantime, the
objects of this lawsuit have spent thousands of dollars of attorney's fees
and have suffered potentially irreparable damage to their business.  This
entire scenario could have been avoided if, prior to filing the suit,
Business Guides simply had spent an hour, like the court's law clerk did,
and checked the accuracy of the purported seeds."  121 F. R. D., at 405.


    Where a represented party appends its signature to a document that a
reasonable inquiry into the facts would have revealed to be without merit,
we see no reason why a District Court should be powerless to sanction the
party in addition to, or instead of, the attorney.  See Wright & Miller
MDRV 1336, at 104.  A contrary rule would establish a safe harbor such that
sanctions could not be imposed where an attorney, pressed to act quickly,
reasonably relies on a client's careless misrepresentations.
    Of course, represented parties may often be less able to investigate
the legal basis for a paper or pleading.  But this is not invariably the
case.  Many corporate clients, for example, have in-house counsel who are
fully competent to make the necessary inquiry.  Other party litigants may
have a great deal of practical litigation experience.  Indeed, Business
Guides itself is no stranger to the courts; it is a sophisticated corporate
entity that has been prosecuting copyright infringement actions since 1948.
App. 105-106.  The most that can be said is that the legal inquiry that can
reasonably be expected from a party may vary from case to case.  Put
another way, "what is objectively reasonable for a client may differ from
what is objectively reasonable for an attorney."  892 F. 2d, at 810.  The
Advisory Committee was well aware of this when it amended Rule 11.  Thus,
the certification standard, while "more stringent than the original
good-faith formula," is not inflexible.  "The standard is one of
reasonableness under the circumstances" (emphasis added).  Advisory
Committee's Note to Fed. Rule Civ. Proc. 11, 28 U. S. C. App., p. 576.
This formulation "has been embraced in all thirteen circuits."  Wright &
Miller MDRV 1335, at 61-62.  This is a far more sensible rule than that
proposed by Business Guides, which would hold parties proceeding pro se to
an objective standard, while applying a lesser subjective standard to
represented parties.  As noted by the Court of Appeals, "We fail to see why
represented parties should be given the benefit of a subjective bad faith
standard whereas pro se litigants, who do not enjoy the aid of counsel, are
held to a higher objective standard."  892 F. 2d, at 811.
    Giving the text its plain meaning, we hold that it imposes on any party
who signs a pleading, motion, or other paper -- whether the party's
signature is required by the Rule or is provided voluntarily -- an
affirmative duty to conduct a reasonable inquiry into the facts and the law
before filing, and that the applicable standard is one of reasonableness
under the circumstances.

III
    One issue remains: Business Guides asserts that imposing sanctions
against a represented party that did not act in bad faith violates the
Rules Enabling Act, 28 U. S. C. MDRV 2072.  The Act authorizes the Court
"to prescribe general rules of practice and procedure," but provides that
such rules "shall not abridge, enlarge, or modify any substantive right."
Business Guides argues that Rule 11, to the extent that it imposes on
represented parties an objective standard of rea sonableness, exceeds the
limits of the Court's power in two ways: (1) it authorizes fee shifting in
a manner not approved by Congress; and (2) it effectively creates a federal
tort of malicious prosecution, thereby encroaching upon various state law
causes of action.
    We begin by noting that any Rules Enabling Act challenge to Rule 11 has
a large hurdle to get over.  The Federal Rules of Civil Procedure are not
enacted by Congress, but "Congress participates in the rulemaking process."
Wright & Miller MDRV 1332, at 40, and n. 74, citing Amendments to the Rules
of Civil Procedure for the United States District Courts, H. R. Doc. No.
54, 98th Cong., 1st Sess., 3-25 (1983).  Additionally, the Rules do not go
into effect until Congress has had at least seven months to look them over.
See 28 U. S. C. MDRV 2074.  A challenge to Rule 11 can therefore succeed
"only if the Advisory Committee, this Court, and Congress erred in their
prima facie judgment that the Rule . . . transgresses neither the terms of
the Enabling Act nor constitutional restrictions."  Hanna v. Plumer, 380 U.
S. 460, 471 (1965).
    This Court's decision in Burlington Northern R. Co. v. Woods, 480 U. S.
1 (1987), presents another hurdle.  There, the Court considered the Act's
proscription against inter ference with substantive rights and held, in a
unanimous decision, that "Rules which incidentally affect litigants'
substantive rights do not violate this provision if reasonably necessary to
maintain the integrity of that system of rules."  Id., at 5 (emphasis
added).  There is little doubt that Rule 11 is reasonably necessary to
maintain the integrity of the system of federal practice and procedure, and
that any effect on substantive rights is incidental.  See id., at 8.  We
held as much only last Term in Cooter & Gell: "It is now clear that the
central purpose of Rule 11 is to deter baseless filings in District Court
and thus, consistent with the Rule Enabling Act's grant of authority,
streamline the administration and procedure of the federal courts."  496 U.
S., at --- (slip op. 6).
    Petitioner's challenges do not clear these substantial hurdles.  In
arguing that the monetary sanctions in this case constitute impermissible
fee-shifting, Business Guides relies on the Court's statement in Alyeska
Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 247 (1975),
that, in the absence of legislative guidance, courts do not have the power
"to reallocate the burdens of litigation" by awarding costs to the losing
party in a civil rights suit; they have only the power to sanction a party
for bad faith.  See id., at 258-259.  The initial difficulty with this
argument is that Alyeska dealt with the courts' inherent powers, not the
Rules Enabling Act.  Rule 11 sanctions do not constitute the kind of fee
shifting at issue in Alyeska.  Rule 11 sanctions are not tied to the
outcome of litigation; the relevant inquiry is whether a specific filing
was, if not successful, at least well founded.  Nor do sanctions shift the
entire cost of litigation; they shift only the cost of a discrete event.
Finally, the Rule calls only for "an appropriate sanction" -- attorney's
fees are not mandated.  As we explained in Cooter & Gell: "Rule 11 is not a
fee-shifting statute . . . .  `A movant under Rule 11 has no entitlement to
fees or any other sanction.' "  496 U. S., at --- (slip op. 22), quoting
American Judicature Society, Rule 11 in Transition, The Report of the Third
Circuit Task Force on Federal Rule of Civil Procedure 11, p. 49 (Burbank,
reporter 1989).
    Also without merit is Business Guides' argument that Rule 11 creates a
federal common law of malicious prosecution.  We rejected a similar claim
in Cooter & Gell.  But see 496 U. S., at --- (Stevens, J., dissenting).
The main objective of the Rule is not to reward parties who are victimized
by litigation; it is to deter baseless filings and curb abuses.  See id.,
at ---, ---.  Imposing monetary sanctions on parties that violate the Rule
may confer a benefit on other litigants, but the Rules Enabling Act is not
violated by such incidental effects on substantive rights.  See Woods,
supra, at 5, 8.  Additionally, we are confident that District Courts will
resist the temptation to use sanctions as substitutes for tort damages.
This case is a good example.  Chromatic asked that the sanctions award
include consequential damages, but the District Court refused.  "[W]hile
sympathetic to [Chromatic's] plight," the court was "not persuaded that
such compensation is within the purview of Rule 11."  121 F. R. D., at 406.
In the event that a District Court misapplies the Rule in a particular
case, the error can be corrected on appeal.  "But misapplications do not
themselves provide a basis for concluding that Rule 11 was the result of .
. . distinct errors in prima facie judgment during the development and
promulgation of the rule."  Wright & Miller MDRV 1332, at 40.
    In sum, we hold today that Rule 11 imposes an objective standard of
reasonable inquiry on represented parties who sign papers or pleadings.  We
have no occasion to determine whether or under what circumstances a
nonsigning party may be sanctioned.  The District Court found that Business
Guides failed to conduct a reasonable inquiry before signing the initial
TRO application and before submitting the signed declaration of its
Director of Research, Michael Lambe.  Consequently, the District Court
imposed $13,865.66 in sanctions against Business Guides and dismissed the
action with prejudice.  The Court of Appeals affirmed each of these
rulings.  For the reasons stated herein, the judgment of the Court of
Appeals is

Affirmed.


 
 
 
 
 


------------------------------------------------------------------------------
1
    Given the posture of this case, we have no occasion to consider whether
the information contained in such a directory would actually be
copyrightable.  See Feist Publications, Inc. v. Rural Telephone Serv. Co.,
cert. granted, 498 U. S. --- (1990).





Subject: 89-1500 -- DISSENT,   BUSINESS GUIDES v. CHROMATIC COMM. ENTERPRISES

 
SUPREME COURT OF THE UNITED STATES


No. 89-1500



BUSINESS GUIDES, INC., PETITIONER v.
CHROMATIC COMMUNICATIONS
ENTERPRISES, INC. and
MICHAEL SHIPP


on writ of certiorari to the united states court of appeals for the ninth
circuit

[February 26, 1991]



    Justice Kennedy, with whom Justice Marshall and Justice Stevens join,
and with whom Justice Scalia joins as to Parts I, III, and IV, dissenting.

    The purpose of Federal Rule of Civil Procedure 11 is to control the
practice of attorneys, or those who act as their own attorneys, in the
conduct of litigation in the federal courts.  Extending judicial power far
beyond that boundary, the Court, relying only on its rulemaking authority,
now holds that citizens who seek the aid of the federal courts may risk
money damages or other sanctions if they do not satisfy some objective
standard of care in the preparation or litigation of a case.  This holding
is an extraordinary departure from settled principles governing liability
for misuse of the courts, just as it departs from the structure of the Rule
itself.  The result is all the less defensible in that the sanctions will
apply quite often to those so uninformed that they sign a paper without
necessity.  Where the rules or circumstances require a verified complaint
or affidavit, the majority's construction of Rule 11 affords no avenue of
escape from this most troubling and chilling liability.
    In my view, the text of the Rule does not support this extension of
federal judicial authority.  Under a proper construction of Rule 11, I
should think it an abuse of discretion to sanction a represented litigant
who acts in good faith but errs as to the facts.
I
    Though the case turns upon a single sentence in Rule 11, the majority
recognizes that the whole text of the Rule must be considered, not just the
sentence in isolation.  See Richards v. United States, 369 U. S. 1, 11
(1962).  The majority errs, however, in its interpretation of the text
which precedes and the text which follows the sentence in question.  And
the result is quite contrary to the Rule's history and the commentary that
accompanied its adoption.  The majority in the last analysis can rely only
upon the following sentence from the rule: "The signature of an attorney or
party constitutes a certificate by the signer . . . that to the best of the
signer's knowledge, information, and belief formed after reasonable inquiry
it is well grounded in fact. . . ."  Fed. Rule Civ. Proc. 11 (emphasis
added).  From this it reasons: Business Guides is a party; agents of
Business Guides signed papers submitted on the company's behalf; therefore,
Business Guides assumed a duty of reasonable inquiry.
    But Rule 11's fifth sentence must be construed in light of its first
two sentences, which provide that "[e]very pleading, motion, and other
paper of a party represented by an attorney shall be signed by at least one
attorney of record," and that "[a] party who is not represented by an
attorney" shall sign the papers in person.  Fed. Rule Civ. Proc. 11.
Neither of the first two sentences requires, or even contemplates, a
signature by a represented party.  Nor is a represented party's signature
required by any later portion of the Rule.  In context, then, one may with
reason correlate "[t]he signature of an attorney or party" that constitutes
a Rule 11 certification with the signatures of attorneys and unrepresented
parties provided for earlier in the Rule.  We employed just such an
analysis last Term in Pavelic & LeFlore v. Marvel Entertainment Group, 493
U. S. ---, --- (1989), reasoning that "in a paragraph beginning with a
requirement of individual signature, and then proceeding to discuss the
import and consequences of signature, . . . references to the signer in the
later portions must reasonably be thought to connote the individual signer
mentioned at the outset."  As we concluded in Pavelic & LeFlore, I would
again hold the drafters of Rule 11 intended to bind those whose signatures
are provided for in the Rule itself.  The disjunction between represented
parties and those whose signatures are significant for purposes of the Rule
is borne out by the Rule's last sentence, which provides for sanctions upon
"the person who signed [the paper], a represented party, or both."  Fed.
Rule Civ. Proc. 11.  In my view, this sentence contemplates that the
represented party and the person who signs will be different persons.
    All would concede the primary purpose of the Rule is to govern those
who practice before the courts, and the history of Rule 11's certification
requirements illustrates the radical nature of the change wrought by the
majority's construction.  At least since Sir Thomas More served as
Chancellor of England, bills in equity have required the signature of
counsel.  Risinger, Honesty in Pleading and Its Enforcement: Some
"Striking" Problems with Federal Rule of Civil Procedure 11, 61 Minn. L.
Rev. 1, 10-12, and n. 22 (1976).  Counsel could be required to pay the
costs of an aggrieved party if a bill contained "irrelevant, impertinent,
or scandalous" matter.  J. Story, Equity Pleadings MDRV 47, pp. 41-42
(1838).  Justice Story explained that the purpose of the required signature
was "to secure regularity, relevancy and decency in the allegations of the
Bill, and the responsibility and guaranty of counsel, that upon the
instructions given to him, and the case laid before him, there is good
ground for the suit in the manner in which it is framed."  See Risinger,
supra, at 9-13.  Justice Story's explanation for counsel's signature was
incorporated into Rule XXIV of the Equity Rules of 1842, {1} and the
certification requirements were expanded in Rule 24 of the 1912 Equity
Rules. {2}  See Risinger, supra, at 13.  Rule 11, adopted in 1938, extended
the signature requirement beyond attorneys to encompass unrepresented
parties as well. {3}  But it did not apply the certification requirements
to unrepresented parties until 1983.
    The 1983 amendments made substantial changes in Rule 11, expanding the
duties imposed by the certification provisions, extending the certification
requirements to unrepresented parties, and establishing that sanctions
could, at least in some circumstances, be imposed on represented parties.
But in light of the history of Rule 11's certification provisions as a set
of duties imposed on counsel, I see no reason to believe that the Rule as
amended attaches any particular significance to the signature of a
represented party.  It is more plausible that the language relied upon by
the majority was designed to bring the signatures of unrepresented parties,
already required by the Rule, within the certification provisions.  This
ensures that every pleading, motion, or other paper filed in federal court
bears at least one signature constituting a Rule 11 certification.
Applying the certification requirements to those who appear on their own
behalf preserves the Rule's well-understood object of imposing obligations
on those who practice before the court.  A pro se litigant in essence
stands in the place of an attorney.  By its uncritical extension of the
Rule's certification provisions to represented parties, the majority's
reading severs the certification requirements from their purpose and
origin.
    If the drafters of the 1983 amendments had intended a radical departure
from prior practice by imposing duties on represented parties that before
had been imposed only on attorneys, one might expect discussion of the
change in the Advisory Committee's Notes accompanying the 1983 amendments.
But the Notes say nothing of the kind.  They refer instead to "the standard
of conduct expected of attorneys who sign pleadings and motions," or the
"expanded nature of the lawyer's certification," or employ similar phrases
indi cating that the Rule's certification duties relate to attorneys and
those who perform the functions of attorneys.  Advisory Committee's Notes
on Fed. Rule Civ. Proc. 11, 28 U. S. C. App., pp. 575-576 (emphasis added).
{4}  In fact, the Notes imply that Rule 11 certification requirements were
not intended to attach to the signature of a represented party, and that a
represented party may be held liable for sanctions only when his attorney
has signed a paper in violation of the Rule.  For instance, the Notes
provide:

    "If the duty imposed by the rule is violated, the court should have the
discretion to impose sanctions on either the attorney, the party the
signing attorney represents, or both, or on an unrepresented party who
signed the pleading, and the new rule so provides."  Id., at 576 (emphasis
added).


The failure to mention the signature of a represented party is a startling
omission if such a signature could violate the Rule.  The assumption of
this passage, that a represented party can be sanctioned in some instances
because his attorney signed in violation of the Rule, not because the party
did, finds further support in the next paragraph of the Notes.  It begins,
"[e]ven though it is the attorney whose signature violates the rule, it may
be appropriate under the circumstances of the case to impose a sanction on
the client."  Ibid. (emphasis added).
    Consider as well the portion of the Notes indicating that "[a]mended
Rule 11 continues to apply to anyone who signs a pleading, motion, or other
paper."  Ibid. (emphasis added).  Since Rule 11 did not impose any duties
on a represented party who signed papers prior to 1983, it is difficult to
fathom what this passage means if the 1983 amendments had the effect
attributed to them by the majority.  The passage makes sense only if it
means that Rule 11 continues to apply to anyone whose signature is provided
for in the Rule itself.
    With little support for its views in the text of Rule 11 or the
Advisory Committee's Notes, the majority turns to the works of scholars.
Even here, though, the passages quoted from the treatise authored by
Professors Wright and Miller do not seem to me unambiguous endorsements of
the majority's position.  They speak of Rule 11's expansion to "all
signers, not just attorneys" or "non-attorney signers."  Ante, at 12
(quoting 5A C. Wright & A. Miller, Federal Practice and Procedure MDRV
1331, pp. 21-22, and n. 54 (2d ed. 1990)).  But "signer" is a term of art
in Rule 11, and under a proper interpretation it applies to those whose
signatures the Rule itself requires.  In any event, these snippets from a
multivolume treatise do not reflect studied consideration of the precise
question before the Court, whether a represented party's signature comes
within the Rule 11 certification requirements.  The only explicit reference
I find in that treatise to the signature of a represented party is the
statement that such signatures are "unnecessary, but not improper."  5A
Wright & Miller, supra, MDRV 1333, at 47.  This falls far short of the
majority's position.
    The majority's construction can draw scant support from the deterrent
policies of Rule 11.  See Cooter & Gell v. Hart marx Corp., 496 U. S. ---,
--- (1990) ("[A]ny interpretation [of Rule 11] must give effect to the
Rule's central goal of deterrence").  Since the Rule does not require
represented parties to sign pleadings, motions, or other papers, the
certification requirements will apply in many instances to a represented
party who signs a paper as a volunteer.  Given the majority's holding,
enlistees will be few and far between.  It can be supposed that after
today's decision, most represented parties who sign papers without
necessity will do so unaware that they subject themselves to the risk of
sanctions.  If so, their conduct will not be affected by the duties
assumed.  If the Rule 11 certification requirements were intended to apply
to represented parties, its provisions would require them to sign papers
covered by the Rule, not leave it as an option.  I can imagine no plausible
reason for leaving it to the discretion of a represented party whether to
assume Rule 11 certifi cation duties and the concomitant risk of sanctions.
The majority's suggestion that a represented party's signature might induce
a court to give greater credence to a submitted paper, ante, at 12,
provides little justification for construing Rule 11 to become a trap for
the unwary.  Rule 11 already requires a represented party's attorney to
sign, and few courts will be swayed by the fact that a pleading bears two
Rule 11 signatures rather than one.
    The majority errs in suggesting that Rule 11's third sentence, coupled
with Rule 65(b), "required" the signature of Business Guides.  Ante, at 10.
Rule 65(b) requires that applications for temporary restraining orders be
verified or supported by affidavit.  Since, as I explain below, infra, at
9, affidavits are not "papers" within the meaning of the Rule, and are
often signed by individual witnesses and not parties, the rules did not
require Business Guides to sign here.
    Moreover, the majority's suggestion that Rule 11's third sentence
"require[s]," ante, at 9, or "provide[s] for," ante, at 10, signatures by
represented parties ignores the evident fact that this sentence abolishes
any verification or affidavit requirement "[e]xcept when otherwise
specifically provided by rule or statute," Fed. Rule Civ. Proc. 11.  Of
course, the sentence in question recognizes that certain rules and
statutes, such as Rule 65(b), still provide for complaints verified by
parties or accompanied by affidavits.  See, e. g., Fed. Rule Civ. Proc.
23.1 (shareholder derivative suit); Fed. Rule Civ. Proc. 27(a)(1)
(perpetuation of testimony); Fed. Rule Civ. Proc. 65(b) (ex parte request
for temporary restraining order); 28 U. S. C. MDRV 1734(b) (application for
order establishing lost or destroyed record); MDRV 2242 (application for
writ of habeas corpus); see generally 5A Wright & Miller, supra MDRV 1339.
It is not plausible to argue that Rule 11 seeks to bring those documents
within its ambit, however, for this portion of the Rule existed prior to
1983, when represented parties were mentioned for the first time.  Wrongful
verification already subjects one to potential prosecution for perjury, 18
U. S. C. 15 1621, 1623, and it is not clear why Rule 11 would impose
additional duties on represented parties in those few instances where
verification is necessary.  Further, if the drafters of Rule 11 had
intended to subject a verifying party to the duties imposed on a Rule 11
signer, a plain statement to that effect in the text of the Rule would have
accomplished that result without the odd consequences of the majority's
analysis.
    The majority's holding that affidavits are included among the
"pleadings, motions, or other papers" covered by Rule 11 will doubtless be
the portion of its opinion having the greatest impact, and will come as a
surprise to many members of the bar.  An affidavit submitted in support of
a represented party's position will now have to be signed by at least one
attorney, or else must be stricken pursuant to Rule 11's sixth sentence.  I
would construe the "papers" covered by Rule 11 to be those which, like
pleadings or motions, invoke the power of the court, as distinct from
supporting affidavits alleging factual matters as in this case or under
Federal Rule of Civil Procedure 56.  Pursuant to Rule 11, one who signs a
paper certifies that it "is warranted by existing law or a good faith
argument for the extension, modification, or reversal of existing law."
Since it would be meaningless to make such a certification with respect to
an evidentiary document, I do not believe affidavits come within the
intended scope of the Rule.  As the majority all but admits, ante, at 15,
its holding renders superfluous Rule 56(g), which imposes sanctions for
summary judgment affidavits submitted in bad faith, since any affidavit
submitted in bad faith will also fail the Rule 11 certification standards.
    Though it seems unnecessary to the proper resolution of the case, I
feel compelled to point out one further difficulty with the majority's
analysis.  The majority reasons that Business Guides here incurs liability
under the portion of the Rule's last sentence permitting a court to
sanction "the person who signed" a pleading.  But the majority's conclusion
is in square conflict with our interpretation of that phrase last Term in
Pavelic & LeFlore, 493 U. S. --- (1989).  There we construed the authority
to sanction "the person who signed" to extend only to an individual
attorney and not to the firm on whose behalf he signed.  Though a law firm
cannot be a "person who signed," the majority now says that a corporation
may.  But the gist of our rationale in Pavelic & LeFlore was that the
duties imposed by Rule 11's certification requirements attach to an
individual signer, rather than an entity the signer represents.  We said:
"It is as strange to think that the phrase `person who signed' in the last
sentence refers to the partnership represented by the signing attorney, as
it would be to think that the earlier phrase `the signer has read the
pleading' refers to a reading not necessarily by the individual signer but
by someone in the partnership."  Id., at ---.  It is just as strange, I
submit, to assert that here a corporation is the "person who signed," and
that the corporation thereby represented that it "ha[d] read the
pleading."
    In Pavelic & LeFlore, moreover, we rejected an appeal to " `long and
firmly established legal principles of partnership and agency' ":

"We are not dealing here . . . with common-law liability, but with a Rule
that strikingly departs from normal common-law assumptions such as that of
delegability.  The signing attorney cannot leave it to some trusted
subordinate, or to one of his partners, to satisfy himself that the filed
paper is factually and legally responsible; by signing he represents not
merely the fact that it is so, but also the fact that he personally has
applied his own judgment."  Id., at ---.


The majority seeks now to resurrect the same principles of agency we put to
rest last Term.  The president of Business Guides and other employees
signed papers submitted in support of the company's position, and the Court
holds the company assumed a duty, perhaps delegable to other agents, to
comply with the Rule 11 certification requirements.  Either the Court was
wrong last Term or it is wrong now.  The duties imposed by Rule 11 either
apply to corporate entities or they do not.  The better resolution would be
to hold that the signatures of represented parties, including corporations
and partnerships, have no significance for Rule 11 purposes.
II
    Applied to attorneys, Rule 11's requirement of reasonable inquiry can
be justified as within the traditional power of the courts to set standards
for the bar.  Our decisions recognize the "disciplinary powers which
English and American courts (the former primarily through the Inns of
Court) have for centuries possessed over members of the bar, incident to
their broader responsibility for keeping the administration of justice and
the standards of professional conduct unsullied."  Cohen v. Hurley, 366 U.
S. 117, 123-124 (1961).  An attorney acts not only as a client's
representative, but also as an officer of the court, and has a duty to
serve both masters.  Likewise, applying this duty of reasonable inquiry to
pro se litigants, as amended Rule 11 does, can be viewed as a corollary to
the courts' power to control the conduct of attorneys.  Requiring pro se
litigants to make the Rule 11 certification ensures that, in each case, at
least one person has taken responsibility for inquiry into the relevant
facts and law.
    But it is a long step from this traditional judicial role to impose on
a represented party the duty of reasonable inquiry prior to the filing of a
lawsuit, measured by an objective standard applied in hindsight by a
federal judge.  Until now, it had never been supposed that citizens at
large are, or ought to be, aware of the contents of the Federal Rules of
Civil Procedure, or that those rules impose on them primary obligations for
their conduct.  This new remedy far exceeds any previous authority of a
federal court to sanction a represented party.  The rules we prescribe have
a statutory authorization and need not always track the inherent authority
of the federal courts.  See Sibbach v. Wilson & Co., 312 U. S. 1 (1941).
At the same time, the farther our rules depart from our traditional
practices, the more troubling becomes the question of our rulemaking
authority.
    In the Rules Enabling Act, Congress has delegated to this Court
authority to prescribe "general rules of practice and procedure," 28 U. S.
C. MDRV 2072(a), which may not "abridge, enlarge or modify any substantive
right," MDRV 2072(b).  The grant of authority to regulate procedure and the
denial of authority to alter substantive rights expresses proper concern
for federalism and separation of powers.  See 19 C. Wright, A. Miller, & E.
Cooper, Federal Practice and Procedure MDRV 4509 (1982).  Congress desired
the courts to regulate "practice and procedure," an area where we have
expertise and some degree of inherent authority.  But Congress wanted the
definition of substantive rights left to itself in cases where federal law
applies, or to the States where state substantive law governs.
    In my view, the majority's reading of Rule 11 raises troubling concerns
with respect to both separation of powers and federalism.  At the federal
level, the new duty discovered by the majority in the text of the Rule is
one that should be created, if at all, by Congress.  In Alyeska Pipeline
Co. v. Wilderness Society, 421 U. S. 240 (1975), while confirming the
authority of the courts to award attorney's fees against a party conducting
vexatious or bad-faith litigation, we reversed an award of attorney's fees
made on the theory that the prevailing party had acted as a "private
attorney general."  We reaffirmed the American Rule that litigants in most
circumstances must bear their own costs, and noted that Congress had itself
provided for fee awards under various statutes when it thought fee-shifting
necessary to encourage certain types of claims.  We held that "it [was] not
for us to invade the legislature's province by redistributing litigation
costs in the manner" proposed in that case.  Id., at 271.
    As interpreted by the majority, Rule 11 "redistribut[es] litigation
costs" much like the fee-shifting theory rejected in Alyeska Pipeline.  The
majority's distinction between an "appropriate sanction" under Rule 11
based on a "discrete event" and the fee-shifting at issue in Alyeska
Pipeline, ante, at 19, breaks down in a case like this one where the
"discrete event" was the filing of the lawsuit and the "appropriate
sanction" was the payment of respondents' attorney's fees coupled with
dismissal of the suit.  Any mechanism for redistributing costs, even the
inherent sanctioning authority of the federal courts, has the potential to
affect decisions concerning whether and where to file suit.  But the risk
of deterring a meritorious suit is slight where sanctions are only
available for bad-faith or frivolous claims.  On the other hand, when a
party's prefiling conduct is subject to evaluation for objective
reasonableness by the court, the risk of filing suit changes and there
arises a real risk of deterring meritorious claims.  Under the majority's
holding in this case, the deterrent effect will arise most often where the
rules require verification of complaints.  See supra, at 8.  In particular,
one may expect reticence to seek temporary restraining orders since the
time pressures inherent in such situations create an acute risk of
sanctions for unreasonable prefiling inquiry.
    The majority does not tell us what standard it thinks should be applied
in deciding whether to sanction a represented party who has not signed a
Rule 11 paper.  Ante, at 20.  The chilling impact of the majority's
negligence standard will be much greater if the majority applies it in that
circumstance as well.  This result seems a plausible consequence of the
majority's reasoning.  See ante, at 15-16.  It is not the business of this
Court to prescribe rules "redis tributing litigation costs" in a manner
that discourages goodfaith attempts to vindicate rights granted by the
substantive law.  Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U. S.
---, --- (1990) ("[T]he allocation of the costs accruing from litigation is
a matter for the legislature, not the courts").
    Our potential incursion into matters reserved to the States also
counsels against adoption of the majority's rule.  Just as the various
statutory fee-shifting mechanisms reflect policy choices by Congress
regarding the extent to which certain types of litigation should be
encouraged or discouraged, state tort law reflects comparable state
policies.  As interpreted by the majority, Rule 11 places on those
represented parties who sign papers subject to the Rule duties far
exceeding those imposed by state tort law.  In general, States permitting
recovery for malicious prosecution or abuse of process require the
plaintiff to prove malice or improper purpose as a necessary element.  W.
Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and Keeton on Law of Torts
15 120-121 (5th ed. 1984); 1 F. Harper, F. James, & O. Gray, The Law of
Torts MDRV 4.8 (2d ed. 1986); Restatement (Second) of Torts MDRV 676
(1977).  As interpreted by the majority, Rule 11 creates a new tort of
"negligent prosecution" or "accidental abuse of process," applicable to any
represented party ignorant enough to sign a pleading or other Rule 11
paper.  Cf. Response to a Practitioner's Commentary on the Actual Use of
Amended Rule 11, 54 Ford. L. Rev. 28, 29-30 (1985) (remarks of Judge
Charles Sifton); Brief for Petitioner 40.
    In this case, the District Court imposed sanctions on a corporation for
the actions of its agents taken in reliance on business records developed
to safeguard the company's property rights in its own research.  The
decision to impose sanctions required the court, sitting without a jury, to
make judgments about the skill and care that companies of this kind must
use in their business practices.  We tolerate judgments about the care an
attorney must use because we deem judges to know the standards appropriate
for the practice of law.  We do not have similar expertise in the workings
of private enterprise or the conduct and supervision of investigations made
by a company to protect and defend its rights.  And though the majority
would seem to suggest it, I should not have thought that before a person or
entity seeks the aid of the federal courts, it ought to know the contents
of the Federal Rules of Civil Procedure, rules that, at least until now,
were the domain of lawyers and not the community as a whole.
    A rule sanctioning misconduct during the litigation process will often
satisfy the Rules Enabling Act because it "affects only the process of
enforcing litigants' rights and not the rights themselves."  Burlington
Northern R. Co. v. Woods, 480 U. S. 1, 8 (1987).  As applied to attorneys,
and perhaps those who act as their own attorneys, the same can be said of
Rule 11's sanctions for failure to conduct a reasonable prefiling inquiry.
That much we established in Cooter & Gell v. Hartmarx Corp., 496 U. S., at
---.  See ante, at 19.  But the presumption that a Federal Rule is valid
carries less weight in a case such as this, where "the intended scope of
[the] Rule is uncertain," 19 Wright, Miller, & Cooper, at 147-148, and the
construction of Rule 11 adopted today extends our role far beyond its
traditional and accepted boundaries.  Whether or not Rule 11 as construed
by the majority exceeds our rulemaking authority, these concerns weigh in
favor of a reasonable, alternative interpretation, one which, as I said at
the outset, is more consistent with the text of the Rule.  See Cooter &
Gell, supra, at --- - --- ("We . . . interpret Rule 11 according to its
plain meaning, . . . in light of the scope of the congressional
authorization [in the Rules Enabling Act]"); 19 Wright, Miller, & Cooper,
at 148 ("If a federal court concludes it is uncertain whether a Civil Rule
truly governs a given question of practice, and if a relevant state rule of
law differs, the extent to which application of the Civil Rule would
interfere with substantive rights is certainly one of the factors that
should be considered in deciding whether the Civil Rule applies.  In
effect, the `substantive rights' limitation, and the concern it reflects
for the integrity of state substantive policies, is relevant to determining
the scope of the Civil Rules").
III
    Under my analysis, an attorney must violate Rule 11 before a
represented party can be sanctioned.  Regardless of the standard of conduct
applicable to represented parties, I would reverse because it has not been
shown on this record that an attorney signed a paper in violation of the
Rule.  A Finley, Kumble attorney did sign the original complaint and
application for a temporary restraining order.  However, the District Court
did not find that Finley, Kumble lawyers had violated the Rule at the time
the complaint was submitted.
    The District Court did conclude that Finley, Kumble attorneys failed to
conduct a reasonable inquiry prior to submission of the Lambe declaration.
The Lambe declaration was not itself signed by an attorney, however, and,
under my analysis of the Rule, could not serve as a basis for sanctions.
See also supra, at 9.  Indeed, Mr. Lambe's signature was not even the
signature of a party.  Certainly, a corporation only acts through its
agents; that does not mean that all actions by a corporation's agents are
actions on behalf of the corporation.  Unlike the signature of the
company's president verifying the complaint, Mr. Lambe's signature was on
his own behalf, and did not in any way purport to bind the corporation.
    I doubt that the papers submitted to the court with the Lambe
declaration violate Rule 11.  The only action these documents requested of
the court was that it accept the Lambe declaration under seal and review it
in camera.  The relief requested was in no sense dependent on the accuracy
of the representations made by Lambe.  Given the purpose of these
documents, they were well supported by fact and existing law, and an
attorney's signature on these papers would not seem to me a violation of
Rule 11 certification requirements. {5}
    Even were I to find an attorney violation, I would view it as an abuse
of discretion to sanction a represented party if the party has acted in
good faith.  I recognize that an objective standard does, and should,
govern the conduct of the attorney.  With respect to a represented party,
though, I would reverse the decision below for having applied a standard of
objective reasonableness rather than some subjective bad-faith standard.
IV
    Just as patience is requisite in the temperament of the individual
judge, so it must be an attribute of the judicial system as a whole.  Our
annoyance at spurious and frivolous claims, and our real concern with
burdened dockets, must not drive us to adopt interpretations of the rules
that make honest claimants fear to petition the courts.  We may be
justified in imposing penalties on attorneys for negligence or mistakes in
good faith; but it is quite a different matter, and the exercise of a much
greater and more questionable authority, for us to impose that primary
liability on citizens in general.  These concerns underscore my objections
to the majority's holding.  With respect, I dissent.

 
 
 
 
 

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1
    "Every bill shall contain the signature of counsel annexed to it, which
shall be considered as an affirmation on his part, that upon the
instructions given to him and the case laid before him, there is good
ground for the suit, in the manner in which it is framed."  Rules of
Practice for the Courts of Equity of the United States, 1 How. xxxix,
xlviii (1842).

2
    "Every bill or other pleading shall be signed individually by one or
more solicitors of record, and such signatures shall be considered as a
certificate by each solicitor that he has read the pleading so signed by
him; that upon the instructions laid before him regarding the case there is
good ground for the same; that no scandalous matter is inserted in the
pleading; and that it is not interposed for delay."  Rules of Practice for
the Courts of Equity of the United States, 226 U. S. 627, 655 (1912).

3
    Prior to 1983, Rule 11 read:
    "Every pleading of a party represented by an attorney shall be signed
by at least one attorney of record in his individual name, whose address
shall be stated.  A party who is not represented by an attorney shall sign
his pleading and state his address.  Except when otherwise specifically
provided by rule or statute, pleadings need not be verified or accompanied
by affidavit.  The rule in equity that the averments of an answer under
oath must be overcome by the testimony of two witnesses or of one witness
sustained by corroborating circumstances is abolished.  The signature of an
attorney constitutes a certificate by him that he has read the pleading;
that to the best of his knowledge, information, and belief there is good
ground to support it; and that it is not interposed for delay.  If a
pleading is not signed or is signed with intent to defeat the purpose of
this rule, it may be stricken as sham and false and the action may proceed
as though the pleading had not been served.  For a wilfull violation of
this rule an attorney may be subjected to appropriate disciplinary action.
Similarly [sic] action may be taken if scandalous or indecent matter is
inserted."  Fed. Rule Civ. Proc. 11, 28 U. S. C. App. (1982 ed.).

4
    See, Advisory Committee's Notes on Fed. Rule Civ. Proc. 11, 28 U. S. C.
App. p. 575 ("The new language is intended to reduce the reluctance of
courts to impose sanctions by emphasizing the responsibilities of the
attorney and reenforcing those obligations by the imposition of sanctions")
(emphasis added; citation omitted).

5
    It might be argued that the attorney's signature on the original
filings created a continuing duty to conduct reasonable inquiry and to
amend or withdraw the pleadings as new facts came to light.  Compare Thomas
v. Capital Security Serv., Inc., 836 F. 2d 866 (CA5 1988) (en banc), with
Herron v. Jupiter Transp. Co., 858 F. 2d 332, 335-336 (CA6 1988).  See
Burbank, The Transformation of American Civil Procedure: The Example of
Rule 11, 137 U. Pa. L. Rev. 1925, 1930, n. 27 (1989).  However, I would be
unwilling to adopt such a construction of the Rule in a case such as this,
where the issue has not been briefed.
