Court upholds Rule 11 sanction in Quackwatch defamation case

This is a defamation case arising from a website called Quackwatch, which talks about medical doctors, as you might have guessed. The plaintiffs are doctors who sued over the website's commentary on a disciplinary proceeding that the State of Illinois had instituted against them. The district court sanctioned the plaintiff's lawyer $10,000 over these claims under Rule 11, which prohibits frivolous cases. So this is really a sanctions case and not a defamation case.

The case is Goldman v. Barrett, a summary order issued on September 10. Plaintiffs were promoting an anti-aging business in China but said that Quackwatch sabotaged those efforts with false allegations against them. When defendants moved for sanctions, plaintiff's lawyer said he got their information through a politically-connected colleague in China, Stephanie Kuo, who said the likely reason why the "China Project" was rejected was these defamatory allegations. Does this information allow plaintiffs to avoid sanctions? The Court of Appeals (Livingston, Walker and Jacobs) says it does not.

Rule 11 has been in the Federal Rules of Civil Procedure for decades, but it had no real bite until sometime in the 1980s, which courts began sanctioning lawyers more frequently after the rule was revised. Before Rule 11 motions became more prominent, the rule sat in obscurity. I remember the movie, A Civil Action, in which the lawyer for a chemical company moved for Rule 11 sanctions against the class action lawyer who claimed the chemicals had caused a leukemia cluster in Woburn, Massachusetts. When everyone appeared in court on the motion, the judge asked class action counsel if he knew what Rule 11 was prior to this motion. Counsel said he had to look up the rule. The judge said that he was not that familiar with the rule either. Things have changed. These days, all federal practitioners know about Rule 11, which also has a "safe harbor" provision that requires the opposing lawyer to warn his adversary that if he does not withdraw the offending claim within 21 days, he will move for sanctions. 

While a lawyer can rely on a client's information in pursuing a lawsuit, he can only do so when it is reasonable to do so. Otherwise, the lawyer is just wasting everyone's time. The Court of Appeals finds that anything that Kuo said to the plaintiffs' lawyer was mere speculation about why the China Project failed. The district court found, and the Court of Appeals agrees, that this case only rested on speculation.

Plaintiffs said that discovery may have proven these allegations. While Rule 11 does have a provision allowing for discovery to prove the claim is not frivolous, "an attorney may not rely on discovery to manufacture a claim that lacks factual support in the first instance." You still have to undertake an appropriate investigation into the facts before you file the lawsuit. 

As for the $10,000 fine, the Court of Appeals says that was not an abuse of the district court's discretion. That's a lot of money, but the trial court has discretion to levy such a fine, so long as it deters repetition or the similar conduct in the future. In any event, the trial court actually reduced the amount of the sanction in light of the attorney's financial situation.