The Effect of Jandrt on Satellite Litigation
The supreme court's decision to uphold
a frivolous litigation sanction in Jandrt v. Jerome Foods Inc. will
alter the nature of satellite litigation under sections 802.05 and
814.025 and may very well change the overall practice methods of all
civil litigators in Wisconsin. The Advisory Committee Notes to Federal
Rules of Civil Procedure 11 refer to litigation over the imposition of
sanctions under Rule 11 as litigation that is "satellite" to the main
litigation from which it was derived.
by Janine P. Geske & William C. Gleisner
III
ccording to Chief Justice Abrahamson in her
dissent to the Supreme Court's Denial of the Motion to Reconsider its
decision in Jandrt v. Jerome
Foods Inc., 1 "[t]he court's
opinion will have a significant effect on the practice of law in this
state for both plaintiffs' and defendants' counsel and on the people of
the state of Wisconsin seeking redress of wrongs or defending themselves
in court."2
In Jandrt, the Wisconsin Supreme Court substantially upheld
the trial court's imposition of a $716,081 sanction against a Milwaukee
law firm. In essence, the supreme court concluded that while a lawsuit
commenced on May 10, 1995, was not frivolous, it became frivolous just
43 days later. The basis for why the suit became frivolous, and the
supreme court's discussion of Wisconsin sanction law in connection with
its finding of frivolousness, should be of serious concern to all
Wisconsin litigators.
At a minimum, the Jandrt decision will
almost certainly alter and increase the nature of "satellite"3 litigation in Wisconsin under sections 802.05
and 814.025
of the Wisconsin Statutes. At its worst, this decision may very well
change the overall practice methods of all civil litigators in
Wisconsin, regardless of whether they represent plaintiffs or
defendants, and may harm clients and the trial bar, and unacceptably
increase the business of the courts.
The Jandrt decision reflects, in part, some of the
deficiencies of our existing sanction rules, as those rules are set
forth in sections 802.05
and 814.025.
As demonstrated in this article, the adoption of the current standards
under Rule 11 of the Federal Rules of Civil Procedure (FRCP) could
ameliorate many of the adverse consequences of Jandrt without
diminishing the manifest necessity of regulating and discouraging
frivolous litigation.
The Majority Decision
In Jandrt, upon certification from the Wisconsin Court of
Appeals, a majority of the Wisconsin Supreme Court reversed the trial
court's decision that the Milwaukee law firm of Previant, Goldberg,
Uelmen, Gratz, Miller & Brueggeman (Previant) had commenced a
frivolous action against Jerome Foods.4
However, the supreme court's majority upheld the trial court's
determination that Previant's continued prosecution of that action
became frivolous.5 While it remanded the
action to the trial court for a recalculation of the sanction amount
that should be imposed against Previant, the court's majority did not
directly criticize the trial court's imposition of a $716,081 sanction
against Previant.6 The sanction represented
a portion of the fees and costs incurred by Jerome Foods Inc. (JFI) in
defending the Previant action.
Jandrt involved an alleged toxic tort. Previant commenced an
action against JFI alleging that several children had been born with
birth defects due to the leaking of certain chemicals into the
atmosphere of the JFI plant.7 The action was
styled a class action and had two main claims: a claim for common law
negligence and a claim for a violation of Wisconsin's Safe Place law
under section
101.11 (2) of the Wisconsin Statutes.8
Both the majority and dissent in Jandrt considered the
chronology of events before and after the filing of the action to be
significant.
Relevant Chronology. The relevant chronology
according to the majority's decision follows.
- In November 1994 Previant received a referral from a trusted
referring attorney, who had made a preliminary investigation that had
disclosed to him that between 12 and 15 women had indicated problem
pregnancies while working at JFI. Referring counsel had done a medical
literature search for evidence of a possible relationship between carbon
dioxide or ammonia and birth defects. The referring attorney also had a
statement from one of his clients stating that her doctor had told her
that JFI was probably responsible for her child having a birth
defect.9
- In February 1995 the mothers of the children with birth defects
first retained Previant.10
- In February 1995 Previant had an associate and a law librarian
conduct a medical literature search. Previant also consulted with a
toxic tort consultant MD, who told Previant that "in order to obtain an
expert opinion on causation it [will] be necessary to commence an action
and obtain discovery."11
- On March 1, 1995, Senate Bill 11 was passed by the Wisconsin
Legislature, significantly altering the law on joint and several
liability.12
- In April 1995 Previant was advised by numerous sources, including
its malpractice carrier, that suit should be filed in order to protect
the rights of clients such as the plaintiffs in Jandrt.13
- On or about May 10, 1995, Previant commenced suit sooner than it
otherwise would have because of its concerns relative to Senate Bill
11.14
- On May 17, 1995, Senate Bill 11 became law.15
- In May and again on June 21, 1995, Previant formally requested
documents from JFI, which request JFI resisted on the grounds that it
would only produce documents under an order of confidentiality.16
- On July 8, 1995, JFI learned from its expert that there was no way
in which the plaintiffs could prove a causal relationship between the
chemicals at JFI and the birth defects.17
JFI nevertheless retained one local and one national law firm, several
experts on negligence and causation, a public relations firm, and a
private investigation firm.18
- On July 13, 1995, JFI answered the Previant complaint, without
making any mention of its belief that causation could not be proved. In
fact, JFI did not in any way affirmatively raise the possible
frivolousness of the Previant claim in its answer.19
- On Dec. 7, 1995, after extensive negotiations, an order of
confidentiality was entered.20
- On Jan. 31, 1996 and Feb. 1, 1996, Previant first had an opportunity
to review more than 200,000 documents produced by JFI.21
- Previant consulted with two experts; one of those experts consulted
with an out-of-state expert, who advised Previant that cause could not
be proved (none of the experts saw the documents produced by
JFI).22
- On Feb. 28, 1996, Previant voluntarily dismissed its action, and
only then was put on notice by JFI of its intention to seek sanctions
under sections 802.05
and 814.025.23
The majority's decision is divided roughly into two parts. The first
part analyzes whether Previant frivolously commenced an action under section
802.05. The second part analyzes whether Previant frivolously
continued the action under section
814.025.
Was the action frivolously commenced under section
802.05? The majority stated that it would turn to federal case
law interpreting Rule 11 in order to determine whether the trial court
had correctly concluded that the action had been frivolously
commenced.24 However, the majority relied
upon federal authorities from prior to a fundamental and critical 1993
amendment to Rule 11. Citing a 1993 case, the majority stated that the
circuit court is to apply an objective standard of conduct for litigants
and attorneys.25 Citing federal decisions
from 1983, 1987, and 1989, the majority then stated that decisions under
Rule 11 are not to be made using the wisdom of hindsight.26
The majority then states that the single allegation in the Previant
complaint upon which JFI based its claim that the action against it had
been frivolously commenced was Paragraph 28, which contained an
allegation of cause "on information and belief."27 The majority focused on Previant's failure to
deal with the issue of causation under its common law negligence claim,
while dismissing Previant's point made that the alternate claim for
relief under Wisconsin's Safe Place law required no proof of
causation.28 It appears clear that
negligence or safe place law constituted completely alternate causes of
action in every sense and either theory could have allowed for a
recovery against JFI for the alleged harm done to the plaintiffs.29
Then citing federal authorities from 1985, 1986, 1987, 1992, and
1993, the majority concluded that Previant had no right to rely upon
what the referring attorney or the client said about the claim.30
While it would be "good practice" to consult an expert before trial,
the majority concluded that Previant did not have an obligation to
retain an expert before commencing suit because of the pending change in
the law of joint and several liability.31
Characterizing it a "close case," the majority finally did conclude that
Previant had not frivolously commenced the lawsuit.32
Was the action frivolously continued under section
814.025? When the supreme court concluded that the lawsuit was
not frivolously commenced, its analysis under section
802.05 was at an end,33 and thus one
might conclude that any further comparisons to Rule 11 of the FRCP were
similarly at an end. However, while the court stated that section 802.05
was patterned after Federal Rule 11,34 it
nevertheless also observed that "in many respects, these are the same
guidelines [under section
802.05] a circuit court uses in its determination of frivolousness
under Wis. Stat. §
814.025."35
In the discussion of the court's analysis of
whether the action was frivolously continued, one ought to bear in mind
several important considerations. First, this action was pending only
for a total of nine months.36 The court
concluded that the action became frivolous just 43 days after its
commencement, without explaining the significance of that period.37 The majority concluded, for several reasons,
that the action was frivolously maintained. A review of those reasons
seems to show a reliance on the trial court's findings on the issue of a
frivolously commenced law suit. Although the court concluded that the
action was not frivolously commenced, it concluded that
Previant should have completed a series of tasks within the following 43
days. According to the majority, Previant did not:
- Obtain an expert witness who supported the causation theory upon
which rested the claims in the complaint.38
- Consult with an identified scientific or medical professional with
expertise in the areas of teratology, toxicology, epidemiology,
genetics, pediatrics, or the causes of birth defects.39
- Interview any treating physician of any of the mothers or the
children in question.40
- Pursue the purported "cover up" identified as one of the bases for
the filing of the complaint.41
- Conduct a comprehensive review of the medical records of the mothers
and children in question.42
- Attempt to identify the risk factors present in the mothers of the
three children with birth defects.43
- Conduct an evaluation through consultation with appropriate medical
and scientific authorities of the multiple pregnancy problems among JFI
employees.44
The majority concluded that the Previant firm "unreasonably followed"
the toxic tort consultant's recommendation to commence a lawsuit in
order to take discovery, since the Previant firm could have obtained all
the information it required regarding chemical usage at JFI from OSHA
records.45 Despite Kelly v.
Clark,46 the majority found that
Previant was not entitled to a "safe harbor" whereby Previant could
safely file a pleading and make reasonable inquiry through formal
discovery as to uncertain or unclear facts within a reasonable time
after the pleading was filed.47 In the
words of the majority, a "'safe harbor' is not a loophole through which
attorneys may escape the requirement of Wis. Stat. §
814.025 that an action have a reasonable basis in law or
equity."48 It is unclear why the majority
found that the action was not frivolously commenced, since the OSHA
records presumably would have been available both before and after the
commencement of the action.
According to the majority, while a plaintiff need not "exhaust"
outside sources of information before embarking on discovery, the
Previant firm failed to avail itself of information that was available
without discovery, such as the OSHA reports.49 The majority said, "[t]he Previant firm may have
believed that JFI had more detailed information on the levels of
exposure than that which is required by OSHA. However, that belief does
not excuse the Previant firm for failing to avail itself of information
that was available without discovery." And yet, again, all of these
conclusions are in sharp contrast with the majority's conclusion that
Previant did not frivolously commence the lawsuit.
Stating that a party is not relieved of its responsibility to ensure
that an action is well-grounded in fact and law once an action is
commenced, the majority states "it is the facts the Previant firm knew
and what it should have done in light of its recognition that the causal
element was essential to its claim that lies at the heart of this
appeal."50 However, Previant did commence
discovery immediately after the action was filed and was met by stiff
resistance from JFI when it insisted on a protective order before it
would turn over any documents for Previant's review.51 Despite the request for production of documents
in June of 1995, and the consequent failure of JFI to produce same, the
majority concluded that "for nine months the Previant firm did nothing
to try to establish ... causation."52 This
begs the question of just what should Previant have done.
Given the stringency of the majority's decision, it no longer will
suffice to commence an action, counterclaim, or cross-claim and then
focus on one form of discovery until that avenue is exhausted. If there
are any doubts concerning the merits of a claim, immediate, aggressive,
and comprehensive discovery will be the only prudent course of action.
Further, if relevant information can be acquired, either before or after
suit, by any means other than through formal discovery, one would be
very well advised to aggressively pursue it.
Another disturbing aspect of the majority's decision is its
conclusion that the purpose of sanctions under section
814.025 is not just punitive. "[W]e are less convinced that
compensation is not an appropriate consideration [under 814.025]...
[I]n a proper case, [814.025 may] provide full compensation for
reasonable attorney fees necessary to defend against a frivolous
action... We embrace this view today."53
The emphasis on sanctions as a form of compensation may lead to a
proliferation of claims under sections 802.05
and 814.025.
After all, if one believes that there is a colorable basis for seeking
sanctions, the failure to assert such a claim may be malpractice.
The Wisdom of Federal Rule 11, as Amended in 1993
The majority analyzes the decision of the Previant firm to commence
litigation by reference to federal decisions interpreting Rule 11 of the
Federal Rules of Civil Procedure. However, almost all of the decisions
relied upon by the majority pre-date 1993. According to one
commentator:
"Because many of the elements of Rule 11 were changed in 1993, be
careful about relying on earlier cases. Such rulings were made when
sanctions were mandatory and when fee-shifting was the most commonly
imposed sanction. Neither is true under the amended Rule."54
When analyzing the majority's decision, it is important to contrast
sections 802.05 and 814.025 and the majority's decision with the
language of FRCP 11 and the Advisory Committee Notes that appertain to
its 1993 amendment. First, current FRCP 11 is not mandatory. Moreover,
arguably, the wording of FRCP 11 would today reach conduct covered by
both section 802.05
and 814.025.
FRCP 11 (b) now provides in pertinent part:
"By presenting to the court (whether by signing, filing, submitting,
or later advocating) a pleading, written motion, or other paper, an
attorney or unrepresented party is certifying that to the best of the
person's knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances,
"(1) it is not being presented for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase in the cost of
litigation;
"(2) the claims, defenses, and other legal contentions therein are
warranted by existing law or by a nonfrivolous argument for the
extension, modification, or reversal of existing law or the
establishment of new law;
"(3) the allegations and other factual contentions have evidentiary
support or, if specifically so identified, are likely to have
evidentiary support after a reasonable opportunity for further
investigation or discovery; and
"(4) the denials of factual contentions are warranted on the evidence
or, if specifically so identified, are reasonably based on a lack of
information or belief." [Emphasis supplied.]
FRCP 11 further provides that a motion under same "shall be served as
provided in Rule 5, but shall not be filed with or presented to the
court unless, within 21 days after service of the motion (or such other
period as the court may prescribe), the challenged paper, claim,
defense, contention, allegation, or denial is not withdrawn or
appropriately corrected."
According to the Advisory Committee Notes following FRCP 11, the 1993
Amendments were intended to:
- Equalize the burden of the rule on plaintiffs and defendants.
- Establish uniform standards for the imposition of sanctions, which
could be monetary or nonmonetary. These standards: "[E]numerate the
factors a court should consider in deciding whether to impose a sanction
or what sanctions would be appropriate in the circumstances. ... [that
is] Whether the improper conduct was willful, or negligent; whether it
was part of a pattern of activity, or an isolated event; whether it
infected the entire pleading, or only one particular count or defense;
whether the person has engaged in similar conduct in other litigation;
whether it was intended to injure; what effect it had on the litigation
process in time or expense; ... what amount, given the financial
resources of the responsible person, is needed to deter that person from
repetition in the same case; what amount is needed to deter similar
activity by other litigants."
- The court has significant discretion in determining what sanctions,
if any, should be imposed for a violation, subject to the principle that
the sanctions should not be more severe than reasonably necessary to
deter repetition of the conduct by the offending person or comparable
conduct by similarly situated persons.
- Since the purpose of Rule 11 sanctions is to deter rather than to
compensate, the rule provides that if a monetary sanction is imposed, it
ordinarily should be paid into court as a penalty.
- Any award of fees to another party under FRCP 11 should not exceed
the expenses and attorney fees for the services directly and unavoidably
caused by the violation of Rule 11.
- If a wholly unsupportable count were included in a multi-count
complaint or counterclaim any award of expenses should be limited to
those directly caused by inclusion of the improper count, and not those
resulting from the filing of the complaint or answer itself. The award
should not provide compensation for services that could have been
avoided by an earlier disclosure of evidence or an earlier challenge to
the groundless claims or defenses.
It's Time to Conform Wisconsin's Sanction Rules to Federal Rule
11
Jandrt is not just a problem for the plaintiffs' bar. In
fact, the Civil Trial Counsel sought to intervene in Jandrt
when Previant's Motion to Reconsider was pending before the supreme
court. Serious consideration should be given to reforming our frivolous
sanctions law to better conform to the landscape of FRCP 11 practice in
the following respects.55
Levy sanctions on those who bring groundless motions for
sanctions. As Justice Bradley put it in her dissent, a party
cannot spend unlimited resources to defend a frivolous action without
those expenditures becoming frivolous as well.
Adopt the FRCP 11 provision that permits courts to sua sponte
impose sanctions on offending parties. Why should sanctions be
the exclusive province of a satellite adversarial proceeding? Perhaps it
is clear that one party is frivolous, but the other party in seeking
redress may cross into frivolous conduct as well. Why shouldn't the
court have the power to step in and sanction both offenders?
![Geske](/SiteCollectionImages/WisconsinLawyer/2000/05/geske.jpg)
Janine P. Geske, Marquette 1975, a former
justice of the Wisconsin Supreme Court, is a distinguished professor of
law at the Marquette University Law School.
![Gleisner](/SiteCollectionImages/WisconsinLawyer/2000/05/gleisner.jpg)
William C. Gleisner, Marquette
1974, an attorney practicing in Milwaukee, coauthored an amicus curiae
brief in Jandrt, which was submitted to the Wisconsin Supreme
Court on behalf of the Wisconsin Academy of Trial Lawyers.
A party who believes that a claim is frivolous should not be
able to withhold that information from the court and opposing counsel
until after the expenditure of considerable sums of money and judicial
resources. Shouldn't a party with such knowledge at the minimum
be required to plead affirmatively the existence of a frivolous claim
(which wasn't done in Jandrt) or at least not be permitted to
benefit from a considerable delay in asserting same?
More carefully calibrate sections 802.05 and 814.025 so as to
take account of the factors mandated under FRCP 11, especially those
factors that focus more precisely on the equity of a sanctions
inquiry. That is: whether the improper conduct was willful, or
negligent; whether it was part of a pattern of activity, or an isolated
event; whether it infected the entire pleading, or only one particular
count or defense; whether the person has engaged in similar conduct in
other litigation; whether it was intended to injure; what effect it had
on the litigation process in time or expense; what amount, given the
responsible person's financial resources, is needed to deter that person
from repetition in the same case; and what amount is needed to deter
similar activity by other litigants.
Conclusion
To litigate is to sail in troubled waters. All members of the trial
bar, however, have an interest in ensuring that reasonable safe harbors
exist both for their own protection and to secure equal justice for all
members of our society. It is time to at least reexamine our frivolous
sanction rules in light of the 1993 amendments to FRCP 11.
Endnotes
1 Jandrt v. Jerome Foods Inc.,
227 Wis. 2d 531, 597 N.W.2d 744 (July 7, 1999). [Authors' Note: All
references in this article are to the opinion's page and, for pinpoint
citations, to the paragraph number.]
2 Jandrt v. Jerome Foods:
Reconsideration Dissent, __ Wis. 2d __, 601 N.W.2d 650 (Oct.
28, 1999), 6.
3 "Although Rule 11 must be read in
light of concerns that it will spawn satellite litigation and chill
vigorous advocacy, any interpretation of [the] rule must give effect to
the rule's central goal of deterrence." Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 393 (1990).
4 Jandrt, 597 N.W.2d 744,
559-60, 55. Although it found this to be a "close case."
Id.
5 Id. at 749, 6.
6 Id. at 7.
7 Id. at 749-50, 8-9.
8 Id. at 751, 18.
9 Id. at 749-50, 8-10.
10 Id. at 750, 12.
11 Id. at 13-14.
12 Id. at 751, 16.
13 Id.
14 Id. at 17.
15 Id.
16 Id. at 20.
17 Id. at 752, 23.
18 Id. at 751-52, 21.
19 Id. at 769, 94.
20 Id. at 752, 24.
21 Id.
22 Id. at 25.
23 Id. at 26.
24 Id. at 754, 31.
25 Id. at 32; National
Wrecking Co. v. International Bhd. of Teamsters Local 731, 990 F.2d
957, 963 (7th Cir. 1993).
26 Jandrt at 754-55, 33.
27 Id. at 755, 34.
28 Id. at 35 (Previant cited
Frederick v. Hotel Inv. Inc., 48 Wis. 2d 429, 434, 180 N.W.2d
562 (1970) for the proposition that no proof of causation is needed in a
safe place action).
29 Id. at 36.
30 Id. at 757, 40-41.
31 Id. at 758, 48.
32 Id. at 559-60, 55.
33 Id. at 753, 28.
34 Id. at 754, 31.
35 Id.
36 Id. at 768, 88.
37 Id. at 769, 97.
38 Id. at 760-61, 60.
39 Id.
40 Id.
41 Id.
42 Id. at 761, 61.
43 Id.
44 Id.
45 Id. at 761, 62, Id. at 762,
68.
46 Kelly v. Clark, 192
Wis. 2d 633, 651, 531 N.W.2d 455 (Ct. App. 1995).
47 Jandrt at 762, 64, Id. at 763,
65.
48 Id. at 762, 64.
49 Id. at 763, 67, Id. at 762, 68.
50 Id. at 760, 57-59.
51 Id. at 751, 20.
52 Id. at 765, 75.
53 Id. at 79-80.
54 Hittner, Schwarzer, et al.,
Practice Guide: Federal Civil Procedure Before Trial - 5th Circuit
Edition (Rutter Group 1993-98).
55 Chief Justice Abrahamson
quotes the Civil Trial Counsel in her dissent from the denial of
Previant's Motion to Reconsider. According to her dissent, the Civil
Trial Counsel asked to be heard by the supreme court for the following
reason:
"We believe that this is a case of significant importance to all
attorneys practicing in the state, regardless of their affiliation with
either the plaintiff's or defense bar. It is our position that this is a
matter that needs to be addressed in an evenhanded way since it affects
both sides dramatically."
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