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Delaware Supreme Court Settles Attorney Sanction Rules

Authored by Edward M. McNally
This article was originally published in the Delaware Business Court Insider | November 7, 2012

The Delaware Supreme Court on October 22 decided when and how Delaware lawyers may be sanctioned for the way they conduct litigation. For the first time, that court firmly held that the so-called "objective test" applies in Delaware to determine if a lawyer's conduct is sanctionable under Rule 11. Second, the court held that an attorney is entitled to a hearing where he is able to defend himself before a sanction is imposed. Because the lawyer conduct involved did not violate the objective test, the trial court's sanction was vacated. The decision in Crumplar v. Delaware Superior Court has important implications for the practice of law in Delaware's courts.

The Delaware Superior Court had levied a $25,000 sanction for two reasons. First, the attorney cited an unreported decision to support part of his argument in his brief opposing a motion for summary judgment. The case he cited had actually been settled and not decided as he claimed. Second, in another case, that attorney failed to distinguish opposing authority cited by his opponent's brief. The Superior Court, without a hearing, imposed a $25,000 sanction. The Superior Court judge was concerned that the attorney's conduct caused the court trouble in dealing with the heavy workload of the asbestos case docket. Hence, the court meant to send a signal on how attorneys should conduct themselves.

The Supreme Court held that neither conduct was sanctionable under the circumstances. The attorney's first mistake followed his reasonable effort to cite an existing decision in his favor, but which he misnamed in his brief. The opposing party was not prejudiced, as the mistaken citation was promptly disclosed to be wrong. Similarly, the failure to distinguish opposing authority was not prejudicial to the opposing party when the authority was duly noted in the other side's brief.

The Supreme Court noted that only conduct that impedes the judicial proceedings may be the basis for a Rule 11 sanction. Violations of the Rules of Professional Conduct that do not affect the proceedings should be referred to the Office of Disciplinary Counsel for review instead of a Rule 11 sanction hearing. However, a Rule 11 sanction may be imposed if the conduct does unfairly burden the opposing party and the court, such as by "raising factually baseless" claims "without citing any authority whatsoever for the claim."

Finally, the Supreme Court held that an attorney is entitled to notice and a fair hearing where he may defend himself, before a Rule 11 sanction may be imposed. That hearing must also consider the attorney's ability to pay as a significant factor in setting the amount of the sanction. The Superior Court gave notice to the attorney and permitted him to file a written response to that court's order to show cause. That was not enough, however, to satisfy the attorney's right to a hearing.

There are several important consequences that we expect to come about as a result of the Supreme Court's decision. First, lawyers will be more careful about what they tell a Delaware court. Previously, the Delaware Superior Court often applied a subjective test to determine if the lawyer sincerely believed he or she was acting properly. That lenient standard will no longer apply. As the Supreme Court put it, "Delaware demands more from attorneys than pure hearts and empty heads."

Second, we should expect Delaware judges to use the judicial pulpit to correct lawyer misconduct. The Supreme Court hinted at this in its opinion when it noted that there are "many informal penalties on attorneys who do not make thorough arguments." Indeed, that has happened before when the Supreme Court issued an opinion expressing its disdain for deposition misconduct by a famous lawyer. In Delaware, at least, that sort of deposition misconduct largely disappeared after the Supreme Court spoke up.

This judicial outspokenness is both necessary and preferable to a Rule 11 hearing, in most cases. Delaware is a small state with a small bench and bar. Criticism by any judge will sting any Delaware lawyer. He or she knows that all the other judges and his or her fellow members of the bar will know of that criticism. Damage to reputation is worse than a monetary sanction for it is harder to recoup. Thus, a word from the bench will not only correct the immediate problem, but avoid repetition of that problematic conduct by others.

Moreover, once the Delaware lawyers "get it" on how the judges expect them to act in any specific litigation situation, they will see to it that out-of-town counsel also follow the rules. Delaware courts, both state and federal, require a Delaware lawyer sign all filings and attend all hearings, even if a non-Delaware lawyer drafts the filing or conducts the hearing for the client. The Delaware lawyer will be held accountable if his or her non-Delaware colleague breaches the rules. This strongly encourages insistence the rules be followed, at least by all the Delaware lawyers who regularly litigate in our courts.

Judges do need to speak out. Lawyers are occasionally out of line and impose undue burdens on already busy judges. By raising the level of conduct of a few misguided lawyers, the standard of conduct for the bar as a whole will rise as well. Litigants will also gain greater respect for our justice system as a result. The Court of Chancery is now often using rulings from the bench, along with its recently published guidelines, to instruct lawyers on how to conduct litigation in that court.

Finally, however, a word of caution is in order. A judge's barb may permanently scar. Part of justice is mercy for the mistakes of others. Wit, when used properly, is preferable to scorn. Abuse, even by a judge, debases the abuser, too. We do trust our Delaware judges to do right by those of us who struggle to do our best, but who sometimes come up short.

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