Firms Urged to Adopt Policies Requiring Management Approval for Sanctions Motions

NEW ORLEANS--Sanction fights are as inevitable for litigators as death and taxes, but the routine nature of these disputes should not lull law firms into a false sense of complacency about engaging in them because laxity can be costly.

That was the warning sounded by a panel of professional liability experts who spoke at the 2012 Aon Law Firm Symposium, which took place here Oct. 10-12.

The speakers advised law firms to adopt policies that would preclude firm litigators from initiating or responding to sanction or disqualification motions without first obtaining the approval of a supervisory attorney or other designated in-house authority. (See box.)

Such reporting policies are desirable, the panelists said, because a firm can face serious liability risks if its members are imprudent in handling sanction motions, disqualification disputes, and other “sensitive litigation matters.”

The panel was moderated by Douglas R. Richmond, who, as managing director in the Professional Services Group of Aon Risk Solutions, Chicago, advises law firms on risk management issues. Richmond was joined by two prominent malpractice defense attorneys: Arthur D. Burger, chair of the professional responsibility group at Jackson & Campbell, Washington, D.C., and Sean M. SeLegue, a partner at Arnold & Porter, San Francisco.

Where the Red Flags Are

Written materials for the sanctions program include a nonexclusive list of eight “litigation decisions or strategies” that Aon has flagged as requiring “special consideration” of whether a firm's action or response should be preceded by a consultation with a higher-up in the firm:  

“1. Filing a motion for sanctions.

“2. A motion for sanctions being filed against the firm or one of our lawyers, or against our client.

“3. Filing a motion to disqualify a lawyer.

“4. A motion for disqualification being filed against our firm or one of our lawyers.

“5. Filing a motion to disqualify a judge or seeking a judge's recusal.

“6. The entry of a default judgment or similar action against a client while we are representing the client in the matter in which the default or action was taken.

“7. Filing an ethics complaint against opposing counsel during the course of litigation.

“8. Any other matter that may expose the firm or one of our lawyers to sanctions, professional discipline, embarrassment, or adverse publicity.”

The program explored a range of issues and recent cases dealing with sanctions and disqualification disputes, and the speakers dispensed practical advice on litigating--or choosing not to litigate--these battles.

Routine v. Sensitive.

Richmond kicked off the discussion by asking whether there was “a category of sanction motions” that can comfortably be entrusted to an attorney of record and need not be brought to the attention of firm management or other in-house colleagues.

Burger replied that most discovery-related motions meet that description. Asked for an example, Burger said that there is no need to “call in the marines” to deal with a sanctions motion sparked by a dispute over the location or timing of a deposition.

SeLegue concurred. “Generally speaking, discovery sanctions motions are routine,” he said.

Richmond then turned his inquiry around: Are there any sanctions motions that should, as a matter of course, be referred up a law firm stovepipe?

Burger identified two broad categories of motions that should receive such treatment: (1) motions that “go to the heart” of the case by “challeng[ing] the factual premise” of a claim or defense, and (2) motions that “have a tendency to put a lawyer and a client in different [i.e., conflicting] positions.”

Case Study.

Burger said that Crawford v. Katz, 32 A.3d 418, 27 Law. Man. Prof. Conduct 775 (D.C. 2011), illustrates the dangers of failing to respond to a sanctions motion that both goes to the heart of a client's claim and tends to create a conflict between a lawyer and client.

The case involved Bernabei & Katz (B&K), an employment discrimination firm retained to represent Dwight W. Crawford, a former Black Entertainment Television (BET) employee who said he was fired after he uncovered financial fraud at the company.

B&K filed a wrongful discharge action on Crawford's behalf in 2000. As part of its defense, BET filed a sanctions motion against B&K under D.C. Super. Ct. Civ. R. 11. The motion argued that the firm failed to make a reasonable inquiry into the factual soundness of their client's financial misconduct allegations.

It soon became clear that Crawford's case was weak, the court said, and B&K urged him to settle in a letter that stated: “[Y]our case is much weaker than we believed it to be at the time we filed the lawsuit. This is due not only to the relatively consistent version of events that BET and its auditors have presented,” the letter added, “but also to the fact that your own writings and testimony have undermined the version of the events that forms the basis for your claim.”

However, Crawford was not informed about the Rule 11 motion that had been filed against B&K. That omission would subsequently form part of the basis of a negligence suit that Crawford filed against B&K. Among other claims, Crawford alleged that B&K acted negligently by failing to disclose the sanctions motion, because the mere existence of the motion “created a conflict between [B&K's] personal, financial interests and [its] duty to zealously represent [Crawford].”

Key Lesson.

A trial judge dismissed Crawford's lawsuit against the firm. Among other things, the court said that Crawford failed to adequately support his claim that B&K's failure to disclose the Rule 11 motion amounted to professional negligence.

The appeals court disagreed. It ruled that expert testimony provided by Professor Geoffrey C. Hazard was sufficient to support Crawford's claim for purposes of avoiding summary judgment. Hazard averred that B&K's failure to explain the conflict of interest created by BET's Rule 11 motion constituted a “substantial departure from recognized standards of professional conduct.”

According to Richmond, the key lesson from Crawford is that a conflict issue arising out of a sanction motion “has to be analyzed quickly.” Lawyers often make the unwarranted assumption that their interests are aligned with those of their clients, Richmond said.

Crawford is instructive, he added, because it shows that although the interests of client and counsel may be aligned at the outset of a representation, sanctions motions have a tendency to create adversity where none existed.

By Samson Habte  

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.

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