USCA1 Opinion
[Systems note: Appendix available from Clerk's Office.]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 92-2030
ROBERTO NAVARRO-AYALA, ET AL.,
Plaintiffs, Appellees,
v.
RAFAEL HERNANDEZ-COLON, GOVERNOR
OF THE COMMONWEALTH OF PUERTO RICO, ET AL.,
Defendants, Appellants.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Hector M. Laffitte, U.S. District Judge]
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Before
Breyer, Chief Judge,
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Torruella and Boudin, Circuit Judges.
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Carlos A. Del Valle Cruz with whom Ramirez & Ramirez, Jorge E.
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Perez Diaz, Secretary of Justice, Commonwealth of Puerto Rico, and
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Anabelle Rodriguez, Solicitor General, Commonwealth of Puerto Rico,
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were on brief for appellants.
Carlos Garcia Gutierrez with whom Armando Cardona Acaba, Puerto
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Rico Legal Services, Inc., and Luis M. Villaronga were on brief for
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appellees.
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August 20, 1993
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BREYER, Chief Judge. Kenneth Colon, an attorney,
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appeals a $500 sanction that the district court imposed
after finding that he had violated Rule 11 of the Federal
Rules of Civil Procedure. The district court based the
sanction upon a motion that Colon signed, on behalf of the
Commonwealth of Puerto Rico, which asked the court to reduce
the compensation paid to a special master. After reviewing
the motion and the record, we find no violation of Rule 11.
We conclude that the sanction is without basis in law, and
reverse the order imposing it.
I
Background
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The sanction arose in the context of lengthy
litigation seeking to reform part of Puerto Rico's mental
health system. See, e.g., Navarro-Ayala v. Hernandez-Colon,
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956 F.2d 348 (1st Cir. 1992). In 1974, a group of patients
at Rio Piedras Hospital filed suit, claiming that conditions
there violated the federal Constitution. In 1977, the
district court entered a Stipulation, agreed upon by the
parties, which prescribes reforms and sets standards for
care and treatment. In 1985, the district court appointed a
Special Master who, assisted by a staff, was to monitor
compliance with the Stipulation. In 1987, the district
court began to interpret the Stipulation as applying to
other hospitals in Puerto Rico (at least insofar as they
treated patients transferred from Rio Piedras). The Special
Master began to monitor treatment conditions and seek
compliance with the Stipulation at, at least, one other
hospital.
In late 1991, this court held that the Stipulation
applied only to conditions at Rio Piedras; in the court's
view, the parties had not agreed to its application
elsewhere. Navarro-Ayala v. Hernandez-Colon, 951 F.2d 1325,
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1346 (1st Cir. 1991) ("Navarro I"). The court's opinion also
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observed that Rio Piedras Hospital seemed to be close to
achieving full compliance with the Stipulation's conditions.
Id. at 1329 n.3. About one month later, in January 1992,
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the district court reappointed the Special Master, and his
monitoring staff, to serve until the end of the year.
In February 1992, the Commonwealth filed the
motion, signed by attorney Colon, that is the subject of
this appeal. The motion asked the district court to
reconsider its January 1992 reappointment of the Special
Master, to reduce the length of the term of that
reappointment, to reduce the level of compensation paid the
Master and his staff, and to relieve the Commonwealth of the
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burden of paying for a year's worth of monitoring services
in advance. After considering and rejecting the motion, the
district court decided that its signer had violated Rule 11.
The district court ordered a sanction of $500. The
sanctioned attorney, Kenneth Colon, now appeals.
II
Review of the Sanction Order
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Under Rule 11 (in relevant part), an attorney's
signature on a motion paper certifies that "to the best of
the signer's knowledge, information and belief formed after
reasonable inquiry, [the motion] 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
. . ." Fed. R. Civ. P. 11. The district court concluded
that the signer of the motion paper before us failed in his
duty to undertake reasonable inquiry. In reviewing that
holding, we must take account of that court's greater
familiarity with relevant context, and "apply an abuse-of-
discretion standard." Cooter & Gell v. Hartmarx Corp., 496
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U.S. 384, 399 (1990). See also Muthig v. Brant Point
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Nantucket, Inc., 838 F.2d 600, 603 (1st Cir. 1988).
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Applying that standard, we have found no lawful basis for
applying a sanction in this case.
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The reader can most easily understand why we reach
this conclusion by examining attorney Colon's motion paper,
attached to this opinion as an Appendix. Just what is it
about this paper, one might rightly ask, that would violate
Rule 11? The document makes three requests. First, the
motion asks the district court to reappoint the Special
Master to a term shorter than an additional (nearly) full
year. It relies on the fact that our then-recent Navarro I
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opinion both 1) limited the Stipulation's scope to
conditions at Rio Piedras Hospital, and 2) referred to Rio
Piedras' conditions as close to compliance. In light of
those reasons, the motion asserts that the Master's duties
under the Stipulation may be less extensive in the coming
year than the district court had previously thought. And,
it claims that the parties' briefs discussing the
implications of Navarro I (scheduled for submission in mid-
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March) would clarify the more limited scope of those future
duties.
Second, the motion asks the district court not to
require the Commonwealth to "prepay[]" a year's worth of
monitoring services, for such payment would be "premature"
given that "the need for and extent of these services has
not been defined." It adds that there "is no reason why the
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required monitoring services cannot be compensated after
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their performance . . . ." As authority, it cites Rule
53(a) of the Federal Rules of Civil Procedure, which gives
federal courts broad authority to structure a special
master's compensation. See Fed. R. Civ. P. 53(a)
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(compensation shall be paid "as the court may direct").
Third, the motion opposes the rates of
compensation for the Special Master and staff set forth in
the court-approved budget. The motion, in an Appendix A,
presents a chart which says, in effect, that the
Commonwealth compensates its judges, inferior judicial
officers, and comparable health care personnel at much lower
rates of pay. And the motion, in referring to Rule 53(a),
makes clear that the district court has wide discretion to
set the proper amount of compensation. See Fed. R. Civ. P.
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53(a) (compensation "shall be fixed by the court").
The district court based its Rule 11 finding
primarily upon the motion's third request, seeking a
reduction in compensation. The January 1992 order
reappointing the Special Master provided for compensation at
the following hourly rates:
Special Master $100.00
Special Master's assistant 30.00
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Psychiatrist 75.00
Psychologist 75.00
Social worker 60.00
Occupational therapist 25.00
Quality assurance director 25.00
The appellant's motion in opposition set forth (in its
Appendix A) a different and much lower set of hourly rates
at which, it said, the Commonwealth paid comparable
employees:
Superior Court judge $27.00
Superior Court law clerk 10.00
Psychiatrist 11.20
Psychologist 11.20
Social worker 9.80
Occupational therapist 7.90
Quality assurance director 7.90
The district court took objection to this latter schedule.
The court said that this schedule did not reflect the pay
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that many health care professionals in the Commonwealth's
employ actually receive. The court said further that Colon
had failed to make a reasonable prefiling inquiry into the
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actual pay of such professionals before suggesting Appendix
A's pay scales, which were "drastically below the staff's
current rates." These suggested pay scales, the court
added, were "insulting to the professionals on the Special
Master's staff."
In our view, the record does not support the
district court's conclusion that Rule 11 required attorney
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Colon to make a further inquiry. For one thing, the object
of Rule 11's inquiry requirement is to avoid filings that
are baseless. See Fed. R. Civ. P. 11 (signature certifies
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that "to the best of the signer's knowledge . . . formed
after reasonable inquiry, [the motion] is well grounded in
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fact and is warranted" by law) (emphasis added); Cooter &
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Gell, 496 U.S. at 393 ("the central purpose of Rule 11 is to
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deter baseless filings"). Here, the inquiry that the
district court believed the appellant should have made would
not have shown the motion to be baseless (i.e. legally
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unwarranted, or without adequate factual grounding). It
would simply have weakened, without destroying, the
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Commonwealth's argument.
More specifically, the inquiry would have shown 1)
that the motion's Appendix A accurately reflects an official
Commonwealth pay scale, set by its central personnel agency,
for permanent health care professionals, but 2) that the
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Commonwealth hires many (perhaps most) health care
professionals, not as permanent employees, but under special
contractual arrangements at higher rates. In light of that
showing, the Commonwealth might have found it more
difficult, but not at all impossible, to proceed with its
claim for lower compensation on the basis of Appendix A.
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The legal standards governing special master compensation
leave much to the district court's discretion. Fed. R. Civ.
P. 53(a). And, an effort to tie the Special Master and
staffs' compensation more directly to judicial compensation
and to an "official" (though frequently skirted)
Commonwealth pay scale is plausible, and within the realm of
reasonable argument, even if that argument eventually would
not carry the day. Cf. Newton v. Consolidated Gas Co., 259
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U.S. 101, 105 (1922) (special master's compensation should
be "liberal, but not exorbitant"; salaries "for judicial
officers performing similar duties are valuable guides," but
a "higher rate of compensation is generally necessary").
For another thing, the motion paper's failure to
set forth a more complete account of Commonwealth pay
practices did not impose significant additional costs upon
the opposing party. See, e.g., Unioil, Inc. v. E.F. Hutton &
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Co., 809 F.2d 548, 557 (9th Cir. 1986) (cost of foreseeable
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response by opposing parties relevant for determining what
constitutes reasonable inquiry), cert. denied, 484 U.S. 822
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(1987); Jerold S. Solovy et al., Sanctions in Federal
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Litigation 2.04 at 2-18 (1991) (magnitude of burden in
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responding to filing affects thoroughness of investigation
that must be performed). That party, the Special Master,
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and the Master's staff, all had ready access to the relevant
compensation-related facts and quickly brought them to the
court's attention. Of course, presenting these facts did
cost the opposing party some time and effort. But Rule 11
normally does not require one party to uncover and to set
forth the facts that support the other side's position. Cf.
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Continental Air Lines, Inc. v. Group Systems International
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Far East, Ltd., 109 F.R.D. 594, 598 (C.D. Cal. 1986) (Rule
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11 does not impose general duty to call all important facts
to court's attention).
Finally, the motion, read fairly and as a whole,
contains no significant false statement that significantly
harmed the other side. We emphasize the word "significant"
because the district court found one sentence literally
false. That sentence says that the "rates of pay" for the
Master's staff "outpace by a factor of 6 or more to 1, the
rates of pay of their counterparts in the Public Health
System." This statement is not literally false, if one uses
the "official" pay scale for permanent employees as a
comparison; in light of actual pay practices, we would
characterize it as "overstatement" or "one-sided
characterization." But were it literally inaccurate, it
would not matter, for Rule 11 neither penalizes
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overstatement nor authorizes an overly literal reading of
each factual statement. Forrest Creek Assoc., Ltd. v.
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McLean Sav. and Loan Ass'n, 831 F.2d 1238, 1244-45 (4th Cir.
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1987) (Rule 11 "does not extend to isolated factual errors,
committed in good faith, so long as the pleading as a whole
remains `well grounded in fact.'"); Gregory P. Joseph,
Sanctions: The Federal Law of Litigation Abuse 9(D) at
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133-34 (1989) ("The focus of . . . Rule [11] is the court
paper as a whole, not individual phrases or sentences
construed separately or taken out of context. . . . [A]t
some level of analysis, every unsuccessful litigation paper
contains an unsupported allegation or flawed argument").
The district court provided several other
justifications for its sanctions. It said that Colon, in
the motion paper, (1) should not have used the word
"bilking," (2) should not have called the payments
"burdensome" without first investigating the actual "effects
of these payments on the Department of Health's budget," (3)
should not have said the litigation was in the "final stage
of proceedings" without asking government officials "if full
compliance and an end to this case were in fact close at
hand," and (4) should not have asked to change the budgeting
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process without first finding out "how the Special Master
had been paid in the past."
In our view, these circumstances do not justify a
Rule 11 sanction, whether considered separately or all
together. (1) We concede that the word "bilking" is
pejorative and, insofar as it implies cheating, without
justification. We also concede the obvious point that
argument made to a judge is more appropriate (and usually
works better) without pejoratives. But to find support for
a Rule 11 sanction in appellant's use of a single, rather
mild (albeit unjustified) pejorative, is to impose a
standard of perfection that few lawyers or judges would
meet. We are not aware of any reason or authority
suggesting that Rule 11 imposes such a standard.
(2) The motion paper does call the Special
Master's budget "burdensome," but we do not understand
where, or how, Rule 11 forbids such a characterization. No
one disputes that the total amount of the Special Master's
court-approved budget is $171,000. Nothing in the record
suggests that the Commonwealth found this amount
insignificant; nor do we understand either how further
consultation with government officials would have led
attorney Colon to change the characterization, or how the
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use of the word "burdensome" made a significant difference
to the litigation.
(3) Neither do we understand how, or why, Rule 11
would forbid attorney Colon to characterize the litigation
as in the "final stage of proceeding." Our opinion in
Navarro I curtailed the scope of the Stipulation and also
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observed that "conditions" at Rio Piedras may be "largely .
. . in compliance." The motion paper made clear that the
Commonwealth would soon file a brief arguing in favor of
significantly limiting the Special Master's monitoring
activity. Thus the statement seems to amount to an
argument, reasonable in its context, that might, or might
not, help convince a court. The record does not make clear
how further "inquiry" or further consultation with
government officials would have shown the argument to have
lacked adequate "ground[ing] in fact."
(4) We agree with the district court that the
motion paper, in requesting that "monitoring services be
compensated after their performance," does not take account
of the fact that the current budgeting system provided for
disbursement of budget funds (on a monthly basis) to the
Special Master only after he performed services.
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Nonetheless, we do not see how the motion's possible
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misstatement can justify a sanction. Read fairly, and in
context, the paper's request indicates that the Commonwealth
objected to having to budget for a year's worth of
monitoring services in advance, a portion of which might
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turn out to have been unnecessary. At worst, the paper's
statement reflects a minor, technical confusion about the
budgeting process, and one which apparently caused no harm.
(After all, the opposing party, the Special Master, and the
court, all understood, and could readily explain, how
current budgeting worked.) See Forrest Creek Associates,
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Ltd., 831 F.2d at 1244-45; Joseph, Sanctions 9(D) at 133-
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34.
In sum, the district court, at most, could have
found a few isolated instances of noncritical statements
that further inquiry might have shown to be inaccurate or
overstated. That further inquiry would not have shown the
motion's requests to have been baseless. And, failure to
make that inquiry did not unfairly impose upon the other
party some special litigation cost or burden. This case
differs significantly from the kinds of cases in which this
court has upheld a district court's imposition of Rule 11
sanctions. Cf. Muthig, 838 F.2d at 605 (no reasonable
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inquiry where counsel could have readily learned from
clients facts that would have shown their claim for
intentional infliction of emotional distress lacked
validity); Ryan v. Clemente, 901 F.2d 177, 179-81 (1st Cir.
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1990) (sanctioning harmful allegation that state officials
failed to investigate illegal scheme where available record
showed the contrary); Cruz v. Savage, 896 F.2d 626, 632-34
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(1st Cir. 1990) (sanctioning attorney for unreasonably
bringing and pursuing nine frivolous claims, including some
with either no supporting evidence or where record directly
contradicted claim); Bay State Towing Co. v. Barge American
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21, 899 F.2d 129, 131 (1st Cir. 1990) (no reasonable inquiry
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where extensive record contains nothing to suggest why or
how a person could have believed most of filing's claims).We
do not see how the district court could find a failure to
undertake the "reasonable inquiry" that Rule 11 requires.
The order of the district court is
Reversed.
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NOTE: See Slip Opinion for copy of Appendix.
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