Kathryn S. Barnhill, Vs. Iowa District Court For Polk County

IN THE SUPREME COURT OF IOWA
No. 06–0163
Filed May 1, 2009
KATHRYN S. BARNHILL,
Plaintiff,
vs.
IOWA DISTRICT COURT FOR POLK COUNTY,
Defendant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Douglas F.
Staskal, Judge.
Attorney seeks further review after court of appeals upheld
sanctions ordered against her. WRIT ANNULLED.
Kathryn S. Barnhill of Barnhill & Associates P.C., West Des
Moines, pro se.
Wade R. Hauser III of Ahlers & Cooney, P.C., Des Moines, for
defendant.
2
STREIT, Justice.
An Iowa attorney brought a class-action lawsuit on behalf of
homeowners against the manufacturer of roofing shingles and its
president. The action asserted seven theories of recovery, most of which
were based in contract. After the district court granted summary
judgment in favor of the manufacturer and its president, the president
requested sanctions against the attorney who filed the class action. The
president argued sanctions were appropriate because the claims against
him lacked merit both in law and in fact and cost him considerable
expense to defend. The district court agreed and sanctioned the attorney
$25,000. The attorney filed a petition for writ of certiorari challenging
the court’s sanction. The court of appeals found no error and annulled
the writ. Because we conclude the district court did not abuse its
discretion in imposing sanctions, we agree the writ should be annulled.
I. Facts and Prior Proceedings.
The underlying controversy in this case arose from allegations that
Tamko Roofing Products, Inc. manufactured and sold defective roofing
shingles that were installed on the class-action plaintiffs’ homes or
structures by Jerry’s Homes, Inc. In 1998, Jerry’s Homes, represented
by attorney Kathryn Barnhill, filed suit against Tamko in the Iowa
district court. The purpose of the lawsuit was to either compel Tamko to
repair the roofs on over 400 houses built by Jerry’s Homes or, in the
alternative, recover sufficient damages for Jerry’s Homes to make the
repairs itself. Jerry’s Homes asserted Tamko promised it would repair
the damages to the shingles when problems first arose with the quality of
the shingles. The case was removed to federal court based on diversity.
Most of the claims were dismissed on summary judgment, including the
claims for breach of express and implied warranty and fraud. A jury
3
returned a verdict in favor of Jerry’s Homes for $1.6 million on the
promissory estoppel claim, but the court granted Tamko’s post-trial
motion to vacate the verdict. The district court’s ruling was affirmed on
appeal. See Jerry’s Homes, Inc. v. Tamko Roofing Prods., Inc., 40 Fed.
App’x 326 (8th Cir. 2002).
In March 2001, Barnhill filed a class-action lawsuit in an Iowa
district court against Tamko and David Humphreys, Tamko’s president
and CEO. The class consisted of people who had either directly or
indirectly purchased the allegedly defective shingles, including through
Jerry’s Homes. Jerry’s Homes itself was a representative plaintiff. The
petition (after four amendments) asserted the following claims against
Tamko and Humphreys: (1) breach of express warranty, (2) breach of
implied warranty, (3) fraudulent misrepresentation, (4) negligent
misrepresentation, (5) rescission due to impermissible liquidated
damages, (6) rescission due to unconscionability of express warranty,
and (7) violation of a Missouri statute prohibiting unfair business
practices. 1 The petition asserted Humphreys “at all times relevant hereto
directed and controlled the actions of [Tamko] with respect to the
allegations herein.” For the most part, the allegations made no
distinction between Tamko and Humphreys.
Following discovery, the plaintiffs filed a motion for class
certification, and defendants filed motions for summary judgment on
every allegation of plaintiffs’ petition. Before ruling on the summary
1Tamko is a Missouri corporation located in Joplin, Missouri. Although the
Missouri statute was not expressly pled against Humphreys, there is a reference in the
petitions that Humphreys should be liable for punitive damages for violating the
statute. Further, during the sanctions hearing, Barnhill admitted that she should have
included Humphreys’ name in the petition under that count and that she argued
Humphreys violated the statute in every hearing.
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judgment motions, the court certified the case as a class action against
both defendants. We allowed a limited remand to permit the district
court to rule on the pending motions for summary judgment. On
remand, the district court dismissed six of the seven counts against
Humphreys and a substantial part of the case against Tamko. In
particular, the court dismissed the claims of Jerry’s Homes and another
plaintiff on grounds of res judicata. Fraudulent misrepresentation was
the only claim remaining against Humphreys. The appeal then
proceeded with the court of appeals affirming the dismissal of the six
claims against Humphreys and reversing the district court’s failure to
grant summary judgment on the final claim of fraudulent
misrepresentation. Sharp v. Tamko Roofing Prods., Inc., No. 02–0728
(Iowa Ct. App. Nov. 15, 2004). At this point, all claims against
Humphreys were dismissed on summary judgment. The district court
subsequently granted summary judgment in favor of Tamko on the two
remaining issues. The court of appeals affirmed the dismissal of these
claims. Sharp v. Tamko Roofing Prods., Inc., No. 05–1372 (Iowa Ct. App.
Oct. 11, 2006).
During the pendency of these appeals, Humphreys filed a motion
for sanctions against all of the named plaintiffs and their attorney,
Barnhill, pursuant to Iowa Code section 619.19 (2001) and Iowa Rule of
Civil Procedure 1.413(1). He asserted: “None of the claims pursued by
plaintiffs in this case against Humphreys were well grounded in fact or
warranted by existing law or a good faith argument for the extension,
modification, or reversal of existing law.”
5
The district court 2 found Barnhill violated rule 1.413 with respect
to each and every claim against Humphreys, although it did not sanction
her for the fraudulent misrepresentation claim. It sanctioned Barnhill
and ordered her to pay Humphreys $25,000 of the nearly $150,000 he
had incurred in attorneys’ fees defending the case. In its order, the
district court stated:
In summary, the pleadings and other documents filed by
Barnhill in this case have in general such a confusing,
convoluted, self-contradictory and elusively vague,
ambiguous, indirect and constantly shifting quality as to
compel the conclusion that the case was made up as it went
along. It is as though Barnhill said whatever needed to be
said at each step to just get past the moment, whether there
was a legitimate basis for saying it or not. In the process,
Barnhill has violated Rule 1.413(1).
Barnhill filed a petition for writ of certiorari. We transferred the
case to the court of appeals, which annulled the writ. On further review,
we do so as well.
II. Scope of Review.
We review a district court’s decision on whether to impose
sanctions for an abuse of discretion. Mathias v. Glandon, 448 N.W.2d
443, 445 (Iowa 1989). The proper means to review a district court’s
order imposing sanctions is by writ of certiorari. Id. Certiorari is a
procedure to test whether a lower board, tribunal, or court exceeded its
proper jurisdiction or otherwise acted illegally. Iowa R. Civ. P. 1.1401.
“Relief through certiorari is strictly limited to questions of jurisdiction or
illegality of the challenged acts.” French v. Iowa Dist. Ct., 546 N.W.2d
911, 913 (Iowa 1996). Although our review is for an abuse of discretion,
2The motions for summary judgment and the motion for sanctions against
Barnhill were not before the same judge. Judge Rosenberg ruled on the summary
judgment motions. Judge Staskal ruled on Humphreys’ motion for sanctions and
determined the appropriate sanction.
6
we will correct erroneous application of the law. Weigel v. Weigel, 467
N.W.2d 277, 280 (Iowa 1991). The district court’s findings of fact,
however, are binding on us if supported by substantial evidence.
Zimmermann v. Iowa Dist. Ct., 480 N.W.2d 70, 74 (Iowa 1992).
III. Merits.
A. Rule 1.413. The district court found Barnhill committed
numerous violations of Iowa Rule of Civil Procedure 1.413. That rule
states in pertinent part:
Counsel’s signature to every motion, pleading, or other paper
shall be deemed a certificate that: counsel has read the
motion, pleading, or other paper; that to the best of counsel’s
knowledge, information, and belief, formed after reasonable
inquiry, it 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; and that it is not
interposed for any improper purpose, such as to harass or
cause an unnecessary delay or needless increase in the cost
of litigation. . . . If a motion, pleading, or other paper is
signed in violation of this rule, the court, upon motion or
upon its own initiative, shall impose upon the person who
signed it, a represented party, or both, an appropriate
sanction, which may include an order to pay the other party
or parties the amount of the reasonable expenses incurred
because of the filing of the motion, pleading, or other paper,
including a reasonable attorney fee.
Iowa Code section 619.19 is identical in substance.
The rule creates three duties known as the “reading, inquiry, and
purpose elements.” Weigel, 467 N.W.2d at 280. Each duty is
independent of the others, and a breach of one duty is a violation of the
rule. Harris v. Iowa Dist. Ct., 570 N.W.2d 772, 776 (Iowa Ct. App. 1997).
If a document is signed in violation of rule 1.413, the court is required to
impose an appropriate sanction. See Mathias, 448 N.W.2d at 445 (“We
are mindful the rule and statute directs the court to impose a sanction
when it finds a violation.”).
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Compliance with the rule is determined as of the time the paper is
filed. Weigel, 467 N.W.2d at 280. Counsel’s conduct is measured by an
objective, not subjective, standard of reasonableness under the
circumstances. Id. at 281. “The test is ‘reasonableness under the
circumstances,’ and the standard to be used is that of a reasonably
competent attorney admitted to practice before the district court.” Id.
(citations omitted) (quoting Golden Eagle Distrib. Corp. v. Burroughs
Corp., 801 F.2d 1531, 1536 (9th Cir. 1986)). The reasonableness of the
signer’s inquiry into the facts and law depends on a number of factors,
including, but not limited to: (a) the amount of time available to the
signer to investigate the facts and research and analyze the relevant legal
issues; (b) the complexity of the factual and legal issues in question; (c)
the extent to which pre-signing investigation was feasible; (d) the extent
to which pertinent facts were in the possession of the opponent or third
parties or otherwise not readily available to the signer; (e) the clarity or
ambiguity of existing law; (f) the plausibility of the legal positions
asserted; (g) the knowledge of the signer; (h) whether the signer is an
attorney or pro se litigant; (i) the extent to which counsel relied upon his
or her client for the facts underlying the pleading, motion, or other paper;
(j) the extent to which counsel had to rely upon his or her client for facts
underlying the pleading, motion, or other paper; and (k) the resources
available to devote to the inquiries. Mathias, 448 N.W.2d at 446–47
(citing ABA Section on Litigation, Standard and Guidelines for Practice
under Rule 11 of the Federal Rules of Civil Procedure (1988), reprinted in
121 F.R.D. 101, 114 (1988)).
One of the primary goals of the rule is to maintain a high degree of
professionalism in the practice of law. Weigel, 467 N.W.2d at 282. The
rule is intended to discourage parties and counsel from filing frivolous
8
suits and otherwise deter misuse of pleadings, motions, or other papers.
Hearity v. Iowa Dist. Ct., 440 N.W.2d 860, 864 (Iowa 1989). Sanctions
are meant to avoid the general cost to the judicial system in terms of
wasted time and money. Breitbach v. Christenson, 541 N.W.2d 840, 846
(Iowa 1995). “The ‘improper purpose’ clause seeks to eliminate tactics
that divert attention from the relevant issues, waste time, and serve to
trivialize the adjudicatory process.” Hearity, 440 N.W.2d at 866 (quoting
Mark S. Cady, Curbing Litigation Abuse and Misuse: A Judicial Approach,
36 Drake L. Rev. 483, 499 (1987) [hereinafter Cady]). However, a party
or his attorney need not act in subjective bad faith or with malice to
trigger a violation. Perkins v. Gen. Motors Corp., 129 F.R.D. 655, 658
(W.D. Mo. 1990). A party or his attorney cannot use ignorance of the law
or legal procedure as an excuse. Id. The rule “ ‘was designed to prevent
abuse caused not only by bad faith but by negligence and, to some
extent, professional incompetence.’ ” Id. (quoting Gaiardo v. Ethyl Corp.,
835 F.2d 479, 482 (3d Cir. 1987)). Moreover, because rule 1.413 is
based on Federal Rule of Civil Procedure 11, we look to federal decisions
applying rule 11 for guidance. Mathias, 448 N.W.2d at 445.
B. Application. With these principles in mind, we turn to the
claims Barnhill asserted against Humphreys on behalf of the plaintiffs.
We must determine whether the district court abused its discretion in
concluding a reasonably competent Iowa attorney would not have
brought these claims and that $25,000 is an appropriate sanction.
1. Warranty claims. Barnhill alleged Humphreys breached express
and implied warranties made by Tamko. The district court found there
was no reasonable basis to assert a breach-of-warranty claim against
Humphreys because a corporate officer is not ordinarily liable for the
contracts of the corporation. See Bossuyt v. Osage Farmers Nat’l
9
Bank, 360 N.W.2d 769, 778 (Iowa 1985). Barnhill never argued the
court should ignore Tamko’s corporate existence. See In re Marriage of
Ballstaedt, 606 N.W.2d 345, 349 (Iowa 2000) (discussing the factors that
must be proven in order to “pierc[e] the corporate veil”).
Instead, she asserted these warranty claims were legitimate
against Humphreys because they were based in tort rather than contract
law. While it is true a corporate officer is individually liable for the torts
he commits in his official capacity, see Haupt v. Miller, 514 N.W.2d 905,
908 (Iowa 1994), it is not true that a breach of warranty claim is founded
in tort law.
Barnhill quoted from Tomka v. Hoechst Celanese Corp., 528
N.W.2d 103 (Iowa 1995), to support her contention that a breach of
warranty can be based on a tort theory:
[C]ontract law protects a purchaser’s expectation interest
that the product received will be fit for its intended use. The
essence of products liability law is that the plaintiff has been
exposed, through a dangerous product, to a risk of injury to
his person or property. As the Wisconsin Supreme Court
summarized, “defects of suitability and quality are redressed
through contract actions and safety hazards through tort
actions.”
Tomka, 528 N.W.2d at 107 (citations omitted) (quoting Northridge Co. v.
W.R. Grace & Co., 471 N.W.2d 179, 185 (Wis. 1991)).
No reasonably competent attorney would conclude, based on this
passage, that a breach of warranty can be based on a tort theory. In
Tomka, this court was simply distinguishing warranty claims, which are
based on contract, from product-liability claims, which are based on tort
law. Id. It was not creating or implicitly accepting “tort-warranty
theories” as Barnhill alleges. In fact, the very next sentence of the
opinion makes clear breach-of-warranty claims are contractual claims:
“We think the damage sustained by Tomka here clearly falls within
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contract-warranty theories, not tort theories.” Id. (emphasis added).
Thus, the district court correctly concluded Barnhill violated rule 1.413
when she asserted warranty claims against Humphreys.
2. Claims based on rescission. Likewise, it was inappropriate for
Barnhill to allege rescission claims against Humphreys, which are
obviously contract claims. Notably, Barnhill did not even address the
rescission claims in her brief to this court.
3. Fraudulent misrepresentation claim. Barnhill also pursued a
claim for fraudulent misrepresentation against Humphreys. The district
court did not grant Humphreys’ motion for summary judgment on the
issue of fraudulent misrepresentation; however, the court of appeals did.
Although the district court, in ruling on Humphreys’ motion for
sanctions, found “the manner in which this claim was pled against
Humphreys violated rule 1.413 because Barnhill pled facts that were
literally untrue,” the court did not sanction Barnhill for bringing the
fraudulent misrepresentation claim. As the court noted, “Humphreys
would have had to defend against the fraudulent misrepresentation claim
in any event,” because the district court did not dismiss this claim on
summary judgment.
4. Negligent misrepresentation claim. On behalf of the plaintiffs,
Barnhill also pursued a claim of negligent misrepresentation against
Humphreys. However, a negligent misrepresentation claim may only be
brought against “a person in the profession or business of supplying
information.” Meier v. Alfa-Laval, Inc., 454 N.W.2d 576, 581 (Iowa 1990).
The cause of action is not available against product manufacturers or
product sellers who supply information about the product in connection
with its sale. Id.; accord Haupt, 514 N.W.2d at 910. Humphreys’
attorney sent Barnhill a letter in August 2001 (early in the litigation
11
process), advising her of the Meier case and urging her to dismiss the
negligent misrepresentation claim as it was contrary to Iowa law.
Barnhill claimed she was justified in pursuing a negligence claim
against Humphreys because Tamko maintained an in-house testing
laboratory, which reported directly to Humphreys. To submit a warranty
claim, Tamko customers were required to send one of their shingles to
Tamko’s labs for testing. Barnhill argued the lab committed negligent
misrepresentation when it provided plaintiffs with lab results indicating
no evidence of manufacturing defect.
There are several problems with Barnhill’s argument. First, she
wrongly cites Burbach v. Radon Analytical Laboratories, Inc., 652 N.W.2d
135 (Iowa 2002), for the proposition that “[t]he Iowa Supreme Court has
held testing laboratories are in the business of supplying information.”
Burbach had nothing to do with testing laboratories. Rather, in that
case, we held a home inspection company (with a name that happened to
include the word “laboratories”) could be liable for negligent
misrepresentation despite it not knowing who “the ultimate buyer of the
property might be or when a purchase might occur.” Burbach, 652
N.W.2d at 138. Secondly, Barnhill claimed Tamko’s lab reports “were
intended solely to induce reliance by customers to prevent them from
filing lawsuits against Tamko.” Assuming arguendo that statement is
true, there is still no cause of action because the plaintiffs obviously did
not rely on these reports to their detriment—they filed suit. See Beeck v.
Kapalis, 302 N.W.2d 90, 97 (Iowa 1981) (stating reliance is one of the
elements of negligent misrepresentation). Finally, Barnhill’s argument
fails because there was no evidence to suggest Humphreys personally
took part in the lab reports. See Haupt, 514 N.W.2d at 909 (holding
12
“corporate officers can be held liable for negligence if they take part
personally in the commission of the tort against a third party”).
In sum, a reasonably competent attorney would have ascertained
whether negligent misrepresentation is an available cause of action
against manufacturers or product sellers (and their corporate officers)
before filing suit. Thus, the district court did not abuse its discretion in
ruling Barnhill violated rule 1.413 when she brought this claim against
Humphreys.
5. Claim based on a Missouri statute. Finally, Barnhill alleged
Humphreys violated Missouri’s Unfair Business Practices Act. See Mo.
Rev. Stat. § 407.020(1) (2008). Although the Act allows a private cause
of action, it requires the action be brought in a Missouri circuit court.
Id. § 407.025(1); see Foreman v. Discount Motors, Inc., 629 S.W.2d 635,
637 (Mo. Ct. App. 1982) (stating when a statute “ ‘gives a right of action,
and at the same time prescribes the means by which, or the court in
which, the right is to be enforced, resort cannot be had to any other
means or court than that prescribed’ ” (quoting Carlisle v. Mo. Pac. Ry.,
68 S.W. 898, 900 (Mo. 1902))). 3
Although Barnhill argued in her appellate brief and application for
further review that the Missouri statute was never pled against
Humphreys, there is a reference in the petitions that Humphreys should
be liable for punitive damages for violating the statute. Further, during
the hearing to determine what sanctions should be imposed, Barnhill
admitted she should have included Humphreys’ name in the petition
under that count, and she argued he violated the statute in every
hearing.
3Barnhill does not contend the state of Missouri cannot define the jurisdiction of
an Iowa court.
13
The district court found a reasonably competent attorney would
have discovered through research the jurisdictional requirement and not
brought such a cause of action in an Iowa district court. We agree.
Therefore, Barnhill’s assertion of this claim violated rule 1.413.
C. Sanctions. Under rule 1.413, “the court . . . shall impose
upon the person who [violated this rule] an appropriate sanction, which
may include an order to pay the other party . . . the amount of
reasonable expenses incurred . . . including a reasonable attorney fee.”
We have determined the purpose of imposing monetary sanctions is to
(1) deter attorneys from filing frivolous lawsuits, Hearity, 440 N.W.2d at
864, and (2) avoid the general cost to the judicial system in terms of
wasted time and money, Breitbach, 541 N.W.2d at 846.
Although this case does not involve Rule 11, the federal rule is
instructive in explaining the nature of sanctions: “A sanction imposed
under this rule must be limited to what suffices to deter repetition of
such conduct or comparable conduct by others similarly situated.” Fed.
R. Civ. P. 11(c)(4). Deterrence, not compensation, is the primary purpose
of Rule 11 sanctions. In re Kunstler, 914 F.2d 505, 522 (4th Cir. 1990).
A sanction is imposed with the hope a litigant or lawyer will “ ‘stop, think
and investigate more carefully before serving and filing papers.’ ” Cooter
& Gell v. Hartmarx Corp., 496 U.S. 384, 398, 110 S. Ct. 2447, 2457, 110
L. Ed. 2d 359, 377 (1990) (quoting Amendments to Federal Rules of Civil
Procedure, 97 F.R.D. 165, 192 (1983) (Letter from Judge Walter
Mansfield, Chairman, Advisory Committee on Civil Rules) (Mar. 9, 1982)).
However, as the Sixth Circuit pointed out, “although it is clear that Rule
11 is not intended to be a compensatory mechanism in the first instance,
it is equally clear that effective deterrence sometimes requires
compensating the victim for attorney fees arising from abusive litigation.”
14
Rentz v. Dynasty Apparel Indus., Inc., 556 F.3d 389, 400 (6th Cir. 2009).
The Sixth Circuit has also concluded that de minimis sanctions are
“simply inadequate to deter Rule 11 violations.” Id. at 402.
With these purposes in mind, we turn to determining the
appropriate amount of sanction. We have yet to establish criteria to
assist the district court in determining an appropriate sanction.
The ABA has set forth the following factors a court may consider in
assessing the amount of a monetary sanction:
a. the good faith or bad faith of the offender;
b. the degree of willfulness, vindictiveness, negligence
or frivolousness involved in the offense;
c. the knowledge, experience and expertise of the
offender;
d. any prior history of sanctionable conduct on the
part of the offender;
e. the reasonableness and necessity of the out-of-
pocket expenses incurred by the offended person as a result
of the misconduct;
f. the nature and extent of prejudice, apart from out-
of-pocket expenses, suffered by the offended person as a
result of the misconduct;
g. the relative culpability of client and counsel, and
the impact on their privileged relationship of an inquiry into
that area;
h. the risk of chilling the specific type of litigation
involved;
i. the impact of the sanction on the offender, including
the offender’s ability to pay a monetary sanction;
j. the impact of the sanction on the offended party,
including the offended person’s need for compensation;
k. the relative magnitude of sanction necessary to
achieve the goal or goals of the sanction;
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l. burdens on the court system attributable to the
misconduct, including consumption of judicial time and
incurrence of juror fees and other court costs;
m. the degree to which the offended person attempted
to mitigate any prejudice suffered by him or her;
n. the degree to which the offended person’s own
behavior caused the expenses for which recovery is sought;
o. the extent to which the offender persisted in
advancing a position while on notice that the position was
not well grounded in fact or warranted by existing law or a
good faith argument for the extension, modification or
reversal of existing law; and
p. the time of, and circumstances surrounding, any
voluntary withdrawal of a pleading, motion or other paper.
ABA Section of Litigation, Standards and Guidelines for Practice under
Rule 11 of the Federal Rules of Civil Procedure (1988), reprinted in 121
F.R.D. 101, 125–26 (1988). The Fourth Circuit articulated the following
four factors when determining a monetary sanction: “(1) the
reasonableness of the opposing party’s attorney’s fees; (2) the minimum
to deter; (3) the ability to pay; and (4) factors related to the severity of the
. . . violation.” Kunstler, 914 F.2d at 523; see also White v. Gen. Motors
Corp., 908 F.2d 675, 684–85 (10th Cir. 1990). We find the Fourth
Circuit’s considerations instructive in determining an appropriate
monetary sanction for a rule 1.413 violation. However, we also
encourage district courts to consider the ABA factors as they relate to the
issues identified in the four-factor test when determining an appropriate
monetary sanction.
In this case, there was substantial evidence supporting a $25,000
sanction. Not only did the district court consider all four factors listed
above as well as several of the ABA considerations, but it balanced the
twin purposes of compensation and deterrence set forth in our case law.
See Breitbach, 541 N.W.2d at 846; Hearity, 440 N.W.2d at 864. The
16
court analyzed the expenses Humphreys incurred in defending himself,
the deterrence factor, and the nature and number of rule 1.413
violations. Although the district court’s order imposing sanctions does
not discuss Barnhill’s ability to pay, at the hearing to determine the
amount of sanctions, Barnhill did say, “a large sanction will put [my firm]
out of business.” The court heard Barnhill’s statement and sanctioned
her for $25,000.
In determining the amount of the sanction, the district court noted
that Humphreys’ itemization of his fee claim ($148,596.37 4) was over
sixteen, single-spaced pages with about 400 entries and the court file for
this case (of over four years) was at least twenty-two volumes. The
$25,000 sanction is reasonable given the legal and factual issues
involved and the sheer number of pleadings, motions, discovery, and
hearings. In total, there were six sanctionable counts asserted against
Humphreys, five petitions, more than a dozen individually-named
plaintiffs, eight motions for summary judgment against nine individually-
named plaintiffs, a class certification appeal, limited remand procedures,
and a summary judgment appeal. Even though Humphreys would have
had to defend against the fraudulent misrepresentation claim (according
to the district court), he still had to defend against six other claims.
Humphreys’ attorney had to read, research, and respond to each claim.
He had to conduct and participate in discovery and file motions for
summary judgment and respond when Barnhill repeatedly attacked
them.
Although the court did not explain why $25,000 specifically was
necessary to deter Barnhill, it did state
4Barnhill never contended that $148,596.37 was an unreasonable amount of
attorney’s fees.
17
[n]ot imposing a sanction in a case where an attorney
pursues six unfounded claims along with one legitimate
claim on the ground that the other party had to defend the
legitimate claim anyway would reward, not deter, the filing of
frivolous claims.
We believe a lesser sanction would not be sufficient “to deter repetition of
such conduct or comparable conduct by others similarly situated,” Fed.
R. Civ. P. 11(c)(4), especially in cases like this where there is a potential
for a hefty settlement. See Rentz, 556 F.3d at 402 (determining a $2,500
sanction was not sufficient to deter where defendants incurred nearly
$30,000 in attorneys’ fees due to sanctionable conduct).
In addition to the sanctionable conduct, the district court was also
frustrated with Barnhill’s trial tactics and lack of candor and
forthrightness, both of which led to the extension of the proceedings and
increased legal expenses incurred by Humphreys. As the district court
pointed out, “It was as though Barnhill said whatever needed to be said
at each step to just get past the moment, whether there was a legitimate
basis for saying it or not.” 5 Further, Barnhill displayed a lack of candor
on several occasions throughout this litigation. She repeatedly and
vehemently represented to the court that every single plaintiff in the
class action suit individually selected the specific shingles, when in fact
many of her clients did not personally select the shingles. In addition, in
her response to Humphreys’ motion for sanctions, Barnhill asserted she
never pled Humphreys violated the Missouri statute; yet Barnhill “fought
5The district court also stated:
Barnhill vigorously resisted Humphreys’ counsel’s attempt to have his
then pending motions for summary judgment heard and decided before
class certification proceedings were undertaken. Had this procedure
been followed, it is likely that Humphreys would have been out of this
case before he incurred the cost of the class certification proceedings. All
but one of the claims against him would have been dismissed by [the
judge]. . . .
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tooth and nail . . . to preserve a claim that Mr. Humphreys violated that
act.” The district court called her out on her actions and asked her
whether she was being “honest with the court.” As we have stated,
“A lawyer has a very special responsibility for candor and
fairness in all of his dealings with a court. Absent mutual
trust and confidence between a judge and a lawyer—an
officer of the court—the judicial process will be impeded and
the administration of justice frustrated.”
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Plumb, 546 N.W.2d
215, 217–18 (Iowa 1996) (quoting People v. Selby, 606 P.2d 45, 47 (Colo.
1979)); see also Iowa Code Prof’l Responsibility DR 7–102(A)(5) (2004) (“a
lawyer shall not . . . knowingly make a false statement of law or fact”).
The test of an attorney’s actions in zealously pursuing his or her
client’s interests is one of reasonableness. Weigel, 467 N.W.2d at 281. In
looking at all of Barnhill’s efforts in pursuit of her quest, it is clear her
only reason for keeping Humphreys in the litigation was to force or
coerce a settlement of the litigation so Humphreys would avoid personal
liability. Although it would be fair to conclude corporate officers will pay
closer attention to litigation if personal liability is at issue, it is an abuse
to drag corporate officers into corporate litigation with hopes to affect
their attitude and professional judgment involving corporate
responsibilities and obligations. Barnhill’s lack of candor was pervasive
throughout her pleadings, the motion for summary judgment
proceedings, and the sanctions proceedings.
We conclude the district court’s factual findings are supported by
substantial evidence, and we agree with the district court’s legal
conclusions and application of law to the facts. Consequently, we hold
the court did not abuse its discretion in ordering Barnhill to pay $25,000
toward Humphreys’ attorney fees. Under the circumstances, a $25,000
19
sanction is appropriate both to deter Barnhill (and other attorneys) from
similar conduct in the future and to partly compensate Humphreys for
expenses incurred.
In sanctioning Barnhill, we note rule 1.413 is not meant to stifle
the creativity of attorneys or deter attorneys from challenging or
attempting to expand existing precedent. Our law is constantly evolving
and hopefully improving because talented attorneys are willing to fight
uphill battles. See, e.g., Speight v. Walters Dev. Co., 744 N.W.2d 108
(Iowa 2008) (recognizing a claim of breach of implied warranty of
workmanlike construction brought by subsequent purchasers against
home builder); Comes v. Microsoft Corp., 646 N.W.2d 440 (Iowa 2002)
(recognizing a cause of action exists for all consumers, regardless of one's
technical status as direct or indirect purchaser, who are injured by
conduct prohibited by Iowa Competition Law).
Admittedly, there is a fine line at times between zealous advocacy
and frivolous claims. Cady at 497. However, we agree with the district
court and the court of appeals this line has been crossed in the present
case. Our standard of review is appropriately deferential to the district
court because it is in the best position to evaluate counsel’s actions and
motivations. In this case, the district court found that “[n]o reasonably
competent attorney practicing in this court” would have pursued these
claims against Humphreys. See Andrews v. Bible, 812 S.W.2d 284, 293
n.4 (Tenn. 1991) (noting a violation of rule 11 could stem from
“inexperience, incompetence, neglect, willfulness, or deliberate choice”).
It specifically found Barnhill “made up [the case] as it went along.” Such
conduct will not be tolerated by our judicial system.
An attorney making a good-faith challenge to existing law may still
rely on notice pleading. But there comes a point in every case—usually
20
in response to a motion for summary judgment—when the attorney must
acknowledge controlling precedent with “candor and honesty” while
asserting reasons to modify or change existing law. Cady at 498. Such
arguments need not be successful to avoid sanctions. Id. at 497.
However, we will not allow an attorney to act incompetently or
stubbornly persistent, contrary to the law or facts, and then later
attempt to avoid sanctions by arguing he or she was merely trying to
expand or reverse existing case law. Barnhill did not demonstrate to the
district court she knowingly made a “good faith argument for the
extension, modification, or reversal of existing law.” Iowa R. Civ. P. 1.413.
Consequently, the $25,000 sanction was warranted in light of the
number of meritless claims asserted, the expense and time necessary to
dispose of them, and most importantly, the amount necessary to deter
such conduct in the future.
IV. Conclusion.
The district court did not abuse its discretion when it sanctioned
Barnhill for pursuing frivolous claims against Humphreys.
WRIT ANNULLED.
All justices concur except Wiggins and Hecht, JJ., who dissent and
Appel and Baker, JJ., who take no part.
21
#63/06–0163, Barnhill v. Iowa Dist. Ct.
WIGGINS, Justice (dissenting).
I dissent. Although I agree with the majority that Barnhill’s
conduct is sanctionable, I disagree with the way the district court and
the majority determined the amount of the sanction.
Iowa Rule of Civil Procedure 1.413(1) is patterned after Federal
Rule of Civil Procedure 11, as amended in 1983. See Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 391–92, 110 S. Ct. 2447, 2453–54, 110
L. Ed. 2d 359, 373 (1990) (quoting Federal Rule of Civil Procedure 11 as
it existed after the 1983 amendment). We look to cases interpreting the
1983 amendment to Federal Rule of Civil Procedure 11 to aid us in our
interpretation of rule 1.413(1). Weigel v. Weigel, 467 N.W.2d 277, 279
(Iowa 1991). In Weigel, we relied on Cooter & Gell to determine the
proper standard of review. Id. at 280.
The first error made by the majority is to say a sanction under rule
1.413 has the “twin purposes of compensation and deterrence.” The
cases cited by the majority do not support that proposition. Hearity v.
Iowa District Court, 440 N.W.2d 860 (Iowa 1989), recognizes the intent of
the rule is “to discourage parties and their counsel from filing frivolous
lawsuits and to otherwise deter misuse of pleadings, motions, or other
court papers.” Hearity, 440 N.W.2d at 864. Breitbach v. Christenson,
541 N.W.2d 840 (Iowa 1995), does not say compensation is a purpose of
the sanction. Breitbach, 541 N.W.2d at 846. Breitbach says a sanction
is warranted because “this matter has been very costly to the opposing
litigants and the judicial system in terms of wasted time and money.” Id.
Although, the court awarded the fees expended as a sanction, it did not
say it made the award to compensate the party because this was not an
issue in the case.
22
When Federal Rule of Civil Procedure 11 first was enacted, the
circuits and the commentators were split on whether the purpose of a
sanction was compensation or deterrence. See 5A Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 1334, 541–42 (3d ed.
2004) (discussing the different schools of thought as to the purpose of
the rule). In 1990 the Supreme Court made it clear that the central
purpose of a sanction under rule 11 is to deter baseless filings in district
court. Cooter & Gell, 496 U.S. at 393, 110 S. Ct. at 2454, 110 L. Ed. 2d
at 374. The purpose of a sanction under rule 11 or rule 1.413 is not to
compensate a party for attorney fees expended.
Although rule 11 allows an award of attorney fees to the opposing
party, the rule’s mention of attorney fees does not create an entitlement
to full compensation when an opposing party files a frivolous pleading.
White v. Gen. Motors Corp., 908 F.2d 675, 683–84 (10th Cir. 1990). The
sanction chosen by the court should be the least severe sanction
adequate to deter a party from filing frivolous pleadings. Navarro-Ayala
v. Nunez, 968 F.2d 1421, 1426–27 (1st Cir. 1992); In re Kunstler, 914
F.2d 505, 522 (4th Cir. 1990); White, 908 F.2d at 684–85. 6
6In 1993, Federal Rule of Civil Procedure 11 was amended. Rule 11(c) now
provides:
(c) Sanctions.
(1) In General. If, after notice and a reasonable opportunity to
respond, the court determines that Rule 11(b) has been violated, the
court may impose an appropriate sanction on any attorney, law firm, or
party that violated the rule or is responsible for the violation. Absent
exceptional circumstances, a law firm must be held jointly responsible
for a violation committed by its partner, associate, or employee.
(2) Motion for Sanctions. A motion for sanctions must be made
separately from any other motion and must describe the specific conduct
that allegedly violates Rule 11(b). The motion must be served under Rule
5, but it must not be filed or be presented to the court if the challenged
paper, claim, defense, contention, or denial is withdrawn or appropriately
corrected within 21 days after service or within another time the court
23
The second error the majority makes is stating the district court
followed the four-step test of the fourth and tenth circuits when it
awarded the sanction to the defendant. The four-step test referred to by
the majority is the roadmap developed by these circuits that a court
should follow when awarding sanctions under rule 11 as it existed in
1983. The first step is to determine the reasonableness of the opposing
party’s attorney fees incurred by defending the action. Kunstler, 914
F.2d at 523; White, 908 F.2d at 684. In determining the reasonableness,
only the time an attorney expends in response to actions that are
sanctioned should be considered. Bodenhamer Bldg. Corp. v.
sets. If warranted, the court may award to the prevailing party the
reasonable expenses, including attorney’s fees, incurred for the motion.
(3) On the Court’s Initiative. On its own, the court may order an
attorney, law firm, or party to show cause why conduct specifically
described in the order has not violated Rule 11(b).
(4) Nature of a Sanction. A sanction imposed under this rule must
be limited to what suffices to deter repetition of the conduct or
comparable conduct by others similarly situated. The sanction may
include nonmonetary directives; an order to pay a penalty into court; or,
if imposed on motion and warranted for effective deterrence, an order
directing payment to the movant of part or all of the reasonable
attorney’s fees and other expenses directly resulting from the violation.
(5) Limitations on Monetary Sanctions. The court must not impose
a monetary sanction:
(A) against a represented party for violating Rule 11(b)(2); or
(B) on its own, unless it issued the show-cause order under
Rule 11(c)(3) before voluntary dismissal or settlement of the
claims made by or against the party that is, or whose attorneys
are, to be sanctioned.
(6) Requirements for an Order. An order imposing a sanction
must describe the sanctioned conduct and explain the basis for the
sanction.
Fed. R. Civ. P. 11(c). This amendment incorporates the principle that a sanction should
be the least severe sanction adequate to deter a party from filing frivolous pleadings. Id.
r. 11(c)(4). The amendment also requires the court to explain the basis for a sanction.
Id. r. 11(c)(6). As I point out later in this dissent, neither the district court nor the
majority explained the basis for its sanction.
24
Architectural Research Corp., 989 F.2d 213, 218 (6th Cir. 1993); Kunstler,
914 F.2d at 523. As my colleague, Justice Cady, noted when he was on
the district court bench, “[w]hen a petition contains a mixture of frivolous
and founded claims, only those expenses incurred in defending the
frivolous claims may be awarded.” Mark S. Cady, Curbing Litigation
Abuse and Misuse: A Judicial Approach, 36 Drake L. Rev. 483, 506
(1986–87).
The second step is to determine a sanction that equals the
minimum amount necessary to deter misconduct. Kunstler, 914 F.2d at
524; White, 908 F.2d at 684–85. A court should not use a sanction to
drive an attorney out of the practice of law. Kunstler, 914 F.2d at 524.
Decisions as to whether an attorney should be practicing are better left
to our attorney discipline process. The amount of sanction is
appropriate only “ ‘when it is the minimum that will serve to adequately
deter the undesirable behavior.’ ” Doering v. Union County Bd. of Chosen
Freeholders, 857 F.2d 191, 194 (3d Cir. 1988) (quoting Eastway Constr.
Corp. v. City of New York, 637 F. Supp. 558, 565 (E.D.N.Y. 1986)
(emphasis added)).
The third step is to determine the ability of the sanctioned party to
pay. Rule 11 sanctions are analogous to punitive damages because of
their deterrent purpose. Kunstler, 914 F.2d at 524. It should be the
sanctioned party’s burden to show ability or inability to pay. Id.
The last step is to consider other factors, such as the ABA
standards set forth by the majority in its opinion. Id. at 524–25; White,
908 F.2d at 685. I believe these four steps should be followed by a court
when it awards sanctions under rule 1.413(1).
An examination of the district court’s thought process in awarding
the sanction reveals it failed to follow any of these steps when it awarded
25
the sanction. The district court acknowledged “Humphreys would have
had to defend against the fraudulent misrepresentation claim in any
event,” but failed to determine the amount of fees actually expended by
the defendant in defending the sanctionable claims. This is contrary to
the first step in assessing a sanction.
The majority makes the same error by not determining what fees
are attributable to the sanctioned conduct. How much time could the
defendant have expended getting claims such as negligent
misrepresentation dismissed? I say not much. The court should have
requested the defendant to produce records of time and expenses spent
only attributable to the sanctioned conduct. Upon the filing of an
affidavit setting forth the party’s time and expenses the court could
review such an affidavit, as is done in any other case, to determine a fair
and reasonable fee for the sanctioned conduct.
The district court and the majority do not apply steps two and
three. The district court acknowledged in its ruling that the sanctioned
party stated she did not have the ability to pay a large sanction.
However, the district court and the majority fail to make any finding
regarding her ability to pay. Furthermore, both the district court and the
majority use sanctions as a fee-shifting device rather than as a deterrent.
Finally, the district court did not consider other factors in meting
out its sanction. The majority and the district court narrowly focus on
what sanction is needed to compensate rather than apply the four-step
test. The majority’s failure to apply the four-step test and scrutinize the
district court’s award of the sanction gives the district court unlimited
power to craft a sanction without giving any explanation as to how it
arrived at the amount. As one court aptly noted,
26
because “Rule 11 sanctions have significant impact beyond
the merits of the individual case” and can affect the
reputation and creativity of counsel, the abuse of discretion
standard does not mean we give complete deference to the
district court’s decision.
Bilharz v. First Interstate Bank of Wis., 98 F.3d 985, 989 (7th Cir. 1996)
(quoting Pac. Dunlop Holdings, Inc. v. Barosh, 22 F.3d 113, 118 (7th Cir.
1994)).
Under the majority’s analysis, this court will never have a basis to
overturn a district court’s award of sanctions. The factors used by the
majority coupled with its nonexistent abuse of discretion standard can
be used to support any award of sanctions.
It is standard practice for defendants to raise a myriad of defenses
in their answers to petitions. These defenses include failure to state a
cause of action, statute of limitation defenses, laches, estoppels,
comparative fault, assumption of the risk, failure to mitigate damages,
unreasonable failure to avoid injury, or misuse. Many times defendants
raise these defenses without factual support. If we abide by the
majority’s analysis in its review of the district court, the attorneys that
raise these defenses without support should be sanctioned, and that
sanction would be unreviewable.
I suspect when a party requests sanctions this court will not
overturn a substantial award of sanctions if the nonsanctioned party can
submit records justifying the work it did in pursuing its claim. I say this
because the award of the sanction approved by the majority has no
relationship to the time actually spent by the defendant in dealing with
the sanctioned conduct. If it takes $25,000 to deter a solo practitioner
from filing frivolous claims, then is $150,000 enough to deter a fifty-
person law firm from filing frivolous claims?
27
Therefore, I would find the district court abused its discretion by:
(1) not determining the time spent by the defendant to defend against the
sanctioned activity; (2) not determining the minimum amount needed to
deter the conduct; (3) not determining the ability of the sanctioned party
to pay; and (4) not considering other factors as set forth in the ABA
standards. I would sustain the writ and remand the case to the district
court to determine the proper sanction in light of the test I have set forth
in this dissent. Maybe the sanction is too low, too high, or just right.
However, without a principled analysis by the district court supported by
substantial evidence, I can only conclude it abused its discretion in
making this award. See State v. Millsap, 704 N.W.2d 426, 432 (Iowa
2005) (holding a court abuses its discretion when it bases its decision on
untenable grounds or it acts unreasonably. A ground or reason is
untenable when it is based on an erroneous application of law or when it
is not supported by substantial evidence.).
Hecht, J., joins this dissent.