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43. May the stockbroker's attorney still file the motion to dismiss?
An investor sued a stockbroker in federal court on a federal statutory claim for securities fraud. The stockbroker's attorney prepared a motion under FRCP 12(b) arguing that the complaint should be dismissed because the statute under which the suit is brought does not allow a private right of action. The day before the stockbroker served the motion, the stockbroker's attorney learned of a new U.S. Supreme Court decision that held private lawsuits under this particular statute are allowed.
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the paper is not presented for any improper purpose (i.e., harassment, delay, etc.);the legal contentions therein are warranted by existing law or a non-frivolous argument for the modification of existing law or the establishment of a new law;the allegations and factual contentions either have or upon further investigation or discovery are likely to have evidentiary support; anddenials of factual contentions are warranted on the evidence or, where specified, are reasonably based on a lack of information and belief.An attorney who fails in this duty may be fined or otherwise sanctioned. FRCP 11 sanctions may be invoked by an opposing party's motion or the court on its own initiative.
Under FRCP 11(c)(2), the party seeking sanctions serves a motion on the other party but is not allowed to file the motion with the court if the challenged paper, claim, or defense is withdrawn or appropriately corrected within 21 days after the service.
B is correct. Rule 11 applies to every single paper at attorney files in federal civil cases. Specifically, written motions, pleadings, and other papers are governed by Rule 11, which requires parties to certify that the information presented to the court is not being presented for an improper purpose, that the allegations and factual contentions have evidentiary support, and that the legal contentions therein are warranted by existing law. In other words, the attorney MUST abide by Rule 11.
Here, the stockbroker's motion to dismiss is based on the ground that the statute does not allow such a private action, but that law changed when the U.S. Supreme Court decision was issued. Under Rule 11, therefore, the stockbroker's attorney may not file the same motion because it is no longer based on a reasonable belief that it is based in existing law. Filing such a motion while knowing the law changed would be in bad faith under Rule 11.
A is incorrect. First, a defense that a particular statute does not allow a private right of action could be brought in a Rule 12(b) motion because it might be based solely on a plaintiff's complaint. It is incorrect to assert that it would have to be raised only in an answer.
Second, the defense here is not warranted by existing law or non-frivolous argument for modifying the law, so it may not be raised in either a motion OR an answer, as indicated by this choice.
C is incorrect. The Rule 11 certification requirements apply to every filing of every paper in federal civil cases, including a motion to dismiss such as the one in this lawsuit.
D is incorrect. There is no shifting of the burden under Rule 11, which imposes the requirement to determine that an action is warranted under existing law on the party making the filing (here, the stockbroker's attorney). An attorney does not comply with the Rule by leaving it to his or her opponent to figure out what the law is.