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37. Is a court likely to find that the businessman's complaint was pleaded in good faith?
The second count of the complaint alleged that although the landscaper's statements to the businessman were not false, and although the businessman did not rely on the landscaper's statements when making a loan to the landscaper, that the landscaper is in default on the loan and liable to the businessman for the balance due. Payment of the loan was due before the complaint was filed.
A businessman sued a landscaper in federal court. The first count of the complaint alleged that the landscaper knowingly made false statements to the businessman concerning the financial status of the landscaper's company and that the businessman had relied on those statements, to his detriment, in making a loan to the landscaper.
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Lawyers in federal suits have the responsibility to ensure their client's pleadings are not frivolous or issued to harass or delay an adversary. FRCP 11 codifies this requirement and provides that a lawyer who fails in this duty may be fined or otherwise sanctioned.
When the lawyer files a pleading, he is certifying that to the best of his knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:
the pleading is not presented for an improper purpose;the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; ANDthe factual contentions have evidentiary support, or if specifically so identified, are reasonably based on belief or a lack of information.B is correct. Although it is possible that the businessman could have inconsistent evidence with respect to whether the landscaper was telling the truth, the businessman claimed that he both relied on false statements and did not rely on the statements. In other words, he cannot in good faith have believed that he both relied and did not rely on the landscaper's statements.
A is incorrect. This answer choice states the correct conclusion with the incorrect legal reasoning. Although the businessman's complaint has inconsistent statements as to whether the landscaper was truthful, it is possible that the businessman may not have known whether the landscaper's statements were false. It is the businessman's allegations that he both relied and did not rely, that renders his complaint not pleaded in good faith.
C is incorrect. The fact that a complaint stated a claim upon which relief can be granted is not dispositive on the issue of whether the complaint violated the requirement that pleadings be made in good faith.
D is incorrect. FRCP 8, which allows parties to make alternative and inconsistent allegations, is still subject to the FRCP 11 requirement that any pleadings be made in good faith. Thus, a party may make factually inconsistent statements in a pleading only if there is a good faith basis for believing either statement.