Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 85 C 6132, Harry D. Leinenweber, Judge.
Easterbrook, Ripple, and Kanne, Circuit Judges.
EASTERBROOK, Circuit Judge.
The complaint charged the International Powerlifting Federation (IPF), its American affiliate the United States Powerlifting Federation (USPF), and Conrad Cotter, the president of the USPF with conspiring to monopolize the sport of weight lifting. The plaintiffs include two weight lifters who were disqualified from participating in events sponsored by the IPF because they participated in events sponsored by the American Powerlifting Federation (APF), a rival to the USPF. The APF is itself a plaintiff. Under the IPF's rules, participants in meets that are not sanctioned by the IPF or its national affiliates may not participate in the IPF's international championship meets.
The IPF did not file an appearance, and a default judgment was entered against it. The district court dismissed the complaint against the USPF and Cotter under Fed. R. Civ. P. 12(b)(6) for failure to state a claim on which relief may be granted, after plaintiffs' counsel conceded that the complaint was insufficient. The plaintiffs then filed an amended complaint against USPF, dropping Cotter as a defendant. The district court dismissed this complaint under Rule 12(b)(6), finding it dependent on a theory of conspiracy between the USPF and the IPF that could not be sustained. The court also held that Cotter is entitled to attorneys' fees as a sanction under Fed. R. Civ. P. 11 for the initial complaint against him, because the plaintiffs did not have a plausible argument about how the USPF could conspire with its officers. The court denied the USPF's request for sanctions, however, because it concluded that the plaintiffs' amended complaint had a colorable, though unsuccessful, theory.
Cotter's request for fees came to $44,700: $4,300 to obtain dismissal of the initial complaint, and $40,400 to pursue the request for fees (and ask the district court to ensure that the amended complaint did not apply to him). The size of the request surprised -- shocked -- the district judge. The court vacated its award under Rule 11, writing:
The court granted Cotter's request for sanctions [because] the law is clear that a corporate officer is not capable of conspiring with his corporation about antitrust violations. Sanctions where awarded because it was extremely clear to the court that there was no legal or factual basis for naming Cotter as a defendant. Cotter's attorneys, however, contend that they have spent at least 39.535 hours drafting that portion of the motion to dismiss, memorandum in support of the motion and summary of the motion which pertained to Cotter. They have requested $4289.48 in fees as to this activity. (They also request an additional $40,401.40 in fees.) Apparently, the issues regarding Cotter's legal and factual involvement in the case were vastly more complicated than this court had determined. The issues must also have been more complicated than appeared from the briefs of the parties. Therefore, the court is sua sponte reconsidering the award of attorneys' fees under Rule 11, Fed. R. Civ. P., and is hereby denying the award of attorneys fees in toto.
Cotter appeals from the vacation of the award in his favor, and the USPF appeals the denial of its request for sanctions.
The suit against Cotter was frivolous, given Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984), decided a year before this suit began. Rule 11 requires counsel to do legal research before filing, and to be aware of legal rules established by the Supreme Court. E.g., Sparks v. NLRB, 835 F.2d 705 (7th Cir. 1987); Szabo Food Service, Inc. v. Canteen Corp., 823 F.2d 1073, 1080-82 (7th Cir. 1987). A party may not strike out blindly and rely on its opponent to do the research to make the case or expose its fallacies. See In re TCI Ltd., 769 F.2d 441, 445-47 (7th Cir. 1985). If a party files a paper in violation of Rule 11, the district court "shall" impose a sanction, under the express terms of that Rule. See also Brown v. Federation of State Medical Boards, 830 F.2d 1429, 1434 n.3 (7th Cir. 1987). The complaint was sanctionable on two bases: it was frivolous, and it was filed without a prior, reasonable inquiry into the law. The district court was required to impose a sanction -- as initially it did.
The court vacated the sanction because the request for fees showed that counsel spent about 40 hours preparing and filing the motion to dismiss. This showed, according to the court, that the case was "vastly more complicated" than the court had believed. Perhaps this is a droll way to say that Cotter's total bill was out of line. We consider this possibility later. If the court meant the remark seriously, it is insufficient. Whether the complaint violated Rule 11 depends on what the plaintiffs and their lawyer did -- whether they performed the legal and factual work necessary to avoid filing an unwarranted paper -- not on what the defendants did with the complaint. That the defendants may have taken too long to find Copperweld does not absolve plaintiffs; the violation of Rule 11 exists at the moment the paper is filed. If Cotter's lawyers were inefficient, then Cotter must pay them (or counsel must swallow the costs, as counsel who waste time recognize when exercising billing judgment). The defendants' inefficiency does not show that the case was "vastly more complex" than the district court first thought. Copperweld holds that corporate officers cannot conspire with their corporations for purposes of the antitrust laws. The complaint was based on a conspiracy between officer and corporation; this was doomed after Copperweld, and sanctions were in order.
For what it is worth, we doubt that 40 hours is preposterous for preparing a response to this complaint. Cotter's lawyers had to find Copperweld and then consider the possibility that plaintiffs were trying to create an exception to that case. This might entail researching the treatment of Copperweld in later cases and interviewing Cotter, a resident of Florida, to discover whether there were facts (and therefore a theory) lurking behind the outline provided by the complaint. Antitrust suits are easy to file yet notoriously costly to defend, and achieving the dismissal of an antitrust case in under 40 hours is unusual.
What is even more unusual is that counsel took about 400 hours to pursue the compensation for 40 hours, a ratio of billing time to productive time that would be fatal when collecting from one's own clients. The request for sanctions was an adversarial proceeding, which eats up time that need not be spent when collecting from friendlier clients, but a ratio of ten to one still is extreme. The district court was entitled to be skeptical of this bill.
We held in Brown v. Stackler, 612 F.2d 1057 (7th Cir. 1980), that a district court may deny a request for fees under 42 U.S.C. § 1988 ds a sanction for filing an outrageously large request -- in Brown v. Stackler, a bill for 800 hours to prosecute, mostly by filing requests for extensions of time, a "plain and simple" case that "almost automatically" would be disposed of in accordance with the result of another pending case. 612 F.2d at 1059. See also Vocca v. Playboy Hotel of Chicago, Inc., 686 F.2d 605 (7th Cir. 1982) (same result in a request for fees under the Age Discrimination in ...