Moore
Moore v. Keegan Management Co.
Opinion
Lead Opinion
Poole, J.
Opinion by Judge POOLE; Partial Concurrence and Partial Dissent by Judge O’SCANNLAIN.
We consider under what circumstances and pursuant to what authority attorneys may be sanctioned for the filing of a complaint. Because we find such circumstances *433 not present here, we reverse the district court’s order imposing $100,000 in sanctions against attorneys Elizabeth Cabraser and Richard Jaeger, and their respective law firms, Lieff, Cabraser & Heimann and Feldman, Waldman & Kline.
I
The merits of this ease, a securities class-action, are not at issue. The sole question on appeal is whether plaintiffs’ counsel may be sanctioned for initiating this lawsuit.
Defendant Keegan Management was a franchisee of Nutri/System Weight Loss Centers (“Nutri/System”). It sold weight loss programs. In December 1989, Keegan made an initial public offering (“IPO”) of stock at $7 per share. Stock rose to $10 per share within a few months.
In early 1990, controversy over the Nutri/System program broke out. A series of personal injury lawsuits alleging gall bladder problems resulting from weight-loss programs were filed against Nutri/System. In March, Congressional hearings on the diet industry…
Concurrence in Part
Scannlain, J.
concurring in part and dissenting in part:
I concur in Parts I, III, and IV of the opinion; I respectfully dissent from Part II.
The court concludes that the district court’s imposition of Rule 11 sanctions should be reversed, insisting that it is appropriate for a complaint to be filed on the basis of a hunch if it is ultimately well-grounded in fact and law.
In support of its ruling, the court cites our decision in Townsend v. Holman Consulting Corp., 929 F.2d 1358 (9th Cir.1990) (en banc), which noted that a filing is frivolous if it is “both baseless and made without a reasonable and competent inquiry.” Id. at 1362 . The court appears to hold that this language implicitly overrules Unioil, Inc. v. E.F. Hutton & Co., 809 F.2d 548 (9th Cir.1986), which held that “an attorney violates Rule 11 whenever he signs a pleading, motion or other paper without having conducted a reasonable inquiry into whether his paper is frivolous, legally unreasonable, or without factual foundation.” Id. at 557 . Since the Townsend language which the court cites is mere dicta, I must strongly disagree with the assertion that Unioil has been overruled.