MEMORANDUM OF OPINION AND ORDER

Plaintiff brought this action in Minnesota state court for fraud, negligence, and breach of contract against Burroughs Corporation, the manufacturer of an allegedly defective computer system sold to plaintiff. Defendant removed to federal court in Minnesota on the basis of diversity of citizenship, and that court, on defendant’s motion, transferred the action to this Court pursuant to 28 U.S.C. § 1404 (a). Defendant then moved for summary judgment on the ground that all four claims are time-barred under California law. While conceding that the breach of contract claim is time-barred by the terms of the sales agreement, plaintiff argued that the limitations period for the remaining claims was governed by Minnesota law under which they would not be time-barred. Defendant also moved to dismiss plaintiff's'claim for economic loss arising from negligent manufacture as being barred by California law.

At the hearing on defendant’s motion, the Court denied it for lack of merit and directed counsel for defendant responsible for the filing of the motion 1 to submit a memorandum explaining why sanctions should not be imposed under Rule 11.

The Statute of Limitations Issue

Counsel for defendant have submitted an excellent brief in defense of their position. *126 It articulates the argument they sought to present in support of their motion with exemplary clarity and fairness. The difficulty is that this is not the argument presented when the motion was made. Had it been made then, there would be no question that it would have qualified under Rule 11 as “a good faith argument for the extension ... of existing law” and the issue of sanctions would never have arisen. Instead of doing what they have now done, counsel presented an argument calculated to lead the Court to believe that it was “warranted by existing law.” Nothing demonstrates the point more clearly than a comparison of the key portions of the argument made in the memorandum in support of the motion with those in the memorandum in opposition to Rule 11 sanctions. 2 Counsel’s argument was two-pronged. The first prong was that a Minnesota court would have dismissed the action under the doctrine of forum non conveniens. The second was that a federal court, following a change of venue, would not have applied the longer Minnesota statute to plaintiff’s claims because Minnesota would not have done so.

*127 The contrast between the two memoranda speaks for itself. It is a dramatic illustration of the sort of practice at which Rule 11 is aimed and of the result it seeks to achieve. There would be little point to Rule 11 if it tolerated counsel making an argument for the extension of existing law disguised as one based on existing law. The certification made by counsel signing the motion is not intended to leave the court guessing as to which argument is being made, let alone to permit counsel to lead the court to believe that an argument is supported by existing law when it is not.

The duty of candor is a necessary corollary of the certification required by Rule 11. A court has a right to expect that counsel will state the controlling law fairly and fully; indeed, unless that is done the court cannot perform its task properly. A lawyer must not misstate the law, fail to disclose adverse authority (not disclosed by his opponent), or omit facts critical to the application of the rule of law relied on.

These are settled principles. 3 Rule 3.3 of the ABA’s Model Rules states that

The accompanying comment states in part:

Ethical Consideration 7-23 under the former ABA Model Code further explains:

The most elemental rationale of this branch of Rule 11 is that fair decisions cannot be expected if the deciding tribunal is not fully informed, let alone if it is misled. It is as badly misled by an argument purporting to reflect existing law when such law does not exist as by a failure to disclose adverse authority. The misleading character of defendant’s counsel’s memorandum is convincingly demonstrated by their subsequent memorandum. That is a sufficient basis for finding a violation of Rule 11, regardless of their purpose and whether they may have acted in good faith. The absence of a purpose to cause unnecessary delay or needless expense—or, for that matter, the absence of bad faith—is irrelevant to the imposition of sanctions under the first prong of Rule 11.

The Economic Loss Issue

In support of the motion to dismiss plaintiff’s claim for economic loss, counsel quoted from Seely v. White Motor Co., 63 Cal.2d 9 , 45 Cal.Rptr. 17, 23 , 403 P.2d 145 (1965), that “in actions for negligence, a manufacturer’s liability is limited to damages for physical injuries and there is no recovery for economic losses alone.” Counsel failed to cite the California Supreme Court’s recent opinion in J’Aire Corp. v. Gregory, 24 Cal.3d 799 , 157 Cal.Rptr. 407 , 598 P.2d 60 (1979), in which the court held economic loss to be recoverable in a negligence action against a contractor, saying:

It is true that J’Aire, inexplicably, did not cite Seely . But inasmuch as the later decision is on its face at least inconsistent with the former, it cannot be' ignored in- a discussion of the claim for economic loss, even if it can be distinguished.

Further, the effect of J’Aire on Seely was specifically considered in two recent decisions of the California intermediate appellate court, the Court of Appeal. In Pisano v. American Leasing, 146 Cal.App.3d 194 , 194 Cal.Rptr. 77 (1983), the court reversed a summary judgment for defendant manufacturer holding that plaintiff, to whom defendant had supplied a defective sander, could recover economic loss suffered in his business as a result of the supplier’s negligence. The court appears to have reasoned that J’Aire rather than Seely , both of which are cited, controlled. Pisano was followed in Huang v. Garner, 157 Cal.App.3d 404 , 203 Cal.Rptr. 800 (1984), again citing both Seely and J’Aire.

Counsel distinguished J’Aire in their reply only , after it was cited in plaintiff's opposition. They did not cite either Pisano or Huang while asserting in their reply that Seely “has never been overruled.” That statement, while technically correct, becomes misleading in the light of two intermediate appellate decisions which relied on J’Aire in explaining away Seely .

In their Rule 11 memorandum counsel offer a “principled basis” for distinguishing J’Aire. Again, the argument made there in support of the continuing vitality of Seely is entirely acceptable but it is not the argument made in the earlier memorandum.

Moreover, the failure to cite, if not Huang , at least Pisano , decided almost a year earlier, is a violation of counsel’s “duty to disclose directly adverse authority.” See pp. 127-128, above. Counsel claim to have been “unaware of [those cases] until the oral argument on the motion.” For counsel to have been unaware of those cases means that they, did not Shepardize their principal authority, Seely ; as early as February 1984, Shepard lists Pisano under Seely as “distinguished.” In some circumstances a failure to discover adverse authority after a reasonable search has been made may be excusable. Counsel’s declaration does not specify what search was made here, but their Rule 11 memorandum bespeaks their capacity to find supporting authority, such as the Lexis copy of an unreported district court decision and a decision of the California Court of Appeal issued on July 13, 1984. Thus their failure to cite adverse authority is not excusable.

Conclusion

Accordingly the Court finds and concludes, first, that defendant’s memorandum in support of its motion based on the statute of limitations was not warranted by existing law, contrary to the representation made therein by counsel, and, second, that counsel failed to make a reasonable inquiry to determine whether the motion to dismiss the economic loss claim was warranted by existing law. The memorandum therefore was signed in violation of Rule 11.

Counsel for plaintiff are directed to submit a declaration setting forth the record of plaintiff’s reasonable expenses, including reasonable attorney’s fees, incurred in opposing the motion. The Court will thereafter issue its order specifying the amount assessed as sanctions.

Sanctions shall be paid by the firm of Kirkland & Ellis and shall not be reimbursed by the defendant. In addition, both Kirkland & Ellis and Crosby, Heafey, Roach & May, local counsel, shall submit á statement certifying that a copy of this opinion was given to each partner and associate of each firm.

IT IS SO ORDERED.

. At the hearing, an associate of the Chicago firm of Kirkland & Ellis acknowledged responsibility for the preparation of the motion although it was signed by local counsel. One reason for requiring the association of an attorney who is a member of the bar of this court (see Local Rule 110-2(a)) is to assure that standards of professional conduct will be met. (See Local Rule 110-3) Accordingly local counsel has an obligation to satisfy himself before signing a paper that it complies with applicable requirements. However, in the absence of an indication of active participation in the preparation or decision to file a paper by local counsel—of which there is none here—it does not seem appropriate to subject them to sanctions other than criticism for their apparent neglect.

. Counsel’s reply memorandum, being essentially of the same tenor as the opening memorandum, will not be separately addressed here.

. The Advisory Committee Notes to Rule 11 state that "[t]he new language is intended to reduce the reluctance of courts to impose sanctions ... by emphasizing the responsibilities of the attorney and reenforcing those obligations by the impositions of sanctions.” 97 F.R.D. 165 , 198 (1983).