Thursday, October 10, 2024
Civil Sanction Appeal Heard By Iowa Supreme Court
The Iowa Supreme Court heard an oral argument today in a case in which the Court of Appeals had affirmed sanctions imposed on two attorneys for an alleged failure to properly investigate contentions made concerning the filing of a notice of disallowance in a probate matter involving an unpaid vehicle loan
Dupaco Community Credit Union and its two attorneys seek further review of the court of appeal decision finding the district court did not abuse its discretion in imposing sanctions against them. The court of appeals annulled the writ of certiorari and declined to disturb the sanctions imposed, finding that the attorneys’ false statements violated Iowa Rule of Civil Procedure 1.413 and Iowa Code section 619.19.
The Court of Appeals held that the District Court had not abused its discretion in sanctioning the attorneys
In this certiorari action, we review sanctions imposed against two attorneys and their client, Dupaco Community Credit Union (“Dupaco”). The district court imposed sanctions after concluding the attorneys violated their professional obligations when they filed pleadings without reasonably inquiring into asserted facts. Because the district court did not abuse its discretion, we annul the writ and allow the order for sanctions to stand.
The District Court
The district court—at the invitation of Dupaco and its attorneys—evaluated each of Dupaco’s pleadings independently. The court found the initial request for a hearing did not warrant sanctions but the subsequent reply pleading and false oral statements did. Specifically, the district court found Blau and Bright did not conduct a reasonable investigation into the facts regarding Manning’s belief LeConte worked for USPS—which turned out to be based on “essentially, secondhand assumptions of a mailroom employee.” The court found Blau and Bright acted unreasonably when they made no effort to confirm whether LeConte worked for USPS, even though they had at least one week to reply to the estate’s resistance and could have sought an extension of time if necessary. The court found, at minimum, “Dupaco and its attorneys certainly should have conducted the inquiry [into LeConte’s employment] before the July 1 hearing,” but the investigation did not actually happen until August 24.
In addition to the unreasonably incomplete investigation into LeConte, the district court found Blau did not conduct an adequate investigation when she asserted the notice was not sent by certified mail. As the court put it, “Blau was either confused by the information she found on the USPS tracking site or was attempting to confuse or mislead the court.” Or, as put more bluntly a bit later in the ruling, “The court is unable to explain what Blau was looking at when she reached her conclusions.” The court noted that, even if Blau made a mistake rather intentional misrepresentation, the false assertions “did cause confusion and waste of time for both [the estate attorney] and the court to work through.”
Duty to investigate
The main thrust of Blau and Bright’s defense is they believe they reasonably relied on information provided to them by their client’s agent, Manning, and no further investigation was necessary. We, like the district court, disagree. “Generally, an attorney must do more than rely on a client’s assurance of the existence of facts when a reasonable inquiry would reveal their accuracy.” Mark S. Cady, Curbing Litigation Abuse and Misuse: A Judicial Approach, 36 Drake L. Rev. 483, 492 & n.66 (1987) (collecting cases). And “if the information provided by a client is inconsistent or otherwise questionable, verification is an absolute necessity.” Id. “The rule requires that an attorney be satisfied in the existence of the facts. Mere conjecture, suspicion or rumor are not ingredients of a reasonable factual basis.” Id. (footnote omitted). “Allegations cannot be made in pleadings which a reasonable factual investigation would disprove.” Id. at 493. The record here establishes Blau and Bright did little if any investigation to satisfy for themselves that Manning provided accurate information. The claim LeConte was a postal service “interloper” was at best “questionable,” and the basis for that claim was “conjecture, suspicion or rumor.” See id. at 492. Blau and Bright did not fulfill their obligations under rule 1.413 and section 619.19.
Court of Appeals conclusion
Overall, we find the arguments Blau, Bright, and Dupaco advance in mitigation do little more than highlight or reinforce the district court’s rationale for imposing sanctions. We annul the writ of certiorari and decline to disturb the sanctions imposed. And we, like the district court, find the attorneys’ false statements violated Iowa Rule of Civil Procedure 1.413 and Iowa Code section 619.19. We direct the clerk of appellate courts to transmit a copy of this opinion to the Attorney Discipline Board. See Iowa R. of Prof’l Conduct 32:8.3 (on the duty to report misconduct); Iowa Code Judicial Conduct 51:2.15(B) (same).
My impression after hearing the oral argument is that there may have been a mistake but that it did not rise to the level of sanctionable misconduct or worthy of a referral for a disciplinary investigation. ( Mike Frisch)
https://lawprofessors.typepad.com/legal_profession/2024/10/the-iowa-supreme-court-heard-an-oral-argument-today-in-a-case-in-which-the-court-of-appeals-had-imposed-sanctions-on-two-atto.html