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Civil Procedure — sanctions

United States Court of Appeals For the Seventh Circuit

Civil

Civil Procedure — sanctions

Where attorneys made misleading allegations concerning confidential sources to stave off dismissal, sanctions are appropriate.

“The plaintiffs’ lawyers had made confident assurances in their complaints about a confidential source—their only barrier to dismissal of their suit—even though none of the lawyers had spoken to the source and their investigator had acknowledged that she couldn’t verify what (according to her) he had told her. She had qualms: the names the source had given her of persons to whom he reported in the Boeing chain of command were inconsistent with what she was able to learn about the chain. This should have been a red flag to the plaintiffs’ lawyers. Their failure to inquire further puts one in mind of ostrich tactics—of failing to inquire for fear that the inquiry might reveal stronger evidence of their scienter regarding the authenticity of the confidential source than the flimsy evidence of scienter they were able to marshal against Boeing. Representations in a filing in a federal district court that are not grounded in an ‘inquiry reasonable under the circumstances’ or that are unlikely to ‘have evidentiary support after a reasonable opportunity for further investigation or discovery’ violate Rules 11(b) and 11(b)(3).”

Affirmed in part, and Vacated in part.

12-1899 & 12-2009 City of Livonia Employees’ Retirement System v. The Boeing Co.

Appeals from the United States District Court for the Northern District of Illinois, Conlon, Castillo, JJ., Posner, J.

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