Court Reverses Sanctions Against Defense Lawyers

(CN) - The 2nd Circuit reversed sanctions against three attorneys with New York-based Cravath, Swaine & Moore, saying there was "no support in law or logic" for the decision to fine the defense lawyers $5,000 each for their allegedly unsubstantiated statements about the plaintiffs in an alien tort claims action.

The sanctions stemmed from a class action accusing three corporate affiliates of violating international law while exploring for and drilling oil in Nigeria.

In 2004, a magistrate judge recommended that the district court deny the plaintiffs' motion for class certification.

The plaintiffs objected to the recommendation, and defense attorneys Rory Millson, Thomas Rafferty and Michael Reynolds responded by claiming that seven of the plaintiffs' witnesses in the Benin Republic had been paid a combined $15,195 for their testimony, and that witnesses had given testimony that they and their attorneys knew to be false.

The plaintiffs moved for sanctions, saying the defense attorneys violated Rule 11 of the Federal Rules of Civil Procedure by making unsubstantiated statements.

In 2006 a magistrate judge agreed that some of the statements were false and fined each attorney $5,000. The attorneys appealed, arguing that their statements were supported by the evidence.

The federal appeals court in New York ruled that the district court had abused its power when it sanctioned the lawyers, though the judges could not agree on whether a magistrate judge is authorized to issue an order imposing Rule 11 sanctions.

But that issue is moot, according to Judge Jose Cabranes, in light of the fact that the lawyers identified "14 statements of the Benin witnesses that they contend were so obviously false that plaintiffs' counsel must have known of their falsity."

The most glaring of these statements, Cabranes said, "came from a witness who testified that 'Shell had a $260 billion contract' in Nigeria, notwithstanding that the Shell Petroleum Development Company of Nigeria had annual pre-tax expenses of only $1 billion and Nigeria's annual gross domestic product during the relevant time period was only $30 billion."

Cabranes added that the there is "no support in law or logic" for the sanctions, and that "the record evidence does not provide an adequate basis to impose Rule 11 sanctions on appellants."

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