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Kiobel v. Royal Dutch Petroleum Co.

September 29, 2006


The opinion of the court was delivered by: Henry Pitman, United States Magistrate Judge


I. Introduction

In Docket Item 98, plaintiffs move for an Order imposing sanctions pursuant to Fed.R.Civ.P. 11(b)(3) on the ground that Defendants' Response to Plaintiffs' Objections to the Report and Recommendation of March 31, 2004, dated May 24, 2004 (Docket Item 72) ("May 24 Response") contains three assertions of fact that lacked evidentiary support. For the reasons set forth below, plaintiffs' motion is granted in part and denied in part.

II. Facts

This action, along with Docket Nos. 96 Civ. 8386 and 01 Civ. 1909, is a human rights action in which plaintiffs allege that defendants colluded with the former Nigerian government to violate the rights of the Ogoni people in response to their protests concerning petroleum development activities in the vicinity of their villages and farms. The allegations in this matter are substantially similar to the allegations in Docket Nos. 96 Civ. 8386 and 01 Civ. 1909 which are summarized in my Opinion and Order dated September 12, 2006. Wiwa v. Royal Dutch Petroleum Co., 96 Civ. 8386 (KMW)(HBP), 2006 WL 2637836 (S.D.N.Y. Sept. 12, 2006).

On March 31, 2004, I issued a Report and Recommendation recommending that plaintiffs' motion for class certification be denied. Although I found that certain factors weighed against class certification, I affirmatively concluded that plaintiffs' counsel was clearly adequate. Specifically, I wrote

Plaintiffs' counsel has submitted a compendium of cases with its memorandum of law setting forth counsel's victories in a multitude of other federal class actions involving a wide range of subject matters (Plaintiffs' Mem. Ex. A). Included in this compendium are quotations from twelve different District Judges' praise for the work of plaintiffs' counsel, including the following comment from the Honorable John F. Keenan, United States District Judge, of this District:

The quality of work of plaintiffs' counsel on this case is also demonstrated by the efficient manner of prosecution. . . . At the settlement hearing, defense counsel conceded that plaintiffs' counsel constitute the "cream of the plaintiffs' bar." The court cannot find fault with that characterization.

(Plaintiffs' Mem. Ex. A at 10).

Defendants['] only substantial gripe with plaintiffs' counsel is their contention that counsel failed to comply with certain discovery obligations. The discovery dispute cited by defendants has, however, been resolved, substantially in plaintiffs' favor.

In light of their record in other cases and in this case, I find that plaintiffs' counsel will adequately represent the interests of the class. Although defendants did not file objections to my Report and Recommendation, plaintiffs did. Defendants filed their May 24 Response in opposition to plaintiffs' objections which contained three statements that give rise to the present motion:

"Now we have learned that seven of the identified witnesses are being paid for their testimony."

"There can be no doubt that the witnesses are giving testimony that counsel know to be false."

"[W]e know that between February 29, 2004 and April 2, 2004, Berger & Montague wired $15,195 to the Benin republic for the benefit of the witnesses." (May 24 Response at 20 & 20 n.27).

Plaintiffs contend that all three statements violate Rule 11(b)(3) because they have no evidentiary support. Defendants argue that all three statements are supported by the evidence.

III. Analysis

A. Applicable Legal Standards

Rule 11(b)(3) of the Federal Rules of Civil Procedure provides:

(b) Representations to Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, --

(3) the allegations and other factual contentions have evidentiary support, or if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery . . . .

In ruling on a motion for sanctions, "the court is to avoid hindsight and resolve all doubts in favor of the signer." Oliveri v. Thompson, 803 F.2d 1265, 1275 (2d Cir. 1986). "With regard to factual contentions, 'sanctions may not be imposed unless a particular allegation is utterly lacking in support.'" Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 388 (2d Cir. 2003), quoting O'Brien v. Alexander, 101 F.3d 1479, 1489 (2d Cir. 1996). As the Court of Appeals noted last year,

Rule 11 sanctions are a coercive mechanism, available to trial court judges, to enforce ethical standards upon attorneys appearing before them, while being careful not to rein in zealous advocacy. Although the imposition of sanctions is within the province of the district court, "any such decision [should be] made with restraint and discretion." Schlaifer Nance & Co., Inc. v. Estate of Warhol, 194 F.3d 323, 334 (2d Cir. 1999).

Pannonia Farms, Inc. v. USA Cable, 426 F.3d 650, 652 (2d Cir. 2005).

"The mental state applicable to liability for Rule 11 sanctions initiated by motion is objective reasonableness, i.e., liability may be imposed if the lawyer's claim to have evidentiary support is not objectively reasonable." In re Pennie & Edmonds LLP, 323 F.3d 86, 90 (2d Cir. 2003); see Ted Lapidus, S.A. v. Vann, 112 F.3d 91, 96 (2d Cir. 1997); O'Brien v. Alexander, supra, 101 F.3d at 1490. In assessing whether a claim of evidentiary support is objectively reasonable, a court should focus "upon the objective meaning of the words used rather than the attorney's creative post hoc explanation." O'Brien v. Alexander, supra, 101 F.3d at 1490. Thus, a court cannot rely on hindsight in assessing the propriety of an attorney's conduct, but must instead base its award on the particular facts that were reasonably accessible to the attorney at the time of the signing. Accordingly, a court must look to the objective reasonableness of an attorney's actions under the circumstances known to him or her at the time the questionable document was signed.

McLoughlin v. Altman, 92 Civ. 8106 (KMW), 1995 WL 640770 at *2 (S.D.N.Y. Oct. 31, 1995). The sole exception is where a party makes "a specific disclaimer that additional investigation is necessary." O'Brien v. Alexander, supra, 101 F.3d at 1489. Finally, imposition of Rule 11 sanctions as a result of a motion does not require a finding of subjective bad faith. Ted Lapidus, S.A. v. Vann, supra, 112 F.3d at 96; Wechsler v. Hunt Health Sys., Ltd., 216 F. Supp.2d 347, 356 (S.D.N.Y. 2002).

B. Defendants' Counsel's Statements

1. "Now we have learned that seven of the identified witnesses are being paid for their testimony."

This statement has its origin in the fact, freely admitted by plaintiffs, that plaintiffs' counsel paid for and assisted in the transportation of seven individuals and their families from Nigeria to the neighboring Benin Republic.*fn1 Plaintiffs contend that these individuals feared retaliation if they gave testimony unfavorable to the Nigerian government and remained in Nigeria and that their relocation was, therefore, necessary to ensure their safety and that of their families. Accordingly, plaintiffs' counsel assisted their transport to the Benin Republic, and provided lodging and subsistence for them there.*fn2 The assistance provided by plaintiffs' counsel included food, clothing, lodging, medical care and entertainment.*fn3 Al though the parties dispute the precise amount of financial assistance provided to the Benin Witnesses and their families, even if I view the evidence in the light most favorable to defendants' counsel, the amount is less than $16,000.

Although defendants' counsel makes a number of arguments concerning whether the relocation payments violated statutory or professional ethical prohibitions, those arguments miss the point; the only issue here is whether there was an evidentiary basis for the statement that the Benin Witnesses were "being paid for their testimony" by plaintiffs' counsel. Defendants' counsel cites no direct evidence on this issue.

The closest defendants' counsel comes to citing evidence for their statement is the hearsay declaration of Michael T. Reynolds, dated August 5, 2004 ("Reynolds Decl.") in which Mr. Reynolds describes a conversation he had with an unidentified former employee ("Anonymous Ex-employee") of Shell Petroleum Development Company of Nigeria, Limited ("SPDC") in July 2004. According to Mr. Reynolds, the Anonymous Ex-employee stated that he received a telephone call on an unspecified date from Keith Mabray, an individual who plaintiffs admit is one of their investigators, and that Mabray said he was working for the "'Ogoni legal team.'" Mr. Reynolds recounts that Anonymous Ex-employee stated that he met with Mabray on a second unspecified date and that the following took place:

a. Mr. Mabray told the former employee that he was looking for witnesses in the Niger Delta who would be willing to testify in the case.

b. Mr. Mabray told the former employee that there was a lot of money in the case and that he believed that those who signed up to testify would be "rewarded very, very well".

c. Mr. Mabray told the former employee that the "Ogoni legal team" would be prepared to relocate the former employee outside of Nigeria if he agreed to testify.

d. Mr. Mabray told the former employee that if he was interested, the "Ogoni legal team" would send him to the United States to meet with the "bigger boys", who were the lawyers actually handling the case in the United States.

e. The former employee told Mr. Mabray that he would think it over and get back to him.

f. Mr. Mabray gave the former employee his business card. (Reynolds Decl. ¶ 6(a-f)).*fn4

Crediting the foregoing report from Anonymous Employee, defendants' counsel goes on to infer that there was a "presumptively similar offer to reward the Benin Witnesses" (Defendants' Memo. at 4) and concludes that the statements of the Anonymous Ex-employee support the statement ...

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