Downloadable below is another of many law review articles by Doug Richmond on the difficult issues that crop up in real practice. Abstract and some excerpts:
Abstract: Courts have long invoked agency law to sanction clients for litigation misconduct by their lawyers. This approach dates to the Supreme Court’s 1962 decision in Link v. Wabash Railroad Co. But Link, while correctly decided on its particular facts, was incompletely reasoned. Unfortunately, subsequent courts have uncritically accepted its rationale. In fact, agency law is a poor basis for imputing lawyers’ misconduct to clients where sanctions are concerned. The hallmark of agency is the agent’s ability to bind the principal contractually. In contrast, principals are generally not liable for agents’ intentional misconduct. Vicarious liability instead requires a master-servant relationship. That is fatal here, of course, because lawyers are presumptively independent contractors vis-à-vis their clients. The alternative liability theory of apparent authority is unavailing because agents are generally authorized by their principals to undertake only those activities that are legal and proper, which does not include the sort of misconduct for which sanctions will lie. In short, agency law simply doesn’t work well when attempting to assign responsibility for sanctions between lawyers and clients. Courts should therefore discard it. Imposing sanctions based on equitable principles is more efficient and reasonable. When the issues are properly analyzed using equitable principles, clients should be sanctioned for lawyers’ misconduct in only two situations. The first is where the client is complicit in the misconduct. The second is where sanctions will be meaningful only if they affect the client, or it is impossible to cure the lawyer’s misconduct without sanctioning the client. This is most often the case where a lawyer commits misconduct during trial. This Article advocates courts’ adoption of these positions based on a thorough analysis of agency law, and principles of equity and efficiency.
Excerpts: It is understandable that a party that engages in bad faith conduct in litigation may be sanctioned by a court. It is also logical that where a lawyer and the lawyer’s client are guilty of coordinated litigation misconduct, the court may sanction them both and either hold them liable jointly and severally, or allocate or apportion sanctions between them. But what of the situation where the lawyer alone commits misconduct and the court visits the lawyer’s sins on the innocent client when awarding sanctions, as per-haps by striking the client’s pleadings, precluding the introduction of evidence or testimony favorable to the client, fining the client, or even dismissing the client’s case with prejudice? In a tragic Illinois product liability case, for example, the court struck the defendant manufacturer’s pleadings—a so-called “death penalty” sanction—as punishment for the defense lawyers’ serious misconduct in discovery. Stripped of its liability defenses, the de-fendant settled with the plaintiffs for an estimated $15 million.
Courts and others who seek to hold parties liable for their lawyers’ misconduct have long invoked agency law as a basis for doing so. This is a superficially appealing approach; after all, the attorney–client relationship is plainly an agency relationship. Yet agency law is not a reliable basis for imputing a lawyer’s misconduct to a client in the sanctions context. Vicari-ous liability based on respondeat superior requires a master–servant rela-tionship, but lawyers are not their clients’ servants even though they are their agents. Rather, lawyers generally are independent contractors. Liability based on a lawyer’s apparent authority is no answer for several reasons, the most fundamental being that a lawyer’s apparent authority generally extends only to conduct that is legal and proper. In addition, sanctioning innocent clients for lawyers’ misconduct is often unfair and is unlikely to remedy the misconduct or to deter misbehavior in the future. To be effective, sanctions should be personal to the offender. Courts should therefore depart from agency law when considering sanctions that may penalize a client for its lawyer’s misconduct and instead rely on equitable principles in fashioning an appropriate penalty.
In a nutshell, clients should be sanctioned for their lawyers’ miscon-duct in only two situations. The first is where the client is complicit in the lawyer’s misconduct, as where the misconduct is the product of their coor-dinated effort. The second is where a sanction will be meaningful only if it affects the client or if it is impossible to cure the lawyer’s misconduct with-out penalizing the client. Some courts now follow these courses, discarding imprecise and often inaccurate notions of agency law in the process. All courts should do so.