Financial and Ethical Sanctions for Unmeritorious Litigation Claims: Two Recent Decisions Highlight the Necessity of Advancing Only Meritorious Litigation Claims

By Charles Berwanger

Those two decisions are: Plantations at Haywood 1, LLC v. Plantations at Haywood, LLC (2025) 108 Cal. App. 5th 803; and Lake v. Gates (9th Cir., 2025) 130 F. 4th 1064. Both culminated in the imposition of in excess of $80,000 in sanctions on the attorneys, not the parties, and directly or indirectly implicate rules of professional conduct.

Relevant to the ethical directive that claims and defenses in litigation be advanced only with merit is California Rule of Professional Conduct 3.1 entitled “Meritorious Claims and Contentions.” It directs that “a lawyer shall not: (1) bring or continue an action, conduct a defense, assert a position in litigation, or take an appeal, without probable cause and for the purpose of harassing or maliciously injuring any person; or (2) present a claim or defense in litigation that is not warranted under existing law, unless it can be supported by good faith argument for an extension, modification, or reversal of existing law.”

Also relevant is Rule 3.3 entitled “Candor Toward the Tribunal.” Relevant is section (a) (2) which mandates that “a lawyer shall not…fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel, or knowingly misquote to a tribunal the language of a book, statute, decision or other authority….”

Plantations deals with counsel’s appeal from the $37,000 award of sanctions against him for having filed and refused to withdraw what the trial court concluded was a frivolous and factually unsupported opposition to plaintiff’s motion to confirm an arbitration award. Counsel appealed such award and the Court of Appeal, finding that the trial court did not abuse its discretion in making the award, remanded the matter to the trial court with instructions to determine whether or not the appeal sanction sought by the successful respondent of $44,000 was an appropriate amount.

Counsel argued that he had a right to contest the arbitrator’s award in response to plaintiff’s successful motion to confirm. The Court of Appeal responded that a party’s right to oppose a petition, or to preserve arguments for appeal, is not entitlement to pursue frivolous arguments in the trial court or the court of appeal. Specifically, counsel, rather than relying upon the statutory bases for challenging an award, asserted that the arbitrator was wrong on the facts and the law, a notion that had been rejected by the California Supreme Court 33 years ago.

Finally, the repetition of such a meritless argument on appeal warranted the imposition of further sanctions.

The Ninth Circuit Lake decision affirmed the trial court’s imposition of $122,000 in attorneys’ fees to sanction plaintiffs’ Lead Attorneys. The trial court dismissed the complaint for lack of Article III standing. The complaint concerned Arizona’s voting system. It was alleged that Arizona’s current voting system, which relies upon electronic elements, insufficiently protects the rights of Arizona voters and must be replaced by a system using exclusively hand – counted paper ballots.

Defendants’ motion for sanctions was granted ordering that Lead Attorneys and their law firms pay $122,200. The fees, awarded pursuant to FRCP 11, were premised on a pleading found to be “both baseless and made without a reasonable and competent inquiry.” Among other things, the trial court found, and the Ninth Circuit determined that such finding was not an abuse of discretion, that even though some of the allegations may have been factually supportable, nonetheless unsupported allegations still warrant sanctions.

The potential ethical consequences for the attorneys in both proceedings are equivalent to if not substantially greater than the financial consequences.

In Plantations, by Business and Professions Code section 6068 (o) (3) “the imposition of judicial sanctions against the attorney, except for sanctions for failure to make discovery or monetary sanctions of less than one thousand dollars ($1000)” must be reported to the State Bar, in writing, within 30 days of the time the attorney has knowledge of…” the sanction.

Although the Lake Ninth Circuit decision arose out of a proceeding commenced in Arizona, nonetheless, assuming that the Lead Attorneys are not California licensed, federal courts require counsel to abide by the rules of professional conduct of the forum state. Were the matter filed in a California-based District Court, the Lead Attorneys would face a highly likely ethical investigation and resulting charges.