Reasonable, If Flawed: The Postman Always Rings Twice

The Iowa Supreme Court held that it was error to sanction two attorneys for representations made in an attempt to collect on an allegedly unpaid car loan against an estate

we now conclude that the district court abused its discretion in awarding sanctions because there was no violation of either rule 1.413(1) or section 619.19. The district court—and the court of appeals which affirmed it—focused their analysis to a large degree on perceived delays by the credit union and its counsel in catching and correcting the prior erroneous statements in their reply and affidavit. But rule 1.413(1) and section 619.19 turn exclusively on the circumstances when the papers were signed and filed. When we examine that time period, we find that the credit union and its counsel performed a reasonable, if flawed, investigation. Therefore, on further review, we now sustain the writ of certiorari, vacate the award of sanctions, and remand.

The court described the allegedly sanctionable conduct

The court sanctioned Dupaco for one thing: the paragraph of [client employee] Manning’s affidavit wherein she said, “Ron LeConte is not an agent, employee, or representative of Dupaco. To the best of my knowledge, Ron LeConte is an agent of the United States Postal Service.”

Reasonableness of investigation

Manning’s investigation was limited by several factors. Manning was in the third trimester of her pregnancy and her one-week timeline to investigate straddled the Memorial Day weekend. Although the court’s sanctions order said that “a reasonable attorney would have simply asked the Court for an extension of time to conduct further inquiry,” Manning wasn’t an attorney, and the reasonableness of the client inquiry should be considered in the context of the existing timeframe. That is especially true given that the court had specifically ordered Dupaco to file its reply “prior to 4:30 p.m. on June 2, 2022.” The court’s order further advised that “[f]ailure . . . to file a reply may result in the Court
denying the Request for Hearing for the reasons stated in the Resistance thereto.”

Manning’s investigation into the mailing receipt was also hampered by LeConte’s failure to indicate the “status of signer” or the “date of delivery” when he picked up the notice. And LeConte’s status was not all that easy to uncover. His company had an oral contract with Dupaco to pick up mail. After retrieving the mail, he regularly dropped it off in the vestibule at the front of the Dupaco building, something a postal service worker might normally do.

Manning first verified that there was no record at Dupaco of the notice having been received. She searched through the company intranet and phone registry to check if LeConte was employed by Dupaco and could not find him. She spoke with the supervisor in the mailroom and was told LeConte didn’t work for Dupaco. The supervisor remembered that he occasionally dropped off mail and her assumption was that he worked for the post office. Thus, when Manning executed the affidavit, she believed in good faith that LeConte worked on behalf of the post office.

It is also important to recognize that this filing was not going to resolve whether Dupaco’s claim should be allowed or disallowed. It was part of a request for a hearing at which that issue would be addressed. We agree with the district court that with hindsight Manning could have done more. When Hoffmann redid the investigation, she performed the same steps and got the same results until she thought of going to a longtime employee and tapping “her vast institutional knowledge.” But given the circumstances, Manning’s multi-step, good-faith inquiry was clearly enough for rule 1.413(1) purposes. We hold that the district court abused its discretion in concluding otherwise. It is noteworthy that the administrator’s counsel claims to have spent many hours of time and $300 worth of investigator fees tracking down LeConte and disproving Dupaco’s claims about him. Clearly, Dupaco was in a better position to uncover the facts, but this does not demonstrate that the true facts were immediately apparent.

Perfection not required

Affidavits that contain incorrect factual statements surface frequently in litigation. One can often say that the affiant could have investigated more. Evidentiary hearings exist to resolve those disputes. Here, Manning signed her affidavit believing that it was true, there was no improper purpose, and she contacted multiple individuals and departments to gather facts before submitting it. Her investigation was objectively reasonable under the circumstances. We therefore vacate the award of sanctions against Dupaco.

Misstatements at the hearing no basis to sanction under rule

This analysis was based on a legal error. Rule 1.413(1) does not “impose a continuing obligation upon counsel” after the pleading, motion, or paper has been filed. Mathias, 448 N.W.2d at 447. Nor is it a tool for addressing verbal misstatements by an attorney at a hearing. We vacate the award of sanctions against Bright.

And against other counsel

We do not agree with the district court that there was “no proof” to support Blau’s statements about LeConte’s status; the Manning affidavit amounted to some proof. Attorneys may present sworn testimony in civil matters even where they may have doubts as to the credibility of the witness. The ethical rules prohibit a lawyer from presenting testimony that they know is false; they permit a lawyer to refrain from presenting testimony that they reasonably believe is false. See Iowa R. of Prof’l Conduct. 32:3.3(a)(3). A comment to rule 32:3.3 reminds us that the attorney “is usually not required to have personal knowledge of matters asserted” in litigation documents, which “ordinarily present assertions by the client, or by someone on the client’s behalf, and not assertions by the lawyer.” Id. r. 32:3.3 cmt. 3…

Here, too, the June 1 reply brief had some basis in fact. The notice of disallowance had not been received by Dupaco personnel, it was missing the name of the claimant, and as of that date, the best information Manning had based on a series of inquiries was that LeConte didn’t work for Dupaco but presumably worked for the postal service. It is also worth noting again that the function of the reply brief was merely to obtain an evidentiary hearing where the facts could be sorted out. We conclude that the award of sanctions against Blau was likewise an abuse of discretion and vacate the award.

I had watched the oral argument of the case and expected this result. (Mike Frisch)