Plaintiffs' Baycol Steering Committee v. Bayer Corp. (419 F.3d 794, 2005)

BYE, Circuit Judge.

Kenneth B. Moll, and his firm Kenneth B. Moll & Associates Ltd. (KBM), and K. Amy Lemon, appeal the district court’s order imposing sanctions against them for their conduct in the Baycol Multi-District Litigation (MDL). Pursuant to its inherent power, the district court removed Moll and KBM from the plaintiffs’ steering committee (PSC) and imposed a $50,000 sanction against Moll after finding Moll committed perjury, violated two pretrial orders, and violated multiple provisions of the Minnesota Rules of Professional Conduct. Additionally, the district court sua sponte barred Lemon from the practice of law in the United States District Court for the District of Minnesota after finding she committed perjury and violated provisions of the Minnesota Rules of Professional Conduct. We affirm the removal of Moll and KBM from the PSC, but vacate the $50,000 sanction imposed against Moll and remand for further proceedings. We reverse the district court’s imposition of sanctions against Lemon.

I. Background

The Baycol product liability litigation concerns a medication known as Baycol, which was used to lower cholesterol before it was withdrawn from the market in August 2001. On December 18, 2001, the judicial panel on multidistrict litigation established the Baycol MDL, in which Bayer Corporation, Bayer A.G., and GlaxoS-mithKline are defendants. All federal district court Baycol cases were transferred to the District of Minnesota. The PSC is a select group of lawyers charged with coordinating and directing pretrial proceedings on behalf of plaintiffs in the Bay-col MDL. The district court appointed Moll and KBM to serve as one of the eighteen members of the PSC and one of the seven attorneys on the PSC’s executive committee.

Pre-Trial Order (PTO) 18 directs all filings in the Baycol MDL “shall be filed and served through Verilaw Technologies,” a provider of electronic document storage and management services. The order states documents filed through Verilaw “shall not be filed by traditional paper means” and “will not contain visual representations of the filing attorneys’ signatures.” Instead, PTO 18 provides:

On word processing files that they submit, attorneys shall, in place of a signature and where the signature would normally appear, place “Original Signature on File with Filing Attorney.” A Filing Attorney shall make an original signature available to any registered user upon request. The filer of any document requiring multiple signatures ... must list thereon all the names of other signatories by means of an “/s/_” block for each. By submitting such a document, the filer certifies that each of the other signatories has expressly agreed to the form and substance of the document and the filer has their actual authority to submit the document electronically. The filer must maintain any records evidencing this concurrence for subsequent production to the Court if so ordered or for inspection upon request by a party.

PTO 24 provides confidential documents produced in the Baycol MDL “shall not be disclosed to anyone other than” the court, the parties to the litigation, the parties’ counsel, and certain outside experts and consultants. PTO 24 further states “[a]ll parties and their respective counsel ... shall take all steps reasonably necessary to prevent the disclosure of confidential discovery material other than in accordance with the terms of this Order.” The order also states unauthorized disclosure “may subject the disclosing person to such sanctions and remedies as the Court may deem appropriate.”

In August 2002, at the PSC’s request, Moll, who speaks Italian, scheduled a meeting with Raffaelle Guariniello, an Italian prosecutor, to discuss the criminal investigation of Bayer A.G. managers in Europe and to review related documents. In October 2002, Moll met with Guariniello in Torino, Italy. According to Moll, at this meeting he provided Guariniello with non-privileged documents and he promised to file a motion to intervene, which would allow Guariniello access to privileged documents.

The October 2002 meeting included a teleconference with members of the PSC who were in the United States. During the teleconference, the PSC members in the United States were told to “gather as many documents as [they could] or any documents [they] felt were not privileged” for Guariniello to review. Following the teleconference, Ron Goldser sent an email to Guariniello’s account and attached two documents: a PowerPoint presentation entitled “Baycol Hot Documents Seminar,” and a document entitled “Baycol-MDL 1431 Liability Summary.” These documents were created by the PSC and contained portions of Bayer’s confidential documents. Moll was copied in the email. In the email, Goldser instructed Guariniello to let Moll review the attached documents for confidentiality before viewing them. Guariniello did not read Goldser’s message before opening the attachments, and Moll did not read the email until after Guari-niello viewed the documents. Moll viewed the PowerPoint attachment with Guariniel-lo. Every page of both documents contained the following: “CONFIDENTIAL-SUBJECT TO PROTECTIVE ORDER.”

On October 21, 2002, after returning from Italy, Moll received an email from Guariniello’s assistant, Patrizia Solia, asking Moll if he had any news regarding Guariniello’s access to privileged documents. In December 2002, Moll and KBM associate Hal Kleinman exchanged emails with Solia regarding information KBM needed to prepare a motion to intervene. On January 20, 2003, Kleinman sent an email to Solia and Guariniello in which he stated he was working on a final draft of the motion to intervene and requested additional information. Solia responded to Kleinman the same day and thanked Kleinman for “helping us to receive Baycol documents.” In January and February 2003, Kleinman and Solia exchanged more emails regarding the motion. In a February 27, 2003, email, Solia asked Kleinman: “How is going your Motion for Permission to provide us copies of Bayer documentation?” After March 5, 2003, however, there is no evidence of communication between Guariniello’s office and KBM until June 2003.

Lemon graduated from law school in 2002 and was admitted to the Illinois and Indiana state bars. After working for a medical malpractice firm for less than a year, she joined KBM in Chicago. Lemon started with KBM the last week of May 2003. The first assignment Lemon received from Moll was to prepare the memorandum of law in support of the motion to intervene. Lemon was also asked to prepare the motion for filing including obtaining a declaration from Guariniello in support of the motion. The declarations of Guariniello and Moll had already been prepared by Kleinman who no longer worked at KBM. Lemon was instructed to get the motion and supporting papers to the PSC “law committee” by June 6.

On June 5, at Moll’s request, Lemon emailed Guariniello’s declaration to Solia. In her email, Lemon asked Guariniello to sign the declaration, fax it to KBM, and send the original by mail. On June 10, Lemon had not heard back from Guariniel-lo’s office so she tried calling Guariniello’s office directly, but was unable to speak with anyone. The same day, Lemon emailed a draft of the motion papers to various members of the PSC. She also faxed a copy of the motion papers to Moll, who was out of town. Lemon only received one comment from the PSC “law committee” in response to her draft. On June 11, Mike Nast emailed Lemon and told her the motion looked fine and directed Lemon to work with another member of the PSC, Robert Shelquist of Lockridge Grindal Ñauen PLLP (LGN), to coordinate the filing of the motion. As a courtesy, LGN filed on Verilaw documents prepared by other firms in the Baycol MDL.

On the morning of June 12, Lemon, Moll, and Sonia Kinra, another associate of KBM, met to discuss the motion. The discussion focused on the absence of Guar-iniello’s signature. Moll attempted to call Guariniello’s office but was unable to speak to anyone. Then Moll directed Lemon to call Shelquist and tell him they were still missing Guariniello’s signature. Apparently, June 12 was the filing deadline for consideration of matters at the district court’s July 2003 status conference.

The district court found at this point KBM’s and LGN’s versions of the facts diverge. In her deposition, Lemon testified at Moll’s urging she called Shelquist at LGN the morning of June 12 to tell him the Guariniello declaration was not signed and to seek his advice. According to Lemon, sometime after meeting with Moll and before emailing the motion to Shelquist’s office at 3:56 p.m., she spoke with Shel-quist over the telephone about filing the motion. Lemon testified during the conversation she specifically told Shelquist KBM did not have the signature from Guariniello and she did not know when they would have it. Lemon testified Shel-quist told her to insert the “signature on file” notation and send the file anyway. Lemon stated she then inserted the 7s/ signature on file” notations and at 3:56 p.m. emailed the motion papers to Shel-quist’s assistant for filing. When asked how long the conversation with Shelquist lasted, Lemon stated: “A few minutes. I couldn’t tell you. Maybe 10. I don’t know.”

In Shelquist’s deposition, he disputed Lemon’s account of the conversation. He testified he did not speak with Lemon until after 4:00 p.m. on June 12, after Lemon emailed him the final draft of the motion. Shelquist testified that based on this conversation with Lemon he believed KBM had Guariniello’s signed declaration in hand. Shelquist insisted he did not order Lemon to file the unsigned declaration. He testified he did not learn Guariniello’s declaration was unsigned until July.

Additionally, in his deposition, Shelquist testified it was his “preference to have the signature on file,” but, “in a couple of instances, when we were pushing up against a 5:00 p.m. deadline, we emailed the affidavit to Verilaw and then faxed the signature page when it came in.” When asked to explain his word choice of “preference,” Shelquist stated:

With regard to MDL filings on both sides, there had been instances where documents have been filed, affidavits, that say “signature on file.” I believe there has [sic] been discovery responses served by Defendants that have “signature on file.” I don’t know if, technically, that’s what is supposed to have been done, but nobody has complained or tried to kick out those filings on either side until this motion.

The motion was filed on Verilaw by LGN at 4:15 p.m. on June 12. Moll’s declaration included a notation of “/s/ Signature on File.” Moll’s declaration stated he was “counsel for the purpose” of the motion to intervene. Guariniello’s declaration included a notation that the declaration was executed on June 12, 2003, and a notation of 7s/ Signature on File.” Neither Moll nor Guariniello had signed their declarations.

Half an hour after the motion was filed, Verilaw sent an email to Moll confirming the motion had been filed. Moll forwarded the email to Lemon with the message: “that was fast.” According to Lemon, Moll directed Lemon to send another email to Guariniello requesting his signature. Lemon drafted an email to Guari-niello’s office requesting a signature at approximately 6:19 p.m. on June 12.

Moll testified that he did not learn the motion to intervene was filed until he received the notification from Verilaw, that he was surprised Shelquist had given Lemon permission to file the motion without proper signatures, and that he told Lemon it was wrong to file the motion without having a signed signature page.

However, after learning the motion had been filed, rather than attempting to have the motion withdrawn, Moll and Lemon continued to request Guariniello’s signature. On June 16, Solia sent Lemon an email stating Guariniello would not sign his declaration because he had decided to pursue the privileged documents through a rogatory rather than a motion to intervene. On June 20, Lemon sent Guariniello an email stating: “Please know that we have already prepared the motion on your behalf ... and feel the court will rule in our favor.” Lemon discussed the contents of the email with Moll before it was sent. On the same day, Moll also sent Guariniel-lo an email stating: