Garr v. U.S. Healthcare, Inc.
United States Court of Appeals for the Third Circuit
22 F.3d 1274 (3d Cir. 1994)
After a Wall Street Journal article reported insider stock sales at U.S. Healthcare (defendant), attorney Malone personally investigated and filed suit the same day on behalf of one plaintiff, then filed a similar suit the next day for another; attorneys Levin and Sklar (defendants below), after a brief conversation with Malone about his research but without reviewing it themselves or conducting independent investigation, filed a nearly identical class action for the Garrs (plaintiffs) two days after the article. The district court found Malone's inquiry reasonable but found Levin and Sklar's reliance on Malone's work, without any personal investigation, unreasonable given the lack of time pressure justifying such haste, and sanctioned them under Rule 11, dismissing the Garr complaint and referring the matter for disciplinary review.
Whether an attorney who fails to conduct a reasonable personal investigation before filing a complaint is subject to Rule 11 sanctions, even if the complaint ultimately proves meritorious.