According to Illinois Supreme Court Rule 137, an attorney’s signature on a pleading certifies that to the best of his or her knowledge, information and belief “it is well grounded in fact and is warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose.”  Violations of the rule can bring sanctions, and “[w]here a sanction is imposed under this rule, the judge shall set forth with specificity the reasons and basis of any sanction so imposed either in the judgment order itself or in a separate written order.”

In Lake Environmental, Inc. v. Arnold, the Illinois Supreme Court addressed the question of whether a trial court was also required to give an explanation when it denies sanctions.  In a unanimous opinion by Justice Thomas, the Court answered “no.”  Our detailed summary of the facts and lower court decisions in Lake Environmental is here.  Our report on the oral argument is here.

Lake Environmental started seven years ago when the Illinois Department of Public Health issued an emergency stop work order to the plaintiff based on alleged violations during an asbestos cleanup job.  Several months later, the Department concluded that the violations had been remedied and dismissed the stop work order proceedings.  But in 2010, the Department notified the plaintiff that it intended to revoke the plaintiff’s license as an asbestos abatement contractor based on the same alleged violations.  In the meantime, the Department had filed a civil lawsuit, seeking monetary penalties for the 2008 problems, but the lawsuit had been tossed out of court based on res judicata.

The plaintiff filed a petition for administrative review of the Department’s revocation of its license, arguing that the proceeding was also barred by res judicata.  The circuit court agreed and overturned the revocation.  The plaintiff then moved for sanctions on the basis that the Department’s defense of the administrative review proceedings constituted a Rule 137 violation.  The trial court denied the motion without sanctions, but the Appellate Court reversed, holding that Rule 137 required an explanation whether sanctions were granted or denied.

The Supreme Court reversed.  The Court began by rejecting the plaintiff’s claim that the Appellate Court’s decision wasn’t an interpretation of Rule 137 at all, but rather was pursuant to Rule 366, which permits an Appellate Court to make any order, including a remand, “that the case may require.”  The Supreme Court held that it was perfectly clear, reading the Appellate Court opinion, that the basis for the decision was Rule 137, not Rule 366.

Ultimately, the Court found that the plain language of Rule 137 disposed of the case.   The Rule requires an explanation in orders imposing sanctions.  It says nothing about orders denying sanctions.  Such a reading was consistent with the reasons for the Rule, the Court found.  Given that sanctions are not automatic even when a filing technically violates the Rule, there was a clear need for an explanation when the court decided to impose them, so as to inform both the parties and future litigants exactly what the court thought merited the penalty.  There was no similar need for an explanation when sanctions were denied.

Besides, the Court held, a denial of sanctions is reviewed for abuse of discretion.  Settled standards of abuse of discretion provide that an order can be upheld on any grounds supported by the record, regardless of whether or not it’s actually the basis that the lower court cited.  So, the Supreme Court held, ultimately it didn’t really matter for purposes of judicial review why the lower court had denied the sanctions – if there was an arguable justification for the order in the record, it would be upheld.  The Court remanded Lake Environmental with instructions that the Appellate Court should review the record to determine whether such grounds existed for upholding the denial order.

Image courtesy of Flickr by Brian Turner (no changes).