2026 CO 20
CenturyLink, Inc.; Glen F. Post, III; R. Stewart Ewing, Jr.; David D. Cole; William A. Owens; Martha H. Bejar; Virginia Boulet; Peter C. Brown; W. Bruce Hanks; Jeffrey K. Storey; Steven T. Clontz; Mary L. Landrieu; Gregory J. McCray; Harvey P. Perry; Michael J. Roberts; Laurie A. Siegel; and Sunit S. Patel, Petitioners
v.
Dean Houser, Respondent
No. 24SC644
Supreme Court of Colorado, En Banc
April 6, 2026
2
Certiorari to the Colorado Court of Appeals Court of Appeals
Case No. 23CA1214
Attorneys for Petitioners: Wheeler Trigg O'Donnell LLP
Frederick R. Yarger Kathryn A. Reilly Daniel N. Guisbond
Denver, Colorado
Attorneys for Respondent: Ranson & Kane PC Jason P. Kane
Denver, Colorado Bottini & Bottini, Inc. Francis A.
Bottini, Jr. Albert Y. Chang La Jolla, California
3
Attorneys for Amicus Curiae Colorado Defense Lawyers
Association: Berg Hill Greenleaf Ruscitti LLP Rudy E. Verner
Geoffrey C. Klingsporn Andrew C. Fischer Boulder, Colorado
Attorneys for Amicus Curiae Securities Industry and Financial
Markets Association: Womble Bond Dickinson (US) LLP Kendra N.
Beckwith Kenneth F. Rossman Denver, Colorado
JUSTICE GABRIEL delivered the Opinion of the Court, in which
CHIEF JUSTICE MÁRQUEZ, JUSTICE BOATRIGHT, JUSTICE
HOOD, JUSTICE SAMOUR, JUSTICE BERKENKOTTER, and JUSTICE
BLANCO joined.
4
OPINION
GABRIEL, JUSTICE
¶1
In this class action brought by shareholders against a
corporation alleging securities law violations, we granted
certiorari to decide whether C.R.C.P. 11(a)'s duty to
conduct an objectively reasonable inquiry is satisfied when
an attorney copies information, including allegations by
confidential witnesses, from complaints in related lawsuits
involving some of the same defendants.[1]
¶2
We now conclude that counsel must conduct a sufficient
investigation to support the allegations contained in a
complaint, at least on information and belief. The extent of
the investigation required, however, is highly fact
dependent, and, therefore, a plaintiff's copying of
allegations contained in complaints in related actions does
not alone violate counsel's duty under C.R.C.P. 11(a) but
rather must be considered in the context of each case.
Applying those principles here, we further conclude that
plaintiff Dean Houser's counsel conducted a sufficient
investigation to allow counsel to include in the amended
complaint in this case, consistent with counsel's
obligations under C.R.C.P. 11, allegations that were
5
contained in complaints in related actions against some of
the same defendants named here.
¶3
Accordingly, we affirm the judgment of the court of appeals
division below.
I.
Facts and Procedural History
¶4
In 2018, Houser filed a securities class action against
CenturyLink, Inc. and Glen F. Post, III, R. Stewart Ewing,
Jr., David D. Cole, William A. Owens, Martha H. Bejar,
Virginia Boulet, Peter C. Brown, W. Bruce Hanks, Jeffrey K.
Storey, Steven T. Clontz, Mary L. Landrieu, Gregory J.
McCray, Harvey P. Perry, Michael J. Roberts, Laurie A.
Siegel, and Sunit S. Patel (collectively,
"defendants") in Boulder County District Court.
Houser filed the complaint on behalf of all persons and
entities who had purchased or acquired CenturyLink stock
pursuant or traceable to CenturyLink's Registration
Statement and Prospectus (the "Offering Documents")
issued in connection with the merger of CenturyLink, Level 3
Communications, Inc., and their subsidiaries. Houser alleged,
among other things, that the Offering Documents were
negligently prepared and, as a result, contained untrue
statements of material fact, omitted material information,
and failed to make adequate disclosures required by the
applicable rules and regulations. Houser further alleged that
the Offering Documents were false and misleading because they
contained material omissions.
6
¶5
Defendants moved to dismiss the complaint pursuant to
C.R.C.P. 12(b)(5) for failure to state a claim upon which
relief can be granted. In this motion, defendants argued, as
pertinent here, that (1) as a matter of law, none of the
affirmative statements that Houser cited were misleading; and
(2) the majority of the alleged omissions were, in fact,
disclosed, and the remainder were not facts required to be
disclosed.
¶6
Approximately thirteen months after defendants filed their
motion to dismiss and while the motion was still pending,
Houser filed a notice of supplemental authority citing In
re CenturyLink Sales Practices & Securities
Litigation, 403 F.Supp.3d 712 (D. Minn. 2019)
("CenturyLink"), a parallel securities
fraud class action lawsuit and multidistrict litigation
proceeding pending in the United States District Court for
the District of Minnesota. According to Houser, the
plaintiffs in that case had alleged that CenturyLink and its
executives had made false and misleading statements regarding
the purportedly widespread practice of "cramming,"
which, citing the complaint in that case, the
CenturyLink court described as "adding services
to customers' accounts without authorization, deceiving
customers about the prices they would be charged, and
misquoting prices by failing to disclose that
'bundles' included fees for optional services that
the customers did not need or authorize."
CenturyLink, 403 F.Supp.3d at 720.
7
¶7
Several months later, the district court conducted a hearing
on CenturyLink's motion to dismiss, and four days after
that hearing, Houser filed a supplemental brief responding to
questions that the court had asked during the hearing. In
this brief, Houser also requested leave to amend his
complaint, if the court were inclined to grant
defendants' motion to dismiss. In support of this
request, Houser cited the "substantial new facts"
that had come to light since the current action was filed, as
reflected in the CenturyLink case.
¶8
The district court, however, granted defendants' motion
to dismiss with prejudice and denied Houser's request for
leave to file an amended complaint. In so ruling, the court
determined that Houser had "failed to plead with
particularity any material misstatements or omissions in
violation of Section 11 or Section 12(a)(2)" of the 1933
Securities Act.
¶9
Houser appealed, and in a unanimous, published opinion, a
division of the court of appeals affirmed in part, reversed
in part, and remanded the case for further proceedings.
Houser v. CenturyLink, Inc., 2022 COA 37, ¶ 51,
513 P.3d 395, 407 ("Houser I").
Specifically, the division (1) affirmed the district
court's order dismissing Houser's claims under
C.R.C.P. 12(b)(5); (2) reversed the court's order denying
Houser's motion for leave to amend the complaint as it
pertained to Houser's omissions claims based on the
cramming theory; and (3) otherwise affirmed the district
court's order denying Houser's motion for leave to
amend.
8
Houser I, ¶¶ 50-51, 513 P.3d at 407. In
support of this determination, the division opined that it
could not at that point say, as a matter of law, that Houser
would be unable to state omissions claims under sections 11,
12(a)(2), and 15 with the addition of facts related to the
cramming theory that the CenturyLink court had found
sufficient to state a plausible claim. Id. at ¶
50, 513 P.3d at 407. The division cautioned, however, that,
to the extent that, on remand, Houser desired to use
allegations made by another party in a separate lawsuit,
"he must plead them as facts, not as allegations by
someone else, and must do so only after reasonable inquiry as
required by C.R.C.P. 11." Id. at ¶ 28 n.9,
513 P.3d at 403 n.9.
¶10
Houser then filed an amended class action complaint,
individually and on behalf of all former shareholders of
Level 3 Communications, who, according to Houser, had
acquired CenturyLink stock pursuant or traceable to the
CenturyLink Offering Documents issued in connection with the
merger between CenturyLink and Level 3. Defendants included
certain executive officers and directors of CenturyLink at
the time of the merger and certain executive officers and
directors of Level 3 who had joined CenturyLink after the
merger.
¶11
In the amended complaint, Houser alleged:
Plaintiff Dean Houser ("Plaintiff"), individually
and on behalf of all others similarly situated, by
Plaintiff's undersigned attorney, for Plaintiff's
amended complaint against Defendants, alleges the following
based upon personal knowledge as to Plaintiff and
Plaintiff's own acts and upon information and belief as
to all other matters based on the investigation conducted by
and through
9
Plaintiff's attorneys, which included, among other
things, a review of U.S. Securities and Exchange Commission
("SEC") filings by CenturyLink, Inc.
("CenturyLink" or the "Company"), the
Company's press releases and earnings calls, analyst
reports and media reports about the Company, review of public
filings in the related cases, including State v.
CenturyTel Broadband Services, LLC, No. 02-CV-17-3488
(Minn. Dist. Ct., Cnty. of Anoka), In re CenturyLink
Sales Practices &Securities Litigation, MDL No.
17-2795 (MJD/KMM) (D. Minn.), and Heiser v. CenturyLink,
Inc., No. CV2017-008928 (Az. Super. Ct., Cnty. of
Maricopa), and discussions with plaintiffs' counsel in
those actions, and review of other publicly-available
information about CenturyLink. Plaintiff believes that
substantial additional evidentiary support will exist for the
allegations set forth herein after a reasonable opportunity
for discovery.
(Footnote omitted.)
¶12
Houser further alleged, among other things, that the Offering
Documents were false and misleading and omitted material
information regarding systemic and ongoing illegal cramming
practices at CenturyLink that existed at the time, were known
to CenturyLink's senior management, and were likely
to—and, in fact, did—have a material impact on
CenturyLink's revenues and results of operations.
Specifically, Houser asserted that when the truth about the
undisclosed cramming practices became public, the price of
CenturyLink's common stock fell, thereby injuring Houser
and other members of the class.
¶13
In support of the foregoing contentions, Houser alleged that
unnamed former employees at CenturyLink had said that
cramming at CenturyLink was "happening all the time, all
day, every day" and was a "very common and
widespread" issue among customer complaints that were
reported to senior
10
management. Houser further alleged that "[t]he rampant
overbilling" at CenturyLink was not accidental and did
not escape defendants' attention. To the contrary, it was
recorded in CenturyLink's computer systems and regularly
reported to senior management.
¶14
As noted above, the amended complaint also included
references to a number of other lawsuits filed against
CenturyLink. For example, the amended complaint referred to
the CenturyLink case and relied on allegations made
in that case by confidential witnesses.
¶15
The amended complaint further referred to a lawsuit filed by
the Minnesota Attorney General against CenturyLink, captioned
State v. CenturyTel Broadband Services LLC, No.
02-CV-17-3488 (Minn. Dist. Ct., Cnty. of Anoka). The amended
complaint described and attached as exhibits four named
customers' affidavits describing alleged cramming
practices that the Minnesota Attorney General had submitted
in the CenturyTel case. Houser asserted in the
amended complaint that he had obtained these affidavits from
the public docket in that case.
¶16
The amended complaint alleged that the above-described
lawsuits were "based on extensive research as well as
thousands of complaints from aggrieved customers," all
of which painted a consistent picture and made clear that
CenturyLink's cramming practices were not isolated
occurrences but rather
11
comprised a pervasive and systemic problem that was known to
CenturyLink's senior management.
¶17
Finally, the amended complaint contained allegations from a
lawsuit filed by a former employee named Heidi Heiser, who
had discovered that multiple CenturyLink customers had been
billed for additional services that they did not request or
authorize. The amended complaint recited that Heiser had
raised her concerns with CenturyLink's management and
ultimately filed a whistleblower complaint against
CenturyLink. Houser cited his counsel's review of public
filings in Heiser's lawsuit as one of the bases for the
allegations in his amended complaint.
¶18
Defendants subsequently filed a motion to dismiss the amended
complaint pursuant to C.R.C.P. 12(b)(5), arguing, as
pertinent here, that Houser had based his cramming omissions
theory on "untested statements attributed to anonymous
CenturyLink employees cited in other lawsuits."
According to defendants, Houser did not allege that he or his
counsel had spoken to any of these anonymous employees,
verified their statements, or taken any other actions that
could constitute a "reasonable inquiry" under
C.R.C.P. 11. Defendants further contended that Houser had
"simply plagiarized" complaints filed in other
actions against CenturyLink without alleging that he or his
counsel had spoken with any of the sources who had provided
the underlying facts in those cases. As a result,
12
defendants argued, Houser had not conducted the reasonable
inquiry required by C.R.C.P. 11 and, therefore, he did not
have a basis to make such allegations. Accordingly, his
amended complaint failed to state a plausible claim for
relief.
¶19
The district court ultimately agreed with defendants and
dismissed Houser's amended complaint. The court began by
noting that Houser had not contended that he had spoken with
the unnamed employees who had made allegations against the
defendants in the CenturyLink case. Nor had he
asserted that he had spoken with Heiser. And, the court
found, the statements given by the former CenturyLink
employees in CenturyLink were "given in
interviews conducted by various attorneys, none of whom
[were] Plaintiff's counsel." As a result, in the
court's view, Houser's contentions amounted to no
more than that he had conducted "painstaking research
and review of the related lawsuits" and had had
discussions with plaintiffs' counsel in those cases.
This, however, was insufficient to satisfy the reasonable
inquiry standard. Accordingly, the court reviewed the
viability of Houser's amended complaint by considering
only the allegations that remained after omitting the
foregoing "copied" allegations, and the court
concluded that such allegations could not establish the
requisite plausibility above a speculative level.
¶20
Houser then appealed again, arguing that the district court
had created an unworkable "reasonable inquiry"
standard and incorrectly imposed on him the
13
burden to state the sources and bases for his allegations at
the pleading stage. Specifically, Houser alleged that the
district court had erred by (1) failing to apply the proper
standard in deciding a C.R.C.P. 12(b)(5) motion and
impermissibly converting C.R.C.P. 11's requirement of a
reasonable inquiry into a standard of pleading; (2) failing
to consider his allegations as a whole and to draw all
reasonable inferences in his favor; and (3) denying him leave
to amend again because this was his first amended complaint
and there was no undue delay or prejudice.
¶21
In a unanimous, published opinion, a division of the court of
appeals reversed and remanded for further proceedings.
Houser v. CenturyLink, Inc., 2024 COA 96, ¶ 8,
559 P.3d 677, 680 ("Houser II"). In so
ruling, the division concluded that (1) if a plaintiff takes
appropriate investigative steps, then the plaintiff may
incorporate allegations from confidential witnesses cited in
another complaint; and (2) in such circumstances, C.R.C.P.
11(a) does not require plaintiff's counsel to speak
directly with the confidential witnesses. Id.
¶22
To reach this conclusion, the division began by noting that
in evaluating the adequacy of an attorney's inquiry into
the factual basis for a pleading, we have applied an
"objective reasonableness standard." Id.
at ¶ 29, 559 P.3d at 684 (quoting In re Trupp,
92 P.3d 923, 930 (Colo. 2004) ("Trupp
II"). Thus, an attorney
14
violates C.R.C.P. 11(a) "by failing to conduct an
objectively reasonable inquiry prior to filing a signed
pleading." Id. (quoting Trupp II, 92
P.3d at 930).
¶23
Relying, then, on federal cases interpreting Fed.R.Civ.P. 11,
the division concluded that Houser's counsel had not
violated C.R.C.P. 11 by copying allegations, including
allegations made by confidential witnesses, from the
CenturyLink complaint without speaking with those
witnesses. Id. at ¶ 54, 559 P.3d at 687. The
division reached this conclusion for six reasons: (1) counsel
had undertaken an independent investigation, even though
counsel did not speak with the witnesses; (2) Houser had
attested in good faith that the allegations were based on
personal knowledge as to him and his own acts and on
information and belief as to all other matters, based on
counsel's investigation; (3) Houser had attested in good
faith that he believed that additional evidentiary support
for his allegations would exist after a reasonable
opportunity for discovery; (4) another court had already
determined that the confidential witness statements that
Houser had copied into his amended complaint were sufficient
to support a properly pled complaint; (5) Houser's
counsel's inquiry was objectively reasonable; and (6) the
federal cases cited by defendants regarding potential
unethical behavior by attorneys did not warrant raising the
bar for plaintiffs to access the justice system. Id.
at ¶¶ 54-59, 559 P.3d at 687-88. As to the last
point, the division observed that if a plaintiff filed a
complaint largely premised on fabricated witness statements
15
from another complaint, then Colorado law provides for
appropriate sanctions. Id. at ¶ 60, 559 P.3d at
688.
¶24
Defendants then sought certiorari review in this court, and
we granted their petition.
II.
Analysis
¶25
We begin by setting forth the applicable standard of review.
We then discuss the pleading and investigation requirements
set forth in our civil rules, and we review the case law
setting forth the parameters of an attorney's obligation
to conduct a reasonable investigation before making
allegations in a complaint. Finally, we apply these
principles to the facts now before us.
A.
Standard of Review
¶26
Defendants' contentions before us require us to interpret
C.R.C.P. 11. We interpret the Colorado Rules of Civil
Procedure de novo. Mason v. Farm Credit of S. Colo.,
ACA, 2018 CO 46, ¶ 7, 419 P.3d 975, 979. In doing
so, we interpret the rules according to their commonly
understood and accepted meanings. Id. Moreover, we
construe the rules liberally to effectuate their objective of
securing "the just, speedy, and inexpensive
determination of every action." Id. (quoting
C.R.C.P. 1(a)).
16
¶27
Similarly, we review de novo a district court's dismissal
of a complaint for failure to state a claim under C.R.C.P.
12(b)(5). Jagged Peak Energy Inc. v. Okla. Police
Pension &Ret. Sys., 2022 CO 54, ¶ 24,
523 P.3d 438, 446.
B.
Pleading and Investigation Requirements
¶28
The principal purpose of a complaint is to provide notice of
the claims being asserted. Kluge v. Wilson, 448 P.2d
786, 787 (Colo. 1968). C.R.C.P. 8(a)(2) sets out the basic
requirements of a claim for relief: "A pleading which
sets forth a claim for a relief whether an original claim,
counterclaim, cross-claim, or a third-party claim, shall
contain . . . a short and plain statement of the claim
showing that the pleader is entitled to relief ...."
C.R.C.P. 8(e)(1) adds, "When a pleader is without direct
knowledge, allegations may be made upon information and
belief."
¶29
C.R.C.P. 11(a), in turn, provides, in pertinent part:
Every pleading of a party represented by an attorney shall be
signed by at least one attorney of record in his individual
name.... The signature of an attorney constitutes a
certificate by him that he has read the pleading; that to the
best of his knowledge, information, and belief formed after
reasonable inquiry, 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, such as
to harass or to cause unnecessary delay or needless increase
in the cost of litigation.
¶30
This rule focuses on the pre-filing and pre-pleading behavior
of the attorney and personalizes the responsibility of the
attorney who certified the pleading by signing it. People
v. Trupp, 51 P.3d 985, 990, 992 (Colo. 2002)
("Trupp I"). The rule
17
also "safeguards the judicial process by compelling
attorneys to submit pleadings which are truthful and advance
meritorious legal arguments." Stepanek v. Delta
Cnty., 940 P.2d 364, 370 (Colo. 1997).
¶31
The scope of a C.R.C.P. 11(a) inquiry "concerns whether
the attorney (1) has read the pleading in question; (2) has
undertaken reasonable inquiry into the pleading's factual
and legal assertions; and (3) possessed a proper purpose in
filing the pleading." Trupp I, 51 P.3d at 991.
The inquiry does not, however, turn on the outcome of a case.
Id. Rather, "it turns on whether the attorney
met the reasonable inquiry and proper purpose threshold in
preparing and filing the pleading." Id.
¶32
Bad faith is not a prerequisite of a C.R.C.P. 11 violation.
Trupp II, 92 P.3d at 930. Accordingly, an attorney
may violate C.R.C.P. 11(a) solely by failing to conduct an
objectively reasonable inquiry before filing a signed
pleading. Id.
C.
Objectively Reasonable Inquiry
¶33
Defendants essentially argue that Houser's counsel did
not conduct an objectively reasonable inquiry when drafting
the amended complaint because counsel (1) copied allegations
and information from complaints in other cases without
personally verifying or corroborating such allegations and
information and (2) did not speak with any of the
confidential witnesses cited in the other cases before
copying their allegations into the amended complaint here. As
a result,
18
defendants contend, Houser's counsel failed to comply
with C.R.C.P. 11, and, therefore, the division's decision
should be reversed.
¶34
Colorado case law discussing the parameters of an
attorney's C.R.C.P. 11(a) obligation to conduct an
objectively reasonable inquiry appears to be limited. In
Trupp II, 92 P.3d at 930-32, we considered
whether an assistant attorney regulation counsel had
conducted a reasonable investigation before filing a
complaint alleging that an attorney had violated the Colorado
Rules of Professional Conduct by not paying child support. We
observed that before filing her complaint, counsel, either
directly or through an investigator, had reviewed the intake
file, spoken several times with the respondent attorney and a
number of others with relevant information, reviewed the
current and prior child support orders and records of the
respondent attorney's payments, independently calculated
the arrearages, and researched case law. Id. at 931.
In those circumstances, we concluded that no evidence
established that regulation counsel had failed to investigate
either the facts or the law or had misrepresented the facts
or law in her complaint. Id. at 931-32. Accordingly,
we determined that the presiding disciplinary judge had
abused his discretion in concluding that regulation counsel
had violated C.R.C.P. 11. Id. at 932.
¶35
Federal courts construing Fed.R.Civ.P. 11 appear to have
addressed the objectively reasonable inquiry requirement of
that rule more frequently than we
19
have addressed the analogous requirement in C.R.C.P. 11, and
because C.R.C.P. 11 closely parallels Fed.R.Civ.P. 11,
compare Fed.R.Civ.P. 11(b)(3) (requiring reasonable
inquiry), with C.R.C.P. 11(a) (same), we deem it
appropriate to look to federal case law for guidance, see
Trupp I, 51 P.3d at 990 ("We consider federal
precedent when our rule is similar to the federal
rule.").
¶36
Federal courts addressing whether counsel who had not
independently verified allegations in a complaint had
satisfied Fed.R.Civ.P. 11's reasonable investigation
requirement have reached varying conclusions, depending on
the particular facts of each case.
¶37
For example, in In re Teva Securities Litigation,
671 F.Supp.3d 147, 164-66 (D. Conn. 2023), several
plaintiffs who had opted out of a class action settlement
brought direct actions concerning the same securities fraud
allegations involving Teva Pharmaceutical Industries, Ltd.
and others that underlay the class action. In their
complaints in the direct actions, the plaintiffs had
"recycle[d]" several allegations raised in the
class action and in an action brought by state attorneys
general, some of which contained allegations made by
confidential witnesses. Id. at 191, 193. Although
the direct action complaints were modeled on the class
action, they also raised new claims and added new defendants.
Id. at 166.
¶38
The defendants moved to dismiss, contending that the direct
actions' "wholesale lifting" of allegations
from the other actions did not constitute the
20
reasonable investigation required by Fed.R.Civ.P. 11.
Id. at 191. Ultimately, the district court rejected
that contention and concluded that the direct action
complaints complied with Fed.R.Civ.P. 11. Id. at
192-93. In reaching this conclusion, the district court
observed that (1) the state attorneys general's
allegations "were the product of an intensive,
multi-year investigation," and it was reasonable for the
direct action plaintiffs to rely on a governmental
investigation because "such information may have more
'evidentiary support'"; (2) counsel for the
direct action plaintiffs had investigated the complaints on
which counsel had relied; (3) it was proper for counsel for
the direct action plaintiffs to reassert allegations brought
in complaints drafted by experienced counsel or governmental
investigators and counsel; and (4) each of the direct action
complaints identified the sources that counsel had
investigated and attested in good faith that discovery would
provide evidentiary support for the allegations pled on
information and belief. Id. (quoting de la
Fuente v. DCI Telecomms., Inc., 259 F.Supp.2d 250, 260
(S.D.NY. 2003)). According to the court, "Rule 11
requires nothing more." Id. at 193. And that
rule specifically did not "require counsel to certify
that counsel has spoken with the confidential witnesses and
knows who they are." Id.
¶39
In Garr v. U.S. Healthcare, Inc., 22 F.3d 1274,
1277-79 (3d Cir. 1994), in contrast, the court affirmed the
district court's imposition of sanctions on two
21
plaintiffs' attorneys who had copied allegations from a
complaint filed in a separate securities action. The court
noted that the attorneys had relied only on a newspaper
article, another complaint, and another attorney's
research without making any effort to examine the materials
that the other attorney had assembled and without justifying
their failure to have done so. Id. at 1280.
According to the court, no evidence suggested that the other
attorney would have declined to share the materials with
them, and the other attorney's office was a short
distance from the plaintiffs' attorneys' offices.
Id. In addition, the materials on which the other
attorney had relied were all publicly accessible.
Id. And there were no time constraints requiring the
attorneys to act on an expedited basis. Id.
¶40
The court added, however:
A signer's obligation personally to comply with the
requirements of Rule 11 clearly does not preclude the signer
from any reliance on information from other persons.... Thus,
in CTC Imports and Exports, we stated that a
determination of whether there has been "a reasonable
inquiry may depend on . . . whether [the signer] depended on
forwarding counsel or another member of the bar."
Id. at 1278-79 (second omission and alteration in
original) (quoting CTC Imports &Exports v. Nigerian
Petroleum Corp., 951 F.2d 573, 578 (3d Cir. 1991)). The
court further observed that a court "must consider all
the material circumstances in evaluating the signer's
conduct." Id. at 1279.
¶41
Finally, in In re BankAtlantic Bancorp, Inc. Securities
Litigation, 851 F.Supp.2d 1299, 1309 (S.D. Fla. 2011),
the court addressed, among other things, the propriety
22
of class counsel's relying on statements made by
confidential witnesses to investigators employed by
counsel's law firms. There, the defendants argued that
class counsel had violated Fed.R.Civ.P. 11(b)(3) by falsely
attributing factual assertions to confidential witnesses and
by failing to make a reasonable inquiry to determine whether
such assertions were true and properly attributable to those
witnesses. Id. at 1309-10. The defendants also
pointed out that four of the confidential witnesses had
disavowed making some of the assertions attributed to them
and one witness denied providing information to class
counsel. Id. at 1310.
¶42
In response, class counsel asserted that investigators at
their law firms had interviewed the confidential witnesses
and that counsel had supervised the investigative efforts,
provided the investigators with proposed points of inquiry,
and reviewed the notes and memoranda prepared by the
investigators. Id. at 1311.
¶43
On these facts, the court concluded that the inquiry that
class counsel had conducted was not unreasonable under the
circumstances. Id. In reaching this conclusion, the
court, citing Garr, 22 F.3d at 1280, noted that
"an attorney has a non-delegable duty to
analyze the facts and law that support a pleading or
motion, not necessarily to personally gather those
facts." BankAtlantic, 851 F.Supp.2d at 1311.
Accordingly, the court found that the fact that some of the
witnesses' later deposition testimony contradicted the
assertions attributed to them in the consolidated complaints
did not, without more, warrant a conclusion that class
23
counsel had violated Rule 11. Id. at 1311-12. In the
court's view, any such discrepancies created only
credibility questions. Id. at 1312. The court did
conclude, however, that class counsel's inclusion of
assertions attributed to one witness violated Rule 11 because
that witness did not work for BankAtlantic's credit
department for years prior to or during the class period,
and, therefore, a reasonable inquiry by class counsel would
have revealed that the factual contentions attributed to this
witness lacked adequate evidentiary support. Id. at
1313-14.
¶44
With this case law in mind, we turn to the facts now before
us.
D.
Application
¶45
Defendants contend that it was improper for Houser to copy
allegations from other complaints against CenturyLink without
interviewing the witnesses on whose statements the
allegations were based. We do not believe that our civil
rules or the above-described case law support so unbending a
rule.
¶46
As noted above, C.R.C.P. 8(a) makes clear that the purpose of
a complaint is notice. Subject to exceptions admittedly not
at issue here, see C.R.C.P. 9(b) (indicating matters
that must be alleged with particularity), a plaintiff need
only set forth "a short and plain statement of the claim
showing that the pleader is entitled to relief,"
C.R.C.P. 8(a)(2). Moreover, our rules expressly provide that
a party may plead on information and belief. C.R.C.P.
8(e)(1).
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¶47
In light of the foregoing, and recognizing that the extent of
investigation necessary in a given litigation is highly fact
dependent, we decline to adopt a bright-line rule precluding
a party from copying allegations in related litigation unless
counsel speaks to the witnesses whose statements supported
such allegations. It simply may not be possible for counsel
to do so. Instead, we conclude that counsel must conduct a
sufficient investigation to support the allegations contained
in a complaint, at least on information and belief.
¶48
Here, we agree with the division that Houser's counsel
conducted a sufficient inquiry. Houser's counsel stated
in the amended complaint that their investigation included
talking to plaintiffs' counsel in the other related cases
involving CenturyLink. Houser's counsel further alleged
that counsel had reviewed (1) publicly available filings in
the related cases, including documents concerning the
whistleblower's testimony and witnesses' testimony in
other cases in which courts had determined that ample
evidence supported the plaintiffs' claims; (2)
investigations by state attorneys general; (3) SEC filings by
CenturyLink; (4) CenturyLink's press releases, earning
calls, and analyst reports; and (5) media reports about
CenturyLink. Houser's counsel also attached to the
amended complaint affidavits from four named customers
describing their experiences with CenturyLink. In our view,
these efforts, which largely paralleled those found
sufficient by the court in Teva, 671 F.Supp.3d at
192-93, satisfied
25
C.R.C.P. 11(a)'s reasonable inquiry requirement, even if
counsel did not personally speak with the witnesses whose
allegations counsel copied.
¶49
Such a conclusion is fully consistent with the
above-described purposes of both C.R.C.P. 8 and 11, which are
to provide a short and plain statement showing that the
pleader is entitled to relief, C.R.C.P. 8(a), and to set
forth a plausible claim for relief after conducting a
reasonable investigation of the facts and law, C.R.C.P.
11(a); see also Warne v. Hall, 2016 CO 50, ¶
24, 373 P.3d 588, 595 (adopting the plausibility standard for
motions to dismiss for failure to state a claim). Such a
conclusion also recognizes that, in many cases, essential
facts are in the hands of civil defendants and may not be
available to plaintiffs absent a fair opportunity for
discovery after setting forth a plausible claim for relief,
which is one reason that C.R.C.P. 8(e)(1) expressly
authorizes counsel to plead on information and belief.
¶50
To conclude otherwise, as defendants would have us do, would
dramatically raise the standard for sufficient pleading in a
case like this. It would essentially require plaintiffs to
set forth substantial evidence in their complaint before they
have had an opportunity to conduct reasonable discovery. And
it would also require plaintiffs to recite in their complaint
all that their counsel did to investigate the allegations
made in the complaint. Our civil rules, however, do not
establish such requirements, and we will not impose them by
judicial fiat.
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¶51
Simply stated, our pleading rules and C.R.C.P. 11 exist to
ensure fair notice to defendants of the claims being asserted
against them and that plaintiffs conduct reasonable
investigations before filing suit, so that plaintiffs'
claims are plausibly supported by the facts and the law. In
our view, these rules adequately protect the interests of all
parties in a litigation, and we perceive no reason to require
either more or less from plaintiffs.
¶52
In reaching our conclusion today, we are unpersuaded by
defendants' argument that our opinion will allow
plaintiffs in Colorado "to wholesale copy complaints
from other lawsuits without personally investigating the
facts alleged in them" and will leave Colorado courts in
cases involving borrowed allegations with no ability to
enforce C.R.C.P. 11's duty to investigate, because the
attorney who investigated the claims will be absent and
beyond the jurisdiction of Colorado's procedural and
ethical rules. Contrary to defendants' assertions, our
opinion requires the reasonable investigation mandated by our
civil rules. In addition, we are confident that Colorado
courts have all of the tools necessary to hold accountable
attorneys who file pleadings in Colorado that violate
Colorado procedural and ethical rules.
¶53
We likewise are unpersuaded by defendants' suggestion
that opinions like ours today have caused (and presumably
will continue to cause) securities class actions to skyrocket
in state courts. We are not convinced by defendants'
27
suggestion that any increase in the number of securities
class actions pending in state courts is attributable to
judicial decisions allowing meritless actions to proceed. To
the contrary, we believe that trial courts in this state and
others have served—and we have every confidence will
continue to serve—as appropriate gatekeepers to ensure
that lawsuits that do not satisfy the requirements to survive
motions to dismiss will be resolved properly and
expeditiously.
III.
Conclusion
¶54
For these reasons, we conclude that counsel must conduct a
sufficient investigation to support the allegations contained
in a complaint, at least on information and belief. The
extent of the investigation required, however, is highly fact
dependent, and, therefore, a plaintiff's copying of
allegations contained in complaints in related actions does
not alone violate counsel's duty under C.R.C.P. 11(a) but
rather must be considered in the context of each case.
¶55
Applying these principles here, we further conclude that
Houser's counsel conducted a sufficient investigation to
allow counsel to include in the amended complaint in this
case, consistent with counsel's obligations under
C.R.C.P. 11, allegations that were contained in complaints in
related actions against some of the same defendants named
here.
¶56
Accordingly, we affirm the judgment of the division below.
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Notes:
[1] Specifically, we granted certiorari to
decide:
Whether C.R.C.P. 11(a)'s non-delegable duty to
conduct an objectively reasonable inquiry is satisfied when
an attorney "borrows plausibility" from a complaint
in another lawsuit.
Because we do not believe that the phrase
"borrows plausibility" is clear or precise, we do
not use that phrase in this opinion.