The Colorado Supreme Court has ruled that plaintiffs’ attorneys are permitted to “borrow” allegations from other legal proceedings to support their own clients’ claims, provided they conduct a reasonable investigation into those assertions. The decision clarifies the boundaries of professional conduct for lawyers filing civil complaints, specifically regarding how much independent verification is required when a defendant is already facing similar accusations in other forums.
At the heart of the dispute is the balance between a lawyer’s duty to ensure a lawsuit is well-grounded in fact and the practical reality that critical evidence is often held exclusively by the defendants. By rejecting a strict requirement that lawyers personally interview every witness mentioned in related cases, the court has opted for a flexible, fact-dependent standard over a rigid “bright-line” rule.
The ruling stems from a complex legal battle involving CenturyLink, Inc. Et al. V. Houser. The case began when Dean Houser sued CenturyLink and its directors, alleging the telecommunications giant violated federal securities law. Houser claimed the company failed to disclose deceptive charging practices during its merger with Level 3 Communications, Inc.
Defining ‘Reasonable Inquiry’ in Civil Litigation
Under Colorado’s rules for civil cases, attorneys must certify that their filings are based on knowledge, information, and belief formed after a “reasonable inquiry.” The central question for the justices was whether that inquiry must include direct contact with witnesses from other cases—especially when those witnesses are confidential or unnamed.
Justice Richard L. Gabriel, writing for the court in the April 6 opinion, concluded that such a requirement would be impractical. Gabriel noted that in many instances, it may simply be impossible for counsel to speak with every witness, and that the extent of the necessary investigation depends heavily on the specific facts of the litigation.
The court determined that lawyers do not need to “grab it on faith” from other attorneys, but they must perform sufficient due diligence to support their claims “at least on information and belief.” In Houser’s case, his legal team had reviewed federal filings, press releases, earnings calls, and media reports, and had consulted with lawyers involved in other civil proceedings against CenturyLink.
The Battle Over ‘Copycat’ Lawsuits
The path to the Supreme Court was marked by conflicting views on what constitutes a legitimate legal strategy versus a “copycat” lawsuit. After an initial dismissal, Houser amended his complaint to include allegations drawn from other litigation and investigations by state attorneys general. While a trial judge initially dismissed the case again—refusing to consider the “borrowed” portions—a three-judge Court of Appeals panel reversed that decision.
Judge Steve Bernard of the Court of Appeals argued that “borrowing plausibility” is an acceptable practice. He maintained that the rules do not mandate direct communication with confidential witnesses if other investigative steps are sufficient to ground the complaint.
CenturyLink and other intervenors strongly disagreed. The Securities Industry and Financial Markets Association, supporting the company, argued that allowing this practice would leave defendants vulnerable to lawsuits based on a “glorified game of telephone.” Frederick R. Yarger, representing CenturyLink, contended during oral arguments that borrowing allegations from lawyers not before the court was unacceptable.
Impact on Plaintiffs and Defendants
For plaintiffs, this ruling lowers a significant barrier to entry. Because essential facts are often controlled by the defendants—a situation Justice Gabriel explicitly acknowledged—plaintiffs can now leverage publicly available information from other lawsuits to establish the “plausibility” of their claims without needing immediate access to confidential witnesses.
To address the concern that Colorado would become a haven for meritless “parrot” lawsuits, the Supreme Court emphasized the role of the judiciary as a filter. Gabriel expressed confidence that trial courts would continue to act as “appropriate gatekeepers,” ensuring that lawsuits failing to meet the requirements to survive a motion to dismiss are resolved quickly.
| Stage | Action/Ruling |
|---|---|
| Trial Court | Original complaint dismissed. later dismissed again after “borrowed” allegations were excluded. |
| Court of Appeals | Reinstated the case, ruling that “borrowing plausibility” is acceptable with reasonable inquiry. |
| Supreme Court | Affirmed that lawyers may use external allegations if a sufficient investigation is documented. |
What This Means for Legal Practice
- Investigation Standards: Attorneys must document the specific steps taken (e.g., reviewing SEC filings, press releases, or media reports) to justify borrowed claims.
- Witness Access: Direct contact with confidential witnesses in related cases is not a prerequisite for filing a complaint.
- Judicial Oversight: Trial judges retain the authority to dismiss cases that lack sufficient factual grounding despite the use of external allegations.
Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. For specific legal guidance, consult a licensed attorney.
The resolution of this procedural dispute allows the merits of the underlying securities law claims against CenturyLink to move forward. The next phase of the litigation will focus on whether the specific allegations regarding deceptive charging practices can survive a motion to dismiss based on the evidence now permitted in the complaint.
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