Willy v. Coastal Corporation

• Citation: 503 U.S. 131,112 S.Ct. 1076,117 L.Ed.2d 280
• Decision Date: 03 March 1992
• Docket Number: No. 90-1150,90-1150
• Parties: Donald J. WILLY, Petitioner, v. COASTAL CORPORATION et al
• Court: U.S. Supreme Court

503 U.S. 131

112 S.Ct. 1076

117 L.Ed.2d 280

Donald J. WILLY, Petitioner,

v COASTAL CORPORATION et al.

No. 90-1150.

Argued Dec. 3, 1991.

Decided March 3, 1992.

Syllabus

After petitioner Willy sued respondent Coastal Corporation in Texas state court, alleging that Coastal fired him in violation of, inter alia, federal and state environmental law "whistleblower" provisions, Coastal removed the case to Federal District Court. That court rejected Willy's argument that it lacked subject-matter jurisdiction and dismissed the case for failure to state a claim. It also imposed sanctions against him, pursuant to Federal Rule of Civil Procedure 11, based on conduct in the case that was unrelated to petitioner's effort to convince the court that it lacked jurisdiction. The Court of Appeals concluded that the District Court lacked subject-matter jurisdiction, but upheld the court's decision to award sanctions and remanded the case for the court to determine the amount. On a second appeal, the Court of Appeals rejected Willy's argument that the District Court had no authority to impose sanctions in the absence of subject-matter jurisdiction.

Held: A court may impose Rule 11 sanctions in a case in which the district court is later determined to be without subject-matter jurisdiction. Pp. 134-139.

(a) While the expansive language of Rules 1 and 81(c) indicates a clear intent to have the Rules, including Rule 11, apply to all district court civil proceedings, the Rules must be deemed to apply only if their application will not impermissibly expand the judicial authority conferred by Article III, see Sibbach v. Wilson, 312 U.S. 1, 61 S.Ct. 422, 85 L.Ed. 479. Pp. 134-135.

(b) The District Court's order in this case does not lie outside the range of action constitutionally permitted to an Article III court. Willy concedes that Congress has the power to regulate the courts and to authorize the imposition of sanctions. He errs in contending that Rule 11 sanctions must be aborted whenever it is determined that a court lacked jurisdiction at the time the objectionable conduct occurred. A court's concern with the maintenance of orderly procedure, even in the wake of a jurisdictional ruling later found to be mistaken, justifies the conclusion that the sanction here need not be upset. See, e.g., United States v. Mine Workers, 330 U.S. 258, 67 S.Ct. 677, 91 L.Ed. 884. Because it deals with the issue whether the court's rules were violated, the instant order is collateral to the merits of the case. Thus, it implicates no constitutional concern because it does not deal with the court's assessment of the complaint's legal merits, over which the court lacked jurisdiction. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359. And the District Court's interest in having rules of procedure obeyed did not disappear with the subsequent determination that it lacked subject-matter jurisdiction. United States Catholic Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 108 S.Ct. 2268, 101 L.Ed.2d 69, distinguished. Pp. 135-139.

915 F.2d 965 (CA5 1990), affirmed.

REHNQUIST, C.J., delivered the opinion for a unanimous Court.

THE CHIEF JUSTICE delivered the opinion of the Court.

We granted certiorari to decide whether a federal district court may impose sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure in a case in which the district court is later determined to be without subject-matter jurisdiction. 501 U.S. ----, 111 S.Ct. 2824, 115 L.Ed.2d 994 (1991). We conclude that in the circumstances presented here it may do so.

Petitioner Willy sued respondent Coastal Corporation (Coastal) in Texas state court, raising a variety of claims relating to Coastal's decision to terminate his employment as "in-house" counsel. Petitioner alleged that he had been fired due to his refusal to participate in respondent's violation of various federal and state environmental laws. Respondent removed the case to Federal District Court, claiming original federal-question jurisdiction under 28 U.S.C. §§ 1331, 1441. Petitioner objected to the removal, claiming that his case did not "arise under" federal law, see § 1331, but the District Court disagreed and concluded that it had subject-matter jurisdiction. The District Court subsequently granted respondent's motion to dismiss for failure to state a claim, Fed.Rule Civ.Pro. 12(b)(6), and dismissed petitioner's pendent state claims.

At the same time, the District Court granted respondent's motion for Rule 11 sanctions, awarding attorney's fees of $22,625 against Willy and his attorney, Young, jointly and severally. The District Court found that the filings made by plaintiff's counsel "create[d] a blur of absolute confusion." App. to Pet. for Cert. A-7. These included a 1,200-page, unindexed, unnumbered pile of materials that the District Court determined "to be a conscious and wanton affront to the judicial process, this Court, and opposing counsel" that was "irresponsible at a minimum and at worst intentionally harassing." Ibid. Petitioner's sanctionable behavior also included careless pleading, such as reliance on a nonexistent Federal Rule of Evidence. Ibid. None of the sanctionable conduct was related to petitioner's initial effort to convince the District Court that it was without subject-matter jurisdiction.

On appeal, the Court of Appeals for the Fifth Circuit concluded that the District Court had lacked subject-matter jurisdiction because the complaint raised no claims arising under federal law. Willy v. Coastal Corp., 855 F.2d 1160 (1988). It therefore reversed the District Court order dismissing the claims and instructed that the case be remanded to state court. The court also upheld the District Court's decision to award Rule 11 sanctions, although it remanded the case to the District Court to determine the amount. On remand the District Court recomputed the Rule 11 sanctions and imposed sanctions in the amount of $19,307, the amount of attorney's fees that respondent had incurred in responding to petitioner's sanctionable conduct. The Court of Appeals affirmed. 915 F.2d 965 (CA5 1990).

On this second appeal, the Court of Appeals rejected petitioner's contention that, in the absence of subject-matter jurisdiction, the District Court was constitutionally without authority to impose Rule 11 sanctions. It concluded that the authority to impose Rule 11 sanctions rested in the "inherent powers" of the federal courts—those powers " 'necessary to the exercise of all others.' " Id., at 966 (quoting Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455, 2463, 65 L.Ed.2d 488 (1980)). The court concluded that the exercise of Rule 11 powers was an example of such inherent powers. It principally relied on our recent decision in Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990), in which we upheld a Rule 11 sanction imposed for filing a frivolous complaint even though the sanction order was entered after the plaintiff voluntarily dismissed its suit.

Before this Court, petitioner advances two claims. The first is that Congress, in acquiescing in the adoption of the Federal Rules of Civil Procedure, did not "authoriz[e] recovery of fees or costs against parties who prevail on jurisdictional grounds." Brief for Petitioner 18. Petitioner finds in both the Act and the Rules the "implicit premise . . . that rules of practice and procedure are not necessary for disputes beyond the judicial power conferred by Article III." Id., at 28. Phrased this way, the petitioner's contention is correct, but it does not dispose of this case.

The Rules Enabling Act, 28 U.S.C. § 2072, authorizes the Court to "prescribe general rules of practice and procedure and rules of evidence for cases in the United States district courts. . . ." Those rules may not "abridge, enlarge or modify any substantive right." In response, we have adopted the Federal Rules of Civil Procedure. Rule 1 governs their scope. It provides that "[t]hese rules govern the procedure in the United States district courts in all suits of a civil nature. . . ." Rule 81(c) specifically provides that the Rules "apply to civil actions removed to the United States district courts from the state courts and govern procedure after removal." This expansive language contains no express ex- ceptions and indicates a clear intent to have the Rules, including Rule 11, apply to all district court civil proceedings.¹

But in Sibbach v. Wilson, 312 U.S. 1, 61 S.Ct. 422, 85 L.Ed. 479 (1941), we observed that federal courts, in adopting rules, were not free to extend or restrict the jurisdiction conferred by a statute. Id., at 10, 61 S.Ct., at 425. Such a caveat applies a fortiori to any effort to extend by rule the judicial power of the United States described in Article III of the Constitution. The Rules, then, must be deemed to apply only if their application will not impermissibly expand the judicial authority conferred by Article III. We must therefore examine petitioner's second, and related contention, that the District Court action in this case lies outside the range of action constitutionally permitted to an Article III court.

Petitioner begins by pointing out that Article III limits the subject-matter ju- risdiction of the federal courts to certain "cases or controversies." Brief for Petitioner 11. He then contends that the District Court's exercise of judicial power to grant Rule 11 sanctions must have been an unconstitutional act because, in the absence of subject-matter jurisdiction, the district court lacks "a substantive source of judicial power, beyond that conferred by Article III." Id., at 18. Thus, according to petitioner, even had Congress attempted to grant the courts authority to impose sanctions in a case such as this, the grant would run afoul of Article III.

In making this claim, petitioner acknowledges that there are some circumstances in which federal...