836 F.2d 866 (5th Cir. 1988), 86-4480, Thomas v. Capital Sec. Services, Inc.

Docket Nº:86-4480.
Citation:836 F.2d 866
Party Name:10 Fed.R.Serv.3d 329 Patricia THOMAS, et al., Plaintiffs-Appellees, v. CAPITAL SECURITY SERVICES, INC., Defendant-Appellant.
Case Date:January 21, 1988
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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836 F.2d 866 (5th Cir. 1988)

10 Fed.R.Serv.3d 329

Patricia THOMAS, et al., Plaintiffs-Appellees,

v.

CAPITAL SECURITY SERVICES, INC., Defendant-Appellant.

No. 86-4480.

United States Court of Appeals, Fifth Circuit

January 21, 1988

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[Copyrighted Material Omitted]

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M. Curtiss McKee, Jackson, Miss., for defendant-appellant.

Deborah A. McDonald, Natchez, Miss., Mary Brown, Willie L. Rose, McComb, Miss., George C. Cochran, University of Mississippi, University, Miss., for plaintiffs-appellees.

Appeal from the United States District Court for the Southern District of Mississippi.

Before CLARK, Chief Judge, and GEE, RUBIN, REAVLEY, POLITZ, CAROLYN DINEEN KING, [*] JOHNSON, WILLIAMS, GARWOOD, JOLLY, HIGGINBOTHAM, DAVIS, JONES, and SMITH, [**] Circuit Judges. [***]

JOHNSON, Circuit Judge:

In view of the high import of Rule 11 to both the bench and bar, this Court took the instant case en banc to resolve any inconsistencies between previous opinions in this Circuit regarding procedures and standards for the imposition of sanctions under Rule 11, as amended in 1983.

I. FACTS AND PROCEDURAL HISTORY

On October 19, 1984, the plaintiffs-employees filed suit against their former employer Capital, alleging that Capital had engaged in a wide variety of racially and sexually motivated discriminatory practices in such areas as hiring, promotions, terminations, and on-the-job treatment. The plaintiffs based their suit on Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e et seq., 42 U.S.C. Sec. 1981, and the thirteenth amendment. Additionally, the plaintiffs filed a class action on behalf of all similarly situated black women who were, had been, or would be employed by Capital.

Ultimately, Capital prevailed on the merits of the litigation after a three day bench trial. As the facts regarding the disposition of the main litigation are accurately set forth by the panel opinion, they are not reiterated at this time. Thomas v. Capital Security Systems, Inc., 812 F.2d 984, 986 (5th Cir.1987). However, we repeat, for purpose of clarity, that portion of the panel opinion discussing the disposition of Capital's subsequent motion for attorney's fees.

On April 7, 1986, after the plaintiffs had appealed the case-in-chief to this Court, Capital requested an award of attorney's fees against the plaintiffs and their attorneys. Capital's motion was based upon Fed.R.Civ.P. 11, 28 U.S.C. Sec. 1927, 42 U.S.C. Sec. 1988, 42 U.S.C. Sec. 2000e-5(k), and the inherent equitable powers of the district court. Capital asserted that an award was appropriate because the plaintiffs and their attorneys had expanded their judicial allegations far beyond the scope of their EEOC complaints, filed a class action but failed to later certify the class, withdrew from settlement negotiations, and added seven new witnesses to the court's pretrial order two weeks before trial; Capital also asserted that plaintiffs' attorneys prosecuted the action in a mistaken belief that they were required to act in only subjective good faith and presented irrelevant evidence at trial.

On June 10, 1986, the district court denied the motion. While denying the motion, the court noted that the situation presented a close question. Most of the court's discussion centered upon whether

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the plaintiffs and their attorneys had violated Fed.R.Civ.P. 11. The court noted that the broad or "shotgun" allegations contained in the plaintiffs' complaint appeared to evidence a lack of inquiry by the plaintiffs' attorneys into the law and supporting facts. The court, however, stated that it was reluctant to impose sanctions because of the unsettled nature of the law in regard to the breadth of a judicial complaint based upon a narrower EEOC complaint.

Id.

On appeal, a panel of this Court affirmed in part and vacated in part the district court's decision regarding Capital's motion for attorney's fees. Specifically, the panel, applying a de novo standard of review to the district court's Rule 11 determination, held that Rule 11 imposes upon attorneys several affirmative duties, including the continuing obligation to reevaluate one's litigation position. Furthermore, the panel recognized the mandatory character of Rule 11, concluding that once a violation of Rule 11 occurs, it is incumbent upon the district court to assess some type of sanction upon the offending litigant. Finally, the panel held that district courts must now furnish specific findings of fact and conclusions of law for all Rule 11 decisions, which should reflect an assessment by the district court of an attorney's compliance, or lack thereof, with each of the affirmative obligations of Rule 11.

The panel concluded that, as to Capital's Rule 11 claim, a remand was appropriate due to the ambiguous language of the district court's order indicating that the district court may have found a Rule 11 violation, but nevertheless chose not to impose sanctions. The panel reasoned that the decision not to impose sanctions was no longer an available option to a district court once a Rule 11 violation occurred. In this regard, the panel stressed that mandatory findings and conclusions by the district court were "particularly crucial," since they would serve as the foundation for the court's de novo review of whether Rule 11's provisions had been violated.

II. DISCUSSION

A. Amended Rule 11

In recent years, Fed.R.Civ.P. 11 has generated extensive debate and controversy among legal scholars, jurists, and practitioners. Originally enacted in 1937, Rule 11, as amended in 1983, currently provides in pertinent part:

Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in the attorney's individual name, whose address shall be stated.... The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's 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.... If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.

Fed.R.Civ.P. 11. 1

Despite its laudable goals, Rule 11 was rarely applied before its amendment in

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1983. Growing concern over misuse and abuse of the litigation process prompted rulemakers to amend Rule 11 in 1983 to reduce the reluctance of courts to impose sanctions by emphasizing the responsibilities of attorneys and reinforcing those obligations through the imposition of sanctions. Fed.R.Civ.P. 11 advisory committee notes. 2 Former Rule 11 provided that an attorney's signature acted as a certificate by the attorney "that to the best of his knowledge, information, and belief there is good ground to support [the motion]," and the standard by which to assess attorney conduct for Rule 11 purposes was a subjective good faith standard, contemplating sanctions only when there was a showing of bad faith on the part of the attorney. Amended Rule 11 changed the rule by requiring that the attorney's certification must be formed "after reasonable inquiry," thereby defining a standard of reasonableness under the circumstances by which to measure attorney conduct.

In addition to the requirement of a reasonable prefiling inquiry, Judge Schwarzer, in his article Sanctions Under the New Federal Rule 11--A Closer Look, 104 F.R.D. 181 (1985), notes further changes effected by amended Rule 11 from its predecessor, including: (1) the rule now applies to all papers filed in court, not only pleadings; (2) the rule applies to persons appearing pro se as well as to attorneys and parties; (3) the rule specifies that papers filed must be well grounded in fact and warranted by existing law or by a good faith argument for the extension, modification or reversal of existing law; and (4) the rule specifies that papers may not be interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. Id. at 184-85. One further important difference between former Rule 11 and Rule 11, as amended in 1983, is the latter's mandatory character, directing district courts to impose a sanction once a violation of Rule 11 has occurred. While the type of sanction imposed lies within the discretion of the district court, amended Rule 11 expressly authorizes an award of reasonable expenses, including attorney's fees, as an appropriate sanction. 3

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As Rule 11 cases begin to emerge in the wake of the 1983 amendments, it is apparent that courts are no longer reluctant to impose sanctions on attorneys and litigants who stray from their obligations under the rule. However, Rule 11 decisions by courts have not always been consistent, producing confusion among the bench and bar, as well as inequitable results. 4 By our opinion today, we seek to ameliorate this confusion and modify existing inequities to the extent possible by clarifying some of the more important issues presented by the application of Rule 11 in this case.

B. Standard of Review

As a threshold matter, the...

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