Hunter v. Earthgrains Co. Bakery

• Decision Date: 30 January 2002
• Docket Number: No. 00-2543.,00-2543.
• Citation: 281 F.3d 144
• Parties: Pamela A. HUNTER, Plaintiff-Appellant, and Fred L. Williams; Timothy Harden; Floyd Love, on behalf of themselves and all others similarly situated, Plaintiffs, v. EARTHGRAINS COMPANY BAKERY; Anheuser-Busch Companies, Inc.; Campbell Taggart Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

281 F.3d 144

Pamela A. HUNTER, Plaintiff-Appellant, and Fred L. Williams; Timothy Harden; Floyd Love, on behalf of themselves and all others similarly situated, Plaintiffs, v. EARTHGRAINS COMPANY BAKERY; Anheuser-Busch Companies, Inc.; Campbell Taggart Company, Defendants-Appellees.

No. 00-2543.

United States Court of Appeals, Fourth Circuit.

Argued October 31, 2001.

Decided January 30, 2002.

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ARGUED:

Ned Clifton Cannon, Jr., Gastonia, North Carolina, for Appellant. Anderson Butler Scott, Fisher & Phillips, L.L.P., Atlanta, Georgia, for Appellees.

ON BRIEF:

Pamela A. Hunter, Charlotte, North Carolina, for Appellant.

Before MICHAEL, MOTZ,^* and KING, Circuit Judges.

Suspension from practice vacated by published opinion. Judge KING wrote the opinion, in which Judge MICHAEL joined.

OPINION

KING, Circuit Judge.

By Order of October 23, 2000, appellant Pamela A. Hunter, a practicing attorney in Charlotte, North Carolina, and an active member of the North Carolina State Bar, was suspended from practice in the Western District of North Carolina for five years. Ms. Hunter appeals this suspension, imposed upon her pursuant to Rule 11 of the Federal Rules of Civil Procedure. As explained below, we conclude that her appeal has merit, and we vacate her suspension from practice by the district court.

I.

Ms. Hunter, along with her co-counsel N. Clifton Cannon and Charlene E. Bell, represented a group of workers at a Charlotte, North Carolina, bakery owned by appellee Earthgrains Company Bakery ("Earthgrains").¹ These three lawyers filed a class action lawsuit against Earthgrains on February 24, 1997, in the Superior Court of Mecklenburg County (the "First Lawsuit"). The class action complaint, verified by the three named plaintiffs, alleged violations of Title VII of the Civil Rights Act of 1964, and it also asserted fraudulent misrepresentation on the part of Earthgrains in the closing of its Charlotte bakery. Earthgrains promptly removed the First Lawsuit to the Western District of North Carolina.

Earthgrains responded to the class action complaint on April 15, 1997. The plaintiffs thereafter filed certain motions in the district court, specifically: (1) seeking certification of the class (filed September 4, 1997); (2) to amend the complaint (filed September 4, 1997); (3) to amend the motion for class certification (filed January 30, 1998); and (4) for intervention by other plaintiffs (filed April 3, 1998).² The plaintiffs also filed responses to several motions made by Earthgrains. Throughout the wrangling concerning the various motions, Ms. Hunter and her co-counsel maintained certain essential assertions, including: (1) that a pattern and practice of racial discrimination existed at Earthgrains' Charlotte bakery; (2) that the workers there were more skilled, but paid less, than those at other Earthgrains bakeries; (3) that the hourly wage workforce at the Charlotte bakery was predominantly African-American, while the workforce at other Earthgrains bakeries was predominantly white; and (4) that Earthgrains management had represented to its Charlotte employees that the Charlotte bakery was profitable and would remain open after a corporate spinoff, but that it was nonetheless closed. The plaintiffs alleged various incidents of racial discrimination by Earthgrains, including an assertion by an Earthgrains manager that he wanted to change the "complexion" of the workforce in the Charlotte bakery. Earthgrains denied the allegations of the First Lawsuit and moved for summary judgment, contending, first, that its Charlotte employees were bound to arbitrate their Title VII claims under their collective bargaining agreement (the "Earthgrains CBA"); second, that the plaintiffs had failed to establish a prima facie case of racial discrimination; and third, that if a prima facie case had been shown, the plaintiffs had failed to rebut Earthgrains' legitimate nondiscriminatory reasons for closing its Charlotte bakery. In response, the plaintiffs consistently asserted, inter alia, that the Earthgrains CBA did not apply to the Title VII claims at issue.

By Order entered on April 22, 1998, the district court awarded summary judgment to Earthgrains.³ It concluded that the plaintiffs were obligated to arbitrate under the Earthgrains CBA, and alternatively, that they had failed to rebut the nondiscriminatory reasons proffered by Earthgrains for the closing of its Charlotte bakery. Further, the court determined that the plaintiffs had failed to establish a prima facie case of fraudulent misrepresentation under North Carolina law. The court included in its Order a sua sponte directive that plaintiffs' lawyers show cause why Rule 11 sanctions should not be imposed on them for their conduct in the First Lawsuit (the "Show Cause Order").⁴ On May 6, 1998, the lawyers responded to the Order, seeking reconsideration of the summary judgment decision and requesting a stay of the Show Cause Order pending their appeal of the summary judgment award. By Order of July 21, 1998, the stay was granted and reconsideration of the summary judgment was denied.

On February 9, 1999, Ms. Hunter and Mr. Cannon filed another lawsuit against Earthgrains in North Carolina state court concerning the closing of the Charlotte bakery. This complaint (the "Second Lawsuit") was not of the class action variety, but instead named individual plaintiffs and alleged the tort of fraudulent misrepresentation under North Carolina law. In response, Earthgrains filed its own lawsuit in the Western District of North Carolina, seeking an injunction under 28 U.S.C. § 2281 (the Anti Injunction Act), and asserting that the Second Lawsuit constituted a collateral attack on the summary judgment awarded to Earthgrains on April 22, 1998. The Second Lawsuit was voluntarily dismissed on May 4, 1999.

On April 21, 1999, this Court affirmed the summary judgment award to Earthgrains, concluding that plaintiffs had failed to rebut the legitimate, nondiscriminatory rationale offered by Earthgrains for the closing of its Charlotte bakery, and also concluding that plaintiffs had failed to make a prima facie showing of fraudulent misrepresentation under North Carolina law. Williams v. Earthgrains Co. Bakery, 178 F.3d 1289 (4th Cir.1999) (unpublished). In that decision, we explicitly declined to address whether the plaintiffs were required under the Earthgrains CBA to submit their claims to arbitration. Id.

On May 3, 2000, Ms. Hunter filed another complaint against Earthgrains in North Carolina state court (the "Third Lawsuit"), this time alleging the tort of negligent misrepresentation under North Carolina law. The Third Lawsuit, which Earthgrains promptly removed to the Western District of North Carolina, arose from the same essential facts and circumstances as the two earlier cases. Thereafter, on October 23, 2000, the district court concluded that federal jurisdiction was lacking, and it remanded the Third Lawsuit to state court.

For over two years, from May 1998 until June 2000, no action was taken with respect to the Show Cause Order of April 22, 1998. On June 16, 2000, however, Earthgrains filed a motion in district court seeking Rule 11 sanctions against Ms. Hunter and her co-counsel, entitled "Motion for Rule 11 Sanctions Pursuant to Show Cause Order" (the "Sanctions Motion"). The bases asserted for the motion were twofold: (1) the Fourth Circuit had affirmed summary judgment for Earthgrains, and (2) plaintiffs' lawyers (Ms. Hunter in particular) had filed two subsequent lawsuits on the same facts. On July 17, 2000, Ms. Hunter and her co-counsel filed a "Memorandum in Objection" to the Sanctions Motion, pointing out that the Show Cause Order related only to the First Lawsuit, and referring the court to their response to the Show Cause Order, filed on May 6, 1998, as establishing their compliance with Rule 11.

On October 23, 2000, the district court entered the order we are called upon to review in this appeal. Williams v. Earthgrains Co. Bakery, Order, No. 3:97CV179-P (W.D.N.C. Oct. 23, 2000) (the "Sanctions Order"). Finding the attorneys' behavior to be sanctionable, the court barred Ms. Hunter from the practice of law in the Western District of North Carolina for a period of five years. It also reprimanded Ms. Hunter's co-counsel, and it admonished them "to be conscious of and strictly abide by the provisions of Rule 11 in the future."⁵ The court based its Sanctions Order on the following:

(a) first and foremost, counsel's assertion of a legal position contrary to the holding of our 1996 decision in Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875 (4th Cir.1996), which the court characterized as a "frivolous legal contention." Sanctions Order at 7;

(b) counsel's lack of judgment and skill; and

(c) Ms. Hunter's sanction by the same court eleven years earlier.

Ms. Hunter has timely appealed the suspension imposed upon her, maintaining that Rule 11 sanctions are unwarranted and that her suspension from practice was an overly severe penalty. We possess jurisdiction under 28 U.S.C. § 1291.

II.

A.

We review for abuse of discretion a district court's imposition of Rule 11 sanctions on a practicing lawyer.⁶ Advisory Committee Notes to the 1993 Amendments, Fed.R.Civ.P. 11 ("Note, FRCP 11"); Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). Of course, an error of law by a district court is by definition an abuse of discretion. Hartmarx, 496 U.S. at 405, 110 S.Ct. 2447; United States v. Pearce, 191 F.3d 488, 492 (4th Cir.1999). As the Supreme Court has observed in the Rule 11 context, if a district court "rel[ied] on a materially incorrect view of the relevant law in determining that a pleading was not `warranted by existing law or a good faith argument' for changing the law," we are justified in concluding that the district court abused its discretion. Hartmarx, 496 U.S. at 402, ...