Commercial Litigation and Arbitration

Appellate Court Looks Skeptically on Sanction Issued Sua Sponte without Explanation As to Why It Was Necessary — Improper Purpose vs. Harmful Effect — No Inherent Power Sanction If Rule 11 Apt

Kenyon Int’l Emergency Servs. Inc. v. Malcolm, 2013 U.S. App. LEXIS 9704 (5th Cir. May 14, 2013):

The district court's written order does not specify the basis for sanctions, although its oral statement indicates they were imposed for Faubus's "having filed the irrelevantly scurrilous e-mail" that graphically documented Employee A's sexual practices.

There are three possibilities. First, Federal Rule of Civil Procedure 11 permits a court to sanction an attorney for a pleading or other document that (among other potential transgressions) is presented for an improper purpose or makes factual representations that are without reasonable evidentiary support. See Fed. R. Civ. P. 11(b)(1) and (3), (c). Second, under 28 U.S.C. § 1927, an attorney "who so multiplies the proceedings in any case unreasonably and vexatiously" may be held to account for the excess fees and other costs resulting from her improper conduct. Finally, a court has the inherent authority to impose sanctions . . . .

Johnson v. Cherry, 422 F.3d 540, 548 (7th Cir. 2005). Section 1927 is inapposite here, which leaves two candidates: Rule 11 and inherent power. We review sanctions imposed under both Rule 11 and the court's inherent power for abuse of discretion.


Assuming the sanctions were imposed pursuant to Rule 11, the district court committed reversible error by failing to issue a show-cause order. [Footnote 18. See Fed. R. Civ. P. 11(c)(5)(B); see also Marlin, 533 F.3d at 379.] Although the court engaged in a colloquy with Faubus about the offending filing, that extended discussion falls short of satisfying Rule 11(c)(3)'s show-cause requirement. Until the end of the hearing, Faubus was never put on notice that sanctions were at issue, nor did he have a chance to contest their imposition orally or in writing. [Footnote 19. See Fed. R. Civ. P. 11 Advisory Committee's Note (1993 Amendments) ("Explicit provision is made for litigants to be provided notice of the alleged violation and an opportunity to respond before sanctions are imposed. Whether the matter should be decided solely on the basis of written submissions or should be scheduled for oral argument (or, [*18] indeed, for evidentiary presentation) will depend on the circumstances."). ] "Providing [a sanctioned party] with an opportunity to mount a defense 'on the spot' does not comport with due process." 1488, Inc. v. Philsec Inv. Corp., 939 F.2d 1281, 1292 (5th Cir. 1991).

Some of the defendants rely on Rule 11(c)(3)'s conditional language ("may order") for the proposition that notice and an opportunity to respond are discretionary. That interpretation misreads the rule: Issuing a show-cause order is a mandatory prerequisite to imposing monetary sanctions sua sponte.

Footnote 20. See Fed. R. Civ. P. 11 (c)(5)(B) ("The court must not impose a monetary sanction . . . on its own, unless it issued the show-cause order under Rule 11(c)(3) . . . .") (emphasis added).]


Federal courts possess wide-ranging implicit authority incident to "'The judicial Power.'" As a general matter, the Federal Rules of Civil Procedure have not displaced the inherent power to impose sanctions. "[T]he inherent power springs from the well of necessity, and sparingly so." Natural Gas I, 2 F.3d at 1407. We look skeptically on the imposition of sanctions sua sponte "without explanation as to why [a particular sanction] was necessary to accomplish the court's legitimate . . . purpose." Natural Gas II, 86 F.3d at 468.

In Corley v. Rosewood Care Center, Inc., 142 F.3d 1041, 1058-59 (7th Cir. 1998), the court addressed a similar sanction:

[I]f the court was relying on its inherent power to sanction a bad faith filing, it should have specifically so stated, along with delineating its reasons for finding bad faith. The court also should have explained why Rule 11 was inadequate to serve the court's purposes, for as the Supreme Court observed in Chambers, "when there is bad-faith conduct in the course of litigation that could be adequately sanctioned under the Rules, the court ordinarily should rely on the Rules rather than the inherent power." 501 U.S. at 50 . . . .

We agree that "even if Rule 11's . . . procedural requirements [do] not strictly curtail the procedures necessary for a sanction under the inherent power, even that type of sanction requires notice and an opportunity to respond." Id. at 1059. Because Faubus was afforded neither, the sanctions order could not stand procedurally even if it were otherwise sound. ***

We therefore address, for abuse of discretion, the merits of the sanctions order to determine whether we remand for a show-cause proceeding or reverse the order sine die. In Chambers, 501 U.S. at 51, the Court affirmed the district court's resort to inherent power against a party whose "conduct sanctionable under the Rules was intertwined within conduct that only the inherent power could address." Faubus's filing of an "irrelevantly scurrilous e-mail," even if sanctionable, was not "beyond the reach of the Rules." Rather, it was well within the scope of Rule 11(b)(1), pursuant to which a district court may sanction [*21] an attorney for presenting a document for "any improper purpose . . . ."

Rule 11, therefore, provides the only plausible basis for the sanctions. "[A] district court is not to read an ulterior motive into a document" unless "the improper purpose is objectively ascertainable." Whitehead, 332 F.3d at 805.

[I]n determining compliance vel non with each obligation [of Rule 11], the standard under which an attorney is measured is an objective, not subjective, standard of reasonableness under the circumstances. Our emphasis on an objective inquiry has been emphatic; we have expressly rejected any subjective inquiries into the motivation behind a filing . . . . [Fed. Deposit Ins. Corp. v. Maxxam, 523 F.3d 566, 581 (5th Cir. 2008) (alterations in original) (footnote and internal quotation marks omitted).]

In Whitehead, for example, the sanctioned attorney attempted to execute a judgment against Kmart "by seizing currency in the cash registers and vault," with "media representatives and two United States Marshals" in tow. Id. at 800. "In ascertaining [an improper] purpose, we implied that the sanctioned party would not have acted as he did in the absence of the improper purpose." Maxxam, 523 F.3d at 585 (5th Cir. 2008).

Faubus has consistently maintained that his sole purpose in filing the explicit email was to demonstrate that Employee A's termination was for cause rather than part of Kenyon's plan to flee the jurisdiction. The district court characterized Faubus's unsealed filing of the offending document as "a vicious, deliberate smear." Whatever might have been the negative effect on Employee A's public reputation, however, we can discern no improper purpose in Faubus's zealous representation of his client. Because the district court "based its ruling . . . on a clearly erroneous assessment of the evidence," Whitehead, 332 F.3d at 803 (internal quotation marks omitted), we reverse the sanctions order.

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