Hunter v. Earthgrains Company , 281 F.3d 144 ( 2002 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
PAMELA A. HUNTER, 
Plaintiff-Appellant,
and
FRED L. WILLIAMS; TIMOTHY
HARDEN; FLOYD LOVE, on behalf of
themselves and all others similarly
situated,  No. 00-2543
Plaintiffs,
v.
EARTHGRAINS COMPANY BAKERY;
ANHEUSER-BUSCH COMPANIES, INC.;
CAMPBELL TAGGART COMPANY,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
Robert D. Potter, Senior District Judge.
(CA-97-179-3-P)
Argued: October 31, 2001
Decided: January 30, 2002
Before MICHAEL, MOTZ,* and KING, Circuit Judges.
*Judge Motz served on the argument panel of this case but has since
recused herself from it. This decision is filed by a quorum of the panel.
28 U.S.C. § 46(d).
2 HUNTER v. EARTHGRAINS COMPANY BAKERY
Suspension from practice vacated by published opinion. Judge King
wrote the opinion, in which Judge Michael joined.
COUNSEL
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.
OPINION
KING, Circuit Judge:
By Order of October 23, 2000, appellant Pamela A. Hunter, a prac-
ticing 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
1
The Earthgrains Company Bakery, Anheuser-Busch Companies, Inc.,
and Campbell Taggart Company were all defendants in the First Lawsuit.
Campbell Taggart was at one time a wholly-owned subsidiary of
Anheuser-Busch. In 1996, Anheuser-Busch spun-off Campbell Taggart
to its shareholders, and the newly independent company changed its
name to Earthgrains Company Bakery. We refer to the appellees collec-
tively as Earthgrains.
HUNTER v. EARTHGRAINS COMPANY BAKERY 3
against Earthgrains on February 24, 1997, in the Superior Court of
Mecklenburg County (the "First Lawsuit"). The class action com-
plaint, verified by the three named plaintiffs, alleged violations of
Title VII of the Civil Rights Act of 1964, and it also asserted fraudu-
lent 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 Septem-
ber 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 Earth-
grains. 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 bak-
eries; (3) that the hourly wage workforce at the Charlotte bakery was
predominantly African-American, while the workforce at other Earth-
grains bakeries was predominantly white; and (4) that Earthgrains
management had represented to its Charlotte employees that the Char-
lotte bakery was profitable and would remain open after a corporate
spinoff, but that it was nonetheless closed. The plaintiffs alleged vari-
ous 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
2
The motion to intervene named 199 individual plaintiffs as necessary
parties to the First Lawsuit, presumably a precaution in the event class
certification was not granted. Earthgrains does not appear to have
responded to this motion, nor did the district court rule upon it, though
the court mentioned the motion in its sanctions order.
4 HUNTER v. EARTHGRAINS COMPANY BAKERY
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 alterna-
tively, that they had failed to rebut the nondiscriminatory reasons
proffered by Earthgrains for the closing of its Charlotte bakery. Fur-
ther, 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 plain-
tiffs’ 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 Law-
suit") 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 judg-
3
By its April 22, 1998 Order, the court also denied the plaintiffs’
Motion to Amend Complaint. It concluded that plaintiffs had failed to
comply with the pretrial order and that the proposed amendment was
futile.
4
In the Show Cause Order, the court stated that it appeared the plain-
tiffs’ attorneys had not made a sufficient prefiling inquiry before initiat-
ing suit. Further, the court noted that the plaintiffs had filed four motions,
see supra at 3, which appeared to violate Rule 11.
HUNTER v. EARTHGRAINS COMPANY BAKERY 5
ment 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 explic-
itly 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 Earth-
grains 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 Octo-
ber 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 Objec-
tion" 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 establish-
ing 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. Bak-
ery, Order, No. 3:97CV179-P (W.D.N.C. Oct. 23, 2000) (the "Sanc-
6 HUNTER v. EARTHGRAINS COMPANY BAKERY
tions Order"). Finding the attorneys’ behavior to be sanctionable, the
court barred Ms. Hunter from the practice of law in the Western Dis-
trict 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 posi-
tion 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 sus-
pension from practice was an overly severe penalty. We possess juris-
diction 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
5
Neither of Ms. Hunter’s co-counsel in the First Lawsuit have
appealed. As such, we generally refer in this opinion to Ms. Hunter only.
6
Rule 11 of the Federal Rules of Civil Procedure was first promulgated
in 1937, and it was substantially amended in 1983 to increase its effec-
tiveness and clarify the circumstances in which it applied. Rule 11 was
further revamped in 1993, primarily to curb the collateral litigation
resulting from the 1983 amendments and to introduce the notion of a
"safe harbor" from Rule 11 sanctions. Rule 11(b), which contains most
of the provisions relevant to this appeal, currently provides in relevant
part as follows:
HUNTER v. EARTHGRAINS COMPANY BAKERY 7
to the 1993 Amendments, Fed. R. Civ. P. 11 ("Note, FRCP 11");
Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990). Of course,
an error of law by a district court is by definition an abuse of discre-
tion. Hartmarx, 496 U.S. at 405; 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 ‘war-
ranted 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.
B.
Although Rule 11 does not specify the sanction to be imposed for
any particular violation of its provisions, the Advisory Committee
Note to the Rule’s 1993 amendments provides guidance with an illus-
trative list. A court may, for example, strike a document, admonish
a lawyer, require the lawyer to undergo education, or refer an allega-
tion to appropriate disciplinary authorities. Note, FRCP 11; see also
Thornton v. Gen. Motors Corp., 136 F.3d 450, 455 (5th Cir. 1998)
("[W]hen a district court finds that a disciplinary sanction more
(b) Representations to Court. By presenting to the court
(whether by signing, filing, submitting, or later advocating) a
pleading, written motion, or other paper, an attorney . . . is certi-
fying that to the best of [her] knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances —
(1) it is not being presented for any improper purpose,
. . .;
(2) the claims, defenses, and other legal contentions
therein are warranted by existing law or by a nonfrivolous
argument for the extension, modification, or reversal of
existing law or the establishment of new law;
(3) the allegations and other factual contentions have evi-
dentiary support . . .; and
(4) the denials of factual contentions are warranted . . . .
Fed. R. Civ. P. 11(b).
8 HUNTER v. EARTHGRAINS COMPANY BAKERY
severe than admonition, reprimand, or censure under Rule 11 is war-
ranted, it should refer the matter to the appropriate disciplinary
authorities."). While a reviewing court owes "substantial deference"
to a district court’s decision to suspend or disbar, In re Evans, 801
F.2d 703, 706 (4th Cir. 1986), it is axiomatic that asserting a losing
legal position, even one that fails to survive summary judgment, is not
of itself sanctionable conduct. Christiansburg Garment Co. v. EEOC,
434 U.S. 412, 421-22 (1977); In re Sargent, 136 F.3d 349, 352 (4th
Cir. 1998) (noting that losing argument "well within the bounds of
fair adversarial argument" was not sanctionable).
Under Rule 11, the primary purpose of sanctions against counsel
is not to compensate the prevailing party, but to "deter future litiga-
tion abuse." In re Kunstler, 914 F.2d 505, 522 (4th Cir. 1990) (disal-
lowing award of attorneys’ fees which compensated defendants
"rather than . . . deter[ring] improper litigation").7 Importantly, a sua
sponte show cause order deprives a lawyer against whom it is directed
of the mandatory twenty-one day "safe harbor" provision provided by
the 1993 amendments to Rule 11.8 In such circumstances, a court is
obliged to use extra care in imposing sanctions on offending lawyers.
United Nat’l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1115-16
(9th Cir. 2001) (noting that sua sponte Rule 11 sanctions for allegedly
baseless legal claims are to be examined closely as there is no "safe
harbor" available). The Advisory Committee contemplated that a sua
sponte show cause order would only be used "in situations that are
akin to a contempt of court," and thus it was unnecessary for Rule
11’s "safe harbor" to apply to sua sponte sanctions. Note, FRCP 11.
Furthermore, when imposing sanctions under Rule 11, a court must
limit the penalty to "what is sufficient to deter repetition of such con-
duct," and "shall describe the conduct determined to constitute a vio-
7
The circumstances involving Ms. Hunter are unusual, in that the
notion of sanctions was first raised by the court sua sponte in April 1998.
However, sanctions were not imposed until after a motion was filed more
than two years later by Earthgrains. This distinction is important because,
as we shall explain, differing standards apply.
8
The "safe harbor" of Rule 11 forbids filing or presenting a motion for
sanctions to the court "unless, within 21 days after service of the motion
. . ., the challenged paper . . . is not withdrawn or appropriately cor-
rected." Fed. R. Civ. P. 11(c)(1)(A).
HUNTER v. EARTHGRAINS COMPANY BAKERY 9
lation of this rule and explain the basis for the sanction imposed."
Fed. R. Civ. P. 11(c).9
III.
A.
In considering this appeal, we first address the inordinate delay
between issuance of the Show Cause Order in April 1998 and entry
of the Sanctions Order in October 2000.10 While Rule 11 sanctions
may be imposed when a case is no longer pending, Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384 (1990), the delay here — absent an
adequate explanation — contravenes the Rule’s purposes. Indeed, the
Supreme Court has observed that "[a]lthough Rule 11 does not estab-
lish a deadline for the imposition of sanctions, the Advisory Commit-
tee did not contemplate that there would be a lengthy delay prior to
their imposition." Id. at 398 (interpreting Rule 11 prior to its 1993
amendments and finding plaintiff’s voluntary dismissal did not
deprive court of jurisdiction to award attorney’s fees); In re Kunstler,
914 F.2d 505, 513 (4th Cir. 1990).
If we construe the suspension of Ms. Hunter as having been
imposed pursuant to Earthgrains’ motion of June 2000, it presents a
serious timeliness problem.11 It is important that such a motion be
9
An order levying sanctions should spell out with specificity both the
legal authority under which the sanctions are imposed and the particular
behavior being sanctioned. Fed. R. Civ. P. 11; Nuwesra v. Merrill Lynch,
Fenner & Smith, Inc., 174 F.3d 87, 92-94 (2d Cir. 1999). Although there
are multiple sources of authority for the imposition of sanctions, not all
sanctions upon lawyers are appropriate under each source; thus, a court
must ensure that the authority relied upon supports the sanctions
imposed. See Sakon v. Andreo, 119 F.3d 109, 113 (2d Cir. 1997).
10
Although the issue of timeliness was not raised in the initial briefing,
it was discussed at oral argument and in post-argument briefs. In that
connection, a dispute arose between counsel concerning a supplemental
joint appendix requested by us. In resolution, we grant Ms. Hunter’s
motions to file the supplemental appendix and to file a corrected brief.
We further grant Earthgrains’ motion to supplement the supplemental
appendix, and we overrule their objection to the supplemental appendix.
11
When Local Rules are in place to govern the timeliness of Rule 11
motions, we abide by them. See Ortega v. Geelhaar, 914 F.2d 495 (4th
Cir. 1990). We have identified no such rules in this case.
10 HUNTER v. EARTHGRAINS COMPANY BAKERY
"served promptly after the inappropriate paper is filed, and, if delayed
too long, [it] may be viewed as untimely." Note, FRCP 11; Morgan-
roth & Morganroth v. DeLorean, 123 F.3d 374, 384 (5th Cir. 1997).
Indeed, the "safe harbor" provisions of Rule 11(c)(1)(A) preclude the
serving and filing of any Rule 11 motion after conclusion of the case.
Note, FRCP 11 ("Given the ‘safe harbor’ provisions . . ., a party can-
not delay serving its Rule 11 motion until conclusion of the case (or
judicial rejection of the offending contention)."). Although we have
not held the safe harbor provision to be jurisdictional, we recently
noted that many courts have decided that compliance with it is man-
datory. Rector v. Approved Fed. Sav. Bank, 265 F.3d 248, 251 (4th
Cir. 2001); see, e.g., Hutchinson v. Pfeil, 208 F.3d 1180, 1183-84
(10th Cir. 2000) (noting that motion filed after summary judgment
challenging interlocutory disputes would have been untimely under
Rule 11); Barber v. Miller, 146 F.3d 707, 711 (9th Cir. 1998) (con-
cluding that "a party cannot wait until after summary judgment to
move for sanctions under Rule 11"); Ridder v. City of Springfield, 109
F.3d 288, 297 (6th Cir. 1997) (same).
Earthgrains waited for fourteen months after this Court affirmed
the summary judgment award in the First Lawsuit — from April 1999
to June of 2000 — to initially move for Rule 11 sanctions against Ms.
Hunter. In this case, Earthgrains failed in its obligation to "notify[ ]
[its] opponent and the court of [its] intention to pursue sanctions at
the earliest possible date." Kunstler, 914 F.2d at 513. While Ms.
Hunter has not asserted prejudice from the late filing and lack of
notice, we are unable to find them excusable. Sanctions should oper-
ate as educational tools, and this "exemplary function is ill served
when sanctions are delayed." Prosser v. Prosser, 186 F.3d 403, 405
(3d Cir. 1999).12
12
In a decision rendered prior to the "safe harbor" amendment in 1993,
we observed that no absolute time limit governed Rule 11 motions, and
considerations of timeliness "are equitable, and must be resolved on a
case by case analysis." Kunstler, 914 F.2d at 513. Our analysis of the cir-
cumstances of this case, in addition to Kunstler’s instruction that sanc-
tions should not be granted where there is an "inordinately long time"
between the conclusion of the case and the motion, compel the conclu-
sion that Earthgrains’ Sanctions Motion was fatally tardy. Id.HUNTER v. EARTHGRAINS COMPANY BAKERY 11
If, as Earthgrains’ counsel suggests, we should construe the sus-
pension of Ms. Hunter as being a sua sponte action of the court, we
run head-on into the legal principle that a court should resolve sua
sponte Rule 11 issues before resolution of the merits of the case.13 If,
as Earthgrains now contends, the suspension was imposed sua sponte,
we must examine the court’s assertion that Ms. Hunter’s legal conten-
tion was frivolous "with particular stringency." United Nat’l Ins. Co.
v. R&D Latex Corp., 242 F.3d 1102, 1115 (9th Cir. 2001).
In these confusing circumstances, we will accord Earthgrains the
benefit of the doubt, and we will assume the suspension of Ms.
Hunter was imposed sua sponte. Notwithstanding our serious concern
over the delay in its imposition, we will proceed to examine the sus-
pension of Ms. Hunter.
B.
The primary basis for the suspension of Ms. Hunter is that she
advanced a frivolous legal position in the First Lawsuit. By presenta-
tion of a pleading to a court, an attorney is certifying, under Rule
11(b)(2), that the claims and legal contentions made therein "are war-
ranted by existing law or by a nonfrivolous argument for the exten-
sion, modification, or reversal of existing law or the establishment of
new law." In its Sanctions Order, the district court found the legal
assertions of Ms. Hunter to be "utter nonsense" that were "paradig-
matic of a frivolous legal contention." Sanctions Order at 7.
We have recognized that maintaining a legal position to a court is
only sanctionable when, in "applying a standard of objective reason-
ableness, it can be said that a reasonable attorney in like circum-
stances could not have believed his actions to be legally justified." In
re Sargent, 136 F.3d 349, 352 (4th Cir. 1998) (internal citations and
13
Indeed, the Court of Appeals for the Third Circuit, by way of exam-
ple, has adopted a supervisory rule requiring that "a district court should
raise and resolve sua sponte Rule 11 sanctions issues prior to or concur-
rent with its resolution of the merits of the case." Prosser, 186 F.3d at
405 (internal quotation omitted). Any appeal of the final order then
includes the sanctions order, and all issues are reviewed in a single
appeal.
12 HUNTER v. EARTHGRAINS COMPANY BAKERY
quotations omitted). That is to say, as Judge Wilkins recently
explained, the legal argument must have "absolutely no chance of
success under the existing precedent." Id. Although a legal claim may
be so inartfully pled that it cannot survive a motion to dismiss, such
a flaw will not in itself support Rule 11 sanctions — only the lack of
any legal or factual basis is sanctionable. Simpson v. Welch, 900 F.2d
33, 36 (4th Cir. 1990). We have aptly observed that "[t]he Rule does
not seek to stifle the exuberant spirit of skilled advocacy or to require
that a claim be proven before a complaint can be filed. The Rule
attempts to discourage the needless filing of groundless lawsuits."
Cleveland Demolition Co. v. Azcon Scrap Corp., 827 F.2d 984, 988
(4th Cir. 1987). And we have recognized that "[c]reative claims, cou-
pled even with ambiguous or inconsequential facts, may merit dis-
missal, but not punishment." Brubaker v. City of Richmond, 943 F.2d
1363, 1373 (4th Cir. 1991) (quoting Davis v. Carl, 906 F.2d 533, 536
(11th Cir. 1990)).
In its Sanctions Order, the court maintained, with respect to Ms.
Hunter, that "[p]laintiffs’ standing to file suit was challenged based
on a binding arbitration clause in the [Earthgrains] CBA. Plaintiffs’
response to this gateway issue rested on a tenuous, if not preposter-
ous, reading of the CBA and applicable law."14 Sanctions Order at 5.
The court was correct that the legal position it found frivolous — that
a collective bargaining agreement ("CBA") arbitration clause must
contain specific language to mandate arbitration of a federal discrimi-
nation claim — had been rejected by us four years earlier in Austin
v. Owens-Brockway Glass Container, Inc., 78 F.3d 875 (4th Cir.
1996). However, our reasoning in Austin, as of April 22, 1998 (when
the Show Cause Order issued), stood alone on one side of a circuit
split. Six of our sister circuits (the Second, Sixth, Seventh, Eighth,
Tenth, and Eleventh) had taken the legal position contrary to Austin
14
The Show Cause Order asserted that failure to make a reasonable
prefiling inquiry and the filing of motions violated Rule 11. The Sanc-
tions Order focused primarily on the pursuit of a purportedly frivolous
legal position. We note that a show cause order should be sufficiently
precise to place an attorney on notice of the conduct alleged to be sanc-
tionable. Fed. R. Civ. P. 11(c)(1)(B); Thornton v. Gen. Motors Corp.,
136 F.3d 450, 454 (5th Cir. 1998); Johnson v. Waddell & Reed, 74 F.3d
147, 151 (7th Cir. 1996).
HUNTER v. EARTHGRAINS COMPANY BAKERY 13
on whether a CBA could waive an individual employee’s statutory
cause of action. See Penny v. United Parcel Serv., 128 F.3d 408, 414
(6th Cir. 1997) (finding that allowing judicial forum for individual
statutory claim under CBA displays fidelity to Supreme Court prece-
dent); Brisentine v. Stone & Webster Eng’g Corp., 117 F.3d 519, 526-
27 (11th Cir. 1997) (finding that "mandatory arbitration clause in a
collective bargaining agreement does not bar litigation of a federal
statutory claim" and disagreeing with Austin); Harrison v. Eddy Pot-
ash, Inc., 112 F.3d 1437, 1453-54 (10th Cir. 1997) (adopting majority
view and noting that only this circuit required arbitration of federal
statutory claims when CBA contains an arbitration clause); Pryner v.
Tractor Supply Co., 109 F.3d 354, 363 (7th Cir. 1997) (rejecting Aus-
tin and adopting majority view); Varner v. Nat’l Super Markets, Inc.,
94 F.3d 1209, 1213 (8th Cir. 1996) (allowing pursuit of Title VII
claim in judicial forum under CBA); Tran v. Tran, 54 F.3d 115, 117
(2d Cir. 1995) (deciding that plaintiff need not have arbitrated before
pursuing lawsuit).15 In point of fact, and consistent with the foregoing,
none of our sister circuits, as of April 1998, had agreed with the posi-
tion we took in Austin.
The circuit split evidenced by these decisions concerned whether
collective bargaining agreements containing general language
required arbitration of individuals’ statutory claims, such as those
arising under the ADEA and Title VII. The disagreement of the cir-
cuits on this issue resulted from varying interpretations of the Court’s
decisions in Alexander v. Gardner-Denver Company, 415 U.S. 36(1974), and Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20(1991).16 This Court, in Austin, had deemed Gilmer to be the control-
15
On May 8, 1998 (shortly after issuance of the Show Cause Order),
the Ninth Circuit rejected Austin in its decision in Duffield v. Robertson
Stephens & Co., 144 F.3d 1182 (9th Cir. 1998).
16
In its 1974 decision in Alexander, the Court determined that an
employee who had filed a grievance in accordance with a CBA did not
forfeit a Title VII discriminatory discharge lawsuit, and it distinguished
between contractual and statutory rights. In 1991, the Court concluded in
Gilmer that there was a presumption of arbitrability, and that an age dis-
crimination claim could be subject to compulsory arbitration. Ms.
Hunter, in response to the Show Cause Order, explained her basis for the
First Lawsuit by making the pertinent observation that Gilmer involved
an individual employment contract, while Alexander concerned arbitra-
tion under a CBA. She accordingly asserted that the Alexander decision
controlled in the First Lawsuit.
14 HUNTER v. EARTHGRAINS COMPANY BAKERY
ling authority, while the other circuits chose the alternate route, find-
ing the Court’s decision in Alexander to control.
In opposition to Earthgrains’ summary judgment motion, Ms.
Hunter repeatedly relied upon the Supreme Court’s decision in Alex-
ander (failing, however, to rely on the decisions of the six circuits that
had followed Alexander). She further sought to align her case against
Earthgrains with Alexander by discussing the generality of the appli-
cable clause of the Earthgrains CBA, which included the agreement
not to "illegally discriminate." She contended that this provision was
not sufficiently specific to require her clients to arbitrate.
The district court was particularly concerned with Ms. Hunter’s
attempt to distinguish her case from our decision in Brown v. Trans
World Airlines, 127 F.3d 337 (4th Cir. 1997). She maintained to the
court that Brown had distanced itself from Austin on essentially the
same facts, and she inferred from this the reluctance of our Brown
panel to follow Austin. Ms. Hunter argued that, as in Brown, "the pro-
visions of the collective bargaining agreement which allegedly pro-
scribe racial discrimination, do not mention Title VII, 42 U.S.C.
§ 1981 or common law fraud," and that "the language of the collective
bargaining agreement between plaintiffs and defendant is not suffi-
cient to require plaintiffs to first arbitrate their claim." Earthgrains
contended, on the other hand, that the agreement "not to illegally dis-
criminate" in the Earthgrains CBA compelled arbitration of Title VII
claims under Austin. The district court agreed with Earthgrains and
based its suspension of Ms. Hunter largely on this legal contention.
As we have pointed out, however, there was a good-faith basis for
Ms. Hunter to assert the position she propounded. We would be
reaching to conclude that, as of 1998, Ms. Hunter’s position had "no
chance of success" under existing law. Sargent, 136 F.3d at 352. And
subsequent legal developments render Ms. Hunter’s position on the
Austin issue not only tenable, but most likely correct.
On November 16, 1998 — nearly two years before the Sanctions
Order of October 23, 2000 — the Supreme Court decided that, in
order for a CBA to waive individuals’ statutory claims, it must at least
"contain a clear and unmistakable waiver of the covered employees’
rights to a judicial forum for federal claims of employment discrimi-
nation." Wright v. Universal Mar. Serv. Corp., 525 U.S. 70, 82
HUNTER v. EARTHGRAINS COMPANY BAKERY 15
(1998). The Court declined to address whether even a clear and
unmistakable waiver of the right to take one’s statutory discrimination
claim to court would be enforceable. Id. It also observed that "the
right to a federal judicial forum is of sufficient importance to be pro-
tected against less-than-explicit union waiver in a CBA," and that a
clause requiring arbitration of "matters under dispute" was not suffi-
ciently explicit to meet the standard. Id. at 80. The Court distin-
guished its earlier decision in Gilmer on the basis that Gilmer
involved "an individual’s waiver of his own rights, rather than a
union’s waiver of the rights of represented employees," and thus it
was not subject to the "clear and unmistakable standard." Id. at 80-81;
see also supra n.16. When the district court suspended Ms. Hunter for
advancing a legal position that was "not the law of this circuit," see
Sanctions Order at 7, it was itself propounding a legal proposition in
conflict with the Supreme Court’s Wright decision.17
In Blue v. United States Dept. of the Navy, 914 F.2d 525 (4th Cir.
1990), we had occasion to address a Rule 11 sanctions issue in a simi-
lar, but distinguishable, context. We there affirmed an award of sanc-
tions where the attorneys had pursued a claim after it became clear
that it was factually without merit. Of significance, the plaintiffs’
counsel had espoused a legal position contrary to circuit precedent
(regarding the necessary showing for a prima facie case of discrimina-
tion), but arguably more consistent with Supreme Court authority. Id.
at 537. In Blue, the district court recognized that the question of law
at issue was "in a state of flux," and it declined to impose Rule 11
sanctions based on the legal contention being asserted. Id. In this
appeal, the suspension of Ms. Hunter was in large part premised on
her legal contention on the arbitrability of discrimination claims under
the Earthgrains CBA, a legal position being asserted in connection
17
After Wright was decided in 1998, and prior to the Sanctions Order
of October 2000, our Court examined CBA provisions similar to the one
at issue in this case and found that they did not compel plaintiffs to arbi-
trate. See Carson v. Giant Food, 175 F.3d 325, 331-32 (4th Cir. 1999);
see also Brown v. ABF Freight Sys., 183 F.3d 319, 322 (4th Cir. 1999)
(finding "legally dispositive" difference "between an agreement not to
commit discriminatory acts that are prohibited by law and an agreement
to incorporate, in toto, the antidiscrimination statutes that prohibit those
acts").
16 HUNTER v. EARTHGRAINS COMPANY BAKERY
with a body of law that was "in a state of flux." Indeed, the district
court sanctioned Ms. Hunter for advocating a legal proposition sup-
ported by a majority of our sister circuits, which was later substan-
tially adopted by the Supreme Court.
In pursuing the First Lawsuit, Ms. Hunter, under Rule 11(b)(2),
was plainly entitled (and probably obligated),18 to maintain that Austin
was incorrectly decided. While she could expect the district court to
adhere to Austin, she was also entitled to contemplate seeking to have
this court, en banc, correct the error (perceived by her) of its earlier
Austin decision. If unsuccessful, she might then have sought relief in
the Supreme Court on the basis of the circuit split. Indeed, our good
Chief Judge, in his Blue decision, observed that if it were forbidden
to argue a position contrary to precedent,
the parties and counsel who in the early 1950s brought the
case of Brown v. Board of Ed., 347 U.S. 483, 74 S.Ct. 686,
98 L.Ed. 873 (1954), might have been thought by some dis-
trict court to have engaged in sanctionable conduct for pur-
suing their claims in the face of the contrary precedent of
Plessy v. Ferguson, 163 U.S. 537, 16 S.Ct. 1138, 41 L.Ed.
256 (1896). The civil rights movement might have died
aborning.
Blue, 914 F.2d at 534.
This astute observation of Judge Wilkinson is especially pertinent
in the context of this case. The district court’s erroneous view of the
law in its suspension of Ms. Hunter necessarily constitutes an abuse
of discretion. Hartmarx, 496 U.S. at 405. Although Ms. Hunter and
the other lawyers (i.e., her co-counsel and the lawyers for Earth-
grains) failed to provide the court with a thorough exposition on the
18
See North Carolina Rule of Professional Conduct 1.3 cmt. (2001) ("A
lawyer should act with commitment and dedication to the interests of the
client and with zeal in advocacy upon the client’s behalf."); McCoy v.
Court of Appeals of Wisconsin, 486 U.S. 429, 444 (1988) ("In searching
for the strongest arguments available, the attorney must be zealous and
must resolve all doubts and ambiguous legal questions in favor of his or
her client.") (discussing criminal defense attorneys).
HUNTER v. EARTHGRAINS COMPANY BAKERY 17
circuit split and the Supreme Court’s decision in Wright, their lack of
thoroughness does not render her position frivolous. Because Ms.
Hunter’s legal contentions in the First Lawsuit on the issue of arbitra-
bility were not frivolous, her suspension from practice in the Western
District of North Carolina on this basis does not withstand scrutiny.
C.
Although the district court enunciated two other bases for its sus-
pension of Ms. Hunter, neither of them supports the suspension.19
First, in its Sanctions Order, the court broadly observed that Ms.
Hunter had demonstrated a "lack of judgment and skill." Sanctions
Order at 7. Other than its conclusion on the frivolous nature of Ms.
Hunter’s legal contentions on the CBA issue, no other basis was spec-
ified for her lack of judgment and skill. As we have pointed out, a
court, especially when acting sua sponte, must particularize the
behavior it deems sanctionable, and it may only impose the sanction
necessary to deter future misconduct. See Fed. R. Civ. P. 11(c)
(requiring court entering sua sponte order to "describ[e] the specific
conduct that appears to violate" the Rule, and authorizing sanction
"limited to what is sufficient to deter repetition of such conduct or
comparable conduct by others similarly situated"); Thornton v. Gen.
Motors Corp., 136 F.3d 450, 454-55 (5th Cir. 1998) (finding general
assertion in show cause order of failure to produce evidence insuffi-
cient to support sanction for inadequate prefiling inquiry). In these
circumstances, where the lone basis of its support has failed, a broad
assertion that a lawyer is lacking in "judgment and skill" does not
pass muster under Rule 11.20
19
The district court properly rejected the assertion by Earthgrains that
the filing of the Second and Third Lawsuits constituted improper subse-
quent behavior on the part of Ms. Hunter and also supported her suspen-
sion. It is clear that "Rule 11 sanctions are properly applied only to cases
before the court, not to cases in other courts." Woodard v. STP Corp.,
170 F.3d 1043, 1045 (11th Cir. 1999).
20
We note that the district court lacked authority under the federal rules
to sanction Ms. Hunter for conduct occurring in state court, including the
filing of the First Lawsuit. Kirby v. Allegheny Beverage Corp., 811 F.2d
253, 257 (4th Cir. 1987).
18 HUNTER v. EARTHGRAINS COMPANY BAKERY
Second, the district court relied upon a previous incident involving
Ms. Hunter in further support of its Sanctions Order. In 1989, this dis-
trict judge sanctioned Ms. Hunter for failure to conduct an adequate
prefiling inquiry under the pre-1993 version of Rule 11. See Lyles v.
K-Mart Corp., 703 F. Supp. 435 (W.D.N.C. 1989). Because we have
found Ms. Hunter’s conduct in the First Lawsuit does not warrant
sanctions, there is no improper conduct in this case for the 1989 inci-
dent to support, and it is rendered irrelevant.21
D.
Finally, Ms. Hunter maintains that her five-year suspension from
practice in the Western District of North Carolina was overly severe,
in that it was not the minimum sanction necessary to deter further vio-
lations of Rule 11. In view of our conclusion that Rule 11 sanctions
were unwarranted, we need not reach this issue or the related issue of
notice of the possible penalty.
IV.
Pursuant to the foregoing, we vacate the suspension of Ms. Hunter
from practice in the Western District of North Carolina, as set forth
in the Sanctions Order of October 23, 2000.
SUSPENSION FROM PRACTICE VACATED
21
Earthgrains also maintained that the suspension of Ms. Hunter was
supported by a second sanction against her in 1988 in the Superior Court
for Gaston County. However, the sanction was apparently against Ms.
Hunter’s client — not against her — and it was nevertheless vacated.
Brown v. Rhyne Floral Supply Mfg. Co., 366 S.E.2d 894 (N.C. Ct. App.
1988). We therefore grant Earthgrains’ motion, filed after oral argument
of this appeal, to withdraw its reference to the Brown case.