Worrell v. Houston Can! Academy , 287 F. App'x 320 ( 2008 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 16, 2008
No. 08-20012 Charles R. Fulbruge III
Summary Calendar Clerk
SARAH WORRELL
Plaintiff - Appellant
v.
HOUSTON CAN! ACADEMY; GREATSCHOOLS, INC; AMERICA CAN!
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC 4:07-CV-1100
Before KING, DAVIS, and CLEMENT, Circuit Judges.
PER CURIAM:*
Melvin Houston, Sarah Worrell’s attorney, and his law firm, Melvin
Houston & Associates, P.C., appeal the district court’s grant of GreatSchools,
Inc.’s (“GreatSchools”) motion for sanctions against them under Federal Rule of
Civil Procedure 11. For the following reasons, we affirm.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 08-20012
I. FACTS AND PROCEEDINGS
On April 3, 2007, Houston signed and filed a complaint on Worrell’s behalf,
alleging several employment discrimination claims under Title VII of the Civil
Rights Act of 1964, against Houston Can! Academy (“HCA”) and GreatSchools.
The complaint alleged that GreatSchools “regularly conducts business in the
State of Texas,” and “was at all relevant times an employer within the meaning
of Title VII.” It also alleged that GreatSchools’s founder and president, William
Jackson, is “the registered agent” of HCA and that GreatSchools shared an
address with HCA.
HCA, a charter school, was Worrell’s actual employer. GreatSchools,
however, has not regularly conducted business in Texas, has never employed
Worrell, and has never had any involvement with Worrell’s employment with
HCA. Jackson has never been HCA’s registered agent, and GreatSchools has
never shared an address with HCA. Rather, GreatSchools is a small non-profit
corporation that has its principal place of business in California and that
operates an informational website designed to assist parents of school-age
children by providing a searchable database containing information on
approximately 115,000 public, private, and charter schools across the United
States. As stated on its website, GreatSchools does not own, operate, or manage
any school, and it has no legal relationship to any school that is listed on its
website, including HCA.
After being named as a defendant, GreatSchools’s counsel, Oswald
Cousins, placed numerous telephone calls and sent several letters, over a period
of nearly three months (May 15, 2007 to August 9, 2007), to Houston and Marie
Jamison, a second-year associate who worked for Houston at that time, to inform
them that GreatSchools had no legal connection to HCA and to request that
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No. 08-20012
GreatSchools be dismissed from the suit. During that period, GreatSchools
provided Houston and Jamison with documentary evidence substantiating its
contentions that it had no connection to HCA and was not a proper defendant,
including: (1) its articles of incorporation and by-laws, stating that it is a
California non-profit public benefit corporation and that its objective is to
publish information on schools; (2) excerpts from GreatSchools’s website,
explaining its activities and mission of providing information on schools and
specifically disclaiming any affiliation with the schools listed on the site; and
(3) identification of the website of the entity that controls HCA, Texas Can!,
which also indicates that HCA has no connection to GreatSchools. After
submitting this information, GreatSchools asked Houston to provide the
information upon which he based GreatSchools’s inclusion in this lawsuit, but
Houston never responded. On July 31, 2007, Cousins spoke to Jamison, and she
stated that Houston refused to dismiss GreatSchools, notwithstanding the
foregoing information. When Cousins inquired about this decision, she
responded only that an attorney for HCA—whose name she could not
remember—had provided information during an Equal Employment
Opportunity Commission (“EEOC”) mediation that GreatSchools was somehow
connected to HCA. On August 9, 2007, Cousins sent another letter to Houston
warning that he was risking sanctions under Rule 11 for filing a meritless
complaint with numerous factual inaccuracies against GreatSchools, and that
GreatSchools was going to file a motion to dismiss. Houston again did not
respond.
On August 17, 2007, GreatSchools filed a motion to dismiss for lack of
personal jurisdiction under Rule 12(b)(2), citing GreatSchools’s lack of
connection to Texas, HCA, or Worrell. On this same day, GreatSchools served
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Houston with a motion for sanctions under Rule 11, as indicated by its
declaration of service. Houston, however, took no action in response to this
motion. On September 11, 2007, after Rule 11’s safe harbor period of twenty-one
days had passed, GreatSchools filed its motion for sanctions with the court. In
this motion, GreatSchools argued that the factual claims and legal contentions
related to it in the complaint were inaccurate, had been presented to the court
without a reasonable pre-filing investigation, and lacked evidentiary support.
More specifically, GreatSchools asserted that Houston (1) did not check any
public records to determine whether there was any legal connection between
GreatSchools and HCA; (2) alleged without any basis that HCA has the same
address as GreatSchools; (3) alleged without any basis that Jackson is the
registered agent for HCA; (4) ignored ample evidence from Cousins confirming
that there is no connection between HCA and GreatSchools; (5) filed a Title VII
complaint against GreatSchools even though they knew that Worrell never
attempted to exhaust administrative remedies against GreatSchools; and
(6) attempted to justify the inclusion of GreatSchools by improperly disclosing
what was allegedly said during a confidential EEOC mediation that involved
only HCA. GreatSchools provided a sworn declaration from Cousins, stating
that he billed at an hourly rate of $560.00 and spent at least twelve hours in
attempting to obtain a dismissal of GreatSchools through repeatedly contacting
Houston and Jamison by telephone and mail and then drafting a motion to
dismiss, a motion for sanctions, and accompanying briefing. GreatSchools thus
requested $6,720.00 in attorney’s fees as sanctions against Houston and his law
firm. Houston filed no opposition to GreatSchools’s motion to dismiss or motion
for sanctions.
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No. 08-20012
On October 19, 2007, the district court held the initial pretrial and
scheduling conference, where it considered GreatSchools’s two pending motions.1
The district court first granted GreatSchools’s motion to dismiss, noting that
both parties agreed that GreatSchools was not a proper defendant.2 The district
court then heard arguments on GreatSchools’s motion for sanctions. At the
outset, Houston noted that he “did not respond to these pending motions”
because Jamison had left his firm on September 1, 2007 and he was “just getting
[his] feet under the case.” Houston then went on to admit that he undertook no
investigation of his own regarding GreatSchools’s inclusion in this lawsuit and
stated that he relied solely on Jamison’s “reasonable” investigation. Houston
stated that Jamison reasonably concluded that GreatSchools was the parent
organization of HCA based on information contained on GreatSchools’s website,
but he cited no evidence for this contention. Houston also interestingly asserted
that it was GreatSchools’s duty to investigate and provide the name of HCA’s
registered agent. GreatSchools reiterated the arguments made in its motion and
asserted that no evidence demonstrated any legal connection between it and
HCA. The district court took the motion under advisement. On November 28,
2007, the district court granted the motion for sanctions, finding that Houston
improperly signed the complaint naming GreatSchools as a defendant, because
1
The order relating to this conference, which both parties received, expressly stated
that the court “may rule on any pending motions at the conference.” Moreover, Southern
District of Texas Local Rule 16.1 states that the initial pretrial conference is conducted in
accordance with Federal Rule of Civil Procedure 16. That rule expressly provides that the
district court may consider and act upon any pending motions during the conference. FED. R.
CIV. P. 16(c)(2)(K).
2
Houston noted that he agreed to the dismissal of GreatSchools based upon a letter he
had received from HCA that morning stating that it had no connection to GreatSchools.
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No. 08-20012
he had failed to conduct a reasonable pre-filing investigation and subsequently
refused to dismiss GreatSchools even when presented with sufficient information
that GreatSchools was not affiliated with HCA. The district court also explained
that it was Houston’s duty to determine who was the registered agent for HCA
and that such an investigation should have occurred before filing suit. Based
upon Houston’s “egregious conduct” in violating Rule 11, the district court
assessed $6,000.00 in attorney’s fees as sanctions against Houston and his law
firm.
On December 10, 2007, Houston filed a motion to alter or amend that
judgment under Federal Rule of Civil Procedure 59(e). For the first time,
Houston argued that he had not received proper notice of the hearing on the
motion for sanctions and that the procedural requirements of Rule 11 were not
satisfied. Houston further argued that Jamison’s pre-filing investigation was
reasonable—this time submitting affidavits from him and Jamison—and that
the amount of the sanctions award was “wholly inappropriate.” On January 2,
2008, the district court denied Houston’s motion, finding that he had not
demonstrated any manifest error of fact or law or offered any newly discovered
evidence that warranted reconsideration. The district court stated that “[t]o the
contrary, . . . Houston is attempting to make arguments or offer evidence that
he could have made long before in connection with GreatSchools’s motion for
sanctions.” Houston appeals.
II. STANDARD OF REVIEW
“We review all aspects of the district court’s decision to invoke Rule 11 and
accompanying sanctions under the abuse of discretion standard.” Am. Airlines,
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Inc. v. Allied Pilots Ass’n, 968 F.2d 523, 529 (5th Cir. 1992); Thomas v. Capital
Sec. Servs., Inc., 836 F.2d 866, 872 (5th Cir. 1988) (en banc) (holding that the
abuse of discretion standard applies “across-the-board to all issues in Rule 11
cases”). This court has noted that this standard is “necessarily very deferential”
for two reasons:
First, based on its familiarity with the issues and litigants, the
district court is better situated than the court of appeals to marshal
the pertinent facts and apply the fact-dependent legal standard
mandated by Rule 11.
Second, the district judge is independently responsible for
maintaining the integrity of judicial proceedings in his court and,
concomitantly, must be accorded the necessary authority.
Whitehead v. Food Max of Miss., Inc., 332 F.3d 796, 802–03 (5th Cir. 2003) (en
banc) (internal quotations, citations, and alterations omitted). “A district court
abuses its discretion if it imposes sanctions based on (1) an erroneous view of the
law or (2) a clearly erroneous assessment of the evidence.” Skidmore Energy,
Inc. v. KPMG, 455 F.3d 564, 566 (5th Cir.), cert. denied, 127 S. Ct. 524 (2006).
“Generally, an abuse of discretion only occurs when no reasonable person could
take the view adopted by the trial court.” Whitehead, 332 F.3d at 803 (internal
quotations omitted).
III. DISCUSSION
Houston argues that the district court abused its discretion by (1) granting
GreatSchools’s motion for sanctions, (2) assessing $6,000.00 in attorney’s fees as
sanctions against Houston and his law firm, and (3) denying Houston’s motion
to alter or amend the judgment imposing sanctions. Houston’s arguments are
entirely without merit, and we address each below.
A. Motion for Sanctions
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(1) Award of Sanctions
Rule 11 provides for sanctions against “any attorney, law firm, or party
that violated the rule or is responsible for the violation.” FED. R. CIV. P. 11(c)(1).
This rule is “aimed at curbing abuses of the judicial system,” Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 397 (1990), and is designed “to reduce the
reluctance of courts to impose sanctions by emphasizing the responsibilities of
attorneys and reinforcing those obligations through the imposition of sanctions,”
Thomas, 836 F.2d at 870. Along those lines, attorneys are required to sign
“[e]very pleading, written motion, and other paper” and must certify to the best
of their knowledge—formed after an inquiry reasonable under the
circumstances—that allegations and other factual contentions submitted to the
court have evidentiary support. See FED. R. CIV. P. 11(a), (b)(3); Jenkins v.
Methodist Hosps. of Dallas, Inc., 478 F.3d 255, 263–64 (5th Cir.), cert. denied,
128 S. Ct. 181 (2007); see also Skidmore, 455 F.3d at 567 (stating that an
attorney has a duty “to conduct a reasonable inquiry into the facts or law before
filing the lawsuit” (internal quotations omitted)). These obligations are
“personal[ and] nondelegable,” Pavelic & LeFlore v. Marvel Entm’t Group, 493
U.S. 120, 126 (1989), and they “must be satisfied; [a] violation . . . justifies
sanctions.” Whitehead, 332 F.3d at 802. In determining compliance with
Rule 11, “the standard under which an attorney is measured is an objective, not
subjective, standard of reasonableness under the circumstances.” Id. (internal
quotations omitted). “The reasonableness of the conduct involved is to be viewed
at the time counsel . . . signed the document alleged to be the basis for the Rule
11 violation.” Jennings v. Joshua Indep. Sch. Dist., 948 F.2d 194, 197 (5th
Cir. 1991).
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No. 08-20012
Based upon the evidence before it, the district court did not abuse its
discretion in sanctioning Houston and his law firm for failing to conduct a
reasonable pre-filing investigation to determine whether GreatSchools was a
proper defendant as Worrell’s employer, and for signing and filing the complaint
against GreatSchools with numerous incorrect factual allegations. Notably,
Houston never filed a response to GreatSchools’s motions, which he
acknowledged at the October 17, 2007 hearing. Houston also admitted that he
did not conduct any investigation of his own to determine if GreatSchools was
affiliated with HCA. Houston asserted only that he relied upon Jamison’s
“reasonable” investigation. The evidence, however, reveals that Jamison’s pre-
filing investigation, and Houston’s reliance upon it in signing the complaint, was
far from reasonable. Jamison’s extremely limited research included searching
for HCA on (1) the Texas Secretary of State’s website, which did not yield any
results; and (2) the internet, where she discovered that GreatSchools’s website
listed information on HCA. Based upon this information alone, Jamison
concluded that HCA was the parent organization of GreatSchools and Houston
relied upon it in including GreatSchools as a defendant. GreatSchools, however,
listed HCA on its website, because the site provides a searchable database to
parents that contains information on approximately 115,000 schools nationwide.
More importantly, GreatSchools expressly disclaims on its website any formal
affiliation or legal connection to any school listed in its database. Houston failed
to present any evidence to the contrary—indeed, there was no affirmative
evidence linking GreatSchools to HCA—or to cite any other research done by
him or Jamison before filing suit against GreatSchools. Nor is there any
evidence that Worrell told Jamison or Houston that HCA had any connection to
GreatSchools or that Worrell’s EEOC proceedings involved GreatSchools.
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No. 08-20012
Nevertheless, Houston signed the complaint, which contained numerous
unsupported and factually incorrect allegations regarding GreatSchools, and
filed it with the court. Like the district court, we hold, under an objective
standard, that these facts indicate a “complete failure to conduct a reasonable
investigation before suing GreatSchools.” Because Houston clearly violated
Rule 11, we hold that the district court did not abuse its discretion in assessing
sanctions against him and his law firm.
(2) Quantum of Sanctions Award
Rule 11 provides:
A sanction imposed under this rule must be limited to what suffices
to deter repetition of the conduct or comparable conduct by others
similarly situated. The sanction may include nonmonetary
directives; an order to pay a penalty into court; or, if imposed on
motion and warranted for effective deterrence, an order directing
payment to the movant of part or all of the reasonable attorney’s
fees and other expenses directly resulting from the violation.
FED R. CIV. P. 11(c)(4). District courts are given considerable discretion in
determining the appropriate sanction to impose on a party that violates Rule 11.
See Thomas, 836 F.2d at 876–77. “District courts may choose to deter
individuals who violate Rule 11 with monetary sanctions. One benefit of
monetary sanctions is that they may be imposed exclusively against the
attorney, thereby avoiding punishment of the client for attorney misconduct.”
Id. at 877. Nevertheless, while monetary sanctions may be appropriate under
Rule 11, this court stated that the “basic principle governing the choice of
sanctions is that the least severe sanction adequate to serve the purpose [of Rule
11] should be imposed.” Id. at 877–78. Thus, “as a less severe alternative to
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No. 08-20012
monetary sanctions, district courts may choose to admonish or reprimand
attorneys who violate Rule 11.” Id. at 878.
Houston argues that the district court abused its discretion in assessing
$6,000.00 in attorney’s fees as sanctions against Houston and his law firm.
Houston first asserts that a monetary sanction to reimburse GreatSchools for
their attorney’s fees is “wholly inappropriate.” Houston argues that the district
court should have instead admonished or reprimanded him as a less severe
sanction. However, Rule 11(c)(4) expressly provides for an award of attorney’s
fees directly resulting from a violation of the rule. Furthermore, given Houston’s
conduct—in both signing the complaint based upon an unreasonable pre-filing
investigation and then disregarding overwhelming evidence presented by
GreatSchools that it had no connection to HCA, causing more work to be done
by Cousins—and the district court’s necessarily broad discretion in choosing an
appropriate sanction, the district court did not err in imposing a monetary
sanction, in the form of attorney’s fees, against Houston and his law firm. Such
a sanction, as the district court explained, is needed to serve the purpose of
Rule 11 in deterring repetition of similar conduct by Houston in the future.
Additionally, Houston argues that the amount of the sanction was
unreasonable and not related to the expenses of GreatSchools. This strained
argument, however, lacks merit. GreatSchools provided a sworn declaration
from Cousins, which stated that he (1) was a partner at Orrick, Herrington &
Sutcliffe, LLP in San Francisco, California with fourteen years of legal
experience and ten years of specialized employment law experience; (2) billed at
an hourly rate of $560.00; and (3) spent at least twelve hours in obtaining the
dismissal of GreatSchools, through making numerous telephone calls, writing
several letters, and drafting a motion to dismiss, a motion for sanctions, and
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No. 08-20012
accompanying briefing because of Houston’s dereliction. Houston did not dispute
any of Cousins’s contentions, in briefing or at the October 17, 2007 hearing.
Given this undisputed information, the district court properly conducted the
lodestar analysis by multiplying the reasonable number of hours expended in
defending the suit—which it determined to be twelve based upon Cousins’s
sworn declaration—by the reasonable hourly rate for the participating
attorney—which it actually adjusted from $560.00 to $500.00 to reflect the
market in the district—in calculating GreatSchools’s reasonable attorney’s fees
to be $6,000.00. See La. Power & Light Co. v. Kellstrom, 50 F.3d 319, 323–24
(5th Cir. 1995) (per curiam). The district court did not clearly err in making this
calculation, because it relied on Cousins’s undisputed sworn declaration, as well
as the significant amount of work that Cousins had to perform in obtaining
dismissal of GreatSchools given Houston’s conduct. See Skidmore, 455 F.3d at
566 (stating that, when this court reviews the imposition of monetary sanctions,
“[d]eterminations of hours and rates [for calculating reasonable litigation
expenses and attorneys’ fees] are questions of fact” reviewed for clear error
(internal quotations omitted)). Thus, we hold that the district court did not
abuse its discretion in assessing $6,000 in attorney’s fees—which was only a
portion of the fees requested—as sanctions against Houston and his law firm.
B. Motion to Alter or Amend Judgment
Rule 59(e) allows motions to alter or amend judgment filed within ten days
of the judgment. This motion “serve[s] the narrow purpose of allowing a party
to correct manifest errors of law or fact or to present newly discovered evidence.”
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Waltman v. Int’l Paper Co., 875 F.2d 468, 473 (5th Cir. 1989) (internal
quotations omitted). “This court has indicated[, however,] that a civil litigant
may not use Rule 59(e) to raise new claims that could have been raised prior to
the district court’s entry of a final judgment.” United States v. Dupre, 247 F.3d
241, 2001 WL 43554, at *1 (5th Cir. Jan. 9, 2001) (per curiam) (unpublished); see
also Michael Linet, Inc. v. Vill. of Wellington, Fla., 408 F.3d 757, 763 (11th Cir.
2005) (stating that a party may not use “a Rule 59(e) motion to relitigate old
matters, raise argument or present evidence that could have been raised prior
to the entry of judgment”).
Houston’s Rule 59(e) motion was nothing more than a belated effort to
offer evidence and make arguments that he could have raised before the due
date for his response to the motion for sanctions, before the October 17, 2007
hearing, and during that hearing. In that post-judgment motion, Houston, for
the first time, argued that he did not receive the motion for sanctions, that he
did not have proper notice that the motion for sanctions would be discussed at
the initial pretrial and scheduling conference, and that the procedural
requirements of Rule 11 were not satisfied. Because Houston did not raise those
arguments in briefing or at the hearing, when he had ample opportunity to do
so, we need not consider them here. Regardless, the record clearly contradicts
Houston’s arguments and demonstrates that they have no merit.3 Houston also
3
Houston’s arguments fail to indicate any manifest error of fact or law. First,
GreatSchools filed its motion for sanctions electronically on September 11, 2007, and the record
indicates that it was served automatically on Houston the same day pursuant to Southern
District of Texas Local Rule 7.4. Moreover, Houston discussed GreatSchools’s motion for
sanctions at the October 17, 2007 hearing and indicated that he knew about them. Second,
Houston had notice that the motion for sanctions could be considered at the initial pretrial
conference, because the order setting the date for the conference expressly stated that the
district court “may rule on any pending motions at the conference.” This order is consistent
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No. 08-20012
attempted to submit evidence in the form of affidavits from him and Jamison to
support new arguments regarding the reasonableness of the pre-filing
investigation. Houston, however, failed to identify any newly discovered
evidence that could not have been presented in briefing or at the hearing.
Accordingly, we hold that the district court did not abuse its discretion in
denying Houston’s Rule 59(e) motion.
IV. CONCLUSION
The district court did not abuse its discretion in granting GreatSchool’s
Rule 11 motion for sanctions against Houston and his law firm or in denying
Houston’s Rule 59(e) motion to alter or amend judgment. For the foregoing
reasons, the judgment of the district court is AFFIRMED.
with Local Rule 16.1 and Federal Rule of Civil Procedure 16(c)(2)(K). Third, the procedural
requirements of Rule 11 have been satisfied. Rule 11 requires that a motion for sanctions be
filed separately and served on the nonmoving party at least twenty-one days before it is filed
with the court. See FED. R. CIV. P. 11(c)(2). The record reveals that GreatSchools served its
motion on Houston on August 17, 2007 and more than twenty-one days had passed when
GreatSchools filed it with the court on September 11, 2007, after no action was taken by
Houston in response to the motion.
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