Hunter v. Earthgrains Co. Bakery

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.