Willy v. The Coastal Corporation Petition for Writ of Certiorari
Public Court Documents
January 30, 1991
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Brief Collection, LDF Court Filings. Willy v. The Coastal Corporation Petition for Writ of Certiorari, 1991. 58263d54-c99a-ee11-be36-6045bdeb8873. LDF Archives, Thurgood Marshall Institute. https://ldfrecollection.org/archives/archives-search/archives-item/2a88d86d-a7ff-44d0-920f-55580c65f756/willy-v-the-coastal-corporation-petition-for-writ-of-certiorari. Accessed October 10, 2025.
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IN THE
No.
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1990
DONALD J. WILLY,
Petitioner,
versus
THE COASTAL CORPORATION, ET AL.,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR. THE FIFTH CIRCUIT
Michael A. Maness
Counsel of Record
for Petitioner
1900 North Loop West
Suite 500
Houston, Texas 77018
(713) 680=9922January 1991
QUESTIONS PRESENTED
1. In the absence of subject matter jurisdiction, does
Article III § 2 of the Constitution foreclose a federal
court’s award of attorney’s fees to a defendant that
wrongly removed the case from a state court, against a
plaintiff who successfully contested removal?
2. In the absence of subject matter jurisdiction, is it
appropriate, reasonable, and within a federal court’s
discretion under its inherent power, or under Rule 11,
F.R.Civ.P., to award attorney’s fees of $19,307.00 to an
$8 billion corporate defendant that wrongly removed the
case from a state court, against a plaintiff with assets of
less than $21,000.00, who successfully contested removal?
3. Is a party liable for attorney’s fees awarded
because of his lawyer’s purported Rule 11 violations, if
he did not sign the pleadings or participate in other
alleged misconduct for which his lawyer was sanctioned?
-l-
LIST OF ALL PARTIES
Petitioner Donald J. Willy was the plaintiff in the
district court and the appellant in the court of appeals.
The respondents in this Court, defendants in the
district court, and appellees in the court of appeals are
the Coastal Corporation, Coastal States Management
Company, James R. Paul, George L. Brundrett, Charles
F. Jones, William L. Dunker, and E. C. (Bud) Simpson.
-n-
TABLE OF CONTENTS
Page
OPINIONS BELOW.................................................................... 1
JURISDICTION...........................................................................1
CONSTITUTIONAL AND OTHER PROVISIONS............ 2
STATEMENT OF THE CASE......................................... 2
REASONS FOR GRANTING THE PETITION
1. The Fifth Circuit’s unprecedented
holding that a federal court never possessing
subject matter jurisdiction has the inherent
power to award attorney’s fees to a defendant
wrongly removing a case from a state court is
in conflict with Article III of the Constitution
and with decisions of this Court and other
courts of appeals.................................................
2. This case presents substantial,
recurring questions involving the inter
pretation and application of Rule 11 that have
not been, but should be, resolved by this
Court........... ........................................................
10
20
(i) Should Rule 11 be used to
reward a party’s wrongful invocation of
federal subject matter jurisdiction?............... ....... 21
(ii) Does Rule 11 permit an
award of attorney’s fees that effectively
bankrupts a plaintiff before his claims
are decided?........................................................... 23
(iii) Is a party strictly,
vicariously liable for attorney’s fees
awarded because of his lawyer’s sup
posed Rule 11 violations?.......................................... 24
CONCLUSION............................................ ..............................27
-ill-
APPENDIX:
Page
Willy v. Coastal Corp., 647
F.Supp. 116 (S.D. Tex. 1986)........................................ A -l
Order for Sanctions (unreported)
(November 12, 1986)..................................................... A-6
Willy v. Coastal Corp., 855
F.2d 1160 (5 Cir. 1988)................................................ „.A-9
Order for Sanctions (unreported)
(April 17, 1989)....................................................... ..A-40
Willy v. Coastal Corp., 915 F.2d
965 (5 Cir. 1990)....................................... A-48
Judgment (October 26, 1990)....................................... A-56
Order Denying Petition for
Rehearing and Suggestion for
Rehearing In Banc (November 27,
1990)...............................................................................A-56
Article III, Constitution of
the United States........................................................... A-57
Title 28, United States Code
(relevant sections).........................................................A-58
Rule 11, Federal Rules of Civil
Procedure....................................................................... A-59
-iv-
TABLE OF AUTHORITIES
Page
Cases:
Aldinger v. Howard, 427 U.S. 1
(1976).........................................................................12, 14
Afyeska Pipeline Service Co. v. Wilderness
Society, 421 U.S. 240 (1975).................................... 11, 13
American Fire & Cas. Co. v. Finn,
341 U.S. 6 (1951).......................... ...... ..........................19
Bender v. Williamsport Area School
District, 475 U.S. 534 (1986)........................................ ..12
Business Guides, Inc. v. Chromatic Communications
Enterprises, Inc., 892 F.2d 802 (9 Cir. 1989),
cert, granted __ U .S .___ , 110 S.Ct. 3235,
111 L.Ed.2d 746 (1990).................................................26
Calloway v. Marvel Entertainment Group, 854 F.2d 1452
(2 Cir. 1988), rev’d in part on other grounds sub nom.
Pavelic & LeFlore v. Marvel Entertainment Group, 493
U .S .__ , 110 S.Ct. 456, 107 L.Ed.2d 438 (1989)......... 21
Citizens’ Bank of Louisiana v. Cannon,
164 U.S. 319 (1896)................................ ........... ............13
Cooter & Cell v. Hartman Corp., 496
U.S.__ , 110 S.Ct. 2447, 110 L.Ed.2d
359 (1990)............................................................. 8, 14, 22
Crawford Fitting Co. v. J.T. Gibbons,
Inc., 482 U.S. 437 (1987)........................ .......................13
Davis v. Cluet, Peabody & Co., 667 F.2d
1371 (11 Cir. 1982)......................................................... 18
Donaldson v. Clark, 819 F.2d 1551
(11 Cir. 1987) (enbanc) .................................... 21
-v-
Page
Eastway Construction Corp. v. City o f New York,
637 F. Supp. 558 (E.D.N.Y. 1986), mod. on appeal,
821 F.2d 121 (2 Cir. 1987), cert, denied 484 U.S. 918
(1987)................................................. ....... .................... 21
F.D. Rich Co., Inc. v. United States ex rel. Industrial
Lumber Co., 417 U.S. 116 (1974)...................................11
Finley v. United States, 490 U .S .___,
109 S.Ct. 2003, 104 L.Ed.2d 593 (1989)........................ 14
Mealy v. Ratta, 292 U.S. 263 (1934).......................... . 12
Insurance Corp. o f Ireland, Ltd. v. Compagnie Des
Bauxites De Guinea, 456 U.S. 694 (1982)............... 12, 13
Irwin v. Veterans Administration,__ U.S. _
[59 U.S.L.W. 4021, December 3, 1990]......................... 24
Johnson v. Smith, 630 F. Supp. 1
(N.D. Cal. 1986)...............................................................16
Link v. Wabash Railroad Co., 370
U.S. 626 (1962).................................................. 15, 24, 25
Lion Bonding & Surety Co. v. Karatz,
262 U.S. 640 (1923)......................................................... 13
Marbury v. Madison, 1 Cranch
137 (1803)..........................................................................11
The Mayor v. Cooper, 6 Wall. 247 (1868)........................ 13
Mitchell v. Maurer, 293 U.S. 237 (1934)....................... . 12
Muthig v. Brant Point Nantucket, Inc.,
838 F.2d 600 (1 Cir. 1988)............................................... 16
Nasco, Inc. v. Calcasieu Television and Radio, Inc., 894
F.2d 696 (5 Cir. 1990), cert, granted sub nom.
Chambers v. Nasco, Inc., __ U .S.___ , 111 S.Ct. 38,
112 L.Ed.2d 15 (1990)................ ................... . 11, 15
-vi-
Page
News-Texan, Inc. v. City of Garland,
814 F.2d 216 (5 Cir. 1987)..........................................5, 16
Oliveri v. Thompson, 803 F.2d 1265 (2 Cir.1986),
cert, denied sub nom. County of Suffolk v. Graseck,
480 U.S. 918 (1987).........................................................25
Orange Production Credit Assn. v. Frontline Ventures Ltd.,
792 F.2d 797 (9 Cir. 1986)..................... .........................16
Owen Equipment & Erection Co. v. Kroger,
437 U.S. 365 (1978).......... ..................... ............... 12, 14
Pavelic & LeFlore v. Marvel Entertainment Group, 493
U .S .__ , 110 S.Ct. 456, 107 L.Ed.2d 438 (1989)........ 24
Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980) 11, 15
Smyth v. Asphalt Belt Ry. Co.,
267 U.S. 326 (1925)................................................ ....... 13
Szabo Food Service, Inc. v. Canteen Corp.,
823 F.2d 1073 (7 Cir. 1987)............................... ............16
Thomas v. Capital Security Services, Inc.
Inc., 836 F.2d 866 (5 Cir. 1988) (en banc).... ............1, 6
Trohimovich v. Commissioner, 776 F.2d
873 (9 Cir. 1985)....................................................... 16
United Mine Workers v. Gibbs,
383 U.S. 715 (1966)........................................................ .14
United States Catholic Conference v. Abortion Rights
Mobilization, Inc., 487 U.S. 72 (1988)............. 13, 17, 20
United States v. Corrick,
298 U.S 435 (1936).......................................................... 12
United States v. Hudson,
7 Cranch 32(1812).......................................................... 15
-vii-
Page
United States v. Morton Salt Co.,
338 U.S. 632 (1950)........................................................ 13
United States v. Shipp,
203 U.S. 563 (1906)................ ....................................... 20
United States v. United Mine Workers,
330 U.S. 258 (1947)........................................... 13, 16, 17
Vatican Shrimp Co. v. Solis, 820 F.2d 674
(5 Cir. 1987), cert, denied 484 U.S. 953 (1987).............. 5
Wainwright v. Sykes, 433 U.S. 72 (1977)....................... ...25
White v. General Motors Corp., Inc.,
908 F.2d 675 (10 Cir. 1990)............................................ 21
Willy v. Coastal Corp., 647 F. Supp.
116 (S.D. Tex. 1986)..................................................... 1, 4
Willy v. Coastal Corp., 855 F.2d 1160 (5 Cir. 1988).......1,5
Willy v. Coastal Corp., 915 F.2d 965 (5 Cir. 1990)........1, 8
Wojan v. General Motors Corp., 851 F.2d
969 (7 Cir. 1988)..............................................................16
Constitutional Provisions:
Art. Ill, Constitution of the
United States.............................................................. passim
Statutes:
28 U.S.C. § 1254(1).............................................................. 2
28 U.S.C. § 1447(c)..................................................... 16, 17
28 U.S.C. § 1919................................................................. 17
28 U.S.C. § 2283 .................................................................23
- V l l l -
Page
Federal Rules:
Supreme Court Rule 10.1(a)............................................20
Supreme Court Rule 10.1(c)........................ 21
Supreme Court Rule 14.1(i)............................................. 12
Rule 11, F.R.Civ.P............................................... passim
Rule 12(h)(3), F.R.Civ.P............................................... . 15
Rule 41(a), F.R.Civ.P...................................................8, 16
Rule 82, F.R.Civ.P....... .............................................. .....14
-ix-
1
OPINIONS BELOW
The district court’s opinion on the merits, following
Coastal’s improvident removal of the case from a Texas
state court, is reproduced in the appendix at page A-l.
Willy v. Coastal Corp., 647 F. Supp. 116 (S.D. Tex. 1986).
The district court’s initial unreported order, awarding
attorney’s fees of $22,625.00 against Petitioner and his
lawyer as a sanction under Rule 11, F.R.Civ.P., is
reproduced at page A-6.
The Fifth Circuit’s first opinion, Willy v. Coastal
Corp., 855 F.2d 1160 (5 Cir. 1988), reversing the district
court’s decision on the merits for lack of Article III
subject matter jurisdiction, reversing the Rule 11
sanctions order, and remanding the case for
reconsideration in light of the intervening en banc
decision in Thomas v. Capital Security Services, Inc., 836
F.2d 866 (5 Cir. 1988), is reproduced at page A-9.
The district court’s second unreported order,
awarding attorney’s fees of $19,307.00 against Petitioner
and his lawyer as a Rule 11 sanction, is reproduced at
page A-40. The Fifth Circuit’s second opinion, Willy v.
Coastal Corp., 915 F.2d 965 (5 Cir. 1990), summarily
affirming the sanctions award on the briefs, without oral
argument, is reproduced at page A-48.
JURISDICTION
The opinion and judgment of the court of appeals,
reproduced in the appendix at pages A-48 and A-56,
were entered on October 26, 1990. Petitioner was
granted a timely extension within which to file a petition
for panel rehearing and suggestion for rehearing en banc,
which were timely filed on November 14, 1990.
2
The Fifth Circuit’s order denying the petition for
panel rehearing and suggestion for rehearing en banc,
reproduced in the appendix at page A-56, was entered
on November 27, 1990. This petition for certiorari was
filed with the Clerk of this Court within 90 days
thereafter and is timely.
This Court has jurisdiction under 28 U.S.C. §
1254(1).
CONSTITUTIONAL AND OTHER PROVISIONS
The relevant provisions of Article III of the
Constitution of the United States, of Title 28 of the
United States Code, and of Rule 11, F.R.Civ.P., are
reproduced in the appendix beginning at page A-57.
STATEMENT OF THE CASE
Petitioner Donald J. Willy, a Houston attorney hired
in 1981 as in-house environmental counsel by a subsidiary
of the Coastal Corporation, was fired in 1984. In 1985,
represented by George A. Young, another Houston
lawyer, Willy sued Coastal and others ("Coastal") in a
Texas state court, alleging that the company terminated
his employment because of his refusal to violate the
criminal provisions of state and federal environmental
statutes and federal securities laws. The state court
petition [R. 7: 1096] alleged only state causes of action
and sought damages and other relief exclusively under
Texas law. None of Willy’s claims arose under or was
created by a federal statute, and he did not allege
entitlement to any federal remedy.
Coastal wrongly removed the case to the United
States district court in Houston, mistakenly claiming that
resolution of the controversy would require "significant
3
interpretation and application" of federal environmental
and securities statutes, and that federal law therefore was
"an essential and necessary element" of Willy’s state law
cause of action, conferring original federal question
jurisdiction [R. 7: 1092, 1093], Young promptly filed a
motion to remand the case to the state court, on the
grounds that no federal question was presented, that
there was no diversity of citizenship, and that the federal
district court lacked subject matter jurisdiction [R. 7:
1049],
Before any supposedly sanctionable misconduct
occurred, the district court mistakenly denied the motion
to remand [R. 6: 877], Two subsequent requests by
Willy’s counsel to return the case to the state court for
lack of subject matter jurisdiction also were erroneously
rejected [R. 4: 469-70; R. 9: 5-6].
Coastal then filed a motion to dismiss Willy’s
principal state law claim on its merits [R. 6: 779]. Young
responded by filing a reply to Coastal’s motion to dismiss
[R. 5: 567], a six-page motion for partial summary
judgment, supported by Willy’s 12-page affidavit, and a
110-page supporting brief 1 [R. 5: 609; R. 6: 744],
addressed principally to Coastal’s 14 defenses and a
counterclaim [R. 7: 1059], Young also sought permission
to file in support of his partial summary judgment motion
approximately 1,200 pages of documents Coastal
produced during discovery in an earlier administrative
proceeding Willy had initiated against the company in the 1
1 The court of appeals mistakenly refers to a
nonexistent "110-page motion for summary judgment," at
one point mischaracterizing the document as "the infamous
110-page summary judgment motion.” 915 F.2d at 966 n. 3
and 968 [A-49, 54, 55].
4
United States Department of Labor [R. 5: 565; R. 6:
742], The district court granted permission for Young to
file the documents [R. 4: 527; R. 9: 38],
Coastal filed a response to the motion for partial
summary judgment, demanding Rule 11 sanctions on the
grounds that there was "no evidence to support the
summary judgment" and that the motion was
"unwarranted and wholly inadequate" [R. 4: 544],
Coastal filed a supplemental response and brief
supporting its request for sanctions, setting out what it
regarded as inappropriate behavior by Young and
attributing his actions to Willy [R. 4: 485; 512].2
In its published memorandum and order, Willy v.
Coastal Corp., 647 F. Supp. 116 (S.D. Tex. 1986) [A-l],
the district court mistakenly declined to reexamine its
own subject matter jurisdiction, erroneously rejected on
its merits Willy’s principal state-law claim, and granted
Coastal’s motion to dismiss the remainder of the case. In
an unpublished order [A-6] the court also granted
Coastal’s motion for Rule 11 sanctions and awarded
attorney’s fees of $22,625.00 against both Willy and
Young, jointly and severally. The order attributed
personal responsibility to Willy for Young’s pleadings,
although he did not sign them, and for all of Young’s
other supposed misconduct.3
2 Although no discovery was undertaken, only two
potentially dispositive motions were filed, and less than two
hours of hearings were held, Coastal claimed attorney’s fees
and costs of more than $85,000.00 [R. 4: 427].
3 The first order sanctioned Willy for Young’s filing of
the motion for partial summary judgment, the 110-page
supporting brief, the 1,200 pages of documents that the
district court granted permission for Young to file, and
5
Willy filed in the court of appeals a motion to stay
the sanctions order, asserting that Young had been
hospitalized in a Minnesota alcohol and drug abuse
treatment facility. The Fifth Circuit denied the stay to
permit the district court to consider "the health condition
of Mr. Young, who, as counsel in the case appears to
have been significantly responsible for incurring the Rule
11 sanctions [that are the] subject of this motion" [R. 3:
290-91].4
Willy then discharged Young, retained his present
counsel, and appealed. The Fifth Circuit sustained
Willy’s contention that the district court lacked subject
matter jurisdiction, reversed its mistaken decision on the
merits, and directed that Willy’s claims be remanded to
the state court from which Coastal had improperly
removed them almost three years earlier. Willy v. Coastal
Corp., 855 F.2d 1160 (5 Cir. 1988) [A-9, 10]. Stating that
"we and the district court retain jurisdiction over the Rule
11 aspects of this case, even though we have held that
removal was improper," 855 F.2d at 1172 [A-35],5 the
another brief misciting a provision of the Federal Rules of
Evidence [R. 5: 567, 572]. Willy did not sign any of these
pleadings. The district court also cited Willy’s 12-page
affidavit supporting the motion for partial summary
judgment, believing that the affidavit failed properly to
authenticate the documents.
4 Willy did not renew his application for a stay in the
district court. That court was aware of Young’s
hospitalization after entry of the sanctions order [R. 8: 3-8].
5 Vatican Shrimp Co. v. Solis, 820 F.2d 674 (5 Cir. 1987),
cert, denied 484 U.S. 953 (1987), and News-Texan, Inc. v. City
of Garland, 814 F.2d 216 (5 Cir. 1987), cited by the first panel
to support its dictum that federal courts without subject
6
panel also reversed the Rule 11 sanctions order and
remanded the case for reconsideration in light of the
intervening en banc decision in Thomas v. Capital Security
Services, Inc., 836 F.2d 866 (5 Cir. 1988) [A-37, 38],
On remand, Willy argued that awarding attorney’s
fees to defendants who wrongly invoked federal subject
matter jurisdiction, against a plaintiff who successfully
contested that jurisdiction, was inconsistent with Rule 11
and would violate Article III of the Constitution [R. 2:
189], Following a hearing, the district court severed the
Rule 11 issues, remanded the remainder of the case to
the state trial court from which Coastal had improvidently
removed it more than three years earlier [R. 11: 2-4],
and awarded $19,307.00 in attorney’s fees to Coastal as a
Rule 11 sanction against Willy and Young, jointly and
severally, citing additional instances of purported
misconduct by Young that had not been specifically
mentioned in the original order 29 months earlier.6 Both
matter jurisdiction are empowered to award attorney’s fees
to defendants wrongly removing cases from state courts, do
not support that proposition, although the second panel
thought that "this conclusion is implicit in their broader
holding." 915 F.2d at 967 n. 6 [A-52]. In those cases, which
decided only issues of appellate jurisdiction. Rule 11
sanctions were sought against defendants who wrongly
invoked federal subject matter jurisdiction by
improvidently removing cases from state courts, not against
a plaintiff who successfully contested removal jurisdiction.
Apparently no federal appeals court has ever previously
sustained an award of attorney’s fees in the circumstances
of this case.
6 The previously unremarked violations were (i)
Young’s inclusion in a pleading of irrelevant and
inflammatory allegations that previously had been stricken;
(ii) Young’s filing of responses to Coastal’s motion to
7
the second sanctions order and the Fifth Circuit’s
summary affirmance of it ascribed all of the purported
misdeeds to "Plaintiff" or "Willy," when it was actually
Young who did them.* 7 Willy’s timely Rule 59 motion [R.
2: 57], reurging his arguments that Article III and Rule
11 precluded the attorney’s fee award, was denied
without opinion by the district court almost nine months
later [R. 1: 5],
Willy filed a motion to stay the second sanctions
order pending appeal, asserting in an accompanying
affidavit that he had assets of less than $21,000.00 [R. 2:
63, 66]. Coastal did not contest that figure but instead
argued that a stay should be denied because Willy had
not shown his inability to borrow the money [R. 2: 24,
27-28]. Attached to Willy’s application for stay were
extracts from Coastal’s 1988 annual report, establishing
that the company and its operating subsidiaries in that
year had revenues of more than $8 billion, profits of
dismiss that were "confusing, misleading, and not
reasonably based on law or fact"; (iii) Young’s allegation in
a pleading that Coastal’s counsel were engaged in an
improper conflict of interest; (iv) Young’s misquotation in
a pleading of a Texas disciplinary rule; (v) Young’s
statement in open court that he intended to depose no less
than 60 individuals in connection with the case; and (vi)
Young’s filing on Willy’s behalf of a separate federal civil
action "in an effort to harass Defendants in this case" [A-
43, 44],
7 For example, the order asserts that, "in a transcribed
conference occurring during the course of this action,
Plaintiff further evidenced his intent to harass Defendants
by stating on the record that he intended to depose no less
than 60 individuals in connection with this matter”
(emphasis added) [A-44]. Young made this statement, not
Willy [R. 10: 29],
8
more than $718 million, net earnings of more than $157
million, and total assets of almost $8 billion [R. 2: 69-75].
The district court denied the stay without opinion [R. 1:
61-
Willy again appealed.8 Without oral argument, the
Fifth Circuit summarily affirmed the sanctions award on
the briefs, concluding that the district court possessed
inherent power to award attorney’s fees to Coastal as a
Rule 11 sanction against Willy, even though the court
never possessed Article III subject matter jurisdiction
over the controversy at any stage of the proceedings, and
even though Coastal, rather than Willy, wrongly invoked
federal jurisdiction. The panel analogized this case to
Cooler & Gell v. Hartmarx Corp., 496 U .S .___, 110 S.Ct.
2447, 2456, 110 L.Ed.2d 359, 376 (1990), thinking it
involved, not "a judgment on the merits of an action,"
but rather, like the imposition of costs, attorney’s fees,
and contempt sanctions, "the determination of a
collateral issue: whether the attorney has abused the
judicial process, and, if so, what sanction would be
appropriate." 915 F.2d at 967 [A-51].9
8 Young did not appear in the district court following
remand and did not appeal the second, modified sanctions
order.
9 The panel acknowledged Willy’s argument that Cooler
& Gell is not controlling because the Rule 11 attorney’s fee
award there was collateral to an Article III controversy
over which the federal court properly exercised subject
matter jurisdiction, invoked by the sanctioned attorneys,
even though they dismissed the case under Rule 41(a),
F.R.Civ.P., before the sanctions were imposed. Here, by
contrast, the federal court never possessed Article III
subject matter jurisdiction at any stage of the proceedings,
and Willy, the sanctioned party, did not improperly invoke
9
The court also believed that the award of attorney’s
fees was not foreclosed by the defendants’ wrongful
removal of the action because Coastal acted in "good
faith." Since there was at least "a colorable basis" for the
district court’s mistaken rejection of Willy’s legally
correct jurisdictional position, the panel reasoned that
Cooter & Gell permits litigants and lawyers wrongly
invoking federal jurisdiction to recover attorney’s fees
under a federal court’s inherent power, even though the
derelictions and award relate only to the merits of a
controversy the court was never constitutionally
empowered by Article III or by Congress to hear and
decide in the first place. 915 F.2d at 967 and n. 7 [A-
52].
Finally, affirming the "broad discretion" that Cooter
& Gell accords to federal trial judges under Rule 11, the
panel found no abuse of discretion in this case.
Mistakenly stating that the first panel affirmed the
original sanctions order when it actually reversed it,10
such jurisdiction but instead repeatedly and successfully
contested it. Nonetheless, the court found Cooter & Gell’s
"discussion of the collateral character of Rule 11 orders
applicable in this context as well." 915 F.2d at 967 n. 5 [A-
51]-
10 The first panel nullified the original sanctions order.
"The sanctions order is therefore reversed and the matter of
sanctions is remanded to the district court for further
proceedings consistent with this opinion and Thomas." 855
F.2d at 1173 [A-38] (emphasis added). The panel’s judgment
recited that the sanctions order "is set aside" [R. 3: 224].
Inexplicably, the second panel held that the first panel
"affirmed the award of Rule 11 sanctions," 915 F.2d at 966
[A-49] (emphasis added). Concluding that "we are bound
by our prior decision affirming the district court’s award of
sanctions against both Willy and his attorney," 915 F.2d at
10
without disclosing that virtually all the supposed
misbehavior attributed to Willy personally by the district
court’s orders and by the panel opinion had been
committed by his lawyer, and without revealing that the
revised sanctions order awarded attorney’s fees for
purported misconduct never specifically mentioned in the
first order 29 months earlier, the panel summarily ratified
the district court’s implicit determination that, under all
of the circumstances shown, the substantial monetary
award favoring Coastal was appropriate and reasonable,
in the sense demanded by Rule 11, and was the "least
severe sanction adequate to [serve the] purpose" of the
Rule. Thomas, 836 F.2d at 878.
Willy’s petition for panel rehearing and suggestion
for rehearing en banc, renewing his claims that the
attorney’s fees awarded against him were unauthorized
by Rule 11 and violated Article III of the Constitution,
were denied without opinion [A-56].
REASONS FOR GRANTING THE PETITION
1. The Fifth Circuit’s unprecedented holding that a
federal court never possessing subject matter jurisdiction
has the inherent power to award attorney’s fees to a
defendant wrongly removing a case from a state court is
in conflict with Article III of the Constitution and with
decisions of this Court and other courts of appeals.
In Article III cases and controversies over which
Congress has conferred the constitutional competence to
968 [A-54] (emphasis added), the court declined for that
reason to consider or decide five issues presented by Willy’s
brief. Willy’s petition for panel rehearing and suggestion
for rehearing en banc both pointed out the error. The Fifth
Circuit did not correct it.
11
act through a statutory grant of subject matter
jurisdiction, federal courts "enjoy a zone of implied
power incident to their judicial duty,"11 including the
inherent power to award attorney’s fees for bad faith
litigation.11 12 The question here is whether a federal court
is inherently empowered to award attorney’s fees, in a
case over which neither Article III nor Congress
conferred subject matter jurisdiction, to those who
wrongly removed the controversy from a state court, for
time devoted to the merits of a dispute that should never
have been considered or decided by a federal court in the
first place. The Fifth Circuit’s surprising, unprecedented
answer stands squarely in conflict with Article III, with
decisions of this Court and other courts of appeals, and
with almost two centuries of federal judicial history.
Time and again since Marbury v. Madison, 1 Cranch
137 (1803), this Court’s decisions have underscored the
principle that questions of federal judicial power are
constitutional questions, not simply procedural issues to
be decided by resort to expediency, in whatever fashion
11 Nasco, Inc. v. Calcasieu Television and Radio, Inc., 894
F.2d 696, 702 (5 Cir. 1990), cert, granted sub nom. Chambers v.
Nasco, Inc., __ U .S .___ , 111 S.Ct. 38, 112 L.Ed.2d 15 (1990).
Although the "inherent power" issues on which the Court
granted certiorari in Chambers resemble the questions
presented here, this case presents them in an even more
elementary posture. The United States district court in
Chambers had subject matter jurisdiction, conferred by
Congress, over an Article III case or controversy. The
district court in this case did not.
12 Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980);
Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240,
258-59 (1975); F.D. Rich Co., Inc. v. United States ex rel.
Industrial Lumber Co., 417 U.S. 116, 129 (1974).
12
best promotes efficient judicial administration or
convenience. The Court repeatedly has stressed the
simple but profoundly important proposition that federal
courts are courts of limited rather than general
jurisdiction,13 restrained in the exercise of judicial power
both by Article III of the Constitution and by the
legislation of Congress. Aldinger v. Howard, 427 U.S. 1,
15 (1976). Because it would be an unconstitutional
invasion of the province reserved to state courts for
federal courts to act beyond constitutional and legislative
constraints, the Court has adhered rigorously to the view
that limitations on federal jurisdiction "must be neither
disregarded nor evaded." Owen Equipment & Erection
Co. v. Kroger, 437 U.S. 365, 374 (1978). "Due regard
for the rightful independence of state governments . . .
requires that [federal courts] scrupulously confine their
own jurisdiction to the precise limits which [Congress] has
defined." Heaiy v. Ratta, 292 U.S. 263, 270 (1934).14
The validity of a federal court’s order awarding
13 E.g., Insurance Corp. o f Ireland, Ltd. v. Compagnie Des
Bauxites De Guinea, 456 U.S. 694, 701 (1982).
14 "For that reason, every federal court has a special
obligation to ‘satisfy itself not only of its own jurisdiction,
but also that of the lower courts in a cause under review’.”
Bender v. Williamsport Area School District, 475 U.S. 534, 541
(1986), quoting Mitchell v. Maurer, 293 U.S. 237, 244 (1934).
When a lower federal court lacks subject matter
jurisdiction, this Court reviews the case "not [on] the merits
but merely for the purpose of correcting the error of the
lower court in entertaining the suit." United States v. Corrick,
298 U.S. 435, 440 (1936). Cf. Supreme Court Rule 14.1(i) ("If
review of a judgment of a United States court of appeals is
sought, the statement of the case shall also show the basis
for federal jurisdiction in the court of first instance").
13
attorney’s fees, like the validity of any of its other orders,
"depends upon that court’s having jurisdiction over both
the subject matter and the parties.”15 Absent
congressional authorization, a federal court lacking
Article III subject matter jurisdiction has no inherent
power to order the payment of fines, costs, fees, or
expenses of litigation, even against parties wrongly
invoking its jurisdiction.16 Such an order must be
reversed "in its entirety."17
15 Insurance Corp. o f Ireland, Ltd. v. Compagnie Des
Bauxites De Guinea, 456 U.S. 694, 701-02 (1982). Compagnie
Des Bauxites draws a bright line between personal
jurisdiction over parties to a federal controversy, which
implicates no Article III concerns, and subject matter
jurisdiction, which does. See also United States Catholic
Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 77
(1988).
16 "If there were no jurisdiction, there was no power to
do anything but to strike the case from the docket." The
Mayor v. Cooper, 6 Wall. 247, 250-51 (1868); Smyth v. Asphalt
Belt Ry. Co., 267 U.S. 326, 330 (1925); Lion Bonding & Surety
Co. v. Karatz, 262 U.S. 640, 642 (1923); Citizens’ Bank o f
Louisiana v. Cannon, 164 U.S. 319, 324 (1896).
Even in cases within their subject matter jurisdiction,
federal courts have no inherent power to award attorney’s
fees or costs, other than as a sanction. Alyeska Pipeline
Service Co. v. Wilderness Society, 421 U.S. 240 (1975); Crawford
Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437 (1987).
17 United States v. United Mine Workers, 330 U.S. 258, 295
(1947) (civil contempt penalties for violation of temporary
restraining order); United States Catholic Conference v.
Abortion Rights Mobilization, Inc., 487 U.S. 72, 76, 80 (1988)
(civil contempt penalties for resistance to subpoena duces
tecum in case over which district court exercised
"colorable" jurisdiction); United States v. Morton Salt Co., 338
U.S. 632, 642 (1950) (statutory civil penalties).
14
Congress did not empower the federal district court
to act in this case by granting subject matter jurisdiction.
A federal statute purporting to confer such competence
would have violated Article III of the Constitution,
because Willy’s claims arose exclusively under state law,
were asserted only against Texas defendants, and did not
present a federal question.
Since the Federal Rules of Civil Procedure do not
confer subject matter jurisdiction on federal courts, Rule
11 itself provides no source of judicial power.18 Nor can
it be maintained plausibly that a federal court’s
acknowledged collateral authority to award attorney’s
fees in a case that was once within its Article III
jurisdiction, as in Cooter & Gell v. Hartmarx Corp., 496
U.S. __ , 110 S.Ct. 2447, 2456, 110 L.Ed.2d 359, 376
(1990), encompasses the entirely different situation in
which a federal court was never constitutionally
empowered to act in the first place, at any stage of the
proceedings. Like pendent or ancillary jurisdiction,19 an
exercise of federal judicial power that is collateral to a
federal case, as in Cooter & Gell, demands some sort of
Article III jurisdiction at some point in the controversy.
If federal subject matter jurisdiction never existed at all,
at any stage of the proceedings before the federal court,
an award of attorney’s fees cannot be "collateral" to
anything that Article III permits such a court to decide.
18 Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365,
370 and n. 7 (1978); Aldinger v. Howard, 427 U.S. 1, 8-9
(1976); Rule 82, F.R.Civ.P.
19 Finley v. United States, 490 U.S. __ , 109 S.Ct. 2003, 104
L.Ed.2d 593 (1989); Owen Equipment & Erection Co. v. Kroger,
437 U.S. 365 (1978); Aldinger v. Howard, 427 U.S. 1 (1976);
United Mine Workers v. Gibbs, 383 U.S. 715 (1966).
15
Finally, federal courts cannot invoke their
acknowledged inherent power to award costs or
attorney’s fees, against those properly resisting the
mistaken exercise of subject matter jurisdiction, when
Article III competence to decide a federal case or
controversy never existed at any stage of the proceedings.
"The inherent powers of federal courts are those which
‘are necessary to the exercise of all others’." Roadway
Express, Inc. v. Piper, 447 U.S. 752, 764 (1980), citing
United States v. Hudson, 7 Cranch 32, 34 (1812).
Inherent power under Article III "is not a broad reservoir
. . ., ready at an imperial hand, but a limited source; an
implied power squeezed from the need to make the court
function."20 Inherent and constitutional powers are
correlative. If the Constitution and Congress never
authorized a federal court to act in the first place, there
can be no conceivable constitutional necessity to award a
money judgment against litigants properly contesting
federal subject matter jurisdiction, in favor of attorneys
and litigants wrongly invoking it, to compensate them for
time and expense devoted to the merits of a controversy
they were responsible for wrongly inflicting on the federal
courts. When subject matter jurisdiction is lacking, and
Congress has not authorized recovery of fees or costs, the
appropriate course is found, not in Rule 11 or in some
confected "inherent power," but in Rule 12(h)(3)21 or in
20 Nasco, Inc. v. Calcasieu Television and Radio, Inc., supra,
n. 11, 894 F.2d at 702, citing Roadway Express v. Piper, Link v.
Wabash R. Co., and United States v. Hudson.
21 "Whenever it appears by suggestion of the parties or
otherwise that the court lacks jurisdiction of the subject
matter, the court shall dismiss the action."
16
28 U.S.C. § 1447(c).22
Because a federal court always has jurisdiction to
determine its own jurisdiction, United States v. United
Mine Workers, 330 U.S. 258 (1947), lower federal courts
have held that the filing of a legally or factually baseless
complaint by a plaintiff, or petition for removal by a
defendant, even one so frivolous that it fails to invoke
federal subject matter jurisdiction, nevertheless is
sanctionable under Rule 11 as an interference with the
M
court’s "jurisdiction to determine jurisdiction, because of
the unwarranted imposition on judicial time and
resources that results from such a filing.23 Moreover,
22 "If at any time before final judgment it appears that
the district court lacks subject matter jurisdiction, the case
shall be remanded."
23 See, e.g., Szabo Food Service, Inc. v. Canteen Corp., 823
F.2d 1073, 1076-79 (7 Cir. 1987) ("silly" complaint or other
improper imposition on federal court’s time and resources
sanctionable as interference with "jurisdiction to determine
jurisdiction”); Orange Production Credit Assn. v. Frontline
Ventures Ltd., 792 F.2d 797, 800 (9 Cir. 1986) (filing of
complaint "completely [lacking] a factual foundation for
subject matter jurisdiction" sanctionable under Rule 11);
Muthig v. Brant Point Nantucket, Inc., 838 F.2d 600, 603 (1 Cir.
1988) (groundless complaint, followed by Rule 41(a)
dismissal, sanctionable as misconduct committed during
consideration of jurisdiction); News-Texan, Inc. v. City o f
Garland, 814 F,2d 216 (5 Cir. 1987) ((sanctions sought against
defendant wrongfully removing case from state court));
Johnson v. Smith, 630 F. Supp. 1 (N.D. Cal. 1986) (same); cf.
Trohimovich v. Commissioner, 776 F.2d 873, 875 (9 Cir. 1985)
(appeal dismissed for lack of jurisdiction; appellant
sanctioned for abusive tactics).
Wojan v. General Motors Corp., 851 F.2d 969 (7 Cir. 1988),
a pseudo-diversity case cited in the panel opinion, involved
17
even in the absence of a congressional grant of subject
matter jurisdiction, binding federal court orders may be
issued "as necessary for the court to determine and rule
upon its own jurisdiction, including jurisdiction over the
subject matter."24 The same principle permits Congress,
consistently with Article III, to authorize by statute the
award of costs and attorney’s fees against those wrongly
invoking federal jurisdiction.25
But entering a money judgment in favor of a party
that wrongly invoked federal subject matter jurisdiction,
against a party who properly contested it, and who did
nothing to impede or obstruct the determination that it
was lacking, is a fundamentally different matter.
Recognizing an unprecedented "inherent" constitutional
power to award attorney’s fees in those circumstances
makes no more sense than would a statute authorizing
the recovery of attorney’s fees and costs against plaintiffs
potential obstruction of jurisdiction to determine
jurisdiction because the defendant’s counsel waited more
than five years to apprise the district court that there was
no diversity. ”[W]e are stunned that GM’s counsel
neglected to move for dismissal within a few weeks of the
filing, much less waiting five and a half years." 851 F.2d at
975. It took Willy’s counsel 18 days, over New Year’s, to
move for remand [R. 7: 1049].
24 United States Catholic Conference v. Abortion Rights
Mobilization, Inc., 487 U.S. 72, 79 (1988), reiterating the Mine
Workers doctrine.
25 See, e.g., 28 U.S.C. § 1919 (authorizing "payment of
just costs" in any action or suit dismissed for lack of
jurisdiction); 28 U.S.C. § 1447(c) (authorizing attorney’s
fees and costs for wrongful removal). Of course, Congress
has never authorized the recovery of fees or costs against
parties who prevail on jurisdictional grounds.
18
who succeed in having cases remanded to state court for
lack of Article III jurisdiction, in favor o f defendants
wrongly removing them. Like the Fifth Circuit’s holding
in this case, such bizarre legislation would not merely be
unwise as a matter of federal judicial policy. It would
violate Article III of the Constitution as well.
The Eleventh Circuit’s decision in Davis v. Cluet,
Peabody & Co., 667 F.2d 1371 (11 Cir. 1982) stands
squarely in conflict with the Fifth Circuit on this point.
The plaintiffs in Davis, like Willy in this case, had sued
their former employer in a state court although, unlike
Willy, they had alleged deprivation of a federal right.
Like Coastal in this case, the employer wrongly removed
the case to the federal court, asserting federal question
removal jurisdiction. As in this case, the federal district
court erroneously concluded it had jurisdiction,
mistakenly denied the plaintiffs’ motion to remand the
case to the state court, and then dismissed the action on
its merits, as a sanction for "plaintiffs’ repeated refusal to
follow federal and local procedural rules and court
orders" with respect to the merits of the controversy. 667
F.2d at 1372.26
Finding no subject matter jurisdiction because the
federal question presented was insubstantial, the
Eleventh Circuit first considered whether "jurisdiction to
determine jurisdiction" warranted affirming the district
court’s sanction of dismissal on the merits, rather than
directing the remand of the case to the state court: 26
26 Davis was decided before the 1983 amendment of
Rule 11.
19
At oral argument the issue was raised as
to whether we might uphold the district
court’s dismissal of the case for plaintiffs’
misfeasance, despite the absence of subject
matter jurisdiction, because the court’s action
was not actually on the merits. Because the
district court has authority to consider the case
pending a determination that it lacked subject
matter jurisdiction and because while it is
considering the case the parties must comply
with procedural rules and court orders, one
might argue that a court may dismiss a suit for
a party’s misfeasance though it ultimately
determines that subject matter jurisdiction
does not exist. 667 F.2d at 1373.
Correctly recognizing the Article III implications of
its decision, Judge Frank Johnson’s opinion for the court
rejected that argument:
[Ejven assuming that the court only
dismissed for plaintiffs’ misfeasance, we could
not uphold such action in the absence of
subject matter jurisdiction. The major portion
of plaintiffs’ actions that served as the basis
for the court’s order occurred after the motion
to remand was denied and most of the actions
were not connected with the dispute over subject
matter jurisdiction. We do not find it
appropriate here for the district court to have
imposed the sanction of dismissal, thus
disposing of the proceeding, even though it
had no authority to rule on the merits in the
first place. Such an act would ‘work a
wrongful extension of federal jurisdiction and
give the district courts power the Congress has
denied them.’ American Fire & Cas. Co. v.
Finn, 341 U.S. 6, 18, 71 S.Ct. 534, 542, 95
L.Ed. 702 (1951) (reversing entry of judgment
after removal by court without jurisdiction).
667 F.2d at 1373 (emphasis added; footnote
omitted).
20
The Davis court emphasized the circumstance,
stressed by Willy in the courts below, "that we are not
dealing here with the misfeasance of a party solely
involving procedures connected with a court’s
determination of whether it has subject matter
jurisdiction. The federal courts have jurisdiction to
determine whether they have jurisdiction to hear a case
. . ., and therefore have authority to sanction parties for
misfeasance connected with the determination of whether
jurisdiction exists." 667 F.2d at 1374 n. 8.27 Willy was
not sanctioned for interfering with the district court’s
determination of its jurisdiction. He was sanctioned for
his purported interference with an unconstitutional
exercise of federal judicial power over the merits of his
case, against which he repeatedly protested from the very
beginning to the bitter end.
The Fifth Circuit’s decision in this case stands
squarely in conflict with this Court’s decisions, and with
the Eleventh Circuit’s holding in Davis, on this very
elementary but profoundly important point of federal
constitutional law. The Court should grant certiorari to
resolve the conflict. Supreme Court Rule 10.1(a).
2. This case presents substantial, recurring
questions involving the interpretation and application of
Rule 11 that have not been, but should be, resolved by
the Court.
Rule 11 by its terms authorizes "an appropriate
sanction," including an award of "reasonable" expenses
and attorney’s fees "incurred because o f a violation of
27 See, e.g., United States v. Shipp, 203 U.S. 563, 573
(1906), cited in United States Catholic Conference v. Abortion
Rights Mobilization, Inc., 487 U.S. 72, 79 (1988).
21
the Rule, against the person signing an offending
pleading, motion, or other paper, a represented party, or
both. After seven years of experience, lower federal
court opinions provide little definitive guidance as to
when, if at all, it is appropriate and reasonable to award
attorney’s fees as a Rule 11 sanction against a
represented party, for supposed violations attributable
exclusively to the conduct of counsel.28 The award of
attorney’s fees against Willy for the purported
misfeasance of his lawyer thus presents important
questions of federal law that have not been, but should
be, decided by this Court. Supreme Rule 10.1(c).
(i) Should Rule 11 be used to reward a party’s
wrongful invocation of federal subject matter jurisdiction?
The court of appeals thought that ”[t]o effect the goals of
deterrence and punishment, Rule 11 must embrace the
conduct of those who resist, as well as those who invoke,
federal jurisdiction." 915 F.2d at 967 [A-52]. Surely,
however, the policies underlying the Rule neither require
nor permit a federal court to reward lawyers and litigants
28 Compare the sanctions order and summary
appellate review in this case with, e.g., decisions of the
Second, Tenth, and Eleventh Circuits, holding that "the
sanctioning of a party requires specific findings that the
party was aware of the wrongdoing" and must take into
account "relative fault." White v. General Motors Corp., Inc.,
908 F.2d 675, 685-86 (10 Cir. 1990); Calloway v. Marvel
Entertainment Group, 854 F.2d 1452, 1474-75 (2 Cir. 1988), rev’d
in part on other grounds sub nom. Pavelic & LeFlore v. Marvel
Entertainment Group, 493 U.S. __ , 110 S.Ct. 456, 107 L.Ed.2d
438 (1989); Donaldson v. Clark, 819 F.2d 1551, 1560 (11 Cir.
1987) (en banc); see also Eastway Construction Corp. v. City o f
New York, 637 F. Supp 558, 569-70 (E.D.N.Y. 1986), mod. on
appeal, 821 F.2d 121 (2 Cir. 1987), cert, denied 484 U.S. 918
(1987).
22
who wrongly file a jurisdictionally defective complaint or
removal petition, by compensating them for fees and
expenses they incur with respect to the merits of a case
they have wrongly inflicted on the federal judiciary.
Such an approach is inconsistent with the Rule’s
primary purpose: to deter improper filings. "It is now
clear that the central purpose of Rule 11 is to deter
baseless filings in District Court and thus . . . streamline
the administration and procedure of the federal courts."
Cooter & Cell v, Hartmarx Corp., 496 U .S .___, ___, 110
S.Ct. 2447, 2454, 110 L.Ed.2d 359, 374 (1990). The
"baseless filing" that initiated this case was Coastal’s own
removal petition.
Rewarding lawyers and litigants who improperly
invoke federal jurisdiction is essentially irrational.
Although Coastal could not have prevailed in this
litigation, its three lawyers were awarded more than
$19,000.00 in attorney’s fees for time devoted to
preparing documents, conducting conferences, and
attending hearings on the merits of a case that should
never have been before the federal courts at all. Rather
than deterring the filing of legally or factually baseless
complaints and removal petitions, the Fifth Circuit’s
inversion of Rule 11 positively encourages them.
Moreover, Coastal’s attorney’s fees, in every
meaningful sense, were incurred because of the
company’s improper imposition on the time and
resources of the federal courts, as the result of the
wrongful filing of its removal petition. Coastal’s
improvident removal of this case delayed its final
disposition for years and inflicted significant harm on the
federal system, on the state court, and on Willy himself.
23
The consequences were functionally indistinguishable
from those resulting from the wrongful issuance of a
federal injunction against state court proceedings.29
More than five years after they were properly asserted in
a state court, Willy’s state claims still have not been
resolved or even brought to trial.
(ii) Does Rule 11 permit an award of attorney’s fees
that effectively bankrupts a plaintiff before his claims are
decided? Stressing the Rule’s requirement that a sanction
must be "appropriate," the Fifth Circuit said in Thomas v.
Capital Security Services, Inc., 836 F.2d 866, 878 (5 Cir.
1988) (en banc), that "the sanction imposed should be
the least severe sanction adequate to the purpose of Rule
11," and should take into account "the conduct and
resources of the party to be sanctioned." 836 F.2d at
881. The district court and the court of appeals ignored
those principles in this case. Faced with the uncontested
fact that Young’s pleadings prompted the sanctions, and
that the amount of the fee award approached the value
of all of Willy’s assets, the Fifth Circuit treated those
circumstances as irrelevant and did not mention them in
its opinion.
In view of Coastal’s improvident removal, and the
resulting delay in the final disposition of Willy’s state
claims, the conduct and resources of the defendant are no
less relevant to an informed determination of whether
monetary sanctions, imposed before the case is over, are
appropriate and reasonable in the sense demanded by
Rule 11. Coastal’s assets are approximately 400,000
times greater than Willy’s. When a multi-billion dollar
corporation’s wrongful invocation of federal jurisdiction
29 See 28 U.S.C. § 2283 (the Anti-Injunction Act).
24
inflicts significant and unwarranted financial burdens and
years of delay on a plaintiff struggling to bring his claims
to trial in the proper state court, there is no persuasive
justification for gratuitously stacking the deck against him
all over again.
(iii) Is a plaintiff strictly, vicariously liable for
attorney’s fees awarded because of his lawyer’s supposed
Rule 11 violations? Because Willy "voluntarily chose
[Young] as his representative in the action," it might be
argued that "he cannot now avoid the consequences of
the acts or omissions of this freely selected agent. Any
other notion would be wholly inconsistent with our system
of representative litigation, in which each party is deemed
bound by the acts of his lawyer-agent . . . " Link v.
Wabash Railroad Co., 370 U.S. 626, 633-34 (1962). The
district court and court of appeals apparently took that
view of the case, metaphorically attributing Young’s
supposed misdeeds to Willy personally, as though he had
actually engaged in the conduct himself, without
bothering to disclose that the behavior said to have been
that of "plaintiff" or "Willy" actually was the conduct of
his counsel.
Such an essentially fictional approach is
fundamentally at odds with the Court’s decision in Pavelic
& LeFlore v. Marvel Entertainment Group, 493 U.S. ___,
110 S.Ct. 456, 107 L.Ed.2d 438 (1989), establishing that
Rule 11 must be read literally to prescribe a standard of
personal accountability, not strict, vicarious liability. In
other contexts, it may be appropriate to attribute a
lawyer’s procedural defaults to his client, on a theory of
agency, because important governmental interests of
judicial economy, finality, and the orderly administration
of justice could not otherwise be served. See, e.g., Irwin
25
v. Veterans Administration, __ U.S. ___[59 U.S.L.W.
4021, 4022 December 3, 1990] (client bound by lawyer’s
receipt of EEOC notice of right to sue); Wainwright v.
Sykes, 433 U.S. 72 (1977) (client bound by lawyer’s
failure to object at trial); Link v. Wabash Railroad Co.,
370 U.S. 626 (1962) (client bound by dismissal resulting
from lawyer’s failure to appear before court). But
holding a client strictly liable for attorney’s fees
supposedly generated by the objectively unreasonable
behavior of his lawyer, when he was not personally
involved in it, and when he may not even have been
aware of it, does nothing to promote the Rule’s
announced objectives of deterrence and punishment.
Automatically awarding attorney’s fees as a Rule 11
sanction against clients does not deter or punish
misbehavior by their lawyers.
Most importantly, Rule 11 focuses on the signing and
filing of pleadings and other papers, rather than on an
attorney’s behavior generally.30 If the client has not
ratified an offending pleading or other document by
signing it, he cannot be held vicariously liable under Rule
11. Adopting such a principle would be contrary to the
Rule’s policy of imposing strict liability and personal
accountability only on the signer of a pleading, motion,
or other paper.
The Court presently is considering whether, and in
what circumstances, Rule l l ’s standard of "objective
reasonableness" is applicable to litigants as well as to
30 Rule 11 "refers repeatedly to the signing of papers;
its central feature is the certification established by the
signature." Oliveri v. Thompson, 803 F.2d 1265, 1267 (2 Cir.
1986), cert, denied sub nom. County o f Suffolk v. Grasick, 480
U.S. 918 (1987).
26
their attorneys. Business Guides, Inc. v. Chromatic
Communications Enterprises, Inc., 892 F.2d 802 (9 Cir.
1989), cert, granted __ U.S. ___, 110 S.Ct. 3235, 111
L.Ed.2d 746 (1990). In Business Guides, however, the
litigant itself purportedly had violated Rule 11 on at least
two occasions "by failing to conduct a reasonable factual
inquiry" with respect to papers its employees had
prepared and signed for filing in the case. 892 F.2d at
812.
In this case, by contrast, virtually all of the attorney’s
fees awarded against Willy for supposed Rule 11
violations were attributable to the pleadings and other
behavior of his lawyer. Willy was held liable, not for
what he did, but for what his counsel did on his behalf.
The questions raised by this case are substantial,
recurring, and deserving of review by this Court. A near-
impecunious plaintiff, who never wanted to be in a
federal court in the first place, was illegally abducted
there from a state court, kicking and screaming, by an $8
billion corporate defendant that wrongly held him
hostage for more than three years. Free at last, he now
has been ordered to pay a $19,307.00 ransom that
effectively bankrupts him after his kidnappers, claiming
they were harmed, "nail" him31 for supposed misconduct,
attributed to him personally by the courts below, but
actually committed by his lawyer. That bizarre,
unprecedented, unconscionable result is irreconcilable
with Article III of the Constitution, this Court’s decisions,
and the holdings of other courts of appeals. It cannot
conceivably be "appropriate" or "reasonable" in any
sense contemplated by Federal Rule 11.
31 This was the district court’s expression [R. 10: 21].
27
CONCLUSION
The petition for certiorari should be granted.
Respectfully submitted,
Michael A. Maness
Counsel of Record
for Petitioner
1900 North Loop West
Suite 500
Houston, Texas 7701S
(713) 680-9922
A -l
Donald J. WILLY, Plaintiff,
v.
The COASTAL CORPORATION, Coastal States
Management Company, Inc., James R. Paul, George L.
Brundrett, Charles F. Jones, William A. Bunker, and
E.C. (Bud) Simpson, Defendants.
Civ. A. No. H-85-6947.
United States District Court,
S.D. Texas,
Houston Division.
Nov. 12, 1986.
MEMORANDUM AND ORDER
OF DISMISSAL
HITTNER, District Judge.
Pending before the Court is Defendants’ Motion to
Dismiss (as to Plaintiffs alleged First Cause of Action for
wrongful termination). Having considered the pleadings
and the law applicable thereto, this Court is of the
opinion that Defendants’ Motion to Dismiss should be,
and hereby is, GRANTED. It is therefore
ORDERED that Plaintiff’s First Cause of Action,
alleging wrongful termination, be DISMISSED pursuant
to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon
which relief can be granted. Furthermore, it is
ORDERED that Plaintiff’s remaining pendant claims
(Plaintiff’s Second, Third, Fourth, and Fifth Causes of
Action) be DISMISSED.
A-2
Plaintiff Willy complains via five alleged causes of
action of his termination from employment as "in-house"
counsel with Defendant Coastal Corporation. Willy
worked for Coastal Corporation for over three years
before he was fired on October 1, 1984. His legal advice
concerned the company’s compliance with various federal
and state environmental laws.
Plaintiffs first cause of action alleges wrongful
termination from his employment as an "in-house"
attorney for the Defendant corporation. Plaintiff
contends that he was fired because he "required the
company to comply with the environmental laws. They
objected to this requirement. I left the employment of
the company involuntarily." Plaintiffs Petition for
Removal, exhibit 1, Plaintiffs Original Petition, page 10.
The Plaintiff does not allege, however, that he reported
these alleged violations by his employer to any Federal
Authority.1 Nonetheless, this Court will not decide 1
1 Plaintiff bases his allegations of illegal acts upon
various federal statutes: the Comprehensive Envi
ronmental Response, Compensation, and Liability Act of
1980, 42 U.S.C. § 9601 et seq.; Safe Drinking Water Act, 42
U.S.C. § 201, 300f et seq.; the Clean Air Act, 42 U.S.C. § 7401
et seq.; and the Securities Act of 1933, 15 U.S.C. § 77a et seq.
Many of these Acts provide statutory safeguards for
retaliatory discharge, a protection the Plaintiff has sought
via the United States Department of Labor in Case No. 85-
CAA-1. The resolution of said complaint is not under
review by this Court; however, this Court acknowledges the
precedential case of Brown & Root, Inc. v. Donovan, 747 F.2d
1029 (5th Cir. 1984), in which the Fifth Circuit held that the
retaliatory discharge protection of the Energy
Reorganization Act does not protect internal activities such
as disagreements over the conformance of reports with
federal requirements. Absent contact with a competent
organ of the government, the employee does not make out
A-3
whether the Defendant company ordered the plaintiff to
commit an illegal act. The basis for dismissal rests upon
another rationale.
The well-established standard to be used for
dismissal for failure to state a claim upon which relief can
be granted is "that a complaint should not be dismissed
for failure to state a claim unless it appears beyond doubt
that the Plaintiff can prove no set of facts in support of
his claim which would entitle him to relief." Conley v.
Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2
L.Ed.2d 80 (1957). The purpose of the Rule 12(b)(6)
motion to dismiss is to test the law of the alleged claim,
and not the facts allegedly supporting the claim. 5 C.
WRIGHT & A. MILLER, FEDERAL PRACTICE AND
PROCEDURE § 1356 (1969 & Supp.1986). The law at
issue in Plaintiffs claim is the law of wrongful
termination as it is developing in the State of Texas.2
Plaintiff has asked this Court to expand the Texas
exception to employment-at-will to an attorney who
believes he has been asked to violate the law. Indeed,
the narrow public policy exception to employment-at-will
adopted in Hauck encourages law enforcement.3 An
a claim intended to protect a "whistle blower." Brown &
Root, Inc., at 1034-36.
2 The Texas Supreme Court has only recently
acknowledged the tort of wrongful termination but the
Court did so for a very limited exception to the common
law doctrine of employment-at-will. The public policy
exception adopted is very narrow and "governs only the
discharge of an employee for the sole reason that the
employee refused to perform an illegal act." Hauck v. Sabine
Pilot Services, Inc., 687 S.W.2d 733, 735 (Tex.1985).
3 Hauck, 687 S.W.2d at 735.
A-4
attorney, as an officer of the Court, often is placed in the
dilemma of serving either his client’s wishes or the law’s
demands. As legal practitioners are no doubt aware, the
line is often not clear. Under these circumstances,
however, the Texas Canons of Ethics and the Disciplinary
Rules are the standard for an attorney’s professional
conduct. If an attorney believes that his client is intent
upon pursuing an illegal act, the attorney’s option is to
voluntarily withdraw from employment. DR 2-
110(C)(1)(c). When an attorney elects not to withdraw
and not to follow the client’s wishes, he should not be
surprised that his client no longer desires his services.
Once the client does elect to terminate the relationship,
however, the attorney is required mandatorily to
withdraw from any further representation of that client.
DR 2-110(B)(4). The standard is the same for an in-
house attorney.4
There is a well-established standard for professional
conduct when an attorney finds himself in the situation as
described by the plaintiff. Therefore, this Court does not
believe that it is necessary or proper5 to extend the
Hauck public policy exception and does not find a cause
of action for termination of an attorney’s services to be
within the exception to employment-at-will adopted by
4 See, e.g., of application of the same standards of
conduct to "in-house" attorneys, Upjohn Co. v. United States,
449 U.S. 383, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981), and Doe v.
A. Corp., 709 F.2d 1043 (5th Cir.1983).
5 Prior to the Texas Supreme Court’s decision in Hauck,
the Fifth Circuit for the Federal Courts had been asked but
declined to delve into making exceptions to the
employment at will doctrine as it existed in the common
law of Texas. See, e.g., Claus v. Gyorkey, 674 F.2d 427, 433
(5th Cir.1982).
A-5
the Texas Supreme Court.
Additionally, this Court declines to maintain pendant
jurisdiction over the remaining state law claims which
allege breach of ethical duty, invasion of privacy,
intentional infliction of emotional distress, blacklisting,6
conspiracy, and intentional interference with business and
contracts. The long-standing case authority on pendant
jurisdiction is United Mine Workers v. Gibbs, 383 U.S.
715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). The general
rule of Gibbs is to dismiss state claims, if the federal
claims are dismissed before trial. Gibbs at 726, 86 S.Ct.
at 1139, 16 L.Ed.2d at 228. In the exercise of its
discretion in this area, the Court has considered the three
prerequisites of Gibbs,7 and finds there to have been little
substance to the alleged Federal claim although sufficient
to confer subject matter jurisdiction.8 This case was
originally filed in state court and removed by the
Defendants based upon the assertion that the Plaintiffs
6 Tex.Rev.Civ.Stat.Ann. arts. 5196c and 5196d (Vernon
Supp.1986).
7 In Gibbs, the Supreme Court delineated three
prerequisites to the exercise of pendant jurisdiction. First,
”[t]he federal claim must have substance sufficient to
confer subject matter jurisdiction on the court." Second,
”[t]he state and federal claims must derive from a common
nucleus of operative facts.” Finally, the "plaintiff’s claims
are such that he would ordinarily be expected to try them
all in one judicial proceeding . . . " Gibbs at 725, 86 S.Ct. at
1138, 16 L.Ed.2d at 227. Also see, Ingram Corp. v. J. Ray
McDermott & Co., Inc., 698 F.2d 1295, 1317-1320 (5th Cir.1983).
8 The Plaintiff did object to the removal of this case
from state court. However, another Judge of this Court in
an order dated April 11, 1986, considered and denied that
motion. This Court declines to look behind that order.
A-6
first cause of action would require, as an essential
element of the action, construction or application of a
federal statute. Franchise Tax Board o f California v.
Construction Laborers Vacation Trust for Southern
California, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420
(1983); Gully v. First National Bank, 299 U.S. 109, 57
S.Ct. 96, 81 L.Ed. 70 (1936). In Plaintiffs first cause of
action, unlawful conduct is an essential element. Hauck
at 735. The unlawful conduct in this case requires
interpretation of several Federal statutes.9 Therefore,
dismissal of the federal claim, which is extrapolated from
a state cause of action, makes dismissal of the remaining
pendant claims appropriate.
(Caption Omitted)
ORDER FOR SANCTIONS
Pending before this Court is Defendants’ Motion for
Sanctions. Having considered the pleadings with the
reams of allegedly relevant supplemental material, the
oral statements made on the record at hearings on
August 18, 1986, and September 15, 1986, the
Defendants’ affidavits for attorneys fees, the Plaintiff’s
(Pro Se) Response to Defendants Affidavits in Support
of Sanction, and the court rules and law applicable
thereto, this Court is of the opinion that Defendants’
Motion for Sanctions is well advised.
Under Fed. R. Civ. P. 11, an attorney’s signature on
a pleading certifies that the attorney has (1) read the
pleadings and other papers submitted, (2) made a
reasonable inquiry of the Plaintiff’s Complaint to
determine if it is well grounded in fact and warranted by
9 Supra, note 2.
A-7
existing law or can make a good faith argument for
extension of existing law, and (3) determined that the
Complaint is not made in order to harass.
Plaintiff filed this suit in an apparent attempt to
establish new law, at least as to one cause of action.
Under such circumstances, the Court would expect
Plaintiff, an attorney himself, and his counsel, to shed
what light they could upon the issue in clear focus.
Among the thousands of pages of pleadings and
supplemental materials, Plaintiff did not illuminate the
issue with any clarity, but rather chose to create a blur of
absolute confusion. When the Plaintiffs attorney signed
his 110-page brief in support of a Motion for Partial
Summary Judgment, he made the Rule 11 certifications
to this Court. Furthermore, Plaintiff asked and received
permission of this Court to file what Plaintiffs attorney
certifies to be appropriate and competent summary
judgment evidence. What Plaintiffs attorney filed,
however, was a 1,200-page, unindexed, unnumbered,
foot-high pile of material which this Court is unable,
after examination, to fathom and which is determined to
be a conscious and wanton affront to the judicial process,
this Court, and opposing counsel. This Court finds the
submission and the Plaintiffs accompanying affidavit to
this Court to be irresponsible at a minimum and at worst
intentionally harassing. The material is generally
incompetent hearsay, supported only by the Plaintiffs
own conclusions and averments. See Galindo v. Precision
Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985).
Unfortunately, the transgressions do not stop here.
Plaintiffs response(s) to Defendants’ Motion to Dismiss
are also careless and confusing. For example, at page 4
of Defendants’ Response to Plaintiff’s Briefs Regarding
A-8
Defendants’ Motion to Dismiss, the Plaintiff relies upon
Rule 503 of the Federal Rules of Evidence. At the
August 18, 1986, hearing, this Court asked Plaintiff to
find Federal Rule of Evidence 503. Plaintiff could not.
At the September 15, 1986, hearing, Plaintiff
acknowledged that Rule 503 was never adopted by the
United States Supreme Court. This is but an example of
Plaintiffs and Plaintiffs counsel’s careless pleading and a
strong indication of intentional harassment.
The Court has spent enough time on this case to be
sorely concerned with the actions of the Plaintiff and
Plaintiffs counsel. The conduct of this suit has been
inexcusable and can hardly be seen as a good faith
attempt at making new law. It is therefore
ORDERED that Defendants’ Motion for Sanctions
be GRANTED. Plaintiff and Plaintiff’s counsel, jointly
and severally, are to pay $22,625 to the Defendants for
the purpose of compensating the Defendants for the
attorneys fees incurred in responding to Plaintiff’s
improper pleadings; in particular, Plaintiff’s Motion for
Partial Summary Judgment and Responses to
Defendants’ Motion to Dismiss. The $22,625 will be
tendered to Defendants’ attorney-in-charge on or before
December 1, 1986. Proof of payment will be filed with
the Court on or before December 1, 1986.
SIGNED at Houston, Texas, on this 12th day of
November, 1986.
DAVID HITTNER
United States District Judge
A-9
Donald J. WILLY, Plaintiff-Appellant,
and
George A. Young,
Respondent-Appellant,
v.
The COASTAL CORP., Coastal States Management
Co., Inc., et al.,
Defendants-Appellees.
No. 86-2992.
United States Court of Appeals,
Fifth Circuit.
Sept. 29, 1988.
Appeals from the United States District Court for
the Southern District of Texas.
Before GARWOOD and JONES, Circuit Judges,
and HUGHES,* District Judge.
GARWOOD, Circuit Judge:
Plaintiff-appellant Donald J. Willy (Willy) brought
this action in the Texas courts seeking primarily to allege
a wrongful discharge claim under Sabine Pilot Service,
Inc. v. Hauck, 687 S.W.2d 733, 735 (Tex. 1985), or some
extension thereof. He also asserted other related claims
(such as defamation and blacklisting) under state law.
Defendants-appellees removed the case to federal court
on the basis of original federal question jurisdiction under
District Judge of the Southern District of Texas,
sitting by designation.
A-10
28 U.S.C. §§ 1331, 1441, arguing that federal issues
pleaded as a part of Willy’s state wrongful discharge
claim made this a federal case. The district court agreed
and subsequently dismissed Willy’s wrongful discharge
claim for failure to state a claim upon which relief can be
granted, Fed.R.Civ.P. 12(b)(6), treated Willy’s
remaining claims as pendent state claims and dismissed
them under United Mine Workers v. Gibbs, 383 U.S. 715,
86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966), and ordered
Willy and his attorney to pay $22,625 in attorneys’ fees to
defendants as a sanction pursuant to Fed.R.Civ.P. 11.
We find that the district court lacked subject matter
jurisdiction over the case, and that the amount of the
Rule 11 sanctions is not adequately supported by the
record and should be reconsidered in light of our opinion
herein and the principles announced in Thomas v. Capital
Security Services, Inc., 836 F.2d 866 (5th Cir.1988).
Accordingly, we reverse and remand.
Facts and Proceedings Below
Willy is a lawyer who was employed as in-house
counsel from May 1981 until he was fired in October
1984 by defendant-appellee Coastal States Management
Co., a wholly-owned subsidiary of defendant-appellee
The Coastal Corporation. These entities (collectively,
Coastal), are involved in the oil and gas industry through
other subsidiaries of The Coastal Corporation. Willy
claims that he was fired because he insisted that Coastal
comply with various state and federal environmental and
securities laws and because he would not act in violation
of those laws.
Within a month of his dismissal, Willy filed an
administrative complaint against Coastal with the United
A -ll
States Department of Labor pursuant to 29 C.F.R. pt. 24
(1984). He argued that by firing him Coastal had
violated the "whistleblower" provisions of the
Comprehensive Environmental Response, Compen
sation, and Liability Act, 42 U.S.C. § 9610; the Clean Air
Act, 42 U.S.C. § 7622; the Solid Waste Disposal Act, 42
U.S.C. § 6971; the Water Pollution Control Act, 33
U.S.C. § 1367; the Safe Drinking Water Act, 42 U.S.C. §
300j-9(i); and the Toxic Substances Control Act, 15
U.S.C. § 2622. The Department of Labor investigated
and agreed. The Administrative Law Judge (A U ) to
whom Willy’s case was assigned, however, found that
Willy had engaged in only intra-corporate activity, not
communications with a governmental agency, and
recommended dismissal of Willy’s claim under Brown &
Root Inc. v. Donovan, 747 F.2d 1029 (5th Cir.1984) (the
"whistleblower" provision of the Energy Reorganization
Act, 42 U.S.C. § 5851(a)(3), does not protect an
employee from filing an intra-corporate quality control
report). On June 4, 1987, the Secretary of Labor
(Secretary) rejected the ALJ’s recommendation and
remanded, finding from the record that Willy had been in
contact with governmental agencies, presumably federal,
before he was fired. The Secretary further "held" that
Brown & Root was incorrectly decided and that this Court
should be given an opportunity to reconsider its decision
in light of Kansas Gas & Electric Co. v. Brock, 780 F.2d
1505 (10th Cir.1985), cert, denied, 478 U.S. 1011, 106
S.Ct. 3311, 92 L.Ed.2d 724 (1986), and Mackowiak v.
University Nuclear Systems, 735 F.2d 1159 (9th Cir.1984).
The present status of Willy’s administrative action is not
reflected by the record or briefs.
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On November 22, 1985, after the ALJ’s
recommendation of dismissal but before remand by the
Secretary, Willy filed this action in Texas state court,
naming as defendants Coastal and several individuals
associated with Coastal. He asserted claims for wrongful
discharge, breach of the codes of ethics of the American
and Texas bar associations, invasion of privacy,
defamation, blacklisting, and interference with
contractual and business relationships. Although Willy’s
complaint does not mention case law, he obviously
attempted to plead his wrongful discharge action under
Sabine Pilot, which established a Texas common law
wrongful discharge action for at-will employees who have
been fired for refusing to perform an illegal act, or some
extension thereof. Willy alleged that he sought to cause
his employer to comply with, and that he refused to
engage in activity that assertedly would violate, state and
federal environmental and securities laws, specifically
naming the Clean Water Act (33 U.S.C. §§ 1251, etseq.),
the Resource Conservation and Recovery Act (42 U.S.C.
§§ 6901, et seq.), the Clean Air Act (42 U.S.C. §§ 7401,
et seq.), the Safe Drinking Water Act (42 U.S.C. §§ 300f,
et seq.), and the Solid Waste Disposal Act (42 U.S.C. §§
6901, et seq.).1
On December 30, 1985, defendants removed the
case to the United States District Court for the Southern
District of Texas pursuant to 28 U.S.C. § 1441 on the 1
1 In his state court pleading, Willy alleged only the
names of these statutes, and did not otherwise state in his
pleading any citation for the statutes he named; we have
furnished the citations appearing in parentheses in the text.
We, of course, imply no pleading requirement concerning
case law or statutory citations.
A-13
basis of original federal question jurisdiction under 28
U.S.C. § 1331. They contended that federal question
jurisdiction appears on the face of Willy’s complaint
because the federal statutes that Willy claimed he was
fired for refusing to violate formed a necessary element
of his Sabine Pilot-type claim. The district court agreed
and denied Willy’s initial motion to remand. Willy then
moved for partial summary judgment and defendants
moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and
for sanctions pursuant to Fed.R.Civ.P. 11. Before the
district court ruled on these motions, Willy twice more
unsuccessfully moved for remand. On September 17,
1986, the district court denied Willy’s motion for partial
summary judgment and on November 12, 1986, dismissed
Willy’s Sabine Pilot-type action pursuant to Rule
12(b)(6), dismissed Willy’s remaining pendent state law
claims under Gibbs, 647 F.Supp. 116, and imposed Rule
11 sanctions in the amount of $22,625 jointly and
severally against Willy and his attorney.2 This appeal
followed.
Discussion
Because the district court dismissed Willy’s complaint
for failure to state a claim pursuant to Rule 12(b)(6), see
Voter Information Project, Inc. v. City of Baton Rouge, 612
F.2d 208, 210 (5th Cir.1980), and because we look to the
well-pleaded complaint to determine subject matter
jurisdiction, see, eg., Franchise Tax Board v. Construction
Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841,
2846, 77 L.Ed.2d 420 (1983), we accept as true for the
2 After entering judgment on these orders, the district
court entered a modified judgment, Fed.R.Civ.P. 60(b), that
dismissed counterclaims pleaded by defendants.
A-14
purposes of this appeal Willy’s factual allegations that are
relevant to subject matter jurisdiction, see Williamson v.
Tucker, 645 F.2d 404, 412 (5th Cir.), cert, denied, 454
U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1982). We
note, however, that Willy’s factual allegations are often
imprecise. For instance, he discusses an episode where
he sought to prevent changes in a report, but does not
indicate whether the report was for purely intracorporate
purposes. Similarly, a contact with a governmental
agency is hinted at by a vague discussion of "actions" he
took that "were the first legal step" in reporting to the
Securities and Exchange Commission Coastal’s
noncompliance with environmental laws. Because we
hold that the district court did not have subject matter
jurisdiction over Willy’s action under any reasonable
construction of his state court pleading, we find it
unnecessary to resolve these ambiguities. Thus, for
purposes of this appeal, we will assume, arguendo, that
Willy alleges that he was fired because he complied with
and/or refused to violate federal and state environmental
and federal securities laws and that his activities in this
connection were not wholly intracorporate.3
I. Removal Jurisdiction
As a preliminary matter, we emphasize that the
burden of establishing federal jurisdiction is placed upon
the party seeking removal. See Wilson v. Republic Iron &
Steel Co., 257 U.S. 92, 42 S.Ct. 35, 66 L.Ed. 144 (1921).
Moreover, removal jurisdiction raises significant
federalism concerns, see Merrell Dow Pharmaceuticals,
3 We do not, however, purport to decide these matters
and in no way reach the substantive merits of Willy’s
claims.
A-15
Inc. v. Thompson, 478 U.S. 804, 106 S.Ct. 3229, 3233, 92
L.Ed.2d 650 (1986); Franchise Tax Board, 103 S.Ct. at
2846, and we must therefore strictly construe removal
jurisdiction. Shamrock Oil & Gas Corp v. Sheets, 313 U.S.
100, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941); Powers v.
South Central United Food & Commercial Workers Unions
and Employers Health & Welfare Trust, 719 F.2d 760, 762
(5th Cir.1983); Butler v. Polk, 592 F.2d 1293, 1296 (5th
Cir.1979).
The right to remove a case from state to federal
court derives solely from the statutory grant of
jurisdiction in 28 U.S.C. § 1441, which provides in
relevant part:
"(a). . . any civil action brought in a State
court of which the district courts of the United
States have original jurisdiction, may be removed
by the defendant or the defendants, to the
district court of the United States for the district
and division embracing the place where such
action is pending."4
See Finn v. American Fire & Cas. Co., 207 F.2d 113,
115 (5th Cir.1953), cert, denied, 347 U.S. 912, 74 S.Ct.
476, 98 L.Ed. 1069 (1954). Here, there is no allegation
4 Section 1441(c) provides:
”(c) Whenever a separate and independent
claim or cause of action, which would be
removable if sued upon alone, is joined with one
or more otherwise non-removable claims or causes
of action, the entire case may be removed and the
district court may determine all issues therein, or,
in its discretion, may remand all matters not
otherwise within its original jurisdiction."
A-16
of diversity of citizenship between the parties; therefore,
the propriety of removal depends on whether the case
falls within the provisions of 28 U.S.C. § 1331 that: "The
district courts shall have original jurisdiction of all civil
actions arising under the Constitution, laws, or treaties of
the United States."
Section 1331 executes Article III, § 2, of the
Constitution, which grants the federal courts the power to
hear cases "arising under" the Constitution and federal
statutes. Although section 1331 and Article III employ
the same "arising under" language, the phrase does not
have the same meaning in these different contexts. For
constitutional purposes, the case arises under federal law
whenever a federal question is an "ingredient" of the
cause of action. Osborn v. Bank of United States, 9
Wheat. 22 U.S. 738, 822, 6 L.Ed. 204 (1824). Section
1331 "arising under" jurisdiction is more limited,
however. Merrell Dow, 106 S.Ct. at 3232. See Fabrique,
Inc. v. Corman, 813 F.2d 725, 725-26 (5th Cir 1987)
(Supreme Court has rejected "ingredient" test for federal
question jurisdiction). See generally 13B C. Wright, A.
Miller, & C. Cooper, Federal Practice and Procedure §
3562 (2d ed. 1984) (hereinafter Wright & Miller).
The issue that we address in this case is whether the
federal aspect of Willy’s state cause of action brings his
case within section 1331’s "arising under" boundaries.
Defining when a claim arises under federal law has drawn
much attention but no simple solutions. See Powers, 719
F.2d at 763 & n. 1. See also Superior Oil Co. v. Pioneer
Corp., 706 F.2d 603, 605 (5th Cir. 1983). Certainly the
most often discussed feature of the "arising under"
requirement, however, is the well-pleaded complaint
rule: whether a claim arises under federal law must be
A-17
determined from the allegations in the well-pleaded
complaint. See generally 13B Wright & Miller, § 3566 (2d
ed. 1984). In cases removed to federal court, the
plaintiffs well-pleaded complaint, not the removal
petition, must establish that the case arises under federal
law. See Merrell Dow, 106 S.Ct. at 3232; Franchise Tax
Board, 103 S.Ct. at 2847. This rule requires the court to
determine federal jurisdiction from only those allegations
necessary to state a claim or, stated alternatively, a
federal court does not have jurisdiction over a state law
claim because of a defense that raises a federal issue,
even if the plaintiff anticipates and pleads the federal
issue in his complaint. Franchise Tax Board, 103 S.Ct. at
2846; Gully v. First National Bank at Meridian, 299 U.S.
109, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Louisville &
Nashville R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53
L.Ed. 126 (1908) (case brought in federal court).
A. Jurisdiction Based on Federal Preemption
Under the well-pleaded complaint rule, federal
preemption is generally a defensive issue that does not
authorize removal of a case to federal court.5 See
Powers, 719 F.2d 764-65. However, in Avco Corp. v.
Aero Lodge No. 735, Int’l Assn, of Machinists, 390 U.S.
557, 88 S.Ct. 1235, 1237, 20 L.Ed.2d 126 (1968), the
Court tersely held that because state action for breach of
collective bargaining agreements were preempted by
section 301 of the Labor Management Relations Act of
1947 (LMRA), 29 U.S.C. §185, the federal court had
5 Prior to the amendments to the removal statute in
1887, a federal defense such as preemption could be the
basis for removal jurisdiction. Caterpillar, Inc. v. Williams,
__U.S.___ , 107 S.Ct. 2425, 2430, 96 L.Ed.2d 318 (1987).
A -18
removal jurisdiction.6 In Fanchise Tax Board, 103 S.Ct.
at 2853-54, the Court subsequently explained that
because "the preemptive force of § 301 is so powerful as
to displace entirely" state actions for breach of a
collective bargaining agreement, any such action "is
purely a creature of federal law, notwithstanding the fact
that state law would provide a cause of action in the
absence of § 301." The Court further stated: "Avco stands
for the proposition that if a federal cause of action
completely preempts a state cause of action any
complaint that comes within the scope of the federal
cause of action necessarily ‘arises under’ federal law.” 103
S.Ct. at 2854.
Nonetheless, Franchise Tax Board refused to find
federal question jurisdiction based on preemption of a
state tax collection action by the Employee Retirement
Income Security Act of 1974, 29 U.S.C. § 1001, et seq.
(ERISA).7 The Court held that because the state’s
claims were not within the scope of section 502(a), which
is ERISA’s civil enforcement provision, they could not be
removed to federal court. 103 S.Ct. at 2854-55. In other
words, a federal action cannot be found to so completely
6 Although section 301 has been held to be an adequate
jurisdictional grant, see, e.g., Textile Workers Union v. Lincoln
Mills o f Ala., 353 U.S. 448, 77 S.Ct. 912, 915, 1 L.Ed.2d 972
(1957), the Avco Court found jurisdiction for cases
preempted by section 301 under 28 U.S.C. § 1337, which
grants federal jurisdiction in actions "arising under any Act
of Congress regulating commerce." There is no distinction,
however, between "arising under" standards for section 1337
and section 1331. See Franchise Tax Board, 103 S.Ct. at 2845
n. 7.
7 The Court assumed ERISA preemption, but did not
actually determine that question.
A-19
displace state claims that Avco applies unless there would
have been a federal cause of action under the preempting
federal law.8 In fact, in Merrell Dow, which did not
directly raise federal preemption as an issue, the Court
held that
"a complaint alleging a violation of a federal
statute as an element of a state cause of action,
when Congress has determined that there should
be no private, federal cause of action for the
violation, does not state a claim ‘arising under
the Constitution, laws, or treaties of the United
States.’ 28 U.S.C. § 1331." 106 S.Ct. at 3237.
In Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58,
107 S.Ct. 1542, 95 L.Ed.2d 55 (1987), the Court
extended the Avco rule to a state action that is
preempted by ERISA’s civil enforcement provision,
section 502(a). See Pilot Life Ins. Co. v. Dedeawc, 481
U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (under
section 514(a), section 502(a)(1)(B) completely
preempts a state common law claim for improper
processing of a claim submitted to an ERISA-qualified
plan). In Taylor, unlike Franchise Tax Board, the claim
was within the scope of ERISA’s private cause of action.
Furthermore, Congress had expressed an explicit intent
for actions preempted by section 502(a) to arise under
federal law in a "similar fashion to those brought under
section 301." 107 S.Ct. at 1547-48. Because of these two
8 In Avco the plaintiff was denied the injunctive relief
that it sought because of independent limits on federal
jurisdiction at that time. The Francise Tax Board Court
reasoned that the Avco plaintiff nevertheless had stated a
claim that arose under section 301 of the LMRA. 103 S.Ct.
at 2853.
A-20
factors, the Court found that the action arose under
federal law. Id. at 1548. See also Oneida Indian Nation
v. County of Oneida, 414 U.S. 661, 94 S.Ct. 772, 39
L.Ed.2d 73 (1974) (claim of right to possession of Indian
lands asserts a purely federal right and claim therefore
arises under federal law).
It is important to recognize that Taylor is a narrow
extension of Avco, which itself represents a narrow
exception to the rule that federal preemption is a
defensive issue that does not authorize removal of a case
to federal court. Avco was an action arising under
section 301 of the LMRA. Because of the unique
Congressional mandate for a uniform body of federal
labor law under the LMRA, several broad preemption
doctrines have evolved to protect this federal interest.
See, e.g., Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17
L.Ed.2d 842 (1967) (preemption of state substantive law,
but not state court jurisdiction, in breach of duty of fair
representation claim); Amalgamated Ass’n o f Street,
Electric Railway and Motor Coach Employees v. Lockridge,
403 U.S. 274, 91 S.Ct. 1909, 29 L.Ed.2d 473 (1971)
(jurisdiction of National Labor Relations Board over
unfair labor practices preempts state and federal court
jurisdiction); Allis Chalmers Corp. v. Lueck, 471 U.S. 202,
105 S.Ct. 1904, 1912-16, 85 L.Ed. 2d 206 (1985) (state
tort action that is "inextricably intertwined with
consideration of the terms of" a collective bargaining
agreement is preempted by LMRA section 301). But see
Farmer v. United Brotherhood of Carpenters & Joiners, 430
U.S. 290, 97 S.Ct. 1056, 1061-62, 51 L.Ed.2d 338 (1977)
(discussing cases where state law is not preempted
because the activity is only a "peripheral concern of the
LMRA" or touches an interest "deeply rooted in local
A-21
feeling"); Caterpillar, Inc. v. Williams,___U .S .___ , 107
S.Ct. 2425, 2431, 96 L.Ed.2d 318 (1987) (section 301
does not preempt state breach of employment contract
claim even though there was a collective bargaining
agreement in place under which plaintiffs could have
brought suit). In cases not implicating the LMRA, we
have read the majority and concurring opinions in Taylor
to require "manifest congressional intent" to make a
preempted state claim removable to federal court. See
Beers v. North American Van Lines, Inc., 836 F.2d 910,
913 n. 3 (5th Cir.1988) (preemptive effect of Interstate
Commerce Act).
Here, the federal laws9 to which Willy explicitly
refers as an aspect of his Sabine Pilot-type claim and the
legislative history of those statutes indicate no intent,
manifest or otherwise, that Avco should apply in this
character of case. Thus, under Taylor, complete federal
preemption or displacement cannot be a basis for
removing Willy’s case to federal court. In reaching this
conclusion that complete federal preemption or
displacement does not provide a basis for federal
jurisdiction, we reiterate that we are not determining
whether all or any of Willy’s state wrongful discharge
claim is preempted.10
9 Although occasionally mentioning federal securities
laws, the parties have focused this appeal on the
environmental laws.
10 We note that state legislation is generally not
preempted unless Congress has sufficiently evidenced
(either expressly or inferentially through the
comprehensiveness of the federal regulatory scheme) an
intent to exclude all state regulation in the field or unless
state law conflicts with federal law (either because
A-22
B. Jurisdiction Based on General
"Arising Under" Principles
If complete displacement of state law cannot be the
basis of federal question jurisdiction, does the presence
of a federal aspect in Willy’s state cause of action create
federal jurisdiction? With the exception of state actions
completely displaced by federal law, the plaintiff is
generally "master to decide what law he will rely upon,"
The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 33
S.Ct. 410, 411, 57 L.Ed. 716 (1913), and he "may avoid
federal jurisdiction by exclusive reliance on state law."
Caterpillar, 107 S.Ct. at 2429 & n. 7 (1987) (footnote
omitted).11 Here, of course, Willy in part relies upon *
compliance with both is impossible or because state law
stands as an obstacle to the accomplishment of the full
objectives of Congress). See Silkwood v. Kerr-McGee Corp.,
464 U.S. 238, 104 S.Ct. 615, 621, 78 L.Ed.2d 443 (1984); Osburn
v. Anchor Laboratories, Inc., 925 F.2d 908, 911 (5th Cir.1987).
The states, of course, are traditional partners with the
federal government in the fields of securities and
environmental regulation. And the Sabine Pilot remedy may
sometimes in practice supplement but does not appear to
directly conflict with any federal remedy. State remedies
may, however, be preempted by federal ones in a given
context. See Atkinson v. Gates, McDonald & Co., 838 F.2d 808
(5th Cir.1988) (Longshore and Harbor Workers’
Compensation Act preempts state law claim for bad faith
refusal to pay benefits due thereunder); LeSassier v. Chevron
USA, Inc., 776 F.2d 506 (5th Cir.1985) (Louisiana law claim
for wrongful discharge in retaliation for claim under
Longshore and Harbor Workers’ Compensation Act
inconsistent with section 48a thereof for purposes of the
Outer Continental Shelf Lands Act).
11 In Caterpillar, the Court explained that the well-
pleaded complaint rule makes plaintiff the master of his
claim when he wishes to avoid federal jurisdiction. 107 S.Ct.
at 2429. The plaintiff’s mastery over his complaint gives
A-23
federal law and the question remains whether his case
therefore arises under federal law.
One answer is found in Justice Holmes’ test for
federal question jurisdiction: "A suit arises under the law
that creates the cause of action." American Well Works
Co. v. Layne & Bowler Co., 241 U.S. 257, 36 S.Ct. 585,
586, 60 L.Ed. 987 (1916). Federal jurisdiction is not
shown by this test, for Willy alleges an asserted cause of
action created by Texas Law.
"However, it is well settled that Justice
Holmes’ test is more useful for describing the
vast majority of cases that come within the
district courts’ original jurisdiction than it is for
describing which cases are beyond district court
jurisdiction. We have often held that a case
‘arose under’ federal law where the vindication
of a right under state law necessarily turned on
some construction of federal law, see, e.g., Smith
v. Kansas City Title & Trust Co., 255 U.S. 180, 41
S.Ct. 243, 65 L.Ed. 577 (1921); Hopkins v.
Walker, 244 U.S. 486, 37 S.Ct. 711, 61 L.Ed.
1270 (1917), and even the most ardent
proponent of the Holmes test has admitted that
way to the well-pleaded complaint rule when plaintiff
attempts to choose a federal forum based on an anticipated
federal defense. Louisville & Nashville R.R. v. Mottley, 211 U.S.
149, 29 S.Ct. 42, 53 L.Ed.2d 126 (1908). See also Skelly Oil Co.
v. Phillips Petroleum Co., 339 U.S. 667, 70 S.Ct. 876, 94 L.Ed.
1194 (1950) (no federal jurisdiction over plaintiff’s federal
declaratory judgment action because federal issue would be
a defense in underlying damages or injunction action);
Lowe v. Ingalls Shipbuilding, 723 F,2d 1173, 1179-83 (5th
Cir.1984) (no federal jurisdiction for declaratory judgment
as to whether federal statute preempts nonfederal claim).
A-24
it has been rejected as an exclusionary principle,
see Flournoy v. Wiener, 321 U.S. 253, 270-272,
64 S.Ct. 548, 556-557, 88 L.Ed. 708 (1944)
(Frankfurter, J., dissenting)." Franchise Tax
Board, 103 S.Ct. at 2846.
Following Franchise Tax Board, we addressed federal
question jurisdiction premised on vindication of a state
right that "necessarily turned on some construction of
federal law." In Oliver v. Trunkline Gas Co., 796 F.2d 86,
88-89 (5th Cir.1986) (on petition for rehearing), we
discussed the two cases cited in Franchise Tax Board for
this proposition, Smith v. Kansas City Title & Trust Co.,
255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577 (1921), and
Hopkins v. Walker, 244 U.S. 486, 37 S.Ct. 711, 61 L.Ed.
1270 (1917). We read Hopkins, a suit to remove a cloud
from title originating in a federal patent, as
distinguishable from a seemingly inconsistent decision in
a quiet title action, Barnett v. Kunkel, 264 U.S. 16, 44
S.Ct. 254, 68 L.Ed. 539 (1924), based on traditional
distinctions in the pleading requirements for these two
actions. We thus found Hopkins to have "narrow"
applicability. We read Smith, a shareholder suit to enjoin
investment in bonds allegedly issued under an
unconstitutional federal act, as irreconcilable with Moore
v. Chesapeake & Ohio Railway, 291 U.S. 205, 54 S.Ct.
402, 78 L.Ed. 755 (1934). We found it unnecessary to
resolve this dilemma, however, because in neither case
did federal law provide a private remedy, and the
recently rendered majority opinion in Merrell Dow, 106
S.Ct. 3229, required a federal remedy for the statute to
be a basis for federal jurisdiction. The Merrell Dow Court
found Smith and Moore reconcilable based on the
"difference in the nature of the federal issues at stake."
A-25
106 S.Ct. at 3236 n. 12. Merrell Dow suggested that
Smith challenged the constitutionality of an important
federal statute, whereas Moore was simply a state tort
action that incorporated a federal standard. Merrell Dow,
106 S.Ct. at 3236 n. 12.
Justice Cardozo formulated the other well-recognized
test for determining when an action arises under federal
law: "a right or immunity created by the Constitution or
laws of the United States must be an element, and an
essential one, of the plaintiffs cause of action . . . [and]
must be such that it will be supported if the Constitution
or laws of the United States are given one construction of
effect, and defeated if they receive another." Gully, 57
S.Ct. at 97. In Franchise Tax Board, the Court then
explained that the Holmes and Cardozo tests are
alternative analyses, though the Court slightly altered the
Cardozo essential element language and instead required
the well-pleaded complaint to require "resolution of a
substantial question of federal law." 103 S.Ct at 2848,
2856. See also Fabrique, Inc., 813 F.2d at 726.
Defendants argue that the federal statutes to which
Willy refers as a feature of his claim raise a substantial
issue of federal law, as demonstrated by the private,
federal remedy granted by those statutes. However,
Franchise Tax Board only held that a case might arise
under federal law when a state claim requires resolution
of a substantial question of federal law, and we have
interpreted the substantial question test to be a "narrow
exception" to the rule that a suit "arises under the law
that creates the cause of action." Oliver, 796 F.2d at 88.
Merrell Dow recognizes "that the mere presence of a
federal issue in a state cause of action does not
automatically confer federal-question jurisdiction" and
A-26
cites with approval the passage from Justice Frankfurter’s
dissenting opinion in Textile Workers v. Lincoln Mills, 353
U.S. 448, 77 S.Ct. 912, 928, 1 L.Ed.2d 972 (±957),
defining the proper test as "the degree to which federal
law must be in the forefront of the case and not
collateral, peripheral or remote." Merrell Dow, 106 S.Ct.
at 3235 & n. 11. While Merrell Dow held that a private,
federal remedy was a necessary predicate to determining
that the presence of a federal element in a state-created
cause of action resulted in that cause of action being one
which arose under federal law, it did not hold that the
presence of any private, federal remedy would in all
instances suffice for that purpose. See Merrell Dow, 106
S.Ct. at 3232 (no "single, precise definition" of section
1331 "arising under" jurisdiction), 3235 ("[f]ar from
creating some kind of automatic test, Franchise Tax
Board thus candidly recognized the need for careful
judgments about the exercise of federal judicial power in
an area of uncertain jurisdiction.").
Finally, because Merrell Dow, 106 S.Ct. at 3235, and
Franchise Tax Board, 103 S.Ct. at 2852, relied heavily
upon Gully, we return in conclusion to its frequently cited
passage:
"What is needed is something of that
common-sense accommodation of judgment to
kaleidoscopic situations which characterizes the
law in its treatment of problems of causation.
One could carry the search for causes backward,
almost without end . . . . Instead, there has been
a selective process which picks the substantial
causes out of the web and lays the other ones
aside. As in problems of causation, so here in
the search for the underlying law. If we follow
A-27
the ascent far enough, countless claims of right
can be discovered to have their source or their
operative limits in the provisions of a federal
statute or in the Constitution itself with its
circumambient restrictions upon legislative
power. To set bounds to the pursuit, the courts
have formulated the distinction between
controversies that are basic and those that are
collateral, between disputes that are necessary
and those that are merely possible. We shall be
lost in a maze if we put that compass by." 57
S.Ct. at 100.
Cf. Belknap, Inc. v. Hale, 463 U.S. 491, 103 S.Ct. 3172,
3177, 77 L.Ed.2d 798 (1983) (LMRA does not preempt
state law where claim only of peripheral concern to
LMRA and deeply rooted in local law); Fanner, 97 S.Ct.
at 1561-62 (same).
Turning to Willy’s complaint, we begin with the
minimum requirement that the federal statutes involved
provide a private, federal remedy. See Merrell Dow, 106
S.Ct. at 3234-37; Oliver, 796 F.2d at 89. But Willy does
not claim that defendants violated the "whistleblower"
provisions of the federal statutes.12 Instead, he pleaded
that he was fired for refusing to violate, or seeking to
cause his employer to comply with, state and federal
reporting requirements. Defendants have not argued
that Congress has provided a private, federal cause of
action for violation of these federal regulations.
Furthermore, the "whistleblower" provisions expressly
12 The parties do not contend that there is a
"whistleblower" provision in the securities law and we are
aware of none.
A-28
limit the remedy to an administrative claim with the
Secretary; therefore, the district court could not have
exercised jurisdiction over Willy’s claim if he had
originally brought it in federal court under those
provisions. See In re Willy, 931 F.2d 545, 546 (5th
Cir.1987). Just as it would "flout” congressional intent to
allow a federal court to exercise federal question
jurisdiction over a removed claim for violation of a
federal statute that does not provide a private cause of
action, Merr ell Dow, 106 S.Ct. at 3234-35, it would
equally flout congressional intent to give the federal court
original (and hence removal) jurisdiction based on
statutes that limit the federal remedy to an administrative
action.13
Assuming, however, that the "whistleblower"
provisions meet the requirements of Merrell Dow, the
federal element in Willy’s Sabine Pilot-type claim is not
substantial enough to confer federal question jurisdiction.
We note to begin with that Willy’s wrongful discharge
claim14 was predicated on his alleged attempts to cause
his employer to comply with, or his refusal to violate,
state as well as federal environmental laws and federal
securities laws. For example, Willy alleges that he
"refused to permit Defendants to continue to operate in
violation of the environmental laws of the federal and
13 We note that if Willy’s activities were wholly
intracorporate, Brown & Root would take his Sabine Pilot
claim outside of the scope of the whistleblower provisions.
This, however, would only strengthen our conclusion that
the district court lacked subject matter jurisdiction.
14 Willy’s claims other than for wrongful discharge
concededly involved no federal aspect.
A-29
state governments," that had he "permitted the
Defendants to continue to operate in violation of the laws
and regulations’ of the federal and state governments, he
would have been in violation of the laws of the United
States and the various states, and also not in compliance
with the code of ethics governing the actions of lawyers in
Texas," and that his
"actions . . . also would have required Defendant
Coastal . . . to report to the U.S. Environmental
Protection agency any non-compliance with the
laws and regulations of that agency, and to
report to the respective state environmental
agencies, any failure to comply with state law
and regulations. Among the state agencies to
which reporting would have been required was
the Texas Department of Water Resources and
the Kansas Department of Health and
Environment."
He further alleged that "Defendant Coastal would
have been required to report these conditions to the
investment public and its shareholders in its SEC Form
10K and 10Q." While Willy did not expressly allege why
he was fired, the plain inference from his pleading is that
he was discharged because of his refusal to violate, or his
insistence that his employer comply with, state as well as
federal environmental laws and federal securities laws.
Willy also alleged in connection with his wrongful
discharge claim:
"A contract for employment at will under the
laws of the State of Texas prohibits discharge for
compliance with the laws of the United States
and the various states, including the State of
A-30
Texas. All actions relevant to this cause of
action undertaken by Donald J. Willy were to
comply with the laws of the United States and
the various states."
Thus, Willy’s wrongful discharge claim was supported
by alternate theories, first that his discharge was wrongful
because it was on account of his attempt to cause
employer compliance with or his refusal to violate federal
law, and second that it was wrongful because it was on
account of his attempt to cause employer compliance
with or his refusal to violate state law. Nothing in Willy’s
state pleading or in the Texas common law as announced
in Sabine Pilot or otherwise indicates that the first
(federal law related) theory is necessary to Willy’s
wrongful discharge claim or that the second (state law
related) theory is not sufficient of itself and without the
first theory.15
In its recent decision in Christianson v. Colt Industries
Operating Corp., ___ U.S. ___, 108 S.Ct. 2166, 100
L.Ed.2d 811 (1988) the Court considered an analogous
situation in determining whether a claim was one "arising
under any Act of Congress relating to patents" for
purposes of jurisdiction under 28 U.S.C. § 1338(a). The
Court noted that resolution of this question was governed
by the same principles that applied in determining
15 We do not determine that the facts pleaded by Willy
are sufficient, under any theory, to state a claim under
Texas law; we merely assume, arguendo only, that they are.
Our point is that i f they are, there is nothing in either the
complaint or any Texas law source to indicate that the first
(federal law related) theory is necessary to state a claim
and that the second (state law related) is not alone
sufficient to do so.
A-31
"arising under" jurisdiction for purposes of section 1331.
Christianson,__ U.S. a t ___ , 108 S.Ct. at 2172-74. It
then announced that "a claim supported by alternative
theories in the complaint may not form the basis for
section 1338 jurisdiction unless patent law is essential to
each of these theories," id., and further explained:
"The well-pleaded complaint rule, however,
focuses on claims, not theories, see Franchise
Tax Board, 463 U.S. at 26, and n. 29 [103 S.Ct.
at 2855 and n. 29]; Gully, 299 U.S., at 117 [57
S.Ct. at 99-100], and just because an element
that is essential to a particular theory might be
governed by federal patent law does not mean
that the entire monopolization claim ’arises
under’ patent law." I d .__ U.S. a t___ , 108 S.Ct.
at 2175-76.
The Christianson Court proceeded to hold that
neither of the two Sherman Act claims there involved, an
attempted monopolization claim under section 2 and a
group boycott claim under section 1, arose under the
patent laws because "[t]he patent-law issue, while
arguably necessary to at least one theory under each
claim, is not necessary to the overall success of either
claim." Id. The theory on which the plaintiff actually
prevailed in the district court was the patent law theory
as to each claim, Id.___U.S. a t __ _, 108 S.Ct. at 2170-
72, but the Court pointed out that the complaint also
alleged alternative theories of recovery, not involving
patent law, on each of the two claims. I d .___U.S. at
___, 108 S.Ct. at 2175-76. Hence, none of the claims met
the section 1338 "arising under" requirement, and
accordingly the suit was not one within the district court’s
section 1331 jurisdiction.
A-32
We conclude that the Christianson doctrine is
properly applied to this case and results in the conclusion
that Willy’s wrongful discharge claim does not arise under
federal law.
Our conclusion in this connection is strengthened by
our view that the federal issues in Willy’s claim are not
ones in the forefront of the case, but are more collateral
in nature, and are not substantial in relation to the claim
as a whole, which is in essence one under state law. The
Texas common law doctrine stated in Sabine Pilot is one
intended to protect the rights of any employees, and
whether the law that they are fired for refusing to violate
is state or federal, environmental or otherwise, is wholly
immaterial.16 It is likewise immaterial to the Texas action
whether the employee sought to aid a law enforcement
agency or to bring to official cognizance violations
committed by others. The federal "whistleblower"
statutes, by contrast, promote enforcement of environ
mental laws by protecting employees who aid the
government enforcement agency. Accordingly, in this
Texas common law wrongful discharge case, the role of
issues of federal law is more collateral than in the
forefront.17
16 Sabine Pilot can be reasonably read as restricted to
instances where the violations of law the employee refused
to commit "carry criminal penalties." 687 S.W.2d at 735. But
whether a wrongful discharge action of the Sabine Pilot
variety will remain so limited by the Texas courts—a
matter we do not decide—is an issue the resolution of
which would not appear to be affected by whether the law
in question is state or federal, environmental or otherwise.
17 Just because a Sabine Pilot-type wrongful discharge
action might lie in instances where a federal
"whistleblower" administrative remedy would also be
A-33
Further, other issues of Texas law are substantially
implicated in all theories of the wrongful discharge claim.
In their motion to dismiss, defendants argued that Willy’s
ethical obligations as an attorney prohibited him from
bringing this action. The Texas Code of Professional
Responsibility, DR 2-110(B)(4), requires an attorney to
withdraw when discharged by his client; DR 2-110(C)(l)
allows an attorney to withdraw if his client intends to
pursue an illegal course of action. Tex.Rev.Civ.Stat.
Ann., Title 14 App., art. 12, § 8 (Vernon 1973). In
either case, DR 4-101(C) prohibits an attorney from
revealing confidences without permission except in
limited situations not applicable here. Willy argues, on
the other hand, that the attorney-client privilege does not
allow Coastal to fire him illegally.
Tex.Rev.Civ.Stat.Ann., Title 14 App., art. 12, § 8
(Vernon 1973). Thus, the primary legal issues in this
available does not mean the former regulates the same
subject matter as the latter. Cf. Pilot Life Ins. Co., 481 U.S.
41, 107 S.Ct. 1549 at 1553-53, 95 L.Ed.2d 39 (Mississippi
common law tort action for bad faith breach of contract,
"the roots" of which "are firmly planted in the general
principles of Mississippi tort and contract law” and under
which ”[a]ny breach of contract, and not merely breach of
an insurance contract, may lead to liability for punitive
damages," is not a law "which regulates insurance" within
the exception to the preemptive provision of section
514(b)(2)(A) of ERISA ”[e]ven though the Mississippi
Supreme Court has identified its law of bad faith with the
insurance industry"); Mackey v. Lanier Collections Agency &
Service, Inc., __ U.S. __ , 108 S.Ct. 2182, 100 L.Ed.2d 836
(1988) (ERISA § 514(a) preempts Georgia statute
specifically exempting from garnishment any employee
benefit plan subject to ERISA, but does not preempt
application of Georgia general garnishment statute to
garnish benefit due employee under ERISA welfare benefit
plan).
A-34
case will involve regulation of employment relationships
and attorney conduct, both of which are areas deeply
rooted in local interest. See, e.g., Belknap, 103 S.Ct. at
3183 (employment misrepresentation case). Resolution
of these issues in defendants’ favor could well mean that
the federal issues would never arise.
We conclude that Willy’s wrongful discharge claim is
not one that "arises under" federal law for purposes of
section 1331, and is hence not removable on that basis.
We have previously concluded that possible federal
preemption does not serve as a ground for removal here.
There is no diversity. Accordingly, the district court
erred in denying Willy’s motion to remand, and the
judgment below must be reversed with directions to
remand the case to the state court. The only remaining
issue is that of the Rule 11 sanctions against Willy and his
attorney.
II. Rule 11 Sanctions
On the day that it dismissed Willy’s action for failure
to state a claim, the district court also awarded $22,625 in
attorneys’ fees to Coastal as a Rule 11 sanction. The
district court viewed Willy’s wrongful discharge claim as a
legitimate attempt to establish new law, but found that
instead of illuminating the issues, he chose to "create a
blur of absolute confusion." The district court’s primary
concern was with a 110-page brief in support of Willy’s
motion for partial summary judgment. With this brief,
Willy filed what the district court described as "a 1,200-
page, unindexed, unnumbered, foot-high pile of material
which this Court is unable, after examination, to fathom
and which is determined to be a conscious and wanton
affront to the judicial process, this Court, and opposing
A-35
counsel." The district court furthermore found that
Willy’s responses to defendants’ motion to dismiss, in
which Willy relied in part upon a federal rule of evidence
that had not been adopted, were equally confusing. Willy
argues both that sanctions were inappropriate and that
the amount of the sanction was excessive.
We begin by noting that we and the district court
retain jurisdiction over the Rule 11 aspect of this case,
even though we have held that removal was improper.
See Vatican Shrimp Co. v. Solis, 820 F.2d 674, 680 n. 7
(5th Cir.), cert, denied, __ U.S. ___ , 108 S.Ct. 345, 98
L.Ed.2d 371 (1987); News-Texan, Inc. v. City of Garland,
Texas, 814 F.2d 216, 21820 (5th Cir.1987). As to the
propriety of the district court’s Rule 11 sanctions, we are
guided by our recent en banc opinion in Thomas v.
Capital Security Services, Inc., 836 F.2d 866, 872-73 (5th
Cir. 1988), where we adopted an abuse of discretion
standard of review. Our en banc opinion in Thomas was
issued after the case was appealed, and the district court,
of course, did not have the benefit of it when imposing
sanctions. Under Thomas, compliance with Rule 11 is
generally judged by an objective standard of
reasonableness. Id. at 873. Once a district court finds a
Rule 11 violation, it must impose some sanction. Id. at
876. The district court retains broad discretion in
fashioning an "appropriate" sanction; however, the
sanction imposed should be the least severe that
adequately furthers the purposes of Rule 11. Id. at 876-
78. Reasonable and appropriate expenses, including
attorneys’ fees, may be awarded as a Rule 11 sanction to
the extent that the expenses were reasonably caused by a
violation of Rule 11. Id. at 878. Actual expenses and
attorneys’ fees are not necessarily reasonable: "A party
A-36
seeking Rule 11 costs and attorney’s fees has a duty to
mitigate those expenses, by correlating his response, in
hours and funds expended, to the merit of the claims."
Id. at 879. Moreover, not all such expenses and fees so
caused need be awarded. See Smith International, Inc. v.
Texas Commerce Bank, 844 F.2d 1193, 1197 (5th Cir.
1988).
Here, the district court clearly did not abuse its
discretion in determining that Willy had violated Rule 11.
Filing mountainous piles of unorganized documents and
citing to nonexistent rules of law are precisely the sort of
conduct that, under the objective test of Rule 11, could
lead a district court to conclude that the attorney had not
made reasonable inquiry into the law or was seeking to
harass or delay. And the district court pointed out that
its list of conduct that violated Rule 11 was not meant to
be comprehensive. As Coastal argued in its motion for
sanctions below and on appeal now, Willy’s briefs below
contain other misleading citations of law.
Turning to the sanction imposed, we find the type of
sanction appropriate but that the amount of and basis
for the sanction must be reconsidered by the district
court in light of the standards set out in Thomas.
Sanctions may be awarded jointly and severally against
the client and his attorney, see Robinson v. National Cash
Register Co., 808 F.2d 1119, 1131 (5th Cir. 1987);
Southern Leasing Partners Ltd. v. McMullan, 801 F.2d
783, 789 (5th Cir.1986), and a joint and several award
may often be appropriate where, as here, the client is an
attorney. Among other things, the court must determine
whether its substantial award satisfied the requirement
that the fees must have been reasonably incurred as a
result of a violation of Rule 11 and in light of the duty to
A-37
mitigate. Thomas, 836 F.2d at 878. Defendants
submitted affidavits from two law firms: one sought
reimbursement for 442 hours at $100 per hour ($44,200)
and $2,639 in expenses; the other firm sought
reimbursement for 307 hours at $125 an hour ($38,325).
Neither firm submitted sufficiently detailed information
from which the district court could determine what
portion of these fees and expenses were incurred because
of Rule 11 violations. Nor did the district court explain
how it derived from these amounts its figure of $22,625.
As we stated in Smith International, 844 F.2d at 1197:
"While Thomas adopted ‘a rule . . . that does not
require specific findings and conclusions by a
district court in all Rule 11 cases,’ nevertheless
we there held that where ‘the basis and
justification for the trial judge’s Rule 11 decision
is not readily discernible’ some explanation is
ordinarily required, though ‘the degree and
extent to which specific explanation must be
contained in the record will vary according with
the particular circumstances of the case,
including the severity of the violation, the
significance of the sanctions, and the effect of
the award.’ Id. [Thomas] at 883. ‘If the
sanctions imposed are substantial in amount’—as
they clearly are here—then ‘appellate review of
such awards will be inherently more rigorous’
and ‘such sanctions must be quantifiable with
some precision.’ Id. [Thomas ]."
Here the sanctions are clearly substantial in amount
and the district court’s orders in reference to the amount
thereof do not meet the foregoing requirements.
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The sanctions order is therefore reversed and the
matter of sanctions is remanded to the district court for
further proceedings consistent with this opinion and
Thomas,18
CONCLUSION
We hold that this case was improvidently removed
and that the district court lacked subject matter
jurisdiction over it (except as to Rule 11 sanctions).
Accordingly, the judgment below is reversed and
remanded to the district court with directions to remand
the cause, except for the matter of sanctions, to the state
court. We likewise set aside the district court’s sanctions
order, and that phase of the case is remanded to the
district court for further proceedings consistent herewith.
REVERSED AND REMANDED.
E1UGHES, District Judge, dissenting in part:
Although I join fully the jurisdictional decision and
reasoning, I cannot concur in the portion of the opinion
that remands the award of sanctions for further findings.
The process of imposing sanctions has three steps.
First, the respondent must be given notice of the abuse
for which sanctions are sought. Second, he must have an
opportunity to be heard in response. Third, the abuse
and the imposition must be supported by the record.
The only issue here is the third step, the quantification of
the monetary sanction. The majority confuse whether the
record supports the findings with whether there are
18 We also note that "Rule 11 does not apply to conduct
that occurred in state court before removal." Foval v. First
National Bank o f Commerce in New Orleans, 841 F.2d 126, 130
(5th Cir.1988).
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sufficient findings.
The record is not limited to the trial judge’s
recitations. Ferguson v. Hill, 846 F.2d 20 (5th Cir.1988).
Failure to articulate the process of the evidence
evaluation does not undermine the trial court’s judgment.
The quantification required some evidence and an answer
finding the appropriate level of compensation. If it were
a jury issue,, the question on appeal would be whether the
one answer had sufficient evidence in the record to
support the amount.
The testimony that is in the record consists of
affidavits from the defendants’ lawyers describing in some
detail and some generality the time and efforts expended
in the whole case. The fee total was $82,575. The trial
court did not accept that evidence uncritically; he
obviously discounted it by about 83%, awarding $22,625.
The record is more than the fee affidavits and the judge’s
findings. Fed.Rule of App.Pro. 10(a). We must
presume that the trial court considered the course of the
litigation represented by the pleadings, motions,
hearings, docket entries, briefs, and other filed papers.
Although the abuses of the plaintiff and his counsel
were pervasive, the record is weak on causation, but just
because I would find the amount resulting from the
abuses to be a lot less does not amount to an absence of
either sufficiently specific findings or of evidence in the
record itself. Anderson v. City o f Bessemer, 470 U.S. 564,
576, 105 S.Ct. 1504, 1513, 84 L.Ed.2d 518 (1985).
The people on whom the sanction was imposed here
were content to leave the record in the state we find it.
It supports the judgment. They were under a duty to
contradict the evidence of amount and to supply evidence
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of justification. They did not. This case involves neither
a default nor unrepresented parties, which would be
instances that may require a trial or appellate judge to
use a vigorous skepticism.
On appeal, our choices are limited: If we cannot hold
that the value was clearly erroneous on the evidence, we
are obliged to affirm.
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
DONALD J. WILLY,
Plaintiff,
V. CIVIL ACTION
NO. H-85-6947
THE COASTAL
CORPORATION,
et al.,
Defendants.
ORDER FOR SANCTIONS
Pending before this Court is Defendants’ Motion for
Sanctions.
In December, 1985, Defendants, on the basis of
federal question jurisdiction, removed to this Court an
action filed by Plaintiff, Donald J. Willy. After numerous
pleadings and no less than four hearings or conferences,
this Court, on November 12, 1986, granted Defendants’
Motion to Dismiss Plaintiff’s claims of wrongful
discharge. In the same Order, the Court simultaneously
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dismissed Plaintiffs remaining claims for lack of pendent
jurisdiction. On that same date, the Court also granted a
Motion for Rule 11 Sanctions filed by Defendants. In its
separate sanction order, the Court found that Plaintiff
(who is himself an attorney) and his former attorney,
George A. Young, had committed multiple violations of
Rule 11. Examples of improper conduct cited by the
Court included Plaintiff’s repeated oral and written
citation of a nonexistent rule of evidence, Plaintiffs filing
of confusing and misleading pleadings, his misleading
misquotation of an applicable disciplinary rule, and, most
notably, his filing of a 120-page Motion for Summary
Judgment that was accompanied by some 1200 pages of
unnumbered, unindexed, and largely irrelevant
documents, which were purportedly rendered admissible
by a wholly inadequate affidavit. As the result of this
conduct, the Court, after the receipt of a generalized
statement of attorneys’ fees submitted by Defendants,
ordered Plaintiff and his former counsel to pay to
Defendants attorneys’ fees in the amount of $22,625.
Plaintiff appealed both orders of this Court to the
United States Court of Appeals for the Fifth Circuit. On
September 29, 1988, the Fifth Circuit issued a lengthy
opinion wherein it found that this Court had lacked
removal jurisdiction over Plaintiff’s claims and that those
claims should therefore be remanded to the state court in
which they were initially filed. Willy v. Coastal Corp., 855
F.2d 1160 (5th Cir. 1988). Notwithstanding this finding,
the Fifth Circuit also concluded the following: (1) that
this Court properly found that Plaintiff and his former
counsel had violated Rule 11 and (2) that this Court
properly imposed a joint and several award of attorneys’
fees against them. Id. at 1172-73. The Fifth Circuit
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found that the transgressions of Plaintiff and his former
counsel were "precisely the sort of conduct" to which
Rule 11 applies. Id. at 1172. The Court of Appeals
further found expressly that the type of sanction imposed
by this Court, i.e., attorneys’ fees, was appropriate in this
case. Id. Because the Fifth Circuit was unable to discern
from the record the precise calculations by which this
Court reached the amount of its sanction award or the
extent to which attorneys’ fees were the result of
Plaintiffs Rule 11 violations, the Fifth Circuit remanded
the Rule 11 issue to this Court for further proceedings in
accordance with the decision in Thomas v. Capital
Security Services, Inc., 836 F.2d 866 (5th Cir. 1988).1
Thus, the only issues resubmitted to this Court for further
consideration pertain to "the amount of and basis for the
sanction" to be imposed. Id.
First, this Court will discuss "the amount of and basis
for the sanction." It is noted by this Court that the Fifth
Circuit did not rule that the amount of the sanction
initially imposed by this Court was excessive or
inappropriate, but directed this Court to evaluate that
amount in accordance with the guidelines in Thomas.
Willy at 1173. Additionally, the Fifth Circuit did not rule
that this Court was incorrect in finding that the conduct
by Willy and his counsel was an appropriate ground or
basis for sanctions. Id. at 1172. The Circuit Court did,
however, state the following: (1) that the attorneys’ fees
"must have been reasonably incurred as a result o f a
violation of Rule 11 and in light of the duty to mitigate"
and (2) that the affidavits supporting the fees were
1 The Honorable Lynn Hughes, sitting by designation,
dissented from the remand of this Court’s Rule 11 Order,
and would have affirmed that Order in its entirety.
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insufficient. Id. at 1173. Thus, this Court will examine:
(1) the basis for, or causal relationship between, the fees
and the sanctions to be imposed and (2) the basis or the
quantification of the fees.
Under Fed.R.Civ.P. 11, an attorney’s signature on a
pleading, motion, or other paper certifies that the
attorney has (1) read the pleadings and other papers
submitted, (2) made a reasonable inquiry of the basis for
the document to determine if it is well grounded in fact
and if it is warranted by existing law or makes a good
faith argument for the extension of existing law, and (3)
determined that the document is not made in order to
harass, to cause unnecessary delay, or to increase
needlessly the cost of litigation. Any sanction imposed
pursuant to Rule 11 should be the least severe sanction
that adequately furthers the purpose of Rule 11. Willy,
855 F.2d at 1172 (citing Thomas, 836 F.2d at 876-78).
"Thomas does not require that the ‘least severe sanction’
be imposed, rather that the ‘least severe sanction
adequate to serve the purpose’ of Rule 11 be imposed."
Harmony Drilling Co. v. Kreutter, 846 F.2d 17, 19 (5th Cir.
1988).
In addition to the violations of Rule 11 previously
mentioned, Plaintiff and his counsel engaged in the
following conduct that was violative of Rule 11:
a. Plaintiff reinserted in a subsequent pleading
allegations which had been previously stricken by
the Court as irrelevant and inflammatory;
b. Plaintiff filed responses to Defendants’
Motion to Dismiss which were confusing,
misleading, and not reasonably based on law or
fact;
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c. Plaintiff, without a reasonable basis in law or
fact, asserted in a response to Defendants’
Motion to Dismiss that Defendants’ counsel, the
law firm of Looper, Reed, Ewing & McGraw,
was engaged in an improper conflict of interest;
d. in a pleading, Plaintiff misquoted Disciplinary
Rule 2-110(B)(4) of the Texas Code of
Professional Responsibility, and then proceeded
in that pleading to discuss the Disciplinary Rule
as though the language he had omitted did not
exist;
e. in an effort to harass Defendants in the
instant proceeding, Plaintiff filed an action
against some 80 officers, directors, employees,
affiliates, and attorneys of the corporate
Defendants, wherein he alleged that those
individuals, by engaging in the actions which are
the subject of the instant proceedings had
violated the Racketeering Influenced and
Corrupt Organizations (RICO) Act; and
f. in a transcribed conference occurring during
the course of this action, Plaintiff further
evidenced his intent to harass Defendants by
stating on the record that he intended to depose
no less than 60 individuals in connection with this
matter.
In addition, the Court finds that Plaintiff and his
counsel had sufficient and repeated notice that they were
acting in violation of Rule 11. Specifically, the Court
finds as follows:
a. in open court on August 18, 1986, and in a
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responsive pleading dated August 12, 1986,
Defendants pointed out to Plaintiff and his
counsel that their citation of Rule 503 of the
Federal Rules of Evidence was improper;
b. in open court on August 18, 1986, and in a
responsive pleading dated September 9, 1986,
Defendants objected to Plaintiffs filing of the
mass of exhibits that accompanied his Motion for
Partial Summary judgment on the grounds that
such exhibits were improper;
c. in responsive pleadings dated August 12,
1986, Defendants pointed out to Plaintiff and his
counsel that their Briefs in Response to
Defendants’ motion to Dismiss were improper;
d. in open court on August 18, 1986, and in a
responsive pleading dated August 12, 1986,
Defendants pointed out to Plaintiff and his
counsel that they had misquoted Disciplinary
Rule 2-110 (b) (4);
e. in a responsive pleading dated August 12,
1986, Defendants pointed out to Plaintiff and his
counsel that they had improperly reinterjected in
a subsequent pleading language that had
previously been stricken from their Complaint by
this Court;
f. in a responsive pleading dated August 12,
1986, Defendants pointed out that Plaintiff and
his counsel had improperly asserted that a
conflict of interest existed on the part of the law
firm of Looper, Reed, Ewing & McGraw;
g. by letter dated March 26, 1986, Plaintiff and
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his counsel were advised that their proposed
filing of an action against additional defendants,
including Defendants’ counsel, was improper;
and
h. on several occasions, James L. Reed, counsel
for Defendants, verbally advised Plaintiffs
counsel that positions taken by Plaintiff,
including those involving the miscitation of DR
2-110(b)(4) and Rule 503, were not well
grounded.
Based upon the foregoing, the Court finds that
Defendants incurred at least the following attorneys’ fees
as a direct and proximate result of the Rule 11 violations
previously listed and that Defendants acted reasonably in
attempting to mitigate expenses as the result of the Rule
11 violations :
a. The law firm of Looper, Reed, Ewing
& McGraw performed work in response to
Plaintiffs Rule 11 violations in the amount of at
least Thirteen Thousand Ninety Dollars
($13,090).
b. The law firm of Ford & Harrison
performed work in response to Plaintiff’s Rule
11 violations in the amount of at least Six
Thousand Two Hundred Seventeen Dollars
($6,217).
By way of comparison, Plaintiff filed an affidavit with
this Court indicating he had incurred attorneys’ fees in
excess of Forty Thousand Dollars ($40,000) in the
preparation of the Motion for Summary Judgment, Brief,
and supporting documents. The sanctions which this
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Court will impose will be the total of the expenses of
Defendants’ fees incurred as a result of the Rule 11
violations, i.e., $19,307. It is therefore
ORDERED that Defendants’ Motion for Sanctions
be GRANTED. Plaintiff and Plaintiff’s counsel at the
time, George A. Young, jointly and severally, are to pay
Nineteen Thousand Three Hundred Seven Dollars
($19,307) to the Defendants for the purpose of
compensating the Defendants for the attorneys’ fees
incurred in responding to the aforementioned Rule 11
violations. The Nineteen Thousand Three Hundred
Seven Dollars ($19,307) will be tendered to Defendants’
attorney-in-charge on or before May 1, 1989. Proof of
payment will be filed with the Court on or before May 1,
1989.
SIGNED at Houston, Texas, on this 17th day of
April, 1989.
DAVID HITTNER
United States
District Judge
A-48
Donald J. WILLY, Plaintiff-Appellant,
v.
The COASTAL CORPORATION, et al.,
Defendants - Appellees.
No. 90-2097
Summary Calendar.
United States Court of Appeals,
Fifth Circuit.
Oct. 26, 1990.
Appeal from the United States District Court for the
Southern District of Texas.
Before KING, GARWOOD, and DUHE, Circuit
Judges.
DUHE, Circuit Judge:
The appellant Donald Willy challenges the district
court’s imposition of sanctions pursuant to Rule 11 of the
Federal Rules of Civil Procedure. Willy contends the
district court lacked jurisdiction to impose these
sanctions, and that they are excessive and unreasonable.
Finding no merit in these contentions, we affirm.
Facts and Proceedings Below
Willy, a Houston attorney, filed suit in state court
against Coastal, his former employer, alleging that his
discharge was in violation of Texas law prohibiting
retaliatory firing. Coastal removed asserting that federal
employment statutes constituted an essential element of
Willy’s claim. Willy moved to remand, challenging the
basis for federal question jurisdiction. In response to
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Coastal’s 12(b)(6) motion to dismiss the case, Willy filed
a 110-page motion for summary judgment and submitted
1200 pages of unindexed, unorganized supporting
material. After two separate hearings, the district court
granted Coastal’s 12(b)(6) motion for dismissal of the
federal claims, dismissed the state law claims for lack of
pendant jurisdiction, and granted Coastal’s motion for
Rule 11 sanctions against Willy and his attorney.
On appeal, this court ruled that the suit was
improvidently removed and remanded the matter to the
state court in which the action was initially filed.1
However, we affirmed the award of Rule 11 sanctions
and remanded the case to the district court for further
proceedings in accordance with this court’s intervening
decision in Thomas v. Capital Security Services, Inc., 836
F.2d 866 (5th Cir.1988) (en banc).1 2
On remand, the district court concluded that Willy
and his attorney should be assessed $19,307 in Rule 11
sanctions.3 The district court further ruled that Coastal
1 See, Willy v. Coastal Corp., 855 F.2d 1160 (5th Cir.1988)
(Willy I).
2 This court concluded that remand was necessary
because it could not discern the basis upon which the
district court had calculated the appropriate amount of
sanctions.
3 These sanctions were imposed for the filing of
misleading and ill founded pleadings, the use of the
discovery process to harass opposing parties, repeated
references to non-existent disciplinary and evidentiary
rules, baseless allegations of conflicts of interest, and the
filing of the infamous 110-page summary judgment motion
accompanied by reams of irrelevant and unorganized
material.
A-50
and the other defendants had repeatedly notified Willy
and his attorney of their transgression to no avail. Willy
filed a Rule 59 motion for relief from this judgment,
which was denied. This appeal followed.
Rule 11 Jurisdiction
Willy contends that because the district court lacked
subject matter jurisdiction over the merits of his claim, it
was similarly without jurisdiction to impose Rule 11
sanctions. He argues that Rule 11 does not confer its
own jurisdiction, and federal courts possess no "inherent
power" to impose sanctions when subject matter
jurisdiction is lacking. We reject this argument.
As the appellant correctly notes, constitutional
limitations on the exercise of federal jurisdiction can be
neither "disregarded nor evaded." Owen Equipment and
Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396,
2403, 57 L.Ed.2d 274 (1978). However, federal courts
are entitled to exercise inherent powers, those considered
"necessary to the exercise of all others." Roadway
Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455,
2463, 65 L.Ed.2d 488 (1980), citing United States v.
Hudson, 7 Cranch 32, 34, 3 L.Ed. 259 (1812). We
believe the imposition of Rule 11 sanctions, consistent
with Congress’ intent to streamline the administration of
federal justice,4 constitutes such an inherent power.
Although the appellant maintains that Rule 11
jurisdiction is dependent on subject matter jurisdiction,
the Supreme Court in Cooter & Gell v. Hartmarx Corp.,
_ U.S. __ , 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990),
4 See, Schwarzer, Sanctions Under the New Federal
Rule 11—A Closer Look, 104 F.R.D. 181 (1985).
A-51
the seminal case on Rule 11 sanctions, teaches otherwise.
Characterizing the decision to sanction as a collateral
one, the court concluded:
Like the imposition of costs, attorney’s fees,
and contempt sanctions, the imposition of a Rule
11 sanction is not a judgment on the merits of an
action. Rather, it requires the determination of
a collateral issue: whether the attorney has
abused the judicial process, and if so, what
sanction would be appropriate.
Id. llOS.Ct. at 2456.5
This circuit and others have recognized that to
effectuate the goals of Rule 11, a district court must
possess the authority to impose sanctions irrespective of
the existence of subject matter jurisdiction. In Vatican
Shrimp Co. v. Solis, 820 F.2d 674 (5th Cir.), cert. den. 484
U.S. 953, 108 S.Ct 345, 98 L.Ed.2d 371 (1987) and
News-Texan, Inc. v. Garland, 814 F.2d 216 (5th
Cir. 1987), both involving improvidently removed suits,
this court concluded that review of Rule 11 sanctions was
available even when the district court which imposed
them was without subject matter jurisdiction.6
5 In Cooter & Gell, the specific question addressed by
the court was whether voluntary dismissal under
Fed.Rule.Civ.Pro. 41(a), after the filing of the offending
pleading, deprived the district court of the authority to
impose Rule 11 sanctions. We find, however, the court’s
discussion of the collateral character of Rule 11 orders
applicable in this context as well.
6 As the appellant correctly notes, both Vatican Shrimp
and News-Texan addressed the jurisdiction of the appellate
court to review sanctions imposed by a district court
lacking subject matter jurisdiction. Although these
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The appellant attempts to distinguish these cases on
the basis that the sanctioned parties in each were
attempting to invoke rather than resist federal jurisdiction.
We find no merit in this distinction. Willy and his
attorney were sanctioned for objectionable conduct which
was independent of his jurisdictional posture in the case.
Willy was entitled to contest removal jurisdiction to the
extent a reasonable interpretation of the law allowed
such a contest. However, this right did not include the
authority to file misleading or incomprehensible
pleadings, to use the discovery process for harassment, or
to level frivolous allegations of conflicts of interest.7 To
effectuate the goals of deterrence and punishment, Rule
11 must embrace the conduct of those who resist, as well
as those who invoke, federal jurisdiction.
Other circuits have adopted a similar view. In Wojan
v. General Motors Corp., 851 F.2d 969 (7th Cir.1988), the
plaintiff invoked diversity jurisdiction. The defendant
admitted diversity of citizenship in its early pleadings, but
five years later asserted that diversity was lacking. After
the action was dismissed, the district court concluded it
opinions do not expressly address the propriety of the
district court’s Rule 11 jurisdiction, this conclusion is
implicit in their broader holding.
7 We are similarly unmoved by Willy’s suggestion that
any injury suffered by Coastal is the result of Coastal’s
decision to seek removal of this action. Essentially, Willy
argues that if Coastal had not removed the case, Willy
would not have had to file the offending pleadings. The
district court’s denial of the motion to remand indicates
that there was at least a colorable basis upon which Coastal
could have sought removal. We refuse to find that
Coastal’s good faith efforts "caused” Willy and his attorney
to engage in sanctionable conduct.
A-53
had no jurisdiction to impose Rule 11 sanctions.8 The
Seventh Circuit reversed, concluding that the district
court "[confused] subject matter jurisdiction with the
court’s inherent ‘power’ to engage in those judicial acts
attendant to the presence of a live controversy before the
court." Id. at 972.
In Orange Production Credit Assoc, v. Frontline
Ventures, Ltd., 792 F.2d 797 (9th Cir.1986), the plaintiff
filed a complaint in federal court lacking a factual basis
for subject matter jurisdiction. The Ninth Circuit upheld
the district court’s Rule 11 order ruling that "[t]he fact
that the district court lacked jurisdiction to consider the
merits of the case did not preclude it from imposing
sanctions." Id. at 801, citing Trohimovich v.
Commissioner, 776 F.2d 873, 875 (9th Cir.1985). See also,
8 The district court based its ruling on a case from this
circuit, Chick Kam Choo v. Exxon Corp., 764 F.2d 1148 (5th
Cir.1985), affirmed, 817 F.2d 307 (5th Cir.1987), reversed on
other grounds, 486 U.S. 140, 108 S.Ct. 1684, 100 L.Ed.2d 127
(1988). In that case, this court vacated a district court’s
Rule 11 order based upon its determination that the district
court lacked subject matter jurisdiction. Although the
Seventh Circuit in Wojan criticized this case without
attempting to distinguish it, the distinction is easily made.
In Chick Kam Choo, the plaintiffs filed a wrongful death
claim in federal court, which was dismissed with prejudice
for failure to state a cause of action. The plaintiffs then
filed a nearly identical suit in Texas state court, which the
defendants removed based on diversity. The district court
granted the defendants’ motion to dismiss on the basis of
res judicata and imposed Rule 11 sanctions. This court
vacated the award of sanctions because the offending
conduct occurred in Texas state court rather than federal
court. Instead of expressing an opinion on the authority of
a district court to regulate conduct in its own arena, this
decision merely prohibits the use of Rule 11 to regulate state
court activities.
A-54
Szabo Food Service Inc. v. Canteen Corp., 823 F.2d 1073,
1077 (7th Cir.1987.) We reaffirm our conclusion in Willy
I that the district court had jurisdiction to impose Rule 11
sanctions upon Willy and his attorney.
The Thomas Formula
Under the "law of the case" doctrine, a legal decision
by this court is binding upon both district and appellate
courts in all subsequent proceedings in the same case
unless that decision is clearly erroneous. Schexnider v.
McDermott International, Inc., 868 F.2d 717 (5th
Cir.1989); White v. Martha, 377 F.2d 428, 431-32 (5th
Cir.1967). Finding no clear error, we are bound by our
prior decision affirming the district court’s award of
sanctions against both Willy and his attorney. Our review
is limited to the amount of sanctions imposed under the
Thomas criteria. We review the district court’s
calculations for an abuse of discretion. Cooter & Cell, 110
S.Q. at 2461.
The district court has broad discretion in imposing
sanctions reasonably tailored to further the objectives of
the rule. Thomas, 836 F.2d at 876-78. "Reasonableness"
within the context of Rule 11 "must be considered in
tandem with the rule’s goals of deterrence, punishment,
and compensation." Id. at 879. Additionally, the court
must consider "the extent to which the nonviolating
party’s expenses and fees could have been avoided or
were self-imposed." Id.
On remand, the district court examined both the
causal relationship between Willy’s conduct and the fees
incurred by Coastal, as well as the amount of sanctions
imposed. It found that Willy had filed confusing,
misleading, and ill-founded pleadings (including the 110-
A-55
page summary judgment motion), asserted a baseless
conflict of interest allegations and repeatedly misquoted
Texas disciplinary and evidentiary rules. The court also
found that Willy had asserted baseless RICO claims
against eighty Coastal officers and employees and
threatened to depose each of them in an effort to harass
Coastal. The court recognized Coastal’s repeated efforts,
in open court and in private communications, to advise
Willy and his attorney of these violations and mitigate its
own expenses.
As the Supreme Court has noted, a district court is in
the best position to "marshall the pertinent facts and
apply the fact-dependent legal standard mandated by
Rule 11." Cooter & Gell, 110 S.Ct. at 2459. Our review
of the record discloses ample support for the district
court’s conclusions. We find no abuse of discretion in the
amount of sanction imposed against Willy and his
attorney.
Conclusion
For the foregoing reasons, the judgment of the
district court is
AFFIRMED.
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(Caption Omitted)
JUDGMENT
This cause came on to be heard on the record on
appeal and was taken under submission on the briefs on
file.
ON CONSIDERATION WHEREOF, It is now here
ordered and adjudged by this Court that the judgment of
the District Court in this cause is affirmed.
IT IS FURTHER ORDERED that plaintiff-
appellant pay to the defendants-appellees the costs on
appeal to be taxed by the Clerk of this Court.
October 26, 1990
(Caption Omitted)
ON PETITION FOR REHEARING AND
SUGGESTION FOR REHEARING IN BANC
(November 27, 1990)
The Petition for Rehearing is DENIED and no
member of this panel nor Judge in regular service on the
Court having requested that the Court be polled on
rehearing en banc, (Federal Rules of Appellate
Procedure and Local Rule 35) the Suggestion for
Rehearing En Banc is DENIED.
ENTERED FOR THE COURT:
John M. Duhe, Jr.
United States Circuit Judge
A-57
ARTICLE III OF THE CONSTITUTION OF
THE UNITED STATES
Section. 1. The judicial Power of the United States,
shall be vested in one supreme Court, and in such
inferior Courts as the Congress may from time to time
ordain and establish. The Judges, both of the supreme
and inferior Courts, shall hold their Offices during good
Behavior, and shall, at stated Times, receive for their
Services, a Compensation, which shall not be diminished
during their Continuance in Office.
Section. 2. The judicial Power shall extend to all
Cases, in Law and Equity, arising under this Constitution,
the Laws of the United States, and Treaties made, or
which shall be made, under their Authority;—to all Cases
affecting Ambassadors, other public Ministers and
Consuls;—to all Cases of admiralty and maritime
Jurisdiction;—to Controversies to which the United
States shall be a Party;—to Controversies between two or
more States;—between a State and Citizens of another
State;—between Citizens of different States;—between
Citizens of the same State claiming Lands under Grants
of different States, and between a State, or the Citizens
thereof, and foreign States, Citizens or Subjects.
In all Cases affecting Ambassadors, other public
Ministers and Consuls, and those in which a State shall
be Party, the supreme Court shall have original
Jurisdiction. In all the other Cases before mentioned,
the supreme Court shall have appellate Jurisdiction, both
as to Law and Fact, with such Exceptions, and under
such Regulations as the Congress shall make.
A-58
TITLE 28, UNITED STATES CODE:
§ 1254. Court of appeals: certiorari; certified
questions
Cases in the courts of appeals may be reviewed by
the Supreme Court by the following methods:
(1) By writ of certiorari granted upon the petition of
any party to any civil or criminal case, before or after
rendition of judgment or decree.
§ 1331. Federal question
The district courts shall have original jurisdiction of
all civil actions arising under the Constitution, laws, or
treaties of the United States.
§ 1441. Actions removable generally
(a) Except as otherwise expressly provided by Act of
Congress, any civil action brought in a State court of
which the district courts of the United State have original
jurisdiction, may be removed by the defendant or the
defendants, to the district court of the United States for
the district and division embracing the place where such
action is pending. For purposes of removal under this
chapter, the citizenship of defendants sued under
fictitious names shall be disregarded.
(b) Any civil action of which the district courts have
original jurisdiction founded on a claim or right arising
under the Constitution, treaties or laws of the United
States shall be removable without regard to the
citizenship or residence of the parties. Any other such
action shall be removable only if none of the parties in
interest properly joined and served as defendants is a
citizen of the State in which such action is brought.
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§ 1447. Procedure after removal generally
* * *
(c) A motion to remand the case on the basis of any
defect in removal procedure must be made within 30 days
after the filing of the notice of removal under section
1446(a). If at any time before final judgment it appears
that the district court lacks subject matter jurisdiction, the
case shall be remanded. An order remanding the case
may require payment of just costs and any actual
expenses, including attorney fees, incurred as a result of
the removal. A certified copy of the order of remand
shall be mailed by the clerk to the clerk of the State
court. The State court may thereupon proceed with such
case.
§ 1919. District courts; dismissal
for lack of jurisdiction
Whenever any action or suit is dismissed in any
district court or the Court of International Trade for want
of jurisdiction, such court may order the payment of just
costs.
FEDERAL RULES OF CIVIL PROCEDURE:
Rule 11. Signing of Pleadings,
Motions, and Other Papers; Sanctions
Every pleading, motion, and other paper of a party
represented by an attorney shall be signed by at least one
attorney of record in the attorney’s individual name,
whose address shall be stated. A party who is not
represented by an attorney shall sign the party’s pleading,
motion, or other paper and state the party’s address.
Except when otherwise specifically provided by rule or
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statute, pleadings need not be verified or accompanied by
affidavit. The rule in equity that the averments of an
answer under oath must be overcome by the testimony of
two witnesses or of one witness sustained by
corroborating circumstances is abolished. The signature
of an attorney or party constitutes a certificate by the
signer that the signer has read the pleading, motion, or
other paper; that to the best of the signer’s knowledge,
information, and belief formed after reasonable inquiry it
is well grounded in fact and is warranted by existing law
or a good faith argument for the extension, modification,
or reversal of existing law, and that it is not interposed
for any improper purpose, such as to harass or to cause
unnecessary delay or needless increase in the cost of
litigation. If a pleading, motion, or other paper is not
signed, it shall be stricken unless it is signed promptly
after the omission is called to the attention of the pleader
or movant. If a pleading, motion, or other paper is
signed in violation of this rule, the court, upon motion or
upon its own initiative, shall impose upon the person who
signed it, a represented party, or both, an appropriate
sanction, which may include an order to pay to the other
party or parties the amount of the reasonable expenses
incurred because of the filing of the pleading, motion, or
other paper, including a reasonable attorney’s fee.
M ichael A. Maness
Attorney And Counselor At Law
1900 North Loop West, Suite 500 Telephone: (713) 680-9922
Houston, Texas 77018 FAX: (713) 680-0804
January 21, 1991
TO: Participants in the New York University School of Law
Rule 11 Conference, November 2-3, 1990
FROM: Michael A. Maness
RE: Willy v. Coastal Corp., et al.
Enclosed is a copy of the petition for certiorari filed in
the Supreme Court of the United States on January 17, 1991.