JOHNSON, Circuit Judge:
In view of the high import of Rule 11 to both the bench and bar, this Court took the instant case en banc to resolve any inconsistencies between previous opinions in this Circuit regarding procedures and standards for the imposition of sanctions under Rule 11, as amended in 1983.
I. FACTS AND PROCEDURAL HISTORY
On October 19, 1984, the plaintiffs-employees filed suit against their former employer Capital, alleging that Capital had engaged in a wide variety of racially and sexually motivated discriminatory practices in such areas as hiring, promotions, terminations, and on-the-job treatment. The plaintiffs based their suit on Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., 42 U.S.C. § 1981, and the thirteenth amendment. Additionally, the plaintiffs filed a class action on behalf of all similarly situated black women who were, had been, or would be employed by Capital.
Ultimately, Capital prevailed on the merits of the litigation after a three day bench trial. As the facts regarding the disposition of the main litigation are accurately set forth by the panel opinion, they are not reiterated at this time. Thomas v. Capital Security Systems, Inc., 812 F.2d 984, 986 (5th Cir.1987). However, we repeat, for purpose of clarity, that portion of the panel opinion discussing the disposition of Capital's subsequent motion for attorney's fees.
On appeal, a panel of this Court affirmed in part and vacated in part the district court's decision regarding Capital's motion for attorney's fees. Specifically, the panel, applying a de novo standard of review to the district court's Rule 11 determination, held that Rule 11 imposes upon attorneys several affirmative duties, including the continuing obligation to reevaluate one's litigation position. Furthermore, the panel recognized the mandatory character of Rule 11, concluding that once a violation of Rule 11 occurs, it is incumbent upon the district court to assess some type of sanction upon the offending litigant. Finally, the panel held that district courts must now furnish specific findings of fact and conclusions of law for all Rule 11 decisions, which should reflect an assessment by the district court of an attorney's compliance, or lack thereof, with each of the affirmative obligations of Rule 11.
The panel concluded that, as to Capital's Rule 11 claim, a remand was appropriate due to the ambiguous language of the district court's order indicating that the district court may have found a Rule 11 violation, but nevertheless chose not to impose sanctions. The panel reasoned that the decision not to impose sanctions was no longer an available option to a district court once a Rule 11 violation occurred. In this regard, the panel stressed that mandatory findings and conclusions by the district court were "particularly crucial," since they would serve as the foundation for the court's de novo review of whether Rule 11's provisions had been violated.
A. Amended Rule 11
In recent years, Fed.R.Civ.P. 11 has generated extensive debate and controversy among legal scholars, jurists, and practitioners. Originally enacted in 1937, Rule 11, as amended in 1983, currently provides in pertinent part:
Despite its laudable goals, Rule 11 was rarely applied before its amendment in
In addition to the requirement of a reasonable prefiling inquiry, Judge Schwarzer, in his article Sanctions Under the New Federal Rule 11 — A Closer Look, 104 F.R.D. 181 (1985), notes further changes effected by amended Rule 11 from its predecessor, including: (1) the rule now applies to all papers filed in court, not only pleadings; (2) the rule applies to persons appearing pro se as well as to attorneys and parties; (3) the rule specifies that papers filed must be well grounded in fact and warranted by existing law or by a good faith argument for the extension, modification or reversal of existing law; and (4) the rule specifies that papers may not be interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. Id. at 184-85. One further important difference between former Rule 11 and Rule 11, as amended in 1983, is the latter's mandatory character, directing district courts to impose a sanction once a violation of Rule 11 has occurred. While the type of sanction imposed lies within the discretion of the district court, amended Rule 11 expressly authorizes an award of reasonable expenses, including attorney's fees, as an appropriate sanction.
B. Standard of Review
As a threshold matter, the appropriate standard of review to utilize when assessing a district court's ruling on Rule 11 sanctions must be determined. Rule 11 provides that if a paper is signed in violation of the rule, "the court ... shall impose ... an appropriate sanction...." Fed.R.Civ.P. 11. The rule itself does not set forth a specific standard of review for Rule 11 decisions; however, the Advisory Committee recognized the necessity of retaining discretion for such decisions in the district court when it pronounced,
Fed.R.Civ.P. 11 advisory committee notes.
In this regard, one line of authority in this Circuit established a single abuse of discretion standard to be applied across-the-board to all of the issues ruled on in Rule 11 cases. In Davis v. Veslan Enterprises, 765 F.2d 494 (5th Cir.1985), we stated, "[i]n determining whether the district court erred in imposing such sanctions, this Court's review is limited to determining whether the district court abused its discretion." Id. at 498. See also Bell v. Bell, slip. op. at 2179 (5th Cir. Sept. 17, 1986); Southern Leasing Partners, Ltd. v. McMullan, 801 F.2d 783, 788 (5th Cir.1986).
However, in a recent decision, Robinson v. National Cash Register Co., 808 F.2d 1119 (5th Cir.1987), this Circuit appeared to depart from its previous application of the abuse of discretion standard and opted instead for a more demanding, differentiated standard of review encompassing three tiers of analysis.
Id. at 1125-26 (emphasis added and citations and footnote omitted). Attempting to reconcile this new three-tiered standard of review with the Court's previous line of decisions under Davis, the Robinson Court distinguished subsidiary facts used by the district court to determine that Rule 11 has been violated from the ultimate question of whether a particular set of facts constitutes a violation of Rule 11. The Robinson Court applied a deferential abuse of discretion standard to the subsidiary findings of the district court, such as whether bad faith or dilatory reasons were present which would give rise to Rule 11 sanctions, but applied a de novo analysis to the ultimate conclusion as to whether Rule 11 had been violated.
Additionally, the Court in Robinson placed great emphasis on the mandatory language of Rule 11 which provides that "[i]f a pleading, motion, or other paper is signed in violation of [Rule 11], the court ... shall impose ... an appropriate sanction ..." reasoning that such mandatory language dictated de novo review. Fed.R.Civ.P. 11 (emphasis added). In conformity with the Robinson opinion, the panel in the instant case also applied the three-tiered differentiated standard of review to the district court's denial of sanctions.
There is also a divergence of opinion among the circuits as to the proper standard of review to be applied to Rule 11 decisions by district courts. The Ninth Circuit established the three-tiered analysis adopted in Robinson. Zaldivar v. City of Los Angeles, 780 F.2d 823, 828 (9th Cir.1986). See also Brown v. Federation of State Medical Boards, 830 F.2d 1429, 1434 (7th Cir.1987). Other circuits apply a variation of the three-tiered analysis espoused in Zaldivar, utilizing an abuse of discretion standard when reviewing the factual reasons for imposing Rule 11 sanctions and the amount and type of sanctions, while reserving a de novo analysis for reviewing the legal sufficiency of a pleading or motion and the determination to impose sanctions. See Donaldson v. Clark, 819 F.2d 1551, 1556 (11th Cir.1987) (en banc); Westmoreland v. CBS, 770 F.2d 1168, 1175 (D.C.Cir.1985); Eastway Construction Corp. v. City of New York, 762 F.2d 243, 254 n. 7 (2d Cir.1985), cert. denied, ___ U.S. ___, 108 S.Ct. 269, 98 L.Ed.2d 226 (1987).
After careful consideration of the policies behind Rule 11, we believe application of an abuse of discretion standard across-the-board to all issues in Rule 11 cases is the better approach. Although the imperative character of the language "shall impose" in the rule carries with it the natural concomitant that mandatory sanctions broaden the scope of appellate review, we do not interpret the amended rule to remove from the district court the discretion which it must enjoy to effectively regulate its courtroom. In this regard, Judge Schwarzer observes
We likewise believe that the imposition or denial of sanctions of necessity involves a fact-intensive inquiry into the circumstances surrounding the activity alleged to be a violation of Rule 11. The perspective of a district court is singular. The trial judge is in the best position to review the factual circumstances and render an informed judgment as he is intimately involved with the case, the litigants, and the attorneys on a daily basis. We can perceive of no advantage that would result if this Court were to conduct a second-hand review of the facts from the trial court level, as "the district court will have a better grasp of what is acceptable trial-level practice among litigating members of the bar than will appellate judges." Eastway Construction Corp. v. City of New York, 637 F.Supp. 558, 566 (E.D.N.Y.1986).
In a recent publication by the American Bar Association surveying the law of sanctions as it has developed since Rule 11 was amended in 1983, the author notes that those courts advocating de novo review are probably doing so in an effort to promote uniformity in the imposition of sanctions, "but the goal of uniformity may be no better served by the de novo standard because many sanctions cases are fact-intensive, close calls. Furthermore, the complexity of the three-tiered standard creates additional work for district courts and additional issues for appeal. The abuse of discretion standard is preferable...." C. Shaffer, Jr. and P. Sandler, Sanctions: Rule 11 and Other Powers, at 28-29 (2d ed. 1987) (citation omitted).
Of course, legal issues may be subsumed within a group of issues generated by a district court's decision on sanctions. For instance, the actions of a litigant may be so egregious when considered in the light of prior decisions by this Court upholding or denying the imposition of sanctions, that those actions become per se violative of Rule 11 as a matter of well-established legal precedent. We emphasize, however, that the overall umbrella remains abuse of discretion. To hold otherwise would transform an appellate court into a trial court where attorneys' and litigants' conduct would be reviewed as if those individuals were litigating their case initially on the appellate level. This cannot be the result contemplated by the rulemakers when they amended Rule 11 in 1983. Appellate courts are not replacements for district courts and we decline to adopt a standard of review in Rule 11 cases which would effectively usurp the discretion of district courts.
C. Attorneys' Obligations Under Rule 11
Having determined the appropriate standard of review in Rule 11 cases, we now turn to the obligations imposed upon litigants and their counsel under the amended rule. Consistent with the purpose of the 1983 amendments, this Court has held that Rule 11 compliance is now measured by an objective, not subjective, standard of reasonableness under the circumstances. Robinson, 808 F.2d at 1127; Davis, 765 F.2d at 497.
It is well established that Rule 11 imposes the following affirmative duties with which an attorney or litigant certifies he has complied by signing a pleading, motion, or other document.
In addition to the aforementioned duties, the instant panel imposed upon a certifying attorney the continuing obligation to review and reevaluate his position as a case develops.
While sympathizing with the concerns that prompted previous panels in our Circuit to hold to the contrary, we depart from language in the instant panel's opinion and earlier decisions by this Court that impose upon an attorney a continuing obligation under Rule 11. Instead, we believe that a construction of Rule 11 which evaluates an attorney's conduct at the time a "pleading, motion, or other paper" is signed is consistent with the intent of the rulemakers and the plain meaning of the language contained in the rule. Like a snapshot, Rule 11 review focuses upon the instant when the picture is taken — when the signature is placed on the document. Rule 11 was promulgated for a particular purpose — to check abuses in the signing of pleadings. Fed.R.Civ.P. 11 advisory committee notes.
Our interpretation of Rule 11 finds support in the fact that Rule 11 has as its primary focal point the certification made by an attorney that he has complied with the affirmative duties imposed by the rule at the moment he affixes his signature to a pleading, motion, or other paper in a lawsuit. The rule itself is titled "Signing of Pleadings, Motions, and Other Papers; Sanctions." (Emphasis added). Furthermore, the express language of Rule 11 provides that "[t]he signature of an attorney or party constitutes a certificate by the signer that" he has complied with the obligations imposed by Rule 11. Fed.R.Civ.P. 11 (emphasis added). In addressing this issue, the Second Circuit reached a similar conclusion, stating
Oliveri v. Thompson, 803 F.2d 1265, 1274 (2d Cir.1986), cert. denied, ___ U.S. ___, 107 S.Ct. 1373, 94 L.Ed.2d 689 (1987).
Moreover, the advisory committee notes to the amended rule support our conclusion that Rule 11 applies only to the signing of pleadings and imposes a standard of good faith and reasonable investigation as of the date of that signing. Specifically, the committee
As a practical matter, while the review of an attorney's conduct for Rule 11 purposes is isolated to the moment the paper is signed, virtually all suits will require a series of filings. This series of filings may indicate a pattern of attorney conduct of some consequence. On the other hand, one or more of the filings may indicate attorney conduct entirely different from that reflected by previous filings. In any event, Rule 11 applies to each and every paper signed during the course of the proceedings and requires that each filing reflect a reasonable inquiry.
Ample protection from the use of abusive tactics in litigation in respects other than the signing of papers is provided by other rules governing attorney conduct. For instance, section 1927 imposes a continuing obligation on attorneys by prohibiting the persistent prosecution of a meritless claim.
Rule 11 is restricted to the signing of pleadings, motions, and other papers imposing upon attorneys and litigants its affirmative duties as of the date a document was signed.
D. Mandatory Application of Sanctions
Rule 11 provides that "[i]f a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose ... an appropriate sanction...." Fed.R.Civ.P. 11 (emphasis added). In Bell v. Bell, a panel of this Court found no abuse of discretion on the part of the district court in finding no sanction as the appropriate sanction for a Rule 11 violation. The Bell Court stated "[w]e are not constrained to say that the district court must, upon the establishment of a violation of the rules at issue here, impose some sort of sanction however nominal." Id. at 2178 (footnote omitted). Subsequent to the Bell decision, in Robinson, another panel of this Circuit found that where a district court determines an attorney's conduct to be violative of Rule 11, that court must then fashion an appropriate sanction in accordance with the dictates of Rule 11. Robinson, 808 F.2d at 1130-31. We adopt the Robinson rule. There are no longer any "free passes" for attorneys and litigants who violate Rule 11. Once a violation of Rule 11 is established, the rule mandates the application of sanctions. This appears to be the only construction consistent with the plain language of the rule.
When Rule 11 was amended in 1983 to include the mandatory "shall" language regarding the imposition of sanctions, the rulemakers inserted such language in an attempt to combat the reluctance of judges to impose sanctions on their fellow professionals. This reluctance on the part of the judiciary to impose sanctions has been explained as stemming from judges' sympathy, as former practitioners, for the pressures on lawyers in the adversarial system, concern that available sanctions would punish the client, and uncertainty as to whether judges could impose sanctions on their own initiative. Nelken, Sanctions Under Amended Federal Rule 11 — Some "Chilling" Problems in the Struggle Between Compensation and Punishment, 74 Geo. L.J. 1313, 1321-22 (1986).
In concluding that Rule 11 requires the imposition of sanctions once a violation has been found, however, we stress that
An examination of the history behind the 1983 amendments to Rule 11 indicates that the rulemakers inserted the discretionary language in Rule 11 in response to concerns that mandatory sanctions would chill the adversarial process. The advisory committee notes expressly disclaim any intent to chill an attorney's enthusiasm or creativity in pursuing factual or legal theories.
The broad discretion afforded district courts is reflected in the numerous types of sanctions that may be imposed under Rule 11. As attorneys' fees and reasonable costs are expressly provided for by Rule 11, we recognize the natural tendency of district courts to gravitate toward imposing these types of sanctions. However, we would caution that
Donaldson, 819 F.2d at 1556 (emphasis added). Sanctions should also be educational and rehabilitative in character and, as such, tailored to the particular wrong. To serve these multiple purposes behind Rule 11, the district court should carefully choose sanctions that foster the appropriate purpose of the rule, depending upon the parties, the violation, and the nature of the case.
District courts may choose to deter individuals who violate Rule 11 with monetary sanctions. One benefit of monetary sanctions is that they may be imposed exclusively against the attorney, thereby avoiding punishment of the client for attorney misconduct. Additionally, as to parties, financial penalties have been characterized as perhaps "the most effective way to deter a powerful and wealthy party from bringing frivolous or vexatious litigation" or from maintaining a baseless position in defense of another party's claim. Id. at 1557.
While monetary sanctions are appropriate under Rule 11, it is noted that
Schwarzer, 104 F.R.D. at 201-02. In an innovative approach, one district court required the errant attorney to circulate the court's opinion criticizing his conduct throughout his firm. Heuttig & Schromm, Inc. v. Landscape Contractors Council, 582 F.Supp. 1519 (N.D.Cal.1984), aff'd, 790 F.2d 1421 (9th Cir.1986). The educational effect of sanctions might be enhanced even by requiring some form of legal education.
While district courts may theoretically still dismiss baseless claims or defenses as sanctions, "such a dismissal is now better grounded, not on misconduct, but on the merits under Rules 12, 41, 55, and 56." Schwarzer, 104 F.R.D. at 204. Also, Rules 16 and 26 provide a more solid basis for taking such action in response to abusive practices by litigants. Finally, as to disciplinary action applied to an attorney under Rule 11, district courts should recognize a very real problem that might arise; due process considerations emerge if this type of penalty is applied. Id.
In sum, a district court must impose sanctions once a violation of Rule 11 is found, but the district court retains broad discretion in determining the "appropriate" sanction under the rule. What is "appropriate" may be a warm friendly discussion on the record, a hard-nosed reprimand in open court, compulsory legal education, monetary sanctions, or other measures appropriate to the circumstances. Whatever the ultimate sanction imposed, the district court should utilize the sanction that furthers the purposes of Rule 11 and is the least severe sanction adequate to such purpose.
E. Mitigation of Fees and Expenses
Rule 11 specifically permits the district court to order a party who violates Rule 11 to pay his opponent "the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee." Fed.R.Civ.P. 11 (emphasis added). Therefore, according to the express language of Rule 11, in those cases in which such sanctions are imposed, the expenses reimbursed must
What constitutes "reasonable expenses" and a "reasonable attorney's fee" within the context of Rule 11 must be considered in tandem with the rule's goals of deterrence, punishment, and compensation. In this respect, we note "reasonable" does not necessarily mean actual expenses. INVST Financial Group v. Chem-Nuclear Systems, 815 F.2d 391, 404 (6th Cir.), cert. denied, ___ U.S. ___, 108 S.Ct. 291, 98 L.Ed.2d 251 (1987). See also In re TCI Ltd., 769 F.2d 441, 448-49 (7th Cir.1985); United Food & Commercial Workers v. Armour and Co., 106 F.R.D. 345, 349 (1985). One district court has characterized the relevant policy concerns underlying Rule 11 as follows:
United Food, 106 F.R.D. at 348-49 (citations omitted).
The "reasonableness" finding necessarily embraces an inquiry by the court as to the extent to which the nonviolating party's expenses and fees could have been avoided or were self-imposed. INVST, 815 F.2d at 404. A party 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. If a litigant fails to do so, the district court may exercise its discretion and either reduce the award accordingly, or in some instances, decline to award any expenses. See Brown, 830 F.2d at 1439 (Court should consider whether the party seeking fees caused the litigation to be longer than necessary, because a duty of mitigation exists for that party.).
Similarly, an attorney may not remain idle after a "motion, pleading, or other paper" filed in violation of Rule 11 by his opponent has come to his attention. The advisory committee notes stress that "[a] party seeking sanctions should give notice to the court and the offending party promptly upon discovering a basis for doing so." Fed.R.Civ.P. 11 advisory committee notes (emphasis added). In the same manner that a failure to mitigate expenses may result in a corresponding reduction in the amount of attorney's fees and costs awarded, so also may a failure to provide prompt notice of an alleged violation to the court and the offending party reduce the ultimate award. Donaldson, 819 F.2d at 1560. Prompt notice of Rule 11 violations conserves judicial time and energy, as well as monetary resources, while at the same time deterring future violations. At least one district court has characterized a party's duty to mitigate damages and provide notice as one encompassing a duty to use the least expensive method to resolve the dispute, stating
United Food, 106 F.R.D. at 350.
In mandating prompt notice, we do not mean to impose upon litigants a duty of notification that requires written notice or notice through the formality of pleadings; nor do we specify a particular time frame in which notice must be given by counsel. Notice may be in the form of a personal conversation, an informal telephone call, a letter, or a timely Rule 11 motion. We do caution, however, that "to avoid misunderstanding and permit appellate review, the notice given, or evidence of the giving of notice, should be made a part of the record." Donaldson, 819 F.2d at 1560. In this regard, prudence dictates that notice should be reduced to writing and given to both the court and the offending party.
Our Circuit has previously recognized the importance of prompt action by litigants in Rule 11 cases. In Trevino v. Holly Sugar Corp., 811 F.2d 896 (5th Cir.1987), this Court affirmed the district court's denial of Rule 11 sanctions against the plaintiff when the defendant, in July 1985, had challenged all of the plaintiff's claims as frivolous from the inception of the suit in April 1983. Id. at 908. The district court declined to impose sanctions, holding that the Rule 11 request for sanctions
Our discussion presupposes that when a court's primary purpose in imposing sanctions is to deter, not to compensate, a determination of the "reasonableness" of fees and expenses does not necessarily depend on the steps taken to mitigate those expenses by the Rule 11 movant. Rather, the relevant considerations become the conduct and resources of the party to be sanctioned. See Nelken, 74 Geo.L.J. at 1336. However, it is precept that sanctions must be imposed within a time frame that has a nexus to the behavior sought to be deterred. This nexus becomes particularly important when a court imposes sanctions against a litigant on its own initiative. Sanctions assessed by courts should not amount to an "accumulation of all perceived misconduct, from filing through trial," resulting in a "single post-judgment retribution in the form of a massive sanctions award." In re Yagman, 796 F.2d 1165, 1183 (9th Cir.1986), cert. denied, ___ U.S. ___, 108 S.Ct. 450, 98 L.Ed.2d 390 (1987).
Id. (citations omitted).
We recognize that the drafters of Rule 11 contemplated that, in the case of pleadings, the sanctions issue normally will be determined at the end of the litigation. Fed.R.Civ.P. 11 advisory committee notes. Thus, by our opinion today, we do not mean to imply that withholding a sanctions decision until the end of trial is in all instances inappropriate. "The particular format to be followed should depend on the circumstances of the situation and the severity of the sanction under consideration." Id. For instance, a determination of whether or not a pleading is well grounded in law and fact may not be feasible until after an evidentiary hearing on a motion for summary judgment or even after the parties have presented their case at trial. Indeed, even if the information available to one side may seem to indicate that the other's position is not well founded, the former is nonetheless ordinarily entitled to assume, unless and until the contrary is unmistakably apparent, that his opponent is acting reasonably and in good faith; and, of course, the trial court may likewise so assume. Additionally, a judge is not obliged to raise the sanctions issue initially before applying sanctions sua sponte. Nevertheless, where a complaint or other paper is obviously defective within the context of Rule 11, we join with the Ninth Circuit in concluding that a court should at a minimum notify the individual certifying the document that Rule 11 sanctions will be assessed at the end of trial if appropriate. In re Yagman, 796 F.2d at 1184. Such early notice will warn a certifying individual that he may be exposed to substantial sanctions should he persist in his offensive conduct, as well as prevent unsuspecting parties from suffering a large punitive award at the end of the proceedings.
F. Conclusions of Law and Findings of Fact
Before turning to the facts of the instant case, there is one final issue to be addressed: that is, whether Rule 11 decisions must in all cases be supported by specific findings of fact and conclusions of law by the district court. Rule 11 itself makes no mention of this concern and there is, understandably, no helpful legislative history.
At least one circuit has already expressly rejected our panel's language requiring evidentiary findings and explanations every time a party seeks sanctions under Rule 11. Szabo Food Service, Inc. v. Canteen Corp., 823 F.2d 1073, 1084 (7th Cir.1987) (en banc), petition for cert. filed, (Nov. 20, 1987). However, the Szabo court stopped short of adopting a rule that would excuse specific explanations for Rule 11 decisions in all cases. Focusing on the severity of the sanctions imposed in a particular case, the Seventh Circuit stated,
Id. at 1084 (citation omitted). The Szabo court went on to conclude that the Rule 11 movant in that case was entitled to some explanation for the district court's abrupt dismissal of his claim for sanctions and remanded for a more precise determination of the sanctions issue.
In a subsequent case, the Seventh Circuit more precisely delineated the responsibility of district courts in Rule 11 cases, requesting that, in cases involving substantial awards, district judges state with some specificity the reasons for the imposition of a sanction, and the manner in which the sanction is computed. Brown, 830 F.2d at 1438. The Brown court recognized that what constitutes a "substantial" award is incapable of precise definition, but will usually involve a large sum of money or be large in relation to the offending conduct. Additionally, the court required that sanctions must be "quantifiable with some precision," sufficiently incorporating the district court's findings and conclusions so as to permit effective appellate review of the justification for the award. Id.
In a similar vein, the Tenth Circuit has mandated findings in Rule 11 cases when the prepayment of a sanctions award has the effect of a preclusion of access to the courts. Cotner, 795 F.2d at 903.
Mindful of the concerns of our brethren on other circuits, we adopt a rule today that does not require specific findings and conclusions by a district court in all Rule 11 cases. However, the rule we adopt does emphasize the importance of an adequate record for appellate review in those cases in which the violation is not apparent on the record and the basis and justification for the trial judge's Rule 11 decision is not readily discernible. As Judge Schwarzer notes
Schwarzer, 104 F.R.D. at 199. Like a sliding scale, the degree and extent to which a specific explanation must be contained in the record will vary accordingly with the particular circumstances of the case, including the severity of the violation, the significance of the sanctions, and the effect of the award.
If the sanctions imposed are substantial in amount, type, or effect, appellate review of such awards will be inherently more rigorous; such sanctions must be quantifiable with some precision. Therefore, justification for the Rule 11 decision in the record must correspond to the amount, type, and effect of the sanction applied. Likewise, if a district court denies, rather than imposes, sanctions without justification in the record, the appellate court will undertake an analysis similar to that mentioned above regarding the award of sanctions. Thus, the sword of inadequate record preparation cuts both ways — against a successful Rule 11 movant who has obtained a significant award as well as against a litigant who successfully defeats a Rule 11 motion.
We therefore reject a rule that would impose upon district courts the onerous and often time-consuming burden of making specific findings and conclusions in all Rule 11 cases. In doing so, it should be clearly understood that when the basis and justification for a Rule 11 decision is not readily discernible on the record, an adequate explanation by the trial court for the decision will be necessary. In its absence, a prompt remand for such findings will be made.
G. Capital's Rule 11 Motion
We now turn to the district court's determination that Rule 11 sanctions were not appropriate in the instant case. As previously mentioned, this Court will not overturn a district court's ruling on a request
It is well established that Rule 11 imposes upon attorneys the affirmative obligation of reasonable inquiry into the facts and law of their case. In its order denying Capital's motion for attorney's fees as Rule 11 sanctions, the district court stated that while it was not "totally convinced that a reasonable prefiling inquiry as to the specific facts and the law was made by the attorneys for Plaintiffs in the instant case," it nevertheless was reluctant to grant Capital's motion because of the unsettled state of existing law prior to the time the plaintiffs' complaint was filed. After reviewing the district court's order denying Capital's motion, we agree with the panel that the district court may have found a Rule 11 violation, but chose to excuse the offending conduct and not to impose sanctions. As we noted earlier, Rule 11, by its express language, mandates the imposition of sanctions once a violation of the rule is discovered. We agree with the panel's statement that "under our current practice there are no `free passes.'" Thomas, 812 F.2d at 989. District courts may not selectively impose sanctions when a violation of Rule 11 is established. Therefore, in view of the fact that a Rule 11 violation may have been perpetrated by the plaintiffs without the subsequent imposition of sanctions by the district court, we are unable to say that the district court did not abuse its discretion in denying Capital's Rule 11 motion.
Furthermore, it is important to note that, in its motion for attorney's fees, Capital asserted that the plaintiffs failed to make a reasonable inquiry into either the facts or law before filing their complaint and that the action was brought and litigated in bad faith. Specifically, Capital pointed to the expansion of the plaintiffs' judicial complaint beyond the EEOC complaint and the assertion of a class action by the plaintiffs that was never certified. In this respect we note that, as we today hold, Rule 11 does not impose a continuing obligation on attorneys, but only a standard of good faith and reasonable investigation as of the date legal documents are signed.
If, on remand, the district court should decide that Rule 11 was violated, and that the appropriate sanction is the rigorous one of an award of attorney's fees, the district court must weigh in its Rule 11 analysis Capital's duty to mitigate its expenses (1) by correlating its response, in hours and funds expended, to the merits of the plaintiffs' claim and (2) by timely notifying the court and the plaintiffs-employees of the alleged Rule 11 violations. In this vein, we note that Capital did not request Rule 11 sanctions until after the case was on appeal to this Court, despite the fact that the alleged violations of Rule 11 had occurred during the initial stages of the litigation.
Our opinion today strives to further the rulemakers' goal of deterring abuse in the litigation process by providing guidance concerning the procedures and standards utilized in the imposition of Rule 11 sanctions. We trust that our opinion, like the rule itself, will instill among members of the bar a sense of responsibility to prevent public perception of the legal profession as
For the reasons stated above, we vacate the district court's order denying Rule 11 sanctions and remand for further proceedings not inconsistent with this opinion. Further, we affirm the district court's order denying attorney's fees under 28 U.S.C. § 1927 and 42 U.S.C. § 2000e-5(k).
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
Fed.R.Civ.P. 11, 28 U.S.C. (West 1960).
Rule 11 was only one of several rules amended in 1983 to deter the abuse and misuse in litigation. Rule 16 was amended to promote greater judicial management over civil cases from their inception by narrowing the scope of the litigation and expediting the disposition of cases, thereby reducing expense and delay. 97 F.R.D. 190, 192-93 (1983) (Letter from Walter R. Mansfield, Chairman, Advisory Committee on Civil Rules to Judge Edward T. Gignoux, Chairman, and Members of the Standing Committee on Rules of Practice and Procedure.). See also Schwarzer, Sanctions Under the New Federal Rule 11 — A Closer Look, 104 F.R.D. 181, 183 (1985). Amended Rule 26 was intended by rulemakers to protect against excessive discovery and evasion of reasonable discovery demands. Mansfield Letter, 97 F.R.D. 190. Rule 11 was amended to minimize abuse in the signing of legal papers by setting forth a more precise definition of the standards to be met by a signing party or attorney and mandating sanctions if those standards were not met. Id.
Furthermore, as previously noted, Rules 16 and 26 deter abuse in litigation by providing procedures for effective judicial management of pretrial and discovery. Finally, under its inherent power, a district court may award to the prevailing party reasonable attorney's fees upon a showing that an attorney has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. Batson v. Neal Spelce Associates, 805 F.2d 546, 550 (5th Cir.1986).
In addition to district courts, appellate courts may also impose sanctions in the form of single or double costs against an appellant who brings a frivolous appeal. Fed.R.App.P. 38. Tax courts also possess the power to deter abuse by imposing damages, not to exceed $5,000.00, against taxpayers who have asserted a frivolous or baseless claim, or have filed a claim only for purposes of delay. 26 U.S.C. § 6673.
Oliveri, 803 F.2d at 1274.
See also Albright v. Upjohn Co., 788 F.2d 1217, 1222 (6th Cir.1986) (Rule 11 expressly mandates the imposition of sanctions once a violation is found.); Westmoreland, 770 F.2d at 1174 (Under amended Federal Rule of Civil Procedure 11, however, the new provision that the court "shall impose" sanctions mandates the imposition of sanctions when warranted by groundless or abusive practices.).
Lieb, 788 F.2d at 158.
Schwarzer, 104 F.R.D. at 198-200 (footnotes omitted).
While we, like the district court in United Food, strongly encourage litigants to use the least expensive alternative to alert the court and the offending party of a Rule 11 violation, we stress that what constitutes the appropriate alternative will vary depending on the nature of the case and the severity of the violation. In United Food, the court's decision was premised to a large extent on the obvious and egregious nature of the Rule 11 violation in the original complaint. The same considerations which influenced the court's decision in United Food may not apply when the violation occurs in a subtle manner. Moreover, a party's plan of action in a Rule 11 situation necessarily depends upon the extent to which the local rules permit and the court is receptive to informal resolution of such disputes.