4th Circuit reverses sanctions imposed on plaintiff’s attorney

A district court erred when it imposed sanctions on plaintiff’s counsel after granting summary judgment in favor of the defendant, the 4th U.S. Circuit Court of Appeals has ruled.

Nawal Ali filed an employment discrimination suit against her former employer, Falls Church-based BC Architects Engineers.

After granting summary judgment to BC on Ali’s final claim, the district court imposed sanctions against her counsel pursuant to
28 U.S.C. § 1927 and ordered the attorney to pay roughly $57,000 in costs.

By the end of discovery, Ali’s counsel knew or should have known that his client’s sole remaining claim was baseless, the district court found, and he should have voluntarily dismissed the case instead of opposing BC’s motion for summary judgment, unreasonably and vexatiously multiplying the proceedings in a manner warranting sanctions.

Counsel appealed, and the federal appellate panel reversed.

“Ali’s counsel had at least two non-frivolous grounds for opposing summary judgment,” Judge Pamela
A. Harris wrote. “The district court abused its discretion when it imposed sanctions on Ali’s counsel based on the ‘flawed … legal premise’ that the failure to substantiate two specific allegations in the complaint rendered his opposition to summary judgment so frivolous, that it constituted an abuse of process under § 1927.”

The 17-page opinion in Ali v. BC Architects Engineers PLC (VLW 026-2-056) was joined by Chief Judge Albert Diaz and Judge James
Andrew Wynn.

Rachel Yates of Yates Appellate Law in Richmond explained that the district court failed to conduct the proper analysis and should have examined whether there was an “arguable” basis for the attorney’s response.

“Simply because an attorney loses
on the merits does not mean that the attorney should face these types of sanctions,” she said. “Here, the attorney had at least two ‘non-frivolous’ arguments.”

Arinderjit Dhali of Dhali PLLC in Washington, D.C., who represented Ali, was “thrilled” with the court’s decision.

“Most good lawyers know that filing a motion for sanctions is a waste of time and when they are rarely awarded, they are almost always reversed,” he said.

Washington, D.C., attorney Lars Liebeler, who represented BC, declined to comment on the decision.

Sanctions awarded

A computer-assisted design drafter, Ali worked at BC from March 2015 until April 2016, when she was terminated. Ali is a Syrian American Muslim woman and wears a hijab.

After her termination, Ali sued BC in 2018 for unlawful race discrimination, hostile work environment, retaliation, breach of contract and a violation of the Fair
Labor Standards Act. She claimed that she was passed up for promotions and later demoted because of her race, and that another BC employee harassed and discriminated against her because she was Arab.

The district court dismissed all of her claims. On appeal, the 4th Circuit affirmed, with the exception of a claim for retaliatory termination.

Specifically, the panel noted that Ali alleged “that her work performance was satisfactory throughout her tenure,” and that after she reported discrimination and harassment to BC’s owners, “she was twice denied reasonable requests to work from home to care for her sick son.”

During discovery, evidence was revealed that did not corroborate all of the complaint’s allegations, including those highlighted by the 4th Circuit; other new information also came out that was less favorable to BC.

The parties filed cross motions for summary judgment, and the district court sided with the employer. BC then moved for sanctions pursuant to § 1927. The district court granted the motion and ordered Ali’s counsel to pay $57,015.82, which he appealed.

Standard for § 1927 sanctions

Ali’s counsel took the position that prior Fourth Circuit case law categorically foreclosed the imposition of § 1927 sanctions for the kind of conduct the district court relied on, but the panel disagreed.

“It is true that § 1927 ‘focuses on the conduct of the litigation and not on its merits,’ and the ‘weaknesses of [a plaintiff’s] case’ are not by themselves grounds for sanctions under § 1927,” the court wrote. “But at the same time … our precedents leave open the possibility that § 1927 sanctions may be awarded when counsel continues to litigate a frivolous claim ‘long after it would have been reasonable and responsible to have dismissed’ it – which necessarily requires the court to consider whether a claim in fact qualifies as frivolous, with no ‘arguable basis either in law or in fact.’”

However, the court did agree with Ali’s counsel that in applying the standard under § 1927 – that he “knew, or should have known” by the end of discovery that the retaliation claim was “entirely groundless,” or “baseless,” the district court abused its discretion.

“[T]hat a claim proves to be non-meritorious cannot by itself be grounds for sanctions, and it does nothing to distinguish this case from countless other employment discrimination actions in which plaintiffs are ultimately successful,” the court said. “What is missing from this seemingly routine merits decision is any indication that Ali’s claim was not only unavailing but also so obviously frivolous that its continued pursuit could be deemed an ‘abuse of court processes’ under § 1927.”

District court’s inquiry too narrow

The district court assessed only the two specific allegations in Ali’s complaint that the 4th Circuit cited in reversing dismissal of the retaliation claim.

“We think the district court framed its § 1927 inquiry too narrowly,” the court wrote. “We can assume the district court was correct that these two specific allegations were disproved by discovery evidence. But by then, the case had moved on in other respects as well: BC had proffered legitimate and non-retaliatory reasons for Ali’s termination, and Ali had pointed to evidence from discovery to show that these reasons were pretextual.”

For purposes of its sanctions inquiry, the district court should instead have asked whether Ali had an “arguable basis either in law or in fact,” for her pretext argument, the court said, and a review of the record showed that Ali put forth at least two non-frivolous arguments to oppose summary judgment on this basis.

BC offered shifting explanations for Ali’s termination, an action that has been recognized as evidence of pretext, the court explained, and BC failed to follow its own progressive discipline policy in terminating her.

While the district court concluded that neither argument carried the day at the summary judgment stage, “[t]hat a lawyer ends up on the wrong side of this line does not make his position so evidently baseless that he should be sanctioned for pursuing it,” the court noted.

The court reversed the district court’s judgment imposing sanctions on Ali’s counsel.