Appeal from the United States District Court for the Northern District of California; D.C. No. CV-88-4587; Robert H. Schnacke, District Judge, Presiding.
Alarcon, Boochever, T. G. Nelson, Circuit Judges.
Bud Antle, Inc. (Antle) appeals from an order awarding attorney's fees and other expenses to Fresh Fruit & Vegetable Workers Local 78-B (Union) under Rule 11 of the Federal Rules of Civil Procedure. Antle seeks reversal because the district court did not provide Antle with prior notice of its intention to award sanctions under Rule 11 contrary to the law of this circuit. Antle further contends that the district court failed to identify the signed document that it believed violated the requirements of Rule 11. We agree. We reverse and remand for further proceedings.
The Union has cross-appealed from the order awarding attorney's fees on the ground that the district court abused its discretion in basing the amount of the award on the rate paid by the Union to its attorney in this matter. We do not imply whether any attorney's fee should be awarded but we briefly address this issue because of the possibility that it may arise again. We conclude that the court did not abuse its discretion in establishing the amount of the award.
Antle first argues that the district court erred in awarding sanctions under Rule 11 because the district court failed to give Antle prior notice that it was considering the imposition of Rule 11 sanctions. Antle asserts that while the court informed it that an award of attorney's fees was being considered, the district court did not state that such award would be imposed as a sanction under Rule 11. We review the imposition of sanctions under Rule 11 for abuse of discretion. See Cooter & Gell v. Hartmarx Corp., 110 S. Ct. 2447, 2461 (1990).
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.
Due process requires that the awarding of Rule 11 sanctions must be preceded by notice and a hearing that provides an opportunity to respond. See Tom Growney Equip., Inc. v. Shelly Irrigation Dev., Inc., 834 F.2d 833, 836 (9th Cir. 1987). Antle had no notice that the district court was considering Rule 11 sanctions. In a letter to Antle's counsel dated October 19, 1988, the Union stated that it intended to seek Rule 11 sanctions. The Union failed to file a motion for the imposition of sanctions under Rule 11.
The Union's Petition for Order to Compel Arbitration requested attorney's fees and costs of suit. No authority was cited in support of this request. The Union's Memorandum of Points and Authorities in Support of Motion for Summary Judgment, dated March 23, 1989, argued that a court had the inherent power to award attorney's fees because Antle had acted in bad faith in refusing to arbitrate. No reference was made to the imposition of sanctions under Rule 11 by the Union in its points and authorities. The first mention of the imposition of sanctions pursuant to Rule 11 appears in the district court's final order filed on December 20, 1989. At the hearing to set attorney's fees on December 8, 1989, the district court implied that it was not considering imposing any sanctions. The court commented as follows:
Well, I do agree that these are not really sanctions. These are compensation for out of pocket expenses . . .
The failure of the district court to give Antle notice that it was considering Rule 11 sanctions deprived Antle of the opportunity to present evidence that it had not violated Rule 11. Accordingly, ...