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John Karl had represented Theodore Lucas in an age discrimination case against the Secretary of Education. That claim survived summary judgment, but lost at the bench trial. After deciding the motion for summary judgment, the Magistrate Judge issued a sua sponte motion for sanctions under FRCP 11(b)(3). The magistrate judge eventually imposed sanctions of $3,000. See Lucas v. Spellings, 408 F. Supp. 2d 8 (D.D.C. 2006). The Magistrate Judge imposed sanctions on Karl for the alleged offense of failing to label his inferences as inferences, and for failing to present material adverse facts in his opposition to the motion for summary judgment.

On appeal, I submitted an amicus brief for the NELA Ethics and Sanctions Committee. The amicus focused on the important role of inferences in employment discrimination cases, and the sufficiency of showing support in the record for the claims made.  Here are some of my favorite excerpts from the Court's opinion, starting at page 9 of the slip opinion:

There is no basis in the text of Rule 11(b)(3) for the legal proposition that an attorney must separately identify “fact” and “inference.” The Rule merely requires an attorney to certify that the factual contentions in a paper he presents to the court “have evidentiary support.” FED. R. CIV. P. 11(b)(3). “Inferences” -- which are commonly described as “circumstantial evidence” -- are as capable of providing evidentiary support as “facts” -- which are commonly described as “direct evidence.” See U.S. Postal Serv. Bd. of Governors v. Aikens, 460 U.S. 711, 714 n.3 (1983) (“As in any lawsuit, the plaintiff may prove his case by direct or circumstantial evidence.”); Doe v. U.S. Postal Serv., 317 F.3d 339, 343 (D.C. Cir. 2003) (“[W]e generally draw no distinction between the probative value of direct and circumstantial evidence.”). As a consequence, “juries are routinely instructed that ‘[t]he law makes no distinction between the weight or value to be given to either direct or circumstantial evidence.’” Desert Palace, Inc. v. Costa, 539 U.S. 90, 100 (2003) (quoting 1A K. O’MALLEY, J. GRENIG & W. LEE, FEDERAL JURY PRACTICE AND INSTRUCTIONS, CRIMINAL § 12.04 (5th ed. 2000)). “The reason for treating circumstantial and direct evidence alike,” the Supreme Court has explained, “is both clear and deep rooted: ‘Circumstantial evidence is not only sufficient, but may also be more certain, satisfying and persuasive than direct evidence.’” Id. (quoting Rogers v. Mo. Pac. R.R. Co., 352 U.S. 500, 508 n.17 (1957)).

P. 12:
He may not have proof by a preponderance, but he certainly has “support.” Accordingly, a lawyer does not violate Rule 11 by saying so.

. . . The magistrate judge also imposed sanctions on the premise that, when an attorney makes a factual contention, he must simultaneously disclose evidence that is contrary to that contention. The judge thought that Karl’s failure to do so violated Rule 11, notwithstanding that he did have affirmative evidentiary support for his contentions.

P. 15

. . . There is nothing in the text of Rule 11(b)(3) to suggest that any of these statements violated that rule. In each case, the “factual contentions” in Karl’s pleadings had “evidentiary support,” and that is all the rule requires. See Navarro-Ayala v. Hernandez-Colon, 3 F.3d 464, 467 (1st Cir. 1993) (“Rule 11 normally does not require one party to uncover and to set forth the facts that support the other side’s position.”). This is not to say that it may never be misleading to assert that something has evidentiary support without advising the court of contrary facts. But once again, context is relevant.

The pleading at issue here was an opposition to the defendant’s motion for summary judgment. The defendant’s motion asserted that “there is no genuine issue of material fact precluding the entry of judgment for defendant as a matter of law.” Def.’s Mem. in Supp. of Its Mot. for Summ. J. at 1. Under Local Rules 7(h) and 56.1, Karl’s obligation in opposing the defendant’s motion was to file a separate statement “setting forth all material facts as to which it is contended there exists a genuine issue necessary to be litigated.” To do that, Karl was obliged to do no more than set forth facts in contravention of the defendant’s claims. The rules do not require him to rehearse the government’s evidence, and nothing in Rule 11 imposes that added burden. Nor could the omission of that evidence have been misleading to the reader. Many of the facts that the magistrate judge criticized Karl for failing to disclose in his opposition were contained in the government motion to which he was responding.

P. 17

. . . We have examined each of the eleven statements at issue on this appeal. In light of the foregoing analysis, we conclude that none warranted the imposition of Rule 11 sanctions. Accordingly, the sanctions order is
Vacated.

P. 10
. . . It is also relevant that Karl filed his opposition to summary judgment pursuant to Local Rules 7(h) and 56.1. Those rules require that “[a]n opposition to such a motion shall be accompanied by a separate concise statement of genuine issues setting forth all material facts as to which it is contended there exists a genuine issue necessary to be litigated, which shall include references to the parts of the record relied on to support the statement.” D.D.C. LOCAL RULE 7(h) (emphasis added); id. 56.1 (same). Karl adhered to the rules, and each of the criticized sentences in Karl’s Rule 7(h) Statement was followed by record citations indicating which evidence Karl thought supported the statement. Thus, there was no hiding of the ball. Even if it mattered whether the supporting evidence was direct or circumstantial (and it does not), there was no possibility that the reader would be misled.

The amicus brief was filed on behalf of the National Whistleblowers Center (NWC) and the Government Accountability Project (GAP). GAP attorneys Kasey Dunton-Dermont and Tom Devine assisted with the brief.

The SOX provision at issue is 18 U.S.C. §1514A(b)(1)(B).  It provides that if the Department of Labor (DOL) does not issue a final order within 180 days, then the complainant can file a de novo civil action in U.S. district court.  

Between 1999 and 2005, David Stone became a quick climber of the corporate ladder at Instrumentation Laboratory Company (IL).  Promoted twice, we went from a Sales Representative to Director of National Accounts.  In this national management position, Stone learned that IL had not been paying required administrative fees to Group Purchasing Organizations (GPOs). Combined with internal control problems, this meant that IL was misrepresenting its financial condition to investors. Stone reported these problems to corporate officials who promptly began retaliating.  First they gave Stone a bad performance appraisal.  Then, in March 2006, they fired him.

Stone filed a SOX whistleblower complaint with DOL's Occupational Safety and Health Administration (OSHA) which (as it does in most cases) found no merit in the complaint.  Stone appealed to an administrative law judge (ALJ) who dismissed the case without allowing Stone to have discovery or a hearing.  It is no wonder then that Stone decided to leave the DOL process and file in federal court.

The federal judge, however, also did not want to hear the case.  Citing a decision from Louisiana, and a comment by the Secretary of Labor, the judge said that allowing Stone to have a trial after the ALJ had issued a recommended decision was an "absurd result."  Ignoring the plain language of SOX, the judge ordered that the case go back to DOL for a final decision.  Stone appealed.

In our amicus brief, NWC and GAP argue that the plain and clear language of SOX controls, and it was an error for the judge to refuse to hear Stone's case.  The brief notes that the Fourth Circuit reached the same conclusion for discrimination cases under Title VII, holding that de novo review “makes clear” that the trial in district court “proceeds as if no earlier proceedings had been completed at all.” Laber v. Harvey, 438 F.3d 404, 421 (4th Cir. 2006). Other courts have also followed SOX the way it is written, allowing de novo litigation. JDS Uniphase Corp. v. Jennings, 473 F.Supp.2d 705, 710 (E.D. Va. 2007); Collins v. Beazer Homes USA, Inc., 334 F. Supp. 2d 1365, 1374 (N.D. Ga. 2004).

The brief argues that legislative history need not be considered when the statute's language is clear. Nevertheless, the history of SOX supports what the language says.  Senator Patrick Leahy stated “Only if there is not a final decision within 180 days of the complaint (and such delay is not shown to be due to the bad faith of the claimant) may he or she bring a de novo case in federal court with a jury trial available.” Legislative History of Title VIII of HR 2673, the Sarbanes-Oxley Act of 2002, Section 806, 148 Cong. Rec. S7418, S7420 (July 26, 2002).  Congress clearly knew what it was saying.  In fact, Congress has said it six more times in the whistleblower laws it has passed since enacting SOX in 2002:  Energy Reorganization Act, 42 USC 5851(b)(4); Surface Transportation Assistance Act, 49 USC 31105(c); National Transit Systems Security Act of 2007, 6 USC 1142(c)(7); Federal Rail Safety Act, 49 USC 20109(d)(3); Defense Authorization Act, 10 USC 2409(c)(2); and Consumer Product Safety Improvement Act, 49 USC 2087(b)(4).

The brief concludes that it is not “absurd” to follow the law as Congress wrote it.  A decision is expected by the end of 2009.  Click here to download the Brief of Amici Curiae.