Pаtrick V. MORRIS, Individually and on behalf of all others similarly situated, Plaintiff-Appellee, v. WACHOVIA SECURITIES, INCORPORATED, Defendant-Appellant. Patrick V. Morris, Individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. Wachovia Securities, Incorporated, Defendant-Appellee.
Nos. 05-1217, 05-1281.
United States Court of Appeals, Fourth Circuit.
Argued Feb. 1, 2006. Decided May 17, 2006.
Before MICHAEL, SHEDD, and DUNCAN, Circuit Judges.
Affirmed in part, vacated in part, and remanded with instructions by published opinion. Judge MICHAEL wrote the opinion, in which Judge SHEDD and Judge DUNCAN joined.
MICHAEL, Circuit Judge.
An individual investor‘s securities fraud claims against a brokerage firm were rejected when the district court granted the firm a summary judgment and dismissal. The firm then invoked a provision of the Private Securities Litigation Reform Act of 1995 (Act or Reform Act),
I.
Patrick V. Morris owned shares of The Proctor & Gamble Co. worth about $1.6 million when he retired from the company in 1999. Morris decided to sell the shares and invest the proceeds in a diversified retirement portfolio. In December 2001 he invested roughly $1.4 million with the Masters Program, an investment service offered by Wachovia Securities, Inc. The Masters Program allows investors with more than $100,000 to have their portfolios handled by money managers who usually work with accounts exceeding $1 million. Wachovia describes participation in the program as involving three steps: first, a Wachovia financial advisor helps the investor choose an investment strategy; second, the advisor recommends money managers who will implement the strategy by selecting and monitoring suitable securities; and third, the advisor and the investor periodically assess investment results.
Morris selected five money managers who had contracted with Wachovia to participate in the program. Morris signed several documents disclosing numerous fees associated with the program. Contrary to his expectations, Morris‘s initial account balance of approximately $1.4 million decreased by $300,000, or 21 percent, within “several months.” Morris v. Wachovia Sec., Inc., 277 F.Supp.2d 622, 626 (E.D.Va.2003).
A.
In November 2002 Morris sued Wachovia in the U.S. District Court for the Eastern District of Virginia. His complaint attributed his losses to Wachovia‘s operation of the Masters Program in violation of the securities laws (specifically, section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act“),
Among the allegations contained in the first amended complaint, but not the second amended one, was that Wachovia never disclosed that the firm profited by lending to third parties stocks held in Morris‘s account. SEC rules sharply constrain such lending, but permit it for stocks held by investors who have bought on margin. See
The second amended complaint contained numerous claims under section 10(b) of the Exchange Act and section 206 of the Investment Advisers Act of 1940,
B.
Wachovia moved for summary judgment. In his brief opposing Wachovia‘s motion, Morris (through counsel) made two contentions that the district court later determined were Rule 11(b) violations. The first contention concerned the deposition of Charles W. Baldiswieler, an executive at TCW Investment Management Co., one of the five money managers Morris selected. At one point in his deposition Baldiswieler was asked about a Wachovia questionnaire to TCW that used the phrase “commission recapture program.” J.A. 1051. Baldiswieler testified that the phrase could have been a reference to a “soft dollar arrangement.” Id. Under such an arrangement an investment adviser directs its clients’ brokerage transactions to a broker-dealer in exchange for products and services (other than transaction execution) ranging from research reports to client referrals. See U.S. Securities & Exchange Commission, Inspection Report on the Soft Dollar Practices of Broker-Dealers, Invеstment Advisers and Mutual Funds at Part II.A (Sept. 22, 1998) available at http://www.sec.gov/news/ studies/softdolr.htm.
However, Baldiswieler also testified in his deposition, “I believe Wachovia is not a soft dollar broker.... I don‘t believe they even have the apparatus to do soft dollars.” J.A. 1052. Morris‘s brief quoted Baldiswieler‘s more tentative comment about soft dollars and argued that “[t]he logical and reasonable inference to be drawn” from this and other facts was that Wachovia selected only those money managers who would help Wachovia earn trade execution income, not those who would maximize client returns. J.A. 646. The brief never pointed out that Baldiswieler said specifically that he did not believe Wachovia was a soft dollar broker.
The second problematic contention in Morris‘s brief opposing summary judgment concerned the deposition of Wachovia executive Burt Whitе. White described himself as “the only door that gets money managers into the Masters Program.” J.A. 425. Asked whether Wachovia had any controls or policies “to ensure that financial advisors are paying attention to the portfolio construction in a way that maximizes their returns for the investors,” White replied, “I don‘t know if there are
The district court granted Wachovia summary judgment as to all of Morris‘s remaining claims on August 2, 2004. On the same day, the district court entered an order dismissing Wachovia‘s counterclaim that had been based on Morris‘s express waiver of receipt of trade confirmation slips. A provision in the waiver purported to obligate Morris to indemnify Wachovia for any expenses arising from Wachovia‘s actions based on the waiver. The court concluded that the indemnity provision neither applied to Morris‘s suit nor complied with Virginia‘s rule “that indemnity against one‘s own wrongdoing must be clearly set forth in the contract.” J.A. 1631.
C.
Although the summary judgment and dismissal order terminated the case on the merits, the district court did not make specific findings “upon [the] final adjudication” as to whether all parties and lawyers had complied with the anti-abuse requirеments of Rule 11(b), as the Reform Act requires. On August 6, 2004, Wachovia moved to alter or amend the judgment, see
Wachovia requested that the district court “direct [it] to submit its affidavit of costs and attorneys’ fees incurred in defending this action.” Reply Br. at 28-29. At the sanctions hearing on November 8, 2004, the district court noted that Wachovia had not submitted any actual evidence of its fees. Later that week Wachovia‘s counsel submitted an affidavit listing the fees by generic procedural stages of the case, for example, “Class Certification Motion” and “Document Discovery.” The affidavit named the lawyers or paralegals who worked on each stage, their hourly rates, hours billed on the stage, and the total amount billed. Morris mоved to strike this affidavit as untimely presented.
In a memorandum opinion filed on January 28, 2005, the district court found (as noted above) three Rule 11(b) violations by Morris‘s counsel: the unsubstantiated stock loan claim in the original and first amended complaints, the selective citation of Baldiswieler‘s testimony in the brief opposing summary judgment, and the mischaracterization of White‘s testimony in that same brief. The district court concluded, however, that these violations did not merit the award of monetary sanctions. The court held that the other instances of misconduct alleged by Wachovia were not Rule 11(b) violations and did not merit sanctions. The court therefore denied Wachovia‘s motion to alter the judgment to impose sanctions and denied as moot Morris‘s motion to strike the fee affidavit. Finally, the court denied Morris‘s motion for sanctions, concluding that Wachovia had not violated Rule 11(b) in filing its cоunterclaim. Wachovia appeals and Morris cross-appeals.
Title I of the Reform Act,
At the end of a private securities fraud action, the district court must evaluate on the record whether each party and lawyer complied with Rule 11(b) “as to any complaint, responsive pleading, or dispositive motion” filed.
The Act guides the district court‘s selection of a sanction. When the abuse being punished is a Rule 11(b) violation in “any responsive pleading or dispositive motion,” the Act establishes a rebuttable prеsumption that the “appropriate sanction,”
Thus, for private securities fraud suits Congress altered the consequences of a Rule 11(b) violation but did not rewrite the conventional standards for evaluating Rule 11(b) compliance. Dellastatious v. Williams, 242 F.3d 191, 197 n. 5 (4th Cir. 2001) (quoting Simon DeBartolo Group, L.P. v. Richard E. Jacobs Group, Inc., 186 F.3d 157, 167 (2d Cir.1999)). Those standards continue to apply.
Rule 11(b) provides in part that when a lawyer “present[s] to the court” a pleading, motion, or other paper,” the lawyer on penalty of sanctions certifies two things “to the best of [his or her] knowledge, information, and belief, formed after an inquiry reasonable under the circumstances.” First, the lawyer certifies that “the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.”
A legal argument fails to satisfy Rule 11(b)(2) when “in applying a standard of objective reasonableness, it can be said that a reasonable attorney in like circumstances could not have believed his actions to be legally justified.” Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 153 (4th Cir.2002) (punctuation omitted). “The legal argument must have absolutely no chance of success under the existing precedent” to contravene the rule. Id. (punctuation omitted). Factual allegations fail to satisfy Rule 11(b)(3) when they are “unsupported by any information obtained prior to filing.” Brubaker, 943 F.2d at 1373.
By the time a case reaches the final order stage, the district court has acquired unique familiarity with the conduct of the parties and their lawyers. That familiarity explains why our review of “all aspects” of a district court‘s Rule 11 determination is for abuse of discretion. In re Kunstler, 914 F.2d 505, 513 (4th Cir.1990). Nothing in the Reform Act‘s sanctions provision changes this standard of review. Moreover, the Supreme Court has reasoned that review of Rule 11 decisions for abuse of discretion “discourage[s] litigants from pursuing marginal appeals, thus reducing the amount of satellite litigation.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 404, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990).
A district court has abused its discretion if its decision “is guided by erroneous legal principles” or “rests upon a clear-ly erroneous factual finding.” Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir.1999). We do not ask whether we would have come to the same conclusion as the district court if we were examining the matter de novo. Fellheimer, Eichen & Braverman, P.C. v. Charter Techs., 57 F.3d 1215, 1223 (3d Cir.1995). Rather, after reviewing the record and the reasons the district court offered for its decision, we reverse for abuse of discretion if we form “a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.” Westberry, 178 F.3d at 261 (punctuation omitted).
III.
Wachovia first challenges the district court‘s evaluation of Morris‘s complaints.
A.
The district court held that “Morris’ counsel lacked a sufficient factual basis to include the stock loaning allegation in the [first amended complaint].” J.A. 1628. The allegation, in other words, was “unsupported by any information obtained prior to filing” in cоntravention of Rule 11(b). Brubaker, 943 F.2d at 1373. The court then found that this Rule 11(b) violation in the first amended complaint did not compel an award of fees and costs under the Reform Act for two reasons: (1) “[the violation‘s] impact on Wachovia and the case was de minim[i]s,” and (2) the “baseless allegation ... d[id] not qualify as [a] ‘substantial violation[ ]‘” triggering § 78u-4(c)(3)(A)(ii)‘s presumption for the sanctions sum. J.A. 1629.
A Rule 11(b) violation in a complaint is only severe enough to activate the full attorney fees and expenses presumption if the violation makes the complaint as a whole a “substantial failure” under Rule 11(b). Therefore, if we determine that the district court did not err in concluding that the stock loan allegation alone did not make the first amended complaint a “substantial failure” under Rule 11(b), we may affirm without reaching the question whether the impact of the violation was de minimis in the context of the litigation as a whole.
We must first consider what standard of appellate review applies to a district court‘s Reform Act determination that a complaint is a “substantial failure” under Rule 11(b). The Act does not specify the standard. While at first blush de novo review might appear to be appropriate, as it is for ordinary questions of law, we conclude that Reform Act “substantial failure” determinations should be reviewed for abuse of discretion. This conclusion hews to two Supreme Court precedents. In one case the Court explained that because trial judges are in a better position than appellate judges to decide whether parties or their lawyers have violated Rule 11, trial judge decisions in this area warrant deference. Cooter & Gell, 496 U.S. at 403-05. Reform Act “substantial failure” determinations are simply a variation of Rule 11(b) assessments. In the other case the Court adopted abuse of discretion as the stаndard of review for district court rulings under the Equal Access to Justice Act (EAJA),
Under this standard we conclude that the district court did not abuse its discretion in holding that the factually-unsupported stock loan allegation did not turn the first amended complaint into a “substantial failure” under Rule 11(b). “[T]he ‘substantial failure’ language requires an inquiry into whether the complaint‘s Rule 11(b) violations make the complaint as a whole ‘essentially,’ ‘without material qualification,’ ‘in the main,’ or
Here, the stock loan allegation was only one of many claims asserted in the first amended complaint. Wachovia does not contend that rebutting the allegation, which was not very complex factually, imposed any demonstrably onerous burden. The allegation did not, moreover, figure so prominently in the case as to contaminate the first amended complaint “in the main.” So the district court did not abuse its discretion when it declined to classify the first amended complaint as a “substantial failure” under Rule 11(b) solely because of the stock loan claim.
B.
Wachovia next argues that the district court should have concluded that several of Morris‘s other allegatiоns were without legal or factual support in violation of Rule 11(b). In particular, Wachovia homes in on four matters: (1) the pay-to-play allegation that Wachovia selected as money managers only those who pledged to generate trading fee income for Wachovia; (2) the allegation that Wachovia impermissibly earned hidden fees; (3) the allegation that Wachovia earned market-making revenue at Morris‘s expense; and (4) the “fraud on the market” allegation that would have enabled Morris to benefit from a presumption of reliance on a Wachovia misrepresentation.
To prevail Wachovia must first show that the district court abused its discretion in finding that none of these claims violated Rule 11(b). If violations are established, Wachovia must next show that the court abused its discretion in concluding that these violations did not make the complaints as a whole “substantial failure [s]” under Rule 11(b). Finally, the sanctions opponent (such as Morris‘s counsel) could avoid payment of the adversary‘s full fees by demonstrating that the Rule 11(b) violations found were “de minimis,” but we do not reach this last analytical step because we dispense with Wachovia‘s claims at the first two steps.
1.
Among the allegations in the second amended complaint was the “pay-to-play” claim, namely that Wachovia allowed a money manager to enlist in the Masters Program only if the manager promised to help Wachovia earn stock trade, asset custody, or other fees from the manager‘s clients. The complaint attributed the information supporting this allegation to a “Richmond-based investment adviser.” J.A. 83.
“[A] complaint containing allegations unsupported by any information obtained prior to filing, or allegations based on information which minimal factual inquiry would disprove, will subject the author to [Rule 11] sanctions.” Kunstler, 914 F.2d at 516 (emphasis added). This rule also empowers the district court to sanction a party or lawyer for “insisting [on] a position after it is no longer tenable.”
The district court did not abuse its discretion in concluding that Morris‘s lawyers had a sufficient factual basis for the pay-to-play claim. Morris‘s lawyers initially grounded the pay-to-play allegation on information provided by Stephen M. God-
The district court concluded that Mooney‘s “personal knowledge” was only hearsay and therefore insufficient to allow Morris to survive summary judgment on the pay-to-play allegation. The court nevertheless determined that the testimony was sufficient to avoid a Rule 11(b) violation on the pay-to-play allegation. Because Mooney‘s testimony provided some (albeit vulnerable) support for the allegation, there was no abuse of discretion in the court‘s determination.
2.
The first amended complaint alleged that Wachovia charged hidden fees each time Morris bought stocks. This claim stemmed from an apparent discrepancy in the accоunt statements. The price per share as listed on the statements, multiplied by the number of shares purchased, did not match the total sum charged each month. The hidden fees claim was brought into doubt when Morris‘s lawyers examined the confirmation slips associated with each trade. The slips, unlike the monthly statements, reported the prices charged to a full nine decimal places. Morris had waived receipt of the slips when he opened the account, and Wachovia provided the slips to Morris‘s counsel only after the first amended complaint was filed. The second amended complaint dropped this hidden fees claim.
The district court acted within its discretion in holding that Morris‘s lawyers were entitled to infer from the monthly account statements that Morris was being charged transaction fees not previously disclosed to him. Although Wachovia asserted that the slips, not the monthly statements, accurately stated the fees charged when the firm provided the slips to Morris‘s lawyers, that assertion alone did not compel Morris‘s lawyers to abandon the hidden fees claim. Rather, Morris‘s lawyers were entitled to a reasonable amount of time to investigate the assertion and the discrepancy between the slips and the account statements. Because Morris‘s lawyers dropped the claim when their inquiry established that it was no longer tenable, the district court did not abuse its discretion in determining there was no Rule 11(b) violation.
3.
The first amended complaint also alleged that on some unspecified trades Wachovia acted as a principal rather than as an agent for Morris as buyer or seller, thereby profiting directly at Morris‘s expense. Morris‘s counsel based this market-making revenue claim on Wachovia‘s statement in a disclosure doсument that it engaged in “transactions as agent, or where permitted by law, as principal for clients.” J.A. 1095-96. This claim did not appear in the second amended complaint.
The district court did not abuse its discretion in concluding that the disclosure document relied on by Morris‘s lawyers provided a sufficient factual basis for his market-making revenue claim. Wachovia points to another document that said the
4.
With regard to Morris‘s allegation that he had relied on Wachovia‘s fraudulent statements or omissions, the first amended complaint asserted: “The fraud alleged herein consisted of the omission of material facts, accordingly reliance is presumed as a matter of law. Alternatively, should the fraud alleged herein be construed as misstatements the Plaintiff and the Class members rely on the ‘fraud on the market’ doctrine.” J.A. 1348. See Longman v. Food Lion, Inc., 197 F.3d 675, 682 n. 1 (4th Cir.1999) (“[W]here material false statements or omissions have been disseminated to an impersonal, well-developed market for securities, the reliance of individual plaintiffs on the integrity of the market price may be presumed.“) (punctuation omitted). The second amended complaint, by contrast, did not invoke the fraud on the market theory; rather, it emphasized that Morris was entitled to rely оn Wachovia‘s representations because Wachovia owed Morris a fiduciary duty. The district court concluded that the first amended complaint‘s reference to the fraud on the market theory did not contravene Rule 11(b)‘s requirement that legal contentions be reasonably justified. Wachovia argues that this conclusion was an abuse of discretion.
We agree that this case was ill-suited for the fraud on the market theory. The case concerns alleged improprieties in an investment advice and management program Wachovia operated. Wachovia‘s alleged misstatements about fees charged were not falsehoods that could have been reflected in the market price of any securities. The fee charged for a securities trade is distinct from the price of the security being traded. The Masters Program connected Morris to money managers in exchange for fees Wachovia charged, but the program was not a security traded on any market (let alone, in Longman‘s terms, an “impersonal” and “well-developed” market). The fraud on the market theory was simply inapplicable to Morris‘s claim. Thus, when Morris‘s lawyers invoked the theory in the first complaint, they violated Rule 11(b)‘s prohibition on legal arguments that have “absolutely no chance of success under existing precedent.” Hunter, 281 F.3d at 153.
The next step is to determine whether this violation made the first amended complaint a “substantial failure” under Rule 11(b). We note that the violation concerned an essential element of the securities fraud claim, which was the only kind of claim the first amended complaint asserted. A private plaintiff‘s Rule 10b-5 securities fraud complaint must allege among other things that the plaintiff relied on the misrepresentations at issue. See The Wharf (Holdings) Ltd. v. United Int‘l Holdings, Inc., 532 U.S. 588, 593, 121 S.Ct. 1776, 149 L.Ed.2d 846 (2001) (“the plaintiff [must] sustain damages through reliance on the misrepresentation“) (citing Basic Inc. v. Levinson, 485 U.S. 224, 243, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)).
Nevertheless, Wachovia‘s arguments ultimately pay insufficient attention to the entirety of the first amended complaint.
The first amended complaint‘s reliance allegation did not hinge, then, on the fraud on the market theory, but could be reasonably understood to hinge on the fiduciary relationship between Wachovia and Morris. As a result, the frivolous invocation of the theory did not transmute the first complaint as a whole into a “substantial fаilure” under Rule 11(b). We therefore cannot conclude that the district court committed reversible error in assessing Wachovia‘s claim.
C.
In sum, the district court did not err in rejecting Wachovia‘s four arguments that Morris‘s complaints were “substantial failures” under Rule 11(b). In addition, because the sole instance of Rule 11(b) misconduct that the district court identified in the complaints did not convert them into “substantial failures” of compliance in violation of the rule, supra part III.A., the district court was not bound to presume that Wachovia should receive an award of its full fees and costs in the action under
IV.
Wachovia next challenges the district court‘s evaluation of Morris‘s brief opposing summary judgment. Because a motion for summary judgment is a “dispositive motion,” a brief opposing such a motion falls within the ambit of the Reform Act‘s sanction inquiry. See
Wachovia contends that the district court erred in allocating the burden of proving the fee amount to the firm and in not providing it another chance to explain what portion of its fees were fairly traced to the Baldiswieler and White violations. In arguing that the district court was obligated to award a fee notwithstanding any deficiencies in its fee affidavit,
The Reform Act does not instruct the district court how to determine a “reasonable attorneys’ fee.” Fee-shifting statutes such as the Civil Rights Attorney‘s Fees Awards Act of 1976,
We thus evaluate the adequacy of the fee evidence Wachovia presented using our § 1988 precedent. In Fair Housing Council of Greater Washington v. Landow, 999 F.2d 92 (4th Cir.1993), we “out-line[d] the appropriate tack a fee applicant should follow” under § 1988:
First, the applicant must make every effort to submit time records which specifically allocate the time spent on each claim. Second, those records should attempt to specifically describe the work which the fee applicant allocated to unsuccessful claims so as to assist the district court in determining the reasonableness of the fee request. In estаblishing these guidelines, we recognize that some claims may have such a common core of facts and legal theories so as to prevent any allocation of the fees to the applicant‘s separate claims. However, we hereby admonish all parties that a blind adherence to this argument runs the risk of incurring a complete denial of fees.
Id. at 97. Applicants for fee awards under the Reform Act, no less than those seeking awards under
We take the district court‘s conclusion that Wachovia failed to prove the fee amount attributable to the Rule 11(b) violations to mean that the district court found Wachovia‘s fee affidavit deficient on its face. The fee affidavit in the record makes clear that Wachovia‘s counsel did nothing to “allocate the time spent on each claim” or to “describe the work” it performed in a way that cоuld have assisted the court in “determining the reasonableness of the fee request.” Confronting these weaknesses in the fee affidavit, the district acted within its discretion in denying the fee award. Landow, 999 F.2d at 97-98.
Wachovia is correct that the Reform Act imposes on the district court the duty of making specific findings regarding
Also meritless is Wachovia‘s argument that it should have been allowed to submit a more detailed fee affidavit once it learned at the sanctions hearing that the district court needed evidence of which fees were fairly traceable to the Rule 11(b) violations. Requiring another round of fee submissions here would effectively encourage rather than curtail satellite litigation over fees. Carroll v. Wolpoff & Abramson, 53 F.3d 626, 628 (4th Cir.1995).
For these reasons there was no error in the district court‘s denial of attorney fees and costs attributable to the Rule 11(b) violations in the brief opposing summary judgment.
V.
We turn to the consequences of the Reform Act‘s command that for identified Rule 11(b) violations the district court “shall impose sanctions ... in accordance with Rule 11.”
Other than establishing the baseline rule that the sanction must be “in accordance with Rule 11,” the Act does not specify an appropriate sanction where, as here, the sanctions proponent fails to make the threshold showings that would entitle the proponent to the presumed award amounts specified in
The question then becomes whether the district court, within its discretion, appropriately sanctioned Morris‘s lawyers under Rule 11. The rule limits the sanction—which “may consist of, or include, directives of a nonmonetary nature“—to “what is sufficient to deter repetition” of the offending conduct.
Wachovia‘s counsel contended at oral argument that the difference between the Reform Act‘s description of “specific findings regarding [Rule 11(b)] compliance” on one hand,
Such a narrow remand is the prudent course here. The implication of the district court‘s order finding Rule 11(b) violations yet denying monetary sanctions is this: had the court understood that the Reform Act required it to impose a sanction, it would have imposed the non-monetary sаnction that flows most naturally from its finding—namely, admonition. An admonition will only be meaningful, however, if it is directed at the lawyers whose conduct gave rise to the Rule 11(b) violations found. The district court is familiar with the proceedings and filings in this case and is therefore better suited than we are to identify those lawyers. On remand the district court should issue a written order admonishing by name the individual lawyers responsible for the Rule 11(b) violations that the district court identified in Morris‘s complaints and in the brief opposing summary judgment. We conclude that such an order is necessary to satisfy the Reform Act‘s sanction requirement in this case. (The order may be short because the district court‘s memorandum opinion dealing with the sanctions issue fully explains the three violations.)
VI.
On cross-appeal Morris challenges the district court‘s findings of the three Rule 11(b) violations and argues further that the court should have concluded that Wachoviа‘s counterclaim violated Rule 11(b)‘s ban on frivolous legal arguments. After carefully examining the district court‘s conclusions that Morris‘s lawyers violated Rule 11(b) in pressing the stock loan claim and in mischaracterizing White‘s testimony, we need only say that we find no abuse of discretion. The court‘s determination about the mischaracterization of Baldiswieler‘s testimony in the brief opposing summary judgment warrants some discussion.
Again, Morris‘s opposition brief argued that “[t]he logical and reasonable inference to be drawn” from Baldiswieler‘s deposition and other facts was that Wachovia selected money managers based on their potential for generating profits for Wachovia. J.A. 646. This assertion rested on a portion of Baldiswieler‘s testimony mentioning the possibility that language in a communication between Wachovia and Baldiswieler‘s money management firm referred to a soft dollar deal. The opposition brief failed to acknowledge, however, that Baldiswieler went on to specifically testify that he did not believe Wachovia was a party to any actual soft dollar deals. The brief thus did not accurately represent Baldiswieler‘s testimony, and the district court‘s concern about the inaccuracy was legitimate.
We leave undisturbed the district court‘s findings of the Rule 11(b) violations because they do not constitute an abuse of discretion. Likewise, Morris fails to show that the district court abused its discretion in determining that while Wachovia‘s counterclaim was “on the edge of propriety,” J.A. 1631, the counterclaim was not so
VII.
The district court‘s order entered January 28, 2005, is vacated to the extent it does not impose any sanctions. The order is otherwise affirmed. The case is remanded for the district court to enter an order naming and admonishing the lawyers responsible for the identified Rule 11(b) violations.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED WITH INSTRUCTIONS