Sanctions?

After recently addressing a party’s rights to oral argument in a dispute about enforcement of an arbitration award, the Fifth Circuit then returned to Sun Coast Resources v. Conrad to review the prevailing party’s motion for sanctions under Fed. R. App. 38 for a frivolous appeal.The Court observed:

    “[T]he case for Rule 38 sanctions is strongest in matters involving malice, not incompetence. And our decision on Sun Coast’s appeal was careful not to assume the former. As to the merits of its appeal—including the company’s
failure to disclose that it cited Opalinski II rather than Opalinski I to the arbitrator—we observed that ‘[t]he best that may be said for Sun Coast is that it badly misreads the record.’ As to its demand for oral argument, we stated that ‘Sun Coast’s motion misunderstands the federal appellate process in more ways than one.’
Perhaps Sun Coast earnestly (if mistakenly) believed it had a valid legal claim to press. Or perhaps it was bad faith—maximizing legal expense to drive a less-resourced adversary to drop the case or settle for less. Or perhaps its decisions were driven by counsel. But we must resolve the pending motion based on facts and evidence—not speculation. We sympathize with Conrad . . . [b]ut we conclude that this is a time for grace, not punishment.”

No. 19-20058 (May 7, 2020) (citations omitted).

While the timing is coincidental, the case is an instructive companion to the Texas Supreme Court’s recent opinion in Brewer v. Lennox Hearth Products LLC, which reversed a sanctions award. That Court noted that “while the absence of authoritative guidance is not a license to act with impunity, bad faith is required to impose sanctions under the court’s inherent authority,” and this held that “the sanctions order in this case cannot stand because evidence of bad faith is lacking.” No. 18-0426 (Tex. April 24, 2020) (footnotes omitted).