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for summary judgment was not accompanied by supporting affidavits. However, “a motion for summary judgment may be made pursuant to Rule 56 with or without supporting affidavits.’ ” Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. “Under Rule 56(c), summary judgment is proper ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Id., 477 U.S. at 322, 106 S.Ct. at 2552. In the present case, answers to interrogatories and depositions on file show that Pachla’s layoff was incident to a nationwide reorganization by Saunders. In response to one of Pachla’s interrogatories, Saunders explained that “Pachla was placed on permanent layoff after the company decided to condense its regional offices into a smaller number of area offices, thereby reducing the number of regional operations managers the company needed.” Defendant’s Response To Plaintiff’s First Set Of Interrogatories at 14. In fact, Saunders underwent three reorganizations during Pachla’s tenure of employment. Gordon Shelfer, Jr., President and Chief Executive Officer of Saunders, testified in his deposition that each of these layoffs that we’ve gone through were designed to address the company’s performance in terms of return on the investment that was there. The company was not performing and we kept trying to get it to a point where it could. We took out overhead; we tried to align the organization.... Deposition of A. Gordon Shelfer, Jr. at 10-11. Thomas Dunn, Vice-President of Personnel at Saunders, testified in his deposition that Saunders was experiencing some economic difficulties and decided to consolidate its regions, and this included combining the Michigan Region with the Wisconsin Region and naming John Simmons as manager of the newly combined area. Deposition of Thomas Dunn at 8-9. Pachla’s evidence in response to the motion for summary judgment consisted of his affidavit, Saunders’ responses to interrogatories, certain employment-related records and memoranda, and Saunders’ personnel manual. Pachla’s evidence showed that he was the only regional operations manager laid off during the

Saunders underwent three reorganizations during Pachla’s tenure of employment. Gordon Shelfer, Jr., President and Chief Executive Officer of Saunders, testified in his deposition that each of these layoffs that we’ve gone through were designed to address the company’s performance in terms of return on the investment that was there. The company was not performing and we kept trying to get it to a point where it could. We took out overhead; we tried to align the organization.... Deposition of A. Gordon Shelfer, Jr. at 10-11. Thomas Dunn, Vice-President of Personnel at Saunders, testified in his deposition that Saunders was experiencing some economic difficulties and decided to consolidate its regions, and this included combining the Michigan Region with the Wisconsin Region and naming John Simmons as manager of the newly combined area. Deposition of Thomas Dunn at 8-9. Pachla’s evidence in response to the motion for summary judgment consisted of his affidavit, Saunders’ responses to interrogatories, certain employment-related records and memoranda, and Saunders’ personnel manual. Pachla’s evidence showed that he was the only regional operations manager laid off during the 1984 reorganization, and that two regional operations managers with less seniority were retained. Pachla’s evidence also showed that his successor, John Simmons, was terminated approximately two weeks after Pachla was laid off, and that Simmons was replaced by a manager with less seniority than Pachla. Pachla testified in his deposition that when he asked Gordon Shelfer, Jr., Saunders’ Vice-President in charge of human resources at that time, why he was not rehired to replace Simmons, Shelfer told Pachla that there was a problem with Paeh-la not “being a team player.” Pachla also stated in his affidavit that "during the time he served as the Michigan Regional Operational Manager, his region generally met all financial expectations and operated on a profitable basis irrespective of what the national profit situation may have been.” Pachla contends that this evidence is sufficient to create a jury question as to the true reason for his discharge. Under Ewers, the burden is upon Pachla to show “that a genuine issue of disputed fact exists concerning the legitimacy of the economic necessity reduction

1984 reorganization, and that two regional operations managers with less seniority were retained. Pachla’s evidence also showed that his successor, John Simmons, was terminated approximately two weeks after Pachla was laid off, and that Simmons was replaced by a manager with less seniority than Pachla. Pachla testified in his deposition that when he asked Gordon Shelfer, Jr., Saunders’ Vice-President in charge of human resources at that time, why he was not rehired to replace Simmons, Shelfer told Pachla that there was a problem with Paeh-la not “being a team player.” Pachla also stated in his affidavit that "during the time he served as the Michigan Regional Operational Manager, his region generally met all financial expectations and operated on a profitable basis irrespective of what the national profit situation may have been.” Pachla contends that this evidence is sufficient to create a jury question as to the true reason for his discharge. Under Ewers, the burden is upon Pachla to show “that a genuine issue of disputed fact exists concerning the legitimacy of the economic necessity reduction in force defense presented.” Ewers, 178 Mich.App. at 378, 443 N.W.2d at 507. Unlike the plaintiff in Ewers, Pachla has not presented substantial evidence “to rebut [Saunders’] economic necessity defense sufficient to create a jury question on the legitimacy of the defense.” Id. In Ewers, the plaintiff presented deposition and documentary evidence, including defendant’s Form 10-K annual report filed with the Securities and Exchange Commission, which showed “that defendant was experiencing substantial economic growth and operating at a substantial profit before and after his discharge.” Id. at 375, 443 N.W.2d at 506. However, Pachla has presented no evidence suggesting that the reorganization and elimination of his job was not economically motivated. Because Pachla has failed to rebut Saunders’ economic necessity defense, there is no genuine issue of material fact concerning the legitimacy of the defense, and summary judgment was properly granted on this issue. B. Despite the adverse disposition of Pachla’s substantive challenge to his discharge, he is not precluded from challenging the procedure followed by Saunders in discharging him. See Boynton, 858 F.2d at 1184. “The

in force defense presented.” Ewers, 178 Mich.App. at 378, 443 N.W.2d at 507. Unlike the plaintiff in Ewers, Pachla has not presented substantial evidence “to rebut [Saunders’] economic necessity defense sufficient to create a jury question on the legitimacy of the defense.” Id. In Ewers, the plaintiff presented deposition and documentary evidence, including defendant’s Form 10-K annual report filed with the Securities and Exchange Commission, which showed “that defendant was experiencing substantial economic growth and operating at a substantial profit before and after his discharge.” Id. at 375, 443 N.W.2d at 506. However, Pachla has presented no evidence suggesting that the reorganization and elimination of his job was not economically motivated. Because Pachla has failed to rebut Saunders’ economic necessity defense, there is no genuine issue of material fact concerning the legitimacy of the defense, and summary judgment was properly granted on this issue. B. Despite the adverse disposition of Pachla’s substantive challenge to his discharge, he is not precluded from challenging the procedure followed by Saunders in discharging him. See Boynton, 858 F.2d at 1184. “The question whether termination was in breach of contract, i.e., whether plaintiff was discharged for cause and in compliance with applicable procedures, is also for the jury as long as there is a genuine factual dispute.” Struble v. Lacks Indus., Inc., 157 Mich.App. 169, 175, 403 N.W.2d 71, 74 (1986) (per curiam) (emphasis added). Pachla contends that Saunders violated the policies and procedures set forth in its personnel manual regarding laying off employees. The district court rejected Pachla’s assertion that Saunders breached its layoff policy, holding that the layoff procedures in the personnel manual did not apply to Pachla because he was an exempt-salaried employee. Moreover, the district court held that the manual did not address layoffs stemming from a corporate reorganization based upon economic necessity. Pachla argues that “Saunders had a policy that if performance was equal, the person with the longest term of service would be retained and the person with the lesser seniority would be laid off.” Appellant’s Brief at 19. Pachla argues that his job performance was impeccable, and Saunders concedes that Pachla

question whether termination was in breach of contract, i.e., whether plaintiff was discharged for cause and in compliance with applicable procedures, is also for the jury as long as there is a genuine factual dispute.” Struble v. Lacks Indus., Inc., 157 Mich.App. 169, 175, 403 N.W.2d 71, 74 (1986) (per curiam) (emphasis added). Pachla contends that Saunders violated the policies and procedures set forth in its personnel manual regarding laying off employees. The district court rejected Pachla’s assertion that Saunders breached its layoff policy, holding that the layoff procedures in the personnel manual did not apply to Pachla because he was an exempt-salaried employee. Moreover, the district court held that the manual did not address layoffs stemming from a corporate reorganization based upon economic necessity. Pachla argues that “Saunders had a policy that if performance was equal, the person with the longest term of service would be retained and the person with the lesser seniority would be laid off.” Appellant’s Brief at 19. Pachla argues that his job performance was impeccable, and Saunders concedes that Pachla performed his employment duties satisfactorily. Thus, Pach-la argues that Saunders violated its seniority-based layoff policy by laying him off while retaining two operations managers with less seniority. Saunders’ personnel manual provides for a seniority-based layoff procedure for nonexempt (clerical) and hourly employees. Pachla contends that regardless of the written personnel manual, Saunders employed the same seniority-based standards in laying off both exempt and nonexempt employees. Pachla argues that the written personnel manual is contradicted by Saunders’ actual enforcement of the layoff policy and by Pachla’s understanding of that policy based on oral statements made to him. To support his position, Pachla notes that Thomas Dunn, Saunders’ Vice-President of Personnel, testified in his deposition that all other things being equal, seniority was a factor used to determine who would be laid off. The personnel manual clearly provides that the seniority-based layoff procedure applies only to nonexempt and hourly employees. Thus, the personnel manual provided Pachla, an exempt-salaried employee, no reasonable expectation that he would be laid off on the basis of seniority. Pachla has shown only a subjective

performed his employment duties satisfactorily. Thus, Pach-la argues that Saunders violated its seniority-based layoff policy by laying him off while retaining two operations managers with less seniority. Saunders’ personnel manual provides for a seniority-based layoff procedure for nonexempt (clerical) and hourly employees. Pachla contends that regardless of the written personnel manual, Saunders employed the same seniority-based standards in laying off both exempt and nonexempt employees. Pachla argues that the written personnel manual is contradicted by Saunders’ actual enforcement of the layoff policy and by Pachla’s understanding of that policy based on oral statements made to him. To support his position, Pachla notes that Thomas Dunn, Saunders’ Vice-President of Personnel, testified in his deposition that all other things being equal, seniority was a factor used to determine who would be laid off. The personnel manual clearly provides that the seniority-based layoff procedure applies only to nonexempt and hourly employees. Thus, the personnel manual provided Pachla, an exempt-salaried employee, no reasonable expectation that he would be laid off on the basis of seniority. Pachla has shown only a subjective understanding that layoffs were based on seniority and “a mere subjective expectancy on the part of an employee ... [does] not create a legitimate [Toussaint] claim.” Boynton, 858 F.2d at 1185 (quoting Schwartz v. Michigan Sugar Company, 106 Mich.App. 471, 478, 308 N.W.2d 459, 462 (1981), appeal denied, 414 Mich. 870 (1982)). Thomas Dunn’s testimony established only that seniority was one factor in Saunders’ layoff procedure. Indeed, Pachla concedes that seniority was the basis for layoffs at Saunders only “if performance was equal.” Appellant’s Brief at 19. Because Pachla has failed to show that Saunders had a layoff policy based solely on seniority, he cannot argue that Saunders violated its layoff procedure simply by retaining two less senior employees. See Boynton, 858 F.2d at 1188. Therefore, summary judgment was properly granted on the seniority issue. C. A closer question is presented as to whether Saunders violated its layoff policy by failing to conduct a job search within the company prior to laying off Pachla. Section 11.321(c) of Saunders’ personnel manual provides in relevant part: Layoff (02) — Lack of

understanding that layoffs were based on seniority and “a mere subjective expectancy on the part of an employee ... [does] not create a legitimate [Toussaint] claim.” Boynton, 858 F.2d at 1185 (quoting Schwartz v. Michigan Sugar Company, 106 Mich.App. 471, 478, 308 N.W.2d 459, 462 (1981), appeal denied, 414 Mich. 870 (1982)). Thomas Dunn’s testimony established only that seniority was one factor in Saunders’ layoff procedure. Indeed, Pachla concedes that seniority was the basis for layoffs at Saunders only “if performance was equal.” Appellant’s Brief at 19. Because Pachla has failed to show that Saunders had a layoff policy based solely on seniority, he cannot argue that Saunders violated its layoff procedure simply by retaining two less senior employees. See Boynton, 858 F.2d at 1188. Therefore, summary judgment was properly granted on the seniority issue. C. A closer question is presented as to whether Saunders violated its layoff policy by failing to conduct a job search within the company prior to laying off Pachla. Section 11.321(c) of Saunders’ personnel manual provides in relevant part: Layoff (02) — Lack of Available Work— should be used only when business reversals require a temporary or permanent reduction in the work force. 1. Exempt — Salaried Prior to the lay-off of any employee due to Lack of Available Work, first determine if another job or shift at a similar rate of pay is available at the same location. If not, the supervisor is to contact his/her manager for similar job openings at other locations within the region or area. Headquarters Supervisors — contact the Personnel Department-Employment Section for openings in other departments or at other Company locations. (Emphasis in original.) The district court held, “Any procedures relied upon in this manual regarding layoffs speaks [sic] only to situations involving lack of work.” The court concluded that the manual did not address layoffs based upon economic necessity. Our review of the personnel manual and the record evidence convinces us that a genuine issue of material fact is presented as to whether Pachla’s layoff is subject to the job search requirement of Section 11.-321(c). Section 11.321 lists reasons for termination, and subsection (c) addresses layoffs

Available Work— should be used only when business reversals require a temporary or permanent reduction in the work force. 1. Exempt — Salaried Prior to the lay-off of any employee due to Lack of Available Work, first determine if another job or shift at a similar rate of pay is available at the same location. If not, the supervisor is to contact his/her manager for similar job openings at other locations within the region or area. Headquarters Supervisors — contact the Personnel Department-Employment Section for openings in other departments or at other Company locations. (Emphasis in original.) The district court held, “Any procedures relied upon in this manual regarding layoffs speaks [sic] only to situations involving lack of work.” The court concluded that the manual did not address layoffs based upon economic necessity. Our review of the personnel manual and the record evidence convinces us that a genuine issue of material fact is presented as to whether Pachla’s layoff is subject to the job search requirement of Section 11.-321(c). Section 11.321 lists reasons for termination, and subsection (c) addresses layoffs due to lack of available work. Subsection (c) provides that layoff due to lack of available work “should be used only when business reversals require a temporary or permanent reduction in the work force.” (Emphasis added.) The record does not reveal which reason for termination was given for Pachla’s layoff, but the definition of layoff due to lack of available work is consistent with Saunders’ assertion of economic necessity. If lack of available work properly describes the reason for Pachla’s layoff, then the job search requirement is applicable to him as an exempt-salaried employee. Thomas Dunn and Charles Donald Stevenson, Saunders’ compensation and benefits manager, confirmed in their depositions that Saunders had a policy of searching inside the company for another position if an employee was laid off. Both Dunn and Stevenson testified in their depositions “that they were not aware of or could not recall what discussions may have been held by Saunders’ top management in connection with relocating Pachla within the corporate structure following his lay-off.” Appellee’s Brief at 25. Pachla testified in his

due to lack of available work. Subsection (c) provides that layoff due to lack of available work “should be used only when business reversals require a temporary or permanent reduction in the work force.” (Emphasis added.) The record does not reveal which reason for termination was given for Pachla’s layoff, but the definition of layoff due to lack of available work is consistent with Saunders’ assertion of economic necessity. If lack of available work properly describes the reason for Pachla’s layoff, then the job search requirement is applicable to him as an exempt-salaried employee. Thomas Dunn and Charles Donald Stevenson, Saunders’ compensation and benefits manager, confirmed in their depositions that Saunders had a policy of searching inside the company for another position if an employee was laid off. Both Dunn and Stevenson testified in their depositions “that they were not aware of or could not recall what discussions may have been held by Saunders’ top management in connection with relocating Pachla within the corporate structure following his lay-off.” Appellee’s Brief at 25. Pachla testified in his deposition that he was aware of Saunders’ policy of conducting a job search within the company for laid off employees, and he testified that as regional operations manager, he followed this policy when discharging Dennis Paulski, a shop manager. Viewing the evidence and inferences drawn therefrom in the light most favorable to Pachla, we conclude that genuine issues of material fact are presented as to whether the job search policy was applicable to Pachla’s layoff and whether Saunders violated the policy in Pachla’s case. Pachla has presented evidence from which a jury could reasonably find that Saunders violated its layoff policy by failing to conduct a job search within the company prior to laying him off. See Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. Therefore, the district court erred by granting summary judgment for Saunders on the job search issue. D. Another procedural issue asserted by Pachla in the district court concerned Saunders’ compliance with a recall provision of the personnel manual. Section 11.-321(c)3 provides in part that “[pjrior to hiring a new employee for a

deposition that he was aware of Saunders’ policy of conducting a job search within the company for laid off employees, and he testified that as regional operations manager, he followed this policy when discharging Dennis Paulski, a shop manager. Viewing the evidence and inferences drawn therefrom in the light most favorable to Pachla, we conclude that genuine issues of material fact are presented as to whether the job search policy was applicable to Pachla’s layoff and whether Saunders violated the policy in Pachla’s case. Pachla has presented evidence from which a jury could reasonably find that Saunders violated its layoff policy by failing to conduct a job search within the company prior to laying him off. See Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. Therefore, the district court erred by granting summary judgment for Saunders on the job search issue. D. Another procedural issue asserted by Pachla in the district court concerned Saunders’ compliance with a recall provision of the personnel manual. Section 11.-321(c)3 provides in part that “[pjrior to hiring a new employee for a specific classification, any qualified employee who has been on Lay-Off Status for less than six (6) months will be called back to work in the reverse order of their lay-off.” In his brief in response to Saunders’ motion for summary judgment, Pachla argued that Saunders violated the recall policy by not recalling him to replace Simmons as area operations manager when Simmons was terminated. Pachla did not raise this issue in his opening brief on appeal, but he did mention the issue in his reply brief. Generally, an issue raised for the first time in a reply brief will not be considered on appeal. Wright v. Holbrook, 794 F.2d 1152, 1156 (6th Cir.1986). However, in this case, Saunders raised the recall issue in its brief on appeal. “[Wjhere an appellee raises a [sic] argument not addressed by the appellant in its opening brief, the appellant may reply.” Bennett v. Tucker, 827 F.2d 63, 70 n. 2 (7th Cir.1987). Therefore, we consider the recall issue properly raised in this appeal. Saunders concedes that “it is clear that

specific classification, any qualified employee who has been on Lay-Off Status for less than six (6) months will be called back to work in the reverse order of their lay-off.” In his brief in response to Saunders’ motion for summary judgment, Pachla argued that Saunders violated the recall policy by not recalling him to replace Simmons as area operations manager when Simmons was terminated. Pachla did not raise this issue in his opening brief on appeal, but he did mention the issue in his reply brief. Generally, an issue raised for the first time in a reply brief will not be considered on appeal. Wright v. Holbrook, 794 F.2d 1152, 1156 (6th Cir.1986). However, in this case, Saunders raised the recall issue in its brief on appeal. “[Wjhere an appellee raises a [sic] argument not addressed by the appellant in its opening brief, the appellant may reply.” Bennett v. Tucker, 827 F.2d 63, 70 n. 2 (7th Cir.1987). Therefore, we consider the recall issue properly raised in this appeal. Saunders concedes that “it is clear that the only right which laid off employees had under Saunders’ personnel policy was the right to be recalled to a position for which they were qualified prior to the hiring of a new employee.” Appellee’s Brief at 26 (emphasis in original). However, the right to be recalled does not apply where no new employee is hired but an existing employee is instead promoted, as occurred in this case. Moreover, Saunders argues that implementation of the recall policy requires evaluation of employee qualifications and such a decision is not subject to judicial review. Viewing the evidence and inferences drawn therefrom in the light most favorable to Pachla, we conclude that a genuine issue of material fact exists as to whether Saunders complied with the recall policy in Pachla’s case. The recall policy is clearly set forth in the personnel manual. Saunders confirmed its adoption of the recall policy in response to one of Pachla’s interrogatories, and on appeal, Saunders has conceded that qualified laid off employees have the right to be recalled prior to the hiring of

the only right which laid off employees had under Saunders’ personnel policy was the right to be recalled to a position for which they were qualified prior to the hiring of a new employee.” Appellee’s Brief at 26 (emphasis in original). However, the right to be recalled does not apply where no new employee is hired but an existing employee is instead promoted, as occurred in this case. Moreover, Saunders argues that implementation of the recall policy requires evaluation of employee qualifications and such a decision is not subject to judicial review. Viewing the evidence and inferences drawn therefrom in the light most favorable to Pachla, we conclude that a genuine issue of material fact exists as to whether Saunders complied with the recall policy in Pachla’s case. The recall policy is clearly set forth in the personnel manual. Saunders confirmed its adoption of the recall policy in response to one of Pachla’s interrogatories, and on appeal, Saunders has conceded that qualified laid off employees have the right to be recalled prior to the hiring of a new employee. Saunders also concedes that Pachla performed his duties as regional operations manager satisfactorily, from which one could infer that Pachla was qualified for the position of area operations manager. It is also undisputed that a lower-level manager was promoted and transferred to replace Simmons as area operations manager. Whether promoting an employee to a new position constitutes “hiring a new employee for a specific classification,” thus invoking the recall policy, is an issue on which no evidence has been presented. Therefore, as we cannot say that Saunders is entitled to a judgment on the recall issue as a matter of law, the district court erred in granting summary judgment on this issue. III. Accordingly, the district court’s grant of summary judgment is AFFIRMED in part and REVERSED in part, and this case will be REMANDED to the district court for further proceedings consistent with this opinion. . Pachla testified in his deposition that at his initial interview with Bill Armistead, Vice-President and Regional Manager for Saunders’ Great Lakes Region, he was told that he would

a new employee. Saunders also concedes that Pachla performed his duties as regional operations manager satisfactorily, from which one could infer that Pachla was qualified for the position of area operations manager. It is also undisputed that a lower-level manager was promoted and transferred to replace Simmons as area operations manager. Whether promoting an employee to a new position constitutes “hiring a new employee for a specific classification,” thus invoking the recall policy, is an issue on which no evidence has been presented. Therefore, as we cannot say that Saunders is entitled to a judgment on the recall issue as a matter of law, the district court erred in granting summary judgment on this issue. III. Accordingly, the district court’s grant of summary judgment is AFFIRMED in part and REVERSED in part, and this case will be REMANDED to the district court for further proceedings consistent with this opinion. . Pachla testified in his deposition that at his initial interview with Bill Armistead, Vice-President and Regional Manager for Saunders’ Great Lakes Region, he was told that he would have a job with the company until his work was unsatisfactory. Pachla also testified that when he was offered the position in Cincinnati, he was told that as long as he was performing up to expectations there would be no termination except for a just cause.

ORDER KOZINSKI, Chief Judge: Upon the vote of a majority of nonrecused active judges, it is ordered that this case be reheard en banc pursuant to Circuit Rule 35-3. The three-judge panel opinion shall not be cited as precedent by or to any court of the Ninth Circuit.

ORDER AND JUDGMENT Gregory A. Phillips Circuit Judge In 2010, while represented by appointed counsel, Francisco Lubio pleaded guilty to one count of conspiracy to distribute and possess with the intent to distribute over 60 grams of methamphetamine, in violation of 21 U.S.C. §§ 846, 841(a)(1), and (b)(1)(A). In a plea agreement, Lubio admitted that he possessed 330.9 grams of actual methamphetamine. Based on this amount, the Presentence Investigation Report (“PSR”) calculated a base offense level of 34. See U.S.S.G. § 2D1.1(c)(3) (U.S. Sentencing Comm’n 2009). The PSR then subtracted three offense levels to account for Lubio’s acceptance of responsibility, which resulted in a total offense level of 31. When combined with Lubio’s criminal-history category of I, this total offense level produced an advisory guideline range of 108 to 135 months. But, because Lubio’s offense involved at least 50 grams of methamphetamine, the PSR also noted that Lubio’s conviction triggered a statutory mandatory-minimum sentence of 10 years under 21 U.S.C. § 841(b)(1)(A). Under this circumstance, Lubio’s guideline range became 120 to 135 months. See U.S.S.G. § 5G1.1(e)(2). After receiving no objections from the parties, the district court adopted the PSR in full and imposed the mandatory-minimum sentence of 10 years, plus five years of supervised released and a $100 monetary assessment. In 2016, Lubio filed a motion under 18 U.S.C. § 3582(c)(2), seeking to reduce his sentence based on the U.S. Sentencing Commission’s Amendment 782, which lowered the base offense level from 34 to 32 for offenses involving 330.9 grams of actual methamphetamine. But the district court dismissed Lubio’s motion for lack of jurisdiction, concluding that, because of the 10-year statutory mandatory minimum, Lu-bio’s advisory guideline range had not been lowered. Lubio now appeals. We review “de novo the scope of a district court’s authority to resentence a defendant in a § 3582(c)(2) proceeding.” United States v. Gay, 771 F.3d 681, 685 (10th Cir. 2014). Under § 3582(c)(2), “a district court is authorized to reduce a sentence ... only if the defendant was originally ‘sentenced to a term of imprisonment based on a sentencing range that has subsequently been lowered by the Sentencing Commission.’” United

receiving no objections from the parties, the district court adopted the PSR in full and imposed the mandatory-minimum sentence of 10 years, plus five years of supervised released and a $100 monetary assessment. In 2016, Lubio filed a motion under 18 U.S.C. § 3582(c)(2), seeking to reduce his sentence based on the U.S. Sentencing Commission’s Amendment 782, which lowered the base offense level from 34 to 32 for offenses involving 330.9 grams of actual methamphetamine. But the district court dismissed Lubio’s motion for lack of jurisdiction, concluding that, because of the 10-year statutory mandatory minimum, Lu-bio’s advisory guideline range had not been lowered. Lubio now appeals. We review “de novo the scope of a district court’s authority to resentence a defendant in a § 3582(c)(2) proceeding.” United States v. Gay, 771 F.3d 681, 685 (10th Cir. 2014). Under § 3582(c)(2), “a district court is authorized to reduce a sentence ... only if the defendant was originally ‘sentenced to a term of imprisonment based on a sentencing range that has subsequently been lowered by the Sentencing Commission.’” United States v. White, 765 F.3d 1240, 1246 (10th Cir. 2014) (quoting § 3582(c)(2)). But when a district court sentences a defendant to a statutory mandatory-minimum sentence, it bases the defendant’s sentence on the mandatory minimum rather than “a sentencing range that has subsequently been lowered,” § 3582(c)(2), making the defendant “ineligible for a sentence reduction under § 3582(c)(2),” United States v. Munoz, 682 Fed.Appx. 635, 636 (10th Cir. 2017) (unpublished). Here, the district court sentenced Lubio to a statutory mandatory-minimum sentence of 10 years, and Amendment 782 does not lower his sentencing range in that circumstance. So Lubio is ineligible for a sentence reduction under § 3582(c)(2). Therefore, the district court properly dismissed Lubio’s motion for lack of jurisdiction, and we AFFIRM. After examining the briefs and appellate record, this panel has determined unanimously to honor the parties’ request for a decision on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore submitted without oral argument. This order and judgment is not binding precedent, except under the

States v. White, 765 F.3d 1240, 1246 (10th Cir. 2014) (quoting § 3582(c)(2)). But when a district court sentences a defendant to a statutory mandatory-minimum sentence, it bases the defendant’s sentence on the mandatory minimum rather than “a sentencing range that has subsequently been lowered,” § 3582(c)(2), making the defendant “ineligible for a sentence reduction under § 3582(c)(2),” United States v. Munoz, 682 Fed.Appx. 635, 636 (10th Cir. 2017) (unpublished). Here, the district court sentenced Lubio to a statutory mandatory-minimum sentence of 10 years, and Amendment 782 does not lower his sentencing range in that circumstance. So Lubio is ineligible for a sentence reduction under § 3582(c)(2). Therefore, the district court properly dismissed Lubio’s motion for lack of jurisdiction, and we AFFIRM. After examining the briefs and appellate record, this panel has determined unanimously to honor the parties’ request for a decision on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. . Based on Lubio’s financial inability to pay, the district court granted Lubio’s motion to proceed in forma pauperis (“IFP”) on appeal. Order, May 24, 2017, ECF No. 70. We do not reevaluate that decision. See Fed. R. App. P. 24(a)(2) (providing that a party may proceed IFP on appeal where the district court has granted leave to do so).

PER CURIAM: Abie Wolf appeals' the district court’s dismissal of his appeal from the decision of a bankruptcy court. The district court dismissed Wolfs appeal pursuant to Federal Rule of Bankruptcy Procedure 8003(a)(2) based on his failure to timely file a brief. Wolf does not address this issue in his briefing before this court. “Although we liberally construe the briefs of pro se appellants, we also require that arguments must be briefed to be preserved.” Yohey v. Collins, 985 F.2d 222, 225 (5th Cir. 1993) (quoting Price v. Digital Equip. Corp., 846 F.2d 1026, 1028 (5th Cir. 1988)). Wolf has abandoned any arguments regarding the district court’s dismissal of his bankruptcy appeal by failing to argue them in the body of his brief. See id. The district court’s dismissal is, therefore, AFFIRMED. Wolfs motion to supplement is DENIED as moot. Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

McKAY, Circuit Judge. Seven employees or former employees of the Southern Pacific Transportation Company (Railroad) brought this suit against the Railroad and the Brotherhood of Railway Carmen and two of its subordinate organizations (Union). The seven allege that they were demoted and then laid off in violation of the applicable collective bargaining agreement and that the Union breached its duty of fair representation by failing to enforce the agreement. The plaintiffs ask for reinstatement with full seniority, lost wages and benefits, punitive damages, and various costs and fees. The district court dismissed the action against both the Railroad and the Union for lack of jurisdiction, holding that the plaintiffs had not exhausted their administrative remedies before the National Railroad Adjustment Board (Board). Later, in a separate ruling, the court refused to retain jurisdiction over the matter while administrative remedies were sought. Plaintiffs appeal. The dispute derives from a 1968 merger of the Railroad with another railroad company. The merger required a modification of the basic collective bargaining agreement to govern the dovetailing of two seniority rosters. Plaintiffs allege that, during each year from 1972 until 1975, they were demoted and subsequently furloughed from their positions as “Upgraded Carmen Apprentices,” while “Upgraded Carmen Helpers,” who should have been demoted first under a 1965 Memorandum of Agreement, continued to work without demotion. Plaintiffs further allege that Union officials, many of whom were former employees of the merging company, consistently misled them about their rights and demonstrated a persistent antagonism toward the apprenticeship program. As a result, plaintiffs were prevented from filing a timely claim before the Board. The Railroad and Union counter with the argument that certain employees, including the Upgraded Helpers, were given special protection under the 1968 Reorganization Agreement. Under this view, the Union failed to aid plaintiffs not because of antagonism, but because the plaintiffs’ claims lacked merit under the contract. If this suit had been brought against the Railroad only, we would have no difficulty in determining the proper disposition. The dispute between plaintiffs and the Railroad is clearly a “minor” one — that is, “between an employee or group of

allege that, during each year from 1972 until 1975, they were demoted and subsequently furloughed from their positions as “Upgraded Carmen Apprentices,” while “Upgraded Carmen Helpers,” who should have been demoted first under a 1965 Memorandum of Agreement, continued to work without demotion. Plaintiffs further allege that Union officials, many of whom were former employees of the merging company, consistently misled them about their rights and demonstrated a persistent antagonism toward the apprenticeship program. As a result, plaintiffs were prevented from filing a timely claim before the Board. The Railroad and Union counter with the argument that certain employees, including the Upgraded Helpers, were given special protection under the 1968 Reorganization Agreement. Under this view, the Union failed to aid plaintiffs not because of antagonism, but because the plaintiffs’ claims lacked merit under the contract. If this suit had been brought against the Railroad only, we would have no difficulty in determining the proper disposition. The dispute between plaintiffs and the Railroad is clearly a “minor” one — that is, “between an employee or group of employees and a carrier or carriers growing out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions.” 45 U.S.C. § 153 First (i). As the Supreme Court has emphatically told us, “Congress considered it essential to keep these so-called ‘minor’ disputes within the Adjustment Board and out of the courts.” Union Pacific Railroad v. Sheehan, 439 U.S. 89, 94, 99 S.Ct. 399, 402, 58 L.Ed.2d 354 (1978). See also Andrews v. Louisville & Nashville Railroad, 406 U.S. 320, 325, 92 S.Ct. 1562, 32 L.Ed.2d 95 (1972). Similarly, had plaintiffs brought only the fair representation claim against the Union, our duty would be clear. The Railway Labor Act provides no explicit jurisdiction for the Board to resolve employee-union disputes. In Czosek v. O’Mar a, 397 U.S. 25, 90 S.Ct. 770, 25 L.Ed.2d 21 (1970), also a case arising from the dislocations of a merger, the Court left no doubt about the limits of Board jurisdiction: And surely it is beyond cavil that a suit against the union for

employees and a carrier or carriers growing out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions.” 45 U.S.C. § 153 First (i). As the Supreme Court has emphatically told us, “Congress considered it essential to keep these so-called ‘minor’ disputes within the Adjustment Board and out of the courts.” Union Pacific Railroad v. Sheehan, 439 U.S. 89, 94, 99 S.Ct. 399, 402, 58 L.Ed.2d 354 (1978). See also Andrews v. Louisville & Nashville Railroad, 406 U.S. 320, 325, 92 S.Ct. 1562, 32 L.Ed.2d 95 (1972). Similarly, had plaintiffs brought only the fair representation claim against the Union, our duty would be clear. The Railway Labor Act provides no explicit jurisdiction for the Board to resolve employee-union disputes. In Czosek v. O’Mar a, 397 U.S. 25, 90 S.Ct. 770, 25 L.Ed.2d 21 (1970), also a case arising from the dislocations of a merger, the Court left no doubt about the limits of Board jurisdiction: And surely it is beyond cavil that a suit against the union for breach of its duty of fair representation is not within the jurisdiction of the National Railroad Adjustment Board or subject to the ordinary rule that administrative remedies should be exhausted before resort to the courts. The claim against the union defendants for the breach of their duty of fair representation is a discrete claim quite apart from the right of individual employees expressly extended to them under the Railway Labor Act to pursue their employer before the Adjustment Board. Id. at 27-28, 90 S.Ct. at 772 (citations omitted). See also Glover v. St. Louis-San Francisco Railway, 393 U.S. 324, 329, 89 S.Ct. 548, 551, 21 L.Ed.2d 519 (1969). This case is a hybrid which fits neither of the above models, and it is not a case where the claims and prayers for relief against the Railroad and Union are so easily separable as to warrant bifurcating the proceeding— with the claim against the Railroad presented to the Board and the fair representation claim heard in federal court. Because reinstatement with seniority is sought, plaintiffs could not secure

breach of its duty of fair representation is not within the jurisdiction of the National Railroad Adjustment Board or subject to the ordinary rule that administrative remedies should be exhausted before resort to the courts. The claim against the union defendants for the breach of their duty of fair representation is a discrete claim quite apart from the right of individual employees expressly extended to them under the Railway Labor Act to pursue their employer before the Adjustment Board. Id. at 27-28, 90 S.Ct. at 772 (citations omitted). See also Glover v. St. Louis-San Francisco Railway, 393 U.S. 324, 329, 89 S.Ct. 548, 551, 21 L.Ed.2d 519 (1969). This case is a hybrid which fits neither of the above models, and it is not a case where the claims and prayers for relief against the Railroad and Union are so easily separable as to warrant bifurcating the proceeding— with the claim against the Railroad presented to the Board and the fair representation claim heard in federal court. Because reinstatement with seniority is sought, plaintiffs could not secure full relief in federal court if the Railroad were not a party. Furthermore, the alleged facts, viewed in a light most favorable to plaintiffs, are consistent with a pattern of collusion between Union and Railroad. The district court’s concern about the duplication of effort and the possibly inconsistent results should two forums be required to interpret the contract is well-founded. Although the Supreme Court in Czosek did not decide whether “the employer may always be sued with the union when a single series of events gives rise to claims against the employer for breach of contract and against the union for breach of the duty of fair representation,” 397 U.S. at 30, 90 S.Ct. at 773-774 (emphasis added), the Court has explicitly permitted such suits in federal court and denied Board jurisdiction. This is the only resolution of that problem to receive Supreme Court approval. See Glover v. St. Louis-San Francisco Railway, 393 U.S. 324, 89 S.Ct. 548, 21 L.Ed.2d 519 (1969). Unless Union Pacific Railroad v. Sheehan, 439 U.S. 89, 99 S.Ct. 399, 58 L.Ed.2d 354

full relief in federal court if the Railroad were not a party. Furthermore, the alleged facts, viewed in a light most favorable to plaintiffs, are consistent with a pattern of collusion between Union and Railroad. The district court’s concern about the duplication of effort and the possibly inconsistent results should two forums be required to interpret the contract is well-founded. Although the Supreme Court in Czosek did not decide whether “the employer may always be sued with the union when a single series of events gives rise to claims against the employer for breach of contract and against the union for breach of the duty of fair representation,” 397 U.S. at 30, 90 S.Ct. at 773-774 (emphasis added), the Court has explicitly permitted such suits in federal court and denied Board jurisdiction. This is the only resolution of that problem to receive Supreme Court approval. See Glover v. St. Louis-San Francisco Railway, 393 U.S. 324, 89 S.Ct. 548, 21 L.Ed.2d 519 (1969). Unless Union Pacific Railroad v. Sheehan, 439 U.S. 89, 99 S.Ct. 399, 58 L.Ed.2d 354 (1978), has repudiated those portions of Glover and Czosek which discuss federal court jurisdiction of hybrid cases, we must find the district court’s order of dismissal improper. In Sheehan, the Court determined that the Board has exclusive jurisdiction over minor disputes between employees and carriers. However, the Court did not discuss fair representation cases. As strong as the Sheehan Court’s exclusivity language is, we find no authority to repudiate the equally strong language of Czosek and Glover. See also Conley v. Gibson, 355 U.S. 41, 44-45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Steele v. Louisville & Nashville Railroad, 323 U.S. 192, 65 S.Ct. 226, 89 L.Ed. 173 (1944). Absent statutory command, we are reluctant to grant to the Board jurisdiction over fair representation cases and, absent clearer direction from the Supreme Court, we are unwilling to require bifurcated jurisdiction of hybrid cases. We recognize that other circuits have created a form of pendent jurisdiction permitting the Board to hear fair representation cases that are intertwined with minor disputes. See, e. g., Goclowski v. Penn Central

(1978), has repudiated those portions of Glover and Czosek which discuss federal court jurisdiction of hybrid cases, we must find the district court’s order of dismissal improper. In Sheehan, the Court determined that the Board has exclusive jurisdiction over minor disputes between employees and carriers. However, the Court did not discuss fair representation cases. As strong as the Sheehan Court’s exclusivity language is, we find no authority to repudiate the equally strong language of Czosek and Glover. See also Conley v. Gibson, 355 U.S. 41, 44-45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Steele v. Louisville & Nashville Railroad, 323 U.S. 192, 65 S.Ct. 226, 89 L.Ed. 173 (1944). Absent statutory command, we are reluctant to grant to the Board jurisdiction over fair representation cases and, absent clearer direction from the Supreme Court, we are unwilling to require bifurcated jurisdiction of hybrid cases. We recognize that other circuits have created a form of pendent jurisdiction permitting the Board to hear fair representation cases that are intertwined with minor disputes. See, e. g., Goclowski v. Penn Central Transportation Co., 571 F.2d 747, 755-56 (3d Cir. 1978). The district court here relied on Goclowski for the proposition that all disputes “which primarily [involve] contractual interpretation,” id. at 756, require the “expertise of the Board in construing railroad labor contracts.” Id. at 755. However appealing that proposition might be if we were writing on a tabula rasa, neither the statute nor the Supreme Court cases support it. In addition, we hesitate to place on the district courts the perhaps impossible burden of determining, at an initial stage of the proceeding, whether the ultimate resolution of the case will depend “primarily” on contract interpretation. We note that the complaint here charges Union officials with maliciously discriminatory behavior. See, e. g., Record, vol. 1, at 9. This is sufficient to create a fair representation claim which may not depend primarily on the terms of the contract. See Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 571, 96 S.Ct. 1048, 1059, 47 L.Ed.2d 231 (1976); Vaca v. Sipes, 386 U.S. 171, 190, 87 S.Ct. 903, 916,

Transportation Co., 571 F.2d 747, 755-56 (3d Cir. 1978). The district court here relied on Goclowski for the proposition that all disputes “which primarily [involve] contractual interpretation,” id. at 756, require the “expertise of the Board in construing railroad labor contracts.” Id. at 755. However appealing that proposition might be if we were writing on a tabula rasa, neither the statute nor the Supreme Court cases support it. In addition, we hesitate to place on the district courts the perhaps impossible burden of determining, at an initial stage of the proceeding, whether the ultimate resolution of the case will depend “primarily” on contract interpretation. We note that the complaint here charges Union officials with maliciously discriminatory behavior. See, e. g., Record, vol. 1, at 9. This is sufficient to create a fair representation claim which may not depend primarily on the terms of the contract. See Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 571, 96 S.Ct. 1048, 1059, 47 L.Ed.2d 231 (1976); Vaca v. Sipes, 386 U.S. 171, 190, 87 S.Ct. 903, 916, 17 L.Ed.2d 842 (1967); Foust v. IBEW, 572 F.2d 710, 715 (10th Cir. 1978). No Supreme Court authority permits Board jurisdiction over a breach of fair representation claim. The dismissal of the claim against the Union is therefore reversed. Because we believe that Sheehan does not repudiate the doctrine of hybrid jurisdiction, the dismissal of the claim against the Railroad was also improper. REVERSED AND REMANDED. . The parties also filed motions for summary judgment. The district court, however, decided only the jurisdictional issue, and that issue alone is before us on appeal. . Indeed, the plaintiffs argue that they could not secure any relief if required to take their claims to the Board because the Union’s actions here prevented the filing of a timely claim. . The Third Circuit believes that “Glover is not applicable when the basis of the claim is primarily construction and interpretation of existing collective bargaining agreements.” 571 F.2d at 756 n. 13. Since few fair representation cases will not have elements of contractual interpretation, the danger of emasculating the mandates of Glover and Czosek

17 L.Ed.2d 842 (1967); Foust v. IBEW, 572 F.2d 710, 715 (10th Cir. 1978). No Supreme Court authority permits Board jurisdiction over a breach of fair representation claim. The dismissal of the claim against the Union is therefore reversed. Because we believe that Sheehan does not repudiate the doctrine of hybrid jurisdiction, the dismissal of the claim against the Railroad was also improper. REVERSED AND REMANDED. . The parties also filed motions for summary judgment. The district court, however, decided only the jurisdictional issue, and that issue alone is before us on appeal. . Indeed, the plaintiffs argue that they could not secure any relief if required to take their claims to the Board because the Union’s actions here prevented the filing of a timely claim. . The Third Circuit believes that “Glover is not applicable when the basis of the claim is primarily construction and interpretation of existing collective bargaining agreements.” 571 F.2d at 756 n. 13. Since few fair representation cases will not have elements of contractual interpretation, the danger of emasculating the mandates of Glover and Czosek is great. Even if the Board validly has jurisdiction in some fair representation cases, we note that the alleged facts here are strikingly similar to those of Czosek. There the jurisdictional issue was “beyond cavil.” 397 U.S. at 28, 90 S.Ct. at 772.

PECK, Judge. Appellant, an owner-operator of a gasoline service station, commenced this action against appellee, a reseller-retailer of petroleum products, pursuant to the Economic Stabilization Act of 1970, as amended (ESA), 12 U.S.C. § 1904 note (1976 Supp.), and the Emergency Petroleum Allocation Act of 1973, as amended (EPAA), 15 U.S.C. § 751 et seq. (1976 Supp.), to recover alleged overcharges on gasoline purchased by appellant from the appellee between January 1, 1974 and January 23, 1976. The dispute in this case arose out of appellee’s termination of a $.02 per gallon discount on December 31, 1973, that appellant had received from appellee prior to that date. After a bench trial, the district court filed Findings of Fact and Conclusions of Law favorable to the appellee, and entered judgment thereon. The court held that the $.02 discount was a competitive discount, which could be validly terminated under both the ESA and its successor, the EPAA. Additionally, the district court found that the appellant had failed to present a claim for refund to the appellee, a condition precedent to recovery under ESA § 210(b). This appeal followed. For the reasons set forth below, we hold that the district court did not err in determining that the appellant did not make a claim for refund, and we affirm on that ground. The stipulations and evidence offered by the parties and admitted at trial showed that appellant, Bob Dempsey, initially purchased his gasoline from Boring Oil Company (Boring). On or about November 1, 1971, he terminated his contract with Boring and began purchasing gasoline from Gulf Oil Company (Gulf). Gulf granted Dempsey a $.02 per gallon discount, as well as other consideration, to lure him away from Boring. Sometime prior to August 15, 1973, Gulf made a decision to “pull out” of eastern Missouri, where Dempsey’s station is located. On that date, defendant-appellee, Rhodes Oil Company (Rhodes), which owned a bulk plant near Dempsey’s station, assumed Gulf’s obligations under the contract and supplied Dempsey with gasoline thereafter until January 23, 1976. On December 31, 1973, four months after appellee commenced supplying gasoline to appellant, Rhodes notified Dempsey that it

to recovery under ESA § 210(b). This appeal followed. For the reasons set forth below, we hold that the district court did not err in determining that the appellant did not make a claim for refund, and we affirm on that ground. The stipulations and evidence offered by the parties and admitted at trial showed that appellant, Bob Dempsey, initially purchased his gasoline from Boring Oil Company (Boring). On or about November 1, 1971, he terminated his contract with Boring and began purchasing gasoline from Gulf Oil Company (Gulf). Gulf granted Dempsey a $.02 per gallon discount, as well as other consideration, to lure him away from Boring. Sometime prior to August 15, 1973, Gulf made a decision to “pull out” of eastern Missouri, where Dempsey’s station is located. On that date, defendant-appellee, Rhodes Oil Company (Rhodes), which owned a bulk plant near Dempsey’s station, assumed Gulf’s obligations under the contract and supplied Dempsey with gasoline thereafter until January 23, 1976. On December 31, 1973, four months after appellee commenced supplying gasoline to appellant, Rhodes notified Dempsey that it was discontinuing the $.02 discount. Between January 1, 1974 and January 23, 1976, appellant purchased 459,932 gallons of gas from Rhodes at the non-discounted rate. In July 1975, prior to severing business relations with defendant, Dempsey sent a letter to the Federal Energy Administration (FEA). He asserted that the $.02 per gallon “rent” he had been receiving had been terminated by Rhodes, and asked the FEA to help in determining his rights. The FEA contacted a corporate officer of appel-lee by phone, related the substance of Dempsey’s allegations, and asked Rhodes to respond. In a letter to the FEA, Rhodes’ manager stated that the “rent” referred to in Dempsey’s letter was a “competitive discount” that was discontinued due to a change in market conditions rendering it no longer necessary. The FEA concluded from its investigation that no violation of its regulations had occurred, and the parties were so informed. In February 1976, shortly after Dempsey ceased purchasing gasoline from Rhodes, Dempsey sent a letter to Rhodes proposing settlement of a claim that Rhodes apparently was asserting against

was discontinuing the $.02 discount. Between January 1, 1974 and January 23, 1976, appellant purchased 459,932 gallons of gas from Rhodes at the non-discounted rate. In July 1975, prior to severing business relations with defendant, Dempsey sent a letter to the Federal Energy Administration (FEA). He asserted that the $.02 per gallon “rent” he had been receiving had been terminated by Rhodes, and asked the FEA to help in determining his rights. The FEA contacted a corporate officer of appel-lee by phone, related the substance of Dempsey’s allegations, and asked Rhodes to respond. In a letter to the FEA, Rhodes’ manager stated that the “rent” referred to in Dempsey’s letter was a “competitive discount” that was discontinued due to a change in market conditions rendering it no longer necessary. The FEA concluded from its investigation that no violation of its regulations had occurred, and the parties were so informed. In February 1976, shortly after Dempsey ceased purchasing gasoline from Rhodes, Dempsey sent a letter to Rhodes proposing settlement of a claim that Rhodes apparently was asserting against him. In. this letter, appellant made reference to “back rent” that he asserted appellee owed him. This was' followed by a letter from appellant’s attorney to appellee’s attorney. This letter invited Rhodes’ attorney to discuss the possibility of settlement of Rhodes’ claim and included an assertion that “a substantial amount” was owed by appellee under FEA regulations. The record discloses no further communications between the parties prior to the commencement of this suit. Plaintiff instituted this action for treble damages in federal district court on November 12, 1976. Fifteen months later, Dempsey’s attorney sent a letter to appellee in which he set forth the grounds for objecting to the termination of the discount, the period during which the alleged violation occurred, the quantity of gasoline purchased during that period, and the total amount of the alleged overcharge. The letter concluded with a demand for refund of the overcharge within ninety days. Section 210(b) of the ESA, which the trial court found appellant had failed to comply with, provides, in part: [W]here the overcharge is not willful within the

him. In. this letter, appellant made reference to “back rent” that he asserted appellee owed him. This was' followed by a letter from appellant’s attorney to appellee’s attorney. This letter invited Rhodes’ attorney to discuss the possibility of settlement of Rhodes’ claim and included an assertion that “a substantial amount” was owed by appellee under FEA regulations. The record discloses no further communications between the parties prior to the commencement of this suit. Plaintiff instituted this action for treble damages in federal district court on November 12, 1976. Fifteen months later, Dempsey’s attorney sent a letter to appellee in which he set forth the grounds for objecting to the termination of the discount, the period during which the alleged violation occurred, the quantity of gasoline purchased during that period, and the total amount of the alleged overcharge. The letter concluded with a demand for refund of the overcharge within ninety days. Section 210(b) of the ESA, which the trial court found appellant had failed to comply with, provides, in part: [W]here the overcharge is not willful within the meaning of section 208(a) of this title, no action for an overcharge may be brought by or on behalf of any person unless such person has first presented to the seller or renter a bona fide claim for refund of the overcharge and has not received repayment of such overcharge within ninety days from the date of the presentation of such claim. Appellant has never asserted that appel-lee “willfully” violated the Act, and he concedes that ESA § 210(b), therefore, is the applicable law on this issue. See Manning v. University of Notre Dame Du Lac, 484 F.2d 501 (Em.App.1973). He contends, however, that “substantial" compliance with § 210 is all that is required. Appellant argues that appellee had sufficient notice of his claim without formal presentment and that the district court therefore erred when it held strict compliance to be the rule. In support of this argument, appellant asserts that the language of § 210(b) is nonspecific, case law provides no guidance with respect to the formalities that must be followed in making a claim,

meaning of section 208(a) of this title, no action for an overcharge may be brought by or on behalf of any person unless such person has first presented to the seller or renter a bona fide claim for refund of the overcharge and has not received repayment of such overcharge within ninety days from the date of the presentation of such claim. Appellant has never asserted that appel-lee “willfully” violated the Act, and he concedes that ESA § 210(b), therefore, is the applicable law on this issue. See Manning v. University of Notre Dame Du Lac, 484 F.2d 501 (Em.App.1973). He contends, however, that “substantial" compliance with § 210 is all that is required. Appellant argues that appellee had sufficient notice of his claim without formal presentment and that the district court therefore erred when it held strict compliance to be the rule. In support of this argument, appellant asserts that the language of § 210(b) is nonspecific, case law provides no guidance with respect to the formalities that must be followed in making a claim, and non-judicial settlement of claims is encouraged, consonant with the congressional intent underlying § 210(b), where a seller receives notice sufficient to apprise him of the general “nature” of a purchaser’s claim. Appellant’s assertions are not persuasive. When ESA § 210, which provides for civil actions to recover overcharges and permits the courts to award treble damages, was undergoing congressional scrutiny prior to passage, legislators became concerned that the enactment of this section, as originally proposed, would result in the courts being deluged with frivolous suits. Following debate on the floor of both houses, the proviso of section 210(b) at issue here was added as a procedural hurdle to recovery in an attempt to counteract what Congress perceived to be a “substantial inducement to litigate.” 117 Cong.Rec. 43712 (1971) (remarks of Sen. Inouye). In keeping with Congress’ intent to avoid “misunderstanding[s]” and consequent litigation, Id., section 210(b) sets forth several explicit requirements as conditions precedent to a purchaser’s right to recover overcharges in an action in federal court: there must be a claim; the claim must

and non-judicial settlement of claims is encouraged, consonant with the congressional intent underlying § 210(b), where a seller receives notice sufficient to apprise him of the general “nature” of a purchaser’s claim. Appellant’s assertions are not persuasive. When ESA § 210, which provides for civil actions to recover overcharges and permits the courts to award treble damages, was undergoing congressional scrutiny prior to passage, legislators became concerned that the enactment of this section, as originally proposed, would result in the courts being deluged with frivolous suits. Following debate on the floor of both houses, the proviso of section 210(b) at issue here was added as a procedural hurdle to recovery in an attempt to counteract what Congress perceived to be a “substantial inducement to litigate.” 117 Cong.Rec. 43712 (1971) (remarks of Sen. Inouye). In keeping with Congress’ intent to avoid “misunderstanding[s]” and consequent litigation, Id., section 210(b) sets forth several explicit requirements as conditions precedent to a purchaser’s right to recover overcharges in an action in federal court: there must be a claim; the claim must be for a refund; it must be presented by the purchaser; and it must be presented to the seller. With regard to appellant’s claimed compliance, he never once sent a letter or even made a phone call demanding that appellee pay the alleged overcharge until almost fifteen months after filing this suit. The legislative history clearly indicates that a demand for repayment is a condition precedent to bringing suit. As this Court recognized in Longview Refining Co. v. Shore, 554 F.2d 1006, 1012 (Em.App.1977), “[Requiring presentation of a bona fide claim for refund of an overcharge is part of the congressional provision of an opportunity and an incentive for nonjudicial settlement.” Moreover, we stated very specifically in Manning v. University of Notre Dame Du Lac, 484 F.2d 501, 503 (Em.App.1973), that where a seller has not willfully violated the Act, it is “mandatory” that a purchaser make a “request for refund.” In addition to appellant’s failure to make a demand for repayment, he never indicated the amount that he believed he had been overcharged. In Evans v.

be for a refund; it must be presented by the purchaser; and it must be presented to the seller. With regard to appellant’s claimed compliance, he never once sent a letter or even made a phone call demanding that appellee pay the alleged overcharge until almost fifteen months after filing this suit. The legislative history clearly indicates that a demand for repayment is a condition precedent to bringing suit. As this Court recognized in Longview Refining Co. v. Shore, 554 F.2d 1006, 1012 (Em.App.1977), “[Requiring presentation of a bona fide claim for refund of an overcharge is part of the congressional provision of an opportunity and an incentive for nonjudicial settlement.” Moreover, we stated very specifically in Manning v. University of Notre Dame Du Lac, 484 F.2d 501, 503 (Em.App.1973), that where a seller has not willfully violated the Act, it is “mandatory” that a purchaser make a “request for refund.” In addition to appellant’s failure to make a demand for repayment, he never indicated the amount that he believed he had been overcharged. In Evans v. Suntreat Growers and Shippers, Inc., 531 F.2d 568, 571 (Em.App.1976), this Court held that the inclusion of a “sum certain” is an implicit and necessary element of a claim for refund under section 210(b). The Court there reasoned that the seller is entitled to be apprised of the total overcharge that the buyer is claiming he has suffered. Indeed, if we did not require a purchaser to know and make known the amount of the purported overcharge, the incentive to settle meritorious claims extrajudicially, and the deterrent to filing frivolous suits would be substantially impaired. We recognize that, on occasion, there may be exceptional circumstances that call for the suspension of the requirement that a sum certain be stated. Where, for example, a seller has information necessary to a determination of the total overcharge, and this information is not available to the buyer, fairness precludes rigid adherence to this rule. Appellant has offered no explanation, however, that would justify waiving the requirement in this case. In fact, appellant’s brief discloses conclusively, though perhaps unwittingly, that the

Suntreat Growers and Shippers, Inc., 531 F.2d 568, 571 (Em.App.1976), this Court held that the inclusion of a “sum certain” is an implicit and necessary element of a claim for refund under section 210(b). The Court there reasoned that the seller is entitled to be apprised of the total overcharge that the buyer is claiming he has suffered. Indeed, if we did not require a purchaser to know and make known the amount of the purported overcharge, the incentive to settle meritorious claims extrajudicially, and the deterrent to filing frivolous suits would be substantially impaired. We recognize that, on occasion, there may be exceptional circumstances that call for the suspension of the requirement that a sum certain be stated. Where, for example, a seller has information necessary to a determination of the total overcharge, and this information is not available to the buyer, fairness precludes rigid adherence to this rule. Appellant has offered no explanation, however, that would justify waiving the requirement in this case. In fact, appellant’s brief discloses conclusively, though perhaps unwittingly, that the information upon which he ultimately relied to compute the alleged overcharge was readily available to him at the time he sent his first letter to the appellee, nine months before he filed suit. The statute is explicit and the legislative intent clear. Congress placed the responsibility for complying with § 210(b) squarely upon the shoulders of the purchaser, and this Court has consistently required strict compliance with the statute. Appellant’s proposed substitution of substantial compliance would have the effect of shifting the focus of the courts from the objective conduct of the purchaser to issues involving a seller’s knowledge and state of mind. Such an approach, we conclude, would impose too great a burden upon trial courts to enter into collateral areas of fact in view of the ease with which a purchaser can comply with the express provisions of the Act. Appellant also argues that filing a “complaint” with the FEA is an alternative means of satisfying the requirements of § 210(b), and, therefore, this suit is saved because he followed that agency’s procedures as set

information upon which he ultimately relied to compute the alleged overcharge was readily available to him at the time he sent his first letter to the appellee, nine months before he filed suit. The statute is explicit and the legislative intent clear. Congress placed the responsibility for complying with § 210(b) squarely upon the shoulders of the purchaser, and this Court has consistently required strict compliance with the statute. Appellant’s proposed substitution of substantial compliance would have the effect of shifting the focus of the courts from the objective conduct of the purchaser to issues involving a seller’s knowledge and state of mind. Such an approach, we conclude, would impose too great a burden upon trial courts to enter into collateral areas of fact in view of the ease with which a purchaser can comply with the express provisions of the Act. Appellant also argues that filing a “complaint” with the FEA is an alternative means of satisfying the requirements of § 210(b), and, therefore, this suit is saved because he followed that agency’s procedures as set forth in EPAA, 10 C.F.R. § 200 et seq. for filing a complaint. We need not decide this issue here, for appellant did not comply with the FEA regulations governing procedures for filing a complaint. See, e. g., 10 C.F.R. 205.183 (“[Complaint] shall include a statement describing the regulation, ruling, order or interpretation that allegedly has been violated.”). Alternatively, appellant argues that § 210(b) is jurisdictional. In appellant’s view, the district court lacked subject matter jurisdiction to determine the merits of the case once it decided that a proper claim had not been made. Appellant concludes, therefore, that this case must be remanded to the district court with instructions to dismiss the claim without prejudice. Appellant could then proceed to give proper notice to appellee and reinstitute this action if appellee fails to refund the claimed overcharge within ninety days. The authority that appellant has cited does not support the proposition he advances. In Manning v. Notre Dame Du Lac, 484 F.2d 501, 503-504 (Em.App.1973), relied on by appellant, this Court held that Section 210(a) confers jurisdiction,

forth in EPAA, 10 C.F.R. § 200 et seq. for filing a complaint. We need not decide this issue here, for appellant did not comply with the FEA regulations governing procedures for filing a complaint. See, e. g., 10 C.F.R. 205.183 (“[Complaint] shall include a statement describing the regulation, ruling, order or interpretation that allegedly has been violated.”). Alternatively, appellant argues that § 210(b) is jurisdictional. In appellant’s view, the district court lacked subject matter jurisdiction to determine the merits of the case once it decided that a proper claim had not been made. Appellant concludes, therefore, that this case must be remanded to the district court with instructions to dismiss the claim without prejudice. Appellant could then proceed to give proper notice to appellee and reinstitute this action if appellee fails to refund the claimed overcharge within ninety days. The authority that appellant has cited does not support the proposition he advances. In Manning v. Notre Dame Du Lac, 484 F.2d 501, 503-504 (Em.App.1973), relied on by appellant, this Court held that Section 210(a) confers jurisdiction, not 210(b). See also Lo-Vaca Gathering Co. v. Railroad Commission of Texas, 565 F.2d 144, 146 (Em.App.1977), cert. denied, 434 U.S. 1067, 98 S.Ct. 1245, 55 L.Ed.2d 768 (1978). The Manning court stated that compliance with § 210(b) is an “essential condition to recovery” of an overcharge as opposed to a jurisdictional predicate. 484 F.2d at 504. Thus, this Court there upheld the district court’s dismissal of the plaintiff’s complaint for failure to state a claim upon which relief could be granted, pursuant to Rule 12(b)(6), Fed.R.Civ.P., where no demand for refund had been made or alleged in the complaint. Likewise, the district court in Thomas v. Amerada Hess Corp., 393 F.Supp. 58 (M.D. Pa.1975), dismissed a complaint pursuant to Rule 12(b)(6) rather than for lack of subject matter jurisdiction where no claim for refund was averred in the pleadings. A dismissal under 12(b)(6) is on the merits and with prejudice. See Rule 41(b), Fed.R. Civ.P. In the case at bar, appellee moved for dismissal of this action pursuant to Rule 12(b)(6) on the morning of

not 210(b). See also Lo-Vaca Gathering Co. v. Railroad Commission of Texas, 565 F.2d 144, 146 (Em.App.1977), cert. denied, 434 U.S. 1067, 98 S.Ct. 1245, 55 L.Ed.2d 768 (1978). The Manning court stated that compliance with § 210(b) is an “essential condition to recovery” of an overcharge as opposed to a jurisdictional predicate. 484 F.2d at 504. Thus, this Court there upheld the district court’s dismissal of the plaintiff’s complaint for failure to state a claim upon which relief could be granted, pursuant to Rule 12(b)(6), Fed.R.Civ.P., where no demand for refund had been made or alleged in the complaint. Likewise, the district court in Thomas v. Amerada Hess Corp., 393 F.Supp. 58 (M.D. Pa.1975), dismissed a complaint pursuant to Rule 12(b)(6) rather than for lack of subject matter jurisdiction where no claim for refund was averred in the pleadings. A dismissal under 12(b)(6) is on the merits and with prejudice. See Rule 41(b), Fed.R. Civ.P. In the case at bar, appellee moved for dismissal of this action pursuant to Rule 12(b)(6) on the morning of trial. Though appellant did not allege in his complaint that a demand for refund had been made, and dismissal would therefore have been proper, the court deferred ruling on the motion to give plaintiff an opportunity to present evidence on the issue. The court subsequently entered judgment for the ap-pellee, holding that it had jurisdiction in the case and finding that appellant had failed to prove an element necessary for recovery; specifically, that a proper demand for refund had not been made. We agree with the trial court that it had subject matter jurisdiction. Appellant’s argument to the contrary, upon which his request for remand is premised, is without merit. Lest the result here seem harsh, we point out that appellant could have sought a voluntary dismissal, without prejudice, prior to trial, pursuant to Rule 41(a), Fed.R.Civ.P. If such dismissal had been available by stipulation or if it had been granted by order of the court, plaintiff could then have made a proper claim for refund, and then filed suit anew. Instead, he chose to proceed to

trial. Though appellant did not allege in his complaint that a demand for refund had been made, and dismissal would therefore have been proper, the court deferred ruling on the motion to give plaintiff an opportunity to present evidence on the issue. The court subsequently entered judgment for the ap-pellee, holding that it had jurisdiction in the case and finding that appellant had failed to prove an element necessary for recovery; specifically, that a proper demand for refund had not been made. We agree with the trial court that it had subject matter jurisdiction. Appellant’s argument to the contrary, upon which his request for remand is premised, is without merit. Lest the result here seem harsh, we point out that appellant could have sought a voluntary dismissal, without prejudice, prior to trial, pursuant to Rule 41(a), Fed.R.Civ.P. If such dismissal had been available by stipulation or if it had been granted by order of the court, plaintiff could then have made a proper claim for refund, and then filed suit anew. Instead, he chose to proceed to trial and assume the risk of an adverse determination. Appellant will not now be heard to complain of the bitter fruit that has sprung from the seed that he had reason to suspect was faulty, yet chose to sow and rely upon. For the reasons stated above, the judgment of the district court is AFFIRMED.

PER CURIAM: Defendant and third-party plaintiff Southeastern Maritime Co. (SEMCO) appeals from a summary judgment in favor of the third-party defendants, the M/S SYLVO, E. B. Aabys, the owner, and Sylvan Shipping Co. (hereinafter collectively referred to as Sylvan). Holding this ease is not controlled by Grace Lines, Inc. v. Central Gulf Steamship Corp., 416 F.2d 977 (5th Cir. 1969), cert. denied, 398 U.S. 939, 90 S.Ct. 1843, 26 L.Ed.2d 271 (1970), and that the general rule with respect to third-party claims applies, we reverse. Cargo owned by ITT Rayonier Co. (Rayo-nier) was damaged while enroute from Savannah, Georgia, to Rotterdam on Sylvan’s vessel. The cargo had been loaded by SEM-CO, a stevedoring company, and had been discharged in Rotterdam on September 14, 1976. More than a year afterwards, Rayo-nier sued SEMCO but not Sylvan. Ten days later SEMCO filed a third-party complaint against Sylvan seeking recovery for indemnity and contribution under Fed.R. Civ.P. 14. Rayonier’s contract with Sylvan was governed by the Carriage of Goods by Sea Act (COGSA), 46 U.S.C.A. § 1300 et seq. Section 1303(6) of COGSA states, in part, that the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered . SEMCO’s stevedoring contract with Sylvan contained no COGSA provisions and the stevedore was not a party to the contract between Rayonier and Sylvan. The law is clear that in the absence of a contractual agreement, a stevedore is neither bound by the terms of a bill of lading nor regulated by the provisions of COGSA. Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297,301-02, 79 S.Ct. 766, 3 L.Ed.2d 820 (1959); Stein Hall & Co. v. S.S. Concordia Viking, 494 F.2d 287, 291 (2d Cir. 1974). Claiming that 'SEMCO’s third-party action was governed by the COGSA one-year limitation and thus time barred, Sylvan moved for summary judgment or judgment on the pleadings. The district court granted the motion, basing its ruling largely on this Court’s opinion in Grace Lines,

of COGSA states, in part, that the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered . SEMCO’s stevedoring contract with Sylvan contained no COGSA provisions and the stevedore was not a party to the contract between Rayonier and Sylvan. The law is clear that in the absence of a contractual agreement, a stevedore is neither bound by the terms of a bill of lading nor regulated by the provisions of COGSA. Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297,301-02, 79 S.Ct. 766, 3 L.Ed.2d 820 (1959); Stein Hall & Co. v. S.S. Concordia Viking, 494 F.2d 287, 291 (2d Cir. 1974). Claiming that 'SEMCO’s third-party action was governed by the COGSA one-year limitation and thus time barred, Sylvan moved for summary judgment or judgment on the pleadings. The district court granted the motion, basing its ruling largely on this Court’s opinion in Grace Lines, Inc. v. Central Gulf Steamship Corp., 416 F.2d 977. The well-established general rule with respect to third-party indemnity and contribution claims is: If defendant has a claim over against a third-party defendant — such as a claim for indemnity, contribution, etc. — the statute usually will not commence to run against the defendant (third-party plaintiff) and in favor of the third-party defendant until judgment has been entered against the defendant, or the defendant has paid the judgment. 3 Moore’s Federal Practice II 14.09 at 14-247 (2d ed. 1979). Accord, United States Lines, Inc. v. United States, 470 F.2d 487 (5th Cir. 1972); United States v. Farr & Co., 342 F.2d 383 (2d Cir. 1965); States Steamship Co. v. American Smelting & Refining Co., 339 F.2d 66 (9th Cir. 1964), cert, denied, 380 U.S. 964, 85 S.Ct. 1109, 14 L.Ed.2d 155 (1965); Chicago, Rock Island & Pacific Railway v. United States, 220 F.2d 939 (7th Cir. 1955). Grace Lines explicitly recognized this rule for the “ordinary cause of action for indemnity,” 416 F.2d at 978, but, because of the

Inc. v. Central Gulf Steamship Corp., 416 F.2d 977. The well-established general rule with respect to third-party indemnity and contribution claims is: If defendant has a claim over against a third-party defendant — such as a claim for indemnity, contribution, etc. — the statute usually will not commence to run against the defendant (third-party plaintiff) and in favor of the third-party defendant until judgment has been entered against the defendant, or the defendant has paid the judgment. 3 Moore’s Federal Practice II 14.09 at 14-247 (2d ed. 1979). Accord, United States Lines, Inc. v. United States, 470 F.2d 487 (5th Cir. 1972); United States v. Farr & Co., 342 F.2d 383 (2d Cir. 1965); States Steamship Co. v. American Smelting & Refining Co., 339 F.2d 66 (9th Cir. 1964), cert, denied, 380 U.S. 964, 85 S.Ct. 1109, 14 L.Ed.2d 155 (1965); Chicago, Rock Island & Pacific Railway v. United States, 220 F.2d 939 (7th Cir. 1955). Grace Lines explicitly recognized this rule for the “ordinary cause of action for indemnity,” 416 F.2d at 978, but, because of the operation of COGSA, carved out an exception to that rule. SEMCO urges this Court to refuse to follow Grace Lines, pointing out that the opinion has been often criticized. Whether or not Grace Lines was correctly decided, it is the law of the Circuit and we would have to follow it. We conclude, however, that its holding is not controlling in this case. In Grace Lines the shipowner and the charterer entered into a charter party which incorporated COGSA. The charterer, as carrier, issued a bill of lading governed by COGSA. Both the charter and the bill of lading were subject to COGSA’s one-year statute of limitations. The plaintiff cargo owner, upon discovering damage to the cargo, filed an action against the vessel, the owner, and the charterer. After the one-year period had run, the charterer filed a third-party indemnity claim against the owner. The Court found that since the right to indemnity arose from the charter, and because the charter was subject to COGSA, the one-year statute of limitations operated to bar the charterer’s claim. Here, however,

operation of COGSA, carved out an exception to that rule. SEMCO urges this Court to refuse to follow Grace Lines, pointing out that the opinion has been often criticized. Whether or not Grace Lines was correctly decided, it is the law of the Circuit and we would have to follow it. We conclude, however, that its holding is not controlling in this case. In Grace Lines the shipowner and the charterer entered into a charter party which incorporated COGSA. The charterer, as carrier, issued a bill of lading governed by COGSA. Both the charter and the bill of lading were subject to COGSA’s one-year statute of limitations. The plaintiff cargo owner, upon discovering damage to the cargo, filed an action against the vessel, the owner, and the charterer. After the one-year period had run, the charterer filed a third-party indemnity claim against the owner. The Court found that since the right to indemnity arose from the charter, and because the charter was subject to COGSA, the one-year statute of limitations operated to bar the charterer’s claim. Here, however, whatever rights SEMCO might have to indemnity and contribution from Sylvan do not arise through application of an agreement subject to COGSA. In Grace Lines the rights of the plaintiff against the defendant and of the third-party plaintiff against the third-party defendant were limited by COGSA. In the present case the only relationship governed by COGSA, the one between Rayonier and Sylvan, does not bear on SEMCO’s theory of liability. COGSA has no application as between Rayonier and SEMCO or between SEMCO and Sylvan. Thus, we think Grace Lines does not decide the issue here. The Grace Lines reasoning should not be extended to the facts here. As was pointed out in Francosteel Corp. v. S.S. Tien Cheung, 375 F.Supp. 794 (S.D.N.Y.1973), the application of COGSA to indemnification claims may thwart the purpose of Rule 14 of the Federal Rules of Civil Procedure and could sanction plaintiff’s selectively suing an isolated defendant and, through skillful manipulation of the limitations period, denying the defendant his rightful claim for indemnity. While such risks may be tolerated when, as

whatever rights SEMCO might have to indemnity and contribution from Sylvan do not arise through application of an agreement subject to COGSA. In Grace Lines the rights of the plaintiff against the defendant and of the third-party plaintiff against the third-party defendant were limited by COGSA. In the present case the only relationship governed by COGSA, the one between Rayonier and Sylvan, does not bear on SEMCO’s theory of liability. COGSA has no application as between Rayonier and SEMCO or between SEMCO and Sylvan. Thus, we think Grace Lines does not decide the issue here. The Grace Lines reasoning should not be extended to the facts here. As was pointed out in Francosteel Corp. v. S.S. Tien Cheung, 375 F.Supp. 794 (S.D.N.Y.1973), the application of COGSA to indemnification claims may thwart the purpose of Rule 14 of the Federal Rules of Civil Procedure and could sanction plaintiff’s selectively suing an isolated defendant and, through skillful manipulation of the limitations period, denying the defendant his rightful claim for indemnity. While such risks may be tolerated when, as in Grace Lines, the relative rights of the parties are governed by the explicit congressional pronouncement in COGSA, application where the rights and liabilities of the parties are not based on COGSA cannot be justified. We hold, therefore, that COGSA does not bar SEM-CO’s third-party indemnification and contribution suit. Instead, the general rule that any limitations period in a cause of action for indemnity or contribution does not begin to run until judgment against defendant has been entered or payment of the primary liability payment has been made should be followed. Under this rule, it is clear that SEMCO’s third-party claim is not time-barred. The order of the district court dismissing SEM-CO’s third-party claim against Sylvan is reversed and the case is remanded for further proceedings not inconsistent with this opinion. REVERSED AND REMANDED. TATE, Circuit Judge, specially concurring: I agree with the result reached in this case. The stevedore was never given a chance to implead the shipper, and the cargo claimant should not be given the opportunity to choose which of two defendants will be held responsible

in Grace Lines, the relative rights of the parties are governed by the explicit congressional pronouncement in COGSA, application where the rights and liabilities of the parties are not based on COGSA cannot be justified. We hold, therefore, that COGSA does not bar SEM-CO’s third-party indemnification and contribution suit. Instead, the general rule that any limitations period in a cause of action for indemnity or contribution does not begin to run until judgment against defendant has been entered or payment of the primary liability payment has been made should be followed. Under this rule, it is clear that SEMCO’s third-party claim is not time-barred. The order of the district court dismissing SEM-CO’s third-party claim against Sylvan is reversed and the case is remanded for further proceedings not inconsistent with this opinion. REVERSED AND REMANDED. TATE, Circuit Judge, specially concurring: I agree with the result reached in this case. The stevedore was never given a chance to implead the shipper, and the cargo claimant should not be given the opportunity to choose which of two defendants will be held responsible for damage that may have been caused by both, or in fact may have been caused by the sole fault of the shipper. Under the circumstances of this case, the district court erred in holding that the third-party action was time-barred. See Francosteel Corp. v. S.S. Tien Cheung, 375 F.Supp. 794 (S.D.N.Y.1973). Since the contract between the stevedore and the shipper was not governed by the time limitations of COGSA, Grace Lines, Inc. v. Central Gulf Steamship Corp., 416 F.2d 977 (1969), cert. denied, 398 U.S. 939, 90 S.Ct. 1843, 26 L.Ed.2d 271 (1970), is factually distinguishable and not controlling. I concur specially only to state, for benefit of possible future en banc consideration of the issue, that were I writing on a clean slate, I would decide Grace Lines differently. It is clear to me that the rationale of Francosteel should be applied to prevent the application of the COGSA one-year statute of limitations to any action for indemnity or contribution not founded solely on subrogation. See 3 Moore’s Federal Practice H 14.09, at 14-247

for damage that may have been caused by both, or in fact may have been caused by the sole fault of the shipper. Under the circumstances of this case, the district court erred in holding that the third-party action was time-barred. See Francosteel Corp. v. S.S. Tien Cheung, 375 F.Supp. 794 (S.D.N.Y.1973). Since the contract between the stevedore and the shipper was not governed by the time limitations of COGSA, Grace Lines, Inc. v. Central Gulf Steamship Corp., 416 F.2d 977 (1969), cert. denied, 398 U.S. 939, 90 S.Ct. 1843, 26 L.Ed.2d 271 (1970), is factually distinguishable and not controlling. I concur specially only to state, for benefit of possible future en banc consideration of the issue, that were I writing on a clean slate, I would decide Grace Lines differently. It is clear to me that the rationale of Francosteel should be applied to prevent the application of the COGSA one-year statute of limitations to any action for indemnity or contribution not founded solely on subrogation. See 3 Moore’s Federal Practice H 14.09, at 14-247 to 248 (2d ed. 1979). Otherwise, a cargo claimant has the ability to manipulate the time limitation in order to favor one possible tortfeasor over another. In my opinion, policy dictates that even in the COGSA context, the general rule on actions for indemnity or contribution should apply — “the statute of limitation on an action to enforce [the right to indemnity] would not begin to run until payment was made.” Grace Lines, Inc. v. Central Gulf Steamship Corp., 416 F.2d at 978. I must admit, as did the district court, that contrary policy reasons are not without weight. The one-year COGSA limitation on bringing cargo damage claims may indeed have been designed to bar not only claims for cargo damage but also claims for indemnity or contribution arising out of such cargo-damage claims — such as those by charterers or stevedores for cargo-damage for which they are held liable to the cargo-owner, but for which, as between the shipowner and themselves, the shipowner is primarily or partially liable. A defendant’s delayed claim for indemnity or

to 248 (2d ed. 1979). Otherwise, a cargo claimant has the ability to manipulate the time limitation in order to favor one possible tortfeasor over another. In my opinion, policy dictates that even in the COGSA context, the general rule on actions for indemnity or contribution should apply — “the statute of limitation on an action to enforce [the right to indemnity] would not begin to run until payment was made.” Grace Lines, Inc. v. Central Gulf Steamship Corp., 416 F.2d at 978. I must admit, as did the district court, that contrary policy reasons are not without weight. The one-year COGSA limitation on bringing cargo damage claims may indeed have been designed to bar not only claims for cargo damage but also claims for indemnity or contribution arising out of such cargo-damage claims — such as those by charterers or stevedores for cargo-damage for which they are held liable to the cargo-owner, but for which, as between the shipowner and themselves, the shipowner is primarily or partially liable. A defendant’s delayed claim for indemnity or contribution, in this latter instance, presents problems and policy-values similar to those that arise when suit for the cargo damage itself is unduly delayed. Nevertheless, I presently incline to the belief that the weight of policy reasons favors indemnity claims in such situations, without regard to COGSA’s one-year time limitation. As between potential defendants, an opportunity to hold liable the party primarily responsible should not be foreclosed by plaintiff-choice. I agree that summary calendar treatment of this case is appropriate. The facts and legal arguments are adequately presented by the briefs and the record, and the deci-sional process would not be significantly aided by oral argument. I feel impelled to state my serious reservations concerning the correctness of this court’s decision in Grace Lines, but these reservations can only be resolved by the court en banc. Therefore, I respectfully concur.

PER CURIAM: In this seaman’s personal injury case, the District Court held that there existed no genuine issue of material fact with respect to the validity of the release executed by the plaintiff and granted summary judgment to the defendants. We reverse. Releases signed by seamen, the “wards of admiralty,” are given the most careful scrutiny. The burden is on the shipowner to show that the seaman signed the release with a full understanding of his rights and the effect of his action. See Garrett v. Moore-McCormack Co., 1942, 317 U.S. 239, 63 S.Ct. 246, 87 L.Ed. 239; Aguiluz-Nunez v. Carnival Cruise Lines, Inc., 584 F.2d 76 (5th Cir. 1978). On a motion for summary judgment based on a seaman’s release, the shipowner has an even heavier burden to shoulder, for he must conclusively demonstrate the absence of genuine issues of material fact. F.R.Civ.P. 56(c). The record reveals that Halliburton had been on a course of therapy which required Phenaphen, Valium and Dalmane. The affidavit of Dr. Morgan, a noted pharmacologist and acting Chairman of the Louisiana State University School of Medicine, was filed in opposition to the motion. Addressing himself to the above noted drugs, Dr. Morgan stated: “These drugs, when ingested concomitantly, have a potentiating, or greatly increased effect upon the patients’ mental faculties, which the drugs, if ingested alone, would not have;” And, referring to the two drugs taken by plaintiff-appellant that morning: “A patient who has been on a course of therapy consisting of these drugs and who, on a particular day has ingested four capsules of Phenaphen No. 3 and two 5 milligram tablets of Valium would more than likely have impaired or diminished mental capacity to fully understand and appreciate any actions requiring the patient to be fully alert and attentive to details, or which require the patient to engage in any complicated thought processes wherein he must make any more than the simplest routine judgments and certainly this would include the ability to understand, assess and fully appreciate the terms, results, and effects of a release of any claim involving the patient.” Dr. Morgan was called as a witness by

University School of Medicine, was filed in opposition to the motion. Addressing himself to the above noted drugs, Dr. Morgan stated: “These drugs, when ingested concomitantly, have a potentiating, or greatly increased effect upon the patients’ mental faculties, which the drugs, if ingested alone, would not have;” And, referring to the two drugs taken by plaintiff-appellant that morning: “A patient who has been on a course of therapy consisting of these drugs and who, on a particular day has ingested four capsules of Phenaphen No. 3 and two 5 milligram tablets of Valium would more than likely have impaired or diminished mental capacity to fully understand and appreciate any actions requiring the patient to be fully alert and attentive to details, or which require the patient to engage in any complicated thought processes wherein he must make any more than the simplest routine judgments and certainly this would include the ability to understand, assess and fully appreciate the terms, results, and effects of a release of any claim involving the patient.” Dr. Morgan was called as a witness by defendants at the hearing, and when questioned about the effects of the three drugs, reaffirmed his opinion: “Q. But some persons might react to this combination of drugs— A. Some people — excuse me. Most adults taking that combination would require going to bed. I mean, their mental activity would be decreased where they couldn’t function.” Defendants’ contention that the release was valid is premised on the verbal transcript of the settlement meeting and Halliburton’s statements on that occasion that he knew what he was doing. If Halliburton was in fact suffering from diminished mental capacity, it is doubtful whether these statements prove anything. Then, too, there is a serious conflict of evidence concerning the alleged threats to reduce Halliburton’s maintenance and cure payments and to drag the case out for several years. It is noted that Halliburton was not represented by counsel at the time of the settlement. We are quite sure that plaintiff’s submission created genuine issues of material fact. Therefore, the judgment of the District Court is REVERSED and the case is REMANDED to that Court

defendants at the hearing, and when questioned about the effects of the three drugs, reaffirmed his opinion: “Q. But some persons might react to this combination of drugs— A. Some people — excuse me. Most adults taking that combination would require going to bed. I mean, their mental activity would be decreased where they couldn’t function.” Defendants’ contention that the release was valid is premised on the verbal transcript of the settlement meeting and Halliburton’s statements on that occasion that he knew what he was doing. If Halliburton was in fact suffering from diminished mental capacity, it is doubtful whether these statements prove anything. Then, too, there is a serious conflict of evidence concerning the alleged threats to reduce Halliburton’s maintenance and cure payments and to drag the case out for several years. It is noted that Halliburton was not represented by counsel at the time of the settlement. We are quite sure that plaintiff’s submission created genuine issues of material fact. Therefore, the judgment of the District Court is REVERSED and the case is REMANDED to that Court for further proceedings consistent with this opinion. IT IS SO ORDERED.

MEMORANDUM Allana Baroni appeals the Bankruptcy Appellate Panel’s (BAP) decision affirming the bankruptcy court’s grant of summary judgment to Wells Fargo. We have jurisdiction under 28 U.S.C. § 158(d)(1). The undisputed facts in the record established that Wells Fargo possessed Bar-oni’s promissory note indorsed in blank. As the holder of a negotiable instrument, Wells Fargo is entitled to enforce the note in Baroni’s bankruptcy case. Cal. Com. Code §§ 1201(b)(21)(A), 3301. Baroni now argues that notes secured by a deed of trust to real property are nonnegotiable and that the statute of frauds prohibits Wells Fargo from enforcing the note. Because she failed to raise these arguments to the bankruptcy court or BAP, they are waived. In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 992 (9th Cir. 2010). In any event, both arguments lack merit. First, a negotiable instrument may be accompanied by a deed of trust. Cal. Com. Code § 3104(a)(3); Wilson v. Steele, 211 Cal. App. 3d 1053, 1061, 259 Cal.Rptr. 851 (1989). Second, the failure to satisfy the statute of frauds merely renders a contract voidable, not void. Masin v. Drain, 150 Cal. App. 3d 714, 717, 198 Cal.Rptr. 367 (1984). Baroni lacks standing to challenge assignments as voidable. See Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919, 939-40, 199 Cal.Rptr.3d 66, 365 P.3d 845 (2016). Finally, because we hold that Wells Fargo is entitled to enforce the note as the holder of a negotiable instrument, we do not address whether it could alternatively enforce the note through an unbroken chain of title, AFFIRMED. This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. . Since we do not address Wells Fargo’s chain of title, we deny Baroni’s contested motion, filed September 19, 2016, for judicial notice of a purported assignment of the deed of trust.

BREYER, Circuit Judge. The two parties before us — Westates and Charter One — signed a “charter air service” contract. As the contract required, Charter One arranged for a bank to issue a $50,000 “standby” letter of credit in Wes-tates’ favor, a letter designed, in part, to make certain Westates would not suffer harm should Charter One fail to carry out its contractual obligations. See generally Itek Corp. v. First National Bank of Boston, 730 F.2d 19, 24 (1st Cir.1984) (explaining the purpose of the standby credit); J. Dolan, The Law of Letters of Credit 111.04, at 1-12 to 1-15 (1984 & Supp.1989) (same). Subsequently, a dispute arose; each party claimed the other broke the contract. Westates, the beneficiary of the letter of credit, would now like to “call” the letter, thereby obtaining the $50,000, which it hopes to keep, at least while the courts litigate the parties’ various “breach of contract” claims. The federal district court, however, has issued an injunction, forbidding Westates to call the letter of credit. Westates appeals from the issuance of the injunction. It says that the law prohibits a court from enjoining a call on a stand by letter of credit, at least in a typical case, where the beneficiary’s position in the underlying contract dispute is colorable and where the beneficiary can satisfy the terms that the letter of credit itself sets forth as conditions for its call. See, e.g., Trans Meridian Trading, Inc. v. Empresa Nacional de Comercializacion de Insumos, 829 F.2d 949, 956 (9th Cir.1987); Itek, 730 F.2d at 24-25; Intraworld Indus., Inc. v. Girard Trust Bank, 461 Pa. 343, 336 A.2d 316, 325 (1975); Dynamics Corp. of America v. Citizens & Southern National Bank, 356 F.Supp. 991, 999 (N.D.Ga.1973). We agree with Westates that the record before us indicates that this case presents the typical commercial circumstances (in respect to the underlying contract, the dispute, and the letter of credit), in which commercial law, as embodied in the Uniform Commercial Code, prohibits an injunction. Charter One argues that California law (which governs this dispute) is different; it reads an intermediate state appellate court

It says that the law prohibits a court from enjoining a call on a stand by letter of credit, at least in a typical case, where the beneficiary’s position in the underlying contract dispute is colorable and where the beneficiary can satisfy the terms that the letter of credit itself sets forth as conditions for its call. See, e.g., Trans Meridian Trading, Inc. v. Empresa Nacional de Comercializacion de Insumos, 829 F.2d 949, 956 (9th Cir.1987); Itek, 730 F.2d at 24-25; Intraworld Indus., Inc. v. Girard Trust Bank, 461 Pa. 343, 336 A.2d 316, 325 (1975); Dynamics Corp. of America v. Citizens & Southern National Bank, 356 F.Supp. 991, 999 (N.D.Ga.1973). We agree with Westates that the record before us indicates that this case presents the typical commercial circumstances (in respect to the underlying contract, the dispute, and the letter of credit), in which commercial law, as embodied in the Uniform Commercial Code, prohibits an injunction. Charter One argues that California law (which governs this dispute) is different; it reads an intermediate state appellate court decision as permitting an injunction. See Steinmeyer v. Warner Consolidated Corp., 42 Cal.App.3d 515, 116 Cal.Rptr. 57 (Cal.Ct.App.1974). We do not believe, however, that Steinmeyer creates what would amount to an unusual exception to the “no injunction” rule. Alternatively, if Steinmeyer means to create such an exception, we do not believe the California Supreme Court would follow it. Consequently, we reverse the district court. I. Background We set forth several background circumstances so that the reader can see that this case (as far as the record here reveals) is one in which commercial law normally would prohibit an injunction. That is to say, the underlying contract is a simple, typical commercial contract; Westates’ claim that Charter One broke the contract is at least “colorable;” and Westates seems able to satisfy the terms that the letter of credit itself sets forth as conditions for its call. 1. The contract. Westates provides airplanes and related services for charter flights. Charter One sells charter flights to travelers. In mid-1989 Westates and Charter One signed a contract under which Westates promised to

decision as permitting an injunction. See Steinmeyer v. Warner Consolidated Corp., 42 Cal.App.3d 515, 116 Cal.Rptr. 57 (Cal.Ct.App.1974). We do not believe, however, that Steinmeyer creates what would amount to an unusual exception to the “no injunction” rule. Alternatively, if Steinmeyer means to create such an exception, we do not believe the California Supreme Court would follow it. Consequently, we reverse the district court. I. Background We set forth several background circumstances so that the reader can see that this case (as far as the record here reveals) is one in which commercial law normally would prohibit an injunction. That is to say, the underlying contract is a simple, typical commercial contract; Westates’ claim that Charter One broke the contract is at least “colorable;” and Westates seems able to satisfy the terms that the letter of credit itself sets forth as conditions for its call. 1. The contract. Westates provides airplanes and related services for charter flights. Charter One sells charter flights to travelers. In mid-1989 Westates and Charter One signed a contract under which Westates promised to provide planes and crews for Charter One’s new service between Providence, Rhode Island, and Atlantic City, New Jersey, and also (by later amendment to the contract) for its new service between Worcester, Massachusetts, and Atlantic City. The contract required Charter One to pay Westates each month a fee calculated on the basis of the number of hours flown, with a minimum fee of about $105,000 (based on 70 hours flown), which was increased to about $209,000 (150 hours flown) when the Worcester service was added. The contract contained a special “default” clause, which says, upon any default by Charter One as defined in this agreement, Westates may immediately terminate all service.... Westates shall immediately notify Charter One of the default.... If the default is not cured by Charter One within ten (10) days from the date of mailing the notice of default, Westates shall have the right to immediately declare Charter One’s default to be a material breach of this agreement and declare this agreement to be terminated without further notice to Charter One. (Emphasis added.) The

provide planes and crews for Charter One’s new service between Providence, Rhode Island, and Atlantic City, New Jersey, and also (by later amendment to the contract) for its new service between Worcester, Massachusetts, and Atlantic City. The contract required Charter One to pay Westates each month a fee calculated on the basis of the number of hours flown, with a minimum fee of about $105,000 (based on 70 hours flown), which was increased to about $209,000 (150 hours flown) when the Worcester service was added. The contract contained a special “default” clause, which says, upon any default by Charter One as defined in this agreement, Westates may immediately terminate all service.... Westates shall immediately notify Charter One of the default.... If the default is not cured by Charter One within ten (10) days from the date of mailing the notice of default, Westates shall have the right to immediately declare Charter One’s default to be a material breach of this agreement and declare this agreement to be terminated without further notice to Charter One. (Emphasis added.) The contract also required speedy transmission of each monthly payment. It said that late payment was “considered a default.” 2. The contract dispute. Each party now says that the other party broke this contract. The record reveals a dispute that began in August 1989, when the contract was less than one month old. Charter One’s president says that Westates’ owner called him and threatened to cancel the contract unless Charter One would pay a higher minimum fee. Charter One refused. Westates then sent Charter One a “ten day default” notice, under the contract’s special “default” provision. The “ten day notice” said that Westates would not provide planes for Charter One’s Worcester/Atlantic City service after September 4. Wes-tates, even before September 4, provided only one plane, rather than two planes (as the contract required), but Westates says that maintenance problems, not contract-cancellation efforts, were responsible. Subsequently, Westates, apparently under pressure from Charter One, changed its mind about cancelling the contract. Charter One’s attorney wrote to Westates suggesting that “Westates reconsider its decision to cancel the contract and instead perform

contract also required speedy transmission of each monthly payment. It said that late payment was “considered a default.” 2. The contract dispute. Each party now says that the other party broke this contract. The record reveals a dispute that began in August 1989, when the contract was less than one month old. Charter One’s president says that Westates’ owner called him and threatened to cancel the contract unless Charter One would pay a higher minimum fee. Charter One refused. Westates then sent Charter One a “ten day default” notice, under the contract’s special “default” provision. The “ten day notice” said that Westates would not provide planes for Charter One’s Worcester/Atlantic City service after September 4. Wes-tates, even before September 4, provided only one plane, rather than two planes (as the contract required), but Westates says that maintenance problems, not contract-cancellation efforts, were responsible. Subsequently, Westates, apparently under pressure from Charter One, changed its mind about cancelling the contract. Charter One’s attorney wrote to Westates suggesting that “Westates reconsider its decision to cancel the contract and instead perform its obligations as required.” The letter adds: Please advise the undersigned by close of business on Wednesday, August 30, 1989, whether Westates intends ... cancellation of the Worcester program. If we do not hear from [you] ... by that time, we will assume that Westates does not intend to abide by its contract, and Charter One will take such measures as are necessary to protect its rights. On August 30 a Westates attorney, in California, called Charter One’s attorney, in Washington, D.C. She says that she told Charter One that Westates indeed intended to abide by the contract and that it rescinded its cancellation. She did not call, however, until 3 p.m. California time, which was 6 p.m. Washington, D.C., time. Charter One then decided that it would not go through with the contract; and it wrote back to Westates that Westates’ call had come “too late” (apparently meaning that the call had arrived after “close of business”). The letter added that Charter One would therefore “reject your verbal offer to rescind cancellation of the Worcester program....” Westates

its obligations as required.” The letter adds: Please advise the undersigned by close of business on Wednesday, August 30, 1989, whether Westates intends ... cancellation of the Worcester program. If we do not hear from [you] ... by that time, we will assume that Westates does not intend to abide by its contract, and Charter One will take such measures as are necessary to protect its rights. On August 30 a Westates attorney, in California, called Charter One’s attorney, in Washington, D.C. She says that she told Charter One that Westates indeed intended to abide by the contract and that it rescinded its cancellation. She did not call, however, until 3 p.m. California time, which was 6 p.m. Washington, D.C., time. Charter One then decided that it would not go through with the contract; and it wrote back to Westates that Westates’ call had come “too late” (apparently meaning that the call had arrived after “close of business”). The letter added that Charter One would therefore “reject your verbal offer to rescind cancellation of the Worcester program....” Westates then stopped providing Worcester/Atlantic City service. It continued, however, to provide Providence/Atlantic City service. In mid-September Charter One withheld about $32,000 from the monthly fees due Westates for that Providence service. Westates said that the contract did not permit Charter One to withhold this money. On September 22 it sent Charter One another “ten day default” notice. After ten days it cancelled the contract. The parties have not yet litigated the merits of their contract disputes. We therefore need not decide whether Wes-tates did, or did not, break the contract in mid-August, or whether it successfully reinstated the contract on August 30, or whether, irrespective of the status of the Worcester/Atlantic City portion of the contract, the Providence/Atlantic City portion remained in effect, or whether Charter One did, or did not, have the right to withhold $32,000 in mid-September. We need only decide that the record, so far, indicates that Westates’ position, in respect to the contract dispute, is not obviously without merit, that its position is “colorable,” and that, in arguing that it was entitled

then stopped providing Worcester/Atlantic City service. It continued, however, to provide Providence/Atlantic City service. In mid-September Charter One withheld about $32,000 from the monthly fees due Westates for that Providence service. Westates said that the contract did not permit Charter One to withhold this money. On September 22 it sent Charter One another “ten day default” notice. After ten days it cancelled the contract. The parties have not yet litigated the merits of their contract disputes. We therefore need not decide whether Wes-tates did, or did not, break the contract in mid-August, or whether it successfully reinstated the contract on August 30, or whether, irrespective of the status of the Worcester/Atlantic City portion of the contract, the Providence/Atlantic City portion remained in effect, or whether Charter One did, or did not, have the right to withhold $32,000 in mid-September. We need only decide that the record, so far, indicates that Westates’ position, in respect to the contract dispute, is not obviously without merit, that its position is “colorable,” and that, in arguing that it was entitled to receive the $32,000 and (not having received the money) to send a “ten day default” letter, Westates is not acting “fraudulently.” 3. The letter of credit. The letter of credit here at issue is a typical, commercial letter designed to guarantee a beneficiary against harm caused by a contractual “default.” The air service contract described above requires Charter One to arrange for a “letter of credit” as a “default guarantee.” It says specifically in the section dealing with “default” that Charter One must provide Westates with a Irrevocable Letter of Credit acceptable to Westates in the amount of $50,000.... It adds that: Upon termination of the agreement by Westates ... it is agreed that Westates may take the irrevocable Letter of Credit as liquidated damages for the breach of this agreement by Charter One. Charter One arranged for a Michigan bank to issue the letter. The letter itself says that Westates may “call” the letter and obtain the money by asking the bank for the money and providing the bank with a copy of the ten day default notice.

to receive the $32,000 and (not having received the money) to send a “ten day default” letter, Westates is not acting “fraudulently.” 3. The letter of credit. The letter of credit here at issue is a typical, commercial letter designed to guarantee a beneficiary against harm caused by a contractual “default.” The air service contract described above requires Charter One to arrange for a “letter of credit” as a “default guarantee.” It says specifically in the section dealing with “default” that Charter One must provide Westates with a Irrevocable Letter of Credit acceptable to Westates in the amount of $50,000.... It adds that: Upon termination of the agreement by Westates ... it is agreed that Westates may take the irrevocable Letter of Credit as liquidated damages for the breach of this agreement by Charter One. Charter One arranged for a Michigan bank to issue the letter. The letter itself says that Westates may “call” the letter and obtain the money by asking the bank for the money and providing the bank with a copy of the ten day default notice. It reads: the credit amount is available to you [Westates] by your drafts on us at sight accompanied by: Dated notarized copy of the ten (10) day notice described in [the Westates/Charter One contract]. The record indicates that Westates can easily meet the terms in this letter of credit. It can provide the bank with a draft and with the “dated notarized copy of the ten ... day notice” that it sent to Charter One on September 22. II. Ordinary Principles of Commercial Law As we have previously explained, parties to commercial contracts often arrange for “standby” or “guarantee” letters of credit. The beneficiary of such a letter typically wants to make certain that, if the other party to the contract defaults, the beneficiary can gain access to a secure fund of money which he can use, say, to satisfy the other party’s debt to him (if he is a “seller”), or to purchase a substitute performance (if he is a “buyer”). He may also wish to make certain that, should any contractual dispute arise, it will “wend [its]

It reads: the credit amount is available to you [Westates] by your drafts on us at sight accompanied by: Dated notarized copy of the ten (10) day notice described in [the Westates/Charter One contract]. The record indicates that Westates can easily meet the terms in this letter of credit. It can provide the bank with a draft and with the “dated notarized copy of the ten ... day notice” that it sent to Charter One on September 22. II. Ordinary Principles of Commercial Law As we have previously explained, parties to commercial contracts often arrange for “standby” or “guarantee” letters of credit. The beneficiary of such a letter typically wants to make certain that, if the other party to the contract defaults, the beneficiary can gain access to a secure fund of money which he can use, say, to satisfy the other party’s debt to him (if he is a “seller”), or to purchase a substitute performance (if he is a “buyer”). He may also wish to make certain that, should any contractual dispute arise, it will “wend [its] way towards resolution with the money in [his] pocket, rather than in the pocket” of his adversary. Itek, 730 F.2d at 24. In order to permit the parties to agree to achieve these objectives, courts have typically considered the letter of credit as “independent” of the contract. That is to say, they have considered it a separate agreement with, say, the issuing bank, that permits the beneficiary to present the documents that satisfy the “call” conditions, and that requires the bank to honor the letter when the beneficiary does so. See, e.g., Emery-Waterhouse Co. v. Rhode Island Hospital Trust National Bank, 757 F.2d 399, 404 (1st Cir.1985); Philadelphia Gear Corp. v. Central Bank, 717 F.2d 230, 235-36 (5th Cir.1983); Pringle-Associated Mortgage Corp. v. Southern National Bank, 571 F.2d 871, 874 (5th Cir.1978); Venizelos, S.A. v. Chase Manhattan Bank, 425 F.2d 461, 464-65 (2d Cir.1970); New York Life Insurance Co. v. Hartford National Bank & Trust Co., 173 Conn. 492, 378 A.2d 562, 567 (1977); InterFirst Bank Greenspoint v. First Federal Savings & Loan Ass'n of

way towards resolution with the money in [his] pocket, rather than in the pocket” of his adversary. Itek, 730 F.2d at 24. In order to permit the parties to agree to achieve these objectives, courts have typically considered the letter of credit as “independent” of the contract. That is to say, they have considered it a separate agreement with, say, the issuing bank, that permits the beneficiary to present the documents that satisfy the “call” conditions, and that requires the bank to honor the letter when the beneficiary does so. See, e.g., Emery-Waterhouse Co. v. Rhode Island Hospital Trust National Bank, 757 F.2d 399, 404 (1st Cir.1985); Philadelphia Gear Corp. v. Central Bank, 717 F.2d 230, 235-36 (5th Cir.1983); Pringle-Associated Mortgage Corp. v. Southern National Bank, 571 F.2d 871, 874 (5th Cir.1978); Venizelos, S.A. v. Chase Manhattan Bank, 425 F.2d 461, 464-65 (2d Cir.1970); New York Life Insurance Co. v. Hartford National Bank & Trust Co., 173 Conn. 492, 378 A.2d 562, 567 (1977); InterFirst Bank Greenspoint v. First Federal Savings & Loan Ass'n of Beloit, 242 Kan. 181, 747 P.2d 129, 134 (1987); Intraworld Industries, Inc., 336 A.2d at 323-24; see also U.C.C. § 5-114, comment 1 (“The letter of credit is essentially a contract between the issuer and the beneficiary and is recognized by this Article as independent of the underlying contract between the customer and the beneficiary.”). Whether in satisfying those conditions — say, as here, by presenting a draft and a copy of a ten day notice — the beneficiary is, or is not, violating the terms of some other document, such as an underlying contract, is normally beside the point, for to prevent the beneficiary from obtaining the money while the court decides the “underlying contract” question may deprive the beneficiary of the very benefit for which he bargained, namely that any such underlying contract dispute will be “resolved while he is in possession of the money.” Itek, 730 F.2d at 24; see KMW International v. Chase Manhattan Bank N.A., 606 F.2d 10, 15 (2d Cir. 1979); J. Dolan, supra p. 2, 113.07[4], at 3-26

Beloit, 242 Kan. 181, 747 P.2d 129, 134 (1987); Intraworld Industries, Inc., 336 A.2d at 323-24; see also U.C.C. § 5-114, comment 1 (“The letter of credit is essentially a contract between the issuer and the beneficiary and is recognized by this Article as independent of the underlying contract between the customer and the beneficiary.”). Whether in satisfying those conditions — say, as here, by presenting a draft and a copy of a ten day notice — the beneficiary is, or is not, violating the terms of some other document, such as an underlying contract, is normally beside the point, for to prevent the beneficiary from obtaining the money while the court decides the “underlying contract” question may deprive the beneficiary of the very benefit for which he bargained, namely that any such underlying contract dispute will be “resolved while he is in possession of the money.” Itek, 730 F.2d at 24; see KMW International v. Chase Manhattan Bank N.A., 606 F.2d 10, 15 (2d Cir. 1979); J. Dolan, supra p. 2, 113.07[4], at 3-26 to 3-28. That is why the Uniform Commercial Code explicitly states that an “issuer must honor a ... demand for payment which complies with the terms of the relevant contract regardless of whether the ... documents conform to the underlying contract ... between the customer and the beneficiary.” U.C.C. § 5-114(1), Cal.Com. Code § 5114(1) (West 1989). And, that is why the U.C.C. narrowly circumscribes the circumstances under which a court can enjoin the issuer from making such a payment. See U.C.C. § 5-114(2). Courts have also proved about as reluctant to issue injunctions against beneficiaries calling, as against issuers paying, letters of credit. See, e.g., Harris Corp. v. National Iranian Radio & Television, 691 F.2d 1344, 1353-55 (11th Cir.1982); Shaffer v. Brooklyn Park Garden Apartments, 311 Minn. 452, 250 N.W.2d 172, 176 (1977); J. Dolan, supra p. 2, ¶ 7.04[4][f], at 7-51 n. 170 (citing cases). Given the policy reasons against enjoining payment, the random happenstance as to whether beneficiary or issuer is within the court’s jurisdiction, and the practical fact that, in any

to 3-28. That is why the Uniform Commercial Code explicitly states that an “issuer must honor a ... demand for payment which complies with the terms of the relevant contract regardless of whether the ... documents conform to the underlying contract ... between the customer and the beneficiary.” U.C.C. § 5-114(1), Cal.Com. Code § 5114(1) (West 1989). And, that is why the U.C.C. narrowly circumscribes the circumstances under which a court can enjoin the issuer from making such a payment. See U.C.C. § 5-114(2). Courts have also proved about as reluctant to issue injunctions against beneficiaries calling, as against issuers paying, letters of credit. See, e.g., Harris Corp. v. National Iranian Radio & Television, 691 F.2d 1344, 1353-55 (11th Cir.1982); Shaffer v. Brooklyn Park Garden Apartments, 311 Minn. 452, 250 N.W.2d 172, 176 (1977); J. Dolan, supra p. 2, ¶ 7.04[4][f], at 7-51 n. 170 (citing cases). Given the policy reasons against enjoining payment, the random happenstance as to whether beneficiary or issuer is within the court’s jurisdiction, and the practical fact that, in any such case, the real parties in interest are likely the contracting parties (with issuing bank as neutral observer), the roughly parallel reluctance to enjoin both issuer and beneficiary is understandable. See id. at 7-50 to 7-52. We have said throughout that courts may not “normally” issue an injunction because of an important exception to the general “no injunction” rule. The exception, as we also explained in Itek, 730 F.2d at 24-25, concerns “fraud” so serious as to make it obviously pointless and unjust to permit the beneficiary to obtain the money. Where the circumstances “plainly” show that the underlying contract forbids the beneficiary to call a letter of credit, Itek, 730 F.2d at 24; where they show that the contract deprives the beneficiary of even a “colorable ” right to do so, id. at 25; where the contract and circumstances reveal that the beneficiary’s demand for payment has “absolutely no basis in fact,” id.; see Dynamics Corp. of America, 356 F.Supp. at 999; where the beneficiary’s conduct has “ ‘ “so vitiated the entire transaction that

such case, the real parties in interest are likely the contracting parties (with issuing bank as neutral observer), the roughly parallel reluctance to enjoin both issuer and beneficiary is understandable. See id. at 7-50 to 7-52. We have said throughout that courts may not “normally” issue an injunction because of an important exception to the general “no injunction” rule. The exception, as we also explained in Itek, 730 F.2d at 24-25, concerns “fraud” so serious as to make it obviously pointless and unjust to permit the beneficiary to obtain the money. Where the circumstances “plainly” show that the underlying contract forbids the beneficiary to call a letter of credit, Itek, 730 F.2d at 24; where they show that the contract deprives the beneficiary of even a “colorable ” right to do so, id. at 25; where the contract and circumstances reveal that the beneficiary’s demand for payment has “absolutely no basis in fact,” id.; see Dynamics Corp. of America, 356 F.Supp. at 999; where the beneficiary’s conduct has “ ‘ “so vitiated the entire transaction that the legitimate purposes of the independence of the issuer’s obligation would no longer be served,” ’ ” Itek, 730 F.2d at 25 (quoting Roman Ceramics Corp. v. Peoples National Bank, 714 F.2d 1207, 1212 n. 12, 1215 (3d Cir.1983) (quoting Intraworld Industries, Inc., 336 A.2d at 324-25)); then a court may enjoin payment. The Uniform Commercial Code, as adopted in most states, says: Unless otherwise agreed when documents appear on their face to comply with the terms of a credit but a required document ... is forged or fraudulent or there is fraud in the transaction: (b) [except in certain circumstances listed in subsection (a) not here applicable] an issuer acting in good faith may honor the draft or demand for payment despite notification from the customer of fraud, forgery or other defect not apparent on the face of the documents but a court of appropriate jurisdiction may enjoin such honor. U.C.C. 5-114(2) (emphasis added). The “fraud” exception does not apply in this case, however, for the record shows nothing “fraudulent” about Westates’ demand for payment, nor did the

the legitimate purposes of the independence of the issuer’s obligation would no longer be served,” ’ ” Itek, 730 F.2d at 25 (quoting Roman Ceramics Corp. v. Peoples National Bank, 714 F.2d 1207, 1212 n. 12, 1215 (3d Cir.1983) (quoting Intraworld Industries, Inc., 336 A.2d at 324-25)); then a court may enjoin payment. The Uniform Commercial Code, as adopted in most states, says: Unless otherwise agreed when documents appear on their face to comply with the terms of a credit but a required document ... is forged or fraudulent or there is fraud in the transaction: (b) [except in certain circumstances listed in subsection (a) not here applicable] an issuer acting in good faith may honor the draft or demand for payment despite notification from the customer of fraud, forgery or other defect not apparent on the face of the documents but a court of appropriate jurisdiction may enjoin such honor. U.C.C. 5-114(2) (emphasis added). The “fraud” exception does not apply in this case, however, for the record shows nothing “fraudulent” about Westates’ demand for payment, nor did the district court find to the contrary. As our earlier discussion of the contract dispute makes clear, see pp. 1270-71 supra, the record reveals that Westates’ claims and defenses are, at the least, “colorable.” Since the letter of credit at issue is an ordinary “standby” or “guarantee” letter, since Westates can readily fulfill the letter’s expressed “call” conditions, and since, in doing so, Westates’ call would not amount to “fraud,” commercial law, as embodied in the law of most states, would forbid a court to enjoin Westates from calling the letter, whether or not that court believed that eventually Westates would lose its case on the underlying contract. See cases cited at p. 1272 supra. The only remaining question on this appeal is whether California’s law significantly deviates from the norm. III. California Law California letter of credit law quite obviously differs from the norm in one important respect, but in a respect that must make a court more reluctant, not less reluctant, to issue an injunction. When California adopted the Uniform Commercial Code, it consciously refused to adopt

district court find to the contrary. As our earlier discussion of the contract dispute makes clear, see pp. 1270-71 supra, the record reveals that Westates’ claims and defenses are, at the least, “colorable.” Since the letter of credit at issue is an ordinary “standby” or “guarantee” letter, since Westates can readily fulfill the letter’s expressed “call” conditions, and since, in doing so, Westates’ call would not amount to “fraud,” commercial law, as embodied in the law of most states, would forbid a court to enjoin Westates from calling the letter, whether or not that court believed that eventually Westates would lose its case on the underlying contract. See cases cited at p. 1272 supra. The only remaining question on this appeal is whether California’s law significantly deviates from the norm. III. California Law California letter of credit law quite obviously differs from the norm in one important respect, but in a respect that must make a court more reluctant, not less reluctant, to issue an injunction. When California adopted the Uniform Commercial Code, it consciously refused to adopt the language permitting an injunction that we italicized when we quoted U.C.C. 5-114(2) at p. 1273, supra. By omitting this language, California underscored the principle of the “independence” of the letter of credit. The California Code’s drafters explicitly stated that the U.C.C.’s “provision for a protective injunction was omitted because: ‘By giving the courts power to enjoin the honor of drafts drawn upon documents which appear to be regular on their face, the Commissioners on Uniform State Laws do violence to one of the basic concepts of the letter of credit, to wit, that the letter of credit agreement is independent of the underlying commercial transaction.’ ” Cal. Com.Code § 5114, comment 6 (West 1989) (citations omitted); see Agnew v. FDIC, 548 F.Supp. 1234, 1238 (N.D.Cal.1982); New Tech Developments v. Bynamics, Inc., 191 Cal.App.3d 1065, 236 Cal.Rptr. 746, 750-51 (Cal.Ct.App.1987); Mitsui Manufacturers Bank v. Texas Commerce Bank-Fort Worth, 159 Cal.App.3d 1051, 206 Cal.Rptr. 218, 222 (Cal.Ct.App.1984). But see Wyle v. Bank Melli, 577 F.Supp. 1148, 1165 (N.D.Cal.1983) (holding that California law does not prohibit injunctions

the language permitting an injunction that we italicized when we quoted U.C.C. 5-114(2) at p. 1273, supra. By omitting this language, California underscored the principle of the “independence” of the letter of credit. The California Code’s drafters explicitly stated that the U.C.C.’s “provision for a protective injunction was omitted because: ‘By giving the courts power to enjoin the honor of drafts drawn upon documents which appear to be regular on their face, the Commissioners on Uniform State Laws do violence to one of the basic concepts of the letter of credit, to wit, that the letter of credit agreement is independent of the underlying commercial transaction.’ ” Cal. Com.Code § 5114, comment 6 (West 1989) (citations omitted); see Agnew v. FDIC, 548 F.Supp. 1234, 1238 (N.D.Cal.1982); New Tech Developments v. Bynamics, Inc., 191 Cal.App.3d 1065, 236 Cal.Rptr. 746, 750-51 (Cal.Ct.App.1987); Mitsui Manufacturers Bank v. Texas Commerce Bank-Fort Worth, 159 Cal.App.3d 1051, 206 Cal.Rptr. 218, 222 (Cal.Ct.App.1984). But see Wyle v. Bank Melli, 577 F.Supp. 1148, 1165 (N.D.Cal.1983) (holding that California law does not prohibit injunctions against issuers when the beneficiary is amenable to service of process and the courts of the beneficiary are effectively closed to the account party plaintiff) (Wyle was specifically not followed in New Tech Develop- merits, 236 Cal.Rptr. at 751). Thus California would seem even more hostile than the typical state to an injunction in the circumstances before us. In order to bring this case outside ordinary principles of commercial law, which seem to preclude an injunction, and outside a California version of the U.C.C. that would seem even more hostile to an injunction, Charter One points to two intermediate California appellate court opinions. See Mitsui, 159 Cal.App.3d at 1051, 206 Cal.Rptr. at 218; Steinmeyer, 42 Cal.App.3d at 515, 116 Cal.Rptr. at 57. The first of these cases, Mitsui, does not offer Charter One much help. The Mitsui court enjoined a beneficiary of a letter of credit from calling that letter, but it did so because it believed that the beneficiary could not satisfy a term contained in the letter itself, namely a term that required the beneficiary,

against issuers when the beneficiary is amenable to service of process and the courts of the beneficiary are effectively closed to the account party plaintiff) (Wyle was specifically not followed in New Tech Develop- merits, 236 Cal.Rptr. at 751). Thus California would seem even more hostile than the typical state to an injunction in the circumstances before us. In order to bring this case outside ordinary principles of commercial law, which seem to preclude an injunction, and outside a California version of the U.C.C. that would seem even more hostile to an injunction, Charter One points to two intermediate California appellate court opinions. See Mitsui, 159 Cal.App.3d at 1051, 206 Cal.Rptr. at 218; Steinmeyer, 42 Cal.App.3d at 515, 116 Cal.Rptr. at 57. The first of these cases, Mitsui, does not offer Charter One much help. The Mitsui court enjoined a beneficiary of a letter of credit from calling that letter, but it did so because it believed that the beneficiary could not satisfy a term contained in the letter itself, namely a term that required the beneficiary, a bank, to state that a borrower had failed to repay certain “loans drawn ... in connection with drilling of oil wells for [a company named] Simon.” See Mitsui, 206 Cal.Rptr. at 221. The record before that court made clear that the bank could not make such a statement without lying, and apparently no one could make even a “colorable” argument to the contrary. See id. Thus, at most, one might read Mitsui as authorizing an injunction against a beneficiary where an effort to call a letter would fall within the scope of the traditional exception for forgery or fraud. See Trans Meridian Trading, Inc., 829 F.2d at 956-57 (reading Mitsui narrowly because “[g]iven California’s seemingly strong policy honoring letters of credit, it would be illogical to thwart it so easily by enjoining the beneficiary, not the issuer”). At the same time, the Mitsui court strongly reaffirmed the principle of “independence.” It said that “a court should not resort to ... underlying agreements in interpreting a letter of credit_ [NJoncompliance with the underlying contract does not

a bank, to state that a borrower had failed to repay certain “loans drawn ... in connection with drilling of oil wells for [a company named] Simon.” See Mitsui, 206 Cal.Rptr. at 221. The record before that court made clear that the bank could not make such a statement without lying, and apparently no one could make even a “colorable” argument to the contrary. See id. Thus, at most, one might read Mitsui as authorizing an injunction against a beneficiary where an effort to call a letter would fall within the scope of the traditional exception for forgery or fraud. See Trans Meridian Trading, Inc., 829 F.2d at 956-57 (reading Mitsui narrowly because “[g]iven California’s seemingly strong policy honoring letters of credit, it would be illogical to thwart it so easily by enjoining the beneficiary, not the issuer”). At the same time, the Mitsui court strongly reaffirmed the principle of “independence.” It said that “a court should not resort to ... underlying agreements in interpreting a letter of credit_ [NJoncompliance with the underlying contract does not affect the issuer’s liability unless a reference to the underlying contract explicitly creates a condition for honoring a draft. General references to underlying agreements are surplusage and should not be considered in deciding whether the beneficiary has complied with the terms of the letter of credit.” Mitsui, 206 Cal.Rptr. at 220 (quoting Pringle-Assoc. Mortgage Corp., 571 F.2d at 874)). The case before us is unlike Mitsui in that, here, Westates, the beneficiary, can truthfully say that it satisfied the letter of credit’s express conditions; it mailed a ten day notice to Charter One on September 22, 1989. More importantly, since Westates has at least a “colorable” claim that it acted lawfully under the contract in doing so, Westates’ call would not fall within the traditional exception for forgery or fraud. Charter One’s second case, Steinmeyer, offers it more support. The Steinmeyer court enjoined a letter of credit beneficiary, Warner, from calling the letter. In doing so, the court said that the terms of the letter itself “must ... be construed together” with the underlying contract, and it based

affect the issuer’s liability unless a reference to the underlying contract explicitly creates a condition for honoring a draft. General references to underlying agreements are surplusage and should not be considered in deciding whether the beneficiary has complied with the terms of the letter of credit.” Mitsui, 206 Cal.Rptr. at 220 (quoting Pringle-Assoc. Mortgage Corp., 571 F.2d at 874)). The case before us is unlike Mitsui in that, here, Westates, the beneficiary, can truthfully say that it satisfied the letter of credit’s express conditions; it mailed a ten day notice to Charter One on September 22, 1989. More importantly, since Westates has at least a “colorable” claim that it acted lawfully under the contract in doing so, Westates’ call would not fall within the traditional exception for forgery or fraud. Charter One’s second case, Steinmeyer, offers it more support. The Steinmeyer court enjoined a letter of credit beneficiary, Warner, from calling the letter. In doing so, the court said that the terms of the letter itself “must ... be construed together” with the underlying contract, and it based its injunction upon its belief that the “call” would violate Warner’s duty of “good faith and fair dealing” contained in that underlying contract. See Steinmeyer, 116 Cal.Rptr. at 59-60. Thus, Charter One argues, the Steinmeyer court examined the merits of the underlying contract dispute and enjoined the call on the letter because it concluded that Warner would not likely win that dispute. Similarly, says Charter One, the district court here enjoined Westates’ call because it concluded that Westates would not likely win its contract dispute — a matter close enough so that we ought not to second guess the district court on this “preliminary injunction” appeal. See Planned Parenthood League v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1984) (standards for issuing preliminary injunction and for review of grant of preliminary injunction). Despite its language, however, the facts of Steinmeyer are too special to make it strong precedent for Charter One. The underlying contract involved a sale of stock by Warner to Steinmeyer in return for Steinmeyer’s promissory notes; the letter of credit guaranteed Steinmeyer’s pay ments

its injunction upon its belief that the “call” would violate Warner’s duty of “good faith and fair dealing” contained in that underlying contract. See Steinmeyer, 116 Cal.Rptr. at 59-60. Thus, Charter One argues, the Steinmeyer court examined the merits of the underlying contract dispute and enjoined the call on the letter because it concluded that Warner would not likely win that dispute. Similarly, says Charter One, the district court here enjoined Westates’ call because it concluded that Westates would not likely win its contract dispute — a matter close enough so that we ought not to second guess the district court on this “preliminary injunction” appeal. See Planned Parenthood League v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1984) (standards for issuing preliminary injunction and for review of grant of preliminary injunction). Despite its language, however, the facts of Steinmeyer are too special to make it strong precedent for Charter One. The underlying contract involved a sale of stock by Warner to Steinmeyer in return for Steinmeyer’s promissory notes; the letter of credit guaranteed Steinmeyer’s pay ments on the notes; the letter’s terms conditioned Warner’s call on Warner’s statement that Steinmeyer was in default. See Steinmeyer, 116 Cal.Rptr. at 59. These facts suggest a typical “contract guarantee letter” designed in part to permit Warner to decide whether or not Steinmeyer was in “default” and to permit Warner to have possession of the money during any subsequent dispute (about default). At the same time, however, one of the promissory notes contained its own special condition. Both that note and the stock sale contract itself said that Steinmeyer could “offset” against the note any undisclosed liability of the corporation (whose stock Steinmeyer bought). See id. at 59-60. The Stein-meyer court seemed to think that this special provision in the note meant that Stein-meyer could decide whether or not the corporation had a relevant, undisclosed liability, and would (through exercise of the “offset”) permit Steinmeyer to have possession of the money during any subsequent dispute (about undisclosed corporate liability). The court wrote that it “would be anomalous to empower Warner to circumvent Steinmeyer’s rights of

on the notes; the letter’s terms conditioned Warner’s call on Warner’s statement that Steinmeyer was in default. See Steinmeyer, 116 Cal.Rptr. at 59. These facts suggest a typical “contract guarantee letter” designed in part to permit Warner to decide whether or not Steinmeyer was in “default” and to permit Warner to have possession of the money during any subsequent dispute (about default). At the same time, however, one of the promissory notes contained its own special condition. Both that note and the stock sale contract itself said that Steinmeyer could “offset” against the note any undisclosed liability of the corporation (whose stock Steinmeyer bought). See id. at 59-60. The Stein-meyer court seemed to think that this special provision in the note meant that Stein-meyer could decide whether or not the corporation had a relevant, undisclosed liability, and would (through exercise of the “offset”) permit Steinmeyer to have possession of the money during any subsequent dispute (about undisclosed corporate liability). The court wrote that it “would be anomalous to empower Warner to circumvent Steinmeyer’s rights of offset simply by seeking payment of the letter of credit.” See id. at 60. It thus seems to have thought that the parties, through this special provision, had “agreed” to vary the ordinary rules that govern when a beneficiary can call a letter of credit, as the parties have the power to do. See U.C.C. § 5-114(2), Cal.Com.Code § 5114(2) (West 1989) (“Unless otherwise agreed when documents appear on their face to comply with the terms of a credit_”). If so, Stein-meyer, whether right or wrong about the special intent of the parties before it, is irrelevant here, for there is nothing in this record suggesting that the parties before us bargained for any special “letter of credit” legal rules. Regardless, were Charter One’s interpretation correct, we would not follow Steinmeyer. We should not follow an intermediate state appellate court opinion in a diversity case when we are convinced that the state’s supreme court would not do so. See, e.g., Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886

offset simply by seeking payment of the letter of credit.” See id. at 60. It thus seems to have thought that the parties, through this special provision, had “agreed” to vary the ordinary rules that govern when a beneficiary can call a letter of credit, as the parties have the power to do. See U.C.C. § 5-114(2), Cal.Com.Code § 5114(2) (West 1989) (“Unless otherwise agreed when documents appear on their face to comply with the terms of a credit_”). If so, Stein-meyer, whether right or wrong about the special intent of the parties before it, is irrelevant here, for there is nothing in this record suggesting that the parties before us bargained for any special “letter of credit” legal rules. Regardless, were Charter One’s interpretation correct, we would not follow Steinmeyer. We should not follow an intermediate state appellate court opinion in a diversity case when we are convinced that the state’s supreme court would not do so. See, e.g., Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967) (a federal court may disregard a lower state court opinion if “ ‘it is convinced by other persuasive data that the highest court of the state would decide otherwise.’ ”) (quoting West v. American Telephone & Telegraph Co., 311 U.S. 223, 237, 61 S.Ct. 179, 183, 85 L.Ed. 139 (1940)) (emphasis omitted); Dale Baker Oldsmobile v. Fiat Motors of North America, 794 F.2d 213, 218 (6th Cir.1986). We do not believe the California Supreme Court would follow Steinmeyer insofar as it significantly weakens the principle of “independence” of the letter of credit. In particular, we do not believe the California Supreme Court would permit an injunction where other states (applying the traditional “fraud” exception) would not do so. After all, California’s state legislature has altered the U.C.C. to make it more difficult in California than elsewhere to enjoin an issuer’s payment of a letter of credit; to make it significantly easier than elsewhere to enjoin a call by a beneficiary would undercut that underlying legislative policy. For these reasons the judgment of the district court

(1967) (a federal court may disregard a lower state court opinion if “ ‘it is convinced by other persuasive data that the highest court of the state would decide otherwise.’ ”) (quoting West v. American Telephone & Telegraph Co., 311 U.S. 223, 237, 61 S.Ct. 179, 183, 85 L.Ed. 139 (1940)) (emphasis omitted); Dale Baker Oldsmobile v. Fiat Motors of North America, 794 F.2d 213, 218 (6th Cir.1986). We do not believe the California Supreme Court would follow Steinmeyer insofar as it significantly weakens the principle of “independence” of the letter of credit. In particular, we do not believe the California Supreme Court would permit an injunction where other states (applying the traditional “fraud” exception) would not do so. After all, California’s state legislature has altered the U.C.C. to make it more difficult in California than elsewhere to enjoin an issuer’s payment of a letter of credit; to make it significantly easier than elsewhere to enjoin a call by a beneficiary would undercut that underlying legislative policy. For these reasons the judgment of the district court is Reversed.

DONALD RUSSELL, Circuit Judge: This is a suit by a savings bank to collect on a note purchased from the Federal Savings and Loan Insurance Corporation (“FSLIC”). This note was included in the assets of the original payee which were taken over by the FSLIC. The defense to the action, as well as the basis of the defendants’ counterclaims, is an alleged collateral agreement to that note varying its terms. Based upon D’Oench, Duhme & Co., Inc. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and its progeny, the trial court granted summary judgment for plaintiff on both the complaint and the counterclaims. In D’Oench, the Supreme Court established a policy that collateral, noncontemporaneous agreements to a note that are acquired and sold by the FSLIC cannot serve as a defense to an action on the note or as a counterclaim connected to the note. It was said that to hold otherwise would undermine the FSLIC’s mission. On a motion to reconsider, the appellants later produced some evidence that they contend would avoid the D’Oench doctrine. However, the district judge denied the motion, stating that appellants failed to bring the evidence forth in a timely manner, and that the evidence would not have prevented the entry of summary judgment. That entry of summary judgment is the subject of this appeal. For the reasons stated below, we affirm. I. Appellee Carteret Savings Bank (“Car-teret”) is located in New Jersey. It purchased the assets of a failed savings bank, Mountain Security Savings Bank (“Mountain Security”), from the FSLIC. Included in those assets was a note executed by Margaret and Delano Compton, and Luther Compton and Sons, Inc. (“the Comptons”). The note required payments of principal and interest to begin on July 1, 1985. These payments never began. In addition, this note was originally secured by certain land in West Virginia, and later Virginia land was substituted as security. There were two antecedent liens on the Virginia property — liens that would have to be satisfied before this lien could be enforced. The holder of the first lien on

they contend would avoid the D’Oench doctrine. However, the district judge denied the motion, stating that appellants failed to bring the evidence forth in a timely manner, and that the evidence would not have prevented the entry of summary judgment. That entry of summary judgment is the subject of this appeal. For the reasons stated below, we affirm. I. Appellee Carteret Savings Bank (“Car-teret”) is located in New Jersey. It purchased the assets of a failed savings bank, Mountain Security Savings Bank (“Mountain Security”), from the FSLIC. Included in those assets was a note executed by Margaret and Delano Compton, and Luther Compton and Sons, Inc. (“the Comptons”). The note required payments of principal and interest to begin on July 1, 1985. These payments never began. In addition, this note was originally secured by certain land in West Virginia, and later Virginia land was substituted as security. There were two antecedent liens on the Virginia property — liens that would have to be satisfied before this lien could be enforced. The holder of the first lien on the Virginia property also was not receiving payments, so it foreclosed on the property. Being the third lienholder, Carteret was effectively unsecured. Since it appeared that Carteret would receive none of the proceeds from the foreclosure sale, Carteret sued on the note. The Comptons raised several affirmative defenses and counterclaims. Both the defenses and the counterclaims are based entirely on an alleged collateral agreement between the Comptons and Mountain Security regarding the terms of the note. This alleged agreement was executed more than seven months after the note was executed. Under its terms, Mountain Security agreed to release its liens on any of the Virginia land sold by the Comptons. In return, the Comptons were required to apply the proceeds to the antecedent liens on that property, and then to apply the remaining proceeds to the note between the Comptons and Mountain Security. Since all of the defenses and counterclaims relied on this alleged collateral agreement to the note, Carteret moved for summary judgment based upon the D’Oench doctrine. The district judge sustained the motion under the

the Virginia property also was not receiving payments, so it foreclosed on the property. Being the third lienholder, Carteret was effectively unsecured. Since it appeared that Carteret would receive none of the proceeds from the foreclosure sale, Carteret sued on the note. The Comptons raised several affirmative defenses and counterclaims. Both the defenses and the counterclaims are based entirely on an alleged collateral agreement between the Comptons and Mountain Security regarding the terms of the note. This alleged agreement was executed more than seven months after the note was executed. Under its terms, Mountain Security agreed to release its liens on any of the Virginia land sold by the Comptons. In return, the Comptons were required to apply the proceeds to the antecedent liens on that property, and then to apply the remaining proceeds to the note between the Comptons and Mountain Security. Since all of the defenses and counterclaims relied on this alleged collateral agreement to the note, Carteret moved for summary judgment based upon the D’Oench doctrine. The district judge sustained the motion under the D’Oench decision. He held that all of the counterclaims and defenses were barred by this doctrine, since the Comptons had produced no evidence or affidavits which would support the inapplicability of D’Oench. Anderson v. Liberty Lobby, 477 U.S. 242, 256-57, 106 S.Ct. 2505, 2514-15, 91 L.Ed.2d 202 (1986). The Comptons thereafter made a motion for reconsideration. As part of that motion the Comptons tendered a document that was not presented before. The document is said to indicate that this collateral agreement was contemporaneous with the execution of the note. If the agreement were contemporaneous, the D’Oench doctrine arguably might not apply. However, the district judge did not rule on that issue. Instead, the judge ruled that the Comptons had been given an ample opportunity to produce evidence to combat the affidavits of Carteret in the first summary judgment motion, and had failed to produce any. Admittedly, this document had been produced by the Comptons as part of the motion to reconsider and had been in the case file during the pendency of the first summary judgment

D’Oench decision. He held that all of the counterclaims and defenses were barred by this doctrine, since the Comptons had produced no evidence or affidavits which would support the inapplicability of D’Oench. Anderson v. Liberty Lobby, 477 U.S. 242, 256-57, 106 S.Ct. 2505, 2514-15, 91 L.Ed.2d 202 (1986). The Comptons thereafter made a motion for reconsideration. As part of that motion the Comptons tendered a document that was not presented before. The document is said to indicate that this collateral agreement was contemporaneous with the execution of the note. If the agreement were contemporaneous, the D’Oench doctrine arguably might not apply. However, the district judge did not rule on that issue. Instead, the judge ruled that the Comptons had been given an ample opportunity to produce evidence to combat the affidavits of Carteret in the first summary judgment motion, and had failed to produce any. Admittedly, this document had been produced by the Comptons as part of the motion to reconsider and had been in the case file during the pendency of the first summary judgment motion. In reply, the defendants contended that the document in question was part of a “legion of documents” in that case file and that it was the Comptons’ responsibility to bring that document forward earlier. The district judge well documented the Comptons’ tardiness in bringing forth this alleged evidence of a contemporaneous, collateral agreement. Such evidence was not mentioned in the Comptons’ brief in opposition to summary judgment or in the oral argument of that motion. At the oral hearings of Carteret’s initial summary judgment motion, the district judge instructed the Comptons to file affidavits to support their claims if they could. As of the time when the district judge’s first memorandum opinion (which granted summary judgment) was filed, no affidavits had been produced. In fact, no mention was made of this alleged agreement until the Comptons filed a supplement to their brief in support of their motion to reconsider. Because of this tardiness, the judge ruled that under Anderson, supra, and Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265

motion. In reply, the defendants contended that the document in question was part of a “legion of documents” in that case file and that it was the Comptons’ responsibility to bring that document forward earlier. The district judge well documented the Comptons’ tardiness in bringing forth this alleged evidence of a contemporaneous, collateral agreement. Such evidence was not mentioned in the Comptons’ brief in opposition to summary judgment or in the oral argument of that motion. At the oral hearings of Carteret’s initial summary judgment motion, the district judge instructed the Comptons to file affidavits to support their claims if they could. As of the time when the district judge’s first memorandum opinion (which granted summary judgment) was filed, no affidavits had been produced. In fact, no mention was made of this alleged agreement until the Comptons filed a supplement to their brief in support of their motion to reconsider. Because of this tardiness, the judge ruled that under Anderson, supra, and Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986), the prior summary judgment ruling would stand. At that late date, the Comptons would not be allowed to produce evidence or affidavits in support of their defense since they were given ample opportunity to bring this evidence forward earlier. Although the district judge relied on the failure of the Comptons to follow summary judgment procedure, he stated an alternate basis for his ruling. He examined the plain language of the alleged collateral agreement, and determined that it only reflected a collateral agreement to release specific liens when certain parcels of land were sold. The brunt of the Comptons’ counterclaims and affirmative defenses is that they produced certain willing buyers and the bank refused to release its liens in advance of sale. Hence, on the basis of the evidence produced by the Comptons, even including that evidence produced for the first time in the motion to reconsider, the Comptons could not withstand the summary judgment motion. They had not pled any breach of the agreements which they alleged. There are two subsidiary factual incidents. First, the district

(1986), the prior summary judgment ruling would stand. At that late date, the Comptons would not be allowed to produce evidence or affidavits in support of their defense since they were given ample opportunity to bring this evidence forward earlier. Although the district judge relied on the failure of the Comptons to follow summary judgment procedure, he stated an alternate basis for his ruling. He examined the plain language of the alleged collateral agreement, and determined that it only reflected a collateral agreement to release specific liens when certain parcels of land were sold. The brunt of the Comptons’ counterclaims and affirmative defenses is that they produced certain willing buyers and the bank refused to release its liens in advance of sale. Hence, on the basis of the evidence produced by the Comptons, even including that evidence produced for the first time in the motion to reconsider, the Comptons could not withstand the summary judgment motion. They had not pled any breach of the agreements which they alleged. There are two subsidiary factual incidents. First, the district judge entered two protective orders on December 8, 1987. The Comptons raised in passing at the hearing of the motion to reconsider that their ability to produce evidence sufficient to prevent summary judgment had been impeded by one of the protective orders. The judge ruled that the fact that the Comptons never filed affidavits to support their position was controlling. If the protective order prevented the Comptons from producing evidence, that fact should have been stated in affidavits. Yet, as the district judge indicated, the record does not support such an implication. Second, the Comptons imply that Carter-et was put on notice by them that there was a collateral agreement to the note. At one point, the Comptons wrote to Carteret to inquire about the possibility of Carteret releasing certain liens in order to facilitate the liquidation of certain property. A Car-teret official wrote back stating that if the Comptons had any specific proposal in mind, it should be presented. Neither in the appellants’ letter to Carteret nor in Carteret’s reply letter was there any reference

judge entered two protective orders on December 8, 1987. The Comptons raised in passing at the hearing of the motion to reconsider that their ability to produce evidence sufficient to prevent summary judgment had been impeded by one of the protective orders. The judge ruled that the fact that the Comptons never filed affidavits to support their position was controlling. If the protective order prevented the Comptons from producing evidence, that fact should have been stated in affidavits. Yet, as the district judge indicated, the record does not support such an implication. Second, the Comptons imply that Carter-et was put on notice by them that there was a collateral agreement to the note. At one point, the Comptons wrote to Carteret to inquire about the possibility of Carteret releasing certain liens in order to facilitate the liquidation of certain property. A Car-teret official wrote back stating that if the Comptons had any specific proposal in mind, it should be presented. Neither in the appellants’ letter to Carteret nor in Carteret’s reply letter was there any reference to any previous agreement by Mountain Security to release its lien to permit a sale of any part of the encumbered property. In fact, the letter of the appellants actually implies there was no such agreement. II. As noted above, D’Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), is the controlling case on the merits of this appeal. In D’Oench, it was held that the maker of several notes could not claim that the notes were a mere accommodation in an action on the notes by the Federal Deposit Insurance Corporation (“FDIC”). On the back of the receipts that the bank gave for these notes, it was indicated that the notes would not be called for payment. The bank later failed and was acquired by the FDIC. The Court found that the federal policy in support of the FDIC’s mission would be undercut by recognizing these secret agreements. The D’Oench rule was later codified by Congress: No agreement which tends to diminish or defeat the right, title or

to any previous agreement by Mountain Security to release its lien to permit a sale of any part of the encumbered property. In fact, the letter of the appellants actually implies there was no such agreement. II. As noted above, D’Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), is the controlling case on the merits of this appeal. In D’Oench, it was held that the maker of several notes could not claim that the notes were a mere accommodation in an action on the notes by the Federal Deposit Insurance Corporation (“FDIC”). On the back of the receipts that the bank gave for these notes, it was indicated that the notes would not be called for payment. The bank later failed and was acquired by the FDIC. The Court found that the federal policy in support of the FDIC’s mission would be undercut by recognizing these secret agreements. The D’Oench rule was later codified by Congress: No agreement which tends to diminish or defeat the right, title or interest of the Corporation [the FDIC] in any asset acquired by it under this section, either as security for a loan or by purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank. 12 U.S.C. § 1823(e) (1980 & Supp.1989) (emphasis added). Although the U.S.Code section only codified the D’Oench rule with regards to the FDIC, other circuit courts continue to apply it to situations involving the FSLIC. FSLIC v. Two Rivers Associates, Inc., 880 F.2d 1267 (11th Cir.1989); Mainland Savings Association v. Riverfront Associates, Ltd., 872 F.2d 955 (10th Cir.1989); First-south,

interest of the Corporation [the FDIC] in any asset acquired by it under this section, either as security for a loan or by purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank. 12 U.S.C. § 1823(e) (1980 & Supp.1989) (emphasis added). Although the U.S.Code section only codified the D’Oench rule with regards to the FDIC, other circuit courts continue to apply it to situations involving the FSLIC. FSLIC v. Two Rivers Associates, Inc., 880 F.2d 1267 (11th Cir.1989); Mainland Savings Association v. Riverfront Associates, Ltd., 872 F.2d 955 (10th Cir.1989); First-south, F.A. v. Aqua Construction, Inc., 858 F.2d 441 (8th Cir.1988); FSLIC v. Lafayette Investment Proper ties, Inc., 855 F.2d 196 (5th Cir.1988); Taylor Trust v. Security Trust Federal Savings & Loan Association, 844 F.2d 337 (6th Cir.1988). As these courts have noted, there is no material difference between the FDIC and the FSLIC as far as the public policy behind D’Oench and its progeny is concerned. Further, it is also not a defense to an action by the FDIC that the FDIC knew of the collateral agreement. Langley v. FDIC, 484 U.S. 86, 95, 108 S.Ct. 396, 403, 98 L.Ed.2d 340 (1987). This should also apply to cases involving the FSLIC. Hence, the judge’s first ruling on the summary judgment motion was correct. At that time, the Comptons had only come forth with evidence of a noncontemporaneous agreement that altered the terms of the note. Title 12 U.S.C.A. § 1823 clearly requires that the collateral agreement must be contemporaneous if it is to be enforceable. The trial judge was also safely within his discretion in not overturning

F.A. v. Aqua Construction, Inc., 858 F.2d 441 (8th Cir.1988); FSLIC v. Lafayette Investment Proper ties, Inc., 855 F.2d 196 (5th Cir.1988); Taylor Trust v. Security Trust Federal Savings & Loan Association, 844 F.2d 337 (6th Cir.1988). As these courts have noted, there is no material difference between the FDIC and the FSLIC as far as the public policy behind D’Oench and its progeny is concerned. Further, it is also not a defense to an action by the FDIC that the FDIC knew of the collateral agreement. Langley v. FDIC, 484 U.S. 86, 95, 108 S.Ct. 396, 403, 98 L.Ed.2d 340 (1987). This should also apply to cases involving the FSLIC. Hence, the judge’s first ruling on the summary judgment motion was correct. At that time, the Comptons had only come forth with evidence of a noncontemporaneous agreement that altered the terms of the note. Title 12 U.S.C.A. § 1823 clearly requires that the collateral agreement must be contemporaneous if it is to be enforceable. The trial judge was also safely within his discretion in not overturning his grant of summary judgment on the motion to reconsider. The Comptons had produced evidence of a claimed contemporaneous agreement for the first time at the hearing of the motion to reconsider. The Comptons had been under a duty to bring forward any evidence they had to this effect during the motion for summary judgment — they could not rest on their pleadings when a ;prima facie case for summary judgment had been established. Celotex, supra, 477 U.S. at 322-32, 106 S.Ct. at 2552-57; Anderson, supra, 477 U.S. at 256-57, 106 S.Ct. at 2514-15. Furthermore, as the district judge pointed out, the new evidence produced by the Comptons would not have saved them anyway. They had not produced any evidence of a breach of the alleged contemporaneous agreement, for they had not sold any of the property in question. Hence, the entry of summary judgment and the denial of the motion to reconsider are AFFIRMED. . In their oral argument of the summary judgment motion, the Comptons’ counsel admitted that the case "rises and falls” on the

his grant of summary judgment on the motion to reconsider. The Comptons had produced evidence of a claimed contemporaneous agreement for the first time at the hearing of the motion to reconsider. The Comptons had been under a duty to bring forward any evidence they had to this effect during the motion for summary judgment — they could not rest on their pleadings when a ;prima facie case for summary judgment had been established. Celotex, supra, 477 U.S. at 322-32, 106 S.Ct. at 2552-57; Anderson, supra, 477 U.S. at 256-57, 106 S.Ct. at 2514-15. Furthermore, as the district judge pointed out, the new evidence produced by the Comptons would not have saved them anyway. They had not produced any evidence of a breach of the alleged contemporaneous agreement, for they had not sold any of the property in question. Hence, the entry of summary judgment and the denial of the motion to reconsider are AFFIRMED. . In their oral argument of the summary judgment motion, the Comptons’ counsel admitted that the case "rises and falls” on the alleged breach of the collateral agreement. . However, they never stated which protective order was the culprit, or in what way their efforts were hampered. Also, these protective orders were not appended to the motion to reconsider, and were not made part of the appendix on appeal.

MURPHY, Circuit Judge. Plaintiff Thomas R. Hutchinson and counsel Joan Godlove appeal from an order imposing sanctions under Fed.R.Civ.P. II. The district court directed them, jointly and severally, to pay a $5,000 penalty to defendants, and indefinitely enjoined Ms. Godlove from filing proceedings on behalf of clients in the Northern District of Oklahoma without a co-counsel, who must be furnished copies of certain sanction orders issued against her in this and other litigation. Appellants raise several, primarily procedural, objections to the Rule 11 sanctions imposed. For reasons explained below, we vacate the sanction order and remand for further proceedings consistent with this opinion. Procedural Chronology During the summer of 1993, discovery disputes arose between the parties, which the district court referred to the magistrate judge. In December 1993, the magistrate judge issued an order which, among other things, imposed discovery sanctions on appellants under Fed.R.Civ.P. 37(a)(4). The judge concluded the order with a “Certification of Record and Recommendation for Consideration of Additional Sanctions,” noting that additional sanctions, under Rule 11 and 28 U.S.C. § 1927, “may be appropriate.” Appellants’ Appendix (App.) I at 145-46. Consistent with the inconclusive character of that observation, however, the judge did not recommend the actual imposition of sanctions, only that they be considered by the district court, after proper notice and hearing. Id. at 146. The district court did not immediately act upon this suggestion. After prevailing on summary judgment, defendants filed a motion for attorney fees under § 1927. Proceedings on this and other matters were stayed pending plaintiff’s appeal from summary judgment, which was affirmed in January 1997. At this court’s direction, see Hutchinson, 105 F.3d at 566, the district court then returned its attention to the magistrate judge’s 1993 discovery order. Noting that no additional sanctions had been awarded, the district court limited its review to the discovery sanction imposed under Rule 37(a)(4). Its February 1998 order affirming that sanction was recently affirmed by this court. See Hutchinson, No. 98-5043, 1999 WL 1015557. In the meantime, the parties proceeded with briefing on defendants’ motion for attorney fees, addressing its stated legal bases, 28 U.S.C. § 1927 and

Appellants’ Appendix (App.) I at 145-46. Consistent with the inconclusive character of that observation, however, the judge did not recommend the actual imposition of sanctions, only that they be considered by the district court, after proper notice and hearing. Id. at 146. The district court did not immediately act upon this suggestion. After prevailing on summary judgment, defendants filed a motion for attorney fees under § 1927. Proceedings on this and other matters were stayed pending plaintiff’s appeal from summary judgment, which was affirmed in January 1997. At this court’s direction, see Hutchinson, 105 F.3d at 566, the district court then returned its attention to the magistrate judge’s 1993 discovery order. Noting that no additional sanctions had been awarded, the district court limited its review to the discovery sanction imposed under Rule 37(a)(4). Its February 1998 order affirming that sanction was recently affirmed by this court. See Hutchinson, No. 98-5043, 1999 WL 1015557. In the meantime, the parties proceeded with briefing on defendants’ motion for attorney fees, addressing its stated legal bases, 28 U.S.C. § 1927 and Okla. Stat. tit. 12, § 936. The district court formally set the motion for hearing by a minute order with no reference to Rule 11 or the magistrate judge’s earlier recommendation about consideration of additional sanctions. However, the scheduled hearing opened with the following exchange about the subject matter to be heard: THE COURT: Well, this morning we have a hearing on an appeal from an order for sanctions, certification of record and recommendation of the United States magistrate in case number 92-C-1088-E, Hutchinson versus Pheil [sic], et al; you’re looking as though you are surprised. [PLAINTIFF’S COUNSEL]: Yes, Your Honor, I am. I thought this was on the limited issue of potential liability under section Title 12, 936, as well as Section 28, USC, 1927. THE COURT: I hadn’t even addressed the issue of bifurcation, I was simply addressing what is to be heard, and this is an appeal from the order of the magistrate, and we’re going to first address the entitlement issue on the sanction. Appellants’ App. II at 682. There followed considerable discussion regarding the

Okla. Stat. tit. 12, § 936. The district court formally set the motion for hearing by a minute order with no reference to Rule 11 or the magistrate judge’s earlier recommendation about consideration of additional sanctions. However, the scheduled hearing opened with the following exchange about the subject matter to be heard: THE COURT: Well, this morning we have a hearing on an appeal from an order for sanctions, certification of record and recommendation of the United States magistrate in case number 92-C-1088-E, Hutchinson versus Pheil [sic], et al; you’re looking as though you are surprised. [PLAINTIFF’S COUNSEL]: Yes, Your Honor, I am. I thought this was on the limited issue of potential liability under section Title 12, 936, as well as Section 28, USC, 1927. THE COURT: I hadn’t even addressed the issue of bifurcation, I was simply addressing what is to be heard, and this is an appeal from the order of the magistrate, and we’re going to first address the entitlement issue on the sanction. Appellants’ App. II at 682. There followed considerable discussion regarding the matter under review, with (1) plaintiffs counsel stating their understanding that liability for fees pursuant to defendants’ motion under § 1927 and § 936 was at issue; (2) defendants’ counsel agreeing with that view, but insisting that the motion also incorporated the magistrate judge’s prior recommendation; and (3) the court stating that only the issue of entitlement, not amount, was under consideration. See id. at 682-89. Two days of hearings ensued, focused on the appropriateness of an award of fees as a sanction under § 1927. The court then continued the matter, indicating again that defendants’ entitlement to fees, not the issue of amount, was all that was then under consideration. See Appellants’ App. Ill at 918. The hearings resumed a month later. At that time, the district court summarized the matter under review with more elaboration, referring to sanctions and disciplinary proceedings beyond the scope of defendants’ § 1927 motion, though not specifically citing to Rule 11: See if we can all agree what is at issue before us. The Court has previously affirmed the magistrate’s

matter under review, with (1) plaintiffs counsel stating their understanding that liability for fees pursuant to defendants’ motion under § 1927 and § 936 was at issue; (2) defendants’ counsel agreeing with that view, but insisting that the motion also incorporated the magistrate judge’s prior recommendation; and (3) the court stating that only the issue of entitlement, not amount, was under consideration. See id. at 682-89. Two days of hearings ensued, focused on the appropriateness of an award of fees as a sanction under § 1927. The court then continued the matter, indicating again that defendants’ entitlement to fees, not the issue of amount, was all that was then under consideration. See Appellants’ App. Ill at 918. The hearings resumed a month later. At that time, the district court summarized the matter under review with more elaboration, referring to sanctions and disciplinary proceedings beyond the scope of defendants’ § 1927 motion, though not specifically citing to Rule 11: See if we can all agree what is at issue before us. The Court has previously affirmed the magistrate’s imposition of [discovery] sanctions. What we’re really deciding here is whether there should be an expansion of those sanctions, and, in addition, whether there should be a reference to a court committee of the charged conduct of the attorneys, and whether there should be imposition of an attorneys’ fee award from really the beginning of this case. Those are the only issues we have to address. The sanction issue was really raised by the magistrate in his order, the idea of imposition of additional sanctions, and that’s an issue beyond the issue of attorneys’ fees. Appellants’ App. Ill at 978-79; see also id. at 1022-28 (reiterating same “very serious matters” faced by Ms. Godlove in the proceedings). The court heard additional testimony and, on the following day, oral arguments were presented. Four months later, the district court issued a decision. It held that the case had not been entirely frivolous, denied defendants request for $158,039 in fees under § 1927 and § 936, and decided “the more appropriate course would be to levy sanctions pursuant to Fed. R.

imposition of [discovery] sanctions. What we’re really deciding here is whether there should be an expansion of those sanctions, and, in addition, whether there should be a reference to a court committee of the charged conduct of the attorneys, and whether there should be imposition of an attorneys’ fee award from really the beginning of this case. Those are the only issues we have to address. The sanction issue was really raised by the magistrate in his order, the idea of imposition of additional sanctions, and that’s an issue beyond the issue of attorneys’ fees. Appellants’ App. Ill at 978-79; see also id. at 1022-28 (reiterating same “very serious matters” faced by Ms. Godlove in the proceedings). The court heard additional testimony and, on the following day, oral arguments were presented. Four months later, the district court issued a decision. It held that the case had not been entirely frivolous, denied defendants request for $158,039 in fees under § 1927 and § 936, and decided “the more appropriate course would be to levy sanctions pursuant to Fed. R. Civ. P. 11.” Appellants’ App. II at 670. As noted earlier, the court ordered Ms. Godlove and Mr. Hutchinson to pay a $5,000 penalty to defendants and, relying on decisions from this circuit imposing filing restrictions on recalcitrant litigants, significantly limited Ms. Godlove’s privilege to practice in the Northern District of Oklahoma. Defendants moved to clarify and alter or amend the judgment to increase the amount of the award. While that motion was pending, Ms. Godlove filed a notice of appeal (No. 98-5245). The district court ultimately denied defendants’ motion, and a new notice of appeal (No. 99-5019) was filed jointly by Ms. Godlove and Mr. Hutchinson. Appellants raise numerous objections to the Rule 11 sanctions imposed. It would not be productive to summarize here all of the issues argued on appeal. Because we hold that the sanction order must be vacated for certain procedural reasons, we need not address many of the contentions raised. Sua Sponte Consideration of Rule 11 Sanctions As outlined above, defendants sought attorney fees under 28 U.S.C. § 1927; they did not move

Civ. P. 11.” Appellants’ App. II at 670. As noted earlier, the court ordered Ms. Godlove and Mr. Hutchinson to pay a $5,000 penalty to defendants and, relying on decisions from this circuit imposing filing restrictions on recalcitrant litigants, significantly limited Ms. Godlove’s privilege to practice in the Northern District of Oklahoma. Defendants moved to clarify and alter or amend the judgment to increase the amount of the award. While that motion was pending, Ms. Godlove filed a notice of appeal (No. 98-5245). The district court ultimately denied defendants’ motion, and a new notice of appeal (No. 99-5019) was filed jointly by Ms. Godlove and Mr. Hutchinson. Appellants raise numerous objections to the Rule 11 sanctions imposed. It would not be productive to summarize here all of the issues argued on appeal. Because we hold that the sanction order must be vacated for certain procedural reasons, we need not address many of the contentions raised. Sua Sponte Consideration of Rule 11 Sanctions As outlined above, defendants sought attorney fees under 28 U.S.C. § 1927; they did not move for sanctions under Rule 11. This selectivity had an understandable basis in self-interest: in keeping with its “ultimate goal of deterrence, rather than compensation,” Rule 11 “de-emphasizes monetary sanctions and discourages direct payouts to the opposing party.” Ridder v. City of Springfield, 109 F.3d 288, 294 (6th Cir.1997); see Fed. R. Civ. P. 11(c)(2) (authorizing order for payment of “some or all” of moving party’s fees only if “warranted for effective deterrence”). Further, as the motion was filed subsequent to summary judgment, long af ter disposition of the interlocutory disputes cited as sanctionable conduct, reliance on Rule 11 would have been untimely and in violation of the rule’s twenty-one day “safe harbor” provision, see Fed. R. Civ. P. 11(c)(1)(A), which is intended ‘“to give the parties at whom the motion is directed an opportunity to withdraw or correct the offending contention.’ ” AeroTech, Inc. v. Estes, 110 F.3d 1523, 1528-29 (10th Cir.1997) (quoting Elliott, 64 F.3d at 216); see Ridder, 109 F.3d at 294-95, 297 (discussing history of “safe harbor” provision and holding Rule 11

for sanctions under Rule 11. This selectivity had an understandable basis in self-interest: in keeping with its “ultimate goal of deterrence, rather than compensation,” Rule 11 “de-emphasizes monetary sanctions and discourages direct payouts to the opposing party.” Ridder v. City of Springfield, 109 F.3d 288, 294 (6th Cir.1997); see Fed. R. Civ. P. 11(c)(2) (authorizing order for payment of “some or all” of moving party’s fees only if “warranted for effective deterrence”). Further, as the motion was filed subsequent to summary judgment, long af ter disposition of the interlocutory disputes cited as sanctionable conduct, reliance on Rule 11 would have been untimely and in violation of the rule’s twenty-one day “safe harbor” provision, see Fed. R. Civ. P. 11(c)(1)(A), which is intended ‘“to give the parties at whom the motion is directed an opportunity to withdraw or correct the offending contention.’ ” AeroTech, Inc. v. Estes, 110 F.3d 1523, 1528-29 (10th Cir.1997) (quoting Elliott, 64 F.3d at 216); see Ridder, 109 F.3d at 294-95, 297 (discussing history of “safe harbor” provision and holding Rule 11 motion filed after summary judgment ineffective); see also Barber v. Miller, 146 F.3d 707, 710 (9th Cir.1998) (reversing Rule 11 sanction imposed on motion filed after dismissal of sanction-able pleading). We may still review the district court’s order as an exercise of its authority to impose sanctions sua sponte under Rule 11(c)(1)(B). See Barber, 146 F.3d at 711 (“ ‘safe harbor’ provision applies only to sanctions imposed upon motion of a party,” and “[njothing in the Rule or the history of the 1993 amendments prevents the district court from [imposing sanctions on its own initiative] after judgment”); Elliott, 64 F.3d at 216 (noting Rule 11(c)(1)(B) contains no “safe harbor” provision). This alternative view of the district court’s action, however, has significant analytical and procedural consequences. For one thing, Rule 11(c)(2) prohibits a court acting on its own initiative from ordering payment of a monetary penalty to an opposing party. See Nuwesra v. Merrill Lynch, Fenner & Smith, Inc., 174 F.3d 87, 94 (2d Cir.1999); Johnson v. Waddell & Reed, Inc., 74 F.3d 147, 152 n. 3

motion filed after summary judgment ineffective); see also Barber v. Miller, 146 F.3d 707, 710 (9th Cir.1998) (reversing Rule 11 sanction imposed on motion filed after dismissal of sanction-able pleading). We may still review the district court’s order as an exercise of its authority to impose sanctions sua sponte under Rule 11(c)(1)(B). See Barber, 146 F.3d at 711 (“ ‘safe harbor’ provision applies only to sanctions imposed upon motion of a party,” and “[njothing in the Rule or the history of the 1993 amendments prevents the district court from [imposing sanctions on its own initiative] after judgment”); Elliott, 64 F.3d at 216 (noting Rule 11(c)(1)(B) contains no “safe harbor” provision). This alternative view of the district court’s action, however, has significant analytical and procedural consequences. For one thing, Rule 11(c)(2) prohibits a court acting on its own initiative from ordering payment of a monetary penalty to an opposing party. See Nuwesra v. Merrill Lynch, Fenner & Smith, Inc., 174 F.3d 87, 94 (2d Cir.1999); Johnson v. Waddell & Reed, Inc., 74 F.3d 147, 152 n. 3 (7th Cir.1996). The district court’s order obligating'Ms. Godlove and Mr. Hutchinson to pay a $5,000 penalty to defendants was, therefore, in excess of its authority under Rule 11(c)(1)(B). More fundamentally, however, Rules 11(c), 11(c)(1)(B), and 11(c)(2)(B) prescribe a procedure to be followed when the district court imposes any Rule 11 sanction on its own initiative: issuance of a show cause order specifically describing the conduct implicating the rule, followed by a reasonable opportunity for the party/attorney so advised to demonstrate how she has not violated the rule. The courts have held this procedure to be mandatory, with noncompliance constituting an abuse of discretion requiring reversal. See, e.g., L.B. Foster Co. v. America Piles, Inc., 138 F.3d 81, 89-90 (2d Cir.1998); Thornton v. General Motors Corp., 136 F.3d 450, 454-55 (5th Cir.1998); Johnson, 74 F.3d at 151-52. The district court did not comply with these specific Rule 11 requirements. Defendants contend that, any formal noncomplianee with Rule 11(c) notwithstanding, fundamental due process concerns of notice and opportunity to be heard were satisfied when the magistrate judge “recommended the

(7th Cir.1996). The district court’s order obligating'Ms. Godlove and Mr. Hutchinson to pay a $5,000 penalty to defendants was, therefore, in excess of its authority under Rule 11(c)(1)(B). More fundamentally, however, Rules 11(c), 11(c)(1)(B), and 11(c)(2)(B) prescribe a procedure to be followed when the district court imposes any Rule 11 sanction on its own initiative: issuance of a show cause order specifically describing the conduct implicating the rule, followed by a reasonable opportunity for the party/attorney so advised to demonstrate how she has not violated the rule. The courts have held this procedure to be mandatory, with noncompliance constituting an abuse of discretion requiring reversal. See, e.g., L.B. Foster Co. v. America Piles, Inc., 138 F.3d 81, 89-90 (2d Cir.1998); Thornton v. General Motors Corp., 136 F.3d 450, 454-55 (5th Cir.1998); Johnson, 74 F.3d at 151-52. The district court did not comply with these specific Rule 11 requirements. Defendants contend that, any formal noncomplianee with Rule 11(c) notwithstanding, fundamental due process concerns of notice and opportunity to be heard were satisfied when the magistrate judge “recommended the imposition of sanctions pursuant to Rule 11.” See Ap-pellees’ Br. at 16. It is at least arguable that the procedure for matters referred to the magistrate judge under 28 U.S.C. § 636(b)(1)(B) might, in appropriate circumstances, effectively satisfy the due process concerns informing the Rule 11(c) procedural requirements discussed above. But cf. Johnson, 74 F.3d at 151-52 (reconsideration of sanction through Rule 59(e) process “was insufficient to correct [procedurally] defective application of Rule 11”). There are, however, two distinct considerations which undercut that conclusion here. First, the district court had not referred the matter of Rule 11 sanctions to the magistrate judge, who was authorized at the time only to hear pending discovery disputes. Second, the magistrate judge did not, in any event, actually recommend the imposition of Rule 11 sanctions; he merely noted that sanctions might be appropriate and recommended that they be considered. Appellants’ App. I at 146. This inconclusive, noncommittal suggestion was clearly not a reviewable ruling on, or recommendation for, such a sanction. See Montalvo v. Hutchinson, 837 F.Supp. 576, 582 (S.D.N.Y.1993)

imposition of sanctions pursuant to Rule 11.” See Ap-pellees’ Br. at 16. It is at least arguable that the procedure for matters referred to the magistrate judge under 28 U.S.C. § 636(b)(1)(B) might, in appropriate circumstances, effectively satisfy the due process concerns informing the Rule 11(c) procedural requirements discussed above. But cf. Johnson, 74 F.3d at 151-52 (reconsideration of sanction through Rule 59(e) process “was insufficient to correct [procedurally] defective application of Rule 11”). There are, however, two distinct considerations which undercut that conclusion here. First, the district court had not referred the matter of Rule 11 sanctions to the magistrate judge, who was authorized at the time only to hear pending discovery disputes. Second, the magistrate judge did not, in any event, actually recommend the imposition of Rule 11 sanctions; he merely noted that sanctions might be appropriate and recommended that they be considered. Appellants’ App. I at 146. This inconclusive, noncommittal suggestion was clearly not a reviewable ruling on, or recommendation for, such a sanction. See Montalvo v. Hutchinson, 837 F.Supp. 576, 582 (S.D.N.Y.1993) (statement by magistrate judge implying rule violation and indicating sanction might be imposed in future insufficient to invoke district court review); see Sack v. Huggins, No. 94-7068, 1995 WL 225248 at **2 (10th Cir. Apr.7, 1995) (statement by district court regarding conduct that might justify future sanction did not constitute ruling sufficient to confer standing for appeal) (unpublished). Indeed, as a practical matter, it is obvious from the transcript of the fee hearing, conducted five years later, that the magistrate judge’s recommendation had not provided adequate notice that the functional equivalent of a Rule 11 show cause order was pending in the case. Defendants also argue that appellants had the benefit of “an open-ended hearing within which to respond to the claims against them,” and insist that this afforded them sufficient notice and opportunity to be heard on their liability for Rule 11 sanctions. Appellees’ Br. at 17. However, “[pjroviding the [sanctioned party] with an opportunity to mount a defense ‘on the spot’ does not comport with due process.” 1488, Inc. v. Philsec Inv. Corp., 939

(statement by magistrate judge implying rule violation and indicating sanction might be imposed in future insufficient to invoke district court review); see Sack v. Huggins, No. 94-7068, 1995 WL 225248 at **2 (10th Cir. Apr.7, 1995) (statement by district court regarding conduct that might justify future sanction did not constitute ruling sufficient to confer standing for appeal) (unpublished). Indeed, as a practical matter, it is obvious from the transcript of the fee hearing, conducted five years later, that the magistrate judge’s recommendation had not provided adequate notice that the functional equivalent of a Rule 11 show cause order was pending in the case. Defendants also argue that appellants had the benefit of “an open-ended hearing within which to respond to the claims against them,” and insist that this afforded them sufficient notice and opportunity to be heard on their liability for Rule 11 sanctions. Appellees’ Br. at 17. However, “[pjroviding the [sanctioned party] with an opportunity to mount a defense ‘on the spot’ does not comport with due process.” 1488, Inc. v. Philsec Inv. Corp., 939 F.2d 1281, 1292 (5th Cir.1991). Holding that notice at the hearing itself was adequate would effectively nullify the show cause procedure specifically added to the rule by the 1993 amendments. And, far from giving effective Rule 11 notice to appellants, the pending § 1927 motion actually diverted attention elsewhere. As discussed infra, § 1927 differs from Rule 11 in standards, procedure, and punitive scope. Consequently, the pursuit of sanctions under one of these provisions does not constitute notice for purposes of the other. See, e.g., Ted Lapidus, S.A. v. Vann, 112 F.3d 91, 96-97 (2d Cir.1997); Zuk v. Eastern Pa. Psychiatric Inst., 103 F.3d 294, 298 (3d Cir.1996); see also Rule 11(c)(1)(A) (requiring that “motion for sanction under this rule shall be made separately from other motions or requests”). Even if there might be exceptional circumstances in which actual notice and a real opportunity to be heard could substitute for the formal procedures specified in Fed.R.Civ.P. 11(c), this case does not present such circumstances. On the contrary, the focus of the fee proceeding was unclear from

F.2d 1281, 1292 (5th Cir.1991). Holding that notice at the hearing itself was adequate would effectively nullify the show cause procedure specifically added to the rule by the 1993 amendments. And, far from giving effective Rule 11 notice to appellants, the pending § 1927 motion actually diverted attention elsewhere. As discussed infra, § 1927 differs from Rule 11 in standards, procedure, and punitive scope. Consequently, the pursuit of sanctions under one of these provisions does not constitute notice for purposes of the other. See, e.g., Ted Lapidus, S.A. v. Vann, 112 F.3d 91, 96-97 (2d Cir.1997); Zuk v. Eastern Pa. Psychiatric Inst., 103 F.3d 294, 298 (3d Cir.1996); see also Rule 11(c)(1)(A) (requiring that “motion for sanction under this rule shall be made separately from other motions or requests”). Even if there might be exceptional circumstances in which actual notice and a real opportunity to be heard could substitute for the formal procedures specified in Fed.R.Civ.P. 11(c), this case does not present such circumstances. On the contrary, the focus of the fee proceeding was unclear from the start and did not sharpen substantially during the first two days of hearings. At some point in the second two-day hearing a month later, it became evident that sanctions beyond those sought in defendants’ fee motion were implicated. Nevertheless, it was still not clear that the nature and severity of such sanctions were then under consideration. Furthermore, counsel was not on notice that professional discipline of the sort ultimately imposed was immediately threatened. See Appellants’ App. Ill at 978 (district court’s comments at hearing implying court would refer matter to disciplinary committee in event professional discipline were deemed necessary). In short, the procedure in this case “compliefd] with neither the letter nor the spirit of Rule 11(c)(1)(B), which requires notice and an opportunity to respond before sanctions are imposed.” Johnson, 74 F.3d at 151. While we express no opinion regarding appellants’ ultimate liability for any particular sanction under Rule 11, we must reverse the penalties imposed. Alternative Bases for Sanctions Imposed Defendants urge us to rely on § 1927 as an alternative basis to affirm the district

the start and did not sharpen substantially during the first two days of hearings. At some point in the second two-day hearing a month later, it became evident that sanctions beyond those sought in defendants’ fee motion were implicated. Nevertheless, it was still not clear that the nature and severity of such sanctions were then under consideration. Furthermore, counsel was not on notice that professional discipline of the sort ultimately imposed was immediately threatened. See Appellants’ App. Ill at 978 (district court’s comments at hearing implying court would refer matter to disciplinary committee in event professional discipline were deemed necessary). In short, the procedure in this case “compliefd] with neither the letter nor the spirit of Rule 11(c)(1)(B), which requires notice and an opportunity to respond before sanctions are imposed.” Johnson, 74 F.3d at 151. While we express no opinion regarding appellants’ ultimate liability for any particular sanction under Rule 11, we must reverse the penalties imposed. Alternative Bases for Sanctions Imposed Defendants urge us to rely on § 1927 as an alternative basis to affirm the district court’s Rule 11 order. The district court, however, expressly denied defendants’ motion for fees under § 1927, and they did not cross-appeal that ruling. While “an appellee may defend the judgment won below on any ground supported by the record without filing a cross-appeal,” Tinkler v. United States ex rel. FAA, 982 F.2d 1456, 1461 n. 4 (10th Cir.1992), defendants effectively seek to reverse a ruling lost below in the guise of an alternate-ground affirmance. Cf. Barber, 146 F.3d at 708-09, 711-12 (illustrating proper cross-appeal by party whose request for sanctions under § 1927 was denied when district court awarded Rule 11 sanction instead). A party may not circumvent the obligation to cross-appeal an adverse decision simply by rearguing the matter in connection with another, favorable ruling. Further, significant substantive and procedural differences exist between Rule 11 and § 1927, and the latter, which deals with counsel’s liability for excessive costs,, does not authorize the monetary penalty imposed on Mr. Hutchinson or the filing restrictions imposed on Ms. Godlove. See generally Ted Lapidus, S.A., 112

court’s Rule 11 order. The district court, however, expressly denied defendants’ motion for fees under § 1927, and they did not cross-appeal that ruling. While “an appellee may defend the judgment won below on any ground supported by the record without filing a cross-appeal,” Tinkler v. United States ex rel. FAA, 982 F.2d 1456, 1461 n. 4 (10th Cir.1992), defendants effectively seek to reverse a ruling lost below in the guise of an alternate-ground affirmance. Cf. Barber, 146 F.3d at 708-09, 711-12 (illustrating proper cross-appeal by party whose request for sanctions under § 1927 was denied when district court awarded Rule 11 sanction instead). A party may not circumvent the obligation to cross-appeal an adverse decision simply by rearguing the matter in connection with another, favorable ruling. Further, significant substantive and procedural differences exist between Rule 11 and § 1927, and the latter, which deals with counsel’s liability for excessive costs,, does not authorize the monetary penalty imposed on Mr. Hutchinson or the filing restrictions imposed on Ms. Godlove. See generally Ted Lapidus, S.A., 112 F.3d at 96; Zuk, 103 F.3d at 297. Alternatively, defendants contend the Rule 11 order may be affirmed as an exercise of the district court’s inherent authority to sanction a party or attorney who “has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (quotation omitted). This inherent power, like the authority provided by § 1927, is not governed by the same standard which controls under Rule 11. As a result, appellate courts have declined to affirm Rule 11 sanctions on such alternative grounds. See, e.g., Corley v. Rosewood Care Ctr., Inc., 142 F.3d 1041, 1058-59 (7th Cir.1998); United States v. International Bhd. of Teamsters, 948 F.2d 1338, 1345-47 (2d Cir.1991); Brubaker v. City of Richmond, 943 F.2d 1363, 1382 n. 25 (4th Cir.1991). This court has also refused to rely on an inherent authority rationale when “the district court ... imposed sanctions pursuant to Rule 11, not pursuant to its inherent power.” Karara v. Czopek, No. 95-1361, 1996 WL

F.3d at 96; Zuk, 103 F.3d at 297. Alternatively, defendants contend the Rule 11 order may be affirmed as an exercise of the district court’s inherent authority to sanction a party or attorney who “has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (quotation omitted). This inherent power, like the authority provided by § 1927, is not governed by the same standard which controls under Rule 11. As a result, appellate courts have declined to affirm Rule 11 sanctions on such alternative grounds. See, e.g., Corley v. Rosewood Care Ctr., Inc., 142 F.3d 1041, 1058-59 (7th Cir.1998); United States v. International Bhd. of Teamsters, 948 F.2d 1338, 1345-47 (2d Cir.1991); Brubaker v. City of Richmond, 943 F.2d 1363, 1382 n. 25 (4th Cir.1991). This court has also refused to rely on an inherent authority rationale when “the district court ... imposed sanctions pursuant to Rule 11, not pursuant to its inherent power.” Karara v. Czopek, No. 95-1361, 1996 WL 330260, at **2 (10th Cir. June 6, 1996) (reversing Rule 11 sanction and refusing to review for permissibility under unexercised inherent authority) (unpublished). We must be especially cautious in invoking inherent authority to cure a procedurally defective Rule 11 order, “lest ... the restrictions in [Rule 11] become meaningless.” Corley, 142 F.3d at 1059 (quotation omitted). Finally, while reliance on inherent authority would not implicate the specific procedural prerequisites of Rule 11(c), general concerns about notice and opportunity to be heard would still be raised on this record in any event. See generally Chambers, 501 U.S. at 50, 111 S.Ct. 2123 (noting court must “exercise caution in invoking its inherent power, and it must comply with the mandates of due process.”). Conclusion The initial appeal (No. 98-5245) filed by Ms. Godlove is DISMISSED as moot. Pursuant to our review of the second appeal (No. 99-5109), the order of the United States District Court for the Northern District of Oklahoma imposing Rule 11 sanctions is VACATED, and the cause is REMANDED for further proceedings consistent with this opinion. .

330260, at **2 (10th Cir. June 6, 1996) (reversing Rule 11 sanction and refusing to review for permissibility under unexercised inherent authority) (unpublished). We must be especially cautious in invoking inherent authority to cure a procedurally defective Rule 11 order, “lest ... the restrictions in [Rule 11] become meaningless.” Corley, 142 F.3d at 1059 (quotation omitted). Finally, while reliance on inherent authority would not implicate the specific procedural prerequisites of Rule 11(c), general concerns about notice and opportunity to be heard would still be raised on this record in any event. See generally Chambers, 501 U.S. at 50, 111 S.Ct. 2123 (noting court must “exercise caution in invoking its inherent power, and it must comply with the mandates of due process.”). Conclusion The initial appeal (No. 98-5245) filed by Ms. Godlove is DISMISSED as moot. Pursuant to our review of the second appeal (No. 99-5109), the order of the United States District Court for the Northern District of Oklahoma imposing Rule 11 sanctions is VACATED, and the cause is REMANDED for further proceedings consistent with this opinion. . The underlying action and a discovery sanction dispute have already been concluded in favor of defendants. See Hutchinson v. Pfeil, 105 F.3d 562 (10th Cir.), cert. denied, 522 U.S. 914, 118 S.Ct. 298, 139 L.Ed.2d 230 (1997); Hutchinson v. Pfeil, No. 98-5043, 1999 WL 1015557 (10th Cir. Nov.9, 1999) (unpublished). . After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of these appeals. See Fed. R.App. P. 34(a)(2); 10th Cir. R. 34.1(G). The cases are therefore ordered submitted without oral argument. . The magistrate judge "further recommended that the record as certified first be referred to this court’s Committee on Admissions and Grievances for investigation and advisory recommendations.” Appellants’ App. I at 146-47. There is no indication on the record that such a referral was made. . Defendants also relied on Okla. Stat. tit. 12, § 936 (allowing attorney fees as costs in actions on contract). This statutory claim, abandoned on appeal, does not impact our analysis and, for simplicity, we often refer to defendants’ motion