* Chief Judge King concurs in the judgment only.

** 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that this opinion should not be published and is not precedent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.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

______________

No. 01-11295

_____________

TRINITY GAS CORPORATION,

Plaintiff

J. VAN OLIVER,

Appellant

v.

CITY BANK & TRUST COMPANY OF NATCHITOCHES; ET AL,

Defendants

CITY BANK & TRUST COMPANY OF NATCHITOCHES,

Defendant - Appellee

_________________________________________________________________

Appeal from the United States District Court

for the Northern District of Texas

No. 4:99-CV-1007-A

_________________________________________________________________

November 19, 2002

Before KING*, Chief Judge, and JOLLY and HIGGINBOTHAM, Circuit

Judges.

PER CURIAM:**
2

On December 7, 1999, Trinity Gas Corporation (“Trinity”)

brought suit against City Bank & Trust Company of Natchitoches

(“City Bank”), Sidney W. Sers (“Sers”), Patricia Sers, and Scriven

Taylor asserting fraud, conspiracy, and conversion claims arising

from an alleged relationship between Sers, Trinity’s former

chairman, and Joe Pierson, Jr., City Bank’s president. 

In July 2000, City Bank moved for summary judgment on all

claims asserted against it by Trinity. The district court

ultimately granted that motion for summary judgment in September

2000.

In August 2000, while City Bank’s summary judgment motion was

pending, City Bank moved for sanctions against Trinity and its

attorneys under Rule 11 of the Federal Rules of Civil Procedure and

under 28 U.S.C. § 1927 based on allegations in Trinity’s complaint

which City Bank claimed were unreasonable and vexatious and without

adequate legal and evidentiary support. Trinity and its attorneys

responded to the motion later that same month.

On July 19, 2001, more than ten months after the district

court granted summary judgment in favor of City Bank on all claims

and almost one year after City Bank filed its motion for sanctions,

the district court granted City Bank’s motion for sanctions in

part: it imposed sanctions on one of City Bank’s attorneys,

Appellant J. Van Oliver, individually, based on a finding that

Oliver had violated Rule 11(b)(2) and (3) and 28 U.S.C. § 1927.

The court sanctioned Oliver under Rule 11 in the amount of $5,000

and called for further briefing on the appropriate sanction for his

§ 1927 violation. In late August 2001, the Court entered an order
1 Mercury Air Group, Inc. v. Mansour, 237 F.3d 542, 548

(5th Cir. 2001).

2 See Fed. R. Civ. P. 11.

3 Edwards v. General Motors Corp., 153 F.3d 242, 246 (5th

Cir. 1998).

4 Browning v. Kramer, 931 F.2d 340, 345 (5th Cir. 1991) 

(emphasis in original and citation omitted); see also Proctor &

Gamble Co. v. Amway Corp., 280 F.3d 519, 526 (5th Cir. 2002)

(same).

3

sanctioning Oliver for the § 1927 violation in the amount of

$ 59,688.97. The sanctions imposed under § 1927 shifted to Oliver,

personally, City Bank’s entire defense costs from the date that

Trinity first filed a document bearing Oliver’s signature. Oliver

appeals both sanctions.

ANALYSIS

We review a district court order imposing sanctions for abuse

of discretion, and we will find an abuse of discretion if the

district court based its order on either an erroneous view of the

law or a clearly erroneous view of the evidentiary record.1 Under

Rule 11 of the Federal Rules of Civil Procedure, an attorney may be

sanctioned for presenting any paper to a court without first

conducting a reasonable inquiry into legal and evidentiary support

for allegations, claims, and contentions contained therein.2 In a

similar vein, a court may shift attorneys fees and impose other

sanctions under 28 U.S.C. § 1927, if the court finds “evidence of

bad faith, improper motive, or reckless disregard of the duty owed

to the court.”3 Further, to support a shift of all defense costs,

as is the case here, it must be “shown with ‘convincing clarity’

that every facet of th[e] litigation was patently meritless.”4
5 See, e.g., Cooter & Gell v. Hartmax Corp., 496 U.S.

384, 403-05 (1990).

6 See Thomas v. Capital Sec. Services, Inc., 836 F.2d

866, 988 (5th Cir. 1988)(en banc).

7 Federal Deposit Insurance Corp. v. Calhoun, 34 F.3d

1291, 1296 (5th Cir. 1994).

8 R.2466-67.

4

District courts are given broad discretion in imposing

sanctions against attorneys under Rule 11 and § 1927,5 but even

broad discretion must be exercised within clear and reasonable

limits. As we have explained before, Rule 11 is not intended to

unreasonably chill an attorney's enthusiasm or creativity in

pursuing factual or legal theories.6 To this end, courts should

not impose sanctions simply because one party ultimately lost on

the merits in litigation; nor should courts use the wisdom of

hindsight in ruling on a motion for sanctions under Rule 11 or §

1927. Instead, the task for the district court under Rule 11 and

§ 1927 is only to decide whether an attorney has failed to conduct

a reasonable inquiry into the law and the facts and comply with “an

objective standard of reasonableness under the circumstances.”7 

Upon review of the record, the totality of the circumstances,

and the obligation of Oliver to his clients, we must find that the

district court abused its discretion in imposing drastic sanctions

in this case. 

First, we think that the district court erred as a matter of

law when it held that Trinity’s “claims are legally improper” based

solely on the court’s finding that the claims are “[w]ithout

factual support.”8 In past cases, we have expressly noted the
9 See FDIC v. Calhoun, 34 F.3d at 1298-99.

10 Oliver states in his brief that he did not personally

draft or sign Trinity’s original complaint; however, his name is

clearly listed on the complaint before that of the signatory and

he continuously appeared as a responsible attorney on all papers

filed on Trinity’s behalf. Furthermore, he was designated lead

counsel for Trinity on June 12, 2000. Based on all of this

uncontroverted evidence, Oliver clearly participated in

“presenting” the complaint to the district court. Accordingly,

Oliver can be held liable for the complaint under Fed. R. Civ. P.

11.

5

difference between the requirements of subdivisions (b)(2)

and(b)(3) of Rule 11, and we have reversed district courts that

blurred the two parts of the Rule.9 In this case, too, the

district conflated subdivision (b)(2) & (b)(3) of Rule 11 and

erroneously concluded that a factually unsupported claim was also

necessarily one that is unwarranted by existing law or by a nonfrivolous legal argument for the extension, modification or

reversal of existing law or the establishment of new law.

Second, we think that the district court clearly erred in

holding that Oliver violated Rule 11 by presenting a complaint to

the court without conducting a reasonable inquiry into basis of the

allegations and other factual contentions contained therein.10 Rule

11 makes clear that the exact nature of the inquiry required will

always depend on the individual circumstances in each case. This

inquiry usually will include specific factors such as how much the

attorney had to rely upon his client for the factual support for

the document; whether pre-filing investigation was feasible; the

complexity of the factual and legal issues in question; and the

need for discovery to develop the factual circumstances underlying
11 See Thomas v. Capital Sec. Services, Inc., 836 F.2d at

988.

12 See, e.g., R.2438-41 (Aff. of William Ruth).

6

the claim.11 In drafting pleadings, an attorney is entitled to rely

on his own personal knowledge as well as the objectively reasonable

representations of his clients. In this case, the reasonableness

of Oliver’s inquiry to support his pleadings is manifested by his

prior dealings with the parties in this case. Before filing this

case, Oliver represented the plaintiffs in a shareholder-derivative

action brought on behalf of Trinity against Trinity’s former

President, Sydney W. Sers, and he represented Trinity itself in an

SEC enforcement action against Sers (in which the SEC obtained the

temporary restraining order freezing assets belonging to Sers and

his family at issue in this case). In addition, Oliver

successfully intervened on behalf of Trinity in a lawsuit brought

by City Bank in Louisiana state court against various parties. He

also represented Trinity in various bankruptcy proceedings, as

counsel to the Shareholders Committee. Thus, Oliver was intimately

familiar with Sers, Trinity, City Bank, and alleged relationships

among the three at the time this complaint was filed such that the

reasonable inquiry component of Rule 11 is satisfied. Even if we

set aside Oliver’s affidavit (offering apparently true but untimely

testimony about his own knowledge and beliefs regarding the

parties, their alleged relationships with one another, and the

factual background surrounding this case), the record still shows

that Oliver reasonably relied on the statements and knowledge of

his own clients in presenting Trinity’s complaint to the court.12
7

In fact, each of the “false” allegations cited by City Bank

appear to have some reasonable evidentiary basis sufficient to

withstand attack under Rule 11(b)(3). For example, Trinity’s

allegation that Sers had “a close relationship” with City Bank’s

President, Joe Pierson is clearly supported by information

uncovered during the course of other litigation indicating that

Sers and his family were prominent City Bank customers, that

Pierson acted as the sole loan officer to Sers and the corporations

that he controlled, and that the Bank often extended loans to Sers

and his corporations under unusual conditions. Likewise, based on

the Affidavit of William Ruth filed in this case and based on

deposition testimony taken in other litigation, Trinity appears to

have had a reasonable factual basis for alleging that Sers

conspired with Pierson and City Bank fraudulently to transfer

$800,000 in proceeds from an illegal sale of Trinity stock.

Specifically, on December 8, 1997, Pierson did in fact arrange for

City Bank to transfer $800,000 out of a City Bank account opened in

the name of Sers’s young daughter to an offshore bank account in

the Cayman Islands belonging to Columbia Trinity, one of Sers’s

wholly owned companies. This action was taken only on Sers’s oral

and written request and apparently in contravention of general bank

policies. Moreover, on the same day that this suspicious transfer

occurred a district court entered a temporary restraining order

freezing that account. Still further, Trinity and Oliver had

evidence supporting Trinty’s belief that City Bank and Pierson were
13 The district court stated that “there is no evidence

that City Bank knew of the TRO” in its order granting City Bank’s

sanctions motion. However, a close reading of the original

complaint reveals that Trinity only alleged “[u]pon information

and belief” that “City Bank received notice from Mr. Sers and/or

others that the SEC had filed a lawsuit commencing the SEC

Enforcement Action.” Thus, Trinity did not, as the district

court said, ever make an allegation that City Bank knew about the

granting of the TRO before it wired the $800,000. Because

Trinity never made such an allegation, evidence of the bank’s

knowledge of the TRO is immaterial for the purposes of Rule 11.

14 Browning v. Kramer, 931 F.2d 340, 345 (5th Cir. 1991) 

(emphasis in original and citation omitted); see also Proctor &

Gamble Co. v. Amway Corp., 280 F.3d 519, 526 (5th Cir. 2002)

(same).

8

aware of Sers’s problems with the SEC at the time of the supicious

transfer.13

Finally, with respect to the § 1927 violation, we do not think

that the record supports a determination that Oliver unreasonably

and vexatiously multiplied the proceedings in this case simply by

filing the original complaint and refusing to withdraw it prior to

the disposition of City Bank’s summary judgment motion. Certainly,

the evidence will not support “with ‘convincing clarity’” a

determination “that every facet of th[e] litigation was patently

meritless.”14
15 As we said in Thomas v. Capital Security Service, Inc.,

836 F.2d at 878, we review more rigorously severe sanctions such

as those imposed against Oliver.

9

We thus conclude that, for reasons we have briefly set forth,

the district court abused its discretion in awarding sanctions.15

Accordingly, the judgment of the district court is REVERSED, and

judgment is RENDERED in favor or Oliver.

REVERSED and RENDERED.