Copeland v. Wasserstein, Perella & Co.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

__________________________

No. 00-31292
__________________________

ALVIN C. COPELAND,
Plaintiff-Appellant/Cross-Appellee,

versus

WASSERSTEIN, PERELLA & CO., INC.,
AND CHARLES G. WARD, III,
Defendants-Appellees/Cross-Appellants.

___________________________________________________

Appeals from the United States District Court
For the Eastern District of Louisiana

___________________________________________________
January 4, 2002

Before GARWOOD, WIENER, and CLEMENT, Circuit Judges.

WIENER, Circuit Judge:

This Louisiana diversity case arises out of a food-business

merger gone sour. Plaintiff-Appellant/Cross-Appellee Al Copeland

owned the controlling interest in companies that sought to acquire

a chain of restaurants and retained Defendant-Appellee/Cross-

Appellant Wasserstein, Perella, & Co. (“Wasserstein”) to provide

financial advice regarding the deal. After the corporation that

resulted from the merger was forced into bankruptcy by creditors,

Copeland sued his investment banker, settled that lawsuit, and then

sued Wasserstein and one of its executive employees, Defendant-

Appellee/Cross-Appellant Charles Ward. Copeland appeals from the
district court’s dismissal of his claims against Wasserstein and

Ward, and they cross-appeal from the district court’s denial of

their motion for sanctions. We affirm the district court’s

dismissal of Copeland’s claims; we reverse the court’s denial of

Wasserstein and Ward’s motion for sanctions and remand for further

proceedings consistent with this opinion.

I.

FACTS AND PROCEEDINGS

In June of 1988, a corporation controlled by Copeland, A.

Copeland Enterprises, Inc. (“Old ACE”), and its wholly-owned

acquisition subsidiary, Biscuit Investments, Inc. (“Biscuit”),

signed an engagement letter with Wasserstein, a New York investment

bank boutique. This agreement committed Wasserstein to serve as

the “exclusive financial adviser” to Old ACE and Biscuit in

connection with their prospective acquisition of Church’s Fried

Chicken (“CFC”). Acting chiefly through Ward, its Vice Chairman,

Wasserstein devised a merger financing plan that contemplated

finding an unsecured, subordinated lender that would commit to

provide Biscuit a bridge loan and underwrite high-yield or “junk”

bonds to capitalize the merged corporation. As Wasserstein lacked

underwriting capacity, Biscuit solicited proposals for the

unsecured financing, eventually choosing Merrill Lynch (“Merrill”)

as the subordinated lender. Merrill lent Biscuit $173 million to

fund its tender offer for CFC. This loan was conditioned on

2
Copeland’s contributing specified recipe royalties and the

franchising arm of Old ACE to Biscuit. Copeland testified in the

instant litigation that this condition was agreed to and complied

with in reliance on advice from Wasserstein and Ward.

The tender offer closed on March 21, 1989. Biscuit acquired

86.5% of CFC’s shares and paid Wasserstein the balance of the fees

owed under the engagement letter.

The terms of the bridge loan, which was by then in place, gave

Merrill the right to designate two individuals to serve on

Biscuit’s board of directors. Six days after the closing of the

tender offer, Merrill designated —— and Copeland elected as

directors —— both Ward and Raymond Minella, the lead Merrill

executive handling the merger. Ward agreed to serve only after

Minella orally promised that Merrill would indemnify Ward for

claims arising out of his service on Biscuit’s board of directors.

These two continued to serve on that board until September, 1989,

when Biscuit merged into CFC, which thereupon changed its name to

Al Copeland Enterprises, Inc. (“New ACE”). Copeland was the CEO

and chairman of New ACE and owned all of its common stock. Again

on Merrill’s designation, Copeland elected Minella and Ward to

serve as directors of New ACE. Ward served until January 1990,

when he resigned after learning that Merrill would not indemnify

him after all.

Flash back to 1988: Biscuit received a letter from Merrill

stating that Merrill was “highly confident” that it could sell up

3
to $200 million worth of junk bonds to capitalize New ACE; however,

Merrill never took the bond issue to market. This lack of long-

term financing prompted New ACE’s creditors, including Merrill

itself as the bridge lender, to put New ACE into involuntary

bankruptcy in 1991.

The following year, 1992, Copeland personally sued Merrill,

alleging negligence and breaches of contractual and fiduciary

duties, and claiming damages resulting from the salary he lost, the

royalties he had foregone, and the assets he had contributed to

Biscuit. Merrill and Copeland finally settled that litigation in

1997: Merrill agreed to pay Copeland a substantial sum of money;

Copeland agreed to release all claims against “Merrill Lynch, its

past, present, and future officers, directors, employees, agents

[and] representatives” (emphasis ours).

After settling with Merrill, Copeland filed the instant action

against Wasserstein and Ward in Louisiana state court. Copeland

alleged that Wasserstein, as a financial adviser to the

corporations, and Ward, as a director of Biscuit and its successor,

New ACE, had breached duties they owed to Copeland individually,

had failed to disclose material information to him, and had caused

him to rely detrimentally on their negligent or fraudulent

misrepresentations. The gist of Copeland’s allegations was that

Wasserstein and Ward knew or should have known —— but failed to

disclose to Copeland —— that, among other things, (1) the merger

and financing plans were unworkable or unsound, (2) the Merrill

4
“deal team” had no junk-bond experience, and (3) the junk-bond

market had ceased to exist before Biscuit’s acquisition of CFC

closed.

Both Wasserstein and Ward removed Copeland’s state-court suit

to the Eastern District of Louisiana on diversity grounds and

subsequently filed motions to dismiss pursuant to Rule 12(b)(6).

The district court granted Wasserstein’s motion, holding that it

owed no fiduciary duty to Copeland personally and, alternatively,

that his claims, which the court categorized as sounding in tort

rather than in contract, had prescribed. The court denied Ward’s

dismissal motion, however, concluding that Copeland had pled (1) a

conflict-of-interest claim that could support a fiduciary-duty

claim and (2) a special-relationship claim that could support a

nonderivative cause of action.

In 2000, Ward filed a summary judgment motion grounded in,

inter alia, release, prescription, lack of standing, and absence of

causation. In due course, the district court granted Ward’s motion

and dismissed Copeland’s claims against him, stating that it

“primarily rel[ied] upon...the threshold issue, and that is the

effect of that settlement agreement between Copeland and Merrill

Lynch,” in which Copeland had released, among others, Merrill’s

“representatives.” In addition to dismissing all claims against

both Wasserstein and Ward, the court awarded them costs.

Ward and Wasserstein had filed a motion for sanctions against

Copeland and his counsel on the theory that they knew when the case

5
was filed that it was time-barred and otherwise meritless. After

analyzing the motion from the bench, but discussing only the

release issue in any detail, the trial court orally denied

Wasserstein and Ward’s motion for sanctions.

After final judgment issued, Copeland timely appealed the

district court’s grants of Wasserstein’s 12(b)(6) motion and Ward’s

summary-judgment motion, as well as the award of costs.

Wasserstein and Ward timely cross-appealed the court’s denial of

their motion for sanctions.

II.

ANALYSIS

A. Standards of Review

We examine a district court’s grants of

both a motion to dismiss and a motion for summary
judgment under a de novo standard of review. In the
former, the central issue is whether, in the light most
favorable to the plaintiff, the complaint states a valid
claim for relief. In the latter, we go beyond the
pleadings to determine whether there is no genuine issue
as to any material fact and that the movant is entitled
to judgment as a matter of law.1

By contrast, we review the denial of sanctions and the allocation

1
See St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425,
440 n.8 (5th Cir. 2000) (citing Lowrey v. Texas A & M University
System, 117 F.3d 242, 247 (5th Cir. 1997), and Fed. R. Civ. P.
56(c)).

6
of costs for abuse of discretion.2

B. Fiduciary Duty of Wasserstein

Copeland appeals the district court’s dismissal of his claim

that Wasserstein breached a fiduciary duty. In the district court,

the parties disputed (1) whether an investment bank acting as a

financial adviser owes a corporate client any fiduciary duty; (2)

whether, if such a duty is owed, a controlling shareholder can

maintain a cause of action for breach of such a duty to the

corporation; and (3) whether a claim for the breach of such a duty

prescribes in one year or in ten. The first two issues present

novel questions of Louisiana law, but we have often distinguished

tort claims from contract claims for purposes of prescription.

Thus, the third issue —— prescription —— implicates Louisiana law

that is settled, invoking a line of cases that resolves this claim

in Wasserstein’s favor. As we conclude that Copeland’s claims

against Wasserstein have prescribed, we do not address the first

two questions.

Even when we assume without deciding that (1) Wasserstein owed

a fiduciary duty to Biscuit and Old ACE, and (2) Copeland’s

alleging a breach of Wasserstein’s fiduciary duty would entitle him

to sue Wasserstein directly, we are convinced that this purported

cause of action has prescribed. Under Louisiana law, a claim for

breach of a fiduciary duty is generally personal and prescribes in

2
Hogue v. Royse City, Texas, 939 F.2d 1249, 1256 (5th Cir.
1991).

7
ten years, and a negligence claim is delictual and prescribes in

one year.3 We have recognized this dichotomy in a long line of

cases involving well-recognized categories of fiduciaries,

producing a general rule that if a plaintiff fails to allege self-

dealing, breach of the duty of loyalty, fraud, or breach of trust

on the part of his fiduciary, the plaintiff’s claim sounds in

negligence and is subject to a one-year prescriptive period.4 The

district court relied on this line of cases for its conclusion

that, because Copeland’s claim against Wasserstein was “best

characterized as tort in nature,” a one-year prescriptive period

applied.

The trial court correctly characterized the gravamen of

Copeland’s case. His petition lays out in its count against

Wasserstein a litany of instances in which Wasserstein allegedly

knew or should have known, but failed to disclose, facts key to

shaping Copeland’s understanding of the transaction and his

3
Compare LA. CIV. CODE art. 3499 (personal actions) with LA. CIV.
CODE art. 3492 (negligence actions).
4
FDIC v. Abraham, 137 F.3d 264, 266–67, 269–70 (5th Cir. 1998)
(holding that the FDIC’s claim against corporate directors for
violation of fiduciary duty sounded in tort as a violation of the
duty of care, and therefore prescribed in one year); FDIC v.
Barton, 96 F.3d 128, 133 (5th Cir. 1996) (distinguishing the
mandatary’s fiduciary duty from the duty of care, and applying a
one-year prescriptive period to a violation of the latter by a
board of directors); Gerdes v. Estate of Cush, 953 F.2d 201, 205
(5th Cir. 1992) (“While a mandatary is a fiduciary, it does not
necessarily follow that every action against a mandatary is subject
to the ten year prescriptive period.... In the absence of self-
dealing or a breach of the duty of loyalty, negligence by a
mandatory is subject to the one year prescriptive period.”).

8
willingness to go forward with it. Even if proven, however, these

failures would be violations solely of Wasserstein’s professional

duty of care. In an effort to invoke Louisiana’s ten-year period

of liberative prescription, Copeland has attempted to make out two

conflicts of interest that would transmogrify these violations into

breaches of Wasserstein’s duty of loyalty. But the first alleged

conflict —— that a contingency fee biased Wasserstein toward

pushing the deal through —— sweeps too broadly, both because the

engagement letter fully disclosed the fee arrangement and because

such arrangements are common practice in the investment banking

industry. The second alleged conflict —— that because Wasserstein

lacked underwriting capacity, it favored maintaining its business

relationship with Merrill over its duty to advise Copeland’s

companies —— is not alleged in the complaint and presents a

contention first raised on appeal, and therefore is not an argument

that we will entertain.5

To summarize, Copeland failed to plead facts that would bring

his fiduciary-duty claim under a ten-year prescriptive period. The

district court thus properly dismissed this claim against

Wasserstein on Louisiana’s one-year period of liberative

prescription for delictual claims.

C. Detrimental Reliance on Wasserstein

5
Yohey v. Collins, 985 F.2d 222, 225 (5th Cir. 1993) (“As a
general rule, this Court does not review issues raised for the
first time on appeal.”).

9
 Copeland also appeals from the district court’s Rule 12(b)(6)

dismissal of his claim that he detrimentally relied on

Wasserstein’s assurances regarding Merrill and the merger financing

plan. The district court found that this claim too had prescribed

in one year; that because the claim was “based on a failure to meet

professional obligations or competence,” it was “rooted in tort.”

Consequently, even if under Louisiana law Copeland could

justifiably rely on Wasserstein’s representations regarding third

parties, any detrimental-reliance claim arising out of the merger

has prescribed. The prescriptive period is not determined by the

label of the cause of action but by “the nature of the transaction

and the underlying basis of the claim.”6 We acknowledge that in

Stokes v. Georgia Pacific Corp.,7 we stated that an action based on

a detrimental-reliance theory sounds in contract. Stokes was a

classic detrimental-reliance case, however, in which a supplier

made substantial investments relying on a customer’s assurances of

future purchases. Jurisprudence of the Supreme Court of Louisiana

on prescription binds us in diversity, and that court reasoned in

Roger v. Dufrene that “[i]t is the nature of the duty breached that

should determine whether the action is in tort or in contract.”8

6
Davis v. Parker, 58 F. 3d 183, 189 (5th Cir. 1995).
7
894 F.2d 764, 766–67 (5th Cir. 1990).
8
Roger v. Dufrene, 613 So.2d 947, 948 (La. 1993) (“The proper
prescriptive period to be applied in any action depends upon the
nature of the cause of action.”).

10
Therefore, although nonfeasance in the performance of an obligation

creates a cause of action that prescribes in ten years, misfeasance

in the performance of a contract for professional services, such as

those provided by a lawyer, doctor, accountant, or insurance agent,

gives rise to a claim in tort, which prescribes in one year.9 The

Roger court explained this distinction between misfeasance and

nonfeasance as follows:

The nature of certain professions is such that the fact
of employment does not imply a promise of success, but an
agreement to employ ordinary skill and care in the
exercise of the particular profession. The duty imposed
upon the insurance agent as well as [the lawyer, doctor,
and accountant] upon whose advice the client or patient
depends is that of “reasonable diligence” a breach of
which duty results in an action in negligence.10

We discern no valid reason to treat a financial adviser such

as Wasserstein differently. Wasserstein can reasonably be thought

to have promised only to advise Old ACE and Biscuit diligently, in

accordance with the standard of care among financial advisers.

Copeland claims that Wasserstein’s advice fell short of that

standard; but this states a quintessentially delictual claim that

prescribed years ago, regardless of whether he might now

characterize it as a detrimental-reliance claim.

The district court also properly dismissed as prescribed

Copeland’s claims of negligent or intentional misrepresentation,

9
Id. at 949.
10
Id.

11
which are also delictual.11 Having disposed of Copeland’s claims

against Wasserstein, we now turn to his appeal of the summary

judgment dismissal of his claims against Ward.

D. Release of Ward

Copeland’s claim against Ward arises solely from Ward’s

service on boards of directors of Copeland’s corporations —— first

Biscuit and then New ACE. The district court orally granted Ward’s

motion for summary judgment because in Copeland’s 1997 settlement

with Merrill, he had released Merrill’s “representatives.” The

court found Ward, the director, to have been a “representative” of

Merrill within the meaning of that release. It reads in part:

The settlement agreement hereby releases Merrill Lynch,
its past, present and future officers, directors,
employees, agents, [and] representatives...and the
predecessors, successors, partners, heirs, spouses,
executors, administrators, successors and assignees of
any or all of them (hereinafter the “Releasees”) from any
and all claims, known or unknown, of any every kind
whatever, whether or not enumerated or plead in this
action, or any and all claims that have arisen at any
time prior to the date this Settlement Agreement is
executed...against Releasees by [ ] Copeland.
...
This Settlement Agreement is binding upon and inures to
the benefit of the Parties and of any agents, successors,
predecessors, assigns and subrogees of the Parties. This
Settlement Agreement creates no third party beneficiaries
hereto, and it is not the intention of either party to

11
See, e.g., In re Ward, 894 F.2d 771, 775 (5th Cir. 1990)
(“The tort of negligent misrepresentation occurs when there is a
breach of the duty to supply correct information to the
plaintiff.”); Doucet v. Lafourche Parish Fire Protection Dist.
No. 3, 589 So.2d 517, 519 (La. Ct. App. 1991) (“Misrepresentation,
intentional or negligent, is a delict; an unlawful act covered
under LSA–C.C. article 2315. ‘Delictual actions are subject to a
liberative prescription of one year.’ LSA–C.C. art. 3492.”).

12
 create any such third party beneficiary rights.

We must construe this settlement agreement —— a “transaction”

in the lexicon of the Louisiana Civil Code —— under article 3073:

Transactions regulate only the differences which appear
clearly to be comprehended in them by the intention of
the parties, whether it be explained in a general or
particular manner, unless it be the necessary consequence
of what is expressed; and they do not extend to
differences which the parties never intended to include
in them.
The renunciation, which is made therein to all
rights, claims and pretensions, extends only to what
relates to the differences on which the transaction
arises.12

The burden of proving the scope of a release falls on the

defendant, because the essence of release is res judicata, an

affirmative defense.13 Such proof can include reference to

extrinsic evidence because, even though Louisiana courts generally

interpret a contract from within its four corners, they “have

crafted a special exception to the extrinsic evidence rule for

compromise agreements.”14 Importantly, as the language of article

3073 suggests, if the releasor “did not intend to release certain

aspects” of a claim, extrinsic evidence is admissible to establish

“whether unequivocal language in the instrument was intended to be

unequivocal.”15 Thus in Brown, the Louisiana Supreme Court held

12
LA. CIV. CODE ANN. art. 3073.
13
Brown v. Drillers, Inc., 630 So.2d 741, 747–48 (La. 1994).
14
Id. at 748.
15
Id. at 749.

13
that the plaintiff had not intended to sign away her ability to

bring a wrongful-death action growing out of an oil-rig accident in

which her husband was mortally injured.16 Key to this holding were

facts that suggested no intent to injure and a statutory scheme

that sharply distinguished between personal-injury and wrongful-

death actions.17 Here, the law may distinguish between Copeland’s

causes of action against Merrill and those against Ward, but the

facts confirm that, from the beginning, Copeland himself thought of

Ward as a Merrill “representative.”

Two facts chiefly persuaded the district court that Ward,

during his service on the boards of Biscuit and New ACE, was a

“representative” of Merrill within the meaning of the settlement

agreement’s release clause. First, Ward stated that he served on

the boards solely at the request of Merrill and then on the

condition that Merrill indemnify him, which Minella orally promised

it would do. The court properly credited this undisputed evidence.

Second, Copeland and his counsel repeatedly characterized Ward as

a “representative” of Merrill in testimony and pleadings ranging

throughout this case, the prior suit against Merrill, and the New

ACE bankruptcy proceeding.

Whether Copeland’s arguments here totally founder on his

previous characterizations of Ward as a “representative” of Merrill

16
Id. at 752–57.
17
Brown v. Drillers, Inc., 630 So.2d 741, 751, 754–55 (La.
1994).

14
on the corporations’ boards depends in part on the preclusive

effect of those statements under Louisiana law. Absent prejudice

to an adverse party, he who has made an admission in a prior suit

“is not barred from denying the facts contained in that admission

in a subsequent suit.”18 Even a party’s testimony in the same

proceeding does not conclusively bar his later allegations to the

contrary.19 Thus Copeland’s statements do not ipso facto preclude

his asserting here that Ward was not a “representative.”

Nevertheless, in its summary judgment analysis, the trial court

certainly could take such statements into account as evidence that

18
Alexis v. Metropolitan Life Ins. Co., 604 So.2d 581, 582 (La.
1992). Alexis collected authorities on point:
The allegation contained in the earlier...suit is not a
judicial admission, with its conclusive effect, in the
present proceeding. See La. Civ. Code art. 1853. The
Louisiana jurisprudence is clear that such an “extra-
judicial” confession does not bind the claimant in
subsequent litigation. S. Litvinoff, THE LAW OF
OBLIGATIONS, p. 426 in 5 LA. CIV. LAW TREATISE (1992);
Succession of Turner, 235 La. 206, 103 So.2d 91 (1958),
and authorities cited therein. The party who has made
such an admission in a previous suit is not barred from
denying the facts contained in that admission in a
subsequent suit, unless the adverse party has been
prejudiced by his reliance upon that admission. Id.
Rather, the admission is to be given the probative value
it deserves as an admission of the party who made it.
See LA. C.E. art. 801(D)(3); Farley v. Frost-Johnson
Lumber Co., 133 La. 497, 63 So. 122 (1913); Pugh,
Admissions and Confessions, in The Work of the Louisiana
Supreme Court for the 1957-1958 Term--Evidence, 19 La. L.
Rev. 294, 434 (1959).
19
Scoggins v. Frederick, 744 So.2d 676, 683 (La. Ct. App. 1999)
(“[D]eposition testimony that a sale was not a simulation cannot be
considered a judicial confession sufficient to estop [the
deponent’s] subsequent cross claim alleging that the sale was a
simulation.”) (emphases added).

15
Copeland understood Ward to be “representing” Merrill in some

sense. We agree with the district court that Copeland’s own

references to Ward as Merrill’s “representative,” prior to signing

the settlement agreement, suggest that Copeland would or should

have understood that term in the agreement to include Ward.

We also take note, in our de novo review, of several further

undisputed facts. By the time Ward was designated by Merrill as

one of the two directors on Biscuit’s board, Ward’s services to

Copeland’s corporations under the engagement letter had ceased

altogether. It is clear, moreover, that Ward was serving on the

New ACE and Biscuit boards as Merrill’s watchdog, both to keep

Merrill informed and to prevent Copeland from engaging in rapacious

affiliate transactions. The bridge loan documents provided that

the Merrill-designated directors —— in this event, Ward and Minella

—— would remain on Biscuit’s board “so long as the Bridge Financing

remains outstanding” or until they resigned, and that they would

have veto power over large transactions between Biscuit and its

controlling shareholder, Copeland. As Copeland’s counsel put it

before the district court, “That was the sole basis on which [Ward

and Minella] were there [on the boards] representing Merrill

Lynch.” Copeland himself summed up the situation by stating in a

deposition that “Merrill Lynch had two positions on our board” and

that he “had no choice” but to agree to the appointment of Ward as

a director.

This evidence that Ward was a Merrill representative was

16
contraposed against only an affidavit from Copeland, executed late

in the game, in which he asserted conclusionally that he had not

intended to release Ward. The affidavit did not explain why

Copeland had previously referred to Ward as a Merrill

“representative.” The district court therefore found Copeland’s

assertion “basically self-serving, indeed, not supported by his own

sworn testimony at other times.” We agree that even in this

summary judgment posture, Copeland’s description of his own intent,

coming at the eleventh hour, rings hollow.

While the intent to compromise is usually, under Louisiana’s

transaction jurisprudence, an issue of fact that is not appropriate

for summary judgment, this case involves the kind of “explicit and

detailed” contract of compromise,20 along with a set of almost

uncontroverted facts, that would permit summary judgment in a

Louisiana court. Similarly, under the federal rules, when the sole

evidence purporting to create a genuine issue of material fact and

thus to preclude summary judgment is an affidavit that conflicts

with deposition testimony, we have required an explanation of that

conflict.21 This jurisprudential rule has evolved from cases in

which opposing parties had provided the affidavit and the

20
Hall v. Management Recruiters of New Orleans, Inc., 332 So.2d
509, 512 (La. Ct. App. 1976).
21
S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 495 (5th
Cir. 1996) (“It is well settled that this court does not allow a
party to defeat a motion for summary judgment using an affidavit
that impeaches, without explanation, sworn testimony.”).

17
deposition; but it applies equally to situations such as this, when

the affidavit contradicts prior sworn testimony by the affiant

himself.22

Copeland’s affidavit states that “Charles G. Ward, III was not

a ‘representative’ of Merrill Lynch as that term was used in the

Settlement Agreement.” In stark contrast, Copeland’s deposition,

given under oath, reads as follows:

Q. [Ward] was a representative of Merrill Lynch on the Board
with Manella, correct?
A. Correct. He was put on the Board by Merrill Lynch.
Q. Right. And you agreed to that? Isn’t that right?
A. I had no choice.
Q. But you did agree to that?
A. With no choice I had to agree.
Q. And you understood that Ward and Minella had these dual
representations, correct?
A. I had no choice in the matter. I understood it. I
understood that one represented me separately from the
other through the transactions, but I had no choice in
who they picked to put on the Board.
Q. Well, you agreed?
A. If I had no choice — they said they have a choice, to
pick two people. They gave me two names. What can I
say?
Q. Didn’t you suggest that Ward go on?
A. No. I don’t recall suggesting that.
. . .
Q. You agreed that Merrill Lynch would be able to designate
two representatives on the Biscuit and then Al Copeland
Boards, right?
A. That was part of the deal, yes.

Copeland’s affidavit does not attempt to explain the contradiction

22
See Thurman v. Sears, Roebuck & Co., 952 F.2d 128, 137 n.23
(5th Cir. 1992); Albertson v. T.J. Stevenson & Co., 749 F.2d 223,
228 (5th Cir. 1984) (“[T]he nonmovant cannot defeat a motion for
summary judgment by submitting an affidavit which directly
contradicts, without explanation, his previous testimony.”) (citing
Kennett-Murray Corp. v. Bone, 622 F.2d 887, 894 (5th Cir. 1980)).

18
between his statement there that he did not intend to include Ward

as a “representative” in the release and his deposition testimony

that characterized Ward as a “representative.”

Given that the discrete facts are undisputed, even when we, in

our de novo review, view them in the light most favorable to

Copeland, we reach the legal conclusion that Ward was released by

Copeland when Copeland released Merrill’s representatives from

liability. In reaching this conclusion, both we and the district

court are following our summary-judgment jurisprudence. We are

satisfied that the district court correctly granted summary

judgment for Ward.

Even though the district court decided Ward’s motion on the

release issue, it expressly acknowledged the presence of other

potentially valid grounds for dismissing Copeland’s claims against

Ward on summary judgment. In like manner, we affirm on the release

reasoning of the district court, yet our de novo review of the

summary-judgment record and the applicable law convinces us that

several of the alternative grounds —— including prescription,

causation, and the nonderivative posture of Copeland’s suit ——

would likely support summary judgment for Ward equally well.

Ward’s causation argument is particularly well-taken. The

acquisition closed on March 21, 1989, and Biscuit and Merrill

entered into the necessary financing agreement on the same day; yet

Ward did not join Biscuit’s board until March 27. When Ward began

his board service, therefore, it was too late for him to disclose

19
anything to Biscuit or Copeland that would have influenced

Biscuit’s decision to enter into the obligations that eventually

bankrupted its successor.

E. Allocation of Costs

Copeland also appeals the district court’s award of $23,092 in

photocopying and videotaping expenses incurred by Wasserstein and

Ward. Contending that Wasserstein and Ward inadequately documented

these claims, Copeland cites cases from other circuits and

districts for the proposition that Wasserstein and Ward should have

itemized their bill. The applicable local rule, however, does not

mandate itemization.23 Moreover, the record reveals that in fact

counsel for Wasserstein and Ward did provide detailed documentation

and made the requisite declaration under penalty of perjury. The

district court did not abuse its discretion in awarding costs to

Wasserstein and Ward.

III.

CROSS APPEAL

Wasserstein and Ward have cross-appealed the district court’s

23
E.D. LA. L.R. 54.3:
Within 30 days after receiving notice of entry of
judgment, unless otherwise ordered by the court, the
party in whose favor judgment is rendered and who claims
and is allowed costs, shall serve on the attorney for the
adverse party and file with the clerk a notice of
application to have the costs taxed, together with a
memorandum signed by the attorney of record stating that
the items are correct and that the costs have been
necessarily incurred.

20
denial of their motion for sanctions against Copeland and his

counsel. As an initial matter, we reject Copeland’s contention at

oral argument that Wasserstein did not preserve the sanctions issue

for its cross appeal. Even though the sanctions motion itself

contains Ward’s name alone as movant, the contemporaneously filed

memorandum in support of that motion, to which the motion itself

expressly refers, names both Wasserstein and Ward as movants. When

we review the motion and the memorandum in pari materia, we are

satisfied that the motion was made on behalf of both parties.

Wasserstein’s cross appeal is thus properly before us.

Wasserstein and Ward charge here, as they did in the district

court, that Copeland and his lawyer are sanctionable on three

distinct grounds. First, they contend that in filing this lawsuit,

counsel violated his duty of reasonable inquiry under Article 863

of the Louisiana Code of Civil Procedure because he knew that

Copeland’s claims had prescribed, that Ward could not have caused

Copeland’s injuries, and that Copeland had released Ward. Second,

Wasserstein and Ward seek sanctions under 28 U.S.C. § 1927 and

Federal Rule of Civil Procedure 11 as well, contending that, to

prevent the district court from granting Ward’s 12(b)(6) motion,

Copeland and his attorney essentially fabricated a conflict of

interest that they knew did not exist. Third, Wasserstein and Ward

repeat their urging before the district court that it sanction

Copeland and counsel under Federal Rule of Civil Procedure 37

because they refused to produce copies of tax returns or the

21
settlement agreement with Merrill until the court was required

specifically to order them to do so.

We review a district court’s denial of sanctions for abuse of

discretion.24 It is well settled that, to conduct our review, we

must be able to understand the district court’s disposition of the

sanctions motion.

Although an award of attorney’s fees, like an award
of costs, is committed to the discretion of the trial
court and can only be reversed for an abuse of
discretion, the trial court must give reasons for its
decisions regarding attorney’s fees; otherwise, we cannot
exercise meaningful review.... Where a district court
fails to explain its decision...[,] we do not know
whether the decision was within the bounds of its
discretion or was based on an erroneous legal theory.25

A trial court may make “oral findings of fact” on a sanctions

motion,26 and we do not require district courts to make specific

findings of fact and conclusions of law in every sanctions case.

The degree and extent to which a specific explanation must be

contained in the record on appeal will vary according to the

particular circumstances of the case, including the severity of the

violation, the significance of the sanctions, and the effect of the

24
Hogue v. Royse City, Texas, 939 F.2d 1249, 1256 (5th Cir.
1991) (regarding Rule 11 sanctions).
25
Schwartz v. Folloder, 767 F.2d 125, 133 (5th Cir. 1985). The
Schwartz Court remanded a case for a “brief statement of reasons”
justifying the denial of attorney’s fees. Id. at 134.
26
Id. at 133.

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award.27

Here, in ruling from the bench on the sanctions motion, the

district court dismissed Wasserstein’s and Ward’s multifarious

arguments summarily and in the broadest terms. The court did not

discuss each allegation of sanctionable conduct or give its reasons

for dismissing each. Rather, the court stated globally that it had

“no reason to believe that counsel here acted with any intentional

or even negligent capacity for proceeding with an action that he

knew or should have known would not ultimately be viable.” On the

release issue, the court described Copeland’s argument as “an

interesting point, a point I disagree with,” but not a “totally

untenable” position. “Therefore,” the court concluded, “the motion

for sanctions are [sic] denied.” The court never addressed Ward

and Wasserstein’s argument for sanctions based on causation, or

their allegation that Copeland’s conflict-of-interest argument was

baseless, or their belief that he had no standing to bring a

nonderivative claim, or their charge that he abused the discovery

process.

We do not relish prolonging secondary litigation such as this

any further than necessary, but we are simply unable to review this

issue on appeal without at least a brief statement, on each point,

of the reasons for denying sanctions from the perspective of the

27
Thomas v. Capital Security Services, Inc., 836 F.2d 866,
882–23 (5th Cir. 1988). Here, Ward has alleged legal expenses of
“hundreds of thousands of dollars.”

23
judge best positioned to expound on these matters. Our constricted

review of the motion in its current condition does suggest that it

also raises issues of promptness and of shelter under Rule 11's 21-

day safe harbor, which due process may require. With no intention

to imply how this issue should come out in the end, we reverse and

remand for more detailed findings with respect to Ward and

Wasserstein’s motion for sanctions, including a fuller explication

of the court’s ruling. In so doing, we leave to the sound

discretion of the district court the determination of what further

proceedings, if any, may be necessary or desirable.

IV.

CONCLUSION

We affirm the district court’s 12(b)(6) dismissal of the

claims against Wasserstein as prescribed and its summary judgment

dismissal of the claims against Ward as released. We also affirm

the award of costs to Wasserstein and Ward. As for sanctions,

however, we reverse and remand for a more thorough analysis and

explication by the district court, whichever way Wasserstein’s and

Ward’s sanctions motion might be decided on remand.

AFFIRMED in part, REVERSED in part, and REMANDED.

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