Labor & Employment Law Daily Wrap Up, PROCEDURE—4th Cir.: $57K sanction against employee’s counsel for baseless claim reversed, (Feb 23, 2026)

By Kathleen Kapusta, J.D.

“That a lawyer ends up on the wrong side of this line does not make his position so evidently baseless that he should be sanctioned for pursuing it.”

Because counsel for a Muslim employee in this long running dispute against her former employer, which had been the subject of four district court opinions and three prior appeals, had at least two nonfrivolous grounds for summary judgment, the district court abused its discretion when it imposed sanctions pursuant to Section 1927 and ordered counsel to pay roughly $57,000 in costs. Reversing the lower court’s decision, the Fourth Circuit found the district court framed its Section 1927 inquiry too narrowly (Ali v. BC Architects Engineers, PLC, No. 24-1963 (4th Cir. Feb. 20, 2026)).

The employee, a Syrian-American Muslim woman who wears a hijab, had worked as a computer-assisted design drafter for an architectural services firm for a little over a year when she was fired. After her termination, she sued the firm alleging, among other things, that she was passed up for promotions and later demoted because of her race and that a coworker had harassed and discriminated against her because she was Arab. She also claimed that after she reported the discrimination and harassment to the firm’s owners, they retaliated against her.

Procedural background. Although the district court dismissed her claims, the Fourth Circuit reversed as to her retaliatory termination count. On remand, the case proceeded to discovery and evidence was produced that called into question the employee’s job performance. There was also new information that was arguably less favorable to the firm, including certain “variations” in its stated reasons for terminating the employee and evidence she had not been placed on a performance improvement plan as contemplated by its progressive discipline policy.

At the close of discovery, the district court granted the firm’s motion for summary judgment, finding the employee had failed to establish pretext. The court concluded that the firm’s shifting explanations for her termination were “relatively minor discrepancies.” It did not address her argument the firm’s departure from its progressive discipline policy could support an inference of pretext. The Fourth Circuit affirmed in an unpublished per curiam decision.

Sanctions. The firm then moved for sanctions against the employee’s counsel pursuant to 28 U.S.C. § 1927, which authorizes courts to require “[a]ny attorney... who so multiplies the proceedings in any case unreasonably and vexatiously” to “satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” According to the firm, the employee’s claims were frivolous and her counsel filed and prosecuted the case without a reasonable basis for doing so.

Granting the motion in part, the district court found that the employee’s counsel should have known by the end of discovery “that the core allegations the Fourth Circuit found sufficient to plausibly state a retaliation claim were non-existent” and without support for those allegations, her retaliation claim was “entirely groundless.” Thus, the court ordered counsel to pay $57,000 in attorneys' fees and costs to the firm.

DeBauche. On appeal, counsel first argued that the sanctions award was erroneous as a matter of law because he did nothing to “multiply the proceedings” in this case. In support, he cited the Fourth Circuit’s 1999 decision in DeBauche v. Trani, in which the court explained that “[t]he unambiguous text of § 1927 aims only at attorneys who multiply proceedings” and held “as a matter of law that the filing of a single complaint cannot be held to have multiplied the proceedings unreasonably and vexatiously.”

Distinguishing DeBauche, the appeals court pointed out that the employee’s counsel here did more than just commence the case by filing a complaint. He also opposed the firm’s motion for summary judgment, which the district court had identified as the sanctionable conduct that “prolonged and multiplied the[] proceedings.” Noting that it had previously explained in an unpublished opinion that “refusing to voluntarily dismiss [a] case once its lack of merit bec[omes] evident” is “not analogous to the filing of a single faulty complaint that gave rise to our decision in DeBauche,” the Fourth Circuit adopted that reasoning and found Debauche did not control here.

Continuing to litigate. The appeals court also rejected counsel’s argument that the district court erred by considering the merits of his client’s claim in awarding sanctions. While the court agreed that Section 1927 “focuses on the conduct of the litigation and not on its merits,” and the “weaknesses of [a plaintiff]’s case” are not by themselves grounds for sanctions under Section 1927, it pointed out sanctions could potentially be awarded when counsel continues to litigate a frivolous claim “long after it would have been reasonable and responsible to have dismissed.” Noting that the district court here determined that the employee’s counsel knew or should have known by the end of discovery that her retaliation claim was entirely groundless or baseless, the Fourth Circuit observed that “is the limited inquiry our precedent allows.”

Abuse of discretion. The district court, however, abused its discretion in applying this standard and finding that the claims advanced by counsel in opposing summary judgment were so baseless and unsubstantiated that sanctions were appropriate, the appeals court stated. In awarding sanctions, the court observed, the district court did not focus on its ultimate conclusion that the employee failed to produce evidence of pretext.

Rather, the lower court assessed two specific allegations in the employee’s complaint that were cited by the appeals court in reversing the dismissal of her retaliation claim—that she performed her work to BC’s satisfaction and that she was denied two reasonable requests to work from home shortly after she engaged in protected activity. According to the district court, the evidence in discovery proved these allegations were “factually false” and thus the employee’s retaliation claim was frivolous.

Too narrow. But the district court framed its Section 1927 inquiry too narrowly, said the appeals court, noting that even if these allegations were disproved by discovery evidence, the case had moved on. Specifically, the firm had proffered legitimate, nonretaliatory reasons for firing the employee and she had offered evidence of pretext. Thus, for purposes of the sanctions inquiry, the question was whether the employee had an arguable basis either in law or in fact for her pretext argument. And here, said the appeals court, she put forth two nonfrivolous arguments to oppose summary judgment on this basis.

Shifting explanations. The employee first pointed to the firm’s shifting explanations for her termination as evidence of pretext. While the district court ultimately concluded these were “variations” on a theme and that each explanation fell within the same “general category of lack of productivity and insubordination,” the appeals court noted that “the line between ‘minor discrepancies’ that do not give rise to an inference of pretext and more significant discrepancies that do can be a fine one.” Further, said the court, that “a lawyer ends up on the wrong side of this line does not make his position so evidently baseless that he should be sanctioned for pursuing it.”

As to the employee’s argument that the firm’s failure to follow its own progressive discipline policy in terminating her was also evidence from which pretext could be inferred, while it “did not carry the day” at summary judgment, that did not make it frivolous, said the court, noting that based on the record, her counsel had a plausible, nonfrivolous basis for arguing that the firm’s departure from its progressive discipline policy was evidence of pretext.

For these reasons, the court found the employee’s counsel had at least two nonfrivolous grounds for opposing summary judgment and the district court abused its discretion when it imposed sanctions pursuant to Section 1927.

The case is No. 24-1963.

Judge: Harris, P.

Attorneys: Arinderjit Dhali (Dhali) for Nawal Ali. Lars Howard Liebeler (Law Offices of Lars Liebeler) for BC Architects Engineers, PLC.

Companies: BC Architects Engineers, PLC

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