## Facts

- Gary M. McKnight brought an employment discrimination action against General Motors Corporation in federal district court.
- The district court dismissed the case.
- McKnight appealed to the Seventh Circuit, arguing that § 101 of the Civil Rights Act of 1991 applied retroactively to his claim.
- At the time, Seventh Circuit precedent held § 101 did not apply to pre-enactment conduct.
- The Seventh Circuit dismissed the appeal and sanctioned McKnight’s attorney $500 for filing a frivolous appeal.
- The Supreme Court granted certiorari limited to whether the sanctions were proper.

## Issues

1. Whether a court of appeals may impose sanctions for a “frivolous” appeal solely because the appellant’s legal argument is foreclosed by controlling circuit precedent when the Supreme Court has not yet resolved the question and the issue is reasonably debatable.

## Decision

- The Supreme Court vacated the sanctions order and remanded.
- The Court stated that, if sanctions were imposed solely because the retroactivity argument was foreclosed by circuit precedent, the sanctions order was improper.
- The Court noted the court of appeals correctly rejected the retroactivity argument on the merits, but that merits correctness did not itself justify sanctions on the stated basis.
- The Court observed that, when the appeal was filed, the Supreme Court had not yet ruled on § 101’s application to pending cases and an appeal was the only way to preserve the issue for Supreme Court review.
- The Court emphasized that the retroactivity issue was not so clear in 1992 as to make the position frivolous, given divisions among lower courts.

## Legal Principles

- An appeal is not sanctionably frivolous merely because it is foreclosed by existing circuit precedent when the Supreme Court has not yet decided the issue and the question is reasonably debatable.
- Sanctions cannot properly rest solely on the existence of adverse circuit precedent if the appellant is preserving an unresolved legal question for possible Supreme Court review.
- A court may reject an argument on the merits yet still lack an adequate basis to sanction counsel absent a showing that the position was frivolous, wholly insubstantial, or pursued in bad faith.

## Conclusion

The Supreme Court held that sanctioning counsel solely for pressing a retroactivity argument barred by circuit precedent was improper where the Supreme Court had not yet resolved the question and the issue was reasonably contestable, and it therefore vacated the sanctions order and remanded.


McKnight v. Gen. Motors Corp., 511 U.S. 659 (1994)