Newby v. Enron: The Effect of Settlement on an Appeal from an Order Imposing Compensatory Sanctions

On May 30, 2008, the Court of Appeals for the Fifth Circuit decided Newby v. Enron, which involved an appeal "seeking vacatur of the district court's imposition of compensatory attorneys' fees in light of the [parties'] settlement of [their underlying suit]."1 The court held that the parties have the right "to bargain away sanctions designed to compensate the parties themselves."2 However, "where a district court has reviewed a case of misconduct and issued a well reasoned sanctions order," the court will not vacate the order in its entirety, as the "court's right to sanction parties for misconduct remains."3