FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

April 13, 2006

THOMAS K. KAHN

CLERK

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 05-13401

________________________

D. C. Docket No. 01-02682-CV-VEH-S

SERRA CHEVROLET, INC., 

Plaintiff-Appellee, 

versus 

GENERAL MOTORS CORP., 

Defendant-Appellant, 

EDWARDS CHEVROLET EAST, INC., 

SUSAN SCHEIN CHEVROLET, INC., 

Defendants. 

________________________

Appeal from the United States District Court

for the Northern District of Alabama

_________________________

(April 13, 2006)
 Honorable Lloyd D. George, United States District Judge for the District of Nevada,

*

sitting by designation.

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Before TJOFLAT, PRYOR, Circuit Judges, and GEORGE , District Judge. *

PRYOR, Circuit Judge:

This appeal by General Motors of an order of sanctions that imposed a fine

of $700,000 and struck the affirmative defenses of GM regarding res judicata,

collateral estoppel, and other doctrines of issue preclusion presents two issues: (1)

whether it was an abuse of discretion to find that GM disobeyed an order to

produce documents relating to vehicle allocation and satellite dealerships; and (2)

whether the sanctions violated the Due Process Clause of the Fifth Amendment. 

Although the district court did not abuse its discretion when it found that GM had

violated an order to produce information about its satellite dealerships, the district

court violated the due process rights of GM by failing to provide any rational basis

for the sanctions it imposed. We affirm in part, reverse in part, vacate in part, and

remand this matter to the district court. 

I. BACKGROUND

To explain the context of this appeal, we address three matters. We begin

with a short discussion of the controversy that led to litigation in state and federal

courts between Serra and GM. We then address the state court litigation. Finally,
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we discuss the federal litigation, including the discovery disputes and orders that

led to this appeal.

A. Facts Leading to Litigation

Serra Chevrolet operates a Chevrolet dealership in Centerpoint, Alabama.

Serra alleges that GM encouraged Serra to open a “satellite dealership,” a

temporary location where Chevrolet vehicles can be sold, because Serra could not

effectively provide service in one location to the large geographic area Serra was

assigned by GM. On July 18, 1988, GM and Serra executed a satellite agreement

that created a new facility in Gardendale, Alabama.

After the satellite dealership opened, Serra surpassed Edwards Chevrolet,

another Chevrolet dealer in Birmingham, to become the leading Chevrolet dealer in

the Birmingham area. Serra alleges that Leon Edwards, the owner of Edwards

Chevrolet, and the National Automobile Dealers Association (NADA) complained

to GM executives about Serra’s satellite dealership in Gardendale. Serra alleges

that because of these complaints, GM began to allocate fewer automobiles to Serra

and more automobiles to Edwards Chevrolet in a discriminatory fashion. As a

result of the alleged discriminatory allocation, Edwards Chevrolet increased its

sales, while Serra lost sales.
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B. The State Court Litigation

On April 6, 1998, Serra filed a complaint in state court against Leon

Edwards, Edwards Chevrolet, NADA, and several representatives of GM. The

complaint alleged that the defendants had violated the Motor Vehicle Franchise

Act (MVFA) under Alabama law. See Serra Chevrolet, Inc. v. Edwards Chevrolet,

Inc., 850 So.2d 259, 261 (Ala. 2002). Serra contended that the defendants

conspired to interfere with the relationship between Serra and GM and to restrict

unlawfully the allocation of vehicles to Serra. See id. On October 18, 1998, GM

filed a motion to intervene with both an answer to the complaint and a

counterclaim against Serra for a declaratory judgment, see id. at 262, that GM

could legally terminate the satellite agreement between GM and Serra. After the

trial court granted the motion to intervene, Serra amended its complaint to add GM

as a defendant, and alleged, among other things, misallocation of vehicles in

violation of the MVFA. See id. 

GM ultimately prevailed on both the complaint by Serra and the

counterclaim. With regard to the counterclaim, the trial court concluded that GM

could lawfully terminate the satellite agreement. The Supreme Court of Alabama

affirmed that decision without opinion. As for the complaint filed by Serra,

although the jury returned a verdict in favor of Serra on its misallocation claim, the
5

Supreme Court of Alabama reversed and held that the claim was barred by the

statute of limitations. Id. 

C. The Federal Litigation

On September 12, 2001, GM terminated the satellite agreement with Serra. 

On October 23, 2001, Serra filed the instant complaint against GM and other

defendants and alleged that GM violated the Automobile Dealer Day in Court Act

(ADDCA) when it terminated the satellite agreement. Both the initial and a later

amended complaint alleged that the termination was in response to the state court

litigation and to demands by Serra’s competitor, Edwards Chevrolet. Additionally,

Serra alleged that GM engaged in a discriminatory course of conduct that favored

Edwards Chevrolet and misallocated vehicles from Serra to Edwards Chevrolet.

The complaint was originally assigned to Judge Sharon Lovelace Blackburn. GM

moved to dismiss the complaint on several grounds including res judicata and

collateral estoppel. GM argued that the Alabama courts had ruled that GM had the

right to terminate the Satellite Agreement. The district court denied the motion.

GM moved to reconsider or, in the alternative, to certify the legal question for

interlocutory appeal, but the district court denied the motion without opinion.

On October 17, 2003, the case was reassigned to Judge R. David Proctor.

On April 12, 2004, Serra filed a third amended complaint and added a count for
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wrongful allocation in violation of the MVFA under Alabama law. Serra alleged

that GM wrongfully misallocated vehicles in favor of Edwards Chevrolet. GM

moved to dismiss this claim based in part on the preclusive effect of the earlier

state court judgment. Serra responded that its allocation claim was limited to

wrongful allocations made after the state court litigation, or after April 16, 2001,

when the judgment was entered in state court. While this motion was pending, on

June 28, 2004, the case was reassigned to Judge Virginia E. Hopkins. 

On February 16, 2005, the district court denied the motion to dismiss,

without prejudice to the right of GM to raise its defenses of issue preclusion in a

later motion for summary judgment. After this denial, GM filed an answer to all

three complaints. The answer included 31 affirmative defenses, including the

following three defenses, relevant to this appeal, which are based on the preclusive

effect of the earlier litigation in state court:

FIRST DEFENSE[:] Plaintiff’s claims are barred by the doctrines of

res judicata/claim preclusion and/or collateral estoppel/issue

preclusion. Failure by the court to dismiss the plaintiff’s claims

violates the United States Constitution in that a valid enforceable state

court judgment precludes the plaintiff’s claims in this action. Failure

to give that judgment preclusive effect violates the Full Faith and

Credit Clause of the United States Constitution.

. . . 

EIGHTH DEFENSE[:] Plaintiff’s claims in this action are barred, in

whole or in part, by the law of the case doctrine.

. . .
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TENTH DEFENSE[:] The claims in this action are barred under the

doctrines of judicial estoppel and/or inconsistent positions.

1. The Discovery Disputes

On January 9, 2004, Serra and GM submitted a report to the district court

that proposed scheduling deadlines and a plan regarding the scope and manner of

discovery. With respect to the scope of discovery, the parties disagreed sharply.

On January 28, 2004, the district court ordered discovery to proceed on the topics

proposed by Serra, including “GM’s misallocation of vehicles since 2001” and the

“course of dealings between Serra and GM.” Although the court ordered discovery

on those topics, it allowed GM to object to the extent that Serra operated “outside

of the bounds of permissible discovery as outlined by the Federal Rules of Civil

Procedure and the case law under the ADDCA” and to seek the assistance of the

court if disputes arose.

On February 23, 2004, Serra served GM with its first interrogatories and

requests for production, which produced two disputes relevant to this appeal. The

first dispute involved the following requests for documents regarding Chevrolet

satellite dealerships:

2. Any and all documents, in hard copy or electronic format, regarding

General Motors’ Satellite Program, including but not limited to its

implementation, when it was first made available to the Chevrolet
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dealers body, the purpose of the program, the parameters of the

program, and the name, address, and telephone number of the GM

officials who were responsible for the implementation and overall

oversight of the program to date. 

3. A complete list of any and all Chevrolet dealers who participated in

and/or were awarded satellite facilities under the same or similar

terms as the terms of the satellite facility awarded Serra Chevrolet,

and the status of each of these satellite facilities (i.e. open, full point

or termination, etc.). 

4. Any and all studies, surveys, reports, or other documents in hard

copy or electronic format, relating or referencing the satellite program

as implemented by GM. 

The second dispute involved the request for allocation data for all Chevrolet

dealers in the Birmingham area from 1998 forward. 

On May 17, 2004, GM objected to the discovery requests. As to the requests

for production regarding the satellite information, GM objected to the requests as

“overly broad, unduly burdensome, unlimited in time and scope, irrelevant,

immaterial, and not reasonably calculated to lead to the discovery of relevant or

admissible evidence.” GM referred Serra to the documents produced in the state

court litigation. As to the request regarding the allocation data, GM objected to the

request as “overly broad, unduly burdensome, unlimited in time and scope,

irrelevant, immaterial, and not reasonably calculated to lead to the discovery of

relevant or admissible evidence” and did not produce any responsive documents. 

2. The First Motion to Compel Discovery
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On June 23, 2004, Serra filed its first motion to compel discovery. On

August 27, 2004, the district court held a hearing on the motion. As to the requests

for production regarding the satellite dealerships, the court ordered GM to produce

all documents “[c]reating, evidencing, terminating, implementing, [and]

continuing” the satellite program. The court stressed that “[i]f it has to do with the

satellite program, and it’s a document, then you need to produce it.” GM informed

the court that to accomplish this task, it would have “to look through, to sort

through all seven thousand dealers across the country” or “contact[] the hundred

and fifty or so zone managers across the country and ask[] them to do it.” The

court responded,“I suggest you contact your hundred and fifty zone managers,”

and “then you produce the documents . . . that relate to the satellite.” The court

gave GM 60 days to produce the requested documents. 

As to the request for production regarding allocation data for all Chevrolet

dealers in the Birmingham area from 1998 forward, the court limited the request

from 2001 forward, consistent with the January 28, 2004, order. When the court

asked why GM had not produced this data, GM explained that under Alabama law

the documents were confidential and GM could not legally produce the documents

without either the consent of the other dealers or a court order. The court then

ordered GM to produce the documents within 60 days. On August 30, 2004, the
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district court entered a written order granting the motion to compel discovery in

accordance with the terms described in the hearing. 

Sixty days after the hearing, on October 27, 2004, GM filed a motion to

reconsider regarding the allocation data and argued that there was no factual basis

for the claim. That same day, GM produced monthly allocation data, which are the

monthly determination of the number and type of vehicles each dealer earned

(“File A” data). Although GM produced the data, GM asked Serra “not to produce

or disclose it to anyone, including the plaintiff, experts/consultants and third

parties, until the Court orders that said production and disclosure is appropriate.” 

The district court denied the motion to reconsider on November 14, 2004, without

explanation. 

Because GM retained File A documents for only 36 months in the normal

course of business, it produced the monthly allocation data for all Birmingham

dealers from June 1, 2001, forward. Based on a litigation exception to its retention

policy, GM had retained the monthly allocation documents for Serra and Edwards

Chevrolet from January 1, 2001, forward and produced all those documents. 

On October 29, 2004, counsel for Serra responded by letter to counsel for

GM regarding the documents produced. Counsel for Serra stated that GM failed to

produce weekly allocation data, which are data regarding the weekly process used
11

to determine how the committed volume of vehicles are delivered and received by

the dealership (“File B” data). Counsel for Serra requested the information

immediately. 

On October 29, 2004, GM produced a list of 23 dealerships across the

country that had active satellite agreements. This list was compiled through a

search of a computer database that stored information relative to all Chevrolet

dealers nationwide. After Serra advised GM that the production did not include

terminated satellite agreements, on November 11, 2004, GM supplemented its

response with an additional list of 12 dealerships that had terminated satellite

agreements. 

3. First and Second Motions for Sanctions

On November 15, 2004, Serra filed its first motion for sanctions. Serra

argued that the responses provided by GM were deficient regarding both the

allocation data and the satellite agreements. Serra asked for monetary sanctions,

attorneys fees, or, in the alternative, a default judgment. On December 2, 2004,

Serra withdrew its motion for sanctions because the parties were attempting to

resolve the dispute.

On January 27, 2005, Serra renewed its motion for sanctions. Serra again

argued that GM provided incomplete allocation data and information about the
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satellite dealerships. On February 3, 2005, the district court held a hearing by

telephone on the renewed motion for sanctions. The court first addressed the

motion regarding the allocation data. Because of upcoming depositions, the court

deemed this issue premature and denied the motion in that regard. The court next

addressed the satellite dealership information.

The court disagreed with the argument of GM that the August 27, 2004,

order required GM to produce only a list of satellite dealers. The court reiterated

that it had ordered GM to produce any document that “has to do with the satellite

program” and found that GM violated its order in that regard. Then, the court

again ordered GM to produce all documents relating to satellite dealerships within

14 days. The court further stated that “starting on the 15th day, if [GM is] not in

full compliance with my order, I am going to fine your client $50,000 a day. If

you are not [in] full compliance after 14 days, I am going to start sanctioning as to

your decision in the case.” The court did not provide a rationale as to either

potential sanction. 

On February 7, 2005, the district court entered a written order, consistent

with the rulings stated during the telephone hearing. The court granted in part and

denied in part the motion for sanctions. The district court denied as premature the

motion for sanctions regarding the allocation data. As for the information about
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the satellite agreements, the district court found “that GM violated this Court’s

Order compelling production, entered August 28, 2004 [sic], by failing to provide

documents in its possession and control relating to specific satellite dealerships.”

The district court directed GM “to purge its noncompliance by providing, by the

end of business on Thursday, February 17, 2005, all documents responsive to

[Serra]’s requests.” The district court warned that “failure to comply fully with its

production obligations and this Court’s orders will result in the imposition of

sanctions against General Motors in the amount of $50,000 for every day that GM

remains out of compliance. If GM remains out of compliance thereafter, the Court

will begin striking GM’s defenses.” As in the telephone conference, the district

court did not provide any rationale for the threatened sanctions.

On February 17, 2005, GM filed a notice of compliance with the district

court. GM represented that it had produced a copy of the current form of

agreement between GM and GM dealers with respect to approved satellite

locations and a current and expired version of a manual that outlined the process

for approval of satellite locations. GM also informed the district court that it had

performed two searches of its satellite dealership agreements: first, GM had

searched the dealer contract files of the dealerships that it had identified in the

previous computer search and produced the satellite agreements and
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correspondence related to these 35 locations; and second, GM had asked field

personnel across the nation to identify current and former Chevrolet satellite

dealerships and to locate any documents maintained by the regional offices

regarding those locations. These searches produced three satellite dealerships that

had not been identified in the earlier computer search. GM produced the names of

these dealerships, along with all supporting documentation.

After this production, Serra continued to allege that GM had not disclosed

information about all satellite dealerships because depositions and other testimony

of GM officials referred to several satellite dealerships that GM had not identified. 

Throughout February and the beginning of March, Serra advised GM through

written correspondence that GM had failed to produce information about all the

satellite dealerships. In that correspondence, Serra gave examples of testimonies

of several employees of GM who had testified about satellite dealerships that had

not been disclosed. 

4. Third Motion for Sanctions and Order to Show Cause

On April 1, 2005, Serra filed a third motion for sanctions that alleged GM

failed to produce either complete satellite dealership information or allocation data

for all Birmingham-area Chevrolet dealerships. On May 9, 2005, the court issued
15

an order to show cause that directed GM to explain why it should not be sanctioned

for failure to comply with the orders entered August 30, 2004, and February 7,

2005, regarding satellite information and allocation data. The order set a hearing

for May 16, 2005, and instructed GM to present testimony from any witness with

personal knowledge regarding the satellite program.

In response to the order to show cause, on May 12 and 13, 2005, GM

conducted a manual review of the documents in the 4100 contract files of

Chevrolet dealers. GM hired 14 paralegals to search the documents contained in

each file manually to ascertain whether the dealer had a satellite dealership that had

been missed in the two earlier searches. The search yielded nine additional

satellite dealerships, and GM produced those documents to Serra. 

On May 16, 2005, the district court held a hearing on the order to show

cause. After some discussion between the court and counsel for both parties,

William Middlekauff, General Director of the Dealer Contractual Group of GM,

testified. Among other things, Middlekauff testified regarding the satellite

information and the searches performed by GM to obtain and produce the

information to Serra. 

On May 20, 2005, the district court entered an order that found GM in

contempt, fined GM $700,000, and struck the affirmative defenses regarding the
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preclusive effect of the state judgment. The court addressed two issues in the

sanction order. After briefly reciting the history of the discovery disputes and

court action, the court first addressed the satellite information. The court recounted

that this information was ordered to be produced by October 27, 2004, and that, on

February 3, 2005, the court “verbally held GM in contempt” for not producing

these documents and ordered GM to purge itself of the contempt by February 17,

2005. The court focused on the testimony of Middlekauff and found the following:

(1) Middlekauff did not dispute that GM had not searched for this information until

early November 2004; (2) on February 11, 2005, Middlekauff sent an e-mail to

regional managers requesting satellite information, and he learned that three

satellite dealership had not been disclosed; (3) before this e-mail, the search had

been limited to a computer search; (4) GM did not perform a manual search of its

files until May 12 and 13, 2005, and this search identified nine additional satellite

dealerships; and (5) the dealership file produced to Serra on the Vaden, Georgia,

location lacked documents that should be in every satellite file. 

Second, the court addressed the allocation data. The court found that the

failure of GM to retain File B, or weekly allocation, data before November 7, 2001,

the date on which GM first began retaining such data, was not discovery abuse. As

to the File A, or monthly allocation, data, the court stated that the discovery order
17

dated January 28, 2004, which listed as an area of discovery “GM’s allocation of

vehicles since 2001,” required GM to produce vehicle allocation data from all

Birmingham dealers, and not only Edwards Chevrolet, as argued by GM. GM

retained and produced all File A data for Serra and Edwards Chevrolet, but because

of its policy on document retention, GM retained and produced the File A data for

the other Birmingham dealers from June 2001 forward. The court found that “any

destruction of File A data for the period earlier than 36 months prior to [the

January 28, 2004] Order was a violation of such Order.” The court concluded “that

GM has made a practice throughout this action of unreasonably narrow

interpretations of discovery requests and court Orders.” 

The district court found that “GM has engaged in a pattern of disregarding

discovery obligations, not responding to discovery requests until ordered to do so,

and even then totally disregarding this court’s deadlines for complying with its

Orders.” The court highlighted the fact that “GM knew that it had not performed a

manual search of its [dealer] files,” but “chose to rely on its computer search until

six (6) days before the end of the period allowed GM to purge itself of contempt,

before sending an e-mail to regional managers.” The court also stated that “[e]ven

after the responses to the e-mail established that the computer search was

incomplete, GM delayed approximately one (1) month before it undertook the
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manual search.” Finally, the court reasoned that “Middlekauff’s testimony that the

Vaden, Georgia dealership file lacked documents that ‘would be’ in ‘every’

satellite dealership file, calls into question the completeness of GM’s production

even at this late date.” 

The court concluded that GM did not purge itself of contempt until May 16,

2005, the date on which the latest satellite information was produced. The court

calculated that, under the original contempt order, GM was subject to sanctions of

$4,900,000 for the 98 days of contempt. Without explanation, the court then

limited the monetary sanctions to $700,000, the equivalent of fourteen days of

contempt. Additionally, the court stated that “in lieu of monetary sanctions, it is

more appropriate to impose non-monetary sanctions.” Again, without explanation,

the court struck the affirmative defenses of res judicata, collateral estoppel, and

other related doctrines of issue preclusion. The order also stated that “GM will not

be permitted to challenge any aspect of Serra’s expert’s report . . . to the extent that

such challenge is based . . . on such expert’s lack of information regarding satellite

dealerships.”

GM filed an interlocutory appeal that challenged the sanctions imposed by

the district court. GM moved to stay the proceedings while it appealed to this

Court, but the district court denied the motion and stated that “[t]he Sanctions
19

Order is, unfortunately, mundane in a world where discovery abuse has become

common, and refusal to comply with discovery requests, or even discovery Orders,

often appears to be a tactical decision made after a cost/benefit analysis by the

litigants.” The district court concluded that “[t]he sanctions imposed were neither

harsh nor an abuse of discretion under the circumstances. In other words, this is a

garden variety discovery abuse case, and granting the Motion to Stay would place

an imprimatur of importance that the issues, and facts, do not warrant.” 

On June 28, 2005, GM deposited $700,000 with the clerk of the district

court, and the litigation continued.

II. STANDARD OF REVIEW

“[T]he standard of review for an appellate court in considering an appeal of

sanctions under [R]ule 37 is sharply limited to a search for an abuse of discretion

and a determination that the findings of the trial court are fully supported by the

record.” BankAtlantic v. Blythe Eastman Pain Webber, 12 F.3d 1045, 1048 (11th

Cir. 1994) (quoting Pesaplastic C.A. v. Cincinnati Milacron Co., 799 F.2d 1510,

1519 (11th Cir. 1986)). “A district court abuses its discretion when it misconstrues

its proper role, ignores or misunderstands the relevant evidence, and bases its

decision upon considerations having little factual support.” Arlook v. S.

Lichtenberg & Co., 952 F.2d 367, 374 (11th Cir. 1992). We review de novo the
20

argument that the sanctions imposed by the district court violated due process. 

BankAtlantic, 12 F.3d at 1050 (11th Cir. 1994).

III. DISCUSSION

“It is beyond peradventure that all federal courts have the power, by statute,

by rule, and by common law, to impose sanctions against recalcitrant lawyers and

parties litigant.” Carlucci v. Piper Aircraft Corp., 775 F.2d 1440, 1446 (11th Cir.

1985). Under Federal Rule of Civil Procedure 37, “[i]f a party . . . fails to obey an

order to provide or permit discovery . . . , the court in which the action is pending

may make such orders in regard to the failure as are just.” Fed. R. Civ. P. 37(b)(2). 

Notwithstanding the clear authority of a federal court to enforce its orders, this

appeal presents serious issues about whether the discovery orders of the district

court were violated and, if so, whether the sanctions against GM were just.

Our discussion is divided into two parts. We first address whether the

district court abused its discretion when it found that GM had disobeyed orders to

produce documents relating to vehicle allocation and satellite dealerships. Because

the district court did not abuse its discretion in finding that GM violated an order to

produce information about satellite dealerships, we then address whether the

sanctions entered against GM violated the Due Process Clause. 

A. Whether the District Court Abused Its Discretion 

to Impose Sanctions?
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“Rule 37(b), Federal Rules of Civil Procedure, provides that a district court

may impose sanctions for failure to comply with discovery orders.” Ins. Corp. of

Ireland v. Compagnie des Bauxites de Guinée, 456 U.S. 694, 695, 102 S. Ct. 2099,

2100 (1982); see Fed. R. Civ. P. 37(b). One of the sanctions a district court may

impose under Rule 37 is “an order treating as a contempt of court the failure to

obey any orders.” Id. The court may also “penalize uncooperative attorneys or

parties litigant in discovery proceedings by requiring the payment of ‘reasonable

expenses, including attorney’s fees, caused by the failure. . . .’” Carlucci, 775 F.2d

at 1453 (quoting Fed. R. Civ. P. 37(b)).

“Courts . . . have embraced an inherent contempt authority” that

encompasses the ability to impose civil and criminal contempt. Int’l Union, United

Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831, 114 S. Ct. 2552, 2559

(1994). “[A] contempt sanction is considered civil if it ‘is remedial, and for the

benefit of the complainant. But if it is for criminal contempt the sentence is

punitive, to vindicate the authority of the court.’” Id. at 827-28, 114 S. Ct. at 2557

(quoting Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 441, 31 S. Ct. 492,

498 (1911)). Civil contempt “may be imposed in an ordinary civil proceeding

upon notice and an opportunity to be heard.” Id. A finding of a failure to comply

with discovery orders is a finding of civil contempt. Id. at 833, 114 S. Ct. at 2560.
22

The district court found GM in contempt for failure to produce two

categories of discovery. The district court found that GM failed to produce

allocation data from all Birmingham dealers from January 2001 forward in

violation of its orders on August 27, 2004, and February 3, 2005. The district court

also found that GM failed to produce satellite information in violation of the same

orders. We first address the allocation data and then address the satellite

information.

1. Allocation Data

The district court held GM in civil contempt and sanctioned GM for its

failure to obey the order of the court to produce “File A,” or monthly allocation,

data from Chevrolet dealers in the Birmingham area, excluding Serra and Edwards

Chevrolet, from January 1, 2001, until June 1, 2001. GM argues that the district

court abused its discretion because (1) the data is not important and GM was

justified for not retaining the information, (2) the district court made an important

factual error, and (3) the issue is really one of spoliation, not violation of a

discovery order. We agree that the district court abused its discretion for two

reasons.

First, the finding of the district court that the production was deficient by six

months is not “fully supported by the record.” BankAtlantic, 12 F.3d at 1048
23

(citation omitted). The district court ignored the admission by Serra that limited its

misallocation claim to the period beginning April 16, 2001, when the state court

litigation between Serra and GM ended. Serra stated that “GM’s acts and

omissions after the state court litigation are the basis for its misallocation claim”

(emphasis added). Although the district court, in its January 28, 2004, order,

permitted discovery on the misallocation of vehicles since 2001, Serra specifically

limited its misallocation claim in an admission on June 2, 2004, almost three

months before the August 27, 2004, hearing. The admission rendered irrelevant

any allocation data from January 1, 2001, through April 16, 2001. See Fed. R. Civ.

P. 26(b)(1). The production by GM, therefore, was deficient by six weeks of data,

not six months. 

Second, the district court misquoted the January 28, 2004, order that

permitted discovery on certain outlined topics. The sanction order incorrectly

stated that the court ordered discovery on “GM’s allocation of vehicles since

2001,” when, in fact, the January 28, 2004, order permitted discovery on “GM’s

misallocation of vehicles since 2001.” The distinction between “allocation” and

“misallocation” is material because the misallocation claim related to an alleged

favoritism solely towards Edwards Chevrolet over Serra. 

GM objected to the request by Serra for allocation data for other Chevrolet
24

dealers. GM contended that the “misallocation” data in the discovery order

required the production of only the allocation data for Serra and Edwards, not for

other Chevrolet dealers in Birmingham. The January 28, 2004, discovery order did

not foreclose that argument by GM and instructed the parties to seek assistance

from the court if disputes arose.

After GM objected, Serra filed a motion to compel discovery, and GM lost

the argument. On August 27, 2004, the district court ordered GM to produce the

allocation data for all Birmingham dealers from January 2001 forward, but under

the retention policy of GM, the data from January 2001 until June 2001 regarding

other Chevrolet dealers in Birmingham had been destroyed. When ordered to

produce the data on August 27, 2004, GM complied and produced all that it had—

allocation data from June 2001 forward. GM could not produce what it did not

possess. Although the destruction of the documents by GM may have required the

district court to engage in a spoliation analysis under Alabama law, see Wal-Mart

Stores, Inc. v. Goodman, 789 So.2d 166, 176 (Ala. 2000), the district court abused

its discretion when it held GM in civil contempt and imposed sanctions for the

failure by GM to obey the order of the district court to produce documents GM did

not possess. See Pesaplastic C.A., 799 F.2d at 1520 (“A party held in contempt
25

may defend his failure to obey a court’s order on the grounds that he was unable to

comply.”).

We also note that the parties now agree that the spoliation issue is moot. 

After this appeal was filed, on September 2, 2005, GM filed in the district court a

notice of production, which informed the district court that the allocation data,

dated January 1, 2001, until June 1, 2001, thought to have been destroyed, had

actually been retained by a third party. GM produced the data to Serra on

September 1, 2005. 

2. Satellite Information

The district court also held GM in civil contempt for the failure by GM to

obey the August 27, 2004, order to produce documents relating to all satellite

dealerships. GM contends that the district court abused its discretion because (1)

GM performed reasonable searches in response to the order by the district court,

(2) the order was not sufficiently clear to support a finding of contempt, and (3) the

finding was based in part on clearly erroneous factual findings. After a thorough

review of the record, we reject the arguments made by GM and conclude that the

district court did not abuse its discretion when it held GM in civil contempt for its

failure to produce the satellite information as ordered on August 27, 2004, and

February 3, 2005. 
26

On August 27, 2004, the district court clearly ordered GM to produce

all documents “[c]reating, evidencing, terminating, implementing, continuing” the

satellite program. The court was unambiguous: “If it has to do with the satellite

program, and it’s a document, then you need to produce it.” When GM suggested

that the order required GM to “contact[] the hundred and fifty or so zone managers

across the country,” the district court replied, “I suggest you contact your hundred

and fifty zone managers . . . . And then you produce the documents . . . that relate

to the satellite.” The district court stressed that GM must produce “any GM

satellite as to any document that’s within the scope of their request.” The court

gave GM 60 days to produce the documents.

GM failed to produce any documents relating to satellite agreements by the

deadline prescribed by the court. Instead, on October 29, 2004, 62 days after the

order by the district court to produce the information, GM produced a list of 23

dealerships that had active satellite agreements and their locations. On November

11, 2004, GM supplemented its responses with 12 additional names and locations

of dealerships with terminated satellite agreements. Even this late production by

GM did not comply with the August 27, 2004, order. GM did not provide any

“documents . . . that relate[d] to the satellite” dealerships, as ordered by the district

court. Instead, it produced a list of the names and locations of the satellite
27

dealerships.

GM argues that the August order and discovery requests required it to

produce only a list of satellite dealerships. GM contends that the district court

ordered it to produce documents within the scope of the discovery requests, and the

only requests that asked for documents referenced a “satellite program,” which GM

contends does not exist. GM argues that it produced the list of satellite dealerships,

as requested, but did not provide any documents because GM has never had a

“satellite program.” The problem for GM is that it did not make this argument to

the district court during the August 27, 2004, hearing and the district court rejected

this argument in the February 3, 2005, hearing. 

The district court unambiguously instructed GM to produce all documents in

its possession that related to satellite dealerships. Moreover, the record is clear that

GM understood, at the August 27, 2004, and the February 3, 2005, hearings, what

the district court ordered it to produce. Any argument to the contrary is

unsupported by the record. 

After GM produced the documents found in the search from the telephone

calls, counsel for Serra repeatedly contacted counsel for GM regarding the failure

to produce information regarding satellite dealerships that GM representatives

testified existed in their depositions. Although Serra outlined alleged deficiencies
28

in the production, the record does not reflect that GM took any action in response

to these alleged deficiencies. When the district court issued an order to show cause

why GM should not be sanctioned for the failure to comply with the earlier orders,

GM finally undertook a manual search of its 4100 Chevrolet dealer files, which

yielded nine undisclosed satellite dealerships and, on May 16, 2005, produced

those additional documents. Only after this manual search could GM have known

that the list was finally complete— seven and a half months after GM was ordered

to produce the documents. 

Although GM argues that the district court sanctioned GM because it failed

to perform a manual search in the first instance, the factual record belies this

assertion. GM contemplated that a manual search would be necessary to identify

the requested documents during the August 27, 2004, hearing. If GM was unclear

about the scope of the discovery request or the August 27, 2004, order, GM was

obliged to request clarification from the court; it was “not free to ignore the Order

[of the district court] and to impose [its] own” interpretation of the order. Carlucci,

775 F.2d at 1448 (citations omitted). 

Although GM should have understood the scope of the discovery order

following the August 27, 2004, hearing, any doubts GM had about the scope of

discovery should have disappeared by February 3, 2005, when the district court
29

found the production was deficient and threatened sanctions for “failing to provide

documents in its possession and control relating to specific satellite dealerships.” 

The district court gave GM 14 days to cure the deficiencies, but GM did not

perform a manual search until more than three months later, on May 12, 2005. It

was not an abuse of discretion for the district court to conclude that the failure of

GM to produce documents about satellite dealerships was due to contumacy rather

than good faith misinterpretation.

B. Whether the Sanctions Imposed by the District Court 

Violated Due Process?

Although the district court did not abuse its discretion in determining that

GM had violated the orders to produce satellite information, the more serious

question about just sanctions remains. Whether a district court has the power to

impose sanctions for a violation of a discovery order “depends exclusively upon

Rule 37, which addresses itself with particularity to the consequences of a failure

to make discovery by listing a variety of remedies which a court may employ.” 

Société Internationale pour Participations Industrielles et Commerciales, S.A. v.

Rogers, 357 U.S. 197, 207, 78 S. Ct. 1087, 1093 (1958). “The district court has

broad discretion [to impose sanctions], and this is ‘especially true when the

imposition of monetary sanctions is involved.’” BankAtlantic, 12 F.3d at 1048. 

“Deeply rooted in the common law tradition is the power of any court to ‘manage
30

its affairs [which] necessarily includes the authority to impose reasonable and

appropriate sanctions upon errant lawyers’” and parties that appear before the

court. Malautea v. Suzuki Motor Co., 987 F.3d 1536, 1545 (11th Cir. 1993)

(quoting Carlucci, 775 F.2d at 1447). The broad discretion of the district court to

manage its affairs is governed, of course, by the most fundamental safeguard of

fairness: the Due Process Clause of the Fifth Amendment. See Ins. Co. of Ireland,

456 U.S. at 707, 102 S. Ct. at 2106-07. To comply with the Due Process Clause, a

court must impose sanctions that are both “just” and “specifically related to the

particular ‘claim’ which was at issue in the order to provide discovery.” Id. at 707,

102 S. Ct. at 2107. 

GM appeals two sanctions imposed by the district court: (1) the $700,000

fine, and (2) the striking of the affirmative defenses of res judicata and other

doctrines of issue preclusion. Neither sanction satisfies the basic standard of due

process. We address each sanction in turn. 

1. The $700,000 Fine

GM argues that the fine imposed by the district court is unjust and out of

proportion with the harm caused to Serra by the production delay. Although the

“‘imposition of coercive sanctions by way of fines is generally an area in which

appellate courts must rely heavily on the informed exercise of the district court’s
31

discretion,’” In re Grand Jury Subpoena Duces Tecum, 955 F.2d 670, 673 (11th

Cir. 1992) (citation omitted), that discretion is not unbridled, Dorey v. Dorey, 609

F.2d 1128, 1135 (5th Cir. 1980). “[I]n cases invoking the sanction power of Rule

37[,] the district court must ‘clearly state its reasons so that meaningful review may

be had on appeal.’” Carlucci, 775 F.2d at 1453 (quoting Wilson v. Volkswagen of

Am., Inc., 561 F.2d 494, 505 (4th Cir. 1977)).

In Carlucci, we explained that a fine for misconduct must be based on a

record of evidence and a rationale. We reviewed sanctions imposed by a district

court against an attorney for gross misconduct and recalcitrance. Id. at 1442. The

district court found that the attorney had acted in bad faith and fined him $10,000. 

Id. The court stated four grounds for the sanctions, including the nature of the

misconduct, burden on the court, deterrence, and the fee the lawyer had earned

through his misconduct. Id. at 1453. On appeal, we explained that “[t]he

magnitude of sanctions awarded is bounded under Rule 37 only by that which is

‘reasonable’ in light of the circumstances,” and stressed that we could not uphold a

fine “unless there is offered on the record both a justification for the sanction and

an accounting by the [district] court.” Id. Because “the court below failed to set

forth an accounting adequate to justify the figure adopted,” we concluded that “we

simply are in no position to resolve” whether the sanctions were just. Id. at 1453-
32

54. Accordingly, we reversed and remanded “so that the district court [could]

create a record accounting for costs adequate to sustain whatever sanction that

court ultimately decides is justified in light of the repeated refusal . . . to abide by

that court’s discovery directives.” Id. at 1454.

Here, the district court provided even less of a record and rationale for its

fine of $700,000 than the deficient reasons articulated by the district court in

Carlucci. The district court offered no rationale whatsoever for the $50,000 a day

sanction. Although the court found that GM was in contempt for 98 days, which,

at $50,000 a day, would amount to $4.9 million, the court limited the sanction to

$700,000, or 14 days of contempt, and the district court provided no explanation

for its decision to limit the fine to 14 days. It is impossible for this Court to

provide meaningful review on appeal when the district court fails to give any

justification for its decision. See id. at 1453. We cannot evaluate whether the fine

was “just” and “specifically related to the particular ‘claim’ which was at issue in

the order to provide discovery.” Ins. Co. of Ireland, 465 U.S. at 707, 102 S. Ct. at

2107. 

On remand, the district court must provide a rationale for any fine. The

costs to the court of the numerous motions, hearings, and orders are an appropriate

consideration. See Carlucci, 775 F.2d at 1453. As we explained in Carlucci, the
33

district court “may also find that the fine is better deemed costs to be paid in full or

in part to” Serra or its attorneys for their litigation expenses in compelling the

relevant discovery. Id. at 1454. Whatever the court decides, it must create a record

of its reasons for the imposition of any fine to afford meaningful review by this

Court. See id. at 1453. 

2. The Affirmative Defenses

The remaining sanction raises the same kind of problem. GM argues that the

district court violated due process because “there is absolutely no nexus between

the documents that the district court ordered produced in its discovery orders and

the court’s sanction striking GM’s affirmative defenses of res judicata, issue

preclusion, judicial estoppel, or law of the case doctrine.” We agree.

In Insurance Co. of Ireland, the Supreme Court addressed whether the

district court violated due process when the court overruled an objection to

personal jurisdiction as a sanction for the failure by the defendants to provide

documents regarding personal jurisdiction, as required by a discovery order. Id. at

695, 102 S. Ct. at 2101. The Supreme Court upheld the sanction and explained

that because of the failure of the defendants to provide discovery, the plaintiff was

unable to determine the extent of contacts between the defendants and the forum

state. Id. at 709, 102 S. Ct. at 2107. The Court concluded that the sanction was
34

“specifically related” to the discovery abuse, because the imposition of the sanction

“took as established the facts . . . that [the plaintiff] was seeking to establish

through discovery.” Id. at 709, 102 S. Ct. at 2107-08.

 Here, the district court struck three defenses regarding the preclusive effect

of the earlier litigation in the state courts, but those defenses had no apparent

relationship with the discovery abuse. The discovery orders compelled the

production of documents regarding satellite agreements between GM and

Chevrolet dealers nationwide and vehicle allocation data for Chevrolet dealers in

the Birmingham area, but those documents were unrelated to the earlier litigation

in the state courts. As with the monetary sanctions, the district court failed to state

any reasons for striking these defenses. Because the legal defenses were not

“specifically related to the particular ‘claim’ which was at issue in the order to

provide discovery,” id. at 707, 102 S. Ct. at 2107, the sanctions violated the due

process rights of GM. 

IV. CONCLUSION

Because the district court abused its discretion, we reverse the finding of

contempt regarding the production of allocation data. We affirm the finding of

contempt regarding the failure to produce the satellite information. Because the

sanctions imposed by the district court violated the due process rights of GM, we
35

vacate the sanctions and reinstate the affirmative defenses of GM that were struck

by the district court. We remand this action to the district court for further

proceedings consistent with this opinion.

AFFIRMED in part, REVERSED in part, VACATED in part, and

REMANDED.