Opinion ID: 77297
Heading Depth: 2
Heading Rank: 2

Heading: Whether the Sanctions Imposed by the District Court Violated Due Process?

Text: 64 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, 2 L.Ed.2d 1255 (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 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.2d 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. Corp. 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. 65 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.
66 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 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)). 67 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 1453-54. 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. 68 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. 69 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 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.
70 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. 71 In Insurance Corp. 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 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. 72 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.