Opinion ID: 2833091
Heading Depth: 2
Heading Rank: 2

Heading: sanction against attorney pennington

Text: The primary issue with respect to Mr. Pennington is whether Rule 37(c)(1) grants authority to impose sanctions on counsel. Secondarily, we consider whether the recognized authority to sanction counsel under the district court’s inherent power may be invoked to justify the sanction against Mr. Pennington under the particular circumstances of this case. We conclude that neither source of sanctioning authority is applicable.
As noted above, the relevant case law from other circuits (Grider and Maynard) holds that the sanctions authorized under Rule 37(c)(1) relate solely to parties, not counsel. The district court rejected this case law as unpersuasive and, on the basis of its own textual analysis, concluded that the monetary sanction in Rule 37(c)(1)(A) may properly be imposed on counsel. While the cited cases could have been more thoroughly reasoned, we concur in their conclusion that the rule does not authorize sanctions against counsel, based on our independent analysis of the text, commentary, context, and history of the rule. 9 Prior to its amendment in 1993, Rule 37(c) dealt with a party’s failure to admit the genuineness of a document or the truth of a matter in response to a request for admission, requiring payment of reasonable costs and fees expended by the opposing party in making the necessary proof if the failure to admit was unreasonable and material. The rule specifically referred to the non-admitting party’s liability for such expenses, and was understood not to authorize a sanction against counsel. See, e.g., Apex Oil Co., 855 F.2d at 1014. In tandem with the 1993 amendment of Rule 26(a) imposing an affirmative duty on all parties to disclose various items of basic information (including insurance), Rule 37(c) was amended by the addition of Rule 37(c)(1), which precluded a party’s use of information that it had failed to disclose, thereby “provid[ing] a self-executing sanction for failure to make a disclosure required by Rule 26(a).”5 Fed. R. Civ. P. 37 advisory committee’s note to 1993 amendments. In addition, Rule 37(c)(1)(A)-(C) provided alternative sanctions in the event the threat of use-preclusion would not effectively deter nondisclosure, such as when “parties . . . might be tempted not to disclose evidence that would be helpful to their opponents [rather than to themselves].” 7 James Wm. Moore et al., Moore’s Federal Practice § 37.61 at 37-132.1 (3d ed. 2015). The prior provision dealing with the failure to make reasonable and material admissions was retained as subsection (c)(2). 5 In 2000, Rule 37(c)(1) was amended to include a party’s failure to supplement discovery responses as required by Rule 26(e). See Fed. R. Civ. P. 37 advisory committee’s note to 2000 amendment. 10 Rule 37(c)(1) now reads as follows: (c) Failure to Disclose, to Supplement an Earlier Response, or to Admit. (1) Failure to Disclose or Supplement. If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless. In addition to or instead of this sanction, the court, on motion and after giving an opportunity to be heard: (A) may order payment of the reasonable expenses, including attorney’s fees, caused by the failure; (B) may inform the jury of the party’s failure; and (C) may impose other appropriate sanctions, including any of the orders listed in Rule 37(b)(2)(A)(i)-(vi). Although the introductory paragraph to Rule 37(c) (1) continues to refer only to “the party” in designating the target of its primary sanction disallowing use of undisclosed information, the district court concluded that the alternative monetary sanction set out in Rule 37(c)(1)(A) is not so limited because it does not repeat that restrictive reference to the party as the intended target.6 The district court further noted that this expansive reading of Rule 37(c)(1)(A) was consistent with the trend, evident in other sections of the rule, toward the extension of sanctions to counsel. Several convergent considerations lead us to reject the district court’s reading of the rule as overbroad. Given the historic application of Rule 37(c) only to parties, an express textual reference signaling a new and significant expansion of its 6 The failure to specifically discuss this post-1993 textual feature was the primary reason the district court considered the Grider and Maynard cases unpersuasive. 11 operation to include counsel would be expected, yet no such reference appears. Nor is there anything in the advisory committee notes to suggest that such a change was intended. Further, not only the primary sanction of use-exclusion in the introductory paragraph of Rule 37(c)(1), but all of the other alternative sanctions set out under subsection (c)(1)—including the six additional sanctions incorporated from Rule 37(b)(2)(i)-(vi) by reference in Rule 37(c)(1)(C)—expressly or by their nature apply only to the noncompliant party, not to counsel.7 Again, to distinguish the monetary sanction in Rule 37(c)(1)(A) as the unique sanction applicable to party and counsel alike, an explicit indication of such exceptional treatment would be expected. Finally, as for the asserted trend toward expansion of Rule 37 sanctions to include counsel, which the district court relied on to read Rule 37(c)(1)(A) as one more instance of the trend, consideration of the relevant text actually cuts the other way. In every example of this trend cited by the district court, the provision in question was extended to counsel by adding a reference explicitly including counsel within its reach8—again, something Rule 37(c)(1)(A) does not do. In sum, we discern nothing in the rule’s text, commentary, context, or history indicating that it applies to counsel. 7 By sanctions that “by their nature apply only to the noncompliant party” we refer to sanctions that undercut the party’s prospects in the litigation by, for example, informing the jury of its noncompliance, prohibiting it from supporting or opposing particular claims or defenses, deeming adverse facts admitted, striking pleadings, staying or dismissing proceedings, or entering default judgment. 8 See Rule 37(a)(5)(A), (a)(5)(B), (b)(2)(C). 12 We note this is not some inexplicable gap in the rules unreasonably insulating counsel from personal responsibility in discovery. Counsel are subject to monetary sanctions for unjustified nondisclosures when they certify a discovery response as complete and correct at the time it is made, see Fed. R. Civ. P. 26(g)(1), (3), or (as relevant here with respect to Mr. Csajaghy) when they fail to comply with a court order for discovery, see Fed. R. Civ. P. 37(b)(2)(C). But defendants do not contend that either of these bases for sanctions applies to Mr. Pennington under the circumstances of this case. They do, however, argue that the sanction levied against him may be upheld on the basis of the district court’s inherent power, a point to which we turn next. B. Sanctioning Authority under District Court’s Inherent Power Defendants insist we may affirm the sanction against Mr. Pennington on the alternative basis that it was a proper exercise of the district court’s inherent power to sanction abuse of the judicial process, citing Resolution Trust Corp. v. Dabney, 73 F.3d 262, 267 (10th Cir. 1995). In Dabney this court relied on an inherent-power rationale to affirm a sanction against counsel that was not authorized under the statute (28 U.S.C. § 1927) invoked by the district court. But, as later explained in Hutchinson v. Pfeil, 208 F.3d 1180, 1186 n.9 (10th Cir. 2000), this course was available only because the standard governing sanctions under the two sources of authority was the same. That is not the case here. A court’s inherent power gives it the authority to impose “a sanction for abuse of the judicial process, or, in other words, for bad faith conduct in litigation.” 13 Farmer v. Banco Popular of N. Am., 791 F.3d 1246, 1256 (10th Cir. 2015) (internal quotation marks omitted). The Supreme Court has described the “narrowly defined circumstances [in which] federal courts have inherent power to assess attorney’s fees against counsel” as involving actions taken “in bad faith, vexatiously, wantonly, or for oppressive reasons.” Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991) (internal quotation marks omitted). In contrast, Rule 37(c)(1) requires only the absence of substantial justification—a less stringent standard characterized as “not justified to a high degree, but . . . justified to a degree that could satisfy a reasonable person.” Pierce v. Underwood, 487 U.S. 552, 565 (1988) (internal quotation marks omitted) (comparing Rule 37’s “substantially justified” language to similar provision in Equal Access to Justice Act). “Since Rule 37(c)(1) by its terms does not require a showing of bad faith,” courts have not read such a requirement into the rule.9 Design Strategy, Inc. v. Davis, 469 F.3d 284, 296 (2d Cir. 2006); see S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 596 (4th Cir. 2003); Youn v. Track, Inc., 324 F.3d 409, 421 (6th Cir. 2003); Devaney v. Cont’l Am. Ins. Co., 989 F.2d 1154, 1162 (11th Cir. 1993).10 Here, while the district court found that the failure to disclose the insurance policy was not substantially justified, it did not find 9 There is some authority for requiring bad faith or similar culpability when a sanction amounts to the dismissal of a cause of action, see, e.g., R & R Sails, Inc. v. Ins. Co. of Pa., 673 F.3d 1240, 1247 (9th Cir. 2012), but that is not an issue here. 10 This court has cited “bad faith or willfulness” as just one of several factors to be weighed in considering use-exclusion under Rule 37(c)(1), explaining that the absence of bad faith is not by itself enough to preclude the sanction. Jacobsen v. Deseret Book Co., 287 F.3d 936, 953-54 (10th Cir. 2002). 14 that counsel acted in bad faith, vexatiously, wantonly, or for oppressive reasons. We therefore cannot uphold the sanction against Mr. Pennington on the basis of the district court’s inherent power. Consequently, the sanction must be reversed.