Court Opinion

ID: 2970472
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:14:16.511316+00
Date Added: 2024-06-11T11:43:30.331111
License: Public Domain

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7KH6L[WK&LUFXLWKHOG                                                     imposition of sanctions in this instance transcends a
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                                                                         114 F.3d 1188, 1997 WL 280188, at
& $PRXQWRIWKHDWWRUQH\IHHV                                        *5-6 (6th Cir. May 27, 1997). Under Chambers, other
                                                                      Circuits have held that the mere fact that conduct is held not
  )LUVW%DQNQH[WFRQWHQGVWKDWWKHGLVWULFWFRXUWDEXVHGLWV         to be a violation of any rule or statute authorizing sanctions
GLVFUHWLRQLQWKHDPRXQWRIIHHVLWDZDUGHG+DUWIRUGXQGHULWV        does not preclude a district court from imposing sanctions
LQKHUHQWSRZHUV                                                    under its inherent power. See Amsted Industries, Inc. v.
                                                                      Buckeye Steel Castings Co., 23 F.3d 374, 377-79 (Fed. Cir.
  +HUHWKHGLVWULFWFRXUWKHOGDKHDULQJWRGHWHUPLQHZKHWKHU        1994) (recognizing a federal courts inherent power to
VDQFWLRQV ZHUH DSSURSULDWH DQG LI VR WKH DPRXQW RI WKH
VDQFWLRQV'XULQJWKHVDQFWLRQVKHDULQJ+DUWIRUGSUHVHQWHG          impose sanctions); Gillette Foods Inc. v. Bayernwald-
H[SHUWWHVWLPRQ\WKDWDGGUHVVHGWKHUHDVRQDEOHQHVVRIWKHIHHV        Fruchteverwertung, 977 F.2d 809, 813-14 (3d Cir. 1992)
FKDUJHGE\+DUWIRUG¶VFRXQVHO7KHH[SHUWZLWQHVVWHVWLILHG          UHMHFWLQJWKHUXOHWKDWVDQFWLRQVFDQQRWEHLPSRVHGE\WKH
WKDWWKHKRXUO\IHHFKDUJHGRIZDVORZDQGWKDWWKH          GLVWULFWFRXUWXQGHULWVLQKHUHQWSRZHUVLPSO\EHFDXVHDFODLP
ZRUN GRQH DQG IHHV FKDUJHG ZHUH ³ERWK UHDVRQDEOH DQG          LV KHOG QRW WR YLRODWH 5XOH  RU DQRWKHU UXOH RU VWDWXWH
QHFHVVDU\IRUWKLVW\SHRIFDVH´)XUWKHUWKHH[SHUWZLWQHVV        DXWKRUL]LQJ VDQFWLRQV The Seventh Circuit observed that
HVWLPDWHGWKDWRI+DUWIRUG¶VFRXQVHO¶VWLPHZDVVSHQW             "courts need not consider lesser sanctions, however, in
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                                                                      SRVLWLRQ 8QGHU WKH IDFWV WKHUH WKH &RXUW GLG QRW ILQG WKDW DQ DZDUG RI
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        +DUWIRUG8QGHUZULWHUV                                                                                          +DUWIRUG8QGHUZULWHUV

situations where the misconduct is ‘so egregious, inexcusable,                  PHULWOHVVFODLP$VWREDGIDLWKLQWKHQDWXUHRIILOLQJVXLW
and destructive that no lesser sanction than dismissal could be                 )LUVW %DQN¶V LPSURSHU SXUSRVH ZDV WR ILOH D ODZVXLW DV D
adequate.’" Graham v. Schomaker, 215 F.3d 1329, 2000 WL                         PHFKDQLVPWRIRUFH+DUWIRUGWRVHWWOH&ODLP,,UDWKHUWKDQ
717093, at *3 (7th Cir. 2000). At one time, the Third Circuit                   WU\LQJWRSUHYDLORQWKHPHULWVRIWKDWFODLP)XUWKHULPSOLFLW
noted that the district court is not require to "exhaust all other              LQWKHGLVWULFWFRXUW¶VILQGLQJVRIEDGIDLWKZDVWKHILQGLQJ
sanctioning mechanisms prior to resorting to its inherent                       WKDW)LUVW%DQNKDGWKHLPSURSHUSXUSRVHVRIGHOD\LQILOLQJ
power." Landon v. Hunt, 938 F.2d 450, 454 (3rd Cir. 1991).                      DQGSURVHFXWLQJ LWV FODLPDQGRIKDUDVVPHQWE\IDLOLQJWR
                                                                                GLVFORVH WKH 7RQWL DIILGDYLW XQWLO UHVSRQGLQJ WR +DUWIRUG¶V
  To be sure, the Third Circuit now citing Chambers has                         PRWLRQIRUVXPPDU\MXGJPHQWDQGE\HQJDJLQJLQPXOWLSOH
reversed a district court for failure to consider the applicable                GLVFRYHU\YLRODWLRQV&RQVHTXHQWO\ZHDJUHHZLWKWKHGLVWULFW
federal rules of civil procedure and statutes before resorting                  FRXUWWKDW)LUVW%DQNDFWHGLQEDGIDLWKDQGVXFKEDG IDLWK
to its inherent power can be reversible error.  Montrose                    FOHDUO\HYLQFHG)LUVW%DQN¶VLPSURSHUSXUSRVHLQSXUVXLWRI
Medical Group Participating Savings Plan v. Bulger, 243                         WKLVOLWLJDWLRQ
F.3d 773, 785 (3d Cir. 2001) (noting that we squarely held
that before utilizing its inherent power, a district court should                 %HFDXVH WKH GLVWULFW FRXUW GLG QRW EDVH LWV ILQGLQJ RQ DQ
consider whether any Rule - or statute - based sanctions are                    HUURQHRXVYLHZRIWKHODZRUDFOHDUO\HUURQHRXVDVVHVVPHQW
up to the task in holding that the district court erred when it                RI WKH HYLGHQFH DQG EHFDXVH WKHUH LV DPSOH HYLGHQFH WR
"did not consider whether any such sanctions . . . would have
sufficed to deal with any misconduct that occurred in this                          
case.") (emphasis added) (citing Klein,185 F.3d at 110)                                 7KH GLVVHQW FRQWHQGV WKDW RXU DQDO\VLV HVVHQWLDOO\ HOLPLQDWHV WKH
("When the Rules or pertinent statutes are ‘up to the task,’                    WKLUG UHTXLUHPHQW RI WKH EDGIDLWK H[FHSWLRQ +HUH WKH GLVWULFW FRXUW IRXQG
                                                                                WKDW )LUVW %DQN¶V ILOLQJ DQG SURVHFXWLRQ ZDV LQ WKH QDWXUH RI EDG IDLWK
they should be used. When they are not, a trial court may turn                  ,PSOLFLW LQ WKLV ILQGLQJ LV WKH ILQGLQJ WKDW )LUVW %DQN KDG WKH LPSURSHU
to its inherent power, but should exercise that power with                      SXUSRVHV RI DWWHPSWLQJ WR XVH WKH FRXUW V\VWHP WR WKUHDWHQ +DUWIRUG LQ DQ
caution.") (emphasis added and footnotes omitted).                              DWWHPSW WR IRUFH VHWWOHPHQW RU RWKHU DFWLRQ ZKHUH QRW RWKHUZLVH REWDLQDEOH
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LW NQHZ ZDV DQ LQYDOLG FODLP XQGHU WKH WHUPV RI WKH %RQG        In our view, Chambers should be read broadly to permit the
$JUHHPHQW´ (PSKDVLV DGGHG  %XW KDYLQJ DOUHDG\                  district court to resort to its inherent authority to sanction bad-
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WRDFWXDOO\SUHYDLORQWKHPHULWVRI&ODLP,,@WRILQGWKDW)LUVW        should ordinarily consider whether "the conduct could also be
%DQN¶VVXLWZDVLQEDGIDLWK´                                         sanctioned under the statute or the Rules," Chambers, 501
                                                                         U.S. at 50, there is nothing in Chambers that explicitly
   ,QDGGLWLRQWRHYLGHQFHRI)LUVW%DQN¶VEDGIDLWKLQILOLQJ           requires a court to determine whether "the conduct at issue is
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)LUVW %DQN IDLOHG WR FRPSO\ ZLWK VHYHUDO GLVFRYHU\ RUGHUV        We are reluctant to impose a wooden requirement where the
LVVXHGE\0DJLVWUDWH-XGJH$EHOLQFOXGLQJWKH$XJXVW               district court needs the discretion and flexibility to exercise its
3UHWULDO3UHOLPLQDU\2UGHUWKH2FWREHU            inherent authority to address various impermissible litigation
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       +DUWIRUG8QGHUZULWHUV                                                                                      +DUWIRUG8QGHUZULWHUV

                                                          
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VSHFLILFDOO\DVNHGIRUVXSSRUWLQJGRFXPHQWDWLRQWRVKRZWKDW             WKH GLVWULFW FRXUWs award of sanctions under its inherent power in Carroll
0U%LHKO¶VORDQVZHUHGLVKRQHVW´-$DW                   v. The Jaques Admiralty Law Firm, P.C., 110 F.3d 290 (5th Cir. 1997).
                                                                         In Carroll, the Fifth Circuit concluded that the district court did not err in
  7KXVUDWKHUWKDQSURYLGLQJLQIRUPDWLRQWR+DUWIRUGZKLFK              resorting to its inherent power to sanction an attorney for his behavior at
                                                                         a deposition, finding that "the usual rules were not up to the task. 110
FRXOGKDYHHQDEOHGLWWRDVVHVVWKHFRYHUDJHRI&ODLP,,XQGHU           F.3d at 293. The Ninth Circuit in Mark Indus., 50 F.3d at 732, also found
WKH SROLF\ )LUVW %DQN FKRVH WR KLGH WKH EDOO DQG ILOH WKLV   that the district court did not abuse its discretion by sanctioning an
DFWLRQZKHQLQIRUPHGWKDW+DUWIRUGEHOLHYHGWKDWWKHFODLP               attorney under its inherent power for entering into a stipulated order of
ZDV QRW FRYHUHG XQGHU WKH ERQG EHFDXVH RI WKH ODFN RI          dismissal without the consent of the client. In that case, the Ninth Circuit
HYLGHQFHRIPDQLIHVWLQWHQW                                             concluded that Rule 11 did not authorize sanctions in favor of a party
                                                                         against its own lawyer. Notwithstanding, Mark Indus. held that the trial
  )LUVW %DQN FRQWHQGV WKDW LWV IDLOXUH WR GLVFORVH %LHKO¶V       court has the inherent power, apart from the rules or statutes, to sanction
FRPPHQWLVQRWHYLGHQFHRIEDGIDLWK                                    attorneys for their willful abuse of judicial process or bad faith conduct.
                                                                         Id. The Third Circuit also found no abuse of discretion in Fellheimer,
    1RW WHOOLQJ WKH LQVXUDQFH FRPSDQ\ DERXW D                      Eichen & Braverman, P.C., v. Charter Technologies, Inc., 57 F.3d 1215,
                                                                         1227- 28 (3d Cir. 1995), upholding the imposition of sanctions as the
  FRQYHUVDWLRQZLWKDWKLHIWKDWPDGHQRGLIIHUHQFHWRWKH               proper exercise of the bankruptcy courts discretion under its inherent
  LQVXUDQFHFRPSDQ\LVQRWEDGIDLWK%DGIDLWKLVGHILQHG              power for the bad-faith conduct of the debtors attorneys.
  DVVLWXDWLRQVZKHUHWKHFODLPVZHUHEURXJKWIRULPSURSHU                    On the other hand, circuit courts have reversed district courts for
  SXUSRVHVVXFKDVKDUDVVPHQWRUGHOD\7KH'LVWULFW                abusing their discretion by imposing sanctions under their inherent power.
  &RXUWPDGHQRILQGLQJWKDWWKHFODLPZDVEURXJKWIRUDQ                In Gillette Foods, the Third Circuit considered whether the district court
  LPSURSHUSXUSRVHVXFKDVKDUDVVPHQWRUGHOD\                        had the inherent authority to impose sanctions under its inherent power
                                                                         against counsel for Gillette Foods Incorporated for including a tortious
    7KHILOLQJRIDODZVXLWDIWHUWKHUHKDVEHHQDGHQLDORI             interference claim in the second amended complaint. The district court
                                                                         imposed sanctions after recognizing that counsels conduct was beyond
  FRYHUDJH LV QRW EDG IDLWK EHFDXVH LW ZDV QRW ILOHG IRU       the reach of Rule 11 because he did not personally sign the complaint. In
  SXUSRVHVRIKDUDVVPHQWRUGHOD\7KHVXLWZDVILOHGWR                that case, the Third Circuit held that "Gillette Foodss reasonable claim
  VHHNUHFRYHU\XQGHUDQLQVXUDQFHERQGWKDWZDVEHOLHYHG                for tortious interference could not have been brought in bad faith, finding
                                                                         "it hard to conceive that the tortious interference claim survives Rule 11
     )LUVW%DQNRI0DULHWWDY                     1R           1R                     )LUVW%DQNRI0DULHWWDY          
       +DUWIRUG8QGHUZULWHUV                                                                                           +DUWIRUG8QGHUZULWHUV

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SDUW\VHHNLQJGHOD\,GDWChambers, 501 U.S. at 56.                    SURYLGHLQIRUPDWLRQDERXW%LHKO¶VFRPPHQWWR+DUWIRUGLQWKH
Moreover, as the Seventh Circuit observed, district courts                      3URRIRI/RVVIRUPRULQDQ\RWKHUVXSSRUWLQJGRFXPHQWDWLRQ
need the discretion "to craft sanctions because the power to                    ,QIDFWGHVSLWHWKHERQGDJUHHPHQW¶VUHTXLUHPHQWRID³SURRI
sanction is essential for them to manage heavy case loads and                   RIORVVGXO\VZRUQWRZLWKIXOOSDUWLFXODUV´DQG+DUWIRUG¶V
to protect the interests of litigants." Graham, 2000 WL                         FRQWLQXDOUHTXHVWVIRULQIRUPDWLRQ)LUVW%DQNGLGQRWUHYHDO
717093, at *3 (citing Oliver v. Gramley, 200 F.3d 465, 466                      %LHKO¶VDOOHJHGFRPPHQWVXJJHVWLQJDPDQLIHVWLQWHQWWRKDUP
(7th Cir. 1999)).                                                               WKH EDQN XQWLO -XO\   ZKHQ )LUVW %DQN ILOHG WKH
                                                                                $IILGDYLWRI3DWULFN7RQWLLQRSSRVLWLRQWR+DUWIRUG¶VPRWLRQ
  As a practical matter, the district court should usually                      IRUVXPPDU\MXGJPHQW7KHGLVWULFWFRXUWIRXQG
inform the parties, as did the district judge here, that the
district court is considering using its inherent authority to                     )LUVW %DQN KDG LQ LWV SRVVHVVLRQ WKH UHTXLVLWH SURRI WR
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scrutiny, yet can be sanctioned as a claim brought in bad faith. Id. at 814-
15. The Third Circuit also found in Saldana v. Kmart Corp., 260 F.3d                
228, 238 (3d Cir. 2001) that an attorneys use of profanity and her post-               7KH GLVVHQW DUJXHV WKDW WKH GLVWULFW FRXUW GLG QRW PDNH DQ\ ILQGLQJV
verdict letter describing an expert witness as a "Nazi" did not justify the     WKDW )LUVW %DQN DFWHG ZLWK DQ LPSURSHU SXUSRVH $IWHU LWV VHYHQ SDJHV RI
                                                                                IDFWXDO ILQGLQJV WKH GLVWULFW FRXUW H[SUHVVO\ IRXQG WKDW ³WKHUH LV DQ
imposition of sanctions under the district courts inherent authority. In
                                                                                DEXQGDQFH RI HYLGHQFH ZKLFK GHPRQVWUDWHV WKDW )LUVW %DQN DFWHG LQ EDG
Saldana, the Third Circuit found that the district court improperly             IDLWK QRW RQO\ LQ ILOLQJ WKH FODLP EXW LQ SURVHFXWLQJ LW ,Q RXU UHYLHZ RI
imposed sanctions because the conduct was not "egregious" and because           D GLVWULFW FRXUW¶V IDFWXDO ILQGLQJV ³WKH DSSHOODWH FRXUW PXVW YLHZ WKH
another basis for sanctions existed in the form of a local rule. 260 F.3d at    HYLGHQFH LQ WKH OLJKW PRVW IDYRUDEOH WR LWV SURSRQHQW JLYLQJ WKH HYLGHQFH
238. The Seventh Circuit in Corley v. Rosewood Care Center, Inc. of             LWV PD[LPXP UHDVRQDEOH SUREDWLYH IRUFH DQG LWV PLQLPXP UHDVRQDEOH
Peoria, 142 F.3d 1041, 1958-59 (7th Cir. 1998) similarly vacated the            SUHMXGLFLDO YDOXH 3DVFKDO Y )ODJVWDU %DQN )6%  :/ 
district courtV DZDUG RI VDQFWLRQV XQGHU LWV LQKHUHQW SRZHUV ZKLFK ZDV        WK &LU  TXRWLQJ 8QLWHG 6WDWHV Y 6FKURFN  )G   WK
LPSRVHG DJDLQVW DQ DWWRUQH\ IRU ILOLQJ D IULYRORXV PRWLRQ ,Q &RUOH\ WKH       &LU 7KLV UXOH RI DSSHOODWH UHYLHZ SHUPLWV XV WR PDNH UHDVRQDEOH
6HYHQWK &LUFXLW IRXQG WKDW WR WKH H[WHQW WKH GLVWULFW FRXUW LQWHQGHG WR        LQIHUHQFHV IURP WKH IDFWV IRXQG E\ WKH GLVWULFW FRXUW =DFN  )G DW
LPSRVH WKH VDQFWLRQ XQGHU 5XOH  LW FOHDUO\ DEXVHG LWV GLVFUHWLRQ IRU         $V D PDWWHU RI ODZ WR ILOH D PHULWOHVV ODZVXLW ,3/ WR ZLWKKROG
QHLWKHU GHIHQGDQWV QRU WKH FRXUW FRPSOLHG ZLWK WKH UXOHs procedural            PDWHULDO HYLGHQFH LQ VXSSRUW RI D FODLP LV DQ LPSURSHU XVH RI WKH FRXUWV
requirements. Id. at 1058. The Seventh Circuit in Corley also found that       6HH 0DQVPDQQ Y 7XPDQ  )6XSS   ('3D  ,I
the court could not rely upon its inherent power because the attorney was       3ODLQWLII KDG DOOHJHG WKH 7XPDQV KDG LQWHQWLRQDOO\    ZLWKKHOG
not given an opportunity to respond to the defendants motion for               LQIRUPDWLRQ IURP WKHP WR ILOH D ODZVXLW WKH 7XPDQV NQHZ ZDV QRW
sanctions. Id. at 1059.                                                         ZDUUDQWHG 3ODLQWLII ZRXOG KDYH VWDWHG D FODLP DJDLQVW WKHP IRU ZURQJIXO
                                                                                XVH RI FLYLO SURFHHGLQJV
    )LUVW%DQNRI0DULHWWDY               1R        1R                )LUVW%DQNRI0DULHWWDY      
      +DUWIRUG8QGHUZULWHUV                                                                             +DUWIRUG8QGHUZULWHUV

  7KH HYLGHQFH LQ WKH UHFRUG FOHDUO\ VXSSRUWV WKH GLVWULFW    sanction particular conduct. The parties can present to the
FRXUW¶VILQGLQJWKDW)LUVW%DQN¶VFRXQVHONQHZRUVKRXOGKDYH         district court those rules or statutes that may be more
NQRZQWKDW&ODLP,,RILWVFRPSODLQWZDVZLWKRXWPHULWDQG           appropriate. The district court can then exercise its "informed
ZHDIILUPWKHGLVWULFWFRXUW¶VFRQFOXVLRQRQWKLVLVVXH              discretion" in selecting the appropriate authority. "The
                                                                      different grounds for ordering sanctions and shifting
,PSURSHU3XUSRVH5HTXLUHPHQW                                     attorney’s fees are distinct and require a close and careful
                                                                      analysis." In re Ruben, 825 F.2d 977, 983 (6th Cir. 1987). Of
   $VWRWKHWKLUGHOHPHQWUHTXLUHGWRDZDUGVDQFWLRQVXQGHU          course, there may be some instances in which the litigation
LWVLQKHUHQWSRZHUVWKHGLVWULFWFRXUWFRQFOXGHGEDVHGRQDQ        conduct is so egregious and the court’s inherent authority so
H[WHQVLYH UHYLHZ RI WKH HYLGHQFH LQ WKH UHFRUG WKDW )LUVW   clearly applicable that a district court can exercise its inherent
%DQN¶VVXLWDJDLQVW+DUWIRUGZDV³ODFHGZLWKEDGIDLWK-$         authority without the necessity of a full exposition on the
DW7KHGLVWULFWFRXUWH[SOLFLWO\IRXQGWKDW³)LUVW%DQN¶V        potentially applicable federal rules and statutes.
VXLWDJDLQVW+DUWIRUGLVLQWKHQDWXUHRIEDGIDLWKRIµEULQJLQJ
DQDFWLRQRUFDXVLQJDQDFWLRQWREHEURXJKW¶-$DW7KH         To be sure, the Court in Chambers cautioned that "inherent
GLVWULFW FRXUW SURYLGHG D GHWDLOHG FKURQRORJ\ RI WKH IDFWV    powers must be exercised with restraint and discretion. Id.
XQGHULWVKHDGLQJ)LUVW%DQN$FWHGLQ%DG)DLWK-$DW        at 44. Under Chambers, the appellate court reviews a district
$OWKRXJKWKHGLVWULFWFRXUWGLGQRWH[SOLFLWO\ODEHOLWVILQGLQJV     court’s resort to its inherent authority for an abuse of
LQWKHEDGIDLWKVHFWLRQRILWVRUGHUDVDILQGLQJRI³LPSURSHU       discretion and a district court’s failure to use a clearly
SXUSRVH´WKHUHFRUGDQG6L[WK&LUFXLWSUHFHGHQWUHIOHFWWKDW         applicable and effective sanction rule could constitute an
WKLVLVZKDWWKHGLVWULFWFRXUWLQWHQGHG6HHVXSUDQRWH         abuse of discretion. Chambers, 501 U.S. at 50. As noted by
)RU WKH UHDVRQV WKDW IROORZ ZH FRQFOXGH WKDW WKH GLVWULFW   the Third Circuit in Martin v. Brown, 63 F.3d 1252, 1265 (3d
FRXUW¶VILQGLQJWKDW)LUVW%DQNDFWHGLQEDGIDLWKLVVXIILFLHQW      Cir. 1995), "[g]enerally, a courts inherent power should be
                                                                      reserved for those cases in which the conduct of a party or an
                                                                      attorney is egregious and no other basis for sanctions exists.
                                                                      (citing Gillette Foods v. Bayernwald-Fruchteverwertung, 977
                                                                      F.2d 809, 813 (3rd Cir. 1992).
                                                                        The exercise of inherent authority is particularly
                                                                      appropriate for impermissible conduct that adversely impacts
                                                                      the entire litigation. In response to the contention in
                                                                      Chambers that the conduct at issue could have been addressed
                                                                      by Rule 11 and "other Rules", the Supreme Court responded:
                                                                        Much of the bad-faith conduct by Chambers, however,
                                                                        was beyond the reach of the Rules; his entire course of
                                                                        conduct throughout the lawsuit evidenced bad faith and
                                                                        an attempt to perpetrate a fraud on the court, and the
                                                                        conduct sanctionable under the Rules was intertwined
                                                                        within conduct that only the inherent power could
     )LUVW%DQNRI0DULHWWDY                    1R          1R                   )LUVW%DQNRI0DULHWWDY        
       +DUWIRUG8QGHUZULWHUV                                                                                       +DUWIRUG8QGHUZULWHUV

  address. In circumstances such as these in which all of                     WKDW WKH ILOLQJ RI D VXLW ZLWK ZKDW WKH LQVXUDQFH FDUULHU
  a litigant’s conduct is deemed sanctionable, requiring a                    EHOLHYHVWREHDGHILFLHQWSURRIRIORVVEDUVDVXLW´)LQDOO\
  court first to apply Rules and statutes containing                          )LUVW%DQNUHLWHUDWHVWKDWWKHGLVWULFWFRXUWHUUHGEDVHGRQD
  sanctioning provisions to discrete occurrences before                       ZDLYHUDUJXPHQW
  invoking inherent power to address remaining instances
  of sanctionable conduct would serve only to foster                             ,QRXUYLHZ)LUVW%DQN¶VDUJXPHQWVWKDWLWRULWVFRXQVHO
  extensive and needless satellite litigation, which is                       VKRXOGQRWKDYHEHHQH[SHFWHGWRNQRZWKDW)LUVW%DQNIDLOHG
  contrary to the aim of the Rules themselves.                                WRVDWLVI\WKHFRQGLWLRQSUHFHGHQWDUHXQSHUVXDVLYH*LYHQ
                                                                              2KLR¶V ORQJVWDQGLQJ UXOH UHTXLULQJ FRPSOLDQFH ZLWK DOO
Id. at 50-51, citing Advisory Committee’s Notes on 1983                       FRQGLWLRQVSUHFHGHQWLQDQLQVXUDQFHFRQWUDFWD5XOHOHWWHU
Amendment to Rule 11, 28 U.S.C. App., pp. 575-576.                            ZDVXQQHFHVVDU\WRFRQYH\WKHODFNRIPHULWIRU)LUVW%DQN¶V
                                                                              VHFRQGFODLPRQWKH0DVFUHWHORDQ(YHQLI+DUWIRUGGLGQRW
   Further, as noted in Chambers, there are significant                       ILOHD5XOHVDIHKDUERUOHWWHUDQGWKHGLVWULFWFRXUWGLGQRW
differences between Rule 11 sanctionsDQGLQKHUHQWSRZHU                    VSHFLI\WKDWWKHSURRIRIORVVZDVGHILFLHQW)LUVW%DQNVKRXOG
VDQFWLRQV5XOHDSSOLHVSULPDULO\WRSOHDGLQJDQGSDSHUV                 KDYH NQRZQ WKDW E\ QRW SURYLGLQJ D SURRI RI ORVV ZLWK
%\UQH Y 1H[KDW  )G   WK &LU                SDUWLFXODUV DERXW WKH 0DVFUHWH ORDQ )LUVW %DQN IDLOHG WR
$QRWKHUSULQFLSDOGLIIHUHQFHLVWKDWWKHLPSRVLWLRQRI5XOH                FRPSO\ZLWKWKHFRQGLWLRQSUHFHGHQWDVUHTXLUHGE\2KLRODZ
VDQFWLRQV UHTXLUHV D VKRZLQJ RI "objectively unreasonable                +HUH)LUVW%DQNQHYHUVSHFLILHGDQDPRXQWRIFODLPHGORVV
conduct," United States v. Koury Perez, 187 F.3d 1, 8 (1st                    IURPWKH0DVFUHWHORDQRQWKHSURRIRIORVVIRUPDQGQHYHU
Cir. 1999). In contrast, the imposition of inherent power                     VXSSOHPHQWHG WKH IRUP ZLWK IXUWKHU GRFXPHQWDWLRQ DV
sanctions requires a finding of bad faith. "A court may                       SURPLVHGRUDVUHSHDWHGO\UHTXHVWHGE\+DUWIRUG
impose sanctions pursuant to its inherent powers only when
it finds the action in question was taken in bad faith,"                        )LUVW%DQNZDVZHOODZDUHRIWKHFRQGLWLRQSUHFHGHQWDVLW
Lockary v. Kayfetz, 974 F.2d 1166, 1174 (9th Cir. 1992)                       DSSHDUVLQ6HFWLRQRIWKHILGHOLW\ERQGDJUHHPHQWDQGLV
(citing Chambers, 501 U.S. at 50), or conduct that is                         UHLWHUDWHG LQ +DUWIRUG¶V -XO\   OHWWHU WR )LUVW %DQN
"tantamount to bad faith." Roadway Express, Inc. v. Piper,                    +DUWIRUG LQGLFDWHG LQ D VHFRQG OHWWHU GDWHG 6HSWHPEHU 
447 U.S. 752, 767 (1980). Moreover, a Rule 11 monetary                        WKDW)LUVW%DQNKDVQRWGHPRQVWUDWHGWKDW%LHKODFWHG
sanction is limited to "only those expenses directly caused by                ZLWKD³PDQLIHVWLQWHQW´WRFDXVHDORVVWR)LUVW%DQN)LUVW
the [offending] filer." Cooter & Gell v. Hartmarx Corp., 496                  %DQNGLGQRWUHVSRQGWRWKH6HSWHPEHUWKOHWWHUDQGQHYHU
U.S. 384, 406-07 (1990). Where, as here, the offending                        VXSSOHPHQWHG LWV SURRI RI ORVV RU SURYLGHG DGGLWLRQDO
party’s conduct extends through the proceedings, Rule 11                      GRFXPHQWDWLRQ UHJDUGLQJ &ODLP ,,  ,QVWHDG DV WKH GLVWULFW
                                                                              FRXUW IRXQG )LUVW %DQN ³ZDLWHG DSSUR[LPDWHO\ IRXUWHHQ
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                                                                            WRVXSSRUWWKHFODLP-$DW&RQVHTXHQWO\WKHGLVWULFW
       7KHUH DUH DOVR GLIIHUHQFHV EHWZHHQ 5XOH  VDQFWLRQV DQG LQKHUHQW      FRXUWFRQFOXGHGWKDW³>D@WWKHWLPHLWILOHGVXLW)LUVW%DQN
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      +DUWIRUG8QGHUZULWHUV                                                                                   +DUWIRUG8QGHUZULWHUV

   +HUH WKH GLVWULFW FRXUW GLG QRW DEXVH LWV GLVFUHWLRQ LQ      remedies would not address the injury that the district court
ILQGLQJWKDWWKHUHZDVQRFRORUDEOHEDVLVIRU&ODLP,,7RWKH           sought to remedy that included withholding evidence, the
FRQWUDU\ WKH HYLGHQFH LQ WKH UHFRUG VWURQJO\ VXSSRUWV WKH        consequences of the withholding, violating discovery orders
GLVWULFW FRXUW¶V ILQGLQJ   $GGLWLRQDOO\ ZLWK WKH SRVVLEOH       and extending the proceedings.
H[FHSWLRQ RI WKH 3DWULFN 7RQWL $IILGDYLW ILOHG ZLWK WKH
GLVWULFWFRXUWRQ-XO\)LUVW%DQNGLGQRWSURYLGHDQ\             Chambers leaves to the district courts "informed
SURRIWRHVWDEOLVKWKDW%LHKOPDGHWKHORDQZLWKD³PDQLIHVW              discretion" whether the applicable statutes or rules are "up to
LQWHQW´WRFDXVHWKHLQVXUHGKDUPDUHTXLUHPHQWIRUUHFRYHU\             the task"given the circumstances of the particular conduct.
XQGHUWKHERQG                                                        See Klein v. Stahl GMBH & Co. Maschinefabrik, 185 F.3d
                                                                          98, 109-11 (3rd Cir. 1999) (interpreting Chambers to mean
   )RU WKHVH UHDVRQV WKLV &RXUW DIILUPV WKH GLVWULFW FRXUW¶V     "that the Rules are not up to the task when they would not
ILQGLQJWKDWWKHUHZDVQRFRORUDEOHEDVLVIRU&ODLP,,RI)LUVW           provide a district court with the authority to sanction all of the
%DQN¶VFRPSODLQW                                                         conduct deserving of sanction"); Mark Indus., Ltd. v. Sea
                                                                          Captain's Choice, Inc., 50 F.3d 730, 732 (9th Cir.1995)
   &RXQVHO.QHZRU6KRXOG+DYH.QRZQWKH&ODLPZDV                      (noting that the inherent power to sanction generally should
     0HULWOHVV5HTXLUHPHQW                                                be invoked only if statutes or rules are not "up to the task");
  )LUVW%DQNQH[WDUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQILQGLQJ         Gillette Foods, 977 F.2d at 814 n.10 (construing the above-
WKDW)LUVW%DQNVKRXOGKDYHNQRZQWKDWWKHUHZDVDIDLOXUHRI             quoted paragraph from Chambers to refer to "the ability of a
FRQGLWLRQ SUHFHGHQW RQ WKH SURRI RI ORVV LVVXH IRU VHYHUDO       court to impose sanctions under its inherent power when
UHDVRQV)LUVW3ODLQWLIIFRQWHQGVLWZDVQRWPDGHDZDUHRILWV          some of the attorneys conduct could be sanctionable under
IDLOXUHRIFRQGLWLRQSUHFHGHQWEHFDXVH+DUWIRUGQHYHUVHQWLW             Rule 11 and other rules"). In the absence of a plainly
D³5XOHVDIHKDUERUOHWWHUVWDWLQJWKDWWKHFODLPVKRXOGEH            applicable rule, we likewise trust in the district court’s
GLVPLVVHGEHFDXVHWKHUHZDVQROHJDORUIDFWXDOJURXQGVWR                "informed discretion" when the circumstances require the
VXSSRUWWKHFODLP´6HFRQGEHFDXVHWKHSULRUGHFLVLRQVRI             exercise of its inherent authority.
WKHFRXUWZHUHEDVHGXSRQWKHODFNRIHYLGHQFHRIPDQLIHVW
LQWHQW³DUHDVRQDEOHDWWRUQH\ZRXOGQRWKDYHNQRZQWKDWWKH                 In the section of its Opinion entitled "First Bank Acted in
SURRI RI ORVV ZDV LQVXIILFLHQW EHFDXVH QHLWKHU WKH 'LVWULFW       Bad Faith", JA at 63, WKH GLVWULFW FRXUW PDGH WKH GHWDLOHG
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DSSURSULDWH IRU WKH UHDVRQ WKDW WKH SURRI RI ORVV ZDV            WKHFRQGLWLRQSUHFHGHQWLQWKHERQGDJUHHPHQWEXWFKRVHWR
GHILFLHQW´7KLUG³$SSHOOHHKDVQHYHUFLWHGDFDVHWKDWKROGV           LJQRUH LW  )LUVW %DQN KDG QR OHJDO RU IDFWXDO EDVLV IRU
                                                                          EULQJLQJ VXLW DJDLQVW +DUWIRUG  ³)LUVW %DQN KDG
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       +DUWIRUG8QGHUZULWHUV                                                                                       +DUWIRUG8QGHUZULWHUV

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       +DUWIRUG8QGHUZULWHUV                                                                                          +DUWIRUG8QGHUZULWHUV

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