Court Opinion

ID: 2641176
Source: CourtListenerOpinion
Date Created: 2013-11-06 01:00:54.658739+00
Date Added: 2024-06-11T09:00:46.037703
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 12-2241

PROJECTS MANAGEMENT COMPANY,

                Plaintiff – Appellant,

           v.

DYNCORP INTERNATIONAL LLC,

                Defendant – Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.   T. S. Ellis, III, Senior
District Judge. (1:11-cv-01345-TSE-IDD)

Argued:   September 19, 2013                Decided:   November 5, 2013

Before AGEE, DAVIS, and DIAZ, Circuit Judges.

Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge Davis and Judge Diaz joined.

ARGUED: Thomas Bausman Kenworthy, MORGAN LEWIS & BOCKIUS, LLP,
Philadelphia, Pennsylvania, for Appellant.      Joseph William
Koegel, Jr., STEPTOE & JOHNSON, LLP, Washington, D.C., for
Appellee. ON BRIEF: John F. O’Connor, STEPTOE & JOHNSON LLP,
Washington, D.C., for Appellee.
AGEE, Circuit Judge:

        Projects     Management         Company     (“PMC”)      appeals       from   the

district       court’s      dismissal       of     its    suit       against     DynCorp

International        LLC    (“DynCorp”).         The   district      court     dismissed

PMC’s suit on two alternate grounds: first, as a sanction for

PMC’s     repeated      discovery       abuses;     and    second,     based     on   its

conclusion that PMC was seeking damages contrary to the measure

of damages provided by well-established law. For the reasons set

forth below, we affirm the judgment of the district court.

                                           I.

     DynCorp       contracted      with    the    United      States    Department     of

State to assist in the development of a civilian police force in

Iraq. In connection with this contract, DynCorp entered into a

subcontract      with      PMC   (the    “Subcontract”)        for     operations     and

maintenance support in Iraq between August 1, 2008 and February

17, 2009, with an option to extend performance to February 28,

2010.    PMC   executed      the   Subcontract         with   DynCorp     through     its

Managing Director, Hussein Fawaz, who was also represented to

DynCorp as having an ownership interest in PMC. The Subcontract

                                            2
identified         PMC   Project    Manager       Greg   Byers    as   PMC’s     point   of

contact with DynCorp. 1

       The     Subcontract         provided       that   PMC     would     periodically

invoice DynCorp and that DynCorp would, within 45 days of the

date of each invoice, tender periodic payments to PMC by making

a wire transfer directly to an account held by PMC at Kuwait

Gulf Bank (the “Kuwait Account”). The Subcontract also provided

that       “[n]o    oral    statement    of       any    person    shall       modify    or

otherwise affect the terms, conditions, or specifications stated

in this Subcontract.” (J.A. 39.) PMC began its performance under

the Subcontract and listed payment instructions on the face of

each invoice sent to DynCorp. The invoices were paid by DynCorp

according to those payment instructions, which were consistent

with the payment information in the Subcontract. In December

2008, PMC’s invoices began directing DynCorp to make payments to

a new bank account at the National Bank of Kuwait (Lebanon)

located in Beirut, Lebanon and held in the name of Fawaz (the

“Lebanon      Account”).      DynCorp     personnel        contacted       PMC    through

Fawaz and Byers to confirm that future payments should be made

to the Lebanon Account rather than the Kuwait Account. Fawaz

       1
       The Subcontract listed no other PMC employees, and DynCorp
was made aware of no other principals or managers of PMC.

                                              3
responded to DynCorp with a letter written on PMC letterhead

directing DynCorp to make its payments to the Lebanon Account.

Byers also responded to DynCorp by email, confirming the change

in payment instructions and stating that all PMC invoices would

list the correct banking information on their face. Another PMC

employee, acting at the direction of Fawaz and Byers, followed

up with DynCorp to confirm that future payments should be made

to the Lebanon Account. DynCorp then began making payments to

the Lebanon Account, as directed in the PMC invoices. PMC did

not inform DynCorp of any problems with its payments.

     Near the end of the initial Subcontract term, DynCorp and

PMC, through Greg Byers, agreed to exercise the option to extend

the term of the Subcontract, including a provision that “[a]ll

other terms and conditions remain the same.” (J.A. 75.) After

several months of continuing performance under the Subcontract,

DynCorp   issued   a    Cure   Notice          to   PMC,   notifying   PMC    of

performance issues under the Subcontract and providing PMC with

an opportunity to remedy its performance. Shortly thereafter,

DynCorp terminated the Subcontract and requested a termination

settlement   proposal   from   PMC.       In    response,   PMC   requested    a

payment of $978,494.22, claiming $789,099.50 in unpaid invoices

and $189,394.72 in other costs and expenses. The parties did not

reach a settlement agreement.

                                      4
        After   the    termination         of       the   Subcontract,    DynCorp     was

apprised that Fawaz was not, in fact, a part owner of PMC. It

was further revealed that PMC’s true owners were members of the

Al-Muhanna family of Kuwait, most notably Rabea Al-Muhanna, who

PMC contends had sole authority over the financial affairs of

PMC.

       On January 25, 2012, PMC sued DynCorp in the United States

District Court for the Eastern District of Virginia under the

court’s    diversity        jurisdiction,           alleging     breach   of   contract,

aiding and abetting a breach of fiduciary duty, and business

conspiracy. Specifically, PMC alleged that DynCorp breached its

contract    with      PMC   by    making    payments        to   the   Lebanon   Account

instead of the Kuwait Account. After a pre-trial conference, the

parties     submitted       a     discovery         plan,   representing       that   all

discovery would be completed by April 13, 2012. The district

court set a trial date of August 15, 2012. During discovery,

DynCorp learned that at least some of the funds it had paid into

the Lebanon Account had been used to pay obligations of PMC. In

particular, DynCorp learned that PMC’s primary subcontractor in

Iraq,    Cater-Corp,        had   received          significant    payments    from   the

Lebanon Account.

       After the close of discovery, DynCorp moved for partial

summary judgment on the issue of whether the Subcontract had

                                                5
been modified “to permit instructions on each individual invoice

submitted by PMC to DynCorp to determine the account into which

DynCorp’s payments were to be made.” (J.A. 77.) The district

court granted partial summary judgment to DynCorp, concluding

that the parties’ method of changing banking instructions on the

face of PMC’s invoices complied with the requirements in the

Subcontract for modification. The district court denied summary

judgment in part by expressly declining to conclude that either

Fawaz or Byers had actual or apparent authority to modify the

payment instructions in the Subcontract because genuine issues

of material fact remained to be decided at trial as to that

issue.

       On May 31, 2012, following the district court’s summary

judgment order and the close of discovery, PMC disclosed its

damages calculation. PMC claimed $7,664,638.22 in total damages,

$6,920,501.56 of which represented the entire amount previously

paid     by   DynCorp    into   the   Lebanon   Account.     The    remaining

$744,136.66 was for unpaid invoices that remained outstanding.

DynCorp and PMC later settled PMC’s claim with respect to the

$744,136.66 of unpaid invoices. Thus, only the $6.92 million

that DynCorp paid into the Lebanon Account is at issue here.

       DynCorp   filed   a   motion   in   limine   to   preclude   PMC   from

presenting its damages calculation at trial. DynCorp argued that

                                      6
PMC improperly withheld its damages calculation until after the

close   of    discovery,       leaving    DynCorp    with      no    ability     to   take

discovery relating to damages or to address the damages issues

on   summary    judgment.       In    addition,     DynCorp     argued     that       PMC’s

damages calculation was contrary to well-established law because

it   failed    to   account     for    millions     of    dollars     paid     from    the

Lebanon      Account      to    PMC      employees       and    subcontractors           in

satisfaction of PMC obligations. Further, DynCorp argued that

PMC had intentionally withheld documents showing that funds were

paid from the Lebanon Account to satisfy PMC obligations with

the contemporaneous knowledge of PMC’s owners.

      DynCorp also moved the district court to impose sanctions

against PMC under the court’s inherent authority to sanction a

party for abusing the judicial process, as recognized in United

States v. Shaffer Equipment Co., 11 F.3d 450, 461–63 (4th Cir.

1993). DynCorp argued that sanctions were warranted because PMC

had concealed documents during discovery that evidenced PMC’s

knowledge     of    and   acquiescence      to    Fawaz’s      use    of   the   Lebanon

Account to administer the Subcontract and pay PMC subcontractors

and employees. In support of its motion, DynCorp represented

that it received documents from a third party indicating that

PMC participated in Fawaz’s use of the Lebanon Account. Only

after   DynCorp      received     these    third-party         documents,      and     long

                                           7
after      the     close   of     discovery,       did   PMC   produce    an    additional

2,000 pages of documents demonstrating that PMC acquiesced to

Fawaz’s       use    of    the     Lebanon     Account.        This   late     production,

DynCorp argued, prevented it from taking meaningful depositions

of   PMC’s       Rule     30(b)(6)    representatives,          Rabea    Al-Muhanna     and

Philip      Zacharia,       and    deprived     DynCorp        of   access   to   evidence

critical to its summary judgment motion. DynCorp also posited

that       PMC’s    late-produced      documents         revealed     that     PMC’s   Rule

30(b)(6) representatives 2 provided false or misleading testimony

and that PMC provided false interrogatory answers.

       The district court conducted hearings on DynCorp’s motions

and granted the motion for sanctions, finding that “PMC failed

to produce relevant and requested documents in a timely manner.”

(J.A. 83.) Finding that the factors listed in Shaffer Equipment

were applicable, the district court held that PMC’s “failure of

discovery warrant[ed] the imposition of sanctions.” (J.A. 83.)

Although DynCorp had requested that the district court dismiss

PMC’s claim as sanctions for PMC’s discovery abuse, the district

       2
        Under Rule 30(b)(6) of the Federal Rules of Civil
Procedure, when an organization is required to provide testimony
in a civil trial, that organization must “designate one or more
officers, directors, or managing agents, or designate other
persons who consent to testify on its behalf; and it may set out
the matters on which each person designated will testify.”

                                               8
court declined to do so. Instead, the district court ordered PMC

to produce both of its Rule 30(b)(6) designees for additional

depositions      before    August       11,    2012,     at    a   place   of    DynCorp’s

choosing, costs to be borne by PMC. The district court further

ordered    that    the        factual     substance           of   each    late-produced

document be deemed admitted pursuant to Rule 37(c)(1)(C) of the

Federal Rules of Civil Procedure. The district court deferred

any further decision on DynCorp’s motion for sanctions, holding

in abeyance “any decision to award a monetary sanction against

PMC for its discovery defalcation,” (J.A. 85), and deferred its

decision on DynCorp’s motion in limine, “pending the parties

[sic] submission of further briefs related to the proper measure

of    damages    and    the    timeliness         of    PMC’s      disclosure     of   this

measure.” (J.A. 85.)

       PMC filed for a protective order to relieve it from having

to produce Zacharia for deposition and from having to produce

Al-Muhanna      until    August    13,    2012,        two    days   before      the trial

date. DynCorp renewed its motion in limine on the damages issue

and    again    sought    dismissal       of      the    case      under   the    district

court’s   inherent       authority       to    impose        sanctions.    The    district

court found that the partial remedies it had previously imposed

had failed to “ameliorat[e] the significant prejudice to DynCorp

stemming from the discovery defalcations.” (J.A. 88.) Still, the

                                              9
district      court   expressly       declined      to   dismiss     the    case     and

instead ordered PMC to produce its Rule 30(b)(6) witnesses by

August 13, 2012. The district court deferred ruling on DynCorp’s

motion     in   limine      and     made   clear     that     it    would    consider

additional      sanctions,        including      dismissal,   if     PMC    failed    to

ameliorate the prejudice that its discovery defalcations caused

DynCorp. 3

      On     August   13,    PMC    offered      Al-Muhanna    and    Zacharia       for

deposition. However, PMC also informed DynCorp that Al-Muhanna

and   Zacharia    were      no   longer    its    Rule   30(b)(6)     witnesses      and

offered Mohammed Roof as its new Rule 30(b)(6) representative.

PMC also continued to produce additional relevant documents that

      3
          The district court stated that

              [b]ecause the remedies for PMC’s discovery
              defalcations fell far short of remedying the
              prejudice,  DynCorp   orally  renewed  their
              motion to dismiss. The Court denied that
              motion from the bench and instead ordered
              PMC to produce its Rule 30(b)(6) witnesses
              by Monday, August 13, 2012. Although the
              motion to dismiss was denied, the Court made
              clear that it would reconsider if the
              remedies for PMC’s discovery defalcations
              fail to ameliorate the prejudice DynCorp
              suffered, given the proximity of the trial
              date.

(J.A. 88.)

                                           10
it had not previously disclosed, some of which were written in

Arabic. DynCorp then submitted a supplemental memorandum to the

district court, renewing its motion in limine and requesting

that   the   district   court    strike    PMC’s   claim   of    damages   or

alternatively,   dismiss   the     case.   On   August   15,    the   district

court heard argument on and granted DynCorp’s motion in limine.

The district court noted that “[t]hroughout the pendency of the

case, PMC has consistently asserted that the proper measure of

PMC’s damages for the breach of the Subcontract is the total

amount of money DynCorp paid into the Lebanon [A]ccount.” (J.A.

95.) And in pursuing that theory of damages, PMC continually

“refused to comply with DynCorp’s discovery requests aimed at

ascertaining     the    identity     of    PMC’s    subcontractors,        the

subcontracts between PMC and those entities, and whether monies

were paid from the Lebanon [A]ccount to PMC’s subcontractors and

employees for work done in connection with the Subcontract.”

(J.A. 96.) The district court concluded that, as a matter of

law, PMC bore the burden of proving not only the amount of money

received from DynCorp through the Lebanon Account, but also the

costs avoided by the fact that some of PMC’s subcontractors and

employees were paid out of the Lebanon Account, relieving PMC of

the obligation to pay those debts. The district court thus held

                                     11
that PMC’s measure of damages was improper and contrary to law

and ordered PMC’s claim for damages to be excluded from trial. 4

      The district court also reconsidered sanctions against PMC

and found that the prior remedies it had ordered fell “far short

of    remedying      the       prejudice”       to       DynCorp     caused      by        PMC’s

continuing       discovery      defalcations.            (J.A.     102.)   The    district

court     detailed      the   extent     of   PMC’s       abusive    behavior      in       this

case: PMC did not provide its measure of damages until after the

close of discovery; PMC refused to account for costs avoided in

its   measure      of      damages,     as    required       by     law;   PMC    withheld

documents showing that funds were paid from the Lebanon Account

to PMC subcontractors; and PMC withheld documents showing that

PMC ownership had contemporaneous knowledge of those payments.

Specifically,        the      district    court      found       that    PMC     improperly

withheld     a     number       of      documents         showing       that     Al-Muhanna

contemporaneously knew that funds from the Lebanon Account were

being used to satisfy PMC obligations. The district court then

found     that   these     documents      directly        contradicted         Al-Muhanna’s

deposition       testimony       that     PMC      had    ceased     payments         to     its

      4
        Because PMC did not present an alternate theory of
damages, the district court’s exclusion of PMC’s claim of
damages against DynCorp left PMC able to pursue only nominal
damages for breach of contract.

                                              12
subcontractors and employees once DynCorp began making payments

to the Lebanon Account. The district court also concluded that

PMC gave a false answer to an interrogatory when it was asked to

“[i]dentify         all       funds    received           by     PMC     from     the     Lebanon

[A]ccount,     .     .    .    as   well     as     all    payments       from     the    Lebanon

[A]ccount      to    satisfy        obligations           of    PMC.”     (J.A.    1594.)        PMC

answered      that       it    “has    not    received          funds     from    Mr.     Fawaz’s

Lebanon [A]ccount, and it is not aware of the extent, if any, to

which payments were made from Mr. Fawaz’s personal account in

Lebanon to satisfy . . . obligations of PMC.” (J.A. 1594–95.)

The district court found that it was “clear that PMC knew that

some funds had been paid from the Lebanon [A]ccount to [PMC]

subcontractors.” (J.A. 1595.)

        The   district         court   also        noted       that    PMC’s     Rule    30(b)(6)

witnesses refused to be deposed before August 11 as ordered and

were    not   available         for    deposition          until       August    13,     two    days

before the trial date. It noted that PMC sent a series of late-

night    emails      on       August   12,     producing         a     number    of     documents

contained     in     135      separate       PDF    and    Excel       attachments        for   the

August 13 depositions, which were scheduled to begin at 9:30 the

next morning. On the morning of the 13th, PMC delivered two

boxes of documents to DynCorp, including documents that had not

yet been produced and new documents that were written in Arabic.

                                                  13
PMC also took the position that neither Al-Muhanna nor Zacharia

was appearing as a Rule 30(b)(6) deponent and named an entirely

new     Rule     30(b)(6)       witness.         And    when     DynCorp        took    the     new

depositions           of    Al-Muhanna         and   Zacharia,       both       witnesses      gave

evasive and unresponsive answers to the questions propounded.

       The district court again evaluated PMC’s conduct under the

standard         in        Schaffer       Equipment,         invoking           its     “inherent

authority” to “impose sanctions up to, and including, the ‘most

extreme sanction,’ the ‘dismissal without deciding the merits.’” 5

(J.A.      102   (quoting        Schaffer        Equip., 11 F.3d       at    462).)    The

district court concluded that PMC was highly culpable in its

discovery        defalcations            and     that    DynCorp          was    significantly

prejudiced        by        PMC’s     actions.         The     district         court       further

concluded that its prior sanctions did not remedy the prejudice

to    DynCorp.        Because       no   further       actions      on    PMC’s       part   could

remedy the harm to DynCorp, the district court concluded that

involuntary           dismissal          was     warranted.         The     district         court

dismissed        PMC’s       case     with      prejudice      and       entered      its    final

judgment on September 7, 2012.

       5
       The district court noted that it also had the power to
impose sanctions under Rule 37(b) of the Federal Rules of Civil
Procedure, but placed its “principal reliance on its inherent
powers.” (J.A. 102 n.10.)

                                                 14
     PMC timely appealed. We have jurisdiction under 28 U.S.C.

§ 1291.

                                       II.

     We   review    a    district     court’s    decision    to   exercise    its

inherent power to dismiss a case for an abuse of discretion.

Shaffer   Equip., 11 F.3d   at    462.     We   also   review   a   district

court’s grant of a motion in limine for an abuse of discretion.

Malone v. Microdyne Corp., 26 F.3d 471, 480 (4th Cir. 1994).

                                       III.

     PMC principally argues on appeal that the district court

abused its discretion by imposing a sanction of dismissal of its

case against DynCorp. 6 We have previously recognized that, “[d]ue

to the very nature of the court as an institution, it must and

does have an inherent power to impose order, respect, decorum,

     6
        PMC also challenges the district court’s grant of
DynCorp’s motion in limine and dismissal of PMC’s claim for
damages as being contrary to the applicable contract law. PMC
further argues that the district court improperly granted
DynCorp’s motion for summary judgment, contending that genuine
issues of material fact existed that required determination by
the trier of fact. Because we affirm the district court’s
exercise of its inherent authority to dismiss PMC’s case as
sanctions for PMC’s abuse of the discovery process, we need not
address PMC’s remaining claims.

                                        15
silence, and compliance with lawful mandates.” Shaffer Equip.,
11 F.3d at 461. A court’s inherent power includes the ability to

order    the    dismissal    of    a    case,    though       “such    orders      must     be

entered    with      the   greatest      caution.”      Id.      at   462.       Orders      of

dismissal      are   appropriate        “when   a    party     deceives      a    court     or

abuses the process at a level that is utterly inconsistent with

the     orderly      administration        of       justice      or    undermines          the

integrity of the process.” Id.

      Before      exercising      its    inherent      power     to    dismiss        a    case

based on the wrongdoing of a party in the judicial process,

               a court must consider the following factors:
               (1)   the    degree   of   the   wrongdoer's
               culpability; (2) the extent of the client's
               blameworthiness if the wrongful conduct is
               committed by its attorney, recognizing that
               we seldom dismiss claims against blameless
               clients; (3) the prejudice to the judicial
               process and the administration of justice;
               (4) the prejudice to the victim; (5) the
               availability of other sanctions to rectify
               the wrong by punishing culpable persons,
               compensating harmed persons, and deterring
               similar conduct in the future; and (6) the
               public interest.

Id. at 462–63.

      In this case, the district court concluded that all six

Shaffer Equipment factors weighed in favor of dismissal and that

“[t]he    course     of    this    litigation        has     been     marred     by       PMC’s

discovery      defalcations.”          (J.A.    100.)      The   court    set      out      in

extensive detail the particulars of PMC’s discovery abuse and
                              16
linked those abuses to each of the Shaffer Equipment factors.

(J.A. 1573–96.) With respect to the first factor, the district

court found that “there is a high degree of culpability” on the

part of PMC. (J.A. 1592.) In support of this conclusion, the

district court found that PMC made a calculated effort to shield

its damages claim from the crucible of discovery by providing

false    answers     to    interrogatories,          providing       false       deposition

testimony,      withholding       a    large      number     of    relevant       documents

during     discovery,       and    making         late    disclosures       of     material

significance that continued until the day before trial was to

begin.    The    district     court      then      addressed      the     second    factor,

concluding      that      “PMC,    the    client         rather    than    counsel,    has

committed serious discovery defalcations.” (J.A. 103.)

     In considering the third, fourth, and fifth factors, the

district     court      found     that    “these         defalcations       have     caused

substantial      prejudice        to   the     judicial       process;      DynCorp    has

suffered serious prejudice; and, the several attempts to provide

partial remedies have failed.” (J.A. 103.) The district court

supported       these     conclusions        by     finding       that    PMC’s     willful

failure    to    produce     relevant     documents         precluded       DynCorp    from

conducting effective discovery or taking effective depositions

of Al-Muhanna or Zacharia, PMC’s Rule 30(b)(6) designees. The

district court then recounted that although it had previously

                                             17
imposed lesser sanctions, including ordering PMC to produce Al-

Muhanna and Zacharia for additional depositions and ordering all

facts contained in withheld documents to be deemed admitted, it

had declined to impose the sanction of dismissal. The district

court     further      found          that,        notwithstanding        its     initial

forbearance, PMC’s unabated obstruction and defiance made clear

that    those    lesser    sanctions      did       not   remedy    the   prejudice     to

DynCorp or deter PMC’s conduct.

       Addressing the sixth factor, the district court noted that

“certainly there’s a public interest in ensuring the integrity

of the judicial process.” (J.A. 1581.) Consequently, as “each of

the Shaffer Equipment factors weigh[ed] firmly . . . in favor of

dismissing the case,” the district court imposed the sanction of

dismissal. (J.A. 102–03.)

       PMC makes a number of arguments on appeal, none of which

support    reversal       of    the   district       court’s    order.     Among    other

things, PMC argues that Al-Muhanna did not, in fact, provide

false testimony. However, our review of the record demonstrates

that    the     district       court’s   finding       that    Al-Muhanna       testified

falsely    at    her   deposition        is    not    clearly      erroneous.     In   her

deposition, Al-Muhanna was asked, “Has PMC . . . attempted to

determine in any way any benefits PMC received from payments

from the Lebanon [A]ccount in connection with the [Subcontract]

                                              18
with    DynCorp?”     (J.A.   1586–87.)      Al-Muhanna    answered,    “I    don’t

know if I could answer. But for us, PMC is [an] illegal account.

[The] Lebanon bank account is illegal. So I cannot assume that

there [are] any payments that came from it in the correct—I

don’t know what the word is.” (J.A. 1587.) Al-Muhanna was then

asked, “Do you know if PMC received any benefit in connection

with the [Subcontract] with DynCorp from payments made out of

the Lebanon [A]ccount?” She answered, “No.” (J.A. 1587.)

       Al-Muhanna’s testimony is directly contradicted by, among

other things, an email she sent on June 3, 2009, in which she

asked to see “the invoices for the payment done by Mr. Hussein

[Fawaz],” showing that she knew that Fawaz was making payments

out of the Lebanon Account during the term of the Subcontract.

(J.A.    978.)   On   August    31,    2009,   Al-Muhanna    received       another

email detailing Fawaz’s payments of PMC staff salaries out of

the    Lebanon   Account.      (J.A.   991.)    And   on   May   18,   2010,   Al-

Muhanna’s staff received from Fawaz a spreadsheet providing a

full accounting of deposits into both the Lebanon Account and

the Kuwait Account as well as expenses paid by PMC out of each

account. (J.A. 1121–48.) Thus, the district court’s finding that

Al-Muhanna       provided      false    deposition     testimony       is    fully

supported by facts in the record. Cf. F.C. Wheat Mar. Corp. v.

United States, 663 F.3d 714, 723 (4th Cir. 2011) (holding that a

                                        19
court   of     appeals   may    reverse    a    factual    finding    reviewed        for

clear error only when “left with a definite and firm conviction

that a mistake has been committed”).

      PMC also argues that it was improper for the district court

to consider its false interrogatory response because DynCorp did

not   raise     the   false    interrogatory         response   as   a       reason   for

granting sanctions in its motion. Yet PMC points to no legal

authority suggesting that a district court is limited to the

precise      arguments   raised     by    the    parties    when     the      court    is

exercising its inherent authority to impose sanctions consistent

with Shaffer Equipment. While a district court acting under Rule

37(b)     of    the   Federal     Rules    of     Civil    Procedure          would    be

constrained by the terms of that Rule, a court acting under its

inherent authority may impose sanctions for any “conduct utterly

inconsistent with the orderly administration of justice.” United

States v. Nat’l Med. Enters., Inc., 792 F.2d 906, 912 (9th Cir.

1986). Compare Buffington v. Balt. Cnty., Md., 913 F.2d 113, 132

n.15 (4th Cir. 1990) (holding that a court may impose sanctions

under Rule 37(b) “only to violations of a court order to permit

or    provide     discovery,      or     one    in     regard   to       a    discovery

conference”), with Shaffer Equip., 11 F.3d at 461 (holding that

a court’s inherent power to dismiss a case “is organic, without

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need    of    a   statute     or    rule    for       its     definition,    and   it    is

necessary to the exercise of all other powers”).

       In fact, a district court exercising its inherent authority

to impose sanctions may do so sua sponte and must consider the

whole    of   the   case    in     choosing      the    appropriate        sanction.    See

Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246

(1944) (“The public welfare demands that the agencies of public

justice be not so impotent that they must always be mute and

helpless victims of deception and fraud.”), abrogated on other

grounds by Standard Oil Co. of Cal. v. United States, 429 U.S.
17 (1976); Brickwood Contractors, Inc. v. Datanet Eng’g, Inc.,

369 F.3d 385, 389 n.2 (4th Cir. 2004) (noting that the court has

the authority to impose sanctions sua sponte under either Rule

11 or under the court’s inherent authority); In re Prudential

Ins. Co. Am. Sales Practice Litig. Agent Actions, 278 F.3d 175,

189–91 (3d Cir. 2002) (affirming the imposition of sanctions

after     assessing     the      totality        of     the    sanctioned     attorney’s

conduct before the court).

       In this case, the district court dismissed PMC’s claim in

an exercise of its inherent authority and was therefore entitled

to     consider     sanctions      on   its       own       motion   and    without     any

limitation on the types of conduct that it could consider. See

Shaffer Equip., 11 F.3d at 462. PMC was on clear notice of the

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district       court’s       consideration            of    the    use      of   its     inherent

authority       and    had    a   full      opportunity           to   argue     its     position

before the court. Moreover, the district court’s finding that

PMC provided a false interrogatory answer is amply supported by

facts    in    the     record.       When    asked         in   Interrogatory       No.     12   to

“[i]dentify          all     funds     received            by   PMC      from      the    Lebanon

[A]ccount, as well as all payments from the Lebanon [A]ccount to

satisfy obligations of PMC,” PMC responded “PMC has not received

funds from Mr. Fawaz’s Lebanon [A]ccount, and it is not aware of

the extent, if any, to which payments were made from Mr. Fawaz’s

personal account in Lebanon to satisfy [obligations] of PMC.”

(J.A. 733.) As noted earlier, this answer is contradicted by the

emails of June 3, 2009, August 31, 2009, and May 18, 2010, all

of      which         demonstrate           that        Al-Muhanna           had         personal,

contemporaneous knowledge of Fawaz’s use of the Lebanon Account

to pay PMC’s indebtedness to subcontractors and employees, some

of which payments were substantial.

      PMC      similarly       fails        to   challenge         any      of   the      district

court’s other findings supporting its dismissal of PMC’s claim.

PMC flatly asserts that the district court’s culpability finding

is not supported by substantial evidence, referring back to its

previous arguments that Al-Muhanna did not give false testimony

and     that    it     answered       Interrogatory             No.    12    truthfully.         As

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reflected above, our review of the record demonstrates that the

district    court’s   culpability    finding   was   not    made      in   clear

error. That finding is supported by the conflict between PMC’s

deposition testimony and PMC’s answer to Interrogatory No. 12,

and the emails of June 3, 2009, August 31, 2009, and May 18,

2010.

     PMC also asserts in a single sentence, without citation to

the record or to any authority, that neither DynCorp nor the

judicial process suffered prejudice because DynCorp received all

relevant documents before the trial date. PMC does not address,

however, the fact that many of these documents were produced

long after the close of discovery—through and including the day

before trial—depriving DynCorp of the opportunity to effectively

depose     PMC’s   Rule   30(b)(6)   representatives       and   to    conduct

effective discovery and adequately prepare for trial. In any

event, by failing to support its contentions “with citations to

the authorities and parts of the record on which [it] relies,”

PMC has waived this argument. Fed. R. App. P. 28(a)(9)(A); see

also Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 607

(4th Cir. 2009).

     PMC last posits that other, lesser sanctions could have

remedied the prejudice to DynCorp and that public policy favors

deciding cases on the merits. While it is true that we recognize

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a “strong policy that cases be decided on the merits,” Shaffer,
11 F.3d at 462, we also recognize “the need to preserve the

integrity of the judicial process in order to retain confidence

that the process works to uncover the truth.” Silvestri v. Gen.

Motors   Corp.,    271 F.3d 583,    590   (4th    Cir.   2001)   (emphasis

added). The district court found that PMC intentionally acted

throughout the pre-trial process to hide the truth from both

DynCorp and from the court. And the district court first imposed

lesser sanctions, but later found that those lesser sanctions

did not alleviate the prejudice caused by PMC. Accordingly, PMC

has not demonstrated that the district court here abused its

discretion.

     For   the    above   reasons,      we    affirm   the    district   court’s

dismissal of PMC’s case against DynCorp as a sanction for its

discovery malfeasance.

                                        IV.

     For all the foregoing reasons, the judgment of the district

court is

                                                                      AFFIRMED.

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