The Supreme Court/The Supreme Court.iso/pc/ascii/1990/90_256/90_256.s

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Subject:  CHAMBERS v. NASCO, INC., Syllabus




    NOTE: Where it is feasible, a syllabus (headnote) will be released, as
is being done in connection with this case, at the time the opinion is
issued.  The syllabus constitutes no part of the opinion of the Court but
has been prepared by the Reporter of Decisions for the convenience of the
reader.  See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES


Syllabus


CHAMBERS v. NASCO, INC.


certiorari to the united states court of appeals for the fifth circuit

No. 90-256.  Argued February 27, 1991 -- Decided June 6, 1991

Petitioner Chambers, the sole shareholder and director of a company that
operated a television station in Louisiana, agreed to sell the station's
facilities and broadcast license to respondent NASCO, Inc.  Chambers soon
changed his mind and, both before and after NASCO filed this diversity
action for specific performance in the District Court, engaged in a series
of actions within and without that court and in proceedings before the
Federal Communications Commission, the Court of Appeals, and this Court,
which were designed to frustrate the sale's consummation.  On remand
following the Court of Appeals' affirmance of judgment on the merits for
NASCO, the District Court, on NASCO's motion and following full briefing
and a hearing, imposed sanctions against Chambers in the form of attorney's
fees and expenses totaling almost $1 million, representing the entire
amount of NASCO's litigation costs paid to its attorneys.  The court noted
that the alleged sanctionable conduct was that Chambers had (1) attempted
to deprive the court of jurisdiction by acts of fraud, nearly all of which
were performed outside the confines of the court, (2) filed false and
frivolous pleadings, and (3) "attempted, by other tactics of delay,
oppression, harassment and massive expense to reduce [NASCO] to exhausted
compliance."  The court deemed Federal Rule of Civil Procedure 11 -- which
provides for the imposition of attorney's fees as a sanction for the
improper filing of papers with a court -- insufficient to support the
sanction against Chambers, since the Rule does not reach conduct in the
foregoing first and third categories, and since it would have been
impossible to assess sanctions at the time the papers in the second
category were filed because their falsity did not become apparent until
after the trial on the merits.  The court likewise declined to impose
sanctions under 28 U. S. C. MDRV 1927, both because the statute's
authorization of an attorney's fees sanction applies only to attorneys who
unreasonably and vexatiously multiply proceedings, and therefore would not
reach Chambers, and because the statute was not broad enough to reach "acts
which degrade the judicial system."  The court therefore relied on its
inherent power in imposing sanctions.  In affirming, the Court of Appeals,
inter alia, rejected Chambers' argument that a federal court sitting in
diversity must look to state law, not the court's inherent power, to assess
attorney's fees as a sanction for bad-faith conduct in litigation.

Held: The District Court properly invoked its inherent power in assessing
as a sanction for Chambers' bad-faith conduct the attorney's fees and
related expenses paid by NASCO.  Pp. 8-24.

    (a) Federal courts have the inherent power to manage their own
proceedings and to control the conduct of those who appear before them.  In
invoking the inherent power to punish conduct which abuses the judicial
process, a court must exercise discretion in fashioning an appropriate
sanction, which may range from dismissal of a lawsuit to an assessment of
attorney's fees.  Although the "American Rule" prohibits the shifting of
attorney's fees in most cases, see Alyeska Pipeline Service Co. v.
Wilderness Society, 421 U. S. 240, 259, an exception allows federal courts
to exercise their inherent power to assess such fees as a sanction when a
party has acted in bad faith, vexatiously, wantonly, or for oppressive
reasons, id., at 258-259, 260, as when the party practices a fraud upon the
court, Universal Oil Products Co. v. Root Refining Co., 328 U. S. 575, 580,
or delays or disrupts the litigation or hampers a court order's
enforcement, Hutto v. Finney, 437 U. S. 678, 689, n. 14.  Pp. 9-12.

    (b) There is nothing in MDRV 1927, Rule 11, or other Federal Rules of
Civil Procedure authorizing attorney's fees as a sanction, or in this
Court's decisions interpreting those other sanctioning mechanisms, that
warrants a conclusion that, taken alone or together, the other mechanisms
displace courts' inherent power to impose attorney's fees as a sanction for
badfaith conduct.  Although a court ordinarily should rely on such rules
when there is bad-faith conduct in the course of litigation that could be
adequately sanctioned under the rules, the court may safely rely on its
inherent power if, in its informed discretion, neither the statutes nor the
rules are up to the task.  The District Court did not abuse its discretion
in resorting to the inherent power in the circumstances of this case.
Although some of Chambers' conduct might have been reached through the
other sanctioning mechanisms, all of that conduct was sanctionable.
Requiring the court to apply the other mechanisms to discrete occurrences
before invoking the inherent power to address remaining instances of
sanctionable conduct would serve only to foster extensive and needless
satellite litigation, which is contrary to the aim of the rules themselves.
Nor did the court's reliance on the inherent power thwart the mandatory
terms of Rules 11 and 26(g).  Those Rules merely require that "an
appropriate sanction" be imposed, without specifying which sanction is
required.  Bank of Nova Scotia v. United States, 487 U. S. 250,
distinguished.  Pp. 12-17.

    (c) There is no merit to Chambers' assertion that a federal court
sitting in diversity cannot use its inherent power to assess attorney's
fees as a sanction unless the applicable state law recognizes the
"bad-faith" exception to the general American Rule against fee shifting.
Although footnote 31 in Alyeska tied a diversity court's inherent power to
award fees to the existence of a state law giving a right thereto, that
limitation applies only to fee-shifting rules that embody a substantive
policy, such as a statute which permits a prevailing party in certain
classes of litigation to recover fees.  Here the District Court did not
attempt to sanction Chambers for breach of contract, but rather imposed
sanctions for the fraud he perpetrated on the court and the bad faith he
displayed toward both NASCO and the court throughout the litigation.  The
inherent power to tax fees for such conduct cannot be made subservient to
any state policy without transgressing the boundaries set out in Erie R.
Co. v. Tompkins, 304 U. S. 64, Guaranty Trust Co. v. York, 326 U. S. 99,
and Hanna v. Plumer, 380 U. S. 460, for fee shifting here is not a matter
of substantive remedy, but is a matter of vindicating judicial authority.
Thus, although Louisiana law prohibits punitive damages for a bad-faith
breach of contract, this substantive state policy is not implicated.  Pp.
17-21.

    (d) Based on the circumstances of this case, the District Court acted
within its discretion in assessing as a sanction for Chambers' bad-faith
conduct the entire amount of NASCO's attorney's fees.  Chambers' arguments
to the contrary are without merit.  First, although the sanction was not
assessed until the conclusion of the litigation, the court's reliance on
its inherent power did not represent an end run around Rule 11's notice
requirements, since Chambers received repeated timely warnings both from
NASCO and the court that his conduct was sanction able.  Second, the fact
that the entire amount of fees was awarded does not mean that the court
failed to tailor the sanction to the particular wrong, in light of the
frequency and severity of Chambers' abuses of the judicial system and the
resulting need to ensure that such abuses were not repeated.  Third, the
court did not abuse its discretion by failing to require NASCO to mitigate
its expenses, since Chambers himself made a swift conclusion to the
litigation by means of summary judgment impossible by continuing to assert
that material factual disputes existed.  Fourth, the court did not err in
imposing sanctions for conduct before other tribunals, since, as long as
Chambers received an appropriate hearing, he may be sanctioned for abuses
of process beyond the courtroom.  Finally, the claim that the award is not
"personalized" as to Chambers' responsibility for the challenged conduct is
flatly contradicted by the court's detailed factual findings concerning
Chambers' involvement in the sequence of events at issue.  Pp. 21-24.

894 F. 2d 696, affirmed.

    White, J., delivered the opinion of the Court, in which Marshall,
Blackmun, Stevens, and O'Connor, JJ., joined.  Scalia, J., filed a
dissenting opinion.  Kennedy, J., filed a dissenting opinion, in which
Rehnquist, C. J., and Souter, J., joined.

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