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Keywords

contractlitigationattorneytrustbad faith
jurisdictionattorneystatuteinjunctionappealdue processcitizenshipbad faith

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NASCO, Inc. v. Calcasieu Television and Radio, Inc., 894 F.2d 696, 58 USLW 2495, 18 Fed.R.Serv.3d 1357

Facts

On August 9, 1983, CTR and NASCO agreed to the sale of CTR's television station, but CTR failed to file necessary FCC forms. After NASCO threatened legal action, Chambers and his attorney created a trust to transfer property subject to the contract, which led to a series of legal disputes. The district court found that the transfer was a sham and imposed sanctions for bad faith conduct during the litigation process, including disbarment of attorneys involved.

On August 9, 1983, CTR and NASCO agreed to the sale to NASCO of CTR's television station. The agreement required CTR to file required forms with the FCC by a specified date, but it did not do so.

Issue

Did the district court have the inherent power to impose sanctions and award attorneys' fees for bad faith litigation practices in a diversity case?

The Court of Appeals, Patrick E. Higginbotham, Circuit Judge, held that: (1) Rule 11 and 28 U.S.C.A. § 1927 did not bar district court from assessing fees against party under its inherent power, when party's conduct is not within reach of rule or statute; (2) Erie doctrine and its progeny do not displace district court's inherent power to shift fees for bad-faith wanton and vexatious conduct in prosecution of diversity action; (3) evidence was sufficient to support district court's conclusion that seller litigated in bad faith and to support imposition of monetary sanction; (4) disbarment proceedings did not violate due process; (5) evidence was sufficient to support disbarment; and (6) remand would be ordered with respect to length of nonresident attorney's disbarment where district court may not have anticipated that attorney's home state would similarly discipline attorney.

Rule

Federal courts have inherent power to impose sanctions for bad faith conduct in litigation, even in diversity cases where state law may not provide for such awards.

We find that the district court has inherent power to prevent frustration of its judicial duty by a party. We also conclude that, although jurisdiction in this suit rested on diversity of citizenship, the district court may, without reference to Louisiana law, award attorneys' fees to the party forced by the obstructive tactics to incur them.

Analysis

The court applied the inherent power doctrine to sanction the seller and its attorneys for their obstructive tactics, which included transferring property to a trust to evade the contract and failing to comply with court orders. The evidence supported the conclusion that the seller acted in bad faith, justifying the imposition of significant monetary sanctions.

The district court held these records were clearly within the scope of the injunction and fined Chambers and CTR after NASCO instituted a civil contempt proceeding. NASCO, Inc. v. Calcasieu Television & Radio, 583 F.Supp. 115 (W.D.La.1984).

Conclusion

The appellate court affirmed the district court's decision, upholding the sanctions imposed for bad faith conduct and remanding for further consideration of the length of disbarment for one attorney.

The court did not rest a statute or rule, but found that it had the inherent power to issue the order.

Who won?

NASCO prevailed in the case due to the seller's bad faith actions, which included obstructive litigation tactics and failure to comply with court orders.

We hold that the district court afforded them due process and that its findings are supported by clear and convincing evidence, and affirm the disbarment and suspension orders.

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