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.

------------------------------------------------------------------------------




Subject: 90-256 -- OPINION, CHAMBERS v. NASCO, INC.

 


NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.

SUPREME COURT OF THE UNITED STATES


No. 90-256



G. RUSSELL CHAMBERS, PETITIONER v.
NASCO, INC.


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

[June 6, 1991]



    Justice White delivered the opinion of the Court.
    This case requires us to explore the scope of the inherent power of a
federal court to sanction a litigant for bad-faith conduct.  Specifically,
we are asked to determine whether the District Court, sitting in diversity,
properly invoked its inherent power in assessing as a sanction for a
party's badfaith conduct attorney's fees and related expenses paid by the
party's opponent to its attorneys.  We hold that the District Court acted
within its discretion, and we therefore affirm the judgment of the Court of
Appeals.

I
    This case began as a simple action for specific performance of a
contract, but it did not remain so. {1}  Petitioner G. Russell Chambers was
the sole shareholder and director of Cal casieu Television and Radio, Inc.
(CTR), which operated television station KPLC-TV in Lake Charles,
Louisiana.  On August 9, 1983, Chambers, acting both in his individual
capacity and on behalf of CTR, entered into a purchase agreement to sell
the station's facilities and broadcast license to respondent NASCO, Inc.,
for a purchase price of $18 million.  The agreement was not recorded in the
parishes in which the two properties housing the station's facilities were
located.  Consummation of the agreement was subject to the approval of the
Federal Communications Commission (FCC); both parties were obligated to
file the necessary documents with the FCC no later than September 23, 1983.
By late August, however, Chambers had changed his mind and tried to talk
NASCO out of consummating the sale.  NASCO refused.  On September 23,
Chambers, through counsel, informed NASCO that he would not file the
necessary papers with the FCC.
    NASCO decided to take legal action.  On Friday, October 14, 1983,
NASCO's counsel informed counsel for Chambers and CTR that NASCO would file
suit the following Monday in the United States District Court for the
Western District of Louisiana, seeking specific performance of the
agreement, as well as a temporary restraining order (TRO) to prevent the
alienation or encumbrance of the properties at issue.  NASCO provided this
notice in accordance with Federal Rule of Civil Procedure 65 and Rule 11 of
the District Court's Local Rules (now Rule 10), both of which are designed
to give a defendant in a TRO application notice of the hearing and an
opportunity to be heard.
    The reaction of Chambers and his attorney, A. J. Gray III, was later
described by the District Court as having "emas culated and frustrated the
purposes of these rules and the powers of [the District] Court by utilizing
this notice to prevent NASCO's access to the remedy of specific
performance."  NASCO, Inc. v. Calcasieu Television & Radio, Inc., 623 F.
Supp. 1372, 1383 (WD La. 1985).  On Sunday, October 16, 1983, the pair
acted to place the properties at issue beyond the reach of the District
Court by means of the Louisiana Public Records Doctrine.  Because the
purchase agreement had never been recorded, they determined that if the
prop erties were sold to a third party, and if the deeds were recorded
before the issuance of a TRO, the District Court would lack jurisdiction
over the properties.
    To this end, Chambers and Gray created a trust, with Chambers' sister
as trustee and Chambers' three adult children as beneficiaries.  The pair
then directed the president of CTR, who later became Chambers' wife, to
execute warranty deeds conveying the two tracts at issue to the trust for a
recited consideration of $1.4 million dollars.  Early Monday morning, the
deeds were recorded.  The trustee, as purchaser, had not signed the deeds;
none of the consideration had been paid; and CTR remained in possession of
the properties.  Later that morning, NASCO's counsel appeared in the
District Court to file the complaint and seek the TRO.  With NASCO's
counsel present, the District Judge telephoned Gray.  Despite the judge's
queries concerning the possibility that CTR was negotiating to sell the
properties to a third person, Gray made no mention of the recordation of
the deeds earlier that morning.  NASCO, Inc. v. Calcasieu Television &
Radio, Inc., 124 F. R. D. 120, 126, n. 8 (WD La. 1989).  That afternoon,
Chambers met with his sister and had her sign the trust documents and a
$1.4 million note to CTR.  The next morning, Gray informed the District
Court by letter of the recordation of the deeds the day before, and
admitted that he had intentionally withheld the information from the
court.
    Within the next few days, Chambers' attorneys prepared a leaseback
agreement from the trustee to CTR, so that CTR could remain in possession
of the properties and continue to operate the station.  The following week,
the District Court granted a preliminary injunction against Chambers and
CTR and entered a second TRO to prevent the trustee from alienating or
encumbering the properties.  At that hearing, the District Judge warned
that Gray's and Chambers' conduct had been unethical.
    Despite this early warning, Chambers, often acting through his
attorneys, continued to abuse the judicial process.  In November 1983, in
defiance of the preliminary injunction, he refused to allow NASCO to
inspect CTR's cor porate records.  The ensuing civil contempt proceedings
resulted in the assessment of a $25,000 fine against Chambers personally.
NASCO, Inc. v. Calcasieu Television & Radio, Inc., 583 F. Supp. 115 (WD La.
1984).  Two sub sequent appeals from the contempt order were dismissed for
lack of a final judgment.  See NASCO, Inc. v. Calcasieu Television & Radio,
Inc., No. 84-9037 (CA5, May 29, 1984); NASCO, Inc. v. Calcasieu Television
& Radio, Inc., 752 F. 2d 157 (CA5 1985).
    Undeterred, Chambers proceeded with "a series of mer itless motions and
pleadings and delaying actions."  124 F. R. D., at 127.  These actions
triggered further warnings from the court.  At one point, acting sua
sponte, the District Judge called a status conference to find out why
bankers were being deposed.  When informed by Chambers' counsel that the
purpose was to learn whether NASCO could afford to pay for the station, the
court canceled the depositions consistent with its authority under Federal
Rule of Civil Procedure 26(g).
    At the status conference nine days before the April 1985 trial date,
{2} the District Judge again warned counsel that further misconduct would
not be tolerated. {3}  Finally, on the eve of trial, Chambers and CTR
stipulated that the purchase agreement was enforceable and that Chambers
had breached the agreement on September 23, 1983, by failing to file the
necessary papers with the FCC.  At trial, the only defense presented by
Chambers was the Public Records Doctrine.
    In the interlude between the trial and the entry of judgment during
which the District Court prepared its opinion, Chambers sought to render
the purchase agreement meaningless by seeking permission from the FCC to
build a new transmission tower for the station and to relocate the
transmission facilities to that site, which was not covered by the
agreement.  Only after NASCO sought contempt sanctions did Chambers
withdraw the application.
    The District Court entered judgment on the merits in NASCO's favor,
finding that the transfer of the properties to the trust was a simulated
sale and that the deeds purporting to convey the property were "null, void,
and of no effect."  623 F. Supp., at 1385.  Chambers' motions, filed in the
District Court, the Court of Appeals, and this Court, to stay the judgment
pending appeal were denied.  Undeterred, Chambers convinced CTR officials
to file formal oppositions to NASCO's pending application for FCC approval
of the transfer of the station's license, in contravention of both the
District Court's injunctive orders and its judgment on the merits.  NASCO
then sought contempt sanctions for a third time, and the oppositions were
withdrawn.
    When Chambers refused to prepare to close the sale, NASCO again sought
the court's help.  A hearing was set for July 16, 1986, to determine
whether certain equipment was to be included in the sale.  At the beginning
of the hearing, the court informed Chambers' new attorney, Edwin A. McCabe,
{4} that further sanctionable conduct would not be tolerated.  When the
hearing was recessed for several days, Chambers, without notice to the
court or NASCO, removed from service at the station all of the equipment at
issue, forcing the District Court to order that the equipment be returned
to service.
    Immediately following oral argument on Chambers' appeal from the
District Court's judgment on the merits, the Court of Appeals, ruling from
the bench, found the appeal frivolous.  The court imposed appellate
sanctions in the form of attorney's fees and double costs, pursuant to
Federal Rule of Appellate Procedure 38, and remanded the case to the
District Court with orders to fix the amount of appellate sanctions and to
determine whether further sanctions should be imposed for the manner in
which the litigation had been conducted.  NASCO, Inc. v. Calcasieu
Television & Radio, Inc., 797 F. 2d 975 (CA5 1986) (per curiam)
(unpublished order).
    On remand, NASCO moved for sanctions, invoking the District Court's
inherent power, Fed. Rule Civ. Proc. 11, and 28 U. S. C. MDRV 1927.  After
full briefing and a hearing, see 124 F. R. D., at 141, n. 11, the District
Court determined that sanctions were appropriate "for the manner in which
this proceeding was conducted in the district court from October 14, 1983,
the time that plaintiff gave notice of its intention to file suit to this
date."  Id., at 123.  At the end of an extensive opinion recounting what it
deemed to have been sanc tionable conduct during this period, the court
imposed sanctions against Chambers in the form of attorney's fees and
expenses totaling $996,644.65, which represented the entire amount of
NASCO's litigation costs paid to its attorneys. {5}  In so doing, the court
rejected Chambers' argument that he had merely followed the advice of
counsel, labeling him "the strategist," id., at 132, behind a scheme
devised "first, to deprive this Court of jurisdiction and, second, to
devise a plan of obstruction, delay, harassment, and expense sufficient to
reduce NASCO to a condition of exhausted compliance," id., at 136.
    In imposing the sanctions, the District Court first considered Federal
Rule of Civil Procedure 11.  It noted that the alleged sanctionable conduct
was that Chambers and the other defendants had "(1) attempted to deprive
this Court of jurisdiction by acts of fraud, nearly all of which were
performed outside the confines of this Court, (2) filed false and frivolous
pleadings, and (3) attempted, by other tactics of delay, oppression,
harassment and massive expense to reduce plaintiff to exhausted
compliance."  Id., at 138.  The court recognized that the conduct in the
first and third categories could not be reached by Rule 11, which governs
only papers filed with a court.  As for the second category, the court
explained that the falsity of the pleadings at issue did not become
apparent until after the trial on the merits, so that it would have been
impossible to assess sanctions at the time the papers were filed.  Id., at
138-139.  Consequently, the District Court deemed Rule 11 "insufficient"
for its purposes.  Id., at 139.  The court likewise declined to impose
sanctions under MDRV 1927, {6} both because the statute applies only to
attorneys, and therefore would not reach Chambers, and because the statute
was not broad enough to reach "acts which degrade the judicial system,"
including "attempts to deprive the Court of jurisdiction, fraud, misleading
and lying to the Court."  Ibid.  The court therefore relied on its inherent
power in imposing sanctions, stressing that "[t]he wielding of that
inherent power is particularly appropriate when the offending parties have
practiced a fraud upon the court."  Ibid.
    The Court of Appeals affirmed.  NASCO, Inc. v. Calcasieu Television &
Radio, Inc., 894 F. 2d 696 (CA5 1990).  The court 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
badfaith conduct in litigation.  The court further found that neither 28 U.
S. C. MDRV 1927 nor Federal Rule of Civil Procedure 11 limits a court's
inherent authority to sanction bad faith conduct "when the party's conduct
is not within the reach of the rule or the statute."  {7}  894 F. 2d, at
702-703.  Although observing that the inherent power "is not a broad
reservoir of power, ready at an imperial hand, but a limited source; an
implied power squeezed from the need to make the court function," id., at
702, the court also concluded that the District Court did not abuse its
discretion in awarding to NASCO the fees and litigation costs paid to its
attorneys.  Because of the importance of these issues, we granted
certiorari, 498 U. S. --- (1990).

II
    Chambers maintains that 28 U. S. C. MDRV 1927 and the various
sanctioning provisions in the Federal Rules of Civil Procedure  {8} reflect
a legislative intent to displace the inherent power.  At least, he argues
that they obviate or foreclose resort to the inherent power in this case.
We agree with the Court of Appeals that neither proposition is persuasive.

A
    It has long been understood that "[c]ertain implied powers must
necessarily result to our Courts of justice from the nature of their
institution," powers "which cannot be dispensed with in a Court, because
they are necessary to the exercise of all others."  United States v.
Hudson, 7 Cranch 32, 34 (1812); see also Roadway Express, Inc. v. Piper,
447 U. S. 752, 764 (1980) (citing Hudson).  For this reason, "Courts of
justice are universally acknowledged to be vested, by their very creation,
with power to impose silence, respect, and decorum, in their presence, and
submission to their lawful mandates."  Anderson v. Dunn, 6 Wheat. 204, 227
(1821); see also Ex parte Robinson, 19 Wall. 505, 510 (1874).  These powers
are "governed not by rule or statute but by the control necessarily vested
in courts to manage their own affairs so as to achieve the orderly and
expeditious disposition of cases."  Link v. Wabash R. Co., 370 U. S. 626,
630-631 (1962).
    Prior cases have outlined the scope of the inherent power of the
federal courts.  For example, the Court has held that a federal court has
the power to control admission to its bar and to discipline attorneys who
appear before it.  See Ex parte Burr, 9 Wheat. 529, 531 (1824).  While this
power "ought to be exercised with great caution," it is nevertheless
"incidental to all Courts."  Ibid.
    In addition, it is firmly established that "[t]he power to punish for
contempts is inherent in all courts."  Robinson, supra, at 510.  This power
reaches both conduct before the court and that beyond the court's confines,
for "[t]he underlying concern that gave rise to the contempt power was not
. . . merely the disruption of court proceedings.  Rather, it was
disobedience to the orders of the Judiciary, regardless of whether such
disobedience interfered with the conduct of trial."  Young v. United States
ex rel. Vuitton et Fils S.A., 481 U. S. 787, 798 (1987) (citations
omitted).
    Of particular relevance here, the inherent power also allows a federal
court to vacate its own judgment upon proof that a fraud has been
perpetrated upon the court.  See Hazel-Atlas Glass Co. v. Hartford-Empire
Co., 322 U. S. 238 (1944); Universal Oil Products Co. v. Root Refining Co.,
328 U. S. 575, 580 (1946).  This "historic power of equity to set aside
fraudulently begotten judgments," Hazel-Atlas, 322 U. S., at 245, is
necessary to the integrity of the courts, for "tampering with the
administration of justice in [this] manner . . . involves far more than an
injury to a single litigant.  It is a wrong against the institutions set up
to protect and safeguard the public."  Id., at 246.  Moreover, a court has
the power to conduct an independent investigation in order to determine
whether it has been the victim of fraud.  Universal Oil, supra, at 580.
    There are other facets to a federal court's inherent power.  The court
may bar from the courtroom a criminal defendant who disrupts a trial.
Illinois v. Allen, 397 U. S. 337 (1970).  It may dismiss an action on
grounds of forum non conveniens, Gulf Oil Corp. v. Gilbert, 330 U. S. 501,
507-508 (1947); and it may act sua sponte to dismiss a suit for failure to
prosecute, Link, supra, at 630-631.
    Because of their very potency, inherent powers must be exercised with
restraint and discretion.  See Roadway Express, supra, at 764.  A primary
aspect of that discretion is the ability to fashion an appropriate sanction
for conduct which abuses the judicial process.  As we recognized in Roadway
Express, outright dismissal of a lawsuit, which we had upheld in Link, is a
particularly severe sanction, yet is within the court's discretion.  447 U.
S., at 765.  Consequently, the "less severe sanction" of an assessment of
attorney's fees is undoubtedly within a court's inherent power as well.
Ibid.  See also Hutto v. Finney, 437 U. S. 678, 689, n. 14 (1978).
    Indeed, "[t]here are ample grounds for recognizing . . . that in
narrowly defined circumstances federal courts have inherent power to assess
attorney's fees against counsel," Roadway Express, supra, at 765, even
though the so-called "American Rule" prohibits fee-shifting in most cases.
See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 259
(1975).  As we explained in Alyeska, these exceptions fall into three
categories. {9}  The first, known as the "common fund exception," derives
not from a court's power to control litigants, but from its historic equity
jurisdiction, see Sprague v. Ticonic National Bank, 307 U. S. 161, 164
(1939), and allows a court to award attorney's fees to a party whose
litigation efforts directly benefit others.  Alyeska, 421 U. S., at
257-258.  Second, a court may assess attorney's fees as a sanction for the
" `willful disobedience of a court order.' "  Id., at 258 (quoting
Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U. S. 714, 718
(1967)).  Thus, a court's discretion to determine "[t]he degree of
punishment for contempt" permits the court to impose as part of the fine
attorney's fees representing the entire cost of the litigation.  Toledo
Scale Co. v. Computing Scale Co., 261 U. S. 399, 428 (1923).
    Third, and most relevant here, a court may assess attorney's fees when
a party has " `acted in bad faith, vexatiously, wantonly, or for oppressive
reasons.' "  Alyeska, supra, at 258-259 (quoting F. D. Rich Co. v. United
States ex rel. Industrial Lumber Co., 417 U. S. 116, 129 (1974)).  See also
Hall v. Cole, 412 U. S. 1, 5 (1973); Newman v. Piggie Park Enterprises,
Inc., 390 U. S. 400, 402, n. 4 (1968) (per curiam).  In this regard, if a
court finds "that fraud has been practiced upon it, or that the very temple
of justice has been defiled," it may assess attorney's fees against the
responsible party, Universal Oil, supra, at 580, as it may when a party
"shows bad faith by delaying or disrupting the litigation or by hampering
enforcement of a court order,"  {10} Hutto, 437 U. S., at 689, n. 14.  The
imposition of sanctions in this instance transcends a court's equitable
power concerning relations between the parties and reaches a court's
inherent power to police itself, thus serving the dual purpose of
"vindicat[ing] judicial authority without resort to the more drastic
sanctions available for contempt of court and mak[ing] the prevailing party
whole for expenses caused by his opponent's obstinacy."  Ibid.

B
    We discern no basis for holding that the sanctioning scheme of the
statute and the rules displaces the inherent power to impose sanctions for
the bad-faith conduct described above.  These other mechanisms, taken alone
or together, are not substitutes for the inherent power, for that power is
both broader and narrower than other means of imposing sanctions.  First,
whereas each of the other mechanisms reaches only certain individuals or
conduct, the inherent power extends to a full range of litigation abuses.
At the very least, the inherent power must continue to exist to fill in the
interstices.  Even the dissent so concedes.  See post, at 5.  Second, while
the narrow exceptions to the American Rule effectively limit a court's
inherent power to impose attorney's fees as a sanction to cases in which a
litigant has engaged in bad-faith conduct or willful disobedience of a
court's orders, many of the other mechanisms permit a court to impose
attorney's fees as a sanction for conduct which merely fails to meet a
reasonableness standard.  Rule 11, for example, imposes an objective
standard of reasonable inquiry which does not mandate a finding of bad
faith. {11}  See Business Guides, Inc. v. Chromatic Communications
Enterprises, Inc., 498 U. S. ---, --- (1991) (slip op. at 15).
    It is true that the exercise of the inherent power of lower federal
courts can be limited by statute and rule, for "[t]hese courts were created
by act of Congress."  Robinson, 19 Wall., at 511.  Nevertheless, "we do not
lightly assume that Congress has intended to depart from established
principles" such as the scope of a court's inherent power.  Weinberger v.
Romero-Barcelo, 456 U. S. 305, 313 (1982); see also Link, 370 U. S., at
631-632.  In Alyeska we determined that "Congress ha[d] not repudiated the
judicially fashioned exceptions" to the American Rule, which were founded
in the inherent power of the courts.  421 U. S., at 260.  Nothing since
then has changed that assessment, {12} and we have thus reaffirmed the
scope and the existence of the exceptions since the most recent amendments
to MDRV 1927 and Rule 11, the other sanctioning mechanisms invoked by NASCO
here.  See Pennsylvania v. Delaware Valley Citizens' Council for Clean Air,
478 U. S. 546, 561-562, and n. 6 (1986).  As the Court of Appeals
recognized, 894 F. 2d, at 702, the amendment to MDRV 1927 allowing an
assessment of fees against an attorney says nothing about a court's power
to assess fees against a party.  Likewise, the Advisory Committee Notes on
the 1983 Amendment to Rule 11, 28 U. S. C. App., p. 575, declare that the
Rule "build[s] upon and expand[s] the equitable doctrine permitting the
court to award expenses, including attorney's fees, to a litigant whose
opponent acts in bad faith in instituting or conducting litigation," citing
as support this Court's decisions in Roadway Express and Hall. {13}  Thus,
as the Court of Appeals for the Ninth Circuit has recognized, Rule 11 "does
not repeal or modify existing authority of federal courts to deal with
abuses . . . under the court's inherent power."  Zaldivar v. Los Angeles,
780 F. 2d 823, 830 (CA9 1986).
    The Court's prior cases have indicated that the inherent power of a
court can be invoked even if procedural rules exist which sanction the same
conduct.  In Link, it was recognized that a federal district court has the
inherent power to dismiss a case sua sponte for failure to prosecute, even
though the language of Federal Rule of Civil Procedure 41(b) appeared to
require a motion from a party:

"The authority of a court to dismiss sua sponte for lack of prosecution has
generally been considered an `inherent power,' governed not by rule or
statute but by the control necessarily vested in courts to manage their own
affairs so as to achieve the orderly and expeditious disposition of cases.
That it has long gone unquestioned is apparent not only from the many state
court decisions sustaining such dismissals, but even from language in this
Court's opinion in Redfield v. Ystalyfera Iron Co., 110 U. S. 174, 176.  It
also has the sanction of wide usage among the District Courts.  It would
require a much clearer expression of purpose than Rule 41(b) provides for
us to assume that it was intended to abrogate so well-acknowledged a
proposition."  370 U. S., at 630-632 (footnotes omitted).


    In Roadway Express, a party failed to comply with dis covery orders and
a court order concerning the schedule for filing briefs.  447 U. S., at
755.  After determining that MDRV 1927, as it then existed, would not allow
for the assessment of attorney's fees, we remanded the case for a
consideration of sanctions under both Federal Rule of Civil Procedure 37
and the court's inherent power, while recognizing that invocation of the
inherent power would require a finding of bad faith. {14}  Id., at 767.
    There is, therefore, nothing in the other sanctioning mechanisms or
prior cases interpreting them that warrants a conclusion that a federal
court may not, as a matter of law, resort to its inherent power to impose
attorney's fees as a sanction for bad-faith conduct.  This is plainly the
case where the conduct at issue is not covered by one of the other
sanctioning provisions.  But neither is a federal court forbidden to
sanction bad-faith conduct by means of the inherent power simply because
that conduct could also be sanctioned under the statute or the rules.  A
court must, of course, exercise caution in invoking its inherent power, and
it must comply with the mandates of due process, both in determining that
the requisite bad faith exists and in assessing fees, see Roadway Express,
supra, at 767.  Furthermore, when there is bad faith conduct in the course
of litigation that could be adequately sanctioned under the rules, the
court ordinarily should rely on the rules rather than the inherent power.
But if in the informed discretion of the court, neither the statute nor the
rules are up to the task, the court may safely rely on its inherent power.
    Like the Court of Appeals, we find no abuse of discretion in resorting
to the inherent power in the circumstances of this case.  It is true that
the District Court could have employed Rule 11 to sanction Chambers for
filing "false and frivolous pleadings," 124 F. R. D., at 138, and that some
of the other conduct might have been reached through other rules.  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 address.  In circumstances such as these in which all
of a litigant's conduct is deemed sanctionable, requiring a court first to
apply rules and statutes containing sanctioning provisions to discrete
occurrences before invoking 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.
See, e. g., Advisory Committee Notes on the 1983 Amendment to Rule 11, 28
U. S. C. App., pp. 575-576.
    We likewise do not find that the District Court's reliance on the
inherent power thwarted the purposes of the other sanctioning mechanisms.
Although the dissent makes much of the fact that Rule 11 and Rule 26(g)
"are cast in mandatory terms," post, at 6, the mandate of these provisions
extends only to whether a court must impose sanctions, not to which
sanction it must impose.  Indeed, the language of both rules requires only
that a court impose "an appropriate sanction."  Thus, this case is
distinguishable from Bank of Nova Scotia v. United States, 487 U. S. 250
(1988), in which this Court held that a district court could not rely on
its supervisory power as a means of circumventing the clear mandate of a
procedural rule.  Id., at 254-255.

III
    Chambers asserts that even if federal courts can use their inherent
power to assess attorney's fees as a sanction in some cases, they are not
free to do so when they sit in diversity, unless the applicable state law
recognizes the "bad-faith" exception to the general rule against fee
shifting.  He relies on footnote 31 in Alyeska, in which we stated with
regard to the exceptions to the American Rule that "[a] very different
situation is presented when a federal court sits in a diversity case.
`[I]n an ordinary diversity case where the state law does not run counter
to a valid federal statute or rule of court, and usually it will not, state
law denying the right to attorney's fees or giving a right thereto, which
reflects a substantial policy of the state, should be followed.'  6 J.
Moore, Federal Practice MDRV 54.77[2], pp. 1712-1713 (2d ed. 1974)
(footnotes omitted)."  421 U. S., at 259, n. 31.
    We agree with NASCO that Chambers has misinterpreted footnote 31.  The
limitation on a court's inherent power described there 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.  That was precisely the issue in People of Sioux County v.
National Surety Co., 276 U. S. 238 (1928), the only case cited in footnote
31.  There, a state statute mandated that in actions to enforce an
insurance policy, the court was to award the plaintiff a reasonable
attorney's fee.  See id., at 242, and n. 2.  In enforcing the statute, the
Court treated the provision as part of a statutory liability which created
a substantive right.  Id., at 241-242.  Indeed, Alyeska itself concerned
the substantive nature of the public policy choices involved in deciding
whether vindication of the rights afforded by a particular statute is
important enough to warrant the award of fees.  See 421 U. S., at 260-263.
    Only when there is a conflict between state and federal substantive law
are the concerns of Erie R. Co. v. Tompkins, 304 U. S. 64 (1938), at issue.
As we explained in Hanna v. Plumer, 380 U. S. 460 (1965), the "outcome
determinative" test of Erie and Guaranty Trust Co. v. York, 326 U. S. 99
(1945), "cannot be read without reference to the twin aims of the Erie
rule: discouragement of forum-shopping and avoidance of inequitable
administration of the laws."  380 U. S., at 468.  Despite Chambers'
protestations to the contrary, neither of these twin aims is implicated by
the assessment of attorney's fees as a sanction for bad-faith conduct
before the court which involved disobedience of the court's orders and the
attempt to defraud the court itself.  In our recent decision in Business
Guides, Inc. v. Chromatic Communications Enterprises, Inc., 498 U. S., at
--- (slip op., at 19), we stated, "Rule 11 sanctions do not constitute the
kind of fee shifting at issue in Alyeska [because they] are not tied to the
outcome of litigation; the relevant inquiry is whether a specific filing
was, if not successful, at least well founded."  Likewise, the imposition
of sanctions under the bad-faith exception depends not on which party wins
the lawsuit, but on how the parties conduct themselves during the
litigation.  Consequently, there is no risk that the exception will lead to
forum-shopping.  Nor is it inequitable to apply the exception to citizens
and noncitizens alike, when the party, by controlling his or her conduct in
litigation, has the power to determine whether sanctions will be assessed.
As the Court of Appeals expressed it, "Erie guarantees a litigant that if
he takes his state law cause of action to federal court, and abides by the
rules of that court, the result in his case will be the same as if he had
brought it in state court.  It does not allow him to waste the court's time
and resources with cantankerous conduct, even in the unlikely event a state
court would allow him to do so."  894 F. 2d, at 706.
    As Chambers has recognized, see Brief for Petitioner 15, in the case of
the bad-faith exception to the American Rule, "the underlying rationale of
`fee shifting' is, of course, punitive."  Hall, 412 U. S., at 4-5.  Cf.
Pavelic & LeFlore v. Marvel Entertainment Group, 493 U. S. 120, 126 (1989).
"[T]he award of attorney's fees for bad faith serve[s] the same purpose as
a remedial fine imposed for civil contempt," because "[i]t vindicate[s] the
District Court's authority over a recalcitrant litigant."  Hutto, 437 U.
S., at 691.  "That the award ha[s] a compensatory effect does not in any
event distinguish it from a fine for civil contempt, which also compensates
a private party for the consequences of a contemnor's disobedience."  {15}
Id., at 691, n. 17.
    Chambers argues that because the primary purpose of the sanction is
punitive, assessing attorney's fees violates the State's prohibition on
punitive damages.  Under Louisiana law, there can be no punitive damages
for breach of contract, even when a party has acted in bad faith in
breaching the agreement.  Lancaster v. Petroleum Corp. of Delaware, 491 So.
2d 768, 779 (La. App. 1986).  Cf. La. Civ. Code Ann., Art. 1995 (West
1987).  Indeed, "as a general rule attorney's fees are not allowed a
successful litigant in Louisiana except where authorized by statute or by
contract."  Rutherford v. Impson, 366 So. 2d 944, 947 (La. App. 1978).  It
is clear, though, that this general rule focuses on the award of attorney's
fees because of a party's success on the underlying claim.  Thus, in Frank
L. Beier Radio, Inc. v. Black Gold Marine, Inc., 449 So. 2d 1014 (La.
1984), the state court considered the scope of a statute which permitted an
award of attorney's fees in a suit seeking to collect on an open account.
Id., at 1015.  This substantive state policy is not implicated here, where
sanctions were imposed for conduct during the litigation.
    Here the District Court did not attempt to sanction petitioner for
breach of contract, {16} but rather imposed sanctions for the fraud he
perpetrated on the court and the bad faith he displayed toward both his
adversary and the court throughout the course of the litigation. {17}  See
124 F. R. D., at 123, 143.  We agree with the Court of Appeals that "[w]e
do not see how the district court's inherent power to tax fees for that
conduct can be made subservient to any state policy without transgressing
the boundaries set out in Erie, Guaranty Trust Co., and Hanna," for
"[f]ee-shifting here is not a matter of substantive remedy, but of
vindicating judicial authority."  894 F. 2d, at 705.

IV
    We review a court's imposition of sanctions under its inherent power
for abuse of discretion.  Link, 370 U. S., at 633; see also Cooter & Gell
v. Hartmarx Corp., 496 U. S. ---, --- (1990) (slip op., at 17-18) (Rule
11).  Based on the circumstances of this case, we find that 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.
    Relying on cases imposing sanctions under Rule 11, {18} Chambers
proffers five criteria for imposing attorney's fees as a sanction under a
court's inherent power, and argues that the District Court acted improperly
with regard to each of them.  First, he asserts that sanctions must be
timely in order to have the desired deterrent affect, and that the
postjudgment sanction imposed here fails to achieve that aim.  As NASCO
points out, however, we have made clear that, even under Rule 11, sanctions
may be imposed years after a judgment on the merits. {19}  Id., at ---
(slip op., at 9).  Interrupting the proceedings on the merits to conduct
sanctions hearings may serve only to reward a party seeking delay.  More
importantly, while the sanction was not assessed until the conclusion of
the litigation, Chambers received repeated timely warnings both from NASCO
and the court that his conduct was sanctionable.  Cf. Thomas v. Capital
Security Services, Inc., 836 F. 2d 866, 879-881 (CA5 1988) (en banc).
Consequently, the District Court's reliance on the inherent power did not
represent an end run around the notice requirements of Rule 11.  The fact
that Chambers obstinately refused to be deterred does not render the
District Court's action an abuse of discretion.
    Second, Chambers claims that the fact that the entire amount of fees
was awarded means that the District Court failed to tailor the sanction to
the particular wrong.  As NASCO points out, however, the District Court
concluded that full attorney's fees were warranted due to the frequency and
severity of Chambers' abuses of the judicial system and the resulting need
to ensure that such abuses were not repeated. {20}  Indeed, the court found
Chambers' actions were "part of [a] sordid scheme of deliberate misuse of
the judicial process" designed "to defeat NASCO's claim by harassment,
repeated and endless delay, mountainous expense and waste of financial
resources."  124 F. R. D., at 128.  It was within the court's discretion to
vindicate itself and compensate NASCO by requiring Chambers to pay for all
attorney's fees.  Cf. Toledo Scale, 261 U. S., at 428.
    Third, Chambers maintains that the District Court abused its discretion
by failing to require NASCO to mitigate its expenses.  He asserts that had
NASCO sought summary disposition of the case, the litigation could have
been concluded much sooner.  But, as NASCO notes, 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, Chambers challenges the District Court's imposition of
sanctions for conduct before other tribunals, including the FCC, the Court
of Appeals, and this Court, asserting that a court may sanction only
conduct occurring in its presence.  Our cases are to the contrary, however.
As long as a party receives an appropriate hearing, as did Chambers, see
124 F. R. D., at 141, n. 11, the party may be sanctioned for abuses of
process occurring beyond the courtroom, such as disobeying the court's
orders.  See Young, 481 U. S., at 798; Toledo Scale, supra, at 426-428.
Here, for example, Chambers' attempt to gain the FCC's permission to build
a new transmission tower was in direct contravention of the District
Court's orders to maintain the status quo pending the outcome of the
litigation, and was therefore within the scope of the District Court's
sanctioning power.
    Finally, Chambers claims the award is not "personalized," because the
District Court failed to conduct any inquiry into whether he was personally
responsible for the challenged conduct.  This assertion is flatly
contradicted by the District Court's detailed factual findings concerning
Chambers' involvement in the sequence of events at issue.  Indeed, the
court specifically held that "the extraordinary amount of costs and
expenses expended in this proceeding were caused not by lack of diligence
or any delays in the trial of this matter by NASCO, NASCO's counsel or the
Court, but solely by the relentless, repeated fraudulent and brazenly
unethical efforts of Chambers" and the others.  124 F. R. D., at 136.  The
Court of Appeals saw no reason to disturb this finding.  894 F. 2d, at 706.
Neither do we.
    For the foregoing reasons, the judgment of the Court of Appeals for the
Fifth Circuit is

Affirmed.


 
 
 
 
 

------------------------------------------------------------------------------
1
    The facts recited here are taken from the findings of the District
Court, which were not disturbed by the Court of Appeals.

2
    The trial date itself reflected delaying tactics.  Trial had been set
for February 1985, but in January, Gray, on behalf of Chambers, filed a
motion to recuse the judge.  The motion was denied, as was the subsequent
writ of mandamus filed in the Court of Appeals.

3
    To make his point clear, the District Judge gave counsel copies of
Judge Schwarzer's then-recent article, Sanctions Under the New Federal Rule
11 -- A Closer Look, 104 F. R. D. 181 (1985).

4
    Gray had resigned as counsel for Chambers and CTR several months
previously.

5
    In calculating the award, the District Court deducted the amounts
previously awarded as compensatory damages for contempt, as well as the
amount awarded as appellate sanctions.  124 F. R. D., at 133-134.
    The court also sanctioned other individuals, who are not parties to the
action in this Court.  Chambers' sister, the trustee, was sanctioned by a
reprimand; attorney Gray was disbarred and prohibited from seeking
readmission for three years; attorney Richard A. Curry, who represented the
trustee, was suspended from practice before the court for six months; and
attorney McCabe was suspended for five years.  Id., at 144-146.  Although
these sanctions did not affect the bank accounts of these individuals, they
were nevertheless substantial sanctions and were as proportionate to the
conduct at issue as was the monetary sanction imposed on Chambers.  Indeed,
in the case of the disbarment of attorney Gray, the court recognized that
the penalty was among the harshest possible sanctions and one which derived
from its authority to supervise those admitted to practice before it.  See
id., at 140-141.

6
    That statute provides:
    "Any attorney . . . who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to satisfy
personally the excess costs, expenses, and attorneys' fees reasonably
incurred because of such conduct."  28 U. S. C. MDRV 1927.

7
    The court remanded for a reconsideration of the proper sanction for
attorney McCabe.  894 F. 2d, at 708.

8
    A number of the rules provide for the imposition of attorney's fees as
a sanction.  See Fed. Rule Civ. Proc. 11 (certification requirement for
papers), 16(f) (pretrial conferences), 26(g) (certification requirement for
discovery requests), 30(g) (oral depositions), 37 (sanctions for failure to
cooperate with discovery), 56(g) (affidavits accompanying summary judgment
motions).  In some instances, the assessment of fees is one of a range of
possible sanctions, see, e. g., Fed. Rule Civ. Proc. 11, while in others,
the court must award fees, see, e. g., Fed. Rule Civ. Proc. 16(f).  In each
case, the fees that may be assessed are limited to those incurred as a
result of the rule violation.  In the case of Rule 11, however, a violation
could conceivably warrant an imposition of fees covering the entire
litigation, if, for example, a complaint or answer was filed in violation
of the rule.  The court generally may act sua sponte in imposing sanctions
under the rules.

9
    See also Pennsylvania v. Delaware Valley Citizens' Council for Clean
Air, 478 U. S. 546, 561-562, and n. 6 (1986); Summit Valley Industries,
Inc. v. Local 112, United Brotherhood of Carpenters & Joiners of America,
456 U. S. 717, 721 (1982); F. D. Rich Co. v. United States ex rel.
Industrial Lumber Co., 417 U. S. 116, 129-130 (1974).

10
    In this regard, the bad-faith exception resembles the third prong of
Rule 11's certification requirement, which mandates that a signer of a
paper filed with the court warrant that the paper "is not interposed for
any improper purpose, such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation."

11
    Indeed, Rule 11 was amended in 1983 precisely because the subjective
bad-faith standard was difficult to establish and courts were therefore
reluctant to invoke it as a means of imposing sanctions.  See Advisory
Committee Notes on the 1983 Amendment to Rule 11, 18 U. S. C. App., pp.
575-576.  Consequently, there is little risk that courts will invoke their
inherent power "to chill the advocacy of litigants attempting to vindicate
all other important federal rights."  See post, at 9.  To the extent that
such a risk does exist, it is no less present when a court invokes Rule 11.
See Cooter & Gell v. Hartmarx Corp., 496 U. S. ---, --- (1990).

12
    Chambers also asserts that all inherent powers are not created equal.
Relying on Eash v. Riggins Trucking Inc., 757 F. 2d 557, 562-563 (CA3 1985)
(en banc), he suggests that inherent powers fall into three tiers: (1)
irreducible powers derived from Article III, which exist despite contrary
legislative direction; (2) essential powers that arise from the nature of
the court, which can be legislatively regulated but not abrogated; and (3)
powers that are necessary only in the sense of being useful, which exist
absent legislation to the contrary.  Brief for Petitioner 17.  Chambers
acknowledges that this Court has never so classified the inherent powers,
and we have no need to do so now.  Even assuming, arguendo, that the power
to shift fees falls into the bottom tier of this alleged hierarchy of
inherent powers, Chambers' argument is unavailing, because we find no
legislative intent to limit the scope of this power.

13
    The Advisory Committee Notes to the 1983 Amendments to other rules
reflect a similar intent to preserve the scope of the inherent power.
While the Notes to Rule 16, 28 U. S. C. App., p. 591, point out that the
sanctioning provisions are designed "to obviate dependence upon Rule 41(b)
or the court's inherent power," there is no indication of an intent to
displace the inherent power, but rather simply to provide courts with an
additional tool by which to control the judicial process.  The Notes to
Rule 26(g), 28 U. S. C. App., p. 622, point out that the rule "makes
explicit the authority judges now have to impose appropriate sanctions and
requires them to use it.  This authority derives from Rule 37, 28 U. S. C.
MDRV 1927, and the court's inherent power."  (Citations omitted).

14
    The decision in Societe Internationale Pour Participations Industri
elles et Commerciales, S.A. v. Rogers, 357 U. S. 197 (1958), is not to the
contrary.  There it was held that the Court of Appeals had erred in relying
on the District Court's inherent power and Rule 41(b), rather than Federal
Rule Civil Procedure 37(b)(2)(iii), in dismissing a complaint for a
plaintiff's failure to comply with a discovery order.  Because Rule 37
dealt specifically with discovery sanctions, id., at 207, there was "no
need" to resort to Rule 41(b), which pertains to trials, or to the court's
inherent power.  Ibid.  Moreover, because individual rules address specific
problems, in many instances it might be improper to invoke one when another
directly applies.  Cf. Zaldivar v. Los Angeles, 780 F. 2d 823, 830 (CA9
1985).

15
    Consequently, Chambers' reformulated argument in his reply brief that
the primary purpose of a fee shift under the bad-faith exception "has
always been compensatory," Reply for Petitioner 15-16, fails utterly.

16
    We therefore express no opinion as to whether the District Court would
have had the inherent power to sanction Chambers for conduct relating to
the underlying breach of contract, or whether such sanctions might
implicate the concerns of Erie.

17
    Contrary to Chambers' assertion, the District Court did not sanction
him for failing to file the requisite papers with the FCC in September
1983, although the District Court did find that this conduct was a
deliberate violation of the agreement and was done "in absolute bad faith,"
124 F. R. D., at 125.  As the court noted, "the allegedly sanctionable acts
were committed in the conduct and trial of the very proceeding in which
sanctions [were] sought," id., at 141, n. 11, and thus the sanctions
imposed "appl[ied] only to sanctionable acts which occurred in connection
with the proceedings in the trial Court," id., at 143.  Although the
fraudulent transfer of assets took place before the suit was filed, it
occurred after Chambers was given notice, pursuant to court rule, of the
pending suit.  Consequently, the sanctions imposed on Chambers were aimed
at punishing not only the harm done to NASCO, but also the harm done to the
court itself.  Indeed, the District Court made clear that it was policing
abuse of its own process when it imposed sanctions "for the manner in which
this proceeding was conducted in the district court from October 14, 1983,
the time that plaintiff gave notice of its intention to file suit."  Id.,
at 123.

18
    See, e. g., In re Kunstler, 914 F. 2d 505 (CA4 1990), cert. denied, 499
U. S. --- (1991); White v. General Motors Corp., Inc., 908 F. 2d 675 (CA10
1990); Thomas v. Capital Security Services, Inc., 836 F. 2d 866 (CA5 1988)
(en banc).

19
    Cf. Advisory Committee Notes on the 1983 Amendment to Rule 11, 28 U. S.
C. App., p. 576 ("The time when sanctions are to be imposed rests in the
discretion of the trial judge.  However, it is anticipated that in the case
of pleadings the sanctions issue under Rule 11 normally will be determined
at the end of the litigation, and in the case of motions at the time when
the motion is decided or shortly thereafter").

20
    In particular, Chambers challenges the assessment of attorney's fees in
connection with NASCO's claim for delay damages and with the closing of the
sale.  As NASCO points out, however, Chambers' bad-faith conduct in the
course of the litigation caused the delay for which damages were sought and
greatly complicated the closing of the sale, through the cloud on the title
caused by the fraudulent transfer.





Subject: 90-256 -- DISSENT, CHAMBERS v. NASCO, INC.

 


    SUPREME COURT OF THE UNITED STATES


No. 90-256



G. RUSSELL CHAMBERS, PETITIONER v.
NASCO, INC.


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

[June 6, 1991]




    Justice Scalia, dissenting.

    I agree with the Court that Article III courts, as an independent and
coequal Branch of Government, derive from the Constitution itself, once
they have been created and their jurisdiction established, the authority to
do what courts have traditionally done in order to accomplish their
assigned tasks.  Some elements of that inherent authority are so essential
to "[t]he judicial Power," U. S. Const., Art. III, MDRV 1, that they are
indefeasible, among which is a court's ability to enter orders protecting
the integrity of its proceedings.


    "Certain implied powers must necessarily result to our Courts of
justice from the nature of their institution. . . .  To fine for contempt
-- imprison for contumacy -- inforce the observance of order, &c. are
powers which cannot be dispensed with in a Court, because they are
necessary to the exercise of all others: and so far our Courts no doubt
possess powers not immediately derived from statute . . . ."  United States
v. Hudson, 7 Cranch 32, 34 (1812).


    I think some explanation might be useful regarding the "bad faith"
limitation that the Court alludes to today, see ante, at 13.  Since
necessity does not depend upon a litigant's state of mind, the inherent
sanctioning power must extend to situations involving less than bad faith.
For example, a court has the power to dismiss when counsel fails to appear
for trial, even if this is a consequence of negligence rather than bad
faith.


"The authority of a court to dismiss sua sponte for lack of prosecution has
generally been considered an `inherent power,' governed not by rule or
statute but by the control necessarily vested in courts to manage their own
affairs so as to achieve the orderly and expeditious disposition of cases."
Link v. Wabash R. Co., 370 U. S. 626, 630-631 (1962).


However, a "bad-faith" limitation upon the particular sanction of
attorney's fees derives from our jurisprudence regarding the so-called
American Rule, which provides that the prevailing party must bear his own
attorney's fees, and cannot have them assessed against the loser.  See
Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 247
(1975).  That rule, "deeply rooted in our history and in congressional
policy," id., at 271, prevents a court (without statutory authorization)
from engaging in what might be termed substantive fee-shifting, that is,
fee-shifting as part of the merits award.  It does not in principle bar
fee-shifting as a sanction for procedural abuse, see id., at 258-259.  We
have held, however -- in my view as a means of preventing erosion or
evasion of the American Rule -- that even fee-shifting as a sanction can
only be imposed for litigation conduct characterized by bad faith.  See
Roadway Express, Inc. v. Piper, 447 U. S. 752, 766 (1980).  But that in no
way means that all sanctions imposed under the courts' inherent authority
require a finding of bad faith.  They do not.  See Redfield v. Ystalyfera
Iron Co., 110 U. S. 174, 176 (1884) (dismissal appropriate for unexcused
delay in prosecution); cf. Link, supra.

    Just as Congress may to some degree specify the manner in which the
inherent or constitutionally assigned powers of the President will be
exercised, so long as the effectiveness of those powers is not impaired,
cf. Myers v. United States, 272 U. S. 52, 128 (1926), so also Congress may
prescribe the means by which the courts may protect the integrity of their
proceedings.  A court must use the prescribed means unless for some reason
they are inadequate.  In the present case they undoubtedly were.  Justice
Kennedy concedes that some of the impairments of the District Court's
proceedings in the present case were not sanctionable under the Federal
Rules.  I have no doubt of a court's authority to go beyond the Rules in
such circumstances.  And I agree with the Court that an overall sanction
resting at least in substantial portion upon the court's inherent power
need not be broken down into its component parts, with the actions
sustainable under the Rules separately computed.  I do not read the Rules
at issue here to require that, and it is unreasonable to import such
needless complication by implication.

    I disagree, however, with the Court's statement that a court's inherent
power reaches conduct "beyond the court's confines" that does not "
`interfer[e] with the conduct of trial,' " ante, at 10 (quoting Young v.
United States ex rel. Vuitton et Fils S. A., 481 U. S. 787, 798 (1987)).
See id., at 819-822 (Scalia, J., concurring in judgment); Bank of Nova
Scotia v. United States, 487 U. S. 250, 264 (1988) (Scalia, J.,
concurring).  I emphatically agree with Justice Kennedy, therefore, that
the District Court here had no power to impose any sanctions for
petitioner's flagrant, bad-faith breach of contract; and I agree with him
that it appears to have done so.  For that reason, I dissent.
------------------------------------------------------------------------------




Subject: 90-256 -- DISSENT, CHAMBERS v. NASCO, INC.

 


    SUPREME COURT OF THE UNITED STATES


No. 90-256


G. RUSSELL CHAMBERS, PETITIONER v.
NASCO, INC.


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

[June 6, 1991]



    Justice Kennedy, with whom The Chief Justice and Justice Souter join,
dissenting.

    Today's decision effects a vast expansion of the power of federal
courts, unauthorized by rule or statute.  I have no doubt petitioner
engaged in sanctionable conduct that warrants severe corrective measures.
But our outrage at his conduct should not obscure the boundaries of settled
legal categories.
    With all respect, I submit the Court commits two fundamental errors.
First, it permits the exercise of inherent sanctioning powers without prior
recourse to controlling rules and statutes, thereby arrogating to federal
courts Congress' power to regulate fees and costs.  Second, the Court
upholds the wholesale shift of respondent's attorney's fees to petitioner,
even though the District Court opinion reveals that petitioner was
sanctioned at least in part for his so-called bad faith breach of contract.
The extension of inherent authority to sanction a party's prelitigation
conduct subverts the American Rule and turns the Erie doctrine upside down
by punishing petitioner's primary conduct contrary to Louisiana law.
Because I believe the proper exercise of inherent powers requires
exhaustion of express sanctioning provisions and much greater caution in
their application to redress pre litigation conduct, I dissent.

I
    The Court's first error lies in its failure to require reliance, when
possible, on the panoply of express sanctioning provisions provided by
Congress.

A
    The American Rule prohibits federal courts from awarding attorney's
fees in the absence of a statute or contract providing for a fee award.
Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 258-259
(1975).  The Rule recognizes that Congress defines the procedural and
remedial powers of federal courts, Sibbach v. Wilson & Co., 312 U. S. 1,
9-10 (1941); McIntyre v. Wood, 7 Cranch 504, 505-506 (1813), and controls
the costs, sanctions, and fines available there, Kaiser Aluminum & Chemical
Corp. v. Bonjorno, 494 U. S. ---, --- (1990) ("[T]he allocation of the
costs accruing from litigation is a matter for the legislature, not the
courts"); Alyeska Pipeline Co., supra, at 262 ("[T]he circumstances under
which attorney's fees are to be awarded and the range of discretion of the
courts in making those awards are matters for Congress to determine").
    By direct action and delegation, Congress has exercised this
constitutional prerogative to provide district courts with a comprehensive
arsenal of Federal Rules and statutes to protect themselves from abuse.  A
district court can punish contempt of its authority, including disobedience
of its process, by fine or imprisonment, 18 U. S. C. MDRV 401; award costs,
expenses, and attorney's fees against attorneys who multiply proceedings
vexatiously, 28 U. S. C. MDRV 1927; sanction a party and/or the party's
attorney for filing groundless pleadings, motions, or other papers, Fed.
Rule Civ. Proc. 11; sanction a party and/or his attorney for failure to
abide by a pretrial order, Fed. Rule Civ. Proc. 16(f); sanction a party
and/or his attorney for baseless discovery requests or objections, Fed.
Rule Civ. Proc. 26(g); award expenses caused by a failure to attend a
deposition or to serve a subpoena on a party to be deposed, Fed. Rule Civ.
Proc. 30(g); award expenses when a party fails to respond to discovery
requests or fails to participate in the framing of a discovery plan, Fed.
Rule Civ. Proc. 37 (d) and (g); dismiss an action or claim of a party that
fails to prosecute, to comply with the Federal Rules, or to obey an order
of the court, Fed. Rule Civ. Proc. 41(b); punish any person who fails to
obey a subpoena, Fed. Rule Civ. Proc. 45(f); award expenses and/or contempt
damages when a party presents an affidavit in a summary judgment motion in
bad faith or for the purpose of delay, Fed. Rule Civ. Proc. 56(g); and make
rules governing local practice that are not inconsistent with the Federal
Rules, Fed. Rule Civ. Proc. 81.  See also 28 U. S. C. MDRV 1912 (power to
award just damages and costs on affirmance); Fed. Rule App. Proc. 38 (power
to award damages and costs for frivolous appeal).
    The Court holds nonetheless that a federal court may ignore these
provisions and exercise inherent power to sanction bad faith misconduct
"even if procedural rules exist which sanction the same conduct."  Ante, at
15.  The Court describes the relation between express sanctioning
provisions and inherent power to shift fees as a sanction for bad faith
conduct in a number of ways.  At one point it states that where "neither
the statute nor the rules are up to the task [i. e., cover all the
sanctionable conduct], the court may safely rely on its inherent power."
Ante, at 16.  At another it says that courts may place exclusive reliance
on inherent authority whenever "conduct sanctionable under the rules was
intertwined within conduct that only the inherent power could address."
Ante, at 16-17.  While the details of the Court's rule remain obscure, its
general approach is clear: When express rules and statutes provided by
Congress do not reach the entirety of a litigant's bad faith conduct,
including conduct occurring before litigation commenced, a district court
may disregard the requirements of otherwise applicable rules and statutes
and instead exercise inherent power to impose sanctions.  The only
limitation on this sanctioning authority appears to be a finding at some
point of "bad faith," a standard the Court fails to define.
    This explanation of the permitted sphere of inherent powers to shift
fees as a sanction for bad faith litigation conduct is as illegitimate as
it is unprecedented.  The American Rule recognizes that the legislature,
not the judiciary, possesses constitutional responsibility for defining
sanctions and fees; the bad faith exception to the Rule allows courts to
assess fees not provided for by Congress "in narrowly defined
circumstances."  Roadway Express, Inc. v. Piper, 447 U. S. 752, 765 (1980).
By allowing courts to ignore express Rules and statutes on point, however,
the Court treats inherent powers as the norm and textual bases of authority
as the exception.  And although the Court recognizes that Congress in
theory may channel inherent powers through passage of sanctioning rules, it
relies on Weinberger v. Romero-Barcelo, 456 U. S. 305 (1982), a decision
that has nothing to do with inherent authority, to create a powerful
presumption against congressional control of judicial sanctions.  Ante, at
13.
    The Court has the presumption backwards.  Inherent powers are the
exception, not the rule, and their assertion requires special justification
in each case.  Like all applications of inherent power, the authority to
sanction bad faith litigation practices can be exercised only when
necessary to preserve the authority of the court.  See Roadway Express,
Inc. v. Piper, supra, at 764 (inherent powers " `are those which are
necessary to the exercise of all others' "); Young v. United States ex rel.
Vuiton et Fils, 481 U. S. 787, 819-820 (1987) (Scalia, J., concurring in
judgment) (inherent powers only those "necessary to permit the courts to
function").
    The necessity limitation, which the Court brushes aside almost without
mention, ante, at 9, prescribes the rule for the correct application of
inherent powers.  Although this case does not require articulation of a
comprehensive definition of the term "necessary," at the very least a court
need not exercise inherent power if Congress has provided a mechanism to
achieve the same end.  Consistent with our unaltered admonition that
inherent powers must be exercised "with great caution," Ex parte Burr, 9
Wheat. 529, 531 (1824), the necessity predicate limits the exercise of
inherent powers to those exceptional instances in which congressionally
authorized powers fail to protect the processes of the Court.  Inherent
powers can be exercised only when necessary, and there is no necessity if a
rule or statute provides a basis for sanctions.  It follows that a district
court should rely on text-based authority derived from Congress rather than
inherent power in every case where the text-based authority applies.
    Despite the Court's suggestion to the contrary, ante, at 14, our cases
recognize that rules and statutes limit the exercise of inherent authority.
In Societe Internationale pour Participations Industrielles et
Commerciales, S. A. v. Rogers, 357 U. S. 197 (1958), we rejected the Court
of Appeals' reliance on inherent powers to uphold a dismissal of a
complaint for failure to comply with a production order.  Noting that
"[r]eliance upon . . . `inherent power' can only obscure analysis of the
problem," we held that "whether a court has power to dismiss a complaint
because of noncompliance with a production order depends exclusively upon
Rule 37."  Id., at 207.  Similarly, in Bank of Nova Scotia v. United
States, 487 U. S. 250, 254 (1988), we held that a federal court could not
invoke its inherent supervisory power to circumvent the harmless error
inquiry prescribed by Fed. Rule Crim. Proc. 52(a).  And Ex parte Robinson,
19 Wall. 505 (1874), the very case the Court cites for the proposition that
" `[t]he power to punish for contempt is inherent in all courts,' " ante,
at 9, held that Congress had defined and limited this inherent power
through enactment of the contempt statute.  "The enactment is a limitation
upon the manner in which the [contempt] power shall be exercised."  19
Wall., at 512.
    The Court ignores these rulings and relies instead on two decisions
which "indicat[e] that the inherent power of a court can be invoked even if
procedural rules exist which sanction the same conduct."  Ante, at 15.  The
"indications" the Court discerns in these decisions do not withstand
scrutiny.  In Roadway Express, Inc. v. Piper, supra, we held that the costs
recoverable under a prior version of 28 U. S. C. MDRV 1927 for discovery
abuse did not include attorney's fees.  In the remand instruction, the
Court mentioned that the District Court might consider awarding attorney's
fees under either Fed. Rule Civ. Proc. 37 or its inherent authority to
sanction bad-faith litigation practices.  447 U. S., at 767-768.  The
decision did not discuss the relation between Rule 37 and the inherent
power of federal courts, and certainly did not suggest that federal courts
could rely on inherent powers to the exclusion of a federal rule on point.
    The Court also misreads Link v. Wabash R. Co., 370 U. S. 626 (1962).
Link held that a Federal District Court possessed inherent power to dismiss
a case sua sponte for failure to prosecute.  The majority suggests that
this holding contravened a prior version of Fed. Rule Civ. Proc. 41(b),
which the Court today states "appeared to require a motion from a party,"
ante, at 14-15 (emphasis added).  Contrary to the Court's characterization,
the holding in Link turned on a determination that Rule 41(b) contained
"permissive language . . . which merely authorizes a motion by the
defendant," 370 U. S., at 630 (emphasis added).  Link reasoned that
"[n]either the permissive language of the Rule . . . nor its policy" meant
that the rule "abrogate[d]" the inherent power of federal courts to dismiss
sua sponte.  The permissive language at issue in Link distinguishes it from
the present context, because some sanctioning provisions, such as Rule 11
and Rule 26(g), are cast in mandatory terms.
    In addition to dismissing some of our precedents and misreading others,
the Court ignores the commands of the Federal Rules of Civil Procedure,
which support the conclusion that a court should rely on rules, and not
inherent powers, whenever possible.  Like the Federal Rules of Criminal
Procedure, the Federal Rules of Civil Procedure are "as binding as any
statute duly enacted by Congress, and federal courts have no more
discretion to disregard the Rule[s'] mandate than they do to disregard
constitutional or statutory provisions."  Bank of Nova Scotia v. United
States, supra, at 255.  See also Fed. Rule Civ. Proc. 1 (Federal Rules
"govern the procedure in the United States district courts in all suits of
a civil nature") (emphasis added).  Two of the most prominent sanctioning
provisions, Rules 11 and 26(g), mandate the imposition of sanctions when
litigants violate the Rules' certification standards.  See Fed. Rule Civ.
Proc. 11 (court "shall impose . . . an appropriate sanction" for violation
of certification standard); Fed. Rule Civ. Proc. 26(g) (same); see also
Business Guides, Inc. v. Chromatic Communications Enterprises, Inc., 498 U.
S. ---, --- (slip op., at 9) (Rule 11 "requires that sanctions be imposed
where a signature is present but fails to satisfy the certification
standard").
    The Rules themselves thus reject the contention that they may be
discarded in a court's discretion.  Disregard of applicable rules also
circumvents the rulemaking procedures in 28 U. S. C. MDRV 2071 et seq.,
which Congress designed to assure that procedural innovations like those
announced today "shall be introduced only after mature consideration of
informed opinion from all relevant quarters, with all the opportunities for
comprehensive and integrated treatment which such consideration affords."
Miner v. Atlass, 363 U. S. 641, 650 (1960).

B
    Upon a finding of bad faith, courts may now ignore any and all textual
limitations on sanctioning power.  By inviting district courts to rely on
inherent authority as a substitute for attention to the careful
distinctions contained in the rules and statutes, today's decision will
render these sources of authority superfluous in many instances.  A number
of pernicious practical effects will follow.
    The Federal Rules establish explicit standards for, and explicit checks
against, the exercise of judicial authority.  Rule 11 provides a useful
illustration.  It requires a district court to impose reasonable sanctions,
including attorneys fees, when a party or attorney violates the
certification standards that attach to the signing of certain legal papers.
A district court must (rather than may) issue sanctions under Rule 11 when
particular individuals (signers) file certain types (groundless,
unwarranted, vexatious) of documents (pleadings, motions and papers).  Rule
11's certification requirements apply to all signers of documents,
including represented parties, see Business Guides, Inc. v. Chromatic
Communications Enterprises, Inc., supra, but law firms are not responsible
for the signatures of their attorneys, see Pavelic & Leflore v. Marvel
Entertainment Group, 493 U. S. 120, --- (1989), and the Rule does not apply
to papers filed in fora other than district courts, see Cooter & Gell v.
Hart marx Corp., 496 U. S. ---, --- (1990).  These definite standards give
litigants notice of proscribed conduct and make possible meaningful review
for misuse of discretion -- review which focuses on the misapplication of
legal standards.  See id., at ---  (slip op., at 15) (misuse of discretion
standard does "not preclude the appellate court's correction of a district
court's legal errors").
    By contrast, courts apply inherent powers without specific definitional
or procedural limits.  True, if a district court wishes to shift attorney's
fees as a sanction, it must make a finding of bad faith to circumvent the
American Rule.  But today's decision demonstrates how little guidance or
limitation the undefined bad faith predicate provides.  The Court states
without elaboration that courts must "comply with the mandates of due
process . . . in determining that the requisite bad faith exists," ante, at
16, but the Court's bad-faith standard, at least without adequate
definition, thwarts the first requirement of due process, namely, that
"[a]ll are entitled to be informed as to what the State commands or
forbids."  Lanzetta v. New Jersey, 306 U. S. 451, 453 (1939).  This
standardless exercise of judicial power may appear innocuous in this
litigation between commercial actors.  But the same unchecked power also
can be applied to chill the advocacy of litigants attempting to vindicate
all other important federal rights.
    In addition, the scope of sanctionable conduct under the bad-faith rule
appears unlimited.  As the Court boasts, "whereas each of the other
mechanisms [in Rules and statutes] reaches only certain individuals or
conduct, the inherent power extends to a full range of litigation abuses."
Ante, at 12.  By allowing exclusive resort to inherent authority whenever
"conduct sanctionable under the rules was intertwined within conduct that
only the inherent power could address," ante, at 16-17, the Court
encourages all courts in the federal system to find bad faith misconduct in
order to eliminate the need to rely on specific textual provisions.  This
will ensure the uncertain development of the meaning and scope of these
express sanctioning provisions by encouraging their disuse, and will
defeat, at least in the area of sanctions, Congress' central goal in
enacting the Federal Rules -- " `uniformity in the federal courts.' "
Hanna v. Plumer, 380 U. S. 460, 472 (1965).  Finally, as Part IV of the
Court's opinion demonstrates, the lack of any legal requirement other than
the talismanic recitation of the phrase "bad faith" will foreclose
meaningful review of sanctions based on inherent authority.  See Cooter &
Gell v. Hart marx Corp., supra, at --- (slip op., at 15).
    Despite these deficiencies, the Court insists that concern about
collateral litigation requires courts to place exclusive reliance on
inherent authority in cases, like this one, which involve conduct
sanctionable under both express provisions and inherent authority:

"In circumstances such as these in which all of a litigants conduct is
deemed santionable, requiring a court first to apply rules and statutes
containing sanctioning provisions to discrete occurrences before invoking
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."  Ante, at 17.

We are bound, however, by the Rules themselves, not their "aim," and the
Rules require that they be applied, in accordance with their terms, to much
of the conduct in this case.  We should not let policy concerns about the
litigation effects of following the Rules distort their clear commands.
    Nothing in the foregoing discussion suggests that the feeshifting and
sanctioning provisions in the Federal Rules and Title 28 eliminate the
inherent power to impose sanctions for certain conduct.  Limitations on a
power do not constitute its abrogation.  Cases can arise in which a federal
court must act to preserve its authority in a manner not provided for by
the Federal Rules or Title 28.  But as the number and scope of rules and
statutes governing litigation misconduct increase, the necessity to resort
to inherent authority -- a predicate to its proper application --  lessens.
Indeed, it is difficult to imagine a case in which a court can, as the
District Court did here, rely on inherent authority as the exclusive basis
for sanctions.

C
    The District Court's own findings concerning abuse of its processes
demonstrate that the sanctionable conduct in this case implicated a number
of rules and statutes upon which it should have relied.  Rule 11 is the
principle provision on point.  The District Court found that petitioner and
his counsel filed a number of "frivolous pleadings" (including "baseless,
affirmative defenses and counterclaims") that contained "deliberate
untruths and fabrications."  NASCO, Inc. v. Calcasieu Television & Radio,
Inc., 124 F. R. D. 120, 127-128, 135 (WD La. 1989).  Rule 11 sanctions
extend to "the person who signed [a paper], a represented party, or both."
The Court thus had a nondefeasible duty to impose sanctions under Rule 11.
    The Court concedes that Rule 11 applied to some of the conduct in this
case, ante, at 15, and even hints that the Rule might have sufficed as a
basis for all of the sanctions imposed, ante, at 8 n. 8.  It fails to
explain, however, why the District Court had the discretion to ignore Rule
11's mandatory language and not impose sanctions under the Rule against
Chambers.  Nor does the Court inform us why Chambers' attorneys were not
sanctioned under Rule 11.  Although the District Court referred to Chambers
as the "strategist" for the abusive conduct, it made plain that
petitioner's attorneys as well as petitioner were responsible for the
tactics.  For example, the District Court stated:

"[Petitioner's] attorneys, without any investigation whatsoever, filed [the
baseless charges and counterclaims].  We find . . . that these attorneys
knew, at the time that they were filed, that they were false." 124 F. R.
D., at 128.

The Court further stressed that "Chambers, through his attorneys, filed
answers and counterclaims . . . which both Chambers and his attorneys knew
were false at the time they were filed."  Id., at 143.  In light of Rule
11's mandatory language, the District Court had a duty to impose at least
some sanctions under Rule 11 against Chambers' attorneys.    The District
Court should have relied as well upon other sources of authority to impose
sanctions.  The Court found that Chambers and his attorneys requested
"[a]bsolutely needless depositions" as well as "continuances of trial
dates, extensions of deadlines and deferments of scheduled discovery" that
"were simply part of the sordid scheme of deliberate misuse of the judicial
process to defeat NASCO's claim by harassment, repeated and endless delay,
mountainous expense and waste of financial resources."  Id., at 128.  The
intentional pretrial delays could have been sanctioned under Fed. Rule Civ.
Proc. 16(f), which enables courts to impose sanctions, including attorney's
fees, when a party or attorney "fails to participate in good faith" in
certain pretrial proceedings; the multiple discovery abuses should have
been redressed by "an appropriate sanction, . . . including a rea sonable
attorney's fee," under Fed. Rule Civ. Proc. 26(g).  The District Court also
could have sanctioned Chambers and his attorneys for the various bad-faith
affidavits they presented in their summary judgment motions, see 124 F. R.
D., at 128, 135, under Fed. R. Civ. P. 56(g), a Rule that permits the award
of expenses and attorney's fees and the additional sanction of contempt.
In addition, the District Court could have relied to a much greater extent
on 18 U. S. C. MDRV 401 to punish the "contempt of its authority" and
"[d]isobedience . . . to its . . . process" that petitioner and his counsel
displayed throughout the proceedings.
    Finally, the District Court was too quick to dismiss reliance on 28 U.
S. C. MDRV 1927, which allows it to award costs and attorney's fees against
an "attorney . . . who . . . multiplies the proceedings in any case
unreasonably and vexatiously."  The District Court refused to apply the
provision because it did not reach petitioner's conduct as a nonattorney.
124 F. R. D., at 138-139.  While the District Court has discretion not to
apply MDRV 1927, it cannot disregard the statute in the face of attorney
misconduct covered by that provision to rely instead on inherent powers
which by definition can be invoked only when necessary.

II
    When a District Court imposes sanctions so immense as here under a
power so amorphous as inherent authority, it must ensure that its order is
confined to conduct under its own authority and jurisdiction to regulate.
The District Court failed to discharge this obligation, for it allowed
sanctions to be awarded for petitioner's prelitigation breach of contract.
The majority, perhaps wary of the District Court's authority to extend its
inherent power to sanction prelitigation conduct, insists that "the
District Court did not attempt to sanction petitioner for breach of
contract, but rather imposed sanctions for the fraud he perpetrated on the
court and the bad faith he displayed toward both his adversary and the
Court throughout the course of the litigation."  Ante, at 20 (footnote
omitted).  Based on this premise, the Court appears to disclaim that its
holding reaches prelitiga tion conduct.  Ante, at 20, and nn. 16-17.  This
does not make the opinion on this point correct, of course, for the
District Court's opinion, in my view, sanctioned petitioner's prelitigation
conduct in express terms.  Because I disagree with the Court's
characterization of the District Court opinion, and because I believe the
Court's casual analysis of inherent authority portends a dangerous
extension of that authority to prelitigation conduct, I explain why
inherent authority should not be so extended and why the District Court's
order should be reversed.
    The District Court's own candid and extensive opinion reveals that the
bad faith for which petitioner was sanctioned extended beyond the
litigation tactics and comprised as well what the District Court considered
to be bad faith in refusing to perform the underlying contract three weeks
before the lawsuit began.  The Court made explicit reference, for instance,
to "this massive and absolutely unnecessary lawsuit forced on NASCO by
Chambers' arbitrary and arrogant refusal to honor and perform this
perfectly legal and enforceable contract."  124 F. R. D., at 136.  See also
id., at 143 ("Chambers arbitrarily and without legal cause refused to
perform, forcing NASCO to bring its suit for specific performance"); ibid.
("Chambers, knowing that NASCO had a good and valid contract, hired Gray to
find a defense and arbitrarily refused to perform, thereby forcing NASCO to
bring its suit for specific performance and injunctive relief"); id., at
125 (petitioner's "unjustified and arbitrary refusal to file" the FCC
application "was in absolute bad faith").  The District Court makes the
open and express concession that it is sanctioning petitioner for his
breach of contract:

"[T]he balance of . . . fees and expenses included in the sanctions, would
not have been incurred by NASCO if Chambers had not defaulted and forced
NASCO to bring this suit.  There is absolutely no reason why Chambers
should not reimburse in full all attorney's fees and expenses that NASCO,
by Chambers' action, was forced to pay."  Id., at 143.

The trial court also explained that "[t]he attorney's fees and expenses
charged to NASCO by its attorneys . . . flowed from and were a direct
result of this suit.  We shall include them in the attorney's fees
sanctions."  Id., at 142 (emphasis added).
    Despite the Court's equivocation on the subject, ante, at 20, n. 16, it
is impermissible to allow a District Court acting pursuant to its inherent
authority to sanction such prelitiga tion primary conduct.  A Court's
inherent authority extends only to remedy abuses of the judicial process.
By contrast, awarding damages for a violation of a legal norm, here the
binding obligation of a legal contract, is a matter of substantive law, see
Marek v. Chesny, 473 U. S. 1, 35 (1985) ("right to attorney's fees is
`substantive' under any reasonable definition of that term"); see also
Alyeska, 421 U. S., at 260-261, and n. 33, which must be defined either by
Congress (in cases involving federal law), or by the States (in diversity
cases).
    The American Rule recognizes these principles.  It bars a federal court
from shifting fees as a matter of substantive policy, but its bad faith
exception permits fee shifting as a sanction to the extent necessary to
protect the judicial process.  The Rule protects each person's right to go
to federal court to define and to vindicate substantive rights.  "[S]ince
litigation is at best uncertain one should not be penalized for merely
defending or prosecuting a lawsuit."  Fleischmann Distilling Corp. v. Maier
Brewing Co., 386 U. S. 714, 718 (1967).  When a federal court, through
invocation of its inherent powers, sanctions a party for bad-faith
prelitigation conduct, it goes well beyond the exception to the American
Rule and violates the Rule's careful balance between open access to the
federal court system and penalties for the willful abuse of it.
    By exercising inherent power to sanction prelitigation conduct, the
District Court exercised authority where Congress gave it none.  The
circumstance that this exercise of power occurred in a diversity case
compounds the error.  When a federal court sits in diversity jurisdiction,
it lacks constitutional authority to fashion rules of decision governing
primary contractual relations.  See Erie R. Co.. v. Tompkins, 304 U. S. 64,
78 (1938); Hanna v. Plumer, 380 U. S., at 471-472.  See generally Ely, The
Irrepressible Myth of Erie, 87 Harv. L. Rev. 693, 702-706 (1974).  The Erie
principle recognizes that "[e]xcept in matters governed by the Federal
Constitution or by Acts of Congress, the law to be applied in any
[diversity] case is the law of the State."  304 U. S., at 78.  The inherent
power exercised here violates the fundamental tenet of federalism announced
in Erie by regulating primary behavior that the Constitution leaves to the
exclusive province of States.
    The full effect of the District Court's encroachment on State
prerogatives can be appreciated by recalling that the rationale for the bad
faith exception is punishment.  Hall v. Cole, 412 U. S. 1, 5 (1973).  To
the extent that the District Court imposed sanctions by reason of the
so-called bad-faith breach of contract, its decree is an award of punitive
damages for the breach.  Louisiana prohibits punitive damages "unless
expressly authorized by statute," International Harvester Credit Corp. v.
Seale, 518 So. 2d 1039, 1041 (La. 1988); and no Louisiana statute
authorizes attorney's fees for breach of contract as a part of damages in
an ordinary case.  Ogea v. Loffland Brother Co., 622 F. 2d 186, 190 (CA5
1980); Rutherford v. Impson, 366 So. 2d 944, 947 (La. App. 1978).  One
rationale for Louisiana's policy is its determination that "an award of
compensatory damages will serve the same deterrent purpose as an award of
punitive damages."  Ricard v. State, 390 So. 2d 882, 886 (La. 1980).  If
respondent had brought this suit in state court he would not have recovered
extra damages for breach of contract by reason of the socalled willful
character of the breach.  Respondent's decision to bring this suit in
federal rather than state court resulted in a significant expansion of the
substantive scope of his remedy.  This is the result prohibited by Erie and
the principles that flow from it.
    As the Court notes, ante, at 20-21, n. 17, there are some passages in
the District Court opinion suggesting its sanctions were confined to
litigation conduct.  See ante, at 20-21, n. 17.  ("[T]he sanctions imposed
`appl[ied] only to sanc tionable acts which occurred in connection with the
proceedings in the trial Court' ").  But these passages in no way
contradict the other statements by the trial court which make express
reference to prelitigation conduct.  At most, these passages render the
court's order ambiguous, for the District Court appears to have adopted an
expansive definition of "acts which occurred in connection with" the
litigation.  There is no question but that some sanctionable acts did occur
in court.  The problem is that the District Court opinion avoids any clear
delineation of the acts being sanctioned and the power invoked to do so.
This confusion in the premises of the District Court's order highlights the
mischief caused by reliance on undefined inherent powers rather than on
Rules and statutes that proscribe particular behavior.  The ambiguity of
the scope of the sanctionable conduct cannot be resolved against petitioner
alone, who, despite the conceded bad-faith conduct of his attorneys, has
been slapped with all of respondent's not inconsiderable attorney's fees.
At the very least, adherence to the rule of law requires the case to be
remanded to the District Court for clarification on the scope of the
sanctioned conduct.

III
    My discussion should not be construed as approval of the behavior of
petitioner and his attorneys in this case.  Quite the opposite.  Our Rules
permit sanctions because much of the conduct of the sort encountered here
degrades the profession and disserves justice.  District courts must not
permit this abuse and must not hesitate to give redress through the Rules
and statutes prescribed.  It may be that the District Court could have
imposed the full million dollar sanction against petitioner through
reliance on federal Rules and statutes, as well as on a proper exercise of
its inherent authority.  But we should remand here because a federal court
must decide cases based on legitimate sources of power.  I would reverse
the Court of Appeals with instructions to remand to the District Court for
a reassessment of sanctions consistent with the principles here set forth.
For these reasons, I dissent.

 
 
 
 
 
------------------------------------------------------------------------------
