Opposition Brief — Chambers v. Nasco, Inc.

* 7 * 9 e r 12

. Ry yee ES Pe IE yO AR Bg

In the

Supreme Court of the United States

OCTOBER TERM, 1990

G. RUSSELL CHAMBERS,

Petitioner

Versus

NASCO, INC.,

Respondent

ON PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

RESPONDENT’S BRIEF IN OPPOSITIGN

AUBREY B. HARWELL, JR. JOHN B. SCOFIELD

JON D. ROSS DAVID L. HOSKINS*

NEAL & HARWELL SCOFIELD, GERARD, VERON,

2000 One Nashville Place HOSKINS & SOILEAU

150 4th Avenue North P.O. Drawer 3028

Nashville, TN 37219 Lake Charles, LA 70602

(615) 244-1713 (319) 433-9436

Attorneys for Respondents

*Counsel of Record

eS

A B Letter Service, Inc., 327 Chartres St., New Orleans, La. (504) 581-5555

i

QUESTIONS PRESENTED FOR REVIEW

Given that a United States District Court possesses the

inherent power to sanction parties for egregious miscon-

duct in the course of litigation that is obstructive of

justice, is the arsenal of available sanctions restricted by

state law when the court sits in diversity?

Is the sanction imposed in this case appropriate in light

of the egregious misconduct giving rise to the sanction?

ii

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW i

TAREE Gr GOP is bbl. vib beh acdsee ii

ELLE iii

nie vi

COUNTERSTATEMENT OF THE CASE ........... 1

A. The Nature of the Cage 1

KL. oe 1

C. The Proceedings Below .................... 2

SUMMARY OF ARGUMENT ..................... 3

REASONS FOR DENYING THE WRIT............ 4

KD.. 5

B. Erie and the Inherent Judicial Power ........ 8

5 rr 12

> mw... 13

K w... 15

ü C 19

4. Unconnected miscondu et 21

. ie 22

CERTIFICATE OF SERVICE .................... 24

iii

TABLE OF AUTHORITIES

Cases Page

Alyeska Pipeline Service Co. v. Wilderness Society,

421 U.S. 240, 95 S. Ct. 1612, 44 L. Ed. 2d 141

D . 10.11

Batson v. Neal Spelce Associates, Inc., 805 F. 2d 546

r ... 7.17

Cammer v. United States, 350 U.S. 399, 76 S. Ct.

S 8

Cooter & Gell v. Hartmarx Corp., 89-275, slip op.

.. 13

Eash v. Riggins Trucking, Inc., 757 F.2d 557 (3d

ES 8,9

Eppes v. Snowden, 656 F. Supp. 1267 (E.D. Ky.

D ̃˙ ⁵ʃ. „„ „ „ 7.17

Erie R. Co. v. Tompkins, 304 U.S. 64. S. Ct.

e 9.10.12

General Talking Pictures Corp. v. Western Electric

Co., Inc., 304 U.S. 175. 8. Ct. 82 L. Ed.

D ᷑ ¶¶¶ m 19

Hasel Atlas Glass Co. v. Hartford Empire Co, 322

U.S. 238, 64 S. Ct. 997, 88 L. Ed. 1250 (1944 7

Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933,

r ce ence 18

Huddleston v. Hermann & MacLean, 640 F.2d 534

EE EEE 7

In re Martin-Trigona, 737 F.2d 1254 (2d Cir. 1984),

cited with approval in In re McDonald, 489 U.S.

— 109 S. Ct.. 103 L. Ed. 2d 158 (1989) 6.9

Johnson v. Georgia Highway Express, Inc., 488

r „„ „ „ 4.18

iv

TABLE OF AUTHORITIES (continued)

Cases Page

Kendrick v. Zanides, 609 F. Supp. 1162 (N.D. Cal.

. un dbs cendsaceedsaan 8,17

Kupferman v. Consolidated Research & Mfg. Corp.,

Sh... 7

Link v. Wabash R. Co., 370 U.S. 626, 82 S. Ct. 1386,

+S F ee 7

Magnum Import Co. v. Coty, 262 U.S. 159, 43 S. Ct.

I I ooo 0's O0C8S chi ewes i Cs, 13

McCandless v. Great Atlantic & Pacific Tea Co.,

Inc., 697 F.2d 198 (7th Cir. 1983) ................. 7

Miranda v. Southern Pacific Transportation Co.,

J ee 7

Montgomery Ward & Co. v. Pacific Indem. Co., 557

F.2d 51 (3d Cir. 1977) (Gibbons, J., concurring) ... .12

NASCO, Inc. v. Calcasieu Television & Radio, Inc.,

583 F. Supp. 115 (W.D. La. 1984)................ 14

NASCO, Inc. v. Calcasieu Television and Radio,

Inc., 124 F.R.D. 120 (W.D. La. 1989)............ 2.16

NASCO, Inc. v. Calcasieu Television and Radio,

Inc., 894 F. ad 696 (5th Cir. 1990) ................. 3

Republic of Cape Verde v. A & A Partners, 89

Fe a ie BEM chicnnnwweds 06 cwrecdne: 12

Roadway Express, Inc. v. Piper, 447 U.S. 752, 100

S. Ct. 2455, 65 L. Ed. 2d 488 (1980)............... 7

Sterling Energy, Ltd. v. Friendly Nat'l Bank, 744

co } , II 12

Vv

TABLE OF AUTHORITIES (continued)

Cases Page

Tedeschi v. Smith Barney, Harris, Upham and Co.,

Inc., 579 F. Supp. 657 (S.D.N.Y.), aff'd 757 F.2d

I OS ae 12

Thomas v. Capital Security Services, Inc., 836 F.2d

866 (5th Cir. 1988) (en banc)................. 7,13,18

Unioil, Inc. v. E.F. Hutton Co., Inc., 809 F.2d 548

EE 17

United Business Communications v. Racal-Milgo,

Inc., 591 F. Supp. 1172 D. Kan. 1984)............. 7

United States v. Hudson, 11 U.S. (7 Cranch) 32, 3

r on a6 ob do UR UUPOUUEE ES 66 cece nes 6

Universal Oil Products Co. v. Root Ref g Co., 328

U.S. 575, 66 S. Ct. 1176, 90 L. Ed. 1447 (1946) .. 7.17

Statutes and Rules

28 U.S.C. 5 1927 Ne 5.10

, 5.10.14

, Vide da 6 CACWERCEEGE ccs aues 4

The following entities are subsidiaries of the respon-

vi

RULE 29.1 STATEMENT

dent, NASCO, Inc.:

1.

10.

11.

NASCO Holdings, Inc., a Tennessee

corporation:

NASCO Real Estate, Inc., a Ten-

nessee corporation;

Chalk-Line, Inc., an Alabama

corporation;

NASCO Data Systems, a Tennessee

corporation;

Johnson/Rudolph Training Develop-

ment, Inc., a Kentucky corporation;

Channel Communications of Lake

Charles, Inc., a Louisiana

corporation;

Venture Mark, Inc., a Tennessee

corporation;

BAYLY Corporation, a Delaware

corporation;

NASCO Advanced Solutions, a Ten-

nessee corporation;

Source One Corporation, a Tennessee

— .

NASCO Northcreek, Inc., a Ten-

nessee corporation;

12.

13.

14.

vii

NASCO Otterwood, Inc., a Tennessee

corporation;

Northfield Lodge, Inc., a Tennessee

corporation;

Channel Communications, Inc., a

Tennessee corporation.

1

COUNTERSTATEMENT OF THE CASE

From the affirmance of a judgment imposing sanc-

tions, the defendant-petitioner, G. Russell Chambers, seeks

a writ of certiorari to the United States Court of Appeals

for the Fifth Circuit. This brief is respectfully submitted on

behalf of the plaintiff-respondent, NASCO, Inc., in opposi-

tion to that petition.

A. The Nature of the Case

The challenged sanction was imposed in response to

a motion filed by the plaintiff, NASCO, Inc. (NASCO). The

ts were G. Russell Chambers (Chambers), Mabel

Christine Baker (Baker), and their counsel, A.J. Gray III

(Gray), Edwin A. McCabe (McCabe), Richard A. Curry

(Curry), and Gary L. Boland (Boland).

The motion arose out of an action in diversity for the

specific enforcement of a Purchase Agreement providing

for the sale of television station KPLC-TV in Lake Charles,

Louisiana. NASCO was the purchaser. The defendants in

the underlying action were Calcasieu Television and Radio,

Inc. (CTR), the owner and defaulting seller; Chambers, the

sole shareholder and sole director of CTR, who caused CTR

to breach the Agreement; and Baker, Chambers’ sister and

trustee of the Facility Trust, an entity created by

Chambers to receive simulated ownership of certain station

properties in an attempt to avoid the entry of a TRO

preserving the status quo and to prevent the judicial en-

forcement of the sale.

B. The Factual Context

Chambers does not so much misstate, as ignore, the

factual context from which the challenged sanction arises.

2

A telling omission. For the nature of this case cannot be

understood without an appreciation of the scope and

malignancy of the misconduct to which the district and ap-

pellate courts below responded in imposing sanctions. That

context is set forth in the district court’s Findings of Fact,

NASCO, Inc. v. Caleasieu Television and Radio, Inc., 124

F. R. D. 120, 123-37 (W. D. La. 1989), Petitioner’s App., 4-38.

Those Findings were affirmed by the Fifth Circuit on ap-

peal. NASCO hereby adopts those findings as its

Counterstatement of the factual context of this case.

C. The Proceedings Below

NASCO’s sanctions motion was filed on December

29, 1987, following the settlement of its claim for equitable

adjustments for the delays incurred as the result of

Chambers’ breach. An evidentiary hearing was held on

April 11, 1988. All parties were given the opportunity to

brief the legal and factual issues raised, and to submit

documentary evidence, affidavits, and testimony. All par-

ties availed themselves of that opportunity to the extent

they deemed appropriate. *

On January 23, 1989, the district court granted

NASCO’s motion. NASCO, Inc. v. Calcasieu Television

and Radio, Inc., 124 F.R.D. 120 (W.D. La. 1989), Peti-

tioner’s App., 1-58. Chambers was ordered to pay NASCO

the sum of $66,286.85 in appellate sanctions! and

$996,644.65 in sanctions for the manner in which the

defense of the action was conducted. For the same pattern

| The trial court's fixing of the amount of the appellate sanctions award-

ed by the Fifth Circuit was not appealed by Chambers, and is, therefore,

not at issue on this petition.

3

of abusive conduct, his lawyers were disbarred or

suspended.” Baker was reprimanded.

On Chambers’ appeal, the Fifth Circuit affirmed,

holding that the district court possessed the inherent

power to sanction a party for such misconduct, and that

the sanction imposed was appropriate in light of the

egregious misconduct which had occurred. NASCO, Inc. v.

Calcasieu Television and Radio, Inc., 894 F.2d 696 (5th Cir.

1990), Petitioner’s App., 59.

Chambers now seeks certiorari in an attempt to over-

turn that decision.

SUMMARY OF ARGUMENT

The instant petition for certiorari should be denied.

The decision of the lower appellate court is correct.

As an essential element of their very existence,

federal district courts have the inherent power to regulate

and control the conduct of litigants and lawyers appearing

before them and, concomitantly, the power to levy ap-

propriate sanctions against both for abuses of the judicial

process. Those sanctions may include the assessment of

the attorneys’ fees and expenses incurred by the aggrieved

party in combating the abusive tactics. That inherent

power exists regardless of the source of jurisdiction or the

substantive rule of decision in a particular case.

2 Gray was disbarred from the Western District, and was prohibited

from applying for readmission for a period of three years. McCabe was

severely reprimanded and declared ineligible to practice in the Western

District for a period of five years. Curry was suspended from practice

in the Western District for a period of six months. Boland was not

sanctioned.

4

The severity of the sanction imposed pursuant to a

court’s inherent power should be tailored to the gravity of

the misconduct it seeks to redress. Where misconduct con-

stitutes a systematic program of abuse embodying a fraud

upon the court, it is appropriate and fitting that the entire

cost of the proceedings be assessed as sanctions. In that

context, the guidelines set forth in such cases as Johnson

v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.

1974), simply have no application.

REASONS FOR DENYING TH WRIT

This case presents no “special and important

reasons warranting review on writ of certiorari. Sup. Ct.

R. 10.1. It is nothing more and nothing less than a case of

unparalleled misconduct reaping an apt reward.

The defense mounted in this action was initiated by

a deliberate act of fraud upon the court—a fraud designed

to create the appearance that the subject properties had

been sold to a third party, when in fact no sale had taken

place and all ownership and control remained vested ex-

clusively in Chambers. The immediate objective was to

deceive the district court into believing it was powerless to

preserve the stutus quo. The ultimate objective was to

deceive that court into believing it was powerless to grant

specific performance. That initial fraud literally manufac-

tured the frivolous Public Records Doctrine argument

ultimately relied upon by Chambers as his sole defense to

NASCO’s suit.

Following the initial fraud, Chambers and his counsel

pursued a defense strategy designed to delay the inevitable

transfer of the station for as long as possible, and to make

the prosecution of this action as financially punishing to

NASCO as human ingenuity could make it. The single,

5

overriding objective of that strategy was to render the vin-

dication of NASCO’s rights too costly to pursue.

That fraud, and the defense strategy that followed,

was a calculated and deliberate assault upon the jurisdic-

tion of the district court. It was for that extended,

systematic program of abusive tactics that NASCO sought

sanctions. It was for that program of systematic abuse

that sanctions were awarded.

A. Inherent Power

The challenged sanction was imposed under the aegis

of the district court’s inherent power.’

3 In seeking sanctions, NASCO invoked the provisions of 28 U.S.C. §

1927 and Fed. R. Civ. P. 11, as well as the district court's inherent

power.

But those statutory provisions are highly particularized and narrow

in their reach.

Rule 11 was promulgated for the purpose of checking abuses in the

signing of papers filed in the course of litigation. Violation of the Rule

mandates the imposition of appropriate sanctions against the signing

and/or represented party. In terms, however, it does not apply to any

misconduct by any individual that does not involve the signing of a

specific paper in violation of the Rule's certification requirements—no

— nae egregious, no matter how fraudulent, that misconduct

The misconduct addressed by § 1927 is much broader. It applies to the

unreasonable multiplication of proceedings. But the targeted malefac-

tors are much more limited—only attorneys, not parties, may be sanc-

tioned. Thus, § 1927 on its face cannot apply to any misconduct by any

individual who is not an attorney—no matter how egregious, no matter

how fraudulent, that misconduct might be.

Neither Rule 11, nor § 1927, nor both combined, would seem to provide

a basis for assessing sanctions against Chambers for his role in the

6

Contrary to Chambers’ assertions, the appellate

court below did not chart ‘‘a bold new course for the federal

judiciary,” and did not depart from well established

precedent.

That federal district courts have inherent powers—

powers vested in them upon their creation, and by virtue of

their function—is recognized in the jurisprudence of this

Court dating back to the early 19th Century. See, e. g.,

United States v. Hudson, 11 U.S. (7 Cranch) 32, 34, 3 L. Ed.

259, 260 (1812).

Such inherent powers must, as a matter of strict

functional necessity, encompass the power to regulate and

control the conduct of parties and their counsel:

Federal courts have both the inherent power and

the constitutional obligation to protect their

jurisdiction from conduct which impairs their

ability to carry out Article III functions. If such

power did not exist, or if its exercise were

somehow dependent upon the actions of another

branch of government or upon the entitlement of

a private party to injunctive relief, the in-

dependence and constitutional role of Article III

courts would be endangered.

In re Martin-Trigona, 737 F.2d 1254, 1261 (2d Cir. 1984),

cited with approval in In re McDonald, 489 U.S.

Footnote 3 continued.

confection and tion of the fraudulent sale and leaseback

scheme—even though that scheme constituted a deliberate fraud upon

the court—because he is not a lawyer, and because that malefaction did

not involve the signing of papers filed in conjunction with this litigation.

The inherent power of a federal district court is not so restricted.

7

n.8, 109 S. Ct. . n.8, 103 L. Ed. 2d 158, 165 n.8

(1989). Implicit in the power to regulate and control con-

duct is the concomitant power to levy appropriate sanc-

tions for abusive litigation tactics. Roadway Express, Inc.

v. Piper, 447 U.S. 752, 765-67, 100 S. Ct. 2455, __, 65 L.

Ed. 2d 488, 500-01 (1980); Thomas v. Capital Security Ser-

vices, Inc., 836 F.2d 866, 870 n.3;-875 (5th Cir. 1988) (en

banc). See Batson v. Neal Spelce Associates, Inc., 805 F.2d

546, 550 (5th Cir. 1986); Huddleston v. Hermann &

MacLean, 640 F.2d 534, 559-60 (5th Cir. 1981). See also

Link v. Wabash R. Co., 370 U.S. 626, 630-31, 82 S. Ct. 1386,

— 8 L. Ed. 2d 734, 738 (1962); Miranda v. Southern

Pacific Transportation Co., 710 F.2d 516, 520-21 (9th Cir.

1983); McCandless v. Great Atlantic & Pacific Tea Co.,

Inc., 697 F.2d 198, 200 (7th Cir. 1983). Indeed, the use of

inherent judicial power to impose monetary sanctions has

been recognized as particularly appropriate when parties

have practiced a fraud upon the court:

No doubt, if the court finds after a proper hearing

that fraud has been practiced upon it, or that the

very temple of justice has been defiled, the entire

costs of the proceedings could justly be assessed

against the guilty 2 Such is precisely a

situation where for dominating reasons of

justice a court may assess counsel fees as part of

the taxable costs.

Universal Oil Products Co. v. Root Ref g Co., 328 U. S. 575,

580, 66 S. Ct. 1176, __, 90 L. Ed. 1447, 1452 (1946). See

Eppes v. Snowden, 656 F. Supp. 1267, 1277-79, 1281-82

(E.D. Ky. 1986). See also, e. g., Hazel-Atlas Glass Co. v.

Hartford-Empire Co., 322 U.S. 238, 245, 64 S. Ct. 997.

88 L. Ed. 1250, 1255 (1944); Kupferman v. Consolidated

Research & Mfg. Corp., 459 F.2d 1072, 1078 (2d Cir. 1972);

United Business Communications v. Racal-Milgo, Inc., 591

F. Supp. 1172, 1187 (D. Kan. 1984).

8

Thus, the inherent power is there. It does not derive

from the contempt power. Cammer v. United States, 350

U. S. 399, 408 n.7, 76 S. Ct. 456, 460 n.7, 100 L. Ed. 474,

479 n.7 (1956); Eash v. Riggins Trucking, Inc., 757 F.2d

557, 565-66 (3d Cir. 1985). And it is part and parcel of the

district court’s inherent power to fashion appropriate sanc-

tions in the face of abusive litigation practices. See, e. g.,

Kendrick v. Zanides, 609 F. Supp. 1162, 1173 (N.D. Cal.

1985) (per Schwarzer, J.) (invoking Rule 11, § 1927, and in-

herent judicial power to impose sanctions including com-

pensatory fees and costs).

B. Erie and the Inherent Judicial Power

Chambers does not argue that the district court

below lacks the inherent power to regulate the conduct of

litigants before it. He does not argue that the district court

lacks the inherent power to levy sanctions against litigants

in response to abusive litigation tactics that are obstruc-

tive of justice. He does not argue that the district court

lacks the inherent power to sanction him. Indeed, he does

not even argue that the district court lacks the inherent

power to impose a sanction that includes an award of the

attorneys’ fees reasonably incurred in responding to his

misconduct. He argues only that, under the Erie Doctrine,

such a sanction cannot include all of NASCO’s attorneys’

fees because Louisiana law does not permit awards of at-

torneys’ fees absent express contractual or statutory provi-

sions therefor.

Chambers’ argument misses the point.

He presents his case in an absolute contextual

vacuum, thereby attempting to sterilize it of the malignant

conduct which tainted the proceedings below and provoked

the sanction he now bemoans. That sterile atmosphere

invites his mischaracterization of this matter as a ‘‘fee-

shifting’’ case in which a diversity court must look to state

law for authority to award attorneys’ fees to successful

litigants.

But this is not a fee-shifting case. It is a sanctions

case. Doubtless, the remedies available for breach of con-

tract are, and should be, governed by the law of Louisiana.

But the sanction at issue on this petition was not a remedy

for breach of contract. It was not an element of relief on the

underlying cause of action. It was a sanction. A sanction

levied in response to systematic abuses of process running

the gamut from delay to outright fraud, abuses designed to

manipulate and to obstruct the very machineries of justice,

abuses constituting a direct frontal assault on the district

court's power to adjudicate.

No less than the contempt power, the inherent power

to regulate the conduct of parties before the court arises

from the nature of the court, as court, and is necessary to

the exercise of all other powers. It is a matter of strict func-

tional necessity. See Eash v. Riggins Trucking, Inc., 757

F. 2d 557, 562 (3d Cir. 1985). Such power is essential to the

administration of justice, and is absolutely essential to the

functioning of the judiciary itself. Jd. at 563. Without it, no

federal district court can fulfill its constitutional obliga-

tion to protect [its] jurisdiction from conduct which impairs

[its] ability to carry out Article III functions. Jn re

Martin-Trigona, supra, 737 F.2d at 1261.

The exercise of such inherent power, regardless of

the type of sanction imposed, does not, and cannot, im-

plicate the Erie Doctrine. If the district court below is im-

bued with the inherent power to impose some sanction

upon Chambers for his malignant conduct, then Chambers’

argument is merely that Erie forecloses, not all, but only

10

this particular, sanction. A dubious proposition at best.

The Erie rule seeks to discourage forum shopping

and to prevent the inequitable administration of laws.

The exercise of inherent power by the district court

below to vindicate the sanctity of its proceedings and its

very power to adjudicate does not foster the forum shop-

ping Erie was designed to prevent. As a practical matter,

litigants do not shop forums on the basis of what arsenal

of sanctions is available to punish miscreant litigants and

lawyers, any more than they file suit in federal court (or

remove to federal court) in order to obtain the benefits of

Rule 11 or § 1927.

Nor does the exercise of such inherent power foster

the administration of laws. At bottom, Erie

promises a diversity litigant that if he

defends a state — the — ond abides by the

rules of that court, the result in his case will be the same

as if it had been brought in state court. It does not promise

him that he may lay waste to the orderly processes of

justice, even in the unlikely event that a state court would

permit him to do so.

On a more fundamental policy level, the federal

RY Py ery wep a constitutional obligation—

in ending federal judicial proceedings against conduct

designed to systematically eviscerate a federal court's very

power to adjudicate is manifest. The State of Louisiana has

no conceivable interest whatsover in regulating or limiting

the panoply of sanctions available to a federal district court

in its efforts to fulfill that constitutional obligation. Why,

4 Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95

S. Ct. 1612, 44 L. Ed. 2d 141 (1975), is not to the contrary.

11

indeed. should the ability of a district judge to fashion an

appropriate sanction for egregious misconduct in federal

court be made to vary depending upon what state he sits

in, or what state’s law happens to govern the underlying

substantive claim? Why should a federal court’s power to

redress abuses of federal process be made in any way

subservient to Louisiana policies concerning the availabili-

ty of substantive remedies for breach of contract? Why

should state policy be permitted to strip a federal diversity

court of sanctions it could wield in another type of case?

Those questions answer themselves. Federal courts do not

sit as eunuchs, impotent to protect themselves from

abusive conduct, merely because they sit in diversity.

The sanction imposed on Chambers below was based

solely and squarely on his egregious and relentless miscon-

duct in the district court proceedings. The district court

did not shift fees. It sanctioned. That sanction was not a

matter of remedy. It was a matter of vindicating judicial

authority and the sanctity of the judicial process itself.

Footnote 4 continued.

Alyeska was a fee-shifting case in which the prevailing parties sought

to recover their attorneys’ fees on a private attorney general theory.

It was not a sanctions case, and dic not involve the imposition of sanc-

tions for systematic abuses of probs. assaults upon the jurisdiction of

the court, or misconduct embodying a fraud upon the court. The

Alyeska dictum relied upon by Chambers simply observes that, in an or-

dinary diversity case, where there are no countervailing federal policies

or considerations, fee-shifting requests should be governed by state law.

Id., 421 U.S. at 259 n.31, 95 S. C at n. I. 44 L. Ed 2d at 154 n.31.

That dictum in no way implies the arsenal of sanctions available to

a federal district court for the vindication of its authority should expand

and contract depending on the basis of its jurisdiction.

At bottom, the instant case, which does involve the imposition of

sanctions for egregious misconduct, is not an ordinary diversity case,

does not involve fee-shifting, and does implicate federal policies and con-

siderations of the highest gravity.

12

Erie does not require a federal district court to tolerate

abuses in diversity cases that it would not tolerate in other

cases. Erie does not restrict the range of appropriate sanc-

tions available to vindicate the authority of a federal

in diversity.

As the court in Republic of Cape Verde v. A & A

Partners, 89 F. R. D. 14 (S.D.N.Y. 1980), noted:

Since it is the federal judicial process that has

been abused a federal court should be able to deal

with the abuse as it sees fit regardless of the

power of the courts of the state where it sits.

Id. at 20 n.12 (diversity case applying New York law). See

also Sterling Energy, Ltd. v. Friendly Nat'l Bank, 744 F.2d

1433, 1435 n.2 (10th Cir. 1984); Montgomery Ward & Co. v.

Pacific Indem. Co., 557 F. 2d 51, 61 (3d Cir. 1977) (Gibbons,

J., concurring); Tedeschi v. Smith Barney, Harris, Upham

and Co, Inc, 579 F. Supp. 657, 660-61 (. D. N. V). aff'd 757

F. 2d 465 (2d Cir. 1985).

Simply put, it is not the business of the State of Loui-

siana to police the conduct of parties in federal courtrooms.

And Chambers cites no authority from this Court to sug-

gest otherwise.

C. The Sanction

Chambers next challenges the sanction itself on

several fronts, characterizing it as an abuse of the district

court’s inherent power.

® In essence, these arguments assert mere error in the imposition of the

sanction and its affirmance by the lower appellate court. Such is not the

13

. Timeliness.

He first contends that it was untimely. By only warn-

ing him repeatedly that his conduct was offensive, he

argues, the district court lulled him into believing he had

not yet sunk to a sanctionable level. To deter him, he says,

that court should have sanctioned him earlier.

In retrospect, it is impossible to disagree with the

suggestion that Chambers should have been sanctioned

earlier. But there is nothing whatsover in the record or the

history of these proceedings to suggest it would have done

any good.®

To the extent Chambers argues that the trial court

erred in deferring the sanctions proceeding to the end of the

litigation, he is clearly wrong. See, e.g., Cooter & Gell v.

Hartmarx Corp., No. 89-275, slip op. at 9 (U.S. June 11,

1990).

Be that as it may, the timeliness issue Chambers

urges derives from Thomas v. Capital Security Services,

Inc., 836 F.2d 866 (5th Cir. 1988) (en banc), in which the

Footnote 5 continued.

stuff of certiorari:

The jurisdiction [to bring up cases by certiorari] was not con-

ferred upon this court merely to give the defeated party in

the circuit court of appeals another hearing.

Magnum Import Co. v. Coty, 262 U.S. 159, 163, 43 S. Ct. 531. 67

L. Ed. 922, 924 (1954).

6 Indeed, Chambers to this day characterizes the findings of the district

court as “a scurrilous attack with absolutely no basis in fact. Peti-

tion For Writ of Certiorari, p.18 n.4. Scurrilous? That unrepentant ad-

jective hardly suggests he is deterred even yet.

CCC‘;

14

court concluded that, because Rule 11 permits an award of

reasonable attorneys’ fees, a party seeking such a sanction

has the duty to mitigate his damages by correlating his

response to the merits of the offending paper, and by time-

ly notifying the court and the offending party of the alleged

Rule 11 violation. Jd. at 879, 884. Thus, the timeliness re-

quirement is one of timely notice—notice of the alleged

violation—not the filing of a sanctions motion, not the coin-

mencement of a sanctions proceeding, not the imposition of

sanctions.

And Chambers had plenty of notice, as he readily

admits.’

Moreover (and contrary to Chambers’ representa-

tions to this Court) the district court’s work was not com-

7 He had notice on October 24, 1983—seven days after this suit was

filed—when NASCO filed its Amended Complaint, characterizing the

bogus sale and leaseback scheme as a deliberate fraud upon the court.

He had notice in December 1983, when NASCO sought contempt sanc-

tions against him. He had notice in March 1984, when the district Hurt

imposed contempt sanctions, referencing his manifest bad faith.

NASCO, Inc. v. Calcasieu Television & Radio, Inc, 583 F. Supp. 115,

120-21, 122 (W.D. La. 1984). He had notice when the district court ex-

pressly questioned the defendants’ good faith in the status conference

of December 17, 1984. He had notice when the district court denied his

recusal motion in January 1985, characterizing his supporting affidavit

as rank hearsay, rumor, and gossip interlaced wit“ innuendo, and again

recited the bad faith conduct of the defense. He had notice in April 1985,

when the district court disseminated draft copies of Judge Schwarzer s

article on Rule 11 sanctions, with a direct warning to counsel. He had

notice when NASCO informed the court and counsel that it was re-

questing the court to retain jurisdiction following the rendition of judg-

ment for the express purpose, inter alia, of enabling that court to deter-

mine the issue of attorneys’ fees pursuant to Rule 11.

The list goes on.

Chambers was warned repeatedly. In chilling terms. In terms

calculated to hit home, and to hit home hard. He simply refused to be

deterred.

— RE

15

pleted when it finished the specific performance trial in

1985. There remained the inevitable appeals and their at-

tendant requests for stays to the trial court, the Fifth Cir-

cuit, and the Circuit Justice. There remained two addi-

tional contempt motions pertaining to Chambers’

shenanigans at the FCC. There remained NASCO’s motion

for judicial assistance in closing the sale—provoked by

Chambers’ recalcitrance in conveying the properties

NASCO had contracted to purchase—which required an

evidentiary hearing more elaborate than the merits trial

itself. There remained the closing of the sale, an arduous

task requiring the supervision of the district court. And

there remained the disposition of NASCO’s claim for

equitable adjustments for delay. Given the delays en-

countered in disposing of what should have been a simple

lawsuit, the district court was understandably focused on

the disposition of these substantive matters. It had little

time for collateral issues. Recognizing that, the court in a

series of status conferences with counsel determined that

the sanctions issue would await the completion of the

substantive claims.

Ali in all, the deferral of the sanctions issue was

calculated to exert the maximum pressure possible on

Chambers to curb his offensive tactics during the re-

mainder of the action. But Chambers was undeterrable.

The instant sanction is but the fruit of that recalcitrance.

There is no issue as to the timeliness of the chal-

lenged sanction.

2. Tailoring.

Chambers would suggest that the sanction was not

tailored to his wrongful conduct.

16

On the contrary, it is a perfect fit.

The quantum of the sanction levied against

Chambers is substantial. But it is totally in line with the

gravity of his misconduct.

His first act in response to this litigation was the

perpetration of a deliberate and calculated fraud upon the

district court. His every act thereafter was in aid of that in-

itial fraud, and was designed to maintain its plausibility

and to preserve the Public Records Doctrine defense that

fraud created. The initial fraud indelibly taints the entirety

of the proceedings below, rendering the defense on its face

a sanctionable malefaction by litigants and lawyers alike.

Beyond that, the defense mounted by Chambers em-

bodies a deliberate strategy of delay, harassment, and op-

pression. It was conceived in fraud and conducted

thereafter in absolute bad faith. It was nothing less than a

systematic and relentless assault upon the judiciary itself.

The sanction levied against Chambers comprises

nothing more and nothing less than the expenses necessari-

ly incurred as a direct and proximate result of Chambers’

misconduct. NASCO, Inc. v. Calcasieu Television and

Radio, Inc., 124 F.R.D. 120, 133 (W.D. La. 1989), Peti-

tioner’s App., 28.

Every penny of the substantial fees and expenses in-

curred by NASCO was spent, and spent necessarily, in

dismantling the edifice of fraud erected at Chambers’

behest. But for the fraudulent sale and leaseback scheme,

NASCO’s claim for specific performance would have been

amenable to summary disposition. Instead, NASCO faced

the most effective war of attrition that money could buy.

17

Chambers pursued his tactics of delay with great tenacity

and vigor. According to Gray’s evidentiary submissions in

the sanctions proceedings, Chambers had a host of lawyers

(in addition to Gray, Boland, and McCabe)—one in Atlanta,

three in Washington, and six in Lake Charles—all advising

him on his stzategies at various points in the course of the

litigation. Pleading after pleading, raising issue after issue,

rained down on NASCO’s head. Those issues were not

urged halfheartedly. They were pressed with all the skill

and tenacity that Chambers’ stable of lawyers could bring

to bear. And in the context of this $18 million lawsuit,

NASCO had no choice but to take those volleys seriously,

and to respond in earnest.

The scope, malignancy, and systematic character of

Chambers’ misconduct fully warrants an award of all at-

torneys’ fees, costs, and expenses incurred by NASCO in

the proceedings below. That sanction is nothing more than

the cost directly generated by Chambers’ fraudulent

schemes. It is nothing more than what was necessary in

order for NASCO to endure, and to prevail. Indeed, it is

nothing more than the injury Chambers willingly sought to

inflict on NASCO. Chambers’ malefaction was total. It 1s

only fitting that NASCO’s recompense be total.

Thus, the sanction is tailored. And the fit is perfect.

As this Court has noted, when the very temple of justice

has been defiled by a fraud upon the court, the entire

cost of the proceedings could justly be assessed against the

guilty parties. Universal Oil Products Co. uv. Root Ref'g

Co., 328 U.S. 575, 580, 66 S. Ct. 1176. 90 L. Ed. 1447,

1452 (1946). See also, Unioil, Inc. v. E.F. Hutton Co., Inc.,

809 F.2d 548, 557 (9th Cir. 1986); Batson v. Neal Spelce

Associates, Inc., 805 F.2d 546, 551 (5th Cir. 1986); Eppes

v. Snowden, 656 F. Supp. 1267, 1281-82 (E.D. Ky. 1982);

Kendrick v. Zanides, 609 F. Supp. 1162, 1170, 1172-73

18

(N.D. Cal. 1985) (per Schwarzer, J.).

Chambers would suggest that the sanction imposed

in this case could not have been tailored because the proof

submitted by NASCO at the evidentiary hearing was insuf-

ficient and could not be tested by the district court to

ascertain whether it was related to Chambers’

misconduct.®

NASCO submitted memoranda, affidavits, and

itemized billing statements setting forth the fees and ex-

penses incurred in conjunction with this litigation.

NASCO’s evidentiary submissions established that the

8 Chambers suggests that the sanction should have been tested in accor-

dance with the 12 factors set out in Johnson v. Georgia Highway Ex-

press, Inc., 488 F.2d 714 (5th Cir. 1974), and this Court’s opinion in

Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L. Ed. 2d 40

(1983).

Those factors have no meaningful application in a sanctions case such

as this one. Both Johnson and Hensley addressed attorneys’ fees awards

to prevailing plaintiffs in civil rights cases. The purpose of such awards

is to assure that civil rights plaintiffs are able to obtain competent

counsel worthy of a contest with the caliber of counsel available to their

Johnson v. Highway E s, Inc., s 488 F.2d

at 719-20. Obviously, that policy bes ttle tc — —ͤ—

the sanction awarded in this case.

In situations such as this one, where a litigant has tampered

deliberately and relentlessly with the very machineries of justice, the

court’s response must necessarily focus on the vindication of the integri-

ty of the system, on the deterrence of such misconduct in the future by

similarly motivated litigants, as well as on the alleviation of the offense

to private parties. Those desiderata necessarily imply a shift of the

“reasonableness” focus away from an audit of the offended party's

costs, and toward the gravity of the misconduct and the extent of the

resources of the offender. See, e. g., Thomas v. Capital Security Services,

Inc., 836 F.2d 866, 881 (5th Cir. 1988) (en banc). As Chambers himself

has put it—a tailoring of the sanction to the gravity of the offense.

19

litigation costs awarded were billed and paid on an interim

basis over the course of this litigation. Those submissions

reflected the actual hours and actual funds expended in the

prosecution of this claim. The hourly billing rates charged

by counsel for NASCO were counsel's standard billing

rates, and were entirely compatible with the rates charged

by similar practitioners for similar work in their

communities.

NASCO’s evidentiary submissions were fully suffi-

cient to establish, with particularity, the fees and expenses

incurred, the services performed, and the hours consumed

in the performance of those services. The detail provided

was sufficient to permit the district court to determine the

reasonableness of those fees and expenses, and the extent

to which they should be included in any sanction awarded.

And that is precisely what the district court did. The

district court found no fault with NASCO’s evidence. The

district court found no lack of detail. The district court

found, as a matter of fact, that the sanction was reasonable

in light of the gravity of the offense. And the district court

was affirmed by the appellate court below. This Court does

not sit to review on writ of certiorari the factual findings of

lower federal courts. General Talking Pictures Corp. v.

Western Electric Co., Inc., 304 U.S. 175, 178. 8. Ct.

, 82 L. Ed. 1273, 1275 (1938).

3. Mitigation.

Chambers next suggests that NASCO failed to

mitigate its expenses. A defense so frivolous as to warrant

a per curiam affirmance from the bench at oral argument

and the immediate imposition of sanctions, he argues,

should not have required extensive efforts in the district

court and should have been amenabale to summary

judgment.

20

That suggestion is simply disingenuous.

NASCO did not guilefully lie in wait, acquiescing in

misconduct in order to build a claim for sanctions against

an unsuspecting Chambers. To the contrary, NASCO’s

every effort was to expedite these proceedings, to cut

through the tangled superfluity of collateral issues raised

by Chambers, to get—finally—to the throat of the initial

fraud and bring this matter to an end.

As a practical matter, the malignant purpose and

lack of legal or factual foundation of pleadings cannot

relieve an opponent of the necessity of responding serious-

ly. Silence in the face of such abusive filings may invite

disaster. It is incumbent upon the opponent of such

pleadings to demonstrate their baselessness and malignan-

cy to the tribunal that will ultimately rule upon them. And

unless malignancy and baselessness are combined with

total ineptitude, that can rarely be done without serious

research and preparation. And Chambers and his counsel

were not inept—at least not in that regard. Time and again,

their filings raised issues of apparent merit, only to

disintegrate when the cited authorities were examined.

Throughout the course of this litigation, Chambers routine-

ly placed the burden of that illumination on NASCO.

Chambers’ suggestion that NASCO’s failure to move

for summary judgment demonstrates its failure to mitigate

contains more rhetoric than reason.

The fact of the matter is that the fraudulent sale and

leaseback scheme foreclosed any such summary disposition

on the merits. But NASCO did move immediately to undo

it. NASCO petitioned the district court on October 24,

1983—just days after the confection of that fraud—for

a mandatory preliminary injunction compelling Mabel

21

Baker to reconvey the subject properties to CTR in order

to restore the status quo. The district court chose a more

conservative course—to issue a prohibitory preliminary in-

junction to preserve the altered status quo pending con-

sideration of the merits of Chambers’ Public Records Doc-

trine defense. That choice reflects the underlying factual

question upon which NASCO’s claim for specific perfor-

mance would ultimately turn. Specific performance could

be granted only if the bogus sale to Baker could be rescind-

ed. That sale could be rescinded only if it was not real. And

the reality, vel non, of that sale was purely and simply an

issue of fact that would ultimately turn on the credibility

of the parties to that transaction.

NASCO did not fail to mitigate its damages. It did

what it had to do, and only what it had to do, in order to

prevail.

4. Unconnected misconduct.

Finally, Chambers suggests that the challenged

sanction includes amounts attributable to misconduct un-

connected with the proceedings at the district court.

In truth, that unconnected misconduct was not un-

connected at all. It was part and parcel of Chambers’

strategy of delay. The fees attributable to the proceedings

before the FCC were fees incurred by NASCO in combating

actions taken by Chambers in direct violation of the injunc-

tive orders of the district court. The fees incurred in con-

junction with the mandamus petition to the Fifth Circuit

on the recusal motion (rejected as meritless by that court)

were incurred in combating the most cynical and unseemly

of attempts at manipulating the processes of justice. The

fees incurred in responding to the writs and motions to

stay the district court’s judgment in the Fifth Circuit, and

before the Circuit Justice, were not included in the sanction

imposed by the district court.

The fact of the matter is that the defense of this

litigation was conceived in fraud and was conducted

thereafter in absolute bad faith. All that happened was the

direct and proximate result of that initial fraud. All of the

fees incurred, and ultimately awarded, flowed directly from

In the end, the district court was faced with the task

of fashioning a sanction appropriate to the gravity of

Chambers’ misconduct. A sanction to

deter Chambers, and to deter other pewerfal unf bath,

litigants who might be tempted to bludgeon opponents into

submission by converting a lawsuit into an extended act of

systematic economic brutality. .

The sanction fashioned by the district court, and af.

firmed by the appellate court below, was necessary and en-

tirely appropriate to that task.

CONCLUSION

This case does not warrant review on writ of

certiorari.

As a litigant in federal court, Chambers was duty

bound to litigate in good faith, to deal honestly with the

court, to yield to the orderly processes of justice. He

breached those duties, choosing instead to embrace decep-

tion, fraud, and outright falsehood as the tools of litigation.

The judicial system can neither tolerate nor long survive

conduct so deviant from acceptable standards.

Chambers’ misconduct, unparalleled in reported

The petition for writ of certiorari should be denied.

Respectfully submitted,

AUBREY B. HARWELL, JR. JOHN B. SCOFIELD

JON D. ROSS DAVID L. HOSKINS*

NEAL & HARWELL SCOFIELD, GERARD, VERON,

2000 One Nashville Place HOSKINS & SOILEAU

150 4th Avenue North P.O. Drawer 3028

Nashville, TN 37219 Lake Charles, LA 70602

(614) 244-1713 (318) 433-9436

Attorneys for Respondent

By:

DAVID L. HOSKINS

*Counsel of Record

24

CERTIFICATE OF SERVICE

I, David L. Hoskins, a member of the Bar of this

Court, hereby certify that, as counsel for the plaintiff-

respondent, I received a copy of the Petition For Writ of

Certiorari on August 6, 1990, and that three copies of the

Respondent’s Brief in Opposition to Petition For Writ of

Certiorari were mailed, first class postage prepaid, to Mr.

Mack E. Barham and Mr. Russell T. Tritico, counsel for the

petitioner. I further certify that all parties required to be

served have been served.

DAVID L. HOSKINS

SCOFIELD, GERARD, VERON,

HOSKINS & SOILEAU

P.O. Drawer 3028

Lake Charles, LA 70602

(318) 433-9436

Attorneys for Respondent

ott tt te