Filed: Nov. 05, 2013
Latest Update: Mar. 02, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2241 PROJECTS MANAGEMENT COMPANY, Plaintiff – Appellant, v. DYNCORP INTERNATIONAL LLC, Defendant – Appellee. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. T. S. Ellis, III, Senior District Judge. (1:11-cv-01345-TSE-IDD) Argued: September 19, 2013 Decided: November 5, 2013 Before AGEE, DAVIS, and DIAZ, Circuit Judges. Affirmed by published opinion. Judge Agee wrote the opinio
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2241 PROJECTS MANAGEMENT COMPANY, Plaintiff – Appellant, v. DYNCORP INTERNATIONAL LLC, Defendant – Appellee. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. T. S. Ellis, III, Senior District Judge. (1:11-cv-01345-TSE-IDD) Argued: September 19, 2013 Decided: November 5, 2013 Before AGEE, DAVIS, and DIAZ, Circuit Judges. Affirmed by published opinion. Judge Agee wrote the opinion..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2241
PROJECTS MANAGEMENT COMPANY,
Plaintiff – Appellant,
v.
DYNCORP INTERNATIONAL LLC,
Defendant – Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. T. S. Ellis, III, Senior
District Judge. (1:11-cv-01345-TSE-IDD)
Argued: September 19, 2013 Decided: November 5, 2013
Before AGEE, DAVIS, and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge Davis and Judge Diaz joined.
ARGUED: Thomas Bausman Kenworthy, MORGAN LEWIS & BOCKIUS, LLP,
Philadelphia, Pennsylvania, for Appellant. Joseph William
Koegel, Jr., STEPTOE & JOHNSON, LLP, Washington, D.C., for
Appellee. ON BRIEF: John F. O’Connor, STEPTOE & JOHNSON LLP,
Washington, D.C., for Appellee.
AGEE, Circuit Judge:
Projects Management Company (“PMC”) appeals from the
district court’s dismissal of its suit against DynCorp
International LLC (“DynCorp”). The district court dismissed
PMC’s suit on two alternate grounds: first, as a sanction for
PMC’s repeated discovery abuses; and second, based on its
conclusion that PMC was seeking damages contrary to the measure
of damages provided by well-established law. For the reasons set
forth below, we affirm the judgment of the district court.
I.
DynCorp contracted with the United States Department of
State to assist in the development of a civilian police force in
Iraq. In connection with this contract, DynCorp entered into a
subcontract with PMC (the “Subcontract”) for operations and
maintenance support in Iraq between August 1, 2008 and February
17, 2009, with an option to extend performance to February 28,
2010. PMC executed the Subcontract with DynCorp through its
Managing Director, Hussein Fawaz, who was also represented to
DynCorp as having an ownership interest in PMC. The Subcontract
2
identified PMC Project Manager Greg Byers as PMC’s point of
contact with DynCorp. 1
The Subcontract provided that PMC would periodically
invoice DynCorp and that DynCorp would, within 45 days of the
date of each invoice, tender periodic payments to PMC by making
a wire transfer directly to an account held by PMC at Kuwait
Gulf Bank (the “Kuwait Account”). The Subcontract also provided
that “[n]o oral statement of any person shall modify or
otherwise affect the terms, conditions, or specifications stated
in this Subcontract.” (J.A. 39.) PMC began its performance under
the Subcontract and listed payment instructions on the face of
each invoice sent to DynCorp. The invoices were paid by DynCorp
according to those payment instructions, which were consistent
with the payment information in the Subcontract. In December
2008, PMC’s invoices began directing DynCorp to make payments to
a new bank account at the National Bank of Kuwait (Lebanon)
located in Beirut, Lebanon and held in the name of Fawaz (the
“Lebanon Account”). DynCorp personnel contacted PMC through
Fawaz and Byers to confirm that future payments should be made
to the Lebanon Account rather than the Kuwait Account. Fawaz
1
The Subcontract listed no other PMC employees, and DynCorp
was made aware of no other principals or managers of PMC.
3
responded to DynCorp with a letter written on PMC letterhead
directing DynCorp to make its payments to the Lebanon Account.
Byers also responded to DynCorp by email, confirming the change
in payment instructions and stating that all PMC invoices would
list the correct banking information on their face. Another PMC
employee, acting at the direction of Fawaz and Byers, followed
up with DynCorp to confirm that future payments should be made
to the Lebanon Account. DynCorp then began making payments to
the Lebanon Account, as directed in the PMC invoices. PMC did
not inform DynCorp of any problems with its payments.
Near the end of the initial Subcontract term, DynCorp and
PMC, through Greg Byers, agreed to exercise the option to extend
the term of the Subcontract, including a provision that “[a]ll
other terms and conditions remain the same.” (J.A. 75.) After
several months of continuing performance under the Subcontract,
DynCorp issued a Cure Notice to PMC, notifying PMC of
performance issues under the Subcontract and providing PMC with
an opportunity to remedy its performance. Shortly thereafter,
DynCorp terminated the Subcontract and requested a termination
settlement proposal from PMC. In response, PMC requested a
payment of $978,494.22, claiming $789,099.50 in unpaid invoices
and $189,394.72 in other costs and expenses. The parties did not
reach a settlement agreement.
4
After the termination of the Subcontract, DynCorp was
apprised that Fawaz was not, in fact, a part owner of PMC. It
was further revealed that PMC’s true owners were members of the
Al-Muhanna family of Kuwait, most notably Rabea Al-Muhanna, who
PMC contends had sole authority over the financial affairs of
PMC.
On January 25, 2012, PMC sued DynCorp in the United States
District Court for the Eastern District of Virginia under the
court’s diversity jurisdiction, alleging breach of contract,
aiding and abetting a breach of fiduciary duty, and business
conspiracy. Specifically, PMC alleged that DynCorp breached its
contract with PMC by making payments to the Lebanon Account
instead of the Kuwait Account. After a pre-trial conference, the
parties submitted a discovery plan, representing that all
discovery would be completed by April 13, 2012. The district
court set a trial date of August 15, 2012. During discovery,
DynCorp learned that at least some of the funds it had paid into
the Lebanon Account had been used to pay obligations of PMC. In
particular, DynCorp learned that PMC’s primary subcontractor in
Iraq, Cater-Corp, had received significant payments from the
Lebanon Account.
After the close of discovery, DynCorp moved for partial
summary judgment on the issue of whether the Subcontract had
5
been modified “to permit instructions on each individual invoice
submitted by PMC to DynCorp to determine the account into which
DynCorp’s payments were to be made.” (J.A. 77.) The district
court granted partial summary judgment to DynCorp, concluding
that the parties’ method of changing banking instructions on the
face of PMC’s invoices complied with the requirements in the
Subcontract for modification. The district court denied summary
judgment in part by expressly declining to conclude that either
Fawaz or Byers had actual or apparent authority to modify the
payment instructions in the Subcontract because genuine issues
of material fact remained to be decided at trial as to that
issue.
On May 31, 2012, following the district court’s summary
judgment order and the close of discovery, PMC disclosed its
damages calculation. PMC claimed $7,664,638.22 in total damages,
$6,920,501.56 of which represented the entire amount previously
paid by DynCorp into the Lebanon Account. The remaining
$744,136.66 was for unpaid invoices that remained outstanding.
DynCorp and PMC later settled PMC’s claim with respect to the
$744,136.66 of unpaid invoices. Thus, only the $6.92 million
that DynCorp paid into the Lebanon Account is at issue here.
DynCorp filed a motion in limine to preclude PMC from
presenting its damages calculation at trial. DynCorp argued that
6
PMC improperly withheld its damages calculation until after the
close of discovery, leaving DynCorp with no ability to take
discovery relating to damages or to address the damages issues
on summary judgment. In addition, DynCorp argued that PMC’s
damages calculation was contrary to well-established law because
it failed to account for millions of dollars paid from the
Lebanon Account to PMC employees and subcontractors in
satisfaction of PMC obligations. Further, DynCorp argued that
PMC had intentionally withheld documents showing that funds were
paid from the Lebanon Account to satisfy PMC obligations with
the contemporaneous knowledge of PMC’s owners.
DynCorp also moved the district court to impose sanctions
against PMC under the court’s inherent authority to sanction a
party for abusing the judicial process, as recognized in United
States v. Shaffer Equipment Co., 11 F.3d 450, 461–63 (4th Cir.
1993). DynCorp argued that sanctions were warranted because PMC
had concealed documents during discovery that evidenced PMC’s
knowledge of and acquiescence to Fawaz’s use of the Lebanon
Account to administer the Subcontract and pay PMC subcontractors
and employees. In support of its motion, DynCorp represented
that it received documents from a third party indicating that
PMC participated in Fawaz’s use of the Lebanon Account. Only
after DynCorp received these third-party documents, and long
7
after the close of discovery, did PMC produce an additional
2,000 pages of documents demonstrating that PMC acquiesced to
Fawaz’s use of the Lebanon Account. This late production,
DynCorp argued, prevented it from taking meaningful depositions
of PMC’s Rule 30(b)(6) representatives, Rabea Al-Muhanna and
Philip Zacharia, and deprived DynCorp of access to evidence
critical to its summary judgment motion. DynCorp also posited
that PMC’s late-produced documents revealed that PMC’s Rule
30(b)(6) representatives 2 provided false or misleading testimony
and that PMC provided false interrogatory answers.
The district court conducted hearings on DynCorp’s motions
and granted the motion for sanctions, finding that “PMC failed
to produce relevant and requested documents in a timely manner.”
(J.A. 83.) Finding that the factors listed in Shaffer Equipment
were applicable, the district court held that PMC’s “failure of
discovery warrant[ed] the imposition of sanctions.” (J.A. 83.)
Although DynCorp had requested that the district court dismiss
PMC’s claim as sanctions for PMC’s discovery abuse, the district
2
Under Rule 30(b)(6) of the Federal Rules of Civil
Procedure, when an organization is required to provide testimony
in a civil trial, that organization must “designate one or more
officers, directors, or managing agents, or designate other
persons who consent to testify on its behalf; and it may set out
the matters on which each person designated will testify.”
8
court declined to do so. Instead, the district court ordered PMC
to produce both of its Rule 30(b)(6) designees for additional
depositions before August 11, 2012, at a place of DynCorp’s
choosing, costs to be borne by PMC. The district court further
ordered that the factual substance of each late-produced
document be deemed admitted pursuant to Rule 37(c)(1)(C) of the
Federal Rules of Civil Procedure. The district court deferred
any further decision on DynCorp’s motion for sanctions, holding
in abeyance “any decision to award a monetary sanction against
PMC for its discovery defalcation,” (J.A. 85), and deferred its
decision on DynCorp’s motion in limine, “pending the parties
[sic] submission of further briefs related to the proper measure
of damages and the timeliness of PMC’s disclosure of this
measure.” (J.A. 85.)
PMC filed for a protective order to relieve it from having
to produce Zacharia for deposition and from having to produce
Al-Muhanna until August 13, 2012, two days before the trial
date. DynCorp renewed its motion in limine on the damages issue
and again sought dismissal of the case under the district
court’s inherent authority to impose sanctions. The district
court found that the partial remedies it had previously imposed
had failed to “ameliorat[e] the significant prejudice to DynCorp
stemming from the discovery defalcations.” (J.A. 88.) Still, the
9
district court expressly declined to dismiss the case and
instead ordered PMC to produce its Rule 30(b)(6) witnesses by
August 13, 2012. The district court deferred ruling on DynCorp’s
motion in limine and made clear that it would consider
additional sanctions, including dismissal, if PMC failed to
ameliorate the prejudice that its discovery defalcations caused
DynCorp. 3
On August 13, PMC offered Al-Muhanna and Zacharia for
deposition. However, PMC also informed DynCorp that Al-Muhanna
and Zacharia were no longer its Rule 30(b)(6) witnesses and
offered Mohammed Roof as its new Rule 30(b)(6) representative.
PMC also continued to produce additional relevant documents that
3
The district court stated that
[b]ecause the remedies for PMC’s discovery
defalcations fell far short of remedying the
prejudice, DynCorp orally renewed their
motion to dismiss. The Court denied that
motion from the bench and instead ordered
PMC to produce its Rule 30(b)(6) witnesses
by Monday, August 13, 2012. Although the
motion to dismiss was denied, the Court made
clear that it would reconsider if the
remedies for PMC’s discovery defalcations
fail to ameliorate the prejudice DynCorp
suffered, given the proximity of the trial
date.
(J.A. 88.)
10
it had not previously disclosed, some of which were written in
Arabic. DynCorp then submitted a supplemental memorandum to the
district court, renewing its motion in limine and requesting
that the district court strike PMC’s claim of damages or
alternatively, dismiss the case. On August 15, the district
court heard argument on and granted DynCorp’s motion in limine.
The district court noted that “[t]hroughout the pendency of the
case, PMC has consistently asserted that the proper measure of
PMC’s damages for the breach of the Subcontract is the total
amount of money DynCorp paid into the Lebanon [A]ccount.” (J.A.
95.) And in pursuing that theory of damages, PMC continually
“refused to comply with DynCorp’s discovery requests aimed at
ascertaining the identity of PMC’s subcontractors, the
subcontracts between PMC and those entities, and whether monies
were paid from the Lebanon [A]ccount to PMC’s subcontractors and
employees for work done in connection with the Subcontract.”
(J.A. 96.) The district court concluded that, as a matter of
law, PMC bore the burden of proving not only the amount of money
received from DynCorp through the Lebanon Account, but also the
costs avoided by the fact that some of PMC’s subcontractors and
employees were paid out of the Lebanon Account, relieving PMC of
the obligation to pay those debts. The district court thus held
11
that PMC’s measure of damages was improper and contrary to law
and ordered PMC’s claim for damages to be excluded from trial. 4
The district court also reconsidered sanctions against PMC
and found that the prior remedies it had ordered fell “far short
of remedying the prejudice” to DynCorp caused by PMC’s
continuing discovery defalcations. (J.A. 102.) The district
court detailed the extent of PMC’s abusive behavior in this
case: PMC did not provide its measure of damages until after the
close of discovery; PMC refused to account for costs avoided in
its measure of damages, as required by law; PMC withheld
documents showing that funds were paid from the Lebanon Account
to PMC subcontractors; and PMC withheld documents showing that
PMC ownership had contemporaneous knowledge of those payments.
Specifically, the district court found that PMC improperly
withheld a number of documents showing that Al-Muhanna
contemporaneously knew that funds from the Lebanon Account were
being used to satisfy PMC obligations. The district court then
found that these documents directly contradicted Al-Muhanna’s
deposition testimony that PMC had ceased payments to its
4
Because PMC did not present an alternate theory of
damages, the district court’s exclusion of PMC’s claim of
damages against DynCorp left PMC able to pursue only nominal
damages for breach of contract.
12
subcontractors and employees once DynCorp began making payments
to the Lebanon Account. The district court also concluded that
PMC gave a false answer to an interrogatory when it was asked to
“[i]dentify all funds received by PMC from the Lebanon
[A]ccount, . . . as well as all payments from the Lebanon
[A]ccount to satisfy obligations of PMC.” (J.A. 1594.) PMC
answered that it “has not received funds from Mr. Fawaz’s
Lebanon [A]ccount, and it is not aware of the extent, if any, to
which payments were made from Mr. Fawaz’s personal account in
Lebanon to satisfy . . . obligations of PMC.” (J.A. 1594–95.)
The district court found that it was “clear that PMC knew that
some funds had been paid from the Lebanon [A]ccount to [PMC]
subcontractors.” (J.A. 1595.)
The district court also noted that PMC’s Rule 30(b)(6)
witnesses refused to be deposed before August 11 as ordered and
were not available for deposition until August 13, two days
before the trial date. It noted that PMC sent a series of late-
night emails on August 12, producing a number of documents
contained in 135 separate PDF and Excel attachments for the
August 13 depositions, which were scheduled to begin at 9:30 the
next morning. On the morning of the 13th, PMC delivered two
boxes of documents to DynCorp, including documents that had not
yet been produced and new documents that were written in Arabic.
13
PMC also took the position that neither Al-Muhanna nor Zacharia
was appearing as a Rule 30(b)(6) deponent and named an entirely
new Rule 30(b)(6) witness. And when DynCorp took the new
depositions of Al-Muhanna and Zacharia, both witnesses gave
evasive and unresponsive answers to the questions propounded.
The district court again evaluated PMC’s conduct under the
standard in Schaffer Equipment, invoking its “inherent
authority” to “impose sanctions up to, and including, the ‘most
extreme sanction,’ the ‘dismissal without deciding the merits.’” 5
(J.A. 102 (quoting Schaffer Equip., 11 F.3d at 462).) The
district court concluded that PMC was highly culpable in its
discovery defalcations and that DynCorp was significantly
prejudiced by PMC’s actions. The district court further
concluded that its prior sanctions did not remedy the prejudice
to DynCorp. Because no further actions on PMC’s part could
remedy the harm to DynCorp, the district court concluded that
involuntary dismissal was warranted. The district court
dismissed PMC’s case with prejudice and entered its final
judgment on September 7, 2012.
5
The district court noted that it also had the power to
impose sanctions under Rule 37(b) of the Federal Rules of Civil
Procedure, but placed its “principal reliance on its inherent
powers.” (J.A. 102 n.10.)
14
PMC timely appealed. We have jurisdiction under 28 U.S.C.
§ 1291.
II.
We review a district court’s decision to exercise its
inherent power to dismiss a case for an abuse of discretion.
Shaffer Equip., 11 F.3d at 462. We also review a district
court’s grant of a motion in limine for an abuse of discretion.
Malone v. Microdyne Corp.,
26 F.3d 471, 480 (4th Cir. 1994).
III.
PMC principally argues on appeal that the district court
abused its discretion by imposing a sanction of dismissal of its
case against DynCorp. 6 We have previously recognized that, “[d]ue
to the very nature of the court as an institution, it must and
does have an inherent power to impose order, respect, decorum,
6
PMC also challenges the district court’s grant of
DynCorp’s motion in limine and dismissal of PMC’s claim for
damages as being contrary to the applicable contract law. PMC
further argues that the district court improperly granted
DynCorp’s motion for summary judgment, contending that genuine
issues of material fact existed that required determination by
the trier of fact. Because we affirm the district court’s
exercise of its inherent authority to dismiss PMC’s case as
sanctions for PMC’s abuse of the discovery process, we need not
address PMC’s remaining claims.
15
silence, and compliance with lawful mandates.” Shaffer Equip.,
11 F.3d at 461. A court’s inherent power includes the ability to
order the dismissal of a case, though “such orders must be
entered with the greatest caution.”
Id. at 462. Orders of
dismissal are appropriate “when a party deceives a court or
abuses the process at a level that is utterly inconsistent with
the orderly administration of justice or undermines the
integrity of the process.”
Id.
Before exercising its inherent power to dismiss a case
based on the wrongdoing of a party in the judicial process,
a court must consider the following factors:
(1) the degree of the wrongdoer's
culpability; (2) the extent of the client's
blameworthiness if the wrongful conduct is
committed by its attorney, recognizing that
we seldom dismiss claims against blameless
clients; (3) the prejudice to the judicial
process and the administration of justice;
(4) the prejudice to the victim; (5) the
availability of other sanctions to rectify
the wrong by punishing culpable persons,
compensating harmed persons, and deterring
similar conduct in the future; and (6) the
public interest.
Id. at 462–63.
In this case, the district court concluded that all six
Shaffer Equipment factors weighed in favor of dismissal and that
“[t]he course of this litigation has been marred by PMC’s
discovery defalcations.” (J.A. 100.) The court set out in
extensive detail the particulars of PMC’s discovery abuse and
16
linked those abuses to each of the Shaffer Equipment factors.
(J.A. 1573–96.) With respect to the first factor, the district
court found that “there is a high degree of culpability” on the
part of PMC. (J.A. 1592.) In support of this conclusion, the
district court found that PMC made a calculated effort to shield
its damages claim from the crucible of discovery by providing
false answers to interrogatories, providing false deposition
testimony, withholding a large number of relevant documents
during discovery, and making late disclosures of material
significance that continued until the day before trial was to
begin. The district court then addressed the second factor,
concluding that “PMC, the client rather than counsel, has
committed serious discovery defalcations.” (J.A. 103.)
In considering the third, fourth, and fifth factors, the
district court found that “these defalcations have caused
substantial prejudice to the judicial process; DynCorp has
suffered serious prejudice; and, the several attempts to provide
partial remedies have failed.” (J.A. 103.) The district court
supported these conclusions by finding that PMC’s willful
failure to produce relevant documents precluded DynCorp from
conducting effective discovery or taking effective depositions
of Al-Muhanna or Zacharia, PMC’s Rule 30(b)(6) designees. The
district court then recounted that although it had previously
17
imposed lesser sanctions, including ordering PMC to produce Al-
Muhanna and Zacharia for additional depositions and ordering all
facts contained in withheld documents to be deemed admitted, it
had declined to impose the sanction of dismissal. The district
court further found that, notwithstanding its initial
forbearance, PMC’s unabated obstruction and defiance made clear
that those lesser sanctions did not remedy the prejudice to
DynCorp or deter PMC’s conduct.
Addressing the sixth factor, the district court noted that
“certainly there’s a public interest in ensuring the integrity
of the judicial process.” (J.A. 1581.) Consequently, as “each of
the Shaffer Equipment factors weigh[ed] firmly . . . in favor of
dismissing the case,” the district court imposed the sanction of
dismissal. (J.A. 102–03.)
PMC makes a number of arguments on appeal, none of which
support reversal of the district court’s order. Among other
things, PMC argues that Al-Muhanna did not, in fact, provide
false testimony. However, our review of the record demonstrates
that the district court’s finding that Al-Muhanna testified
falsely at her deposition is not clearly erroneous. In her
deposition, Al-Muhanna was asked, “Has PMC . . . attempted to
determine in any way any benefits PMC received from payments
from the Lebanon [A]ccount in connection with the [Subcontract]
18
with DynCorp?” (J.A. 1586–87.) Al-Muhanna answered, “I don’t
know if I could answer. But for us, PMC is [an] illegal account.
[The] Lebanon bank account is illegal. So I cannot assume that
there [are] any payments that came from it in the correct—I
don’t know what the word is.” (J.A. 1587.) Al-Muhanna was then
asked, “Do you know if PMC received any benefit in connection
with the [Subcontract] with DynCorp from payments made out of
the Lebanon [A]ccount?” She answered, “No.” (J.A. 1587.)
Al-Muhanna’s testimony is directly contradicted by, among
other things, an email she sent on June 3, 2009, in which she
asked to see “the invoices for the payment done by Mr. Hussein
[Fawaz],” showing that she knew that Fawaz was making payments
out of the Lebanon Account during the term of the Subcontract.
(J.A. 978.) On August 31, 2009, Al-Muhanna received another
email detailing Fawaz’s payments of PMC staff salaries out of
the Lebanon Account. (J.A. 991.) And on May 18, 2010, Al-
Muhanna’s staff received from Fawaz a spreadsheet providing a
full accounting of deposits into both the Lebanon Account and
the Kuwait Account as well as expenses paid by PMC out of each
account. (J.A. 1121–48.) Thus, the district court’s finding that
Al-Muhanna provided false deposition testimony is fully
supported by facts in the record. Cf. F.C. Wheat Mar. Corp. v.
United States, 663 F.3d 714, 723 (4th Cir. 2011) (holding that a
19
court of appeals may reverse a factual finding reviewed for
clear error only when “left with a definite and firm conviction
that a mistake has been committed”).
PMC also argues that it was improper for the district court
to consider its false interrogatory response because DynCorp did
not raise the false interrogatory response as a reason for
granting sanctions in its motion. Yet PMC points to no legal
authority suggesting that a district court is limited to the
precise arguments raised by the parties when the court is
exercising its inherent authority to impose sanctions consistent
with Shaffer Equipment. While a district court acting under Rule
37(b) of the Federal Rules of Civil Procedure would be
constrained by the terms of that Rule, a court acting under its
inherent authority may impose sanctions for any “conduct utterly
inconsistent with the orderly administration of justice.” United
States v. Nat’l Med. Enters., Inc., 792 F.2d 906, 912 (9th Cir.
1986). Compare Buffington v. Balt. Cnty., Md.,
913 F.2d 113, 132
n.15 (4th Cir. 1990) (holding that a court may impose sanctions
under Rule 37(b) “only to violations of a court order to permit
or provide discovery, or one in regard to a discovery
conference”), with Shaffer
Equip., 11 F.3d at 461 (holding that
a court’s inherent power to dismiss a case “is organic, without
20
need of a statute or rule for its definition, and it is
necessary to the exercise of all other powers”).
In fact, a district court exercising its inherent authority
to impose sanctions may do so sua sponte and must consider the
whole of the case in choosing the appropriate sanction. See
Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246
(1944) (“The public welfare demands that the agencies of public
justice be not so impotent that they must always be mute and
helpless victims of deception and fraud.”), abrogated on other
grounds by Standard Oil Co. of Cal. v. United States,
429 U.S.
17 (1976); Brickwood Contractors, Inc. v. Datanet Eng’g, Inc.,
369 F.3d 385, 389 n.2 (4th Cir. 2004) (noting that the court has
the authority to impose sanctions sua sponte under either Rule
11 or under the court’s inherent authority); In re Prudential
Ins. Co. Am. Sales Practice Litig. Agent Actions,
278 F.3d 175,
189–91 (3d Cir. 2002) (affirming the imposition of sanctions
after assessing the totality of the sanctioned attorney’s
conduct before the court).
In this case, the district court dismissed PMC’s claim in
an exercise of its inherent authority and was therefore entitled
to consider sanctions on its own motion and without any
limitation on the types of conduct that it could consider. See
Shaffer Equip., 11 F.3d at 462. PMC was on clear notice of the
21
district court’s consideration of the use of its inherent
authority and had a full opportunity to argue its position
before the court. Moreover, the district court’s finding that
PMC provided a false interrogatory answer is amply supported by
facts in the record. When asked in Interrogatory No. 12 to
“[i]dentify all funds received by PMC from the Lebanon
[A]ccount, as well as all payments from the Lebanon [A]ccount to
satisfy obligations of PMC,” PMC responded “PMC has not received
funds from Mr. Fawaz’s Lebanon [A]ccount, and it is not aware of
the extent, if any, to which payments were made from Mr. Fawaz’s
personal account in Lebanon to satisfy [obligations] of PMC.”
(J.A. 733.) As noted earlier, this answer is contradicted by the
emails of June 3, 2009, August 31, 2009, and May 18, 2010, all
of which demonstrate that Al-Muhanna had personal,
contemporaneous knowledge of Fawaz’s use of the Lebanon Account
to pay PMC’s indebtedness to subcontractors and employees, some
of which payments were substantial.
PMC similarly fails to challenge any of the district
court’s other findings supporting its dismissal of PMC’s claim.
PMC flatly asserts that the district court’s culpability finding
is not supported by substantial evidence, referring back to its
previous arguments that Al-Muhanna did not give false testimony
and that it answered Interrogatory No. 12 truthfully. As
22
reflected above, our review of the record demonstrates that the
district court’s culpability finding was not made in clear
error. That finding is supported by the conflict between PMC’s
deposition testimony and PMC’s answer to Interrogatory No. 12,
and the emails of June 3, 2009, August 31, 2009, and May 18,
2010.
PMC also asserts in a single sentence, without citation to
the record or to any authority, that neither DynCorp nor the
judicial process suffered prejudice because DynCorp received all
relevant documents before the trial date. PMC does not address,
however, the fact that many of these documents were produced
long after the close of discovery—through and including the day
before trial—depriving DynCorp of the opportunity to effectively
depose PMC’s Rule 30(b)(6) representatives and to conduct
effective discovery and adequately prepare for trial. In any
event, by failing to support its contentions “with citations to
the authorities and parts of the record on which [it] relies,”
PMC has waived this argument. Fed. R. App. P. 28(a)(9)(A); see
also Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 607
(4th Cir. 2009).
PMC last posits that other, lesser sanctions could have
remedied the prejudice to DynCorp and that public policy favors
deciding cases on the merits. While it is true that we recognize
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a “strong policy that cases be decided on the merits,” Shaffer,
11 F.3d at 462, we also recognize “the need to preserve the
integrity of the judicial process in order to retain confidence
that the process works to uncover the truth.” Silvestri v. Gen.
Motors Corp.,
271 F.3d 583, 590 (4th Cir. 2001) (emphasis
added). The district court found that PMC intentionally acted
throughout the pre-trial process to hide the truth from both
DynCorp and from the court. And the district court first imposed
lesser sanctions, but later found that those lesser sanctions
did not alleviate the prejudice caused by PMC. Accordingly, PMC
has not demonstrated that the district court here abused its
discretion.
For the above reasons, we affirm the district court’s
dismissal of PMC’s case against DynCorp as a sanction for its
discovery malfeasance.
IV.
For all the foregoing reasons, the judgment of the district
court is
AFFIRMED.
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