Beck v. Bassett , 204 F.3d 1322 ( 2000 )

In re: SOUTHEAST BANKING CORPORATION, Debtor.
Jeffrey H. Beck, as Trustee of Southeast Banking Corporation, Plaintiff-Appellant,
v.
Florence S. Bassett, as Personal Representative of the Estate of Harry Hood Bassett, Donald N. Boyce, et
al., Defendants-Intervenors—Defendants-Appellees.
No. 97-5483.
United States Court of Appeals,
Eleventh Circuit.
March 3, 2000.
Appeal from the United States District Court for the Southern District of Florida.(No. 92-01600-CV), Edward
B. Davis, Chief Judge.
Before EDMONDSON and BIRCH, Circuit Judges, and OWENS*, Senior District Judge.
BIRCH, Circuit Judge:
Plaintiff-Appellant Jeffrey H. Beck ("Beck"), as Trustee of Debtor Southeast Banking Corporation
("Debtor" or "Southeast"), appeals the district court's order dismissing the complaint against Defendants-
Appellees ("Defendants"), who were directors and/or officers of Debtor. Beck argues that the district court
erred in dismissing this case as a sanction for discovery violations. We REVERSE and REMAND for
consideration and implementation of less harsh sanctions.
I. Background
On June 17, 1992, William A. Brandt ("Brandt"), then Trustee of Debtor, filed an adversary
proceeding against Defendants in bankruptcy court pursuant to a bankruptcy reference of all cases related to
Debtor's estate. See R1-1-2 at WW 1-2. On June 24, 1992, Brandt filed a motion to withdraw the reference
as to the adversary proceeding against Defendants. See R1-1. On September 22, 1992, the district court1
*
Honorable Wilbur D. Owens, Jr., Senior U.S. District Judge for the Middle District of Georgia, sitting
by designation.
1
The late Judge Sidney Aronovitz had this case from its filing until May 4, 1994, when it was transferred
to Judge Edward Davis, as part of a Multi-District Litigation ("MDL") consolidation. Judge Davis referred
the case to Magistrate Judge Linnea R. Johnson, who recused herself on October 10, 1995. See R14-349
granted Brandt's motion to withdraw the reference as to the adversary proceeding against Defendants
("September 1992 Order"). See R2-32-2 (stating that the district court withdraws the reference and "hereby
takes jurisdiction of this alleged non-core jury case"). This adversary proceeding is the case now before us.
On July 22, 1993, the district court granted Defendants' motions to dismiss, see R5-117, but gave Brandt
leave "to amend his Complaint to state more specifically and succinctly" his direct claims, i.e., claims not
founded on derivative liability, R5-117-4. As part of the order dismissing Brandt's initial complaint ("July
1993 Order"), the district court stated: "Until the Amended Complaint is filed, and attacks on the Amended
Complaint, if any, are heard, discovery is hereby STAYED, so that the proper scope of discovery may be first
determined." R-1-17.
On July 26, 1993, less than a week after the district court dismissed the initial complaint and stayed
discovery, Brandt issued Bankruptcy Rule 2004 subpoenas "on two likely third party witnesses in the present
action—Southeast's former lawyers, Steel Hector & Davis ... and former accountants, Deloitte & Touche"
(collectively, "July 1993 Subpoenas"). R5-119-3-4. Defendants filed a motion to compel Brandt to comply
with the court's September 23, 1992 and July 22, 1993 orders; this motion argued that the Rule 2004
subpoenas "represent an obvious attempt by the Trustee to circumvent the Court's Omnibus Order which
explicitly stayed discovery and dismissed the derivative claims related to the Bank" and that the subpoenas
likewise were "in contravention of the September 23, 1992 Order of this Court assuming jurisdiction of this
non-core jury case." R5-119-5. On August 16, 1993, the district court issued an "Order Again Staying
Discovery" ("August 1993 Order").2 R6-123. In the August 1993 Order, the district court stated that it
"reinforces its July 21, 1993 Omnibus Order staying all discovery," and that "[a]ny and all notices of any kind
(vacating any oral statements that she had made indicating that sanctions were appropriate). The case was
referred to Magistrate Judge Barry L. Garber, who ultimately recommended that the case be dismissed for
discovery violations.
2
Judge Aronovitz handwrote the word "Again" into the Order's caption and underscored it for emphasis.
See R6-123.
2
of discovery whatsoever shall be stayed, nunc pro tunc, effective July 21, 1993." R6-123-2. The district
court reserved ruling on the question of sanctions. R6-123-2.
On September 23, 1993, the district court held a hearing about the July 1993 Subpoenas. At this
hearing, J. Joseph Bainton ("Bainton"), counsel for Brandt, stated that Brandt had filed a separate lawsuit
against Deloitte & Touche. See R20-26; see also R20-6 (district court's noting that a number of other cases
had been filed, including a suit against Deloitte & Touche).3 Bainton conceded that the Rule 2004 subpoena
as to Deloitte & Touche was "inappropriate by reason of the commencement of the action in this Court," R20-
29, and withdrew that subpoena, see R20-31-32. Additionally, the court noted that "there is already on record
a stipulation between Steel, Hector and Davis and the Trustee to allow the taking of a 2004 deposition," R20-
4, and Bainton stated that Brandt and Steel, Hector, and Davis would work out the discovery issues, see R20-
32. Finally, Bainton asked the court "not to tie the Trustee's hands and not to deprive the Estate of the use
of bankruptcy rule 2004 as a discovery tool, only on the basis that that which we might discover through 2004
discovery is potentially relevant to the claims in this case" and requested that the court clarify its orders
related to discovery. R20-40. The court then orally requested that the parties work together "to categorize
the documents that should be discovered under the 2004 subpoenas issued and before the Court at this time,
and get that all organized and ready." R20-55. On October 12, 1993, the district court issued a written order
("October 1993 Order") regarding the July 1993 Subpoenas. In that order, the court stated that the withdrawal
of the Deloitte & Touche subpoena rendered moot Defendants' motion to compel as to that subpoena. See
R6-146-2. Addressing the other subpoena, he noted the interests of both parties; while encouraging the
parties to cooperate in preparing to produce relevant materials, he reiterated that the stay in discovery
remained in place:
The Court further notes that a First Amended Complaint was filed recently by the Plaintiff Trustee
on September 20, 1993. As the parties are aware, the Court has twice stayed discovery, until the
objections, if any, to the Amended Complaint are filed and heard, so that the Court may be better able
3
Brandt requested that the court take judicial notice of eleven related actions. See R6-134; R6-135; R6-
136; R6-137; R6-138; R6-139; R6-140; R6-141; R6-144.
3
to define the scope of discovery. This stay of discovery remains in effect; however, such stay does
not affect the aforementioned alternative means of discovery now in place.
R6-146-3-4. The alternative means included stipulations between the parties that had already been made.
See R6-146-3.
On January 4, 1994, Brandt served a Rule 2004 subpoena ("January 1994 Subpoena") on Lazard
Freres & Company, Debtor's former investment bankers. See R8-186-2. On February 22, 1994, Brandt
served a Rule 2004 subpoena ("February 1994 Subpoena") on Shearman & Sterling, Defendants' counsel in
this action and special counsel to the Defendant outside directors from May 1991 until Debtor failed in
September 1991. See R8-189-2. On February 28, 1994, Defendants filed an emergency motion to compel
Brandt to comply with the September 1992, July 1993, and October 1993 Orders; this motion addressed the
January 1994 Subpoena. See R8-186. On March 7, 1994, the Defendant outside directors filed a second
motion to compel; this motion addressed the February 1994 Subpoena. See R8-189. On March 9, 1994,
Defendants withdrew their motion as to the January 1994 Subpoena, on the ground that Lazard Freres had
withdrawn its objection to producing the requested documents; Defendants emphasized that they would
"welcome the opportunity" to address the larger issues raised in the motion, namely their request that the court
"enjoin[ ] the Trustee from taking any further action in contravention of this Court's orders staying
discovery...." R8-191-3.
On March 14, 1994, the district court conducted a hearing on Defendants' motions regarding the
January 1994 and February 1994 Subpoenas. At the end of that hearing, the court noted that its intent had
always been to stay discovery until there was a viable complaint. See R21-41. The court then stated:
Now, I consider the effort to proceed with the 2004 discovery methods really to be an end run. It's
designed to cause the stay for discovery to be rendered ineffectual.... In the view of the Court, it is
causing this Court to be hamstrung in its ability to proceed this case toward trial. And I consider the
use of the 2004 proceeding to be in violation of the original order that I entered taking back the
jurisdiction in this case.... [T]here are at least two other orders that I entered subsequently, which
reaffirm the original order and which reaffirm the stay that had been entered.
4
R21-42 (alterations added). The district court then reaffirmed the stay "on all discovery except as specifically
authorized by an order of this Court. And that includes any discovery attempted under Rule 2004." R21-42-
43. Defendants emphasized that they did not seek to stay discovery not related to this case. See R21-44. At
the end of the hearing, Bainton stated: "Maybe I'm not smart enough. I honestly, Your Honor, don't
understand. If I thought that I shouldn't have served 2004 ... in light of Your Honor's order, I wouldn't have."
R21-46-47. On March 17, 1994, the district court issued an order which "again" stayed discovery ("March
1994 Order"). See R9-199. This order stated that the January and February 1994 Subpoenas violated the
September 1992, July 1993, August 1993, and October 1993 Orders. See R9-199-3 & n.3, 5. The order again
reaffirmed the stay:
[U]ntil the Motion to Dismiss the Second Amended Complaint is ruled upon, the stay on discovery
shall remain in effect. The scope of this stay encompasses any and all discovery relating to the
allegations made against the named defendants as set forth in the Second Amended Complaint,
including discovery initiated under Bankruptcy Rule 2004 or otherwise, except as specifically
authorized by this Court. The Court will entertain motions for contempt and/or for sanctions should
any party to this action violate this stay as reaffirmed and clarified herein.
R9-199-4-5 (footnote omitted).
On June 10, 1994, the Defendant outside directors filed a motion to compel Brandt to obey the
September 1992, July 1993, August 1993, October 1993, and March 1994 Orders. See R11-264. This motion
asserts that Brandt had sought to enforce the February 1994 Subpoena by filing motions to enforce the
subpoena against Shearman & Sterling and to hold Shearman & Sterling in contempt for failure to obey the
subpoena. In his recommendation of dismissal, the magistrate judge found that, on April 29, 1994, Brandt
filed a motion in bankruptcy court ("April 1994 Motion") to hold Shearman & Sterling in contempt for failing
to obey the February 1994 Subpoena. See R16-380-4 (citing R11-264); R11-264-7. Beck disputes this
claim, noting: "On April 14, 1994, the Bankruptcy Court granted a motion by Mr. Brandt, as trustee, to stay
enforcement of the Rule 2004 subpoena that the trustee had served on Shearman & Sterling in February" until
the district court either vacated the March 1994 Order or gave Brandt permission " 'to take discovery of
Shearman & Sterling.' " Brief of Appellant at 20-21; see also Brief of Appellant at Ex. D (order staying
5
enforcement of subpoena). The record does not include a copy of the April 1994 Motion but does include
correspondence showing that Brandt was seeking in May 1994 to enforce a Rule 2004 subpoena against
Shearman & Sterling. See R11-270-Ex. 4, Ex. 5.
On May 3, 1994, the district court granted in part and denied in part Defendants' motion to dismiss
Brandt's Second Amended Complaint.4 See R10-243-15-16 (listing surviving claims), In re Southeast
Banking Corp., 855 F.Supp. 353, 361 (S.D.Fla.1994), aff'd, 69 F.3d 1539 (11th Cir.1995) ("May 1994
Order").5 Because claims from the Second Amended Complaint had survived the motion to dismiss, the
district court lifted the stay of discovery that had been in effect since the September 1992 Order. See R11-
266-2 ("June 15, 1994 Order"). In the June 15, 1994 Order that lifted the stay, the district court denied the
Defendant outside directors' motion to compel as moot. See R11-266-2-3. On reconsideration, the district
court enjoined Brandt "from seeking discovery through the use of Rule 2004 subpoenas on matters that relates
or may relate to the allegations made by the Trustee in the Second Amended Complaint." R11-271-2 ("June
21, 1994 Order"). The district court applied that injunction to the February 1994 Subpoena. See R11-271-2.
The district court emphasized that "[a]ll discovery that relates or may relate to the allegations made by the
Trustee in the Second Amended Complaint shall be governed by the Federal Rules of Civil Procedure and
shall take place in the District Court." R11-271-2. Subsequently, the district court denied an emergency
motion to expedite discovery of Shearman & Sterling filed by Brandt on the ground that "no good faith basis
exists for taking discovery of Shearman & Sterling." R12-284-3 ("August 1994 Order").
On October 28, 1994, Brandt, through Bainton, served a Fed.R.Civ.P. 30 subpoena ("October 1994
Subpoena") on Shearman & Sterling. See R13-297-Ex. G. This subpoena was filed in the Southern District
of New York, rather than in the Southern District of Florida. See R13-297-Ex. G. On November 14, 1994,
4
On February 2, 1994, Brandt filed the Second Amended Complaint, see R7-163, which was the operative
complaint when the district court dismissed the case for discovery violations.
5
The portions of this order that dismissed certain averments of the Second Amended Complaint were
appealed by Brandt; addressing only those findings appealed, we affirmed in part and reversed in part. See
In re Southeast Banking Corp., 69 F.3d 1539 (11th Cir.1995).
6
the Defendant Outside Directors filed a motion for sanctions and fines against both Brandt and Bainton and
for rescission of Bainton's pro hac vice admission "for failure to comply with courts orders and for discovery
abuses." R13-297-1. This motion alleged that the October 1994 Subpoena violated the August 1994 Order.
See R13-297-2. The Defendant Outside Directors emphasized that they sought "sanctions against the Trustee
and his counsel"—but that "[i]n order that the creditors of [Debtor's] bankruptcy estate should not suffer from
the misconduct of the Trustee and his counsel ... any sanctions imposed shall not be reimbursed, directly or
indirectly, through application to the Bankruptcy Court." R13-297-9-10.6
On April 1, 1996, Brandt moved to file a Third Amended Complaint; in his memorandum in support
of this motion, Brandt stated that the majority of the materials underlying the additions to the complaint came
from materials produced by the FDIC and by Steel Hector & Davis. See R15-357-2 n.2. In opposition to this
motion, Defendants noted that the FDIC was challenging Brandt's right to possess a number of documents
produced by the FDIC. See generally R15-361. The FDIC's motion to require Brandt to return "Inadvertently
Produced, Privileged Documents" was filed in a separate action, 92-2602-CIV-DAVIS. See R15-361-Ex.A.
In response to that motion, the magistrate judge ordered:
The plaintiff Trustee, his employees and counsel shall not utilize, directly or indirectly, any of the
Post-Closing Privileged Documents or the information contained therein for any purpose whatsoever
until further Order of this Court. Such documents or the information contained therein shall not be
made available, directly or indirectly, to any third parties including but not limited to the media. Any
violation of this provision shall result in the imposition of sanctions.
R15-361-Ex. B at 2 ("April 1996 Order").
On May 2, 1996, Brandt and Bainton were quoted in a Miami Daily Business Review article entitled
"Trustee: I'd love to show smoking gun." See R16-367-Ex. H. The article addresses the disputed FDIC
documents, which Brandt likened to the " 'Pentagon Papers' " and which Bainton likened to " 'the gun in a
murder investigation.' " R16-367-Ex. H at 1. Brandt noted his disagreement with the April 1996 Order
barring him from using the documents. See R16-367-Ex. H at 2. Based on Brandt's use of the FDIC
6
We note with interest that Defendants, while arguing before us that the creditors' interests were not raised
in the district court, did, in fact, raise that very argument themselves.
7
documents in preparing the Third Amended Complaint and on the Miami Daily Business Review article,
Defendants filed an Emergency Motion to Dismiss the Action and for Monetary Sanctions. See R16-366.
The magistrate judge held a hearing on Defendants' motion to dismiss. At this hearing, Defendants'
counsel focused on the fact that Brandt "isn't an ordinary opponent.... This is the Court's trustee, you,
meaning the Southern District, [are] responsible for this person, you appointed him.... [T]his is the Southern
District's appointee. He's a fiduciary." R25-10; see also R25-18 ("The trustee just doesn't get it. He is a
fiduciary. His lawyer's an officer of the Court. He's an officer of the Court."). Defendants argued that it
would be insufficient merely to remove Bainton because "the trustee is responsible for [Bainton's]" conduct
and because "we have here not only a pattern of the misconduct, we have a pattern of approval and
ratification." R25-24. Bainton argued both that he and Brandt had not engaged in misconduct and that there
were innocent creditors who deserved their day in court:
I don't think we've done anything wrong other than being overzealous in our representation of a client
who's got important people to protect.
Judge, you've lived in Miami all your life. People who bought Southeast Bank stock didn't think they
were buying Alaskan gold mining stock.
There's been a catastrophe here and the people who are responsible for it should be held accountable.
R25-59-60.
The magistrate judge recommended dismissal. See R16-380. Specifically, the magistrate judge
found:
that Plaintiff [Brandt] and his counsel [Bainton] have willfully violated orders of this Court on six
separate occasions:
1. Plaintiff and his counsel, on August 12, 1993, served Bankruptcy Rule 2004 subpoenas on Steel,
Hector & Davis and Deloitte & Touche contrary to an order of this Court [September 1992 Order].
2. Plaintiff and his counsel violated this Court's original order staying discovery [July 1993 Order], as
well as two subsequent orders staying discovery [the August 1993 and October 1993 Orders] when
Plaintiff and his counsel served a Bankruptcy Rule 2004 subpoena on Shearman & Sterling.
3. Plaintiff and his counsel violated this Court's order of March 17, 1994 staying discovery by their
continued efforts to use Rule 2004 subpoenas.
8
4. Plaintiff and his counsel violated this Court's past orders by filing in Bankruptcy Court a Motion to
Enforce Bankruptcy Rule 2004 subpoena on Shearman & Sterling.
5. Plaintiff and his counsel again violated this Court's past discovery orders when on October 28, 1994
they served another Bankruptcy Rule 2004 subpoena on Shearman & Sterling in direct violation of
this Court's [June 21, 1994 Order] enjoining the use of Rule 2004 subpoenas.
6. Plaintiff and his counsel violated this Court's [April 1996 Order] restricting the utilization of
privileged FDIC documents within the possession of Plaintiff and his counsel when Plaintiff and his
counsel made various prejudicial statements relating to documents whose use had been barred by the
Court and which appeared in the May 2, 1996 edition of the Miami Daily Business Review.
In re Southeast Banking Corp. Sec. & Loan Loss Reserves Litig., 212 B.R. 397, 405 (S.D.Fla.1997)
(alterations added). After discussing Brandt's and Bainton's history, the court concluded "that [Brandt's] and
[Bainton's] misconduct was willful, that it was unfairly prejudicial to Defendants in this cause, that they had
been amply warned by this Court to comply with court orders, and that lesser sanctions would be unavailing."
Id. at 407 (alterations added). Accordingly, the magistrate judge recommended dismissing the case with
prejudice and awarding Defendants attorneys' fees and costs caused by Brandt's and Bainton's misconduct.
See id..
The district court held a hearing on Brandt's objections to the recommendation. Brandt's new
counsel7 argued that the remedy for discovery abuses should not fall on the innocent creditors of Debtor:
[Brandt's] not a man who represents his own interest in this proceeding.
What he does is he's a fiduciary [sic] for literally thousands of shareholders and creditors and many
others, all of whom suffered, in some cases, catastrophically, when Southeast Holding Corporation
went into Chapter 7 proceedings.
...
[T]he question is more what is the remedy. And if there are possible sanctions that could involve
money, then why would it be fashioned or recommended that the remedy ought to fall devastatingly
upon the rights of everyone who is represented by that estate.
7
Bainton withdrew from all of the cases that were part of the MDL. See R26-52.
9
R26-9-10 (alterations added); see also R26-36-37 ("The collapse of Southeast Bank, Your Honor, was a
tragedy to this community.... Maybe it's a truth that people don't want to know, but I think there has to be
the right for that story to be told. And whatever mistakes were made, they can be remedied.").
On August 1, 1997, the district court issued the order at issue in this appeal. See In re Southeast
Banking Corp. Sec. and Loan Loss Reserves Litig., 212 B.R. 397 (S.D.Fla.1997) ("August 1997 Order"). In
the August 1997 Order, the district court found that:
Plaintiff [Brandt] and his counsel [Bainton] willfully violated this Court's orders through the
following actions:
1. On July 26, 1993, Plaintiff and his counsel served Bankruptcy Rule 2004 subpoenas on Steel Hector
& Davis and Deloitte & Touche, in violation of [the July 1993 Order] (staying discovery).
2. On January 5, 1994, Plaintiff and his counsel served Bankruptcy Rule 2004 subpoenas on Lazard
Freres, in violation of the [July 1993, August 1993, and October 1993 Orders] (staying discovery).
3. On February 24, 1994, Plaintiff and his counsel served Bankruptcy Rule 2004 subpoenas on
Shearman & Sterling, in violation of the [July 1993, August 1993, and October 1993 Orders] (staying
discovery).
4. On April 29, 1994, Plaintiff and his counsel continued to pursue discovery through the enforcement
of Bankruptcy Rule 2004 subpoenas against Shearman & Sterling, in violation of the [July 1993,
August 1993, October 1993, and March 1994 Orders] (staying discovery).
5. Plaintiff and his counsel made various prejudicial statements relating to documents whose use had
been barred by this Court and which appeared in the May 2, 1996 edition of the Miami Daily
Business Review, in violation of the [April 1996 Order] (restricting Plaintiff and his counsel's use of
these documents, including disclosure, directly or indirectly, to the media).
Id. at 399 (bracketed text added; parenthetical text in original). The district court held that Brandt and
Bainton had otherwise "engaged in abusive litigation practices" including "pursu[ing] discovery with no good
faith basis for doing so" and "improperly obtain[ing] certain privileged documents from the FDIC, but
continu[ing] to litigate the turnover proceedings and conceal[ing] their actions."8 Id. (alterations added;
emphasis in original). The district court noted that Brandt and Bainton had received "numerous warnings
throughout this litigation" about the risk of sanctions, id., and then concluded that "Plaintiff and his counsel's
8
In support of this latter "abusive litigation practice," the district court cites to an order issued in a separate
but related case. In re Southeast Banking Corp., 212 B.R. at 399.
10
misconduct in this case and other litigation gives no indication to this Court that lesser sanctions would be
effective," id. at 399-400. After finding that the misconduct had both prejudiced Defendants "in that they
have suffered delay in attempting to clear their names" and had "interfered with this Court's ability to
effectively resolve this litigation, as well as the other cases the Court is charged with overseeing," the court
dismissed the action with prejudice. Id. at 400.
II. Analysis
The district court adopted the magistrate judge's recommendation that this case be dismissed pursuant
to Fed.R.Civ.P. 41(b).9 "An appellate court reviewing the exercise of this power is constrained by the abuse
of discretion standard." State Exch. Bank v. Hartline, 693 F.2d 1350, 1352 (11th Cir.1982) (citing Rule 41(b)
and the "inherent ... authority [of the trial court] to enforce its orders and ensure prompt disposition of legal
actions").
The district court's order addressed seven acts of alleged misconduct: Issuance of the July 1993
Subpoenas; issuance of the January 1994 Subpoena; issuance of the February 1994 Subpoena; filing of the
April 1994 Motion in bankruptcy court; attempts to engage in discovery of Shearman & Sterling with "no
good faith basis" for such discovery; obtaining and retaining the disputed FDIC documents; and the
comments made by Brandt and Bainton in the May 2, 1996 edition of the Miami Daily Business Review.
Beck does not dispute the district court's finding in the March 1994 Order that issuance of the January 1994
and February 1994 Subpoenas violated the July 1993, August 1993, and October 1993 Orders staying
discovery, see Appellant's Brief at 32, but argues that the district court erred (1) in finding that the issuances
of the July 1993, January 1994, and February 1994 Subpoenas were willful violations, (2) in finding that
9
Rule 41(b) states, in relevant part:
For failure of the plaintiff to prosecute or to comply with these rules or any order of court,
a defendant may move for dismissal of an action or of any claim against the defendant.
Unless the court in its order for dismissal otherwise specifies, a dismissal under this
subdivision ... operates as an adjudication upon the merits.
(alterations added).
11
Brandt had attempted to enforce the Rule 2004 subpoena against Shearman & Sterling on April 29, 1994, (3)
in considering the comments from the Miami Daily Business Review article, and (4) in dismissing the case
rather than issuing lesser sanctions that would not have injured innocent creditors. We consider these
arguments in turn.
A. July 1993, January 1994, and February 1994 Subpoenas
Beck argues that it was inappropriate for Judge Davis to rule in 1996 that Brandt's issuances of the
July 1993, January 1994, and February 1994 Subpoenas were willful. Beck notes that Judge Aronovitz, who
had the case at the time that those subpoenas were issued, did not find that Brandt acted willfully in issuing
the subpoenas. Beck argues that it was wrong for Judge Davis to decide, years after the fact, that Brandt acted
willfully where Judge Aronovitz made no such a finding.
An interesting question not discussed by Beck is whether Beck would view such a belated finding
as inappropriate if Judge Aronovitz had been the judge to make it. Beyond terming Judge Davis's ruling as
"ex post facto," Appellant's Brief at 46, Beck's argument is based on the fact that Judge Aronovitz never found
that Brandt's actions were willful but, instead, issued new orders clarifying his rulings. Beck did not offer,
nor did we find, any case law to support the conclusion that a judge cannot consider the entire history of a
case—even conduct that occurred two years before—to determine if a litigant's conduct was willful.
Accordingly, mere passage of time does not bar a district court from considering whether particular conduct
amounted to willful violation of court orders.10 We also reject any intimation that a judge who replaces
another judge on a case cannot address whether conduct committed prior to the transfer was willful.11
10
We do not discount the fact that passage of time without further wrongdoing is relevant to the question
of whether dismissal is an appropriate remedy for wrongful conduct.
11
Beck argues (without case support) that the standard of review should be different for a "judge who
'inherited' this case well after four of the five events that were alleged to have been violations of court orders
had occurred." Appellant's Brief at 32. While Beck argues that the timing of Judge Davis's receiving the case
means that he "was not in any position superior to that of this Court," id., we are concerned that such a rule
would provide a windfall to the fortunate malfeasant litigant whose case is transferred due to the retirement,
recusal, or death of the initial judge or by the confirmation of new judges on the district court. Because we
find that the district court erred in dismissing the case, rather than using a lesser sanction, we need not address
12
Having rejected the broader interpretations of Beck's argument, we are left with two subtler, more
case-specific questions: First, did Judge Aronovitz's failure to find that Brandt's issuances of the July 1993,
January 1994, and February 1994 Subpoenas were willful bar Judge Davis's later finding of willfulness?
Second, does the fact that Judge Aronovitz's issued orders "clarifying" his prior orders bar a finding of
willfulness on the ground that the prior orders were unclear? The answer to each of these questions is "No."
As to the first question, we agree with Defendants that Judge Aronovitz was never asked to determine whether
Brandt's issuances of the July 1993, January 1994, and February 1994 Subpoenas were willful. Thus, Judge
Davis's later findings of willfulness do not contradict prior findings. As to the second question, we find that
the fact that Judge Aronovitz issued orders "clarifying" his prior orders does not mean that Judge Davis was
incorrect in finding that Brandt willfully violated those prior orders. It is true that a finding of willfulness
is inappropriate where a litigant's "[v]iolation of a discovery order [is] caused by simple negligence,
misunderstanding, or inability to comply." Malautea v. Suzuki Motor Co., 987 F.2d 1536, 1542 (11th
Cir.1993); see also E.E.O.C. v. Troy State Univ., 693 F.2d 1353, 1357 (11th Cir.1982) ("A party's simple
negligence or other action grounded in a misunderstanding of a court order does not warrant dismissal.").
Sanctions, like a finding of contempt, for violation of an order are only appropriate if "the order stated in
specific and clear terms what acts were required or prohibited." E.E.O.C. v. General Dynamics Corp., 999
F.2d 113, 116 (5th Cir.1993). That said, the fact that Judge Aronovitz chose to state in his subsequent orders
that he was clarifying the prior orders staying discovery did not bar Judge Davis from concluding that the
prior orders were sufficiently clear to justify a finding of willfulness. The July 1993, August 1993, and
October 1993 Orders made clear that all discovery related to this case was stayed until a viable complaint
survived a motion to dismiss; these orders also made clear that this case was to be ruled by the Federal Rules
of Civil Procedure, not by the Bankruptcy Rules. Beck has proffered no explanation for why these orders
were unclear, nor has he given any justification for why the subpoenas where not covered by the stay in the
Beck's novel argument regarding standard of review.
13
July 1993, August 1993, and October 1993 Orders. If the Orders were unclear or unduly impeded Brandt's
duties as trustee to investigate other cases against other defendants, Brandt could have sought clarification
of the prior orders—but he never did. This situation is similar to that of Malautea, where we affirmed a
finding of willfulness and the granting of a default judgment under Rule 37 because:
[n]either defendant has provided a credible explanation of how it interpreted the discovery orders not
to encompass the General Motors information. Neither defendant asked Judge Edenfield to clarify
the orders, as a genuinely confused litigant, twice-threatened with the sanction of a default judgment,
would have done. In particular, the defendants never asked Judge Edenfield to explain whether the
orders covered the plaintiff's interrogatory that requested the General Motors information.
987 F.2d at 1543. Accordingly, we find that the district court did not err in holding that the issuances of the
July 1993, January 1994, and February 1994 Subpoenas were willfully in violation of the July 1993, August
1993, and October 1993 Orders staying discovery and reaffirming the district court's jurisdiction over this
case.
B. April 1994 Motion
Beck argues that the finding regarding the April 1994 Motion is unsupported. We have been unable
to find any documentation of the April 1994 Motion despite a thorough search of the record. However,
Brandt filed a motion in the district court that appended correspondence between Bainton's law firm and
Shearman & Sterling about a hearing to be held in June 1994 in the bankruptcy court regarding a motion to
compel production of documents, see R11-270-Ex.4, Ex.5; while the brief in support of that motion is dated
March 11, 1994, see R11-270-Ex. 6, the correspondence regarding the hearing is dated May 1994, see R11-
270-Ex. 4, Ex. 5. Taken together, the correspondence and brief in support support the finding that Brandt was
attempting in May 1994 to enforce a Rule 2004 subpoena against Shearman & Sterling in bankruptcy court.
See R11-270-Ex.4, Ex. 5, Ex. 6. Thus, while there is no record support for the specific finding that Brandt
moved on April 29, 1994 to enforce a Rule 2004 subpoena against Shearman & Sterling, there is record
support for a finding that Brandt moved to enforce a Rule 2004 subpoena against Shearman & Sterling at
some point in time after issuance of the March 1994 Order. We find that, to the extent that the district court
14
erred in its finding that Brandt filed a motion on April 29, 1994 to enforce a Rule 2004 subpoena, that error
was harmless.
C. Miami Daily Business Review article
The impetus for the imposition of sanctions was the Miami Daily Business Review article. Beck
argues that it was inappropriate for the district court to sanction the estate for the article where (1) the order
allegedly violated by the article was from another case and (2) the article was published two years after the
last discovery violation occurred in this case. We find that it is not error for a district court to consider
violation of an order from a separate case where that wrongdoing is related to the case at hand.12 Cf.
Chambers v. NASCO, Inc., 501 U.S. 32, 57, 111 S.Ct. 2123, 2139, 115 L.Ed.2d 27 (1991) (affirming
sanctions imposed by district court "for conduct before other tribunals, including the FCC, the Court of
Appeals, and this Court"; "As long as a party receives an appropriate hearing ... the party may be sanctioned
for abuses of process occurring beyond the courtroom, such as disobeying the court's orders."). Here, in a
related case, Brandt and Bainton received disputed documents. They were told not to use the documents in
any way—including direct or indirect contact with the media. Brandt and Bainton used the documents (1)
to draft a complaint in this case and (2) to comment publicly on Defendants' liability. While the order was
issued in another case, the wrongdoing affected this case. We need not answer the question of whether the
district court erred in dismissing the case based on the article where no misconduct occurred in this case for
a substantial period of time, because we find that lesser sanctions should have been levied in this case.13
D. Failure to utilize lesser sanctions
12
The Ninth Circuit has held that prior incidents of wrongdoing may be considered in assessing later
incidents of wrongdoing but, where the later incidents are not "a continuation" of the earlier incidents, it is
error to use the prior incidents "as a fulcrum to elevate the final incident of misconduct to a level that would
allow dismissal of the action with prejudice." United States v. National Med. Enters., Inc., 792 F.2d 906, 913
(9th Cir.1986). Similarly, we find that the district court may "consider ... the long pattern of conduct
[including] ... several failures by plaintiffs to obey court rules and orders." Jones v. Graham, 709 F.2d 1457,
1462 (11th Cir.1983).
13
We also need not address Beck's claim that the district court erred in dismissing this case when the case
in which the April 1996 Order was issued was not similarly dismissed.
15
We find that the district court should have used lesser sanctions to resolve the problems caused by
Brandt's and Bainton's misconduct without barring innocent creditors from pursuing their claims against
Defendants. As Defendants themselves emphasized throughout the proceedings in this case, Brandt was a
trustee of a bankruptcy estate, while Bainton was serving pro hac vice as attorney to Brandt in his role as
trustee. This situation raises the concern that innocent parties who were unable to choose their own
representatives might be injured through no fault of their own. "We have viewed dismissal as particularly
harsh when the parties whose interests are at stake are not the named plaintiffs who have complete control
of the litigation." Hartline, 693 F.2d at 1353. This principle is compatible with the Third Circuit's
requirement that a district court consider whether a party has had personal responsibility for the wrongdoing
of its attorney. See Adams v. Trustees of New Jersey Brewery Employees' Pension Trust Fund, 29 F.3d 863,
873 (3d Cir.1994)14; see also Rogers v. Kroger Co., 669 F.2d 317, 322 (5th Cir.1982) (treating "direct
plaintiff culpability" as an "aggravating circumstance" that may justify dismissal as a sanction for
misconduct). This emphasis on the personal responsibility of the parties-in-interest is reasonable, not only
to preserve the rights of truly innocent parties, but also because, where a party is personally involved in
malfeasance, the likelihood that alternative sanctions will resolve the misconduct is lower. See, e.g., Gratton
v. Great American Communications, 178 F.3d 1373, 1375 (11th Cir.1999) (affirming sanction of dismissal
where "the district court found that plaintiff was culpable, and found that no other sanction would cure the
harm"). Additionally, cases that have found that dismissal was appropriate despite the lack of personal
wrongdoing on the part of the client have focused on the fact that the attorney engaging in misconduct was
the "freely selected agent" of the client. Link v. Wabash R.R. Co., 370 U.S. 626, 633-34 & n. 10, 82 S.Ct.
14The Third Circuit notes that, "[w]here ... a party is personally responsible for [misconduct], the effect
of dismissal on third parties cannot be dispositive." Adams, 29 F.3d at 873. Our conclusion does not
contradict the Third Circuit but states that where, as here, the misconduct is attributed to a representative party
or its attorney, the district court should consider the malfeasance (if any) of the represented party, as well as
the availability of alternative remedies caused by the fact of the representation.
16
1386, 1390 & n. 10, 8 L.Ed.2d 734 (1962). Here, as emphasized by Defendants in the hearing before the
district court, Brandt was appointed by the district court to act as trustee for Debtor's estate.
The fact that Brandt was an appointed trustee and Bainton was acting pro hac vice raises the
possibility of alternative sanctions. Specifically, the district court could have replaced Brandt as trustee to
Debtor's estate and/or revoked Bainton's pro hac vice status. While these sanctions are harsh, they may be
used "[i]f the conduct at issue threatens disruption of the court proceedings or is a deliberate challenge to the
authority of the district court." Schlumberger Techs., Inc. v. Wiley, 113 F.3d 1553, 1561 (11th Cir.1997)
(addressing disqualification of an attorney admitted pro hac vice ) (citations omitted); see also 11 U.S.C. §
324(a) ("The court, after notice and a hearing, may remove a trustee, other than the United States trustee, or
an examiner, for cause."). Where, as here, there is no evidence that the represented parties, i.e., the creditors,
were involved in misconduct, removal of the trustee and/or the trustee's attorney are viable sanctions, short
of dismissal, that may resolve misconduct and permit the litigation to continue without further disruption.15
In finding that the district court abused its discretion in dismissing this case, we emphasize the
limited nature of our holding. We do not hold that it is per se inappropriate to use dismissal to sanction
misconduct by a bankruptcy trustee (or other representative party). Rather, in such a case, the district court
should consider whether the represented parties are innocent and whether lesser sanctions, such as removal
of the representative party, exist that could remedy the misconduct without injuring the represented parties.
We also do not belittle the strong interests that a court has in protecting itself and litigants from abusive,
contumacious conduct. Sanctions, including dismissal or issuance of a default judgment, must be available
"to protect the ability of district courts to police discovery simply and speedily." Phipps v. Blakeney, 8 F.3d
15Prior cases involving Brandt and Bainton have also resulted in sanctions. See Brandt v. Schal Assocs.,
960 F.2d 640, 646-47 (7th Cir.1992) (affirming Fed.R.Civ.P. 11 sanctions against Brandt's counsel for "an
egregious and unjustified abuse of the judicial process"); Warner Bros. v. Dae Rim Trading, Inc., 877 F.2d
1120, 1128 (2d Cir.1989) (dismissing Bainton's appeal of Rule 11 sanctions against him and imposing double
costs for the appeal; "In short, in this Court, as well as in the district court, Attorney Bainton has
demonstrated a blatant disregard of the rules and regulations which permit the judicial machinery to function
smoothly.").
17
788, 790 (11th Cir.1993). "No litigant and no attorney, even if motivated by misguided perceptions of
constitutional [or statutory] privilege, may be permitted to exhibit ... contumacious conduct without risk of
sanctions under Rule 37 [or Rule 41(b) ]." Adolph Coors Co. v. Movement Against Racism & the Klan, 777
F.2d 1538, 1543 (11th Cir.1985). We do not foreclose the possibility that, in a future case, dismissal will be
justified as a sanction for violation of court orders. We find that, on the facts of this case, dismissal is not
justified.
III. Conclusion
The district court's August 1997 Order is REVERSED insofar as it ordered dismissal of this case.
We REMAND this case for imposition of appropriate sanctions in accordance with this opinion.
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