Chrysler Corp. v. Carey, U.S. Ct. of Appeals, 8th Circuit (1999)
Author: Bram

Cause of action: The following is a cause of action for breach of fiduciary duty against former counsel.

Procedural History: Judgment for sanctions against DF's.  As a sanction, District Court struck the pleadings of the DF's, entered judgment against DF's as to liability, and submitted the case to jury to determine damages.  This court affirms the district court's ruling.

Facts: DF's used to represent PL with old firm but then left, while taking several confidential/privileged documents with them on the way out.  Upon leaving DF's formed a group with other attorneys to work on class action suits, and one came up against PL.  DF's former firm, representing PL, demanded DF remove themselves from the case, saying it was a breach of fiduciary duty.  This continued with other members of the group filing similar actions against PL.

PL filed this complaint, and after began in its interrogatories and requests for production of documents regarding any documents relating to any communication between DF's and , the responded that none existed.  The pre-trial litigation took over 2 years.

At trial, 42 letters & other correspondence involving DF's re: complaints against PL produced by PL's counsel.  DF's, 4 days later, shared a document it intended to use in cross; PL notified the judge of the letter, and moved to strike DF's answer, which eventually resulted in default judgment against DF.  DF says sanction not possible, and even if so, it was too harsh.

Issue(s): Under FRCP, may court strike DF's testimony on findings from PL in a letter revealed to them by DF's counsel which would reveal previous statements to be falsely made by DF?

Court's Rationale/Reasoning: Standard of review is abuse of discretion.  The letter reveals nothing the PL's never knew, but it did reveal a systematic pattern of discovery abuses by DF.  Additionally, previous responses were all contrary to what the letter revealed, so the letter was applicable in an impeachment sense as well.  This could suffice as reason to strike the pleadings.  The lies prevented PL from making any ability to conduct effective discovery, and thus they likely would have headed to trial with less evidence than they could have entering trial.

These lies also cost money, as discovery and pre-trial practices had to take longer b/c PL had to dig longer and harder before finding enough evidence to get there.  This cover-up, if you will, did not preserve the integrity of the trial and the judicial system.  Further, DF's argue they never got a chance to have their defense heard at a hearing, but the court says there is no requirement for such an action.  The hearing that they were involved in before the sanctionable disclosure was appropriate enough to satisfy any due process claims.  No requests were made for a hearing, despite DF's contentions to the contrary.

Rule: For a FRCP 37 sanction, there must be an order compelling discovery, a willful violation of that order, and prejudice to the other party.

Holding: Yes.  "When a litigant's conduct abuses the judicial process . .  Dismissal of a lawsuit is a remedy within the inherent power of the court."  Thus, sanctions in the form of striking statements is okay.