Commercial Litigation and Arbitration

Imprisonment for Civil Contempt for Failure to Pay Rule 11 Sanction — 4-Part Fourth Circuit Test for Dismissal Sanction — No Rule 11 Sanction for Isolated, Inadvertent Mistake

Young Again Prods., Inc. v. Ortega, 2011 U.S. App. LEXIS 25713 (4th Cir. Dec. 23, 2011):

This appeal arises from the district court's entry of default judgment in the amount of $3,832,832 against John Acord and his mother, Marcella Ortega (collectively, the "Appellants"), pursuant to Federal Rules of Civil Procedure 16(f) and 37(b)(2)(A)(vi). In addition to appealing the default judgment, Acord appeals the district court's earlier award of Rule 11 sanctions against him in the amount of $24,357 and the order incarcerating him for civil contempt for his refusal to pay that amount. For the reasons that follow, we affirm. We find that Appellants were adequately put on notice as to the consequences of their actions, and that their intransigence warranted no lesser sanctions. ***


The district court imposed a default judgment on the defendants pursuant to Rules 16(f) and 37(b)(2)(A)(vi) based primarily on their failure to participate in the pretrial process. ***

Recognizing the seriousness of the imposition of default judgment, we have instructed district courts to apply a four part test when determining appropriate sanctions under 37(b): "(1) whether the noncomplying party acted in bad faith; (2) the amount of prejudice his noncompliance caused his adversary . . .; (3) the need for deterrence of the particular sort of noncompliance; and (4) the effectiveness of less drastic sanctions." Mut. Fed. Sav. & Loan Ass'n v. Richards & Assocs., Inc., 872 F.2d 88, 92 (4th Cir. 1989) (citing Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 503-05 (4th Cir. 1977)). In Mutual Federal Savings and Loan Association, we noted that the Wilson factors balance a "district court's desire to enforce its discovery orders" and a "party's rights to a trial by jury and a fair day in court." 872 F.2d at 92.

We emphasize, however, that our review of the district court's determination is a deferential one, in recognition that "it is the district court judge who must administer (and endure)" the proceedings. Lee v. Max Int'l, LLC, 638 F.3d 1318, 1320 (10th Cir. 2011); see also id. (advising appellate courts not "to draw from fresh springs of patience and forgiveness"). This court has "emphasized the significance of warning a defendant about the possibility of default before entering such a harsh sanction." Hathcock, 53 F.3d at 40. However, in a similar context — the failure to prosecute a case — the Supreme Court has said "[n]or does the absence of notice as to the possibility of dismissal or the failure to hold an adversary hearing necessarily render such a dismissal void." Link v. Wabash R.R., 370 U.S. 626, 632, 82 S. Ct. 1386, 8 L. Ed. 2d 734 (1962). Indeed, in the context of sanctions for abuse of discovery, the Supreme Court has warned that appellate courts "tend[] . . . to be heavily influenced by the severity of outright dismissal as a sanction . . . But here, as in other areas of the law, the most severe in the spectrum of sanctions . . . must be available to the district court." Nat'l Hockey League v. Metro. Hockey Club, 427 U.S. 639, 642-43, 96 S. Ct. 2778, 49 L. Ed. 2d 747 (1976). ***


We now turn to Acord's contention that the district court erred when it entered Rule 11 sanctions against him and that it committed further error when it order him incarcerated for failure to pay these sanctions. ***


The district court imposed sanctions both because it found that the purpose of Acord's motion was to harass, delay, and increase the costs of litigation and because his motion "contained numerous factual allegations without evidentiary support." J.A. 2306. Acord disagrees with the district court's assessment of his motion and contends that the allegations were true and that the motion was necessary to prevent Mason from defaming Acord. Acord points to no evidence in the record to support this contention.

Furthermore, this does not appear to be a case like In re Bees, in which we found the imposition of Rule 11 sanctions to be reversible error because the erroneous factual assertions in the sanctioned party's filings were isolated, inadvertent, and in good faith. 562 F.3d at 288. Instead, the district court found Acord's motion to be "utterly devoid of any merit whatsoever," and Acord has not presented any argument on appeal that contradicts this assessment. J.A. 2174. On these facts, we cannot find that Acord's meritless motion and other misdeeds were inadvertent lapses, or otherwise in good faith. For these reasons, we find that the district court did not abuse its discretion when it sanctioned Acord.


The district court held Acord in contempt on August 6, 2009, when he skipped a hearing that the district court ordered him to attend after he failed to pay the Rule 11 sanctions within thirty days of March 25, 2009. To establish civil contempt, a movant must demonstrate: "(1) the existence of a valid decree of which the alleged contemnor had actual or constructive knowledge; (2) . . . that the decree was in the movant's 'favor'; (3) . . . that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations; and (4) . . . that [the] movant suffered harm as a result." Ashcraft, 218 F.3d at 301 (citation omitted). All of these elements are clearly established here. The court assessed sanctions in the amount of $24,357.00 against the defendant on November 17, 2008. Acord had knowledge of these sanctions, and he not only violated the district court's order to pay, but also failed to appear at the show cause hearing regarding his civil contempt and incarceration. He harmed Young Again both by delaying payment and by continuing to delay the proceedings. In light of these flagrant violations, we hold that the district court did not abuse its discretion when it held Acord in civil contempt.

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