A court may assess attorney fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. In this regard, if a court finds that fraud has been practiced upon it, or that the very temple of justice has been defiled, it may assess attorney fees against the responsible party as it may when a party shows bad faith by delaying or disrupting the litigation or by hampering enforcement of a court order. The imposition of sanctions in this instance transcends a court's equitable power concerning relations between the parties and reaches a court's inherent power to police itself, thus serving the dual purpose of vindicating judicial authority without resort to the more drastic sanctions available for contempt of court and making the prevailing party whole for expenses caused by his opponent's obstinacy.
Petitioner was the sole shareholder and director of a radio and television station. Petitioner agreed to sell the station and license to respondent. Petitioner through his attorney, changed his mind. Respondent brought suit. On the day before the suit was to be filed, the owner and his attorney attempted to place the properties beyond the District Court's reach by creating a trust, of which the trustee and beneficiaries were the owner's family members, and causing the properties to be conveyed to the trust. The attorney withheld this information from the District Court, which subsequently granted a preliminary injunction against the owner and warned the owner and the attorney that their conduct had been unethical. However, the owner proceeded to defy the preliminary injunction, file meritless motions and pleadings, and engage in delaying actions. The court awarded attorney's fees and expenses as a sanction for bad-faith conduct by petitioner in favor of respondent purchaser. On appeal, the court affirmed.
Did the lower court err in awarding respondent's attorney fees and costs?
The court held that a district court, sitting in diversity, did not abuse its discretion when it invoked its inherent power in assessing sanction based on the circumstances. In a case for specific performance of a contract, petitioner attempted to fraud the court, continuously took action to delay proceedings, repeatedly took actions in contempt of court orders, and proceeded with a series of meritless motion and pleadings and delaying actions. The court gave repeated warnings to petitioner and his counsel that his actions were sanctionable. Statutes and Federal Rules of Civil Procedure address sanctions in no way limited court's ability to use its inherent power; they instead supplemented that power. There was no abuse of discretion in the court ordering attorney fees and expenses as a sanction.