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In re Tutu Wells Contamination Litig.

ELR Citation: 27 ELR 21494
Nos. 96-7385 et al., 120 F.3d 368/(3d Cir., 07/22/1997, 07/24/1997) Attorney fees and sanctions

The court vacates district court sanctions that called for the suspension of three attorneys and the payment of $1 million to a halfway house, but affirms a $120,000 sanction for counsel fees and costs, which were imposed against a law firm and its client, an oil company, for discovery violations in a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) case. The court first holds that the district court order suspending three attorneys from law practice because of discovery violations violates due process. None received particularized notice that the court was contemplating their suspension from practicing law as a sanction. The mere mention of a court's inherent powers does not put a party on notice that suspension is a possible sanction. Because of the lack of notice, the attorneys' opportunity to be heard was less than meaningful; they were not given the appropriate opportunity to present relevant defenses to the penalties that they were ultimately assessed. Next, the court holds that the district court's inherent powers cannot support the imposition of the community service sanction—a $1 million payment to a halfway house—against the law firm and the oil company. An order directing a party to the litigation to remit funds to a third party is outside the scope of a court's inherent powers. Here, the court ordered the reallocation of resources from private entities to an agency of the public sector not a party in the case. In doing so, the court ventured well beyond the case and controversy before it.

The court next holds that the district court did not abuse its discretion in concluding that the law firm is subject to some form of sanction and that $120,000 was an appropriate amount. It is beyond dispute that attorney fees are, in certain circumstances, properly awarded as a sanction. The court's findings that the law firm intentionally withheld an important memorandum summarizing the results of soil and liquid tests was not unreasonable. And undisputed evidence makes it clear that it was not unreasonable for the district court to conclude that the delays in the investigation of a possible underground storage tank were willful and in bad faith. Further, nothing in the record suggests that the district court was clearly erroneous in finding that a contract did not release the law firm from sanctions. The court then upholds the district court's awarding of only a portion of the monetary sanctions sought by the moving parties. The district court was well within its discretion to deny the requested sanctions based on the parties' submissions. The submissions were voluminous, not well organized, and unclear. The district court was also within its discretion to award each party a uniform level of sanction to compensate the parties for their participation in the sanctions proceedings, and to base that uniform level on one party's submission. Last, the court holds that it lacks appellate jurisdiction over that portion of the district court's order rejecting the motion to dismiss the oil company's claims for CERCLA contribution as a sanction.

Counsel for Appellants
Kell M. Damsgaard
Morgan, Lewis & Bockius
2000 One Logan Sq., Philadelphia PA 19103
(215) 963-5000

Vincent J. Apruzzese
Apruzzese, McDermott, Mastro & Murphy
Somerset Hills Corporate Ctr.
25 Independence Blvd., Liberty Corner NJ 07938
(908) 580-1776

Counsel for Appellee
John R. Coon
Wright, Coon & Cunningham
377 Fore St., P.O. Box 7526, Portland ME 04112

Before Scirica and Alito, JJ.