Hollon v. Merck & Co., 589 F. App'x 570

Gary J. Douglas, defense counsel in a Fosamax design-defect trial, delivered an animated, theatrical closing argument described by the district court as "agitated," "boisterous," and likened to "vaudeville."
During summation Douglas made statements urging the jury to "say something to Merck" and called Merck's conduct "reprehensible" and "disgusting."
The district court had previously ruled that punitive damages were excluded from the case.
The district court concluded Douglas attempted to inject punitive-damages themes into the trial during summation, issued an order to show cause, held a hearing, and imposed sanctions under the court's inherent powers.
Douglas appealed the sanctions to the Second Circuit, which reviewed whether the district court adequately found that (1) the challenged conduct lacked a colorable basis and (2) was brought in bad faith.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court permissibly imposed sanctions under its inherent powers	Douglas argued his remarks in summation were not clearly improper and did not show subjective bad faith	Merck argued Douglas intentionally and insidiously sought to inject punitive-damages themes despite the court's ruling excluding them	Reversed and remanded: the Second Circuit found the district court failed to make specific factual findings of bad faith or show the remarks were entirely without merit, so the record was insufficient to support sanctions
Whether the conduct was "without colorable basis" and shown to be in bad faith	Douglas maintained his statements had legal/factual support or at least reasonable belief and were not proven to be made in bad faith	Merck asserted the statements were baseless and intended to provoke the jury into awarding punitive relief	Court held that a claim is only sanctionable if without colorable basis and made in bad faith; here the district court did not make the required high-specificity findings to support that conclusion

Wolters Kluwer Fin. Servs., Inc. v. Scivantage, 564 F.3d 110 (2d Cir. 2009) (sets two-part test for inherent-power sanctions: lack of colorable basis and bad faith)
Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323 (2d Cir. 1999) (defines colorable claim and requires specific findings for bad-faith sanctions)
Wilson v. Citigroup, N.A., 702 F.3d 720 (2d Cir. 2012) (reviews deference and need for restraint when courts impose inherent-power sanctions)
Enmon v. Prospect Capital Corp., 675 F.3d 138 (2d Cir. 2012) (explains heightened scrutiny on district courts acting as accuser, factfinder, and judge when imposing sanctions)