Michael Williamson v. Recovery Limited Partnership, 826 F.3d 297

Background

In 2006 the district court entered a consent order requiring defendants (RLP and CX) to provide documents from Jan 1, 2000 through July 20, 2006 so KPMG could audit gold recovered from the S.S. Central America.
After noncompliance, the court found defendants in contempt in Dec. 2006 and ordered they tender an inventory of the gold; defendants produced only an inventory of items sold to California Gold Marketing Group (sales Feb–Sep 2000).
Over multiple hearings and appellate filings, defendants’ counsel Richard Robol repeatedly represented that the California-Gold inventory was the only inventory in defendants’ possession.
In 2013 a receiver seized file cabinets from property owned by Robol and recovered numerous pre-California-Gold inventories (including a master inventory) that had never been produced.
Dispatch moved for sanctions against Robol for bad-faith concealment; after a three-day hearing the district court found Robol acted in bad faith, awarded $224,580 (reduced from $249,359.85) to compensate costs of pursuing the sanctions motion and locating the inventories, and Robol appealed.
The Sixth Circuit affirmed: it concluded Robol hampered enforcement of the 2006 order and acted in bad faith, and the sanction amount was within the district court’s discretion.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether court may sanction counsel under inherent power for hampering enforcement of a court order	Robol concealed pre-2000 inventories and repeatedly misrepresented their nonexistence, thereby hampering enforcement; sanctions are proper	Sanctions improper because representations were reasonable reliance on clients and inventories’ location/timing uncertain	Court: Yes. Sanctions proper where counsel’s misrepresentations hampered enforcement and were made in bad faith
Whether Robol acted in bad faith (knew of or willfully blind to inventories)	Multiple facts (1991 letter, prior admiralty litigation, testimony of Bob Evans and Jim Henson) show Robol knew or was willfully blind	Robol: may have known of inventories historically but not that defendants possessed them during 2006–2009; he relied on clients and lacked access to defendants’ side of duplex	Court: Held Robol knew or was willfully blind; his repeated misrepresentations infer intentional hampering; conduct was sanctionable bad faith
Whether fraud-on-the-court standard (clear-and-convincing elements) governed here	Dispatch argued fraud-on-the-court would support awarding entire litigation costs	Robol relied on narrower bad-faith sanction standard	Court: Fraud-on-the-court doctrine (used to vacate judgments) is inapplicable; proper inquiry is whether counsel hampered enforcement of an order in bad faith
Whether the monetary sanction ($224,580) was an abuse of discretion	Amount reflects costs to pursue sanctions and to uncover inventories; punitive and remedial purposes justify award	Robol: award not causally tied to his individual conduct; settlement with co-defendant would make award a windfall to Dispatch	Court: No abuse. Inherent-power sanctions are punitive/deterrent; perfect causal equivalence not required and amount was within discretion

Key Cases Cited

Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (courts have inherent power to sanction for bad-faith litigation conduct and to vindicate judicial authority)
Universal Oil Prods. Co. v. Root Refining Co., 328 U.S. 575 (1946) (fraud on the court can justify assessing entire costs; discussed as dicta)
First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501 (6th Cir. 2002) (standards for reviewing sanctions and discussion of bad-faith sanctions test)
Big Yank Corp. v. Liberty Mut. Fire Ins. Co., 125 F.3d 308 (6th Cir. 1997) (three-prong test for frivolous-claim sanctions in plaintiff context)
Johnson v. Bell, 605 F.3d 333 (6th Cir. 2010) (fraud-on-the-court elements requiring clear and convincing evidence)
Carter v. Anderson, 585 F.3d 1007 (6th Cir. 2009) (fraud-on-the-court framework cited in Sixth Circuit precedent)
Stalley ex rel. United States v. Mountain States Health Alliance, 644 F.3d 349 (6th Cir. 2011) (inherent-authority sanctions are punitive and reviewed for abuse of discretion)
Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642 (6th Cir. 2006) (court’s inherent-power sanctions need not equal the opposing party’s entire harm)
Williamson v. Recovery Ltd. Partnership, 731 F.3d 608 (6th Cir. 2013) (prior panel recounting S.S. Central America litigation background)