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      +DUWIRUG8QGHUZULWHUV                                                                                +DUWIRUG8QGHUZULWHUV

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       +DUWIRUG8QGHUZULWHUV                                                                              +DUWIRUG8QGHUZULWHUV

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      +DUWIRUG8QGHUZULWHUV                                                                                 +DUWIRUG8QGHUZULWHUV

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      +DUWIRUG8QGHUZULWHUV                                                                                +DUWIRUG8QGHUZULWHUV

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  judicial authority without resort to the more drastic                    :KHWKHU WKH GLVWULFW FRXUW DEXVHG LWV GLVFUHWLRQ LQ
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  the prevailing party whole for expenses caused by his
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consider whether the conduct could be sanctioned under the                 KDUERUSURYLVLRQRI&LYLO5XOHDQGLWVIDLOXUHWRGRVR
rules before it relies upon its inherent authority to impose               ZDV LWVHOI D 5XOH  YLRODWLRQ DQG WKH 'LVWULFW &RXUW
sanctions for bad-faith conduct, Chambers does not explicitly              DEXVHGLWVGLVFUHWLRQLQQRWDZDUGLQJ$SSHOODQW5XOH
require in every instance that a district court first determine            VDQFWLRQV+DG$SSHOOHHFRPSOLHGZLWKWKHVDIHKDUERU
whether the conduct could be sanctioned under the rules or                 FRQGLWLRQ SUHFHGHQW QRQH RI WKH OLWLJDWLRQ ZRXOG KDYH
relevant statutes before considering sanctions under its                   EHHQQHFHVVDU\RUDWOHDVWWKH$SSHOODQWZRXOGKDYHEHHQ
inherent authority. As the Court also stated: "the Court’s                 RQQRWLFHRIWKHSRWHQWLDO5XOHVDQFWLRQ
prior cases have indicated that the inherent power of the
district court can be invoked even if procedural rules exist          $SSHOODQW)LUVW%DQN¶V)LQDO%ULHIDW
which sanction the same conduct." Id. at 49. 7KLV LV                   5XOHSURYLGHVWKDWWKHFRXUWPD\LPSRVHDQDSSURSULDWH
HVSHFLDOO\WUXHDVKHUHDQGLQ&KDPEHUVZKHUHVRPHRIWKH            VDQFWLRQVLISOHDGLQJVRUFODLPVDUHSUHVHQWHGIRUDQLPSURSHU
SDUWLFXODUFRQGXFWDWLVVXHZDVVDQFWLRQDEOHXQGHU5XOH            SXUSRVHDUHQRWZDUUDQWHGE\H[LVWLQJODZRUDQRQIULYRORXV
DQG WKURXJK RWKHU 5XOHV ZKLOH RWKHU FRQGXFW ZDV               H[WHQVLRQ RI WKH ODZ RU LI WKH DOOHJDWLRQV DQG IDFWXDO
³LQWHUWZLQHG ZLWKLQ FRQGXFW WKDW RQO\ WKH LQKHUHQW SRZHU       FRQWHQWLRQV GR QRW KDYH HYLGHQWLDU\ VXSSRUW  5LGGHU 
FRXOGDGGUHVV´,GDW                                         )G DW  VWDWLQJ WKDW WKH LPSRVLWLRQ RI VDQFWLRQV IRU
   We do not interpret Chambers to require the district court,        YLRODWLRQVRI5XOHLVGLVFUHWLRQDU\UDWKHUWKDQPDQGDWRU\
in every instance, to exhaust consideration of sanctions under        ,Q3RZHOOY6TXLUH6DQGHUV	'HPSVH\)G
other relevant rules and/or statutes. This reading of                 :/WK&LUWKLV&RXUWKHOGWKDWWKHGLVWULFW
Chambers is reasonable given its express language that                FRXUW GLG QRW DEXVH LWV GLVFUHWLRQ LQ GHFOLQLQJ WR DZDUG
QHLWKHU LV D IHGHUDO FRXUW IRUELGGHQ WR VDQFWLRQ EDGIDLWK   VDQFWLRQV XQGHU 5XOH   ,Q VR KROGLQJ WKH &RXUW VWDWHG
FRQGXFWE\PHDQVRIWKHLQKHUHQWSRZHUVLPSO\EHFDXVHWKDW            ³5XOHSURYLGHVWKDWVDQFWLRQVPD\EHLPSRVHGDQGRQO\WR
FRQGXFW FRXOG DOVR EH VDQFWLRQHG XQGHU WKH VWDWXWH RU WKH    WKHH[WHQWUHTXLUHGWRGHWHUVLPLODUFRQGXFWLQIXWXUH´,GDW
5XOHVWKHFRXUWRUGLQDULO\VKRXOGUHO\RQWKH5XOHVUDWKHU      
WKDQ WKH LQKHUHQW SRZHU." 501 U.S. at 50. The Supreme                +HUH WKH GLVWULFW FRXUW GHQLHG )LUVW %DQN¶V PRWLRQ IRU
Court’s use of the word "ordinarily" suggests that there may          VDQFWLRQVKDYLQJGHFLGHGWKDW+DUWIRUG¶VPRWLRQIRUVDQFWLRQV
be some exceptional circumstances when a district court’s             VKRXOGEHJUDQWHG:HDIILUPWKHGLVWULFWFRXUW¶VGHQLDORI
express consideration of other rules and statutes is not              )LUVW%DQN¶VPRWLRQIRU5XOHVDQFWLRQVEHFDXVHWKHGLVWULFW
required. Our ruling is wholly consistent with the Supreme            FRXUWGLGQRWEDVHLWVUXOLQJRQDQHUURQHRXVYLHZRIWKHODZ
Court’s language in Chambers.                                         RUDFOHDUO\HUURQHRXVDVVHVVPHQWRIWKHHYLGHQFH
    )LUVW%DQNRI0DULHWWDY               1R        1R                      )LUVW%DQNRI0DULHWWDY           
      +DUWIRUG8QGHUZULWHUV                                                                                   +DUWIRUG8QGHUZULWHUV

VXSSRUWDILQGLQJRILPSURSHUSXUSRVHZHFRQFOXGHWKDWWKH              This Court has affirmed the imposition of sanctions under
GLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQILQGLQJEDGIDLWK      the district court’s inherent authority where the district court
RQWKHSDUWRI)LUVW%DQN                                          did not expressly consider particular rules of civil procedure.
                                                                      Mann v. Univ. Of Cinn., 114 F.3d 1188, 1997 WL 280188, at
& $PRXQWRIWKHDWWRUQH\IHHV                                        *5-6 (6th Cir. May 27, 1997). Under Chambers, other
                                                                      Circuits have held that the mere fact that conduct is held not
  )LUVW%DQNQH[WFRQWHQGVWKDWWKHGLVWULFWFRXUWDEXVHGLWV         to be a violation of any rule or statute authorizing sanctions
GLVFUHWLRQLQWKHDPRXQWRIIHHVLWDZDUGHG+DUWIRUGXQGHULWV        does not preclude a district court from imposing sanctions
LQKHUHQWSRZHUV                                                    under its inherent power. See Amsted Industries, Inc. v.
                                                                      Buckeye Steel Castings Co., 23 F.3d 374, 377-79 (Fed. Cir.
  +HUHWKHGLVWULFWFRXUWKHOGDKHDULQJWRGHWHUPLQHZKHWKHU        1994) (recognizing a federal courts inherent power to
VDQFWLRQV ZHUH DSSURSULDWH DQG LI VR WKH DPRXQW RI WKH
VDQFWLRQV'XULQJWKHVDQFWLRQVKHDULQJ+DUWIRUGSUHVHQWHG          impose sanctions); Gillette Foods Inc. v. Bayernwald-
H[SHUWWHVWLPRQ\WKDWDGGUHVVHGWKHUHDVRQDEOHQHVVRIWKHIHHV        Fruchteverwertung, 977 F.2d 809, 813-14 (3d Cir. 1992)
FKDUJHGE\+DUWIRUG¶VFRXQVHO7KHH[SHUWZLWQHVVWHVWLILHG          UHMHFWLQJWKHUXOHWKDWVDQFWLRQVFDQQRWEHLPSRVHGE\WKH
WKDWWKHKRXUO\IHHFKDUJHGRIZDVORZDQGWKDWWKH          GLVWULFWFRXUWXQGHULWVLQKHUHQWSRZHUVLPSO\EHFDXVHDFODLP
ZRUN GRQH DQG IHHV FKDUJHG ZHUH ³ERWK UHDVRQDEOH DQG          LV KHOG QRW WR YLRODWH 5XOH  RU DQRWKHU UXOH RU VWDWXWH
QHFHVVDU\IRUWKLVW\SHRIFDVH´)XUWKHUWKHH[SHUWZLWQHVV        DXWKRUL]LQJ VDQFWLRQV The Seventh Circuit observed that
HVWLPDWHGWKDWRI+DUWIRUG¶VFRXQVHO¶VWLPHZDVVSHQW             "courts need not consider lesser sanctions, however, in
GHIHQGLQJ&RXQW,,EHFDXVH+DUWIRUGKDGDOUHDG\DJUHHGWR
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FRXUW¶VDZDUGRIDWWRUQH\IHHV                                       >QRW@ XS WR WKH WDVN WKH FRXUW PD\ VDIHO\ UHO\ RQ LWV LQKHUHQW SRZHU :H
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        +DUWIRUG8QGHUZULWHUV                                                                                          +DUWIRUG8QGHUZULWHUV

situations where the misconduct is ‘so egregious, inexcusable,                  PHULWOHVVFODLP$VWREDGIDLWKLQWKHQDWXUHRIILOLQJVXLW
and destructive that no lesser sanction than dismissal could be                 )LUVW %DQN¶V LPSURSHU SXUSRVH ZDV WR ILOH D ODZVXLW DV D
adequate.’" Graham v. Schomaker, 215 F.3d 1329, 2000 WL                         PHFKDQLVPWRIRUFH+DUWIRUGWRVHWWOH&ODLP,,UDWKHUWKDQ
717093, at *3 (7th Cir. 2000). At one time, the Third Circuit                   WU\LQJWRSUHYDLORQWKHPHULWVRIWKDWFODLP)XUWKHULPSOLFLW
noted that the district court is not require to "exhaust all other              LQWKHGLVWULFWFRXUW¶VILQGLQJVRIEDGIDLWKZDVWKHILQGLQJ
sanctioning mechanisms prior to resorting to its inherent                       WKDW)LUVW%DQNKDGWKHLPSURSHUSXUSRVHVRIGHOD\LQILOLQJ
power." Landon v. Hunt, 938 F.2d 450, 454 (3rd Cir. 1991).                      DQGSURVHFXWLQJ LWV FODLPDQGRIKDUDVVPHQWE\IDLOLQJWR
                                                                                GLVFORVH WKH 7RQWL DIILGDYLW XQWLO UHVSRQGLQJ WR +DUWIRUG¶V
  To be sure, the Third Circuit now citing Chambers has                         PRWLRQIRUVXPPDU\MXGJPHQWDQGE\HQJDJLQJLQPXOWLSOH
reversed a district court for failure to consider the applicable                GLVFRYHU\YLRODWLRQV&RQVHTXHQWO\ZHDJUHHZLWKWKHGLVWULFW
federal rules of civil procedure and statutes before resorting                  FRXUWWKDW)LUVW%DQNDFWHGLQEDGIDLWKDQGVXFKEDG IDLWK
to its inherent power can be reversible error.  Montrose                    FOHDUO\HYLQFHG)LUVW%DQN¶VLPSURSHUSXUSRVHLQSXUVXLWRI
Medical Group Participating Savings Plan v. Bulger, 243                         WKLVOLWLJDWLRQ
F.3d 773, 785 (3d Cir. 2001) (noting that we squarely held
that before utilizing its inherent power, a district court should                 %HFDXVH WKH GLVWULFW FRXUW GLG QRW EDVH LWV ILQGLQJ RQ DQ
consider whether any Rule - or statute - based sanctions are                    HUURQHRXVYLHZRIWKHODZRUDFOHDUO\HUURQHRXVDVVHVVPHQW
up to the task in holding that the district court erred when it                RI WKH HYLGHQFH DQG EHFDXVH WKHUH LV DPSOH HYLGHQFH WR
"did not consider whether any such sanctions . . . would have
sufficed to deal with any misconduct that occurred in this                          
case.") (emphasis added) (citing Klein,185 F.3d at 110)                                 7KH GLVVHQW FRQWHQGV WKDW RXU DQDO\VLV HVVHQWLDOO\ HOLPLQDWHV WKH
("When the Rules or pertinent statutes are ‘up to the task,’                    WKLUG UHTXLUHPHQW RI WKH EDGIDLWK H[FHSWLRQ +HUH WKH GLVWULFW FRXUW IRXQG
                                                                                WKDW )LUVW %DQN¶V ILOLQJ DQG SURVHFXWLRQ ZDV LQ WKH QDWXUH RI EDG IDLWK
they should be used. When they are not, a trial court may turn                  ,PSOLFLW LQ WKLV ILQGLQJ LV WKH ILQGLQJ WKDW )LUVW %DQN KDG WKH LPSURSHU
to its inherent power, but should exercise that power with                      SXUSRVHV RI DWWHPSWLQJ WR XVH WKH FRXUW V\VWHP WR WKUHDWHQ +DUWIRUG LQ DQ
caution.") (emphasis added and footnotes omitted).                              DWWHPSW WR IRUFH VHWWOHPHQW RU RWKHU DFWLRQ ZKHUH QRW RWKHUZLVH REWDLQDEOH
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      +DUWIRUG8QGHUZULWHUV                                                                                +DUWIRUG8QGHUZULWHUV

LW NQHZ ZDV DQ LQYDOLG FODLP XQGHU WKH WHUPV RI WKH %RQG        In our view, Chambers should be read broadly to permit the
$JUHHPHQW´ (PSKDVLV DGGHG  %XW KDYLQJ DOUHDG\                  district court to resort to its inherent authority to sanction bad-
FRQFOXGHGWKDW)LUVW%DQN¶VEDGIDLWK±RULPSURSHUSXUSRVH              faith conduct, even if the court has not expressly considered
±ZDVLQWKHQDWXUHRIEULQJLQJWKHDFWLRQWKHGLVWULFWFRXUW           whether such conduct could be sanctioned under all
VWDWHGWKDWLW³QHHGQRWUHDFK>WKHLVVXHRI)LUVW%DQN¶VDWWHPSW        potentially applicable rules or statutes. While a district court
WRDFWXDOO\SUHYDLORQWKHPHULWVRI&ODLP,,@WRILQGWKDW)LUVW        should ordinarily consider whether "the conduct could also be
%DQN¶VVXLWZDVLQEDGIDLWK´                                         sanctioned under the statute or the Rules," Chambers, 501
                                                                         U.S. at 50, there is nothing in Chambers that explicitly
   ,QDGGLWLRQWRHYLGHQFHRI)LUVW%DQN¶VEDGIDLWKLQILOLQJ           requires a court to determine whether "the conduct at issue is
WKLVDFWLRQWKHUHFRUGUHIOHFWVWKHGLVWULFWFRXUW¶VILQGLQJVWKDW      covered by one of the other sanctioning mechanisms." Id.
)LUVW %DQN IDLOHG WR FRPSO\ ZLWK VHYHUDO GLVFRYHU\ RUGHUV        We are reluctant to impose a wooden requirement where the
LVVXHGE\0DJLVWUDWH-XGJH$EHOLQFOXGLQJWKH$XJXVW               district court needs the discretion and flexibility to exercise its
3UHWULDO3UHOLPLQDU\2UGHUWKH2FWREHU            inherent authority to address various impermissible litigation
2UGHUWKDW)LUVW%DQNUHVSRQGWRDOORXWVWDQGLQJGLVFRYHU\QR
ODWHUWKDQ1RYHPEHUDQGWKH2FWREHU
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LQ WKH SURRI RI ORVV DQG D YLVLW E\ 0U 3RZHUV ZKR                  $SSO\LQJ WKH DEXVH RI GLVFUHWLRQ VWDQGDUG WKH )LIWK &LUFXLW XSKHOG
VSHFLILFDOO\DVNHGIRUVXSSRUWLQJGRFXPHQWDWLRQWRVKRZWKDW             WKH GLVWULFW FRXUWs award of sanctions under its inherent power in Carroll
0U%LHKO¶VORDQVZHUHGLVKRQHVW´-$DW                   v. The Jaques Admiralty Law Firm, P.C., 110 F.3d 290 (5th Cir. 1997).
                                                                         In Carroll, the Fifth Circuit concluded that the district court did not err in
  7KXVUDWKHUWKDQSURYLGLQJLQIRUPDWLRQWR+DUWIRUGZKLFK              resorting to its inherent power to sanction an attorney for his behavior at
                                                                         a deposition, finding that "the usual rules were not up to the task. 110
FRXOGKDYHHQDEOHGLWWRDVVHVVWKHFRYHUDJHRI&ODLP,,XQGHU           F.3d at 293. The Ninth Circuit in Mark Indus., 50 F.3d at 732, also found
WKH SROLF\ )LUVW %DQN FKRVH WR KLGH WKH EDOO DQG ILOH WKLV   that the district court did not abuse its discretion by sanctioning an
DFWLRQZKHQLQIRUPHGWKDW+DUWIRUGEHOLHYHGWKDWWKHFODLP               attorney under its inherent power for entering into a stipulated order of
ZDV QRW FRYHUHG XQGHU WKH ERQG EHFDXVH RI WKH ODFN RI          dismissal without the consent of the client. In that case, the Ninth Circuit
HYLGHQFHRIPDQLIHVWLQWHQW                                             concluded that Rule 11 did not authorize sanctions in favor of a party
                                                                         against its own lawyer. Notwithstanding, Mark Indus. held that the trial
  )LUVW %DQN FRQWHQGV WKDW LWV IDLOXUH WR GLVFORVH %LHKO¶V       court has the inherent power, apart from the rules or statutes, to sanction
FRPPHQWLVQRWHYLGHQFHRIEDGIDLWK                                    attorneys for their willful abuse of judicial process or bad faith conduct.
                                                                         Id. The Third Circuit also found no abuse of discretion in Fellheimer,
    1RW WHOOLQJ WKH LQVXUDQFH FRPSDQ\ DERXW D                      Eichen & Braverman, P.C., v. Charter Technologies, Inc., 57 F.3d 1215,
                                                                         1227- 28 (3d Cir. 1995), upholding the imposition of sanctions as the
  FRQYHUVDWLRQZLWKDWKLHIWKDWPDGHQRGLIIHUHQFHWRWKH               proper exercise of the bankruptcy courts discretion under its inherent
  LQVXUDQFHFRPSDQ\LVQRWEDGIDLWK%DGIDLWKLVGHILQHG              power for the bad-faith conduct of the debtors attorneys.
  DVVLWXDWLRQVZKHUHWKHFODLPVZHUHEURXJKWIRULPSURSHU                    On the other hand, circuit courts have reversed district courts for
  SXUSRVHVVXFKDVKDUDVVPHQWRUGHOD\7KH'LVWULFW                abusing their discretion by imposing sanctions under their inherent power.
  &RXUWPDGHQRILQGLQJWKDWWKHFODLPZDVEURXJKWIRUDQ                In Gillette Foods, the Third Circuit considered whether the district court
  LPSURSHUSXUSRVHVXFKDVKDUDVVPHQWRUGHOD\                        had the inherent authority to impose sanctions under its inherent power
                                                                         against counsel for Gillette Foods Incorporated for including a tortious
    7KHILOLQJRIDODZVXLWDIWHUWKHUHKDVEHHQDGHQLDORI             interference claim in the second amended complaint. The district court
                                                                         imposed sanctions after recognizing that counsels conduct was beyond
  FRYHUDJH LV QRW EDG IDLWK EHFDXVH LW ZDV QRW ILOHG IRU       the reach of Rule 11 because he did not personally sign the complaint. In
  SXUSRVHVRIKDUDVVPHQWRUGHOD\7KHVXLWZDVILOHGWR                that case, the Third Circuit held that "Gillette Foodss reasonable claim
  VHHNUHFRYHU\XQGHUDQLQVXUDQFHERQGWKDWZDVEHOLHYHG                for tortious interference could not have been brought in bad faith, finding
                                                                         "it hard to conceive that the tortious interference claim survives Rule 11
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WR FRQGXFW VDQFWLRQV KHDULQJV PD\ VHUYH RQO\ WR UHZDUG D               -XO\ RI   'HVSLWH WKLV NQRZOHGJH )LUVW %DQN GLG QRW
SDUW\VHHNLQJGHOD\,GDWChambers, 501 U.S. at 56.                    SURYLGHLQIRUPDWLRQDERXW%LHKO¶VFRPPHQWWR+DUWIRUGLQWKH
Moreover, as the Seventh Circuit observed, district courts                      3URRIRI/RVVIRUPRULQDQ\RWKHUVXSSRUWLQJGRFXPHQWDWLRQ
need the discretion "to craft sanctions because the power to                    ,QIDFWGHVSLWHWKHERQGDJUHHPHQW¶VUHTXLUHPHQWRID³SURRI
sanction is essential for them to manage heavy case loads and                   RIORVVGXO\VZRUQWRZLWKIXOOSDUWLFXODUV´DQG+DUWIRUG¶V
to protect the interests of litigants." Graham, 2000 WL                         FRQWLQXDOUHTXHVWVIRULQIRUPDWLRQ)LUVW%DQNGLGQRWUHYHDO
717093, at *3 (citing Oliver v. Gramley, 200 F.3d 465, 466                      %LHKO¶VDOOHJHGFRPPHQWVXJJHVWLQJDPDQLIHVWLQWHQWWRKDUP
(7th Cir. 1999)).                                                               WKH EDQN XQWLO -XO\   ZKHQ )LUVW %DQN ILOHG WKH
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  As a practical matter, the district court should usually                      IRUVXPPDU\MXGJPHQW7KHGLVWULFWFRXUWIRXQG
inform the parties, as did the district judge here, that the
district court is considering using its inherent authority to                     )LUVW %DQN KDG LQ LWV SRVVHVVLRQ WKH UHTXLVLWH SURRI WR
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scrutiny, yet can be sanctioned as a claim brought in bad faith. Id. at 814-
15. The Third Circuit also found in Saldana v. Kmart Corp., 260 F.3d                
228, 238 (3d Cir. 2001) that an attorneys use of profanity and her post-               7KH GLVVHQW DUJXHV WKDW WKH GLVWULFW FRXUW GLG QRW PDNH DQ\ ILQGLQJV
verdict letter describing an expert witness as a "Nazi" did not justify the     WKDW )LUVW %DQN DFWHG ZLWK DQ LPSURSHU SXUSRVH $IWHU LWV VHYHQ SDJHV RI
                                                                                IDFWXDO ILQGLQJV WKH GLVWULFW FRXUW H[SUHVVO\ IRXQG WKDW ³WKHUH LV DQ
imposition of sanctions under the district courts inherent authority. In
                                                                                DEXQGDQFH RI HYLGHQFH ZKLFK GHPRQVWUDWHV WKDW )LUVW %DQN DFWHG LQ EDG
Saldana, the Third Circuit found that the district court improperly             IDLWK QRW RQO\ LQ ILOLQJ WKH FODLP EXW LQ SURVHFXWLQJ LW ,Q RXU UHYLHZ RI
imposed sanctions because the conduct was not "egregious" and because           D GLVWULFW FRXUW¶V IDFWXDO ILQGLQJV ³WKH DSSHOODWH FRXUW PXVW YLHZ WKH
another basis for sanctions existed in the form of a local rule. 260 F.3d at    HYLGHQFH LQ WKH OLJKW PRVW IDYRUDEOH WR LWV SURSRQHQW JLYLQJ WKH HYLGHQFH
238. The Seventh Circuit in Corley v. Rosewood Care Center, Inc. of             LWV PD[LPXP UHDVRQDEOH SUREDWLYH IRUFH DQG LWV PLQLPXP UHDVRQDEOH
Peoria, 142 F.3d 1041, 1958-59 (7th Cir. 1998) similarly vacated the            SUHMXGLFLDO YDOXH 3DVFKDO Y )ODJVWDU %DQN )6%  :/ 
district courtV DZDUG RI VDQFWLRQV XQGHU LWV LQKHUHQW SRZHUV ZKLFK ZDV        WK &LU  TXRWLQJ 8QLWHG 6WDWHV Y 6FKURFN  )G   WK
LPSRVHG DJDLQVW DQ DWWRUQH\ IRU ILOLQJ D IULYRORXV PRWLRQ ,Q &RUOH\ WKH       &LU 7KLV UXOH RI DSSHOODWH UHYLHZ SHUPLWV XV WR PDNH UHDVRQDEOH
6HYHQWK &LUFXLW IRXQG WKDW WR WKH H[WHQW WKH GLVWULFW FRXUW LQWHQGHG WR        LQIHUHQFHV IURP WKH IDFWV IRXQG E\ WKH GLVWULFW FRXUW =DFN  )G DW
LPSRVH WKH VDQFWLRQ XQGHU 5XOH  LW FOHDUO\ DEXVHG LWV GLVFUHWLRQ IRU         $V D PDWWHU RI ODZ WR ILOH D PHULWOHVV ODZVXLW ,3/ WR ZLWKKROG
QHLWKHU GHIHQGDQWV QRU WKH FRXUW FRPSOLHG ZLWK WKH UXOHs procedural            PDWHULDO HYLGHQFH LQ VXSSRUW RI D FODLP LV DQ LPSURSHU XVH RI WKH FRXUWV
requirements. Id. at 1058. The Seventh Circuit in Corley also found that       6HH 0DQVPDQQ Y 7XPDQ  )6XSS   ('3D  ,I
the court could not rely upon its inherent power because the attorney was       3ODLQWLII KDG DOOHJHG WKH 7XPDQV KDG LQWHQWLRQDOO\    ZLWKKHOG
not given an opportunity to respond to the defendants motion for               LQIRUPDWLRQ IURP WKHP WR ILOH D ODZVXLW WKH 7XPDQV NQHZ ZDV QRW
sanctions. Id. at 1059.                                                         ZDUUDQWHG 3ODLQWLII ZRXOG KDYH VWDWHG D FODLP DJDLQVW WKHP IRU ZURQJIXO
                                                                                XVH RI FLYLO SURFHHGLQJV
    )LUVW%DQNRI0DULHWWDY               1R        1R                )LUVW%DQNRI0DULHWWDY      
      +DUWIRUG8QGHUZULWHUV                                                                             +DUWIRUG8QGHUZULWHUV

  7KH HYLGHQFH LQ WKH UHFRUG FOHDUO\ VXSSRUWV WKH GLVWULFW    sanction particular conduct. The parties can present to the
FRXUW¶VILQGLQJWKDW)LUVW%DQN¶VFRXQVHONQHZRUVKRXOGKDYH         district court those rules or statutes that may be more
NQRZQWKDW&ODLP,,RILWVFRPSODLQWZDVZLWKRXWPHULWDQG           appropriate. The district court can then exercise its "informed
ZHDIILUPWKHGLVWULFWFRXUW¶VFRQFOXVLRQRQWKLVLVVXH              discretion" in selecting the appropriate authority. "The
                                                                      different grounds for ordering sanctions and shifting
,PSURSHU3XUSRVH5HTXLUHPHQW                                     attorney’s fees are distinct and require a close and careful
                                                                      analysis." In re Ruben, 825 F.2d 977, 983 (6th Cir. 1987). Of
   $VWRWKHWKLUGHOHPHQWUHTXLUHGWRDZDUGVDQFWLRQVXQGHU          course, there may be some instances in which the litigation
LWVLQKHUHQWSRZHUVWKHGLVWULFWFRXUWFRQFOXGHGEDVHGRQDQ        conduct is so egregious and the court’s inherent authority so
H[WHQVLYH UHYLHZ RI WKH HYLGHQFH LQ WKH UHFRUG WKDW )LUVW   clearly applicable that a district court can exercise its inherent
%DQN¶VVXLWDJDLQVW+DUWIRUGZDV³ODFHGZLWKEDGIDLWK-$         authority without the necessity of a full exposition on the
DW7KHGLVWULFWFRXUWH[SOLFLWO\IRXQGWKDW³)LUVW%DQN¶V        potentially applicable federal rules and statutes.
VXLWDJDLQVW+DUWIRUGLVLQWKHQDWXUHRIEDGIDLWKRIµEULQJLQJ
DQDFWLRQRUFDXVLQJDQDFWLRQWREHEURXJKW¶-$DW7KH         To be sure, the Court in Chambers cautioned that "inherent
GLVWULFW FRXUW SURYLGHG D GHWDLOHG FKURQRORJ\ RI WKH IDFWV    powers must be exercised with restraint and discretion. Id.
XQGHULWVKHDGLQJ)LUVW%DQN$FWHGLQ%DG)DLWK-$DW        at 44. Under Chambers, the appellate court reviews a district
$OWKRXJKWKHGLVWULFWFRXUWGLGQRWH[SOLFLWO\ODEHOLWVILQGLQJV     court’s resort to its inherent authority for an abuse of
LQWKHEDGIDLWKVHFWLRQRILWVRUGHUDVDILQGLQJRI³LPSURSHU       discretion and a district court’s failure to use a clearly
SXUSRVH´WKHUHFRUGDQG6L[WK&LUFXLWSUHFHGHQWUHIOHFWWKDW         applicable and effective sanction rule could constitute an
WKLVLVZKDWWKHGLVWULFWFRXUWLQWHQGHG6HHVXSUDQRWH         abuse of discretion. Chambers, 501 U.S. at 50. As noted by
)RU WKH UHDVRQV WKDW IROORZ ZH FRQFOXGH WKDW WKH GLVWULFW   the Third Circuit in Martin v. Brown, 63 F.3d 1252, 1265 (3d
FRXUW¶VILQGLQJWKDW)LUVW%DQNDFWHGLQEDGIDLWKLVVXIILFLHQW      Cir. 1995), "[g]enerally, a courts inherent power should be
                                                                      reserved for those cases in which the conduct of a party or an
                                                                      attorney is egregious and no other basis for sanctions exists.
                                                                      (citing Gillette Foods v. Bayernwald-Fruchteverwertung, 977
                                                                      F.2d 809, 813 (3rd Cir. 1992).
                                                                        The exercise of inherent authority is particularly
                                                                      appropriate for impermissible conduct that adversely impacts
                                                                      the entire litigation. In response to the contention in
                                                                      Chambers that the conduct at issue could have been addressed
                                                                      by Rule 11 and "other Rules", the Supreme Court responded:
                                                                        Much of the bad-faith conduct by Chambers, however,
                                                                        was beyond the reach of the Rules; his entire course of
                                                                        conduct throughout the lawsuit evidenced bad faith and
                                                                        an attempt to perpetrate a fraud on the court, and the
                                                                        conduct sanctionable under the Rules was intertwined
                                                                        within conduct that only the inherent power could
     )LUVW%DQNRI0DULHWWDY                    1R          1R                   )LUVW%DQNRI0DULHWWDY        
       +DUWIRUG8QGHUZULWHUV                                                                                       +DUWIRUG8QGHUZULWHUV

  address. In circumstances such as these in which all of                     WKDW WKH ILOLQJ RI D VXLW ZLWK ZKDW WKH LQVXUDQFH FDUULHU
  a litigant’s conduct is deemed sanctionable, requiring a                    EHOLHYHVWREHDGHILFLHQWSURRIRIORVVEDUVDVXLW´)LQDOO\
  court first to apply Rules and statutes containing                          )LUVW%DQNUHLWHUDWHVWKDWWKHGLVWULFWFRXUWHUUHGEDVHGRQD
  sanctioning provisions to discrete occurrences before                       ZDLYHUDUJXPHQW
  invoking inherent power to address remaining instances
  of sanctionable conduct would serve only to foster                             ,QRXUYLHZ)LUVW%DQN¶VDUJXPHQWVWKDWLWRULWVFRXQVHO
  extensive and needless satellite litigation, which is                       VKRXOGQRWKDYHEHHQH[SHFWHGWRNQRZWKDW)LUVW%DQNIDLOHG
  contrary to the aim of the Rules themselves.                                WRVDWLVI\WKHFRQGLWLRQSUHFHGHQWDUHXQSHUVXDVLYH*LYHQ
                                                                              2KLR¶V ORQJVWDQGLQJ UXOH UHTXLULQJ FRPSOLDQFH ZLWK DOO
Id. at 50-51, citing Advisory Committee’s Notes on 1983                       FRQGLWLRQVSUHFHGHQWLQDQLQVXUDQFHFRQWUDFWD5XOHOHWWHU
Amendment to Rule 11, 28 U.S.C. App., pp. 575-576.                            ZDVXQQHFHVVDU\WRFRQYH\WKHODFNRIPHULWIRU)LUVW%DQN¶V
                                                                              VHFRQGFODLPRQWKH0DVFUHWHORDQ(YHQLI+DUWIRUGGLGQRW
   Further, as noted in Chambers, there are significant                       ILOHD5XOHVDIHKDUERUOHWWHUDQGWKHGLVWULFWFRXUWGLGQRW
differences between Rule 11 sanctionsDQGLQKHUHQWSRZHU                    VSHFLI\WKDWWKHSURRIRIORVVZDVGHILFLHQW)LUVW%DQNVKRXOG
VDQFWLRQV5XOHDSSOLHVSULPDULO\WRSOHDGLQJDQGSDSHUV                 KDYH NQRZQ WKDW E\ QRW SURYLGLQJ D SURRI RI ORVV ZLWK
%\UQH Y 1H[KDW  )G   WK &LU                SDUWLFXODUV DERXW WKH 0DVFUHWH ORDQ )LUVW %DQN IDLOHG WR
$QRWKHUSULQFLSDOGLIIHUHQFHLVWKDWWKHLPSRVLWLRQRI5XOH                FRPSO\ZLWKWKHFRQGLWLRQSUHFHGHQWDVUHTXLUHGE\2KLRODZ
VDQFWLRQV UHTXLUHV D VKRZLQJ RI "objectively unreasonable                +HUH)LUVW%DQNQHYHUVSHFLILHGDQDPRXQWRIFODLPHGORVV
conduct," United States v. Koury Perez, 187 F.3d 1, 8 (1st                    IURPWKH0DVFUHWHORDQRQWKHSURRIRIORVVIRUPDQGQHYHU
Cir. 1999). In contrast, the imposition of inherent power                     VXSSOHPHQWHG WKH IRUP ZLWK IXUWKHU GRFXPHQWDWLRQ DV
sanctions requires a finding of bad faith. "A court may                       SURPLVHGRUDVUHSHDWHGO\UHTXHVWHGE\+DUWIRUG
impose sanctions pursuant to its inherent powers only when
it finds the action in question was taken in bad faith,"                        )LUVW%DQNZDVZHOODZDUHRIWKHFRQGLWLRQSUHFHGHQWDVLW
Lockary v. Kayfetz, 974 F.2d 1166, 1174 (9th Cir. 1992)                       DSSHDUVLQ6HFWLRQRIWKHILGHOLW\ERQGDJUHHPHQWDQGLV
(citing Chambers, 501 U.S. at 50), or conduct that is                         UHLWHUDWHG LQ +DUWIRUG¶V -XO\   OHWWHU WR )LUVW %DQN
"tantamount to bad faith." Roadway Express, Inc. v. Piper,                    +DUWIRUG LQGLFDWHG LQ D VHFRQG OHWWHU GDWHG 6HSWHPEHU 
447 U.S. 752, 767 (1980). Moreover, a Rule 11 monetary                        WKDW)LUVW%DQNKDVQRWGHPRQVWUDWHGWKDW%LHKODFWHG
sanction is limited to "only those expenses directly caused by                ZLWKD³PDQLIHVWLQWHQW´WRFDXVHDORVVWR)LUVW%DQN)LUVW
the [offending] filer." Cooter & Gell v. Hartmarx Corp., 496                  %DQNGLGQRWUHVSRQGWRWKH6HSWHPEHUWKOHWWHUDQGQHYHU
U.S. 384, 406-07 (1990). Where, as here, the offending                        VXSSOHPHQWHG LWV SURRI RI ORVV RU SURYLGHG DGGLWLRQDO
party’s conduct extends through the proceedings, Rule 11                      GRFXPHQWDWLRQ UHJDUGLQJ &ODLP ,,  ,QVWHDG DV WKH GLVWULFW
                                                                              FRXUW IRXQG )LUVW %DQN ³ZDLWHG DSSUR[LPDWHO\ IRXUWHHQ
                                                                              PRQWKVDIWHUILOLQJVXLWWRVXEPLWDQDIILGDYLWZKLFKSXUSRUWHG
                                                                            WRVXSSRUWWKHFODLP-$DW&RQVHTXHQWO\WKHGLVWULFW
       7KHUH DUH DOVR GLIIHUHQFHV EHWZHHQ 5XOH  VDQFWLRQV DQG LQKHUHQW      FRXUWFRQFOXGHGWKDW³>D@WWKHWLPHLWILOHGVXLW)LUVW%DQN
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      +DUWIRUG8QGHUZULWHUV                                                                                   +DUWIRUG8QGHUZULWHUV

   +HUH WKH GLVWULFW FRXUW GLG QRW DEXVH LWV GLVFUHWLRQ LQ      remedies would not address the injury that the district court
ILQGLQJWKDWWKHUHZDVQRFRORUDEOHEDVLVIRU&ODLP,,7RWKH           sought to remedy that included withholding evidence, the
FRQWUDU\ WKH HYLGHQFH LQ WKH UHFRUG VWURQJO\ VXSSRUWV WKH        consequences of the withholding, violating discovery orders
GLVWULFW FRXUW¶V ILQGLQJ   $GGLWLRQDOO\ ZLWK WKH SRVVLEOH       and extending the proceedings.
H[FHSWLRQ RI WKH 3DWULFN 7RQWL $IILGDYLW ILOHG ZLWK WKH
GLVWULFWFRXUWRQ-XO\)LUVW%DQNGLGQRWSURYLGHDQ\             Chambers leaves to the district courts "informed
SURRIWRHVWDEOLVKWKDW%LHKOPDGHWKHORDQZLWKD³PDQLIHVW              discretion" whether the applicable statutes or rules are "up to
LQWHQW´WRFDXVHWKHLQVXUHGKDUPDUHTXLUHPHQWIRUUHFRYHU\             the task"given the circumstances of the particular conduct.
XQGHUWKHERQG                                                        See Klein v. Stahl GMBH & Co. Maschinefabrik, 185 F.3d
                                                                          98, 109-11 (3rd Cir. 1999) (interpreting Chambers to mean
   )RU WKHVH UHDVRQV WKLV &RXUW DIILUPV WKH GLVWULFW FRXUW¶V     "that the Rules are not up to the task when they would not
ILQGLQJWKDWWKHUHZDVQRFRORUDEOHEDVLVIRU&ODLP,,RI)LUVW           provide a district court with the authority to sanction all of the
%DQN¶VFRPSODLQW                                                         conduct deserving of sanction"); Mark Indus., Ltd. v. Sea
                                                                          Captain's Choice, Inc., 50 F.3d 730, 732 (9th Cir.1995)
   &RXQVHO.QHZRU6KRXOG+DYH.QRZQWKH&ODLPZDV                      (noting that the inherent power to sanction generally should
     0HULWOHVV5HTXLUHPHQW                                                be invoked only if statutes or rules are not "up to the task");
  )LUVW%DQNQH[WDUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQILQGLQJ         Gillette Foods, 977 F.2d at 814 n.10 (construing the above-
WKDW)LUVW%DQNVKRXOGKDYHNQRZQWKDWWKHUHZDVDIDLOXUHRI             quoted paragraph from Chambers to refer to "the ability of a
FRQGLWLRQ SUHFHGHQW RQ WKH SURRI RI ORVV LVVXH IRU VHYHUDO       court to impose sanctions under its inherent power when
UHDVRQV)LUVW3ODLQWLIIFRQWHQGVLWZDVQRWPDGHDZDUHRILWV          some of the attorneys conduct could be sanctionable under
IDLOXUHRIFRQGLWLRQSUHFHGHQWEHFDXVH+DUWIRUGQHYHUVHQWLW             Rule 11 and other rules"). In the absence of a plainly
D³5XOHVDIHKDUERUOHWWHUVWDWLQJWKDWWKHFODLPVKRXOGEH            applicable rule, we likewise trust in the district court’s
GLVPLVVHGEHFDXVHWKHUHZDVQROHJDORUIDFWXDOJURXQGVWR                "informed discretion" when the circumstances require the
VXSSRUWWKHFODLP´6HFRQGEHFDXVHWKHSULRUGHFLVLRQVRI             exercise of its inherent authority.
WKHFRXUWZHUHEDVHGXSRQWKHODFNRIHYLGHQFHRIPDQLIHVW
LQWHQW³DUHDVRQDEOHDWWRUQH\ZRXOGQRWKDYHNQRZQWKDWWKH                 In the section of its Opinion entitled "First Bank Acted in
SURRI RI ORVV ZDV LQVXIILFLHQW EHFDXVH QHLWKHU WKH 'LVWULFW       Bad Faith", JA at 63, WKH GLVWULFW FRXUW PDGH WKH GHWDLOHG
&RXUW RU WKH 6L[WK &LUFXLW IRXQG VXPPDU\ MXGJPHQW WR EH          ILQGLQJVRIIDFWLQFOXGLQJWKDW)LUVW%DQNZDVDZDUHRI
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                                                                          EULQJLQJ VXLW DJDLQVW +DUWIRUG  ³)LUVW %DQN KDG
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