F.D.I.C. v. Conner

• Decision Date: 25 May 1994
• Docket Number: 93-1343,Nos. 92-1666,s. 92-1666
• Citation: 20 F.3d 1376
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Capital National Bank, Plaintiff-Appellant, and Charles W. Sartain, individually and as attorney for the Federal Deposit Insurance Corporation, etc., Appellant, v. William C. CONNER, et al., Defendants, Charles Hillard, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1376

20 F.3d 1376

62 USLW 2741

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Capital National Bank, Plaintiff-Appellant and Charles W. Sartain, individually and as attorney for the Federal Deposit Insurance Corporation, etc., Appellant, v. William C. CONNER, et al., Defendants Charles Hillard, et al., Defendants-Appellees.

Nos. 92-1666, 93-1343.

United States Court of Appeals Fifth Circuit.

May 25, 1994.

Rehearing Denied July 1, 1994.

Olson, Gibbons, Sartain, Nicoud, Birne & Sussman, Charles Wilfred Sartain, Harvey G. Joseph, James E. Urmin, Godwin & Carlton, Dallas, TX, for Charles Wilfred Sartain, in No. 92-1666.

Gregory E. Gore, Washington, DC, for F.D.I.C. in No. 92-1666.

Beale Dean, R. David Broiles, Brown, Herman, Scott, Dean & Miles, Ft. Worth, TX, for

Hillard, Robinson, Ryan, Stevens and Whipp in No. 92-1666.

Charles W. Sartain, Godwin & Carlton, Dallas, TX, for Sartain in No. 93-1343.

Gregory Gore, FDIC, Washington, DC, for F.D.I.C., in No. 93-1343.

Beale Dean, Brown, Herman, Scott, Dean & Miles, Ft. Worth, TX, for appellees in No. 93-1343.

Appeals from the United States District Court for the Northern District of Texas.

Before GOLDBERG, DAVIS, and DeMOSS, Circuit Judges.

GOLDBERG, Circuit Judge:

The Federal Deposit Insurance Corporation ("FDIC") filed this suit against seven former directors of Capital National Bank of Fort Worth ("Capital"), alleging that, in their management of the bank, the defendants were negligent, breached their fiduciary duties, and violated express and implied agreements that they had with the institution. In these consolidated appeals, we are called upon to review several of the district court's orders: the dismissal of the FDIC's claims against five of the seven defendants as a sanction for violating a discovery order, two monetary sanctions levied personally against one of the FDIC's attorneys (one imposed pursuant to Federal Rule of Civil Procedure 37(b)(2) and the other imposed pursuant to 28 U.S.C. Sec. 1927), and the denial of the FDIC's motion to amend its original complaint. We reverse the dismissal of the FDIC's claims and the denial of the motion to amend, vacate the sanction imposed on the FDIC's attorney pursuant to 28 U.S.C. Sec. 1927, and affirm the sanction imposed on the FDIC's attorney pursuant to Rule 37(b)(2).

I. The Discovery Sanctions

A. Background

On September 15, 1988, the Comptroller of the Currency declared Capital insolvent. The FDIC was thereafter appointed receiver of the bank. Almost three years later, on September 13, 1991, the FDIC filed the present suit against seven of the former directors of the failed institution. The directors named in the original complaint were William C. Conner, Deborah Conner Norris, Charles Hillard, Marshall Robinson, Terrance Ryan, Richard I. Stevens, and Harry H. Whipp. In its original complaint, the FDIC alleged that the defendants engaged in various "unsafe, unsound, imprudent or unlawful acts and omissions ... with respect to the management, conduct, supervision and direction of the Bank." These acts and omissions allegedly constituted negligence, breached the defendants's fiduciary duties, violated express and implied agreements that the defendants had with the institution, and caused Capital to wrongfully approve twenty-one specified loans to specified borrowers. The wrongful approval of these loans allegedly caused the bank to lose in excess of $2.8 million.

On November 12, 1991, five of the defendants--Hillard, Robinson, Ryan, Stevens, and Whipp--filed a joint answer. ¹ On the same day, each of these defendants served on the FDIC a separate set of written interrogatories. See Fed.R.Civ.P. 33. Except for the name of the person about which information was sought, each set of interrogatories was identical. Each set tracked the allegations made in the FDIC's complaint and contained forty-five principal questions; however, many questions had extensive sub-parts. The FDIC calculates that there were 1,615 questions in all. On December 16, 1991, the FDIC filed a motion for a protective order pursuant to Federal Rule of Civil Procedure 26(c). The FDIC claimed that the defendants's interrogatories were oppressive and burdensome and "were filed more to harass and annoy the FDIC than to enable the Defendants to prepare their case for trial." The defendants who served the interrogatories opposed the FDIC's motion and explained their need for the information sought.

On January 13, 1992, the district court denied the FDIC's motion for a protective order. The court's order also contained the following language:

The court further ORDERS that plaintiff shall deliver ... on or before January 30, 1992, full and complete responses to each of defendants' interrogatories. The court further ORDERS that such responses shall be fully self-contained, that is, they shall not incorporate by reference or merely refer to any other interrogatory response, document or thing, and that such answers shall be verified in the manner contemplated by the Federal Rules of Civil Procedure. Failure to comply with this order will result in the imposition of sanctions, including, if appropriate, the striking of plaintiff's complaint in this action.

Approximately ten days later, the district court granted a motion by the FDIC for an extension of time within which to answer the disputed interrogatories. On February 11, 1992, the date on which the responses to the interrogatories were due, the FDIC served its answers and objections on Hillard, Robinson, Ryan, Stevens, and Whipp. The defendants were unhappy with the FDIC's responses. Thus, on May 14, 1992, they filed a motion for sanctions, alleging that the FDIC failed to comply with the district court's January 13 order. The FDIC opposed this motion and filed a response. Later, on May 29, 1992, the FDIC served on the defendants a set of amended and supplemental interrogatory answers. Still dissatisfied with the FDIC's responses, the defendants continued to press their motion for sanctions. The district court held a hearing on this motion on July 17, 1992.

At the hearing, the district court found that the FDIC's responses to the defendants's interrogatories violated the January 13 discovery order in several respects. First, the court held that the FDIC violated the January 13 order by including in its responses objections to the defendants's interrogatories. Believing that the time for making objections had expired and interpreting the January 13 order to forbid the raising of any objections to the interrogatories, the district court chided the FDIC for including in its responses both general objections to the interrogatories as a whole and specific objections to several individual questions. Second, the court found that the FDIC disregarded the directive of the January 13 order that the interrogatory answers be fully self-contained. Each set of the FDIC's responses to the interrogatories violated this portion of the January 13 order by repeatedly referring to other interrogatory answers and other documents. Finally, the district court concluded that the FDIC disobeyed the portion of the January 13 order that required interrogatory answers to be full and complete because some of the interrogatory answers merely stated general legal conclusions without stating the facts upon which those conclusions were based.

The district court found that the FDIC's violations of the January 13 discovery order were conscious, deliberate, and willful. The court did "not accept as credible or worthy of belief the explanations of forgetfulness and the like given by [FDIC attorney Charles W.] Sartain as excuses for failures to obey the order." The court then considered what sanctions would be appropriate to impose on the FDIC for its violations of the January 13 order. The court found that the FDIC's conduct amounted to bad faith and stated that it had considered alternative sanctions short of dismissal. The court thus invoked its authority under Federal Rule of Civil Procedure 37(b)(2) and dismissed the FDIC's claims against Hillard, Robinson, Ryan, Stevens, and Whipp. Finding that the FDIC's violations of the discovery order were not substantially justified and that there were no other circumstances that would make an award of expenses unjust, the court then ordered Sartain to pay the reasonable expenses, including attorney's fees, that the defendants incurred in their motion for sanctions. The court thus ordered Sartain to pay Hillard, Robinson, Ryan, Stevens, and Whipp $6,045.00 for the FDIC's failure to comply with the January 13 order. The court required Sartain to pay this sum from his personal funds and forbade him from seeking reimbursement from the FDIC. The court then entered a final judgment as to Hillard, Robinson, Ryan, Stevens, and Whipp, dismissing the FDIC's claims against them.

B. Discussion

Federal Rule of Civil Procedure 37(b)(2) empowers a district court to impose "just" sanctions on parties who disobey a discovery order. For the violation of a discovery order, a district court can, among other things, order the dismissal of a claim and the payment of the opposing party's expenses, including attorney's fees. ² Rule 37 also grants a district court considerable, but not unlimited, discretion in fashioning appropriate penalties for those who disobey such an order. Chilcutt v. United States, 4 F.3d 1313, 1320 (5th Cir.1993). We thus begin our review of the proceedings below mindful that the question presented to us is not whether we would have imposed the same sanction as the district court; it is whether the district court abused its discretion in imposing that sanction. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976) (per curiam); Topalian v. Ehrman, 3 F.3d 931, 934 (5th Cir.1993). We will discuss the dismissal of the claims against Hillard, Robinson, Ryan, Stevens, and Whipp and the monetary...