Chambers v. Nasco, Inc.

501 U.S. 32 (1991)

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Nature of the Case

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Facts

Chambers (D) entered into an agreement to sell assets to Nasco (P). D was the sole shareholder and director of CTR, which operated a television station KPLC-TV. The purchase price was $18 million. The agreement was not recorded in the parishes in which the two properties housing the station’s facilities were located. Consummation of the agreement was subject to the approval of the FCC. Both parties were obligated to file appropriate documents with the FCC by September 23, 1983. D decided he did not want to follow through with the agreement and tried to talk P out of consummating the sale. P refused. D then notified P he would not consummate the sale nor file the necessary documents with the FCC. P decided to sue D and noticed P under Rule 65 and Rule 11 of its intention to sue and to get a TRO to prevent alienation or encumbrance of the properties at issue. D and his attorney then set out to transfer the property to a third party (his sister) under trust with D's three adult children as beneficiaries. They determined that because the purchase agreement had never been recorded and if the deeds were recorded into a third party before issuance of the TRO, the District Court would lack jurisdiction over the properties. The sales were made, and the deeds were recorded. The trustee as purchaser had not signed the deeds, none of the consideration that was recited was paid, and CTR remained in possession of the properties. Later that morning, P appeared in District Court to seek the TRO, and the judge got D’s attorney on the phone and made judicial inquiry concerning the possibility of selling the property to third parties. The attorney said nothing to the judge and did not tell him the deeds had been recorded earlier that morning. That afternoon the parties had the trust documents and note signed, and the next morning the attorney informed the judge and admitted he had intentionally withheld information from the judge. The judge entered a TRO and a preliminary injunction and then at a hearing informed D and his attorney that their conduct had been unethical. D continued to abuse the judicial process by refusing examination of corporate records, and by making a series of meritless motions and pleadings and delaying actions and attempted end runs with the FCC. These resulted in assessment of a $25,000 fine against D personally, and two subsequent appeals from the contempt order were dismissed for lack of a final judgment. D and counsel were repeatedly warned that misconduct would not be tolerated. The only defense at trial presented by D was the Public Records Doctrine. In the interlude between trial and the entry of final judgment, D sought to render the purchase agreement invalid by seeking permission from the FCC to build a new transmission tower and to relocate the facilities to another site. P sought contempt sanctions, and D withdrew the application. Eventually, it was found that the trust sale was a simulated sale and that the deeds were null and void. Specific performance was awarded. D then removed all the equipment and an appeal that was filed was deemed to be frivolous. D then tried to convince CTR officials to oppose P’s approval at the FCC. Appellate sanctions were imposed in the form of attorney fees and double costs. The case was remanded for a further determination of sanctions and the court levied $999,644.65 against D. The court discussed Rule 11 sanctions but determined that the sanctions levied were done so under the inherent power of the court to levy sanctions particularly when parties practice fraud upon the court. The court of appeals affirmed.