de Manez, Sofia v. Bridgestone Fireston ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-1126
SOFIA LOPEZ DE MAÑEZ, et al.,
Plaintiffs,
v.
BRIDGESTONE FIRESTONE
NORTH AMERICAN TIRE, LLC, et al.,
Defendants-Appellees.
APPEAL OF:
LEONEL PEREZNIETO
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP 03-5790-C-B/S, MDL No. 1373—Sarah Evans Barker, Judge.
____________
ARGUED SEPTEMBER 11, 2007—DECIDED JULY 11, 2008
____________
Before RIPPLE, MANION, and WOOD, Circuit Judges.
WOOD, Circuit Judge. This appeal arises out of one of
the many cases that were filed against Ford Motor Com-
pany and Bridgestone/Firestone, Inc. (now known as
Bridgestone Firestone North American Tire, LLC), after
some Firestone tires installed on Ford Explorers ex-
ploded, often with catastrophic consequences. Although
2 No. 07-1126
most of those lawsuits involved U.S. citizens who were
driving their cars within the United States, a certain
number involved foreigners. This is one of the latter
group: it was brought by the family of José Samuel Mañez-
Reyes, who was killed in Veracruz, Mexico, in one such ac-
cident. In an earlier opinion, this court reviewed a deci-
sion by the district court to dismiss the Mañez litigation
under the doctrine of forum non conveniens, on the ground
that a forum in Mexico would be available and more
appropriate. In re Bridgestone/Firestone, Inc., 420 F.3d 702
(7th Cir. 2005) (Mañez I).
The earlier appeal took an unexpected turn when the
plaintiffs submitted documents indicating that the
Fourth Court of First Instance for Civil Cases of the First
Judicial District in Morelos, Mexico, had concluded
(contrary to the district court’s expectation) that it did
not have jurisdiction over the case. In supplemental
filings before this court, plaintiffs argued that this demon-
strated conclusively that the courts of Mexico were not
available to hear the case and thus that a dismissal for
forum non conveniens was improper. See generally Gulf
Oil Corp. v. Gilbert, 330 U.S. 501, 506-07 (1947) (“In all cases
in which the doctrine of forum non conveniens comes into
play, it presupposes at least two forums in which the
defendant is amenable to process; the doctrine furnishes
critera for choice between them.”). When we invited
the defendants to respond to this new information, they
raised serious questions about the proffered documents.
We concluded that the best course of action was to remand
the case to the district court for reconsideration of the
question whether, in light of all the evidence, Mexico is
an available forum.
The district court accordingly held an evidentiary
hearing on remand to explore the circumstances sur-
No. 07-1126 3
rounding the Morelos court’s decision. Ultimately, the
court had to decide whether the plaintiffs brought that
case in good faith and whether the Mexican court’s deci-
sion was entitled to recognition in the U.S. action. The
district court concluded that the Morelos judgment had
indeed been procured in bad faith and thus was not sub-
ject to recognition. The court therefore reaffirmed its
earlier decision to dismiss the Mañez litigation on the
ground of forum non conveniens.
With that judgment in hand, defendants moved for an
order imposing sanctions against plaintiffs’ U.S. and
Mexican lawyers. Initially, the district court refrained
from taking that step, because it believed that any fraud
that may have been perpetrated was directed to this
court, not the district court. Upon reconsideration, how-
ever, the court concluded that the court of appeals no
longer had jurisdiction over the motion for sanctions,
because no proceeding was then pending there. In addi-
tion, the court noted that it, too, was arguably the victim of
vexatious and unreasonable proceedings, as described in 28
U.S.C. § 1927. It therefore imposed a fine of $50,000 as a
sanction against plaintiffs’ U.S. lawyers, to be divided
among the defendants in any way that defendants
thought appropriate. In addition, the court singled out
the appellant before us, Leonel Pereznieto-Castro, for a
particular sanction:
Further, Dr. Leonel Pereznieto, the apparent master-
mind behind these frauds on the U.S. and Mexican
courts, is ordered to pay over, as a personal sanction,
the amount of one hundred thousand dollars
($100,000.00). Fifty thousand dollars ($50,000.00) of
that amount is payable to Defendants as an addi-
tional offset against the expenses they incurred in
4 No. 07-1126
investigating the Morelos proceedings and litigating
the remand issues and the second fifty thousand
dollars is payable to the Clerk of this court as a sanc-
tion for the fraud perpetrated by him in this forum. So
long as this monetary sanction remains unpaid in
the full amount of $100,000, Leonel Pereznieto is and
shall be barred from providing any testimony against
any Defendant in this cause in any United States
court. Further, in terms of resolving the remaining
cases in this multidistrict litigation, any and all
sworn assertions reflecting the views or opinions of
Leonel Pereznieto, whether made by him directly
or indirectly, shall be stricken and we shall not con-
sider as authority cases where his testimony wheth-
er oral or written was relied upon as justification for
the court’s opinion.
The court concluded by ordering that its sanctions judg-
ment should be issued under FED. R. CIV. P. 58(d), and
that the dismissal of the case as a whole would be with-
out prejudice. (Here and throughout this opinion we cite
to the version of the Federal Rules of Civil Procedure
that took effect on December 1, 2007, unless it appears
that it would not be “just and practicable” to apply the
new rules to this pending case.)
The fact that the dismissal was without prejudice
raises the question whether the judgment before us is
final for purposes of 28 U.S.C. § 1291. We conclude that
it was, given the nature of a dismissal based on forum
non conveniens. First, we note the obvious difference
between dismissing a case on this ground and refusing
to dismiss and thereby permitting the litigation to con-
tinue. The latter kind of order is nonfinal and does not
fall within the narrow confines of the collateral order
No. 07-1126 5
doctrine. See Van Cauwenberghe v. Biard, 486 U.S. 517,
527 (1988). A dismissal, in contrast, ends the case before
the court. The premise of a dismissal under the forum non
conveniens doctrine, as we noted earlier, is that there is
an alternative forum that is better suited to hear the
case. Had the dismissal here been one “with prejudice,”
there would have been some question about plaintiffs’
right to resort to that alternative forum; by stipulating
that it was “without prejudice,” the district court prop-
erly signaled that it intended no such limitation. See
In re Joint E. & S. Dists. Asbestos Litig., 22 F.3d 755, 762
n.13 (7th Cir. 1994) (stating that “[t]he grant of a motion to
dismiss on the common law grounds of forum non
conveniens is appealable,” despite being without prejudice).
Compare Peters v. Welsh Dev. Agency, 920 F.2d 438, 439
(7th Cir. 1990) (holding that the district court’s order,
which dismissed a complaint without prejudice for
failure to prosecute but indicated that the case would be
reinstated in that same court if plaintiff were to meet cer-
tain conditions, was not final and therefore not appealable).
In this context, therefore, the phrase “without prejudice”
means that although the dismissal is “final” in the sense
that plaintiffs are finished before the U.S. courts, they
still are free to refile the case in another, appropriate
forum, and (at least to the extent that a U.S. court is in a
position to assure such a thing) such a refiling would not
be subject to a defense based on former adjudication. See
Esfeld v. Costa Crociere, S.P.A., 289 F.3d 1300, 1303, 1306
(11th Cir. 2002) (stating that after a dismissal without
prejudice on grounds of forum non conveniens, plaintiffs
are “free to refile” in “any other jurisdiction which
[would] entertain the case,” and noting that an “appropri-
ate forum” for refiling in Esfeld could be “the courts of
6 No. 07-1126
Italy, Vietnam, or Plaintiffs [sic] respective home states”).
Because the underlying litigation is finished, nothing
in Cunningham v. Hamilton County, 527 U.S. 198 (1999),
which addressed interlocutory appeals from sanctions
orders, would prevent Pereznieto from appealing (assum-
ing for the sake of argument that he is best characterized
as one of the lawyers for the plaintiffs, rather than an
expert witness).
This situation is not unlike a dismissal for lack of per-
sonal or federal subject-matter jurisdiction, which, while
foreclosing future litigation of the matter in the court
issuing the order, does not preclude a plaintiff from
refiling and litigating in a proper forum. See, e.g., Milwaukee
Concrete Studios, Ltd. v. Fjeld Mfg. Co., Inc., 8 F.3d 441, 448
(7th Cir. 1993) (taking appellate jurisdiction and affirming
the district court’s dismissal without prejudice on grounds
of improper venue because of insufficient contacts to confer
personal jurisdiction but noting that refiling in a proper
venue remains an option); Fuhrman v. Livaditis, 611 F.2d
203, 204 (7th Cir. 1979) (same).
Returning to the case presently before us, it is Pereznieto
who has appealed. His complaint is not about the dis-
missal of the underlying action, but instead is about the
order imposing sanctions on him. This order, we con-
clude, is also final for purposes of appeal; the district
court is finished with him, and the only thing that re-
mains is for him to pay the fine that it imposed, unless
he can obtain relief on appeal. See United States v. Dowell,
257 F.3d 694, 698 (7th Cir. 2001); United States v.
Kirschenbaum, 156 F.3d 784, 794 (7th Cir. 1998). Beginning
with fundamental jurisdictional arguments and moving
on to others, he argues that the court’s order was either
beyond its competence, unauthorized, or an abuse of
No. 07-1126 7
discretion. We consider these points in turn, filling in the
factual background as necessary.
I
A few more details about the conduct for which
Pereznieto was sanctioned help to explain the district
court’s action. After the case was remanded to the dis-
trict court, the parties spent nearly a year in discovery. The
court then held a two-day evidentiary hearing. The evi-
dence presented showed that plaintiffs’ U.S. lawyers,
Roger Reed and Alberto Guerrero, had hired Mexican
lawyers on a contingent-fee basis after the initial appeal
had been filed in this court, and that they did so for
the express purpose of filing a deficient complaint in an
improper Mexican court. The idea was to file something
that the Morelos courts would dismiss, so that plaintiffs
could present “proof” to this court that Mexico was not
an available alternative forum. The Mexican attorney in
charge of this strategy was Pereznieto—a Mexican citi-
zen and attorney whom plaintiffs’ U.S. lawyers knew
because he previously had filed an expert declaration in
support of their claims in the U.S. courts. Pereznieto in
turn hired two other Mexican lawyers to assist him, Juan
Carlos Guerrero-Valle and Rosa Maria Avila-Fernandez.
The district court found that the evidence, including a
“smoking gun” email sent on January 14, 2005, showed
that the Mexican attorneys improperly had used family
connections and had ex parte contact with the Morelos
judge in order to manipulate the system and ensure that
the judge would “throw out the suit according to what
we planned.” Pereznieto, the court found, had “played a
double role in this attempted fraud on the court,” both by
8 No. 07-1126
orchestrating the proceedings in Morelos and by sub-
mitting an “expert affidavit” to the Seventh Circuit in
support of the plaintiffs’ arguments while the initial
appeal was pending. At no time did Pereznieto disclose
the circumstances of the Mexican proceedings to the
U.S. courts, nor did he mention that he was representing
the plaintiffs on a contingent-fee basis in Mexico (in
itself, a lawful arrangement) while at the same time
giving sworn statements as an expert in the U.S. proceed-
ings. These findings provided the basis for the sanc-
tions order we set forth above.
II
In his appeal, Pereznieto raises three principal argu-
ments: that the district court lacked jurisdiction to
impose sanctions against him; that the district court did
not observe the requirements of due process; and that
the court erred in its findings about the Mexican pro-
ceedings and Mexican law.
A
We consider first Pereznieto’s jurisdictional argument.
To the extent that he is challenging the district court’s
subject-matter jurisdiction to investigate the circumstances
behind his filings and to impose sanctions for fraud or
misconduct, we reject his argument. In Chambers v. NASCO,
Inc., 501 U.S. 32 (1991), the Supreme Court reaffirmed
the inherent power of the federal courts to address “a
full range of litigation abuses.” Id. at 46. Although the
exercise of the inherent power may be limited by statute
or rule, id. at 47, it is still possible in appropriate circum-
No. 07-1126 9
stances for a court “to sanction bad-faith conduct by
means of the inherent power” even if “that conduct
could also be sanctioned under the statute or the Rules,” id.
at 50. No matter who allegedly commits a fraud on the
court—a party, an attorney, or a nonparty witness—the
court has the inherent power to conduct proceedings to
investigate that allegation and, if it is proven, to punish
that conduct.
Whether the court had authority under 28 U.S.C. § 1927
to punish someone in Pereznieto’s position is another
question. Section 1927 permits sanctions only against
“[a]ny attorney or other person admitted to conduct cases
in any court of the United States or any Territory thereof.”
Pereznieto is neither, and so the court’s sanction was not
authorized by § 1927. That is not, however, a point that
affects the court’s jurisdiction; it simply means that the
sanction must stand or fall on some other ground. The
fact that some of the conduct that ultimately gave rise
to the filings in the U.S. court took place outside the
United States (here, in Mexico) does not deprive the
court of its competence to adjudicate this matter. Compare
F. Hoffman-LaRoche Ltd. v. Empagran S.A., 542 U.S. 155,
175 (2004) (in an antitrust case, reserving judgment on
the question whether U.S. law may apply if foreign con-
duct and domestic conduct are not independent of one
another).
This case is not like United Phosphorus, Ltd. v. Angus
Chemical Co., 322 F.3d 942 (7th Cir. 2003) (en banc), in
which this court found that the restrictions imposed by
the Foreign Trade Antitrust Improvements Act (FTAIA),
15 U.S.C. § 6a, on the reach of the antitrust laws over
conduct occurring outside the United States affect the
subject-matter jurisdiction of the district court. Relying
10 No. 07-1126
on cases that had construed the FTAIA, the en banc court
found that Congress, through that particular statute,
had acted to limit the subject-matter jurisdiction of the
federal courts. No such statute exists in our case. Moreover,
here the district court was exercising its authority to protect
the integrity of the proceedings occurring before it. The acts
in question may have begun outside the United States, but
the scheme decidedly came to fruition within the United
States.
Insofar as Pereznieto is objecting to the court’s exercise
of personal jurisdiction, he runs into a somewhat dif-
ferent problem. He was not a defendant, “haled” into the
U.S. federal district court against his will. See, e.g., World-
Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
Instead, he was hired in part as an expert witness and
in part as co-counsel for the Mexican proceedings. He
voluntarily submitted opinions to his U.S. counterparts,
knowing that they would in turn submit them to the
district court and this court in connection with the
Ford/Firestone cases. The nature of a person’s relation
to the court matters, as the Supreme Court held in
Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985). There
the Court held that the Due Process Clause of the Four-
teenth Amendment “need not and does not afford [absent
class plaintiffs] as much protection from state-court
jurisdiction as it does [absent defendants in non-class
cases].” Id. at 811. At the same time, the Court stressed
that due process protections appropriate to the person
in question must be observed: “The Fourteenth Amend-
ment does protect ‘persons,’ not ‘defendants,’ however,
so absent plaintiffs as well as absent defendants are entitled
to some protection from the jurisdiction of a forum State
which seeks to adjudicate their claims.” Id. What the Court
No. 07-1126 11
said about the Fourteenth Amendment and state-court
jurisdiction applies with equal force to the Due Process
Clause of the Fifth Amendment, for purposes of federal-
court jurisdiction.
There are two questions here: first, to the extent that the
district court imposed sanctions against Pereznieto for
representations he made, directly or indirectly, to the
district court or this court, is it permissible to conclude
that Pereznieto submitted himself to the personal juris-
diction of the court for purposes of anything arising out
of those filings; second, to the extent that the district
court imposed sanctions against Pereznieto for actions
he took before the Morelos courts, in Mexico, what, if
anything, justifies bringing Pereznieto before the U.S.
court?
In the affidavit he submitted in conjunction with the
proceedings on remand, Pereznieto stated:
1. My involvement in this case, and others involving
“roll over” cases against the Defendants here and
others [sic], initially arose in consulting capacity
based on experience and training in conflict of law,
Mexican law, and particularly, issues of “territorial
competence” of Mexican Courts (much akin to U.S.
jurisdictional issues).
2. In this capacity I have consulted and/or provided
declarations or opinions in 20 U.S. cases.
* * *
4. However, in this case, US attorneys Reed, Guerrero
and Dubose (hereinafter collectively “American
Lawyers”) approached me regarding initiation of
litigation in Mexican Courts, first, to establish a Mexi-
12 No. 07-1126
can “estate”, and, second, to pursue a claim of the
estate in a Mexican Court.
* * *
10. I did send, with the other Mexican lawyers, the
letter attached as Exhibit “B”, which I understand was
sent to the Court by the American Lawyers by trans-
mittal letter Exhibit “C”.
Although it is not entirely clear to which “Exhibit B”
Pereznieto was referring in paragraph 10 of his affidavit,
there is no doubt that Pereznieto allowed at least one
document to be filed directly with a U.S. court. While
Mañez I was pending in this court, Pereznieto filed an
affidavit discussing the Morelos proceedings. It began
with the caption of the case, showing our docket number
(No. 04-1827), leaving no doubt that he meant to file the
affidavit with this court; it concluded with Pereznieto’s
signature. The affidavit was signed on July 6, 2005, in
Mexico City, with the statement that it was executed
“under penalty of perjury under the laws of the State of
Illinois, the United States of American, and Mexico.”
The district court was entitled to exercise personal
jurisdiction over Pereznieto (putting to one side for the
moment questions of proper notice and proper service
of papers) if Pereznieto had the kind of contacts with
Indiana specified in its Trial Rule 4.4(A) (which serves as
Indiana’s long-arm provision, see LinkAmerica Corp. v.
Albert, 857 N.E.2d 961, 965 (Ind. 2006)) and had minimum
contacts with Indiana such that the exercise of authority
would be consistent with fair play and substantial
justice. See FED. R. CIV. P. 4(k)(2)(A); World-Wide Volks-
wagen, 444 U.S. at 291-92. Indiana Trial Rule 4.4(A)(1)
provides for jurisdiction over a nonresident over actions
No. 07-1126 13
arising from his having done any business in the state;
Rule 4.4(A)(4) covers actions arising from the supply of
services in the state. Either or both of those subsections
describe Pereznieto’s situation. From the standpoint of the
federal constitution, the person’s contacts with the state
cannot be fortuitous; instead, there must be “some act by
which the defendant purposefully avails itself of the
privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws.”
Hanson v. Denckla, 357 U.S. 235, 253 (1958). Because the
issue before the court is tied directly to Pereznieto’s
activities with respect to the Mañez litigation, there is no
need to consider whether his contacts with Indiana were
so extensive as to justify so-called general jurisdiction.
See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.
408, 414-16 (1984). Here, it would be hard to imagine a
closer link between the activities within a forum and the
conduct for which a person is being asked to answer. The
fact that the affidavit mentioned Illinois law, and the
proceedings in the district court were occurring in Indiana,
does not mean anything. The affidavit was filed in sup-
port of an appeal that sought to restore the case to the
docket of the district court for the Southern District of
Indiana. Looking strictly at adjudicatory competence,
we conclude that the district court was entitled to exer-
cise jurisdiction over Pereznieto in this manner.1
1
The discussion in the text follows the well-established
rule that the district court’s jurisdiction over the parties in a
diversity case is linked to the state’s long-arm statute. Because
we find that jurisdiction was proper under Indiana law, we
save for another day the question whether the district court
might also have relied on federal law in the proceedings
(continued...)
14 No. 07-1126
Although it is conceivable that one might argue that
Pereznieto also consented to the court’s jurisdiction, by
the act of furnishing his affidavit to be filed in the
Seventh Circuit, we prefer not to reach that question. It
was plaintiffs’ U.S. lawyers who actually submitted
Pereznieto’s affidavit to the district court. He never ap-
peared personally, he never had his deposition taken (for
this case) within the United States, nor in the end did
he consent to a deposition in Mexico. We thus proceed
on the basis only of specific adjudicatory jurisdiction,
which supports the district court’s power to resolve
issues arising out of Pereznieto’s actions directed to the
Indiana litigation.
Finally, we consider the question whether the district
court had any authority to evaluate Pereznieto’s actions
before the Mexican courts, apart from anything he reported
back to the U.S. lawyers or courts. We think not (and,
indeed, the district court may not have meant to do any
such thing). Whether the proceedings in Morelos were
conducted in an honest and upright manner is a matter
for the Mexican judicial and bar authorities, not for us.
We are not in a position to draw any conclusion, positive or
negative, even though we are aware that the problem
of corruption within the judicial sector is one that
plagues scores of countries around the globe, as the 2007
Report of the organization Transparency International
documents in detail. See http://www.transparency.org/
publications/gcr/download_gcr (last visited Mar. 3, 2008).
As the famous Operation Greylord investigation in Chicago
1
(...continued)
against Pereznieto, on the theory that his actions were an af-
front to the federal court’s own processes.
No. 07-1126 15
during the 1980s illustrated, courts in the United States are
not exempt from this plague. See http://www.fbi.gov/
page2/march04/greylord031504.htm (last visited Mar. 3,
2008). We therefore focus only on Pereznieto’s actions
that were directed toward the proceedings in the United
States.
B
Pereznieto’s central argument is that the proceedings
that led to the court’s sanctions order against him did not
satisfy basic due process standards. He is supported in
this effort by the Consulate General of Mexico in
Chicago, appearing amicus curiae on behalf of the Ministry
of Foreign Affairs of the United Mexican States. A few
more background facts are important at this point.
Pereznieto emphasizes time and again that he was never
a party to the action before the district court, that he
did not appear as counsel in the district court, and that he
is not admitted to practice in the Southern District of
Indiana. He is a citizen and resident of Mexico. He also
points out that there was never a court order directing
him to do anything. Instead, when the case returned to
the district court after Mañez I, the assigned magistrate
judge stated, in connection with a possible deposition of
Pereznieto, that “this court likely has no authority to
require Mexican counsel to travel to the United States to
be deposed.” Instead, the judge directed in Decem-
ber 2005 that he should be deposed in Mexico City.
Ford and Firestone noticed depositions in accordance
with that order, but they never attempted to serve any
subpoenas, court orders, letters of request, or letters
rogatory on him there. Prior to a court-ordered status
conference in mid-July 2006, Pereznieto and the other
16 No. 07-1126
Mexican lawyers notified plaintiffs’ U.S. lawyers that
they were refusing to be deposed. They cited both rules
of professional secrecy and the risk of criminal penalties
under Mexican law if they violated those rules. Later,
Ford and Firestone listed the Mexican attorneys, in-
cluding Pereznieto, as witnesses for the upcoming evi-
dentiary hearing, but once again they did not follow
up with subpoenas or other compulsory process. Indeed,
they never served Pereznieto directly with a notice of
the hearing, which had been scheduled for July 19, 2006.
One week before the hearing, defense counsel filed a
motion requesting sanctions against both the U.S. lawyers
and the Mexican lawyers, including Pereznieto. That
motion was served on the U.S. lawyers, but not on
Pereznieto. The court initially declined to address the
motion, but it promised the U.S. lawyers that if the
court changed its mind and decided to rule, they would
be given an opportunity to respond before a decision
was rendered. As matters unfolded, this did not happen.
Instead, the court conducted its evidentiary hearing on
the facts surrounding the Morelos litigation on Septem-
ber 5 and 6, 2006. Pereznieto was not present and was
not represented by counsel at the hearing. The details of the
evidence are not important here, as no one has appealed
from the district court’s November 14 decision to reaffirm
its dismissal of the action based on forum non conveniens.
After the case was again dismissed, Ford and Firestone
made a formal request for a ruling on their sanctions
motion on December 6, 2006. Three days before the end
of the 15-day period normally allowed by S.D. Ind. Local
Rule 7.1(a) for a response to such a motion, on Decem-
ber 18, 2006, the court issued its order imposing sanc-
tions and ordering entry of a final judgment. We have
No. 07-1126 17
already set forth the critical language from that order. The
U.S. lawyers did not contest the order, but on January 12,
2007, Pereznieto appeared by counsel and filed a mo-
tion for relief from the sanctions; he supported his mo-
tion with an affidavit and offered to make himself avail-
able for testimony pursuant to the terms of the Hague
Convention on the Taking of Evidence Abroad in Civil
or Commercial Matters (“Hague Evidence Convention”),
Oct. 7, 1972, 23 U.S.T. 2555, 847 U.N.T.S. 231, reproduced at
28 U.S.C. § 1781 note. On January 16, 2007, Pereznieto
(through newly-retained counsel) filed a timely notice
of appeal. The district court later dismissed his motion
for relief as moot, in light of the fact that it no longer
had jurisdiction over the matter.
The defendants do not seriously dispute the fact that
they never attempted to compel Pereznieto to appear
before the district court. Instead, they stress the close-
ness of his relationship with the plaintiffs’ U.S. attor-
neys—in effect, they say, he was a “joint venturer” with
counsel for Mañez. As such, they argue, any notices
that reached U.S. counsel also reached Pereznieto by
operation of law, and U.S. counsel were de facto represen-
tatives of Pereznieto’s interests before the district court.
Through Mañez’s U.S. counsel, Pereznieto received a
copy of the notice of deposition and initially indicated
that he would be willing to be deposed in Mexico. His
later change of heart, defendants urge, permitted the
district court to draw negative inferences, find facts
against him, and impose the sanctions that it chose.
In analyzing the district court’s sanctions against
Pereznieto, we must draw a distinction between the
$100,000 fine for which he is personally liable and the
order barring his testimony (new or already submitted)
18 No. 07-1126
before any courts in the United States. We look first to
the fine, and then to the testimonial bar.
1
As an initial matter, it is unclear how we should charac-
terize the $100,000 fine. The court did not specify the
exact nature of the order, although that in itself is unim-
portant, as it is the substance that matters. The order
could have been several different things: (1) an adjudica-
tion of criminal contempt of court; (2) an adjudication of
civil contempt; (3) a penalty under FED. R. CIV. P. 11 or
37 for submitting a misleading or evasive document; or
(4) a penalty for acts that imposed needless costs on the
court, imposed under the court’s inherent authority. No
matter which of these it was, however, the conclusion
is inescapable that Pereznieto did not have adequate
notice or a proper opportunity to respond. See generally
Autotech Tech. LP v. Integral Research & Dev. Corp., 499 F.3d
737, 746-47 (7th Cir. 2007) (observing that due process
requires that one charged with contempt of court be
advised of the charges against him, have a reasonable
opportunity to meet them by way of defense or explana-
tion, have the right to be represented by counsel, and
have a chance to testify and call other witnesses in his
behalf, either by way of defense or explanation, and noting
that this principle extends to both criminal and civil cases).
We start with the first two possibilities, criminal or
civil contempt. The Supreme Court reviewed the dif-
ference between these two types of proceedings in Mine
Workers v. Bagwell, 512 U.S. 821 (1994). Citing Gompers v.
Bucks Stove & Range Co., 221 U.S. 418, 441 (1911), the
Court stated that “a contempt sanction is considered
No. 07-1126 19
civil if it is remedial, and for the benefit of the complain-
ant. But if it is for criminal contempt the sentence is
punitive, to vindicate the authority of the court.” 512
U.S. at 827-28 (internal quotation marks omitted). As the
Ninth Circuit explained it, “[t]he primary purpose of
criminal contempt is to punish past defiance of a
court’s judicial authority, thereby vindicating the court,”
while “[c]ivil contempt is characterized by the court’s
desire to compel obedience to a court order or to com-
pensate the contemnor’s adversary for the injuries
which result from the noncompliance.” Falstaff Brewing
Corp. v. Miller Brewing Co., 702 F.2d 770, 778 (9th Cir. 1983)
(citation omitted). The line between the two forms of
contempt is not always clear. As applied to fines, how-
ever, Bagwell held that “a ‘flat, unconditional fine’
totaling even as little as $50 announced after a finding
of contempt is criminal if the contemnor has no subse-
quent opportunity to reduce or avoid the fine through
compliance.” 512 U.S. at 829 (quoting Penfield Co. of Cal. v.
SEC, 330 U.S. 585, 588 (1947)). Last, the Bagwell Court
reviewed the procedures that due process requires
before any particular contempt penalty may be imposed. Id.
at 830-34. For that purpose, it distinguished between direct
contempt, occurring in the court’s presence, and indirect
contempt, occurring out of court. Id. at 827 n.2.
Even for a direct contempt, the Court held, if the trial
court “delays punishing a direct contempt until the com-
pletion of trial, . . . due process requires that the
contemnor’s rights to notice and a hearing be respected.”
Id. at 832 (citing Taylor v. Hayes, 418 U.S. 488 (1974)). Direct
contempt “cannot be punished with serious criminal
penalties absent the full protections of a criminal trial.” Id.
at 833; see FED. R. CRIM. P. 42(a). Even greater procedural
20 No. 07-1126
protections must accompany punishment for indirect
contempt; “[s]ummary adjudication of indirect con-
tempts is prohibited.” Bagwell, 512 U.S. at 833.
A finding of civil contempt also requires adequate
procedures. One court described the process as follows:
To establish civil contempt, each of the following
elements must be shown by clear and convincing
evidence:
(1) the existence of a valid decree of which the
alleged contemnor had actual or constructive
knowledge; (2) . . . that the decree was in the
movant’s “favor”; (3) . . . that the alleged
contemnor by its conduct violated the terms of
the decree, and had knowledge (at least construc-
tive knowledge) of such violations; and (4) . . . that
[the] movant suffered harm as a result.
Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000)
(alterations in original). This court, too, emphasizes the
importance of a particular decree or order as a predicate
for civil contempt:
To hold [a person] in civil contempt, the district court
“must be able to point to a decree from the court
which sets forth in specific detail an unequivocal
command which the party in contempt violated.”
Grove Fresh Distribs., Inc. v. John Labatt, Ltd., 299 F.3d 635,
642 (7th Cir. 2002) (quoting Jones v. Lincoln Elec. Co., 188
F.3d 709, 738 (7th Cir. 1999)); see also 11A WRIGHT, MILLER
& KANE, FEDERAL PRACTICE AND PROCEDURE § 2960 (2d ed.
1995).
We need not pursue the topic of contempt further,
because we are convinced that it is a poor match for
No. 07-1126 21
what the district court did in this case. Because Pereznieto’s
actions were not taken in the presence of the court, any-
thing he did would have to be viewed as an indirect
contempt. No one argues that the court invoked the
procedures spelled out in FED. R. CRIM. P. 42(a) for a
prosecution for criminal contempt, and there is no hint
in this record that Pereznieto received notice that this
was what he was facing. If the $100,000 fine was in-
tended instead to reflect a finding of civil contempt, the
procedural problems are just as serious. The most glaring
deficiency is the lack of any particular court decree or
order that Pereznieto allegedly violated. Without any
certainty about that, it is also impossible to know wheth-
er Pereznieto had actual or even constructive knowledge
of the decree or that the decree somehow favored the
defendants.
Another possibility is that the court’s order rested on
either Rule 11 or Rule 37 of the Federal Rules of Civil
Procedure. It is easy, however, to eliminate Rule 11,
because it applies only to attorneys or unrepresented
parties, see Rule 11(a) & (c), and Pereznieto is neither. He
participated in the U.S. proceeding as an expert witness,
and so it is possible that his affidavit and other (unspeci-
fied) filings might be considered as reports for purposes
of Rule 26(b)(4)(A). That rule does not specifically ad-
dress misleading or fraudulent expert reports, but
Rule 37 addresses the topic of discovery sanctions in
general. Rule 37(a)(1) allows a party to move for a court
order compelling discovery, and Rule 37(b) provides for
sanctions against either parties or nonparties who disre-
gard a court order. To outline this possibility is to show,
once again, that it does not fit here. The court never
issued an order to Pereznieto either requiring him to file
the affidavit in this court or requiring him to explain
22 No. 07-1126
himself. It tried instead to arrange for a voluntary deposi-
tion in Mexico City, and when that fell through, it took no
additional steps either to compel his appearance or to
compel his compliance with any other court order. Thus,
we must reject both Rule 11 and Rule 37 as possible
sources of authority.
Last is the possibility of a penalty imposed under the
court’s inherent authority to punish Pereznieto for an act
that inflicted needless costs on the court and the defen-
dants. As we have already noted, courts retain inherent
power to punish the full range of litigation abuses. Cham-
bers, 501 U.S. at 46. This power is distinct from the con-
tempt power. See Matter of Maurice, 73 F.3d 124, 127-28
(7th Cir. 1995). In Maurice, we discussed the difference
between a sanction under FED. R. APP. P. 38 and contempt.
Rule 38 authorizes the courts of appeals to “award just
damages and single or double costs to the appellee” if
it determines that an appeal is frivolous. (Notably, the
court may do so only “after a separately filed motion or
notice from the court and reasonable opportunity to
respond.”) We also explained that
a fine for contempt of court . . . entails a violation of a
judicial order, rather than a waste of time by taking
frivolous steps, the domain of Rule 38. Ability to
impose sanctions for acts that impose needless costs
on other litigants is a longstanding power of federal
courts.
73 F.3d at 128. All that means, however, is that the full
panoply of procedures that attend contempt proceedings,
either criminal or civil, are not necessary for Rule 38 or
analogous sanctions. Maurice assuredly did not hold
that sanctions could be imposed without either notice to
the offending person or an opportunity to respond.
No. 07-1126 23
In short, while we have no doubt that the court
possessed inherent authority to address the kind of
abuse with which Pereznieto is charged, that does not
mean that it could dispense with such fundamental
incidents of due process as adequate notice and an op-
portunity to be heard. Cf. In re Teknek, LLC, 512 F.3d
342 (7th Cir. 2007) (holding that the bankruptcy rules
and the Federal Rules of Civil Procedure require a non-
party to be served with process before being held in
contempt). And the kind of casual notice that one can
infer from this record that Pereznieto may have received
is not good enough. In order to be adequate, the Supreme
Court has held, a person is entitled to “notice reasonably
calculated, under all the circumstances, to apprise [him]
of the pendency of the action and afford [him] an opportu-
nity to present [his] objections.” Mullane v. Cent. Hanover
Bank & Trust Co., 339 U.S. 306, 314 (1950). The Court also
specified how much it expected of the person giving notice:
But when notice is a person’s due, process which is
a mere gesture is not due process. The means em-
ployed must be such as one desirous of actually in-
forming the absentee might reasonably adopt to
accomplish it. The reasonableness and hence the
constitutional validity of any chosen method may
be defended on the ground that it is in itself reasonably
certain to inform those affected, or, where conditions
do not reasonably permit such notice, that the form
chosen is not substantially less likely to bring home
notice than other of the feasible and customary sub-
stitutes.
Id. at 315 (citation omitted).
Defendants take the position that their motion for
sanctions sufficed both to give Pereznieto notice of that
24 No. 07-1126
possibility and to afford him the opportunity to be heard. It
is neither their fault nor the court’s, they continue, if
Pereznieto let this chance slip away. Their motion identi-
fied him by name, sought sanctions against him personally,
and detailed the events in Morelos in which he was di-
rectly involved. What defendants downplay, however,
is the fact that they never served that motion on him
directly. Nothing in the court record indicates that coun-
sel for plaintiffs were also representing Pereznieto in his
individual capacity, and so we cannot accept that service
as a substitute. Nor is there anything that indicates an
effort to serve Pereznieto directly in Mexico. Both the
United States and Mexico are parties to the Hague Con-
vention on the Service Abroad of Judicial and Extrajudicial
Documents in Civil or Commercial Matters (“Hague
Service Convention”), opened for signature Nov. 15,
1965, 20 U.S.T. 361, 658 U.N.T.S. 163, reproduced at 28
U.S.C. App., FED. R. CIV. P. 4 note, as well as the Hague
Evidence Convention. In the documents he filed seeking
reconsideration of the district court’s order, Pereznieto
specifically said that he would make himself available in
Mexico City for a deposition pursuant to the Evidence
Convention. Beyond that, FED. R. CIV. P. 4(f) offers a
number of options for service on an individual in a
foreign country.
We conclude, therefore, that the part of the district
court’s order that imposed a personal fine of $100,000 on
Pereznieto must be set aside for failure of proper
service. The court is free if it wishes to conduct further
proceedings on this matter on remand, if it concludes they
are warranted.
No. 07-1126 25
2
The part of the district court’s order that bars Pereznieto
from providing any testimony in the Ford/Firestone
cases before any court in the United States and that
strikes all assertions that are already in the record is also
problematic, although parts of it stand on stronger
ground. District courts have broad discretion over the
admission of evidence into the record, whether at the
pretrial stage or during a trial. The findings that the
court made about the contrived nature of the Morelos
proceedings and the attempted fraud on the court amply
support the court’s decision to exclude these materials
for purposes of the multi-district proceeding before it.
Insofar as it purported to address other lawsuits, before
other courts, however, the court’s order was impermissibly
overbroad. As applied to the Ford/Firestone cases, how-
ever, the order can be implemented easily. Pereznieto has
a lesser stake in the possibility of acting as an expert for
these consolidated cases, as compared with his interest in
not being subject to a large monetary fine. Courts reg-
ularly reject expert testimony using the framework intro-
duced by Daubert v. Merrell Dow Pharmaceuticals, Inc., 509
U.S. 579 (1993), and later incorporated in FED. R. EVID. 702.
No one suggests that the rejected expert has a right to
notice and an opportunity to be heard before the court
renders such a decision. If this means that Pereznieto has
breached his contract with the attorneys for the plain-
tiffs, that is a matter to be resolved between them.
That said, we think it best to vacate this part of the order
as well. The testimonial bar is linked directly to the pay-
ment of the monetary sanction of $100,000 that must be
set aside for lack of proper notice and opportunity to be
heard. It is unclear what sanction or sanctions the dis-
26 No. 07-1126
trict court may decide are appropriate, if and when it
has the benefit of a full adversary proceeding that in-
cludes Pereznieto. We note, in this connection, that
Pereznieto has argued that the district court erred in its
consideration of Mexican law and that it should have
considered a wider range of materials. Should the district
court decide to pursue this proceeding on remand,
Pereznieto will be free to renew these arguments at an
appropriate time.
III
In summary, we conclude that the district court had
subject-matter jurisdiction to decide whether there had
been an abuse of process and that Pereznieto’s contacts
with the Indiana proceeding were sufficient to support
personal jurisdiction over him. We further conclude
that although the district court possesses inherent au-
thority to address the kind of abuse with which Pereznieto
is charged, Pereznieto did not receive constitutionally
adequate notice and an opportunity to be heard in the
proceeding that led to the $100,000 fine and other sanc-
tions against him. We therefore VACATE the order and
REMAND to the district court for reconsideration in light
of this opinion. Each party shall bear its own costs on
appeal.
USCA-02-C-0072—7-11-08