Dale W. Bradley, individually v. AMERICAN HOUSEHOLD, No. 03-2341  INCORPORATED, formerly known as Sunbeam Corporation

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 DALE W. BRADLEY, individually and
as Guardian and Next Friend of
their minor children; TAMMY L.
BRADLEY, individually and as
Guardian and Next Friend of their
minor children; JLB and JDB,
Plaintiffs-Appellees,
v.
AMERICAN HOUSEHOLD, No. 03-2341 
INCORPORATED, formerly known as
Sunbeam Corporation; STEPHEN T.
MOFFETT, Esq.,
Defendants-Appellants,
and
R. SCOTT LONG; BARBARA A. ALLEN;
THOMAS L. VITU; JOHN E. HALL,
Parties in Interest. 
Appeal from the United States District Court
for the Northern District of West Virginia, at Wheeling.
Frederick P. Stamp, Jr., District Judge;
James E. Seibert, Magistrate Judge.
(CA-99-144-5)
Argued: June 4, 2004
Decided: August 6, 2004
Before WILKINSON, LUTTIG, and MICHAEL, Circuit Judges.

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Vacated and remanded by published opinion. Judge Wilkinson wrote
the opinion, in which Judge Luttig and Judge Michael joined.
COUNSEL
ARGUED: Walter Estes Dellinger, III, O’MELVENY & MYERS,
L.L.P., Washington, D.C.; Paul Mogin, WILLIAMS & CONNOLLY,
Washington, D.C., for Appellants. William J. Hansen, MCDER-
MOTT, HANSEN & MCLAUGHLIN, Denver, Colorado, for Appel-
lees. ON BRIEF: Pamela Harris, Jessica Davidson Miller, Shannon
Pazur, O’MELVENY & MYERS, L.L.P., Washington, D.C., for
Appellant Moffett. Robert B. Barnett, WILLIAMS & CONNOLLY,
L.L.P., Washington, D.C.; John E. Hall, ECKERT, SEAMANS,
CHERIN & MELLOTT, L.L.C., Pittsburgh, Pennsylvania, for Appel-
lant American Household, Inc. George E. McLaughlin, MCDER-
MOTT, HANSEN & MCLAUGHLIN, Denver, Colorado, for
Appellees.
OPINION
WILKINSON, Circuit Judge:
Dale and Tammy Bradley sued Sunbeam in this products liability
action, claiming that their house had caught fire as a result of a defec-
tive Sunbeam electric blanket. During discovery, the Bradleys
requested access to all returned electric blankets then in Sunbeam’s
possession, and the district court granted their request in part. But
before Sunbeam produced the blankets, the parties settled the case for
a substantial sum and agreed to vacate the district court’s production
order.
Nevertheless, the Bradleys later moved to reopen the case, arguing
that Sunbeam should be sanctioned for continuing to dispose of blan-
kets both before and after the district court’s production order. The
district court agreed, and it severely sanctioned both Sunbeam and its
attorneys. While some of the sanctions were clearly criminal in
nature, they were imposed without the necessary constitutional and
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statutory safeguards. And to the extent that the sanctions were civil
in nature, the Bradleys surrendered those claims when they settled the
case. We therefore vacate the sanctions imposed by the district court,
and remand the case for further proceedings consistent with this opin-
ion.
I.
A.
The Sunbeam Corporation manufactured over 32 million electric
bedding products between 1990 and 2000.1 Sunbeam receives approx-
imately 600,000 returned products each year, including those that
have allegedly smoked, sparked, smoldered or caught fire. In 1999,
for instance, Sunbeam received about 1100 such blanket remnants; in
2000, about 1800.
Sunbeam long ago adopted a retention policy to deal with its
returned products. Under its policy, Sunbeam retains returned prod-
ucts for as long as they are the subject of a potential claim or lawsuit.
Once a customer’s complaint has been resolved, the product is
marked for destruction, or returned to the consumer upon request.
Documentary claim files are not discarded with the product, but
instead are retained for an additional two years after the claim is
closed.
George McLaughlin, the plaintiff’s lead counsel in this case,
requested the suspension of Sunbeam’s policy on numerous occa-
sions, dating back at least to 1998. The purpose of these requests was
to determine if the returned blankets had any bearing on pending
cases against Sunbeam being litigated by McLaughlin. Stephen Mof-
fett, Sunbeam’s lead counsel, replied to McLaughlin each time by
explaining that Sunbeam did not intend to change its policy.
On September 22, 1999, a fire occurred at the residence of Dale
and Tammy Bradley in Moundsville, West Virginia. The Bradleys
1Defendant-appellant American Household, Inc. is the recent post-
bankruptcy successor to the Sunbeam Corporation, but for convenience
we continue to refer to the defendant as Sunbeam.
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retained Mr. McLaughlin and sued Sunbeam Corporation, claiming
that the fire had been caused by a defective Sunbeam electric blanket.
During discovery, the Bradleys sought the remains of, and the claims
files for, every returned electric blanket that had allegedly smoked,
sparked, smoldered, or caught fire. On August 8, 2000, the magistrate
judge ordered Sunbeam to produce blanket remains "in their posses-
sion as of the date of the serving" of plaintiff’s initial discovery
request, which was November 2, 1999. He also ruled that Sunbeam
had to produce "claims filed that Sunbeam has in its possession."
As a result, Sunbeam set aside all of the blankets then in its posses-
sion — on August 8, 2000 — that had also been in its possession nine
months earlier on November 2, 1999. However, the Bradleys had not
specifically requested that Sunbeam suspend its retention policy, and
the magistrate judge had not ordered suspension of the policy on his
own initiative. Sunbeam therefore continued to dispose of blankets
that had been returned after November 2, 1999, just as it had disposed
of blankets returned prior to the magistrate judge’s August 8 Order.
It is Sunbeam’s continuing adherence to its retention policy — both
before and after the magistrate judge’s August 8 Order — that lies at
the heart of this appeal.
On November 1, 2000, the United States District Court for the
Northern District of West Virginia adopted the magistrate judge’s
August 8 Order. The parties then dispute whether discovery was
forthcoming, but in any event, the Bradleys moved for sanctions. At
a hearing on November 17, 2000, the magistrate judge found that
Sunbeam and Moffett had "intentionally and willfully refused" to
comply with his August 8 Order by not producing the ordered discov-
ery. The magistrate judge fined Sunbeam and Moffett sums of $5000
and $1000, respectively; ordered all discovery produced to the Brad-
leys’ counsel on November 20 and 24; promised to fine Sunbeam and
Moffett sums ranging from $5,000 to $125,000 in the event that dis-
covery was not completed on November 20 and 24; threatened default
judgment; and scheduled a criminal contempt hearing.
On November 20 — the day that Sunbeam had been ordered to
produce discovery — Sunbeam and the Bradleys settled their case on
the record. Sunbeam agreed to pay the Bradleys $500,000, and to pro-
duce 80 boxes of documents for McLaughlin’s review. In addition,
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the parties agreed that the earlier August 8, November 1, and Novem-
ber 17 court orders would be vacated. In December 2000, Sunbeam
paid the Bradleys the full settlement amount, and the parties executed
a "Full and Final Settlement" that incorporated "the terms and condi-
tions . . . specifically set forth and recited on the record" at the
November 20 hearing ("Settlement Agreement"). Notably, the Settle-
ment Agreement did not address the production of blanket remains,
nor had that issue been set forth at the November 20 hearing as a term
or condition of the parties’ settlement. During settlement negotiations,
Sunbeam had agreed to produce blanket remains in Florida and Mis-
sissippi, but this was never incorporated into the Settlement Agree-
ment. On January 16, 2001, the district court dismissed the case,
subject to reopening on either party’s motion, or for good cause
shown, within 90 days.
B.
The parties’ settlement was not, however, the end of this litigation.
In January 2001, Sunbeam produced the 80 boxes of documents, and
McLaughlin tagged 25,000 pages that he wanted copied. Later, with
written notice, Sunbeam withheld approximately 300 of the tagged
pages as privileged, after what Sunbeam claimed was a more thor-
ough review of the files. As for production of returned blankets, Sun-
beam made available blanket remains in its Fort Lauderdale and
Hattiesburg offices, and McLaughlin inspected the Fort Lauderdale
blankets in January 2001 and the Hattiesburg blankets in June 2002
and February 2003.
Nevertheless, in February 2003 the Bradleys moved to reopen the
case and enforce the settlement. The thrust of the Bradleys’ motion
was twofold: first, Sunbeam’s withholding of roughly 300 pages from
the 80 boxes of documents, and, second, Sunbeam’s ongoing destruc-
tion of blanket remains. The Bradleys requested that the district court
reaffirm the August 8, November 1, and November 17 Orders, which
the parties had agreed to vacate at the time of the settlement.
On February 20, 2003, the district court granted the Bradleys’
motion, reopened the case, and returned the matter to the magistrate
judge for a report and recommendation. After an evidentiary hearing,
the magistrate judge issued an order faulting Sunbeam for destroying
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blanket remains following the August 8 Order. The magistrate judge
then held a hearing on sanctions, and ordered Sunbeam and Moffett
to submit affidavits as to their financial status.
On August 4, 2003, the magistrate judge issued his report. As to
Sunbeam’s withholding of documents, he found that the parties had
agreed that privileged documents could be removed during the copy-
ing process. The magistrate judge therefore ordered the nearly 300
pages be submitted for in camera inspection, so that he could deter-
mine whether they were discoverable. As for the destruction of evi-
dence, the magistrate judge found "that Sunbeam [had] destroyed or
failed to produce items which were the subject of a discovery request
and a court order." He was particularly troubled by testimony that
Sunbeam had not suspended its retention policy while the Bradleys’
case was pending. The magistrate judge believed that Sunbeam had
an ongoing duty, before and after the August 8 Order, to preserve
blanket remains in anticipation of litigation. He recommended that
Sunbeam be fined $200,000; that Moffett be fined $100,000; and that
copies of his report be forwarded to the attorney disciplinary boards
in the states in which Moffett was licensed.
On September 30, 2003, the district court largely adopted the mag-
istrate judge’s report and recommendation. Like the magistrate judge,
the district court ordered Sunbeam to submit the 290 removed pages
for in camera review. Neither party contests this portion of the district
court’s order. What the parties contest are the district court’s findings
with regard to Sunbeam’s destruction of blanket remains. According
to the court, Sunbeam had an initial duty under the Federal Rules of
Civil Procedure to preserve blanket remains once it learned of the
Bradleys’ lawsuit, as well as a further duty to supplement discovery
with blankets returned after the August 8 discovery order. Because
Sunbeam had discarded blankets after the Bradleys’ discovery
requests and continued discarding blankets after the district court’s
August 8 Order, the district court concluded that sanctions were in
fact appropriate. The court then fined Sunbeam $200,000 and Moffett
$100,000; it ordered Sunbeam to pay the Bradley’s fees and expenses
resulting from the motion for sanctions; and it forwarded its order to
the relevant attorney disciplinary boards. Sunbeam and Moffett now
appeal those sanctions.
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II.
Sunbeam and Moffett claim that the sanctions were invalid,
because they were criminal in nature but were imposed without the
procedural protections required for a finding of criminal contempt.
We agree, at least in part. The district court’s imposition of substan-
tial fines was doubtless an improper criminal sanction. As for the
court’s notification of disciplinary authorities and its levying of attor-
ney’s fees and expenses, even if those sanctions are denominated civil
rather than criminal, they should not have been imposed in light of the
Settlement Agreement.
A.
We shall address the criminal sanctions first. The district court did
not believe that it was conducting criminal contempt proceedings.
However, we cannot take the court’s characterization of its own pro-
ceedings as either civil or criminal to be determinative; we are
required to decide that matter for ourselves. Buffington v. Baltimore
County, 913 F.2d 113, 133 (4th Cir. 1990) (citing Shillitani v. United
States, 384 U.S. 364, 369 (1966)). Here, the district court believed
that Sunbeam had a duty, under both the Federal Rules of Civil Proce-
dure and the magistrate judge’s August 8 Order, to preserve and pro-
duce the remains of returned electric blankets. In the district court’s
view, Sunbeam had failed in that duty throughout the pendency of the
litigation. The court therefore imposed various sanctions on Sunbeam
and Moffett in the name of its inherent authority to sanction a litigant
for the destruction of relevant evidence, as well as its authority under
Federal Rule of Civil Procedure 37 "to make orders as are just" and
to "impose appropriate sanctions."
Of those sanctions, there can be little doubt that the fines were
criminal in nature. As the Bradleys concede, the weighty fines were
intended to punish Sunbeam and Moffett rather than to compensate
the Bradleys. The basic difference between civil and criminal con-
tempt sanctions is that civil contempt sanctions are intended "to
coerce the contemnor into compliance with court orders or to com-
pensate the complainant for losses sustained," while criminal con-
tempt sanctions are intended "to vindicate the authority of the court
by punishing the contemnor and deterring future litigants’ miscon-
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duct. . . ." Buffington, 913 F.2d at 133; see also Int’l Union, United
Mine Workers of Am. v. Bagwell, 512 U.S. 821, 829 (1994).
This court faced essentially the same situation in Buffington, where
the district court — likewise relying on its inherent power and its
authority under Federal Rule of Civil Procedure 37 — had imposed
fines of almost $7,000 on two attorneys accused of violating a discov-
ery order. See 913 F.2d at 132-33. The fines had been labeled "strictly
compensatory." Id. at 133. However, we found them to be criminal
sanctions because the fines were payable to the court rather than to
the complaining party; they were not conditioned on compliance with
a court order; they were not tailored to compensate the complaining
party; and they were imposed for punitive purposes. See id. at 134-35.
The present case mirrors Buffington. First, the fines here were
made payable to the court, not to the Bradleys, and they were not con-
ditioned on compliance with any court order. See id. at 133 (quoting
Hicks v. Feiock, 485 U.S. 624, 632 (1988) ("If the relief provided is
a fine, it is remedial when it is paid to the complainant, and punitive
when it is paid to the court, though a fine that would be payable to
the court is also remedial when the defendant can avoid paying the
fine simply by performing the affirmative act required by the court’s
order.")).
Second, the amounts of the fines were not determined by reference
to any losses incurred by the Bradleys as a result of Sunbeam’s
alleged failure to complete discovery. See id. Indeed, the district court
awarded attorney’s fees and expenses to the Bradleys "to compensate"
them for their time and trouble in filing the motion, and then pro-
ceeded to impose the fines as a penalty for Sunbeam’s apparent dis-
covery abuses. In setting the fines at $200,000 on Sunbeam and
$100,000 on Moffett, the magistrate judge made clear that it was
seeking amounts commensurate to Sunbeam’s and Moffett’s per-
ceived wrongdoing; it did not even discuss any harms suffered by the
Bradleys either before or after the Settlement Agreement.
The courts have found fines far less substantial than those imposed
here to require the procedural protections that accompany criminal
contempt sanctions. See, e.g., Jake’s Ltd. v. City of Coates, 356 F.3d
896, 901 (8th Cir. 2004)(holding $68,000 contempt sanction to
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require criminal procedure protections); Mackler Prod., Inc. v. Cohen,
225 F.3d 136, 142 (2d Cir. 2000)(holding $2,000 contempt sanction
to require criminal procedure protections); Buffington, 913 F.2d at
132-33 (holding $7,000 contempt sanction to require criminal proce-
dure protections). Thus, in form and in substance, the district court’s
fines were meant to vindicate its own authority by punishing Sun-
beam and Moffett for what the court saw as their refusal to complete
discovery in a timely fashion. See Buffington, 913 F.2d at 134-35.
In imposing the fines, the district court relied on its inherent
authority to sanction a litigant for the destruction of relevant evi-
dence, as well as its authority under Federal Rule of Civil Procedure
37 "to make orders as are just" and to "impose appropriate sanctions."
However, we have previously made clear "that a Rule 37 fine is effec-
tively a criminal contempt sanction, requiring notice and the opportu-
nity to be heard." Hathcock v. Navistar Int’l Transp. Corp., 53 F.3d
36, 42 (4th Cir. 1995). "Criminal contempt is a crime in the ordinary
sense," and "criminal penalties may not be imposed on someone who
has not been afforded the protections that the Constitution requires of
such criminal proceedings." Bloom v. Illinois, 391 U.S. 194, 201
(1968); Hicks v. Feiock, 485 U.S. 624, 632 (1988). At a minimum,
criminal contempt defendants have the right to receive notice of the
criminal nature of the charges, Richmond Black Police Officers Ass’n
v. City of Richmond, 548 F.2d 123, 126 (4th Cir. 1977), and to be
prosecuted by an independent prosecutor, Gompers v. Buck’s Stove &
Range Co., 221 U.S. 418, 445-50 (1911), and to have their guilt deter-
mined "beyond a reasonable doubt." Id. at 444; See also Young v.
United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 798 (1987).
Perhaps because the district court did not believe it was conducting
criminal contempt proceedings, it failed to provide any of these basic
procedural protections.
The fines here were for criminal contempt, and yet were imposed
without the procedural protections necessary for a judgment of crimi-
nal contempt. Our system cannot condone such asymmetry.
B.
The Bradleys contend that the remaining sanctions — the notice to
the disciplinary boards and the substantial award of attorney’s fees
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and expenses — are civil sanctions, untainted by the absence of pro-
cedural safeguards. Calling the sanctions civil, however, does not aid
the Bradleys. Even assuming that these sanctions are civil rather than
criminal in nature, they should not have been imposed in light of the
Settlement Agreement.
On November 20, 2000, Sunbeam and the Bradleys agreed to settle
their litigation, and they described the terms of their agreement to the
court. The main features of the negotiated settlement were a $500,000
payment from Sunbeam to the Bradleys, and an agreement that the
district court would vacate the August 8, November 1, and November
17th orders regarding blanket production. Mr. Moffett explicitly clari-
fied — with Mr. McLaughlin’s confirmation on the record — that
"the cashing of the checks is with the understanding that the orders
[ ] be vacated."
Neither party has made any claim of a fraudulent inducement to
settle. Neither party is seeking rescission of the Agreement or relin-
quishing its claim to any of its benefits. The record reflects that both
Sunbeam and the Bradleys negotiated and compromised their differ-
ences with all eyes open. At the end of the hearing, the district court
approved the settlement, which Mr. McLaughlin explained would be
consummated once Sunbeam’s checks had cleared. The $500,000
payment cleared in December 2000, upon which the parties signed a
"Full and Final Settlement." This written agreement incorporated the
terms set forth at the November 20 settlement conference and
wrapped up "all claims . . . mentioned in, arising out of, or related to
the Lawsuit." Shortly thereafter, the district court dismissed the case,
subject to re-opening "for good cause shown." Nearly three years
later, on September 30, 2003, the district court sanctioned Sunbeam
and Mr. Moffett for spoliation of evidence related to this lawsuit.
Given the circumstances of this case, we find the post-settlement
imposition of sanctions unwarranted.
We need not speak broadly. We do not exclude the possibility that
sanctions of some sort may be necessary in some cases to ensure the
proper functioning of judicial process notwithstanding a negotiated
settlement agreement. Our focus here is on this particular award of
sanctions in the aftermath of this particular Settlement Agreement.
For the reasons that follow, we conclude it was error for the district
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court to impose compensatory sanctions, and their imposition here
amounted to an impermissible reformation of the settlement reached
by the litigants.
To begin with, the Bradleys and Sunbeam clearly intended to reach
an integrated agreement. Indeed, the document is explicit "that this
Settlement Agreement contains the entire agreement between the Par-
ties." Both parties had the expectation that the terms of the settlement
to which they consented — the written terms and the terms discussed
at conference — marked the outer limits of their obligations.2 Courts
enforce only those settlement terms on which the parties have reached
agreement. Hensley v. Alcon Lab., Inc., 277 F.3d 535, 541 (4th Cir.
2002). Indeed, we have held it to be "improper for the district court
. . . to place itself in the role of ‘final arbiter’ of a settlement agree-
ment." Ozyagcilar v. Davis, 701 F.2d 306, 308 (4th Cir. 1983).
Yet that is unfortunately what happened here. As part of the con-
sideration for the $500,000 payment from Sunbeam, the Bradleys
gave up their right to pursue additional sums. Were we to uphold the
award of compensatory sanctions in this case, we would risk aug-
menting the precise settlement figure that the parties had negotiated
and agreed upon. Motions to enforce settlement agreements draw
upon standard contract principles. Hensley, 277 F.3d at 540. The
sanctions here compensated the Bradleys for the very things they had
agreed contractually to forego. This is not the role that our precedents
encourage courts to play.
The imposition of sanctions is made more problematic by the fact
that the Settlement Agreement does not address blanket production or
destruction at all. Yet the sanctions were imposed at least partially on
those grounds. Reopening the case was proper on the issue concern-
2The record contains evidence of a collateral understanding reached by
counsel during the settlement discussions regarding inspection of blanket
remains held in Florida and Mississippi. As the Bradleys concede, this
understanding does not appear in the written Settlement Agreement, nor
is it incorporated by virtue of having been discussed at the conference.
This collateral agreement is of little significance now because those blan-
ket remains appear to have been made available for Mr. McLaughlin’s
review.
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ing the 300 potentially privileged documents because that controversy
sprang directly from the terms of the negotiated settlement. Reopen-
ing the case on the issue of product production was another matter,
however.
The written agreement contains no mention of blanket production,
and nothing concerning blankets was discussed at the November 20
conference. This omission is not surprising. The Bradleys were set-
tling their case, and the blankets would only have been useful in fur-
ther litigation, which they were agreeing to forego. To allow a party
to pursue claims beyond the terms of the final settlement begs the
question of just what legal interest that party continues to possess. To
further sanction Sunbeam for delinquent blanket production, or no
blanket production at all, was to move beyond the contours of the Set-
tlement Agreement. Again, the perception is that of a court improp-
erly modifying a final settlement, not merely enforcing it. See
Ozyagcilar, 701 F.2d at 308.
Moreover, the Settlement Agreement by its terms specifically cal-
led for the district court to vacate its November 1 and November 17
orders, in addition to the magistrate’s original August 8 order. The
Agreement expressly incorporated the terms set forth at the Novem-
ber 20 hearing, and included an attached copy of the hearing tran-
script. At that hearing, Mr. Moffett clarified that "the settlement is
contingent on the Court having the ability to vacate those [November
1, November 17, and August 8] orders." Mr. McLaughlin then
explained that "everything [would] be stayed pending the checks
clearing, at which point it is understood this Court would then vacate
those orders before entry of the dismissal order." It was the magis-
trate’s August 8 order that covered the production of blanket rem-
nants. Put simply, once the checks had cleared and the case was
settled and dismissed, Sunbeam was under no obligation to produce
blankets to the Bradleys at all. We must presume that one of the bar-
gaining objectives for Sunbeam was to put the issue of blanket pro-
duction — and the orders pertaining thereto — behind it. Negating the
outcome of negotiations by imposing belated sanctions on these
orders was not an appropriate judicial course.
Finally, in section three of the "Full and Final Settlement Agree-
ment," the plaintiffs promised to "fully and forever release, acquit and
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discharge the Defendant from and against any and all claims, actions
. . . demands and fees (including attorney fees), of any kind or
description whatsoever in law or in equity, now known or hereafter
discovered." The Agreement thus explicitly protects the defendants
from further fee requests. The fact that plaintiffs now seek substantial
attorney’s fees not for enforcing the settlement, but for a motion that
has no basis in the settlement, only highlights the incongruence
between the Settlement Agreement and the sanctions award.
III.
In sum, the sanctions imposed on Sunbeam and Moffett suffer from
several infirmities. The $200,000 and $100,000 fines were improperly
imposed because, as in Buffington, they constitute criminal contempt
penalties, and therefore cannot be issued without accompanying crim-
inal procedure protections. Assuming that the attorney’s fees and
other sanctions are civil in nature, they are nonetheless invalid
because their imposition is irreconcilably at odds with the negotiated
Settlement Agreement. We respect the concern of courts for the
proper functioning of the judicial process. But settlement agreements
too are part of the dispute resolution process to which courts them-
selves owe a measure of respect. All sanctions imposed on Sunbeam
and Moffett by the district court’s September 30, 2003 order are
hereby vacated and the case is remanded for further proceedings con-
sistent with this opinion.
VACATED and REMANDED
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