## Facts

- The United States, through the EPA, brought a CERCLA cost-recovery action seeking over $5 million for cleanup of PCB contamination at a site in Minden, West Virginia.
- The defendants included Shaffer Equipment Company and others associated with the property and operations involving transformers and related fluids that contaminated soil.
- EPA on-scene coordinator Robert E. Caron oversaw the cleanup and prepared or supervised key administrative and technical documents supporting the government’s claims.
- In discovery, Caron testified he held degrees from Rutgers University and Drexel University, but records did not support those claims.
- Government trial counsel learned of discrepancies and of a developing criminal investigation into Caron’s misrepresentations but continued to object to defense questioning about Caron’s education and did not disclose the known problems to the court or opposing counsel.
- Government counsel relied on cleanup and record materials associated with Caron in dispositive motions while withholding information undermining his credibility and qualifications.
- After defendants learned of Caron’s falsified credentials from other litigation, the district court held evidentiary hearings, found deliberate concealment and obstruction by government counsel, and dismissed the action with prejudice and awarded attorney’s fees.

## Issues

1. Whether government counsel breached duties of candor and honesty by failing to disclose known falsity in a key witness’s credentials and related investigative developments.
2. Whether the district court abused its discretion by dismissing the action with prejudice as an inherent-power sanction for fraud on the court and litigation misconduct.

## Decision

- The Fourth Circuit affirmed the district court’s finding that government counsel acted deliberately and in bad faith and violated their duty of candor.
- The court held that Caron’s misrepresentations were material because they bore on credibility and on the weight of technical judgments embedded in key record materials.
- The court vacated the dismissal with prejudice as an abuse of discretion because it was disproportionate to the objectives of inherent-power sanctions.
- The case was remanded for the district court to impose lesser sanctions sufficient to punish and deter misconduct and compensate defendants, while permitting adjudication of the CERCLA claims on the merits.

## Legal Principles

- Federal courts possess inherent power to sanction bad-faith conduct and fraud on the court, but that power must be exercised with restraint and proportionality.
- Attorneys, including government attorneys, owe a duty of candor to the tribunal and may not allow false evidence or materially misleading impressions to persist when they know of falsity.
- Materiality for candor and fraud-on-the-court purposes includes information bearing on the credibility of a key witness and the reliability of evidence central to the claims.
- Dismissal with prejudice is an ultimate sanction appropriate only when lesser measures cannot adequately address prejudice, protect the judicial process, and deter future misconduct.
- In selecting sanctions, courts should weigh culpability, prejudice to the opposing party and to the judicial process, the availability and efficacy of lesser sanctions, and the public interest in merits-based resolution, including avoiding unjustified windfalls.

## Conclusion

The Fourth Circuit held that government counsel’s concealment of a key witness’s falsified credentials warranted serious inherent-power sanctions, but vacated the dismissal with prejudice as excessive and remanded for lesser remedies that protect the court’s integrity without extinguishing potentially meritorious environmental liability claims.


United States v. Shaffer Equip. Co., 11 F.3d 450 (4th Cir. 1993)