On September 2, 2015, the US Court of Appeals for the Tenth Circuit held in Sun River Energy, Inc. v. Nelson that sanctions under FRCP 37(c)(1) can be imposed solely on parties and not on their counsel (No. 14-1321, (10th Cir. Sept. 2, 2015)).

James Pennington and Stephen Csajaghy represented Sun River Energy, Inc., the plaintiff, in the underlying proceeding. Sun River had an insurance policy which potentially could have covered some of the counterclaims asserted in the underlying action. However, Pennington and Csajaghy failed to disclose the existence of the policy, even though FRCP 26(a)(1)(A)(iv) mandates the disclosure of any insurance agreement under which an insurer may be liable to satisfy or reimburse all or part of a possible judgment in the action. They continued to deny the existence of a policy that might cover the counterclaims, despite multiple efforts by opposing counsel to obtain it. The policy was eventually disclosed when opposing counsel filed a motion to compel its production. By that time, coverage under the policy had lapsed.

The district court found that counsel exhibited deliberate indifference to the obligation of providing relevant insurance information under FRCP 26 but concluded that Sun River should not be held responsible for its counsel's failure. Instead, the district court held that counsel should be held personally liable for the attorneys' fees incurred by the defendants in pursuing the motion for sanctions and awarded the defendants $20,435. The attorneys moved for reconsideration, and the district court granted in part and denied in part their motion, holding, among other things, that FRCP 37(c) authorized the imposition of sanctions on counsel. The district court noted that FRCP 37(c)(1)(A) focuses primarily on sanctioning the noncompliant party but ruled that the sanction of "payment of reasonable expenses…caused by the [discovery] failure" could be imposed on counsel.

In reversing the district court, the Tenth Circuit first noted that the relevant case law from other circuits holds that sanctions authorized under FRCP 37(c)(1) relate solely to parties, not counsel. The court examined the text context and history of the rule and found no basis for extending sanctions to counsel. FRCP 37(c) initially dealt with a party's failure to admit the genuineness of a document or truth of a matter in response to a request for admission. The rule discussed a party's conduct and was understood not to authorize a sanction against counsel. After its amendment in 1993, FRCP 37(c) continues to refer only to the party and all of the sanctions, other than the monetary sanction that the district court imposed under FRCP 37(c)(1)(A), expressly or by their nature apply only to the noncompliant party. Therefore, the Tenth Circuit found the district court's reading of the rule overly broad. Because the district court did not find that counsel acted in bad faith, it would not be appropriate to sanction counsel under the court's inherent power to sanction abuse of the judicial process.