The case arose from a contract entered into between DynCorp International LLC (DynCorp) and Projects Management Company (PMC) for operations and maintenance support in DynCorp's efforts to assist the US Department of State to develop a civilian police force in Iraq. DynCorp terminated the contract before the end of its term, and the parties were unable to agree on what payments due to PMC remained outstanding. PMC subsequently filed suit, alleging breach of contract among other claims. In the following months, PMC engaged in a number of evasive discovery tactics, including withholding important documents, providing false deposition testimony, providing false answers to interrogatories, and making late disclosures of material significance. After the failure of less severe sanctions to rectify the situation, the district court granted the extreme sanction of dismissal of PMC's case. PMC appealed.

In reviewing the district court's decision for abuse of discretion, the Fourth Circuit looked to United States v. Shaffer Equipment Co., which outlined six factors to be considered by the district court before exercising its inherent power to dismiss a case based on the wrongdoing of a party:

The Fourth Circuit found that the district court did not abuse its discretion when it concluded that all six factors weighed in favor of dismissal of the action. Reviewing the record, the Fourth Circuit held that the district court did not abuse its discretion in finding that a PMC employee had given false testimony regarding the benefits realized by PMC from DynCorp's payments. The appellate court rejected PMC's argument that the district court should not have considered the false testimony when deciding whether to sanction PMC, noting that a court acting under its inherent authority to sanction a party may look at any misconduct by a party, not merely the behavior complained of in a sanctions motion. The Fourth Circuit ultimately affirmed the district court's sanction of dismissal.

Counsel should bear in mind that a court has great latitude in examining the conduct of a party when deciding whether to impose sanctions under its inherent authority to do so. Further, counsel should note that this authority may be exercised sua sponte. In cases of particularly egregious abuse, such as when a party purposefully impedes discovery by failing to disclose documents or providing false testimony, a party may be subject to having its case dismissed in its entirety.