In November 1981, Athena and Lefteri Poulis (plaintiffs) sued State Farm Fire and Casualty Company (State Farm) (defendant) in district court to recover payment under an insurance policy after a home fire. State Farm denied coverage, alleging that the Poulises had intentionally caused the fire, misrepresented information, and failed to timely file the claim. In March 1982, the district court set a discovery schedule. The Poulises did not seek any discovery. State Farm filed a notice of service of interrogatories to the Poulises, but the Poulises never filed answers. State Farm also filed its pre-trial statement, but the Poulises neither filed a statement nor sought any extensions. On August 5, the district court dismissed the case with prejudice based on the Poulises’ failure to comply with orders to file a pre-trial statement. On August 9, George Retos, the Poulises’ counsel, filed a pre-trial statement along with a motion to reconsider and set aside the dismissal, claiming that a variety of events, including illness and a pregnant wife, had caused him to fall behind. The district court denied reconsideration. On the Poulises’ appeal, the court of appeals vacated the district court’s order dismissing the case, noting that the Poulises were not responsible for the failure to comply. On remand, the district court ordered briefings on appropriate alternative sanctions and again sanctioned dismissal, finding that there was no appropriate alternative. The Poulises appealed.