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Lawson v. Brown’s Home Day Care Center, Inc., No. 1 95-9-97 Cacv (Teachout, J., Jan. 29, 2003)

[The text of this Vermont trial court opinion is un official. It has been reformatted from the original. The accuracy of the text and the accompan ying data included in the Vermont trial court opinion database is not guaranteed.]

STATE OF VERMONT CALEDONIA COUNTY, SS.

KATHERINE LAWSON & BRADLEY LAWSON, : individually, and as parents and guardians of thei r : Caledonia Superior Court daughter, JORDAN LAWSON : Docket No. 195-9-97 C acv

:

v.

:

: BROWN’S HOME DAY CARE CENTER, INC., and :
LUCILLE M. NELSON & ROBERT NELSON, JR. :

Upon Remand from the Vermont Supreme Court

MEMORANDUM OF DECISION

By Entry Order reported at 172 Vt. 574 (2001), thi s case was remanded to the undersigned trial judge for further proceedings. A ppellant Duncan F. Kilmartin, Esq., through his attorney Robert R. Bent, Esq., filed a memorand um of law on the remand issues, and a hearing was held on September 25, 2002 at which tim e the court heard additional evidence and oral argument.

At issue is a sanction imposed by the court on Att orney Kilmartin, one of Defendants’ attorneys, for filing with the court information fr om a confidential mediation session. In its Memorandum Decision, the Vermont Supreme Court uphe ld the court’s inherent power to sanction, but held that “[a] finding of bad faith i s essential to the court’s power to impose the

sanction it did.” Id. at 576. It remanded the case for the trial court to address Attorney Kilmartin’s stated justification for making the fil ing, and to make a finding on whether the

conduct was done in bad faith. “Kilmartin is entit led to some explanation why the reasons for the disclosure were not only wrong, but so wrong th at they were advanced in bad faith.” Id. The Court concluded: “On remand, if the court finds that Kilmartin revealed the mediation materials in bad faith, then a sanction would be an appropriate exercise of the court’s inherent powers.” Id. at 578.2

For the reasons set forth below, the court finds t hat the filing by Attorney Kilmartin of

confidential information from a mediation session d uring the course of settlement negotiations was done in bad faith, and that such bad faith is t he basis of the sanction imposed by the court.

The decision of the court delivered from the bench at the close of the sanctions hearing on September 2, 1998 did not include a detailed explan ation of why the court did not accept Attorney Kilmartin’s justification for his conduct, nor did it include a specific statement of a finding of bad faith. Attorney Kilmartin has now h ad the opportunity to present additional evidence in support of his position, as well as pre sent additional argument, and the court has had the benefit of both, as well as the memorandum deci sion of the Supreme Court and opportunity for further research. The current finding is based on the additional evidence and arguments in addition to the record as of September 2, 1998, and is informed by the memorandum decision of the Supreme Court.

The court’s consideration of this issue was, and i s, founded on a presumption of good faith. Attorney Kilmartin has advanced as justific ation for his conduct that his purpose was “to disclose unethical conduct and/or potentially crimi nal conduct and to disqualify the opposing lawyer.” Id. at 576. As noted by the Supreme Court, this appea rs on its face as a plausible justification. Furthermore, the record is devoid o f direct statements manifesting bad faith. Under these circumstances, it is incumbent on this court to analyze the proferred justification in the light of all of the facts and circumstances, st arting from the presumption of good faith and using an objective standard in analyzing those fact s and circumstances, and to explain clearly any conclusion that the conduct was done in bad fai th.

The conduct of Attorney Kilmartin at issue occurre d within the context of a pattern of conduct between him and opposing counsel Attorney G areth Caldbeck that developed early in the lawsuit and continued throughout the life of th e case. The facts of the underlying case are tragic and heartbreaking. Jordan Lawson, a toddler , choked on a rattle that had become lodged in her throat while she was at Brown’s Home Day Car e Center, which was operated by the Defendants. By the time the rattle was removed, sh e had severe brain damage, required significant care, and faced permanent disability. Jordan and her parents were the Plaintiffs and were represented by Attorney Gareth Caldbeck. The original Defendants were the day care corporation and its principal, Lucille Nelson, who operated the home day care, as well as her

husband Robert Nelson. The Defendants’ insurance c ompany provided a defense through Attorney Kilmartin. Attorney Oreste V. Valsangiac omo, Jr. also represented the Defendants, having been retained by them directly.

The case was filed in September of 1997. From the beginning, Attorneys Caldbeck and Kilmartin were the active advocates and they oppose d each other in a highly contentious manner. By July of 1998, over 60 motions had been filed. M any of the motions included highly personal attacks made by one of the two attorneys against th e other. The hostile dynamic that developed between them was unnecessary, unprofessional, and d istracting. It had a life of its own, separate and apart from the demanding needs of the case, suc h that each attorney appeared unable to avoid provoking the other gratuitously on a regular basis or to avoid overreacting to the other’s3

provocation. Both attorneys are intelligent and ex perienced, but it became readily apparent that Attorney Caldbeck was emotionally involved in his c lients’ case, and Attorney Kilmartin could not resist the temptation to “bait” him and provoke a reaction, which prompted a counterreaction. The intensity of this negative dynamic far exceeded any level of animosity that occasionally develops between attorneys in Vermont. As a result , the case demanded a high level of judicial oversight.

There were many disputes between the parties conce rning discovery issues, and concerning requirements of pretrial discovery order s. Motions for Contempt, Motions to Strike, Motions for Protective Orders, and Motions for Sanc tions began to be filed not long after the case was filed. On December 11, 1997, Attorney Cal dbeck filed a Motion to Compel on the grounds that Attorney Kilmartin was refusing to com ply with a detailed discovery order issued by the court. On January 23, 1998, the Motion was granted with compliance required by February 6, 1998. In another ruling the same day, the court admonished Attorney Kilmartin that his opposition was nonresponsive “and appears to be without substantial justifications. [Included] language is unacceptable and if included in future pleadings it may result in sanctions pursuant to VRCP 26 (g).” Entry Order on Motion for Contempt, No.10, January 23, 1998. The court entered a revised, detailed, specific, realis tic Pretrial Order on January 23, 1998.

Rather than comply with the Order compelling the p roduction of discovery by February 6th, Attorney Kilmartin filed, late, a Motion for a Protective Order in which he sought permission to decline to provide the requested disc overy material. The court denied the motion in a March 2, 1998 Entry Order: “Compliance with th e Plaintiff’s Motion to Compel was required by February 6, 1998. This Motion was not filed until 10 days after that date and is out of time. In the context of the history and the Ord ers in this case, it is unreasonable delay. As sanctions pursuant to VRCP 26(g), Atty Kilmartin sh all pay Atty Caldbeck $150 in attorneys fees for having to respond to this motion. This Mo tion is also denied on substantive grounds. Further sanctions may be imposed if the material is not provided within five days.” These were discovery sanctions imposed pursuant to V.R.C.P. 26 (g).

Attorney Kilmartin did not comply, but filed anoth er motion on March 13, 1998, seeking again to avoid providing the discovery that was ser iously overdue. The court denied the motion in an Order of March 26, 1998, which stated in part :

Because Attorney Kilmartin has advanced a position without basis as a reason for avoiding providing di scovery past due under a prior Order on a Motion to Compel, sanction s are appropriate. Plaintiff’s attorney was put in the p osition of having to respond to this Motion, and Plaintiffs still hav e not received discovery in compliance with discovery requirements and orders. Plaintiff’s ability to obtain discovery in the norm al course has been seriously disrupted. Attorney Kilmartin shall pay Plaintiff’s attorney $500.00 (4 hours x $125 per hour) as sanct ions. In addition, the Court will not consider any further d iscovery motions4 from Attorney Kilmartin until he files an affidavit that he has paid all sanctions ordered by the Court to date, and has acted in good faith to provide all discovery required to date und er all prior orders in the case. Failure to abide by this Order could result in further

sanctions.

The Order further specified that the sanctions were imposed as discovery sanctions pursuant to V.R.C.P. 26 (g). Thus, as of March 26, 1998, Attor ney Kilmartin had been sanctioned twice for violating specific discovery orders. Questions abo ut his good faith compliance with discovery obligations had been raised.

In January of 1998 the court arranged for an Early Neutral Evaluation to be conducted by Attorney Peter Joslin. The case had attracted publ ic attention, and in February of 1998, the parties stipulated to a Protective Order for the co nfidentiality of discovery materials. Stipulation filed February 6, 1998. They then stipulated to a delay of the early ADR/ENE to permit the completion of limited discovery, and the court appr oved the limited delay.

On April 28, 1998, Attorney Kilmartin filed a “Mot ion for Sanctions for Attorney Caldbeck’s False Representations to the Court in re gard to present state of Discovery” along with several other motions. In the introductory sentenc e, he accused Attorney Caldbeck of misconduct and false statements, and continued this direct attack for twenty more pages. Orders issued on April 30, 1998 included admonishments as to the behavior of the two attorneys: “The Court expects the attorneys to conduct themselves p rofessionally during depositions, to make no unnecessary comments to witnesses and parties, and to behave formally and with civility.” “The attorneys are expected to conduct discovery within that framework [referring to the Pre-Trial Order] efficiently, and professionally.” “In filin gs with the court, the attorneys shall refrain from the use of rhetoric containing personal criticism.” Orders of April 30, 1998.

In early May, Attorney Caldbeck filed a Motion to Amend the complaint to add Robert Nelson as a party Defendant on a theory of piercing the corporate veil. Mr. Nelson had previously been dismissed from the case, and this m otion was based on new facts developed in discovery. Attorney Caldbeck also obtained an ex parte Order of Approval for an attachment based on affidavits claiming an imminent sale of th e real estate in which the day care had been located and personal use by Mr. Nelson of a truck o wned by the corporation. When it developed

that the Nelsons were in Florida and could not be s erved, and therefore the likelihood of a sale or use of the truck were no longer imminent, a hearing with notice was scheduled. At the hearing on May 13, 1998, Attorney Kilmartin repeatedly atta cked Attorney Caldbeck’s representations to the court, claiming that Attorney Caldbeck prepared affidavits for affiants to sign that were

inaccurate and that he fabricated evidence. He cri ticized Attorney Caldbeck for having balked at providing transcripts of telephone interviews Attor ney Caldbeck had conducted with some witnesses in the case. He argued that Attorney Cal dbeck’s conduct required his removal from the case. This was the first time he sought to rem ove Attorney Caldbeck from the case. The court ruled on the substantive motions only.5

During the following month, a flurry of motions wa s filed, including motions for sanctions, for reconsideration, and for a protectiv e order; motions to add other claims and defendants and to compel. Attorney Kilmartin filed a motion to suspend the discovery schedule,

which was denied. Mediation was scheduled to take place on June 22, 1998.

On June 18, 1998, Attorney Kilmartin filed a volum inous “Emergency Motion to Disqualify Attorney Caldbeck & To Call Attorney Cal dbeck as a Witness & To Suspend all Proceedings Pending Full Hearing on the Motion to D isqualify.” The basis advanced for the motion was that Attorney Caldbeck had prepared affi davits for witnesses to sign that contained

facts that were inconsistent with those witnesses’ subsequent deposition testimony. Defendants’ other attorney, Attorney Valsangiacomo, did not joi n in this motion, or file any parallel motion, or indicate support for it. In his cover letter to the Superior Court Clerk, Attorney Kilmartin requested a ruling on the motion “no later than 10: 30 AM Friday, June 19, 1998,” which was the following morning. He made further procedural requ ests related to obtaining an immediate decision. He proceeded as follows:

In any event, we request that Judge Teachout immedi ately suspend all discovery and the mediation pending further orders and notice. [Bold in original.]

Under the circumstances, mediation must be canceled and all future discovery suspended. . . .

Please bring to Judge Teachout’s attention the mand atory withdrawal required by DR2-110(b) of Attorney Caldbeck because it is known and obvious that his continued employment will result in the violation o f a Disciplinary Rule.

On June 19, 1998, the court denied the emergency mo tion in an Entry Order, stating that “the factual discrepancies described in the Motion are n ot unusual ones to occur in discovery, and the

court will not rule on an ex parte basis that they constitute a reason to halt a plan ned discovery process or an early neutral evaluation of the case. ” 1

Therefore, as of Friday, June 19 th , Attorney Kilmartin’s attempt to seek to cancel mediation, suspend discovery, and remove Attorney C aldbeck from the case was denied on the basis that it lacked merit. The parties were sched uled for mediation with Peter Joslin the following Monday morning.

Attorney Peter Joslin conducted the mediation on J une 22, 1998, starting at 9:00 a.m. He

1 Technically, the motion was not filed on an ex parte basis, as Attorney Kilmartin’s cover letter states that copies were faxed, without exhib its, to the other attorneys. Nonetheless he was asking for a ruling on a voluminous motion to be ma de immediately, before opposing counsel would have seen all the exhibits or had an opportun ity to respond. If the court had acted as he requested, it would have effectively granted the mo tion on an ex parte basis.6

began by obtaining all parties’ agreement that all mediation proceedings were to be confidential. By late in the day, the parties had reached substan tial agreement of a settlement, and proceeded to discuss details of written terms. Attorney Cald beck asked for a condition of settlement that no professional conduct complaints would be filed. Af ter Attorney Joslin spoke to him privately, apparently to remind him that it was improper to do so, he withdrew this request. Nonetheless, he requested a term of settlement that no civil or criminal complaints be pursued against parties and witnesses involved in the case. At that point , approximately 6:30 p.m., Mr. Joslin had to leave. He suggested that standard terms of settlem ent be used, and the session ended for the day,

but mediation was not terminated. 2

On June 24 th , Attorney Caldbeck faxed to Attorney Kilmartin a p roposed written settlement agreement. In the fax cover sheet, he s tated: “It is my understanding that the Coop [insurance company] is agreeable to all terms of th is agreement insofar as their interests may be concerned.” The proposed agreement included in par agraphs 5 and 6 that Defendants would not make any claims, complaints or allegations, civil o r criminal, against any persons arising out of the suit and would agree “that they have expressly requested that Attorney Kilmartin not do so,” and that the Defendants would agree that “they do n ot authorize, and will not authorize, Attorney Kilmartin” to make any such claims. (Exhibit A.1 a ttached to Exhibit A from the hearing on September 25, 1998.) Attorney Kilmartin immediat ely faxed back a letter in response, in which he stated: “Not only have you misrepresented that t he Co-op was agreeable to all terms of your Proposed Agreement, I believe that you should caref ully review 13 VSA §8 in light of paragraphs 5 and 6.” Attorney Kilmartin thereby ra ised the claim that Attorney Caldbeck’s conduct may be in violation of a criminal statute.

Attorney Kilmartin’s position is that on June 24 th , when he received the fax cover sheet and proposed settlement agreement from Attorney Cal dbeck and saw that Attorney Caldbeck had included paragraphs 5 and 6 in the proposed settlem ent agreement, a duty on his part to report professional misconduct was triggered under then ap plicable DR 1-103(A), which required attorneys to report misconduct by other attorneys u nless the information is privileged. 3 The

2 See Letter of Attorney Kilmartin dated June 24, 199 8 to Attorney Caldbeck (attached as Exhibit B to Plaintiff’s Exhibit A from the hearing on September 25, 2002): “You have no basis for. . . More importantly, you are breaching the t erms of the mediation and I suggest that you forward this immediately to Attorney Joslin. We wi ll not consider this apart from mediation, which has not concluded.” Also see Attorney Joslin ’s letter of July 17, 1998 regarding his

continued involvement.

3 The confidentiality agreement was to protect settle ment discussions, and would not have precluded the filing of professional misconduct com plaints. As noted by the Supreme Court in its Memorandum Decision, information that may be co nfidential under a confidentiality requirement related to mediation, and may thereby a lso be inadmissible, is nonetheless not privileged, and may be disclosed in other settings, such as in relation to a professional misconduct complaint. Such complaints are, however , confidential under separate Board rules7

misconduct alleged by Attorney Kilmartin was that i n demanding that neither Defendants nor Attorney Kilmartin pursue any criminal or civil com plaint against any party, Attorney Caldbeck was violating the following provisions of DR 1-102( A): “A lawyer shall not: . . . (3)Engage in illegal conduct involving moral turpitude; (4) Enga ge in conduct involving dishonesty, fraud, deceit or misrepresentation; (5)Engage in conduct t hat is prejudicial to the administration of justice.” The criminal statutes Attorney Kilmarti n references are 13 V.S.A. §7, §8, and §9.

13 V.S.A. §7, “Inciting to Felony,” provides: “A p erson who endeavors to incite, procure or hire another person to commit a felony, though a felony is not actually committed as a result of such inciting, hiring or procuring, shall be imp risoned not more than five years or fined not more than $500.00 or both.”

13 V.S.A. §8, “Compounding Felony,” provides: “A p erson having knowledge of the commission of a felony who takes money, or a gratui ty or reward, or an engagement therefor, upon an agreement or understanding, expressed or im plied, to compound or conceal such felony or not to prosecute therefor, or not to give eviden ce thereof, shall be imprisoned not more than ten years or fined not more than $1,000.00 or both. ”

13 V.S.A. §9, “Attempts,” provides in paragraph (a ): A person who attempts to commit

an offense and does an act toward the commission th ereof, but by reason of being interrupted or prevented fails in the execution of the same, shall be punished as herein provided unless other express provision is made by law for the punishment of the attempt.”

Attorney Kilmartin alleges that the basis for conc luding that Attorney Caldbeck had violated DR 1-102(A) was Attorney Caldbeck’s inclus ion in the proposed settlement agreement of paragraphs 5 and 6. 4 Thus, Attorney Kilmartin asserts that as of June 24, 1998, he had a mandatory obligation to report professional miscond uct. DR 1-103(A), then in effect, provided: “A lawyer possessing unprivileged knowledge of a vi olation of DR 1-102 shall report such knowledge to a tribunal or other authority empowere d to investigate or act upon such violation.” Attorney Kilmartin testified on September 25, 2002 that he read the Rule to impose on him not

until the Board decides that the filing of a formal charge is warranted. This was also the case in

1998.

4 As to the claim of illegal conduct, the exact natur e of the alleged crimes is not readily apparent from the facts, the terms of the proposed settlement agreement, and the texts of the criminal statutes, although Attorney Kilmartin purp orts to explain it in his July 2 nd motion. The claims of misrepresentation apparently relate to th e statement that the Coop Insurance Company was in agreement with all proposed terms, including paragraphs 5 and 6. The claim of conduct prejudicial to the administration of justice is app arently the inclusion of paragraphs 5 and 6 calling for Defendants and Attorney Kilmartin not t o pursue criminal or other complaints, which could possibly be interpreted to include disciplina ry complaints. Attorney Kilmartin has also claimed that Attorney Caldbeck appeared to be couns eling his clients to engage in an act that

violated the criminal law.8

only an obligation to report a violation on the par t of Attorney Caldbeck, but to do so to “this” tribunal, i.e., the Superior Court.

He also testified, and the court so finds, that hi s reaction to paragraphs 5 and 6 included a concern that Attorney Caldbeck was attempting to dr ive a wedge between Attorney Kilmartin and the Defendants, his clients. The court finds t hat some of the terms in paragraphs 5 and 6 functioned, among other things, as yet one more in a long series of provocations, and prompted a zealous response on the part of Attorney Kilmartin.

The foregoing provides the context for the conduc t that is the subject of the sanctions in the present proceeding. To summarize, as of June 2 4 th , the case had substantially settled but the terms of a written stipulation had not been finaliz ed, and Attorney Joslin remained involved to help complete the settlement. Attorney Caldbeck wa s seeking to include in the settlement agreement a covenant for no civil or criminal claim s to be pursued by either the Defendants or Attorney Kilmartin, and Attorney Kilmartin felt tha t such conduct on the part of Attorney Caldbeck was professional misconduct which he, Atto rney Kilmartin, was obligated to report.

The court accepts at face value Attorney Kilmartin ’s conclusion that he had a professional obligation to report what he perceived to be professional misconduct, and does not base its finding of bad faith on any analysis of th e merits of such a conclusion. Although the claim that Attorney Caldbeck was engaged in the com mission of a crime is not one that presents itself with self-evident clarity, and Attorney Cald beck had already withdrawn any effort to negotiate away disciplinary complaints, there is no question that Attorney Caldbeck was attempting to prevent the pursuit of criminal claim s. Such an effort raises issues with public policy implications and has been the basis of attor ney discipline, including suspension from law practice for six months. In the Matter of David Friedland, et al , 59 N.J. 209 (1971) (attorneys suspended for six months for arranging settlement o f civil claims on terms that included dismissing pending criminal complaints). This is a plausible basis upon which Attorney Kilmartin could have concluded that he had a profes sional obligation to report perceived attorney misconduct, even though there is no evidence that e ither of the other two attorneys aware of this conduct (Attorneys Valsangiacomo and Joslin) reache d such a conclusion.

Assuming Attorney Kilmartin believed that there wa s a basis for a duty to report, DR 1- 103 provided that the attorney shall “report such k nowledge to a tribunal or other authority empowered to investigate or act upon such violation .” At the time, the Professional Conduct Board was the tribunal empowered to investigate and act upon reports of alleged misconduct. 5

5 Effective September 1, 1999, the Rules of Professio nal Conduct replaced the Code of Professional Responsibility, and the Professional R esponsibility Board replaced the Professional

Conduct Board. The Professional Conduct Board had staff, resources, and procedures to review reports, undertake investigations, conduct hearings , and recommend sanctions to the Supreme Court. The Superior Court did not have concurrent jurisdiction, and did not have staff, resources, or procedures.9

To the extent alleged misconduct threatened to comp romise the fairness of a pending case, a motion to disqualify an attorney could be filed in the case. There is not necessarily any direct

connection between violations of the Code of Profes sional Conduct and litigation of the case.

See In re Gadbois, 12 Vt.L.W. 275 (2001) (attorney disqualified, but n o finding of violation of the Code); State v. Zele , 168 Vt. 154, 161 n.2 (1998) (alleged violations o f the Code have no direct bearing on the fairness of trial and were re jected as basis for arguments for reversal in criminal appeal).

Violations of the Code may or may not directly aff ect the fairness of the proceeding and involve conduct that supports a motion to disqualif y opposing counsel. The commentary to Rule

1.7 of the Model Rules of Professional Conduct curr ently in effect states that where a conflict of interest between an attorney and a client “is such as clearly to call in question the fair or efficien t administration of justice, opposing counsel may pro perly raise the question. Such an objection should be viewed with caution, however, for it can be misused as a technique of harassment.” This shows that a motion to disqualify should only be filed by opposing counsel when the fair administration of justice is threatened. This is n ot necessarily every situation in which there are grounds for discipline of opposing counsel.

Complaints filed with the Professional Conduct Boa rd remained confidential throughout an investigatory stage, and only became public upon the filing of a formal charge. A.O. 9, Rule 12. Motions filed with the Superior Court in a civ il case are public documents.

Thus, Attorney Kilmartin’s perceived mandatory obl igation to report called for him to file a report with the Professional Conduct Board. If he also concluded that Attorney Caldbeck’s conduct compromised the integrity of the mediation or other legal process in the case, he could also file a motion to disqualify Attorney Caldbeck in the lawsuit. In filing such a motion, it would not have been necessary to include specific i nformation from the mediation session upon the initial filing of the motion. He could have de scribed the allegations in general terms to avoid compromising the confidentiality of the ongoing med iation process, or asked for an evidentiary hearing on the motion with the hearing closed to th e public due to the confidential nature of the proposed evidence because of the continuation of me diation, or he could have sought permission

to file confidential information under seal. 6

As an experienced attorney, he knew that these wer e the options for filing confidential information with the court, since all documents fil ed with the court are subject to public inspection. Sensitivity to maintaining the confide ntiality of mediation discussions was particularly important in this case at that time be cause settlement efforts were active, and the press was following the case. Any information that became part of the case record was likely to be published and jeopardize the ability to conclude the settlement of the case.

6 These are methods routinely used when motions are f iled on discovery issues involving discovery materials that are subject to a confident iality agreement or protective order.10

It is also inherent in the filing of motions in Su perior Court that they are required to be

served on other counsel of record at the time of fi ling, except in the case of specified ex parte motions in which specific standards must be met for particular purposes. 7 Thus, the filing of a motion to disqualify Attorney Caldbeck would have r equired service on Attorneys Caldbeck and Valsangiacomo.

In any event, in addition to filing a motion to di squalify Attorney Caldbeck in the case, or in lieu thereof, Attorney Kilmartin’s obligation wa s to file his report of perceived attorney

misconduct with the Professional Conduct Board. It was the only tribunal equipped to investigate reports of attorney misconduct and to d iscipline attorneys. The filing of any motion to disqualify based on attorney misconduct would be in addition to, and not instead of, a report to

the Professional Conduct Board.

Having set out the framework of courses open to At torney Kilmartin, let us turn to the actions undertaken by him.

On June 29, Attorney Kilmartin filed with the cour t a cover letter and eight page

document entitled “Confidential Disclosure Under DR 1-103(A).” The cover letter to the Clerk was also marked “Confidential” and stated: “Would y ou please immediately bring my mandatory Disclosure to Judge Teachout’s attention. I have m arked it confidential. If the Court wishes me to serve this Disclosure on other parties, I will d o so upon specific instructions from the Court.” (Exhibit A, hearing of September 25, 2002.)

This filing, entitled “Disclosure,” was neither a motion seeking ex parte relief under any rule of the Vermont Rules of Civil Procedure, nor a report filed with the Professional Conduct

Board. It was an ex parte communication with the presiding judge concerning a case, and as such an impermissible communication. 8 The court, having read only the cover letter and title page, wrote on it on June 30 th : “I will not participate in ex parte communicati ons concerning the case,” and instructed the clerk to return it to Att orney Kilmartin, which was done.

The argument that Attorney Kilmartin believed this to be the appropriate mechanism for discharging an obligation to make a mandatory repor t of attorney misconduct for the purposes of attorney discipline has been advanced only in gener al terms, has not been supported by any specific evidence concerning steps taken by Attorne y Kilmartin, and does not have a plausible

7 See, e.g., V.R.C.P. 4.1 (b)(3) concerning motions f or an ex parte attachment, and V.R.C.P. 65 (a) concerning motions for an ex parte temporary restraining order.

8 Canon 3 B (7) of the Code of Judicial Conduct provi des: “A judge shall not initiate, permit, or consider ex parte communications, or con sider other communications made to the judge outside the presence of the parties concernin g a pending or impending proceeding except...” as specified in five clearly stated exce ptions, none of which involve attorney discipline.11

basis. Attorneys know that mandatory reports are f iled with the Professional Conduct Board and not with the Superior Court, and that it is not the role of the Superior Court Judge to administer the process by which professional conduct complaint s are handled. This is not, however, the conduct for which Attorney Kilmartin was sanctioned . Nor was there any harm done, as the court returned it without reading it, and since it was not filed, it was not part of the case record.

To follow through on his mandatory obligation to r eport misconduct, Attorney Kilmartin had only to file the document with the Professional Conduct Board. There is no evidence that this was ever done at any time, either before or af ter the case was settled. 9 This fact alone raises questions about Attorney Kilmartin’s motive with re spect to subsequent actions.

Two days later, on July 2, 1998, Attorney Kilmarti n filed with the court a complicated motion entitled “Motion for Permission to Appeal Or der of June 19, 1998 [the denial of the emergency motion to disqualify Attorney Caldbeck,] or in the Alternative to Suspend and Disqualify Attorney Caldbeck.” In this motion he a ccused Attorney Caldbeck of misconduct in proposing paragraphs 5 and 6 and in conduct at the mediation session, and he repeated the prior charge that Attorney Caldbeck had prepared false af fidavits. Attorney Kilmartin described specific discussions that took place at the mediati on session on June 22 nd , and he attached as an exhibit a draft settlement agreement that Attorney Caldbeck had faxed to him. This was a regular motion, with no request for any portion of it, including the attachments, to be sealed. Thus, it immediately became a matter of public reco rd, even though the settlement process under the supervision of Attorney Joslin was still ongoin g.

This motion filed on July 2 nd was the first of three such events for which Attor ney Kilmartin received the sanction on September 2, 199 8. 10 The others were motions filed on July

9 th and July 10 th in which Attorney Kilmartin included pages of desc riptions of the substance of

the discussions at the mediation session that took place on June 22 nd . In the July 9 th motion he included an affidavit from Lucille Nelson, a partic ipant at the June 22 nd session. The sanctions were not imposed for having filed any motion, inclu ding any motion to disqualify, but for having

9 The Professional Conduct Board was required to main tain confidentiality about complaints it received until a formal complaint was filed. The complainant was not bound by such confidentiality. In this case, Attorney Kilma rtin made public, in his subsequent July 2 nd

motion to this court, that he was alleging professi onal misconduct, so it is not logical to conclude that he filed a report with the Professional Conduc t Board but believes he cannot reveal having made such a complaint. This court, having raised t he issue in the prehearing Entry Order clarifying the purpose of the hearing and having he ard no evidence on the matter, is left to infer that he did not file such a report.

10 Attorney Caldbeck received a similar sanction for t he same reason but in a lesser amount based on proportionality of responsibility f or the costs imposed on public resources. Attorney Caldbeck did not appeal, and thus the acco unt of the case does not focus on his

conduct.12

included in and with it confidential information fr om the mediation and settlement process that thereby became part of the public record of the cas e.

At the time that each of the three motions was fil ed, the mediation followup process to finalize the settlement was ongoing. Attorney Josl in remained involved to facilitate settlement. (Letter of Attorney Joslin filed on July 17, 1998.) A settlement was reached by July 20 th

. (Transcript, Motions Hearing Excerpt, July 20, 1998 .) It is noted that if the court had granted the July 2 nd motion on either of the alternative grounds allege d, the effect would have been to suspend the case for several weeks for further cour t proceedings, resulting in delay in reaching a resolution. By this time, it had become clear that the Coop Insurance Company would incur financial obligations, presumably in the near futur e, if the case settled. Delay would have disadvantaged the Plaintiffs by postponing their re ceipt of damages; it would have benefitted the insurance company that retained Attorney Kilmartin by postponing payment of damages. It would have frustrated Attorney Caldbeck’s efforts t o achieve a prompt resolution of the case on

behalf of his clients.

Attorney Kilmartin did not seek permission to appe al the denial of his June 18 th Motion to Disqualify Attorney Caldbeck (based on a claim o f preparation of false affidavits) during the

two weeks between June 19 th and July 2 nd . If he believed that such conduct and Attorney Caldbeck’s representation of Plaintiffs prejudiced the integrity of the ongoing process on those grounds, then it would have been logical to seek in terlocutory appeal immediately after the

motion was denied on June 19 th . The alternative motion, that Attorney Caldbeck c ommitted professional misconduct during the mediation sessio n, makes more sense as the basis for a motion filed on July 2 nd , but even so, one has to wonder why such a motion was appropriate at that time. Even if Attorney Caldbeck was making an unreasonable demand as to settlement terms, Attorney Joslin had been successful in dissu ading Attorney Caldbeck from overreaching before, and could be called upon again if needed. It does not appear that Attorney Kilmartin sought input from either Attorney Joslin (the media tor) or Attorney Valsangiacomo (Defendants’ other counsel) on this issue before filing the moti on to disqualify. On the contrary, Attorney

Kilmartin’s letter of June 24 th shows how quickly he responded to the written sett lement proposal with an allegation of professional miscond uct.

The fact that Attorney Kilmartin waited until July 2 nd to seek interlocutory appeal on the first issue (inaccurate affidavits) raises a questi on about his purpose. The fact that he sought disqualification on the second issue (misconduct du ring the mediation session) without invoking the assistance of Attorney Joslin and without the s upport of Defendants’ other counsel also raises a question about his purpose. Finally, the fact th at he blended the requests on the two issues into a complex web in a double motion that takes time an d attention to unravel raises an additional question about his reason for filing the motion at all, and doing so when he did. Both motions were denied in an Entry Order of July 9 th

. 11

11 The docket entries show that on July 10 th , the Clerk received notice from the Supreme Court of an interlocutory appeal. By Entry Order o f August 31, 1998, the Supreme Court denied13

On July 6 th , Attorney Caldbeck responded to Attorney Kilmartin ’s July 2 nd Motion by faxing to the court an “Initial Reply,” in which he also described specific conversations from the mediation session, and requested that the court sea l Attorney Kilmartin’s motion. As described by the Supreme Court, “[t]hus began an exchange of several filings between the parties that disclosed more information pertaining to the confid ential mediation. The court ordered the temporary seal of certain pages of these documents on three separate occasions, making clear that its reason for doing so was to protect the con fidentiality of the parties’ mediation and

settlement discussions.” Lawson at 575. The court scheduled a hearing on Attorne y Caldbeck’s Request to Seal to take place on July 20 th . At the hearing, the attorneys notified the court that the case had settled, and that documentation would subs equently be completed and filed with the court. Thus, the court continued the hearing on th e Request to Seal until after the settlement process was complete, and asked the attorneys to su bmit legal memoranda on the issue of sealing

documents.

The court issued a Decision on August 21 st on the Request to Seal, releasing the temporary seal on all documents except for the port ion of the draft settlement proposal that contained proposed financial terms of settlement. 12 In the Decision, the court identified the attorneys’ filing of confidential mediation materia l as potentially having been done in violation of the confidentiality agreement related to mediati on, and gave notice to Attorneys Caldbeck and Kilmartin of the possibility of imposition for sanc tions. A hearing was scheduled, which took place on September 2, 1998.

As described above, the court imposed sanctions at the conclusion of the hearing for having filed confidential material, allocating betw een the two attorneys the compensatory costs to the court of having had to use significant opera tional resources to respond. 13 The allocation was based on specified costs and facts. Transcript , pp. 32-33. Attorney Kilmartin’s share was $2,000.00, and Attorney Caldbeck’s share was $1,000 .00. Attorney Kilmartin appealed, resulting in the decision referenced above and the remand for the court to make a finding concerning whether the conduct was done in bad fait h. Attorney Caldbeck did not appeal.

The specific conduct for which Attorney Kilmartin was sanctioned was repeatedly filing with the court documents containing information pro tected by the confidentiality of the mediation process. In explaining the compensatory basis for the amount of the sanction, the

“Defendants’ motion for permission to appeal,” alth ough it is not stated which interlocutory order was the basis for the Defendants’ appeal to t he Supreme Court.

12 This remained sealed in order to permanently protec t the terms of the final confidential stipulation.

13 The court addressed the impact of the conduct and c oncluded that the detriment fell on the public through consumption of court resources r ather than on the parties. It calculated that five days of judge and staff time was spent in hand ling the consequences of such conduct, and used the daily cost of operation as the basis for t he sanction: 5 days x $600 = $3,000 total cost.14

court noted that Attorney Kilmartin filed 42 pages of confidential material that had to be temporarily sealed, consisting of 31 pages when dup licate fax copies are disregarded. Attorney Kilmartin filed a copy of a proposed settlement agr eement during the course of an ongoing mediation and settlement process, as well as an aff idavit by an individual present at the June 22 nd

mediation session describing the content of discuss ions during the session. Attorney Kilmartin filed the first motion containing confidential mate rial. Not only did he initiate the exchange of such filings but he continued it, filing such mater ial on three separate occasions, including after the court issued entry orders temporarily sealing s uch material.

Attorney Kilmartin claims that he filed such mater ial for two purposes: to disclose unethical conduct and/or potentially criminal condu ct, and to disqualify Attorney Caldbeck.

If his purpose was to disclose unethical conduct, the filing of confidential material with the Superior Court from the mediation session three times between July 2 nd and July 10 th in the context of the filing of civil motions was not the way to do it. As previously noted, after the court made clear on June 30, 1998 that it would not assume responsibility for administering a professional conduct complaint separate and apart f rom a motion filed with the court, Attorney Kilmartin’s recourse was to make his mandated repor t by filing a complaint with the Professional

Conduct Board. There was no need to file confident ial material in the Superior Court in

connection with unethical conduct. The reasonable course of action was to file a complaint with

the Professional Conduct Board. There is no eviden ce that this was ever done.

Similarly, if his purpose was to disclose potentia lly criminal conduct, the filing of the confidential material in motions in the Superior Co urt was ineffectual. The reasonable course of action was to contact law enforcement personnel and /or the State’s Attorneys office to facilitate a review of the possibility of criminal charges. The re is no evidence that this was ever done. Thus, Attorney Kilmartin’s rationale for the conduc t does not match the conduct in which he actually engaged. As an experienced attorney, he w ould have known how to achieve the objectives he claims he was pursuing. Those object ives are not consistent with his conduct, and raise serious questions about his motivation.

The second purpose on which Attorney Kilmartin rel ies is that he was seeking to disqualify the opposing lawyer, Mr. Caldbeck, presu mably on the basis of unethical conduct affecting the administration of justice in the case . That purpose does not, however, explain why it was necessary for him to put into the public rec ord material that was confidential mediation

information when reasonable alternatives existed: r equesting in advance, or at least contemporaneously, to have confidential evidentiary material sealed by the court, or describing in general terms without specifying it that miscond uct occurred and seeking a closed evidentiary hearing. The purpose does not justify the filing of confidential material not only once but repeatedly, including after the court had ordered t hat it would temporarily seal such material. Again, the rationale does not match the conduct in which he actually engaged.

This analysis shows that Attorney Kilmartin’s clai med purposes, however valid they may appear on their face, do not justify the actions he took. In addition, the history of the case shows15

that there was a high degree of animosity between t he attorneys; that Attorney Kilmartin had engaged in a pattern over several months of “baitin g” Attorney Caldbeck; that Attorney Kilmartin had been sanctioned twice for discovery v iolations that involved willful and knowing refusals to comply with discovery requirements to p rovide information to Attorney Caldbeck; that Attorney Kilmartin had already tried unsuccess fully to have Attorney Caldbeck disqualified from the case twice (orally in court on May 13 th and by motion on June 18 th ); that this conduct occurred in the context of a third attempt; that At torney Kilmartin acted swiftly to seek to disqualify Attorney Caldbeck again without the supp ort of the other attorneys at a time when the case was already substantially settled; and that di squalification of Attorney Caldbeck would have deprived Plaintiffs of the one attorney familiar wi th their case at a time when they were near settlement, and foiled Attorney Caldbeck’s attempt to settle the claim in a timely manner. Most importantly, none of Attorney Kilmartin’s stated pu rposes are advanced by the public filing of confidential material from the mediation process.

Finally, the record includes a letter to the Clerk dated August 3, 1998 from Attorney Valsangiacomo stating as follows:

I am extremely concerned that Mr. Kilmartin has co ntinued to file pleadings on behalf of the Defendants. Enc losed for filing is a letter from the insurance company in connection w ith this matter authorizing me to sign the Stipulation for Dismissa l without the necessity of securing Mr. Kilmartin’s signature.

This letter supports my representations to the Cou rt that Mr. Kilmartin’s authority is limited.

If any further pleadings are filed without my co-s ignature, I would request that an immediate hearing be held bef ore the Court in order to clarify this situation.

Otherwise, let’s hope that eventually reason will prevail, and this matter will finally be resolved without an y further

difficulties.

This letter reflects a concern on the part of both the insurance company and Defendants’

other counsel that some of Mr. Kilmartin’s actions in the case were motivated by reasons beyond the goals and desires of either the Defendants them selves or their insurer, and that such conduct was not perceived by them to be in their interest. This matches the court’s observation of the manner in which the case was being conducted in Jun e and July of 1998.

The standard for “bad faith”

This case involves the imposition by the court of a sanction against an attorney for actions taken during his conduct of a case. The co urt’s power to sanction in such a situation16

derives either from Rule 11, 14 or from the inherent authority of the court. Van Eps v. Johnston

, 150 Vt. 324 (1988), United States v. Seltzer , 227 F.3d 36 (2d Cir. 2000), Eash v. Riggins Trucking, Inc. , 757 F. 2d 557 (3d Cir. 1985). In this case, the trial court relied on the inherent authority of the court (Decision and Order, August 21, 1998, page 9), and the Supreme Court analyzed the case within that framework. 15 Where Rule 11 is relied upon, attorney conduct in filing documents with the court is sanctionable if done “for an improper purpose, such as to harass or to cause unnecessary delay or needless in crease in the cost of litigation.” V.R.C.P. 11 (b)(1). In this case, the Vermont Supreme Court ha s determined that the trial court must make a finding of “bad faith.” 16 Lawson at 574.

The first question is what is the meaning of “bad faith” in the attorney discipline context.

The second is whether the conduct in this case fall s within that meaning and the policy objectives

of the standard.

Cases from the different courts that have addresse d bad faith in the context of sanctions for attorney conduct based on the court’s inherent authority show that no uniform body of law has developed, even in the cases reported since Sep tember of 1998 when the sanction was imposed. Courts are seeking to define when a findi ng of bad faith is a prerequisite for sanctions,

14 V.R.C.P. 11 (b): “ Representations to Court . By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry re asonable under the circumstances: (1) it is not being presented for any improper purpose, such as t o harass or to cause unnecessary delay or needless increase in the cost of litigation. . .”

15 Rule 11 permits a court to impose monetary sanction s on the court’s initiative when the

court issues its show cause order before the claims against the party whose attorney is sanctioned are dismissed. In this case, the stipulation for d ismissal was filed on August 10, 1998, and the court’s show cause order was issued on August 21, 1 998 in conjunction with the court’s order on the Plaintiff’s outstanding Request to Seal. It is arguable that Rule 11 was nonetheless applicable because the show cause order was issued in relation to a collateral matter that was still pending against Defendants (Plaintiffs’ Request to Seal) even after the substantive case against

the Defendants was dismissed. The court observed a ll notice and hearing requirements applicable under Rule 11, and the sanction imposed was within the limits set forth in Rule 11 (c)(2).

16 The Vermont Supreme Court also used the phrase “imp roper purpose” in certain places in the opinion. As noted above, Rule 11 possibly c ould have been the basis for a sanctions hearing. The relationship between the “improper pu rpose” and “bad faith” standards is discussed more fully below. This court agrees with Attorney Bent’s argument that in spite of occasional references to “improper purpose,” the holding of th e Court is that the sanction imposed by the

trial court cannot stand unless the court makes a f inding of “bad faith” upon remand.17

what standard of proof must be met, and whether the standard is met in specific cases. 17 Bad faith is not always a required standard, but proced ural due process is a prerequisite, and the

factual basis for a sanction must be clear.

For example, in United States v. Seltzer , 227 F. 3d 36 (2d Circ. 2000), Judge Parker noted that where the charges involve a lawyer’s negligent or reckless failure to perform his or her responsibility as an officer of the court, as oppos ed to actions undertaken for the client’s benefit, “sanctions may be justified absent a finding of bad faith given the court’s inherent power to ‘manage [its] own affairs so as to achieve the orde rly and expeditious disposition of cases.’” Id

. at 41 (internal citation omitted). Subsequently, t he Second Circuit has held that [a]n award of sanctions under the court’s inherent power must be based on ‘clear evidence’ and must be accompanied by ‘a high degree of specificity in the factual findings.’” Mickle v. Morin , 297 F. 3d 114, 125-126 (2d Cir.2002)(citing Oliveri v. Thompson , 803 F.2d 1265, 1272 (2d Cir. 1986), and

also Seltzer , 227 F. 3d at 43).

Many instances of attorney sanctions occur in the context of complaints under Rule 11,

rather than in reliance on the court’s inherent aut hority, and are thus analyzed under an “improper purpose” standard. Although case law sup ports a trial court’s power to sanction when an attorney has acted in bad faith, it is difficult to find cases in which courts have examined the content or elements of “bad faith.” Examples of ca ses applying the “bad faith” standard include Van Eps v. Johnston, 150 Vt. 324, 326-27 (1988)(inherent power to assess sanctions for consequential impact, such as attorney’s fees, for acting in bad faith); Agency of Natural Resources v. Lyndonville Savings Bank & Trust Co

., 13 Vt.L.W. 215, 216 (2002)(inherent power to award attorney’s fees in exceptional cases based on bad faith conduct of litigants); In re Sherman Hollow, Inc ., 160 Vt. 627, 630 (1993)(request for sanctions de nied absent evidence of bad faith); Eberly v. Eberly, 489 A. 2d 433, 449 (Del.1985)(inherent power to ass ess attorney’s fees against counsel when that lawyer has acted in bad faith or wilfully abused the judicial process); Charles v. Charles , 505 A. 2d 462 (D.C. App.1986)(court may invoke in herent powers and assess attorney’s fees, but only upon specific finding of bad faith); Roadway Express, Inc. v. Piper , 447 U.S. 752, 767 (1980)(federal courts have inhe rent power to levy sanctions in response to abusive litigation practices where there is a fi nding of bad faith).

The “bad faith” standard is comparatively more str ingent than the Rule 11 standard. “Rule 11, for example, imposes an objective standar d of reasonable inquiry which does not mandate a finding of bad faith.” Chambers v. NASCO, Inc. , 501 U.S. 32, 47 (1991).

17 In addition, there are procedural requirements of n otice and an opportunity to be heard prior to the imposition of sanctions. Van Eps v. Johnston , 150 Vt. 324 (1988). For a thorough analysis of inherent judicial authority as the basi s for monetary sanctions against an attorney, see Eash v. Riggins Trucking, Inc. , 757 F. 2d 557 (3d Cir. 1985). The court noted: “ The dramatic rise in litigation in the last decade has led trial judges to conclude that indulgent toleration of lawyers’ misconduct is simply a luxury the federal court system no longer can afford.” Eash at
565.18

“Because inherent powers are shielded from direct democratic controls, they must be

exercised with restraint and discretion.” Roadway Express , 447 U.S. at 764. In the absence of rulemaking, there are no clear procedural rules or substantive standards. “A court must, of course, exercise caution in invoking its inherent p ower, and it must comply with the mandates of due process, both in determining that the requisite bad faith exists and in assessing fees.”

Chambers at 50(citing Roadway Express at 767). Thus, to guard against the abuse of judi cial power, courts have developed procedural requirement s and require specific findings and a high evidentiary standard. Mickle , 297 F.3d at 125-26 (citing Oliveri , 803 F.2d at 1272). Nonetheless, the elements of “bad faith” for purposes of an inhe rent authority analysis are not clearly developed in the case law, as courts often remand f or a determination of bad faith, or reach a

conclusion that the conduct at issue falls short of bad faith, without necessarily specifying the

elements of bad faith. See Mickle , 297 F. 3d at 126; Seltzer , 227 F.3d at 42-43; Mackler
Production, Inc. v. Cohen , 146 F.3d 126, 130-31 (2d Cir. 1998); Roadway Express, 447 U.S. at 767; Charles , 505 A.2d at 467; Van Eps, 150 Vt. at 329.

Judicial gloss on a specific statute may also comp licate the effort to distinguish “bad faith” from “improper purpose,” as shown by the fol lowing excerpt from a passage in which the California Appeals Court construed “bad-faith actio ns or tactics that are frivolous or solely intended to cause unnecessary delay” under a statut e authorizing sanctions: “There must also be a showing of an improper purpose, i.e. subjective b ad faith on the part of the attorney or party to

be sanctioned.” Levy v. Blum , 92 Cal. App. 4 th 625, 635, 112 Cal.Rptr.2d 144, 152, 2001 WL 1133475 at 6 (Cal.App. 2001)(citations omitted).

Black’s Law Dictionary (6 th ed. 1990) defines “bad faith” as follows:

Bad faith. The opposite of “good faith,” generally implying or involving actual or constructive fraud, or a design to mislead or de ceive another, or a neglect or refusal to fulfill some duty or some contractual ob ligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive. The term “bad faith” is not simply bad jud gment or negligence, but rather it implies the conscious doing of a wrong because o f dishonest purpose or moral obliquity; it is different from the negative idea o f negligence in that it contemplates a state of mind affirmatively operatin g with furtive design or ill will. Stath v. Williams, Ind. App., 367 N.E.2d 1120, 1124

.

This definition makes clear that acting from an imp roper purpose is only one element of “bad faith,” which calls for a finding of additional ele ments such as violating a duty, acting consciously, and acting with questionable moral int egrity. For example, an attorney could act from an improper purpose (showing off, for example) without doing so to such a degree that the

“bad faith” standard is met.

The attempt to define “bad faith” as a basis for a ttorney sanctions calls for a clear identification of the policy purposes for having su ch a standard for the sanctioning of attorney

conduct where sanctions are based on the inherent a uthority of the court. As described in depth19

by the Third Circuit Court of Appeals in Eash v. Riggins Trucking, Inc., 757 F.2d 557 (3d Cir. 1985), a “court’s inherent authority to manage its caseload, control its docket, and regulate the conduct of attorneys before it, provides authority to fashion tools that aid the court in getting on with the business of deciding cases.” Id. at 567. While Rule 11 provides a foundation for sanctions in the situations to which it applies, th ere are circumstances not covered by Rule 11, and inherent authority provides a basis for the exe rcise of comparable authority to further the

core functions of the court. Id . at 562-63.

Where there are specific rules, such as Rule 11 an d Rule 26 (g) (specifically governing discovery sanctions), the rules themselves generall y specify the attorneys’ obligations, the standards that will be applied, and the type of san ction to be expected. Where there are no specifically applicable rules, standards are needed to provide a restraint on the abuse of judicial power. These include due process requirements of a dvance notice of improper conduct, notice to the attorney and an opportunity to be heard before sanctions are imposed, a high level of specificity in the factual findings, and a clear ev identiary basis for the sanction. See Mickle , 297 F.3d at 125-26, Seltzer , 227 F.3d at 43. Without these protections, the c ourt’s “inherent authority” could itself be misused in a manner unfa ir to attorneys, or for reasons other than the functional necessity upon which it is founded. Eash , 757 F. 2d at 562-63.

In this case, the Court has remanded the case for the trial court to clarify the factual basis for its conclusion that he acted from an improper p urpose, and to address his claim that he acted from a proper purpose. The Court was also concerne d that Attorney Kilmartin did not have clear notice that filing confidential mediation material was sanctionable, but noted that attorneys did

have notice from the Van Eps case “that negotiating in bad faith during settlem ent negotiations

can result in sanctions.” Lawson at 578. Therefore, although there may have been a lack of clarity in 1998 about a court requirement prohibiti ng filing confidential mediation material, 18

attorneys were on notice that negotiating in bad fa ith was sanctionable. Thus, although

18 In 1998 there was no clear rule on confidentiality of mediation communications. Since 1998, the situation has changed. V.R.C.P. 16.3 on Alternative Dispute Resolution, adopted October 5, 1999 and effective December 31, 1999, ha s a specific subsection entitled “Confidentiality” which provides that “all written or oral communications made in connection with or during an alternative dispute resolution pr oceeding conducted under this rule...are confidential...” V.R.C.P. 16.3 (g). The Reporter’ s Notes to paragraph (g) state: “The purpose of the confidentiality requirement is to encourage ADR participants to speak candidly in order to facilitate the conduct of processes such as prelimi nary evaluation and mediation. The requirement of confidentiality is binding on all pa rties by virtue either of their express ADR agreement under Rule 16.3 (c) or their implied agre ement to engage in preliminary evaluation under Rule 16.3(d).” Reporter’s Notes to V.R.C.P. 16.3 (g), page 136. In V.R.C.P. 16.3 (h), courts may impose sanctions for noncompliance “unle ss that person shows good cause for not...complying,” and sanctions may include specifi ed actions or “any other sanction that is just and appropriate in the circumstances.” V.R.C.P. 16 .3 (h). The Reporter’s Notes provide that “Rule 16.3 (h) is intended to supplement, rather th an supersede, Rule 11.”20

“improper purpose” alone would be the standard unde r a Rule 11 analysis, the Court has ruled that this case calls for the more stringent “bad fa ith” standard from Van Eps

. 19

It appears that interpreting the meaning of “bad f aith” for purposes of sanctions for attorney conduct based on the court’s inherent auth ority is a matter of first impression in Vermont. Based on the specific findings of fact se t forth above, the court’s review of case law from Vermont and other jurisdictions, and the polic y of allowing courts to regulate attorney conduct as needed for the orderly administration of justice but only with fairness and restraint, the court concludes that five elements are present in this case which, collectively, compel the

conclusion that the conduct in this case constitute s bad faith. Those elements are (1) the conduct was in violation of a duty to the court; (2) the co nduct was not the result of an inadvertent mistake but consisted of conscious acts; (3) the pr oferred justification, though it appears valid on its face, is not supported by the actual conduct; (4) the conduct was prompted by an improper purpose; and (5) it involved ill will.

The first element is violation of a duty to the co urt. This court previously identified the violation as filing confidential information from m ediation in the public record of the case. (Transcript, Sanctions Hearing, September 2, 1998, pp. 27-28.) The Supreme Court has ruled

that the sanction could be based on violation of th e obligation to negotiate in good faith during settlement negotiations if bad faith is shown. The facts show that from July 2 nd to July 10 th

, during which the three public filings of confidenti al mediation information took place, the parties were engaged in serious settlement negotiations. T he facts are clear that substantial agreement

had been reached on June 22 nd , and the effort to settle the specific terms of a written agreement remained ongoing and active until the case actually settled on July 20 th . The parties had made a specific agreement to confidentiality on June 22 nd , at the beginning of the process, and a confidentiality agreement was in place with respect to discovery in the case. The press was following the case. The material Attorney Kilmarti n filed included not only an affidavit account of who said what to whom at the mediation session, but it included a physical copy of a draft settlement agreement circulated as a proposed final agreement. Under these circumstances, placing confidential settlement discussions and pro posals into the public record, in violation of the specific agreement not to do so, and under circ umstances where it would be sure to be publicized while the case was in active settlement negotiations, violates the duty to negotiate in

19 As noted in the previous footnote, the standard tha t would be applied now to a filing of

confidential mediation communications is whether th e person “shows good cause for not...complying.” V.R.C.P. 16.3 (h). Imposition o f sanctions would occur under Rule 16.3, rather than on the court’s inherent authority. The scope of permissible sanctions would include compensatory sanctions. Attorney Bent has argued t hat his client should not be sanctioned for the purpose of educating the bar. The Supreme Cour t’s decision is consistent with this position, as it permits the sanction only for a violation of an obligation about which attorneys were already on notice (the obligation to refrain from negotiati ng in bad faith), and it imposes the higher “bad

faith” standard rather than the lower standards of “improper purpose” from Rule 11, or ‘no good cause for not complying’ from Rule 16.3.21

good faith. Lawson at 578. 20

The second element is that the conduct was not ina dvertent but conscious. Attorney

Kilmartin chose to include in motions that were a m atter of public record confidential communications that, if made public, would jeopardi ze the finalization of the settlement. He did so despite his own agreement to confidentiality of discovery, the agreement he and all participants at the mediation session made to the c onfidentiality of mediation discussions, and his own knowledge that the settlement process continued after June 22 nd , with the continued available assistance of Attorney Joslin. Attorney Kilmartin’s deliberate choice to file in a public manner is revealed by the fact that once his “Discl osure” was returned as an ex parte communication, he chose to file a motion in the civ il case, including the confidential material, without any attempt to protect the confidential com munications or seek a protective order from the court. It is fundamental that the public has a ccess to documents filed with the court without a specific order establishing otherwise. In additio n, he repeated the filing of confidential

mediation communications even after the court’s res ponse to the first such event was to temporarily seal the confidential portions of the m otion. It is clear that his conduct was not the

result of an inadvertent mistake.

The third element is that the relationship between the justification Attorney Kilmartin has given and the conduct is not a fit. The reasons he has given are that he was carrying out a mandatory professional duty to disclose professiona l misconduct and/or criminal conduct, and to disqualify the opposing lawyer. The factual findi ngs show that he did not do the actions that would have accomplished the first objective, includ ing filing a report with the designated body to investigate and act upon it and pursuing complaints of criminal conduct with law enforcement or prosecutorial personnel. In addition, the objectiv e of mandatory disclosure of professional misconduct does not explain why such material was f iled on three separate occasions, and required the filing of 42 pages with confidential m ediation communications (31 separate documents, with duplications resulting from fax and hard copies).

As to the second objective (seeking to disqualify opposing counsel for perceived unethical behavior), there were standard procedural techniques available for pursuing that objective without disclosing confidential settlemen t communications: referencing the ethical problem in general terms without revealing the deta ils in the public record, seeking a protective

order from the court to seal factual confidential m aterial, and/or requesting a hearing on the motion to be closed to prevent public access to con fidential evidentiary material. The connection that is claimed between the justificatio ns given and the actions actually undertaken is not supported by the evidence.

The fourth element is that the conduct was done fo r an improper purpose. The factual

20 The court itself acted to protect the confidentiali ty of the parties’ settlement discussions, which was necessary to facilitate settlement, by te mporarily sealing the portions containing

confidential settlement communications.22

findings show a clear history of personal and profe ssional attacks on Attorney Caldbeck. Beginning in April of 1998, Attorney Kilmartin took almost every opportunity available to file motions impugning Attorney Caldbeck’s professionali sm in conducting the case, and beginning in May of 1998 Attorney Kilmartin began a series of attempts to seek to disqualify him. The conduct at issue here took place in the context of the third such attempt. As the facts show, the negative dynamic between the two attorneys took on a life of its own, and drove many actions of the attorneys.

The letter from Attorney Valsangiacomo to the cour t on August 3 rd , stating that the insurance company had authorized Attorney Valsangia como to sign the stipulation for dismissal without the necessity of Attorney Kilmartin’s signa ture, shows that Attorney Kilmartin’s own client was aware that Attorney Kilmartin’s motivati ons for some of his actions were not

undertaken for client benefit. The facts also show that the conduct at issue was not appropriate conduct in connection with furthering the administr ation of justice, either in relation to the procedures for discipline of attorneys, or in relat ion to proper techniques for a motion to disqualify opposing counsel based on evidence that is confidential.

Attorney Caldbeck has claimed that the improper pu rpose was to try the case in the press. While it appeared that this might have been an issu e in the early part of the case, the facts do not suggest that by July of 1998 there was trial advant age to be gained by the Defendants in publicizing either information about Attorney Caldb eck’s conduct at the mediation session or the proposed written settlement agreement. The terms h ad essentially been agreed upon. Moreover,

the content of the filed material was not related t o orienting the public to the facts of the case. Rather, the focus of the confidential material file d was on alleged misconduct by Attorney Caldbeck. It is clear that Attorney Kilmartin had reached his own conclusion that Attorney Caldbeck had committed professional misconduct, but he had not succeeded in persuading the Superior Court to assume responsibility for adminis tering the ethical misconduct allegation as a disciplinary matter, or to disqualify Attorney Cald beck. Thus, the improper purpose appears to be a combination of simply vexing Attorney Caldbeck and bringing to public attention Attorney Kilmartin’s claim that Attorney Caldbeck had engage d in unprofessional conduct during the case. In other words, the purpose was not to try t he case in the press, but to use a public record to publicize Attorney Caldbeck’s alleged misconduct . The conduct is consistent with Attorney Kilmartin’s ongoing effort to remove Attorney Caldb eck from the case.

The final element is that the conduct continued a long-standing pattern of ill-will toward Attorney Caldbeck. In an unnecessary manner, Attor ney Kilmartin’s filings in the case included many allegations of unprofessional conduct and dire ct attacks on the character and professional reputation of Attorney Caldbeck. This pattern bega n early in the case, and continued despite

admonishments from the court.

Therefore, the court concludes that Attorney Kilma rtin’s conduct in filing mediation

communications three times when the case was about to settle was not done to discharge a mandatory duty to report unethical conduct to the a ppropriate investigatory tribunal, nor to disclose potentially criminal conduct to the approp riate authorities, nor was it necessary to do so23

in order to pursue a motion to disqualify opposing counsel . Rather, the review of the facts of the case show that the following purposes are the ones consistent with the actual facts: vexing opposing counsel, knowing that Attorney Caldbeck wo uld be upset and confounded in his attempts to reach a timely settlement of Plaintiffs ’ claims; and pursuing his campaign to discredit and disqualify Attorney Caldbeck on professional mi sconduct grounds, elevating that goal over the interests of his own clients in finalizing the imminent settlement of the case.

The court has now had the opportunity to examine m ore closely Attorney Kilmartin’s evidence and explanation of his actions in conjunct ion with having prepared the above specific findings and having reviewed pertinent case law. S uch closer examination has produced a conclusion that is essentially the same as that rea ched on September 2, 1998. As the above account shows, the facts and circumstances of the c ase consist of details from a lengthy series of case events, and call upon the court to infer facts from other facts in a manner that requires extended explanation to describe. Having presided over nearly the entire case and reached a conclusion of ‘bad faith’ initially without specify ing its elements, and now again on the basis of a detailed dissection of the facts, this court conc ludes that the evidence is clear that the conduct

at issue was done in bad faith.

The remand has given the court the opportunity to review whether the facts support the specific sanction imposed. As described in detail in the transcript of the sanctions hearing on September 2, 1998, the basis of the sanction was co mpensation to the public for the costs of improper use of public resources, specifically five days worth of court time. Although at the hearing on September 2, 1998, the court itself desc ribed the sanction at one point as being “in the form of a fine,” (Transcript, page 33), the lengthy specific explanation in the transcript makes

clear that the amount was determined based on a the ory of compensation for unnecessary consumption of public resources, and not on a punit ive basis. 21 No appeal was taken as to the amount or compensatory basis for the sanction.

Grounding a sanction on specific cost consequences of the conduct, as was done here despite the use of the word “fine,” provides both a nexus and a limit on the terms of the sanction.

Eash , 757 F.2d at 565 (upholding monetary sanction agai nst attorney based on the misuse of court resources, specifically the cost of impanelin g a jury for one day). Also see Mackler , 146 F. 3d at 130 (full panoply of criminal procedure safeg uards not required with respect to $45,000 compensatory sanction). Having reviewed the specif ics of the sanction in light of this more detailed analysis as to its basis, the court is sat isfied that the sanction represents a reasonable compensatory amount for the impact on the use of pu blic resources of the sanctionable conduct.

21 During the five days worth of time it took the cour t staff and judge to attend to the improperly filed material, other litigants’ cases c ould have been furthered.24 Order

Pursuant to the Memorandum Decision of the Vermont Supreme Court, the court has held an additional hearing, reviewed additional legal ar guments, and made written findings and

conclusions on the issue of bad faith. Based on th ese findings and for the foregoing reasons, the court confirms its Order of September 2, 1998.

Dated this of January, 2003.

Mary Miles Teachout Superior Judge