Opinion ID: 1366472
Heading Depth: 1
Heading Rank: 4

Heading: the sanctions for misconduct by defense counsel

Text: One month prior to the beginning of the trial, Ross filed a motion in limine to preclude any mention to the jury of a settlement agreement between Ross and Idaho Power Company. The district court orally granted the motion, stating that the settlement agreement could not be mentioned without first making an off-the-record offer of proof as to the particular valid need to disclose the agreement. The trial court in orally granting the motion indicated that it would prepare a formal order and serve it upon the parties. However, no such formal order was entered and served by the trial court, as required by I.R.C.P. 16. At the beginning of the jury selection process, one month later, the district court, in apparent contradiction of its earlier decision to withhold knowledge of the settlement from the jury, advised the entire jury venire that: Defendants in this matter are Coleman Company, Inc., and Coast Catamaran Corporation. Only Coleman Company, Inc., and Coast Catamaran Corporation are defendants at this trial, due to a settlement agreement reached between Michael Ross and the Idaho Power Company. The settlement with Idaho Power is not an issue nor to be considered in this case. (emphasis added). Thereafter, on four other occasions, the district court, in its instructions to the jury, advised them of the settlement agreement reached between Michael Ross and Idaho Power Company. [18] Plaintiff Ross admits in his brief that similar statements [were made] to the jury by plaintiff's counsel regarding the fact of settlement between Idaho Power and Ross, although arguing in the brief that plaintiff's statements were declaratory rather than argumentative, that is, these statements did not ask the jury to draw any inference about negligence or damage based upon Idaho Power's settlement. In its argument to the jury the defendants' counsel also referred to the settlement agreement. [19] No contemporaneous objection was made by plaintiff's counsel to counsel's statement, as required by our decision in Rojas v. Lindsay Mfg. Co., 108 Idaho 590, 701 P.2d 210 (1985) (since Rojas' counsel failed to object, move for a mistrial, or seek a cautionary instruction, the issue has not been preserved); Annau v. Schutte, 96 Idaho 704, 535 P.2d 1095 (1975). After the case had been submitted to the jury and the jury had been deliberating for nearly a day, Ross's attorneys then requested the court to give a supplemental instruction to the jury regarding the effect of the settlement between Ross and Idaho Power Company. Ross's counsel argued that defense counsel's mention of the settlement agreement was prejudicial, even though he acknowledged that in the trial, the court made mention a couple of times, or we did, that Idaho Power had settled. After considerable discussion, the court granted the motion and gave Plaintiff's Requested Jury Instruction No. 43, which read: You are hereby instructed that under Idaho law, the total amount of the judgment awarded to Michael Ross shall be reduced by that amount, which Idaho Power has heretofore paid to Michael Ross, pursuant to the settlement between Michael Ross and Idaho Power Company. The jury retired to deliberate, but was immediately recalled to change the word `the' to `any' in the phrase `the judgment,' so it says `any judgment'. The altered instruction was then read to the jury again, and they retired for further deliberations. Sometime thereafter, the jury sent a note to the court stating: We don't understand No. 34. Will Idaho Power be subtracted from our dollar amount, and then the percentage difference between Ross and Coast Catamaran Company-Coleman be taken from the difference? Or will Idaho Power be subtracted from our dollar amount and the difference be reduced by the percentage negligence of Ross? In response to that request, the court and counsel discussed the matter and agreed that the following additional instruction, No. 44, be given: In response to your question: (1) Do not consider the settlement in any manner, for any purpose, when answering the Special Verdict. (2) Instruction 43 was designed simply to let you know that the court will make any adjustments to your verdict that might be necessary. After being so instructed, the jury again retired to deliberate and, sometime thereafter, returned its verdict for the defendants. Four days later, on October 21, 1985, the plaintiff Ross filed three motions: a motion to make additional findings and enter judgment in favor of Ross; a motion for a new trial; a motion for attorney fees and costs, and sanctions. The trial court granted the motion for additional findings and judgment as discussed in Part II herein. The court also gave the plaintiff an option to elect a new trial as an alternative to the $399,356.40 judgment which it had entered in favor of plaintiff, if the plaintiff elected within five days to accept the new trial in lieu of the judgment. The plaintiff elected to keep the judgment and not accept the new trial, as discussed in Part II, supra. Regarding the motion for attorney fees, costs and sanctions, the trial judge orally stated he was granting this motion based on I.C. ง 12-121, I.R.C.P. 54(d)(1) and 54(e)(1), and held that the defendants were liable for $100,000 in attorney fees and $17,000 in costs. [20] The trial court stated that the award was based on its finding that defense counsel had failed to conduct settlement negotiations in good faith, and further on the court's overwhelming belief that the order prohibiting settlement argument was willfully, consciously, and deliberately violated [by defense counsel]. We conclude that the district court's award of costs and attorney fees in this case was erroneous for several reasons and, accordingly, we reverse. 1. The district court's imposition of attorney fees was based in substantial part upon its finding that the defense counsel had failed to conduct settlement negotiations in good faith. However, this Court has held that the failure to enter into or conduct settlement negotiations is not a basis for awarding attorney fees under I.C. ง 12-121 and I.R.C.P. 54(e)(1). Payne v. Foley, 102 Idaho 760, 639 P.2d 1126 (1982). Today, we again make explicit that which we held in Payne v. Foley, supra , that there is no authority in a trial court to insist upon, oversee, or second guess settlement negotiations, if any, and certainly no authority to impose sanctions for `bad faith' bargaining. Payne v. Foley, supra 102 Idaho at 763, 639 P.2d at 1129 (Bistline, J., specially concurring). The district court erred when it imposed costs and attorney fees for failure to engage in good faith settlement negotiations, and accordingly the order must be reversed for that reason. 2. While trial courts have discretion in determining whether or not settlement agreements between some of the parties will be disclosed to the jury, Quick v. Crane, supra , once the trial court determines to permit the disclosure, and in fact instructs the jury (in this case several times) regarding the settlement agreement, both parties are ordinarily entitled to refer to the court's instructions in their arguments to the jury. It would be an unusual case, requiring a very specific showing, in order to justify a trial court prohibiting the litigants from mentioning the court's instructions in their closing argument to the jury. After deciding to instruct and advise the jury of the settlement agreement between Ross and Idaho Power, the trial court made no statement that the instruction was not to be mentioned in closing argument, nor did he state any reason at that time why it should not be referred to. Plaintiff's counsel himself referred to their settlement with Idaho Power in his jury argument with no criticism from the court. It would certainly raise equal protection problems to permit one party to refer to the settlement agreement, but deny the other party that same right. Plaintiff's claim that defense counsel had violated the in limine order, when they themselves had violated it, troubled the trial court. He stated, Whether or not the violation of that [by Mr. Lynch] adds up to requiring the sanctions that Mr. Schlender talks about, is something that is a little harder for me to deal with. I think Mr. Lynch does point out in a way that is more clear to me now than it was when I was listening to it [closing argument], how Mr. Roark's final argument was a long way from faithful adherence to the fact and was as inappropriate in many ways as a lot of the ideas that Mr. Lynch presents. I don't know what the court should do about that. A review of the hearing on the motion in limine conducted a month before the trial commenced discloses that the main purpose for the plaintiff's motion in limine was to prevent the fact of the settlement agreement from being brought to the attention of the jury. At the hearing on the motion for sanctions, plaintiff's counsel stated that he was aware of our then recent case of Rojas v. Lindsay Mfg. Co., 108 Idaho 590, 701 P.2d 210 (1985), which required counsel to make a contemporaneous objection to the mention of a settlement agreement in final argument or the objection was waived. He was concerned about the rule in Rojas which he stated required the plaintiff to stand up and object at the time, observing that, by objecting, he thereby draws more attention to the settlement agreement. He stated, Now, you can't unring the bell as far as counsel's statement is concerned. The jury at that point knows there is a settlement agreement, and the only thing counsel for the plaintiff can do is emphasize to the jury the existence and importance of a settlement agreement. However, in this case it was not the defendant, but the trial court itself which rang the bell and instructed the jury several times on separate occasions regarding the settlement agreement with Idaho Power. Plaintiff's counsel also referred to the settlement agreement. The bell having been rung both by the trial court in its instructions and the plaintiff in his argument to the jury, the trial court could not unring the bell by penalizing the defendants for doing that which both the court and the plaintiff had previously done. The plaintiff, having done so, can hardly complain of the defendants' reference to the same settlement agreement. We can only assume that when the trial court made the decision to instruct the jury regarding the settlement agreement it, in effect, withdrew its oral order entered on the motion in limine. The fact that the district court failed to finalize the order in written form and serve it upon the parties, as he stated he would do, and as required by the rules, I.R.C.P. 16(c), [21] further supports that conclusion and further deprives the order of the vitality which it might otherwise have had for purposes of imposing sanctions, as will be discussed infra. Finally, if there was any error in either side referring to the Idaho Power settlement agreement during the trial or the final argument, that error was ameliorated by the giving of supplemental Instructions Nos. 43 and 44. By Supplemental Instruction No. 43, which the plaintiff requested, the court advised the jury that the total amount of any judgment awarded to Michael Ross shall be reduced by the amount of the Idaho Power settlement. Then subsequently, in response to the jury's specific question, the court advised the jury, in Instruction No. 44, not to consider the settlement in any manner, for any purpose, when answering the special verdict. The court advised the jury that it will make any adjustments to your verdict that might be necessary as the result of the settlement agreement. These two special instructions, which were given after the jury had been deliberating for a day, and which were segregated from the other instructions and were specially called to the jury's attention โ one at the express request of the jury โ were sufficient to remove the taint of any violation of the court's oral in limine order by either party, assuming that that order still had any vitality considering all the events which occurred subsequent to the court rendering its oral in limine order. 3. The trial court's order stated that it was granting the award of attorney fees pursuant to I.C. ง 12-121 and I.R.C.P. 54(e)(1), and I.C. ง 7-601. [22] Assuming that the in limine order still had viability, and assuming that it had only been violated by the defendants, none of those authorities authorizes the trial court to award $100,000 in attorney fees under these circumstances. First, I.C. ง 12-121 [23] provides that the trial court may award attorney fees to the prevailing party. The defendants Coast and Coleman were the prevailing parties in the jury trial and, accordingly, no award of attorney fees could be made against them under I.C. ง 12-121. Secondly, even if a litigant is a prevailing party under I.C. ง 12-121, I.R.C.P. 54(e)(1) limits the award of attorney fees to those cases in which the court finds from the facts presented to it that the case was brought, pursued or defended frivolously or without foundation... . (Emphasis added.) The award of attorney fees under I.R.C.P. 54(e)(1) and I.C. ง 12-121 is directed to those defenses which are not supported by any factual evidence in the record. See Minich v. Gem State Developers, Inc., 99 Idaho 911, 591 P.2d 1078 (1979). Here, not only was there substantial evidence to support the defense, the defendants prevailed. Accordingly, the case was not defended frivously or unreasonably, and thus no award of attorney fees could be assessed under I.C. ง 12-121 and I.R.C.P. 54(e) against the defendants. Attorney misconduct can be a basis for the imposition of sanctions under I.C. ง 7-601 et seq., which was referred to in the trial court's written order. I.C. ง 7-601 defines contempts and states that [t]he following acts or omissions in respect to a court of justice, or proceedings therein, are contempts of the authority of the court: ... (5) Disobedience of any lawful judgment, order or process of the court. Assuming, arguendo, that the district court's order granting the motion in limine had been disobeyed by either counsel in this case, they could have been cited for contempt under I.C. ง 7-601. However, a contempt proceeding under I.C. ง 7-601 et seq. is a special proceeding, criminal in nature, because a violation thereof is punishable by fine or imprisonment. I.C. ง 7-610; Bandelin v. Quinlan, 94 Idaho 858, 499 P.2d 557 (1972). Because of the criminal nature of such a contempt proceeding, our cases hold that a person charged with contempt under I.C. ง 7-601 is entitled to certain procedural due process protections before the court can impose sanctions. He is entitled to notice of the exact charges against him, proof that he had knowledge of the terms of the court's order he was alleged to have violated, notice of the sanctions which might be imposed against him (fine or jail term), and a trial or hearing on the charges raised. Bandelin v. Quinlan, supra . While those proceedings may be more summary in cases where the contempt was committed in the presence of the court, rather than outside the presence of the court, I.C. ง 7-603, the proceeding is nevertheless criminal in nature and minimal due process requirements must be met. In this case, much of the procedural due process was lacking. In particular, plaintiff's motion for attorney fees, costs and sanctions was based on I.C. ง 12-121 and Rule 54(e), with no reference to I.C. ง 7-601. At no time during the proceedings was defense counsel advised that he was being charged with criminal contempt under I.C. ง 7-601, or the nature of those proceedings. The trial court's oral order granting attorney fees and costs only mentioned Rule 54(e), asserting that defense counsel's tactics constituted frivolity or unreasonable defense. It was only in the final order drafted by plaintiff's counsel that I.C. ง 7-601 was even mentioned. That is particularly significant given the fact that the alleged contemptuous conduct was against counsel, but the criminal sanctions were imposed, not against the counsel, but against the two defendants Coast and Coleman. Even if the procedural due process required by our cases had been rendered, the question then becomes whether or not the trial court abused its discretion in imposing sanctions. As previously discussed, the purpose of the court's oral in limine order was to prevent the settlement agreement from being called to the jury's attention. However, the court itself, subsequent to the in limine order, instructed the jury several times on the settlement agreement, and it was also mentioned by the plaintiff's counsel. Even though there was no contemporaneous objection to the defense counsel's statement, a day later when it was called to the court's attention the jury was specifically instructed not to consider the settlement agreement in arriving at its determination of negligence and causation pursuant to the special verdict. The trial court made conflicting statements on whether or not, in its opinion, the defense counsel's comments had any effect on the trial. While his final order, prepared by counsel, finds prejudice to the plaintiff, the court's statements at the time of the hearing suggest otherwise. He stated: But Mr. Lynch also makes some very good points about, when you bother to have a new trial, and that you have to look not only at individual errors and faults, but would a new trial produce a different result, and is the result at all supported by the evidence, and those questions, I think, are much more difficult to deal with, and I'm going to read both briefs especially the plaintiff's final brief with a little more care... . I'm not inclined to grant a new trial for the reasons that I've indicated, although I haven't thought it through entirely. So I'll have to wait on that. I think it was urged that I take that part under advisement for a while. Finally, I.C. ง 7-610 limits any sanction or penalty for contempt under I.C. ง 7-601 to a fine of $500 or 5 days in jail. The court's action in imposing $100,000 attorney fees and $17,000 costs as sanctions against the defendants exceeded his statutory authority under I.C. ง 7-610 by $116,500.00. For all the reasons set out above, we conclude that the trial court erred egregiously in imposing sanctions against the defendants in this matter, and the order awarding $100,000 attorney fees and $17,000 costs is set aside.